FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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 1-1228
Stone & Webster, Incorporated
(Exact name of registrant as specified in its charter)
Delaware 13-5416910
(State of Incorporation) (I.R.S. Employer Identification No.)
250 West 34th Street, New York, N.Y. 10119
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number (including area code) (212) 290-7500
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: 13,294,505 shares as of March 31, 1996.
<PAGE>
Form 10-Q 2.
For the quarter ended March 31, 1996 Stone & Webster, Incorporated
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
The consolidated financial statements required by this Item for Stone
& Webster, Incorporated and Subsidiaries are contained in Attachment A
which is filed herewith and made a part hereof.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
The Management's Discussion and Analysis of Financial Condition and
Results of Operations required by this Item for Stone & Webster,
Incorporated and Subsidiaries is contained in Attachment A which is
filed herewith and made a part hereof.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
(a) Supplementing Part I, Item 3, Legal Proceedings, in registrant's
Form 10-K for the year ended December 31, 1995, Registrant and two of
its subsidiaries have been named as defendants in two pending legal
actions brought by Blackstone Valley Electric Company in January 1994
in the United States District Court for the District of Massachusetts
(along with another company named as a defendant) and in March 1996 in
the United States District Court for the District of Rhode Island, and
have received other claims from private parties seeking contribution
for costs incurred or to be incurred in remediation of sites under the
Federal Comprehensive Environmental Response, Compensation and
Liability Act and similar state statutes. These matters relate to
business activities which took place generally in the first half of
this century. No governmental authority has sought similar redress
from registrant or its subsidiaries (except in the case of one
subsidiary in limited connection with claims made primarily with
respect to clients of that subsidiary) nor has the registrant been
found to be a Potentially Responsible Party by the Federal or any
state or local governmental authority, although some information has
been requested with regard to environmental matters. Based on
presently known facts and existing laws and regulations, registrant
and its subsidiaries believe that they have valid legal defenses to
such actions and that the costs associated with such matters,
including legal costs, should be mitigated by the presence of other
entities which may be Potentially Responsible Parties, by contractual
indemnities, and by insurance coverage.
Registrant and one subsidiary are plaintiffs in a separate action to
recover damages, attorneys' fees and other monetary relief from
certain of their insurance carriers in connection with such matters.
In April 1996, plaintiffs' motion for summary judgment on one
carrier's duty to defend plaintiffs in two matters, including the
first Blackstone action, was granted. No recognition has been made in
the financial statements for any potentially recoverable amounts.
<PAGE>
Form 10-Q 3.
For the quarter ended March 31, 1996 Stone & Webster, Incorporated
Item 1. Legal Proceedings. (Cont'd.)
(b) Also see Note (H) to the consolidated financial statements filed
herewith.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit Index
(4) Instruments defining the rights of security holders,
including indentures - As of March 31, 1996, registrant and its
subsidiaries had outstanding long-term debt (excluding current
portion) totaling approximately $25,506,000 principally in connection
with mortgages relating to real property for two subsidiaries' office
buildings, and in connection with capitalized lease commitments for
the acquisition of certain computer equipment. None of these
agreements are filed herewith because the amount of indebtedness
authorized under each such agreement does not exceed 10% of the total
assets of the registrant and its subsidiaries on a consolidated basis;
the registrant hereby undertakes to furnish copies of such agreements
to the Commission upon request.
(27) Financial Data Schedule.
(b) Reports on Form 8-K
Registrant did not file any reports on Form 8-K during the
quarter for which this report is filed.
<PAGE>
Form 10-Q 4.
For the quarter ended March 31, 1996 Stone & Webster, Incorporated
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.
STONE & WEBSTER, INCORPORATED
______________________________
By: JEREMIAH P. CRONIN
Dated: May 13, 1996 Jeremiah P. Cronin
Executive Vice President
(Duly authorized officer and
Chief Financial Officer)
______________________________
DANIEL P. LEVY
Daniel P. Levy
Corporate Controller
(Principal Accounting Officer)
<PAGE>
Form 10-Q 5.
For the quarter ended March 31, 1996 Stone & Webster, Incorporated
ATTACHMENT A
Stone & Webster, Incorporated
and Subsidiaries
Index
Page No.
