-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H+/06oKyaVJWipH1dtcTotFR2C/RDAN7pAF1ERE3GKbhCToG+s2B6zhozqO/QwcY 87id3cQ0wUYlhp/ZSCZpcw== 0000094328-96-000009.txt : 19960613 0000094328-96-000009.hdr.sgml : 19960613 ACCESSION NUMBER: 0000094328-96-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960430 FILED AS OF DATE: 19960611 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: 96579500 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 April 30, 1996 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 33,062,088 Shares (Class) (Outstanding at April 30, 1996) 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, 1996 and January 31, 1996. Consolidated Condensed Statement of Earnings -- Three Months Ended April 30, 1996 and 1995. Consolidated Condensed Statement of Cash Flows -- Three Months Ended April 30, 1996 and 1995. Notes to Consolidated Condensed Financial Statements. STEWART & STEVENSON SERVICES, INC. CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION (Dollars in thousands) April 30 January 31 1996 1996 ______________ ______________ ASSETS (Unaudited) CURRENT ASSETS Cash and equivalent $ 6,451 $ 6,325 Accounts and notes receivable, net 229,810 196,548 Recoverable costs and accrued profits not yet billed 311,884 317,855 Inventories: Engineered Power Systems 292,993 269,119 Distribution 141,769 145,179 Excess of current cost over LIFO values (54,601) (53,580) ______________ ______________ 380,161 360,718 Other 268 393 ______________ ______________ TOTAL CURRENT ASSETS 928,574 881,839 PROPERTY, PLANT AND EQUIPMENT 247,174 243,491 Allowances for depreciation and amortization (122,206) (116,436) ______________ ______________ 124,968 127,055 OTHER ASSETS 33,615 31,689 ______________ ______________ $1,087,157 $1,040,583 ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 134,000 $ 65,000 Accounts payable 111,285 134,562 Billings on uncompleted contracts in excess of incurred costs 11,577 14,417 Current income taxes 70,638 68,650 Other current liabilities 44,307 47,451 ______________ ______________ TOTAL CURRENT LIABILITIES 371,807 330,080 LONG-TERM DEBT 210,775 210,800 DEFERRED INCOME TAXES 7,384 6,794 ACCRUED POSTRETIREMENT BENEFITS 15,483 15,454 DEFERRED COMPENSATION 5,462 5,540 SHAREHOLDERS' EQUITY Common Stock, without par value, 100,000,000 shares authorized; 33,073,908 and 33,061,908 shares issued at April 30, 1996 and January 31, 1996, respectively, including 11,820 shares held in treasury 163,672 163,409 Retained earnings 312,607 308,539 ______________ ______________ 476,279 471,948 Less cost of treasury stock (33) (33) ______________ ______________ TOTAL SHAREHOLDERS' EQUITY 476,246 471,915 ______________ ______________ $1,087,157 $1,040,583 ============== ============== 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 _____________________________________ 1996 1995 _______________ ________________ (Unaudited) Sales $ 219,540 $ 289,022 Cost of sales 181,437 240,480 ________________ ________________ Gross profit 38,103 48,542 Selling and administrative expenses 24,332 21,661 Interest expense 4,745 2,950 Other income, net (999) (322) ________________ ________________ 28,078 24,289 ________________ ________________ Earnings before income taxes 10,025 24,253 Income taxes 3,279 8,128 ________________ ________________ Earnings of consolidated companies 6,746 16,125 Equity in net loss of unconsolidated affiliates (33) (110) ________________ ________________ Net earnings $ 6,713 $ 16,015 ================ ================ Weighted average number of shares of Common Stock outstanding 33,057 33,008 ================ ================ Net earnings per share $ 0.20 $ 0.49 ================ ================ Cash dividends per share $ 0.08 $ 0.07 ================ ================ 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 ________________ ________________ 1996 1995 ________________ ________________ (Unaudited) Operating Activities Net earnings $ 6,713 $ 16,015 Adjustments to reconcile net earnings to net cash used in operating activities: Depreciation and amortization 6,924 6,066 Deferred income taxes, net 590 (208) Change in operating assets and liabilities: Accounts and notes receivable, net (33,263) (19,134) Recoverable costs and accrued profits not yet billed 5,971 (33,449) Inventories (19,442) 43,015 Accounts payable (23,276) (62,550) Billings on uncompleted contracts in excess of incurred costs (2,839) 9,306 Current income taxes 1,988 8,238 Other current liabilities (3,148) (6,077) Other--principally long-term assets and liabilities (1,931) 410 ________________ ________________ Net Cash Used In Operating Activities (61,713) (38,368) Investing Activities Expenditures for property, plant and equipment (5,275) (5,919) Disposal of property, plant and equipment 520 519 ________________ ________________ Net Cash Used In Investing Activities (4,755) (5,400) Financing Activities Additions to long-term borrowings 0 33 Payments on long-term borrowings (25) (17) Net borrowings and payments on short-term notes payable 69,000 46,000 Dividends paid (2,645) (2,312) Exercise of stock options 264 873 ________________ ________________ Net Cash Provided By Financing Activities 66,594 44,577 ________________ ________________ Increase In cash and equivalents 126 809 Cash and equivalents, February 1 6,325 3,987 ________________ ________________ Cash and equivalents, April 30 $ 6,451 $ 4,796 ================ ================ Supplemental disclosure of cash flow information: Net cash paid during the period for: Interest payments $ 4,741 $ 2,243 Income tax payments $ 1,380 $ 408 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, 1996 are not necessarily indicative of the results that will be realized for the fiscal year ending January 31, 1997. The accounting policies followed by the Company