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, 1998
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, 1998 and 1997, and the related Statement of Changes in
Net Assets Available for Benefits With Fund Information, and supplemental
schedules for the year ended December 31, 1998, 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/ JAMES P. JONES
-----------------------------------------
James P. Jones
Secretary of the Committee under the Plan
Date: June 29, 1999
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, 1998 5-6
Statement of Net Assets Available for Benefits With
Fund Information as of December 31, 1997 7
Statement of Changes in Net Assets Available for Benefits
With Fund Information for the Year Ended December 31, 1998 8-9
Notes to Financial Statements 10-14
Supplemental Schedules:
Schedule of Assets Held for Investment Purposes at
December 31, 1998 (Form 5500, Line 27a) 15
Schedule of Reportable Transactions for the Year Ended
December 31, 1998 (Form 5500, Line 27d) 16
Schedule of Nonexempt Transactions for the Year Ended
December 31, 1998 (Form 5500, Line 27e) 17
Exhibits:
Exhibit 1
Consent Of Independent Accountants 18
3
REPORT OF INDEPENDENT ACCOUNTANTS
________
To the Participants and Committee under the
Employee Investment Plan of Stone & Webster,
Incorporated and Participating Subsidiaries:
In our opinion, the accompanying statements of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the Employee Investment Plan of Stone & Webster, Incorporated and
Participating Subsidiaries (the "Plan") at December 31, 1998 and 1997, and the
changes in net assets available for benefits for the year ended December 31,
1998 in conformity with generally accepted accounting principles. 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 of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules listed on 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. The fund information in the statements of net assets
available for benefits and the statement of changes in net assets available for
benefits is presented for purposes of additional analysis rather than to present
the net assets available for plan benefits and changes in net assets available
for benefits of each fund. These supplemental schedules and fund information are
the responsibility of the Plan's management. The supplemental schedules and fund
information 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/ PricewaterhouseCoopers LLP
Boston, Massachusetts
June 3, 1999
4
EMPLOYEE INVESTMENT PLAN OF STONE & WEBSTER, INCORPORATED
AND PARTICIPATING SUBSIDIARIES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
December 31, 1998
(All dollar amounts are in thousands)
Participant-Directed
--------------------------------------------------------------------------------------------
Stone & Putnam The Putnam
Stone & Webster OTC & Putnam George Putnam Asset
Webster Putnam Stable Emerging S&P 500 Putnam Putnam Global Allocation:
Stock Voyager Value Growth Index Investors Fund of Growth Growth
Fund Fund Fund Fund Fund Fund Boston Fund Fund
------- ------- ------- ------- ------- --------- ------- ------ ----------
Assets:
Investments at fair value (Note 2):
Stone & Webster, Incorporated
Common Stock (1,392,131 shares,
cost $40,466) $14,489
Shares of registered investment
companies:
Putnam Voyager Fund (4,349,309
shares, cost $74,515) $96,903
Putnam OTC & Emerging Growth
Fund (3,605,468 shares, cost
$53,693) $62,663
Putnam Investors Fund (1,661,655
shares, cost $20,189) $24,692
The George Putnam Fund of Boston
(966,118 shares, cost $17,557) $17,467
Putnam Global Growth Fund