Condensed Financial Statements: (Unaudited)
Consolidated Statements of Operations -
Three Months Ended March 31, 1996 and 1995 6
Consolidated Balance Sheets -
March 31, 1996 and December 31, 1995 7-8
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1996 and 1995 9
Notes to Consolidated Financial Statements 10-12
Management's Discussion and Analysis of Financial
Condition and Results of Operations 13-16
<PAGE>
Form 10-Q 6.
For the quarter ended March 31, 1996 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Consolidated Statements of Operations (Unaudited)
(All dollar amounts, except per share amounts, are in thousands)
Three Months Ended
March 31,
---------------------
1996 1995
-------- -------
Revenue (Note A) $305,834 $222,529
Cost of revenue (Note D) 284,089 204,568
-------- --------
Gross Profit 21,745 17,961
Selling, general and
administrative expenses (Note D) 11,530 10,427
-------- --------
Operating income (Notes A and D) 10,215 7,534
Other income (deductions)
Interest income 1,383 1,784
Interest expense (2,222) (942)
-------- --------
(839) 842
Income before provision
for income taxes 9,376 8,376
Income tax provision (Note B) 3,844 3,672
-------- --------
Net income (Notes A, B and D) $ 5,532 $ 4,704
======== ========
Earnings per share (Note D) $.41 $ .32
==== ======
Dividends declared per share $.15 $ .15
==== ======
Average number of shares outstanding 13,655,000 14,520,000
See accompanying notes to consolidated financial statements.
<PAGE>
Form 10-Q 7.
For the quarter ended March 31, 1996 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Consolidated Balance Sheets (Unaudited)
(All dollar amounts, except per share amounts, are in thousands)
March 31, December 31,
1996 1995
---- ----
Assets
Current Assets:
Cash and cash equivalents $ 44,464 $ 68,417
U.S. Government securities, at amortized
cost, which approximates market (Note C) 44,158 54,899
Accounts receivable, principally trade 141,095 165,836
Costs and revenues recognized in
excess of billings 100,525 64,494
Deferred income taxes (Note B) 6,712 7,202
Other 1,617 3,153
-------- --------
Total Current Assets 338,571 364,001
Fixed assets 212,264 212,596
At cost, less accumulated depreciation,
depletion and amortization of $168,681
(1995-$165,120)
Prepaid pension cost (Note D) 117,374 114,194
Other assets 26,804 25,981
------ ------
$695,013 $716,772
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
Form 10-Q 8.
For the quarter ended March 31, 1996 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Consolidated Balance Sheets (Unaudited)(continued)
(All dollar amounts, except per share amounts, are in thousands)
March 31, December 31,
1996 1995
--------- ---------
Liabilities and Shareholders' Equity
Current Liabilities:
Bank loans $ 8,536 $ 8,200
Current portion of long-term debt (Note G) 68,969 20,944
Accounts payable, principally trade 46,008 56,901
Dividend payable 1,994 2,078
Billings in excess of costs and
revenues recognized 64,715 66,976
Accrued liabilities 46,726 43,308
Accrued taxes 10,242 7,955
--------- ---------
Total Current Liabilities 247,190 206,362
Long-term debt 25,506 74,677
Deferred income taxes (Note B) 51,822 51,262
Other liabilities 23,573 22,800
Shareholders' Equity (Notes E and F)
Preferred stock - -
Authorized, 2,000,000 shares of no par value;
none issued
Common stock 17,731 17,731
Authorized, 40,000,000 shares of $1 par value;
issued, 17,731,488 shares, including shares held
in treasury
Capital in excess of par value of common stock 50,365 50,360
Retained earnings 418,299 414,724
Cumulative translation adjustment (3,031) (3,039)
--------- --------
483,364 479,776
--------- --------
Less: Common stock in treasury, at cost 110,652 92,292
4,436,983 shares (1995-3,875,572)
Employee stock ownership and restricted
stock plans 25,790 25,813
--------- --------
136,442 118,105
--------- --------
Total Shareholders' Equity 346,922 361,671
--------- ---------
$ 695,013 $716,772
========= ========
See accompanying notes to consolidated financial statements.
<PAGE>
Form 10-Q 9.
