Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8782
GLEASON CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 16-1224655
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 University Avenue, Rochester, New York 14692
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(716) 473-1000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (X) No ( ).
The number of shares outstanding of the registrant's Common
stock, par value $1 per share, at September 30, 1994 was
5,162,955 shares.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
(In thousands)
SEPTEMBER 30 DECEMBER 31
Assets 1994 1993
<S> <C> <C>
Current assets
Cash and equivalents $ 6,596 $ 4,155
Trade accounts receivable 27,878 28,543
Inventories 23,579 12,899
Refundable income taxes -- 2,292
Other current assets 3,300 4,744
Net current assets of discontinued operations -- 1,441
Total current assets 61,353 54,074
Property, plant and equipment, at cost 144,819 146,585
Less accumulated depreciation 90,355 86,299
54,464 60,286
Other assets 3,454 3,962
Net assets of discontinued operations 1,567 3,527
Total assets $120,838 $121,849
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<CAPTION>
Liabilities and Stockholders' Equity
<S> <C> <C>
Current liabilities
Short-term borrowings $ 1,839 $ 408
Current portion of long-term debt 60 132
Trade accounts payable 9,996 6,100
Income taxes 1,452 1,103
Other current liabilities 19,374 17,552
Total current liabilities 32,721 25,295
Long-term debt 3,225 14,575
Pension plans and other retiree benefits 44,712 45,269
Other liabilities 3,065 1,701
Total liabilities 83,723 86,840
Stockholders' Equity
Common stock 5,796 5,796
Additional paid-in capital 11,909 11,909
Retained earnings 37,238 35,647
Cumulative foreign currency translation adjustment (800) (1,315)
Minimum pension liability adjustment (6,585) (6,585)
47,558 45,452
Less treasury stock, at cost 10,443 10,443
Total stockholders' equity 37,115 35,009
Total liabilities and stockholders' equity $120,838 $121,849
<FN>
See notes to consolidated financial statements.
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GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
(In thousands, except
per share amounts)
THREE MONTHS ENDED
SEPTEMBER 30
1994 1993
<S> <C> <C>
Net sales $ 26,392 $ 21,907
Costs and expenses
Cost of products sold 18,105 16,327
Selling, general and
administrative expenses 5,854 5,900
Research and development expenses 1,053 983
Interest expense (income)--net 3 (69)
Other (income)--net (140) (104)
Income (loss) before income taxes 1,517 (1,130)
Provision (benefit) for income taxes 485 (131)
Net income (loss) $ 1,032 $ (999)
Weighted average number of common shares
outstanding 5,162,965 5,156,772
Net income (loss) per share $ .20 $ (.19)
Cash dividends declared per common share $ .10 $ .10
<FN>
See notes to consolidated financial statements.
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GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
(In thousands, except
per share amounts)
NINE MONTHS ENDED
SEPTEMBER 30
1994 1993
<S> <C> <C>
Net sales $ 77,699 $ 74,729
Costs and expenses
Cost of products sold 56,128 55,319
Selling, general and
administrative expenses 16,386 18,575
Research and development expenses 3,342 3,939
Interest (income)--net (7) (184)
Other (income)--net (595) (653)
Income (loss) from continuing operations
before income taxes 2,445 (2,267)
Provision (benefit) for income taxes 745 (749)
Income (loss) from continuing operations 1,700 (1,518)
Gain on disposal of discontinued operations 1,440 --
Net income (loss) $ 3,140 $ (1,518)
Weighted average number of common shares
outstanding 5,162,982 5,154,936
Income (loss) per common share:
Income (loss) from continuing operations $ .33 $ (.29)
Gain on disposal of discontinued operations .28 --
Net income (loss) $ .61 $ (.29)
Cash dividends declared per common share $ .30 $ .30
<FN>
See notes to consolidated financial statements.