(674,072 shares, cost $7,949) $8,520
Putnam Asset Allocation:
Growth Fund (21,560 shares,
cost $271) $295
Balanced Fund (27,332 shares,
cost $318)
Conservative Fund (60,801
shares, cost $614)
Putnam Growth and Income
Fund II (41,213 shares,
cost $568)
Putnam Income Fund (153,163
shares, cost $1,057)
Shares of collective investment
trusts:
Putnam S&P 500 Index Fund
(649,640 shares, cost $15,136) $18,794
Money market funds:
The Boston Company:
Short Term Investment Fund $11,700
Pooled Employee Funds Daily
Liquidity Fund 1
Guaranteed investment contracts
(cost $66,679) (Note 4) 66,893
Loans Receivable
Receivables:
Due from broker for securities sold 13
------- ------- ------- ------- ------- ------- ------- ------ ----
Total Assets 14,503 96,903 78,593 62,663 18,794 24,692 17,467 8,520 295
------- ------- ------- ------- ------- ------- ------- ------ ----
Liabilities:
Due to broker for securities
purchased 4
Administrative expenses payable 42
------- ------- ------- ------- ------- ------- ------- ------ ----
Total Liabilities 4 42
------- ------- ------- ------- ------- ------- ------- ------ ----
Net Assets Available for Benefits $14,499 $96,903 $78,551 $62,663 $18,794 $24,692 $17,467 $8,520 $295
======= ======= ======= ======= ======= ======= ======= ====== ====
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
(CONTINUED)
December 31, 1998
(All dollar amounts are in thousands)
Non-
Participant-
Participant-Directed Directed
--------------------------------------------------------- ------------
Putnam Putnam
Asset Asset Putnam
Allocation: Allocation: Growth & Putnam Stone &
Balanced Conservative Income Income Loans Webster
Fund Fund Fund II Fund Account Stock Fund Total
---------- ------------ -------- ------ ------- ---------- ---------
Assets:
Investments at fair value (Note 2):
Stone & Webster, Incorporated
Common Stock (1,392,131 shares,
cost $40,466) $31,799 $ 46,288
Shares of registered investment
companies:
Putnam Voyager Fund (4,349,309
shares, cost $74,515) 96,903
Putnam OTC & Emerging Growth
Fund (3,605,468 shares, cost
cost $53,693) 62,663
Putnam Investors Fund (1,661,655
shares, cost $20,189) 24,692
The George Putnam Fund of Boston
(966,118 shares, cost $17,557) 17,467
Putnam Global Growth Fund
(674,072 shares, cost $7,949) 8,520
Putnam Asset Allocation:
Growth Fund (21,560 shares,
cost $271) 295
Balanced Fund (27,332 shares,
cost $318) $328 328
Conservative Fund (60,801
shares, cost $614) $632 632
Putnam Growth and Income
Fund II (41,213 shares,
cost $568) $575 575
Putnam Income Fund (153,163
shares, cost $1,057) $1,061 1,061
Shares of collective investment
trusts:
Putnam S&P 500 Index Fund
(649,640 shares, cost $15,136) 18,794
Money market funds:
The Boston Company:
Short Term Investment Fund 11,700
Pooled Employee Funds Daily
Liquidity Fund 4 5
Guaranteed investment contracts
(cost $66,679) (Note 4) 66,893
Loans Receivable $5,295 5,295
Receivables:
Due from broker for securities sold 29 42
---- ---- ---- ------ ------ ------- --------
Total Assets 328 632 575 1,061 5,295 31,832 362,153
---- ---- ---- ------ ------ ------- --------
Liabilities:
Due to broker for securities
purchased 9 13
Administrative expenses payable 42
---- ---- ---- ------ ------ ------- --------
Total Liabilities 9 55
---- ---- ---- ------ ------ ------- --------
Net Assets Available for Benefits $328 $632 $575 $1,061 $5,295 $31,823 $362,098
==== ==== ==== ====== ====== ======= ========
The accompanying notes are an integral part of these financial statements.
6
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
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.
