-----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, Tfdy84Pc5xlq6RhtV4NPvi0dRSbTuvWARTJghDYdRuRBceUoe4oYCZrErzS+GCfZ 2KiTunRxw4o4zDK1ntXdYw== 0000094328-94-000036.txt : 19940609 0000094328-94-000036.hdr.sgml : 19940609 ACCESSION NUMBER: 0000094328-94-000036 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940430 FILED AS OF DATE: 19940603 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: 94532816 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 10Q 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 April 30, 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 32,945,190 Shares (Class) (Outstanding at April 30, 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 -- April 30, 1994 and January 31, 1994. Consolidated Condensed Statement of Earnings -- Three Months Ended April 30, 1994 and 1993. Consolidated Condensed Statement of Cash Flows -- Three Months Ended April 30, 1994 and 1993. Notes to Consolidated Condensed Financial Statements. STEWART & STEVENSON SERVICES, INC. CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION (Dollars in thousands)
April 30 January 31 1994 1994 ___________ ___________ (Unaudited) ASSETS CURRENT ASSETS Cash and equivalents $ 2,408 $ 7,788 Accounts and notes receivable 167,798 147,292 Recoverable costs and accrued profits not yet billed 119,633 115,868 Inventories: Engineered Power Systems 180,872 217,180 Distribution 97,382 98,885 Adjustments to a LIFO Basis (47,555) (46,460) ___________ ___________ 230,699 269,605 Other 1,996 224 ___________ ___________ TOTAL CURRENT ASSETS 522,534 540,777 PROPERTY, PLANT AND EQUIPMENT 214,309 208,661 Allowances for depreciation and amortization (86,895) (82,188) ___________ ___________ 127,414 126,473 OTHER ASSETS 29,122 25,374 ___________ ___________ $679,070 $692,624 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 30,000 $ 5,000 Accounts payable 91,231 131,780 Billings on uncompleted contracts in excess of incurred costs 19,264 31,088 Current income taxes 33,992 27,931 Other current liabilities 40,017 45,387 ___________ ___________ TOTAL CURRENT LIABILITIES 214,504 241,186 LONG-TERM DEBT--less current portion 68,000 68,000 DEFERRED INCOME TAXES 5,436 5,868 ACCRUED POSTRETIREMENT BENEFITS 15,028 15,028 DEFERRED COMPENSATION 4,096 3,884 SHAREHOLDERS' EQUITY Common Stock, without par value, 50,000,000 shares authorized; 32,957,010 and 32,948,885 shares issued at April 30, 1994 and January 31, 1994, respectively, including 11,820 shares held in treasury 160,661 160,366 Retained earnings 211,378 198,325 ___________ ___________ 372,039 358,691 Less cost of treasury stock (33) (33) ___________ ___________ TOTAL SHAREHOLDERS' EQUITY 372,006 358,658 ___________ ___________ $679,070 $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)
Three Months Ended April 30 __________________________ 1994 1993 ___________ ___________ (Unaudited) Sales $259,155 $220,153 Cost of sales 218,609 186,465 ___________ ___________ Gross profit 40,546 33,688 Selling and administrative expenses 17,234 15,413 Interest expense 1,039 754 Other income (557) (330) ___________ ___________ 17,716 15,837 ___________ ___________ Earnings before income taxes 22,830 17,851 Income taxes 7,596 5,710 ___________ ___________ Earnings of consolidated companies 15,234 12,141 Equity in net loss of unconsolidated affiliates (205) (49) ___________ ___________ Net earnings $ 15,029 $ 12,092 =========== =========== Weighted average number of shares of Common Stock outstanding 32,942 32,783 =========== =========== Net earnings per share $ .46 $ .37 =========== =========== Cash dividends per share $ .06 $ .05 =========== =========== See accompanying notes to consolidated condensed financial statements.
STEWART & STEVENSON SERVICES, INC. CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (Dollars in thousands)
Three Months Ended April 30 _____________________________ 1994 1993 ___________ ___________ (Unaudited) Operating Activities Net earnings $ 15,029 $ 12,092 Adjustments to reconcile net earnings to net cash used in operating activities: Depreciation and amortization 5,700 4,775 Deferred income taxes (432) 196 Other--principally long-term assets and liabilities (5,477) (408) Change in operating assets and liabilities (36,791) (27,410) ___________ ___________ Net Cash Used In Operating Activities (21,971) (10,755) Investing Activities Expenditures for property, plant and equipment (6,742) (8,420) Disposal of property, plant and equipment 270 167 ___________ ___________ Net Cash Used In Investing Activities (6,472) (8,253) Financing Activities Additions to long-term borrowings 25,216 52,000 Payments on long-term borrowings (25,472) (50,201) Borrowings and payments on short-term notes payable 25,000 -0- Dividends paid (1,976) (1,640) Exercise of stock options 295 296 ___________ ___________ Net Cash Provided By Financing Activities 23,063 455 ___________ ___________ Decrease in cash and equivalents (5,380) (18,553) Cash and equivalents, February 1 7,788 21,939 ___________ ___________ Cash and equivalents, April 30 $ 2,408 $ 3,386 =========== =========== Supplemental disclosure of cash flow information: Net cash paid during the period for: Interest payments $ 867 $ 694 Income tax payments $ 2,206 $ 535 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 three months ended April 30, 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 three months ended April 30, 1994 includes 8,125 shares issued pursuant to exercise of stock options. Note B--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 a determination as to whether the Department of Justice will intervene and pursue the matter on behalf of the United States. 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 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. In connection with the sale of gas turbine engine-driven equipment and the execution of an operating and maintenance contract, the Company has entered into an agreement with a bank under which the Company will repurchase a power plant in the event that the owner defaults in the repayment of the loan secured by the power plant. The repurchase obligation runs for eight years from the date of commercial operation of the power plant and specifies a repurchase price not to exceed $29 million. 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.
