0000094328-95-000027.txt : 19950915 0000094328-95-000027.hdr.sgml : 19950915 ACCESSION NUMBER: 0000094328-95-000027 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950731 FILED AS OF DATE: 19950914 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: STEWART & STEVENSON SERVICES INC CENTRAL INDEX KEY: 0000094328 STANDARD INDUSTRIAL CLASSIFICATION: ENGINES & TURBINES [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: 001-11443 FILM NUMBER: 95573705 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 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 31, 1995 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 33,042,588 Shares (Class) (Outstanding at July 31, 1995) 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 -- July 31, 1995 and January 31, 1995. Consolidated Condensed Statement of Earnings -- Six Months and Three Months Ended July 31, 1995 and 1994. Consolidated Condensed Statement of Cash Flows -- Six Months Ended July 31, 1995 and 1994. Notes to Consolidated Condensed Financial Statements. STEWART & STEVENSON SERVICES, INC. CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION (Dollars in thousands)
July 31 January 31 1995 1995 ____________ ____________ (Unaudited) ASSETS CURRENT ASSETS Cash and equivalents $ 8,493 $ 3,987 Accounts and notes receivable, net 208,284 186,814 Recoverable costs and accrued profits not yet billed 288,525 227,467 Inventories: Engineered Power Systems 197,130 224,729 Distribution 131,865 121,273 Excess of current costs over LIFO values (51,540) (50,135) ____________ ___________ 277,455 295,867 Other 1,354 364 ____________ ____________ TOTAL CURRENT ASSETS 784,111 714,499 PROPERTY, PLANT AND EQUIPMENT 238,362 230,215 Allowances for depreciation and amortization (109,078) (98,355) ____________ ____________ 129,284 131,860 OTHER ASSETS 26,920 29,257 ____________ ____________ $940,315 $875,616 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 75,000 $ 42,000 Accounts payable 144,773 164,474 Billings on uncompleted contracts in excess of incurred costs 22,316 11,284 Current income taxes 58,027 42,240 Other current liabilities 47,229 51,156 ____________ ____________ TOTAL CURRENT LIABILITIES 347,345 311,154 LONG-TERM DEBT 116,858 116,900 DEFERRED INCOME TAXES 7,238 8,038 ACCRUED POSTRETIREMENT BENEFITS 15,251 15,252 DEFERRED COMPENSATION 5,438 5,269 SHAREHOLDERS' EQUITY Common Stock, without par value,100,000,000 and 50,000,000 shares authorized at July 31, 1995 and January 31, 1995, respectively; 33,054,408 and 33,009,635 shares issued at July 31, 1995 and January 31, 1995, respectively, including 11,820 shares held in treasury 163,253 162,057 Retained earnings 284,965 256,979 ____________ ____________ 448,218 419,036 Less cost of treasury stock (33) (33) ____________ ____________ TOTAL SHAREHOLDERS' EQUITY 448,185 419,003 ____________ ____________ $940,315 $875,616 ============ ============ See accompanying notes to consolidated condensed financial statements.
STEWART & STEVENSON SERVICES, INC. CONSOLIDATED CONDENSED STATEMENT OF EARNINGS (In thousands, except per share data)
Six Months Ended Three Months Ended July 31 July 31 _______________________ ________________________ 1995 1994 1995 1994 ________ ________ ________ ________ (Unaudited) (Unaudited) Sales $608,862 $546,273 $319,840 $287,118 Cost of sales 510,371 461,512 269,891 242,903 ________ ________ ________ ________ Gross profit 98,491 84,761 49,949 44,215 Selling and administrative expenses 44,179 35,335 22,518 18,101 Interest expense 6,100 2,299 3,150 1,260 Other income, net (1,119) (873) (797) (316) ________ ________ ________ ________ 49,160 36,761 24,871 19,045 ________ ________ ________ ________ Earnings before income taxes 49,331 48,000 25,078 25,170 Income taxes 16,563 16,093 8,435 8,497 ________ ________ ________ ________ Earnings of consolidated companies 32,768 31,907 16,643 16,673 Equity in net earnings (loss) of unconsolidated affiliates 174 (390) 284 (185) ________ ________ ________ ________ Net earnings $ 32,942 $ 31,517 $ 16,927 $ 16,488 ======== ======== ======== ======== Weighted average number of shares of Common Stock outstanding 33,022 32,955 33,037 32,968 ======== ======== ======== ======== Net earnings per share $ 1.00 $ .96 $ .51 $ .50 ======== ======== ======== ======== Cash dividends per share $ .15 $ .13 $ .08 $ .07 ======== ======== ======== ======== See accompanying notes to consolidated condensed financial statements.
