-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, dJPy6A4WCxYIiZ4MzCF/41oIkUd74EETIn41As44g7u2LmloAijn80bhyqkhDfaA LHc4/h8rVbA9rcQVHBpPKw== 0000094328-94-000052.txt : 19941214 0000094328-94-000052.hdr.sgml : 19941214 ACCESSION NUMBER: 0000094328-94-000052 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19941031 FILED AS OF DATE: 19941207 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: STEWART & STEVENSON SERVICES INC CENTRAL INDEX KEY: 0000094328 STANDARD INDUSTRIAL CLASSIFICATION: 3510 IRS NUMBER: 741051605 STATE OF INCORPORATION: TX FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08493 FILM NUMBER: 94563705 BUSINESS ADDRESS: STREET 1: 2707 N LOOP W CITY: HOUSTON STATE: TX ZIP: 77008 BUSINESS PHONE: 7138687700 MAIL ADDRESS: STREET 1: P O BOX 1637 CITY: HOUSTON STATE: TX ZIP: 77251-1637 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 31, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to _________ Commission file number 0-8493 STEWART & STEVENSON SERVICES, INC. (Exact name of registrant as specified in its charter) Texas 74-1051605 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2707 North Loop West, Houston, Texas 77008 (Address of principal executive offices) (Zip Code) (713) 868-7700 (Registrant's telephone number, including area code) not applicable (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, Without Par Value 32,992,815 Shares (Class) (Outstanding at October 31, 1994) PART I. FINANCIAL INFORMATION Item 1. Financial Statements. The following information required by Rule 10-01 of Regulation S-X is provided herein for Stewart & Stevenson Services, Inc. and Subsidiaries (the "Company"): Consolidated Condensed Statement of Financial Position -- October 31, 1994 and January 31, 1994. Consolidated Condensed Statement of Earnings -- Nine Months and Three Months Ended October 31, 1994 and 1993. Consolidated Condensed Statement of Cash Flows -- Nine Months Ended October 31, 1994 and 1993. Notes to Consolidated Condensed Financial Statements. STEWART & STEVENSON SERVICES, INC. CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION (Dollars in thousands)
October 31 January 31 1994 1994 _____________ _____________ (Unaudited) ASSETS CURRENT ASSETS Cash and equivalents $ 3,955 $ 7,788 Accounts and notes receivable 164,669 147,292 Recoverable costs and accrued profits not yet billed 169,892 115,868 Inventories: Engineered Power Systems 233,870 217,180 Distribution 107,024 98,885 Adjustments to a LIFO Basis (49,899) (46,460) ____________ ____________ 290,995 269,605 Other 800 224 ____________ ____________ TOTAL CURRENT ASSETS 630,311 540,777 PROPERTY, PLANT AND EQUIPMENT 226,781 208,661 Allowances for depreciation and amortization (96,587) (82,188) ____________ ____________ 130,194 126,473 OTHER ASSETS 28,408 25,374 ____________ ____________ $788,913 $692,624 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 41,000 $ 5,000 Accounts payable 153,401 131,780 Billings on uncompleted contracts in excess of incurred costs 17,268 31,088 Current income taxes 37,425 27,931 Other current liabilities 44,817 45,387 ____________ ____________ TOTAL CURRENT LIABILITIES 293,911 241,186 LONG-TERM DEBT--less current portion 68,000 68,000 DEFERRED INCOME TAXES 4,656 5,868 ACCRUED POSTRETIREMENT BENEFITS 15,028 15,028 DEFERRED COMPENSATION 4,555 3,884 SHAREHOLDERS' EQUITY Common Stock, without par value, 50,000,000 shares authorized; 33,004,635 and 32,948,885 shares issued at October 31, 1994 and January 31, 1994, respectively, including 11,820 shares held in treasury 161,945 160,366 Retained earnings 240,851 198,325 ____________ ____________ 402,796 358,691 Less cost of treasury stock (33) (33) ____________ ____________ TOTAL SHAREHOLDERS' EQUITY 402,763 358,658 ____________ ____________ $788,913 $692,624 ============ ============ See accompanying notes to consolidated condensed financial statements.
