SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 11 - K
ANNUAL REPORT
PURSUANT TO SECTION 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(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, 1997
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 1-1228
Employee Investment Plan of Stone & Webster,
Incorporated and Participating Subsidiaries
(Full title of the Plan)
Stone & Webster, Incorporated
245 Summer Street, Boston, Massachusetts 02210
(617) 589-5111
(Name of issuer of the securities held pursuant to the
Plan and the address of its principal executive office)
1
REQUIRED INFORMATION
The Statements of Net Assets Available for Benefits With Fund Information of the
Plan as of December 31, 1997 and 1996, and the related Statement of Changes in
Net Assets Available for Benefits With Fund Information, and supplemental
schedules for the year ended December 31, 1997, together with the Report and
Consent of Independent Accountants, are attached and filed herewith.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Committee under the Plan, which administers the Plan, has duly caused this
annual report to be signed on its behalf by the undersigned hereunto duly
authorized.
EMPLOYEE INVESTMENT PLAN OF STONE & WEBSTER,
INCORPORATED AND PARTICIPATING SUBSIDIARIES
By /s/ PETER F. DURNING
-----------------------------------------
Peter F. Durning
Secretary of the Committee under the Plan
Date: June 26, 1998
2
EMPLOYEE INVESTMENT PLAN
of STONE & WEBSTER, INCORPORATED
and PARTICIPATING SUBSIDIARIES
INDEX OF FINANCIAL STATEMENTS
and SUPPLEMENTAL SCHEDULES
Pages
Report of Independent Accountants 4
Financial Statements:
Statement of Net Assets Available for Benefits With
Fund Information as of December 31, 1997 5
Statement of Net Assets Available for Benefits With
Fund Information as of December 31, 1996 6
Statement of Changes in Net Assets Available for Benefits
With Fund Information for the Year Ended December 31, 1997 7-8
Notes to Financial Statements 9-13
Supplemental Schedules:
Schedule of Assets Held for Investment Purposes at
December 31, 1997 (Form 5500, Line 27a) 14
Schedule of Reportable Transactions for the Year Ended
December 31, 1997 (Form 5500, Line 27d) 15
Schedule of Nonexempt Transactions for the Year Ended
December 31, 1997 (Form 5500, Line 27e) 16
Exhibits:
Exhibit 1
Consent Of Independent Accountants 17
3
REPORT OF INDEPENDENT ACCOUNTANTS
________
To the Committee under the
Employee Investment Plan of Stone & Webster,
Incorporated and Participating Subsidiaries:
We have audited the accompanying statements of net assets available for benefits
with fund information of the Employee Investment Plan of Stone & Webster,
Incorporated and Participating Subsidiaries (the "Plan") as of December 31, 1997
and 1996, and the related statement of changes in net assets available for
benefits with fund information for the year ended December 31, 1997. 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 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 net assets available for benefits with fund
information of the Plan as of December 31, 1997 and 1996, and the changes in net
assets available for benefits with fund information for the year ended December
31, 1997, in conformity with generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules listed in the
accompanying index on page 3 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. These supplemental schedules are the responsibility of the
Plan's management. 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/ COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
June 10, 1998
4
EMPLOYEE INVESTMENT PLAN OF STONE & WEBSTER, INCORPORATED
AND PARTICIPATING SUBSIDIARIES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
December 31, 1997
(All dollar amounts are in thousands.)
Non-
Participant-
Participant-Directed Directed
--------------------------------------------------------------------------------- ------------
Stone & Putnam The The
Stone & Webster OTC & Putnam George Putnam
Webster Putnam Stable Emerging S&P 500 Putnam Putnam Global Stone &
Stock Voyager Value Growth Index Investors Fund of Growth Loans Webster
Fund Fund Fund Fund Fund Fund Boston Fund Account Stock Fund Total
