=============================================================================
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-k
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXHCNAGE ACT
OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________________ to __________________
Commission file number 0-8493
A. Full title of the plan and the address of the plan, if different
From that of the issuer named below:
STEWART & STEVENSON 401 (k) SAVINGS PLAN
Name of issuer of the securities held pursuant to the plan and the
Address of its principal executive office:
STEWART & STEVENSON SERVICES, INC.
2707 NORTH LOOP WEST
HOUSTON, TEXAS 77008
=============================================================================
FINANCIAL STATEMENT
In accordance with Item 4 of the Required Information for Form 11-K,
the following statements of financial condition for the Stewart & Stevenson
401 (k) Saving plan have been prepared in accordance with the financial
reporting requirements of the Employee Retirement Income Security Act of 1974,
as amended, and the regulations promulgated thereunder.
INDEX TO THE FINANCIAL STATEMENTS AND SCHEUDLE
Report of Independent Public Accounts
Item 1. Statement of net Assets Available for Benefits as of December 31,
1997 and 1996.
Item 2. Statement of Changes in Net Assets Available for Benefits for the
Years Ended December 31, 1997 and December 31, 1996.
Notes to Financial Statements
Schedule I - Item 27a - Schedule of Assets Held for Investment Purposes as
of December 31, 1997
Schedule II - Item 27d - Schedule of Reportable Transactions for the Year
Ended December 31, 1997.
==============================================================================
==============================================================================
STEWART & STEVENSON 401(k) SAVINGS PLAN
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997
TOGETHER WITH AUDITORS' REPORT
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Administrative Committee of the
Stewart & Stevenson 401(k) Savings Plan:
We have audited the accompanying statements of net assets available for
benefits of the Stewart & Stevenson 401(k) Savings Plan as of December 31,
1997 and 1996, and the related statements of changes in net assets
available for benefits for the years then ended. These financial
statements and the schedules referred to below are the responsibility of
the Plan's administrator. Our responsibility is to express an opinion on
these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the net assets available for benefits of the
Stewart & Stevenson 401(k) Savings Plan as of December 31, 1997 and 1996,
and the changes in net assets available for benefits for the years then
ended in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of
assets held for investment purposes as of December 31, 1997, reportable
transactions and nonexempt transactions for the year ended December 31,
1997, are presented for the purpose of additional analysis and are not a
required part of the basic financial statements but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act
of 1974. The supplemental schedules have been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in
our opinion, are fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Houston, Texas
June 19, 1998
<TABLE>
STEWART & STEVENSON 401(k) SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1997 AND 1996
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
ASSETS:
Investments, at fair value-
Common stock of Stewart & Stevenson Services, Inc. $ 1,789,246 $ 1,549,186
Mutual funds 23,529,389 14,605,987
Common/collective trust fund 2,660,658 2,080,436
Participant loans 890,184 522,927
----------- -----------
Total investments 28,869,477 18,758,536
Receivables-
Employer contributions 31,454 25,183
Participant contributions 170,168 134,213
Cash 66 170,123
----------- -----------
201,688 329,519
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $29,071,165 $19,088,055
=========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
STEWART & STEVENSON 401(k) SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<CAPTION> 1997 1996
---- ----
<S> <C> <C>
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Investment income-
Dividends $ 2,648,260 $ 1,099,294
Interest 65,432 35,609
Net appreciation (depreciation) in fair value of common stock (164,015) 239,784
Net appreciation in fair value of mutual funds 658,468 597,965
----------- -----------
Total investment income 3,208,145 1,972,652
Contributions-
Employer 1,079,221 984,534
Participant 5,875,460 5,090,204
Participant rollovers 306,513 1,036,336
Other additions-
Transfer from the Sierra Plan (Note 6) 1,562,178 -
Other receipts 38,347 -
----------- -----------
Total contributions and other additions 8,861,719 7,111,074
----------- -----------
Total additions 12,069,864 9,083,726
----------- -----------
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Distributions to participants 1,967,231 389,799
Withdrawals 50,105 135,870
Other distributions - 36,436
Administrative expenses 69,418 3,965
----------- -----------
Total deductions 2,086,754 566,070
----------- -----------
NET INCREASE 9,983,110 8,517,656
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 19,088,055 10,570,399
----------- -----------
End of year $29,071,165 $19,088,055
=========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
==============================================================================
STEWART & STEVENSON 401(k) SAVINGS PLAN
==============================================================================
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE PLAN:
General
The Stewart & Stevenson 401(k) Savings Plan (the Plan or the Stewart &
Stevenson Plan), adopted effective January 1, 1994, is a trusteed, defined
contribution plan established for the benefit of all eligible employees of
Stewart & Stevenson Services, Inc., and its subsidiaries, C. Jim Stewart &
Stevenson, Inc., Stewart & Stevenson Power, Inc., Stewart & Stevenson
Operations, Inc., Stewart & Stevenson Transportation, Inc., Stewart &
Stevenson International Sales, Inc., Stewart & Stevenson Technical
Services, Inc., Stewart & Stevenson de Venezuela, S.A., Creole Stewart &
Stevenson, Inc., Stewart & Stevenson Vehicle Services, Inc., Sierra Detroit
Diesel Allison, Inc., and Pow-R-Quik Limited. These entities are
collectively referred to as "the Company."