STEWART & STEVENSON SERVICES, INC. CONSOLIDATED CONDENSED STATEMENT OF EARNINGS (In thousands, except per share data)
Nine Months Ended Three Months Ended October 31 October 31 ____________________________ ____________________________ 1994 1993 1994 1993 ____________ ____________ ____________ ____________ (Unaudited) (Unaudited) Sales $850,521 $737,230 $304,248 $259,141 Cost of sales 718,584 624,651 257,072 218,274 ____________ ____________ ____________ ____________ Gross profit 131,937 112,579 47,176 40,867 Selling and administrative expenses 54,619 50,780 19,284 18,106 Interest expense 4,103 2,254 1,804 766 Other income (1,568) (821) (695) (448) ____________ ____________ ____________ ____________ 57,154 52,213 20,393 18,424 ____________ ____________ ____________ ____________ Earnings before income taxes 74,783 60,366 26,783 22,443 Income taxes 25,107 20,381 9,014 8,327 ____________ ____________ ____________ ____________ Earnings of consolidated companies 49,676 39,985 17,769 14,116 Equity in net earnings (loss) of unconsolidated affiliates (556) (36) (166) (48) ____________ ____________ ____________ ____________ Net earnings $ 49,120 $ 39,949 $ 17,603 $ 14,068 ============ ============ ============ ============ Weighted average number of shares of Common Stock outstanding 32,966 32,839 32,988 32,894 ============ ============ ============ ============ Net earnings per share $ 1.49 $ 1.22 $ .53 $ .43 ============ ============ ============ ============ Cash dividends per share $ .20 $ .17 $ .07 $ .06 ============ ============ ============ ============ See accompanying notes to consolidated condensed financial statements.
STEWART & STEVENSON SERVICES, INC. CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (Dollars in thousands)
Nine Months Ended October 31 ______________________________ 1994 1993 _____________ _____________ (Unaudited) Operating Activities Net earnings $ 49,120 $ 39,949 Adjustments to reconcile net earnings to net cash provided (used) by operating activities: Depreciation and amortization 17,233 15,330 Deferred income taxes (1,212) (346) Change in operating assets and liabilities: Receivables (17,377) 914 Recoverable costs and accrued profits not yet billed (54,024) (27,188) Inventories (21,390) (50,794) Accounts payable 21,621 (19,185) Billings on uncompleted contracts in excess of incurred costs (13,820) 20,546 Current income taxes 9,494 10,455 Other current liabilities 352 6,097 Other--principally long-term assets and liabilities (3,189) (1,271) _____________ _____________ Net Cash Used By Operating Activities (13,192) (5,493) Investing Activities Expenditures for property, plant and equipment (21,919) (25,684) Disposal of property, plant and equipment 1,215 524 _____________ _____________ Net Cash Used By Investing Activities (20,704) (25,160) Financing Activities Additions to long-term borrowings 35,290 167,738 Payments on long-term borrowings (36,212) (148,185) Borrowings and payments on short-term notes payable 36,000 -0- Dividends paid (6,594) (5,586) Exercise of stock options 1,579 2,752 _____________ _____________ Net Cash Provided By Financing Activities 30,063 16,719 _____________ _____________ Decrease in cash and equivalents (3,833) (13,934) Cash and equivalents, February 1 7,788 21,939 _____________ _____________ Cash and equivalents, October 31 $ 3,955 $ 8,005 ============= ============= Supplemental disclosure of cash flow information: Net cash paid during the period for: Interest payments $ 3,880 $ 2,203 Income tax payments $ 16,465 $ 8,923 See accompanying notes to consolidated condensed financial statements.
