EX-99.1 2 a05-10023_1ex99d1.htm EX-99.1

 

EXHIBIT 99.1

 

 

 

 

 

 

 

 

 

 

PRESS RELEASE

 

 

Contact: 

John Simmons, V.P., CFO

 

Stewart & Stevenson Services, Inc.

 

713-868-7700

FOR IMMEDIATE RELEASE

 

 

 

 

STEWART & STEVENSON SERVICES REPORTS

FIRST QUARTER 2005 RESULTS

First Quarter Net Earnings were $0.26 per Diluted Share

First Quarter Net Earnings from Continuing Operations were $0.32 per Diluted Share

 

HOUSTON — May 26, 2005 — Stewart & Stevenson Services, Inc. (NYSE: SVC) announced results for the first quarter of fiscal 2005, which ended on April 30, 2005.

 

Sales for the first quarter of fiscal 2005 totaled $311.6 million compared to sales of $262.4 million in the same period a year ago.  Net earnings in the first quarter of fiscal 2005 were $7.7 million, or $0.26 per diluted share, compared to $5.4 million, or $0.19 per diluted share, in the first quarter of fiscal 2004.  Net earnings from continuing operations in the first quarter of fiscal 2005 were $9.3 million, or $0.32 per diluted share, compared to $8.8 million, or $0.30 per diluted share, in the first quarter of fiscal 2004.

 

On April 8, 2005, the company completed the acquisition of Automotive Technik (Holdings) Limited (“ATHL”), the United Kingdom manufacturer of the light tactical vehicle known as the Pinzgauer, for £25.0 million ($47.2 million). ATHL operations had no material impact on operating income during the first quarter of Fiscal 2005.

 

Max L. Lukens, the company’s President and Chief Executive Officer, stated, “We are pleased that the strategic initiatives we have taken to improve the company’s overall performance are producing results.  All of our operating segments were profitable for the first quarter, and we continue to work toward our return goals for the corporation.  The acquisition of ATHL represents a strategic action aimed at enhancing value for our shareholders by broadening the product offering of the Tactical Vehicle Systems segment.”

 

 


 

Segment Data

 

The Tactical Vehicle Systems segment, which manufactures tactical vehicles for the U.S. Army and others, recorded sales of $165.5 million in the first quarter of fiscal 2005 compared to $138.8 million in the prior year’s first quarter.  Operating profit for the first quarter of fiscal 2005 decreased to $13.2 million compared to $19.4 million in the first quarter of fiscal 2004.  As previously disclosed, operating margins will be lower in fiscal 2005 as a result of the expected lower contract margins associated with the current multi-year contract with the U.S. Army to produce the Family of Medium Tactical Vehicles (“FMTV”) which began production in November 2004.  The lower margins on this contract were partially offset by sales under U.S. Army contracts to produce Low Signature Armored Cabs (“LSAC”) for use on the FMTV. The first quarter of 2005 included the sale of 621 LSAC units.

 

The Power Products segment, which is responsible for sales and aftermarket support of a wide range of industrial and transportation equipment, recorded sales of $117.0 million in the first quarter of fiscal 2005 compared to sales of $106.3 million a year ago.  The increase in sales is primarily attributable to higher equipment sales volume resulting from focused sales efforts as well as improving economic conditions in the company’s primary markets.  The first quarter 2005 operating profit totaled $2.4 million compared to a $0.2 million operating loss in the comparable period of fiscal 2004.  The improvement in operating profit in this segment is largely attributable to the increased equipment sales volume.

 

The Engineered Products segment, which manufactures equipment for the well servicing industry, as well as mobile railcar movers, off-road seismic vehicles, and snow blowers, recorded sales of $29.0 million for the first quarter of fiscal 2005 compared to $17.3 million last year.  The increased sales volume is largely attributable to strong demand for well servicing equipment as reflected in this segment’s backlog of $90 million as of April 30, 2005.  Operating profit for the first quarter of fiscal 2005 totaled $1.3 million compared to a loss of $1.8 million in the previous year primarily as a result of cost reductions and improved project execution on the increased sales volume.