STEWART & STEVENSON SERVICES, INC. CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (Dollars in thousands)
Six Months Ended July 31 __________________________ 1995 1994 ____________ ____________ (Unaudited) Operating Activities Net earnings $ 32,942 $ 31,517 Adjustments to reconcile net earnings to net cash provided (used) by operating activities: Depreciation and amortization 11,885 11,318 Deferred income taxes (800) (876) Change in operating assets and liabilities: Receivables (21,470) 12,231 Recoverable costs and accrued profits not yet billed (61,058) (31,490) Inventories 18,412 19,651 Accounts payable (19,701) (24,923) Billings on uncompleted contracts in excess of incurred costs 11,032 (11,539) Current income taxes 15,787 1,912 Other current liabilities (3,999) (6,618) Other--principally long-term assets and liabilities 1,354 (3,456) ____________ ____________ Net Cash Used By Operating Activities (15,616) (2,273) Investing Activities Expenditures for property, plant and equipment (9,959) (12,350) Disposal of property, plant and equipment 813 673 ____________ ____________ Net Cash Used By Investing Activities (9,146) (11,677) Financing Activities Additions to long-term borrowings 71 25,216 Payments on long-term borrowings (42) (26,212) Borrowings and payments on short-term notes payable, net 33,000 17,000 Dividends paid (4,956) (4,285) Exercise of stock options 1,195 1,092 ____________ ____________ Net Cash Provided By Financing Activities 29,268 12,811 ____________ ____________ Increase (Decrease) in cash and equivalents 4,506 (1,139) Cash and equivalents, February 1 3,987 7,788 ____________ ____________ Cash and equivalents, July 31 $ 8,493 $ 6,649 ============ ============ Supplemental disclosure of cash flow information: Net cash paid during the period for: Interest payments $ 5,542 $ 2,234 Income tax payments $ 6,258 $ 15,058 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 six months and three months ended July 31, 1995 are not necessarily indicative of the results that will be realized for the fiscal year ending January 31, 1996. 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, 1995 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 1995" commenced on February 1, 1995 and ends on January 31, 1996. 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) are excluded from the computations as they are insignificant. The weighted average number of shares outstanding for the six and three months ended July 31, 1995 includes 42,250 and 16,250 shares issued pursuant to exercise of stock options. Note B--Commitments and Contingencies Major contracts for military systems are performed over extended periods of time and are subject to changes in scope of work and delivery schedules. Pricing negotiations on changes and settlement of claims often extend over prolonged periods of time. The Company's ultimate profitability on such contracts will depend not only upon the accuracy of the Company's cost projections, but also the eventual outcome of an equitable settlement of contractual issues with the U.S. Government. On May 3, 1995, an indictment was returned by a federal Grand Jury in Houston, Texas, accusing the Company, a former consultant and four employees, including the Company's President, of one count of major fraud against the United States, four counts of false statements and one count of conspiracy to commit major fraud, make false statements and interfere with the administration of a foreign military sale. All of the counts arise from a 1987 subcontract to supply diesel generator sets for installation at long-range radar sites in Saudi Arabia (the "Peace Shield"). The indictment alleges that a former employee of the general contractor for the Peace Shield program, who later became a consultant to the Company, conspired with the Company and the other defendants to award the subcontract to the Company. The indictment also alleges that the government was defrauded out of approximately $5 million in connection with cost savings from a change order under the Peace Shield contract and that the Company made false statements relating to cost estimates in connection with such change order. The Company and each individual have denied all charges under the indictment and the case is pending in the United States District Court, Southern District of Texas, Houston Division. The Company is not able to make a reasonable estimate of the fines or penalties that could be imposed under the Federal Sentencing Guidelines in the event of a conviction under the indictment. Such fines and penalties could be substantial and adversely affect the Company's financial position and results of operations. A conviction could also further adversely affect the Company's ability to participate in future government contracts. See Management's Discussion and Analysis of Financial Condition and Results of Operations. Also in connection with the Peace Shield contract, the Company has been advised that the former consultant of the Company referred to above filed a suit in the United States District Court, Southern District of Texas, Houston Division, 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. 