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 June 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 June 30, 1994 was 5,162,980
shares.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
(In thousands)
JUNE 30 DECEMBER 31
Assets 1994 1993
<S> <C> <C>
Current assets
Cash and equivalents $ 6,276 $ 4,155
Trade accounts receivable 32,047 28,543
Inventories 17,257 12,899
Refundable income taxes -- 2,292
Other current assets 2,701 4,744
Net current assets of discontinued operations 1,106 1,441
Total current assets 59,387 54,074
Property, plant and equipment, at cost 144,649 146,585
Less accumulated depreciation 88,383 86,299
56,266 60,286
Other assets 3,529 3,962
Net assets of discontinued operations 3,139 3,527
Total assets $122,321 $121,849
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<CAPTION>
Liabilities and Stockholders' Equity
<S> <C> <C>
Current liabilities
Short-term borrowings $ 1,833 $ 408
Current portion of long-term debt 76 132
Trade accounts payable 9,765 6,100
Income taxes 1,311 1,103
Other current liabilities 16,840 17,552
Total current liabilities 29,825 25,295
Long-term debt 8,231 14,575
Pension plans and other retiree benefits 44,813 45,269
Other liabilities 3,172 1,701
Total liabilities 86,041 86,840
Stockholders' Equity
Common stock 5,796 5,796
Additional paid-in capital 11,909 11,909
Retained earnings 36,722 35,647
Cumulative foreign currency translation adjustment (1,119) (1,315)
Minimum pension liability adjustment (6,585) (6,585)
46,723 45,452
Less treasury stock, at cost 10,443 10,443
Total stockholders' equity 36,280 35,009
Total liabilities and stockholders' equity $122,321 $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
JUNE 30
1994 1993
<S> <C> <C>
Net sales $ 27,608 $ 28,038
Costs and expenses
Cost of products sold 20,222 21,202
Selling, general and
administrative expenses 5,571 6,631
Research and development expenses 1,217 1,321
Interest (income)--net (35) (57)
Other (income)--net (225) (576)
Income (loss) from continuing operations
before income taxes 858 (483)
Provision (benefit) for income taxes 255 (605)
Income from continuing operations 603 122
Gain on disposal of discontinued operations 1,440 --
Net income $ 2,043 $ 122
Weighted average number of common shares
outstanding 5,162,980 5,154,399
Income per common share:
Income from continuing operations $ .12 $ .02
Gain on disposal of discontinued operations .28 --
Net income $ .40 $ .02
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)
SIX MONTHS ENDED
JUNE 30
1994 1993
<S> <C> <C>
Net sales $ 51,307 $ 52,822
Costs and expenses
Cost of products sold 38,023 38,992
Selling, general and
administrative expenses 10,532 12,675
Research and development expenses 2,289 2,956
Interest (income)--net (10) (115)
Other (income)--net (455) (549)
Income (loss) from continuing operations
before income taxes 928 (1,137)
Provision (benefit) for income taxes 260 (618)
Income (loss) from continuing operations 668 (519)
Gain on disposal of discontinued operations 1,440 --
Net income (loss) $ 2,108 $ (519)
Weighted average number of common shares
outstanding 5,162,991 5,154,003
Income (loss) per common share:
Income (loss) from continuing operations $ .13 $ (.10)
Gain on disposal of discontinued operations .28 --
Net income (loss) $ .41 $ (.10)
Cash dividends declared per common share $ .20 $ .20
<FN>
See notes to consolidated financial statements.
