SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
STEWART & STEVENSON SERVICES, INC.
(Name of Registrant as Specified In Its Charter)
STEWART & STEVENSON SERVICES, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
______________________________________________________________________
2) Aggregate number of securities to which transaction applies:
______________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
______________________________________________________________________
4) Proposed maximum aggregate value of transaction:
______________________________________________________________________
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
______________________________________________________________________
2) Form, Schedule or Registration Statement No.:
______________________________________________________________________
3) Filing Party:
______________________________________________________________________
4) Date Filed:
______________________________________________________________________
STEWART & STEVENSON SERVICES, INC.
2707 North Loop West
P.O. Box 1637
Houston, Texas 77251-1637
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 14, 1994
TO OUR SHAREHOLDERS:
The 1994 Annual Meeting of the Shareholders of Stewart & Stevenson
Services, Inc., a Texas corporation (the "Company"), will be held in the Texas
Commerce Center Auditorium, 601 Travis Street, Houston, Texas on Tuesday, June
14, 1994, at 10:00 a.m., local time, for the following purposes:
1. To elect four directors to the Board of Directors to hold office
until the expiration of their terms and until their respective successors have
been duly elected and qualified;
2. To ratify the appointment of Arthur Andersen & Co. as the
independent public accountants of the Company for the fiscal year ending January
31, 1995; and
3. To transact such other business as may properly come before the
meeting and any adjournment thereof.
Shareholders of record at the close of business on April 26, 1994, are
entitled to notice of and to vote at the Annual Meeting.
By Order of the Board of Directors,
LAWRENCE E. WILSON
Vice President and Secretary
Dated: Houston, Texas
May 9, 1994
________________
YOUR VOTE IS IMPORTANT. PLEASE DATE, SIGN AND PROMPTLY RETURN YOUR PROXY SO
THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES. THE GIVING OF
SUCH PROXY DOES NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IN THE EVENT YOU ATTEND
THE MEETING. YOUR PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED.
STEWART & STEVENSON SERVICES, INC.
2707 North Loop West
P.O. Box 1637
Houston, Texas 77251-1637
________________
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
June 14, 1994, and Adjournments
____________________
Approximate date proxy material first sent to shareholders:
May 9, 1994
____________________
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
The proxy furnished herewith, for use only at the Annual Meeting of
Shareholders to be held June 14, 1994, and any and all adjournments thereof, is
solicited by the Board of Directors of Stewart & Stevenson Services, Inc. (the
"Company"). Such solicitation is being made by mail and may also be made in
person or by telephone by officers, directors and regular employees of the
Company, and arrangements may be made with brokerage houses or other custodians,
nominees and fiduciaries to send proxy material to their principals. All
expenses incurred in this solicitation of proxies will be paid by the Company.
The presence of the holders of a majority of the issued and outstanding
shares of Common Stock entitled to vote, either in person or represented by
proxy, is necessary to constitute a quorum for the transaction of business at
the Annual Meeting. Proxies that withhold authority to vote for a nominee or
abstain from voting on any matter are counted for the purpose of determining
whether a quorum is present. Broker non-votes, which may occur when a broker or
nominee has not received timely voting instructions on certain proposals, are
not counted for the purpose of determining whether a quorum is present. If
there are not sufficient shares represented at the meeting to constitute a
quorum, the meeting may be adjourned until a specified future date to allow the
solicitation of additional proxies.
Directors are elected by a plurality of the votes cast at the meeting. The
four nominees that receive the greatest number of votes will be elected even
though the number of votes received may be less than a majority of the shares
represented in person or by proxy at the meeting. Proxies that withhold
authority to vote for a nominee will not prevent the election of such nominee if
other shareholders vote for such nominee.
The ratification of Arthur Andersen & Co. as the Company's independent
public accountants requires the affirmative vote of a majority of the shares
represented in person or by proxy at the meeting. Proxies that abstain from
voting on this proposal have the same effect as a vote against this proposal.
Any shareholder executing a proxy retains the right to revoke it by signing
and delivering a proxy bearing a later date, by giving notice of revocation in
writing to the Secretary of the Company at any time prior to its use, or by
voting in person at the meeting. All properly executed proxies received by the
Company and not revoked will be voted at the meeting, or any adjournment
thereof, in accordance with the specifications of the shareholder. If no
instructions are specified on the proxy, shares represented thereby will be
voted FOR the election of the four nominees herein and FOR the ratification of
Arthur Andersen & Co. as the Company's independent public accountants for the
fiscal year ending January 31, 1995.
VOTING SECURITIES AND OWNERSHIP THEREOF
BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
At the close of business on April 26, 1994, the Company had outstanding
32,945,190 shares (not including treasury shares) of Common Stock, without par
value. Each outstanding share of Common Stock is entitled to one vote with
respect to each of the four director positions and one vote with respect to the
approval of the independent public accountant. Cumulative voting is not
permitted under the Company's Articles of Incorporation. Shareholders of record
at the close of business on April 26, 1994 are entitled to vote at or to execute
proxies relating to the Annual Meeting of Shareholders.