As a result of the acquisition of Sierra Detroit Diesel Allison, Inc., by
the Company, the Sierra Detroit Diesel Allison, Inc. Retirement Plan (the
Sierra Plan) merged into the Stewart & Stevenson Plan, effective April 14,
1997. All assets were transferred in-kind and each member of the Sierra
Plan became a participant in the Stewart & Stevenson Plan.
The following description of the Plan provides a summary of the Plan.
Participants should refer to the Plan document for a more complete
description of the Plan's provisions.
Plan Administration
The Plan is administered by a committee (the Administrative Committee)
which is appointed by the board of directors of Stewart & Stevenson
Services, Inc. This committee is empowered to act on all matters affecting
the Plan including, among other things, interpreting the Plan's provisions,
determining the eligibility of employees to become participants in the
Plan, selecting the funds to be made available in the Plan and determining
any person's right to a benefit under the Plan. The Administrative
Committee members do not receive compensation for services rendered to the
Plan.
Custodial safekeeping of Plan assets is performed by Merrill Lynch Trust
Company (the Trustee). Individual participant record keeping is performed
under Merrill Lynch, Pierce, Fenner & Smith Incorporated (the
Recordkeeper). Among other duties, the Trustee is to receive
contributions, collect the income from the Plan's assets and make
disbursements from the Plan's assets as directed by the Administrative
Committee. The Recordkeeper's duties include processing and maintaining
participant data, participant statements, and contributions and
distributions for purposes of recordkeeping.
Participation
Employee participation in the Plan is voluntary. All employees who are at
least 21 years of age are eligible to participate in the Plan after
completion of one year of service during which 1,000 or more hours are
worked.
Investments
The following details the investment funds available to each Plan
participant:
<TABLE>
<CAPTION>
<S> <C>
Fund 1 Merrill Lynch Global Allocation Fund, Inc., Class A (ML
Global)
Fund 2 Merrill Lynch Corporate Bond Fund, Inc., Intermediate Term,
Class A (ML Corporate)
Fund 3 Merrill Lynch Retirement Preservation Trust (ML Retirement)
Fund 4 AIM Value Fund (AIM)
Fund 5 American Balanced Fund (American)
Fund 6 Stewart & Stevenson Services, Inc., Common Stock (S&S
Services)
</TABLE>
Contributions
Participants may elect to contribute 1 percent to 15 percent of their wages
as reported to the Internal Revenue Service, subject to certain
limitations, as defined, in any or all six funds. Contributions from
employees are recorded in the period in which the Company makes payroll
deductions from Plan participants. The matching employer contribution is
25 percent of the first 6 percent of the participant's contribution.
Matching contributions from the Company are recorded in the same period as
the corresponding employee
contributions. Participant and employer contributions are remitted by the
employer to the Trustee every two weeks and are credited directly to the
participants' accounts by the Recordkeeper. Participants may also make
rollover contributions to the Plan representing distributions from other
qualified defined benefit or contribution plans. Participants can change
the allocation of their contributions in these six funds or they can
discontinue, increase or decrease their contribution rate within the
1 percent to 15 percent range as permitted by the Plan. All changes are
performed over an automated benefits system.
Participants' Benefits
Participants are fully vested in their participant contributions, rollovers
and earnings thereon at all times. Participants shall have a 100 percent
vested interest in their employer contributions upon attaining age 65, the
normal retirement age according to the Plan. Those participants who
terminate prior to normal retirement age are entitled to a benefit pursuant
to the value of their vested interests in their accounts as follows:
<TABLE>
<CAPTION>
Vested
Years of Vesting Service Interest
------------------------ --------
<S> <C>
Less than 3 0%
3 20
4 40
5 60
6 80
7 or more 100
</TABLE>
Prior to June 1, 1996, forfeited employer contributions were applied as a
reduction of future employer matching contributions. Effective June 1,
1996, the Plan was amended to allow forfeited employer contributions to be
used to pay Plan expenses, or to be applied as a reduction of future
employer matching contributions.