For the quarter ended March 31, 1996 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
(All dollar amounts are in thousands)
3 Months Ended March 31,
1996 1995
------- ------
Cash Flows from Operating Activities:
Net Income $ 5,532 $ 4,704
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 4,384 4,960
Deferred income taxes 1,050 2,290
Prepaid pension cost (3,180) (3,694)
Amortization of market value of shares issued
under Restricted Stock Plan 23 32
Amortization of net cost of
Employee Stock Ownership Plan 386 389
Changes in operating assets and liabilities:
Accounts receivable 24,741 (5,568)
Costs and revenues recognized
in excess of billings (36,031) (11,549)
Accounts payable (10,893) 4,353
Billings in excess of costs
and revenues recognized (2,261) 6,387
Accrued liabilities 2,362 860
Other 4,205 3,549
-------- --------
Net cash (used) provided by operating activities (9,682) 6,713
-------- --------
Cash Flows from Investing Activities:
Maturities of U.S. Government securities 11,040 29,075
Purchases of U.S. Government securities - (29,128)
Purchases of fixed assets (4,052) (6,601)
-------- --------
Net cash provided (used) by investing activities 6,988 (6,654)
-------- --------
Cash Flows from Financing Activities:
Proceeds from long-term debt - 5,580
Repayments of long-term debt (1,146) (1,189)
Increase in bank loans 336 -
Payment to Employee Stock Ownership Trust - (2,462)
Payment received from Employee Stock Ownership Trust - 2,753
Purchases of common stock for treasury (18,371) (3,633)
Dividends paid (2,078) (2,195)
-------- --------
Net cash (used) by financing activities (21,259) (1,146)
-------- --------
Net Decrease in Cash and Cash Equivalents (23,953) (1,087)
Cash and Cash Equivalents at Beginning of Period 68,417 55,650
-------- --------
Cash and Cash Equivalents at End of Period $ 44,464 $ 54,563
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
Form 10-Q 10.
For the quarter ended March 31, 1996 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
(All dollar amounts, except per share amounts, are in thousands)
(A) Revenue and operating income (loss) by business segment were the
following for the three months ended March 31, 1996 and 1995:
Three Months
Ended March 31,
1996 1995
-------- --------
Revenue
Engineering, construction and
consulting services $301,037 $214,435
Cold storage and
related activities 4,797 5,195
Other - 2,899
-------- --------
Total revenue $305,834 $222,529
======== ========
Operating income (loss)
Engineering, construction and
consulting services $ 11,285 $ 8,399
Cold storage and
related activities 1,202 1,980
Other (50) (48)
-------- --------
12,437 10,331
General corporate expenses (2,222) (2,797)
-------- --------
Total operating income $ 10,215 $ 7,534
======== ========
(B) The Company had a valuation allowance of $11,604 at December 31, 1995 for
the deferred tax assets related to net operating loss carryforwards.
The net change in the valuation allowance for the first quarter of 1996
was a decrease of $569, primarily due to the utilization of a foreign
net operating loss carryforward which was fully reserved, for a total
valuation allowance of $11,035 at March 31, 1996. The valuation allowance
at March 31, 1996 comprises $6,489 relating to the net operating loss
carryforwards of several of the Company's foreign subsidiaries and $4,546
relating to state net operating loss carryforwards.
(C) U.S. Government securities are debt securities issued by the U.S.
Treasury comprised entirely of U.S. Treasury bills and notes, which the
Company intends to hold to maturity. These securities have maturity dates
of one year or less. The aggregate fair market value of U.S. Government
securities at March 31, 1996 and December 31, 1995 was $44,157 and
$54,722, respectively, the amortized cost basis at March 31, 1996 and
December 31, 1995 was $44,158 and $54,899, respectively, and the net
unrealized holding loss at March 31, 1996 and December 31, 1995 was $1
and $177, respectively.
<PAGE>
Form 10-Q 11.
For the quarter ended March 31, 1996 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)(continued)
(All dollar amounts, except per share amounts, are in thousands)
(D) Pension related items, which reduced operating costs, were $2,995 and
$3,555 for the three months ended March 31, 1996 and 1995,
respectively. These items increased net income by $1,832, or $.13 per
share, and $2,174, or $.15 per share, for the three months ended March
31, 1996 and 1995, respectively.
