<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
For Annual and Transition Reports Pursuant to Sections 13 or 15(d) of the
Securities Exchange Act of 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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
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 other jurisdiction of (IRS Employer Identification No.)
Incorporation or organization)
245 Summer Street, Boston, MA 02210
(Address of Principal Executive Offices) (Zip Code)
(617) 589-5111
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock - $1 par New York Stock Exchange
Boston Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
State the aggregate market value of the voting common equity held by
nonaffiliates of the registrant. The aggregate market value shall be computed by
reference to the price at which the common equity was sold, or the average bid
and asked prices of such common equity, as of a specified date within 60 days
prior to the date of filing. (See Definition of Affiliate in Rule 405.)
$460,000,000 approximately, based on the closing price on the New York Stock
Exchange Composite Transactions as of January 31, 1998.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Common Stock: 12,820,916 shares as of January 31, 1998.
The following documents, or portions thereof as indicated in the following
report, are incorporated by reference in the Parts of Form 10-K indicated:
Part Document
I, II Registrant's Annual Report to Shareholders for the fiscal
year ended December 31, 1997 (the "1997 Annual Report to
Shareholders")
III Proxy Statement in connection with the registrant's 1998
Annual Meeting of Shareholders
<PAGE>
PART I
Item 1. Business.
Registrant was incorporated as a Delaware corporation in 1929. Registrant,
through its subsidiaries, is principally engaged in providing professional
engineering, construction and consulting services. Subsidiaries of the
registrant also own cold storage warehousing facilities in Atlanta and Rockmart,
Georgia; own and operate the Stone & Webster office buildings in Boston,
Massachusetts, and Houston, Texas; and develop, take ownership interests in and
operate projects for which they may provide engineering, construction and other
services. Services of the nature inherent in these businesses are provided to
clients and customers.
The information relating to the business segments of the registrant required by
this Item is hereby incorporated by reference from Note (T) to the consolidated
financial statements and from "Management's Discussion and Analysis" in the
Financial Information section of the registrant's 1997 Annual Report to
Shareholders which are filed herewith in Exhibit (13). This information
indicates the amounts of revenues from sales to unaffiliated customers (from
which percentage of revenues information is available), operating income and
identifiable assets attributable to the registrant's industry segments for the
three years ended December 31, 1997.
Engineering, Construction and Consulting Services
Registrant, through its subsidiaries, provides complete engineering, design,
construction and full environmental services for power, process, governmental,
industrial, transportation and civil works projects. It also constructs from
plans developed by others, makes engineering reports and business examinations,
undertakes consulting engineering work, and offers information management and
computer systems expertise to clients. It also offers a full range of services
in environmental engineering and sciences, including complete execution of
environmental projects. It remains active in the nuclear power business, for
utility and governmental clients, and continues to undertake a significant
amount of modification and maintenance work on existing nuclear power plants. In
addition, it offers advanced computer systems development services and products
in the areas of information systems, systems integration, computer-aided design,
expert systems, and database management. It also develops projects in which the
registrant or its subsidiaries may take an ownership position and for which
other subsidiaries may provide engineering, construction, procurement,
management and operation and maintenance services. Comprehensive management
consulting and financial services are also furnished for business and industry,
including public utility, transportation, pipeline, land development, petroleum
and manufacturing companies, banking and financial institutions and government
agencies, and appraisals are performed for industrial companies and utilities.
The registrant's engineering, construction and consulting services segment
consists of four Divisions which are responsible for marketing and executing
projects within a sector on a worldwide basis. Each Division also is accountable
for achieving goals established for that market sector. These four Divisions are
in the power, process, environmental/infrastructure and industrial sectors. This
structure enables the registrant to capitalize on its international
relationships, experience and abilities. Where appropriate, lump sum, turnkey
contracts are employed as a means of providing comprehensive services.
Registrant's engineering, construction and consulting business segment continues
to focus on its strengths involving technology, for example, in advanced
applications in both refinery and ethylene process work and in development of
expert systems.
Cold Storage Services
Modern public cold storage warehousing, blast-freeze and other refrigeration and
consolidation services are offered in the Atlanta, Georgia, metropolitan area to
food processors and others at three facilities with approximately 24.8 million
cubic feet of freezer and controlled temperature storage space, including a
facility in Rockmart, Georgia, which has approximately 7.2 million cubic feet of
such space. In view of increased demand for services relating to food exports,
this subsidiary's strategic plans resulted in the construction of an additional
3.7 million cubic feet of fully racked freezer space in the Rockmart facility
during 1996. Offices and processing areas are leased to customers. Comprehensive
freezer services are offered to customers. The Rockmart site has sufficient land
to allow for future expansion and to make additional space available to food
processors. In addition, the facility features direct loading of product onto
distribution trucks from railroad cars delivered on two railroad lines which
serve the Rockmart plant.
Other
During 1995, registrant sold all of its natural gas and oil properties and
interests, as well as its interests in a large corporate office and business
center in Tampa, Florida.
Competition
The principal business activities of registrant in the engineering, construction
and consulting services segment are highly competitive, with competition from a
large number of well-established concerns, some privately held and others
publicly held. Inasmuch as registrant is primarily a service organization, it
competes in its areas of interest by providing services of the highest quality.
Registrant believes it occupies a strong competitive position but is unable to
estimate with reasonable accuracy the number of its competitors and its
competitive position in the engineering, construction and consulting services
industry.
The business activities of registrant in the cold storage services segment are
performed in the Atlanta and northwestern areas of Georgia. Competition in this
market area comes from a relatively small number of companies offering similar
types of services. Registrant's subsidiary competes in this field by providing
services of the highest quality, emphasizing responsiveness to the needs of its
customers and to the end receiver of the customers' product. As part of that
commitment, it provides modern data processing and communication equipment for
its customers. Registrant believes it occupies a strong competitive position in
this area.
Backlog
Backlog figures for the registrant's engineering, construction and consulting
services segment historically have not been considered by the registrant to be
indicative of any trend in these activities nor material for an understanding of
its business. At any given date, the portion of engineering and construction
work to be completed within one year can only be estimated subject to
adjustments, which can in some instances be substantial, based on a number of
factors. Clients frequently revise the scope of the services for which they have
contracted with subsidiaries of registrant, especially on projects subject to
regulatory approval or which require environmental permitting/licensing. Scope
increases and decreases of substantial magnitude are commonplace on such
projects and directly affect backlog. Additionally, delays are common and affect
the timing of when backlog would be translated into revenues. As a result, the
aggregate of such figures in relation to registrant's consolidated revenues
could be misleading unless understood in light of the foregoing contingencies.
The registrant's backlog information is calculated on the basis of the total
value to the registrant's subsidiaries of all services to be rendered under the
available contracts plus the value of equipment, material, services and
subcontracts for which the contracting subsidiary has overall technical and
commercial responsibility. The following backlog information is provided as of
December 31, 1997 and December 31, 1996.
The registrant's engineering subsidiaries' backlog as of December 31, 1997
amounted to $2,519.3 million in comparison with $2,487.6 million as of December
31, 1996. New work awards in 1997 were $1,330.9 million. Also see "Revenue, New
Orders and Backlog" in the "Management's Discussion and Analysis" in the 1997
comparison with 1996 as incorporated by reference above in this Item 1 from
registrant's 1997 Annual Report to Shareholders filed herewith as Exhibit (13).
Although the majority of the subsidiaries' contracts may be reduced or canceled
by the client at any time, significant reductions in scope are unusual. The
slowdown that occurred in the second half of 1997 in the Asian economies is
reflected in a decrease in Process Division orders. Work on a grassroots
petrochemical project in Indonesia has been suspended pending resolution of
financing issues with the client. Substantial work on this contract is unlikely
to be restarted until the second half of 1998 at the earliest. This project
represents $537.9 million of the current backlog. The backlog at December 31,
1997 includes $661.1 million for contracts awarded but subject to finalization
of definitive agreements.
Approximately 31 percent of the total backlog as of December 31, 1997 is
expected to be realized within the next year.
In addition, approximately 47 percent of the December 31, 1997 backlog amount is
from contracts with international clients.
BACKLOG
Engineering, Construction and Consulting Services
(in Millions of Dollars)
Changes In Revenue As of
As of 12/31/96 New Work Scope Recognized* 12/31/97
-------------- -------- ---------- ----------- --------
$2,487.6 $1,308.0 $22.9 ($1,299.2) $2,519.3
*Revenue Recognized reflects revenues of the engineering, construction and
consulting segment.
Backlog figures in the cold storage industry are not provided since, in the
registrant's opinion, such information is not necessarily meaningful because of
the nature of the food processing, storage and distribution business where
repetitive services of short duration are the norm.
Clients
Although registrant's subsidiaries in the engineering, construction and
consulting services segment have numerous clients and registrant historically
has not had a continuing dependence on any single client, one or a few clients
has in the past and may in the future contribute a substantial portion of the
registrant's consolidated revenues in any one year or over a period of several
consecutive years due to the size of major engineering and construction
projects. The registrant's business is not necessarily dependent upon
sustaining, and the registrant does not necessarily expect to sustain in future
years, the level of revenues contributed by particular clients in any given year
or period of consecutive years. Once the subsidiary commences work on a
particular project, it is unlikely that the client would terminate the
involvement of the subsidiary prior to completion of the project, unless the
project itself is canceled or postponed. Historically the registrant's
subsidiaries have provided ongoing services to clients following completion of
major projects for them. Nonetheless, the registrant must obtain new engineering
and construction projects, whether from existing clients or new clients, in
order to generate revenues in future years as existing projects are completed.
Consequently, the registrant has not considered the names of clients to be
material to investors' understanding of the registrant's business taken as a
whole. Stated in terms of total revenues (as described under Backlog, above),
which is consistent with registrant's financial reporting in this report,
Tennessee Valley Authority accounted for approximately 13 percent of
consolidated revenues for 1995. In 1996, the engineering, construction and
consulting segment had no client who accounted for more than 10 percent of
consolidated revenues. In 1997, one client, PT Trans-Pacific Petrochemical
Indotama, accounted for 12 percent of consolidated revenues.
The cold storage and related activities segment had no client who accounted for
10 percent or more of consolidated revenues in 1995, 1996, or 1997.
Environmental Compliance
Compliance by registrant and its subsidiaries with Federal, State and local
provisions regulating the discharge of materials into the environment, or
otherwise relating to the protection of the environment, has had, and is
expected to have, no material adverse effect upon the capital expenditures,
earnings and competitive position of registrant and its subsidiaries. Also see
Note (J) to the consolidated financial statements which is incorporated by
reference from the "Notes to Consolidated Financial Statements" of the Financial
Information section of the registrant's 1997 Annual Report to Shareholders.
The engineering, construction and consulting services segment has benefited from
the extensive amount of environmental legislation and regulatory activity now in
place because the effect of such regulations on the businesses of the segment's
clients has increased the demand for environmental services provided by
registrant's subsidiaries. This demand for such services to help clients in
their own environmental compliance efforts is expected to continue.
Year 2000 Compliance
The registrant is in the process of evaluating and upgrading its computer
applications to ensure their functionality with respect to the "Year 2000"
millennium change. At present, the registrant does not anticipate that material
incremental costs will be incurred in any single future year. Also see "Other
Accounting Matters" in the "Management's Discussion and Analysis" as
incorporated by reference above in this Item 1 from registrant's 1997 Annual
Report to Shareholders.
Employees
The registrant and its subsidiaries had approximately 6,100 regular employees as
of December 31, 1997. In addition, there are at times several thousand craft
employees employed on projects by subsidiaries of registrant. The number of such
employees varies in relation to the number and size of the projects actually
undertaken at any particular time.
Executive Officers of the Registrant
Name Age Position Held Held Since
- ---- --- ------------- ----------
H. Kerner Smith 53 Chairman of the Board 5/8/97
President and Chief Executive Officer 2/12/96
Director
Edward J. Walsh 46 Executive Vice President 8/15/95
Director 8/31/95
Robert C. Wiesel 47 Executive Vice President 12/17/96
Thomas L. Langford 56 Executive Vice President 6/2/97
and Chief Financial Officer
James P. Jones 54 Vice President, Secretary 1/27/98
and General Counsel
Gerard A. Halpin, III 40 Treasurer 12/2/96
Daniel P. Levy 49 Corporate Controller 7/19/95
Peter F. Durning 59 Assistant Secretary 1/27/98
Each of the executive officers listed above has held executive or administrative
positions with the registrant or one or more of its subsidiaries for at least
the last five years, except that Mr. Smith, who joined the registrant in
February 1996, had been President and Chief Executive Officer of Deutsche
Babcock Technologies, Inc. and a managing director of Deutsche Babcock A G
during the last five years; Mr. Langford, who joined the registrant in 1997, had
been President of the The Parsons Corporation from 1991 to 1996; Mr. Jones, who
joined the registrant in 1998, had been Special Counsel with Jones Walker
Waechter Poitevent Carrere & Denegre L.L.P. in New Orleans from 1995 to 1997 and
Associate General Counsel for Freeport-McMoRan Inc. from 1987 to 1995; Mr.
Halpin, who joined the registrant in 1996, had been Assistant Treasurer of
General Electric Company since 1991; and Mr. Levy, who joined the registrant in
1995, had been Vice President, Finance and Administration, of Huttig Sash & Door
Co. since 1991.
Each officer was elected to hold office until the first meeting of the Board of
Directors after the next Annual Meeting of the Shareholders and until his
successor is duly elected and qualified. The next Annual Meeting of Shareholders
is scheduled to be held May 14, 1998.
Item 2. Properties.
The important physical properties of registrant and its subsidiaries are as
follows:
A. A 14 story office building with approximately 800,000 square feet of
office space at 245 Summer Street, Boston, Massachusetts, which serves
as corporate headquarters for the organization and is approximately 60
percent occupied by registrant and its subsidiaries with the balance
currently being leased or held for rental to others.
B. A 6 story office building with approximately 320,000 square feet of
office space at 1430 Enclave Parkway, Houston, Texas, which is
substantially occupied by subsidiaries of registrant.
C. Approximately 17.6 million cubic feet of cold storage plant in two
facilities in Atlanta, Georgia, and approximately 7.2 million cubic
feet of cold storage space in a third facility near Rockmart, Georgia.
D. In January 1998, a subsidiary of registrant acquired a 21.5 acre site
in Laporte, Texas, with 7 permanent buildings comprising approximately
44,000 square feet which are used in connection with the subsidiary's
construction business.
Except as specified above, all of the properties listed above are owned in fee
by subsidiaries of the registrant. In addition to the foregoing, registrant and
its subsidiaries occupy office space in various cities, in premises leased from
others for varying periods - both long and short term - the longest of which
extends to 2008.
An 8 story office building with approximately 140,000 square feet of office
space at 51 Sleeper Street, Boston, Massachusetts was sold in December 1997, and
a 6 story office building with approximately 450,000 square feet of office space
at 3 Executive Campus, Cherry Hill, New Jersey, which is approximately 25
percent occupied by registrant's subsidiaries, was sold in February 1998.
Item 3. Legal Proceedings.
(a) Stone & Webster Engineering Corporation ("SWEC"), a subsidiary of the
registrant, has been named as a defendant, along with numerous other defendants,
in a number of complaints which seek damages arising out of alleged personal
injuries and/or wrongful death due to exposure to asbestos products negligently
utilized by the defendants.
Many of these complaints have been dismissed or withdrawn, and SWEC has
settled many of these cases for amounts which, when taken together, do not have
a material impact on registrant's financial condition or results of operations.
Registrant believes that there has not been, nor is there a probability that
there will be, any accrual of a material liability of the registrant as a result
of the asbestos claims received to the present.
SWEC believes that it has strong factual and legal defenses to the
remaining claims and intends to defend vigorously.
(b) 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 determined 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.
(c) Also see Note (J) to the consolidated financial statements as set forth
under "Notes to Consolidated Financial Statements" which was incorporated by
reference above in Item 1 from registrant's 1997 Annual Report to Shareholders.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The information required by Item 5 is hereby incorporated by reference from
"Market and Dividend Information" of the Financial Information section included
in registrant's 1997 Annual Report to Shareholders.
Item 6. Selected Financial Data.
The information required by Item 6 is hereby incorporated by reference from
"Selected Financial Data" of the Financial Information section included in
registrant's 1997 Annual Report to Shareholders.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The information required by Item 7 is hereby incorporated by reference from
"Management's Discussion and Analysis" of the Financial Information section
included in registrant's 1997 Annual Report to Shareholders.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The information required by Item 7A is hereby incorporated by reference from the
Financial Condition and Liquidity section of "Management's Discussion and
Analysis" and from Note (A) and Note (R) to the consolidated financial
statements of the Financial Information section included in registrant's 1997
Annual Report to Shareholders.
Item 8. Financial Statements and Supplementary Data.
The information required by Item 8 is hereby incorporated by reference from the
Consolidated Financial Statements of Stone & Webster, Incorporated and
Subsidiaries of the Financial Information section included in registrant's 1997
Annual Report to Shareholders, which is filed herewith in Exhibit (13).
The schedule required by Regulation S-X is filed herewith in Exhibit (13).
Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
In accordance with General Instruction G(3) to Form 10-K, the information called
for in this Item 10 with respect to Directors is not presented here since such
information is included in the definitive proxy statement which involves the
election of directors which will be filed pursuant to Regulation 14A not later
than 120 days after the close of the fiscal year, and such information is hereby
incorporated by reference from Item I of such proxy statement.
See also the section captioned "Executive Officers of the Registrant" under Item
1 of Part I herein.
Item 11. Executive Compensation.
In accordance with General Instruction G(3) to Form 10-K, the information called
for in this Item 11 is not presented here since such information is included in
the definitive proxy statement which involves the election of directors which
will be filed pursuant to Regulation 14A not later than 120 days after the close
of the fiscal year, and such information is hereby incorporated by reference
from Item I of such proxy statement, except that the information included
therein which is not required to be "filed" in accordance with Regulation S-K,
Item 402(a)(8), including the Report of the Compensation Committee and the
Performance Graph, is not incorporated by reference as part of this report on
Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
In accordance with General Instruction G(3) to Form 10-K, the information called
for in this Item 12 is not presented here since such information is included in
the definitive proxy statement which involves the election of directors which
will be filed pursuant to Regulation 14A not later than 120 days after the close
of the fiscal year, and such information is hereby incorporated by reference
from Item I of such proxy statement.
Item 13. Certain Relationships and Related Transactions.
In accordance with General Instruction G(3) to Form 10-K, the information called
for in this Item 13 is not presented here since such information is included in
the definitive proxy statement which involves the election of directors which
will be filed pursuant to Regulation 14A not later than 120 days after the close
of the fiscal year, and such information is hereby incorporated by reference
from Item I of such proxy statement.
PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K.
(a) Documents filed as part of the report:
1. Financial Statements and Financial Statement Schedule
(i) The following items are incorporated by reference from the
Financial Information section included in registrant's 1997 Annual Report
to Shareholders, filed herewith in Exhibit (13):
Management's Discussion and Analysis
Financial Statements:
Consolidated Statements of Operations for the Three Years Ended
December 31, 1997
Consolidated Balance Sheets at December 31, 1997 and 1996
Consolidated Statements of Shareholders' Equity for the Three Years
Ended December 31, 1997
Consolidated Statements of Cash Flows for the Three Years Ended
December 31, 1997
Notes to Consolidated Financial Statements
Selected Financial Data
Market and Dividend Information
Report of Management
Business Segment Information
(ii) Financial Statement Schedule for the Three Years Ended December
31, 1997:
II. Valuation and Qualifying Accounts
(iii) Report of Independent Accountants
2. Exhibits:
(3) Articles of Incorporation and By-laws -
(i) The Restated Certificate of Incorporation of registrant which
appears in Exhibit 3 (a) to registrant's Form 10-K for the fiscal year
ended December 31, 1990 is hereby incorporated by reference.
(ii) The By-laws of registrant, as amended, are filed herewith.
(4) Instruments defining the rights of security holders, including
indentures -
(i) As of December 31, 1997, registrant and its subsidiaries had
outstanding long-term debt (excluding current portion) totaling
approximately $22,510,000 principally in connection with mortgages
relating to real property for a subsidiary's office building, 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 percent 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.
(ii) Rights Agreement, dated as of August 15, 1996, between Stone
& Webster, Incorporated and ChaseMellon Shareholder Services, L.L.C.,
which includes the form of Right Certificate as Exhibit A and the
Summary of Rights to Purchase Common Shares as Exhibit B (incorporated
by reference to Exhibit 1.1 to registrant's Registration Statement on
Form 8-A filed on August 16, 1996.)
(10) Material contracts -
(a) The Restricted Stock Plan of Stone & Webster, Incorporated,
approved by the Stockholders of registrant in 1976, as amended and
approved by the Stockholders of registrant in 1988, and the form of
grant under the Restricted Stock Plan (incorporated by reference to
Exhibit 10 (a) to registrant's Form 10-K for the fiscal year ended
December 31, 1988).
(b) 1995 Stock Option Plan of Stone & Webster, Incorporated
(incorporated by reference to Exhibit 4-b to the registrant's
Registration Statement on Form S-8 filed on June 22, 1995 (File No.
33-60489)).
(c) 1997 Stock Plan for Non-employee Directors of Stone &
Webster, Incorporated (incorporated by reference to Exhibit 10 (c) to
registrant's Form 10-K for the fiscal year ended December 31, 1996).
(d) Forms of agreements between registrant and fourteen (14)
current officers of registrant and its subsidiaries, entered into as
of September 1, 1995 and subsequent dates, relating to certain
employment arrangements that would become operable only in the event
of a "change of control" (as defined in the agreements) and that would
have a potential aggregate cost to registrant (assuming compensation
levels of September 1, 1995) if triggered as provided in the
agreements of less than $5 million (incorporated by reference to
Exhibit 10 to the registrant's Form 10-Q for the quarter ended
September 30, 1995).
(e) The following forms of agreements with H. Kerner Smith
relating to employment with registrant as Chairman, President and
Chief Executive Officer are incorporated by reference to Exhibit 10
(e) to the registrant's Form 10-K for the fiscal year ended December
31, 1995: a form of Employment Agreement filed therewith as Exhibit 10
(e)(i); a form of Change of Control Employment Agreement filed
therewith as Exhibit 10 (e)(ii); and a form of Stock Option Grant
filed therewith as Exhibit 10 (e)(iii). An Amendment dated January 15,
1997 to the Employment Agreement (10) (e)(i) is incorporated by
reference to Exhibit 10 (e)(iv) of registrant's Form 10-K for the
fiscal year ended December 31, 1996.
(f) Non-employee Director Deferral Plan is filed herewith.
(g) Annual Incentive Compensation Plan (contingent upon
Shareholder approval at the registrant's 1998 Annual Meeting of
Shareholders) is filed herewith.
(h) Long-Term Incentive Compensation Plan (contingent upon
Shareholder approval at the registrant's 1998 Annual Meeting of
Shareholders) is filed herewith.
______________
* Exhibits 10 (b) through (h) are compensatory plans, contracts and
arrangements in which directors and certain executive officers
participate.
(13) (i) 1997 Annual Report to Shareholders for the fiscal year ended
December 31, 1997 (Financial Section) (filed herewith).
(ii) Financial Statement Schedule (filed herewith)
(iii) Report of Independent Accountants (filed herewith)
(21) Subsidiaries of the registrant (filed herewith).
(23) Consent of Independent Accountants (filed herewith).
(24) (i) Secretary's Certificate
(ii) Powers of Attorney
(27) Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K
Registrant did not file any reports on Form 8-K during the last quarter of
the period covered by this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
/s/ THOMAS L. LANGFORD
______________________________________
Thomas L. Langford
Executive Vice President
(Duly Authorized Officer and Chief Financial Officer)
/s/ DANIEL P. LEVY
______________________________________
Daniel P. Levy
Corporate Controller
(Principal Accounting Officer)
Date: March 30, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
/s/ H. KERNER SMITH
______________________________________
H. Kerner Smith
Chairman, President and Chief Executive Officer
Director
*
______________________________________
Edward J. Walsh
Executive Vice President
Director
*
_____________________________________
Kent F. Hansen
Director
*
_____________________________________
Donna F. Bethell
Director
*
_____________________________________
Frank J. A. Cilluffo
Director
*
_____________________________________
Elvin R. Heiberg III
Director
*
_____________________________________
David N. McCammon
Director
*
_____________________________________
J. Angus McKee
Director
______________________________________
John P. Merrill, Jr.
Director
*
_____________________________________
Bernard W. Reznicek
Director
*
______________________________________
Peter M. Wood
Director
*By: /s/ JAMES P. JONES
__________________________________
James P. Jones
Attorney-In-Fact
<PAGE>
EXHIBIT INDEX
No. Exhibit
3 (i) Restated Certificate of Incorporation (incorporated by reference)
(ii) By-Laws (filed herewith)
4 (ii) Rights Agreement, dated as of August 15, 1996, between Stone &
Webster, Incorporated and ChaseMellon Shareholder Services,
L.L.C., which includes the form of Right Certificate as Exhibit A
and the Summary of Rights to Purchase Common Shares as Exhibit B
(incorporated by reference)
10 (a) Material contracts - Restricted Stock Plan and form of grant
(incorporated by reference)
(b) Material contracts - 1995 Stock Option Plan (incorporated by
reference)
(c) Material contracts - 1997 Stock Plan for Non-employee Directors
(incorporated by reference)
(d) Material contracts - Form of change of control agreement
(incorporated by reference)
(e) Material contracts - Forms of agreement with H. Kerner Smith
relating to (i) Agreement; (ii) Change of Control Employment
Agreement; (iii) Stock Option Grant); and (iv) Amendment to
Employment Agreement (each incorporated by reference)
(f) Material contracts - Non-employee Director Deferral Plan (filed
herewith)
(g) Material contracts - Annual Incentive Compensation Plan
(contingent upon Shareholder approval) (filed herewith)
(h) Material contracts - Long-Term Incentive Compensation Plan
(contingent upon Shareholder approval) (filed herewith)
13 (i) 1997 Annual Report to Shareholders for the fiscal year ended
December 31, 1997 (Financial Section) (filed herewith).
(ii) Financial Statement Schedule (filed herewith)
(iii) Report of Independent Accountants (filed herewith)
21 Subsidiaries of the Registrant (filed herewith)
23 Consent of Independent Accountants (filed herewith)
24 (i) Secretary's Certificate (filed herewith)
(ii) Powers of Attorney (filed herewith)
27 Financial Data Schedule (filed herewith)
<PAGE>
EXHIBIT 3 (i)
By Laws
Of
Stone & Webster, Incorporated
(As amended effective May 8, 1997)
ARTICLE I
Name
The name of the corporation (hereinafter referred to as this Corporation) is
Stone & Webster, Incorporated.
ARTICLE II
Stockholders' Meetings
Meetings of the stockholders may be held in such locations within or without the
State of Delaware as shall be designated by the Board of Directors or set forth
in the notice of such meeting.
ARTICLE III
Annual Stockholders' Meeting
The Annual Meeting of the stockholders of this Corporation shall be held at the
time set forth in the notice of such meeting on the second Thursday in May in
each year if not a legal holiday, and if a legal holiday, then at the time set
forth in said notice on the next succeeding Thursday not a legal holiday. In the
event that such Annual Meeting is omitted by oversight or otherwise on the date
herein provided for, the Directors shall cause a meeting in lieu thereof to be
held as soon thereafter as conveniently may be, and any business transacted or
elections held at such meeting shall be as valid as if transacted or held at the
Annual Meeting. Such subsequent meeting shall be called in the same manner as
provided for Special Stockholders' Meetings.
ARTICLE IV
Special Stockholders' Meetings
Special Meetings of the stockholders of this Corporation shall be held whenever
called in the manner required by law for purposes as to which there are special
statutory provisions and for other purposes whenever called by the Chairman of
the Board of Directors or by the President or by the Chairman of the Executive
Committee or by vote of the Board of Directors.
ARTICLE V
Notice of Stockholders' Meetings
Notice of all stockholders' meetings stating the time and place, and, in the
case of Special Meetings, the objects for which such meetings are called, shall
be given by the Chairman of the Board of Directors or the President or the
Chairman of the Executive Committee or a Vice President or the Secretary or an
Assistant Secretary, by mail, to each stockholder of record having voting power
in respect of the business to be transacted thereat, at his or her registered
address at least ten (10) days prior to the date of the meeting, and the person
giving such notice shall make affidavit in relation thereto.
Any meeting at which all stockholders having voting power in respect of the
business to be transacted thereat are present, either in person, or by proxy, or
of which those not present shall at any time waive or have waived notice in
writing, shall be a legal meeting for the transaction of business,
notwithstanding that notice has not been given as hereinbefore provided.
ARTICLE VI
Waiver of Notices
Whenever any notice whatever is required to be given by these By-laws, or the
Restated Certificate of Incorporation of this Corporation, or any of the laws of
the State of Delaware, a waiver thereof in writing, signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
ARTICLE VII
Quorum at Stockholders' Meetings
At any meeting of the stockholders, a majority in interest of all the capital
stock issued and outstanding and entitled to vote, represented by such
stockholders of record in person or by proxy, shall constitute a quorum, but a
less interest may adjourn any meeting from time to time and the meeting may be
held as adjourned without further notice. When a quorum is present at any
meeting, a majority in interest of the stock entitled to vote represented
thereat shall decide any question brought before such meeting, unless the
question is one upon which by express provision of law or of the Restated
Certificate of Incorporation or of these By-laws a larger or different vote is
required, in which case such express provision shall govern and control the
decision of such question.