------- ------- ------- -------- ------- --------- ------- ------ ------- ----------- --------
Assets:
Investments, at fair value:
Stone & Webster,
Incorporated Common
Stock (1,485,209
shares, cost $42,010) $23,513 - - - - - - - - $46,106 $ 69,619
Shares of registered
investment companies:
Putnam Voyager Fund
(4,809,717 shares,
cost $79,193) - $92,779 - - - - - - - - 92,779
Putnam OTC & Emerging
Growth Fund (4,371,958
shares, cost $64,300) - - - $70,782 - - - - - - 70,782
Putnam Investors Fund
(1,156,353 shares,
cost $12,885) - - - - - $13,037 - - - - 13,037
The George Putnam Fund
of Boston (862,411
shares, cost $15,483) - - - - - - $15,571 - - - 15,571
The Putnam Global
Growth Fund (542,986
shares, cost $6,454) - - - - - - - $5,484 - - 5,484
Shares of collective
investment trusts:
Putnam S&P 500 Index
Fund (437,082 shares,
cost $8,981) - - - - $9,865 - - - - - 9,865
Money market funds:
Short Term Investment
Fund - - 6,077 - - - - - - - 6,077
Daily Liquidity Fund 6 - - - - - - - - 14 20
Guaranteed investment
contracts (cost
$69,768) (Note 4) - - $69,768 - - - - - - - 69,768
Loans Receivable - - - - - - - - $5,670 - 5,670
Receivables:
Participants'
contributions 1 - - - - - - - - - 1
Interfund receivable
(payable) - - - - - - - - - - -
Due from Broker for
securities sold 22 - 238 - - - - - - - 260
------- ------- ------- ------- ------ ------- ------- ------ ------ ------- --------
Total assets 23,542 92,779 76,083 70,782 9,865 13,037 15,571 5,484 5,670 46,120 358,933
------- ------- ------- ------- ------ ------- ------- ------ ------ ------- --------
Liabilities:
Due to broker for
securities purchased 11 - - - - 40 39 - - - 90
Administrative expenses
payable - - 42 - - - - - - - 42
------- ------- ------- ------- ------ ------- ------- ------ ------ ------- --------
Total liabilities 11 - 42 - - 40 39 - - - 132
------- ------- ------- ------- ------ ------- ------- ------ ------ ------- --------
Net assets available for
benefits $23,531 $92,779 $76,041 $70,782 $9,865 $12,997 $15,532 $5,484 $5,670 $46,120 $358,801
======= ======= ======= ======= ====== ======= ======= ====== ====== ======= ========
The accompanying notes are an integral part of these financial statements.
5
EMPLOYEE INVESTMENT PLAN OF STONE & WEBSTER, INCORPORATED
AND PARTICIPATING SUBSIDIARIES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
Year Ended December 31, 1996
(All dollar amounts are in thousands.)
Non-
Participant-
Participant-Directed Directed
-------------------------------------------------------------- ------------
Stone & Short Value Assured Stone &
Webster Equity Term Equity Interest Loans Webster
Stock Fund Fund Fund Fund Fund Account Stock Fund Total
---------- ------- ------- ------- -------- ------- ---------- --------
Assets:
Investments at Fair Value (Note 2):
Stone & Webster, Incorporated Common
Stock (1,597,420 shares, cost $43,253) $17,973 - - - - - $32,346 $ 50,319
Participation in The Chase Manhattan
Bank, N.A. pooled trust funds for
employee benefit plans:
Temporary Investment Fund (cost $460) 164 - - - - - 296 460
UBS Temporary Investment Fund
(cost $95,904) - $82,454 $13,450 - - - - 95,904
Domestic Liquidity Fund (cost $8,303) - - - - $8,303 - - 8,303
Putnam OTC & Emerging Growth Fund
(cost $80,546) - - - $80,198 - - - 80,198
Guaranteed Investment Contracts
(cost $63,090) (Note 4) - - - - 63,090 - - 63,090
Loans Receivable (Note 1) - - - - - $4,920 - 4,920
Cash - 11 - 42 1 - - 54
Contributions Receivables:
Employees 7 49 - 46 36 - - 138
Employer - - - - - - 6 6
Dividends Receivable - 44 - 12 - - - 56
Interest Receivable - - - - 336 - - 336
Interfund Receivable (Payable) 67 306 - 184 (632) 75 - -
Other Receivables (Note 6) 270 1,187 - 730 - - 10 2,197
------- ------- ------- ------- ------- ------ ------- --------
Net Assets Available for Benefits $18,481 $84,051 $13,450 $81,212 $71,134 $4,995 $32,658 $305,981
======= ======= ======= ======= ======= ====== ======= ========
<FN>
The accompanying notes are an integral part of these Financial Statements.
</FN>
6
EMPLOYEE INVESTMENT PLAN OF STONE & WEBSTER, INCORPORATED
AND PARTICIPATING SUBSIDIARIES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
Year Ended December 31, 1997
(All dollar amounts are in thousands.)