(E) During the three months ended March 31, 1996, nonqualified options for
4,000 shares of Common Stock were awarded to non-employee directors
under the 1995 Stock Option Plan at an exercise price of $33.25,
nonexercisable for six months. Nonqualified options for 100,000 shares
of Common Stock were awarded under the plan to a newly hired President
and Chief Executive Officer at an exercise price of $34.875, and are
exercisable immediately. During the three months ended March 31, 1996,
options with respect to 5,000 shares terminated unexercised.
A summary of stock option transactions follows:
============================================================
1996
------------------------------------------------------------
Outstanding January 1 135,500
Options granted 104,000
Options cancelled (5,000)
Options exercised -
------------------------------------------------------------
Outstanding at March 31 234,500
============================================================
At March 31, 1996 options for 118,000 shares were exercisable and
515,500 shares were available for grant. Per share options prices
ranged from $30.25 to $36.50.
Under the 1995 Stock Plan, non-employee directors of the Company will
receive grants of Common Stock in payment of their annual retainer and
may elect to receive director meeting fees in Common Stock. The total
number of shares to be issued under the Stock Plan may not exceed
100,000 shares. During the three months ended March 31, 1996, 485
shares were issued to non-employee directors. At March 31, 1996, 97,263
shares were available for grant.
(F) In July 1995, the Board of Directors of the Company authorized an
increase in the share repurchase program from 1 million to 2.5 million
shares of common stock in open market transactions at prevailing
prices. The Company acquired 562,000 shares in the three months ended
March 31, 1996, bringing total purchases to 1,680,000 shares under this
program. As of March 31 1996, the Company had 13,294,505 shares
outstanding. The amount and timing of stock repurchases will depend
upon market conditions, share price, as well as other factors. The
Company reserves the right to discontinue the repurchase program at any
time.
<PAGE>
Form 10-Q 12.
For the quarter ended March 31, 1996 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)(continued)
(All dollar amounts, except per share amounts, are in thousands)
(G) Construction debt in the amount of $48,750, incurred by the Auburn VPS
Partnership in which Stone & Webster holds a majority interest, was
reclassified from a long-term to a current liability. The Auburn VPS
Partnership was unable to meet the interest payment due on March 29,
1996. The terms of the debt include acceleration provisions which, at
the option of the lenders, could now be exercised to make the loan
currently due and payable. The debt is collateralized by the
waste paper recycling plant owned by the Auburn VPS Partnership. The
construction lenders do not have recourse to the assets of Stone &
Webster, Incorporated or its subsidiaries in the event of a default by
the Auburn VPS Partnership.
(H) Although the Company continues to have possible liabilities related to
environmental pollution, management believes, on the basis of its
assessment of these matters, including consultation with counsel, that
none of these pending legal actions nor such possible liabilities will
result in payment of amounts, if any, that would have a material
adverse effect on the consolidated financial statements.
(I) Earnings per share are based on the weighted average number of common
and common equivalent shares (stock options) outstanding during the
period.
(J) These statements are unaudited, and in the opinion of management,
include all adjustments, consisting of normal recurring adjustments
necessary for a fair statement of the results for the interim periods.
The year-end balance sheet data was derived from audited financial
statements, but does not include all disclosures required by generally
accepted accounting principles. Reference is made to the Consolidated
Financial Statements included in the Company's Annual Report to
Shareholders.
Interim results of operations are not necessarily indicative of the
results for a full year.
<PAGE>
Form 10-Q 13.
For the quarter ended March 31, 1996 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(All dollar amounts, except per share amounts, are in thousands)
Results of Operations
For the first quarter ended March 31, 1996, Stone & Webster, Incorporated
reported net income of $5,532 or $.41 per share, compared to net income of
$4,704 or $.32 per share, for the same period in 1995. Operating income was
$10,215, an increase of $2,681 from the first quarter of 1995. Revenue increased
by $83,305 or 37 percent.
Components of earnings per share in the first quarter of 1996 and 1995 were:
First Quarter
1996 1995
----- -----
Earnings per share before special items $0.28 $0.17
Pension related items 0.13 0.15
----- -----
Earnings per share $0.41 $0.32
===== =====
This is the fifth consecutive quarter in which the Company's principal business
segment - Engineering, Construction and Consulting - showed an increase in
revenue and operating income over the comparable periods from the prior year.
