Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
__________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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, 1996 was 5,194,113 shares.
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<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
(Dollars in thousands)
JUNE 30 DECEMBER 31
1996 1995
Assets
<S> <C> <C>
Current assets
Cash and equivalents $ 2,351 $ 9,926
Trade accounts receivable 74,076 65,288
Inventories 31,521 29,565
Deferred income taxes 4,113 4,113
Other current assets 5,914 5,468
Total current assets 117,975 114,360
Property, plant and equipment, at cost 163,864 161,699
Less accumulated depreciation 105,568 100,751
58,296 60,948
Deferred income taxes 14,755 14,755
Other assets 6,956 7,135
Total assets $ 197,982 $ 197,198
Liabilities and Stockholders' Equity
Current liabilities
Short-term borrowings $ 1,924 $ 1,489
Current portion of long-term debt 6 6
Trade accounts payable 14,350 16,153
Income taxes 4,114 2,335
Other current liabilities 31,158 33,968
Total current liabilities 51,552 53,951
Long-term debt 19,710 25,315
Pension plans and other retiree benefits 38,141 38,876
Other liabilities 7,915 5,765
Total liabilities 117,318 123,907
Stockholders' equity
Common stock 5,797 5,796
Additional paid-in capital 11,570 11,749
Retained earnings 77,153 69,112
Cumulative foreign currency
translation adjustment (2,854) (2,156)
Minimum pension liability adjustment (1,093) (1,093)
90,573 83,408
Less treasury stock, at cost 9,909 10,117
Total stockholders' equity 80,664 73,291
Total liabilities and stockholders' equity $ 197,982 $ 197,198
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
<TABLE>
GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
(Dollars in thousands,
except per share amounts)
THREE MONTHS ENDED
JUNE 30
1996 1995
<S> <C> <C>
Net sales $ 65,157 $ 40,604
Costs and expenses
Cost of products sold 44,488 28,429
Selling, general and
administrative expenses 11,376 6,935
Research and development expenses 1,998 1,279
Interest (income) expense --net 186 (35)
Other (income)--net (289) (273)
Income before income taxes 7,398 4,269
Provision for income taxes 2,660 626
Net income $ 4,738 $ 3,643
Primary earnings per common share $ .88 $ .70
Fully diluted earnings per common share $ .88 $ .70
Weighted average number of common shares
outstanding:
Primary 5,383,030 5,168,943
Fully diluted 5,383,030 5,168,943
Cash dividends declared per common share $ .125 $ .125
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
<TABLE>
GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
(Dollars in thousands,
except per share amounts)
SIX MONTHS ENDED
JUNE 30
1996 1995
<S> <C> <C>
Net sales $ 124,667 $ 72,505
Costs and expenses
Cost of products sold 84,859 49,823
Selling, general and
administrative expenses 21,576 12,921
Research and development expenses 3,786 2,698
Interest (income) expense --net 527 (88)
Other (income)--net (617) (439)
Income before income taxes 14,536 7,590
Provision for income taxes 5,198 1,034
Net income $ 9,338 $ 6,556
Primary earnings per common share $ 1.74 $ 1.27
Fully diluted earnings per common share $ 1.74 $ 1.27
Weighted average number of common shares
outstanding:
Primary 5,369,534 5,166,958
Fully diluted 5,375,783 5,166,958
Cash dividends declared per common share $ .25 $ .25
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<PAGE>
<TABLE>
GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
(Dollars in thousands)
SIX MONTHS ENDED
JUNE 30
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 9,338 $ 6,556
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 5,545 4,716
(Gain) on disposals of property, plant
and equipment (10) (24)
Provision (benefit) for deferred income taxes 908 (669)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (9,728) 5,591
(Increase) in inventories (2,528) (11,167)
(Increase) in other current assets (579) (3,829)
Increase (decrease) in trade accounts payable (1,698) 842
(Decrease) in all other current operating
liabilities (2,026) (1,932)
Other, net 2,415 170
Net cash provided by operating activities 1,637 254
Cash flows from investing activities:
Capital expenditures (3,145) (2,904)
Proceeds from asset disposals 26 34
Proceeds from collection of notes receivable 54 97
Net cash (used in) investing activities (3,065) (2,773)
Cash flows from financing activities:
Proceeds from short-term borrowings 486 1,731
Net proceeds (repayments) under revolving
credit agreements (5,413) 1,200
Proceeds from long-term debt 85 101
(Repayment) of long-term debt (3) (33)
Net stock issues 30 76
Dividends paid (1,297) (1,292)
Net cash provided by (used in) financing
activities (6,112) 1,783
Effect of exchange rate changes on cash
and equivalents (35) 11
(Decrease) in cash and equivalents (7,575) (725)
Cash and equivalents, beginning 9,926 3,173
Cash and equivalents, ending $ 2,351 $ 2,448
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(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, 1996 and
1995 (b) the financial position at June 30, 1996 and
December 31, 1995, and (c) the cash flows for the six-month
periods ended June 30, 1996 and 1995, of Gleason Corporation
and subsidiaries.