STEWART & STEVENSON SERVICES, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS Note A--Basis of Presentation and Significant Accounting Policies The accompanying consolidated condensed financial statements have been prepared in accordance with Rule 10-01 of Regulation S-X for interim financial statements required to be filed with the Securities and Exchange Commission and do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. However, the information furnished reflects all normal recurring adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods. The results of operations for the nine and three months ended October 31, 1994 are not necessarily indicative of the results that will be realized for the fiscal year ending January 31, 1995. The accounting policies followed by the Company in preparing interim consolidated financial statements are similar to those described in the "Notes to Consolidated Financial Statements" in the Company's January 31, 1994 Form 10-K. The Company's fiscal year begins on February 1 of the year indicated and ends on January 31 of the following year. For example, "Fiscal 1994" commenced on February 1, 1994 and ends on January 31, 1995. Net earnings per share of Common Stock were computed by dividing net earnings by the weighted average number of shares outstanding. Common Stock equivalents (outstanding options to purchase shares of Common Stock) were excluded from the computations as they were insignificant. The weighted average number of shares outstanding for the nine and three months ended October 31, 1994 includes 55,750 and 17,375 shares, respectively, issued pursuant to exercise of stock options. Note B--Financing Arrangements On October 5, 1994 the Company amended its loan agreement for revolving credit notes with banks ($55,000,000 subject to reduction at the Company's election) to extend the maturity date to July 31, 1997 and reduce the commitment fee to .15 of 1% on the daily average unused balance during the revolving period. Borrowings outstanding under the revolving credit loan bear interest at various options, the maximum rate being the prime rate. The revolving credit loan was issued pursuant to an agreement containing covenants which impose a minimum net worth on the company and restrict indebtedness and other items. Such covenants are similar to those in effect under the Company's other long-term debt agreements. Note C--Commitments and Contingencies The Company has been advised that on January 5, 1993, a former consultant of the Company filed a suit for himself and the United States of America alleging that the Company supplied false information in violation of the False Claims Act (the "Act"), engaged in common law fraud and misapplied costs incurred in connection with a change order under a 1987 government subcontract. Under the provisions of the Act, the suit has not been served upon the Company pending an investigation of the case by the U. S. Department of Justice and the U. S. Attorney's office. The suit alleges damages of $21 million plus unspecified penalties. The Company has denied any wrongdoing in connection with the pricing of the change order and believes that the case will be resolved, if a lawsuit is served on the Company, without any material effect on the financial position, net worth or results of operations of the Company. The Company is a defendant in a number of other lawsuits of the type normally associated with the Company's business and involving claims for damages. Management is of the opinion that such lawsuits will not result in any material liability to the Company. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the attached condensed consolidated financial statements and notes thereto, and with the Company's audited financial statements and notes thereto for the fiscal year ended January 31, 1994. RESULTS OF OPERATIONS The following table sets forth for the periods indicated the percentage of sales represented by certain items reflected in the Company's Consolidated Condensed Statement of Earnings.
Nine Months Ended Three Months Ended October 31 October 31 1994 1993 1994 1993 _________ _________ _________ _________ Sales 100.0% 100.0% 100.0% 100.0% Cost of sales 84.5 84.7 84.5 84.2 _________ _________ _________ _________ Gross profit 15.5 15.3 15.5 15.8 Selling and administrative expenses 6.4 6.9 6.3 7.0 Interest expense .5 .3 .6 .3 Other income (.2) (.1) (.2) (.2) _________ _________ _________ _________ 6.7 7.1 6.7 7.1 _________ _________ _________ _________ Earnings before income taxes 8.8 8.2 8.8 8.7 Income taxes 2.9 2.8 2.9 3.2 _________ _________ _________ _________ Earnings of consolidated companies 5.9 5.4 5.9 5.5 Equity in net earnings (loss) of unconsolidated affiliates (.1) .0 (.1) .0 _________ _________ _________ _________ Net earnings 5.8% 5.4% 5.8% 5.5% ========= ========= ========= =========