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GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
(In thousands)
NINE MONTHS ENDED
SEPTEMBER 30
1994 1993
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 3,140 $ (1,518)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 6,997 7,173
(Gain) on disposals of property, plant
and equipment (51) (14)
Provision (benefit) for deferred income taxes (245) 144
Changes in operating assets and liabilities:
Decrease in accounts receivable 736 8,452
(Increase) in inventories (9,374) (5,256)
(Increase) decrease in other current assets 1,482 (35)
Increase (decrease) in trade accounts payable 3,041 (1,116)
Increase (decrease) in all other current
operating liabilities 2,657 (9,532)
Other, net (513) 1,019
(Gain) on disposal of discontinued operations (1,840) --
Discontinued operations 2,525 (670)
Net cash provided by (used in)
operating activities 8,555 (1,353)
Cash flows from investing activities:
Capital expenditures (1,683) (5,388)
Proceeds from asset disposals 3,699 44
Proceeds from collection of notes receivable 3,236 320
Net cash provided by (used in) investing
activities 5,252 (5,024)
Cash flows from financing activities:
Proceeds from short-term borrowings 1,424 1,539
Net borrowings (repayments) under
revolving credit agreements (11,540) 5,100
Proceeds from long-term debt 72 49
(Repayment) of long-term debt (122) (916)
Dividends paid (1,549) (1,546)
Net cash provided by (used in)
financing activities (11,715) 4,226
Effect of exchange rate changes on cash
and equivalents 349 105
Increase (decrease) in cash and equivalents 2,441 (2,046)
Cash and equivalents, beginning 4,155 7,105
Cash and equivalents, ending $ 6,596 $ 5,059
<FN>
See notes to consolidated financial statements.
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GLEASON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1994
(Unaudited)
1. In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments
necessary to present fairly (a) the results of operations for
the three and nine month periods ended September 30, 1994 and
1993, (b) the financial position at September 30, 1994 and
December 31, 1993, and (c) the cash flows for the nine month
periods ended September 30, 1994 and 1993, of Gleason
Corporation and subsidiaries.
2. The results of operations for the three and nine month
periods ended September 30, 1994 are not necessarily
indicative of the results to be expected for the full year.
3. All significant intercompany transactions are eliminated in
consolidation.
4. Certain reclassifications have been made to the prior year's
financial statements to conform to the 1994 presentation.
5. The components of inventories were as follows:
(In thousands) 9/30/94 12/31/93
Raw materials and
purchased parts $ 2,280 $ 1,519
Work in process 13,913 7,360
Finished goods 7,386 4,020
$23,579 $12,899
6. The Company's former Alliance Metal Stamping and Fabricating
division was classified as Discontinued Operations in the
accompanying financial statements. The Company ceased
operations at this division and sold the machinery and
equipment located at that division's facility during the
third quarter of this year.
In the second quarter of this year the Company reported a
gain (net of applicable income taxes of $400,000) from
discontinued operations of $1,440,000, or $.28 per share, as
the loss from the disposition of this division was lower than
the amount previously estimated.
(continued)
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6. (continued)
The net assets of discontinued operations have been
segregated in the September 30, 1994 and December 31, 1993
Consolidated Balance Sheets as follows:
(In thousands) 9/30/94 12/31/93
Net current assets:
Current assets $ -- $ 1,957
Current liabilities -- (516)
$ -- $ 1,441
Net property, plant and
equipment $ 1,567 $ 3,527
The land and building of the former Alliance Metal Stamping
and Fabricating division remains classified as net assets of
discontinued operations as the Company is continuing to seek
a buyer for this real estate.
7. Net cash refunds for income taxes were $1,398,000 and $35,000
for the nine months ended September 30, 1994 and 1993,
respectively. Interest payments were $370,000 and $314,000
for the nine months ended September 30, 1994 and 1993,
respectively.
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GLEASON CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial Condition
The following are management's comments relating to significant
changes in the results of operations for the three and nine month
periods ended September 30, 1994 and 1993 and in the Company's
financial condition during the nine months ended September 30,
1994.
Results of Operations
Income from continuing operations for the third quarter ended
September 30, 1994 was $1,032,000, or $.20 per share, compared to
a loss of $999,000, or $.19 per share, for the 1993 third
quarter.
For the nine months ended September 30, 1994, the Company had
income from continuing operations of $1,700,000, or $.33 per
share, compared to a loss of $1,518,000, or $.29 per share, in
the 1993 nine month period.
