SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _________
Commission file number 0-8493
STEWART & STEVENSON SERVICES, INC.
(Exact name of registrant as specified in its charter)
Texas 74-1051605
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2707 North Loop West, Houston, Texas 77008
(Address of principal executive offices) (Zip Code)
(713) 868-7700
(Registrant's telephone number, including area code)
not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, Without Par Value 33,042,588 Shares
(Class) (Outstanding at July 31, 1995)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
The following information required by Rule 10-01 of Regulation S-X is provided
herein for Stewart & Stevenson Services, Inc. and Subsidiaries (the "Company"):
Consolidated Condensed Statement of Financial Position -- July 31, 1995 and
January 31, 1995.
Consolidated Condensed Statement of Earnings -- Six Months and Three Months
Ended July 31, 1995 and 1994.
Consolidated Condensed Statement of Cash Flows -- Six Months Ended July 31,
1995 and 1994.
Notes to Consolidated Condensed Financial Statements.
<TABLE>
STEWART & STEVENSON SERVICES, INC.
CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION
(Dollars in thousands)
<CAPTION>
July 31 January 31
1995 1995
____________ ____________
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 8,493 $ 3,987
Accounts and notes receivable, net 208,284 186,814
Recoverable costs and accrued profits
not yet billed 288,525 227,467
Inventories:
Engineered Power Systems 197,130 224,729
Distribution 131,865 121,273
Excess of current costs over LIFO values (51,540) (50,135)
____________ ___________
277,455 295,867
Other 1,354 364
____________ ____________
TOTAL CURRENT ASSETS 784,111 714,499
PROPERTY, PLANT AND EQUIPMENT 238,362 230,215
Allowances for depreciation and
amortization (109,078) (98,355)
____________ ____________
129,284 131,860
OTHER ASSETS 26,920 29,257
____________ ____________
$940,315 $875,616
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 75,000 $ 42,000
Accounts payable 144,773 164,474
Billings on uncompleted contracts in
excess of incurred costs 22,316 11,284
Current income taxes 58,027 42,240
Other current liabilities 47,229 51,156
____________ ____________
TOTAL CURRENT LIABILITIES 347,345 311,154
LONG-TERM DEBT 116,858 116,900
DEFERRED INCOME TAXES 7,238 8,038
ACCRUED POSTRETIREMENT BENEFITS 15,251 15,252
DEFERRED COMPENSATION 5,438 5,269
SHAREHOLDERS' EQUITY
Common Stock, without par value,100,000,000
and 50,000,000 shares authorized at July 31,
1995 and January 31, 1995, respectively;
33,054,408 and 33,009,635 shares issued
at July 31, 1995 and January 31, 1995,
respectively, including 11,820 shares held
in treasury 163,253 162,057
Retained earnings 284,965 256,979
____________ ____________
448,218 419,036
Less cost of treasury stock (33) (33)
____________ ____________
TOTAL SHAREHOLDERS' EQUITY 448,185 419,003
____________ ____________
$940,315 $875,616
============ ============
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<TABLE>
STEWART & STEVENSON SERVICES, INC.
CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
(In thousands, except per share data)
<CAPTION>
Six Months Ended Three Months Ended
July 31 July 31
_______________________ ________________________
1995 1994 1995 1994
________ ________ ________ ________
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Sales $608,862 $546,273 $319,840 $287,118
Cost of sales 510,371 461,512 269,891 242,903
________ ________ ________ ________
Gross profit 98,491 84,761 49,949 44,215
Selling and administrative
expenses 44,179 35,335 22,518 18,101
Interest expense 6,100 2,299 3,150 1,260
Other income, net (1,119) (873) (797) (316)
________ ________ ________ ________
49,160 36,761 24,871 19,045
________ ________ ________ ________
Earnings before income taxes 49,331 48,000 25,078 25,170
Income taxes 16,563 16,093 8,435 8,497
________ ________ ________ ________
Earnings of consolidated
companies 32,768 31,907 16,643 16,673
Equity in net earnings (loss)
of unconsolidated affiliates 174 (390) 284 (185)
________ ________ ________ ________
Net earnings $ 32,942 $ 31,517 $ 16,927 $ 16,488
======== ======== ======== ========
Weighted average number of
shares of Common Stock
outstanding 33,022 32,955 33,037 32,968
======== ======== ======== ========
Net earnings per share $ 1.00 $ .96 $ .51 $ .50
======== ======== ======== ========
Cash dividends per share $ .15 $ .13 $ .08 $ .07
======== ======== ======== ========
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<TABLE>
STEWART & STEVENSON SERVICES, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Dollars in thousands)
<CAPTION>
Six Months Ended
July 31
__________________________
1995 1994
____________ ____________
(Unaudited)
<S> <C> <C>
Operating Activities
Net earnings $ 32,942 $ 31,517
Adjustments to reconcile net earnings to net cash
provided (used) by operating activities:
Depreciation and amortization 11,885 11,318
Deferred income taxes (800) (876)
Change in operating assets and liabilities:
Receivables (21,470) 12,231
Recoverable costs and accrued profits not
yet billed (61,058) (31,490)
Inventories 18,412 19,651
Accounts payable (19,701) (24,923)
Billings on uncompleted contracts in excess
of incurred costs 11,032 (11,539)
Current income taxes 15,787 1,912
Other current liabilities (3,999) (6,618)
Other--principally long-term assets and liabilities 1,354 (3,456)
____________ ____________
Net Cash Used By Operating Activities (15,616) (2,273)
Investing Activities
Expenditures for property, plant and equipment (9,959) (12,350)
Disposal of property, plant and equipment 813 673
____________ ____________
Net Cash Used By Investing Activities (9,146) (11,677)
Financing Activities
Additions to long-term borrowings 71 25,216
Payments on long-term borrowings (42) (26,212)
Borrowings and payments on short-term notes payable, net 33,000 17,000
Dividends paid (4,956) (4,285)
Exercise of stock options 1,195 1,092
____________ ____________
Net Cash Provided By Financing Activities 29,268 12,811
____________ ____________
Increase (Decrease) in cash and equivalents 4,506 (1,139)
Cash and equivalents, February 1 3,987 7,788
____________ ____________
Cash and equivalents, July 31 $ 8,493 $ 6,649
============ ============
Supplemental disclosure of cash flow information:
Net cash paid during the period for:
Interest payments $ 5,542 $ 2,234
Income tax payments $ 6,258 $ 15,058
See accompanying notes to consolidated condensed financial statements.
</TABLE>
STEWART & STEVENSON SERVICES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note A--Basis of Presentation and Significant Accounting Policies
The accompanying consolidated condensed financial statements have been
prepared in accordance with Rule 10-01 of Regulation S-X for interim financial
statements required to be filed with the Securities and Exchange Commission
and do not include all information and footnotes required by generally
accepted accounting principles for complete financial statements. However,
the information furnished reflects all normal recurring adjustments which are,
in the opinion of management, necessary for a fair statement of the results
for the interim periods. The results of operations for the six months and
three months ended July 31, 1995 are not necessarily indicative of the results
that will be realized for the fiscal year ending January 31, 1996.
The accounting policies followed by the Company in preparing interim
consolidated financial statements are similar to those described in the "Notes
to Consolidated Financial Statements" in the Company's January 31, 1995 Form
10-K.
The Company's fiscal year begins on February 1 of the year indicated and ends
on January 31 of the following year. For example, "Fiscal 1995" commenced on
February 1, 1995 and ends on January 31, 1996.
Net earnings per share of Common Stock were computed by dividing net earnings
by the weighted average number of shares outstanding. Common Stock
equivalents (outstanding options to purchase shares of Common Stock) are
excluded from the computations as they are insignificant. The weighted
average number of shares outstanding for the six and three months ended July
31, 1995 includes 42,250 and 16,250 shares issued pursuant to exercise of
stock options.
Note B--Commitments and Contingencies
Major contracts for military systems are performed over extended periods of
time and are subject to changes in scope of work and delivery schedules.
Pricing negotiations on changes and settlement of claims often extend over
prolonged periods of time. The Company's ultimate profitability on such
contracts will depend not only upon the accuracy of the Company's cost
projections, but also the eventual outcome of an equitable settlement of
contractual issues with the U.S. Government.