Participant-Directed
----------------------------------------------------------------------------------------------------
Stone & Putnam
Webster OTC & Putnam
Stone & Putnam Short Assured Stable Value Emerging S&P 500
Webster Equity Voyager Term Interest Value Equity Growth Index
Stock Fund Fund Fund Fund Fund Fund Fund Fund Fund
---------- --------- ------- --------- -------- ------- -------- -------- -------
Additions:
Investment income
Net appreciation
(depreciation) in fair
value of investments $10,642 - $17,824 - - $ 1,345 - $ 7,946 $1,180
Interest 4 - - 18 - 17 -
Dividends 404 - 5,535 - - 4,924 - 94 -
------- -------- ------- -------- -------- ------- -------- ------- ------
11,046 - 23,363 - - 6,287 - 8,057 1,180
------- -------- ------- -------- -------- ------- -------- ------- ------
Contributions:
Participants' (Note 1) 1,101 - 5,943 - - 2,780 - 5,200 1,486
Employer's (Note 1) - - - - - - - - -
------- -------- ------- -------- -------- ------- -------- ------- ------
1,101 - 5,943 - - 2,780 - 5,200 1,486
------- -------- ------- -------- -------- ------- -------- ------- ------
Total additions 12,147 - 29,306 - - 9,067 - 13,257 2,666
------- -------- ------- -------- -------- ------- -------- ------- ------
Deductions:
Benefits paid to
participants 2,644 - 9,447 - - 12,453 - 7,202 869
Administrative expenses - - - - - 44 - - -
------- -------- ------- -------- -------- ------- -------- ------- ------
Total deductions 2,644 - 9,447 - - 12,497 - 7,202 869
------- -------- ------- -------- -------- ------- -------- ------- ------
Net increase prior to
interfund transfers 9,503 - 19,859 - - (3,430) - 6,055 1,797
Interfund transfers (4,453) $(84,051) 72,920 $(13,450) $(71,134) 79,471 $(81,212) 64,727 8,068
------- -------- ------- -------- -------- ------- -------- ------- ------
Net increase (decrease) 5,050 (84,051) 92,779 (13,450) (71,134) 76,041 (81,212) 70,782 9,865
Net assets available for
benefits:
Beginning of year 18,481 84,051 - 13,450 71,134 - 81,212 - -
------- -------- ------- -------- -------- ------- -------- ------- ------
End of year $23,531 $ - $92,779 $ - $ - $76,041 $ - $70,782 $9,865
======= ======== ======= ======== ======== ======= ======== ======= ======
The accompanying notes are an integral part of these financial statements.
7
EMPLOYEE INVESTMENT PLAN OF STONE & WEBSTER, INCORPORATED
AND PARTICIPATING SUBSIDIARIES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
(CONTINUED)
Year Ended December 31, 1997
(All dollar amounts are in thousands.)
Non-
Participant-
Participant-Directed Directed
----------------------------------------- ------------
The The
George Putnam
Putnam Putnam Global Stone &
Investors Fund of Growth Loans Webster
Fund Boston Fund Account Stock Fund Total
--------- -------- ------- -------- ----------- --------
Additions:
Investment income
Net appreciation in fair
value of investments $ 355 $ 116 $ (933) - $13,970 $ 52,445
Interest - - - $ 377 - 416
Dividends 1,121 1,113 980 - 536 14,707
------- ------- ------ ------ ------- --------
1,476 1,229 47 377 14,506 67,568
------- ------- ------ ------ ------- --------
Contributions:
Participants' (Note 1) 1,556 1,513 1,140 - - 20,719
Employer's (Note 1) - - - - 2,461 2,461
------- ------- ------ ------ ------- --------
1,556 1,513 1,140 - 2,461 23,180
------- ------- ------ ------ ------- --------
Total additions 3,032 2,742 1,187 377 16,967 90,748
------- ------- ------ ------ ------- --------
Deductions:
Benefits paid to
participants 564 740 173 287 3,505 37,884
Administrative expenses - - - - - 44
------- ------- ------ ------ ------- --------
Total deductions 564 740 173 287 3,505 37,928
------- ------- ------ ------ ------- --------
Net increase prior to
interfund transfers 2,468 2,002 1,014 90 13,462 52,820
Interfund transfers 10,529 13,530 4,470 585 - -
------- ------- ------ ------ ------- --------
Net increase (decrease) 12,997 15,532 5,484 675 13,462 52,820
Net assets available for
benefits:
Beginning of year - - - 4,995 32,658 305,981
------- ------- ------ ------ ------- --------
End of year $12,997 $15,532 $5,484 $5,670 $46,120 $358,801
======= ======= ====== ====== ======= ========
The accompanying notes are an integral part of these financial statements.
8
EMPLOYEE INVESTMENT PLAN OF STONE & WEBSTER, INCORPORATED
AND PARTICIPATING SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(All dollar amounts are in thousands.)
(1) Plan Description:
General:
The following description of the Employee Investment Plan of Stone & Webster,
Incorporated and Participating Subsidiaries (the "Plan") provides only general
information. Participants should refer to the Plan agreement for a more complete
description of the Plan's provisions.
The Employee Savings Plan of Stone & Webster, Incorporated and Participating
Subsidiaries (the "Original Plan") was created by action of the Board of
Directors of Stone & Webster, Incorporated on September 17, 1969 and by the
Board of Directors of certain subsidiaries of Stone & Webster, Incorporated (the
"Participating Subsidiaries") on various dates subsequent thereto. Stone &
Webster, Incorporated and the Participating Subsidiaries are collectively
referred to herein as the "Participating Companies". The Original Plan became
effective January 1, 1970. The Original Plan was approved by the stockholders of
Stone & Webster, Incorporated (the "Company") at the annual meeting of
stockholders of the Company held on May 14, 1970 and subsequent thereto has been
amended from time to time. As of July 1, 1983, the Original Plan was amended and
restated and the name was changed to the Employee Investment Plan of Stone &
Webster, Incorporated and Participating Subsidiaries (the "Plan").
