EX-99.1 3 a2064724zex-99_1.txt EXHIBIT 99.1 EXHIBIT INDEX Company Press Release dated November 28, 2001, titled Stewart & Stevenson Services Reports Fiscal 2001 Third Quarter DILUTED EPS WAS $0.18 BEFORE NONRECURRING ADJUSTMENTS. NEWS FROM: [LOGO] STEWART & STEVENSON CORPORATE HEADQUARTERS 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 FOR IMMEDIATE RELEASE Ken Dennard / kdennard@easterly.com Lisa Elliott / lisae@easterly.com Easterly Investor Relations 713-529-6600 STEWART & STEVENSON SERVICES REPORTS FISCAL 2001 THIRD QUARTER DILUTED EPS WAS $0.18 BEFORE NONRECURRING ADJUSTMENTS HOUSTON - NOVEMBER 28, 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 third quarter ended October 27, 2001. Sales for the fiscal third quarter grew 15 percent to $329.7 million compared to sales of $286.2 million in the same period a year ago. Net earnings in the third quarter of fiscal 2001 were $11.7 million or $0.40 per diluted share versus $8.6 million or $0.30 per diluted share in last year's third quarter. Included in the fiscal third quarter 2001 pretax earnings were the effects of nonrecurring adjustments that included an $18.5 million resolution of a claim with the U.S. government and nonrecurring expenses of $8.4 million. The impact on net income and earnings per diluted share for these nonrecurring items combined was $6.6 million in net income and $0.23 per diluted share, respectively. Excluding nonrecurring adjustments, net earnings for the third quarter totaled $5.1 million or $0.18 per diluted share, which is in accordance with previous guidance. Michael L. Grimes, President and Chief Executive Officer, stated "As previously disclosed, we experienced cancelled and delayed orders and higher than anticipated costs, resulting in reduced margin in a number of our segments during the third quarter. While this performance was disappointing, we have since taken actions to improve future operating results, including: (1) the appointment of new business leaders in the Petroleum Equipment Segment and the Power Generation Division; (2) restructuring and rationalization of manufacturing facilities in Airline Products and the Power Generation portion of Power Products; and (3) acceleration of process re-engineering to improve cost and margin management." SEGMENT DATA The Tactical Vehicle Systems segment, which manufactures tactical vehicles for the U.S. Army and others, recorded sales of $103.8 million in the fiscal third quarter compared to $69.0 million a year ago. Operating profit for the quarter totaled $33.2 million, compared with $10.0 million in the third quarter of fiscal 2000. Fiscal 2001 third quarter results included an $18.2 million settlement with the U.S. Army, net of $0.3 million in expenses related to the settlement process. Payment of the settlement is anticipated during the fiscal fourth quarter of 2001. The Power Products segment, which is responsible for marketing and aftermarket support of a wide range of industrial equipment, recorded fiscal third quarter sales of $163.9 million, as compared to sales of $158.7 million in the same period of fiscal 2000. The segment reported an operating loss of $1.5 million in the fiscal third quarter versus a $6.1 million operating profit in the comparable period of last year. The $7.6 million unfavorable variance included $3.4 million in nonrecurring expenses associated with a systems automation project and relocation of power generation manufacturing operations and a $2.6 million charge related to costing and inventory valuation issues. The Petroleum Equipment segment manufactures equipment for the oil and gas exploration, production, and well stimulation industries. Sales in this segment totaled $37.4 million for the fiscal third quarter, 42 percent higher than the $26.3 million reported in the same period last year. Operating results were adversely impacted by higher than forecasted costs for certain contracts completed during the quarter. As a result, the operating loss for the fiscal third quarter was $1.5 million versus a $1.5 million operating profit in the previous year. The order backlog at the end of the fiscal third quarter 2001 totaled $44.3 million, compared with $63.0 million at the end of the second fiscal quarter. The Airline Products segment, which manufactures airline ground support products and mobile railcar movers, recorded sales of $17.7 million in the fiscal third quarter, compared with $26.8 million in the same quarter last year. Sales were adversely impacted by the events of September 11 which resulted in cancellations of existing orders and delays in receiving new orders from the commercial airlines. Operating loss for the fiscal third quarter was $7.8 million versus a $0.5 million loss in the previous year. Included in the results for the current quarter were $4.0 million in non-recurring expenses related to restructuring and