in preparing interim con solidated financial statements are similar to those described in the "Notes to Consolidated Financial Statements" in the Company's January 31, 1996 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 1996" commenced on February 1, 1996 and ends on January 31, 1997. Net earnings per share of Common Stock are 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 three months ended April 30, 1996 includes 12,000 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 REAs 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 projection, 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. If the Company or any of the individuals are convicted of any charges under the indictment, the Company could also be suspended or debarred from entering into new contracts or subcontracts with agencies of the U.S. Government or receiving the benefit of federal assistance payments for the duration of such suspension or debarment. Any such suspension could prevent the Company from receiving a modification to the FMTV to fund additional vehicles or extend the delivery schedule of funded vehicles unless the Secretary of the Army finds a compelling need to enter into such modification. The Company would also be unable to sell equipment and services to customers that depend on loans or financial commitments from the Export Import Bank ("EXIM Bank"), Overseas Private Investment Corporation ("OPIC") and similar government agencies during a suspension or debarment. The Engineered Power Systems segment frequently sells equipment to customers that rely on financial commitments from EXIM Bank and/or OPIC. Any such suspension or debarment could have a material adverse impact on the Company's 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 REAs 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 alleging 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. An Agreement to settle this litigation on terms that would not be material to the Company has been preliminarily approved by the court, subject to notice to all class members and determination by the court as to the fairness of the settlement. The Company has reserved all costs expected to be incurred in connection with the settlement of this case. Except as set forth above, 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. Except as set forth above, the Company has not established any reserves or accruals for any potential liability that may be subsequently found in any of the foregoing cases. Note C--Subsequent Events On May 30, 1996 the Company completed a $135,000,000 private placement of long- term debt. The notes are unsecured and were issued pursuant to an agreement containing a covenant which imposes a maximum debt to total capitalization requirement. The notes will mature in three, five, seven and ten year increments with semi-annual interest payments at a weighted average coupon rate of 7.01%, and have a weighted average life of 5 1/2 years. 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, 1996. 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 ______________________________________ 1996 1995 ________________ ________________ Sales 100.0% 100.0% Cost of sales 82.6 83.2 ________________ ________________ Gross profit 17.4 16.8 Selling and administrative expenses 11.1 7.5 Interest expense 2.2 1.0 Other income, net (.5) (.1) ________________ ________________ 12.8 8.4 ________________ ________________ Earnings before income taxes 4.6 8.4 Income taxes 1.5 2.8 ________________ ________________ Earnings of consolidated companies 3.1 5.6 Equity in net loss of unconsolidated affiliates 0 (.1) ________________ ________________ Net earnings 3.1% 5.5% ================ ================
Sales for the first quarter of the year ending January 31, 1997 ("Fiscal 1996") decreased 24% to $219,540,000 compared to sales of $289,022,000 for the same period of the year ended January 31, 1996 ("Fiscal 1995"). The Engineered Power Systems (EPS) segment sales was the primary contributor to the Company's sales decline, decreasing $60,848,000 (38%) for the first quarter of Fiscal 1996 compared to the same period in Fiscal 1995. The sales decrease in the EPS segment is attributed to the gas turbine product line which produced $80,000,000 in sales during the first quarter of Fiscal 1996 compared to $144,000,000 for the same period in Fiscal 1995. Turbine-driven equipment sales decreased $77,000,000 (69%) compared to the first quarter of Fiscal 1995. Such decrease was partially offset by the gas turbine product support (consisting of the servicing of customers' equipment and the long-term contracting for the operation and maintenance of the customers' power plants) group which contributed increased sales of $13,000,000 (39%) in the first quarter of Fiscal 1996 compared to the same period in Fiscal 1995. The Distribution segment sales increased $18,870,000 (20%) in the first quarter of Fiscal 1996 compared to the same period in Fiscal 1995. The Distribution segment's growth reflects general strong demand for the Company's products and services. The Tactical Vehicle Systems (TVS) segment sales decreased $16,949,000 (55%) for the first quarter of Fiscal 1996 compared to the same period in Fiscal 1995. The decrease in TVS sales reflects the decrease in truck production under the "Family of Medium Tactical Vehicles" (FMTV) contract during the first quarter due to the scheduled retrofit program of previously produced vehicles. See "Government Contract Status" below. The gross profit margin of 17.4% for the first quarter of Fiscal 1996 improved as compared to 16.8% for the same period in Fiscal 1995. This increase in gross margin reflects the change in sales mix. Selling and administrative expenses for the first quarter of Fiscal 1996 increased as a percentage of