Third Quarter Net Earnings Were $0.11 Per Diluted Share; Third
Quarter Net Earnings From Continuing Operations Were $0.02 Per
Diluted Share HOUSTON, Nov. 30 /PRNewswire-FirstCall/ -- Stewart
& Stevenson Services, Inc. (NYSE:SVC) announced results for the
third quarter of fiscal 2005, which ended on October 29, 2005. As
previously announced, the company entered into two separate
definitive agreements during the third quarter to sell the
Engineered Products and Power Products businesses. Operating
results have been restated to reflect the two businesses as
discontinued operations and restated fiscal 2005 and fiscal 2004
quarterly statements of operations for continuing operations are
attached. The company's continuing operations consist of the
Tactical Vehicle Systems ("TVS") business and certain corporate
overhead expenses. Sales for the third quarter of fiscal 2005
totaled $161.8 million compared to sales of $133.4 million in the
same period a year ago. Net earnings in the third quarter of fiscal
2005 were $3.4 million, or $0.11 per diluted share, compared to
$2.1 million, or $0.07 per diluted share, in the third quarter of
fiscal 2004. Net earnings from continuing operations in the third
quarter of fiscal 2005 were $0.6 million, or $0.02 per diluted
share, compared to $8.5 million, or $0.29 per diluted share, in the
third quarter of fiscal 2004. Max L. Lukens, Stewart &
Stevenson's President and Chief Executive Officer, stated, "Upon
completion of the sales of the Power Products and Engineered
Products businesses, Stewart & Stevenson will be primarily
engaged in the design, manufacture and service of tactical military
vehicles and related products. We are confident that our expertise
in this area, combined with our strong production backlog and
financial condition, uniquely positions us to take advantage of
potential opportunities aimed at enhancing shareholder value."
Continuing Operations Sales in the third quarter of fiscal 2005
were $161.8 million, representing a 21% increase from $133.4
million of sales in the prior year's third quarter. Gross profit
for the third quarter of fiscal 2005 decreased to $6.4 million or
4.0% of sales compared to $18.5 million or 13.8% of sales in the
third quarter of fiscal 2004. Gross profit margins were expected to
be lower in fiscal 2005 as a result of the lower unit prices and
mix of option vehicles in the current multi-year contract with the
U.S. Army to produce the Family of Medium Tactical Vehicles
("FMTV") which began production in November 2004. The lower margins
on this contract were partially offset by sales under other U.S.
Army contracts to produce Low Signature Armored Cabs ("LSAC") for
use on the FMTV. Third quarter 2005 results included the sale of
230 LSAC units. Selling and administrative expenses during the
third quarter of fiscal 2005 were $4.7 million or 2.9% of sales
compared to $6.2 million or 4.6% of sales in the third quarter of
fiscal 2004. The decline in selling and administrative expenses is
attributable to lower LSAC product development costs combined with
lower spending in the company's corporate office. Corporate office
expenses declined from $4.0 million in the third quarter of fiscal
2004 to $3.4 million in the third quarter of fiscal 2005. As
previously announced, during the second quarter of fiscal 2005, the
TVS business received additional orders from the U.S. Army for FMTV
trucks and trailers valued at approximately $483 million. These
contract modifications, which are funded by the 2005 U.S. Congress
Supplemental Spending Bill, provide for 3,016 additional vehicles
to the third program year of the current production contract with
deliveries scheduled from June 2006 through September 2008. At the
end of the third quarter, total backlog from continuing operations
was approximately $1.1 billion. The company is evaluating the
requirements under the contract modifications and is increasing its
production capacity for 2006 in order to meet the required delivery
schedule. This will require capital expenditures of approximately
$25 million for additional equipment and buildings through the
first half of fiscal 2006, of which approximately $7 million was
expended during the third quarter of fiscal 2005. The contract
modification is not expected to have a significant impact on the
company's fourth quarter fiscal 2005 operating results.