The Company anticipates and believes that the Plan will continue without
interruption but reserves the right to terminate the Plan. In the event of
termination, the assets of the Plan, less expenses of liquidation, will be
allocated to the participants in accordance with the terms of the Plan.
Withdrawals and Loans
Participant benefits are payable to participants or to a designated
beneficiary in the event of their retirement, death or termination of
employment. In limited circumstances, account withdrawals may be made for
financial hardship in accordance with the Plan.
Benefit payments to withdrawing employees are made in lump-sum payments.
A participant may borrow from his account up to a maximum equal to the
lesser of $50,000 or 50 percent of his vested account balance. Loan
transactions are treated as a transfer to (from) the investment fund from
(to) the participant loan fund. The minimum loan is $1,000 and will bear
interest at a rate of prime plus 1 percent. The loans shall not exceed
five years, except for loans for the purpose of acquiring a principal
residence. The loans are secured by the balance in the participant's
account. Principal and interest are paid ratably through monthly payroll
deductions.
2. SUMMARY OF ACCOUNTING POLICIES:
Basis of Accounting
The financial statements of the Plan have been prepared on the accrual
basis of accounting.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
changes therein and disclosure of contingent assets and liabilities.
Actual results could differ from those estimates.
Investment Valuation
The Merrill Lynch Retirement Preservation Trust Fund is a common/collective
trust fund investing primarily in guaranteed investment contracts and U.S.
Government securities. The guaranteed investment contracts are fully
benefit responsive and are recorded at contract value, which approximates
fair value. Contract value is determined based on contributions made under
the contract plus interest earned at the contract's rate less funds used to
pay investment fees and withdrawals. Effective yields of the guaranteed
investment contracts are 6.6 percent and 6.4 percent for the years ended
December 31, 1997 and 1996, respectively. The Plan's investments in mutual
funds and common/collective trust funds are recorded at cost when purchased
but are adjusted to market value based upon published data, by the Trustee,
for financial reporting purposes. The Plan's investments in common stock
are recorded at quoted market prices.
Recognition of Income and Expenses
The net change in the difference between market value of the investments on
hand at December 31, and the market value of the investments on hand as of the
beginning of the year, is included as unrealized appreciation (depreciation) of
investments. Realized gains or losses on the sale of investments and
withdrawals of investments are based on the value of the assets as of the
beginning of the year or the time of purchase during the year, if later.
Unrealized appreciation (depreciation) of investments and realized gains or
losses are recorded in the statement of changes in net assets available for
benefits as net appreciation (depreciation) in fair value of investments.
Interest income is reported daily on the accrual basis. Plan income or
loss for each investment fund is allocated to the participants daily in the
ratio that each participant's account balance bears to all account
balances. The Company may pay all expenses incurred in the administration
of the Plan, but it shall not be obligated to do so. Any such expenses and
fees not paid by the Company during 1997 and 1996 were paid from the Plan.
3. FEDERAL INCOME TAXES:
The Plan obtained its latest determination letter on September 3, 1994, in
which the Internal Revenue Service stated that the Plan, as originally
established, was in compliance with the applicable requirements of the
Internal Revenue Code (the Code). Although the Plan has been amended since
receiving the determination letter, the Administrative Committee believes
that the Plan is currently designed and being operated in compliance with
the applicable requirements of the Code. Therefore, the Administrative
Committee believes that the Plan is qualified and is tax-exempt as of
December 31, 1997 and 1996.
4. RECONCILIATION OF FINANCIAL
STATEMENTS TO FORM 5500:
The following is a reconciliation of net assets available for benefits per
the financial statements to the Form 5500 as of December 31, 1996:
<TABLE>
<CAPTION>
<S> <C>
Net assets available for benefits per the financial statements $19,088,055
Less- Amounts allocated to withdrawing participants (166,435)
------------
Net assets available for benefits per the Form 5500 $18,921,620
============
</TABLE>
There were no amounts allocated to withdrawing participants as of
December 31, 1997.
