EX-99.1 3 a2057970zex-99_1.txt EXHIBIT 99.1 NEWS FROM: STEWART & STEVENSON CORPORATE HEADQUARTERS [STEWART & STEVENSON LOGO] P.O. BOX 1637 HOUSTON, TX 77251-1637 Client: Stewart & Stevenson Services, Inc. Contact: John Doster, CFO David Stewart, Treasurer Stewart & Stevenson Services, Inc. 713-868-7700 Ken Dennard / kdennard@easterly.com Lisa Elliott / lisae@easterly.com Easterly Investor Relations 713-529-6600 STEWART & STEVENSON SERVICES REPORTS FISCAL 2001 SECOND QUARTER REVENUE INCREASED 46 PERCENT NET EARNINGS INCREASED 67 PERCENT AND DILUTED EPS GREW TO $0.45 HOUSTON - AUGUST 23, 2001 - STEWART & STEVENSON SERVICES, INC. (NASDAQ: SSSS), a leading manufacturer, distributor, and service provider of industrial and energy related equipment; oilfield and airline ground support equipment; and medium tactical vehicles for the U.S. Army, announced results for the fiscal second quarter ended July 28, 2001. Sales for the fiscal second quarter grew 46 percent to $390.4 million compared to sales of $267.0 million in the same period a year ago. Net earnings in the second quarter of fiscal 2001 were $13.0 million or $0.45 per diluted share, an increase of 67 percent versus $7.8 million or $0.27 per diluted share in last year's second quarter. Sales for the first six months of fiscal 2001 grew 39 percent to $731.9 million versus $528.1 million for the first six months of fiscal 2000. First half net earnings more than doubled to $33.3 million or $1.15 per diluted share, compared to $15.3 million or $0.54 per diluted share in last year's first half. Michael L. Grimes, President and Chief Executive Officer, stated, "We are pleased with a solid second quarter performance and continued growth in our overall business during this period of weakening in certain segments of the US economy. We have now experienced over two years of improved earnings resulting in a significantly strengthened balance sheet. We continue to take the necessary actions to position the company for sustained top line and earnings growth." SEGMENT DATA The Tactical Vehicle Systems segment, which manufactures tactical vehicles for the U.S. Army and others, recorded sales of $108.8 million in the fiscal second quarter compared to $55.7 million a year ago. Operating profit for the quarter totaled $16.4 million, compared with $14.3 million in the second quarter of fiscal 2000. The operating profit rate of 15.0 percent was in line with the Company's expectations for the second quarter, albeit lower than last year's 25.7 percent which included $4.1 million in special favorable adjustments. Fiscal 2001 first quarter results included a $22.0 million settlement with the U.S. Army, partially offset by special non-recurring costs of $1.7 million, principally related to the settlement process. The $22.0 million of cash due from the settlement was received during the second quarter of fiscal 2001. The Power Products segment, which is responsible for marketing and aftermarket support of a wide range of industrial equipment, recorded second quarter sales of $217.1 million, a 40 percent increase over sales of $155.3 million in the same period of fiscal 2000. The sales growth was paced by $40 million in revenue for two turnkey power generation projects that are part of the California Independent System Operation (ISO) Summer Reliability Program. Operating profit totaled $8.8 million versus $3.2 million in the comparable period of last year. Operating profit rate in fiscal second quarter 2001 rebounded to 4.0 percent, which compared favorably to 2.1 percent in last year's second quarter. The Petroleum Equipment segment manufactures equipment for the oil and gas exploration, production, and well stimulation industries. Sales in this segment totaled $36.9 million for the second quarter, almost double the $18.8 million reported in the same period last year. Operating profit for the second quarter was $2.2 million or 6.0 percent versus $0.4 million or 2.1 percent in the previous year. The order backlog at the end of the fiscal second quarter 2001 totaled $63 million, compared with $47 million at the end of the first fiscal quarter. The Airline Products segment, which manufactures airline ground support products and mobile railcar movers, recorded sales of $22.9 million in the second quarter of fiscal 2001, compared with $28.3 million in the same quarter last year. Operating loss for the second quarter was $2.6 million versus a $4.3 million loss in the previous year. First half sales totaled $47.0 million, and were $9.6 million lower than last year's $56.6 million, due to timing of a sale to the Royal Air Force of approximately $2.1 million and a general weakening of the airline industry. The performance improvement team, established earlier this year, continues to make progress and improved financial