Discontinued Operations Net earnings from discontinued operations
were $2.7 million or $0.09 per diluted share in the third quarter
of fiscal 2005. These earnings include after-tax earnings of $5.2
million from the Power Products and Engineered Products businesses,
an after-tax loss on disposal of $1.9 million resulting from the
settlement of a dispute arising from the sale of the Airline
Products business during fiscal 2004, and after-tax losses of $0.5
million from the continued wind-down of activities in the
Distributed Energy Solutions business. Liquidity Total cash and
short-term investments were $60.9 million at the end of the third
quarter, as compared to $71.5 million at the end of the second
quarter. Cash used in operating activities of the discontinued
Engineered Products and Power Products businesses, partially offset
by $9.4 million of cash provided by the third quarter sale of four
Power Products California locations, accounted for most of the
decrease in the cash balance. The sales of the Engineered Products
and Power Products businesses are expected to provide cash proceeds
of approximately $240 million in the fourth quarter, subject to
adjustment. Conference Call Stewart & Stevenson Services has
scheduled a conference call for Wednesday, November 30, 2005 at
10:00 a.m. Eastern Time to review third quarter results. To listen
to the call, dial 800-299-6183 or 617-801-9713 and use pass code
28695450 at least ten minutes before the conference call begins. A
telephonic replay of the conference call will be available until
December 7, 2005 and may be accessed by dialing 888-286-8010 or
617-801-6888 and using pass code 21556853. Investors, analysts, and
the general public will also have the opportunity to listen to the
conference call free over the Internet by visiting the company's
web site at http://www.ssss.com/ . To listen to the live call on
the web, please visit the Stewart & Stevenson web site at least
fifteen minutes early to register, download, and install any
necessary audio software. For those who cannot listen to the live
web cast, an audio archive will be available shortly after the call
ends. This press release contains forward-looking statements that
are based on management's current expectations, estimates, and
projections. These statements are not guarantees of future
performance and involve a number of risks, uncertainties and
assumptions and are made pursuant to the Safe Harbor Provisions of
the Private Securities Litigation Reform Act of 1995. Many factors,
including those discussed more fully elsewhere in this release and
in the Company's filings with the Securities and Exchange
Commission, particularly its latest annual report on Form 10-K, as
well as others, could cause results to differ materially from those
stated. These factors include, but are not limited to, risks of
dependence on government and failure to obtain new government
contracts, inherent risks of government contracts, risks of supply
interruptions to Tactical Vehicle Systems segment, risks associated
with Distributed Energy Solutions segment, risks of fixed-price
contracts, risks as to rising steel prices, risks as to cost
controls, risks of general economic conditions, risks of oil and
gas industry economic conditions, risks as to distributorships,
risks as to licenses, risk of competition, risks relating to
technology, risks as to terrorist attacks on the U.S. and their
impact on the U.S. economy, risks relating to personnel, risks of
claims and litigation, risks of product defects, risks as to
foreign sales and global trade matters, risks as to acquisitions
and restructuring activities, risks as to currency fluctuations,
risks as to environmental and safety matters, and credit risks all
as more specifically outlined in the Company's latest annual report
on Form 10-K. In addition, such forward-looking statements could be