The Plan is a voluntary defined contribution plan covering eligible employees of
the Participating Companies. Employees are eligible to participate on the first
day of the calendar year subsequent to their date of hire. It is subject to the
provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"). The
objectives of the Plan are (1) to enable employees to accumulate income and
capital by means of their own regular savings augmented by contributions by the
Participating Companies, (2) to encourage ownership by employees of the common
stock of the Company, thereby strengthening their interest in its progress and
(3) to attract and retain capable personnel. There were approximately 3,200 and
3,000 employee participants at December 31, 1997 and 1996, respectively.
The Plan is administered through the trustee and by a committee consisting of
directors of the Company, a majority of whom are outside directors (the
"Committee"). During 1996, the trustee under the Plan was The Chase Manhattan
Bank, N.A., Chase MetroTech Center, Brooklyn, New York 11245 ("Chase").
Effective January 1, 1997, the trustee under the Plan became Putnam Fiduciary
Trust Company ("Putnam"), Putnam Place, 859 Willard Street, Quincy,
Massachusetts 02269. Putnam serves as the single provider of trusteeship,
investment management, recordkeeping and other related services for the Plan. As
a result of this transfer of responsibilities, Plan assets totaling $298,720
were transferred from Chase to Putnam on January 2, 1997. Of this amount,
$50,779 was transferred to the Stone & Webster Stock Fund, $82,509 was
transferred to the Putnam Voyager Fund, $80,252 was transferred to the Putnam
OTC & Emerging Growth Fund, and $85,180 was transferred to the Stone & Webster
Stable Value Fund.
Contributions:
Contributions are held by the trustee and accumulated in separate participant
accounts. Participants may have contributed on his or her behalf an amount equal
to up to 15% of compensation received from a Participating Company for qualified
employment, including payments made under any established plan providing for
incentive compensation, but excluding special or extra compensation and bonuses,
on a before-tax basis as a salary reduction investment contribution under
Section 401(k) of the Internal Revenue Code ("IRC") or may contribute the same
as an after-tax investment contribution under Section 401(a) of the IRC. The
total of before-tax and after-tax contributions may not exceed 15%. All
participant contributions are made by payroll deduction. A participant may
modify his or her before-tax and after-tax contributions, including suspension
of contributions, as of the first day of any month.
The aggregate before-tax investment contributions and aggregate of all other
investment contributions in any year are subject to certain limitations
necessary to comply with the IRC. In order to prevent such limitations from
being exceeded, the Committee under the Plan may limit the percentage or amount
of compensation which may be contributed by or on behalf of certain highly
compensated employees as after-tax or before-tax investment contributions. Under
the IRC, before-tax contributions to qualified cash or deferred arrangements are
not included in the employee's gross income for that year. The employee's
liability for income tax on such contributions is deferred until such
contributions are withdrawn from the Plan.
Concurrent with the payment to the trustee of the contribution made by or on
behalf of the participant, a Participating Company will voluntarily pay to the
trustee for such participant's company accounts an amount equal to 25% of the
first 5% of the compensation contributed by or on behalf of the employee, such
contribution being hereinafter referred to as the "matching" contribution. Other
9
additional Participating Company contributions may, at the discretion of the
Board of Directors of the Company, be paid on or about the end of the calendar
year to the trustee for the Company accounts of each then active member.
Under the terms of the Plan, forfeitures are used to reduce subsequent Company
contributions. Employer contributions reflect a reduction of $119 for the year
ended December 31, 1997 for forfeitures as described in Article IV of the Plan.
Vesting:
Plan earnings and losses are allocated to participant accounts relative to the
participant's account balance in each respective fund.
Employees are always fully vested in their before-tax and after-tax investment
accounts and in the Company matching contributions on the first 1% of their
investments. The Company matching contributions on the next 4% of employee
investments vest upon completion of five years of service, or, earlier upon
death, disability or attainment of age 65.
Investment Options:
There are eight investment funds established pursuant to the Plan as of December
31, 1997 (five investment funds as of December 31, 1996): (1) Stone & Webster
Stock Fund (4,082 participant accounts), invested by the trustee solely in
common stock of the Company; (2) the Putnam Voyager Fund (3,142 participant
accounts), invested in a mutual fund consisting primarily of a portfolio of
stocks of small to medium-sized companies with the potential for above-average
sales and earnings growth and larger, well-established companies that show
near-term growth potential; (3) the Stone & Webster Stable Value Fund (2,525
participant accounts), invested primarily in a portfolio consisting of
guaranteed investment contracts as well as U.S. Treasury and government agency
securities, mortgage-backed securities, derivative instruments, and other debt
securities including corporate bonds that are wrapped by a third party to
provide benefit-responsive payments, if needed; (4) the Putnam OTC & Emerging
Growth Fund (2,869 participant accounts), invested in a mutual fund consisting
primarily of a portfolio of common stocks of small to medium-sized companies
that have potential for capital appreciation greater than market averages; (5)
the Putnam S&P 500 Index Fund (920 participant accounts), invested in a
collective income trust that invests in the 500 stocks that make up the Standard
& Poor's 500 Composite Index; (6) the Putnam Investors Fund (1,002 participant
accounts), invested in a mutual fund consisting primarily of a portfolio of
stocks of larger, well-established companies; (7) The George Putnam Fund of
Boston (899 participant accounts), invested in a mutual fund consisting
primarily of a portfolio of stocks and bonds that seek to produce both capital
growth and current income; and (8) the Putnam Global Growth Fund (800
participant accounts), invested in a mutual fund consisting primarily of a
portfolio of U.S. and international common stocks.