 

Discontinued Operations

 

During the first quarter of fiscal 2005, the company decided to pursue the sale of the business assets and operations of four California distribution locations within the Power Products segment after concluding that the investment in this geographic territory does not meet the company’s long-term objectives.  Accordingly, the identified assets and liabilities of $20 million and results of operations for this portion of the Power Products business are being reported as discontinued operations for all periods presented.

 

 

2


 

Losses from discontinued operations of $0.06 per diluted share represented the ongoing overhead costs associated with the wind-down activities of the Distributed Energy Solutions business and costs related to the ongoing post-closing finalization of the Airline Products segment which was sold in the fourth quarter of fiscal 2004.

 

Liquidity and Backlog

 

Total cash and short-term investments were $113.5 million at the end of the quarter after funding $42.3 million net for the acquisition of ATHL during the quarter. This usage of cash was partially offset by a $15.0 million collection of a note receivable related to the sale of the Airline Products business during the fourth quarter of fiscal 2004.  Net cash provided by operating activities in the first quarter of fiscal 2005 was $9.9 million.

 

Committed backlog at the end of the first quarter exceeded $1 billion, primarily as a result of the funding of the third production year under the FMTV contract and additional orders in all three of our continuing operating segments.

 

Conference Call

 

Stewart & Stevenson Services has scheduled a conference call for Thursday, May 26, 2005 at 10:00 a.m. Eastern Time to review first quarter results.  To listen to the call, dial 888-396-2384 or 617-847-8711 and use pass code 44803382 at least ten minutes before the conference call begins.  A telephonic replay of the conference call will be available until June 2, 2005 and may be accessed by dialing 888-286-8010 or 617-801-6888 and using pass code 58636622.

 

Investors, analysts, and the general public will also have the opportunity to listen to the conference call free over the Internet by visiting the company’s web site at www.ssss.com.  To listen to the live call on the web, please visit the Stewart & Stevenson web site at least fifteen minutes early to register, download, and install any necessary audio software.  For those who cannot listen to the live web cast, an audio archive will be available shortly after the call ends.

 

Stewart & Stevenson Services, Inc., founded in 1902, is a billion-dollar company that manufactures, distributes, and provides service for a wide range of industrial products and diesel-powered equipment to key industries worldwide, including power generation, defense, marine, petroleum, and transportation.

 

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

 

 

3


 

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.  These factors include, but are not limited to, risks of dependence on government and failure to obtain new government contracts, inherent risks of government contracts, risks of supply interruptions to Tactical Vehicle Systems segment, risks associated with Distributed Energy Solutions segment, risks of fixed-price contracts, risks as to rising steel prices, risks as to cost controls,  risks of general economic conditions, risks of oil and gas industry economic conditions, risks as to distributorships, risks as to licenses, risk of competition, risks relating to technology, risks as to terrorist attacks on the U.S. and their impact on the U.S. economy, risks relating to personnel, risks of claims and litigation, risks of product defects, risks as to foreign sales and global trade matters, risks as to acquisitions and restructuring activities, risks as to currency fluctuations, risks as to environmental and safety matters, and credit risks  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.

 

 

4


 

STEWART & STEVENSON SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

 

 

 

 

Three Months Ended

 

 

 

April 30, 2005

 

May 1, 2004

 

 

 

(Unaudited)

 

 

 

 

 

 

 

Sales

 

$

311,562

 

$

262,350

 

Cost of sales

 

274,909

 

225,760

 

 

 

 

 

 

 

Gross profit

 

36,653

 

36,590

 

 

 

 

 

 

 

Selling and administrative expenses

 

23,070

 

23,241

 

Other income, net

 

(739

)

(587

)

 

 

 

 

 

 

Operating profit

 

14,322

 

13,936

 

 

 

 

 

 

 

Interest expense

 

525

 

517

 

Interest income

 

(760

)

(254

)

 

 

 

 

 

 

Earnings from continuing operations before income taxes

 

14,557

 

13,673

 