The following is a reconciliation of distributions to participants and
withdrawals per the financial statements to the Form 5500 for the year
ended December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Distributions to participants and withdrawals per the financial statements $2,017,336 $525,669
Add- Amounts allocated to withdrawing participants at December 31, 1997
and 1996 - 166,435
Less- Amounts allocated to withdrawing participants at December 31, 1996
and 1995 (166,435) -
----------- --------
Distributions to participants and withdrawals per the Form 5500 $1,850,901 $692,104
=========== ========
</TABLE>
Amounts allocated to withdrawing participants are recorded on the Form 5500
for distributions that have been processed and approved for payment prior
to December 31 but not yet paid as of that date.
5. NONEXEMPT TRANSACTION:
The reimbursement of certain forfeitures to the Company in 1996 constituted
a lending of such monies to the Company until corrected on June 25, 1997.
As such, this transaction represented a nonexempt transaction for the year
ended December 31, 1997, between the Company and the Plan as identified in
Schedule III.
6. TRANSFER FROM THE SIERRA PLAN:
On April 12, 1997, the Company purchased all of the outstanding shares of
Sierra Detroit Diesel Allison, Inc. In conjunction with the purchase,
effective April 14, 1997 (the Merger Date), the Sierra Detroit Diesel
Allison, Inc. Retirement Plan (the Sierra Plan) merged with and into the
Plan. The assets of the Sierra Plan were liquidated into cash and
transferred to the Plan, along with in-kind transfers of outstanding loan
amounts from the Sierra Plan trustee, totaling $1,562,178. These amounts
were invested in the closest corresponding fund under the Plan, as
determined by the Administrative Committee.
As such, each member of the Sierra Plan became a participant in the Plan as
of the Merger Date. Notwithstanding any provision of the Plan to the
contrary, each former Sierra Plan participant with three or more years of
service as of the Plan Merger Date (a Grandfathered Sierra Plan
Participant) shall have a vested and nonforfeitable interest in
contributions allocated to his employer contribution account in the Plan on
and after the Merger Date (and earnings thereon) in accordance with the
following schedule:
<TABLE>
<CAPTION>
Years of Vested
Vesting Service Interest
- --------------- --------
<S> <C>
Less than 1 year -%
1 year 20
2 years 40
3 years 60
4 years 80
5 years 100
</TABLE>
Each former Sierra Plan participant with at least one year of service
(determined under the provisions of the Sierra Plan) as of the Plan Merger
Date, who is not a Grandfathered Sierra Plan Participant, shall have his
vesting percentage in contributions allocated to his employer contribution
account in the Plan on or after the Plan Merger Date (and earnings thereon)
determined in accordance with the terms of the Plan provided, however, that
in no case shall such vesting percentage be less than his vesting
percentage under the Sierra Plan on the Plan Merger Date.
7. SALE OF CONSTRUCTION EQUIPMENT DIVISION:
On October 6, 1997, the Company sold substantially all of the net assets of
the Company's construction equipment franchise. In conjunction with the
sale, the benefits of such participants under the Plan shall be distributed
as soon as administratively feasible, subject to any required consents.
8. SUBSEQUENT EVENT:
In conjunction with the sale of the Company's gas turbine operations, the
following entities were added as participating employers of the Plan: GE
Packaged Power, Inc., GE Packaged Power Services, Inc., GE Energy Plan
Operations, Inc., and GE Packaged Power Sales, Inc., or their successors
(the Participating GE Employers). As such, certain employees of the gas
turbine operations became employees of the Participating GE Employers. The
Participating GE Employers have certain provisions that are specific to
their participating employees with respect to contributions and the
availability of Fund 6 - S&S Services for investment.