Investment accounts for matched and unmatched contributions are maintained for
each member; if a member chooses to allocate contributions to more than one
Fund, the allocation between Funds within each account must be in multiples of
1% of contributions.
All nonparticipant-directed amounts represent Participating Company matching
contributions. All matching contributions will be invested in the Stone &
Webster Stock Fund and cannot be transferred out of the Stone & Webster Stock
Fund. Purchases of common stock of the Company may be made by the Trustee in the
open market or from private sources (other than from Directors and Officers of
the Company) or from treasury shares or authorized but unissued shares, or such
stock may be contributed to the trustee by the Company. It is the understanding
of the Company that acquisitions of stock by the trustee for the Stone & Webster
Stock Fund have been made in the open market and from another Company qualified
plan, the Employee Stock Ownership Plan. No such acquisitions have been made of
treasury shares or authorized but unissued shares, nor has any such stock been
contributed by the Company to the trustee, to the date hereof. In the event that
any common stock of the Company is obtained by the trustee from the Company
through purchase or contributions, it is the policy of the Company that such
shares be valued for purposes of the Plan at the then current market value of
the common stock of the Company. The Stone & Webster Stock Fund comprises
participant-directed and nonparticipant-directed amounts. Participant-directed
amounts represent employee contributions.
Loans:
The Plan contains a loan provision under which employees may borrow as much as
50% of their vested account balance up to a maximum of fifty thousand dollars.
The minimum loan is one thousand dollars. The term of loans is a minimum of one
year, with a maximum of five years, or fifteen years if used to purchase a
primary residence. The interest rate for loans is the prime rate, as recorded on
the first day of the month by The Wall Street Journal, plus 1%. The loans are
collateralized by the balance in the participant's account. The interest rate on
loans was 9.5% during 1997.
Payment of Benefits:
Upon termination of employment for any reason, employees are entitled to receive
the value of their vested accounts as of the date that the recordkeeper receives
the completed participant request for distribution. Benefit payments may be
10
deferred by a participant to a date which is not later than the end of the year
in which the participant attains age 70. Terminating employees may elect to
receive a lump-sum payment or to receive payments in installments over a period
not to exceed 10 years. Prior to termination of service, employees may make
withdrawals from their after-tax investment accounts. Employees who have
attained age 59 1/2 may make withdrawals from their before-tax investment
accounts. A member who has not yet attained age 59 1/2 may make withdrawals from
his before-tax investment accounts only for reasons of hardship. Withdrawals may
be made as of any daily valuation date.
(2) Summary of Significant Accounting Policies:
Method of Accounting:
The financial statements of the Plan are prepared under the accrual method of
accounting.
Investment Valuation and Income Recognition:
Investments, exclusive of temporary investments and guaranteed investment
contracts, are stated at fair value and are valued at the closing market prices
on the last business day of the year. Temporary investments are valued at cost,
which approximates fair value as reported by the trustee. Shares of registered
investment companies are valued at quoted market prices which represent the net
asset value of shares held by the Plan at year end. The Company stock is valued
at its quoted market price. Guaranteed investment contracts, which are fully
benefit responsive, are valued at principal plus reinvested interest, at the
contract rates, which approximates fair value. Participant loans are valued at
cost which approximates fair value.
Security Transactions and Related Investment Income:
Purchases and sales of securities are recorded on a trade-date basis. Gains or
losses on sales of securities are determined on an average-cost basis.
Dividend income is recorded on the ex-dividend date. Income from other
investments is recorded as earned on an accrual basis.
Net Appreciation (Depreciation) in the Fair Value of Investments:
The Plan presents in the statement of changes in net assets available for
benefits the net appreciation (depreciation) in the fair value of its
investments, which consists of the realized gains (losses) and the unrealized
appreciation (depreciation) on those investments.
Contributions:
Employee contributions and matching employer contributions are recorded in the
period the payroll deductions are made.
Payment of Benefits:
Payment of benefits and withdrawals are recorded when paid.
Expenses:
Expenses of the Plan, other than investment management fees which are being paid
from the Plan assets, are borne by the Participating Companies.
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. Actual
results could differ from those estimates.