ENGINEERING, CONSTRUCTION AND CONSULTING
The Company's Engineering, Construction and Consulting segment reported
operating income of $11,285 for the first quarter of 1996 compared to $8,399 in
the first quarter of 1995. Revenue increased to $301,037, an increase of $86,602
or 40 percent over 1995 first quarter revenue of $214,435. This improvement is
due primarily to higher revenue in the Process and Industrial business units.
The higher revenue in both of these business units is directly related to the
focused marketing initiatives and the increase in backlog achieved in 1995.
Operating margins in this segment of 3.7 percent were below the 3.9 percent
level experienced in 1995 due to losses incurred in the operation of a
wastepaper recycling plant in Auburn, Maine.
Several significant new contracts were awarded in the first quarter of 1996,
including a $475,000 contract, won by the Process business unit, for the
engineering, procurement and construction of an olefins complex in Indonesia. In
addition, Stone & Webster's Industrial business unit was named the general
contractor for the rebuilding of the Malden Mills textile plant in Lawrence,
Massachusetts. The Process business unit was also awarded a contract to provide
engineering, procurement and construction services to the Companhia Petroquimica
do Sul (COPESUL) for a petrochemical complex in Brazil.
Orders and backlog for the first quarters of 1996 and 1995 were:
1996 1995 % Increase
---- ---- ----------
Beginning backlog $1,917,000 $1,541,800 -
Orders 715,200 218,800 227%
Revenue (301,000) (214,400) 40%
---------- ---------- ----
Ending backlog $2,331,200 $1,546,200 51%
========== ========== ====
Orders are the total of new orders, scope changes and cancellations.
<PAGE>
Form 10-Q 14.
For the quarter ended March 31, 1996 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
(All dollar amounts, except per share amounts, are in thousands)
Results of Operations (continued)
Since March 1994, the Auburn VPS Partnership, a limited partnership in which the
Company owns a 94.3% interest, entered into an agreement with various lending
institutions for a nonrecourse construction loan of $65,000, for the
construction of a wastepaper recycling plant in Auburn, Maine. The construction
loan is collateralized by the plant. The plant is designed to use recycled paper
to produce a high quality de-inked pulp which can be substituted for wood pulp
by paper manufacturers in meeting market demand for recycled paper grades.
During the first quarter of 1996, the facility passed all of its provisional
acceptance tests. Subsequent to quarter end, the Company has invested $15,324 of
equity in the project which was contributed in connection with a letter of
credit which was drawn by the lenders. The partnership's financial statements
are included in the Company's financial statements on a consolidated basis.
As the plant came on line, prices of market pulp started to decline as
industry-wide inventories of pulp and related paper products increased. As a
result, the partnership has been unable to generate sufficient revenue to meet
its debt service obligations and was unable to meet the interest payment due on
March 29, 1996. The Auburn VPS Partnership could be declared in default by the
construction lenders, and the construction debt, which would then be subject to
acceleration, has been reclassified as a current liability in the consolidated
balance sheet. The partnership has requested that the construction lenders agree
to a debt standstill period while financial restructuring alternatives are
explored, and outside advisors have been retained to assist in defining and
evaluating alternatives.
The Company is hopeful that a debt restructuring can be achieved which would
enable the Auburn VPS Partnership to continue operation through the current
market down cycle. If a financial restructuring cannot be accomplished, the
Company's loss, in the event of a foreclosure as of March 31, 1996, could reduce
net income by approximately $7,000 or $.50 per share. This loss comprises the
Company's $15,324 equity contribution, the write-off of loans to and accounts
receivable from the partnership, partially offset by losses incurred to date by
the entity which have reduced the Company's equity in the Auburn VPS
Partnership, net of the applicable tax effect. The Company's first quarter 1996
results include losses of $4,300 pre-tax ($2,500 after tax or $.18 per share) of
the Auburn VPS Partnership.
Since 1994, the Company has been attempting to sublease approximately 30,000
square feet in its New York office, made excess during the staff reductions. The
registrant initially believed it was probable that this space could be sublet at
rates approximating the Company's lease costs. However, during the first quarter
of 1996, it was recognized that a loss will be incurred on a sublet and a charge
of $1,832 was taken, representing the difference between the cost of the lease
and the estimated recovery on a sublease based on prevailing market conditions.