9. ALLOCATION TO INVESTMENT FUNDS:
The following statements reflect the allocation of net assets available for
benefits and changes in net assets available for benefits to the separate
investment funds as of and for the years ended December 31, 1997 and 1996:
<TABLE>
Statement of Net Assets Available for Benefits by Investment Fund
December 31, 1997
<CAPTION>
Fund 1 Fund 2 Fund 3 Fund 4
ML Global ML Corporate ML Retirement AIM
--------- ------------ ------------- ------
<S> <C> <C> <C> <C>
Assets-
Investments, at fair value-
Common stock of Stewart & Stevenson
Services, Inc. $ - $ - $ - $ -
Mutual funds 6,667,131 1,734,374 - 11,138,933
Common/collective trust fund - - 2,660,658 -
Participant loans - - - -
---------- ---------- ---------- ------------
Total investments 6,667,131 1,734,374 2,660,658 11,138,933
Receivables-
Employer contributions 6,953 2,771 2,704 12,170
Participant contributions 37,404 13,912 14,271 67,608
Interfund receivable (payable) - - 66 -
Cash - - - -
----------- ----------- ----------- -------------
44,357 16,683 17,041 79,778
----------- ----------- ----------- -------------
Net assets available for benefits $ 6,711,488 $ 1,751,057 $ 2,677,699 $ 11,218,711
=========== =========== =========== =============
(Continued)
</TABLE>
<TABLE>
<CAPTION>
Fund 5 Fund 6 Participant
American S&S Services Loan Fund General Total
-------- ------------ ----------- ------- -----
<S> <C> <C> <C> <C> <C>
Assets-
Investments, at fair value-
Common stock of Stewart & Stevenson
Services, Inc. $ - $ 1,789,246 $ - $ - $ 1,789,246
Mutual funds 3,988,951 - - - 23,529,389
Common/collective trust fund - - - - 2,660,658
Participant loans - - 890,184 - 890,184
----------- ----------- --------- ------- -----------
Total investments 3,988,951 1,789,246 890,184 - 28,869,477
Receivables-
Employer contributions 4,547 2,309 - - 31,454
Participant contributions 25,015 11,958 - - 170,168
Interfund receivable (payable) - - - (66) -
Cash - - - 66 66
----------- ----------- ---------- ------- ------------
29,562 14,267 - - 201,688
----------- ----------- ---------- ------- ------------
Net assets available for benefits $ 4,018,513 $ 1,803,513 $ 890,184 $ - $ 29,071,165
=========== =========== ========== ======= ============
</TABLE>
<TABLE>
Statement of Net Assets Available for Benefits by Investment Fund
December 31, 1996
<CAPTION>
Fund 1 Fund 2 Fund 3 Fund 4
ML Global ML Corporate ML Retirement AIM
--------- ------------ ------------- ---
<S> <C> <C> <C> <C>
Assets-
Investments, at fair value-
Common stock of Stewart & Stevenson Services,
Inc. $ - $ - $ - $ -
Mutual funds 4,327,018 1,215,995 - 6,466,601
Common/collective trust fund - - 2,080,436 -
Participant loans - - - -
----------- ----------- ----------- -----------
Total investments 4,327,018 1,215,995 2,080,436 6,466,601
Receivables-
Employer contributions 5,551 2,281 2,568 9,066
Participant contributions 29,997 11,316 13,040 49,271
Cash - - - -
----------- ----------- ----------- -----------
35,548 13,597 15,608 58,337
----------- ----------- ----------- -----------
Net assets available for benefits $ 4,362,566 $ 1,229,592 $ 2,096,044 $ 6,524,938
=========== =========== =========== ===========
</TABLE>
(Continued)
<TABLE>
<CAPTION>
Fund 5 Fund 6 Participant
American S&S Services Loan Fund General Total
-------- ------------ ----------- ------- -----
<S> <C> <C> <C> <C> <C>
Assets-
Investments, at fair value-
Common stock of Stewart & Stevenson Services,
Inc. $ - $ 1,459,186 $ - $ - $ 1,549,186
Mutual funds 2,596,373 - - - 14,605,987
Common/collective trust fund - - - - 2,080,436
Participant loans - - 522,927 - 522,927
----------- ----------- ---------- ------- ------------
Total investments 2,596,373 1,549,186 522,927 - 18,758,536
Receivables-
Employer contributions 3,405 2,312 - - 25,183
Participant contributions 18,092 12,497 - - 134,213
Cash - - - 170,123 170,123
----------- ----------- ---------- ------- ------------
21,497 14,809 - 170,123 329,519
----------- ----------- ---------- ------- ------------
Net assets available for benefits $ 2,617,870 $ 1,563,995 $ 522,927 $ 170,123 $ 19,088,055
=========== =========== ========== ========= ============
</TABLE>
<TABLE>