On May 3, 1995, an indictment was returned by a federal Grand Jury in Houston,
Texas, accusing the Company, a former consultant and four employees, including
the Company's President, of one count of major fraud against the United
States, four counts of false statements and one count of conspiracy to commit
major fraud, make false statements and interfere with the administration of
a foreign military sale. All of the counts arise from a 1987 subcontract to
supply diesel generator sets for installation at long-range radar sites in
Saudi Arabia (the "Peace Shield"). The indictment alleges that a former
employee of the general contractor for the Peace Shield program, who later
became a consultant to the Company, conspired with the Company and the other
defendants to award the subcontract to the Company. The indictment also
alleges that the government was defrauded out of approximately $5 million in
connection with cost savings from a change order under the Peace Shield
contract and that the Company made false statements relating to cost estimates
in connection with such change order. The Company and each individual have
denied all charges under the indictment and the case is pending in the United
States District Court, Southern District of Texas, Houston Division. The
Company is not able to make a reasonable estimate of the fines or penalties
that could be imposed under the Federal Sentencing Guidelines in the event of
a conviction under the indictment. Such fines and penalties could be
substantial and adversely affect the Company's financial position and results
of operations. A conviction could also further adversely affect the Company's
ability to participate in future government contracts. See Management's
Discussion and Analysis of Financial Condition and Results of Operations.
Also in connection with the Peace Shield contract, the Company has been
advised that the former consultant of the Company referred to above filed a
suit in the United States District Court, Southern District of Texas, Houston
Division, for himself and the United States of America alleging that the
Company supplied false information in violation of the False Claims Act (the
"Act"), engaged in common law fraud and misapplied costs. Under the
provisions of the Act, the suit has not been served upon the Company pending
an investigation of the case by the U. S. Department of Justice and a
determination as to whether the Department of Justice will intervene and
pursue the matter on behalf of the United States. The suit alleges treble
damages of $21 million plus unspecified penalties. Proceedings in this case
have been stayed pending resolution of the criminal matter referred to above.
The Company cannot predict the outcome of this action or the likelihood that
substantial damages will result. However, the Company intends to vigorously
defend this case if it is served upon the Company.
On May 16, 1995, C. Daniel Chill filed a purported class action suit in the
United States District Court, Southern District of Texas, Houston Division,
against the Company and three of its officers and directors on behalf of
himself and all persons that purchased shares of Common Stock between May 2,
1994 and May 3, 1995. An amended complaint was filed on June 7, 1995. The
suit alleges that the Company violated various sections of and rules under the
Securities Exchange Act of 1934 and common law by disseminating material false
and misleading information, failing to disclose material information and
failing to correct earlier statements that were no longer true, all relating
to the Peace Shield investigation and indictment. The suit claims unspecified
compensatory and punitive damages. The Company cannot predict the outcome of
this action or the likelihood that substantial damages will result. However,
the Company will vigorously defend this case and believes that this case will
be resolved without any material affect on the Company's financial condition
or results of operations.
The Company has not established any reserves or accruals for any potential
liability that may be subsequently found in any of the foregoing cases.
The Company is a defendant in a number of other lawsuits relating to
contractual, product liability, personal injury and warranty matters and
otherwise of the type normally incident to the Company's business. Management
is of the opinion that such lawsuits will not result in any material liability
to the Company.
Note C--Inventories
At January 31, 1995, the Engineered Powered Systems segment's inventory
included approximately $14,789,000 of costs on a certain U.S. Government
contract in excess of contractual authorization. During the second quarter
of Fiscal 1995, the Company recognized $3,500,000 of additional costs under
such contract based upon preliminary settlement discussions and the opinion
of outside legal counsel that the Company will recover a substantial portion
of the amount claimed. At July 31, 1995, the Engineered Power Systems
segment's inventory in excess of billing included $18,794,000 relating to
costs incurred by the Company which will be collectible upon either
contractual ammendment or approval of claims increasing funding.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion should be read in conjunction with the attached
condensed consolidated financial statements and notes thereto, and with the
Company's audited financial statements and notes thereto for the fiscal year
ended January 31, 1995.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage of
sales represented by certain items reflected in the Company's Consolidated
Condensed Statement of Earnings.