7
EMPLOYEE INVESTMENT PLAN OF STONE & WEBSTER, INCORPORATED
AND PARTICIPATING SUBSIDIARIES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
For the Year Ended December 31, 1998
(All dollar amounts are in thousands)
Participant-Directed
-----------------------------------------------------------------------------------------------
Stone & Putnam The Putnam
Stone & Webster OTC & Putnam George Putnam Asset
Webster Putnam Stable Emerging S&P 500 Putnam Putnam Global Allocation:
Stock Voyager Value Growth Index Investors Fund of Growth Growth
Fund Fund Fund Fund Fund Fund Boston Fund Fund
------- ------- ------- -------- ------- --------- ------- ------- -----------
Additions to net assets
attributed to:
Investment income
Net appreciation in fair value
of investments $13,759 $ 4,920 $ 3,523 $ 5,020 $ 85 $1,432 $ 28
Interest $ 1 - - - - - - -
Dividends 257 6,456 $ 5,039 1,980 - 608 1,698 257 9
------- ------- ------- ------- ------- ------- ------- ------ ----
258 20,215 5,039 6,900 3,523 5,628 1,783 1,689 37
------- ------- ------- ------- ------- ------- ------- ------ ----
Contributions:
Participants' (Notes 3 and 4) 955 5,061 2,382 3,885 1,963 2,078 1,469 1,161 5
Employer's (Notes 3 and 4) - - - - - - - - -
------- ------- ------- ------- ------- ------- ------- ------ ----
955 5,061 2,382 3,885 1,963 2,078 1,469 1,161 5
------- ------- ------- ------- ------- ------- ------- ------ ----
Total additions 1,213 25,276 7,421 10,785 5,486 7,706 3,252 2,850 42
======= ======= ======= ======= ======= ======= ======= ====== ====
Deductions from net assets
attributed to:
Net depreciation in fair value
of investments 7,191
Benefits paid to participants 1,618 10,586 14,071 6,856 1,382 2,069 2,016 620 1
Administrative expenses - - 42 - - - - - -
------- ------- ------- ------- ------- ------- ------- ------ ----
Total deductions 8,809 10,586 14,113 6,856 1,382 2,069 2,016 620 1
======= ======= ======= ======= ======= ======= ======= ====== ====
Net increase prior to interfund
transfers (7,596) 14,690 (6,692) 3,929 4,104 5,637 1,236 2,230 41
Interfund transfers (1,436) (10,566) 9,202 (12,048) 4,825 6,058 699 806 254
------- ------- ------- ------- ------- ------- ------- ------ ----
Net increase (decrease) (9,032) $ 4,124 $ 2,510 $(8,119) $ 8,929 $11,695 $ 1,935 $3,036 $295
Net assets available for benefits:
Beginning of year 23,531 92,779 76,041 70,782 9,865 12,997 15,532 5,484 -
------- ------- ------- ------- ------- ------- ------- ------ ----
End of year $14,499 $96,903 $78,551 $62,663 $18,794 $24,692 $17,467 $8,520 $295
======= ======= ======= ======= ======= ======= ======= ====== ====
The accompanying notes are an integral part of these financial statements.
8
EMPLOYEE INVESTMENT PLAN OF STONE & WEBSTER, INCORPORATED
AND PARTICIPATING SUBSIDIARIES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
(CONTINUED)
For the Year Ended December 31, 1998
(All dollar amounts are in thousands)
Non-
Participant
Participant-Directed Directed
--------------------------------------------------------- -----------
Putnam Putnam
Asset Asset Putnam Stone &
Allocation: Allocation: Growth & Putnam Webster
Balanced Conservative Income Income Loans Stock
Fund Fund Fund II Fund Account Fund Total
----------- ------------ -------- ------ ------- -------- --------
Additions to net assets
attributed to:
Investment income
Net appreciation in fair value
of investments $ 11 $ 23 $ 16 $ 28,817
Interest - - - - $ 476 $ 2 479
Dividends 6 16 42 $ 14 - 604 16,986
---- ---- ---- ------ ------ -------- --------
17 39 58 14 476 606 46,282
---- ---- ---- ------ ------ -------- --------
Contributions:
Participants' (Notes 3 and 4) 7 11 12 12 - - 19,001
Employer's (Notes 3 and 4) - - - - - 1,984 1,984
---- ---- ---- ------ ------ -------- --------
7 11 12 12 - 1,984 20,985
---- ---- ---- ------ ------ -------- --------
Total additions 24 50 70 26 476 2,590 67,267
==== ==== ==== ====== ====== ======== ========
Deductions from net assets
attributed to:
Net depreciation in fair value
of investments $ 2 $ 12,275 $ 19,468
Benefits paid to participants $ 35 $ 2 26 $ 566 4,612 44,460
Administrative expenses - - - - - 42
---- ---- ---- ------ ------ -------- --------
Total deductions - 35 2 28 566 16,887 63,970
==== ==== ==== ====== ====== ======== ========
Net increase prior to interfund
transfers 24 15 68 (2) (90) (14,297) 3,297
Interfund transfers 304 617 507 1,063 (285) - -
---- ---- ---- ------ ------ -------- --------
Net increase (decrease) 328 632 575 1,061 (375) (14,297) 3,297
Net assets available for benefits:
Beginning of year - - - - 5,670 46,120 358,801
---- ---- ---- ------ ------ -------- --------
End of year $328 $632 $575 $1,061 $5,295 $ 31,823 $362,098
==== ==== ==== ====== ====== ======== ========
The accompanying notes are an integral part of these financial statements.