ARTICLE VIII
Proxy and Voting
Stockholders of record entitled to vote may vote at any meeting either in person
or by proxy in writing, which shall be filed with the Secretary of the meeting
before being voted. Such proxies shall entitle the holders thereof to vote at
any adjournment of such meeting, but shall not be valid after the final
adjournment thereof. Stockholders entitled to vote may also be represented by a
general power of attorney produced at any meeting until it is revoked. No proxy
or power of attorney shall be voted on after three years from its date, unless
said proxy or power of attorney provides for a longer period.
ARTICLE IX
Board of Directors
A Board of Directors shall be elected by ballot at the Annual Meeting of the
stockholders or at any meeting held in place thereof as hereinbefore provided.
No director shall be elected by stockholders except by the vote of a majority of
all votes entitled to be cast in such election by all of the outstanding shares
of all classes of capital stock of the Corporation. The number of Directors of
this Corporation shall be eleven (11), but the number may be increased or
decreased at any time by amendment of these By-laws adopted by vote of
two-thirds of all of the Directors of this Corporation at the time in office or
by vote of at least two-thirds of the votes at the time entitled to be cast
generally in the election of directors by all of the outstanding shares of all
classes of capital stock of the Corporation, provided that the number of
Directors shall always be not less than three. Directors need not be
stockholders of this Corporation.
The Directors of the Corporation shall be divided into three classes with the
number of Directors fixed by or in accordance with the By-laws divided equally
so far as possible among the three classes. Except as otherwise provided in
Article XXIII, following adoption of this By-law provision,
(a) one-third of the number of Directors shall be elected to serve until
the 1973 Annual Meeting of the stockholders,
(b) one-third of the number of Directors shall be elected to serve until
the 1974 Annual Meeting of the stockholders,
(c) one-third of the number of Directors shall be elected to serve until
the 1975 Annual Meeting of the stockholders,
and until their successors are duly elected and qualified. At each annual
election after the 1972 election, the successors to the Directors of each class
whose term shall expire in that year shall be elected to hold office for a term
of three years from the date of their election and until their successors are
duly elected and qualified. In case of any increase in the number of Directors,
the additional Directors shall be distributed among the several classes as
nearly equally as possible.
ARTICLE X
Power of Directors
The Board of Directors shall have the entire management of the business of this
Corporation. In the management and control of the property, business and affairs
of this Corporation, the Board of Directors is hereby vested with all the powers
possessed by this Corporation itself, so far as this delegation of authority is
not inconsistent with the laws of the State of Delaware, with the Restated
Certificate of Incorporation of this Corporation, or with these By-laws. The
Board of Directors shall have authority from time to time to set apart out of
any assets of this Corporation otherwise available for dividends a reserve or
reserves as working capital or for any other proper purpose or purposes, and to
abolish or add to any such reserve or reserves from time to time as the Board
may deem to be in the interests of this Corporation and the Board shall likewise
have power to determine in its discretion what part of the assets of this
Corporation available for dividends in excess of such reserve or reserves shall
be declared in dividends and paid to the stockholders of this Corporation.
ARTICLE XI
Executive and Other Committees
The Board of Directors may designate by resolution passed by a majority of the
whole Board two or more of its number who shall constitute an Executive
Committee, which Committee shall, when the Board of Directors is not in session,
have and may, subject to any limitation imposed by the laws of the State of
Delaware, exercise any or all of the powers of the Board of Directors in the
management of the business and affairs of this Corporation, and have power to
authorize the seal of this Corporation to be affixed to all papers which may
require it. A Chairman of the Executive Committee (who shall preside at the
meetings of the Executive Committee, may call meetings thereof whenever he deems
it necessary and shall have such other powers and duties as the Board of
Directors shall designate from time to time) shall be appointed by the Board of
Directors at the time it designates members of the Executive Committee. The
Secretary of this Corporation, or, in his absence, an Assistant Secretary or any
other person designated by the Committee, shall act as Secretary of the
Committee. The Executive Committee, except as otherwise herein provided, shall
fix its own rules of procedure and shall keep a record of its acts and
proceedings and report the same from time to time to the Board of Directors. Any
vacancy in the Executive Committee shall be filled by the vote of the majority
of the whole Board of Directors. The Board of Directors may appoint one or more
of its members as ex-officio members of the Executive Committee, who shall have
the privilege of attending meetings of the Executive Committee, but who shall
not be entitled to vote upon any matters brought before the Executive Committee
and shall not be counted as a member of the Executive Committee for the purpose
of determining the number necessary to constitute a quorum, or for the purpose
of determining whether a quorum is present. Notice of meetings to ex-officio
members shall not be deemed to be required under law, the Restated Certificate
of Incorporation or these By-laws.
The Board of Directors likewise may appoint from their number or from the
stockholders other committees from time to time, the number (not less than two)
composing such committees and the powers conferred upon the same to be
determined by a vote of the Board of Directors.
ARTICLE XII
Directors' Meetings
Regular Meetings of the Board of Directors shall be held at such places within
or without the State of Delaware and at such times as the Board by vote may
determine from time to time, and if so determined no notice thereof need be
given. Special Meetings of the Board of Directors may be held at any time or
place either within or without the State of Delaware, whenever called by the
Chairman of the Board of Directors, the President, the Chairman of the Executive
Committee, a Vice President, the Secretary, an Assistant Secretary or three or
more Directors, notice thereof being given to each Director by the Secretary or
an Assistant Secretary or officer calling the meeting, or at any time or place
without formal notice, provided all the Directors are present or waive notice
thereof as provided in Article VI hereof. Notice of Special Meetings, stating
the time and place thereof, shall be given by mailing the same to each Director
at his residence or business address at least two days before the meeting, or by
delivering the same to him personally or telephoning or telegraphing the same to
him at his residence or business address at least one day before the meeting,
unless, in case of exigency, the Chairman of the Board of Directors or the
President or the Chairman of the Executive Committee or in their absence the
Secretary shall prescribe a shorter notice to be given personally or by
telephoning or telegraphing each Director at his residence or business address.
Such Special Meetings shall be held at such times and places as the notice
thereof or waiver shall specify.
ARTICLE XIII
Quorum at Directors' Meetings
One-third of the number of Directors, but not less than four members of the
Board of Directors, shall constitute a quorum for the transaction of business,
but a less number may adjourn any meeting from time to time and the meeting may
be held as adjourned without further notice. When a quorum is present at any
meeting a majority of the members present thereat shall decide any question
brought before such meeting, except as otherwise provided by law, by the
Restated Certificate of Incorporation or by these By-laws.
ARTICLE XIV
Officers
The officers of this Corporation shall be a Chairman of the Board of Directors,
a President, one or more Vice Presidents, a Secretary and a Treasurer. The
officers shall be elected by the Board of Directors at the first meeting after
the Annual Meeting of the stockholders, and a meeting may be held without notice
for this purpose immediately after the Annual Meeting of the stockholders and at
the same place.
ARTICLE XV
Eligibility of Officers
The Chairman of the Board of Directors and the President may, but need not, be a
stockholder but shall be a Director of this Corporation. The Vice Presidents,
Secretary, Treasurer and such other officers as may be elected or appointed may,
but need not, be stockholders or Directors of this Corporation. Any person may
hold more than one office provided the duties thereof can be consistently
performed by the same person, provided, however, that no one person shall, at
the same time, hold the three offices of President or Vice President and
Secretary and Treasurer.
ARTICLE XVI
Additional Officers and Agents
The Board of Directors, at its discretion, may appoint a Corporate Controller,
one or more Assistant Corporate Controllers, one or more Assistant Treasurers,
and one or more Assistant Secretaries, and such other officers or agents as it
may deem advisable, and prescribe the duties thereof.
ARTICLE XVII
Chairman of the Board of Directors
The Chairman of the Board of Directors shall be the chief executive officer of
this Corporation, and, as such, shall have supervision of its policies,
business, and affairs, and such other powers and duties as are commonly incident
to the office of the chief executive officer. He shall preside at the meetings
of the Board of Directors and may call meetings of the Board of Directors and of
any committee thereof whenever he deems it necessary, and he shall call to order
and act as chairman of all meetings of the stockholders of this Corporation. In
addition, he shall have such other powers and duties as the Board of Directors
shall designate from time to time. The Chairman of the Board of Directors,
unless some other person is thereunto specifically authorized by vote of the
Board of Directors, shall have power to sign all certificates of stock, bonds,
deeds and contracts of this Corporation.
ARTICLE XVIII
President
The President shall have such powers and duties as are commonly incident to his
office. He shall also have such other powers and duties as the Board of
Directors or the Chairman of the Board of Directors shall designate from time to
time. He may call meetings of the Board of Directors and of any committee
thereof whenever he deems it necessary. The President, unless some other person
is thereunto specifically authorized by vote of the Board of Directors, shall
have power to sign all certificates of stock, bonds, deeds and contracts of this
Corporation.
ARTICLE XIX
Vice Presidents
The Vice Presidents shall each possess such powers and perform such duties, in
addition to those expressly provided herein, as the Board of Directors may from
time to time determine.
ARTICLE XX
Secretary
The Secretary shall keep accurate minutes of all meetings of the stockholders,
the Board of Directors and the Executive Committee, respectively, shall perform
all the duties commonly incident to his office, and shall perform such other
duties and have such other powers as the Board of Directors shall designate from
time to time. The Secretary shall have power, together with the Chairman of the
Board of Directors, the President or a Vice President, to sign certificates of
stock of this Corporation. In his absence at any meeting an Assistant Secretary
or a Secretary Pro Tempore shall perform his duties thereat. The Secretary, any
Assistant Secretary and any Secretary Pro Tempore shall be sworn to the faithful
discharge of their duties.
ARTICLE XXI
Treasurer
The Treasurer, subject to the order of the Board of Directors, shall have the
care and custody of the moneys, funds, valuable papers and documents of this
Corporation (other than his own bond which shall be in the custody of the
President) and shall have and exercise, under the supervision of the Board of
Directors, all the powers and duties commonly incident to his office, and shall,
if required by the Board of Directors, give bond in such form and with such
sureties as it may require. He shall deposit all funds of this Corporation in
such bank or banks, trust company or trust companies or with such firm or firms
doing a banking business, as the Directors shall designate and shall have power
to borrow from time to time at his discretion moneys for the corporate needs of
this Corporation and cause to be issued as evidence thereof notes of this
Corporation. He may endorse for deposit or collection all checks, notes, et
cetera, payable to this Corporation or to its order, may accept drafts on behalf
of this Corporation, and, together with the President or a Vice President, may
sign certificates of stock. All the property in his possession, shall be subject
at all times to the inspection and control of the Board of Directors. The
Treasurer shall be subject in every way to the order of the Board of Directors.
All checks, drafts, notes, bonds, or other obligations for the payment of money
shall be signed by the Treasurer and/or such other officer or officers, agent or
agents, as the Board of Directors shall by resolution direct. The Board of
Directors may, in its discretion, also provide by resolution for
countersignature or registration of checks, drafts, notes and/or bonds of this
Corporation. Checks for the total amount of any pay roll may be drawn in
accordance with the foregoing provisions and deposited in a special fund. Checks
upon this fund may be drawn by such person as the Treasurer shall designate and
need not be countersigned.
ARTICLE XXII
Corporate Controller
The Corporate Controller shall keep accurate books of account of this
Corporation's transactions which shall be the property of this Corporation,
subject at all times to the inspection and control of the Board of Directors,
shall perform all the duties commonly incident to the office, and shall perform
such other duties and have such other powers as the Board of Directors shall
designate from time to time.
ARTICLE XXIII
Resignations and Removals
Any Director, officer or agent of this Corporation may resign at any time by
giving written notice to the Board of Directors or to any elected officer of
this Corporation and any member of any committee may resign by giving written
notice either as aforesaid or to the committee of which he is a member or the
chairman thereof. Any such resignation shall take effect at the time specified
therein or, if the time be not specified, upon receipt thereof; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Any Director may be removed from office, but only for cause, at a meeting called
for the purpose and by the affirmative approval of holders of shares of capital
stock of the Corporation entitled to cast at least a majority of the votes at
the time entitled to be cast generally in the election of directors by all of
the outstanding shares of all classes of capital stock of the Corporation,
considered for the purposes of this paragraph of this Article as one class;
provided, however, that if the Board of Directors, by vote of two-thirds of all
the Directors then in office, shall have recommended removal of a Director, then
stockholders may remove such Director from office by the foregoing procedure
without cause. If any Director shall be removed pursuant to this paragraph of
this Article, then the stockholders of the Corporation may, at the meeting at
which such removal is effected, elect his successor.
The Board of Directors, by vote of not less than a majority of all the Directors
of the Corporation at the time in office, may remove from office any officer,
agent or member of any committee, elected or appointed by it.
ARTICLE XXIV
Vacancies
If the office of any Director, one or more, becomes vacant by reason of death,
resignation, removal, disqualification or otherwise, then (except where such
vacancy results from removal and is filled by the stockholders as provided in
the Restated Certificate of Incorporation) the Directors at the time in office
may, by vote of a majority of the Directors then in office, elect a successor or
successors who shall hold office for the unexpired term, and even if there be
less than a quorum of the Directors at the time in office, said Directors may by
a majority vote elect a successor or successors who shall hold office for the
unexpired term. Vacancies in the Board of Directors may be filled for an
unexpired term by the stockholders having voting power at a meeting of the
stockholders called for that purpose, by the vote required in Article IX hereof,
unless such vacancy shall have been filled by the Directors in the manner
provided in this Article. Vacancies resulting from an increase in the number of
Directors shall be deemed to be vacancies to be filled in the manner provided in
this Article.
If the office of any officer or agent, one or more, becomes vacant for any of
the aforesaid reasons, the successor or successors shall be elected or appointed
by the Board of Directors.
This Article may not be amended or repealed except by the affirmative approval
of holders of shares of capital stock of the Corporation entitled to cast at
least two-thirds of the votes at the time entitled to be cast generally in the
election of directors by all of the outstanding shares of all classes of capital
stock of the Corporation, considered for the purposes of this Article as one
class, or by resolution adopted by a vote of two-thirds of all the Directors of
the Corporation at the time in office.
ARTICLE XXV
Capital Stock
The maximum amount of capital stock shall be as fixed in the Restated
Certificate of Incorporation or in any lawful amendments thereto from time to
time.
ARTICLE XXVI
Certificates of Stock
Every stockholder shall be entitled to a certificate or certificates of the
capital stock of this Corporation in such form as may be prescribed by the Board
of Directors, duly numbered and setting forth the number and kind of shares.
Such certificates shall be signed by the Chairman of the Board of Directors, the
President or a Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary. The Board of Directors may also appoint
one or more Transfer Agents and/or Registrars for its stock of any class or
classes and may require stock certificates to be countersigned by one or more of
them. If certificates of capital stock of this Corporation are manually signed
by the Registrar, the signatures thereon of the Transfer Agent and of the
Chairman of the Board of Directors, or the President or a Vice President and the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary,
of this Corporation, may be facsimiles, engraved or printed. Any provisions of
these By-laws with reference to the signing of stock certificates shall include
in cases above permitted, such facsimile signatures. In case any officer or
officers who shall have signed, or whose facsimile signature or signatures shall
have been used on, any such certificate or certificates, shall cease to be such
officer or officers of this Corporation, whether because of death, resignation
or otherwise, before such certificate or certificates shall have been delivered
by this Corporation, such certificate or certificates may nevertheless be
adopted by the Board of Directors of this Corporation and be issued and
delivered as though the person or persons who signed such certificate or
certificates or whose facsimile signature or signatures shall have been used
thereon had not ceased to be such officer or officers of this Corporation.
ARTICLE XXVII
Transfer of Stock
Shares of stock may be transferred by delivery of the certificate accompanied
either by an assignment in writing on the back of the certificate or by a
written power of attorney to sell, assign and transfer the same on the books of
this Corporation, signed by the person appearing by the certificate to be the
owner of the shares represented thereby, and shall be transferable on the books
of this Corporation upon surrender thereof so assigned or endorsed. The person
registered on the books of this Corporation as the owner of any shares of stock
shall exclusively be entitled as the owner of such shares to receive dividends
and to vote as such owner, in respect thereof. It shall be the duty of every
stockholder to notify this Corporation of his post office address.
ARTICLE XXVIII
Transfer Books
The Board of Directors shall have power to close the stock transfer books of
this Corporation for a period not exceeding sixty (60) days preceding the date
of any meeting of stockholders or the date for payment of any dividend or the
date for the allotment of rights or the date when any change or conversion or
exchange of capital stock shall go into effect; provided, however, that in lieu
of closing the stock transfer books as aforesaid, the Board of Directors may fix
in advance a date, not exceeding sixty (60) days preceding the date of any
meeting of stockholders or the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, as a record date for the
determination of the stockholders entitled to notice of, and to vote at, any
such meeting and any adjournment thereof, or entitled to receive payment of any
such dividend, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of capital stock, and in such
case only such stockholders as shall be stockholders of record on the date so
fixed shall be entitled to such notice of, and to vote at, such meeting and any
adjournment thereof, or to receive payment of such dividend, or to receive such
allotment of rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any stock on the books of this Corporation after
any such record date fixed as aforesaid. Except where the transfer books of the
Corporation shall have been closed or a date shall have been fixed as a record
date for the determination of the stockholders entitled to vote, as hereinbefore
provided, no share of stock shall be voted on at any election for Directors
which shall have been transferred on the books of the Corporation within twenty
(20) days next preceding such election of Directors.
ARTICLE XXIX
Loss of Certificates
In case of the loss, mutilation or destruction of a certificate of stock, a
duplicate certificate may be issued upon such terms as the Board of Directors
shall prescribe.
ARTICLE XXX
Seal
The seal of this Corporation shall consist of a flatfaced circular die with the
words and figures "Stone & Webster, Incorporated Corporate Seal 1929 Delaware"
cut or engraved thereon.
ARTICLE XXXI
Books and Records
Unless otherwise expressly required by the laws of Delaware, the books and
records of this Corporation may be kept outside of the State of Delaware at such
places as may be designated from time to time by the Board of Directors.
ARTICLE XXXII
Voting of Stock Held
Unless otherwise provided in the Restated Certificate of Incorporation of this
Corporation or by resolution of the Board of Directors, the Chairman of the
Board of Directors or the President may from time to time appoint an attorney or
attorneys or agent or agents of this Corporation, in the name and on behalf of
this Corporation to cast the votes which this Corporation may be entitled to
cast as a stockholder or otherwise in any other corporation or association, any
of whose stock or securities may be held by this Corporation, at meetings of the
holders of the stock or other securities of such other corporations or
associations, or to consent in writing to any action by any such other
corporation or association, and may instruct the person or persons so appointed
as to the manner of casting such votes or giving such consent, and may execute
or cause to be executed on behalf of this Corporation and under its corporate
seal, or otherwise, such written proxies, consents, waivers or other instruments
as he may deem necessary or proper in the premises; or the President, or his
attorney or agent, may attend any meeting of the holders of stock or other
securities of any such other corporation or association and thereat vote or
exercise any or all other powers of this Corporation as the holder of such stock
or other securities of such other corporation or association.
ARTICLE XXXIII
Amendments
Except as otherwise expressly provided in a By-law adopted by the stockholders
at the time having voting power, all By-laws of this Corporation shall be
subject to amendment or repeal, and new By-laws may be adopted, either by the
affirmative approval of holders of shares of capital stock of the Corporation
entitled to cast at least a majority of the votes at the time entitled to be
cast generally in the election of directors by all of the outstanding shares of
all classes of capital stock of the Corporation, considered for the purposes of
this Article as one class, given at an Annual Meeting or at any Special Meeting,
provided notice of the proposed amendment or repeal or of the proposed new
By-laws be included in the notice of such meeting, or by the affirmative vote of
a majority of all of the Directors of the Corporation at the time in office
given at a regular or special meeting of the Board of Directors, provided notice
of the proposed amendment or repeal or of the proposed new By-laws be included
in the notice of such meeting or waiver thereof or all of the Directors at the
time in office be present at such meeting. Except as aforesaid, By-laws made or
amended by the stockholders or by the Board of Directors shall be subject to
amendment or repeal by the stockholders entitled to vote or by the Board of
Directors.
<PAGE>
EXHIBIT 10 (f)
Non-Employee Director Deferral Plan
Contents
Article 1. Establishment, Purpose, and Duration
Article 2. Definitions
Article 3. Administration
Article 4. Eligibility and Participation
Article 5. Deferral of Retainers and Fees
Article 6. Participants' Accounts
Article 7. Stock Units
Article 8. Amendment, Modification, and Termination
Article 9. Miscellaneous
<PAGE>
Article 1. Establishment, Purpose, and Duration
1.1 Establishment of the Plan. Stone & Webster, Incorporated hereby
establishes a deferred compensation plan to be known as the "Stone & Webster,
Incorporated Non-employee Director Deferral Plan" (the "Plan"), as set forth in
this document. The Plan provides for the deferral of compensation and
acquisition of Stock Units by Non-employee Directors, subject to the terms and
provisions set forth herein.
Upon approval by the Board of Directors of the Company, the Plan shall
become effective as of January 1, 1998 (the "Effective Date"), and shall remain
in effect as provided in Section 1.3 herein.
1.2 Purpose of the Plan. The purpose of the Plan is to promote the
achievement of long-term objectives of the Company by linking the personal
interests of Non-employee Directors to those of the Company's shareholders and
to attract and retain Non-employee Directors of outstanding competence.
1.3 Duration of the Plan. The Plan shall commence on January 1, 1998 and
shall remain in effect, subject to the right of the Board of Directors to
terminate the Plan at any time pursuant to Article 8.
Article 2. Definitions
Whenever used in the Plan, the following terms shall have the meanings set
forth below and, when the defined meaning is intended, the initial letter of the
word is capitalized:
(a) "Board" or "Board or Directors" means the Board of Directors of
the Company.
(b) "Cash Deferral Account" means the cash deferral account
established for each Participant in accordance with Section 6.4
of the Plan.
(c) "Committee" means the Compensation Committee of the Board of
Directors of the Company or any other committee appointed by the
Board to administer the Plan.
(d) "Company" means Stone & Webster, Incorporated, the present
Delaware corporation, and any successor by merger, consolidation,
or otherwise.
(e) "Crediting Rate" means the daily average for the preceding twelve
(12) calendar quarters of the prime interest rate as announced
from time to time by The Chase Manhattan Bank, N.A. at its New
York City office as its prime commercial lending rate plus 1.00
percent.
(f) "Deferrals" means, individually or collectively, amounts deferred
under this Plan.
(g) "Director" means any individual who is a member of the Board of
Directors of the Company.
(h) "Fair Market Value" shall mean the average of the highest and
lowest quoted selling prices for Shares on the relevant date, or
if there is no sale on such date, than on the last previous day
on which a sale was reported.
(i) "Non-employee Director" means any individual who is a member of
the Board of Directors of the Company whose arrangements with the
Company provide for him or her to receive fees for serving as a
Director.
(j) "Participant" means a Non-employee Director of the Company who
has an outstanding Deferral under the Plan.
(k) "Shares" means the Common Stock of the Company, par value one
dollar ($1.00) per share.
(l) "Stock Unit Account" means the stock unit account established for
each Participant in accordance with Section 6.1 of the Plan.
(m) "Subsidiary" means (a) a corporation a majority of whose
outstanding stock entitled to elect a majority of its Board of
Directors is at the time owned by the party in question and/or by
a subsidiary or subsidiaries of such a party, and (b) a
corporation a substantial amount of the stock of which the
Company or its Subsidiaries owns or has an option to acquire.
Article 3. Administration
3.1 General. The Plan shall be administered by the Compensation Committee
of the Board, or by any other Committee appointed by the Board for purposes of
administering this Plan. The members of the Committee shall be appointed from
time to time by, and shall serve at the discretion of, the Board of Directors.
Any Committee administering the Plan shall be comprised entirely of Directors.
Members of the Committee can participate in this Plan. The Committee shall have
the authority to delegate administrative duties to officers, Employees, or
Directors of the Company.
3.2 Administration by the Committee. The Committee shall have the full
power, discretion, and authority to interpret and administer the Plan in a
manner which is consistent with the Plan's provisions. However, in no event
shall the Committee have the power to determine Plan eligibility, or to
determine the number, the value, the vesting period, or the timing of Deferrals
to be made under the Plan (all such determinations being automatic pursuant to
the provisions of the Plan).
3.3 Decisions Binding. All determinations and decisions made by the
Committee pursuant to the Plan, and all related orders or resolutions of the
Board shall be final, conclusive, and binding on all persons, including the
Company, its shareholders, employees, Participants, and their estates and
beneficiaries.
Article 4. Eligibility and Participation
Persons eligible to participate in the Plan are limited to Non-employee
Directors who are serving on the Board on the date of each scheduled Deferral
under the Plan.
Article 5. Deferral of Retainers and Fees
5.1 Deferral of Retainers and Fees. During the term of this Plan, any
Non-employee Director may elect to defer all or a portion of his or her annual
retainer, meeting fees, or other fees paid in connection with Board service to a
Cash Deferral Account or a Stock Deferral Account; provided, however, that the
Share portion of the annual retainer may only be deferred into Stock Units. Such
election to defer compensation shall be subject to the provisions of this
Article 5.
5.2 Deferral Elections. Any deferral election under Section 5.1 shall be
made by a date designated by the Committee prior to the calendar year in which
such payments would otherwise be made. New Non-employee Directors shall make
such election within thirty (30) days of their original election to the Board.
Each such election may pertain to more than one (1) year of scheduled payments.
All deferral elections shall be irrevocable, and shall be made on an "Election
to Defer Form," as described herein. Participants shall make irrevocable
elections on the initial and each subsequent "Election to Defer Form" as to:
(a) The amount to be deferred with respect to each component of
compensation for the relevant calendar year; and
(b) The portion of such amount to be deferred to the Stock Account
and the portion of such amount to be deferred to the Cash
Account.
5.3 Number of Stock Units. The number of Stock Units to be granted in
connection with an election pursuant to this Article 5 shall equal the cash
portion of the retainer and fees elected by the Participant to be deferred into
Stock Units, divided by the Fair Market Value of a Share on the date of the
scheduled payment of the amount deferred.
5.4 Vesting of Deferrals. All Deferrals under this Article 5 shall be one
hundred percent (100 percent) vested at the time of such deferral.
5.5 Length of Deferral. Except as otherwise provided herein, all Deferrals
hereunder and investment return thereon shall be maintained in deferred status
until the respective Participant's termination of services on the Board.
5.6 Financial Hardship. The Board shall have the authority to alter the
timing or manner of payment of deferred amounts in the event that the
Participant establishes, to the satisfaction of the Board, severe financial
hardship. In such event, the Board may, in its sole discretion:
(a) Authorize the cessation of Deferrals by such Participant under
the Plan; or
(b) Provide that all, or a portion, of any previous Deferrals by the
Participant shall immediately be paid in a lump-sum cash payment;
or
(c) Provide for such other payment schedule as deemed appropriate by
the Board under the circumstances.
For purposes of this Section 5.6, "severe financial hardship" shall mean
any financial hardship resulting from extraordinary and unforeseeable
circumstances arising as a result of one or more recent events beyond the
control of the Participant. In any event, payment may not be made to the extent
such emergency is or may be relieved: (i) through reimbursement or compensation
by insurance or otherwise; (ii) by liquidation of the Participant's assets, to
the extent the liquidation of such assets would not itself cause severe
financial hardship; and (iii) by cessation of Deferrals under the Plan.
Withdrawals of amounts because of a severe financial hardship may only be
permitted to the extent reasonably necessary to satisfy the hardship. Examples
of what are not considered to be severe financial hardships include the need to
send a Participant's child to college or the desire to purchase a home.
The severity of the financial hardship shall be judged by the Board. The
Board's decision with respect to the severity of financial hardship and the
manner in which, if at all, the Participant's future Deferral opportunities
shall be ceased, and/or the manner in which, if at all the payment of deferred
amounts to the Participant shall be altered or modified, shall be final,
conclusive, and not subject to appeal.
Article 6. Participants' Accounts
6.1 Stock Unit Account. A Stock Account shall be established and maintained
by the Company for each Participant who makes a Deferral thereto under the Plan.
Each Stock Unit Account shall be credited as of the date the amount deferred
otherwise would have become due and payable to the Participant with an amount
elected by the Participant in accordance with Section 5.2. That amount will be
converted to Shares using the Fair Market Value on the date of credit. Dividend
equivalents on Shares in the Stock Account shall be converted to Shares based
upon the value of a Share on the dividend payment date. Each Stock Account is
maintained solely for accounting purposes, and shall not require a segregation
of any Company assets.
6.2 Form and Amount of Payout of the Stock Account. Shares will be paid out
of the Stock Account in Shares provided that fractional Shares standing to the
Stock Account shall be paid in cash at Fair Market Value on the payment date.
6.3. Timing of Payout of Stock Unit Account. Stock Units acquired under the
Plan shall be paid out upon the termination of a Non-employee Director's service
on the Board of Directors. The payout of these Deferrals shall be made in ten
(10) annual installment unless the Participant elects prior to the date one year
prior to the termination of the Non-employee Director's service on the Board to
receive such payout in the form of either a single lump-sum payout or in five
(5) annual installments. Such election shall be in the form and manner
designated by the Board.
6.4 Cash Deferral Account. A cash deferral account (the "Cash Deferral
Account") shall be established and maintained by the Company for each
Participant that makes a cash deferral under the Plan. Each Cash Deferral
Account shall be credited as of the date the amount deferred otherwise would
have become due and payable to the Participant with a Deferral amount elected by
the Participant to be designated in cash in accordance with Section 5.2 and
shall be credited to reflect the interest return thereon. The establishment and
maintenance of such Cash Deferral Accounts, however, shall not be construed as
entitling any Participant to any specific assets of the Company.