Three Months Ended April 30 1994 1993 ________ ________ Sales 100.0% 100.0% Cost of sales 84.4 84.7 ________ ________ Gross profit 15.6 15.3 Selling and administrative expenses 6.6 7.0 Interest expense .4 .3 Other income (.2) (.1) ________ ________ 6.8 7.2 ________ ________ Earnings before income taxes 8.8 8.1 Income taxes 2.9 2.6 ________ ________ Earnings of consolidated companies 5.9 5.5 Equity in net earnings of unconsolidated affiliates (.1) .0 ________ ________ Net earnings 5.8% 5.5% ======== ========
Sales for the first quarter of Fiscal 1994 increased 17.7% to $259,155,000 compared to sales of $220,153,000 for the same period in Fiscal 1993. The Company's Engineered Power Systems (EPS) and Tactical Vehicle Systems (TVS) segments were the primary contributors to this increase. The EPS and TVS segments increased sales $18,533,000 (13.3%) and $17,810,000 (215.8%) respectively, for the first quarter of Fiscal 1994 compared to Fiscal 1993. The growth in the EPS segment sales is attributed to the gas turbine product lines. The number of contracts for turbine-driven products and the aftermarket revenues from operations and maintenance contracts produced a 17.6% growth rate in gas turbine products. The EPS segment was restrained by a lack of sales in the bus product line which was discontinued in the second half of Fiscal 1993, but which recorded sales of $9,341,000 during the first quarter of Fiscal 1993. The TVS segment has moved from test production in the first quarter of Fiscal 1993 to production of 237 trucks in the first quarter of Fiscal 1994. The Company expects 2,400 trucks to be completed in Fiscal 1994. Gross profit margins for the first three months of Fiscal 1994 were consistent with the same period in Fiscal 1993. Selling and administrative expenses incurred by the Company during the three months ended April 30, 1994 increased 11.8% when compared to the same period in Fiscal 1993, but have grown at a much slower rate than sales. When analyzed as a percentage of sales, selling and administrative expenses have declined to 6.6% of sales in the first quarter of Fiscal 1994 as compared to 7.0% of sales in the first quarter of Fiscal 1993. Interest expense for the three months ended April 30, 1994 was up 37.8% over the same period in Fiscal 1993 due primarily to an increase in both outstanding debt and interest rates. The net earnings of $15,029,000 ($.46 per share) for the three months ended April 30, 1994 represents a 24.3% increase compared to $12,092,000 ($.37 per share) for the three months ended April 30, 1993. This growth in earnings is primarily a result of the increase in sales discussed above. 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 April 30, 1994, and at the close of Fiscal 1993 were as follows: ______________________________________________________________________________________________
April 30, January 31, 1994 1994 ______________________________________________________________________________________________ (Dollars in millions) Engineered Power Systems Equipment . . . . . . . . . . . . $ 516.9 $ 491.5 Operations and Maintenance . . . 266.3 269.7 ___________ ___________ 783.2 761.2 Distribution . . . . . . . . . . . 27.8 32.6 Tactical Vehicle Systems . . . . . 1,093.4 1,119.5 ___________ ___________ Total . . . . . . . . . . . . . . $1,904.4 $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 need for additional electrical generating capacity in the United States and in many foreign countries. 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 (the "Family of Medium Tactical Vehicles" or "FMTV"). CAPITAL EXPENDITURES AND COMMITMENTS Capital spending for property, plant and equipment totalled $6,742,000 in the first quarter of Fiscal 1994 compared to $8,420,000 in the first quarter of Fiscal 1993. This decrease in the first quarter of 1994 reflects the return to historical capital expenditure levels after expansion programs at the EPS and TVS segment locations during the two previous fiscal years. LIQUIDITY AND SOURCES OF CAPITAL Long-term borrowings at April 30, 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 April 30, 1994. The Company also has additional banking relationships which provide uncommitted borrowing arrangements. These short- term borrowings increased to $30,000,000 at April 30, 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 and the TVS 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 the event that such activities create a need for working capital or capital expenditures in excess of existing committed lines of credit, the Company may seek to convert its uncommitted borrowing arrangements to committed credit facilities, to borrow under other long-term financing sources or to issue additional equity securities. The Company's current credit facilities appear adequate to 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" (FASB 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 FASB 112 will not have a material impact on the Company's financial position or results of operations. PART II. OTHER INFORMATION All items within Part II of this report are not applicable. 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: June 2, 1994 By: /s/ Robert L. Hargrave Robert L. Hargrave Group Vice President, Chief Financial Officer & Treasurer (Principal Financial Officer) -----END PRIVACY-ENHANCED MESSAGE-----