9
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. During 1998, the Plan was amended to allow
employees to participate in the Plan on the first day of the month following
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 3,800 and 3,200 employee
participants at December 31, 1998 and 1997, 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"). The trustee under the Plan is 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.
Contributions:
Contributions are held by the trustee and accumulated in separate participant
accounts. Each participant 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% of eligible compensation. 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.
10
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
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 $354 for the year
ended December 31, 1998 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 thirteen investment funds established pursuant to the Plan as of
December 31, 1998 (eight investment funds as of December 31, 1997): (1) Stone &
Webster Stock Fund (3,940 participant accounts), invested by the trustee solely
in common stock of the Company; (2) the Putnam Voyager Fund (2,955 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 Find (2,270
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 (2,552 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 (1,169 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 (1,264 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 (973 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; (8) the Putnam Global Growth Fund (896 participant
accounts), invested in a mutual fund consisting primarily of a portfolio of U.S.
and international common stocks; (9) the Putnam Growth & Income Fund II (56
participant accounts), invested in a mutual fund consisting primarily in
"bargain stock" - attractively priced, dividend paying stocks of large and
mid-size companies that offer the potential for a total return; (10) the Putnam
Income Fund (64 participant accounts), invested in a mutual fund consisting
primarily of a portfolio of quality corporate and government bonds that pay a
rate of interest in regularly scheduled payments; (11) the Putnam Asset
Allocation Growth Portfolio (26 participant accounts), invested primarily in a
portfolio of strategic allocation of both equity and fixed income investments,
the equity class invests primarily in growth and value stocks, fixed income
class invests primarily of fixed income investments, including both U.S. and
foreign government obligations and corporate obligations; (12) the Putnam Asset
Allocation Balanced Portfolio (23 participant accounts), invested primarily in a
portfolio of strategic allocation of both equity and fixed income investments,
the equity class invests primarily in growth and value stocks, fixed income
class invests primarily of fixed income investments, including both U.S. and
foreign government obligations and corporate obligations; (13) the Putnam Asset
Allocation Conservative Portfolio (27 participant accounts), invested primarily
in a portfolio of strategic allocation of both equity and fixed income
investments, the equity class invests primarily in growth and value stocks,
fixed income class invests primarily of fixed income investments, including both
U.S. and foreign government obligations and corporate obligations.
11
Investment accounts for before-tax and after-tax 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 ranged from 8.75% to 9.50% during 1998.
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
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. In April 1998,
the Plan eliminated mandatory distributions to active employees over age 70 1/2.
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:
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.
12
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 the Plan administrator 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.
(3) Investments:
The following table presents Plan investments held at December 31, 1998 and 1997
that represent 5% or more of the net assets available for benefits:
December 31, December 31,
Investments at Fair Value 1998 1997
- ------------------------- ------------ ------------
Stone & Webster, Incorporated Common Stock $46,288 $69,619
Putnam Voyager Fund 96,903 92,779
Putnam OTC & Emerging Growth Fund 62,663 70,782
Putnam Investors Fund 24,692 -
Putnam S&P 500 Index Fund 18,794 -
(4) Guaranteed Investment Contracts:
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
fund. 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 Stable Value Fund was 6.46% at December 31, 1998
and the average interest rate for the year ended December 31, 1998 was 6.60%.
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
13
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) 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 $13,305 and $11,180
during 1998 and 1997, respectively. The Plan sold common shares of Stone &
Webster, Incorporated amounting to $42,437 and $22,435 during 1998 and 1997,
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.