Statement of Changes in Net Assets Available for Benefits by Investment Fund
For the Year Ended December 31, 1997
<CAPTION>
Fund 1 Fund 2 Fund 3 Fund 4
ML Global ML Corporate ML Retirement AIM
--------- ------------ ------------- ---
<S> <C> <C> <C> <C>
Additions to net assets attributed to-
Investment income-
Dividends $ 849,779 $ 92,642 $ 140,808 $ 1,126,699
Interest 14,788 3,207 5,319 26,362
Net appreciation (depreciation) in fair
value of investments (274,895) 26,238 - 706,898
------------ ----------- ------------ ------------
Total investment income 589,672 122,087 146,127 1,859,959
Contributions-
Employer 239,698 98,369 102,703 396,611
Participant 1,308,587 506,453 545,736 2,199,106
Participant rollovers 90,037 17,497 28,500 47,245
Transfer from the Sierra Plan (Note 657,124 40,262 115,889 699,031
6)
Other receipts - - 38,347 -
----------- ----------- ------------ ------------
Total contributions and other
additions 2,295,446 662,581 831,175 3,341,993
------------ ----------- ------------ ------------
Total additions 2,885,118 784,668 977,302 5,201,952
------------ ----------- ------------ ------------
Deductions from net assets attributed to-
Distributions to participants 380,822 162,468 440,820 560,788
Withdrawals 4,116 8,532 12,637 12,296
Administrative expenses - - 69,418 -
Interfund transfers (in) out, net 151,258 92,203 (127,228) (64,905)
------------ ----------- ------------ ------------
Total deductions 536,196 263,203 395,647 508,179
------------ ----------- ------------ ------------
Net increase (decrease) 2,348,922 521,465 581,655 4,693,773
Net assets available for benefits-
Beginning of year 4,362,566 1,229,592 2,096,044 6,524,938
------------ ----------- ------------ ------------
End of year $ 6,711,488 $ 1,751,057 $ 2,677,699 $11,218,711
============ =========== ============ ============
(Continued)
</TABLE>
<TABLE>
<CAPTION>
Fund 5 Fund 6 Participant
American S&S Services Loan Fund General Total
-------- ------------ --------- ------- -----
<S> <C> <C> <C> <C> <C>
Additions to net assets attributed to-
Investment income-
Dividends $ 416,447 $ 21,885 $ - $ - $ 2,648,260
Interest 9,053 6,703 - - 65,432
Net appreciation (depreciation) in fair
value of investments 200,227 (164,015) - - 494,453
----------- --------- ----------- ------------ ------------
Total investment income 625,727 (135,427) - - 3,208,145
Contributions-
Employer 149,923 91,917 - - 1,079,221
Participant 822,213 493,365 - - 5,875,460
Participant rollovers 99,237 23,997 - - 306,513
Transfer from the Sierra Plan (Note - - 49,872 - 1,562,178
6)
Other receipts - - - - 38,347
----------- --------- ----------- ------------ ------------
Total contributions and other 1,071,373 609,279 49,872 - 8,861,719
additions
----------- --------- ----------- ------------ ------------
Total additions 1,697,100 473,852 49,872 - 12,069,864
----------- --------- ----------- ------------ ------------
Deductions from net assets attributed to-
Distributions to participants 276,790 71,555 73,988 - 1,967,231
Withdrawals 2,641 9,883 - - 50,105
Administrative expenses - - - - 69,418
Interfund transfers (in) out, net 17,026 152,896 (391,373) 170,123 -
----------- ---------- ----------- ------------ ------------
Total deductions 296,457 234,334 (317,385) 170,123 2,086,754
----------- ---------- ----------- ------------ ------------
Net increase (decrease) 1,400,643 239,518 367,257 (170,123) 9,983,110
Net assets available for benefits-
Beginning of year 2,617,870 1,563,995 522,927 170,123 19,088,055
----------- ----------- ----------- ----------- ------------
End of year $ 4,018,513 $ 1,803,513 $ 890,184 $ - $ 29,071,165
=========== =========== =========== =========== ============
</TABLE>
<TABLE>
Statement of Changes in Net Assets Available for Benefits by Investment Fund
For the Year Ended December 31, 1996
<CAPTION>
Fund 1 Fund 2 Fund 3 Fund 4
ML Global ML Corporate ML Retirement AIM
--------- ------------ ------------- ---
<S> <C> <C> <C> <C>
Additions to net assets attributed to-
Investment income-
Dividends $ 400,619 $ 61,421 $ 92,878 $ 315,731
Interest 7,329 1,999 4,303 12,244
Net appreciation (depreciation) in fair value of
investments 118,966 (23,329) - 450,206
----------- ----------- ------------ -----------