Order levels through nine months were $110 million, a 68 percent
increase over 1993 levels. Order levels for all product lines
showed improvement, with machine orders increasing 109 percent.
The increase in total orders is primarily due to the favorable
market acceptance of the Company's recent machine introductions
and the continued strength of the U.S. economic recovery.
Approximately 55 percent of year-to-date orders for machines were
from U.S. customers. Backlog as of September 30, 1994 increased
to $58.6 million from $26.2 million at December 31, 1993.
Backlog at September 30, 1993 was $25.8 million.
Net sales for the quarter were $26,392,000, or 20 percent higher
compared to the 1993 quarter. For the nine months, sales were
$77,699,000, or 4 percent higher than last year. Sales to the
U.S. market accounted for approximately 50 percent of the 1994
nine month total. Historically, sales to the U.S. have only been
about one-third of total sales, with sales to Europe and Asia
accounting for the remainder.
Sales increased for the quarter due to higher tooling sales and
increased shipments of parallel axis gear machinery. Higher
vehicle production activity in both the U.S. and Europe
contributed to a 23 percent increase in tooling sales for the
quarter compared to the prior year. Parallel axis gear machine
shipments were higher for the quarter as a result of the
introduction of the Company's new parallel axis gear grinding
machine in the second quarter of this year and the continued
success of the Phoenix (Registered Trademark) 125GH gear hobbing
machine, for which shipments began in the second quarter of 1993.
(continued)
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For the nine month period, higher sales of tooling, spare parts
and service produced the year over year sales increase. Machine
sales decreased 3 percent through nine months due to lower
shipments of bevel gear machines. This decline was the result of
lower shipments of mechanical older-style bevel gear equipment,
partially offset by higher sales of the Phoenix line of bevel
machines. Parallel axis gear machine shipments through nine
months increased 46 percent compared to last year and have
accounted for 34 percent of total machine shipments to date in
1994. Parallel axis gear machine sales will reach a record high
for the Company in 1994. About 80 percent of all new machine
sales in 1994 will be products introduced in the last four years.
Cost of products sold as a percentage of sales for the three and
nine month periods ended September 30, 1994 were 68.6 percent and
72.2 percent versus 74.5 percent and 74.0 percent for the 1993
periods. The lower cost of sales percentage is primarily due to
a greater percentage of tooling products in the sales mix and
improved margins on those products. Tooling margins have
increased for both the three and nine month periods compared to
last year due to efficiencies from higher production volumes and
cost reduction activities. Margins on machines have also
improved compared to last year due to higher production volumes
through the Company's new manufacturing facility and lower
manufacturing overhead spending. Overall margins are expected to
be lower in the fourth quarter than the year-to-date percentage
because of the much higher proportion of machines that will be in
the sales mix for the quarter.
Selling, general and administrative (S,G&A) expenses were
$5,854,000, or 22.2 percent of sales, and $16,386,000, or 21.1
percent of sales, for the three and nine month periods ended
September 30, 1994. The comparable 1993 periods were $5,900,000,
or 26.9 percent of sales, and $18,575,000, or 24.9 percent of
sales, respectively. These expenses decreased compared to the
1993 periods as a result of cost reduction initiatives including
staffing reductions which occurred in 1993. Commission expense
was lower as a percentage of sales due to fewer shipments into
regions where dealers are paid. In addition, there are fewer
territories where dealer commissions are now being paid. Over
the past year, the Company has transitioned from machine dealers
to direct sales representatives in Spain, Sweden and France.
S,G&A expenses were higher in the third quarter compared to the
prior two quarters due to higher spending on marketing promotion
primarily related to the Company's participation in the IMTS
trade show.
Research and development expenses were $1,053,000 and $3,342,000
for the three and nine month periods compared to $983,000 and
$3,939,000 for the comparable 1993 periods. Spending was higher
in the nine month period of last year due to greater prototype
development costs on several new machines introduced last year.
During the third quarter of this year, the Company introduced its
(continued)
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most recent addition to the Phoenix line of machines, the 500HL
bevel gear lapping machine, at the IMTS show. Shipments of this
machine are expected to begin in the fourth quarter.
