EX-99.1 2 a05-15401_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
SECOND QUARTER 2005 RESULTS

Second Quarter Net Earnings were $0.31 per Diluted Share

Second Quarter Net Earnings from Continuing Operations were $0.56 per Diluted Share

 

HOUSTON – August 25, 2005 – Stewart & Stevenson Services, Inc. (NYSE: SVC) announced results for the second quarter of fiscal 2005, which ended on July 30, 2005.

 

Sales for the second quarter of fiscal 2005 totaled $369.0 million compared to sales of $272.4 million in the same period a year ago.  Net earnings in the second quarter of fiscal 2005 were $9.3 million, or $0.31 per diluted share, compared to $5.9 million, or $0.20 per diluted share, in the second quarter of fiscal 2004.  Net earnings from continuing operations in the second quarter of fiscal 2005 were $16.5 million, or $0.56 per diluted share, compared to $11.6 million, or $0.40 per diluted share, in the second quarter of fiscal 2004.

 

Max L. Lukens, the company’s President and Chief Executive Officer, stated, “We are pleased with the continued solid operating results in each of our core operating segments as well as the strength in order activity in each of those businesses.  We continue to work to improve our operating results while delivering quality products and services to our customers.”

 

Segment Data

The Tactical Vehicle Systems segment, which manufactures tactical vehicles for the U.S. Army and others, recorded sales of $204.2 million in the second quarter of fiscal 2005 compared to $140.7 million in the prior year’s second quarter.  Operating profit for the second quarter of fiscal 2005 increased to $19.1 million or 9.4%  of sales compared to $18.7 million or 13.3%  of sales in the second quarter of fiscal 2004.  Operating margins in this segment were expected to be lower in fiscal 2005 as a result of the lower unit prices in 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 other U.S. Army contracts to produce Low Signature Armored Cabs (“LSAC”) for use on the FMTV. The second quarter of 2005 included the sale of 852 LSAC units.

 

During the second quarter, the TVS segment received additional orders from the U.S. Army for FMTV trucks and trailers valued at approximately $483 million.  These contract modifications, which are funded by the 2005 U.S. Congress Supplemental Spending Bill,  provide for an additional 3,016 additional vehicles to the third program year of the current production contract with deliveries scheduled from June 2006 through September 2008. At the end of the second quarter, TVS had total backlog of approximately $1.2 billion.

 

The company is evaluating the requirements under the contract modifications and will increase its production capacity for 2006 in order to meet the required delivery schedule.  This will require capital expenditures of approximately $25 million for additional equipment and facilities to be committed during the second half of 2005.  The contract modification is not expected to have a significant impact on the company’s fiscal 2005 operating results.

 

The Power Products segment, which is responsible for sales and aftermarket support of a wide range of industrial and transportation equipment, recorded sales of $125.0 million in the second quarter of fiscal 2005 compared to sales of $109.7 million a year ago.  The increase in sales is primarily attributable to higher parts and equipment sales volume resulting from focused sales efforts as well as improving economic conditions in the company’s primary markets.  The second quarter 2005 operating profit increased to $6.0 million or 4.8% of sales from $2.2 million or 2.0% of sales in the comparable period of fiscal 2004.  The improvement in operating profit in this segment is largely attributable to the increased 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 $39.8 million for the second quarter of fiscal 2005 compared to $21.9 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 $91 million as of July 30, 2005.  Operating profit for the second quarter of fiscal 2005 increased to $2.7 million or 6.8% of sales from $1.1 million or 5.1% of sales in the previous year primarily as a result of cost reductions and improved project execution on the increased sales volume.

 


 

Discontinued Operations

Net losses from discontinued operations were $7.2 million or $0.25 per diluted share in the second quarter of fiscal 2005.  These losses include a $2.6 million after-tax charge resulting from the planned sale of business assets and operations of four California distribution locations within the Power Products segment, a $2.6 million after-tax charge relating to the settlement of  customer disputes in the exited Distributed Energy Solutions business, and a $1.9 million after-tax charge related to the retained post-closing obligations 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 $73.1 million at the end of the second quarter, as compared to $113.5 million at the end of the first quarter.  Cash used in operating activities accounted for most of this decrease and resulted from the timing of progress payments on contracts in the Tactical Vehicle Systems and Engineered Products segments.