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 treble damages of $21 million plus unspecified penalties. Proceedings in this case have been stayed pending resolution of the criminal matter referred to above. The Company cannot predict the outcome of this action or the likelihood that substantial damages will result. However, the Company intends to vigorously defend this case if it is served upon the Company. On May 16, 1995, C. Daniel Chill filed a purported class action suit in the United States District Court, Southern District of Texas, Houston Division, against the Company and three of its officers and directors on behalf of himself and all persons that purchased shares of Common Stock between May 2, 1994 and May 3, 1995. An amended complaint was filed on June 7, 1995. The suit alleges that the Company violated various sections of and rules under the Securities Exchange Act of 1934 and common law by disseminating material false and misleading information, failing to disclose material information and failing to correct earlier statements that were no longer true, all relating to the Peace Shield investigation and indictment. The suit claims unspecified compensatory and punitive damages. The Company cannot predict the outcome of this action or the likelihood that substantial damages will result. However, the Company will vigorously defend this case and believes that this case will be resolved without any material affect on the Company's financial condition or results of operations. The Company has not established any reserves or accruals for any potential liability that may be subsequently found in any of the foregoing cases. The Company is a defendant in a number of other lawsuits relating to contractual, product liability, personal injury and warranty matters and otherwise of the type normally incident to the Company's business. Management is of the opinion that such lawsuits will not result in any material liability to the Company. Note C--Inventories At January 31, 1995, the Engineered Powered Systems segment's inventory included approximately $14,789,000 of costs on a certain U.S. Government contract in excess of contractual authorization. During the second quarter of Fiscal 1995, the Company recognized $3,500,000 of additional costs under such contract based upon preliminary settlement discussions and the opinion of outside legal counsel that the Company will recover a substantial portion of the amount claimed. At July 31, 1995, the Engineered Power Systems segment's inventory in excess of billing included $18,794,000 relating to costs incurred by the Company which will be collectible upon either contractual ammendment or approval of claims increasing funding. 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, 1995. 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.
Six Months Ended Three Months Ended July 31 July 31 1995 1994 1995 1994 _________ _________ _________ _________ Sales 100.0% 100.0% 100.0% 100.0% Cost of sales 83.8 84.5 84.4 84.6 _________ _________ _________ _________ Gross profit 16.2 15.5 15.6 15.4 Selling and administrative expenses 7.3 6.5 7.0 6.3 Interest expense 1.0 .4 1.0 .4 Other income, net (.2) (.2) (.2) (.1) _________ _________ _________ _________ 8.1 6.7 7.8 6.6 _________ _________ _________ _________ Earnings before income taxes 8.1 8.8 7.8 8.8 Income taxes 2.7 2.9 2.6 3.0 _________ _________ _________ _________ Earnings of consolidated companies 5.4 5.9 5.2 5.8 Equity in net earnings (loss) .0 (.1) .1 (.1) _________ _________ _________ _________ Net earnings 5.4% 5.8% 5.3% 5.7% ========= ========= ========= =========
Sales for the first six months of the year ending January 31, 1996 ("Fiscal 1995") increased 11.5% to $608,862,000 compared to sales of $546,273,000 for the same period in the year ended January 31, 1995. The Distribution segment was the primary contributor to the Company's sales growth with an increase in sales of $37,309,000 (23%) in the first half of Fiscal 1995 compared to the same period in Fiscal 1994. This increase is mainly attributable to the acquisition of the assets and business of Power Application & Mfg., Co. ("PAMCO"), a Waukesha distributor for the western United States, during the fourth quarter of Fiscal 1994. The distribution of product lines acquired from PAMCO contributed sales of $22,312,000 in the first half of Fiscal 1995. Excluding sales relating to the PAMCO acquisition, the Distribution segment's increase of 9% in the first half of Fiscal 1995 over the same period in Fiscal 1994 reflects the continued growth of the economies in the territories serviced by the Company. The Engineered Power Systems (EPS) segment sales increased $17,549,000 (6%) for the first half of Fiscal 1995 compared to the same period in Fiscal 1994. The sales growth in the EPS segment is attributed to the sales of gas turbine products and services. Aftermarket services, including contract operation of power plants, increased $11,332,000 in the first half of Fiscal 1995 compared to the first half of Fiscal 1994. This