affected by general industry and market conditions and growth
rates, general domestic and international conditions including
interest rates, inflation and currency exchange rates and other
future factors. Actual outcomes and results may differ materially
from what is expressed or forecasted in such forward- looking
statements. STEWART & STEVENSON SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per
share data) Three Months Ended Nine Months Ended Oct. 29, Oct. 30,
Oct. 29, Oct. 30, 2005 2004 2005 2004 (Unaudited) (Unaudited) Sales
$161,821 $133,431 $531,513 $412,951 Cost of sales 155,421 114,961
489,349 351,752 Gross profit 6,400 18,470 42,164 61,199 Selling and
administrative expenses 4,720 6,199 14,869 19,281 Other expense
(income), net 85 29 (138) 29 Operating profit 1,595 12,242 27,433
41,889 Interest expense 563 534 1,636 1,487 Interest income (525)
(411) (2,082) (997) Earnings from continuing operations before
income taxes 1,557 12,119 27,879 41,399 Income tax expense 918
3,630 10,411 14,038 Net earnings from continuing operations 639
8,489 17,468 27,361 Earnings (loss) from discontinued operations,
net of tax expense (benefit) of $2,574, ($5,557), $4,656 and
($9,454) 4,660 (6,406) 9,656 (13,959) Loss from disposal of
discontinued operations, net of tax of ($1,077) and ($3,269)
(1,949) --- (6,780) --- Net earnings $3,350 $2,083 $20,344 $13,402
Weighted average shares outstanding: Basic 29,194 28,768 29,060
28,729 Diluted 29,674 29,186 29,555 29,100 Earnings (loss) per
share: Basic: Continuing operations $0.02 $0.30 $0.60 $0.95
Discontinued operations 0.09 (0.23) 0.10 (0.48) Net earnings per
share $0.11 $0.07 $0.70 $0.47 Diluted: Continuing operations $0.02
$0.29 $0.59 $0.94 Discontinued operations 0.09 (0.22) 0.10 (0.48)
Net earnings per share $0.11 $0.07 $0.69 $0.46 Cash dividends per
share $0.085 $0.085 $0.255 $0.255 STEWART & STEVENSON SERVICES,
INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS -
CONTINUING OPERATIONS (Dollars in thousands) Three Months Ended
(Unaudited) May 1, July 31, Oct. 30, Jan. 31, April 30, July 30,
2004 2004 2004 2004 2005 2005 Sales $138,783 $140,737 $133,431
$136,852 $165,518 $204,174 Cost of sales 117,527 119,265 114,961
124,254 150,253 183,675 Gross profit 21,256 21,472 18,470 12,598
15,265 20,499 Selling and administrative expenses 6,047 7,036 6,199
6,661 5,264 4,885 Other expense (income), net (101) 102 29 378
(142) (81) Operating profit 15,310 14,334 12,242 5,559 10,143
15,695 Interest expense 517 436 534 542 525 547 Interest income
(254) (332) (411) (391) (760) (797) Earnings from continuing
operations, before income taxes $15,047 $14,230 $12,119 $5,408
$10,378 $15,945 STEWART & STEVENSON SERVICES, INC. AND
SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except
share data) Oct. 29, 2005 Jan. 31, 2005 ASSETS (Unaudited)
(Audited) CURRENT ASSETS Cash and cash equivalents $50,093 $128,515
Short-term investments 10,790 2,480 Accounts receivable, net 63,221
62,136 Inventories 21,460 17,803 Deferred income taxes 6,406 5,872
Income tax receivable 4,551 7,223 Other current assets 6,275 1,655
Total assets of discontinued operations 344,738 321,949 TOTAL
CURRENT ASSETS 507,534 547,633 PROPERTY, PLANT AND EQUIPMENT, NET
40,993 34,660 DEFERRED INCOME TAX ASSET 23,998 26,438 INTANGIBLES
AND OTHER ASSETS, NET 45,972 4,611 TOTAL ASSETS $618,497 $613,342
LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Notes
payable $1,874 $--- Current portion of long-term debt 25,000 ---
Accounts payable 53,897 43,441 Accrued payrolls and incentives
13,308 13,178 Billings in excess of incurred costs 18,162 59,894
Other current liabilities 28,676 26,154 Total liabilities of
discontinued operations 112,005 99,193 TOTAL CURRENT LIABILITIES
252,922 241,860 LONG-TERM DEBT, NET 76 25,000 ACCRUED
POSTRETIREMENT BENEFITS AND PENSION 58,684 57,621 OTHER LONG-TERM
LIABILITIES 3,715 4,141 TOTAL LIABILITIES 315,397 328,622