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GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
(In thousands)
SIX MONTHS ENDED
JUNE 30
1994 1993
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 2,108 $ (519)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 4,719 4,760
(Gain) on disposals of property, plant
and equipment (83) (13)
Provision (benefit) for deferred income taxes (264) 96
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (3,514) 5,084
(Increase) in inventories (3,410) (1,862)
(Increase) decrease in other current assets 2,133 (524)
Increase (decrease) in trade accounts payable 2,807 (231)
Increase (decrease) in all other current
operating liabilities 830 (5,839)
Other, net 770 598
(Gain) on disposal of discontinued operations (1,840) --
Discontinued operations 1,123 (717)
Net cash provided by operating activities 5,379 833
Cash flows from investing activities:
Capital expenditures (1,117) (4,382)
Proceeds from asset disposals 670 37
Proceeds from collection of notes receivable 3,190 211
Net cash provided by (used in) investing
activities 2,743 (4,134)
Cash flows from financing activities:
Proceeds from short-term borrowings 1,407 1,370
Net (repayments) under revolving
credit agreements (6,500) (200)
Proceeds from long-term debt 60 44
(Repayment) of long-term debt (89) (862)
Dividends paid (1,033) (1,033)
Net cash (used in) financing activities (6,155) (681)
Effect of exchange rate changes on cash
and equivalents 154 63
Increase in cash and equivalents 2,121 3,919
Cash and equivalents, beginning 4,155 7,105
Cash and equivalents, ending $ 6,276 $ 3,186
<FN>
See notes to consolidated financial statements.
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GLEASON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 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 six month periods ended June 30, 1994 and 1993,
(b) the financial position at June 30, 1994 and December 31,
1993, and (c) the cash flows for the six month periods ended
June 30, 1994 and 1993, of Gleason Corporation and
subsidiaries.
2. The results of operations for the three and six month periods
ended June 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) 6/30/94 12/31/93
Raw materials and
purchased parts $ 1,876 $ 1,519
Work in process 9,070 7,360
Finished products 6,311 4,020
$17,257 $12,899
6. The Company's Alliance Metal Stamping and Fabricating
division is classified as Discontinued Operations in the
accompanying financial statements. The Company has decided
to cease operations at this division in the third quarter of
this year. In addition, the Company has entered into an
agreement for the sale of the machinery and equipment located
at that division's facility.
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 is expected to be lower than the amount previously
estimated.
(continued)
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6. (continued)
The net assets of discontinued operations have been
segregated in the June 30, 1994 and December 31, 1993
Consolidated Balance Sheets as follows:
(In thousands) 6/30/94 12/31/93
Net current assets:
Current assets $ 1,409 $ 1,957
Current liabilities (303) (516)
$ 1,106 $ 1,441
Net property, plant
and equipment $ 3,139 $ 3,527
7. Net cash payments (refunds) for income taxes were
($2,447,000) and $77,000 for the six months ended June 30,
1994 and 1993, respectively. Interest payments were $269,000
and $159,000 for the six months ended June 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 six month
periods ended June 30, 1994 and 1993 and in the Company's
financial condition during the six months ended June 30, 1994.
Results of Operations
The Company had income from continuing operations for the second
quarter ended June 30, 1994 of $603,000, or $.12 per share,
compared to $122,000, or $.02 per share, for the 1993 second
quarter.
Net income for the 1994 second quarter of $2,043,000, or $.40 per
share, included an after-tax gain from discontinued operations of
$1,440,000, or $.28 per share, as the loss from the disposition
of the Company's Alliance Metal Stamping and Fabricating division
is expected to be lower than the amount previously accrued. The
Company announced during the second quarter that it had decided
to cease operations at this last remaining unit of the former
Gleason Components Group division during the third quarter and
had entered into an agreement to sell the machinery and equipment
located at this division.
For the six months ended June 30, 1994, the Company had income
from continuing operations of $668,000, or $.13 per share,
compared to a loss of $519,000, or $.10 per share, in the first
half of 1993.
Net sales were $27,608,000 and $51,307,000 for the three and six
month periods ended June 30, 1994 compared to $28,038,000 and
$52,822,000 in the comparable prior year periods. Sales to the
U.S. market comprised approximately fifty percent of the 1994 six
month total.
Sales decreased slightly for the quarter and six months due to
lower shipments of bevel gear machines. This decline was
primarily a result of lower shipments of mechanical, older-style
bevel gear equipment. This was partially offset by higher sales
of the Phoenix (Registered Trademark) line of bevel machines.
Parallel axis gear machine shipments exceeded 1993 levels for both
the quarter and first half. This increase resulted primarily from
the introduction of the Company's new parallel axis gear grinding
machine, shipments of which began in the second quarter of this
year.
(continued)
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Tooling sales were approximately 8 percent higher for the 1994
second quarter compared to the 1993 period. Sales for the first
half were slightly higher than in 1993. Sales of other products,
including spare parts, were higher for both the quarter and first
half. Spare parts sales have increased primarily due to higher
shipments to domestic vehicle producers. Their increased
production levels have created a need to revitalize and repair
older available capacity.