Sales for the first nine months of the year ending January 31, 1995 ("Fiscal 1994") increased 15.4% to $850,521,000 compared to sales of $737,230,000 for the same period in the year ended January 31, 1994 ("Fiscal 1993"). The Tactical Vehicle Systems (TVS) segment was the primary contributor to the Company's sales growth as its sales increased $84,332,000 (172%) for the first nine months of Fiscal 1994 compared to the same period in Fiscal 1993. The increase in TVS sales reflects the increase in truck production under the "Family of Medium Tactical Vehicles" (FMTV) contract to 1,046 trucks in Fiscal 1994 compared to 262 trucks in Fiscal 1993. Excluding transit product sales which were discontinued in Fiscal 1993, the Engineered Power Systems (EPS) segment sales increased $40,449,000 (9%) for the first nine months of Fiscal 1994 compared to the same period in Fiscal 1993. This growth was driven by the gas turbine division, as the operations and maintenance group continued its strong performance with sales for the first nine months of Fiscal 1994 exceeding sales over the same period in Fiscal 1993 by 48%. Turbine-driven generator sales increased slightly compared to the first nine months of Fiscal 1993. Within the diesel group, airline product sales continue to be outstanding reflecting the successful integration of two additional product lines which were acquired in the second quarter of Fiscal 1993. The Distribution segment also continued its steady growth which is attributable to the improving economy in the markets and territories serviced and expanded product lines. Sales for the third quarter of Fiscal 1994 increased 17.4% to $304,248,000 compared to sales of $259,141,000 during the third quarter of Fiscal 1993. The TVS segment and EPS segment contributed to this increase. TVS segment sales increased $23,575,000 (98%) for the third quarter of Fiscal 1994 compared to the same period in Fiscal 1993. Truck production under the FMTV contract was 331 trucks in the third quarter of Fiscal 1994, compared to 478 and 237 for the second and first quarters of Fiscal 1994, respectively. The third quarter reduced production rate is mainly the result of model changes requested by the U. S. Army. EPS segment sales increased $20,906,000 (14%) for the third quarter of Fiscal 1994 compared to the same period in Fiscal 1993. This increase is mainly attributable to the gas turbine product lines as production of turbine-driven generators and the aftermarket revenues from operations and maintenance contracts increased over the same period in Fiscal 1993. Within the diesel group, petroleum equipment sales rebounded in the third quarter, resulting in a 27% sales increase over the third quarter of Fiscal 1993. The Distribution segment sales increase of 6% over the third quarter of Fiscal 1993 is consistent with the increase in the first half of Fiscal 1994. Gross profit margins for the first nine months and third quarter of Fiscal 1994 remained consistent with the same periods in Fiscal 1993. Selling and administrative expenses incurred by the Company during the first nine months and third quarter of Fiscal 1994 increased 7.6% and 6.5%, respectively, when compared to the same periods in Fiscal 1993, primarily due to increases in spending levels associated with the increased sales volume. However, selling and administrative expenses for the first nine months and third quarter of Fiscal 1994 have declined as a percentage of sales to 6.4% and 6.3%, respectively, as compared to 6.9% and 7.0% for the same periods in Fiscal 1993. Interest expense as a percentage of sales for the first nine months and third quarter of Fiscal 1994 increased over the same periods in Fiscal 1993 due to an increase in both outstanding debt and interest rates. Net earnings of $49,120,000 ($1.49 per share) and $17,603,000 ($.53 per share) for the first nine months and third quarter of Fiscal 1994, respectively, represent 23% and 25% increases over the same periods in Fiscal 1993. This growth in earnings is primarily the result of the increases in sales discussed above. FMTV CONTRACT STATUS The Company has been requested by the U. S. Government to rebaseline the FMTV contract to consolidate the pending and submitted contract change requests related to government directed changes and delays. Rebaselining involves establishment of an updated contract schedule and a repricing of the contract. The Company expects to begin the negotiation of this rebaselining during the fourth quarter of Fiscal 1994. During the third quarter, the Company was notified that the U. S. Government had experienced an interruption in its testing of the FMTV trucks due to the redeployment of testing personnel to more urgent military matters. This interruption precipitated a government request to the Company to reduce FMTV production levels through August 1995. Finally, the Company anticipates that during Fiscal 1995, the government may request modification to the contract to spread the Fiscal 1994, 1995, and 1996 contract quantities of trucks over a longer time period, possibly into Fiscal 1998. UNFILLED ORDERS The Company's unfilled orders consist of written purchase orders, letters of intent, and oral commitments. These unfilled orders are generally subject to cancellation or modification due to customer relationships or other conditions. Purchase options are not included in unfilled orders until exercised. Unfilled orders at October 31, 1994, and at the close of Fiscal 1993 were as follows: ____________________________________________________________________________________________