rationalization of facilities in Denver, Colorado; Houston, Texas; and the Atlanta, Georgia area. Other business activities not identified in a specific segment include predominantly gas compression equipment sales. Fiscal third quarter sales were $6.9 million, versus $5.4 million for the comparable period last year. Third quarter operating profit was $0.4 million compared to a $0.1 million operating profit in last year's third quarter. Operating activities consumed $7.9 million in cash during the fiscal third quarter of 2001 reflecting higher receivables associated with the settlement with the U.S. Army and timing of collection on certain major projects. The balance in cash and equivalents was $82.7 million at quarter-end and total debt was $65.7 million. OUTLOOK There continues to be softness in the general economy and more specifically in some of the markets served by Stewart & Stevenson. While the government has taken dramatic steps to stimulate the economy, there remain a number of differing opinions on the exact time or strength of a recovery. In the near term, we expect our fiscal fourth quarter results to be similar to our third quarter results before nonrecurring items. Over a longer period, our business segments will be impacted by the war on terrorism, volatile oil markets, the timing of an economic rebound and the positive results of management actions. CONFERENCE CALL Stewart & Stevenson Services has scheduled a conference call for Wednesday, November 28, 2001 at 11:00 a.m. Eastern time to review fiscal third quarter results. To listen to the call, dial (719) 457-2665 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 Wednesday, December 5, 2001. To access the replay, dial (719) 457-0820 and enter the pass code 581490. Investors, analysts and the general public will also have the opportunity to listen to the conference call over the Internet by visiting the Company's web site at http://www.ssss.com. To listen to the live call on the web, please visit the Stewart & Stevenson website at least fifteen minutes early to register, download and install any necessary audio software. For those who cannot listen to the live webcast, an archive will be available shortly after the call ends. For more information, please contact Karen Roan at Easterly Investor Relations at (713) 529-6600 or email KAREN@EASTERLY.COM. Stewart & Stevenson Services, Inc., founded in 1902, is a billion-dollar company that manufactures, distributes, and provides service for [LOGO] a wide range of industrial products and diesel-powered equipment to key industries worldwide, including petroleum, power generation, defense, airline, marine and transportation. For more information on Stewart & Stevenson visit WWW.SSSS.COM. 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)
Nine Months Ended Three Months Ended ----------------------------------- ----------------------------------- October 27, 2001 October 28, 2000 October 27, 2001 October 28, 2000 ----------------- ---------------- ----------------- ---------------- (Unaudited) (Unaudited) Sales $ 1,061,572 $ 814,333 $ 329,662 $ 286,242 Cost of sales 914,853 677,185 289,445 236,297 ----------------- ---------------- ----------------- ---------------- Gross profit 146,719 137,148 40,217 49,945 Recovery of costs incurred, net (39,000) - (18,200) - Selling and administrative expenses 112,165 97,818 40,154 34,037 Interest expense 5,212 6,739 1,454 2,383 Interest and investment income (2,830) (6,230) (718) (1,638) Other (income) expense, net (730) 1,051 (444) 1,684 ----------------- ---------------- ----------------- ---------------- 74,817 99,378 22,246 36,466 ----------------- ---------------- ----------------- ---------------- Earnings before income taxes 71,902 37,770 17,971 13,479 Income tax expense 26,246 13,903 6,290 4,889 ----------------- ---------------- ----------------- ---------------- Net earnings from continuing operations 45,656 23,867 11,681 8,590 Loss on disposal of discontinued operations, net of tax of $372 (628) - - - ----------------- ---------------- ----------------- ---------------- Net earnings $ 45,028 $ 23,867 $ 11,681 $ 8,590 ================= ================ ================= ================ Weighted average shares outstanding: Basic 28,285 28,018 28,441 28,041 Diluted 28,951 28,277 29,002 28,478 Earnings per share: Basic Continuing operations $ 1.61 $ 0.85 $ 0.41 $ 0.31 Loss on disposal of discontinued operations (0.02) - - - ----------------- ---------------- ----------------- ---------------- Net earnings per share $ 1.59 $ 0.85 $ 0.41 # $ 0.31 ================= ================ ================= ================ Diluted Continuing operations $ 1.58 $ 0.84 $ 0.40 $ 0.30 Loss on disposal of discontinued operations (0.02) - - - ----------------- ---------------- ----------------- ---------------- Net earnings per share $ 1.56 $ 0.84 $ 0.40 $ 0.30 ================= ================ ================= ================ Cash dividends per share $0.255 $0.255 $0.085 $0.085