Order levels were $67.1 million, or 31 percent higher during the
first half of 1994 compared to 1993. Order levels for all major
product lines have increased, with the largest increase
attributable to bevel gear production machines. The U.S. market
accounted for over 50 percent of 1994 bookings through June,
primarily driven by strong growth in domestic automotive and
truck producers. Backlog as of June 30, 1994 increased to $42.0
million from $26.2 million at December 31, 1993. Backlog at June
30, 1993 was $33.5 million. The Company expects sales for the
second half of 1994 will be significantly higher than the first
half primarily due to higher machine shipments. Sales of all
major product lines for the year are expected to exceed 1993
levels.
Cost of products sold as a percentage of sales for the three and
six month periods ended June 30, 1994 were 73.2 percent and 74.1
percent versus 75.6 percent and 73.8 percent for the 1993
periods. A higher proportion of tooling and spare parts sales in
the total sales mix helped offset a decline in margins on machine
sales. Machine margins declined primarily due to a higher
percentage of parallel axis gear machines in the sales mix.
Parallel axis equipment generally carries lower margins than
bevel equipment, due to greater competititive pricing pressures
in the parallel axis gear machinery market.
Selling general and administrative expenses were $5,571,000, or
20.2 percent of sales, and $10,532,000, or 20.5 percent of sales,
for the three and six month periods ended June 30, 1994. The
comparable 1993 periods were $6,631,000, or 23.7 percent of
sales, and $12,675,000, or 24.0 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.
Research and development expenses were $1,217,000 and $2,289,000
for the three and six month periods compared to $1,321,000 and
(continued)
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$2,956,000 for the comparable 1993 periods. Spending was higher
in the first half of last year due to greater prototype
development costs on several new products introduced last year.
The Company will be introducing its new Phoenix 500HL bevel gear
lapping machine at the IMTS machine tool show in September with
shipments beginning in the fourth quarter of this year.
Other income for the 1993 second quarter was higher due to the
settlement of a legal claim at an amount below the estimated
liability accrued in prior years.
The effective tax rate for the 1994 first half was 28 percent
compared to 54 percent in the 1993 comparable period. The
effective rate for 1993 was higher due to lower tax provisions on
certain foreign income. Domestic operating losses received
deferred tax benefits in 1994 and 1993. Management believes that
it is more likely than not that future income will be sufficient
to fully realize the benefits recorded.
Liquidity and Capital Resources
Cash and equivalents increased $2,121,000 in the first half to
$6,276,000 at June 30, 1994. Borrowings under the Company's
revolving credit agreements decreased to $7,747,000 at June 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 $22.3 million at June 30, 1994.
Dividend payments to stockholders totaled $1,033,000 in the first
half of 1994.
Net cash provided by operating activities was $5,379,000 compared
to $833,000 in the first half of 1993. The improvement was
primarily attributable to higher operating income, higher income
tax refunds, and lower payments for severance programs previously
accrued. Payments associated with severance programs totaled $.8
million in the 1994 first half compared to $4.6 million in the
comparable 1993 period.
Operating cash flow was negatively impacted by higher working
capital requirements. The net increase in inventory and accounts
payable for the first half of 1994 is attributable to higher
business volumes which will occur in the second half. Accounts
receivable increased during the first half primarily due to heavy
shipments at the end of June. Accounts receivable had dropped
during the same period last year primarily due to decreasing
sales levels.
Investing activities provided $2,743,000 of cash in the 1994
first half compared to $4,134,000 of net cash used in the
(continued)
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comparable prior year period. Proceeds from collections of notes
receivable associated with the sales of former businesses totaled
$3,190,000 ($211,000 in 1993). Proceeds from the sale of assets
included a $550,000 advance deposit on the sale of machinery and
equipment of discontinued operations. Capital expenditures
totaled $1,117,000 in the first six months of 1994 compared to
$4,382,000 in the 1993 comparable period. The Company expects
capital spending for the full year will be somewhat 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: August 3, 1994 John J. Perrotti
John J. Perrotti
Vice President - Controller
(Principal Financial Officer)
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