(7) 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.
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.
(8) 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.
14
EMPLOYEE INVESTMENT PLAN OF STONE & WEBSTER, INCORPORATED
AND PARTICIPATING SUBSIDIARIES
Form 5500 - Line 27a - Schedule of Assets Held for Investment Purposes at
December 31, 1998
Current
Identity of Issuer Description of Investment Shares Cost Value
- ------------------------------------------ --------------------------------- --------- ------------ ------------
Stone & Webster, Incorporated** Common Stock 1,392,130 $ 40,466,000 $ 46,288,344
Shares of registered investment companies:
Putnam Fiduciary Trust Company** Putnam Voyager Fund 4,349,309 74,515,000 96,902,597
Putnam Fiduciary Trust Company** Putnam OTC & Emerging Growth Fund 3,605,468 53,693,000 62,663,027
Putnam Fiduciary Trust Company** Putnam Investors Fund 1,661,655 20,189,000 24,692,196
Putnam Fiduciary Trust Company** The George Putnam Fund of Boston 966,118 17,557,000 17,467,421
Putnam Fiduciary Trust Company** The Putnam Global Growth Fund 674,072 7,949,000 8,520,268
Putnam Fiduciary Trust Company** Putnam Income Fund 153,163 1,057,000 1,061,423
Putnam Fiduciary Trust Company** Putnam Growth & Income Fund II 41,213 568,000 575,336
Putnam Fiduciary Trust Company** Putnam Asset Allocation: Growth Fund 21,559 271,000 295,150
Putnam Fiduciary Trust Company** Putnam Asset Allocation: Balanced Fund 27,332 318,000 328,258
Putnam Fiduciary Trust Company** Putnam Asset Allocation: Conservative Fund 60,801 614,000 631,722
------------ ------------
176,731,000 213,137,398
Shares of collective investment trusts:
Putnam Fiduciary Trust Company** Putnam S&P 500 Index Fund 649,640 15,136,000 18,794,079
Money market funds:
The Boston Company Pooled Employee Funds Daily Liquidity Fund -- 5,000 4,556
The Boston Company Short-term Investment Fund -- 11,700,312 11,700,312
------------ ------------
11,705,312 11,704,868
Guaranteed investment contracts:
AIG Life Insurance Company Maturity Date: 08/15/02 -- 2,113,266 2,113,266
Allstate Life Ins. Co. Maturity Date: 09/30/99 -- 3,934,151 3,934,151
Allstate Life Ins. Co. Maturity Date: 06/29/01 -- 1,243,846 1,243,846
Business Men's Assurance Maturity Date: 03/30/01 -- 3,537,250 3,537,250
Continental Assurance Companies Maturity Date: 05/15/01 -- 5,275,780 5,275,780
GE Life & Annuity Assurance Co. Maturity Date: 03/17/03 -- 2,020,525 2,020,525
GE Life & Annuity Assurance Co. Maturity Date: 12/16/02 -- 3,138,202 3,138,202
Jackson National Life Maturity Date: 06/30/99 -- 2,255,857 2,255,857
John Hancock Mutual Life Maturity Date: 09/17/01 -- 2,067,341 2,067,341
Metropolitan Life Insurance Co. Maturity Date: 12/16/02 -- 1,504,261 1,504,261
Monumental Life Insurance Co. Maturity Date: 09/16/02 -- 5,101,812 5,101,812
New York Life Maturity Date: 03/31/00 -- 4,764,987 4,764,987
Northwestern National Life Maturity Date: 06/30/99 -- 358,144 358,144
Pacific Life Maturity Date: 02/15/02 -- 4,071,182 4,071,182
Principal Life Insurance Company Maturity Date: 06/28/01 -- 1,837,791 1,837,791
Protective Life Insurance Co. Maturity Date: 12/28/00 -- 3,096,278 3,096,278
Protective Life Insurance Co. Maturity Date: 06/17/02 -- 3,034,656 3,034,656
Security Life of Denver Maturity Date: 09/16/02 -- 4,032,970 4,032,970
SunAmerica Life Insurance Company Maturity Date: 06/30/00 -- 6,115,213 6,115,213
The Travelers Maturity Date: 09/29/00 -- 2,374,240 2,374,240
Transamerica Life Insurance and Annuity Maturity Date: 11/06/01 -- 2,006,665 2,006,665