6.5 Investment Return on Cash Deferral Accounts. The rate of interest on
amounts in the Cash Deferral Accounts for 1998 and subsequent calendar years
shall be the Crediting Rate as calculated on the final day of each calendar
quarter or such other rate as the Committee shall determine prior to the
calendar quarter for which the Crediting Rate would be applicable.
Each Participant's Cash Deferral Account shall be credited on the last day
of each calendar quarter, with earnings thereon, such earnings based upon the
actual returns achieved on deferred amounts pursuant to investment elections of
each Participant. Investment return on deferred amounts shall be paid out to
Participants at the same time and in the same manner as the underlying deferred
amounts.
6.6 Form and Timing of Payout of Cash Deferral Accounts. Cash Deferral
Accounts shall be paid out in cash. The payout of a Participant's Cash Deferral
Account shall be made in ten (10) annual installment unless the Participant
elects prior to the date one year prior to the termination of the Non-employee
Director's service on the Board to receive such payout in the form of either in
a single lump-sum payout or in five (5) annual installments. Such election shall
be made in the form and manner designated by the Board.
Article 7. Stock Units
7.1 Value of Stock Units. Each Stock Unit shall have an Initial Value that
is equal to the Fair Market Value of one Share as of the date such Units are
deemed to be acquired. Subsequent to such date of acquisition, the value of each
Stock Unit shall change in direct relationship to changes in the Fair Market
Value of a Share.
7.2 Dividend Equivalents. Dividend equivalents shall be earned on Stock
Units provided under this Plan. Such dividend equivalents shall be converted
into an equivalent amount of Stock Units based upon the value of a Stock Unit on
the date the dividend equivalents are converted into Stock Units. The converted
Stock Units will be fully vested upon conversion.
Article 8. Amendment, Modification, and Termination
8.1 Amendment, Modification, and Termination. Subject to the terms set
forth in this Section 8.1, the Board may terminate, amend, or modify the Plan at
any time and from time to time.
8.2 Previous Deferrals. Unless required by law, no termination, amendment,
or modification of the Plan shall in any material manner adversely affect any
Deferral previously made under the Plan, without the written consent of the
applicable Participant.
Article 9. Miscellaneous
9.1 Gender and Number. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
9.2 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
9.3 Beneficiary Designation. Each Participant under the Plan may, from time
to time, name any beneficiary or beneficiaries (who may be named contingently or
successively) to whom any benefit under the Plan is to be paid in the event of
his or her death. Each designation will revoke all prior designations by the
same Participant, shall be in a form prescribed by the Board, and will be
effective only when filed by the Participant in writing with the Board during
his or her lifetime. In the absence of any such designation, benefits remaining
unpaid at the Participant's death shall be paid to the Participant's estate.
9.4 No Right of Nomination. Nothing in the Plan shall be deemed to create
any obligation on the part of the Board to nominate any Director for reelection
by the Company's shareholders.
9.5 Shares Available. The Shares delivered under the Plan may be either
authorized but unissued Shares, or Shares which have been or may be reacquired
by the Company, as determined from time to time by the Board.
9.6 Successors. All obligations of the Company under the Plan with respect
to Deferrals hereunder shall be binding on any successor to the Company, whether
the existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
9.7 Requirements of Law. Deferrals under the Plan shall be subject to all
applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required.
9.8 Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the internal, substantive laws of
the State of Delaware.
<PAGE>
EXHIBIT 10 (g)
Annual Incentive Compensation Plan
Contents
Article 1. Establishment and Purpose A-2
Article 2. Definitions A-2
Article 3. Administration A-6
Article 4. Eligibility and Participation A-6
Article 5. Award Determination A-7
Article 6. Payment of Final Awards A-8
Article 7. Termination of Employment A-8
Article 8. Covered Employees A-9
Article 9. Rights of Participants A-11
Article 10. Beneficiary Designation A-11
Article 11. Change of Control A-12
Article 12. Amendments A-12
Article 13. Miscellaneous A-12
<PAGE>
Article 1. Establishment and Purpose
1.1 Establishment Of The Plan. Stone & Webster, Incorporated, a Delaware
corporation (the "Company"), hereby establishes an annual incentive compensation
plan to be known as "The Stone & Webster, Incorporated Annual Incentive
Compensation Plan" (the "Plan"), as set forth in this document. The Plan permits
the awarding of annual bonuses to Employees of the Company and its subsidiaries
and affiliates, based on the achievement of pre-established performance goals.
Upon approval by the Board of Directors of the Company and the Shareholders
of the Company, the Plan shall become effective as of January 1, 1998 (the
"Effective Date") and shall remain in effect until January 1, 2008, or until
earlier terminated by the Board.
1.2 Purpose. The primary purposes of the Plan are to: (a) motivate
Participants toward achieving annual goals that are within group and/or
individual control, and are considered key to the Company's success; (b)
encourage teamwork among Participants in various segments of the Company; and
(c) reward performance with pay that varies in relation to the extent to which
the pre-established goals are achieved.
Article 2. Definitions
Whenever used in the Plan, the following terms shall have the meanings set
forth below and, when the defined meaning is intended, the term is capitalized:
2.1 "Affiliate" shall have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations of the Exchange Act.
2.2 "Award Opportunity" Means the various levels of incentive award payouts
which a Participant may earn under the Plan, as established by the Committee
pursuant to Sections 5.1 and 5.2 herein.
2.3 "Beneficial Owner" Or "Beneficial Ownership" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.
2.4 "Board" Or "Board Of Directors" Means the Board of Directors of the
Company.
2.5 "Cause" means: (a) willful misconduct on the part of a Participant that
is detrimental to the Company; or (b) the conviction of a Participant for the
commission of a felony or crime involving moral turpitude; provided, however,
that if the Participant has entered into an employment agreement that is binding
as of the date of employment termination, and if such employment agreement
defines "Cause," such definition of "Cause" shall apply. "Cause" under either
(a) or (b) shall be determined in good faith by the Committee.
2.6 "Change Of Control" For the purpose of this Plan shall mean:
(a) The beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) by any Person of twenty
percent (20 percent) or more of either (i) the then-outstanding
shares of common stock of the Company (the "Outstanding Company
Common Stock") or (ii) the combined voting power of the
then-outstanding voting securities of the Company entitled to
vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes
of this subsection (a), the following accumulations and
acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from the Company, (ii) any acquisition or
accumulation by the Company, (iii) any acquisition or
accumulation by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company, (iv) any acquisition or accumulation
by an corporation pursuant to a transaction which complies with
clauses (i), (ii), and (iii) of subsection (c) of this Section 2,
or (v) the beneficial ownership of twenty percent (20 percent) or
more of either the Outstanding Company Common Stock or the
Outstanding Company Voting Securities by a Person if such
beneficial ownership occurs solely because (x) of a change in the
aggregate number of shares of Outstanding Company Common Stock or
Outstanding Company Voting Securities since the last date on
which such Persons acquired beneficial ownership of any
Outstanding Company Common Stock or Outstanding Company Voting
Securities or (y) such Persons acquired such beneficial ownership
in the good faith belief that such acquisition would not cause
such beneficial ownership to equal or exceed twenty percent (20
percent) of the Outstanding Company Common Stock or Outstanding
Company Voting Securities then outstanding and such Person relied
in good faith in computing the percentage of its beneficial
ownership on publicly filed reports or documents of the Company
which are inaccurate or out-of-date; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election,
or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies by or on
behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger, or consolidation or
sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each case,
unless, following such Business Combination, (i) all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own,
directly or indirectly, more than fifty percent (50 percent) of,
respectively, the then-outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which
as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii)
no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of
the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, twenty
percent (20 percent) or more of, respectively, the
then-outstanding shares of common stock, or the combined voting
power of the then-outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of
the corporation resulting from such Business Combination, except
to the extent that such ownership existed prior to the Business
Combination and (iii) at least a majority of the members of the
board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the
time of the execution of the initial agreement, or of the action
of the Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
Notwithstanding clause (v) of subsection (a) of this Section 2.6,
if any Person whose beneficial ownership is not a Change of
Control due to such clause (v) does not reduce such Person's
percentage of beneficial ownership of Outstanding Company Common
Stock or Outstanding Company Voting Securities to less than
twenty percent (20 percent) by the close of business on the fifth
business day after notice from the Company (the date of notice
being the first day) that such Person's beneficial ownership of
Outstanding Company Common Stock or Outstanding Company Voting
Securities equals or exceeds twenty percent (20 percent), such
Person's beneficial ownership shall be a Change of Control at the
end of such five (5) business day period (and such clause (v)
shall no longer apply); provided, however, that if such Person
asserts in writing to the Company by the end of such five (5)
business day period that a reduction in such Person's percentage
of beneficial ownership would subject such reduction to the
operation of Section 16(b) of the Exchange Act ("Section 16(b)")
the period during which the beneficial ownership of such Person
must be reduced to less than twenty percent (20 percent) so as
not to constitute a Change of Control shall be extended to the
date that is the third business day immediately following the
date which is the earlier of (i) six (6) months following the
receipt by such Person of the notice from the Company of
beneficial ownership of twenty percent (20 percent) or more or
(ii) the date upon which such reduction would no longer be
subject to Section 16(b). For purposes of this definition, the
determination whether any Person acted in "good faith" shall be
conclusively determined by the Board, acting by a vote of those
directors of the Company who, at such time, shall constitute the
Incumbent Board.
2.7 "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
2.8 "Committee" means the Compensation Committee or any other committee
appointed by the Board to administer the Plan, as specified in Article 3 herein.
Any such Committee shall be comprised entirely of outside Directors within the
meaning of Code Section 162(m) and applicable interpretive authority thereunder.
2.9 "Company" means Stone & Webster, Incorporated, a Delaware corporation,
and any successor thereto as provided in Article 13 herein.
2.10 "Covered Employee" means a Participant who, as of the date of payout
of a Final Award, is one of the group of "covered employees," as defined in the
regulations promulgated under Code Section 162(m), or any successor statute.
2.11 "Disability" shall have the meaning ascribed to such term in the
Participant's governing long-term disability plan, or if no such plan exists, at
the discretion of the Board.
2.12 "Effective Date" shall have the meaning ascribed to such term in
Section 1.1 hereof.
2.13 "Employee" means any employee of the Company or its Subsidiaries or
Affiliates. Directors who are employed by the Company shall be considered
Employees under this Plan.
2.14 "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
2.15 "Final Award" means the actual award earned during a Plan Year by a
Participant, as determined by the Committee following the end of the Plan Year.
2.16 "Participant" means an Employee who is actively participating in the
Plan.
2.17 "Plan" means the Stone & Webster, Incorporated Annual Incentive
Compensation Plan, as set forth herein.
2.18 "Plan Year" means the Company's fiscal year.
2.19 "Retirement" shall have the meaning ascribed to such term in the
Employee Retirement Plan of Stone & Webster, Incorporated and Participating
Subsidiaries.
2.20 "Subsidiary" means (a) a corporation, a majority of whose outstanding
stock entitled to elect a majority of its Board of Directors is at the time
owned by the party in question and/or by a subsidiary or subsidiaries of such a
party, and (b) a corporation, a substantial amount of the stock of which the
Company or its Subsidiaries owns or has an option to acquire.
2.21 "Target Incentive Award" means the award to be paid to Participants
when the Company meets "targeted" performance results, as established by the
Committee.
Article 3. Administration
3.1 The Committee. The Plan shall initially be administered by the
Compensation Committee of the Board. Subject to the terms of this Plan, the
Board may appoint a successor Committee to administer the Plan. The members of
the Committee shall be appointed by, and shall serve at the discretion of, the
Board.
3.2 Authority of the Committee. Except as limited by law or by the
Certificate of Incorporation or Bylaws of the Company, and subject to the
provisions herein, the Committee shall have full power to select Employees who
shall participate in the Plan; determine the size and types of Award
Opportunities and Final Awards; determine the terms and conditions of Award
Opportunities in a manner consistent with the Plan; construe and interpret the
Plan and any agreement or instrument entered into under the Plan; establish,
amend, or waive rules and regulations for the Plan's administration; and
(subject to the provisions of Article 8 herein) amend the terms and conditions
of any outstanding Award Opportunity to the extent such terms and conditions are
within the discretion of the Committee as provided in the Plan. Further, the
Committee shall make all other determinations which may be necessary or
advisable for the administration of the Plan. Except in the case of Covered
Employees, the Committee may delegate its authorities as permitted by law.
3.3 Decisions Binding. All determinations and decisions of the Committee as
to any disputed question arising under the Plan, including questions of
construction and interpretation, shall be final, binding, and conclusive upon
all parties.
3.4 Indemnification. Each person who is or shall have been a member of the
Committee, or of the Board, shall be indemnified and held harmless by the
Company against and from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by him or her in connection with or
resulting from any claim, action, suit, or proceeding to which he or she may be
a party, or in which he or she may be involved by reason of any action taken or
failure to act under the Plan, and against and from any and all amounts paid by
him or her in settlement thereof, with the Company's approval, or paid by him or
her in satisfaction of any judgment in any such action, suit, or proceeding
against him or her, provided he or she shall give the Company an opportunity, at
its own expense, to handle and defend the same before he or she undertakes to
handle and defend it on his or her own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which such persons may be entitled under the Company's Certificate of
Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the
Company may have to indemnify them or hold them harmless.
Article 4. Eligibility and Participation
4.1 Eligibility. All Employees shall be eligible to participate in the
Plan.
4.2 Participation. Participation in the Plan shall be determined annually
by the Committee. Employees who are chosen to participate in the Plan in any
given Plan Year shall be so notified in writing, and shall be apprised of the
performance measure(s), performance goal(s), and related Award Opportunities for
the relevant Plan Year, as soon as is practicable.
4.3 Partial Plan Year Participation. Except as provided in Article 8
herein, an Employee who becomes eligible after the beginning of a Plan Year may
participate in the Plan for that Plan Year. The Committee, in its sole
discretion, retains the right to prohibit or allow participation in the initial
Plan Year of eligibility for any of the aforementioned Employees.
4.4 No Right to Participate. No Participant or other Employee shall at any
time have a right to be selected for participation in the Plan for any Plan
Year, despite having previously participated in the Plan.
Article 5. Award Determination
5.1 Performance Measures and Performance Goals. Except as provided in
Article 8 herein, prior to the beginning of each Plan Year, or as soon as
practicable thereafter, the Committee shall select performance measures and
shall establish performance goals for that Plan Year. Except as provided in
Article 8 herein, the performance measures may be based on any combination of
corporate, divisional, and/or individual goals.
The Committee may establish one or more performance measures which must be
achieved for any Participant to receive any portion of his or her Final Award
payment for that Plan Year.
5.2 Award Opportunities. Prior to the beginning of each Plan Year, or as
soon as practicable thereafter, the Committee shall establish, in writing, Award
Opportunities which correspond to various levels of achievement of the
pre-established performance goals. Except as provided in Article 8 herein, in
the event a Participant changes job levels during a Plan Year, the Participant's
Award Opportunity may be adjusted to reflect the amount of time at each job
level during the Plan Year.
5.3 Adjustment of Performance Goals and Award Opportunities. Once
established, performance goals normally shall not be changed during the Plan
Year. However, except as provided in Article 8 herein, if the Committee
determines that external changes or other unanticipated business conditions have
materially affected the fairness of the goals, then the Committee may approve
appropriate adjustments to the performance goals (either up or down) during the
Plan Year as such goals apply to the Award Opportunities of specified
Participants. In addition, the Committee shall have the authority to reduce or
eliminate the Final Award determinations, based upon any objective or subjective
criteria it deems appropriate.
Notwithstanding any other provision of this Plan, in the event of any
change in corporate capitalization, such as a stock split, or a corporate
transaction, such as any merger, consolidation, separation, including a
spin-off, or other distribution of stock or property of the Company, any
reorganization (whether or not such reorganization comes within the definition
of such term in Code Section 368), or any partial or complete liquidation of the
Company, such adjustment shall be made in the Award Opportunities and/or the
performance measures or performance goals related to then-current performance
periods, as may be determined to be appropriate and equitable by the Committee,
in its sole discretion, to prevent dilution or enlargement of rights; provided,
however, that subject to Article 8 herein, any such adjustment shall not be made
if it would eliminate the ability of Award Opportunities held by Covered
Employees to qualify for the "performance-based" exception under Code
Section 162(m).
5.4 Final Award Determinations. At the end of each Plan Year, Final Awards
shall be computed for each Participant as determined by the Committee. Subject
to the terms of Article 8 herein, Final Award amounts may vary above or below
the Target Incentive Award, based on the level of achievement of the
pre-established corporate, divisional, and/or individual performance goals.
5.5 Award Limit. The Committee may establish guidelines governing the
maximum Final Awards that may be earned by Participants (either in the
aggregate, by Employee class, or among individual Participants) in each Plan
Year. The guidelines may be expressed as a percentage of Company-wide goals or
financial measures, or such other measures as the Committee shall from time to
time determine; provided, however, that the maximum payout with respect to a
Final Award payable to any one Participant in connection with performance in any
one Plan Year shall be two million dollars ($2,000,000).
5.6 Threshold Levels of Performance. The Committee may establish minimum
levels of performance goal achievement, below which no payouts of Final Awards
shall be made to any Participant.
Article 6. Payment of Final Awards
6.1 Form and Timing of Payment. Unless a deferral election is made by a
Participant pursuant to Section 6.2 herein, each Participant's Final Award shall
be paid in cash, in one lump sum, within seventy-five (75) calendar days after
the end of each Plan Year.
6.2 Deferral of Final Award Payouts. The Committee may permit (or require,
if necessary, to preserve full deductibility under Code Section 162(m)) a
Participant to defer such Participant's receipt of the payment of cash that
would otherwise be due pursuant to his or her Final Award. If any such deferral
election is required or permitted, the Committee shall, in its sole discretion,
establish rules and procedures for such payment deferrals.
6.3 Unsecured Interest. No Participant or any other party claiming an
interest in amounts earned under the Plan shall have any interest whatsoever in
any specific asset of the Company. To the extent that any party acquires a right
to receive payments under the Plan, such right shall be equivalent to that of an
unsecured general creditor of the Company.
Article 7. Termination of Employment
7.1 Termination of Employment Due to Death, Disability, or Retirement. In
the event a Participant's employment is terminated by reason of death,
Disability, or Retirement, the Final Award determined in accordance with
Section 5.4 herein shall be reduced to reflect participation prior to
termination only. The reduced award shall be determined by multiplying said
Final Award by a fraction, the numerator of which is the number of days of
employment in the Plan Year through the date of employment termination, and the
denominator of which is three hundred sixty-five (365). In the case of a
Participant's Disability, the employment termination shall be deemed to have
occurred on the date that the Committee determines the definition of Disability
to have been satisfied.
The Final Award thus determined shall be paid within seventy-five (75)
calendar days following the end of the Plan Year in which employment termination
occurs.
7.2 Termination of Employment for Other Reasons. In the event a
Participant's employment is terminated for any reason other than death,
Disability, or Retirement (of which the Committee shall be the sole judge), all
of the Participant's rights to a Final Award for the Plan Year then in progress
shall be forfeited. However, except in the event of an involuntary employment
termination for Cause, the Committee, in its sole discretion, may pay a prorated
award for the portion of the Plan Year that the Participant was employed by the
Company, computed as determined by the Committee.
Article 8. Covered Employees
8.1 Applicability of Article 8. The provisions of this Article 8 shall
apply only to Covered Employees. In the event of any inconsistencies between
this Article 8 and the other Plan provisions as they pertain to Covered
Employees, the provisions of this Article 8 shall control.
8.2 Establishment of Award Opportunities. Except as provided in Section 8.8
herein, Award Opportunities for Covered Employees shall be established as a
function of each Covered Employee's Base Salary (as defined below). Within
ninety (90) days after the beginning of each Plan Year, the Committee shall
establish, in writing, various levels of Final Awards which will be paid with
respect to specified levels of attainment of the pre-established performance
goals. For purposes of this Article 8, "Base Salary" shall mean, as to any
specific Plan Year, a Participant's regular annual salary rate as of the first
day of the Plan Year. Regular salary shall not be reduced by any salary
reduction contributions made to any defined contribution plan or other deferred
compensation plans of the Company, but shall not include any payments under this
Plan or any other bonuses, incentive pay, or special awards.
8.3 No Partial Plan Year Participation. A Covered Employee who becomes
eligible after the beginning of a Plan Year may first participate in the Plan
for the succeeding Plan Year.
8.4 Components of Award Opportunities. Each Covered Employee's Award
Opportunity shall be based on: (a) the Covered Employee's Target Incentive
Award; (b) the potential Final Awards corresponding to various levels of
achievement of the pre-established performance goals, as established by the
Committee; and (c) Company, business unit, and/or individual performance in
relation to the pre-established performance goals.
Except as provided in Section 8.8 herein, performance measures which may
serve as determinants of Covered Employees' Award Opportunities shall be limited
to:
(a) Earnings per share;
(b) Net income (before or after taxes);
(c) Return measures (including, but not limited to, return on assets,
capital, equity, or sales);
(d) Cash flow return on investments which equals net cash flows
divided by owners equity;
(e) Earnings before or after taxes;
(f) Gross revenues;
(g) Market-to-book value ratio;
(h) Share price (including, but not limited to, growth measures and
total shareholder return);
(i) Working capital measures; and
(j) Economic value added.
These performance measures may be applied singly or in tandem, and may be
linked to Company-wide performance, Subsidiary or Affiliate performance,
business unit performance, product category performance, or any combination
thereof.
8.5 No Mid-Year Change in Award Opportunities. Except as provided in
Section 8.8 herein, each Covered Employee's Final Award shall be based
exclusively on the Award Opportunity levels established by the Committee
pursuant to Section 8.2 herein.
8.6 Nonadjustment of Performance Goals. Except as provided in Section 8.8
herein, performance goals shall not be changed following their establishment,
and Covered Employees shall not receive any payout when the minimum performance
goals are not met or exceeded.
8.7 Individual Performance Evaluation and Discretionary Adjustments. Except
as provided in Section 8.8 herein, subjective evaluations of performance shall
not be applied to increase Final Awards. However, the Committee shall have the
discretion to decrease or eliminate the amount of the Final Award otherwise
payable to a Covered Employee.
8.8 Possible Modifications. If, on the advice of the Company's tax counsel,
the Committee determines that Code Section 162(m) and the Regulations thereunder
will not adversely affect the deductibility for federal income tax purposes of
any amount paid under the Plan by permitting greater discretion and/or
flexibility with respect to Award Opportunities granted to Covered Employees
pursuant to this Article 8, then the Committee may, in its sole discretion,
apply such greater discretion and/or flexibility to such Award Opportunities as
is consistent with the terms of this Plan, and without regard to the restrictive
provisions of this Article 8.
Without limiting the generality of the foregoing, in the event it is
determined that the Committee may make adjustments to performance goals to
reflect the impact of events that are extraordinary and/or nonrecurring without
precluding compliance with Code Section 162(m), such adjustments may be made.
Further, in determining the degree to which performance goals have been
satisfied in any year, the Committee shall disregard the impact of accounting
changes made by the Financial Accounting Standards Board which become effective
after the performance goals for such year have been established.
In the event the Committee determines that compliance with Code
Section 162(m) is not desired with respect to any Award Opportunities granted or
to be granted under the Plan, then compliance with Code Section 162(m) will not
be required (for example, if such a determination is made, the performance
measures specified in Section 8.4 herein need not be the only determinants of
Final Awards, and subjective discretion may be applied to increase the Final
Awards of Covered Employees). In addition, in the event that changes are made to
Code Section 162(m) to permit greater flexibility with respect to any Award
Opportunities under the Plan, the Committee may, subject to this Article 8, make
any adjustments it deems appropriate.
Article 9. Rights of Participants
9.1 Employment. Nothing in the Plan shall interfere with or limit in any
way the right of the Company to terminate any Participant's employment at any
time, nor confer upon any Participant any right to continued employment with the
Company.
9.2 Nontransferability. No right or interest of any Participant in the Plan
shall be assignable or transferable, or subject to any lien, directly, by
operation of law or otherwise, including, but not limited to, execution, levy,
garnishment, attachment, pledge, and bankruptcy.
Article 10. Beneficiary Designation
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his or her death before
he or she receives any or all of such benefit. Each designation will revoke all
prior designations by the same Participant, shall be in a form prescribed by the
Committee, and will be effective only when filed by the Participant in writing
with the Committee during his or her lifetime. In the absence of any such
designation, benefits remaining unpaid at the Participant's death shall be paid
to the Participant's estate.
Article 11. Change of Control
In the event of a Change of Control, each Participant shall be entitled to
a pro rata payment of his or her Award Opportunity for the Plan Year during
which such Change of Control occurs. The Final Award deemed earned by each
Participant in such year shall equal the greater of: (i) the Participant's
Target Incentive Award for such year; or (ii) the estimated actual performance
as of the date of the Change of Control, projected to the end of such year, as
determined by the Compensation Committee. The proration applicable to Award
Opportunities in the year of a Change of Control shall be determined as a
function of the number of days within the Plan Year prior to the effective date
of the Change of Control, in relation to three hundred sixty-five (365). Such
amount shall be paid in cash to each Participant within thirty (30) days after
the effective date of the Change of Control.
Article 12. Amendments
The Board of Directors, in its sole discretion, without notice, at any time
and from time to time, may modify or amend, in whole or in part, any or all of
the provisions of the Plan, or suspend or terminate it entirely; provided,
however, that no such modification, amendment, suspension, or termination may,
without the consent of a Participant (or his or her beneficiary in the case of
the death of the Participant), materially reduce the right of a Participant (or
his or her beneficiary as the case may be) to a payment or distribution
hereunder to which he or she is entitled.
Article 13. Miscellaneous
13.1 Governing Law. The Plan, and all agreements hereunder, shall be
governed by and construed in accordance with the laws of the state of Delaware.
13.2 Withholding Taxes. The Company shall have the right to deduct from all
payments under the Plan any federal, state, or local taxes required by law to be
withheld with respect to such payments.
13.3 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine, the plural shall
include the singular, and the singular shall include the plural.
13.4 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
13.5 Costs of the Plan. All costs of implementing and administering the
Plan shall be borne by the Company.
13.6 Successors. All obligations of the Company under the Plan shall be
binding upon and inure to the benefit of any successor to the Company, whether
the existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
<PAGE>
EXHIBIT 10 (h)
Long-Term Incentive Compensation Plan
Contents
Article 1. Establishment, Objectives, and Duration
Article 2. Definitions
Article 3. Administration
Article 4. Shares Subject to the Plan and Maximum Awards
Article 5. Eligibility and Participation
Article 6. Stock Options
Article 7. Restricted Stock
Article 8. Performance Units and Performance Shares
Article 9. Performance Measures
Article 10. Beneficiary Designation
Article 11. Deferrals
Article 12. Rights of Employees/Directors
Article 13. Change in Control
Article 14. Amendment, Modification, and Termination
Article 15. Withholding
Article 16. Indemnification
Article 17. Successors
Article 18. Legal Construction
<PAGE>
LONG-TERM INCENTIVE COMPENSATION PLAN
Article 1. Establishment, Objectives, and Duration
1.1. Establishment of the Plan. Stone & Webster, Incorporated, a Delaware
corporation (hereinafter referred to as the "Company"), hereby establishes an
incentive compensation plan to be known as the "Stone & Webster, Incorporated
Long-Term Incentive Compensation Plan" (hereinafter referred to as the "Plan"),
as set forth in this document. The Plan is intended to replace the Company's
Restricted Stock Plan and 1995 Stock Option Plan (the "Old Plans") with respect
to future grants of equity-based incentive compensation. The Plan permits the
grant of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock,
Performance Shares, and Performance Units.
Subject to approval by the Company's shareholders, the Plan shall become
effective as of January 1, 1998 (the "Effective Date") and shall remain in
effect as provided in Section 1.3 hereof.
1.2. Objectives of the Plan. The objectives of the Plan are to optimize the
profitability and growth of the Company through long-term incentives which are
consistent with the Company's goals and which link the personal interests of
Participants to those of the Company's shareholders; to provide Participants
with an incentive for excellence in individual performance; and to promote
teamwork among Participants. Awards generally are made in conjunction with
services performed by the Participant within the previous 12 months.
The Plan is further intended to provide flexibility to the Company in its
ability to motivate, attract, and retain the services of Participants who make
significant contributions to the Company's success and to allow Participants to
share in the success of the Company.
1.3. Duration of the Plan. The Plan shall commence on the Effective Date,
as described in Section 1.1 hereof, and shall remain in effect, subject to the
right of the Board of Directors to amend or terminate the Plan at any time
pursuant to Article 15 hereof, until all Shares subject to it shall have been
purchased or acquired according to the Plan's provisions. However, in no event
may an Award be granted under the Plan on or after December 15, 2007.
Article 2. Definitions
Whenever used in the Plan, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized:
2.1. "Affiliate" shall have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations of the Exchange Act.
2.2. "Award" means, individually or collectively, a grant under this Plan
of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock,
Performance Shares, or Performance Units.
2.3. "Award Agreement" means an agreement entered into by the Company and
each Participant setting forth the terms and provisions applicable to Awards
granted under this Plan.
2.4. "Beneficial Owner" or "Beneficial Ownership" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.
2.5. "Board" or "Board of Directors" means the Board of Directors of the
Company.