The following table lists the beneficial ownership of shares of the
Company's Common Stock by all persons and groups known by the Company to own
beneficially more than 5% of the outstanding shares of the Company's Common
Stock entitled to vote, by each director and nominee, by the Chief Executive
Officer and four highest compensated executive officers, and by all directors
and officers as a group. As of February 28, 1994, the Company had no parent and
none of the directors, nominees or officers of the Company owned any equity
security issued by the Company's subsidiaries other than director's qualifying
shares. Information with respect to officers, directors and their families is
as of February 28, 1994 and is based on the books and records of the Company and
information obtained from each individual. Information with respect to
institutional shareholders is based upon the Schedule 13G filed by such
shareholders with the Securities and Exchange Commission as of December 31,
1993. Unless otherwise stated, the business address of each individual or group
is the same as the address of the Company's principal executive office.
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership
____________________________________________________________________________
Sole Shared Sole Shared Right To Acquire
Name of Voting Voting Investment Investment Beneficial Percent of
Individual or Group Power Power Power Power Ownership Class
________________________________ __________ __________ __________ __________ ________________ __________
<S> <C> <C> <C> <C> <C> <C>
5% SHAREHOLDERS
Northern Trust Corporation
50 South LaSalle Street
Chicago, Illinois 60675 1,352,209 83,175 1,567,714 320,070 -0- 5.8
INDIVIDUAL DIRECTORS AND NOMINEES
C. Jim Stewart II 511,378 197,640 491,378 217,640 -0- 2.2
J. Carsey Manning 600 -0- 600 -0- -0- <F1>
Donald E. Stevenson 600,204 940 600,204 940 -0- 1.8
Robert H. Parsley 2,248 -0- 2,248 -0- -0- <F1>
Jack W. Lander, Jr. 6,000 -0- 6,000 -0- -0- <F1>
Robert L. Hargrave 40,439 -0- 40,439 -0- 2,500 <F1>
James H. Elder, Jr. 3,000 -0- 3,000 -0- -0- <F1>
Bob H. O'Neal 34,055 -0- 34,055 -0- 3,750 <F1>
Jack T. Currie 6,000 -0- 6,000 -0- -0- <F1>
Robert S. Sullivan -0- -0- -0- -0- -0- <F1>
EXECUTIVE OFFICERS
Bob H. O'Neal 34,055 -0- 34,055 -0- 3,750 <F1>
Robert L. Hargrave 40,439 -0- 40,439 -0- 2,500 <F1>
Richard R. Stewart 132,600 -0- 132,600 -0- 2,500 <F1>
Garth C. Bates, Jr. 84,083 -0- 70,307 13,776 7,500 <F1>
C. LaRoy Hammer 36,800 -0- 36,800 -0- 7,500 <F1>
ALL DIRECTORS AND OFFICERS
(18 Persons) 2,628,053 198,615 2,594,277 232,391 42,500 8.6
<FN>
<F1> Less than 1%.
</TABLE>
ELECTION OF DIRECTORS
The Board of Directors of the Company consists of twelve directors, divided
into three classes of four members. At each Annual Meeting of Shareholders, one
class is elected to hold office for a term of three years. Mr. William H.
Greehey resigned from the Board of Directors, during 1993 and Mr. Donald J.
Atwood died in April of 1994. The Board of Directors intends to elect two
people to fill the vacancies on Class II as soon as appropriate candidates are
identified and have agreed to serve on the Board of Directors of the Company.
Proxies received by the Company will not be voted to fill the vacancies on Class
II. The individuals set forth below have been nominated for election to the
Board of Directors at the meeting, to serve as the Class III Directors until
1997. The Class I and Class II Directors will continue to serve until the
expiration of their terms. THE BOARD OF DIRECTORS RECOMMENDS THAT THE NOMINEES
LISTED BELOW BE ELECTED BY THE SHAREHOLDERS. UNLESS OTHERWISE SPECIFIED, ALL
PROPERLY EXECUTED PROXIES RECEIVED BY THE COMPANY WILL BE VOTED AT THE ANNUAL
MEETING OR ANY ADJOURNMENT THEREOF FOR THE ELECTION OF THE PERSONS WHOSE NAMES
ARE LISTED IN THE FOLLOWING TABLE AS NOMINEES FOR THE CLASS III DIRECTORS.
<TABLE>
<CAPTION>
CLASS III
NOMINEES FOR TERM EXPIRING IN 1997
Director
Name and Principal Occupation Age Since
_______________________________________________________ ___ ________
<S> <C> <C>
C. JIM STEWART II <F1><F4> ............................ 68 1955
Chairman of the Board of the Company. Retired
Chief Executive Officer of the Company.
JACK W. LANDER, JR. <F2><F4> .......................... 68 1982
Chairman of the Board of Merchants Bank-Houston
and Chairman of the Board and director for its
holding company, Gulf Southwest Bancorp, Inc.,
in Houston, Texas.
BOB H. O'NEAL <F1> .................................... 59 1988
President and Chief Executive Officer of the
Company. Serves as a director of Lufkin
Industries, Inc.
JACK T. CURRIE <F3><F4> ............................... 65 1988
Personal investments. Retired Managing Director
of Mason Best Company, a merchant banking firm in
Houston, Texas and retired Vice Chairman of Rotan
Mosle Financial Corp., an investment banking firm
in Houston, Texas. Serves as a director for American
Indemnity Financial Corp.; American National Growth
Fund, Inc.; American National Income Fund Inc. and
Triflex Fund Inc.
</TABLE>
<TABLE>
<CAPTION>
CLASS I
DIRECTORS WHOSE TERM EXPIRES IN 1995
Director
Name and Principal Occupation Age Since
_______________________________________________________ ___ ________
<S> <C> <C>
J. CARSEY MANNING ..................................... 68 1973
Retired Senior Vice President of the Company.