Risks and Uncertainties:
The Plan provides for various investment options in stocks, bonds, fixed income
securities, and other investment securities. Investment securities are exposed
to various risks, such as interest rate, market, credit and, with respect to
certain non-U.S. securities, currency and political risks. Due to the level of
risk associated with certain investment securities and the level of uncertainty
related to changes in the value of investment securities, it is at least
reasonably possible that changes in risks in the near term would materially
affect participants' account balances and the amounts reported in the Statement
of Net Assets Available for Benefits and the Statement of Changes in Net Assets
Available for Benefits.
11
(3) Investments:
The following table presents Plan investments held at December 31, 1997 and 1996
that represent 5% or more of the net assets available for benefits:
December 31, December 31,
Investments at Fair Value 1997 1996
- ------------------------- ------------ ------------
Stone & Webster Stock Fund $69,619 $50,319
Putnam Voyager Fund 92,779 --
Putnam OTC & Emerging Growth Fund 70,782 80,198
The Chase Manhattan Bank, N.A.
UBS Temporary Investment Fund -- 95,904
(4) Guaranteed Investment Contracts:
The Assured Interest Fund was, and the Stable Value Fund is, administered so
that the interest rate earned on all contributions and transfers is a blended
rate, based on the weighted average of the different guaranteed investment
contracts and government securities in the Funds. This blended rate varies
depending on the amounts invested in future years under the various contracts
obtained and on the timing of all investments. The blended interest rate in the
Assured Interest Fund was 6.32% at December 31, 1996 and the average interest
rate for the year ended December 31, 1996 was 6.44%. The blended interest rate
in the Stable Value Fund was 6.74% at December 31, 1997 and the average interest
rate for the year ended December 31, 1997 was 6.40%. Guaranteed investment
contracts are generally referred to as "guaranteed" contracts because the
insurance company or other financial institution issuing the contract agrees to
pay an amount equal to the contributions, plus interest at a fixed rate for a
given period of time. However, contributions are deposited with the contract
issuer and become part of its general assets. The obligation of the contract
issuer to make the agreed payments is not secured, and it is not insured or
guaranteed by any third party. Financial instruments which potentially subject
the Plan to concentrations of credit risk consist principally of contracts with
insurance companies. The Plan is exposed to credit risk in the event of
nonperformance by the companies in which those investments are held. The Plan
administrator does not anticipate nonperformance by any of the insurance
companies. The Plan placed its guaranteed investment contracts with high-credit
quality contracts issuers as measured by independent credit rating companies
and, by policy, limits the amount of credit exposure to any one issuer.
(5) Credit Risks
The Plan invests primarily in equity and fixed income funds. The fund managers
invest in a large number of corporations, industries and other instruments in an
attempt to limit exposure to significant loss.
The funds maintain a diverse portfolio of common stock across various industry
groups and a broad range of debt securities in terms of maturity and industry
groups in order to maintain diversity in Plan investments.
The Plan is subject to risk of loss to the extent of its holdings in these
funds.
(6) Other Receivables:
The other receivables balance at December 31, 1996 represents participant
requests for distributions which were canceled prior to December 31, 1996. These
amounts were returned to the Plan during the year ended December 31, 1997.
(7) Party-In-Interest Transactions:
The Stone & Webster Stock Fund invests in common shares of Stone & Webster,
Incorporated, the ultimate parent of the Participating Subsidiaries. As such,
these transactions qualify as party-in-interest transactions. The Plan purchased
common shares of Stone & Webster, Incorporated amounting to $11,180 and $3,231
during 1997 and 1996, respectively. The Plan sold common shares of Stone &
Webster, Incorporated amounting to $22,435 and $7,995 during 1997 and 1996,
respectively.
Plan investments include mutual funds and investment portfolios managed by
Putnam Investments. Since the Plan's trustee and recordkeeper are entities owned
and controlled by Putnam, transactions involving the funds and portfolios
qualify as party-in-interest transactions. In addition, loans to participants
(employees of the Company) qualify as party-in-interest transactions.
(8) Tax Status:
The Internal Revenue Service has issued a determination that the Plan, which
includes provisions under section 401(k) of the IRC, meets the requirements of
section 401(a) of the IRC and therefore is exempt from Federal income taxes
under section 501(a) of the IRC.
12
The Plan obtained its latest determination letter on July 13, 1995, in which the
Internal Revenue Service stated that the Plan, as then designed, was in
compliance with the applicable requirements of the IRC. The Plan has been
amended since receiving the determination letter. However, the Plan
administrator and the Plan's tax counsel believe that the Plan is designed and
is currently being operated in compliance with the applicable requirements of
the IRC.
(9) Reconciliation to Form 5500:
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
Benefits paid to participants as stated in the financial
statements $37,884
Less: Amounts allocated to withdrawing participants at
December 31, 1996 (3,958)
-------
Distributions to participants per the Form 5500 $33,926
=======
Amounts elected to be withdrawn by participants before the Plan's year end but
which have not been distributed from the Plan by year end are required to be
reported as a liability on Form 5500 but are not accrued in the Statement of Net
Assets Available for Benefits. There were no benefits payable for Form 5500
purposes at December 31, 1997.
