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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 11-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM_________ TO _____________
COMMISSION FILE NUMBER 1-8514
A. FULL TITLE OF THE PLAN AND THE ADDRESS OF THE PLAN, IF DIFFERENT
FROM THAT OF THE ISSUER NAMED BELOW:
STEWART & STEVENSON
401(K) SAVINGS PLAN
B. NAME OF ISSUER OF THE SECURITIES HELD PURSUANT TO THE PLAN AND THE
ADDRESS OF ITS PRINCIPAL EXECUTIVE OFFICE:
STEWART & STEVENSON SERVICES, INC.
2707 NORTH LOOP WEST
HOUSTON, TEXAS 77008
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Stewart & Stevenson 401(k) Savings Plan
Financial Statements and Supplemental Schedules
Year ended December 31, 2001
CONTENTS
Report of Independent Auditors.........................................1
Audited Financial Statements
Statements of Net Assets Available for Benefits........................4
Statement of Changes in Net Assets Available for Benefits..............5
Notes to Financial Statements..........................................6
Supplemental Schedules
Schedule G, Part III - Schedule of Nonexempt Transactions.............11
Schedule H, Line 4(i) - Schedule of Assets (Held At End of Year)......12
The statement of net assets available for benefits as of December 31, 2000
of the Stewart & Stevenson 401(k) Savings Plan included in this Form 11-K
were audited by Arthur Anderson LLP, independent auditors, as set forth in
their report thereon included herein, and are included herein, and
incorporated by reference in the Registration Statement of Stewart &
Stevenson Services Inc. on Form S-8 (No. 033-52903), in reliance upon such
report given on the authority of such firm as an expert in accounting and
auditing. Arthur Andersen LLP has not consented to this inclusion of their
report in this Form 11-K or the incorporation by reference of their report in
such Registration Statements and the Stewart & Stevenson 401(k) Savings Plan
has not obtained their consent to do so in reliance on Rule 437a of the
Securities Act of 1933. Because Arthur Andersen LLP has not consented to the
incorporation of their report in such Registration Statements, you will not
be able to recover against Arthur Andersen LLP under such Section 11 of the
Securities Act of 1933 for any untrue statements of a material fact contained
in the financial statements audited by Arthur Andersen LLP or any omissions
to state material fact required to be stated therein.
1
Report of Independent Auditors
Administrative Committee
Stewart & Stevenson 401(k) Savings Plan
We have audited the accompanying statement of net assets available for benefits
of the Stewart & Stevenson 401(k) Savings Plan as of December 31, 2001, and the
related statement of changes in net assets available for benefits for the year
then ended. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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 audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 2001, and the changes in its net assets available for benefits for
the year then ended, in conformity with accounting principles generally accepted
in the United States.
Our audit was performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedule of nonexempt
transactions for the year ended December 31, 2001, and schedule of assets (held
at end of year) as of December 31, 2001, are presented for purposes of
additional analysis and are not a required part of the financial statements but
are supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. These supplemental schedules are the responsibility of the
Plan's management. The supplemental schedules have been subjected to the
auditing procedures applied in our audit of the financial statements and, in our
opinion, are fairly stated in all material respects in relation to the financial
statements taken as a whole.
/s/ Ernst & Young LLP
Houston, Texas
June 6, 2002
2
THE FOLLOWING REPORT IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN
LLP AND HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Administrative Committee of the
Stewart & Stevenson 401(k) Savings Plan:
We have audited the accompanying statements of net assets available for benefits
of the Stewart & Stevenson 401(k) Savings Plan (the Plan) as of December 31,
2000 and 1999, and the related statement of changes in net assets available for
benefits for the year ended December 31, 2000. These financial statements and
supplemental schedules referred to below are the responsibility of the Plan's
administrator. Our responsibility is to express an opinion on these financial
statements and supplemental schedules based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Stewart &
Stevenson 401(k) Savings Plan as of December 31, 2000 and 1999, and the changes
in net assets available for benefits for the year ended December 31, 2000, in
conformity with accounting principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets (held
at end of year) as of December 31, 2000 (Schedule I), and schedule of nonexempt
transactions for the year ended December 31, 2000 (Schedule II), are presented
for the purpose of additional analysis and are not a required part of the basic
financial statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The supplemental schedules
have been subjected to the auditing procedures applied in the audits of the
basic financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Houston, Texas
June 28, 2001
3
Stewart & Stevenson 401(k) Savings Plan
Statements of Net Assets Available for Benefits
DECEMBER 31
2001 2000
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ASSETS
Cash $ 1,113 $ 6,968
Receivables:
Employer contributions 194,975 310,016
Participant contributions 587,419 1,418,271
Accrued income 28,070 22,548
Pending sale 24 22,375
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Total receivables 810,488 1,773,210
Investments 55,139,404 49,135,494
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Total assets 55,951,005 50,915,672
LIABILITIES
Accrued expenses 51,838 34,706
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Net assets available for benefits $55,899,167 $50,880,966
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SEE ACCOMPANYING NOTES.