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
July 31 July 31
1995 1994 1995 1994
_________ _________ _________ _________
<S> <C> <C> <C> <C>
Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 83.8 84.5 84.4 84.6
_________ _________ _________ _________
Gross profit 16.2 15.5 15.6 15.4
Selling and administrative
expenses 7.3 6.5 7.0 6.3
Interest expense 1.0 .4 1.0 .4
Other income, net (.2) (.2) (.2) (.1)
_________ _________ _________ _________
8.1 6.7 7.8 6.6
_________ _________ _________ _________
Earnings before income taxes 8.1 8.8 7.8 8.8
Income taxes 2.7 2.9 2.6 3.0
_________ _________ _________ _________
Earnings of consolidated
companies 5.4 5.9 5.2 5.8
Equity in net earnings (loss) .0 (.1) .1 (.1)
_________ _________ _________ _________
Net earnings 5.4% 5.8% 5.3% 5.7%
========= ========= ========= =========
</TABLE>
Sales for the first six months of the year ending January 31, 1996 ("Fiscal
1995") increased 11.5% to $608,862,000 compared to sales of $546,273,000 for
the same period in the year ended January 31, 1995.
The Distribution segment was the primary contributor to the Company's sales
growth with an increase in sales of $37,309,000 (23%) in the first half of
Fiscal 1995 compared to the same period in Fiscal 1994. This increase is
mainly attributable to the acquisition of the assets and business of Power
Application & Mfg., Co. ("PAMCO"), a Waukesha distributor for the western
United States, during the fourth quarter of Fiscal 1994. The distribution of
product lines acquired from PAMCO contributed sales of $22,312,000 in the
first half of Fiscal 1995. Excluding sales relating to the PAMCO acquisition,
the Distribution segment's increase of 9% in the first half of Fiscal 1995
over the same period in Fiscal 1994 reflects the continued growth of the
economies in the territories serviced by the Company.
The Engineered Power Systems (EPS) segment sales increased $17,549,000 (6%)
for the first half of Fiscal 1995 compared to the same period in Fiscal 1994.
The sales growth in the EPS segment is attributed to the sales of gas turbine
products and services. Aftermarket services, including contract operation of
power plants, increased $11,332,000 in the first half of Fiscal 1995 compared
to the first half of Fiscal 1994. This increase includes $8,180,000 arising
from the acquisition of certain assets and business of CPS International, Inc.
during the third quarter of Fiscal 1994.
The Tactical Vehicle Systems (TVS) segment sales increased $5,151,000 (6%) for
the first half of Fiscal 1995 compared to the same period in Fiscal 1994. The
increase in TVS sales reflects the increase in truck production under the
"Family of Medium Tactical Vehicles" (FMTV) contract to 891 trucks in the
first half of Fiscal 1995 compared to 715 trucks in the same period in Fiscal
1994.
Sales for the second quarter of Fiscal 1995 increased $32,722,000 (11.4%) to
$319,840,000 compared to sales of $287,118,000 during the second quarter of
Fiscal 1994. The Distribution segment and EPS segment contributed to this
increase. The Distribution segment sales increased $19,506,000 (24%) for the
second quarter of Fiscal 1995 compared to the same period in Fiscal 1994. EPS
segment sales increased $10,000,000 (6.8%) for the second quarter of Fiscal
1995 compared to the same period in Fiscal 1994.
The gross profit margin of 16.2% for the first half of Fiscal 1995 improved
as compared to 15.5% for the same period in Fiscal 1994. Gross profit margins
for the second quarter of Fiscal 1995 were 15.6% compared to 15.4% for the
second quarter of 1994. Higher gross profit margins recognized on power
generation equipment during the first half of Fiscal 1995 were partially
offset by lower gross profit margins on compression equipment recognized by
the Company in the second quarter of Fiscal 1995. Also in the second quarter
of Fiscal 1995, the Company recognized $3,500,000 in gross profits based on
initial settlement discussions relating to a pending contract dispute. See
Note C to the Consolidated Condensed Financial Statements.
Selling and administrative expenses for the first half of Fiscal 1995
increased as a percentage of sales to 7.3% compared to 6.5% for the same
period in Fiscal 1994. The significant portion of this increase is
attributable to the two acquisitions made in the second half of Fiscal 1994
and to the increased administrative costs related to the establishment of an
international infrastructure, primarily for gas turbine product support.
Interest expense for the first half of Fiscal 1995 increased to $6,100,000,
up from $2,299,000 for the same period in Fiscal 1994. This increase is due
to an increase in both interest rates and outstanding debt required to carry
increased inventories of turbine-driven equipment and other working capital
items.
Net earnings of $32,942,000 ($1.00 per share) for the first half of Fiscal
1995 represents a 4.5% increase compared to $31,517,000 ($.96 per share) for
the same period in Fiscal 1994. This growth in earnings is primarily the
result of the increases in sales and resulting margins discussed above.