(10) Termination and Extension of the Plan:
It is the desire of the Participating Companies that the Plan continue
indefinitely. However, the Company reserves the right to modify or terminate the
Plan at any time by action of the Board of Directors of the Company (the
"Board"). In the event of a termination of the Plan, all employees' company
accounts with respect to contributions made by the Participating Companies not
theretofore vested will become vested and will be valued as of the end of the
calendar quarter following termination. The Trust will continue after
termination of the Plan, and will be administered as if the Plan were otherwise
in full force and effect. The amounts in members' accounts will be distributed
as determined by the Board of Directors of the Company. Also, any Participating
Company may, with the consent of the Board of Directors of the Company, at any
time, modify or discontinue the Plan as to it or as to any segment of its
employees.
(11) Subsequent Event:
Effective April 21, 1998, the Board approved an amendment to the Plan document
that will permit employee participants over 70 1/2 to defer distribution until
termination of employment. New employees will be eligible to participate in the
Plan on the first day of the month following their date of hire. In addition,
the Board approved the additions of the Putnam Asset Allocation: Growth
Portfolio, Putnam Asset Allocation: Balanced Portfolio, Putnam Asset Allocation:
Conservative Portfolio, Putnam Growth and Income Fund II, Putnam Income Funds to
the Plan.
13
EMPLOYEE INVESTMENT PLAN OF STONE & WEBSTER, INCORPORATED
AND PARTICIPATING SUBSIDIARIES
Form 5500 - Line 27a - Schedule of Assets Held for Investment Purposes at
December 31, 1997
Current
Identity of Issuer Description of Investment Shares Cost Value
- ------------------------------------------ --------------------------------- --------- ------------ ------------
Stone & Webster, Incorporated** Common Stock 1,485,209 $ 42,010,658 $ 69,619,179
Shares of registered investment companies:
Putnam Fiduciary Trust Company** Putnam Voyager Fund 4,809,717 79,192,691 92,779,448
Putnam Fiduciary Trust Company** Putnam OTC & Emerging Growth Fund 4,371,958 64,299,990 70,781,998
Putnam Fiduciary Trust Company** Putnam Investors Fund 1,156,353 12,884,935 13,037,244
Putnam Fiduciary Trust Company** The George Putnam Fund of Boston 862,411 15,482,738 15,571,115
Putnam Fiduciary Trust Company** The Putnam Global Growth Fund 542,986 6,453,948 5,484,163
------------ ------------
178,314,302 197,653,968
Shares of collective investment trusts:
Putnam Fiduciary Trust Company** Putnam S&P 500 Index Fund 437,083 8,980,508 9,864,962
Money market funds:
The Boston Company Short-term Investment Fund 6,076,788 6,076,788
Putnam Fiduciary Trust Company** Daily Liquidity Fund 20,139 20,139 20,139
------------ ------------
6,096,927 6,096,927
Guaranteed investment contracts:
Allstate Life Ins. Co. Maturity date 9/30/99 - 7,309,151 7,309,151
Allstate Life Ins. Co. Maturity date 6/29/01 - 1,168,808 1,168,808
Business Men's Assurance Maturity date 3/30/01 - 3,291,996 3,291,996
Continental Assurance Companies Maturity date 5/15/01 - 5,210,187 5,210,187
John Hancock Mutual Life Maturity date 6/28/02 - 3,518,000 3,518,000
John Hancock Mutual Life Maturity date 9/17/01 - 1,511,639 1,511,639
Life of Virginia Maturity date 3/31/98 - 3,157,191 3,157,191
Metropolitan Life Insurance Co. Maturity date 12/16/02 - 3,052,517 3,052,517
New York Life Maturity date 3/31/00 - 4,410,800 4,410,800
Northwestern National Life Maturity date 6/30/99 - 985,595 985,595
Pacific Mutual Maturity date 2/15/02 - 4,063,604 4,063,604
Peoples Security Maturity date 9/16/02 - 5,101,812 5,101,812
Principal Mutual Life Ins. Co. Maturity date 6/29/01 - 1,726,436 1,726,436
Protective Life Insurance Co. Maturity date 6/30/98 - 2,224,872 2,224,872
Protective Life Insurance Co. Maturity date 12/28/00 - 2,906,339 2,906,339
Prudential Asset Mngmnt Co. Maturity date 3/31/98 - 3,186,898 3,186,898
Security Life of Denver Maturity date 9/16/02 - 4,032,249 4,032,249
SunAmerica Life Insurance Company Maturity date 6/30/00 - 5,790,922 5,790,922
The Travelers Maturity date 9/29/00 - 3,325,576 3,325,576
Transamerica Occidental Maturity date 9/17/01 - 3,041,065 3,041,065
United of Omaha Maturity date 5/14/02 - 752,176 752,176
------------ ------------
69,767,833 69,767,833
Loans to participants (interest rates
from 7% to 13%)** - - 5,670,194
------------ ------------
$305,170,228 $358,673,063
** Party-in-interest to the Plan.
14
EMPLOYEE INVESTMENT PLAN OF STONE & WEBSTER, INCORPORATED
AND PARTICIPATING SUBSIDIARIES
Form 5500 - Line 27d - Schedule of Reportable Transactions for
the Year Ended December 31, 1997
(All dollar amounts, except per share amounts, are in thousands.)
