SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): APRIL 1, 1999
STEWART & STEVENSON SERVICES, INC.
(Exact name of registrant as specified in its charter)
TEXAS 0-8493 74-1051605
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
2707 NORTH LOOP WEST
HOUSTON, TEXAS 77008
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (713) 868-7700
Item 5. Other Events.
On April 1, 1999, Stewart & Stevenson Services, Inc. (the "Company") issued the
press release attached hereto as Exhibit 99.1 announcing results for the
Company's fourth quarter and fiscal year 1998.
Item 7. Exhibits.
Exhibit 99.1 Company Press Release dated April 1, 1999 titled "Stewart &
Stevenson Announces Results for Fourth Quarter and Fiscal
1998 Year-End Results."
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 hereunto duly authorized.
STEWART & STEVENSON SERVICES, INC.
Date: April 1, 1999 By:/s/ C. JIM STEWART II
Name: C. Jim Stewart II
Title: President and Chief
Executive Officer
EXHIBIT INDEX
99.1 Company Press Release dated April 1, 1999 titled "Stewart & Stevenson
Announces Results for Fourth Quarter and Fiscal 1998 Year-End Results."
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Exhibit 99.1
NEWS FROM: STEWART & STEVENSON
CORPORATE HEADQUARTERS
P.O. BOX 1637
HOUSTON, TX 77251-1637
FOR IMMEDIATE RELEASE:
STEWART & STEVENSON ANNOUNCES
RESULTS FOR FOURTH QUARTER & FISCAL 1998 YEAR-END RESULTS
HOUSTON, TX April 1, 1999, STEWART & STEVENSON SERVICES, INC.
(NASDAQ:SSSS), a leading manufacturer and distributor of industrial and energy
related equipment, announced annual sales from continuing operations for the
year ended January 31, 1999, of $1,206.8 million representing an 8% increase in
sales compared to $1,115.0 million for the prior year. Net loss from continuing
operations for Fiscal year 1998 totaled $39.0 million or $1.34 per share,
compared to a net loss of $14.5 million and $.44 per share during 1997. This
year's net loss from continuing operations included a $56.3 million charge, the
equivalent to $1.94 per share, associated with the initial FMTV contract with
the U.S. Army; partially offset by interest income of $5.6 million or $.19 per
share earned on proceeds from the sale of the Gas Turbine business. Results for
Fiscal year 1997 included special year-end adjustments totaling $29.7 million,
or $.89 per share. Excluding certain non-recurring charges, net earnings and
earnings per share for Fiscal year 1998 would have been $11.6 million and $.41,
respectively. Comparable results for 1997 would have been $15.2 million and
$.45, respectively.
The net loss for the year, including discontinued operations, was $73.0
million or $2.51 per share. As previously reported, the Company recorded an
after-tax charge, net of accruals, of $20 million or $.69 per share for
adjustments to the purchase price and other matters relating to the sale of
Stewart & Stevenson's Gas Turbine Operations to General Electric Company (GE).
Additionally, in the fourth quarter of fiscal 1998, it became probable that the
Company would be required to perform under a debt guaranty related to a power
generation facility in Argentina. Accordingly, the Company has recorded an
estimated obligation of $14.0 million, net of tax. The guaranty arose as part of
the Company's Gas Turbine Operations. Accordingly, the charge has been reflected
in results from discontinued operations. Comparable net earnings and earnings
per share for 1997 were $52.3 million or $1.57 per share, respectively, and
included $66.8 million or $2.01 per share, pertaining to earnings from
discontinued operations and gain from the sale of the Company's Gas Turbine
Operations.
The Power Products segment, which is responsible for marketing and
aftermarket support of a wide range of industrial equipment, recorded sales of
$555.5 million during 1998, virtually flat with 1997 sales of $558.4 million.
The Power Products operating profits for 1998 totaled $23.6 million compared
with $34.1 million for the prior year. This segment recorded sales of $131.5
million and a loss of $3.2 million for the fourth quarter of 1998, compared with
sales and earnings of $147.2 million and $2.2 million, respectively for the same
quarter of 1997. Factors contributing to earnings shortfalls during the fourth
quarter and total year included: (1) lower equipment, parts, and service sales
in branches supplying the petroleum industry due to depressed oil and gas
prices; (2) increased reserves for accounts receivable and inventories; and (3)
partially offset by a $2.8 million non-recurring net gain in connection with the
sale of a John Deere franchise during the third quarter of Fiscal year 1997.
The Petroleum Equipment segment manufactures oil and gas production and
service equipment. The segment achieved sales and operating profits of $115.8
million and $10.2 million, respectively, for fiscal year 1998, which compared
favorably with 1997 sales of $83.1 million and profits of $5.7 million. Fourth
quarter sales of $33.5 million and profits of $3.1 million reflected sustained
quarter-to-quarter improvement during 1998. Fourth quarter 1997 results included
sales of $23.1 million and operating income of $.7 million. The segment was less
vulnerable to the impact of depressed oil and gas prices because of a relatively
strong position in deep water exploration products.