performance is expected during the second half of fiscal 2001. Other business activities not identified in a specific segment include predominantly gas compression equipment sales. Fiscal second quarter sales were $4.8 million, versus $8.9 million for the comparable period last year. The decline in sales year over year was due to the sale of the gas compression leasing business during the second quarter of fiscal 2000. Second quarter operating profit was $0.1 million compared to $3.3 million in last year's second quarter, which included a $5.6 million gain from the sale of the gas compression leasing business. Net cash provided by operating activities totaled $40.4 million in the second quarter including a $22 million recovery from the U.S. Government for settlement of a claim, compared with $2.3 million usage in the first quarter. The balance in cash and equivalents was $107.8 million at quarter-end, an increase of $12.0 million for the quarter. Total debt decreased $30.3 million during the quarter. FORWARD LOOKING COMMENTS On August 15, 2001 the Company reached a settlement with the U.S. Government, through the Alternative Disputes Resolution process, pertaining to changes in drive train components on all vehicles produced under the first Family of Medium Tactical Vehicles (FMTV) contract. The Company plans to use a portion of the $18.5 million settlement to accelerate implementation of information system upgrades and to rationalize certain manufacturing facilities. The operating margin rate in the Tactical Vehicle Systems segment for the third quarter of fiscal 2001 could be depressed by approximately two points due to the shipment mix of lower priced option trucks. A rebound in margin rates is expected in the fourth quarter. In addition, second quarter Power Products segment sales were impacted by the delivery of two large power generation units, which will not repeat in the third quarter. However, sequential margin improvements are expected in the third quarter for the Power Products, Petroleum Equipment, and Airline Products segments. CONFERENCE CALL Stewart & Stevenson Services has scheduled a conference call for Thursday, August 23, 2001 at 11:00 a.m. eastern time to review fiscal second quarter 2001 results. To listen to the call, dial (719) 457-2629 at least ten minutes before the conference call begins and ask for the Stewart & Stevenson Services conference call. A replay of the call will be available approximately two hours after the call ends and will be accessible until August 30, 2001. To access the replay, dial (719) 457-0820 and enter the pass code 518816. Additionally, Stewart & Stevenson announced today that senior management has scheduled meetings with analysts and institutional investors on August 28-30, 2001 in Denver, San Francisco and Los Angeles to review financial results and provide updates on the company's progress. The slide presentation that management will be showing on this trip will be available for download on the company's website at HTTP://WWW.SSSS.COM beginning Tuesday morning, August 28, 2001. This press release contains forward-looking statements that are based on management's current expectations, estimates, and projections. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions and are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Many factors, including those discussed more fully elsewhere in this release and in the Company's filings with the Securities and Exchange Commission, particularly its latest annual report on Form 10-K, as well as others, could cause results to differ materially from those stated. Specific important factors that could cause actual results, performance, or achievements to differ materially from such forward-looking statements include risk of competition, risks relating to technology, risks of general economic conditions, risks relating to personnel, risks of dependence on government, inherent risks of government contracts, risks of claims and litigation, risks as to global trade matters, risks as to cost controls, risks as to acquisitions, risks as to currency fluctuations, risks as to environmental and safety matters, and risks as to distributorships, all as more specifically outlined in the Company's latest annual report on Form 10-K. In addition, such forward-looking statements could be affected by general industry and market conditions and growth rates, general domestic and international conditions including interest rates, inflation and currency exchange rates and other future factors. Actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. - tables to follow - STEWART & STEVENSON SERVICES, INC. CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (In thousands, except per share data)