2.6. "Change of Control" of the Company shall mean:
(a) The beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) by any Person of twenty
percent (20 percent) or more of either (i) the then-outstanding
shares of common stock of the Company (the "Outstanding Company
Common Stock") or (ii) the combined voting power of the
then-outstanding voting securities of the Company entitled to
vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes
of this subsection (a), the following accumulations and
acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from the Company, (ii) any acquisition or
accumulation by the Company, (iii) any acquisition or
accumulation by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company, (iv) any acquisition or accumulation
by an corporation pursuant to a transaction which complies with
clauses (i), (ii), and (iii) of subsection (c) of this Section 2,
or (v) the beneficial ownership of twenty percent (20 percent) or
more of either the Outstanding Company Common Stock or the
Outstanding Company Voting Securities by a Person if such
beneficial ownership occurs solely because (x) of a change in the
aggregate number of shares of Outstanding Company Common Stock or
Outstanding Company Voting Securities since the last date on
which such Persons acquired beneficial ownership of any
Outstanding Company Common Stock or Outstanding Company Voting
Securities or (y) such Persons acquired such beneficial ownership
in the good faith belief that such acquisition would not cause
such beneficial ownership to equal or exceed twenty percent (20
percent) of the Outstanding Company Common Stock or Outstanding
Company Voting Securities then outstanding and such Person relied
in good faith in computing the percentage of its beneficial
ownership on publicly filed reports or documents of the Company
which are inaccurate or out-of-date; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election,
or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies by or on
behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger, or consolidation or
sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each case,
unless, following such Business Combination, (i) all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own,
directly or indirectly, more than fifty percent (50 percent) of,
respectively, the then-outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which
as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii)
no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of
the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, twenty
percent (20 percent) or more of, respectively, the
then-outstanding shares of common stock, or the combined voting
power of the then-outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of
the corporation resulting from such Business Combination, except
to the extent that such ownership existed prior to the Business
Combination and (iii) at least a majority of the members of the
board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the
time of the execution of the initial agreement, or of the action
of the Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
Notwithstanding clause (v) of subsection (a) of this Section 2.6,
if any Person whose beneficial ownership is not a Change of
Control due to such clause (v) does not reduce such Person's
percentage of beneficial ownership of Outstanding Company Common
Stock or Outstanding Company Voting Securities to less than
twenty percent (20 percent) by the close of business on the fifth
business day after notice from the Company (the date of notice
being the first day) that such Person's beneficial ownership of
Outstanding Company Common Stock or Outstanding Company Voting
Securities equals or exceeds twenty percent (20 percent), such
Person's beneficial ownership shall be a Change of Control at the
end of such five (5) business day period (and such clause (v)
shall no longer apply); provided, however, that if such Person
asserts in writing to the Company by the end of such five (5)
business day period that a reduction in such Person's percentage
of beneficial ownership would subject such reduction to the
operation of Section 16(b) of the Exchange Act ("Section 16(b)")
the period during which the beneficial ownership of such Person
must be reduced to less than twenty percent (20 percent) so as
not to constitute a Change of Control shall be extended to the
date that is the third business day immediately following the
date which is the earlier of (i) six (6) months following the
receipt by such Person of the notice from the Company of
beneficial ownership of twenty percent (20 percent) or more or
(ii) the date upon which such reduction would no longer be
subject to Section 16(b). For purposes of this definition, the
determination whether any Person acted in "good faith" shall be
conclusively determined by the Board, acting by a vote of those
directors of the Company who, at such time, shall constitute the
Incumbent Board.
2.7. "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
2.8. "Committee" means the Compensation Committee or any other committee
appointed by the Board to administer Awards to Employees, as specified in
Article 3 herein. Any such Committee shall be comprised entirely of outside
Directors within the meaning of Code Section 162(m) and applicable
interpretative authority thereunder.
2.9. "Company" means Stone & Webster, Incorporated, a Delaware corporation,
and any successor thereto as provided in Article 17 herein.
2.10. "Covered Employee" means a Participant who, as of the date of vesting
and/or payout of an Award, as applicable, is one of the group of "covered
employees," as defined in the regulations promulgated under Code Section 162(m),
or any successor statute.
2.11. "Director" means any individual who is a member of the Board of
Directors of the Company.
2.12. "Disability" shall have the meaning ascribed to such term in the
Participant's governing long-term disability plan, or if no such plan exists, at
the discretion of the Board.
2.13. "Effective Date" shall have the meaning ascribed to such term in
Section 1.1 hereof.
2.14. "Employee" means any employee of the Company or its Subsidiaries or
Affiliates. Directors who are employed by the Company shall be considered
Employees under this Plan.
2.15. "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
2.16. "Fair Market Value" at any date shall be the closing sale price on
the principal securities exchange on which the Shares are traded on the last
previous day on which a sale was reported.
2.17. "Incentive Stock Option" or "ISO" means an option to purchase Shares
granted under Article 6 herein and which is designated as an Incentive Stock
Option and which is intended to meet the requirements of Code Section 422.
2.18. "Insider" shall mean an individual who is, on the relevant date, an
officer, Director or ten percent (10 percent) beneficial owner of any class of
the Company's equity securities that is registered pursuant to Section 12 of the
Exchange Act, all as defined under Section 16 of the Exchange Act.
2.19. "Nonqualified Stock Option" or "NQSO" means an option to purchase
Shares granted under Article 6 herein and which is not intended to meet the
requirements of Code Section 422.
2.20. "Option" means an Incentive Stock Option or a Nonqualified Stock
Option, as described in Article 6 herein.
2.21. "Option Price" means the price at which a Share may be purchased by a
Participant pursuant to an Option.
2.22. "Participant" means an Employee or Director who has been selected to
receive an Award or who has outstanding an Award granted under the Plan.
2.23. "Performance-Based Exception" means the performance-based exception
from the tax deductibility limitations of Code Section 162(m).
2.24. "Performance Share" means an Award granted to a Participant, as
described in Article 8 herein.
2.25. "Performance Unit" means an Award granted to a Participant, as
described in Article 8 herein.
2.26. "Period of Restriction" means the period during which the transfer of
Shares of Restricted Stock is limited in some way (based on the passage of time,
the achievement of performance goals, or upon the occurrence of other events as
determined by the Board, at its discretion), and the Shares are subject to a
substantial risk of forfeiture, as provided in Article 7 herein.
2.27. "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and
14(d) thereof, including a "group" as defined in Section 13(d) thereof.
2.28. "Restricted Stock" means an Award granted to a Participant pursuant
to Article 7 herein.
2.29. "Retirement" shall have the meaning ascribed to such term in the
Employee Retirement Plan of Stone & Webster, Incorporated and Participating
Subsidiaries.
2.30. "Shares" means the shares of common stock of the Company.
2.31. "Subsidiary" means (a) a corporation a majority of whose outstanding
stock entitled to elect a majority of its Board of Directors is at the time
owned by the party in question and/or by a subsidiary or subsidiaries of such a
party, and (b) a corporation a substantial amount of the stock of which the
Company or its Subsidiaries owns or has an option to acquire.
Article 3. Administration
3.1. General. The Plan shall be administered by the Compensation Committee
of the Board, or by any other Committee appointed by the Board; provided,
however, that the administration of Awards granted to Directors who are not
Employees (Non-employee Directors) shall be reserved to the Board of Directors.
Any provisions in this Plan regarding administration of Awards by the Committee
shall be deemed to refer to the Board with respect to Awards granted to
Non-Employee Directors. Any Committee administering the Plan shall be comprised
entirely of "outside directors" within the meaning of Code Section 162(m) and
applicable interpretive authority thereunder. The members of the Committee shall
be appointed from time to time by, and shall serve at the discretion of, the
Board of Directors. The Committee shall have the authority to delegate
administrative duties to officers, Employees, or Directors of the Company.
3.2. Authority of the Committee. Except as limited by law or by the
Certificate of Incorporation or Bylaws of the Company, and subject to the
provisions herein, the Committee shall have full power to select Employees who
shall participate in the Plan; determine the sizes and types of Awards;
determine the terms and conditions of Awards in a manner consistent with the
Plan; construe and interpret the Plan and any agreement or instrument entered
into under the Plan; establish, amend, or waive rules and regulations for the
Plan's administration; and (subject to the provisions of Article 15 herein)
amend the terms and conditions of any outstanding Award as provided in the Plan.
Further, the Committee shall make all other determinations which may be
necessary or advisable for the administration of the Plan. As permitted by law
(and subject to Section 3.1 herein), the Committee may delegate its authority as
identified herein.
3.3. Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Board shall be final, conclusive and binding on all persons,
including the Company, its shareholders, Directors, Employees, Participants, and
their estates and beneficiaries.
Article 4. Shares Subject to the Plan and Maximum Awards
4.1. Number of Shares Available for Grants. Subject to adjustment as
provided in Section 4.2 herein, the number of Shares hereby reserved for
issuance to Participants under the Plan shall be six hundred fifty thousand
(650,000) Shares, plus three hundred thirty thousand, seven hundred and
seventy-seven (330,777) Shares which have been previously reserved and
authorized but remaining available for grant under the Old Plans as of the
Effective Date. No more than three hundred thousand (300,000) Shares reserved
for issuance under the Plan may be granted in the form of Restricted Shares. The
Board shall determine the appropriate methodology for calculating the number of
shares issued pursuant to the Plan. Unless and until the Board determines that
an Award to a Covered Employee shall not be designed to comply with the
Performance-Based Exception, the following rules shall apply to grants of such
Awards under the Plan:
(a) Stock Options: The maximum aggregate number of Shares that may be
granted in the form of Stock Options pursuant to any Award
granted in any one fiscal year to any one Participant shall be
one hundred thousand (100,000).
(b) Restricted Stock: The maximum aggregate grant with respect to
Awards of Restricted Stock granted in any one fiscal year to any
one Participant shall be thirty-three thousand (33,000).
(c) Performance Shares: The maximum aggregate payout (determined as
of the end of the applicable performance period) with respect to
Awards of Performance Shares granted in any one fiscal year to
any one Participant shall be equal to the value of twenty-five
thousand (25,000) Shares.
(d) Performance Units: The maximum aggregate payout (determined as of
the end of the applicable performance period) with respect to
Awards of Performance Units granted in any one fiscal year to any
one Participant shall be equal to one million dollars
($1,000,000).
4.2. Adjustments in Authorized Shares. In the event of any change in
corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company, any reorganization (whether or
not such reorganization comes within the definition of such term in Code Section
368) or any partial or complete liquidation of the Company, such adjustment
shall be made in the number and class of Shares which may be delivered under
Section 4.1, in the number and class of and/or price of Shares subject to
outstanding Awards granted under the Plan, and in the Award limits set forth in
Section 4.1, as may be determined to be appropriate and equitable by the Board,
in its sole discretion, to prevent dilution or enlargement of rights; provided,
however, that the number of Shares subject to any Award shall always be a whole
number.
Article 5. Eligibility and Participation
5.1. Eligibility. Persons eligible to participate in this Plan include all
Employees and Directors.
5.2. Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees, those to
whom Awards shall be granted and shall determine the nature and amount of each
Award.
Article 6. Stock Options
6.1. Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Participants in such number, and upon such terms, and
at any time and from time to time as shall be determined by the Committee. A
nonqualified option to purchase 2,000 shares of Common Stock will be granted to
each Non-employee Director who is initially elected or appointed to the Board of
Directors after the Effective Date and prior to the expiration of the Plan,
effective on the date of his or her initial election or appointment (which date
shall be the date of grant for purposes hereof), and a nonqualified option to
purchase 1,000 shares of Common Stock will be granted annually, effective as of
the anniversary date of the Effective Date in each year after the Effective Date
until the expiration of the Plan, to each person who is a Non-employee Director
on each such anniversary date (which date shall be the date of grant for
purposes hereof). Options may provide for the grant of replacement stock options
if all or any portion of the exercise price or taxes incurred in connection with
the exercise, are paid by delivery (or, in the case of payment of taxes, by
withholding of shares) of other common shares of the Company.
6.2. Award Agreement. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as the
Committee shall determine. The Award Agreement also shall specify whether the
Option is intended to be an ISO within the meaning of Code Section 422, or an
NQSO whose grant is intended not to fall under the provisions of Code Section
422.
6.3. Option Price. The Option Price for each grant of an Option under this
Plan shall be at least equal to one hundred percent (100 percent) of the Fair
Market Value of a Share on the date the Option is granted.
6.4. Duration of Options. Each Option granted to a Participant shall expire
at such time as the Committee shall determine at the time of grant; provided,
however, that no Option shall be exercisable later than the tenth (10th)
anniversary date of its grant.
6.5. Exercise of Options. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
each grant or for each Participant.
6.6. Payment. Options granted under this Article 6 shall be exercised by
the delivery of a written notice of exercise to the Company, setting forth the
number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares.
The Option Price upon exercise of any Option shall be payable to the
Company in full either: (a) in cash or its equivalent, or (b) by tendering
previously acquired Shares having an aggregate Fair Market Value at the time of
exercise equal to the total Option Price (provided that the Shares which are
tendered must have been held by the Participant for at least six (6) months
prior to their tender to satisfy the Option Price), or (c) by a combination of
(a) and (b).
The Committee also may allow cashless exercise as permitted under Federal
Reserve Board's Regulation T, subject to applicable securities law restrictions,
or by any other means which the Board determines to be consistent with the
Plan's purpose and applicable law.
Subject to any governing rules or regulations, as soon as practicable after
receipt of a written notification of exercise and full payment, the Company
shall deliver to the Participant, in the Participant's name, a statement setting
forth shares held in book entry form, or Share certificates in an appropriate
amount based upon the number of Shares purchased under the Option(s).
6.7. Restrictions on Share Transferability. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable, including, without
limitation, restrictions under applicable federal securities laws, under the
requirements of any stock exchange or market upon which such Shares are then
listed and/or traded, and under any blue sky or state securities laws applicable
to such Shares.
6.8. Termination of Emploment/Directorship. Each Participant's Option Award
Agreement shall set forth the extent to which the Participant shall have the
right to exercise the Option following termination of the Participant's
employment or directorship with the Company. Such provisions shall be determined
in the sole discretion of the Committee, shall be included in the Award
Agreement entered into with each Participant, need not be uniform among all
Options issued pursuant to this Article 6, and may reflect distinctions based on
the reasons for termination.
6.9. Nontransferability of Options.
(a) Incentive Stock Options. No ISO granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, all ISOs granted to a Participant under
the Plan shall be exercisable during his or her lifetime only by
such Participant.
(b) Nonqualified Stock Options. Except as otherwise provided in a
Participant's Award Agreement, no NQSO granted under this Article
6 may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, other than by will or by the laws of
descent and distribution. Further, except as otherwise provided
in a Participant's Award Agreement, all NQSOs granted to a
Participant under this Article 6 shall be exercisable during his
or her lifetime only by such Participant.
Article 7. Restricted Stock
7.1. Grant of Restricted Stock. Subject to the terms and provisions of the
Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to Participants in such amounts as the Committee shall
determine.
7.2. Restricted Stock Agreement. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Award Agreement that shall specify the Period(s)
of Restriction, the number of Shares of Restricted Stock granted, and such other
provisions as the Committee shall determine.
7.3. Transferability. Except as provided in this Article 7, the Shares of
Restricted Stock granted herein may not be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated until the end of the applicable Period of
Restriction established by the Committee and specified in the Restricted Stock
Award Agreement, or upon earlier satisfaction of any other conditions, as
specified by the Committee in its sole discretion and set forth in the
Restricted Stock Award Agreement. All rights with respect to the Restricted
Stock granted to a Participant under the Plan shall be available during his or
her lifetime only to such Participant.
7.4. Other Restrictions. Subject to Article 9 herein, the Committee shall
impose such other conditions and/or restrictions on any Shares of Restricted
Stock granted pursuant to the Plan as it may deem advisable including, without
limitation, a requirement that Participants pay a stipulated purchase price for
each Share of Restricted Stock, restrictions based upon the achievement of
specific performance goals (corporate, divisional, and/or individual),
time-based restrictions on vesting following the attainment of the performance
goals, and/or restrictions under applicable federal or state securities laws.
The Company may retain the certificates representing Shares of Restricted
Stock in the Company's possession or maintain such records in a book entry
system until such time as all conditions and/or restrictions applicable to such
Shares have been satisfied.
Except as otherwise provided in this Article 7, Shares of Restricted Stock
covered by each Restricted Stock grant made under the Plan shall become freely
transferable by the Participant after the last day of the applicable Period of
Restriction subject to applicable securities laws.
7.5. Voting Rights. Participants holding Shares of Restricted Stock granted
hereunder may be granted the right to exercise full voting rights with respect
to those Shares during the Period of Restriction.
7.6. Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock granted hereunder may be
credited with regular cash dividends paid with respect to the underlying Shares
while they are so held. The Committee may apply any restrictions to the
dividends that the Committee deems appropriate. Without limiting the generality
of the preceding sentence, if the grant or vesting of Restricted Shares granted
to a Covered Employee is designed to comply with the requirements of the
Performance-Based Exception, the Committee may apply any restrictions it deems
appropriate to the payment of dividends declared with respect to such Restricted
Shares, such that the dividends and/or the Restricted Shares maintain
eligibility for the Performance-Based Exception.
7.7. Termination of Employment/Directorship. Each Restricted Stock Award
Agreement shall set forth the extent to which the restrictions on shares awarded
under such Agreement shall lapse following termination of the Participant's
employment with the Company. Such provisions shall be determined in the sole
discretion of the Committee, shall be included in the Award Agreement entered
into with each Participant, need not be uniform among all Shares of Restricted
Stock issued pursuant to the Plan, and may reflect distinctions based on the
reasons for termination; provided, however that, except in the cases of
terminations connected with a Change of Control and terminations by reason of
death or Disability, the lapse of restrictions on Shares of Restricted Stock
which qualify for the Performance-Based Exception and which are held by Covered
Employees shall occur at the time they otherwise would have, but for the
termination.
Article 8. Performance Units and Performance Shares
8.1. Grant of Performance Units/Shares. Subject to the terms of the Plan,
Performance Units and/or Performance Shares may be granted to Participants in
such amounts and upon such terms, and at any time and from time to time, as
shall be determined by the Committee.
8.2. Value of Performance Units/Shares. Each Performance Unit shall have an
initial value that is established by the Committee at the time of grant. Each
Performance Share shall have an initial value equal to the Fair Market Value of
a Share on the date of grant. The Committee shall set performance goals in its
discretion which, depending on the extent to which they are met, will determine
the number and/or value of Performance Units/Shares that will be paid out to the
Participant. For purposes of this Article 8, the time period during which the
performance goals must be met shall be called a "Performance Period."
8.3. Earning of Performance Units/Shares. Subject to the terms of this
Plan, after the applicable Performance Period has ended, the holder of
Performance Units/Shares shall be entitled to receive payout on the number and
value of Performance Units/Shares earned by the Participant over the Performance
Period, to be determined as a function of the extent to which the corresponding
performance goals have been achieved.
8.4. Form and Timing of Payment of Performance Units/Shares. Payment of
earned Performance Units/Shares shall be made in a single lump sum following the
close of the applicable Performance Period. Subject to the terms of this Plan,
the Committee, in its sole discretion, may pay earned Performance Units/Shares
in the form of cash or in Shares (or in a combination thereof) which have an
aggregate Fair Market Value equal to the value of the earned Performance
Units/Shares at the close of the applicable Performance Period. Such Shares may
be granted subject to any restrictions deemed appropriate by the Committee. The
determination of the Committee with respect to the form of payout of such Awards
shall be set forth in the Award Agreement pertaining to the grant of the Award.
At the discretion of the Committee, Participants may be entitled to receive
any dividends declared with respect to Shares which have been earned in
connection with grants of Performance Units and/or Performance Shares which have
been earned, but not yet distributed to Participants (such dividends shall be
subject to the same accrual, forfeiture, and payout restrictions as apply to
dividends earned with respect to Shares of Restricted Stock, as set forth in
Section 7.6 herein). In addition, Participants may, at the discretion of the
Committee, be entitled to exercise their voting rights with respect to such
Shares.
8.5. Termination of Employment/Directorship Due to Death, Disability, or
Retirement. Unless determined otherwise by the Committee and set forth in the
Participant's Award Agreement, in the event the employment or directorship of a
Participant is terminated by reason of death, Disability, or Retirement during a
Performance Period, the Participant or his legal representative shall receive a
payout of the Performance Units/Shares which is prorated, as specified by the
Committee in its discretion.
Payment of earned Performance Units/Shares shall be made at a time
specified by the Committee in its sole discretion and set forth in the
Participant's Award Agreement. Notwithstanding the foregoing, with respect to
Covered Employees who retire during a Performance Period, payments shall be made
at the same time as payments are made to Participants who did not terminate
employment during the applicable Performance Period.
8.6. Termination of Employment/Directorship for Other Reasons. In the event
that a Participant's employment or directorship terminates for any reason other
than those reasons set forth in Section 8.5 herein, all Performance Units/Shares
shall be forfeited by the Participant to the Company unless determined otherwise
by the Committee, as set forth in the Participant's Award Agreement.
8.7. Nontransferability. Except as otherwise provided in a Participant's
Award Agreement, Performance Units/Shares may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution. Further, except as otherwise provided in a
Participant's Award Agreement, a Participant's rights under the Plan shall be
exercisable during the Participant's lifetime only by the Participant or the
Participant's legal representative.
Article 9. Performance Measures
Unless and until the Board proposes for shareholder vote and shareholders
approve a change in the general performance measures set forth in this Article
9, the attainment of which may determine the degree of payout and/or vesting
with respect to Awards to Covered Employees which are designed to qualify for
the Performance-Based Exception, the performance measure(s) to be used for
purposes of such grants shall be chosen from among:
(a) Earnings per share;
(b) Net income (before or after taxes);
(c) Return measures (including, but not limited to, return on assets,
capital, equity, or sales);
(d) Cash flow return on investments which equals net cash flows
divided by owners equity;
(e) Earnings before or after taxes;
(f) Gross revenues;
(g) Market-to-book value ratio;
(h) Share price (including, but not limited to, growth measures and
total shareholder return);
(i) Working capital measures; and
(j) Economic value added.
Subject to the terms of the Plan, each of these measures shall be defined
by the Committee or Board on a corporation or subsidiary or business division
basis or in comparison with peer group performance, and may include or exclude
specified extraordinary items, as determined by the corporation's auditors.
The Committee shall have the discretion to adjust the determinations of the
degree of attainment of the pre-established performance goals; provided,
however, that Awards which are designed to qualify for the Performance-Based
Exception, and which are held by Covered Employee, may not be adjusted upward
(the Committee shall retain the discretion to adjust such Awards downward).
In the event that applicable tax and/or securities laws change to permit
Committee discretion to alter the governing performance measures without
obtaining shareholder approval of such changes, the Board shall have sole
discretion to make such changes without obtaining shareholder approval. In
addition, in the event that the Committee determines that it is advisable to
grant Awards which shall not qualify for the Performance-Based Exception, the
Committee may make such grants without satisfying the requirements of Code
Section 162(m).
Article 10. Beneficiary Designation
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his or her death before
he or she receives any or all of such benefit. Each such designation shall
revoke all prior designations by the same Participant, shall be in a form
prescribed by the Company, and will be effective only when filed by the
Participant in writing with the Company during the Participant's lifetime. In
the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.
Article 11. Deferrals
The Board may permit or require a Participant to defer such Participant's
receipt of the payment of cash or the delivery of Shares that would otherwise be
due to such Participant by virtue of the lapse or waiver of restrictions with
respect to Restricted Stock, or the satisfaction of any requirements or goals
with respect to Performance Units/Shares. If any such deferral election is
required or permitted, the Committee shall, in its sole discretion, establish
rules and procedures for such payment deferrals.
Article 12. Rights of Employees/Directors
12.1. Employment. Nothing in the Plan shall interfere with or limit in any
way the right of the Company to terminate any Participant's employment at any
time, nor confer upon any Participant any right to continue in the employ of the
Company.
12.2. Participation. No Employee or Director shall have the right to be
selected to receive an Award under this Plan, or, having been so selected, to be
selected to receive a future Award.
Article 13. Change of Control
13.1. Treatment of Outstanding Awards. Upon the occurrence of a Change of
Control and notwithstanding the terms of the Award Agreement, unless otherwise
specifically prohibited under applicable laws, or by the rules and regulations
of any governing governmental agencies or national securities exchanges:
(a) Any and all Options granted hereunder shall become immediately
exercisable, and shall remain exercisable throughout their entire
term;
(b) Any restriction periods and restrictions imposed on Restricted
Shares which are not performance-based shall lapse;
(c) The target payout opportunities attainable under all outstanding
Awards of performance-based Restricted Stock, Performance Units
and Performance Shares shall be deemed to have been fully earned
for the entire Performance Period(s) as of the effective date of
the Change of Control. The vesting of all Awards denominated in
Shares shall be accelerated as of the effective date of the
Change of Control, and there shall be paid out to Participants
within thirty (30) days following the effective date of the
Change of Control a pro rata number of shares based upon an
assumed achievement of all relevant targeted performance goals
and upon the length of time within the Performance Period which
has elapsed prior to the Change of Control. Awards denominated in
cash shall be paid pro rata to participants in cash within thirty
(30) days following the effective date of the Change of Control,
with the proration determined as a function of the length of time
within the Performance Period which has elapsed prior to the
Change of Control, and based on an assumed achievement of all
relevant targeted performance goals.
13.2. Termination, Amendment, and Modifications of Change-of-Control
Provisions. Notwithstanding any other provision of this Plan (but subject to the
limitations of Section 14.3 hereof) or any Award Agreement provision, the
provisions of this Article 13 may not be terminated, amended, or modified on or
after the date of a Change of Control to affect adversely any Award theretofore
granted under the Plan without the prior written consent of the Participant with
respect to said Participant's outstanding Awards; provided, however, the Board
may terminate, amend, or modify this Article 13 at any time and from time to
time prior to the date of a Change of Control.
13.3. Pooling of Interests Accounting. Notwithstanding any other provision
of the Plan to the contrary, in the event that the consummation of a Change of
Control is contingent on using pooling of interests accounting methodology, the
Board may take any action necessary to preserve the use of pooling of interests
accounting.
Article 14. Amendment, Modification, and Termination
14.1. Amendment, Modification, and Termination. Subject to the terms of the
Plan, the Board may at any time and from time to time, alter, amend, suspend or
terminate the Plan in whole or in part.
14.2. Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Board may make adjustments in the terms and conditions
of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in
Section 4.2 hereof) affecting the Company or the financial statements of the
Company or of changes in applicable laws, regulations, or accounting principles,
whenever the Board determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan; provided that, unless the Board determines
otherwise at the time such adjustment is considered, no such adjustment shall be
authorized to the extent that such authority would be inconsistent with the
Plan's meeting the requirements of Section 162(m) of the Code, as from time to
time amended.
14.3. Awards Previously Granted. Notwithstanding any other provision of the
Plan to the contrary (but subject to Section 13.3 hereof), no termination,
amendment, or modification of the Plan shall adversely affect in any material
way any Award previously granted under the Plan, without the written consent of
the Participant holding such Award.
14.4. Compliance with Code Section 162(m). At all times when Code Section
162(m) is applicable, all Awards granted under this Plan shall comply with the
requirements of Code Section 162(m); provided, however, that in the event the
Board determines that such compliance is not desired with respect to any Award
or Awards available for grant under the Plan, then compliance with Code Section
162(m) will not be required. In addition, in the event that changes are made to
Code Section 162(m) to permit greater flexibility with respect to any Award or
Awards available under the Plan, the Board may, subject to this Article 14, make
any adjustments it deems appropriate.
Article 15. Withholding
15.1. Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, state, and local taxes, domestic or foreign,
required by law or regulation to be withheld with respect to any taxable event
arising as a result of this Plan.
15.2. Share Withholding. With respect to withholding required upon any
taxable event arising as a result of Share-based Awards granted hereunder,
Participants may elect, subject to the approval of the Board, to satisfy the
withholding requirement, in whole or in part, by having the Company withhold
Shares to satisfy their tax obligations. With respect to withholding required
upon the exercise of Options or upon the lapse of restrictions on Restricted
Stock, Participants may only elect to have Shares withheld having a Fair Market
Value on the date the tax is to be determined equal to the minimum statutory
total tax which could be imposed on the transaction. All elections shall be
irrevocable, made in writing, signed by the Participant, and shall be subject to
any restrictions or limitations that the Board, in its sole discretion, deems
appropriate.
Article 16. Indemnification
Each person who is or shall have been a member of the Committee, or of the
Board, shall be indemnified and held harmless by the Company against and from
any loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him or her in settlement thereof,
with the Company's approval, or paid by him or her in satisfaction of any
judgment in any such action, suit, or proceeding against him or her, provided he
or she shall give the Company an opportunity, at its own expense, to handle and
defend the same before he or she undertakes to handle and defend it on his or
her own behalf. The foregoing right of indemnification shall not be exclusive of
any other rights of indemnification to which such persons may be entitled under
the Company's Articles of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
Article 17. Successors
All obligations of the Company under the Plan with respect to Awards
granted hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
Article 18. Legal Construction
18.1. Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
18.2. Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
18.3. Requirements of Law. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
18.4. Securities Law Compliance. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions or Rule
16b-3 or its successors under the 1934 Act. To the extent any provision of the
plan or action by the Board fails to so comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the Board.
18.5. Governing Law. To the extent not preempted by federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and governed
by the laws of the state of Delaware.
<PAGE>
EXHIBIT 13 (i)
1997 Annual Report To Shareholders
For The Fiscal Year Ended December 31, 1997
(Financial Section)
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
The following is management's discussion and analysis of certain significant
factors that have affected the financial condition and results of operations of
Stone & Webster, Incorporated and Subsidiaries (the "Company") for the periods
noted. This discussion and analysis should be read in conjunction with the
Company's consolidated financial statements and accompanying notes.