<PAGE>
Form 10-Q 15.
For the quarter ended March 31, 1996 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
(All dollar amounts, except per share amounts, are in thousands)
Results of Operations (continued)
COLD STORAGE AND RELATED ACTIVITIES
The Cold Storage segment reported operating income of $1,202 for the first
quarter of 1996 compared to $1,980 for the same period in 1995. Revenue
decreased by 8 percent to $4,797 due to decreased shipments of frozen poultry
destined for export to Russia, caused primarily by a disagreement over
inspection standards between the respective United States and Russian agencies.
This situation has been resolved and shipments have resumed. Operating margins
decreased as compared to the same period in 1995 due to decreased volume.
Selling, general and administrative expenses remained relatively constant from
the prior year period.
OTHER
The Other segment consisted of the Oil and Gas Production Operations and the
Real Estate Development business, both of which were divested in the fourth
quarter of 1995. General corporate expenses have been reduced by $575 for the
first quarter of 1996 as compared to 1995 due to the effect of the staff
reductions resulting from an incentive retirement program, which took effect in
the first quarter of 1996, and a reduction in legal and consulting expenses.
Other expenses increased in 1996 due primarily to construction loan interest
expense of $1,527 for the Auburn wastepaper recycling project.
As discussed in the 1995 Annual Report to Shareholders, the Company has changed
the reporting of pension related items. In prior years, foreign pension plans
were not separately disclosed due to materiality considerations. The Company has
changed the presentation of pension related items to include the foreign plans.
The following table presents total pension related items and shows, separately,
the effect of net pension credit on U.S. pension plans and foreign pension
expense:
Three Months Ended
March 31,
---------------------
Pension Related Items 1996 1995
---- ----
(Income)/Expense
Net pension credit on qualified U.S. plans (1) $(3,180) $(3,694)
Foreign pension expense (2) 185 139
------ -------
Total pension related items $(2,995) $(3,555)
------- --------
After-tax total pension related items $(1,832) $(2,174)
------- --------
Total pension related items per share $ (0.13) $ (0.15)
======= ========
(1) SFAS No. 87 income on qualified U.S. plans
(2) SFAS No. 87 expense on qualified foreign plans
<PAGE>
Form 10-Q 16.
For the quarter ended March 31, 1996 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
(All dollar amounts, except per share amounts, are in thousands)
Results of Operations (continued)
The pension credit results from a plan that is funded in excess of the projected
benefit obligation. The plan is overfunded primarily due to favorable investment
performance.
The income tax provision resulted in an effective tax rate of 41 percent for the
first quarter of 1996 and 44 percent for the same period in 1995. The effective
rates for the three months ended March 31, 1996 and 1995 were higher than the
U.S. statutory tax rate primarily due to state income taxes as well as foreign
taxes, based on gross receipts, which are applicable to certain international
projects.
Financial Condition
Cash and cash equivalents, as shown in the Consolidated Statements of Cash
Flows, decreased by $23,953 during the first three months of 1996. Net cash used
by operating activities of $9,682 reflected an increase in operating working
capital (which consists of accounts receivable and costs and revenues recognized
in excess of billings less accounts payable and billings in excess of costs and
revenues recognized) of $24,444 resulting primarily from increased business
activity. Net cash provided by investing activities of $6,988 reflects
maturities of U.S. Government securities offset by purchases of equipment used
in the Company's operations. Net cash used by financing activities of $21,259
reflects the payment of dividends, repayment of long-term debt and purchases of
common stock under the Company's ongoing share repurchase program as explained
in Note F to the consolidated financial statements.
The Company believes that the types of businesses in which it is engaged require
that it maintain a strong financial condition. The Company has on hand and has
access to sufficient sources of funds to meet its anticipated operating,
dividend and capital expenditure needs. Cash on hand and temporary investments
provide adequate operating liquidity. Additional liquidity is provided through
lines of credit and revolving credit facilities which total $38,323, of which
$29,787 was available at March 31, 1996.
As discussed previously, a construction loan made to the Auburn VPS Partnership
has been reclassified to current from long-term on the Consolidated Balance
Sheet.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFOMATION EXTRACTED FROM
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS AND
RETAINED EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
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