2. The results of operations for the three and six-month
periods ended June 30, 1996 are not necessarily indicative
of the results to be expected for the full year.
3. All significant intercompany transactions are eliminated in
consolidation.
4. The components of inventories were as follows:
(In thousands) 6/30/96 12/31/95
Raw materials and
purchased parts $ 4,312 $ 5,373
Work in process 21,703 18,889
Finished goods 5,506 5,303
$ 31,521 $ 29,565
5. Net cash payments for income taxes were $1,231,000 and
$3,113,000 for the six months ended June 30, 1996 and 1995,
respectively. Interest payments were $694,000 and $102,000
for the six months ended June 30, 1996 and 1995,
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, 1996 and 1995 and in the Company's
financial condition during the six months ended June 30, 1996.
Results of Operations
The Company had net income for the second quarter ended June 30,
1996 of $4.7 million, or $.88 per share, compared to $3.6
million, or $.70 per share, for the 1995 second quarter.
Operating income (earnings before interest and taxes) for the
second quarter of 1996 was $7.6 million, or $1.41 per share,
compared to $4.2 million, or $.82 per share, in the 1995 quarter.
Net income for the six months ended June 30, 1996 was $9.3
million, or $1.74 per share, compared to $6.6 million, or $1.27
per share, in the 1995 period. Operating income for the 1996 six-
month period was $15.1 million, or $2.81 per share, compared to
$7.5 million, or $1.45 per share, in 1995. The improvement in
operating earnings from 1995 is primarily attributable to
benefits from higher operating volumes and incremental earnings
from the Company's Gleason-Hurth subsidiary, which was acquired
on July 1, 1995.
Order levels in the first half of 1996 were $134.5 million
compared to $101.2 million in the prior year first half. Orders
received in the second quarter of 1996 totaled $79.4 million,
representing a record high quarterly total for the Company.
Machine product orders in the 1996 first half, excluding orders
for Hurth, increased 17 percent compared to the 1995 period.
This increase was attributable to higher orders for bevel gear
production machines, which increased 57 percent over the first
half of 1995. In the second quarter, the Company received two
large orders, totaling $24 million, for bevel gear production
equipment from U.S. vehicle and axle manufacturers. The majority
of the shipments associated with these two orders are expected to
ship in 1997. The significant increase in bevel gear equipment
orders is driven largely by the need for vehicle producers to
modernize their manufacturing operations by replacing their older
bevel gear equipment with new technology. Orders received for
cylindrical gear production machinery, excluding Hurth, were down
54 percent in the six-month period of 1996 compared to the first
half of 1995 primarily due to a reduction in orders received from
European customers. Tooling orders, excluding Hurth, were 12
percent lower than in the first half of 1995 for both bevel
cutting tools and workholding equipment with lower order levels
from overseas customers. Backlog at June 30, 1996 increased to
$134.4 million from $124.5 million at December 31, 1995 and $83.4
million at June 30, 1995.
Net sales were $65.2 million and $124.7 million for the three and
six-month periods ended June 30, 1996, increases of 61 percent
and 72 percent over the same periods last year. These increases
were due to incremental sales from the Company's Hurth operation
and increased shipments of bevel gear production machines.
Sales, excluding Hurth, increased 7 percent and 18 percent for
the three and six-month periods compared to 1995. Shipments of
bevel gear production machines were 66 percent higher in the
first half of 1996 compared to the prior year period.
Approximately 80 percent of total sales in the first six months
of 1996 were to customers outside of the U.S.
Sales of cylindrical gear production machines accounted for over
50 percent of total machine sales in the first half of 1996.
Machines produced by the Company's Gleason-Hurth subsidiary
accounted for 68 percent of the first half cylindrical gear
production machine shipments. Sales of cylindrical gear
production equipment, excluding Hurth, declined 11 percent in
the first six months of 1996 compared to the 1995 first half
primarily due to lower shipments to U.S. customers.
Sales of the Company's tooling products, excluding Hurth,
increased slightly in the first half of 1996 compared to the
first half of 1995. This increase was attributable to higher
sales of bevel workholding equipment primarily in the
Asia/Pacific market.
The Company expects a decline in sales during the third quarter
due to summer shutdown periods at many of its customers' plants.
Despite the anticipated lower sales volumes for the third
quarter, the Company expects second half sales to be comparable
to those of the first half. These forward-looking statements are
subject to a number of factors that could cause actual results to
differ materially from those expected. These risk factors
include, but are not limited to, the possibility that the
Company will fail to receive information from customers required
to design and manufacture products scheduled for shipment in the
second half in time to enable the Company to complete and ship
the products by year-end, and possible delays in development of
new products that are scheduled for shipment in the second half.