sales to 11.1% compared to 7.5% for the same period in Fiscal 1995, primarily due to the decrease in sales. Selling and administrative expenses increased 12% during the current year which included a onetime charge of approximately $900,000 related to settling a lawsuit. Exclusive of the onetime legal expense, service and administrative expense grew about 8%, primarily in those business lines having sales growth. Interest expense for the first quarter of Fiscal 1996 increased to $4,745,000, up from $2,950,000 for the same period in Fiscal 1995 due to an increase outstanding debt. Such increase is primarily due to an increase in inventory and an increase in recoverable costs and accrued profits not yet billed related to the EPS segment. Net earnings of $6,713,000 ($.20 per share) for the three months ended April 30, 1996 represents a 58.1% decrease compared to $16,015,000 ($.49 per share) for the three months ended April 30, 1995. This decrease in earnings is primarily the result of the decrease in EPS segment sales. GOVERNMENT CONTRACTS STATUS Initial Operational Test and Evaluation under the FMTV contract was completed in the third quarter of Fiscal 1995 and the Company received approval for full rate production and type classification of the FMTV on August 25, 1995. Actual shipment of the vehicles to combat troops began in January 1996 at Ft. Bragg, North Carolina. 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 retrofit began during the fourth quarter of Fiscal 1995 and is expected to be substantially completed in the second quarter of 1996. 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. The FMTV contract is a firm fixed-price multi-year contract whereby the price paid to the Company is not subject to adjustment to reflect the Company's actual costs, except costs incurred as a result of actions or inactions of the government. The Company has completed approximately 3,000 (of approximately 11,000 trucks) trucks which are undergoing retrofit as of April 30, 1996. Full rate production has been approved and is expected to commence after substantial completion of retrofit of the trucks produced to date to current specifications. Stewart & Stevenson has incurred significant cost overruns and delivery schedule delays on the FMTV contract which the Company believes are primarily due to the government's decision to delay the testing of trucks and other government directed changes to the contract. The Company has and will continue to submit a series of Requests for Equitable Adjustments (REAs), under the FMTV contract, seeking increases in the FMTV contract price for those additional costs that relate to government caused delays and changes. Additionally, the Company has entered into negotiations with the U.S. Army to modify the existing contract to provide for steady production at rates lower than originally anticipated through December 1998. However, the Company is not able to predict whether such modification will be forthcoming on terms acceptable to the Company and production of vehicles may be interrupted after February 1997. Revenues and profits realized on the FMTV contract are based on the Company's estimates of total contract sales value and costs at completion. Amounts in excess of agreed upon contract price for government caused delays, disruptions, unpriced change orders and government caused additional contract costs are recognized in contract value when the Company believes it is probable that the REA for such amounts will result in additional contract revenue and the amount can be reasonably estimated. At April 30, 1996, the Company's FMTV contract accounting position reflects the expected recovery of substantial amounts in excess of the contract price for government caused delays, disruptions, unpriced change orders and other government caused additional contract costs. These REAs are in varying stages of negotiations. Although management believes that the contract provides a legal basis for the REAs and its estimates are based on reasonable assumptions and on a reasonable analysis of contract costs, due to uncertainties inherent in the estimation and REAs negotiations process, no assurances can be given that its estimates will be accurate, and variances between such estimates and actual results could be material. In the event that the Company is unable to recover a substantial portion of the additional costs, the Company may suffer a material adverse effect on its operations during the accounting period in which such contract issues are resolved. The funding of the contract is subject to the inherent uncertainties of congressional appropriations. As is typical of multi-year defense contracts, the FMTV contracts must be funded annually by the Department of the Army and may be terminated at any time for the convenience of the government. The Company has received full funding for the production of approximately 7,364 vehicles through February 1997. Approximately 3,524 vehicles, scheduled for production after that date have not been funded due to reductions in the U.S. Army's budget for acquisitions. In the event that the FMTV contracts are terminated other than for default, the FMTV contracts provide for termination charges that will reimburse the Company for allowable costs, but not necessarily all costs. EFFECT OF CERTAIN LITIGATION On May 3, 1995, the Company and four 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. On May 12, 1995, the U.S. Air Force suspended the Company from contracting with any agency of the U.S. Government and from receiving the benefit of federal assistance programs. This suspension was temporarily terminated on November 8, 1995, pending the resolution of the charges covered by the indictment, pursuant to an Interim Administrative Agreement between the Company