SIX MONTHS ENDED THREE MONTHS ENDED -------------------------------- -------------------------------- JULY 28, 2001 JULY 29, 2000 JULY 28, 2001 JULY 29, 2000 -------------- --------------- --------------- --------------- Sales $ 731,910 $ 528,091 $ 390,389 $ 266,978 Cost of sales 625,408 440,888 332,776 228,361 --------- --------- --------- --------- Gross profit 106,502 87,203 57,613 38,617 Recovery of costs incurred, net (20,800) -- -- -- Selling and administrative expenses 72,011 69,430 36,530 30,643 Interest expense 3,758 4,356 1,693 2,047 Interest and investment income (2,112) (4,592) (897) (400) Other (income) expense, net (286) (6,282) (266) (6,040) --------- --------- --------- --------- 52,571 62,912 37,060 26,250 --------- --------- --------- --------- Earnings before income taxes 53,931 24,291 20,553 12,367 Income tax expense 19,956 9,014 7,539 4,588 --------- --------- --------- --------- Net earnings from continuing operations 33,975 15,277 13,014 7,779 Loss on disposal of discontinued operations, net (628) -- -- -- of tax of $372 --------- --------- --------- --------- Net earnings $ 33,347 $ 15,277 $ 13,014 $ 7,779 ========= ========= ========= ========= Weighted average shares outstanding: Basic 28,206 28,005 28,327 28,013 Diluted 28,927 28,175 29,146 28,229 Earnings per share: Basic Continuing operations $ 1.20 $ 0.55 $ 0.46 $ 0.28 Loss on disposal of discontinued operations (0.02) -- -- -- --------- --------- --------- --------- NET EARNINGS PER SHARE $ 1.18 $ 0.55 $ 0.46 $ 0.28 ========= ========= ========= ========= Diluted Continuing operations $ 1.17 $ 0.54 $ 0.45 $ 0.27 Loss on disposal of discontinued operations (0.02) -- -- -- --------- --------- --------- --------- NET EARNINGS PER SHARE $ 1.15 $ 0.54 $ 0.45 $ 0.27 ========= ========= ========= ========= Cash dividends per share $ 0.170 $ 0.170 $ 0.085 $ 0.085
STEWART & STEVENSON SERVICES, INC. SEGMENT INFORMATION (In thousands)
SIX MONTHS ENDED THREE MONTHS ENDED ------------------------------------ ------------------------------------- JULY 28, 2001 JULY 29, 2000 JULY 28, 2001 JULY 29, 2000 ---------------- ----------------- ----------------- ----------------- SALES Power Products $ 384,771 $ 283,615 $ 217,099 $ 155,299 Tactical Vehicle Systems 217,265 134,325 108,771 55,652 Petroleum Equipment 71,606 34,261 36,868 18,813 Airline Products 46,988 56,585 22,878 28,275 Other Business Activities 11,280 19,305 4,773 8,939 --------- --------- --------- --------- Total $ 731,910 $ 528,091 $ 390,389 $ 266,978 ========= ========= ========= ========= OPERATING PROFIT (LOSS) Power Products $ 10,604 $ 2,417 $ 8,778 $ 3,233 Tactical Vehicle Systems 54,706 28,957 16,361 14,321 Petroleum Equipment 3,595 (269) 2,208 404 Airline Products (6,909) (4,337) (2,558) (4,341) Other Business Activities 333 2,632 107 3,266 --------- --------- --------- --------- Total 62,329 29,400 24,896 16,883 NON-OPERATING INCOME/(EXPENSE) Corporate expense, net (6,753) (5,345) (3,548) (2,869) Interest income 2,112 4,592 897 400 Interest expense (3,757) (4,356) (1,692) (2,047) --------- --------- --------- --------- EARNINGS BEFORE INCOME TAXES $ 53,931 $ 24,291 $ 20,553 $ 12,367 ========= ========= ========= ========= OPERATING PROFIT (LOSS) PERCENTAGE Power Products 2.8% 0.9% 4.0% 2.1% Tactical Vehicle Systems 25.2 21.6 15.0 25.7 Petroleum Equipment 5.0 (0.8) 6.0 2.1 Airline Products (14.7) (7.7) (11.2) (15.4) Other Business Activities 3.0 13.6 2.2 36.5 Total 8.5 5.6 6.4 6.3
STEWART & STEVENSON SERVICES, INC. SELECTED OTHER INFORMATION
ORDER BACKLOG ---------------------------------------------------------------------------------------- January 31, April 29, July 29, October 28, January 31, April 28, July 28, (Millions) 2000 2000 2000 2000 2001 2001 2001 ---------------------------------------------------------------------------------------- Tactical Vehicle Systems $ 914.5 $ 839.5 $ 795.7 $ 742.8 $ 658.2 $ 596.3 $ 493.1 Power Products 77.6 89.9 116.7 119.2 137.8 177.2 146.1 Petroleum Equipment 17.2 26.5 55.6 65.6 55.3 47.4 63.0 Airline Products 23.5 18.6 17.2 19.5 16.2 17.2 17.1 Other Business Activities 24.0 14.7 10.1 16.5 11.3 7.1 10.6 ---------------------------------------------------------------------------------------- $ 1,056.8 $ 989.2 $ 995.3 $ 963.6 $ 878.8 $ 845.2 $ 729.9 ========================================================================================
Fiscal Year 2000 Fiscal Year 2001 --------------------------------------------------------------------------------------- Unit Shipments 1Q 2Q 3Q 4Q Total 1Q 2Q 3Q* 4Q* Total* --------------------------------------------------------------------------------------- MTV 311 186 339 503 1,339 469 476 376 389 1,710 LMTV 91 74 -- 30 195 75 70 175 180 500 Trailers -- -- -- -- -- 163 210 198 119 690 --------------------------------------------------------------------------------------- 402 260 339 533 1,534 707 756 749 688 2,900 ======================================================================================= Estimated Sales (millions) $ 304 $ 108 $ 109 $ 100 $ 105 $ 422 ===================================================