DONALD E. STEVENSON ................................... 50 1975
Vice President of the Company.
ROBERT H. PARSLEY <F1><F3><F4> ........................ 71 1976
Partner in Butler & Binion, L.L.P., attorneys in
Houston, Texas.
ROBERT S. SULLIVAN <F2> ............................... 50 1992
Dean, Graduate School of Industrial Administration,
Carnegie Mellon University, Pittsburgh, Pennsylvania.
Previously, Associate Dean for Research and Academic
Affairs, The University of Texas at Austin,
Austin, Texas.
</TABLE>
<TABLE>
<CAPTION>
CLASS II
DIRECTORS WHOSE TERM EXPIRES IN 1996
Director
Name and Principal Occupation Age Since
_______________________________________________________ ___ ________
<S> <C> <C>
ROBERT L. HARGRAVE <F1> ............................... 53 1984
Group Vice President, Chief Financial Officer and
Treasurer of the Company.
JAMES H. ELDER, JR. <F1><F4> .......................... 69 1986
Personal investments. Retired Chairman, President
and Chief Executive Officer of Anderson, Greenwood
& Co., a manufacturer of industrial valves and
instrumentation in Houston, Texas. Serves as a
director for Battle Mountain Gold Company.
<FN>
<F1> Member of Executive Committee.
<F2> Member of Compensation and Management Development Committee.
<F3> Member of Audit Committee.
<F4> Member of Nominating Committee.
</TABLE>
The Board of Directors believes that each of the nominees will be willing
and able to serve. If any such person is unable to serve for good cause, or is
unwilling to serve for any reason, proxies will be voted for the election of
another person selected by the Nominating Committee of the Board of Directors.
All of the above nominees are presently serving as directors of the
Company. Each nominee and current director has been employed for more than five
years either as shown in the foregoing table or in various executive capacities
with the Company. All nominees were last elected as a director at the 1991
Annual Meeting.
The Audit Committee of the Board of Directors reviews with the Company's
independent public accountants the plan, scope and results of the annual audit;
reviews with the Company's independent public accountants and internal auditors
the procedures for and results of internal auditing and controls; and reviews
with management the effectiveness of various operational policies and controls.
The Audit Committee recommends to the Board of Directors the employment of
independent public accountants and considers, in general, the audit services to
be performed by such public accountants and the possible effect on the
independence of the public accountants from the performance of non-audit
services. The Audit Committee held three meetings during the fiscal year ended
January 31, 1994 ("Fiscal 1993").
The Compensation and Management Development Committee recommends the total
compensation payable by the Company to its Chief Executive Officer, subject to
approval by those members of the Board of Directors that are not and never have
been an officer of the Company or its subsidiaries, and approves the form and
amount of total compensation paid or payable by the Company to its other
executive officers; grants options pursuant to the Company's stock option plans;
conducts such investigations and studies as it deems necessary; and considers
management succession and related matters. See the Report of the Compensation
and Management Development Committee elsewhere herein. The Compensation and
Management Development Committee held three meetings during Fiscal 1993.
The Nominating Committee selects nominees for the Board of Directors of the
Company. The Nominating Committee considers nominees submitted by the members
of the Board of Directors, the officers of the Company and the Company's
shareholders. Nominees for the Board of Directors may be submitted to the
Chairman of the Nominating Committee at the Company's executive offices for
consideration by the Nominating Committee. The Nominating Committee held one
meeting during Fiscal 1993.
The Board of Directors held five meetings during Fiscal 1993. During the
last full fiscal year no director attended fewer than 75% of the aggregate of
(a) the total number of meetings of the Board of Directors (held during the
period for which he was a director) and (b) the total number of meetings held by
all committees of the Board of Directors on which he served (during the periods
that he served).
Executive Officers
The names, ages and positions of all the executive officers of the Company
are listed below. Each officer was last elected as an executive officer at the
meeting of directors immediately following the 1993 Annual Meeting of
Shareholders except for Mr. Brown who was elected on April 12, 1994. The term
of office of each executive officer will expire at the meeting of directors
following the 1994 Annual Meeting of Shareholders and when a successor is
elected and qualifies. There exist no arrangements or understandings between
any officer and any other person pursuant to which the officer was selected.
<TABLE>
<CAPTION>
Officer
Name Age Position Since
___________________ ___ _________________________________________________________ _______
<S> <C> <C> <C>
Bob H. O'Neal 59 President & Chief Executive Officer 1981
Robert L. Hargrave 53 Group Vice President, Chief Financial Officer & Treasurer 1980
Richard R. Stewart 44 Group Vice President (Engineered Power Systems) 1986
Garth C. Bates, Jr. 45 Group Vice President (Distribution) 1991
C. LaRoy Hammer 57 Group Vice President (Tactical Vehicle Systems) 1980
T. Michael Andrews 53 Vice President 1982
Donald E. Stevenson 50 Vice President 1984
Keith T. Stevenson 47 Vice President 1986
C. Jim Stewart III 45 Vice President 1988
Lawrence E. Wilson 41 Vice President & Secretary 1989
Bobby W. Brown 64 Vice President 1994
</TABLE>
Each of the officers listed above, except Messrs. Garth C. Bates, Jr. and
Bobby W. Brown have been employed by the Company in an executive capacity for
more than five years. Garth C. Bates, Jr. was appointed General Manager of the
Distribution Division in February 1991 and elected to his present position in
April 1991. Prior to February 1991, Mr. Bates served as President of Stewart &
Stevenson Power, Inc., the Company's wholly-owned subsidiary based in Denver,
Colorado, for more than five years. Bobby W. Brown was elected to his current
position on April 12, 1994. He previously served as the Company's Director of
Human Resources, Insurance and Risk Management for more than five years.