Effective December 15, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, Earnings per Share. This statement specifies the
computation, presentation and disclosure requirements for earnings per share. As
disclosed in Notes K and U to the consolidated financial statements, the
adoption of SFAS 128 did not have an impact on the Company's earnings per share
calculations for years prior to 1996 and had an immaterial impact in 1997 and
1996. Unless noted otherwise, earnings per share calculations disclosed are
diluted.
Results Of Operations - 1997 Compared With 1996
Revenue for 1997 was $1,322,540, an increase of 14 percent from the $1,164,837
reported in 1996. The increased revenue reflected continued improvement in the
Company's Engineering, Construction and Consulting segment. Operating income for
1997 increased to $47,292 from an operating loss of $25,920 in 1996. Net income
was $33,510, or $2.59 per share in 1997, in comparison with a net loss of
$10,644, or $0.80 per share for 1996. New orders for 1997 of $1,330,970
decreased by 22 percent from the $1,714,139 in new orders reported in 1996.
Orders are the net total of new orders, scope changes and cancellations.
Consistent with the nature of the Company's businesses, significant new awards
can create variability in the Company's awards pattern. Backlog increased to
$2,519,302 at December 31, 1997 from $2,487,552 at December 31, 1996.
Components of earnings per share in 1997 and 1996 were:
- --------------------------------------------------------------------------------
1997 1996
------ ------
Operations $2.50 $1.35
Loss on Middle East joint venture contract (1.20) --
Pension related items 0.80 0.69
------ ------
Earnings per share from ongoing operations 2.10 2.04
Divested operations 0.08 (0.50)
Restructuring, other charges and asset divestitures 0.41 (2.34)
------ ------
Earnings (loss) per share $2.59 $(0.80)
- --------------------------------------------------------------------------------
For the years ended December 31, 1997 and 1996, the Company's results included
significant items which were non-recurring. Operating income, excluding
non-recurring items, for 1997 was $63,507 compared with operating income,
excluding non-recurring items, of $39,822 in 1996. Net income for 1997, also
excluding non-recurring items, was $42,568, compared with net income excluding
non-recurring items, of $27,279 for 1996.
Non-Recurring Items - 1997 and 1996
In 1997, the Company recorded a loss of $25,781 ($15,469 after tax or $1.20 per
share) related to a contract awarded in 1994, being executed by a joint venture
in the Middle East. To recognize its share of the cost to complete this
contract, the Company recorded a loss of $7,692 ($5,000 after tax or $0.38 per
share) in the second and third quarters of 1997 and an additional $18,089
($10,469 after tax or $0.82 per share) in the fourth quarter of 1997. The joint
venture expects to pursue claims related to this contract but no estimated
recovery for these claims is included in the 1997 results.
In 1997, the Company moved its corporate offices from New York to Boston. The
space made available from this consolidation was sublet or deleted from the
lease at costs consistent with amounts provided for in 1996.
In the fourth quarter of 1997, the Company completed the sale of an office
building in Boston for $20,000, consisting of cash and a note receivable. The
Company reported a gain of $8,939 ($5,363 after tax or $0.41 per share) on the
sale of the property. The gain was reported partially as operating income of
$7,954 with the remaining $985 reported as a gain on sale of assets. The
operating income portion, $7,954, was the amount reported as an operating loss
in the third quarter of 1996. The Company expects to complete the sale of its
real estate holdings in Cherry Hill, New Jersey, in 1998.
In 1996, the Company recorded restructuring and other charges of $54,424 in the
third quarter in connection with a major operational and financial
restructuring. This included a charge of $30,509 ($19,974 after tax, or $1.49
per share) to write down certain Boston and New Jersey properties to fair value
and to provide for anticipated losses in subleasing the New York office. A
charge of $1,832 was recorded in the first quarter of 1996 for the expected
sublease loss for a vacant floor in the New York office.
The financial statement impact of 1997 non-recurring items is summarized in the
table on the following page.
1997 - Non-Recurring Items
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Middle East Gain From 1997 Excluding
1997 Joint Sale Of Divested Non-Recurring
As Reported Venture(1) Assets(2) Operations(3) Items
----------- ----------- --------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Revenue $1,322,540 $ -- $ -- $ -- $1,322,540
Cost of revenue 1,254,964 (25,781) -- (1,612) 1,230,795
----------- ----------- --------- ------------- --------------
Gross profit (loss) 67,576 (25,781) -- 1,612 91,745
----------- ----------- --------- ------------- --------------
Selling, general and
administrative expenses (20,284) -- (7,954) -- 28,238
----------- ----------- --------- ------------- --------------
Operating income (loss) 47,292 (25,781) 7,794 1,612 63,507
----------- ----------- --------- ------------- --------------
Net income (loss) $ 33,510 $(15,469) $5,363 $1,048 $ 42,568
----------- ----------- --------- ------------- --------------
Income (loss) per share $2.59 $(1.20) $0.41 $0.08 $3.30
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes provisions for the Company's share of joint venture contract
losses in the Middle East.
(2) Gain on the sale of an office building in Boston. The operating income
portion of $7,954 reflects the amount reported as an operating loss as part
of the 1996 restructuring and other charges.
(3) Represents the Company's share of cash distributions from liquidation of
the Binghamton Cogeneration Partnership.
The 1996 restructuring included the divestiture of the Auburn VPS Partnership.
The partnership, which was 94.3 percent owned by the Company, had been unable to
meet its debt service requirements. In the third quarter of 1996, the assets of
the partnership were transferred to the lenders in return for cancellation of
the related construction debt, resulting in a loss of $989 or $0.07 per share.
This amount included a loss of $11,538 ($7,776 after tax, or $0.59 per share)
and an extraordinary gain of $10,283 ($6,787 after taxes, or $0.52 per share)
for the extinguishment of the construction debt. Losses on the operation of the
Auburn VPS Partnership for 1996, after interest expense of $4,125, were $11,640
($6,984 after tax, or $0.52 per share).
Also in the third quarter of 1996, the Company recorded a charge of $12,377
($7,553 after tax, or $0.57 per share) to recognize several contract related and
operational items. Among these were provisions for resolution, reached in the
quarter, of a contract scope dispute, damages resulting from contract
performance delays and recognition of a judgment awarded and anticipated
settlement costs of several employment related matters.
Divested operations in 1997 included proceeds from the liquidation of the
Binghamton Cogeneration Partnership. During the year, the Company received cash
distributions in excess of distributions expected at the time that the
partnership was liquidated. The cash distributions were recognized as income of
$1,612 ($1,048 after tax, or $0.08 per share).
In the fourth quarter of 1996, a charge of $4,172 ($2,712 after tax, or $0.21
per share) was recorded to write down the Company's one-third interest in the
Binghamton Cogeneration Partnership to its estimated fair value. The fair value
was determined based on the expected cash distribution resulting from
partnership liquidation. Liquidation and a cash distribution occurred in January
1997.
The financial statement impact of 1996 non-recurring items is summarized in the
following table:
1996 - Non-Recurring Items
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Binghamton Divested Contract 1996 Excluding
1996 and Auburn Partnership Real Estate Adjustments Non-Recurring
As Reported Divestitures(1) Operations(2) Adjustments and Other Items
----------- --------------- ------------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Revenue $1,164,837 $ -- $ 2,345 $ -- $ -- $1,162,492
Cost of revenue 1,099,064 4,172 6,721 -- 9,919 1,078,252
----------- --------------- ------------- ----------- ----------- --------------
Gross profit (loss) 65,773 (4,172) (4,376) -- (9,919) 84,240
----------- --------------- ------------- ----------- ----------- --------------
Selling, general and
administrative expenses 91,693 11,538 2,770 30,509 2,458 44,418
----------- --------------- ------------- ----------- ----------- --------------
Operating income (loss) (25,920) (15,710) (7,146) (30,509) (12,377) 39,822
Income (loss) before
extraordinary item (17,431) (10,488) (6,695) (19,974) (7,553) 27,279
Extraordinary item - gain
on extinguishment of debt 6,787 6,787 -- -- -- --
----------- --------------- ------------- ----------- ----------- --------------
Net income (loss) $ (10,644) $(3,701) $(6,695) $(19,974) $(7,553) $ 27,279
----------- --------------- ------------- ----------- ----------- --------------
Income (loss) per share $(0.80) $(0.28) $(0.50) $(1.49) $(0.57) $2.04
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes loss on Binghamton Cogeneration Partnership write-down and a loss
on the divestiture of the Auburn VPS Partnership.
(2) Includes operations of the Binghamton Cogeneration Partnership and the
Auburn VPS Partnership.
Engineering, Construction and Consulting Segment
The Engineering, Construction and Consulting segment reported revenue of
$1,299,220 in 1997, an increase of 14 percent over the $1,143,587 reported for
the same period in 1996. Operating income for the year was $49,595 in comparison
to an operating loss of $20,249 in 1996. Operating income excluding
non-recurring items was $65,810 compared with operating income excluding
non-recurring items of $45,493 in the prior year.
This discussion summarizes business operations excluding non-recurring items and
divested operations. In 1997 and 1996, all non-recurring items and divested
operations were reported in the Engineering, Construction and Consulting
segment.
- --------------------------------------------------------------------------------
Percent
1997 1996 Incr/(Decr) Increase
---------- ----------- ----------- --------
Revenue $1,299,220 $1,143,587 155,633 14%
Revenue, excluding
divested partnerships 1,299,220 1,141,242 157,978 14%
Operating income (loss) 49,595 (20,249) 69,844
Operating income, excluding
non-recurring items 65,810 45,493 20,317 45%
---------- ----------- ----------- --------
Identifiable assets 676,954 625,466 51,488 8%
---------- ----------- ----------- --------
Operating Margin, excluding
non-recurring items 5.1% 4.0%
- --------------------------------------------------------------------------------
New orders (net of scope changes and cancellations) were $1,330,970 for 1997 in
comparison with $1,714,139 in 1996. Revenue, new orders and backlog for 1997 and
1996 were:
Revenue, New Orders And Backlog
- --------------------------------------------------------------------------------
Incr/(Decr)
1997 1996 Percent
----------- ----------- -----------
Beginning backlog $2,487,522 $1,917,000 30%
New orders 1,330,970 1,714,139 (22)%
Revenue (1,299,220) (1,143,587) 14%
----------- ----------- -----------
Ending backlog $2,519,302 $2,487,552 1%
- --------------------------------------------------------------------------------
New orders by Division for 1997 and 1996 were:
New Orders By Division
- --------------------------------------------------------------------------------
Percent
1997 1996 Incr/(Decr) Increase
---------- ---------- ----------- --------
Power $ 640,843 $ 262,137 $ 378,706 145%
Process 340,880 701,354 (360,474) (51)%
Environmental/Infrastructure 55,542 532,163 (476,621) (90)%
Industrial 256,916 188,871 68,045 36%
Other 36,789 29,614 7,175 24%
---------- ---------- ----------- --------
New orders (net) $1,330,970 $1,714,139 $(383,169) (22)%
- --------------------------------------------------------------------------------
The increase in Power Division orders was due to ongoing demand for engineering
and construction as the power industry continues to restructure. Major orders
include a combined cycle plant for a large international power producer, ongoing
service awards involving nuclear engineering work, and several international
contracts in Africa, Asia and the Middle East.
The decrease in Process Division orders reflects both the exceptionally strong
order intake recorded in 1996 and the slowdown that occurred in the second half
of 1997 in the Asian economies. Work on a grassroots petrochemical project in
Indonesia has been suspended pending resolution of financing issues by the
client. Substantial work on this contract is unlikely to be restarted until the
second half of 1998 at the earliest. This project represents $537,920 of the
current backlog.
In 1997, the Environmental/Infrastructure Division focused on developing and
releasing work under existing Federal Task order contracts that had been awarded
in prior years. Significant new work was obtained in environmental remediation
and wastewater.
The segment revenue increase reflects a decrease of $46,897 for domestic and an
increase of $202,530 for export and international projects. The mix of domestic
and international work in 1997 and 1996 was:
Domestic/International Mix of Revenue
- --------------------------------------------------------------------------------
Incr/(Decr)
1997 1996 Percent
---------- ---------- -----------
United States - domestic $ 635,685 $ 682,582 (7)%
United States - export 396,194 187,324 112%
International 267,341 273,681 (2)%
---------- ---------- -----------
Total export and international $ 663,535 $ 461,005 44%
Total engineering, construction
and consulting revenue $1,299,220 $1,143,587 14%
---------- ---------- -----------
Percent export and international 51% 40%
- --------------------------------------------------------------------------------
The increased export and international revenue reflects continuing strong
Process Division activity in international markets and increased Power Division
revenue in Europe, the Middle East and Asia.
Power Division revenue grew from 1996 to 1997 due to increased billable hours,
primarily on nuclear service work, and increases in lump sum construction
contracts. Much of the increase in lump sum contracts was achieved on
international projects. Process Division revenue also grew, with the Indonesian
grassroots petrochemical refinery providing a significant component of the
Division's revenue. Revenue in the Environmental/Infrastructure Division did not
increase relative to backlog due to the slow start up of task order releases on
major Federal environmental remediation contracts. Industrial Division revenue
decreased due to delays in anticipated contract awards and completion of several
significant projects in 1997. The table following shows Engineering,
Construction and Consulting revenue, excluding divested operations, by Division
for 1997 and 1996.
Revenue By Division
- --------------------------------------------------------------------------------
Percent
1997 1996(1) Incr/(Decr) Increase
---------- ---------- ----------- --------
Power $ 537,809 $ 412,375 $125,434 30%
Process 452,122 409,322 42,800 11%
Environmental/Infrastructure 108,165 107,422 743 1%
Industrial 169,417 182,370 (12,953) (7)%
Other 31,707 29,753 1,954 7%
---------- ---------- ----------- --------
Total revenue $1,299,220 $1,141,242 $157,978 14%
- --------------------------------------------------------------------------------
(1) Excludes divested partnerships.
Engineering, Construction and Consulting operating income excluding
non-recurring items, was $65,810 in 1997 compared with $45,493 in 1996. The
operating margin for 1997 in this segment, excluding non-recurring items, was
5.1 percent compared with 4.0 percent in 1996. The improvement in operating
margin is due to increased workload, more effective procurement on lump sum
turnkey projects and improvements in project bidding and execution.
In 1997, the Company completed construction of a pipeline pumping station. The
client defaulted on payment, and the Company has filed suit to exercise its
contractual right to take ownership of the project. The Company recorded
reserves of $3,050 to write down related accounts receivable to the anticipated
fair value of the pumping station. In the fourth quarter of 1997, the Company
received payment and recorded income of $2,859 associated with purchased
technology for a standardized, pre-certified design for nuclear power plants for
which the Company had recorded a write-down of $6,500 in capitalized costs in
1995.
Cold Storage Segment
- --------------------------------------------------------------------------------
Percent
1997 1996 Incr/(Decr) Increase
---------- ---------- ----------- --------
Revenue $23,320 $21,250 $2,070 10%
Operating Income 7,340 5,954 1,386 23%
Identifiable Assets 44,026 42,634 1,392 3%
Operating Margin 31.5% 28.0%
- --------------------------------------------------------------------------------
The Company's Cold Storage segment provides public refrigerated logistics from
three cold storage warehouses in the Atlanta metropolitan area. The Cold Storage
segment combines low cost, energy efficient storage facilities with customized
material handling services.
Cold Storage reported an increase in revenue and operating income of 10 percent
and 23 percent, respectively. Operating results for 1997 have improved due to
increased utilization of the additional 3.7 million cubic feet of space added in
the 1996 expansion of the Rockmart, Georgia facility as well as efficiencies
realized from the implementation of a new information system in 1996.
General Corporate and Other Expenses
General corporate expenses for 1997 were $9,643 compared with $11,462 in 1996.
Both the 1997 and 1996 expenses include costs associated with the closure of the
Company's New York headquarters. The 1996 expenses include costs of developing
the strategic and capitalization plan. Interest income net of interest expense
for 1997 was $2,530 compared with net interest expense of $3,469, in 1996. This
change is due to the higher balances of cash, cash equivalents and U.S.
Government securities and the divestiture of the Auburn VPS Partnership which
had incurred $4,013 of net interest expense in 1996. The 1997 results include a
gain on the sale of assets of $985 related to the sale of an office building in
Boston.
Pension Related Items
Pension related items, which reduced operating expenses, were $17,099 in 1997
compared with $14,998 in 1996. These amounts increased net income by $10,345 (or
$0.80 per share) in 1997 compared with $9,173 (or $0.69 per share) in 1996.
The following table summarizes total pension related items:
- --------------------------------------------------------------------------------
1997 1996 1995
--------- --------- ---------
Net pension credit on qualified
U.S. plan (1) $(18,337) $(15,624) $(15,175)
Foreign pension expense(2) 1,238 626 752
Incentive Retirement Program -- -- 2,112
--------- --------- ---------
Total pension related items $(17,099) $(14,998) $(12,311)
--------- --------- ---------
After-tax total pension related items $(10,345) $ (9,173) $ (7,529)
--------- --------- ---------
Total pension related items per share $(0.80) $(0.69) $(0.52)
- --------------------------------------------------------------------------------
(1) SFAS No. 87 income on qualified U.S. plan.
(2) SFAS No. 87 expense on qualified foreign plans.
The pension credit is the result of a plan that is funded in excess of the
projected benefit obligation and income from the amortization of a SFAS 87 net
transition asset of $10,199 in 1997, $10,383 in 1996 and $10,383 in 1995. The
plan is overfunded primarily due to favorable asset performance. The transition
asset will be fully amortized in 1998.
Income Tax Provision
The income tax provision (benefit) resulted in effective tax rates of 34.0
percent in 1997 and (40.7) percent in 1996. The 1997 rate is lower than the U.S.
statutory rate due to utilization of foreign and state net operating loss
carryforwards. The Company had a valuation allowance of $11,605 at December 31,
1996 for the deferred tax assets related to net operating loss carryforwards.
The valuation allowance decreased by $8,028 to a balance of $3,577 at December
31, 1997. This change resulted primarily from the use of state tax loss
carryforwards in 1997, the use of the net operating loss carryforwards relating
to one of the Company's U.K. subsidiaries and the reversal of $1,509 of the
valuation allowance for this subsidiary. The valuation allowance at December 31,
1997 comprises $118 relating to the carryforwards of an international subsidiary
and $3,459 relating to state net operating loss carryforwards.
1996 Compared with 1995
Revenue for 1996 was $1,164,837, an increase of 16 percent from the $1,002,819
reported in 1995. The increased revenue reflected continued improvement in the
Company's Engineering, Construction and Consulting segment. Including all
restructuring, other charges, asset divestitures and divested operations, the
1996 operating loss was $25,920 compared with operating income of $35,041 in
1995. The net loss in 1996 was $10,644 compared with net income of $14,880 for
the prior year. Operating income for 1996, excluding non-recurring items, was
$39,822 compared with operating income, excluding non-recurring items, in 1995
of $37,498. Earnings per share from ongoing operations improved to $2.04 per
share in 1996 from $1.78 per share in 1995. New orders for 1996 of $1,714,139
increased by 27 percent from the $1,344,587 in new orders reported in 1995.
Backlog increased by 30 percent to $2,487,552 from $1,917,000.
Components of earnings per share in 1996 and 1995 are displayed in the following
table:
- --------------------------------------------------------------------------------
1996 1995
------- ------
Operations $ 1.35 $1.26
Pension related items 0.69 0.52
------- ------
Earnings per share from ongoing operations 2.04 1.78
------- ------
Divested operations (0.50) (0.22)
Restructuring, other charges and
asset divestitures (2.34) (0.52)
------- ------
Earnings per share $(0.80) $1.04
- --------------------------------------------------------------------------------
In 1995, the Company divested its Real Estate Development business and its Oil
and Gas Production business. The loss on these divestitures was $12,443 ($7,511
after tax, or $0.52 per share) consisting of a loss on the sale of the Real
Estate Development business of $18,570 and a gain on the sale of the Oil and Gas
Production business of $6,127. The Real Estate Development business was sold for
$42,500 in cash which was, in part, used to retire $26,360 of related mortgage
debt. The Company sold its Oil and Gas Production business for $16,500 in cash.
The financial statement impact of asset divestitures and divested operations in
1995 is summarized in the table following:
1995 - Non-Recurring Items
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Non-core Divested Divested 1995 Excluding
1995 Business Business Partnership Non-Recurring
As Reported Divestiture(1) Operations(2) Operations(3) Items
----------- -------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Revenue $1,002,819 $ -- $12,347 $ 770 $989,702
Cost of revenue 918,169 -- 7,948 3,562 906,659
----------- -------------- ------------- ------------- --------------
Gross profit (Loss) 84,650 -- 4,399 (2,792) 83,043
Selling, general and
administrative expenses 49,609 -- 3,155 909 45,545
----------- -------------- ------------- ------------- --------------
Operating income (loss) 35,041 -- 1,244 (3,701) 37,498
Income (loss) before tax 23,471 (12,443) (256) (5,030) 41,200
----------- -------------- ------------- ------------- --------------
Net income (loss) $ 14,880 $ (7,511) $ (153) $(3,057) $ 25,601
----------- -------------- ------------- ------------- --------------
Income (loss) per share $1.04 $(0.52) $(0.01) $(0.21) $1.78
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes loss on divestiture of the Company's Real Estate Development
business and gain on the sale of its Oil and Gas Production business.
(2) Includes operations of the Company's Real Estate Development business and
Oil and Gas Production business.
(3) Includes operations of the Binghamton Cogeneration Partnership and the
Auburn VPS Partnership.
The following segment discussion summarizes business operations excluding
restructuring, other charges and asset divestitures. In 1996, all restructuring,
other charges and asset divestitures were reported in the Engineering,
Construction and Consulting segment. In 1995, the Divested Partnership
Operations were reported in the Engineering, Construction and Consulting segment
and the Non-core Business Divestiture and Divested Business Operations were
reported in the Other segment.
Engineering, Construction and Consulting Segment
- --------------------------------------------------------------------------------
Percent
1996 1995 Incr/(Decr) Increase
----------- -------- ----------- --------
Revenue $1,143,587 $969,284 $174,303 18%
Revenue (excluding
divested partnerships) 1,141,242 968,514 172,728 18%
Operating (loss) income (20,249) 38,941 (59,190) --
Operating income, excluding
non-recurring items 45,493 42,642 2,851 7%
----------- -------- ----------- --------
Identifiable assets 625,466 595,699 29,767 5%
----------- -------- ----------- --------
Operating Margin, excluding
non-recurring items 4.0% 4.4%
- --------------------------------------------------------------------------------
New orders (net of scope changes and cancellations) for 1996 improved over 1995
by 27 percent. All Divisions, except the Power Division, recorded substantial
increases in orders versus 1995. The new order rate was sufficiently strong to
allow both an 18 percent increase in revenue and a 30 percent increase in
backlog. Revenue, new orders and backlog for 1996 and 1995 were:
Revenue, New Orders and Backlog
- --------------------------------------------------------------------------------
Percent
1996 1995 Increase
----------- ----------- --------
Beginning backlog $1,917,000 $1,541,967 24%
New orders 1,714,139 1,344,587 27%
Revenue (1,143,587) (969,284) 18%
----------- ----------- --------
Ending backlog $2,487,552 $1,917,000 30%
- --------------------------------------------------------------------------------
New orders by Division for 1996 and 1995 were:
New Orders By Division
- --------------------------------------------------------------------------------
Percent
1996 1995 Incr/(Decr) Increase
---------- ---------- ----------- --------
Power $ 262,137 $ 629,851 $(367,714) (58)%
Process 701,354 393,849 307,505 78%
Environmental/Infrastructure 532,163 195,840 336,323 172%
Industrial 188,871 99,965 88,906 89%
Other 29,614 25,082 4,532 18%
---------- ---------- ----------- --------
New orders (net) $1,714,139 $1,344,587 369,552 27%
- --------------------------------------------------------------------------------
The decrease in the Power Division orders in 1996 was due to the particularly
strong order rate in 1995, cancellation of a significant project due to
financing difficulties on the part of the owner and the deferral of several
significant awards into 1997. The increase in orders in the Process Division
reflected increased demand for ethylene and olefin technology, especially in the
Asian developing countries, and the strength of the Company's proprietary
technologies in this market segment. The increase in the
Environmental/Infrastructure Division was, in large part, due to several major
awards for environmental remediation projects. The Industrial Division also had
several major awards in 1996 for communications, materials handling, and general
industrial facilities.
The revenue increase reflects an increase of $53,203 for domestic and $121,100
for export and international projects. The domestic and international mix of
work in 1996 and 1995 was:
Domestic/International Mix Of Revenue
- --------------------------------------------------------------------------------
Percent
1996 1995 Increase
----------- --------- --------
United States - domestic $ 682,582 $629,379 8%
United States - export 187,324 111,486 68%
International 273,681 228,419 20%
----------- --------- --------
Total export and international 461,005 339,905 36%
----------- --------- --------
Total engineering, construction and
consulting revenue $1,143,587 $969,284 18%
----------- --------- --------
Percent export and international 40% 35%
- --------------------------------------------------------------------------------
All Divisions, except for the Power Division, achieved increases in revenue in
1996. Revenue in the Power Division decreased in the nuclear and fossil plant
services market segment in 1996 compared with 1995. This was attributable to
large construction contracts essentially being completed early in 1996,
partially offset by an increase in fossil-new facilities work. Process Division
revenue increased in 1996 as a result of continued success in winning and
executing lump sum engineering, procurement and construction contracts. The
following table shows segment revenue, excluding divested operations, by
Division for 1996 and 1995:
Revenue by Division
- --------------------------------------------------------------------------------
Percent
1996(1) 1995(1) Incr/(Decr) Incr/(Decr)
---------- -------- ----------- -----------
Power $ 412,375 $455,800 $(43,425) (10)%
Process 409,322 254,900 154,422 61%
Environmental/Infrastructure 107,422 103,800 3,622 3%
Industrial 182,370 118,300 64,070 54%
Other 29,753 35,714 (5,961) (17)%
---------- -------- ----------- -----------
Total revenue $1,141,242 $968,514 $172,728 18%
- --------------------------------------------------------------------------------
(1) Excludes divested partnerships.
Engineering, Construction and Consulting operating income for 1996 was $45,493
excluding non-recurring items compared with $42,642 on the same basis for 1995.
The improvement in operating income from ongoing operations was due to improved
performance in the Process and Industrial Divisions, partially offset by a
decline in the Power Division resulting from the successful completion of work
with large incentive fees in 1995.
In the third quarter of 1995, $16,000 were received in settlement of an action
taken to recover damages, attorney's fees and other monetary relief from
insurance carriers. This settlement, after deducting legal expenses, was
recognized as a gain of $7,220 in the third quarter of 1995. Also in the third
quarter of 1995, a charge of $2,500 was incurred for a settlement relating to
environmental matters. In the same quarter, the Company recorded a write-down of
$6,500 in capitalized costs associated with purchased technology.
Cold Storage Segment
- --------------------------------------------------------------------------------
Percent
1996 1995 Incr/(Decr) Increase
------- ------- ----------- --------
Revenue $21,250 $21,188 $ 62 --
Operating income 5,954 7,783 (1,829) (23)%
Identifiable assets 42,634 35,143 7,491 21%
Operating margin 28.0% 36.7%
- --------------------------------------------------------------------------------
Revenue from Cold Storage and related activities was essentially unchanged. The
1996 revenue mix included higher levels of storage, handling and freezing
revenue and lower levels of rental revenue compared to 1995. Operating income
for the year of $5,954 was down 23 percent from 1995 primarily due to the change
in revenue mix to lower margin service revenue from the prior year.
The Rockmart, Georgia warehouse was expanded by adding 3.7 million cubic feet of
space, which became operational at midyear. The addition provided for increased
service to existing customers at the facility and increased blast freezing
capacity.
Other Segment and General Corporate Expenses
The Other segment consisted of the Oil and Gas Production and the Real Estate
Development businesses which were divested in 1995. General Corporate expenses
were $11,462 for 1996 compared with $12,927 in 1995. The 1996 expenses include
costs of developing the strategic and capitalization plans and certain costs
associated with the closure of the Company's New York headquarters. Also,
included in 1996 General Corporate expenses was a credit of $1,890 representing
insurance reimbursement of legal fees that had been expensed in prior years and
a charge of $2,500 for the settlement of a lawsuit relating to services
performed in the 1980s. The 1995 General Corporate expenses included the $2,315
cost of an early retirement program.
Interest income for 1996 of $3,268 was lower than the $6,422 in 1995 due to the
lower cash balance available for investment. Interest expense of $6,737 was
higher than the $5,549 experienced in 1995 due to the interest incurred by the
Auburn VPS Partnership prior to its divestiture.
Pension Related Items
Pension related items, which reduced operating expenses, were $14,988 in 1996
compared with $12,311 in 1995. These items increased net income by $9,173 (or
$0.69 per share) compared with $7,529 (or $0.52 per share) in 1995.
Income Tax Provision
The income tax provision (benefit) resulted in effective tax rates of (40.7)
percent in 1996 and 36.6 percent in 1995. The 1996 benefit was higher than the
U.S. statutory rate due primarily to a net tax benefit from use of foreign net
operating loss carryforwards, reversal of $500 of the operating loss
carryforward valuation allowance and a tax benefit from use of a Canadian
investment tax credit. In 1995, the effective tax rate was higher than the U.S.
statutory tax rate primarily due to the impact of state and local income taxes,
partially offset by a net tax benefit from international operations and a
benefit resulting from a capital loss carryforward on the sale of subsidiaries.