Income tax expense

 

5,224

 

4,866

 

Net earnings from continuing operations

 

9,333

 

8,807

 

Loss from discontinued operations, net of tax of ($417) and ($1,784)

 

(1,641

)

(3,365

)

Net earnings

 

$

7,692

 

$

5,442

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

Basic

 

28,927

 

28,671

 

Diluted

 

29,433

 

28,934

 

 

 

 

 

 

 

Earnings (loss) per share:

 

 

 

 

 

Basic:

 

 

 

 

 

Continuing operations

 

$

0.32

 

$

0.31

 

Discontinued operations

 

(0.05

)

(0.12

)

Net earnings per share

 

$

0.27

 

$

0.19

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

Continuing operations

 

$

0.32

 

$

0.30

 

Discontinued operations

 

(0.06

)

(0.11

)

Net earnings per share

 

$

0.26

 

$

0.19

 

 

 

 

 

 

 

Cash dividends per share

 

$

0.085

 

$

0.085

 

 

 

5


 

STEWART & STEVENSON SERVICES, INC. AND SUBSIDIARIES

SEGMENT INFORMATION

(Dollars in thousands)

 

 

 

 

Three Months Ended

 

 

 

April 30, 2005

 

May 1, 2004

 

 

 

(Unaudited)

 

 

 

 

 

Sales

 

 

 

 

 

Tactical Vehicle Systems

 

$

165,518

 

$

138,783

 

Power Products

 

117,011

 

106,299

 

Engineered Products

 

29,033

 

17,268

 

Total sales

 

$

311,562

 

$

262,350

 

 

 

 

 

 

 

Operating profit (loss)

 

 

 

 

 

Tactical Vehicle Systems

 

$

13,175

 

$

19,441

 

Power Products

 

2,377

 

(229

)

Engineered Products

 

1,274

 

(1,809

)

Corporate expenses, net

 

(2,504

)

(3,467

)

Total operating profit

 

14,322

 

13,936

 

 

 

 

 

 

 

Interest expense

 

525

 

517

 

Interest income

 

(760

)

(254

)

Earnings from continuing operations before income taxes

 

$

14,557

 

$

13,673

 

 

 

 

 

 

 

Operating profit (loss) percentage

 

 

 

 

 

Tactical Vehicle Systems

 

8.0

%

14.0

%

Power Products

 

2.0

 

(0.2

)

Engineered Products

 

4.4

 

(10.5

)

Consolidated

 

4.6

%

5.3

%

 

 

6


 

STEWART & STEVENSON SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands, except share data)

 

 

 

 

April 30, 2005

 

January 31, 2005

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and cash equivalents

 

$

102,761

 

$

130,447

 

Short-term investments

 

10,775

 

2,480

 

Accounts receivable, net

 

129,790

 

143,600

 

Recoverable costs and accrued profits not yet billed

 

24,750

 

26,544

 

Inventories

 

128,809

 

112,889

 

Excess of current cost over LIFO values

 

(35,667

)

(35,168

)

Deferred income tax asset

 

5,750

 

5,647

 

Income tax receivable

 

6,471

 

7,223

 

Other current assets

 

5,685

 

4,987

 

Total assets of discontinued operations

 

46,636

 

68,186

 

Total Current Assets

 

425,760

 

466,835

 

 

 

 

 

 

 

Property, Plant and Equipment, net

 

113,545

 

115,568

 

Deferred Income Tax Asset

 

18,784

 

20,874

 

Intangibles and Other Assets, net

 

52,648

 

10,065

 

Total Assets

 

$

610,737

 

$

613,342

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Notes payable

 

$

3,783

 

$

1,671

 

Accounts payable

 

89,782

 

81,716

 

Accrued payrolls and incentives

 

20,818

 

22,941

 

Billings in excess of incurred costs

 

45,227

 

59,894

 

Other current liabilities

 

43,684

 

36,691

 

Total liabilities of discontinued operations

 

28,268

 

38,770

 

Total Current Liabilities

 

231,562

 

241,683

 

 