Richard R. Stewart and C. Jim Stewart III are sons of Mr. C. Jim Stewart
II, the Chairman of the Board of Directors of the Company. Garth C. Bates, Jr.
is a nephew of Mr. C. Jim Stewart II and a first cousin of Richard R. Stewart
and C. Jim Stewart III. Keith T. Stevenson is the brother, and T. Michael
Andrews is a first cousin, of Mr. Donald E. Stevenson, a director of the
Company. These persons and other members of the Stewart family and the
Stevenson family could be deemed "control persons" with respect to the Company
as such term is defined in the rules and regulations of the Securities and
Exchange Commission.
Transactions with Management and Certain Business Relationships
The Company leases certain land and buildings from associates of one of its
directors. Mr. J. Carsey Manning's brother, Joe Manning, Jr., and his nephew,
Joe Manning IV, lease land and a building to the Company for payments of $4,100
per month through April 30, 1996. Mr. Joe Manning, Jr. together with an
unrelated person leases land and a building to the Company for $4,270 per month
under a lease which will expire March 31, 1997. In addition, Mr. Joe Manning,
Jr., Trustee, leases land and a building to the Company for $2,500 per month
under a lease which will expire on December 31, 1995. Mr. Miles McInnis, a
former officer and director of the Company, and Mrs. Faye Manning Totsch, Mr. J.
Carsey Manning's mother, lease land and a building to the Company for $6,500 per
month under a lease which will expire April 14, 1997. The Board of Directors
believes that the terms of each of these leases have been at least as fair to
the Company as could have been obtained from nonaffiliated persons.
Director Robert H. Parsley is a partner in the law firm of Butler & Binion,
L.L.P. in Houston, Texas, which the Company retained during the last fiscal year
and proposes to retain during the current fiscal year.
EXECUTIVE COMPENSATION
The following Summary Compensation Table shows the aggregate compensation
paid or accrued by the Company during each of the last three fiscal years to or
for the Company's current Chief Executive Officer and each of the four highest
compensated executive officers.
<TABLE>
<CAPTION>
SUMMARY OF COMPENSATION
Long Term
Annual Compensation Compensation
______________________________________ __________________
Other All
Name and Year ended Annual Options LTIP Other
Principal Position January 31 Salary Bonus Compensation Granted Payout Compensation
______________________ __________ ________ ________ ____________ _______ ______ ____________
<S> <C> <C> <C> <C> <C> <C> <C>
Bob H. O'Neal
President & Chief
Executive Officer 1994 $298,077 $350,000 <F1> 15,000 -0- -0-
1993 199,519 300,000 <F1> -0- -0- -0-
1992 174,615 185,000 <F1> 30,000 -0- -0-
Robert L. Hargrave
Group Vice President,
Chief Financial
Officer & Treasurer 1994 179,423 140,000 <F1> 10,000 -0- -0-
1993 149,712 170,000 <F1> -0- -0- -0-
1992 134,846 160,000 <F1> 20,000 -0- -0-
Richard R. Stewart
Group Vice President
(Engineered Power
Systems) 1994 198,750 220,000 <F1> 10,000 -0- -0-
1993 134,712 250,000 <F1> -0- -0- -0-
1992 119,692 219,000 <F1> 20,000 -0- -0-
Garth C. Bates, Jr.
Group Vice President
(Distribution) 1994 159,231 160,000 <F1> 10,000 -0- -0-
1993 119,615 130,000 <F1> -0- -0- -0-
1992 98,536 120,000 <F1> 20,000 -0- -0-
C. LaRoy Hammer
Group Vice President
(Tactical Vehicle
Systems) 1994 164,423 160,000 <F1> -0- -0- -0-
1993 134,712 160,000 <F1> 10,000 -0- -0-
1992 119,846 180,000 <F1> 10,000 -0- -0-
<FN>
<F1> The total amount of all perquisites and other personal benefits, securities or property paid or accrued by the Company is less
than 10% of the total of annual salary and bonus. There have been no amounts paid or accrued with respect to above-market or
preferential earnings on restricted stock, options, SARs or deferred compensation or with respect to earnings on long-term incentive
plans or tax reimbursements. Except for purchases pursuant to the Stewart & Stevenson Employee Stock Purchase Plan, participation
in which is available to all employees, there were no purchases of any security of the Company for less than the fair market value
thereof on the date of purchase.