STEWART & STEVENSON SERVICES, INC. SEGMENT INFORMATION (In thousands)
Nine Months Ended Three Months Ended ----------------------------------------- ---------------------------------------- October 27, 2001 October 28, 2000 October 27, 2001 October 28, 2000 -------------------- ----------------- ----------------- ------------------- SALES Power Products $ 548,652 $ 441,386 $ 163,881 $ 158,691 Tactical Vehicle Systems 321,036 203,346 103,771 69,021 Petroleum Equipment 109,045 60,606 37,439 26,345 Airline Products 64,651 83,409 17,663 26,824 Other Business Activities 18,188 25,586 6,908 5,361 -------------------- ----------------- ----------------- ------------------- Total $ 1,061,572 $ 814,333 $ 329,662 $ 286,242 ==================== ================= ================= =================== OPERATING PROFIT (LOSS) Power Products $ 9,069 $ 8,820 $ (1,535) $ 6,104 Tactical Vehicle Systems 87,892 38,980 33,186 10,023 Petroleum Equipment 2,103 1,224 (1,492) 1,493 Airline Products (14,708) (4,802) (7,799) (465) Other Business Activities 687 2,446 354 113 -------------------- ----------------- ----------------- ------------------- Total 85,043 46,668 22,714 17,268 NON-OPERATING INCOME/(EXPENSE) Corporate expense, net (10,760) (8,389) (4,007) (3,044) Interest income 2,830 6,230 718 1,638 Interest expense (5,211) (6,739) (1,454) (2,383) -------------------- ----------------- ----------------- ------------------- Earnings before income taxes $ 71,902 $ 37,770 $ 17,971 $ 13,479 ==================== ================= ================= =================== OPERATING PROFIT (LOSS) PERCENTAGE Power Products 1.7% 2.0% -0.9% 3.8% Tactical Vehicle Systems 27.4 19.2 32.0 14.5 Petroleum Equipment 1.9 2.0 (4.0) 5.7 Airline Products (22.7) (5.8) (44.2) (1.7) Other Business Activities 3.8 9.6 5.1 2.1 Total 8.0 5.7 6.9 6.0
STEWART & STEVENSON SERVICES, INC. ANALYSIS OF EARNINGS FROM CONTINUING OPERATIONS Unaudited (in thousands, except per share data)
Three Months Ended October 27, 2001 Selling and Recovery of Total Total Administrative Costs Before After Segment Expenses Incurred Income Taxes Income Taxes EPS ---------------------------------------------------------------------------------- Pre-Tax Presentation Net earnings from continuing operations as reported 17,971 11,681 0.40 Less adjustments for non-recurring (income) expense items: Cost recovery from U.S. government Tactical Vehicle (18,500) (18,500) Less: costs associated with recovery 300 300 Costs associated with restructuring and other nonrecurring and one time costs Airline 3,976 3,976 Costs associated with a systems automation project Power Products 2,372 2,372 Costs associated with the relocation of the power generation business Power Products 1,053 1,053 Costs associated with write off of certain ERP implementation costs Corporate 654 654 ----------------------------------------------------------------- Total non-recurring items 8,055 (18,200) (10,145) (6,571) -0.23 ----------------------------------------------------------------- Net earnings from continuing operations excluding non-recurring items 7,826 5,110 0.18 ======================================
* Effective tax rate of 35% assumed for purposes of this presentation STEWART & STEVENSON SERVICES, INC. SELECTED OTHER INFORMATION
ORDER BACKLOG ------------------------------------------------------------------------------------------ January 31, April 29, July 29, October 28, January 31, April 28, July 28, October 27, ($ Millions) 2000 2000 2000 2000 2001 2001 2001 2001 ------------------------------------------------------------------------------------------ Tactical Vehicle Systems $ 914.5 $ 839.5 $ 795.7 $ 742.8 $ 658.2 $ 596.3 $ 493.1 $ 404.7 Power Products 77.6 89.9 116.7 119.2 137.8 177.2 146.1 133.6 Petroleum Equipment 17.2 26.5 55.6 65.6 55.3 47.4 63.0 44.3 Airline Products 23.5 18.6 17.2 19.5 16.2 17.2 17.1 8.4 Other Business Activities 24.0 14.7 10.1 16.5 11.3 7.1 10.6 5.3 ---------------------------------------------------------------------------------------- $1,056.8 $ 989.2 $ 995.3 $ 963.6 $ 878.8 $ 845.2 $ 729.9 $ 596.3 ========================================================================================
Fiscal Year 2000 Fiscal Year 2001 ---------------------------------------------------------------------------------------------------- Unit Shipments 1Q 2Q 3Q 4Q Total 1Q 2Q 3Q 4Q Total* ---------------------------------------------------------------------------------------------------- MTV 311 186 339 503 1,339 469 476 343 387 1,675 LMTV 91 74 - 30 195 75 70 208 201 554 Trailers - - - - - 163 210 198 121 692 ---------------------------------------------------------------------------------------------------- 402 260 339 533 1,534 707 756 749 709 2,921 ==================================================================================================== Estimated Sales (millions) $ 304 $ 108 $ 109 $ 104 $ 106 $ 427 ============================================================