Financial Condition and Liquidity
Cash, cash equivalents and U.S. Government securities increased by $45,046
during 1997. Net cash provided by operating activities primarily reflects a
decrease in operating working capital of $30,165. The improvement in days
operating working capital outstanding and cash and cash equivalents is a result
of increased focus on working capital management including negotiating more
favorable terms and conditions in project contracts. The operating working
capital and days operating working capital outstanding follow:
- --------------------------------------------------------------------------------
1997 1996
--------- ---------
Accounts receivable $180,057 $181,900
Costs and revenue recognized in excess
of billings 102,476 110,023
Accounts payable (85,338) (76,551)
Billings in excess of costs and revenue
recognized (115,730) (103,742)
--------- ---------
Operating working capital $ 81,465 $111,630
--------- ---------
Fourth quarter revenue $318,541 $308,085
--------- ---------
Days operating working capital
outstanding 23 33
- --------------------------------------------------------------------------------
Net cash used by investing activities of $48,893 reflects purchases of U.S.
Government securities of $121,574 offset by maturities of $93,671. In addition,
the Company purchased $25,909 of fixed assets during 1997. Net cash used in
financing activities of $17,148 resulted primarily from the purchase of Common
Stock of $3,139 under the Company's ongoing share repurchase program, repayments
of debt of $6,657 and the payment of dividends of $7,689.
In July 1994, July 1995 and January 1998, the Company's Board of Directors
authorized the repurchase of 1,000,000, 1,500,000 and 500,000 shares,
respectively, of the Company's common stock. The Company reserves the right to
discontinue the repurchase program at any time. Share repurchase transactions
and total shares outstanding for 1997, 1996 and since inception of the program
have been:
- --------------------------------------------------------------------------------
Total
1997 1996 Program
----------- ----------- -----------
Shares outstanding beginning of year 12,834,618 13,855,916 14,977,850
Shares repurchased under program (81,605) (1,037,037) (2,236,409)
Other share transactions 69,500 15,739 81,072
Shares outstanding end of year 12,822,513 12,834,618 12,822,513
Percentage of outstanding shares
purchased 1% 8% 15%
Repurchase cost $3,139 $33,828 $74,176
Average repurchase cost per share $38.47 $32.62 $33.17
- --------------------------------------------------------------------------------
Management believes that the types of businesses in which the Company is engaged
require that it maintain a strong financial condition. The Company has on hand
and access to sufficient sources of funds to meet its anticipated operating,
dividend, share repurchase 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 totaling
$28,344. At December 31, 1997, there were no amounts outstanding under these
facilities.
The Company enters into forward exchange contracts to hedge anticipated foreign
currency procurement related to contract execution. The Company's forward
exchange contracts do not subject the Company to significant risk from exchange
rate movements, because gains and losses on such contracts offset losses and
gains, respectively, on the procurement transactions being hedged. Although the
Company can not accurately predict changes in foreign currency exchange rates,
Management does not believe that a change will have a material impact.
In the normal course of executing lump sum turnkey engineering, procurement and
construction contracts, the Company may enter into purchase commitments for
equipment, material and services that, depending on the circumstances, may
require payment of cancellation costs in the event of contract termination. It
is the Company's policy to negotiate termination and suspension clauses in a
contract providing for reimbursement to the Company for all reasonable
cancellation costs associated with a project termination or cancellation. In the
event that the contracting party is unable to fulfill their commitment for
reimbursement, the Company could be liable to its suppliers for payment of
cancellation costs.
Outstanding debt consisted of the following as of December 31, 1997 and 1996:
- --------------------------------------------------------------------------------
1997 1996
------- -------
Mortgage debt-company occupied buildings $23,882 $25,313
Lease debt (primarily for office equipment) 378 604
Subsidiary working capital bank loans -- 5,000
------- -------
Total debt $24,260 $30,917
- --------------------------------------------------------------------------------
Other Accounting Matters
The Company is in the process of replacing certain systems and evaluating and
upgrading other computer applications to ensure their functionality with respect
to the "year 2000" millennium change. At present, the Company does not
anticipate that material incremental costs will be incurred in any single future
year.
The Financial Accounting Standards Board recently issued Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income. This Statement
requires that changes in comprehensive income be shown in a financial statement
that is displayed with the same prominence as other financial statements. The
Statement will become effective for fiscal years beginning after December 15,
1997. The Company will adopt the new standard beginning in the first quarter of
the fiscal year ending December 31, 1998.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information. This Statement specifies new guidelines for
determining a company's operating segments and related requirements for
disclosure. The Company is in the process of evaluating the impact of the new
standard on the presentation of the financial statements and the disclosures
therein. The Statement will become effective for fiscal years beginning after
December 15, 1997. The Company will adopt the new standard for the fiscal year
ending December 31, 1998.
This Management's Discussion and Analysis and other sections of this Annual
Report contain forward-looking statements that are based on Management's best
judgment as to what may occur in the future. The Company cautions that a variety
of factors, including but not limited to the following, could cause business
conditions and results to differ materially from what is contained in
forward-looking statements: changes in the rate of economic growth in the United
States and other major international economies, changes in investment by the
energy, power and environmental industries, the uncertain timing of awards and
contracts, changes in regulatory environment, changes in project schedules,
changes in trade, monetary and fiscal policies world-wide, currency
fluctuations, outcomes of pending and future litigation, protection and validity
of patents and other intellectual property rights, increasing competition by
foreign and domestic companies and other risks detailed from time to time in the
Company's filings with the Securities and Exchange Commission.
<PAGE>
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts.)
- --------------------------------------------------------------------------------
Years ended December 31,
1997 1996 1995
----------- ---------- -----------
Revenue $1,322,540 $1,164,837 $1,002,819
Cost of revenue 1,254,964 1,099,064 918,169
----------- ---------- -----------
Gross profit 67,576 65,773 84,650
Selling, general and administrative
expenses 20,284 91,693 49,609
----------- ---------- -----------
Operating income (loss) 47,292 (25,920) 35,041
Other income (expense)
Gain (loss) on sale of assets 985 -- (12,443)
Interest income 4,269 3,268 6,422
Interest expense (1,739) (6,737) (5,549)
----------- ---------- -----------
Income (loss) before provision
(benefit) for income taxes and
extraordinary item 50,807 (29,389) 23,471
Income tax provision (benefit) 17,297 (11,958) 8,591
----------- ---------- -----------
Income (loss) before extraordinary
item 33,510 (17,431) 14,880
Extraordinary item, net of taxes -- 6,787 --
----------- ---------- -----------
Net income (loss) $ 33,510 $ (10,644) $ 14,880
----------- ---------- -----------
Per share amounts:
Basic earnings per share:
Earnings (loss) per share before
extraordinary item $2.61 ($1.32) $1.04
Extraordinary item per share -- 0.52 --
Basic earnings (loss) per share $2.61 ($0.80) $1.04
----------- ---------- -----------
Diluted earnings per share:
Earnings (loss) per share before
extraordinary item $2.59 ($1.32) $1.04
Extraordinary item per share -- 0.52 --
Diluted earnings (loss) per share $2.59 ($0.80) $1.04
----------- ---------- -----------
Dividends declared per share(1) $0.60 $0.45 $0.60
- --------------------------------------------------------------------------------
(1) In 1996, dividends were paid at the annual rate of $0.60 per share, but
because of a change in the dividend declaration date, from December 1996 to
January 1997 for the first quarter 1997 dividend, only three dividends were
declared in 1996.
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts.)
- --------------------------------------------------------------------------------
December 31,
Assets 1997 1996
--------- ---------
Current assets:
Cash and cash equivalents $ 75,030 $ 57,887
U.S. Government securities, at amortized
cost, which approximates fair value 31,909 4,006
Accounts receivable, principally trade 180,057 181,900
Costs and revenue recognized in excess
of billings 102,476 110,023
Deferred income taxes 18,835 10,275
Other 337 30,333
--------- ---------
Total current assets 408,644 394,424
Assets held for sale 10,395 20,885
Fixed assets, net 140,177 127,949
Domestic prepaid pension cost 148,155 129,818
Note receivable 15,000 --
Other assets 16,406 18,989
- --------------------------------------------------------------------------------
$738,777 $692,065
- --------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Bank loans $ -- $ 5,000
Current portion of long-term debt 1,750 1,657
Accounts payable, principally trade 85,338 76,551
Billings in excess of costs and revenue
recognized 115,730 103,742
Accrued liabilities 79,351 91,407
Accrued taxes 14,689 7,164
--------- ---------
Total current liabilities 296,858 285,521
--------- ---------
Long-term debt 22,510 24,260
Deferred income taxes 57,463 43,142
Other liabilities 16,714 22,009
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value
Authorized: 2,000,000 shares
Issued: none -- --
Common stock, $1 par value
Authorized: 40,000,000 shares
Issued: 17,731,488 shares, including
shares held in treasury 17,731 17,731
Capital in excess of par value of common stock 51,426 50,480
Retained earnings 424,287 398,342
Cumulative translation adjustment (2,205) (2,280)
--------- ---------
491,239 464,273
--------- ---------
Less: Common stock held in treasury, at cost
(4,908,975 and 4,896,870 shares,
respectively) 127,070 125,724
Employee stock ownership and restricted
stock plans 18,937 21,416
--------- ---------
146,007 147,140
--------- ---------
Total shareholders' equity 345,232 317,133
--------- ---------
$738,777 $692,065
- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Shareholders' Equity
(Dollars in thousands, except per share amounts.)
- --------------------------------------------------------------------------------
Years ended December 31,
1997 1996 1995
---------- ---------- ----------
Common stock:
Balance at beginning and end of year $ 17,731 $ 17,731 $ 17,731
---------- ---------- ----------
Capital in excess of par value of
common stock:
Balance at beginning of year 50,480 50,360 50,300
Excess of market value over cost of
treasury shares issued under
Restricted Stock Plan 7 54 28
Excess of exercise price over cost of
treasury shares issued under the
Stock Option Plan 406 21 --
Tax benefit for shares issued under
Restricted Stock Plan, net 3 11 11
Excess of market value over cost of
treasury shares issued under the
Stock Plan 88 34 21
Acceleration of stock options 442 -- --
---------- ---------- ----------
Balance at end of year 51,426 50,480 50,360
---------- ---------- ----------
Retained earnings:
Balance at beginning of year 398,342 414,724 408,211
Income tax benefit of Employee Stock
Ownership Plan dividends 124 173 188
Net income (loss) 33,510 (10,644) 14,880
Dividends declared ($0.60, $0.45 and
$0.60 per share in 1997, 1996 and
1995, respectively) (7,689) (5,911) (8,555)
---------- ---------- ----------
Balance at end of year 424,287 398,342 414,724
---------- ---------- ----------
Cumulative translation adjustment:
Balance at beginning of year (2,280) (3,039) (3,072)
Adjustments for the year 75 759 33
---------- ---------- ----------
Balance at end of year (2,205) (2,280) (3,039)
---------- ---------- ----------
Common stock in treasury:
Balance at beginning of year (125,724) (92,292) (66,961)
Cost of treasury shares:
Issued under Stock Plan (5,310,
4,206 and 2,252 shares in 1997,
1996 and 1995, respectively) 137 106 52
Issued under Stock Option Plan
(63,500 and 4,000 shares in 1997
and 1996, respectively) 1,638 100 --
Issued under Restricted Stock Plan
(690, 7,533 and 6,000 shares in
1997, 1996 and 1995, respectively) 18 190 131
Forfeited under Restricted Stock
Plan (7,200 shares in 1995) -- -- (144)
Purchased (81,605, 1,037,037 and
754,443 shares in 1997, 1996 and
1995, respectively) (3,139) (33,828) (25,370)
---------- ---------- ----------
Balance at end of year (127,070) (125,724) (92,292)
---------- ---------- ----------
Employee Stock Ownership and Restricted
Stock Plans:
Balance at beginning of year (21,416) (25,813) (30,891)
Payments received from Employee Stock
Ownership Trust (principal only) 2,285 4,538 4,981
Market value of shares (issued) under
Restricted Stock Plan, net (25) (244) (15)
Amortization of market value of shares
issued under Restricted Stock Plan 219 103 112
---------- ---------- ----------
Balance at end of year (18,937) (21,416) (25,813)
---------- ---------- ----------
Total shareholders' equity $ 345,232 $ 317,133 $ 361,671
- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Cash Flows
(Dollars in thousands.)
Years ended December 31,
1997 1996 1995
--------- ---------- ---------
Cash flows from operating activities:
Net income (loss) $ 33,510 $ (10,644) $ 14,880
Adjustments to reconcile net income
(loss) to net cash provided (used)
by operating activities:
Restructuring and other charges -
contract-related and operational
items -- 12,377 --
Restructuring and other charges -
real estate write-downs (7,954) 30,509 --
Loss on divestiture of Auburn VPS
Partnership -- 1,254 --
Depreciation, depletion and
amortization 13,681 16,893 19,239
Deferred income taxes 5,761 (11,193) 3,305
Write-down of investments -- 4,172 6,500
Domestic pension credit (18,337) (15,624) (15,175)
Incentive Retirement Program -- -- 2,315
(Gain) loss on sale of assets (985) -- 12,443
Amortization of net cost of stock
plans 1,379 1,922 1,667
Changes in operating working capital
(Note V) 30,165 (18,814) (42,020)
Accrued taxes 7,525 (791) 1,885
Accrued liabilities (9,088) 44,792 (8,029)
Other 27,527 (26,398) (1,650)
--------- ---------- ---------
Net cash provided (used) by operating
activities 83,184 28,455 (4,640)
--------- ---------- ---------
Cash flows from investing activities:
Proceeds from maturities of U.S.
Government securities 93,671 56,873 147,050
Purchases of U.S. Government securities (121,574) (5,981) (126,861)
Proceeds from asset divestitures 4,919 -- 59,000
Purchase of joint venture, net of
cash acquired -- -- (2,458)
Purchase of fixed assets (25,909) (24,383) (27,962)
--------- ---------- ---------
Net cash (used) provided by investing
activities (48,893) 26,509 48,769
--------- ---------- ---------
Cash flows from financing activities:
Proceeds from long-term debt -- -- 25,013
Repayments of long-term debt (1,657) (20,954) (31,419)
Increase in bank loans -- 10,000 8,200
Decrease in bank loans (5,000) (13,200) --
Payments from Employee Stock Ownership
Trust 4,588 7,216 9,970
Payments to Employee Stock Ownership
Trust (4,251) (6,739) (9,084)
Purchase of common stock for treasury (3,139) (33,828) (25,370)
Dividends paid (7,689) (7,989) (8,672)
--------- ---------- ---------
Net cash (used) by financing activities (17,148) (65,494) (31,362)
--------- ---------- ---------
Net increase (decrease) in cash and
cash equivalents 17,143 (10,530) 12,767
Cash and cash equivalents at beginning
of year 57,887 68,417 55,650
--------- ---------- ---------
Cash and cash equivalents at end of year $ 75,030 $ 57,887 $ 68,417
- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts.)
(A) Summary of Significant Accounting Policies
Stone & Webster, Incorporated and Subsidiaries (the "Company") has prepared its
financial statements in accordance with generally accepted accounting principles
and has adopted accounting policies and practices which are generally accepted
in the industries in which it operates. The following are the Company's
significant accounting policies:
Basis of Consolidation
The accompanying consolidated financial statements include the accounts of Stone
& Webster, Incorporated and its wholly owned subsidiaries. All intercompany
transactions and accounts have been eliminated.
During 1996, substantially all of the Company's subsidiaries outside the United
States and Canada changed their fiscal years from November 30 to December 31.
Therefore, the 1996 consolidated financial statements include the operations of
these subsidiaries for thirteen months. This change did not have a material
impact on the 1996 consolidated financial statements. The 1997 and 1995
consolidated financial statements include the operations of these subsidiaries
for twelve months.
Use of Estimates
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 disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. The
most significant estimates are related to long-term contracts, pension plans,
income taxes and contingencies. Actual results could differ from these
estimates.
Revenue Recognition on Long-Term Contracts
The Company recognizes engineering and construction revenue on a
percentage-of-completion method, primarily based on contract costs incurred
compared with total estimated costs (contract costs include both direct and
indirect costs). When the Company is contractually responsible for materials,
craft labor, equipment and subcontractor costs, these items are included in
revenue and cost of revenue. Revisions to total estimated contract costs or
losses, if any, are recognized in the period in which they are determined.
Certain contracts contain provisions for performance incentives. Such incentives
are included in revenue when realization is assured. Contract change orders in
excess of agreed contract prices are included in revenue when approved by the
client. Revenue recognized in excess of amounts billed is classified in current
assets. Accounts receivable include amounts representing retainages under
long-term contracts which are due within one year. These retainage amounts are
not material. The Company anticipates that substantially all of its costs and
revenue recognized in excess of billings will be billed and collected over the
next twelve months and there were no significant amounts included in accounts
receivable or costs and revenue recognized in excess of billings under contracts
for claims subject to uncertainty as to their ultimate realization. Billings in
excess of revenue recognized are classified in current liabilities.
Cash Equivalents and U.S. Government Securities
Cash equivalents consist of U.S. Government securities held for cash management
purposes having maturities of three months or less from the date of purchase,
and overnight repurchase agreements. Assets classified as U.S. Government
securities have maturity dates of one year or less. All of the Company's U.S.
Government securities are U.S. Treasury bills and notes, which the Company
intends to hold to maturity.
Fixed Assets
Fixed assets are stated at cost. Depreciation generally is provided on a
straight-line basis (accelerated methods for income taxes) over the estimated
useful lives of the assets. Depreciation and depletion of oil and gas producing
properties and natural gas pipeline systems generally were provided on the unit
of production method. Amortization is provided for leased property and equipment
on a straight-line basis over the life of the lease. The cost and accumulated
depreciation of fixed assets sold are removed from the accounts and the related
gains or losses, if any, are reflected in earnings or loss for the period.
Equity in Joint Ventures and Limited Partnerships
As is common in the industry, the Company executes certain contracts jointly
with third parties through joint ventures and limited partnerships. Investments
in 20 to 50 percent owned companies and investments in limited partnerships
owned more than 5 percent by the Company are accounted for by the equity method.
Income Taxes
Deferred tax assets and liabilities are recognized for the expected future tax
consequences of events that have been recognized in the Company's consolidated
financial statements or tax returns. Undistributed earnings of foreign
subsidiaries for which the Company has not provided deferred U.S. income taxes
because a taxable distribution of these earnings, approximately $16,960 at
December 31, 1997, is not anticipated. This amount represents the accumulated
earnings of consolidated international subsidiaries which are being permanently
reinvested in their operations. Investment tax credits are accounted for by
reducing income taxes currently payable and the provision for income taxes in
the period the related assets are placed in service.
Foreign Exchange Contracts
The Company uses derivative financial instruments to hedge equipment and
material procurement commitments undertaken as contract activities in the
ordinary course of business. The Company's foreign forward exchange contracts do
not subject the Company to risk from exchange rate movements because gains and
losses on such contracts offset losses and gains, respectively, on the assets,
liabilities or transactions being hedged. Accordingly, the unrealized gains and
losses are deferred and accounted for as part of the underlying transactions. At
December 31, 1997, the Company had approximately $20,619 of foreign currency
exchange contracts outstanding relating to contract obligations. In entering
into these contracts, the Company has assumed the risk which might arise from
the possible inability of counterparties to meet the terms of their contracts.
The Company does not expect any losses as a result of counterparty defaults.
Earnings Per Share
Effective December 15, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, Earnings per Share ("SFAS 128"). This statement
specifies the computation, presentation and disclosure requirements for earnings
per share. As disclosed in Notes K and U to the consolidated financial
statements, the adoption of SFAS 128 did not have an impact on the Company's
earnings per share calculations for years prior to 1996 and had an immaterial
impact in 1997 and 1996. Unless noted otherwise, earnings per share amounts are
presented on a diluted basis.
Long-Lived Assets
Effective January 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of ("SFAS 121"). Accordingly, the losses on the
asset divestitures recorded in 1996, as discussed in Note B to the consolidated
financial statements, are included as part of the operating loss in the
consolidated statement of operations for the year ended December 31, 1996 and
subsequent revisions in estimates are recorded in operating income to the extent
of the original write down.
Reclassifications
Certain financial statement items have been reclassified to conform to the
current year's format.
(B) Divestiture of Non-Core Assets
During 1997, 1996 and 1995, the Company completed several transactions involving
the disposal of non-core and underperforming assets. In 1997, the Company
recorded income of $8,939 ($5,363 after tax or $0.41 per share) on the sale of a
140,000 square foot building in Boston. The operating income portion, $7,954,
was the amount reported as an operating loss in 1996. The remaining $985 was
recorded as a gain on sale of assets. In the third quarter of 1996, the Company
transferred the assets of the Auburn VPS Partnership, in which the Company owned
a 94.3 percent interest, to the partnership's lender in return for cancellation
of the related construction debt. As a result, the Company recorded an after-tax
charge of $989, or $0.07 per share, which included a loss on forfeiture of
$11,538 ($7,776 net of tax, or $0.59 per share) to write down the partnership's
plant to fair value and an extraordinary gain of $10,283 ($6,787 net of taxes,
or $0.52 per share) for the extinguishment of the construction debt.
In 1996, the Company recorded a charge of $4,172 ($2,712 net of tax, or $0.21
per share) to write down the Company's one-third interest in the Binghamton
Cogeneration Partnership to fair market value in connection with the
partnership's agreement to sell its power purchase agreement, terminate various
supply and purchase contracts and to cease partnership operations. The sale was
completed in January 1997. During 1997, the Company received cash distributions,
reported as operating income, resulting from liquidation of partnership assets
of $1,612 ($1,048 net of taxes, or $0.08 per share) from the partnership.
In 1995, the Company completed the divestiture of the Oil & Gas Production
business and the Real Estate Development business. Both businesses were sold for
cash. The effect of these transactions was:
- --------------------------------------------------------------------------------
1995
----------------------------------------
Oil & Gas Real Estate
Production Development Total
---------- ----------- ---------
Sale proceeds $16,500 $ 42,500 $ 59,000
Pre-tax gain (loss) on sale 6,127 (18,570) (12,443)
After-tax gain (loss) on sale 4,434 (11,945) (7,511)
Gain (loss) per share $0.31 $(0.83) $(0.52)
- --------------------------------------------------------------------------------
(C) Interest Expense
Interest expense for 1995 excludes $3,471 which was capitalized as part of the
construction cost for a wastepaper recycling plant and a new office facility. No
interest was capitalized in 1997 or 1996.
(D) Income Taxes
The Company reported taxable income of approximately $44,000 in 1997. The
Company used a federal alternative minimum tax ("AMT") credit in 1997. The AMT
credit carryforward was $1,013 at December 31, 1997. This AMT credit can be
carried forward indefinitely to reduce future federal income taxes payable. The
income tax provision (benefit) consists of the following:
- --------------------------------------------------------------------------------
1997 1996 1995
-------- --------- -------
Current tax expense (benefit)
United States $ 4,851 $ (2,396) $1,201
State and local 3,133 704 1,407
International (1) 3,552 1,627 2,678
-------- --------- -------
Total current 11,536 (65) 5,286
-------- --------- -------
Deferred tax expense (benefit)
United States 5,046 (10,280) 2,804
State and local 586 (353) 963
International 129 (1,260) (462)
-------- --------- -------
Total deferred 5,761 (11,893) 3,305
-------- --------- -------
Income tax provision (benefit) $17,297 $(11,958) $8,591
- --------------------------------------------------------------------------------
(1) Includes taxes, in lieu of income taxes, of $921 in 1997, $360 in 1996 and
$798 in 1995 on international projects which are calculated based on gross
receipts.
Deferred tax liabilities (assets) are composed of the following:
- --------------------------------------------------------------------------------
December 31,
1997 1996
-------- --------
Long-term liabilities:
Depreciation $12,188 $ 9,772
Retirement 60,836 52,739
Other 1,202 1,280
-------- --------
Total long-term liabilities 74,226 63,791
-------- --------
Long-term assets:
Deferred rent (1,944) (3,302)
Employee Stock Ownership Plan
interest payments and contributions (4,165) (4,091)
Incentive Retirement Program (3,501) (3,458)
AMT credit carryforward (1,013) (4,146)
Foreign net operating loss carryforward (2,127) (7,468)
State net operating loss carryforwards (3,459) (4,637)
Capital loss carryforward -- (561)
Non-currently deductible accruals (4,131) (4,591)
-------- --------
Total long-term assets (20,340) (32,254)
-------- --------
Net operating loss valuation allowance 3,577 11,605
-------- --------
Net long-term deferred tax liabilities 57,463 43,142
-------- --------
Current assets:
Vacation pay (4,995) (4,346)
Severance pay (430) (465)
State net operating loss carryforwards (660) (763)
Capital loss carryforward (760) (1,460)
Contract reserves (7,904) 0
Other (4,086) (3,241)
-------- --------
Total current deferred tax assets (18,835) (10,275)
-------- --------
Net deferred tax liabilities $38,628 $32,867
- --------------------------------------------------------------------------------
The Company had a valuation allowance of $11,605 at December 31, 1996 for the
deferred tax assets related to net operating loss carryforwards. The net change
in the valuation allowance for 1997 was a decrease of $8,028 for a total
valuation allowance of $3,577 at December 31, 1997. This change resulted
primarily from the use of state tax loss carryforwards of $8,287 in 1997, the
effect of the change in the U.K. exchange rate, the use of the net operating
loss carryforward relating to one of the Company's U.K. subsidiaries, and the
reversal of $1,509 of the valuation allowance for this subsidiary. The valuation
allowance at December 31, 1997 comprises $3,459 relating to state net operating
loss carryforwards and $118 relating to the carryforwards of international
subsidiaries.
For tax purposes, approximately $78,220 (with a tax benefit of $6,246) of the
net operating loss carryforwards remain at December 31, 1997, of which $6,874
(with a tax benefit of $2,127) is applicable to international subsidiaries and
the remaining $71,346 (with a tax benefit of $4,119) relates to state net
operating loss carryforwards. Use of the international net operating loss
carryforwards is limited to future taxable earnings of the subsidiaries and
never expires under current regulations. The state net operating loss
carryforwards of $71,346 are applicable to many states and will expire as
follows:
- --------------------------------------------------------------------------------
1998 $ 2,404
1999 7,408
2000 768
2001 6,185
2002 1,443
2003 4,076
2004 2,124
Thereafter 46,938
--------
$71,346
- --------------------------------------------------------------------------------
The Company has determined that it will be able to realize a tax benefit of $660
relating to these state net operating loss carryforwards and the remaining net
operating loss carryforwards (with a tax benefit of $3,459, which is fully
reserved for) are expected to expire unused.
The following is an analysis of the difference between the United States
statutory income tax rate and the Company's effective income tax rate:
- --------------------------------------------------------------------------------
1997 1996 1995
--------- --------- ---------
United States statutory income tax
rate 35.0% (35.0)% 35.0%
Increase (decrease) resulting from:
State and local income taxes, net of
United States tax effect 4.8 0.8 6.6
Meals and entertainment 1.2 1.7 2.0
Difference in effective tax rate of
international operations and projects,
net of United States tax effect 6.1 -- 4.3
Investment tax credit - Canada (0.3) (3.7) --
Adjustment of prior years' federal
income tax accruals, net of interest
effect -- (0.3) 0.9
Utilization of net operating loss
carryforwards of international
operations (12.4) (3.8) (6.1)
Sale of subsidiaries - capital loss
carryforward -- -- (2.4)
Other (0.4) (0.4) (3.7)
Effective income tax rate 34.0% (40.7)% 36.6%
- --------------------------------------------------------------------------------
Income (loss) before income taxes and extraordinary item were:
- --------------------------------------------------------------------------------
1997 1996 1995
-------- --------- --------
Domestic $30,818 $(34,815) $15,861
International 19,989 5,426 7,610
-------- --------- --------
$50,807 $(29,389) $23,471
- --------------------------------------------------------------------------------
(E) Assets Held for Sale and Real Estate Related Charges
During 1996, the Company completed a review of its organizational structure,
strategic plan and asset base. As a result of this review, the Company decided
to sell a 140,000 square foot building in Boston, Massachusetts and a building
in Cherry Hill, New Jersey. The Company recorded a charge of $20,137 ($13,751
after tax, or $1.03 per share) in 1996 in connection with the write-down of
these properties. The total carrying amount of the properties written down was
$20,885 at December 31, 1996. In December 1997, the Company sold the building in
Boston for $20,000, resulting in income of $8,939.
Also during 1996, the Company announced its intention to consolidate its New
York corporate headquarters with the Boston headquarters of the Company's
principal operating subsidiary, Stone & Webster Engineering Corporation, and
that certain floors of its New York office space would be offered for sublease.
The total charge recorded in the third quarter of 1996 for the write-down of the
leases was $10,372 ($6,223 after tax, or $0.46 per share), which represents
lease commitments and estimated costs to sublet net of anticipated sublease
income. In the first quarter of 1996, a reserve of $1,832 was recorded for the
expected sublease loss for a vacant floor in the New York office. These amounts
were recorded as accrued liabilities. As a result of the relocation of the
corporate offices to Boston in 1997, the Company vacated four floors of the New
York office space. Subsequent to the relocation, the Company entered into
agreements to sublet one floor and to delete two floors from the lease. The
Company anticipates subletting the remaining floor in 1998. The costs incurred
were consistent with amounts provided for in the third quarter of 1996.