</TABLE>
Grants and Exercises of Stock Options and Stock Appreciation Rights
The Company has two stock option plans. The 1988 Nonstatutory Stock Option
Plan (the "1988 Plan") authorizes the grant of options to employees, including
officers, to purchase an aggregate of up to 1,800,000 shares of Common Stock and
provides that limited stock appreciation rights may be granted in connection
with such options. The 1993 Nonofficer Stock Option Plan (the "1993 Plan")
authorizes the grant of options to employees other than officers of the Company
to purchase an aggregate of up to 415,000 shares of Common Stock. Stock
appreciation rights may not be granted under the 1993 Plan. The recipients and
terms of options granted pursuant to the stock option plans are determined by
the Compensation and Management Development Committee of the Board of Directors,
none of whom are employees of the Company or eligible for any benefits under the
plans. During 1993, the Company granted options to purchase an aggregate of
63,000 shares of Common Stock under the 1988 Plan and options to purchase an
aggregate of 115,000 shares of Common Stock under the 1993 Plan. No limited
stock appreciation rights were granted under the 1988 Plan during 1993 or during
any previous fiscal year. The following tables set forth information as to
options under the Company's stock option plans granted to or exercised by the
individuals described in the Summary Compensation Table during 1993 and the
value of all outstanding options owned as of January 31, 1994 by the individuals
named in the Summary Compensation Table.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS DURING FISCAL 1993
Potential Realizable Value at
Assumed Annual Rates of Stock Price
Individual Grants Appreciation for Option Term
_______________________________________________________ ___________________________________
% of Total Exercise
Options Price
Options Granted to per Expiration
Name Granted<F1> Employees share<F2> Date 5% 10%
_________________________________ ___________ __________ _________ __________ ____________ ______________
<S> <C> <C> <C> <C> <C> <C>
Bob H. O'Neal 15,000 8.4 $32.625 3/16/03 $ 307,765 $ 779,938
Robert L. Hargrave 10,000 5.6 32.625 3/16/03 205,177 519,958
Richard R. Stewart 10,000 5.6 32.625 3/16/03 205,177 519,958
Garth C. Bates, Jr. 10,000 5.6 32.625 3/16/03 205,177 519,958
C. LaRoy Hammer -0- -0- N/A N/A N/A N/A
All Employees, including officers 178,000 100.0 32.625 3/16/03 3,652,148 9,255,261
<FN>
<F1> All options become exercisable in four 25% cumulative annual installments commencing on March 16, 1994.
<F2> All options are exercisable at the closing market price on the date of grant.
</TABLE>
<TABLE>
<CAPTION>
OPTION/SAR EXERCISES DURING FISCAL 1993
AND YEAR-END VALUES
Number of Unexercised Value of Unexercised In-the-
Options at Money Options at
January 31, 1994 January 31, 1994
_____________________________ _____________________________
Shares
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
_________________________________ ___________ __________ ___________ _____________ ___________ _____________
<S> <C> <C> <C> <C> <C> <C>
Bob H. O'Neal 15,000 $ 495,000 -0- 30,000 $ -0- $ 654,375
Robert L. Hargrave 10,000 287,500 -0- 20,000 -0- 436,250
Richard R. Stewart 10,000 311,250 -0- 20,000 -0- 436,250
Garth C. Bates, Jr. -0- -0- 5,000 10,000 143,750 436,250
C. LaRoy Hammer -0- -0- 5,000 12,500 121,250 291,875
All Employees, including officers 171,000 5,592,331 79,000 399,100 2,214,438 8,607,476
</TABLE>
Retirement Plans
The Company has a defined benefit Pension Plan (the "Pension Plan") under
which benefits are determined primarily by average final base salary and years
of service. The Pension Plan covers substantially all of its full-time
employees, including officers, and, subject to certain limitations described
below, bases pension benefits on 1.5% of (a) the employee's highest five-year
average base salary out of the last ten years or (b) $235,840 ($150,000 in 1994
and thereafter), whichever is lower, times the employee's years of credited
service. The Internal Revenue Code of 1986, as amended, limited benefits that
may be paid under the Pension Plan to $115,641 per year in 1993.
The Company has a Supplemental Executive Retirement Plan (the "SERP") under
which certain key executives will receive retirement benefits in addition to
those provided under the Pension Plan. The Compensation and Management
Development Committee determines which executive officers are eligible for
benefits under the SERP. Supplemental benefits are based upon the average final
compensation and years of service without regard to the limitations imposed by
the Internal Revenue Code of 1986, as amended, and using the total of base
salary and bonus to compute final average compensation. Benefits under the SERP
are limited to an amount such that the aggregate of all retirement benefits paid
under the Pension Plan and the SERP will not exceed 75% of the executive's final
average base salary not including bonus payments.
The following table sets forth the estimated annual benefits payable upon
retirement to persons in specified compensation and years-of-service
classification pursuant to the Stewart & Stevenson Employee Pension Plan and the
Stewart & Stevenson Supplemental Executive Retirement Plan.
<TABLE>
<CAPTION>
Estimated Annual Retirement Benefit <F1>
Years of Service
_______________________________________________________________________________
Final Average Compensation 20 25 30 35 40 45
__________________________ _________ _________ _________ _________ _________ _________
<S> <C> <C> <C> <C> <C> <C>
$ 100,000 $ 25,536 $ 31,920 $ 38,304 $ 45,060 $ 52,560 $ 60,060
200,000 55,536 69,420 83,304 97,560 112,560 127,560
300,000 85,536 106,920 128,304 150,060 172,560 195,060
400,000 115,536 144,420 173,304 202,560 232,560 262,560
500,000 145,536 181,920 218,304 255,060 292,560 330,060
600,000 175,536 219,420 263,304 307,560 352,560 397,560
700,000 205,536 256,920 308,304 360,060 412,560 465,060
800,000 235,536 294,420 353,304 412,560 472,560 532,560
<FN>
<F1> Computation of estimated annual retirement benefit based on a straight-line annuity for the life of the employee, net of
base Social Security benefits under the Social Security law currently in effect, assuming the employee retires in 2000 at age
65.