The effective tax rate for the nine months ended September 30,
1994 was 30 percent compared to 33 percent in the 1993 comparable
period. Domestic losses for continuing operations received tax
benefits of $.6 million and $1.6 million in 1994 and 1993,
respectively. Management believes that it is more likely than
not that future income will be sufficient to fully realize the
benefits recorded.
Sales and operating profits are expected to be significantly
higher in the fourth quarter compared to the prior three quarters
of 1994. Income from continuing operations for the full year
should be at least $.75 per share.
Liquidity and Capital Resources
Cash and equivalents increased $2,441,000 in the nine months of
1994 to $6,596,000 at September 30, 1994. Borrowings under the
Company's revolving credit agreements decreased to $2,744,000 at
September 30, 1994 from $14,122,000 at December 31, 1993. Unused
short and long-term credit lines with banks, including the
revolving credit facilities, totaled approximately $27.2 million
at September 30, 1994. Dividend payments to stockholders totaled
$1,549,000 in the nine months ended September 30, 1994.
Net cash provided by operating activities was $8,555,000 year-to-
date compared to net cash used in operations of $1,353,000 in the
nine month period of 1993. The improvement was attributable to
higher operating income, cash flow from discontinued operations,
higher income tax refunds and lower payments for severance
programs previously accrued. Payments associated with severance
programs totaled $.9 million in the 1994 nine month period
compared to $5.8 million in the comparable 1993 period. The
higher cash flow from discontinued operations for 1994 was due to
the liquidation of inventories and collection of accounts
receivable of the Alliance Metal Stamping and Fabricating
division.
Operating cash flow for 1994 was negatively impacted by higher
working capital levels. The net increase in inventory for the
nine month period of 1994 relates to the higher expected shipment
levels in the fourth quarter. Higher accounts payable and
advance payments from customers partially offset the higher
working capital requirements.
Investing activities provided $5,252,000 of cash in the 1994 nine
month period compared to $5,024,000 of net cash used in the
comparable prior year period. Proceeds from asset disposals
included $3,550,000 from the sale of machinery and equipment of
discontinued operations. Proceeds from collections of notes
(continued)
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receivable associated with the sales of former businesses totaled
$3,236,000 ($320,000 in 1993). Capital expenditures totaled
$1,683,000 in the nine months of 1994 compared to $5,388,000 in
1993. The Company expects capital spending in the 1994 fourth
quarter will be higher than in prior three quarters, but for the
full year will be lower than the 1993 spending level.
The Company's cash balances, presently available lines of credit
and anticipated funds from operations should be sufficient to
meet its near-term operating and investing activities.
Management believes it will be able to obtain additional long-
term financing if such financing is required.
Phoenix is a registered trademark of The Gleason Works.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Default Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
GLEASON CORPORATION
Registrant
DATE: October 28, 1994 John J. Perrotti
John J. Perrotti
Vice President - Controller
(Principal Financial Officer)
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<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FORM 10-Q FOR THE QUARTERLY PERIOD SEPTEMBER 30, 1994 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000743239
<NAME> GLEASON CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 6596
<SECURITIES> 0
<RECEIVABLES> 27878
<ALLOWANCES> 0
<INVENTORY> 23579
<CURRENT-ASSETS> 61353
<PP&E> 144819
<DEPRECIATION> 90355
<TOTAL-ASSETS> 120838
<CURRENT-LIABILITIES> 32721
<BONDS> 0
<COMMON> 5796
0
0
<OTHER-SE> 31319
<TOTAL-LIABILITY-AND-EQUITY> 120838
<SALES> 77699
<TOTAL-REVENUES> 77699
<CGS> 56128
<TOTAL-COSTS> 56128
<OTHER-EXPENSES> 19133
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (7)
<INCOME-PRETAX> 2445
<INCOME-TAX> 745
<INCOME-CONTINUING> 1700
<DISCONTINUED> 1440
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<CHANGES> 0
<NET-INCOME> 3140
<EPS-PRIMARY> .61
<EPS-DILUTED> .61
</TABLE>