SHAREHOLDERS' EQUITY Common Stock, without par value, 100,000,000
shares authorized; 29,270,741 and 28,865,070 shares issued,
respectively 66,978 59,616 Accumulated other comprehensive loss
(37,968) (36,048) Retained earnings 274,090 261,152 TOTAL
SHAREHOLDERS' EQUITY 303,100 284,720 TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $618,497 $613,342 STEWART & STEVENSON
SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH
FLOWS (In thousands) Three Months Ended Nine Months Ended Oct. 29,
Oct. 30, Oct. 29, Oct. 30, 2005 2004 2005 2004 (Unaudited)
(Unaudited) Operating Activities Net earnings $3,350 $2,083 $20,344
$13,402 Adjustments to reconcile net earnings to net cash provided
by (used in) operating activities: Net (earnings) loss from
discontinued operations (2,711) 6,406 (2,876) 13,959 Deferred tax
(benefit) expense (2,393) 2,634 1,378 (427) Depreciation and
amortization 2,738 2,233 5,988 6,200 Unrealized foreign exchange
(gains) losses (198) --- 1,216 --- Change in operating assets and
liabilities net of the effect of discontinued operations: Accounts
receivable, net (7,826) (6,627) (8,576) (9,716) Recoverable costs
and accrued profits not yet billed 5,044 --- --- --- Inventories
1,877 (6,527) 3,066 (7,072) Other current and noncurrent assets
(1,699) (7,373) (547) 8,935 Accounts payable (10,440) 3,077 3,918
(663) Accrued payrolls and incentives 4,385 4,690 (1,929) 3,308
Billings in excess of incurred costs 18,179 3,635 (41,715) (33,094)
Other current liabilities 253 (2,452) (5,835) 2,884 Accrued
postretirement benefits & pension 348 (10,148) 1,063 (9,434)
Other, net 59 163 (304) (1,413) Net Cash Provided by (Used in)
Continuing Operations 10,966 (8,206) (24,809) (13,131) Net Cash
Provided by (Used in) Discontinued Operations (24,231) (3,152)
(16,606) 47,218 Net Cash Provided by (Used in) Operating Activities
(13,265) (11,358) (41,415) 34,087 Investing Activities Capital
expenditures (7,125) (3,021) (8,960) (6,567) Proceeds from sale of
businesses 9,438 --- 24,438 --- Acquisition of businesses --- ---
(42,778) --- Proceeds from disposal of property, plant and
equipment 147 163 147 342 Short-term investment activity, net 250
3,505 (8,310) 315 Net investing activities of discontinued
operations --- 38 66 112 Net Cash Provided by (Used in) Investing
Activities 2,710 685 (35,397) (5,798) Financing Activities Loan
acquisition costs --- --- (76) --- Change in short-term notes
payable (19) --- (19) --- Dividends paid (2,474) (2,465) (7,407)
(7,341) Proceeds from exercise of stock options 2,302 89 5,949
1,339 Net Cash Used in Financing Activities (191) (2,376) (1,553)
(6,002) Effect of exchange rate changes on cash 348 --- (57) ---
Increase (decrease) in cash and cash equivalents (10,398) (13,049)
(78,422) 22,287 Cash and cash equivalents, beginning of period
60,491 87,522 128,515 52,186 Cash and cash equivalents, end of
period $50,093 $74,473 $50,093 $74,473 STEWART & STEVENSON
SERVICES, INC. AND SUBSIDIARIES SELECTED OTHER INFORMATION
Continuing Operations July 31, Oct. 30, Jan. 31, April 30, July 30,
Oct. 29, ($ Millions) 2004 2004 2005 2005 2005 2005 Order Backlog
$497 $451 $457 $910 $1,205 $1,121 TACTICAL VEHICLE UNIT DELIVERIES
Fiscal 2004 1Q 2Q 3Q 4Q Total Trucks 743 751 683 627 2,804 LSACs
--- --- --- 270 270 Trailers 204 201 146 179 730 Sales (millions)
$139 $141 $133 $137 $550 Fiscal 2005 Estimated Unit Deliveries 1Q
2Q 3Q 4Q* Total* Trucks 627 711 704 937 2,979 LSACs 621 852 230 62
1,765 Trailers 291 337 373 554 1,555 Sales (millions) $166 $204
$162 $187 $719 * Based on current customer forecasts and other
data. See cautionary statements above for important information
regarding forward-looking statements. DATASOURCE: Stewart &
Stevenson Services, Inc. CONTACT: John Simmons, Sr. V.P., CFO of
Stewart & Stevenson Services, Inc., +1-713-868-7700 Web site:
http://www.ssss.com/
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