</TABLE>
The five-year average compensation of the individuals listed in the Summary
Compensation Table differs from the present salary and bonus listed in the
Summary Compensation Table as a result of changes in the rate of pay during the
average period. The following table sets forth the years of credited service,
average compensation and average base salary for each of the individuals listed
in the Summary Compensation Table.
<TABLE>
<CAPTION>
Years of Average Total Average
Name Service Compensation Base Salary
___________________ ________ _____________ ___________
<S> <C> <C> <C>
Bob H. O'Neal 29 $384,689 $193,289
Robert L. Hargrave 26 296,912 142,912
Richard R. Stewart 22 327,232 122,015
Garth C. Bates, Jr. 23 176,831 100,831
C. LaRoy Hammer 36 254,796 127,796
</TABLE>
Compensation of Directors
During Fiscal 1993, directors whose principal occupation is other than
employment with the Company were compensated at the rate of $16,000 per year
plus $1,000 for each meeting of the Board of Directors and each committee
meeting attended and $500 for each telephone meeting attended. The directors
were also reimbursed for any out-of-pocket expenses incurred to attend meetings.
Non-employee directors with 60 months of continuous service will receive $1,000
per month for a period equivalent to service on the Board of Directors up to a
maximum of 120 months, commencing on the month following their 70th birthday or
the date such director ceases to serve on the Board, whichever is later.
Compensation Committee Interlocks and Insider Participation
No person serving on the Compensation and Management Development Committee
during Fiscal 1993 is or has ever been an officer of the Company or any of its
subsidiaries, and no executive officer of the Company is serving or has ever
served on a board of directors or compensation committee of any entity, one of
whose executive officers now serves, or at any time in Fiscal 1993 served, on
the Board of Directors or Compensation and Management Development Committee of
the Company. The Company's Compensation and Management Development Committee
presently consists of Messrs. Jack W. Lander, Jr. and Robert S. Sullivan. Mr.
James H. Elder, Jr. and former directors, Messrs. James E. Knott, Donald J.
Atwood and William E. Greehey, also served on the Compensation and Management
Development Committee during Fiscal 1993.
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon recommendation of the Audit Committee, has
appointed Arthur Andersen & Co. as independent public accountants of the Company
for the year ending January 31, 1995. So far as is known to the Company,
neither such firm nor any of its associates has any relationship with the
Company or any affiliate of the Company other than the usual relationship that
exists between independent public accountants and clients. A representative of
Arthur Andersen & Co. will be present at the meeting to make a statement if such
representative desires and to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE APPOINTMENT OF ARTHUR ANDERSEN &
CO. AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE COMPANY FOR THE FISCAL YEAR ENDING
JANUARY 31, 1995 BE RATIFIED BY THE SHAREHOLDERS. UNLESS OTHERWISE INDICATED,
ALL PROPERLY EXECUTED PROXIES RECEIVED BY THE COMPANY WILL BE VOTED FOR SUCH
RATIFICATION AT THE ANNUAL MEETING OR ANY ADJOURNMENT THEREOF. An adverse vote
will be considered a direction to the Audit Committee to select other
independent public accountants in the following year.
OTHER BUSINESS
As of this date, the Board of Directors is not aware that any other matters
are to be presented for action at the Annual Meeting. THE PROXY FORM SENT
HEREWITH, IF EXECUTED AND RETURNED, GIVES DISCRETIONARY AUTHORITY TO THE EXTENT
PERMITTED BY LAW WITH RESPECT TO ANY OTHER MATTERS THAT MAY COME BEFORE THE
ANNUAL MEETING.
FORM 10-K FOR FISCAL 1993
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO ANY SHAREHOLDER ENTITLED TO VOTE
AT THE ANNUAL MEETING A COPY OF ITS MOST RECENT ANNUAL REPORT ON FORM 10-K UPON
RECEIPT OF A REQUEST THEREFOR. SUCH REQUESTS SHOULD BE DIRECTED TO:
LAWRENCE E. WILSON
VICE PRESIDENT & SECRETARY
P.O BOX 1637
HOUSTON, TEXAS 77251-1637
(713) 868-7700
SHAREHOLDER PROPOSALS FOR THE 1995 ANNUAL MEETING
Shareholders may submit proposals for the 1995 Annual Meeting by sending
such proposals to the attention of the Corporate Secretary. In order to be
considered for inclusion in the proxy statement for the 1995 Annual Meeting,
such proposals should be received by the Company on or before January 9, 1995.
By Order of the Board of Directors,
LAWRENCE E. WILSON
Vice President and Secretary
Dated: Houston, Texas
May 9, 1994
Notwithstanding any statement contained in a previous filing by the Company
under the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended, neither the Performance Graph set forth below nor the Report
of the Compensation and Management Development Committee that follows is
incorporated by reference into any such filing.