 

 

 

 

 

Long-Term Debt

 

25,069

 

25,000

 

Accrued Postretirement Benefits and Pension

 

58,005

 

57,621

 

Other Long-Term Liabilities

 

3,827

 

4,318

 

Total Liabilities

 

318,463

 

328,622

 

Shareholders' Equity:

 

 

 

 

 

Common stock, without par value, 100,000,000 shares authorized; 29,009,789 and 28,865,070 shares issued, respectively

 

62,138

 

59,616

 

Accumulated other comprehensive loss

 

(36,255

)

(36,048

)

Retained earnings

 

266,391

 

261,152

 

Total Shareholders' Equity

 

292,274

 

284,720

 

Total Liabilities and Shareholders' Equity

 

$

610,737

 

$

613,342

 

 

 

7


 

STEWART & STEVENSON SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)

 

 

 

 

Three Months Ended

 

 

 

April 30, 2005

 

May 1, 2004

 

 

 

(Unaudited)

 

 

 

 

 

Operating Activities

 

 

 

 

 

Net earnings

 

$

7,692

 

$

5,442

 

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

 

Net loss from discontinued operations

 

1,641

 

3,365

 

Deferred tax expense

 

3,107

 

517

 

Depreciation and amortization

 

5,445

 

6,524

 

Loss (gain) on sale of assets

 

13

 

(346

)

Change in operating assets and liabilities net of the effect of acquisition, divestiture and discontinued operations:

 

 

 

 

 

Accounts receivable, net

 

6,830

 

33,598

 

Recoverable costs and accrued profits not yet billed

 

1,794

 

1,346

 

Inventories

 

(8,145

)

3,620

 

Other current and noncurrent assets

 

2,230

 

5,714

 

Accounts payable

 

965

 

(8,454

)

Accrued payrolls and incentives

 

(4,202

)

339

 

Billings in excess of incurred costs

 

(14,667

)

(3,771

)

Other current liabilities

 

(1,899

)

1,695

 

Accrued postretirement benefits and pension

 

384

 

555

 

Other, net

 

(759

)

(1,670

)

Net Cash Provided by Continuing Operations

 

429

 

48,474

 

Net Cash Provided by (Used in) Discontinued Operations

 

9,481

 

(4,857

)

Net Cash Provided by Operating Activities

 

9,910

 

43,617

 

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

Capital expenditures, excluding rental equipment

 

(1,632

)

(2,008

)

Additions to rental equipment

 

(770

)

(763

)

Proceeds from sale of businesses

 

15,126

 

3,168

 

Acquisition of businesses, net of cash acquired

 

(42,308

)

—

 

Proceeds from disposal of property, plant and equipment

 

588

 

2,266

 

Short-term investments

 

(8,295

)

(3,490

)

Net investing activities of discontinued operations

 

39

 

37

 

Net Cash Used in Investing Activities

 

(37,252

)

(790

)

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

Loan acquisition costs

 

(76

)

—

 

Change in short-term notes payable

 

69

 

(24

)

Dividends paid

 

(2,454

)

(2,434

)

Proceeds from exercise of stock options

 

2,065

 

740

 

Net Cash Used in Financing Activities

 

(396

)

(1,718

)

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

52

 

—

 

Increase (decrease) in cash and cash equivalents

 

(27,686

)

41,109

 

Cash and cash equivalents, beginning of period

 

130,447

 

53,959

 

Cash and cash equivalents, end of period

 

$

102,761

 

$

95,068

 

 

 

8


 

STEWART & STEVENSON SERVICES, INC. AND SUBSIDIARIES

SELECTED OTHER INFORMATION

Continuing Operations

 

 

 

 

ORDER BACKLOG

 

 

 

January 31,

 

May 1,

 

July 31,

 

October 30,

 

January 31,

 

April 30,

 

 

 

2004

 

2004

 

2004

 

2004

 

2005

 

2005

 

 

 

($Millions)

 

Tactical Vehicle Systems

 

$

453.0

 

$

591.2

 

$

496.7

 