 

Committed backlog at the end of the second quarter exceeded $1.3 billion, compared to $0.6 billion at January 31, 2005, primarily due to the funding of contract modifications 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, August 25, 2005 at 10:00 a.m. Eastern Time to review second quarter results.  To listen to the call, dial 800-901-5218 or 617-786-4511 and use pass code 28928186 at least ten minutes before the conference call begins.  A telephonic replay of the conference call will be available until September 1, 2005 and may be accessed by dialing 888-286-8010 or 617-801-6888 and using pass code 89187398.

 

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 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.

 


 

STEWART & STEVENSON SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

July 30, 2005

 

July 31, 2004

 

July 30, 2005

 

July 31, 2004

 

 

 

(Unaudited)

 

(Unaudited)

 

Sales

 

$

368,976

 

$

272,394

 

$

680,538

 

$

534,744

 

Cost of sales

 

322,497

 

232,128

 

597,406

 

457,888

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

46,479

 

40,266

 

83,132

 

76,856

 

 

 

 

 

 

 

 

 

 

 

Selling and administrative expenses

 

23,038

 

23,379

 

46,108

 

46,620

 

Other income, net

 

(1,427

)

(1,323

)

(2,166

)

(1,910

)

 

 

 

 

 

 

 

 

 

 

Operating profit

 

24,868

 

18,210

 

39,190

 

32,146

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

548

 

436

 

1,073

 

953

 

Interest and investment income

 

(797

)

(332

)

(1,557

)

(586

)

 

 

 

 

 

 

 

 

 

 

Earnings from continuing operations before income taxes

 

25,117

 

18,106

 

39,674

 

31,779

 

Income tax expense

 

8,645

 

6,515

 

13,869

 

11,381

 

Net earnings from continuing operations

 

16,472

 

11,591

 

25,805

 

20,398

 

Loss from discontinued operations, net of tax of ($4,070), ($3,086), ($4,487) and ($4,870)

 

(7,170

)

(5,714

)

(8,811

)

(9,079

)

Net earnings

 

$

9,302

 

$

5,877

 

$

16,994

 

$

11,319

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

29,058

 

28,749

 

28,993

 

28,709

 

Diluted

 

29,560

 

29,182

 

29,513

 

29,058

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.57

 

$

0.40

 

$

0.89

 

$

0.71

 

Discontinued operations

 

(0.25

)

(0.20

)

(0.30

)

(0.32

)

Net earnings per share

 

$

0.32

 

$

0.20

 

$

0.59

 

$

0.39

 

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.56

 

$

0.40

 

$

0.87

 

$

0.70

 

Discontinued operations

 

(0.25

)

(0.20

)

(0.30

)

(0.31

)

Net earnings per share

 

$

0.31

 

$

0.20

 

$

0.57

 

$

0.39

 

 

 

 

 

 

 

 

 

 

 

Cash dividends per share

 

$

0.085

 

$

0.085

 

$

0.170

 

$

0.170

 

 


 

STEWART & STEVENSON SERVICES, INC. AND SUBSIDIARIES

SEGMENT INFORMATION

(Dollars in thousands)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

July 30, 2005

 

July 31, 2004

 

July 30, 2005

 

July 31, 2004

 

 

 

(Unaudited)

 

(Unaudited)

 

Sales

 

 

 

 

 

 

 

 

 

Tactical Vehicle Systems

 

$

204,175

 

$

140,737

 

$

369,693

 

$

279,520

 

Power Products

 

125,049

 

109,721

 

242,060

 

216,020

 

Engineered Products

 

39,752

 

21,936

 

68,785

 

39,204

 

Total sales

 

$

368,976

 

$

272,394

 

$

680,538

 

$

534,744

 

 

 

 

 

 

 

 

 

 

 

Operating Profit (Loss)

 

 

 

 

 

 

 

 

 

Tactical Vehicle Systems

 

$

19,100

 

$

18,711

 

$

32,275

 

$

38,153

 

Power Products

 

5,958

 

2,200

 

8,335

 

1,971

 

Engineered Products

 

2,693

 

1,113

 

3,967

 

(697

)

Corporate expenses, net

 

(2,883

)

(3,814

)

(5,387

)

(7,281

)

Total operating profit

 

24,868

 

18,210

 

39,190

 

32,146

 

