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 March 31, 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 March 31, 1996 was 5,186,681 shares.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
(In thousands)
MARCH 31 DECEMBER 31
Assets 1996 1995
<S> <C> <C>
Current assets
Cash and equivalents $ 1,741 $ 9,926
Trade accounts receivable 67,728 65,288
Inventories 34,826 29,565
Deferred income taxes 4,113 4,113
Other current assets 5,727 5,468
Total current assets 114,135 114,360
Property, plant and equipment, at cost 162,533 161,699
Less accumulated depreciation 103,113 100,751
59,420 60,948
Deferred income taxes 14,755 14,755
Other assets 7,056 7,135
Total assets $ 195,366 $ 197,198
Liabilities and Stockholders' Equity
Current liabilities
Short-term borrowings $ 1,640 $ 1,489
Current portion of long-term debt 6 6
Trade accounts payable 15,377 16,153
Income taxes 4,703 2,335
Other current liabilities 32,782 33,968
Total current liabilities 54,508 53,951
Long-term debt 19,788 25,315
Pension plans and other retiree benefits 38,586 38,876
Other liabilities 5,714 5,765
Total liabilities 118,596 123,907
Stockholders' equity
Common stock 5,797 5,796
Additional paid-in capital 11,696 11,749
Retained earnings 73,064 69,112
Cumulative foreign currency translation
adjustment (2,652) (2,156)
Minimum pension liability adjustment (1,093) (1,093)
86,812 83,408
Less treasury stock, at cost 10,042 10,117
Total stockholders' equity 76,770 73,291
Total liabilities and stockholders' equity $ 195,366 $ 197,198
</TABLE>
See notes to consolidated financial statements.
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<TABLE>
GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
(Dollars in thousands,
except per share
amounts)
THREE MONTHS ENDED
MARCH 31
1996 1995
<S> <C> <C>
Net sales $ 59,510 $ 31,901
Costs and expenses
Cost of products sold 40,371 21,394
Selling, general and
administrative expenses 10,200 5,986
Research and development expenses 1,788 1,419
Interest (income) expense --net 341 (53)
Other (income)--net (328) (166)
Income before income taxes 7,138 3,321
Provision for income taxes 2,538 408
Net income $ 4,600 $ 2,913
Primary earnings per common share $ .86 $ .56
Fully diluted earnings per common share $ .86 $ .56
Weighted average number of common shares outstanding:
Primary 5,355,470 5,164,951
Fully diluted 5,377,630 5,164,951
Cash dividends declared per common share $ .125 $ .125
</TABLE>
See notes to consolidated financial statements.
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<TABLE>
GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
(In thousands)
THREE MONTHS ENDED
MARCH 31
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,600 $ 2,913
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 2,831 2,364
(Gain) on disposals of property, plant
and equipment (5) (16)
Provision (benefit) for deferred income taxes 605 (317)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (2,966) 9,779
(Increase) in inventories (5,557) (9,701)
(Increase) in other current assets (356) (2,451)
Increase (decrease) in trade accounts payable (699) 1,852
(Decrease) in all other current operating
liabilities (233) (401)
Other, net 941 (49)
Net cash provided by (used in) operating activities (839) 3,973
Cash flows from investing activities:
Capital expenditures (1,518) (1,090)
Proceeds from asset disposals 10 16
Proceeds from collection of notes receivable 54 46
Net cash (used in) investing activities (1,454) (1,028)
Cash flows from financing activities:
Proceeds from short-term borrowings 182 1,796
Net (repayments) under revolving
credit agreements (5,381) (200)
Proceeds from long-term debt 22 39
(Repayment) of long-term debt (3) (17)
Net stock issues 23 76
Dividends paid (648) (646)
Net cash provided by (used in) financing
activities (5,805) 1,048
Effect of exchange rate changes on cash
and equivalents (87) 127
Increase (decrease) in cash and equivalents (8,185) 4,120
Cash and equivalents, beginning 9,926 3,173
Cash and equivalents, ending $ 1,741 $ 7,293
</TABLE>
See notes to consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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 month periods ended March 31, 1996 and 1995
(b) the financial position at March 31, 1996 and December
31, 1995, and (c) the cash flows for the three month periods
ended March 31, 1996 and 1995, of Gleason Corporation and
subsidiaries.