$

450.9

 

$

456.6

 

$

909.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Power Products

 

27.8

 

27.2

 

41.7

 

37.7

 

39.3

 

52.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Engineered Products

 

20.1

 

30.9

 

26.6

 

47.1

 

91.9

 

89.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

500.9

 

$

649.3

 

$

565.0

 

$

535.7

 

$

587.8

 

$

1,052.0

 

 

 

 

TACTICAL VEHICLE SYSTEMS UNIT DELIVERIES

 

 

 

Fiscal 2004

 

 

 

1Q

 

2Q

 

3Q

 

4Q

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Trucks

 

743

 

751

 

683

 

627

 

2,804

 

 

 

 

 

 

 

 

 

 

 

 

 

LSACs

 

—

 

—

 

—

 

270

 

270

 

 

 

 

 

 

 

 

 

 

 

 

 

Trailers

 

204

 

201

 

146

 

179

 

730

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales (millions)

 

$

139

 

$

141

 

$

133

 

$

137

 

$

550

 

 

 

 

Fiscal 2005

 

Estimated Unit Deliveries

 

1Q

 

2Q*

 

3Q*

 

4Q*

 

Total*

 

 

 

 

 

 

 

 

 

 

 

 

 

Trucks

 

627

 

738

 

816

 

804

 

2,985

 

 

 

 

 

 

 

 

 

 

 

 

 

LSACs

 

621

 

853

 

292

 

—

 

1,766

 

 

 

 

 

 

 

 

 

 

 

 

 

Trailers

 

291

 

426

 

502

 

485

 

1,704

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales (millions)

 

$

166

 

$

209

 

$

174

 

$

148

 

$

697

 

*Based on current customer forecasts and other data.

See cautionary statements above for important information regarding forward-looking statements.

 

 

9


 

STEWART & STEVENSON SERVICES, INC. AND SUBSIDIARIES

RESTATED SEGMENT INFORMATION

(Dollars in Thousands)

 

 

 

 

Three Months Ended (Unaudited)

 

 

 

April 30, 2005

 

January 31, 2005

 

October 30, 2004

 

July 31, 2004

 

May 1, 2004

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

 

 

 

 

 

 

 

 

 

 

Tactical Vehicle Systems

 

$

165,518

 

$

136,853

 

$

133,431

 

$

140,737

 

$

138,783

 

Power Products

 

117,011

 

121,244

 

113,769

 

109,720

 

106,299

 

Engineered Products

 

29,033

 

33,866

 

25,356

 

21,936

 

17,268

 

Total sales

 

$

311,562

 

$

291,963

 

$

272,556

 

$

272,393

 

$

262,350

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit (loss)

 

 

 

 

 

 

 

 

 

 

 

Tactical Vehicle Systems

 

$

13,175

 

$

9,983

 

$

15,958

 

$

18,711

 

$

19,441

 

Power Products

 

2,377

 

6,043

 

2,160

 

2,200

 

(229

)

Engineered Products

 

1,274

 

1,977

 

805

 

1,113

 

(1,809

)

Corporate expenses, net

 

(2,504

)

(3,676

)

(3,089

)

(3,814

)

(3,467

)

Total operating profit

 

14,322

 

14,327

 

15,834

 

18,210

 

13,936

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(525

)

(542

)

(534

)

(436

)

(517

)

Interest income

 

760

 

391

 

411

 

332

 

254

 

Earnings from continuing operations before income taxes

 

$

14,557

$

 

14,176

$

 

15,711

$

 

18,106

$

 

13,673

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit (loss) percentage

 

 

 

 

 

 

 

 

 

 

 

Tactical Vehicle Systems

 

8.0

%

7.3

%

12.0

%

13.3

%

14.0

%

Power Products

 

2.0

 

5.0

 

1.9

 

2.0

 

(0.2

)

Engineered Products

 

4.4

 

5.8

 

3.2

 

5.1

 

(10.5

)

Consolidated

 

4.6

%

4.9

%

5.8

%

6.7

%

5.3

%

 

 

10