Transamerica Occidental Maturity Date: 09/17/01 -- 3,008,033 3,008,033
------------ ------------
66,892,450 66,892,450
Loans to participants (interest rates
from 7.0% to 13.0%)** -- -- 5,294,833
------------ ------------
$310,930,762 $362,111,972
** Party-in-interest to the Plan.
15
EMPLOYEE INVESTMENT PLAN OF STONE & WEBSTER, INCORPORATED
AND PARTICIPATING SUBSIDIARIES
Form 5500 - Line 27d - Schedule of Reportable Transactions for
the Year Ended December 31, 1998
(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 300 Transactions -
Trust Company Putnam OTC &
Emerging Growth Fund $16.684 --- --- --- $19,791 $19,791 $ -
Putnam Fiduciary 425 Transactions -
Trust Company Putnam OTC & Emerging
Growth Fund --- $17.008 --- --- $30,399 $32,830 $2,431
Putnam Fiduciary 380 Transactions -
Trust Company Putnam Investors Fund $13.583 --- --- --- $26,590 $26,590 $ -
Putnam Fiduciary 345 Transactions -
Trust Company Putnam Investors Fund --- $12.848 --- --- $19,286 $19,915 $ 629
Putnam Fiduciary 278 Transactions -
Trust Company The George Putnam Fund
of Boston $18.536 --- --- --- $10,541 $10,541 $ -
Putnam Fiduciary 301 Transactions -
Trust Company The George Putnam Fund
of Boston --- $18.576 --- --- $ 8,466 $ 8,690 $ 224
Putnam Fiduciary 358 Transactions -
Trust Company Putnam Voyager Fund $20.463 --- --- --- $21,749 $21,749 $ -
Putnam Fiduciary 460 Transactions -
Trust Company Putnam Voyager Fund --- $20.846 --- --- $26,427 $31,384 $4,957
Putnam Fiduciary 324 Transactions -
Trust Company Putnam S&P 500 Index Fund $25.812 --- --- --- $17,017 $17,017 $ -
Putnam Fiduciary 317 Transactions -
Trust Company Putnam S&P 500 Index Fund --- $25.401 --- --- $10,862 $11,611 $ 749
Putnam Fiduciary 566 Transactions -
Trust Company Stone & Webster Stable
Value Fund $1.00 --- --- --- $67,698 $67,698 $ -
Putnam Fiduciary 466 Transactions -
Trust Company Stone & Webster Stable
Value Fund --- $1.00 --- --- $65,344 $65,344 $ -
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.
16
EMPLOYEE INVESTMENT PLAN OF STONE & WEBSTER, INCORPORATED
AND PARTICIPATING SUBSIDIARIES
Form 5500 - Line 27e - Schedule of Nonexempt Transactions for the
Year Ended December 31, 1998
(All dollar amounts are in thousands)
Purchase Expenses
Name Affiliation Price Sales Price Gain/(Loss) Incurred
- --------------- ---------------- -------- ----------- ----------- --------
Stone & Webster, Ultimate Parent $13,305 $42,437 $29,132 $ --
Incorporated of Stone &
Common Stock Webster,
Incorporated
Participating
Subsidiaries
17
CONSENT OF INDEPENDENT ACCOUNTANTS
________
We hereby 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 3, 1999 relating to the
financial statements and supplemental schedules of the Employee Investment Plan
of Stone & Webster, Incorporated and Participating Subsidiaries as of December
31, 1998 and 1997, and for the year ended December 31, 1998, which appears in
this Form 11-K.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
June 29, 1999
18
STONE & WEBSTER, INCORPORATED
245 SUMMER STREET
BOSTON, MASSACHUSETTS 02210
June 29, 1999
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,
1998, 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