PERFORMANCE OF STEWART & STEVENSON COMMON STOCK
The following graph compares the cumulative total shareholder return on the
Company's Common Stock, to the cumulative total shareholder return of the
Standard & Poor's 500 Stock Index and the cumulative total shareholder return of
the Standard & Poor's Machinery-Diversified Index for the Company's last five
fiscal years. The graph assumes that the value of an investment in the
Company's Common Stock and each index was $100 on January 31, 1989 and that all
dividends were reinvested.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
Year Ended January 31,
_________________________________________________
1989 1990 1991 1992 1993 1994
____ ____ ____ ____ ____ ____
<S> <C> <C> <C> <C> <C> <C>
Stewart & Stevenson Services, Inc. 100 178 242 378 475 637
Standard & Poor's 500 Stock Index 100 114 124 152 168 190
Standard & Poor's Machinery - Diversified Index 100 116 111 122 131 188
</TABLE>
REPORT OF THE COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE
TO THE SHAREHOLDERS OF STEWART & STEVENSON SERVICES, INC.
The Compensation and Management Development Committee of the Board of
Directors (the "Committee") is comprised of two independent, non-employee
directors who have no "interlocking" relationships as defined by the Securities
and Exchange Commission. The Committee approves the design of executive
compensation programs, administers such programs and assesses their
effectiveness in supporting the Company's compensation policies. The Committee
also reviews and approves all salary arrangements and other executive
compensation, evaluates executive performance and considers management
succession and related matters.
The Committee is committed to implementing a compensation program which
furthers the Company's goal of emphasizing long-term shareholder value creation.
To facilitate the achievement of the Company's business strategies, the
Committee adheres to the following compensation policies:
To strengthen the relationship between pay and performance, executives'
annual and long-term compensation programs should include variable
compensation that is dependent upon the level of success in meeting
specified corporate and individual performance goals.
To focus management on the long-term interests of shareholders, a
significant portion of pay for senior executives should be comprised of
long-term, "at-risk" compensation.
To enable the Company to attract, retain and encourage the development of
the best available executive personnel, competitive compensation
opportunities should be offered. However, compensation levels should be
adjusted upward if Company performance exceeds that of its peer group and
adjusted downward if Company performance falls below that of its peer
group.
Components of Compensation
In determining the total compensation levels for the Company's senior
executives, the Committee refers to levels of compensation paid to executives of
a comparator group of companies. This comparator group is comprised of
companies similar to the Company which have national business operations and
comparable sales volumes, market capitalizations, employment levels and lines of
business. The selection of companies used for compensation comparison purposes
is reviewed and approved by the Committee.
The companies comprising the comparator group used for compensation
purposes generally are not the same companies comprising the published industry
index used in the Performance Graph included in this proxy statement. The
Committee believes that the Company's most direct competitors for executive
talent are not necessarily the same companies included in the Standard & Poor's
Machinery-Diversified Index, which is used for comparing shareholder returns.
The key elements of the Company's executive compensation program are base
salary, annual incentives and long-term compensation. These key elements are
addressed separately below. In determining each component of compensation, the
Committee considers all elements of an executive's total compensation package.
Base Salary
Base salary comprises from 35% to 40% of the value of each named
executive's compensation. Base salary levels are targeted at or below the
median levels of compensation for the Company's comparator group. The Committee
adjusts base salary levels to recognize historical individual base salary
levels, each individual executive's expected role for the upcoming fiscal year
and changes in the cost of living. Consistent with the Company's philosophy of
providing competitive levels of compensation, in Fiscal 1993 the Committee
adjusted base salaries from levels which were significantly below median market
levels.
Each executive's base salary is reviewed regularly by the Committee.
Increases to base salaries are driven primarily by individual performance, which
is evaluated based on sustained levels of individual contribution to the
Company. The executive's experience and past performance are also considered.
In making its evaluation, the Committee has assigned no particular weights to
these factors.
As reflected in the Summary Compensation Table, Mr. O'Neal's base salary
was increased in Fiscal 1993 by $100,000 (50%). In determining Mr. O'Neal's
base salary in Fiscal 1993, the Committee considered Mr. O'Neal's individual
performance and his long-term contributions to the success of the Company. In
addition, a significant factor in determining the increase to Mr. O'Neal's base
salary in Fiscal 1993 was the comparison to base salaries of CEOs at the group
of comparator companies.
Annual Incentives
To promote the Company's pay-for-performance philosophy and provide
executives with direct financial incentives to achieve corporate, business unit
and individual performance goals, the Company provides an annual bonus
opportunity to executives. Annual bonuses motivate executives to maximize
short-term performance as part of achieving long-term goals.
In establishing bonus payments made to each executive officer, the
Committee considers the following factors: (i) the aggregate total compensation
paid by the comparator group of companies, (ii) the performance of the Company
in comparison to other companies in the same industry and in comparison to the
market as a whole, (iii) the performance of the profit centers for which the
executive is responsible as compared to goals established for such profit
centers and (iv) the aggregate total compensation, including salary, bonus and
long-term incentives, paid to each executive. The Committee has assigned no
particular weights to these factors in establishing bonus payments. Bonus
payments for Fiscal 1993 were influenced by the performance of the Company
compared to its industry, as reflected in the performance graph set forth
elsewhere in these materials, and by the relatively low salaries paid by the
Company during Fiscal 1993 compared to the salaries paid by the comparator
group. Individual bonus payments were further affected by the performance of
certain operating divisions.
Mr. O'Neal was paid $350,000 in connection with Fiscal 1993 performance.
Mr. O'Neal's bonus is above the median of annual incentive compensation paid
other executives at comparator companies, and reflects Company performance above
that reported by competitors.