4
Stewart & Stevenson 401(k) Savings Plan
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 2001
Additions:
Employer contributions $ 2,670,798
Participant contributions 8,521,636
Rollover contributions 769,172
Investment income 1,721,509
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Total additions 13,683,115
Deductions:
Benefit payments 4,257,566
Net depreciation in fair value of investments 4,302,184
Administrative expenses 105,164
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Total deductions 8,664,914
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Net increase 5,018,201
Net assets available for benefits at:
Beginning of year 50,880,966
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End of year $55,899,167
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SEE ACCOMPANYING NOTES.
5
Stewart & Stevenson 401(k) Savings Plan
Notes to Financial Statements
December 31, 2001
1. DESCRIPTION OF PLAN
GENERAL
The Stewart & Stevenson 401(k) Savings Plan (the "Plan") is a defined
contribution plan established effective January 1, 1994 for the benefit of
eligible employees of Stewart & Stevenson, Inc. and certain adopting
subsidiaries (collectively, the "Company") who have completed at least 30 days
of service. The Plan is subject to the provisions of the Employee Retirement
Income Security Act of 1974 ("ERISA").
The following description of the Plan is provided for general information only.
Participants should refer to the SUMMARY PLAN DESCRIPTION for a more complete
description of the Plan's provisions, a copy of which is available from the
Company.
CONTRIBUTIONS
Eligible employees are automatically enrolled for a 1% participant contribution
of their eligible compensation unless otherwise elected. Participants may elect
to make an additional contribution from 2% to 20% of their eligible
compensation, subject to certain limitations, as defined by the Internal Revenue
Code ("IRC"). The first 1% of participant contributions is matched dollar for
dollar ("Basic Match") by the Company, and participant contributions in excess
of 1% of compensation but no more than 6% are matched at 25% ("Supplemental
Match") by the Company. Participants may also make rollover contributions to the
Plan representing distributions from other qualified plans. Participants may
direct the investment of all contributions into one or more of the investment
options offered by the Plan.
VESTING
Participants are fully vested in their participant contributions, rollovers,
Basic Match, and the related earnings which have been credited to their
accounts. Participants shall have a 100% vested interest in their Supplemental
Match contributions upon attainment of age 65, the normal retirement age, or
upon death or disability, as defined by the Plan. Participants who terminate for
any other reason vest in their Supplemental Match contributions and related
earnings at a rate of 20% per year with full vesting after five years of
service. Forfeited amounts of nonvested accounts are used to reduce future
Supplemental Match or administrative expenses of the Plan.
6
Stewart & Stevenson 401(k) Savings Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF PLAN (CONTINUED)
BENEFIT PAYMENTS
Benefits are payable to participants or to a designated beneficiary in the event
of their retirement, death, or termination of employment in the form of a lump
sum payment. In limited circumstances, account withdrawals may be made upon the
attainment of age 59 1/2 or in the event of financial hardship as defined in the
Plan.
PARTICIPANT LOANS
Participants may borrow from their accounts a minimum of $1,000 up to a maximum
equal to the lesser of $50,000 or 50% of their vested account balance. The loan
term may not exceed five years, except for loans used for the purchase of a
principal residence, which may be repaid over a longer period of time. Principal
and interest are paid ratably through payroll deductions.
ADMINISTRATIVE EXPENSES
The Company pays certain administrative expenses of the Plan.
PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions set forth in ERISA. In the event of Plan
termination, participants will become 100% vested in their account balances.
2. SUMMARY OF ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The accompanying financial statements of the Plan have been prepared using the
accrual basis of accounting in accordance with accounting principles generally
accepted in the United States. Benefit payments are recorded when paid.
7
Stewart & Stevenson 401(k) Savings Plan
Notes to Financial Statements (continued)
2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
that affect the amounts reported in the financial statements and accompanying
notes and schedules. Actual results could differ from those estimates.
INVESTMENT VALUATION AND INCOME RECOGNITION
Investments in mutual funds and common stock are stated at fair value, based on
quotations obtained from national security exchanges. The investment in the
common collective trust fund is stated at fair value as determined by the
issuer, based on the fair value of the underlying investments.
Purchases and sales of securities are recorded on a trade-date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date.