increase includes $8,180,000 arising from the acquisition of certain assets and business of CPS International, Inc. during the third quarter of Fiscal 1994. The Tactical Vehicle Systems (TVS) segment sales increased $5,151,000 (6%) for the first half of Fiscal 1995 compared to the same period in Fiscal 1994. The increase in TVS sales reflects the increase in truck production under the "Family of Medium Tactical Vehicles" (FMTV) contract to 891 trucks in the first half of Fiscal 1995 compared to 715 trucks in the same period in Fiscal 1994. Sales for the second quarter of Fiscal 1995 increased $32,722,000 (11.4%) to $319,840,000 compared to sales of $287,118,000 during the second quarter of Fiscal 1994. The Distribution segment and EPS segment contributed to this increase. The Distribution segment sales increased $19,506,000 (24%) for the second quarter of Fiscal 1995 compared to the same period in Fiscal 1994. EPS segment sales increased $10,000,000 (6.8%) for the second quarter of Fiscal 1995 compared to the same period in Fiscal 1994. The gross profit margin of 16.2% for the first half of Fiscal 1995 improved as compared to 15.5% for the same period in Fiscal 1994. Gross profit margins for the second quarter of Fiscal 1995 were 15.6% compared to 15.4% for the second quarter of 1994. Higher gross profit margins recognized on power generation equipment during the first half of Fiscal 1995 were partially offset by lower gross profit margins on compression equipment recognized by the Company in the second quarter of Fiscal 1995. Also in the second quarter of Fiscal 1995, the Company recognized $3,500,000 in gross profits based on initial settlement discussions relating to a pending contract dispute. See Note C to the Consolidated Condensed Financial Statements. Selling and administrative expenses for the first half of Fiscal 1995 increased as a percentage of sales to 7.3% compared to 6.5% for the same period in Fiscal 1994. The significant portion of this increase is attributable to the two acquisitions made in the second half of Fiscal 1994 and to the increased administrative costs related to the establishment of an international infrastructure, primarily for gas turbine product support. Interest expense for the first half of Fiscal 1995 increased to $6,100,000, up from $2,299,000 for the same period in Fiscal 1994. This increase is due to an increase in both interest rates and outstanding debt required to carry increased inventories of turbine-driven equipment and other working capital items. Net earnings of $32,942,000 ($1.00 per share) for the first half of Fiscal 1995 represents a 4.5% increase compared to $31,517,000 ($.96 per share) for the same period in Fiscal 1994. This growth in earnings is primarily the result of the increases in sales and resulting margins discussed above. GOVERNMENT CONTRACTS STATUS Initial Operational Test and Evaluation under the FMTV Contract was completed in the second quarter and recently released test data shows outstanding results in every category. Overall, the fleet of trucks bettered requirements by scoring between 223 percent and 337 percent above the Army's reliability standards. The Company has been informed that a decision to approve full rate production and type classification for the FMTV to be placed in the U.S. Army inventory was reached August 16, 1995 with formal notification to be issued shortly. Actual fielding of the vehicles to combat troops is expected to begin as soon as December of this year. Under the terms of the FMTV contract, all vehicles produced before the full rate production decision must be retrofitted with any changes required by test results or specification changes ordered by the government. The Company has scheduled the retrofit to occur during the fourth quarter of Fiscal 1995. The Company is currently in low rate initial production. The current fiscal year's planned production quantity is scheduled for completion by the end of the third quarter. Full rate production is expected to commence after receipt of program certification and completion of the retrofit program. EFFECT OF CERTAIN LITIGATION On May 3, 1995, the Company and four current employees, including the Company's President, were indicted by a federal Grand Jury on six counts arising out of a 1987 subcontract to supply diesel generator sets for installation in Saudi Arabia. See Note B to the Consolidated Condensed Financial Statements. Based on the indictment, the Company has been suspended from bidding on or receiving any new contracts or extending any existing contracts with agencies of the executive branch of the federal government or receiving the benefit of federal assistance payments. Moreover, a conviction of the Company on the charges set forth in the indictment could result in an ineligibility from receiving government contracts for up to three years. Under the regulations governing suspension, existing contracts are not affected. In addition, the Department of the Army has determined that there are compelling reasons that would permit the extension or renewal of the Company's FMTV contract at any