The Company expects to complete the sale of its real estate holdings in Cherry
Hill, New Jersey in 1998. It also expects to take ownership of a pumping station
in satisfaction of a client receivable.
(F) Fixed Assets
Following is a summary of fixed assets at December 31:
- --------------------------------------------------------------------------------
1997 1996
--------- ---------
Office buildings and other real estate $ 75,120 $ 74,390
Furniture and equipment 166,165 145,876
Cold storage property, plant and equipment 64,249 61,794
--------- ---------
305,534 282,060
Less accumulated depreciation and
amortization 165,357 154,111
--------- ---------
Fixed assets, net $140,177 $127,949
- --------------------------------------------------------------------------------
Fixed assets include computer equipment under capital leases of $2,731 at
December 31, 1997 and $2,832 at December 31, 1996; related amounts included in
accumulated depreciation were $1,663 at December 31, 1997 and $1,528 at December
31, 1996. Total depreciation expense was $12,018 for 1997, $15,429 for 1996 and
$16,785 for 1995.
During 1996, certain assets previously included in office buildings and other
real estate were reclassified to assets held for sale on the consolidated
balance sheets.
(G) Bank Loans
The Company has one line of credit for $25,000. There were no balances
outstanding under this line of credit at December 31, 1997. In 1996, a
subsidiary of the Company had agreements with two financial institutions for
lines of credit totaling $25,000. At December 31, 1996, $5,000 was outstanding
under these agreements. The $5,000 outstanding at December 31, 1996 was repaid
during January 1997. The weighted average interest rate was 5.74 percent.
Borrowings under the agreements were used for general corporate purposes and
incurred interest based on the London Interbank Offered Rate. See Note J to the
consolidated financial statements for information on other financing
arrangements available to the Company.
(H) Long-Term Debt
Long-term debt consists of the following at December 31:
- --------------------------------------------------------------------------------
1997 1996
--------- ---------
Mortgage loans, due 2009, 6.44% $23,882 $25,313
Capitalized lease obligations 378 604
--------- ---------
24,260 25,917
Less current portion 1,750 1,657
--------- ---------
Total long-term debt $22,510 $24,260
- --------------------------------------------------------------------------------
A subsidiary of the Company has a mortgage loan collateralized by an office
building and other real estate with a net book value of $26,497 at December 31,
1997. This 6.44 percent mortgage loan was obtained to finance the acquisition of
land and the construction of an office building occupied by an engineering
subsidiary of the Company. Principal payments required on long-term debt in the
years 1998 through 2002 are $1,750, $1,783, $1,736, $1,851 and $1,974,
respectively.
(I) Accrued Liabilities
Accrued liabilities consist of the following at December 31:
- --------------------------------------------------------------------------------
1997 1996
-------- --------
Salaries and benefits $20,033 $17,834
Insurance accruals and premiums 17,417 46,354
Reserve for loss on sublease 3,102 12,204
Reserve for joint venture contract loss 25,781 --
Other 13,018 15,015
--------- ---------
Total accrued liabilities $79,351 $91,407
- --------------------------------------------------------------------------------
During 1996, the Company recorded a $32,500 insurance reserve representing a
settlement amount and a $30,000 related asset classified under other current
assets, representing anticipated insurance recovery from settlement of a lawsuit
resulting from work performed in the 1980s. The settlement for this case was
completed in 1997. In the third quarter of 1996, the Company recorded charges to
recognize several contract-related and operational items. Among these were
provisions for resolution, reached during the third quarter, of a contract scope
dispute, damages resulting from contract performance delays and recognition of a
judgment awarded and anticipated settlement costs of several employment-related
matters. The total amount of the charges, recorded to accounts receivable, costs
and revenue recognized in excess of billings and accrued liabilities, was
$12,377 ($7,553 after tax, or $0.57 per share).
(J) Commitments and Contingencies
In the normal course of executing lump sum turnkey engineering, procurement and
construction contracts, the Company may enter into purchase commitments for
equipment, material and services that, depending on the circumstances, may
require payment of cancellation costs in the event of contract termination. It
is the Company's policy to negotiate termination and suspension clauses in
contracts providing for reimbursement to the Company for all reasonable
cancellation costs associated with a project termination or cancellation. In the
event that the contracting party is unable to fulfill their commitment for
reimbursement, the Company could be liable to its suppliers for payment of
cancellation costs.
Rental expense was $4,710 in 1997, $5,800 in 1996 and $5,900 in 1995. The
Company and subsidiaries have leases for office space, computer equipment and
other office equipment with varying lease terms. All noncancelable leases have
been categorized as either capital or operating and, under most leasing
arrangements, the Company and subsidiaries pay property taxes, insurance and
maintenance and expenses related to the leased properties. Future minimum lease
payments under long-term leases as of December 31, 1997 are as follows:
- --------------------------------------------------------------------------------
Capital Operating
Leases Leases
------- ---------
1998 $237 $9,214
1999 158 8,060
2000 -- 6,589
2001 -- 6,546
2002 -- 5,879
2003 and thereafter -- 23,604
------- ---------
Total minimum lease payments 395 $59,892
Amount representing interest 17
------- ---------
Present value of minimum lease payments $378
------- ---------
Less rental and sublease income (32,946)
---------
Total $26,946
- --------------------------------------------------------------------------------
The current portion of the present value of the minimum lease obligations under
capital leases as of December 31, 1997 amounted to $233.
The Company has recognized losses of $25,781 related to a contract being
executed by a partially-owned joint venture in the Middle East. The joint
venture plans to pursue claims related to losses on the contract. No cost
recovery for these claims is included in the 1997 results.
The Company and certain subsidiaries have been named as defendants, along with
others, in legal actions claiming damages in connection with engineering and
construction projects and other matters. Most such actions involve claims for
personal injury or property damage which occur from time to time in connection
with services performed relating to project or construction sites and for which
coverage under appropriate insurance policies usually applies. Other actions
arising in the normal course of business include employment-related claims and
contractual disputes for which insurance coverage or other contractual
provisions may or may not apply. Such contractual disputes normally involve
claims relating to the performance of equipment design or other engineering
services or project construction services provided by subsidiaries of the
Company and often such matters may be resolved without going through a complete
and lengthy litigation process. A case involving performance on a client
contract was settled in 1996 for a net cost of $2,500.
As discussed in Note M in the Annual Report to Shareholders for the year 1996,
several legal matters were resolved in 1995. Payment was made in 1995 of $4,936,
for which a provision had been made, representing satisfaction of a 1993
judgment against a subsidiary of the Company in a contract-related law suit. In
another legal action to recover damages, attorneys' fees and other monetary
relief from insurance carriers, a settlement in which a subsidiary of the
Company received $16,000 was reached in the third quarter of 1995. This
settlement, after reduction for current and deferred legal expenses of $8,780,
was recognized as a gain of $7,220 in the third quarter of 1995.
The Company continues to have possible liabilities relating to environmental
pollution. In the third quarter of 1995, a settlement was recorded relating to
environmental matters for which a charge of $2,500 was incurred, representing
the amount of the settlement net of cash received from insurance carriers of
$1,500. The Company and two of its subsidiaries are named as defendants in two
legal actions brought by, and have received other claims from, private parties
seeking contributions 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. No governmental authority has sought
similar redress from the Company or its subsidiaries (except in the case of one
subsidiary in limited connection with claims made with respect to clients of
that subsidiary) nor has the Company been determined 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,
management believes that it has 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.
Management believes, on the basis of its examination and consideration of these
matters and such possible liabilities, including consultation with counsel, that
none of these legal actions, nor such possible liabilities, will result in
payment of amounts, if any, which would have a material adverse effect on the
consolidated financial statements.
In addition to the domestic subsidiary's line of credit discussed in Note G to
the consolidated financial statements, an international subsidiary of the
Company has an overdraft banking facility of $3,344 which is used for general
corporate purposes. The overdraft banking facility incurs interest based on 1
percent over the bank's published rate. At December 31, 1997 and 1996, no
amounts were outstanding under the overdraft banking facility.
As discussed in Note B to the consolidated financial statements, the Company
wrote down its investment in the Binghamton Cogeneration Partnership to fair
value in 1996. During construction of the project, the Company was required to
obtain letters of credit in favor of the bank financing the project to assure
that certain financial obligations were met. In January 1997, these letters of
credit in the amount of $1,830 were canceled. Subsequently, the Company was
required to obtain a standby letter of credit in January, 1997 in the amount of
$6,000 to collateralize its obligation under an indemnity agreement among the
Company, the other partners in the Binghamton Cogeneration Partnership and
certain other parties. The Company is required to maintain this letter of credit
through January 2003.
At December 31, 1997, subsidiaries of the Company have contingent liabilities of
$29,500 arising from guarantees to banks for credit facilities extended to
unconsolidated affiliates for general operating purposes.
(K) Earnings Per Share (EPS)
- --------------------------------------------------------------------------------
For the Year Ended
December 31, 1997
---------------------------------
Shares Per share
Income (000s) Amount
--------- ------- ---------
Basic EPS
Income available to common shareholders $33,510 12,812 $2.61
--------- ------- ---------
Effect of dilutive securities
Stock options -- 117 (.02)
--------- ------- ---------
Diluted EPS
Income available to common shareholders
and assumed exercises $33,510 12,929 $2.59
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
For the Year Ended
December 31, 1996
---------------------------------
Shares Per share
Income (000s) Amount
--------- ------- ---------
Basic and Diluted EPS (1)
Income before extraordinary item $(17,431) 13,223 $(1.32)
--------- ------- ---------
Income available to common shareholders (10,644) 13,223 (0.80)
- --------------------------------------------------------------------------------
(1) Because the computation of diluted EPS shall not assume exercise of
securities that would have an antidilutive effect on earnings per share, as
is the case in a loss year, the effect of outstanding stock options was
excluded from the diluted calculation.
- --------------------------------------------------------------------------------
For the Year Ended
December 31, 1995
---------------------------------
Shares Per share
Income (000s) Amount
--------- ------- ---------
Basic EPS
Income available to common shareholders $14,880 14,367 $1.04
--------- ------- ---------
Effect of dilutive securities
Stock options -- 9 --
--------- ------- ---------
Diluted EPS
Income available to common shareholders
and assumed exercises $14,880 14,376 $1.04
- --------------------------------------------------------------------------------
(L) Treasury Stock
In July, 1995, and January, 1998, the Board of Directors of the Company
authorized an increase in the share repurchase program from 1,000,000 to
2,500,000 shares and from 2,500,000 to 3,000,000 shares, respectively, of the
Company's common stock in open market transactions at prevailing prices. The
Company reserves the right to discontinue the repurchase program at any time.
The Company acquired 81,605 shares in 1997 and 1,037,037 shares in 1996 under
the repurchase program. Through December 31, 1997, the Company has repurchased
2,236,409 shares.
(M) Common Stock
Beginning in the fourth quarter of 1996, the Company changed the quarterly
dividend declaration date to the first month of the quarter from the month
preceding the quarter. Accordingly, the first quarter 1997 dividend was declared
in January 1997 instead of in December 1996. This change had no effect on the
annual dividend payment rate of $0.60 per share, although only $0.45 was
declared in 1996.
In 1996, the Board of Directors of the Company approved a Shareholder Rights
Plan and declared a dividend of one preferred share purchase right ("Right") for
each outstanding share of Common Stock. Each Right entitles the holder to
purchase from the Company one one-hundredth of a share of Series A Junior
Participating Preferred Stock of the Company at a price of $125 per one
one-hundredth of a Preferred Share, subject to adjustment ("Purchase Price").
The description and terms of the Rights are set forth in a Rights Agreement
dated as of August 15, 1996. The Rights will expire on August 15, 2006 unless
extended or unless the Rights are earlier redeemed or exchanged by the Company.
The Rights are not exercisable until the earlier to occur of: (i) 10 days
following a public announcement that a person or group of affiliated or
associated persons ("Acquiring Person") have acquired beneficial ownership of 15
percent or more of the outstanding shares of Common Stock or (ii) 10 business
days (or such later date decided by the Board of Directors) following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer for 15 percent or more of the outstanding shares of Common Stock.
In such event, each holder (other than such Acquiring Person) of a Right will
have the right to receive upon exercise of the Right that number of shares of
Common Stock having a market value of two times the Purchase Price. In the event
that the Company is acquired or 50 percent or more of its assets are sold after
a person or group has become an Acquiring Person, each holder of a Right, upon
exercise thereof, will have the right to receive that number of shares of common
stock of the acquiring company which will have a market value of two times the
then Purchase Price.
(N) Employee Stock Ownership and Restricted Stock Plans
Under the terms of the Employee Stock Ownership Plan (the "ESOP"), the Company
and participating subsidiaries make contributions to the Employee Stock
Ownership Trust (the "Trust") which can acquire from the Company up to 5,000,000
shares of common stock of the Company, for the exclusive benefit of
participating employees.
A note receivable from the Trust, issued in 1976 as consideration for 2,400,000
shares of common stock sold by the Company to the Trust was paid in full in
September 1996. The amount of the note, including interest, was $52,872. The
remaining notes receivable from the Trust, received as consideration by the
Company for the 1,600,000 shares of common stock sold to the Trust subsequent to
1976, are payable in level payments of principal and interest over 20 years. The
last sale of shares to the Trust by the Company occurred in 1985. At December
31, 1997, the balance of the notes receivable from the Trust was $18,654. The
unamortized cost of the shares is being funded by annual contributions necessary
to enable the Trust to meet its current obligations, after taking into account
dividends received on the common stock held by the Trust. The net cost of the
ESOP is being amortized over 20-year periods from the dates of acquisition of
shares. The charge to income was $1,160 in 1997, $1,819 in 1996 and $1,555 in
1995. The accrued cost of the ESOP, included in other liabilities, was $9,165
and $10,247 at December 31, 1997 and 1996, respectively.
In May 1995, the number of shares of common stock remaining available for future
awards under the Restricted Stock Plan (the "Restricted Plan") was reduced.
Under the terms of the Restricted Plan, which will terminate June 1, 1998 unless
extended, the Company may award up to a total of 250,000 shares, after giving
effect to the reduction mentioned above, of Company common stock to key
employees. Restricted Plan awards of 690 shares in 1997, 7,533 shares in 1996
and 6,000 shares in 1995, previously held as Company treasury stock, were
granted subject to the restrictions described in the Restricted Plan. The market
value of the shares awarded is being charged to income over the vesting period,
typically five years. At December 31, 1997, 1,731,223 shares have been awarded,
net of shares forfeited and the unamortized portion of the market value was
$283.
In 1997, the Company established an incentive compensation plan, the Stone &
Webster, Incorporated Long-Term Incentive Compensation Plan, which is subject to
approval by the Company's shareholders and is intended to replace the Company's
Restricted Stock Plan and 1995 Stock Option Plan. Subject to this approval, the
maximum number of shares to be issued shall be 650,000 plus such shares which
shall have been authorized but unissued under the old plans. All employees and
directors are eligible to participate in the plan.
(O) Stock Option Plan and Stock Plan
In May 1995, the Shareholders approved the 1995 Stock Option Plan whereby key
employees are eligible to receive options either as incentive stock options as
defined under the Internal Revenue Code, or as nonqualified options to purchase
shares of the Company's common stock. Non-employee directors may be granted only
nonqualified options. The exercise price of any option granted under the 1995
Stock Option Plan may not be less than the fair market value of the Company's
common stock as of the date of grant and such options may not be exercisable
later than ten years from the date of grant.
Nonqualified options to purchase 2,000 shares were granted to each non-employee
director as of the effective date of the 1995 Stock Option Plan and have been or
will be granted to each new non-employee director upon initial election or
appointment to the Board of Directors. Thereafter on a yearly basis,
nonqualified options to purchase 1,000 shares will be granted to each
non-employee director. The total number of shares which may be issued under the
1995 Stock Option Plan may not exceed 825,000 shares, which includes an increase
of 75,000 shares approved by the Board of Directors during the second quarter of
1997. A summary of the non-qualified options granted and respective price ranges
follows:
- --------------------------------------------------------------------------------
Non-Employee Directors Key Employees
--------------------------- ---------------------------
Options Options
Granted Price Range Granted Price Range
------- ---------------- ------- ----------------
1995 20,000 $30 1/4 - 36 142,500 $31 - 36 1/2
1996 15,000 32 3/4 - 34 1/4 341,500 32 5/8 - 34 7/8
1997 9,000 40 1/2 255,000 32 1/8 - 47 1/8
- --------------------------------------------------------------------------------
All options awarded to non-employee directors are nonexercisable for the first
six months. Twenty-five percent of the nonqualified options granted to key
employees in 1996 and 1997 become exercisable on each of the first four
anniversary dates of the grant, with the exception of 100,000 options granted in
1996 which were exercisable immediately. Nonqualified options granted to key
employees in 1995 become exercisable after three years.
As permitted under Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation ("SFAS 123"), the Company has elected to
continue to follow Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees ("APB 25") and related interpretations in accounting
for its employee stock options. Using the intrinsic value-based method of
accounting prescribed by APB 25, no compensation expense is recognized upon the
issuance of employee stock options if the exercise price of the options equals
the quoted market price of the underlying stock on the date of grant.
However, as required by SFAS 123, for companies electing to remain with APB 25,
pro forma information regarding net income and earnings per share is presented
below and has been determined as if the Company had accounted for its
non-employee director and employee stock options under the fair value method of
SFAS 123. The fair value for these options was estimated at the date of grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions for 1997, 1996 and 1995, respectively: risk-free interest rates of
6.67 percent, 6.02 percent and 5.92 percent; dividend yields of 1.6 percent, 1.9
percent and 2.0 percent; volatility factors of the expected market price of the
Company's common stock of .210, .193 and .230; and a weighted-average expected
life of the option of 5 years.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. Had compensation costs
for the Company's stock option plan awards been determined based on the fair
value at the date of grant, consistent with the provisions of SFAS 123, the
Company's net income and earnings per share would have been as shown in the
following table:
- --------------------------------------------------------------------------------
1997 1996 1995
-------- --------- --------
As reported net income (loss) $33,510 $(10,644) $14,880
As reported net income (loss) per share $2.59 $(0.80) $ 1.04
Pro forma net income (loss) (unaudited) $32,803 $(11,536) $14,701
Pro forma net income (loss) per share
(unaudited) $2.54 $(0.83) $1.03
- --------------------------------------------------------------------------------
A summary of the Company's stock option activity, and related information for
the years ended December 31 is displayed on the following page:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
1997 1996 1995
------------------- ------------------- -------------------
Weighted- Weighted- Weighted-
Average Average Average
Average Exercise Exercise Exercise
Options Price Options Price Options Price
------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding - beginning
of year 471,000 $32.98 135,500 $31.19 -- --
Granted 264,000 37.89 356,500 33.56 162,500 $31.15
Exercised 63,500 32.20 4,000 30.25 -- --
Canceled 15,000 32.34 17,000 31.46 27,000 30.94
------- --------- ------- --------- ------- ---------
Outstanding - end of year 656,500 35.05 471,000 32.98 135,500 31.19
Exercisable at end of year 186,370 34.27 153,000 33.96 16,000 30.25
------- --------- ------- --------- ------- ---------
Weighted-average fair
value of options granted
during the year $10.30 $7.90 $7.96
- ---------------------------------------------------------------------------------------------
</TABLE>
Exercise prices for options outstanding as of December 31, 1997 ranged from
$30.25 to $47.13. The weighted-average remaining contractual life of those
options is 8.6 years.
In 1997, the Company established the Stone & Webster, Incorporated Long-Term
Incentive Compensation Plan as discussed in Note N.
In January 1997, the Board of Directors terminated the 1995 Stock Plan for
Non-Employee Directors (the "1995 Stock Plan") and adopted the 1997 Stock Plan
for Non-Employee Directors (the "1997 Stock Plan"). Before the 1995 Stock Plan
was terminated, non-employee directors of the Company received shares in payment
of their annual retainer and were able to elect to receive all or a portion of
director meeting fees in common stock. Under the 1995 Stock Plan, 4,206 and
2,252 shares were issued to non-employee directors during 1996 and 1995,
respectively. Under the 1997 Stock Plan, non-employee directors will receive an
annual stock grant of 400 shares, payable on a quarterly basis, as part of their
annual retainer. Non-employee directors may also elect to receive all or a
portion of director meeting fees in shares of common stock. During 1997, 5,310
shares were issued to non-employee directors under the 1997 Stock Plan.
(P) Retirement Plans
The Company and its domestic subsidiaries have a noncontributory defined benefit
plan covering executive, administrative, technical and other employees. The
benefits of this plan are based primarily on years of service and employees'
career average pay. The Company's policy is to make contributions which are
equal to current year cost plus amortization of prior service cost, except as
limited by full funding restrictions. Plan assets consist principally of common
stocks, bonds and U.S. Government obligations.
The Company's international subsidiaries in the United Kingdom and Canada have
defined benefit plans covering executive, administrative, technical and other
employees. The U.K. plan is contributory and the benefits are based primarily on
years of service and employees' average pay during their last ten years of
service. The Canada plan is noncontributory and the benefits are based primarily
on years of service and employees' career average pay. The Company's policy is
to make contributions which are equal to the current year cost plus amortization
of prior service cost. Plan assets consist principally of common stocks and
bonds.
Pension related items for the plans include the following components:
- --------------------------------------------------------------------------------
1997 Domestic International Total
--------- ------------- ---------
Service cost - benefits earned
during the year $ 6,995 $2,043 $ 9,038
Interest cost on projected
benefit obligation 31,924 3,887 35,811
Actual return on assets (90,233) (8,103) (98,336)
Net amortization and deferral 32,977 3,411 36,388
--------- ------------- ---------
Total pension related items $(18,337) $1,238 $(17,099)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1996 Domestic International Total
--------- ------------- ---------
Service cost - benefits earned
during the year $ 7,309 $1,565 $ 8,874
Interest cost on projected
benefit obligation 30,496 3,558 34,054
Actual return on assets (96,448) (3,975) (100,423)
Net amortization and deferral 43,019 (522) 42,497
--------- ------------- ---------
Total pension related items $(15,624) $ 626 $(14,998)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1995 Domestic International Total
--------- ------------- ---------
Service cost - benefits earned
during the year $ 6,557 $1,346 $ 7,903
Interest cost on projected
benefit obligation 29,757 3,078 32,835
Actual return on assets (112,938) (3,376) (116,314)
Net amortization and deferral 61,449 (296) 61,153
--------- ------------- ---------
Net pension cost (credit) (15,175) 752 (14,423)
Incentive Retirement Program
charges 2,112 -- 2,112
--------- ------------- ---------
Total pension related items $ (13,063) $ 752 $(12,311)
- --------------------------------------------------------------------------------
In the fourth quarter of 1995, a voluntary Incentive Retirement Program (the
"Program") was offered to, and accepted by, employees of Stone & Webster,
Incorporated. Total Program costs of $2,315 ($1,416 after tax, or $0.10 per
share), including $203 for incentive benefits from a nonqualified Supplemental
Retirement Plan, representing the actuarially determined present value of
Program benefits, were charged to costs and expenses with corresponding offsets
to prepaid pension cost of $2,112 and $203 to accrued liabilities.
Fluctuations in the actual return on plan assets reflect fluctuations in the
market prices of equity securities as well as debt securities owned by the
pension plan. These fluctuations account for most of the variation in the net
amortization and deferral component of pension cost. Amortization of the
transition asset resulted in a credit to income of $10,199 in 1997 and $10,383
in 1996.
A reconciliation of the domestic plan's funded status to the balance sheet
prepaid pension cost is as follows at December 31:
- --------------------------------------------------------------------------------
1997 1996
---------- ----------
Actuarial present value of benefits:
Vested benefit obligation $(456,860) $(405,090)
---------- ----------
Accumulated benefit obligation $(460,561) $(406,969)
---------- ----------
Projected benefit obligation $(480,138) $(423,876)
Plan assets at fair value 684,655 615,321
---------- ----------
Excess of assets over projected
benefit obligation $ 204,517 $ 191,445
---------- ----------
Unrecognized prior service cost 10,682 12,475
Unrecognized net (gain) (57,211) (54,070)
Unrecognized net transition (asset) (9,833) (20,032)
---------- ----------
Prepaid pension cost $ 148,155 $ 129,818
- --------------------------------------------------------------------------------
Domestic pension cost is separately captioned in the balance sheet as domestic
prepaid pension cost and is included in long-term assets. The plan's funded
status as of any measurement date is based on prevailing market conditions as to
discount rate and plan assets, and is accordingly subject to volatility. The
projected benefit obligation was determined using assumed discount rates of 7.0
percent at December 31, 1997 and 7.75 percent at December 31, 1996 and an
assumed long-term rate of compensation increase of 4.5 percent at December 31,
1997 and 1996. Pension cost was determined using an assumed long-term rate of
return on plan assets of 9.25 percent at January 1, 1997 and 1996 and 9.75
percent at January 1, 1995.
A reconciliation of the international plans' funded status is as follows at
December 31:
- --------------------------------------------------------------------------------
1997 1996
--------- ---------
Actuarial present value of benefits:
Vested benefit obligation $(43,459) $(38,286)
--------- ---------
Accumulated benefit obligation $(43,459) $(38,286)
--------- ---------
Projected benefit obligation $(53,351) $(46,685)
Plan assets at fair value 56,727 50,030
--------- ---------
Excess of assets over projected benefit
obligation $ 3,376 $ 3,345
Unrecognized prior service cost 144 178
Unrecognized net (gain) (760) (938)
Unrecognized net transition (asset) (1,862) (2,222)
--------- ---------
Prepaid pension cost $ 898 $ 363
- --------------------------------------------------------------------------------
Net international prepaid pension cost is included in the consolidated balance
sheets in other long-term assets. The plans' funded status as of any measurement
date is based on prevailing market conditions as to discount rate and plan
assets, and is accordingly subject to volatility. The projected benefit
obligation was determined using an assumed weighted discount rate ranging from 7
percent to 8 percent at December 31, 1997 and 8 percent at December 31, 1996,
and assumed long-term rates of compensation increases of 5 percent at December
31, 1997. Pension cost was determined using assumed long-term rates of return on
plan assets ranging from 8 percent to 9 percent for 1997 and 1996 and 8.7
percent for 1995.
(Q) International Subsidiaries
Net income and assets, net of liabilities, of international subsidiaries
amounted to $16,308 and $35,248 in 1997, $5,602 and $20,018 in 1996 and $5,173
and $14,153 in 1995, respectively.
(R) Concentrations of Credit Risk
Financial instruments which potentially expose the Company to concentrations of
credit risk consist primarily of cash and cash equivalents, U.S. Government
securities and accounts receivable. The Company maintains its cash balances with
several major financial institutions thus limiting the amount of credit exposure
to any one financial institution. The Company invests all excess cash balances
in U.S. Government treasury securities and repurchase agreements. Concentrations
of credit risk with respect to trade receivables are limited due to the large
number of engineering and construction clients comprising the Company's customer
base and their dispersion across different business and geographic areas. Most
contracts require payments as the projects progress or in certain cases advance
payments. Consistent with industry practices, the Company generally does not
require collateral, but in most cases can place liens against the property,
plant or equipment constructed if a default occurs. The Company maintains
adequate reserves for potential credit losses and such losses have been within
management's estimates.
(S) Fair Value of Financial Instruments
The carrying amounts for cash, cash equivalents and U.S. Government securities
approximate their fair values because of the short maturity of the instruments.
At December 31, 1997, long-term debt, excluding capital lease obligations,
consists of a mortgage loan relating to an office building. The carrying value
of the mortgage loan for a subsidiary's office building was $23,882 which
approximates fair value.
The Company had several foreign exchange forward contracts at December 31, 1997.
These contracts had varying maturities through January 2000. At December 31,
1997, the notional amount of foreign exchange forward contracts outstanding was
$20,619. The fair value and unrealized loss on these contracts was $1,250 and
$1,365, respectively, at December 31, 1997.
The Company and its subsidiaries have entered into other financial agreements in
the normal course of business. These agreements, which by their nature contain
potential risk of loss, include lines of credit, letters of credit, performance
bonds and performance guarantees. The fair values of these agreements are
estimated at $709 and $784 at December 31, 1997 and 1996, respectively, based on
the fees paid to obtain the obligations.
(T) Business Segments
The Company, through its subsidiaries, is principally engaged in providing
professional engineering, design, procurement, construction, consulting and full
environmental services for power, process, environmental/infrastructure and
industrial projects worldwide. The Company's cold storage business offers
consolidated distribution of frozen products for food processors and others
throughout the southeastern United States. Although the Company has numerous
clients and is not dependent on any single client, one or a few clients may
contribute a substantial portion of the Company's consolidated revenue in any
one year or over a period of several consecutive years due to the size of major
engineering and construction projects and the progress accomplished on those
projects in that year or period of years. The Engineering, Construction and
Consulting services segment had one client in 1997 (12 percent), no clients in
1996 and one client in 1995 (13 percent), who accounted for 10 percent or more
of consolidated revenue. The Cold Storage business segment had no single
customer providing 10 percent or more of consolidated revenue.
Information regarding business segments is shown on page 43 and is incorporated
herein.