October 31 January 31 1994 1994 ____________________________________________________________________________________________ (Dollars in millions) Engineered Power Systems Equipment $ 420.9 $ 491.5 Operations and Maintenance 264.5 269.7 ________ ________ 685.4 761.2 Distribution 45.9 32.6 Tactical Vehicle Systems 1,032.2 1,119.5 ________ ________ $1,763.5 $1,913.3 ======== ========
Although no assurance can be given, the Company expects sales of the Engineered Power Systems segment to continue to be weighted in favor of turbine-driven equipment because of the large number of unfilled orders for these units, the number of proposals that are presently outstanding and the current worldwide need for additional electrical generating capacity. Unfilled orders of the Tactical Vehicle Systems segment consists principally of the contracts awarded in October 1991, by the United States Department of the Army, to manufacture medium tactical vehicles. CAPITAL EXPENDITURES AND COMMITMENTS Capital spending for property, plant and equipment totalled $21,919,000 in the first nine months of Fiscal 1994 compared to $25,684,000 in the same period of Fiscal 1993. Total capital expenditures for Fiscal 1994 includes approximately $3,780,000 associated with the acquisition of Creole. The overall reduction in capital expenditures during Fiscal 1994 in comparison to Fiscal 1993 reflects the substantial completion of both the capital expenditure program for the TVS segment and the program to upgrade EPS segment facilities during Fiscal 1993. LIQUIDITY AND SOURCES OF CAPITAL Long-term borrowings at October 31, 1994 were unchanged from the end of Fiscal 1993. The Company has $55,000,000 in committed credit facilities, which were fully utilized as of October 31, 1994. The Company also has additional banking relationships which provide uncommitted borrowing arrangements. These short- term borrowings increased to $41,000,000 at October 31, 1994 as compared to $5,000,000 at the end of Fiscal 1993. The increase in overall borrowing levels is primarily attributable to increased working capital needs of the gas turbine operations of the EPS segment which fluctuate significantly depending on the progress payment streams of the contracts-in-process. The Company regularly bids on large commercial and military contracts which, if awarded to the Company, could significantly affect both working capital and capital expenditure needs. The Company may expand its Distribution and Engineered Power Systems segments by selective acquisition of additional distribution territories and product lines. In November 1994, the Company signed an agreement for the acquisition of Power Application & Mfg. Co., a Waukesha distributor for the western United States, for approximately $17,600,000. Such activities have created a need for working capital and capital expenditures in excess of existing committed lines of credit. The Company plans to increase its committed credit facilities to adequately meet its foreseeable cash requirements. ACCOUNTING DEVELOPMENTS In November 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 112 "Employers' Accounting for Postemployment Benefits" (SFAS 112), which is effective for fiscal years beginning after December 15, 1993. The effect of initially applying this statement is to be reported as the effect of a change in accounting principle. This new statement will require accrual of postemployment benefits during the years an employee provides services. The Company anticipates adoption of the new standard in the fourth quarter of Fiscal 1994, and management's initial estimates indicate that SFAS 112 will not have a material impact on the Company's financial position or results of operations. PART II. OTHER INFORMATION Item 2. Changes in Securities. (a) Inapplicable. (b) Note B to the consolidated condensed financial statements in Part I of this report is incorporated herein by reference. Item 6. Exhibits and Reports on Form 8-K. (a) The following exhibits are filed as a part of this report pursuant to Item 601 of Regulation S-K. 4 Agreement to File Loan Agreement 27 Financial Data Schedule (b) No reports on Form 8-K were filed during the three months ended October 31, 1994. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. STEWART & STEVENSON SERVICES, INC. Date: December 2, 1994 By: /s/ Robert L. Hargrave _________________ _______________________ Robert L. Hargrave Group Vice President, Chief Financial Officer & Treasurer (Principal Financial Officer) EXHIBIT INDEX Exhibit Number and Description 4 Agreement to File Loan Agreement 27 Financial data schedule EXHIBIT 4 The Company has several instruments which define the rights of holders of long- term debt. As of October 31, 1994, the total of all securities authorized under any individual instrument with respect to long-term debt does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis. Accordingly, such instruments and any amendments thereto are not filed as a part of this report. The Company agrees to furnish upon request of the Securities and Exchange Commission any instruments not filed herewith relating to its long-term debt. EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS JAN-31-1995 OCT-31-1994 3,955 0 164,669 0 460,887 630,311 226,781 (96,587) 788,913 293,911 68,000 161,945 0 0 240,818 788,913 850,521 850,521 718,584 718,584 57,154 0 4,103 74,783 25,107 49,120 0 0 0 49,120 1.49 1.49
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