Cost of products sold as a percentage of sales were 68.3 percent
and 68.1 percent for the three and six-month periods ended June
30, 1996 compared to 70.0 percent and 68.7 percent for the
comparable 1995 periods. The inclusion of Hurth products in the
first half of 1996 had a favorable impact on margins. Excluding
Hurth products, the cost of products sold as a percentage of
sales would have been slightly higher for the 1996 six-month
period than in the prior year. This is attributable to the
higher percentage of machines in the sales mix. Generally,
machine products have lower margins than tooling and other
products. This negative effect was largely offset by the
positive effects of higher production volumes which increased the
coverage of fixed operating costs.
Selling, general and administrative expenses as a percentage of
sales were 17.5 percent and 17.3 percent for the three and six-
month periods ended June 30, 1996 compared to 17.1 percent and
17.8 percent for the comparable 1995 periods. Spending decreased
as a percentage of sales for the six-month period due to the
higher sales levels, including the integration of Gleason-Hurth
products into the existing Gleason sales network. The increase
in spending as a percentage of sales for the second quarter is
due to higher commission expense. Commissions paid to outside
dealers increased as a percentage of sales for both the quarter
and first half with higher sales into the Asia/Pacific and South
American regions where the Company is represented by independent
machine dealers.
Research and development expenses were $2.0 million and $3.8
million in the second quarter and first half of 1996 compared to
$1.3 million and $2.7 million in the 1995 periods. Full year
development spending in 1996 is expected to exceed 1995 levels
because of increased spending for new product development for
bevel and cylindrical gear production equipment and manufacturing
technology initiatives for the Company's tooling operations.
Net interest expense increased to $527,000 in the 1996 first half
compared to net interest income of $88,000 in the 1995 six-month
period. The increase in expense was attributable to higher
average borrowings outstanding under the Company's revolving
credit facilities. The higher debt is associated with higher
working capital requirements with the increased business volumes,
higher capital expenditures during the second half of 1995 and
first half of 1996, and the acquisition of Hurth in the 1995
third quarter.
The Company recorded a tax provision of $5.2 million, or an
effective tax rate of 36 percent, for the first six months of
1996. The effective tax rate for the 1995 period was 13.6
percent. In 1995, the Company recorded certain deferred tax
benefits which significantly lowered its effective tax rate. In
addition, the inclusion of Hurth operations (located in Munich)
increased the consolidated effective tax rate in the 1996 first
half as the statutory tax rate in Germany is higher than at the
Company's other operations.
Liquidity and Capital Resources
Borrowings under the Company's revolving credit facilities
decreased to $19.0 million at June 30, 1996 from $24.7 million at
December 31, 1995. Cash and cash equivalents decreased $7.6
million in the first six months of 1996 to $2.4 million.
Available unused short and long-term credit lines with banks,
including revolving credit facilities, totaled $18.5 million at
June 30, 1996. Dividend payments to stockholders totaled $1.3
million in the six months ended June 30, 1996.
Operating activities provided $1.6 million of cash in the first
half of 1996 compared to $.3 million in the comparable 1995
period. Operating cash flows were higher in 1996 primarily due
to higher operating earnings and a lower increase in inventories,
partially offset by an increase in trade accounts receivable. The
increase in accounts receivable is attributable to the increase
in sales. Sales in the first half of 1996 were 72 percent higher
than in the same period of 1995.
Investing activities used $3.1 million of cash in the 1996 six-
month period versus $2.8 million in the comparable prior year
period. Capital expenditures totaled $3.1 million compared to
$2.9 million in the first half of 1995. The Company expects
capital expenditures for the 1996 full year to exceed the prior
year's level of $8.3 million, with the majority of the spending
planned for further investments to upgrade existing production
capabilities.
In July 1996, the Company's Board of Directors authorized the
repurchase of up to 10 percent of the Company's currently
outstanding common stock in open market or privately negotiated
transactions. At June 30, 1996, there were 5,194,113 shares of
common stock outstanding.
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.
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<PAGE>
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
a) Exhibits:
Exhibit 27: Financial Data Schedule
b) Reports on Form 8-K
None
<PAGE>
<PAGE>
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 8, 1996
John J. Perrotti
John J. Perrotti
Vice President - Finance
(Chief Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FORM 10-Q FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000743239
<NAME> GLEASON CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 2351
<SECURITIES> 0
<RECEIVABLES> 74076
<ALLOWANCES> 0
<INVENTORY> 31521
<CURRENT-ASSETS> 117975
<PP&E> 163864
<DEPRECIATION> 105568
<TOTAL-ASSETS> 197982
<CURRENT-LIABILITIES> 51552
<BONDS> 0
<COMMON> 5797
0
0
<OTHER-SE> 74867
<TOTAL-LIABILITY-AND-EQUITY> 197982
<SALES> 124667
<TOTAL-REVENUES> 124667
<CGS> 84859
<TOTAL-COSTS> 84859
<OTHER-EXPENSES> 24745
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 527
<INCOME-PRETAX> 14536
<INCOME-TAX> 5198
<INCOME-CONTINUING> 9338
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9338
<EPS-PRIMARY> 1.74
<EPS-DILUTED> 1.74
</TABLE>