Total investment income 526,914 40,091 97,181 778,181
Contributions-
Employer 207,663 91,641 98,621 359,753
Participant 1,065,412 450,343 489,759 1,907,006
Participant rollovers 128,641 101,176 230,277 244,561
----------- ----------- ------------ -----------
Total contributions 1,401,716 643,160 818,657 2,511,320
----------- ----------- ------------ -----------
Total additions 1,928,630 683,251 915,838 3,289,501
----------- ----------- ------------ -----------
Deductions from net assets attributed to-
Distributions to participants 83,389 16,763 91,425 192,743
Withdrawals 30,379 9,608 8,855 61,043
Other distributions - - 36,436 -
Administrative expenses - - 3,965 -
Interfund transfers (in) out, net 12,415 85,250 (115,112) 236,577
----------- ----------- ------------ -----------
Total deductions 126,183 111,621 25,569 490,363
----------- ----------- ------------ -----------
Net increase 1,802,447 571,630 890,269 2,799,138
Net assets available for benefits-
Beginning of year 2,560,119 657,962 1,205,775 3,725,800
----------- ----------- ------------ -----------
End of year $ 4,362,566 $ 1,229,592 $ 2,096,044 $ 6,524,938
=========== ============ ============ ===========
</TABLE>
(Continued)
<TABLE>
<CAPTION>
Fund 5 Fund 6 Participant
American S&S Services Loan Fund General Total
-------- ------------ --------- ------- -----
<S> <C> <C> <C> <C> <C>
Additions to net assets attributed to-
Investment income-
Dividends $ 214,022 $ 14,623 $ - $ - $ 1,099,294
Interest 5,817 3,917 - - 35,609
Net appreciation (depreciation) in fair value
of investments 52,122 239,784 - - 837,749
----------- ----------- ----------- ---------- ------------
Total investment income 271,961 258,324 - - 1,972,652
Contributions-
Employer 130,143 96,713 - - 984,534
Participant 670,267 507,417 - - 5,090,204
Participant rollovers 156,402 175,279 - - 1,036,336
----------- ----------- ----------- ---------- ------------
Total contributions 956,812 779,409 - - 7,111,074
----------- ----------- ----------- ---------- ------------
Total additions 1,228,773 1,037,733 - - 9,083,726
----------- ----------- ----------- ---------- ------------
Deductions from net assets attributed to-
Distributions to participants 61,017 45,930 30,236 (131,704) 389,799
Withdrawals 16,740 22,649 - (13,404) 135,870
Other distributions - - - - 36,436
Administrative expenses - - - - 3,965
Interfund transfers (in) out, net 22,855 194,706 (266,568) (170,123) -
----------- ----------- ----------- ---------- ------------
Total deductions 100,612 263,285 (236,332) (315,231) 566,070
----------- ----------- ----------- ---------- ------------
Net increase 1,128,161 774,448 236,332 315,231 8,517,656
Net assets available for benefits-
Beginning of year 1,489,709 789,547 286,595 (145,108) 10,570,399
----------- ----------- ----------- ---------- ------------
End of year $ 2,617,870 $ 1,563,995 $ 522,927 $ 170,123 $ 19,088,055
=========== =========== =========== ========== ============
</TABLE>
<TABLE>
SCHEDULE I
STEWART & STEVENSON 401(k) SAVINGS PLAN
ITEM 27(a) - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1997
<CAPTION>
Number of
Shares or
Principal Current
Identity of Issue Description Amount Cost Value
----------------- ------------ ------ ---- -----
<S> <C> <C> <C> <C>
Merrill Lynch Trust Company* Merrill Lynch Global
Allocation Fund, Inc.,
Class A 471,508.5307 $ 6,800,561 $ 6,667,131
Merrill Lynch Trust Company* Merrill Lynch Corporate Bond
Fund, Inc., Intermediate
Term, Class A
150,032.3813 1,705,372 1,734,374
Merrill Lynch Trust Company* Merrill Lynch Retirement
Preservation Trust 2,660,657.9200 2,660,658 2,660,658
AIM Family of Funds AIM Value Fund 343,582.1551 9,879,022 11,138,933
American Funds Group American Balanced Fund 254,397.3996 3,689,359 3,988,951
Stewart & Stevenson Services,
Inc.* Common stock 70,166.5290 1,889,678 1,789,246
Stewart & Stevenson 401(k) Savings Participant loans (interest
Plan* rates ranging from 7% to
10%)* 890,183.7100 890,184 890,184
------------- --------------
Total assets held for investment purposes $ 27,514,834 $ 28,869,477
============= ==============
*Identified party in interest.
The foregoing notes to the financial statements are an integral part of this
schedule.