time prior to September 30, 1995. Any vehicles under contract prior to that date will not be affected by the suspension. The suspension will affect all future procurement and nonprocurement activity of the federal government and may affect the procurement activities of certain state and local governments. Except for sales pursuant to the FMTV contracts, direct and indirect sales to agencies of the federal government did not make a material contribution to any of the Company's business segments during Fiscal 1994 and are not expected to make a material contribution in the future. Nonprocurement activity affected by the suspension includes the receipt of grants and loans from the federal government and sales that are directly or indirectly funded by loans from agencies of the federal government. The Company is not the direct recipient of any grants or loans from agencies of the federal government but the Company's EPS division regularly sells equipment and services to recipients of loans from Export Import Bank ("EXIM Bank"), Overseas Private Investment Corporation ("OPIC") and other such agencies. The Company has been advised by representatives of EXIM Bank and OPIC that such organizations will not provide financing or other assistance for projects for which the Company is a vendor as long as the Company is suspended or debarred from government contracting. If alternative financial facilities are not available or are unacceptable to the Company's customers, the continued suspension or debarment of the Company could materially adversely affect EPS segment sales. 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 July 31, 1995, and at the close of Fiscal 1994 were as follows:
July 31 January 31 1995 1995 ____________ ____________ (Dollars in millions) Engineered Power Systems Equipment $ 365.7 $ 416.0 Operations and Maintenance 317.7 311.6 ____________ ____________ 683.4 727.6 Distribution 44.8 40.0 Tactical Vehicle Systems 931.3 1,017.8 ____________ ____________ Total $1,659.5 $1,785.4 ============ ============
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. The contracts are subject to Congressional approval of necessary funding for future program years. As of July 31, 1995, funding for purchases for program year five, which begins during the Company's Fiscal 1997, had not been received. If such funding is not approved or is limited or delayed, the number of trucks produced in each fiscal year may be reduced or contract performance may be delayed. CAPITAL EXPENDITURES AND COMMITMENTS Capital spending for property, plant and equipment was $9,959,000 for the first half of Fiscal 1995 compared to $12,350,000 for the same period in Fiscal 1994. LIQUIDITY AND SOURCES OF CAPITAL Long-term borrowings at July 31, 1995 decreased slightly from the end of Fiscal 1994. The Company has $105,000,000 in committed credit facilities which were fully utilized at July 31, 1995 and at the end of Fiscal 1994. The Company has additional banking relationships which provide uncommitted borrowing arrangements. These short-term borrowings increased to $75,000,000 at July 31, 1995 from $42,000,000 at the end of Fiscal 1994. This debt increase of $33,000,000 is principally a result of the timing of customer progress payments for contracts-in-process and absence of progress payments under certain contracts under production during Fiscal 1995. The Company's working capital needs can fluctuate significantly depending on the progress payment streams of contracts-in-process. The Company regularly bids on large commercial contracts and turnkey construction contracts that require the Company to finance work-in-process. If awarded to the Company, these contracts could also affect working capital needs. The Company may expand its Distribution and EPS 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. PART II. OTHER INFORMATION Item 1. Legal Proceedings. See Note B to the Consolidated Condensed Financial Statements. Item 2. Changes in Securities. (a) An amendment of the Articles of incorporation to increase the number of authorized shares of Common Stock from 50,000,000 shares to 100,000,000 shares was approved by stockholders in the Annual Meeting on June 13, 1995. A certificate of Amendment was filed with the State of Texas on July 20, 1995. Item 4. Submission of Matters to a Vote of Security Holders. The Annual Meeting of Shareholders of the Company was held on June 13, 1995. Set forth below is a brief description of each matter acted upon at the meeting and the number of votes cast for, against or withheld, and abstaining or not voting as to each matter. Election of Directors
AGAINST OR FOR WITHHELD J. Carsey Manning 27,294,149 642,582 Donald E. Stevenson 27,345,694 591,037 Robert H. Parsley 27,288,106 648,625 Robert S. Sullivan 27,381,993 554,738
The approval of the 1994 Director Stock Option Plan.
AGAINST OR ABSTAINED OR FOR WITHHELD NOT VOTED 21,142,811 5,762,166* 163,888
The Amendment of the Second Restated Articles of Incorporation to increase the authorized Common Stock of the Company from 50,000,000 shares to 100,000,000 shares, without par value.