Description of Asset
(Including rate and Expense Current
Identity of Party maturity in case Purchase Selling Lease Incurred with Cost of Value of Net Gain
Involved (Note 1) of a Loan) Price Price Rental Transactions Asset Asset (Loss)
- ----------------- -------------------- -------- ------- ------ ------------- ------- -------- --------
Putnam Fiduciary 255 Transactions - $15.134 - - - $14,860 $14,860 $ -
Trust Company Putnam OTC &
Emerging Growth
Fund
Putnam Fiduciary 305 Transactions - - $15.337 - - $30,453 $31,905 $1,452
Trust Company Putnam OTC &
Emerging Growth
Fund
Putnam Fiduciary 253 Transactions - $11.200 - - - $18,425 $18,425 $ -
Trust Company Putnam Investors
Fund
Putnam Fiduciary 191 Transactions - - $11.346 - - $ 5,540 $ 5,783 $ 243
Trust Company Putnam Investors
Fund
Putnam Fiduciary 261 Transactions - $18.052 - - - $18,263 $18,263 $ -
Trust Company The George Putnam
Fund of Boston
Putnam Fiduciary 164 Transactions - - $18.185 - - $ 2,780 $ 2,847 $ 67
Trust Company The George Putnam
Fund of Boston
Putnam Fiduciary 271 Transactions - $18.498 - - - $20,463 $20,463 $ -
Trust Company Putnam Voyager Fund
Putnam Fiduciary 314 Transactions - - $18.909 - - $25,653 $29,695 $4,042
Trust Company Putnam Voyager Fund
Putnam Fiduciary 260 Transactions - $20.709 - - - $13,436 $13,436 $ -
Trust Company Putnam S&P 500
Index Fund
Putnam Fiduciary 172 Transactions - - $21.048 - - $ 4,455 $ 4,751 $ 296
Trust Company Putnam S&P 500
Index Fund
Putnam Fiduciary 495 Transactions - $ 1.000 - - - $34,900 $34,900 $ -
Trust Company Stone & Webster
Stable Value Fund
Putnam Fiduciary 368 Transactions - - $ 1.000 - - $41,448 $42,737 $1,289
Trust Company Stone & Webster
Stable Value Fund
Notes:
1. All orders placed by Putnam Fiduciary Trust Company Trustee under the
Employee Investment Plan of Stone & Webster, Incorporated and Participating
Subsidiaries are party-in-interest transactions.
15
EMPLOYEE INVESTMENT PLAN OF STONE & WEBSTER, INCORPORATED
AND PARTICIPATING SUBSIDIARIES
Form 5500 - Line 27e - Schedule of Nonexempt Transactions for the
Year Ended December 31, 1997
(All dollar amounts are in thousands.)
Purchase Expenses
Name Affiliation Price Sales Price Gain/(Loss) Incurred
- --------------- ---------------- -------- ----------- ----------- --------
Stone & Webster, Ultimate Parent $11,180 $22,435 $11,255 $ -
Incorporated of Stone &
Common Stock Webster,
Incorporated
Participating
Subsidiaries
16
CONSENT OF INDEPENDENT ACCOUNTANTS
________
We consent to the incorporation by reference in the Registration Statement of
Stone & Webster, Incorporated and Participating Subsidiaries on Form S-8 (File
No. 333-19829) of our report dated June 10, 1998, on our audits of the financial
statements and supplemental schedules of the Employee Investment Plan of Stone &
Webster, Incorporated and Participating Subsidiaries as of December 31, 1997 and
1996, and for the year ended December 31, 1997, which report is included in this
Annual Report on Form 11-K.
/s/ COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
June 26, 1998
17
STONE & WEBSTER, INCORPORATED
245 SUMMER STREET
BOSTON, MASSACHUSETTS 02210
June 26, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Annual Report on Form 11-K
Ladies and Gentlemen:
On behalf of Stone & Webster, Incorporated, a Delaware corporation, we are
filing herewith an Annual Report on Form 11-K, for the year ended December 31,
1997, Commission File Number 1-1228, relating to the Employee Investment Plan of
Stone & Webster, Incorporated and Participating Subsidiaries.
If the Staff has any questions regarding this Form 11-K, please feel free
to contact the undersigned at (617) 589-7473.
Very truly yours,
/S/ JOHN P. MCGANN
John P. McGann
Assistant Secretary