The Tactical Vehicle Systems (TVS) segment, which manufactures a family
of tactical vehicles for the U.S. Army and others, recorded sales of $455.4
million in 1998, an increase of $58.7 million (15%) over 1997. An operating loss
of $77.7 million was recorded for the current year which included: (1) a $40
million charge for estimated costs associated with a government directive to
change the FMTV truck configuration; (2) a $36.8 million charge related to a
series of Requests for Equitable Adjustments (REA's); and, (3) a $9.7 million
charge relating to cost overruns and superseded materials on the original
contract.
With regard to the government directive to change the FMTV truck
configuration, intensive efforts continue with the U.S. Army and certain vendors
to reach an equitable settlement. In the fourth quarter of fiscal 1998, the
Company made a decision to refit all fielded vehicles at the Sealy facility and
fund all or a significant portion of the $40 million estimated cost to perform
that work. The Company will submit a claim under the FMTV contract, seeking
compensation for those additional costs related to the directive. Any additional
compensation received from the U.S. Army related to this matter will be recorded
in the period in which the additional compensation is awarded.
On December 17, 1998 following an extensive period of negotiations with
the U.S. Army seeking to amicably resolve certain REA's for additional costs
incurred by the Company due to delays and changes caused by the government
during the initial truck contract, the Company filed a certified claim with the
U.S. Army seeking recovery of the additional costs. Management believes that the
FMTV contract provides a legal basis for the claim, however, due to the inherent
uncertainties in the claims resolution process, the Company has fully reserved
all recoveries relating to the claim. The Company will continue to aggressively
pursue recovery of all amounts claimed. Any additional compensation received
from the U.S. Army related to this matter will be recorded in the period in
which the additional compensation is awarded.
All other business activities not defined as specific segments include
airline ground support equipment, gas compression, certain under-recovered costs
associated with restructuring pooled manufacturing facilities, and other
miscellaneous activities. Sales for these activities totaled $80.1 million for
1998, compared with $76.8 million for 1997. Net losses for years 1998 and 1997
totaled $5.1 million and $5.3 million, respectively.
John H. Doster, Chief Financial Officer, stated that while the operating
performance for the current year was extremely disappointing, a number of
positive actions have been taken to improve future earnings performance:
1. The new multi-year Army truck contract, scheduled to commence in
August 1999, is projected to generate substantially improved margins;
2. Introduction of several new products in the Petroleum Equipment segment,
which are moving out of the start-up phase, is expected to generate
improved margins on modest sales growth;
3. Acquisition of Tug Manufacturing Corporation, coupled with new product
introductions, should enhance our position in the airline ground support
business;
4. Plans have been implemented to reduce expenses, and reduce investment in
receivables and inventories;
5. Leadership changes at the Chief Executive Officer level and in two
businesses should result in improved business performance;
6. Recent acquisition of Deutz engine distributorships should provide
excellent sales growth opportunities.
"These initiatives give us confidence that we will see improved results in
the future," added Mr. Doster.
This report contains forward-looking information. The forward-looking
statements, including without limitation statements relating to the Company's
performance and industry conditions for the year, are made pursuant to the Safe
Harbor provisions of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements may be significantly impacted by various factors
described herein and in the Company's Annual Report and Form 10-K filed with the
Securities and Exchange Commission of the year ended January 31, 1998. There can
be no assurance that anticipated developments will occur.
Contact: Mr. David R. Stewart
Treasurer
Phone: (713) 868-7657
Fax: (713) 863-1519
Email: [email protected]
HTTP://www.ssss.com
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STEWART & STEVENSON
SERVICES, INC.
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CONSOLIDATED CONDENSED STATEMENT OF
EARNINGS
(In thousands, except per
share data)
<CAPTION>
For the twelve months ended For the three months ended
January 31, January 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
(Unaudited) (Unaudited)
Sales $ 1,206,772 $ 1,115,034 $ 257,102 $ 334,297
Cost of Sales 1,178,088 1,032,049 303,034 343,020
Gross profit(loss) 28,684 82,985 (45,932) (8,723)
Selling and administrative
expenses 90,857 75,619 28,846 21,783
Interest expense 12,244 15,440 3,376 4,895
Special charges (credits),
net -- 18,983 -- 8,983
Other (income) expense, net (12,706) (4,867) 391 3,346
90,395 105,175 32,613 39,007
Loss from continuing
operations before taxes (61,711) (22,190) (78,545) (47,730)
Income tax benefit (22,804) (8,075) (28,764) (18,225)
Loss from continuing
operations of consolidated
companies (38,907) (14,115) (49,781) (29,505)
Equity in net earnings/(loss)
of unconsolidated affiliates (98) (390) 91 (184)
Net loss from continuing
operations (39,005) (14,505) (49,690) (29,689)
Earnings (loss) from
discontinued operations,
net of tax (33,979) 66,768 (13,979) 61,700
Net earnings (loss) $ (72,984) $ 52,263 $ (63,669) $ 32,011
Weighted average number of
shares of
Common Stock outstanding 29,006 33,184 27,984 33,194
Net earnings (loss) per share:
Continuing operations (1.34) (0.44) (1.77) (0.90)
Discontinued operations (1.17) 2.01 (0.50) 1.86
Net earnings (loss) per share $ (2.51) $ 1.57 $ (2.27) $ 0.96
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