GOVERNMENT CONTRACTS STATUS
Initial Operational Test and Evaluation under the FMTV Contract was completed
in the second quarter and recently released test data shows outstanding
results in every category. Overall, the fleet of trucks bettered requirements
by scoring between 223 percent and 337 percent above the Army's reliability
standards. The Company has been informed that a decision to approve full rate
production and type classification for the FMTV to be placed in the U.S. Army
inventory was reached August 16, 1995 with formal notification to be issued
shortly. Actual fielding of the vehicles to combat troops is expected to
begin as soon as December of this year. Under the terms of the FMTV contract,
all vehicles produced before the full rate production decision must be
retrofitted with any changes required by test results or specification changes
ordered by the government. The Company has scheduled the retrofit to occur
during the fourth quarter of Fiscal 1995.
The Company is currently in low rate initial production. The current fiscal
year's planned production quantity is scheduled for completion by the end of
the third quarter. Full rate production is expected to commence after receipt
of program certification and completion of the retrofit program.
EFFECT OF CERTAIN LITIGATION
On May 3, 1995, the Company and four current employees, including the
Company's President, were indicted by a federal Grand Jury on six counts
arising out of a 1987 subcontract to supply diesel generator sets for
installation in Saudi Arabia. See Note B to the Consolidated Condensed
Financial Statements. Based on the indictment, the Company has been suspended
from bidding on or receiving any new contracts or extending any existing
contracts with agencies of the executive branch of the federal government or
receiving the benefit of federal assistance payments. Moreover, a conviction
of the Company on the charges set forth in the indictment could result in an
ineligibility from receiving government contracts for up to three years.
Under the regulations governing suspension, existing contracts are not
affected. In addition, the Department of the Army has determined that there
are compelling reasons that would permit the extension or renewal of the
Company's FMTV contract at any time prior to September 30, 1995. Any vehicles
under contract prior to that date will not be affected by the suspension.
The suspension will affect all future procurement and nonprocurement activity
of the federal government and may affect the procurement activities of certain
state and local governments. Except for sales pursuant to the FMTV
contracts, direct and indirect sales to agencies of the federal government did
not make a material contribution to any of the Company's business segments
during Fiscal 1994 and are not expected to make a material contribution in the
future. Nonprocurement activity affected by the suspension includes the
receipt of grants and loans from the federal government and sales that are
directly or indirectly funded by loans from agencies of the federal
government. The Company is not the direct recipient of any grants or loans
from agencies of the federal government but the Company's EPS division
regularly sells equipment and services to recipients of loans from Export
Import Bank ("EXIM Bank"), Overseas Private Investment Corporation ("OPIC")
and other such agencies. The Company has been advised by representatives of
EXIM Bank and OPIC that such organizations will not provide financing or other
assistance for projects for which the Company is a vendor as long as the
Company is suspended or debarred from government contracting. If alternative
financial facilities are not available or are unacceptable to the Company's
customers, the continued suspension or debarment of the Company could
materially adversely affect EPS segment sales.
UNFILLED ORDERS
The Company's unfilled orders consist of written purchase orders, letters of
intent, and oral commitments. These unfilled orders are generally subject to
cancellation or modification due to customer relationships or other
conditions. Purchase options are not included in unfilled orders until
exercised. Unfilled orders at July 31, 1995, and at the close of Fiscal 1994
were as follows:
<TABLE>
<CAPTION>
July 31 January 31
1995 1995
____________ ____________
(Dollars in millions)
<S> <C> <C>
Engineered Power Systems
Equipment $ 365.7 $ 416.0
Operations and Maintenance 317.7 311.6
____________ ____________
683.4 727.6
Distribution 44.8 40.0
Tactical Vehicle Systems 931.3 1,017.8
____________ ____________
Total $1,659.5 $1,785.4
============ ============
</TABLE>
Although no assurance can be given, the Company expects sales of the
Engineered Power Systems segment to continue to be weighted in favor of
turbine-driven equipment because of the large number of unfilled orders for
these units, the number of proposals that are presently outstanding and the
current worldwide need for additional electrical generating capacity.