</TABLE>
SCHEDULE II
<TABLE>
STEWART & STEVENSON 401(k) SAVINGS PLAN
ITEM 27(d) - SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<CAPTION>
Number of Purchase Selling
Identity of Party Involved Description Transactions Price* Price*
<S> <C> <C> <C> <C>
SERIES:
Merrill Lynch Trust Company Merrill Lynch Global Allocation Fund,
Inc., Class A 214 $ 3,429,156 $ -
Merrill Lynch Trust Company Merrill Lynch Global Allocation Fund,
Inc., Class A 195 - 814,148
Merrill Lynch Trust Company Merrill Lynch Corporate Bond Fund,
Inc., Intermediate Term, Class A 158 808,606 -
Merrill Lynch Trust Company Merrill Lynch Corporate Bond Fund,
Inc., Intermediate Term, Class A 161 - 316,465
Merrill Lynch Trust Company Merrill Lynch Retirement
Preservation Trust 303 1,339,714 -
Merrill Lynch Trust Company Merrill Lynch Retirement
Preservation Trust 210 - 759,492
AIM Family of Funds AIM Value Fund 293 5,284,884 -
AIM Family of Funds AIM Value Fund 233 - 1,319,450
American Funds Group American Balanced Fund 211 1,689,721 -
American Funds Group American Balanced Fund 167 - 497,370
Stewart & Stevenson Services, Inc. Common stock 214 965,870 -
Stewart & Stevenson Services, Inc. Common stock 164 - 561,795
SINGLE:
AIM Family of Funds AIM Value Fund 1 1,126,253 -
</TABLE>
[CAPTION]
(Continued)
<TABLE>
<CAPTION>
Current
Value of
Asset on
Cost of Transaction
Identity of Party Involved Asset Date Gain (Loss)
<S> <C> <C> <C>
SERIES:
Merrill Lynch Trust Company $ 3,429,156 $ 3,429,156 $ -
Merrill Lynch Trust Company 758,711 814,148 55,437
Merrill Lynch Trust Company 808,606 808,606 -
Merrill Lynch Trust Company 314,617 316,465 1,848
Merrill Lynch Trust Company 1,339,714 1,339,714 -
Merrill Lynch Trust Company 759,492 759,492 -
AIM Family of Funds 5,284,884 5,284,884 -
AIM Family of Funds 1,138,619 1,319,450 180,831
American Funds Group 1,689,721 1,689,721 -
American Funds Group 449,864 497,370 47,506
Stewart & Stevenson Services, Inc. 965,870 965,870 -
Stewart & Stevenson Services, Inc. 586,881 561,975 (25,086)
SINGLE:
AIM Family of Funds 1,126,253 1,126,253 -
*Amounts are net of purchase/selling expenses.
</TABLE>
NOTE: This schedule includes each single and series transaction involving the
same investment activity which, in the aggregate, amounts to more than 5 percent
of the current value of Plan assets at the beginning of the Plan year.
SCHEDULE III
<TABLE>
STEWART & STEVENSON 401(k) SAVINGS PLAN
ITEM 27(e) - SCHEDULE OF NONEXEMPT TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<CAPTION>
Amount Amount of
Identity of Party Involved Description of Transaction of Loan Interest
------------------------ -------------------- ------- --------
<S> <C> <C> <C>
Stewart & Stevenson Services, Inc. (the Deemed loan to the Sponsor dated
Sponsor) July 24, 1996, maturity June
25, 1997, interest rate 5.7% $36,436 $1,001
</TABLE>
NOTE: The deemed loan to the Sponsor plus accrued interest was paid to the
Plan on June 25, 1997.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Stewart & Stevenson 401(k) Savings Plan Administrative Committee which
administers the Stewart & Stevenson 401(k) Savings Plan has duly caused this
annual report to the signed on its behalf by the undersigned thereunto duly
authorized in the City of Houston and the State of Texas, on the 30th day of
June, 1998.
Stewart & Stevenson 401(k) Savings Plan
Administrative Committee
/s/ Robert L. Hargrave /s/ J. Carsey Manning
______________________ ______________________
Robert L. Hargrave J. Carsey Manning
Member Member
/s/ Donald E. Stevenson /s/ David R. Stewart
______________________ ______________________
Donald E. Stevenson David R. Stewart
Member Member
=================================================================
=================================================================
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference of our report dated June 19, 1998, on the financial statements
and schedules of Stewart & Stevenson 401(k) Savings Plan as of and for the
year ended December 31, 1997 and 1996, included in this Form 11-K, into the
previously filed Stewart & Stevenson Services, Inc., Form S-8 Registration
Statement file No. 33-52903.
/s/ Arthur Andersen
Houston, Texas
June 29, 1998