Long-Term Incentives
In keeping with the Company's philosophy of providing a total compensation
package which favors at-risk components of pay, long-term incentives comprise
from 25% to 30% of the value of each named executive's total compensation
package. Long-term incentives are provided pursuant to the Stewart & Stevenson
1988 Nonstatutory Stock Option Plan. The Committee has elected to grant stock
options as the Company's sole long-term incentive vehicle at this time.
Stock options are granted at an option price not less than the fair market
value of the Common Stock on the date of grant. Accordingly, stock options have
value only if the stock price appreciates from the date the options are granted.
This design focuses executives on the creation of shareholder value over the
long term and encourages equity ownership in the Company.
The size of stock option grants is based on competitive practice and is
targeted to be at the median of option values granted by the comparator group.
The size of the award can be adjusted based on individual performance, level of
responsibility and historical award data. Overall, the Committee aims to
deliver a competitive award opportunity based on the dollar value of the award
granted. As a result, the number of shares underlying stock option awards
varies and is dependent on the stock price on the date of grant.
In Fiscal 1993, Mr. O'Neal received options to purchase 15,000 shares with
an exercise price of $32.625, as is detailed in the Option Grants Table. The
Committee has determined that the compensation opportunities should remain
constant as long as total compensation fairly reflects overall corporate and
individual achievement. Currently, Mr. O'Neal owns 34,055 shares of the
Company's Common Stock and, together with the Fiscal 1993 grant, holds options
to purchase an additional 30,000 shares. The Committee believes this equity
interest provides an appropriate link to the interests of shareholders.
Policy with Respect to the $1 Million Deduction Limit
Recently enacted Section 162(m) of the Internal Revenue Code of 1986
generally limits the corporate deduction for compensation paid to executive
officers named in the proxy to $1 million, unless certain requirements are met.
The Committee has carefully considered the impact of this new tax code provision
on the Company's incentive plans and has determined that Section 162(m) is
currently inapplicable because no named executive officer is expected to receive
compensation, other than performance-based compensation, in excess of $1 million
in the foreseeable future. Thus, the Committee believes it is in the Company's
and shareholders' best interests to retain the Committee's discretionary
evaluation of individual and Company performance when determining total
compensation payable to the Company's executive officers.
Conclusion
The Committee believes these executive compensation policies and programs
serve the interests of the shareholders and the Company effectively. The
various pay vehicles offered are appropriately balanced to provide increased
motivation for executives to contribute to the Company's overall future success,
thereby enhancing the value of the Company for the shareholders' benefit.
We will continue to monitor the effectiveness of the Company's total
compensation program to meet the current needs of the Company.
Respectfully submitted,
THE COMPENSATION AND MANAGEMENT
DEVELOPMENT COMMITTEE
Jack W. Lander, Jr. - Chairman
Robert S. Sullivan
STEWART & STEVENSON SERVICES, INC.
ANNUAL MEETING OF SHAREHOLDERS-JUNE 14, 1994
COMMON STOCK PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Lawrence E. Wilson and Kyle J. Gideon, and
each of them, the attorneys and proxies of the undersigned (each with power to
act without the other and with power of substitution) to vote, as designated
below, all shares of Common Stock, without par value, of Stewart & Stevenson
Services, Inc. which the undersigned may be entitled to vote at the Annual
Meeting of Shareholders to be held at the Texas Commerce Bank Auditorium,
located on the corner of Texas and Travis in Houston, Texas at 10:00 a.m., on
the 14th day of June, 1994 and any adjournments thereof, upon all matters which
may properly come before said Annual Meeting.
IF NO CHOICE IS MARKED, THE UNDERSIGNED GRANTS THE PROXIES DISCRETIONARY
AUTHORITY WITH RESPECT TO THE ELECTION OF DIRECTORS AND PROPOSAL 2. UNLESS
OTHERWISE SPECIFIED THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES
LISTED ON THE REVERSE SIDE AND FOR PROPOSAL 2.
ANY PROXY HERETOFORE GIVEN BY THE UNDERSIGNED WITH RESPET TO SUCH STOCK IS
HEREBY REVOKED. RECEIPT OF THE NOTICE OF THE ANNUAL MEETING AND PROXY STATEMENT
IS HEREBY ACKNOWLEDGED.
(Continued, and to be dated and signed, on reverside side)
The Board of Directors recommends voting FOR all nominees listed below and FOR
Item 2.
1. ELECTION OF DIRECTORS
C. Jim Stewart II FOR [ ] WITHHOLD [ ] BOB H. O'NEAL [ ] WITHHOLD [ ]
Jack W. Lander, Jr. FOR [ ] WITHHOLD [ ] JACK T. CURRIE [ ] WITHHOLD [ ]
2. RATIFICATION OF PUBLIC ACCOUNTANT
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
PROXY DEPARTMENT
NEW YORK, N.Y. 10203-0828
The signature(s) on your proxy
should agree with the name(s)
shown at the left. If the stock
is held jointly, all joint owners
should sign. When signing as
attorney, executor, administrator,
trustee or guardian, please give
your full title as such.
Date: _______________________, 1994
_____________________________(L.S.)
_____________________________(L.S.)
Signature(s) of Shareholder(s)
Please Sign, Date and Return this Proxy Card Promptly Using the Enclosed
Envelope.
Votes must be indicated (X) in
Black or Blue Ink. [ ]