Interest expense

 

548

 

436

 

1,073

 

953

 

Interest and investment income

 

(797

)

(332

)

(1,557

)

(586

)

 

 

 

 

 

 

 

 

 

 

Earnings from continuing operations before income taxes

 

$

25,117

 

$

18,106

 

$

39,674

 

$

31,779

 

 

 

 

 

 

 

 

 

 

 

Operating Profit (Loss) Percentage

 

 

 

 

 

 

 

 

 

Tactical Vehicle Systems

 

9.4

%

13.3

%

8.7

%

13.6

%

Power Products

 

4.8

 

2.0

 

3.4

 

0.9

 

Engineered Products

 

6.8

 

5.1

 

5.8

 

(1.8

)

Consolidated

 

6.7

%

6.7

%

5.8

%

6.0

%

 


 

STEWART & STEVENSON SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 

 

 

July 30, 2005

 

January 31, 2005

 

 

 

(Unaudited)

 

(Audited)

 

ASSETS

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

Cash and cash equivalents

 

$

62,053

 

$

130,447

 

Short-term investments

 

11,040

 

2,480

 

Accounts receivable, net

 

126,777

 

143,600

 

Recoverable costs and accrued profits not yet billed

 

37,834

 

26,544

 

Inventories

 

138,424

 

112,889

 

Excess of current cost over LIFO values

 

(36,021

)

(35,168

)

Deferred income taxes

 

4,646

 

5,647

 

Income tax receivable

 

6,205

 

7,223

 

Other current assets

 

8,350

 

4,987

 

Total assets of discontinued operations

 

44,351

 

68,186

 

TOTAL CURRENT ASSETS

 

403,659

 

466,835

 

 

 

 

 

 

 

PROPERTY, PLANT AND EQUIPMENT, NET

 

111,364

 

115,568

 

DEFERRED INCOME TAX ASSET

 

16,108

 

20,874

 

INTANGIBLES AND OTHER ASSETS, NET

 

53,383

 

10,065

 

TOTAL ASSETS

 

$

584,514

 

$

613,342

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

Notes payable

 

$

4,196

 

$

1,671

 

Current portion of long-term debt

 

25,000

 

—

 

Accounts payable

 

99,397

 

81,716

 

Accrued payrolls and incentives

 

16,735

 

22,941

 

Billings in excess of incurred costs

 

—

 

59,894

 

Other current liabilities

 

42,499

 

36,691

 

Total liabilities of discontinued operations

 

32,661

 

38,770

 

TOTAL CURRENT LIABILITIES

 

220,488

 

241,683

 

 

 

 

 

 

 

LONG-TERM DEBT, NET

 

75

 

25,000

 

ACCRUED POSTRETIREMENT BENEFITS AND PENSION

 

58,336

 

57,621

 

OTHER LONG-TERM LIABILITIES

 

3,899

 

4,318

 

TOTAL LIABILITIES

 

282,798

 

328,622

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

Common Stock, without par value, 100,000,000 shares authorized; 29,104,803 and 28,865,070 shares issued, respectively

 

63,937

 

59,616

 

Accumulated other comprehensive loss

 

(35,434

)

(36,048

)

Retained earnings

 

273,213

 

261,152

 

TOTAL SHAREHOLDERS’ EQUITY

 

301,716

 

284,720

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

584,514

 

$

613,342

 

 


 

STEWART & STEVENSON SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

July 30, 2005

 

July 31, 2004

 

July 30, 2005

 

July 31, 2004

 

 

 

(Unaudited)

 

(Unaudited)

 

Operating Activities

 

 

 

 

 

 

 

 

 

Net earnings

 

$

9,302

 

$

5,877

 

$

16,994

 

$

11,319

 

Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

 

Net loss from discontinued operations

 

7,170

 

5,714

 

8,811

 

9,079

 

Deferred tax expense

 

3,168

 

2,403

 

6,275

 

2,920

 

Depreciation and amortization

 

5,833

 

7,332

 

11,278

 

13,856

 

Unrealized foreign exchange losses

 

1,414

 

—

 

1,414

 

—

 

Gain on sale of assets

 

(792

)

(795

)

(779

)

(1,141

)

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

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

2,116

 

(11,685

)

8,946

 

21,913

 

Recoverable costs and accrued profits not yet billed

 

(13,084

)