Unfilled orders of the Tactical Vehicle Systems segment consists principally
of the contracts awarded in October 1991, by the United States Department of
the Army, to manufacture medium tactical vehicles. The contracts are subject
to Congressional approval of necessary funding for future program years. As
of July 31, 1995, funding for purchases for program year five, which begins
during the Company's Fiscal 1997, had not been received. If such funding is
not approved or is limited or delayed, the number of trucks produced in each
fiscal year may be reduced or contract performance may be delayed.
CAPITAL EXPENDITURES AND COMMITMENTS
Capital spending for property, plant and equipment was $9,959,000 for the
first half of Fiscal 1995 compared to $12,350,000 for the same period in
Fiscal 1994.
LIQUIDITY AND SOURCES OF CAPITAL
Long-term borrowings at July 31, 1995 decreased slightly from the end of
Fiscal 1994. The Company has $105,000,000 in committed credit facilities
which were fully utilized at July 31, 1995 and at the end of Fiscal 1994. The
Company has additional banking relationships which provide uncommitted
borrowing arrangements. These short-term borrowings increased to $75,000,000
at July 31, 1995 from $42,000,000 at the end of Fiscal 1994. This debt
increase of $33,000,000 is principally a result of the timing of customer
progress payments for contracts-in-process and absence of progress payments
under certain contracts under production during Fiscal 1995. The Company's
working capital needs can fluctuate significantly depending on the progress
payment streams of contracts-in-process. The Company regularly bids on large
commercial contracts and turnkey construction contracts that require the
Company to finance work-in-process. If awarded to the Company, these
contracts could also affect working capital needs. The Company may expand its
Distribution and EPS segments by selective acquisition of additional
distribution territories and product lines. In the event that such activities
create a need for working capital or capital expenditures in excess of
existing committed lines of credit, the Company may seek to convert its
uncommitted borrowing arrangements to committed credit facilities, to borrow
under other long-term financing sources or to issue additional equity
securities. The Company's current credit facilities appear adequate to meet
its foreseeable cash requirements.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
See Note B to the Consolidated Condensed Financial Statements.
Item 2. Changes in Securities.
(a) An amendment of the Articles of incorporation to increase the number
of authorized shares of Common Stock from 50,000,000 shares to 100,000,000
shares was approved by stockholders in the Annual Meeting on June 13, 1995.
A certificate of Amendment was filed with the State of Texas on July 20, 1995.
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Shareholders of the Company was held on June 13, 1995.
Set forth below is a brief description of each matter acted upon at the
meeting and the number of votes cast for, against or withheld, and abstaining
or not voting as to each matter.
Election of Directors
<TABLE>
<CAPTION>
AGAINST OR
FOR WITHHELD
<S> <C> <C>
J. Carsey Manning 27,294,149 642,582
Donald E. Stevenson 27,345,694 591,037
Robert H. Parsley 27,288,106 648,625
Robert S. Sullivan 27,381,993 554,738
</TABLE>
The approval of the 1994 Director Stock Option Plan.
<TABLE>
<CAPTION>
AGAINST OR ABSTAINED OR
FOR WITHHELD NOT VOTED
<S> <C> <C> <C>
21,142,811 5,762,166* 163,888
</TABLE>
The Amendment of the Second Restated Articles of Incorporation to increase the
authorized Common Stock of the Company from 50,000,000 shares to 100,000,000
shares, without par value.
<TABLE>
<CAPTION>
AGAINST OR ABSTAINED OR
FOR WITHHELD NOT VOTED
<S> <C> <C> <C>
26,027,160 921,615* 120,090
</TABLE>
The Amendment of the Second Restated Articles of Incorporation to limit the
personal liability of directors.
<TABLE>
<CAPTION>
AGAINST OR ABSTAINED OR
FOR WITHHELD NOT VOTED
<S> <C> <C> <C>
25,380,174 1,516,214* 172,477
</TABLE>
Ratification of Accountants
<TABLE>
<CAPTION>
AGAINST OR ABSTAINED OR
FOR WITHHELD NOT VOTED
<S> <C> <C> <C>
27,875,875 32,064 28,792
*Broker Non-Vote 867,866
</TABLE>
Item 5. Other Information.
On June 8, 1995, the Company's President and Chief Executive Officer, Mr. Bob
H. O'Neal, and three managers were placed on administrative leave as a result
of the indictment of the Company and such individuals and the suspension of
the Company. See Note B to the Consolidated Condensed Financial Statements and
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. Mr. Robert L. Hargrave, the Company's Vice President,
Treasurer and Chief Financial Officer, has been appointed as the Acting Chief
Executive Officer during the term of Mr. O'Neal's administrative leave.