RISKS AND UNCERTAINTIES
The Plan provides for various investments in a common collective trust fund,
mutual funds, and common stock. Investment securities, in general, are exposed
to various risks, such as interest rate, credit, and overall market volatility
risk. Due to the level of risk associated with certain investment securities, it
is reasonably possible that changes in the values of investment securities will
occur in the near term and that such change could materially affect the amounts
reported in the statement of net assets available for benefits and participant
account balances.
8
Stewart & Stevenson 401(k) Savings Plan
Notes to Financial Statements (continued)
3. INVESTMENTS
Individual investments that represent 5% or more of the Plan's net assets are as
follows:
DECEMBER 31
2001 2000
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AIM Value Fund $14,062,515 $14,346,645
American Balanced Fund 5,201,360 4,297,325
Stewart & Stevenson Services, Inc. common stock 3,268,435 3,656,044
Franklin Small Cap Growth Fund 4,408,400 3,921,656
Massachusetts Investors Trust 3,923,704 3,180,118
Merrill Lynch Corporate Bond Fund, Inc. Intermediate Term 6,179,431 4,289,942
Merrill Lynch Global Allocation Fund, Inc. 7,154,706 6,738,359
Merrill Lynch Retirement Preservation Trust 6,514,535 5,140,003
During 2001, the Plan's investments (including investments bought, sold, and
held during the year) depreciated in value as follows:
Common stock $ 551,832
Mutual funds 3,750,352
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$ 4,302,184
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4. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
dated January 20, 2000, stating that the Plan is qualified under section 401(a)
of the IRC and, therefore, the related trust is exempt from taxation. Subsequent
to this issuance of the determination letter, the Plan was amended. Once
qualified, the Plan is required to operate in conformity with the IRC to
maintain its qualification. The Plan administrator believes the Plan is being
operated in compliance with the applicable requirements of the IRC and,
therefore, believes that the Plan, as amended, is qualified and the related
trust is tax exempt.
9
Supplemental Schedules
Stewart & Stevenson 401(k) Savings Plan
Schedule G, Part III - Schedule of Nonexempt Transactions
EIN: 74-1051605 PN: 002
Year ended December 31, 2001
RELATIONSHIP TO PLAN,
EMPLOYER, OR OTHER CURRENT VALUE
IDENTITY OF PARTY INVOLVED PARTY-IN-INTEREST DESCRIPTION OF TRANSACTIONS OF ASSET
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Stewart & Stevenson Employer/Plan Sponsor Failure to timely remit $ 1,062,740
Services, Inc. participant deferrals for
various pay periods in 2000
(contributions and loan
repayments returned to
employer in error and
subsequently remitted in 2001
along with interest).
Stewart & Stevenson 401(k) Savings Plan
Schedule H, Line 4(i) - Schedule of Assets (Held At End of Year)
EIN: 74-1051605 PN: 002
December 31, 2001
IDENTITY OF ISSUE, BORROWER, LESSOR, CURRENT
OR SIMILAR PARTY DESCRIPTION OF INVESTMENT VALUE
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AIM Family of Funds AIM Value Fund $ 14,062,515
American Funds Group American Balanced Fund 5,201,360
Franklin Investments Franklin Small Cap Growth Fund 4,408,400
Massachusetts Financial Services Massachusetts Investors Trust 3,923,704
Merrill Lynch Corporate Bond Fund, Inc.
*Merrill Lynch Intermediate Term 6,179,431
Merrill Lynch Global Allocation Fund, Inc.
*Merrill Lynch 7,154,706
Merrill Lynch Retirement Preservation Trust
*Merrill Lynch 6,514,535
Olympic Trust Hotchkis & Wiley International Fund 2,003,236
*Stewart & Stevenson Services, Inc. 173,761 shares of common stock 3,268,435
Various maturities and interest rates
*Participant loans ranging from 6.0% to 10.5% 2,423,082
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$ 55,139,404
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*Party-in-interest.
SIGNATURES
THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934,
the Stewart & Stevenson 401(k) Savings Plan Administrative Committee has duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
STEWART & STEVENSON
401(k) SAVINGS PLAN ADMINISTRATIVE COMMITTEE
Date: June 28, 2002
/s/ DAVID STEWART
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David Stewart
Chairman
/s/ JOHN SIMMONS
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John Simmons
Member
/s/ BILL MOLL
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Bill Moll
Member
/s/ STEVE HINES
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Steve Hines
Member
/s/ LESLEY ROTH
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Lesley Roth
Member
INDEX TO EXHIBIT
EXHIBIT NO. DESCRIPTION
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23.1 Consent of independent accountants