*Based on current US Army forecast and other data. See "Cautionary Statements" above for important information regarding forward-looking statements. STEWART & STEVENSON SERVICES, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (In thousands)
SIX MONTHS ENDED THREE MONTHS ENDED JULY 28, 2001 JULY 29, 2000 JULY 28, 2001 JULY 29, 2000 ------------- ------------- ------------- ------------- Operating Activities Net earnings from continuing operations $ 33,975 $ 15,277 $ 13,014 $ 7,779 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Accrued postretirement benefits & pension 1,741 618 645 370 Depreciation and amortization 10,901 11,025 5,438 5,493 Deferred income taxes, net (3,106) (754) 1,378 (790) Gain on sale of business assets -- (5,649) -- (5,649) Change in operating assets and liabilities net of the effect of acquisition, divestiture and discontinued operations: Accounts and notes receivable, net (29,612) 36,946 21,799 (8,018) Recoverable costs and accrued profits not yet billed 20,357 (4,736) 8,817 1,247 Inventories (14,127) 15,958 (6,406) 28,272 Accounts payable (13,364) (37,832) (7,227) (27,803) Accrued payrolls and incentive (1,630) (4,332) (2,008) 89 Current income taxes, net 4,509 10,127 (11,622) 5,836 Other current liabilities 6,753 7,219 (7,558) 10,058 Other--principally long-term assets and liabilities 21,703 (4,374) 24,105 (2,905) --------- --------- --------- --------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 38,100 39,493 40,375 13,979 --------- --------- --------- --------- INVESTING ACTIVITIES Expenditures for property, plant and equipment (22,819) (20,558) (10,657) (10,279) Proceeds from sale of business assets 2,323 44,622 -- 44,622 Disposal of property, plant and equipment, net 1,280 2,288 433 2,165 --------- --------- --------- --------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (19,216) 26,352 (10,224) 36,508 --------- --------- --------- --------- FINANCING ACTIVITIES Additions to long-term borrowings -- 20,047 -- -- Payments on long-term borrowings (20,219) (20,221) (20,155) (414) Net short-term borrowings (payments) (2,142) (10,724) (1,254) (1,234) Dividends paid (4,776) (4,761) (2,391) (2,382) Exercise of stock options 6,062 -- 5,592 -- --------- --------- --------- --------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (21,075) (15,659) (18,208) (4,030) --------- --------- --------- --------- Increase (Decrease) in cash and cash equivalents (2,191) 50,186 11,943 46,457 Cash and cash equivalents, beginning of period 109,955 11,715 95,821 15,444 --------- --------- --------- --------- Cash and cash equivalents, end of period $ 107,764 $ 61,901 $ 107,764 $ 61,901 ========= ========= ========= =========
STEWART & STEVENSON SERVICES, INC. CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION (In thousands)
JULY 28, 2001 JANUARY 31, 2001 ---------------- ----------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 107,764 $ 109,955 Accounts and notes receivable, net 199,513 172,441 Recoverable costs and accrued profits not yet billed 2,058 22,415 Inventories: Power Products 171,793 170,176 Petroleum Equipment 40,845 26,809 Airline Products 25,860 29,007 Tactical Vehicle Systems 6,633 3,861 Other Business Activities 762 1,863 Excess of current cost over LIFO values (51,359) (51,309) --------- --------- Total inventories, net 194,534 180,407 Prepaid and other current assets 15,714 16,539 --------- --------- TOTAL CURRENT ASSETS 519,583 501,757 --------- --------- PROPERTY, PLANT AND EQUIPMENT, NET 114,615 114,765 INVESTMENTS AND OTHER ASSETS 21,355 22,340 --------- --------- $ 655,553 $ 638,862 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 10,469 $ 12,611 Accounts payable 53,073 66,437 Accrued payrolls and incentives 19,764 21,395 Current portion of long-term debt 437 20,437 Billings in excess of costs 52,735 30,638 Other current liabilities 39,734 36,685 --------- --------- TOTAL CURRENT LIABILITIES 176,212 188,203 COMMITMENTS AND CONTINGENCIES LONG-TERM DEBT 57,440 66,568 ACCRUED POSTRETIREMENT BENEFITS & PENSION 20,620 18,879 DEFERRED COMPENSATION 1,889 2,145 OTHER LONG-TERM LIABILITIES 6,651 2,483 --------- --------- TOTAL LIABILITIES 262,812 278,278 --------- --------- SHAREHOLDERS' EQUITY Common Stock, without par value, 100,000,000 shares authorized; 28,436,341 and 28,067,566 shares issued at July 28, 2001 and January 31, 2001, respectively 51,997 48,325 Currency translation adjustment (1,015) (929) Retained earnings 341,759 313,188 --------- --------- TOTAL SHAREHOLDERS' EQUITY 392,741 360,584 --------- --------- $ 655,553 $ 638,862 ========= =========