1,588

 

(11,290

)

2,934

 

Inventories

 

(9,958

)

1,230

 

(18,103

)

4,850

 

Other current and noncurrent assets

 

(2,664

)

15,473

 

(434

)

21,187

 

Accounts payable

 

10,215

 

5,599

 

11,180

 

(2,855

)

Accrued payrolls and incentives

 

(4,055

)

(2,190

)

(8,257

)

(1,851

)

Billings in excess of incurred costs

 

(45,227

)

(34,049

)

(59,894

)

(37,820

)

Other current liabilities

 

(452

)

3,272

 

(2,351

)

4,967

 

Accrued postretirement benefits & pension

 

331

 

159

 

715

 

714

 

Other, net

 

387

 

93

 

(372

)

(1,577

)

Net Cash Provided by (Used in) Continuing Operations

 

(36,296

)

21

 

(35,867

)

48,495

 

Net Cash Provided by (Used in) Discontinued Operations

 

(1,230

)

(8,362

)

8,251

 

(13,219

)

Net Cash Provided by (Used in) Operating Activities

 

(37,526

)

(8,341

)

(27,616

)

35,276

 

 

 

 

 

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

 

 

 

 

Capital expenditures, excluding rental equipment

 

(1,917

)

(3,863

)

(3,549

)

(5,871

)

Additions to rental equipment

 

(1,871

)

(2,204

)

(2,641

)

(2,967

)

Proceeds from sale of businesses

 

79

 

464

 

15,205

 

3,632

 

Acquisition of businesses

 

(470

)

—

 

(42,778

)

—

 

Proceeds from disposal of property, plant and equipment

 

1,885

 

9,371

 

2,473

 

11,637

 

Short-term investment activity, net

 

(265

)

300

 

(8,560

)

(3,190

)

Net investing activities of discontinued operations

 

27

 

37

 

66

 

74

 

Net Cash Provided by (Used in) Investing Activities

 

(2,532

)

4,105

 

(39,784

)

3,315

 

 

 

 

 

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

 

 

 

 

Loan acquisition costs

 

—

 

—

 

(76

)

—

 

Change in short-term notes payable

 

543

 

(85

)

612

 

(109

)

Dividends paid

 

(2,479

)

(2,442

)

(4,933

)

(4,876

)

Proceeds from exercise of stock options

 

1,582

 

510

 

3,647

 

1,250

 

Net Cash Used in Financing Activities

 

(354

)

(2,017

)

(750

)

(3,735

)

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

(296

)

—

 

(244

)

—

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

(40,708

)

(6,253

)

(68,394

)

34,856

 

Cash and cash equivalents, beginning of period

 

102,761

 

95,068

 

130,447

 

53,959

 

Cash and cash equivalents, end of period

 

$

62,053

 

$

88,815

 

$

62,053

 

$

88,815

 

 


 

STEWART & STEVENSON SERVICES, INC. AND SUBSIDIARIES

SELECTED OTHER INFORMATION

Continuing Operations

 

 

 

ORDER BACKLOG

 

 

 

May 1,

 

July 31,

 

October 30,

 

January 31,

 

April 30,

 

July 30,

 

($ Millions)

 

2004

 

2004

 

2004

 

2005

 

2005

 

2005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tactical Vehicle Systems

 

$

591.2

 

$

496.7

 

$

450.9

 

$

456.6

 

$

909.9

 

$

1,204.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Power Products

 

27.2

 

41.7

 

37.7

 

39.3

 

52.6

 

56.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Engineered Products

 

30.9

 

26.6

 

47.1

 

91.9

 

89.5

 

91.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

649.3

 

$

565.0

 

$

535.7

 

$

587.8

 

$

1,052.0

 

$

1,352.2

 

 

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

 

 

 

1Q

 

2Q

 

3Q*

 

4Q*

 

Total*

 

Estimated Unit Deliveries

 

 

 

 

 

 

 

 

 

 

 

Trucks

 

627

 

711

 

758

 

798

 

2,894

 

LSACs

 

621

 

852

 

292

 

—

 

1,765

 

Trailers

 

291

 

337

 

444

 

483

 

1,555

 

Sales (millions)

 

$

166

 

$

204

 

$

170

 

$

151

 

$

691

 

 

* Based on current customer forecasts and other data.

 

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