and the U.S. Air Force. The Interim Administrative Agreement does not have any effect on the indictment. The Interim Administrative Agreement requires the Company to maintain various internal procedures and policies intended to assure the U.S. Government that the Company is a responsible contractor. In the event that the Company or any of the indicted employees are convicted of the charges contained in the indictment, the U.S. Air Force may re-evaluate whether the Company should be suspended or debarred based on all of the facts and circumstances then known. An acquittal of all parties of the charges does not terminate the Interim Administrative Agreement and any failure by the Company to perform its obligations thereunder may also be grounds for suspension or debarment. If the Company is suspended or debarred, either because of a conviction pursuant to the indictment or as a result of a breach of the Interim Administrative Agreement, it would be ineligible to enter into new contracts or subcontracts with agencies of the U.S. Government or receive the benefit of federal assistance payments for the duration of such suspension or debarment. Any such suspension could prevent the Company from receiving a modification to the FMTV to fund additional vehicles or extend the delivery schedule of funded vehicles unless the Secretary of the Army finds a compelling need to enter into such modification. The Company would also be unable to sell equipment and services to customers that depend on loans or financial commitments from the Export Import Bank ("EXIM Bank"), Overseas Private Investment Corporation ("OPIC") and similar government agencies during a suspension or debarment. The Engineered Power Systems segment frequently sells equipment to customers that rely on financial commitments from EXIM and/or OPIC. Any such suspension or debarment could have a material adverse impact on the Company's financial condition and results of operations. 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, 1996 and at the close of Fiscal 1995 were as follows:
________________________________________________________________________________________________________ April 30 January 31 1996 1996 ________________________________________________________________________________________________________ (Dollars in millions) Engineered Power Systems Equipment $ 177.5 $ 208.9 Operations and Maintenance 334.7 321.8 ______________ ______________ 512.2 530.7 Distribution 53.9 50.9 Tactical Vehicle Systems 850.3 862.7 ______________ ______________ Total $ 1,416.4 $ 1,444.3 ============== ============== 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 based on the 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, and options under the FMTV contract that have been exercised by the U.S. Army to purchase additional vehicles for the National Guard. CAPITAL EXPENDITURES AND COMMITMENTS Capital spending for property, plant and equipment of $5,275,000 for the first quarter of Fiscal 1996 was comparable to $5,919,000 for the same period in Fiscal 1995. These amounts are consistent with the historical capital expenditure levels of the Company. LIQUIDITY AND SOURCES OF CAPITAL Long-term borrowings at April 30, 1996 decreased slightly from the end of Fiscal 1995. The Company has $200,000,000 in committed credit facilities which were fully utilized at April 30, 1996 and at the end of Fiscal 1995. The Company has additional banking relationships which provide uncommitted borrowing arrangements. These short-term borrowings increased to $134,000,000 at April 30, 1996 from $65,000,000 at the end of Fiscal 1995. This debt increase of $69,000,000 is principally a result of the timing of customer progress payments for contracts-in-process of the EPS segment's gas turbine group. On May 30, 1996, the Company completed a private placement of $135,000,000 debt securities with an average maturity of 5 1/2 years. The notes are unsecured and were issued pursuant to an agreement containing a covenant which imposes a debt to total capitalization requirement. The notes will mature in three, five, seven and ten years increments with semi-annual interest payments at a weighted average life and coupon rate of 5 1/2 years and 7.01%, respectively. The proceeds from the sale of the notes were used to reduce other outstanding indebtedness of the Company in the amount of $129,000,000 and for general corporate purposes. 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 which, if awarded to the Company, could also affect working capital needs. In the event that any acquisition of additional operations, growth in existing operations, changes in inventory levels, accounts receivable or other working capital items create a need for working capital or capital expenditures in excess of existing committed lines of credit, the Company may seek to convert uncommitted borrowing arrangements to committed credit facilities or to issue additional equity securities. Management believes that the Company's current credit facilities are 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 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. 27 Financial Data Schedule (b) No reports on Form 8-K were filed during the three months ended April 30, 1996. 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 11, 1996 By: /s/ Robert L. Hargrave Robert L. Hargrave Chief Executive Officer EXHIBIT INDEX Exhibit Number and Description 27 Financial data schedule
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 3-MOS JAN-31-1997 APR-30-1996 6,451 0 231,558 (1,748) 692,045 928,574 247,174 (122,206) 1,087,157 371,807 210,775 163,672 0 0 312,574 1,087,157 219,540 219,540 181,437 181,437 28,078 0 4,745 10,025 3,279 6,713 0 0 0 6,713 .20 .20
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