*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)
---------------------------------- ---------------------------------- NINE MONTHS ENDED THREE MONTHS ENDED ---------------------------------- ---------------------------------- OCTOBER 27, 2001 OCTOBER 28, 2000 OCTOBER 27, 2001 OCTOBER 28, 2000 ---------------- ---------------- ---------------- ---------------- Operating Activities Net earnings from continuing operations $ 45,028 $ 23,867 $ 11,681 $ 8,590 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization 14,867 16,135 5,342 5,110 Gain on sale of business assets - (5,649) - - Change in operating assets and liabilities net of the effect of acquisition, divestiture and discontinued operations: Accounts and notes receivable, net (54,985) 86,284 (25,373) 49,338 Recoverable costs and accrued profits not yet billed 19,819 (12,756) (538) (8,020) Inventories, net (26,280) (21,511) (12,153) (37,469) Other current and noncurrent assets (1,113) 2,720 (1,767) (3,826) Accounts payable 3,602 (28,839) 16,966 8,993 Accrued payrolls and incentive (2,613) (5,492) (983) (1,160) Billings in excess of costs 23,927 30,444 1,830 19,368 Other current liabilities 6,895 (8,248) 1,478 (3,879) Accrued postretirement benefits & pension (1,098) 801 (2,839) 183 Other long-term liabilities 789 6,364 (1,529) 7,399 ---------------- ---------------- ---------------- ---------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 28,838 84,120 (7,885) 44,627 ---------------- ---------------- ---------------- ---------------- INVESTING ACTIVITIES Expenditures for property, plant and equipment (36,112) (26,255) (13,739) (5,697) Proceeds from sale of business assets 2,323 52,622 - 8,000 Disposal of property, plant and equipment, net 3,165 2,212 954 (76) ---------------- ---------------- ---------------- ---------------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (30,624) 28,579 (12,785) 2,227 ---------------- ---------------- ---------------- ---------------- FINANCING ACTIVITIES Additions to long-term borrowings - 20,417 - 370 Payments on long-term borrowings (20,536) (20,522) (317) (296) Change in short-term notes payable (4,461) (12,172) (2,319) (1,448) Dividends paid (7,193) (7,138) (2,417) (2,377) Exercise of stock options 6,753 58 691 53 ---------------- ---------------- ---------------- ---------------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (25,437) (19,357) (4,362) (3,698) ---------------- ---------------- ---------------- ---------------- Increase (Decrease) in cash and cash equivalents (27,223) 93,342 (25,032) 43,156 Cash and cash equivalents, beginning of period 109,955 11,715 107,764 61,901 ---------------- ---------------- ---------------- ---------------- Cash and cash equivalents, end of period $ 82,732 $105,057 $ 82,732 $105,057 ================ ================ ================ ================
STEWART & STEVENSON SERVICES, INC. CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION (In thousands)
OCTOBER 27, 2001 JANUARY 31, 2001 ---------------- ---------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 82,732 $109,955 Accounts and notes receivable, net 224,886 172,441 Recoverable costs and accrued profits not yet billed 2,596 22,415 Inventories 257,182 231,716 Excess of current cost over LIFO values (50,495) (51,309) Other current assets 16,817 16,539 ------------------ ------------------ TOTAL CURRENT ASSETS 533,718 501,757 ------------------ ------------------ PROPERTY, PLANT AND EQUIPMENT, NET 122,058 114,765 INVESTMENTS AND OTHER ASSETS 22,018 22,340 ------------------ ------------------ $677,794 $638,862 ================== ================== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 8,150 $ 12,611 Accounts payable 70,039 66,437 Accrued payrolls and incentives 18,731 21,395 Current portion of long-term debt 437 20,437 Billings in excess of costs 54,565 30,638 Other current liabilities 40,013 36,685 ------------------ ------------------ TOTAL CURRENT LIABILITIES 191,935 188,203 COMMITMENTS AND CONTINGENCIES LONG-TERM DEBT 57,123 66,568 ACCRUED POSTRETIREMENT BENEFITS & PENSION 17,781 18,879 OTHER LONG-TERM LIABILITIES 8,407 4,628 ------------------ ------------------ TOTAL LIABILITIES 275,246 278,278 ------------------ ------------------ SHAREHOLDERS' EQUITY Common Stock, without par value, 100,000,000 shares authorized; 28,444,281 and 28,067,566 shares issued at October 27, 2001 and January 31, 2001, respectively 52,688 48,325 Currency translation adjustment (1,163) (929) Retained earnings 351,023 313,188 ------------------ ------------------ TOTAL SHAREHOLDERS' EQUITY 402,548 360,584 ------------------ ------------------ $677,794 $638,862 ================== ==================