(U) Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
1997 First Second Third Fourth
Quarter Quarter Quarter Quarter Year
--------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Revenue $349,525 $286,258 $368,216 $318,541 $1,322,540
Operating income 8,802 13,048 13,840 11,602 47,292
Income before income taxes 9,205 13,650 14,469 13,483 50,807
Net income 5,568 9,482 9,385 9,075 33,510
Basic earnings per share 0.43 0.74 0.73 0.71 2.61
Diluted earnings per share (1) 0.43 0.74 0.73 0.69 2.59
- --------------------------------------------------------------------------------------------------------------
(1) Diluted earnings per share includes
earnings per share from the following:
Operations 0.22 0.47 0.53 0.08 1.30
Pension related items 0.21 0.21 0.20 0.18 0.80
--------- --------- --------- --------- -----------
Earnings per share from ongoing
operations 0.43 0.68 0.73 0.26 2.10
Divested operations -- 0.06 -- 0.02 0.08
Restructuring, other charges and asset
divestitures -- -- -- 0.41 0.41
--------- --------- --------- --------- -----------
Earnings per share 0.43 0.74 0.73 0.69 2.59
- --------------------------------------------------------------------------------------------------------------
1996 First Second Third Fourth
Quarter Quarter Quarter Quarter Year
--------- --------- --------- --------- -----------
Revenue $305,834 $268,708 $282,210 $308,085 $1,164,837
Operating income (loss) 10,215 7,468 (49,268) 5,665 (25,920)
Income (loss) before income taxes and
extraordinary item 9,376 5,887 (50,464) 5,812 (29,389)
Income (loss) before extraordinary item 5,532 3,740 (31,680) 4,977 (17,431)
Net income (loss) 5,532 3,740 (24,893)(3) 4,977 (10,644)
Earnings (loss) per share before
extraordinary item 0.41 0.28 (2.38) 0.37 (1.32)
Earnings (loss) per share (2) 0.41 0.28 (1.86) 0.37 (0.80)
- --------------------------------------------------------------------------------------------------------------
(2) Diluted earnings (loss) per share includes
earnings per share from the following:
Operations 0.46 0.35 0.19 0.35 1.35
Pension related items 0.13 0.14 0.21 0.21 0.69
Earnings per share from ongoing
operations 0.59 0.49 0.40 0.56 2.04
Divested operations (0.18) (0.21) (0.12) 0.01 (0.50)
Restructuring, other charges and asset
divestitures -- -- (2.14) (0.20) (2.34)
Earnings (loss) per share 0.41 0.28 (1.86) 0.37 (0.80)
- --------------------------------------------------------------------------------------------------------------
(3) Includes extraordinary gain of $6,787, net of taxes, for extinguishment of debt related to the transfer of
the Auburn VPS Partnership assets to the construction lenders.
</TABLE>
A substantial portion of the Company's business is derived from long-term
engineering and construction contracts. Revenue is determined on the
percentage-of-completion method. Under this method, revisions to earnings
estimates recorded in any quarterly period may be adjusted to revenue and cost
of revenue recognized in prior periods and may in turn be further adjusted
during subsequent quarters. Accordingly, historical results may vary from
quarter to quarter.
(V) Consolidated Statements of Cash Flows
The changes in operating working capital as shown in the Consolidated Statements
of Cash Flows comprise:
- --------------------------------------------------------------------------------
Years Ended December 31,
1997 1996 1995
--------- --------- ---------
Decrease (increase) in:
Accounts receivable $ 1,843 $(21,278) $(71,464)
Costs and revenue recognized in excess
of billings 7,547 (55,542) (21,952)
Increase (decrease) in:
Accounts payable 8,787 21,240 32,905
Billings in excess of costs and revenue
recognized 11,988 36,766 18,491
--------- --------- ---------
Changes in operating working capital assets
and liabilities 30,165 (18,814) (42,020)
--------- --------- ---------
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Interest $1,731 $3,658 $5,629
Income taxes $5,634 $3,920 $4,740
--------- --------- ---------
Supplemental disclosures of non-cash
investing and financing activities:
Receipt of note for asset held for sale $15,000 $ -- $ --
Transfer of Auburn VPS Partnership
property, plant and equipment to
construction lenders -- 53,276 --
Extinguishment of Auburn VPS Partnership
debt -- (48,750) --
Other, net (3,272) --
Fair value of assets acquired -- -- (10,206)
Liabilities assumed -- -- 7,748
--------- --------- ---------
$15,000 $ 1,254 $ (2,458)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Years ended December 31,
1997 1996 1995 1994 1993
----------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
Revenue:
Engineering, Construction and
Consulting services $1,299,220 $1,143,587 $ 969,284 $748,614 $1,013,265
Cold Storage and related activities 23,320 21,250 21,188 17,280 16,914
Other -- -- 12,347 13,361 16,130
----------- ----------- ---------- --------- -----------
Total revenue $1,322,540 $1,164,837 $1,002,819 $779,255 $1,046,309
----------- ----------- ---------- --------- -----------
Operating income (loss) (4) $ 47,292 $ (25,920) $ 35,041 $(42,097) $ 6,813
Income (loss) from continuing
operations 33,510 (17,431) 14,880 (7,807) (370)
Net income (loss) (1, 2, 3 and 4) 33,510 (10,644) 14,880 (7,807) 1,952
Weighted average shares of common and
common stock equivalents outstanding 12,929 13,223 14,376 14,907 14,978
Basic income (loss) from continuing
operations per share $2.61 $(1.32) $1.04 $(0.52) $(0.03)
Diluted income (loss) from continuing
operations per share $2.59 $(1.32) $1.04 $(0.52) $(0.03)
Basic earnings (loss) per share
(1, 2, 3 and 4) $2.61 $(0.80) $1.04 $(0.52) $0.13
Diluted earnings (loss) per share
(1, 2, 3 and 4) $2.59 $(0.80) $1.04 $(0.52) $0.13
Dividends declared per share (5) $0.60 $0.45 $0.60 $0.60 $0.60
----------- ----------- ----------- --------- -----------
Total assets $ 738,777 $ 692,065 $ 716,772 $678,384 $ 683,579
----------- ----------- ----------- --------- -----------
Long-term debt $ 22,510 $ 24,260 $ 74,677 $ 89,642 $ 47,739
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Notes: (1) Reflects gain or loss on sale of assets, which increased net income
by $5,363, or $0.41 per share in 1997, decreased net income by
$7,511, or $0.52 per share in 1995, and increased net income by
$21,208, or $1.42 per share in 1994.
(2) Includes income from divested operations of $1,048, or $0.08 per
share in 1997, and an extraordinary gain of $6,787, or $0.52 per
share in 1996 on debt extinguishment from transfer of Auburn VPS
Partnership assets to the construction lenders.
(3) Includes cumulative effect of a change in accounting principle, which
increased net income by $2,322, or $0.16 per share in 1993.
(4) Net Income includes a provision for the Company's share of contract
losses on a joint venture in the Middle East of $15,469, or $1.20 per
share (operating income includes $25,781) in 1997, restructuring and
other charges of $28,516, or $2.14 per share (operating income
includes $54,424 for these items) in 1996 (see Notes B, E and I to
the consolidated financial statements), a write-down of the Company's
equity interest in Binghamton Cogeneration Partnership to fair value
in 1996 which reduced net income by $2,712, or $0.21 per share, costs
associated with the Incentive Retirement Program of $1,416, or $0.10
per share in 1995, pension curtailment gains which increased net
income by $218, or $0.02 per share in 1994 and by $1,072, or $0.07
per share in 1993, severance costs which decreased net income by
$12,596, or $0.84 per share in 1994 and $4,967, or $0.33 per share in
1993 and costs which decreased net income in 1993 as follows: $5,460,
or $0.36 per share, associated with the Incentive Retirement Program;
$1,131, or $0.08 per share, related to an increase in the statutory
federal income tax rate on corporations from 34 percent to 35
percent; $2,340, or $0.16 per share, related to a judgment against a
subsidiary of the Company and $2,015, or $0.13 per share, related to
an IRS settlement in connection with prior years' income tax returns.
(5) In the fourth quarter of 1996, the Company changed the quarterly
dividend declaration date to the first month of the quarter from the
month preceding the quarter. This change had no effect on the annual
dividend payment rate of $0.60 per share, although dividends declared
in 1996 totaled $0.45 per share.
Market and Dividend Information (Unaudited)
Principal Market - New York Stock Exchange
- --------------------------------------------------------------------------------
Sales Price of Dividends Paid
Common Shares Per Share (1)
---------------------------------------- --------------
1997 1996 1997 1996
------------------ ------------------ ----- -----
Quarter High Low High Low
------- ------- ------- -------
First $37 1/2 $31 1/8 $36 $32 5/8 $0.15 $0.15
Second 45 3/8 36 37 3/8 32 0.15 0.15
Third 55 41 7/8 35 3/8 28 5/8 0.15 0.15
Fourth 55 1/8 41 1/4 34 1/8 30 0.15 0.15
- --------------------------------------------------------------------------------
(1) See Note M to the consolidated financial statements.
The Company has purchased and may continue to purchase from time to time
additional shares of its common stock for general corporate purposes on the New
York Stock Exchange, or otherwise. However, there is no assurance that the
Company will continue to purchase shares of its common stock. Also, see Note L
to the consolidated financial statements. The approximate number of record
holders of common stock as of December 31, 1997 was 5,400. The common stock is
also listed for trading on the Boston Stock Exchange.
<PAGE>
REPORT OF MANAGEMENT
The management of Stone & Webster, Incorporated is responsible for the
preparation of the financial statements and related notes included in this
annual report to shareholders. The financial statements have been prepared in
conformity with generally accepted accounting principles and accordingly include
certain amounts which represent management's best estimates and judgments.
Management maintains internal systems to assist it in fulfilling its
responsibility for financial reporting, including careful selection of
personnel, segregation of duties and the maintenance of formal accounting and
reporting policies and procedures. While no system can ensure elimination of all
errors and irregularities, the systems have been designed to provide reasonable
assurance that assets are safeguarded, policies and procedures are followed and
transactions are properly executed and reported. These systems are reviewed and
modified in response to changing conditions. Management believes that the
Company's system of internal controls is adequate to accomplish the objectives
discussed herein.
The system is supported by an internal auditing function that operates worldwide
and reports its findings to management throughout the year. The Company's
independent accountants are engaged to express an opinion on the year-end
financial statements. The independent accountants review and test the system of
internal accounting controls and the data contained in the financial statements
to the extent required by generally accepted auditing standards as they deem
necessary to arrive at an opinion on the fairness of the financial statements
presented herein. The Audit Committee of the Board of Directors, which is
comprised of outside directors, meets regularly with management, the internal
auditors and the independent accountants to discuss the adequacy of internal
controls, the reported financial results and the results of the auditors'
examinations. The internal auditors and the independent accountants have direct
access to the Audit Committee and meet privately with the Committee.
H. Kerner Smith Thomas L. Langford
Chairman, President and Executive Vice President and
Chief Executive Officer Chief Financial Officer
<PAGE>
BUSINESS SEGMENT INFORMATION
(See Note T to the consolidated financial statements.
All dollar amounts are in thousands.)
Business Segments
- --------------------------------------------------------------------------------
1997 1996 1995
----------- ----------- -----------
Revenue (1)
Engineering, Construction and
Consulting services $1,299,220 $1,143,587 $ 969,284
Cold Storage and related activities 23,320 21,250 21,188
Other (2) -- -- 12,347
----------- ----------- -----------
Total revenue $1,322,540 $1,164,837 $1,002,819
----------- ----------- -----------
Operating income (loss) (3)
Engineering, Construction and
Consulting services $ 49,595 $ (20,249) $ 38,941
Cold Storage and related activities 7,340 5,954 7,783
Other (2) -- (163) 1,244
General corporate (9,643) (11,462) (12,927)
----------- ----------- -----------
Operating income (loss) $ 47,292 $ (25,920) $ 35,041
----------- ----------- -----------
Interest and dividend income 4,269 3,268 6,422
Interest expense (1,739) (6,737) (5,549)
Gain (loss) on sale of assets 985 -- (12,443)
----------- ----------- -----------
Income (loss) before taxes and
extraordinary item $ 50,807 $ (29,389) $ 23,471
----------- ----------- -----------
Identifiable assets (4)
Engineering, Construction and
Consulting services $ 676,954 $ 625,466 $ 595,699
Cold Storage and related activities 44,026 42,634 35,143
Other (2) -- -- 1,273
General corporate 17,797 23,965 84,657
----------- ----------- -----------
Total identifiable assets $ 738,777 $ 692,065 $ 716,772
----------- ----------- -----------
Depreciation, depletion and
amortization
Engineering, Construction and
Consulting services $ 11,041 $ 14,431 $ 14,219
Cold Storage and related activities 2,640 2,264 1,972
Other (2) -- 198 3,048
----------- ----------- -----------
Total depreciation, depletion and
amortization $ 13,681 $ 16,893 $ 19,239
----------- ----------- -----------
Capital expenditures
Engineering, Construction and
Consulting services $ 23,454 $ 14,212 $ 24,127
Cold Storage and related activities 2,455 9,995 1,715
Other (2) -- 176 2,120
----------- ----------- -----------
Total capital expenditures $ 25,909 $ 24,383 $ 27,962
- --------------------------------------------------------------------------------
Geographic Areas
- --------------------------------------------------------------------------------
1997 1996 1995
----------- ----------- -----------
Revenue
United States - Domestic $ 659,005 $ 703,832 $ 659,926
United States - Export (5) 396,194 187,324 111,486
----------- ----------- -----------
United States - Total 1,055,199 891,156 771,412
----------- ----------- -----------
International 267,341 273,681 231,407
----------- ----------- -----------
Total revenue $1,322,540 $1,164,837 $1,002,819
----------- ----------- -----------
Operating income (loss) (3)
United States $ 37,638 $ (19,609) $ 40,660
International 19,297 5,151 7,308
General corporate (9,643) (11,462) (12,927)
----------- ----------- -----------
Operating income (loss) $ 47,292 $ (25,920) $ 35,041
----------- ----------- -----------
Identifiable assets (4)
United States $ 602,314 $ 620,208 $ 567,843
International 118,666 47,892 64,272
General corporate 17,797 23,965 84,657
----------- ----------- -----------
Total identifiable assets $ 738,777 $ 692,065 $ 716,772
- --------------------------------------------------------------------------------
(1) Total segment revenue includes revenue from unaffiliated customers as
reported in the consolidated statements of operations.
(2) The "Other" segment includes the Oil and Gas Production and Real Estate
Development businesses, which were divested in 1995.
(3) The pension related items included in operating income (loss) are:
- --------------------------------------------------------------------------------
(Income) Expense 1997 1996 1995
--------- --------- ---------
Engineering, Construction and
Consulting services $(16,969) $(14,812) $(14,206)
Cold Storage and related activities 101 100 91
Other -- -- (65)
General corporate (231) (286) 1,869
--------- --------- ---------
Total pension related items $(17,099) $(14,998) $(12,311)
- --------------------------------------------------------------------------------
Pension related items include the effect of incentive retirement programs.
Domestic and international pension related items are presented in Note P to
the consolidated financial statements.
(4) Identifiable assets are those assets used in the operation of each segment.
General corporate assets are composed primarily of cash, cash equivalents
and U.S. Government securities.
(5) Far East/Pacific geographic area includes Indonesia which accounted for 13
percent of consolidated revenue in 1997. No other international geographic
area accounted for more than 10 percent of consolidated revenue in 1997,
1996 or 1995.
- --------------------------------------------------------------------------------
1997 1996 1995
--------- --------- ---------
Far East/Pacific $246,743 $105,925 $ 67,598
Other 149,451 81,399 43,888
--------- --------- ---------
United States - Export $396,194 $187,324 $111,486
- --------------------------------------------------------------------------------
EXHIBIT 13 (ii)
Stone & Webster, Incorporated And Subsidiaries
Schedule II - Valuation And Qualifying Accounts
(All dollar amounts are in thousands.)
Col. A Col. B Col. C Col. D Col. E
- ----------- ---------- ---------------------- ---------- ----------
Additions
Balance at Charged to Charged Balance at
Beginning Costs and to Other End of
Description of Period Expenses Accounts Deductions Period
- ----------- ---------- ---------- -------- ---------- ----------
Allowance deducted from asset to which it applies:
Allowance for doubtful accounts:
Year ended December 31, 1997
$3,626 $5,878 $0 $2,815 (A) $6,689
Year ended December 31, 1996
3,767 1,280 0 1,421 (A) 3,626
Year ended December 31, 1995
3,723 712 0 668 (A) 3,767
Note A - Uncollected receivables written off, net of recoveries
EXHIBIT 13 (iii)
Report Of Independent Accountants
To the Shareholders and Board of Directors of Stone & Webster, Incorporated:
We have audited the consolidated financial statements and the financial
statement schedule of Stone & Webster, Incorporated and Subsidiaries listed in
Item 14 of the Form 10-K. These financial statements and the financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and the financial
statement schedule 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 consolidated financial position of Stone & Webster,
Incorporated and Subsidiaries as of December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
February 12, 1998
EXHIBIT 21
Subsidiaries Of Registrant
Subsidiaries of Registrant on December 31, 1997 included:
PLACE OF
NAME OF SUBSIDIARY INCORPORATION
3 Executive Campus Realty, Inc. Delaware
Commercial Cold Storage, Inc. Georgia
Enclave Parkway Realty, Inc. Delaware
Prescient Technologies, Inc. Delaware
Sabal Corporation Florida
Sleeper Street Realty Corporation Delaware
Stone & Webster Development Corporation Delaware
Auburn VPS General Corporation Delaware
Auburn VPS Limited Corporation Delaware
Stone & Webster Auburn Corporation Delaware
Stone & Webster Binghamton Corporation Delaware
SWL Corporation Delaware
Stone & Webster Engineers and Constructors, Inc. Delaware
3 Executive Campus Corporation Delaware
245 Summer Street Corporation Massachusetts
1430 Enclave Parkway Corporation Delaware
Belmont Constructors Company, Inc. Delaware
DSS Engineers, Inc. Florida
Fast Supply Corporation Delaware
Rockton Associates, Incorporated Delaware
SAW Consulting Services, Inc. Delaware
Stone & Webster Civil and Transportation Services, Inc. Massachusetts
Stone & Webster Construction Company, Inc. Delaware
Stone & Webster Canada Limited Canada
Rockton Field Services of Canada Ltd. Canada
Stone & Webster Engineering Corporation Massachusetts
Stone & Webster International of Mauritius Limited Mauritius
Stone & Webster India Private Limited India
Stone & Webster Industrial Technology Corporation Delaware
Stone & Webster Management Consultants, Inc. New York
Stone & Webster of Argentina Corporation Delaware
Stone & Webster Overseas Consultants, Inc. Delaware
Stone & Webster Michigan, Inc. Michigan
Stone & Webster Operating Corporation Delaware
Stone & Webster Overseas Group, Inc. Delaware
Advanced Technologies (Cayman) Limited Cayman Islands
Selective Technologies Corporation Delaware
Associated Engineers & Consultants, Inc. New York
AEC International Projects, Inc. Delaware
International Associates (Cayman) Limited Cayman Islands
International Engineers & Constructors, Incorporated Delaware
Process Engineers (Cayman) Limited Cayman Islands
Process Engineers, Incorporated Delaware
Rockton Technical Services Corporation Delaware
Stone & Webster Abu Dhabi (United Arab Emirates), Inc. Delaware
Stone & Webster Asia Corporation Delaware
Stone & Webster Bharat, Incorporated Delaware
Stone & Webster Dominican Republic, Incorporated Delaware
Stone & Webster Far East Technical Services Corp. Delaware
Stone & Webster Group Limited England
Stone & Webster Abu Dhabi (United Arab Emirates) Limited England
Stone & Webster Anadolu Muhendislik Muteahhitlik
Dis Ticaret Limited Sirketi Turkey
Stone & Webster Construction Limited England
Stone & Webster Engineering Limited England
Stone & Webster Services Limited England
Stone & Webster Services Sdn. Bhd. Malaysia
Stone & Webster Engineering (Mauritius) Limited Mauritius
Stone & Webster Engineering and Field Services Limited England
Stone & Webster Management Consultants Limited England
Stone & Webster Indonesia Corporation Delaware
Stone & Webster Inter-American Corporation Delaware
Stone & Webster International Corporation Delaware
Stone & Webster International Projects Corporation Delaware
Stone & Webster Italia, Incorporated Delaware
Stone & Webster Korea Corporation Delaware
Stone & Webster Kuwait, Incorporated Delaware
Stone & Webster Lithuania Corporation Delaware
Stone & Webster of Mexico Engineering Corporation Delaware
Stone & Webster Middle East Engineering Services
Corporation Delaware
Stone & Webster Pacific Corporation Delaware
Stone & Webster Power Engineering Corporation Delaware
Stone & Webster Puerto Rico, Incorporated Delaware
Stone & Webster Saudi Arabia, Incorporated Delaware
Stone & Webster Taiwan Corporation Delaware
Stone & Webster Technology Corporation Delaware
Stone & Webster Technology B.V. Netherlands
Stone & Webster (Thailand) Limited Thailand
Stone & Webster Power Projects Corporation Delaware
Stone & Webster Worldwide Engineering Corporation Delaware
Stone & Webster Oil Company, Inc. Texas
Summer Street Realty Corporation Massachusetts
Stone & Webster International Sales Corporation US Virgin Islands
EXHIBIT 23
Consent Of Independent Accountants
We consent to the incorporation by reference in the registration statements of
Stone & Webster, Incorporated on Form S-8 (File Nos. 333-19829, 333-19849,
33-60489 and 33-60483) of our report dated February 12, 1998, on our audits of
the consolidated financial statements and financial statement schedule of Stone
& Webster, Incorporated and Subsidiaries as of December 31, 1997 and 1996, and
for each of the three years in the period ended December 31, 1997, which report
is included in this Annual Report on Form 10-K.
/s/ COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 30, 1998
EXHIBIT 24 (i)
Secretary's Certificate
I, James P. Jones, Vice President, Secretary and General Counsel of Stone &
Webster, Incorporated (the "Corporation"), a Delaware corporation, do hereby
certify that the following resolution was duly adopted by the Board of Directors
of the Corporation at a meeting held on February 24, 1998, and that such
resolution is still in full force and effect:
RESOLVED - that any report, registration statement or other form filed on
behalf of this Corporation pursuant to the Securities Exchange Act of 1934, or
any amendment to such report, registration statement or other form, may be
signed on behalf of any Director or Officer of this Corporation pursuant to a
Power of Attorney executed by such Director or Officer.
IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal of
the Corporation this 30th day of March, 1998.
(Seal) /s/ JAMES P. JONES
---------------------------------------
James P. Jones
Vice President, Secretary and
General Counsel
EXHIBIT 24 (ii)
Powers of Attorney
BE IT KNOWN: That the undersigned, in my capacity or capacities as a member
of the Board of Directors and/or Officer of Stone & Webster, Incorporated, a
Delaware corporation (the "Company"), does hereby make, constitute and appoint
H. Kerner Smith and James P. Jones, and each of them acting individually, my
true and lawful attorney-in-fact with power to act without the other and with
full power of substitution, to execute, deliver and file, for and on behalf of
the undersigned, in my name and in my capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year ended December 31, 1997,
and any amendment or amendments thereto and any other document in support
thereof or supplemental thereto, and the undersigned hereby grants to said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing whatsoever that said attorney or attorneys may deem
necessary or advisable to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts and things which said
attorney or attorneys may do or cause to be done by virtue of this Power of
Attorney.
EXECUTED this 24th day of February, 1998.
/s/ DONNA F. BETHELL
-----------------------------------------
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in my capacity or capacities as a member
of the Board of Directors and/or Officer of Stone & Webster, Incorporated, a
Delaware corporation (the "Company"), does hereby make, constitute and appoint
H. Kerner Smith and James P. Jones, and each of them acting individually, my
true and lawful attorney-in-fact with power to act without the other and with
full power of substitution, to execute, deliver and file, for and on behalf of
the undersigned, in my name and in my capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year ended December 31, 1997,
and any amendment or amendments thereto and any other document in support
thereof or supplemental thereto, and the undersigned hereby grants to said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing whatsoever that said attorney or attorneys may deem
necessary or advisable to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts and things which said
attorney or attorneys may do or cause to be done by virtue of this Power of
Attorney.
EXECUTED this 24th day of February, 1998.
/s/ FRANK J. A. CILLUFFO
-----------------------------------------
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in my capacity or capacities as a member
of the Board of Directors and/or Officer of Stone & Webster, Incorporated, a
Delaware corporation (the "Company"), does hereby make, constitute and appoint
H. Kerner Smith and James P. Jones, and each of them acting individually, my
true and lawful attorney-in-fact with power to act without the other and with
full power of substitution, to execute, deliver and file, for and on behalf of
the undersigned, in my name and in my capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year ended December 31, 1997,
and any amendment or amendments thereto and any other document in support
thereof or supplemental thereto, and the undersigned hereby grants to said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing whatsoever that said attorney or attorneys may deem
necessary or advisable to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts and things which said
attorney or attorneys may do or cause to be done by virtue of this Power of
Attorney.
EXECUTED this 24th day of February, 1998.
/s/ KENT F. HANSEN
-----------------------------------------
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in my capacity or capacities as a member
of the Board of Directors and/or Officer of Stone & Webster, Incorporated, a
Delaware corporation (the "Company"), does hereby make, constitute and appoint
H. Kerner Smith and James P. Jones, and each of them acting individually, my
true and lawful attorney-in-fact with power to act without the other and with
full power of substitution, to execute, deliver and file, for and on behalf of
the undersigned, in my name and in my capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year ended December 31, 1997,
and any amendment or amendments thereto and any other document in support
thereof or supplemental thereto, and the undersigned hereby grants to said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing whatsoever that said attorney or attorneys may deem
necessary or advisable to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts and things which said
attorney or attorneys may do or cause to be done by virtue of this Power of
Attorney.
EXECUTED this 24th day of February, 1998.
/s/ ELVIN R. HEIBERG III
-----------------------------------------
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in my capacity or capacities as a member
of the Board of Directors and/or Officer of Stone & Webster, Incorporated, a
Delaware corporation (the "Company"), does hereby make, constitute and appoint
H. Kerner Smith and James P. Jones, and each of them acting individually, my
true and lawful attorney-in-fact with power to act without the other and with
full power of substitution, to execute, deliver and file, for and on behalf of
the undersigned, in my name and in my capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year ended December 31, 1997,
and any amendment or amendments thereto and any other document in support
thereof or supplemental thereto, and the undersigned hereby grants to said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing whatsoever that said attorney or attorneys may deem
necessary or advisable to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts and things which said
attorney or attorneys may do or cause to be done by virtue of this Power of
Attorney.
EXECUTED this 24th day of February, 1998.
/s/ DAVID N. MCCAMMON
-----------------------------------------
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in my capacity or capacities as a member
of the Board of Directors and/or Officer of Stone & Webster, Incorporated, a
Delaware corporation (the "Company"), does hereby make, constitute and appoint
H. Kerner Smith and James P. Jones, and each of them acting individually, my
true and lawful attorney-in-fact with power to act without the other and with
full power of substitution, to execute, deliver and file, for and on behalf of
the undersigned, in my name and in my capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year ended December 31, 1997,
and any amendment or amendments thereto and any other document in support
thereof or supplemental thereto, and the undersigned hereby grants to said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing whatsoever that said attorney or attorneys may deem
necessary or advisable to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts and things which said
attorney or attorneys may do or cause to be done by virtue of this Power of
Attorney.
EXECUTED this 24th day of February, 1998.
/s/ J. ANGUS MCKEE
---------------------------------------
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in my capacity or capacities as a member
of the Board of Directors and/or Officer of Stone & Webster, Incorporated, a
Delaware corporation (the "Company"), does hereby make, constitute and appoint
H. Kerner Smith and James P. Jones, and each of them acting individually, my
true and lawful attorney-in-fact with power to act without the other and with
full power of substitution, to execute, deliver and file, for and on behalf of
the undersigned, in my name and in my capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year ended December 31, 1997,
and any amendment or amendments thereto and any other document in support
thereof or supplemental thereto, and the undersigned hereby grants to said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing whatsoever that said attorney or attorneys may deem
necessary or advisable to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts and things which said
attorney or attorneys may do or cause to be done by virtue of this Power of
Attorney.
EXECUTED this 24th day of February, 1998.
/s/ BERNARD W. REZNICEK
-----------------------------------------
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in my capacity or capacities as a member
of the Board of Directors and/or Officer of Stone & Webster, Incorporated, a
Delaware corporation (the "Company"), does hereby make, constitute and appoint
H. Kerner Smith and James P. Jones, and each of them acting individually, my
true and lawful attorney-in-fact with power to act without the other and with
full power of substitution, to execute, deliver and file, for and on behalf of
the undersigned, in my name and in my capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year ended December 31, 1997,
and any amendment or amendments thereto and any other document in support
thereof or supplemental thereto, and the undersigned hereby grants to said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing whatsoever that said attorney or attorneys may deem
necessary or advisable to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts and things which said
attorney or attorneys may do or cause to be done by virtue of this Power of
Attorney.
EXECUTED this 26th day of March, 1998.
/s/ PETER M. WOOD
-----------------------------------------
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in my capacity or capacities as a member
of the Board of Directors and/or Officer of Stone & Webster, Incorporated, a
Delaware corporation (the "Company"), does hereby make, constitute and appoint
H. Kerner Smith and James P. Jones, and each of them acting individually, my
true and lawful attorney-in-fact with power to act without the other and with
full power of substitution, to execute, deliver and file, for and on behalf of
the undersigned, in my name and in my capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year ended December 31, 1997,
and any amendment or amendments thereto and any other document in support
thereof or supplemental thereto, and the undersigned hereby grants to said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing whatsoever that said attorney or attorneys may deem
necessary or advisable to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts and things which said
attorney or attorneys may do or cause to be done by virtue of this Power of
Attorney.
EXECUTED this 24th day of February, 1998.
/s/ EDWARD J. WALSH
-----------------------------------------
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