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed as a part of this report pursuant to
Item
601 of Regulation S-K.
3(i) Articles of Incorporation
27 Financial Data Schedule
(b) The following reports on Form 8-K were filed during the three months
ended
July 31, 1995.
Form 8-K Reporting Date - May 3, 1995.
Items Reported - Item 5. Other Events (Indictment)
Form 8-K Reporting Date - May 12, 1995.
Items Reported - Item 5. Other Events (Suspension)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STEWART & STEVENSON SERVICES, INC.
Date: 09/13/95 By: /s/ Robert L. Hargrave
Robert L. Hargrave
Group Vice President, Chief Financial
Officer & Treasurer
(Principal Financial Officer)
EXHIBIT INDEX
Exhibit Number and Description
3(i) Articles of incorporation
27 Financial data schedule
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation
Act, the undersigned corporation adopts the following articles of
amendment to
its articles of incorporation:
ARTICLE ONE
The name of the corporation is Stewart & Stevenson Services, Inc.
ARTICLE TWO
The following amendments to the articles of incorporation were
adopted by the
shareholders of the corporation on June 13, 1995.
The number of shares outstanding at the time the amendments were
adopted, and
entitled to vote on the amendments were 33,026,815.
ARTICLE THREE
Article VI of the Second Restated Articles of Incorporation is
amended to read
as follows in its entirety:
The aggregate number of shares which the corporation shall have
authority to
issue is one hundred million (100,000,000) shares of common
stock, without par
value.
The number of shares voted for the amendment was 26,027,160. The
number of
shares voted against the amendment was 921,615.
ARTICLE FOUR
The Second Restated Articles of Incorporation is amended by
adding the following
new Article IX immediately following Article VIII:
IX.
A director of the corporation shall not be liable to the
corporation or its
shareholders for monetary damages for an act or omission in the
director's
capacity as a director, except that this Article does not
eliminate or limit the
liability of a director to the extent the director is found
liable for (i) a
breach of the director's duty of loyalty to the corporation or
its shareholders;
(ii) an act or omission not in good faith that constitutes a
breach of duty of
the director to the corporation or an act or omission that
involves intentional
misconduct or a knowing violation of the law; (iii) a transaction
from which the
director received an improper benefit, whether or not the benefit
resulted from
an action taken within the scope of the director's office; or
(iv) an act or
omission for which the liability of a director is expressly
provided by an
applicable statute. Any repeal or amendment of this Article by
the shareholders
of the corporation shall be prospective only and shall not
adversely affect any
limitation on the liability of a director of the corporation
existing at the
time of such repeal or amendment. In addition to the
circumstances in which the
director of the corporation is not liable as set forth in the
preceding
sentences, the director shall not be liable to the fullest extent
permitted by
any provisions of the statutes of Texas hereafter enacted that
further limits
the liability of a director.
The number of shares voted for the amendment was 25,380,174. The
number of
shares voted against the amendment were 1,516,214.
ARTICLE FIVE
The amendment does not provide for an exchange, reclassification
or cancellation
of issued shares.
ARTICLE SIX
These amendments do not affect a change in the amount of stated
capital.
/s/ Lawrence E.
Wilson
_________________________
Vice President &
Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM
10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-END> JUL-31-1995
<CASH> 8,493
<SECURITIES> 0
<RECEIVABLES> 210,204
<ALLOWANCES> (1,920)
<INVENTORY> 565,980
<CURRENT-ASSETS> 784,111
<PP&E> 238,362
<DEPRECIATION> (109,078)
<TOTAL-ASSETS> 940,315
<CURRENT-LIABILITIES> 347,345
<BONDS> 116,858
<COMMON> 163,253
0
0
<OTHER-SE> 284,932
<TOTAL-LIABILITY-AND-EQUITY> 940,315
<SALES> 608,862
<TOTAL-REVENUES> 608,862
<CGS> 510,371
<TOTAL-COSTS> 510,371
<OTHER-EXPENSES> 49,160
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,100
<INCOME-PRETAX> 49,331
<INCOME-TAX> 16,563
<INCOME-CONTINUING> 32,942
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 32,942
<EPS-PRIMARY> 1.00
<EPS-DILUTED> 1.00
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