AGAINST OR ABSTAINED OR FOR WITHHELD NOT VOTED 26,027,160 921,615* 120,090
The Amendment of the Second Restated Articles of Incorporation to limit the personal liability of directors.
AGAINST OR ABSTAINED OR FOR WITHHELD NOT VOTED 25,380,174 1,516,214* 172,477
Ratification of Accountants
AGAINST OR ABSTAINED OR FOR WITHHELD NOT VOTED 27,875,875 32,064 28,792 *Broker Non-Vote 867,866
Item 5. Other Information. On June 8, 1995, the Company's President and Chief Executive Officer, Mr. Bob H. O'Neal, and three managers were placed on administrative leave as a result of the indictment of the Company and such individuals and the suspension of the Company. See Note B to the Consolidated Condensed Financial Statements and Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Mr. Robert L. Hargrave, the Company's Vice President, Treasurer and Chief Financial Officer, has been appointed as the Acting Chief Executive Officer during the term of Mr. O'Neal's administrative leave. 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. 3(i) Articles of Incorporation 27 Financial Data Schedule (b) The following reports on Form 8-K were filed during the three months ended July 31, 1995. Form 8-K Reporting Date - May 3, 1995. Items Reported - Item 5. Other Events (Indictment) Form 8-K Reporting Date - May 12, 1995. Items Reported - Item 5. Other Events (Suspension) 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: 09/13/95 By: /s/ Robert L. Hargrave Robert L. Hargrave Group Vice President, Chief Financial Officer & Treasurer (Principal Financial Officer) EXHIBIT INDEX Exhibit Number and Description 3(i) Articles of incorporation 27 Financial data schedule
EX-3 2 ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION Pursuant to the provisions of Article 4.04 of the Texas Business Corporation Act, the undersigned corporation adopts the following articles of amendment to its articles of incorporation: ARTICLE ONE The name of the corporation is Stewart & Stevenson Services, Inc. ARTICLE TWO The following amendments to the articles of incorporation were adopted by the shareholders of the corporation on June 13, 1995. The number of shares outstanding at the time the amendments were adopted, and entitled to vote on the amendments were 33,026,815. ARTICLE THREE Article VI of the Second Restated Articles of Incorporation is amended to read as follows in its entirety: The aggregate number of shares which the corporation shall have authority to issue is one hundred million (100,000,000) shares of common stock, without par value. The number of shares voted for the amendment was 26,027,160. The number of shares voted against the amendment was 921,615. ARTICLE FOUR The Second Restated Articles of Incorporation is amended by adding the following new Article IX immediately following Article VIII: IX. A director of the corporation shall not be liable to the corporation or its shareholders for monetary damages for an act or omission in the director's capacity as a director, except that this Article does not eliminate or limit the liability of a director to the extent the director is found liable for (i) a breach of the director's duty of loyalty to the corporation or its shareholders; (ii) an act or omission not in good faith that constitutes a breach of duty of the director to the corporation or an act or omission that involves intentional misconduct or a knowing violation of the law; (iii) a transaction from which the director received an improper benefit, whether or not the benefit resulted from an action taken within the scope of the director's office; or (iv) an act or omission for which the liability of a director is expressly provided by an applicable statute. Any repeal or amendment of this Article by the shareholders of the corporation shall be prospective only and shall not adversely affect any limitation on the liability of a director of the corporation existing at the time of such repeal or amendment. In addition to the circumstances in which the director of the corporation is not liable as set forth in the preceding sentences, the director shall not be liable to the fullest extent permitted by any provisions of the statutes of Texas hereafter enacted that further limits the liability of a director. The number of shares voted for the amendment was 25,380,174. The number of shares voted against the amendment were 1,516,214. ARTICLE FIVE The amendment does not provide for an exchange, reclassification or cancellation of issued shares. ARTICLE SIX These amendments do not affect a change in the amount of stated capital. /s/ Lawrence E. Wilson _________________________ Vice President & Secretary EX-27 3
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 6-MOS JAN-31-1996 JUL-31-1995 8,493 0 210,204 (1,920) 565,980 784,111 238,362 (109,078) 940,315 347,345 116,858 163,253 0 0 284,932 940,315 608,862 608,862 510,371 510,371 49,160 0 6,100 49,331 16,563 32,942 0 0 0 32,942 1.00 1.00