2. The results of operations for the three month periods ended
March 31, 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) 3/31/96 12/31/95
Raw materials and
purchased parts $ 5,264 $ 5,373
Work in process 23,400 18,889
Finished goods 6,162 5,303
$ 34,826 $ 29,565
5. Net cash payments for income taxes were $288,000 and
$2,510,000 for the three months ended March 31, 1996 and
1995, respectively. Interest payments were $154,000 and
$28,000 for the three months ended March 31, 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 month periods
ended March 31, 1996 and 1995 and in the Company's financial
condition during the three months ended March 31, 1996.
Results of Operations
The Company had net income for the first quarter ended March 31,
1996 of $4.6 million, or $.86 per share, compared to $2.9
million, or $.56 per share, for the 1995 first quarter.
Operating earnings before interest and taxes for the first
quarter were $7.5 million, or $1.40 per share, compared to $3.3
million, or $.63 per share, in the 1995 first quarter. The
improvement in operating earnings compared to the 1995 quarter
was primarily attributable to benefits from higher operating
volumes and incremental earnings provided by the Company's
Gleason-Hurth subsidiary, which was acquired in the 1995 third
quarter.
Order levels in the first quarter were $55.1 million compared to
$55.2 million in the fourth quarter of 1995 and $47.8 million in
the prior year first quarter. First quarter order levels,
excluding Hurth products, declined 13 percent compared to the
1995 first quarter. Machine orders were lower as demand for
cylindrical gear hobbing machines was down somewhat from recent
quarters. Orders for tooling were 17 percent lower compared to
last year's first quarter, but 13 percent higher than in the 1995
fourth quarter. Backlog as of March 31, 1996 decreased slightly
to $120.1 million from $124.5 million at December 31, 1995.
Backlog at March 31, 1995 was $70.6 million.
Net sales were $59.5 million for the three month period ended
March 31, 1996, an 87 percent increase compared to the 1995
quarter. Sales increased 32 percent quarter over quarter,
excluding the Hurth operation, primarily due to higher machine
shipments. Shipments of new bevel gear and cylindrical gear
production machines increased compared to the prior year period
by 50 percent and 31 percent, respectively.
Cost of products sold as a percentage of sales were 67.8 percent
for the three month period ended March 31, 1996 compared to 67.1
percent for the comparable 1995 period. The higher percentage was
attributable to a larger percentage of machines in the overall
sales mix. Margins on machine products, in general, are lower
than those on tooling and other products. This effect was
partially offset by the inclusion of Hurth products in the 1996
first quarter, which had a favorable impact on overall margins,
and improved margins on machine products for the quarter. The
margin improvement for machines was the result of a favorable mix
of higher margin bevel gear machine products and the positive
effects of higher production volumes which increased the coverage
of fixed operating costs.
Selling, general and administrative expenses were $10.2 million,
or 17.1 percent of sales, for the first quarter of 1996 compared
to $6.0 million, or 18.8 percent of sales, in the 1995 first
quarter. The decrease as a percentage of sales is attributable
to the higher sales levels, including the integration of Hurth
products into the existing Gleason sales network. Commissions
paid to outside dealers increased in total and as a percentage of
sales with higher sales to regions where the Company is
represented by third party machine dealers.
Research and development expenses were $1.8 million in the first
quarter of 1996, an increase of 26 percent compared to the 1995
period. Full year development spending in 1996 is expected to
exceed 1995 levels with new product development programs for both
bevel and cylindrical gear products and manufacturing technology
initiatives for the Company's tooling operations.
The Company recorded a tax provision at an effective tax rate of
35.6 percent for the quarter compared to 12.3 percent in the 1995
first quarter. In 1995, the Company recorded certain deferred
tax benefits which significantly lowered its effective tax rate.
In addition, the incremental earnings from the Hurth operation
increased the consolidated effective tax rate in the 1996 first
quarter 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 $19.2 million at March 31, 1996 from $24.7 million
at December 31, 1995. Cash and cash equivalents decreased $8.2
million in the first three months of 1996 to $1.7 million.
Available unused short and long-term credit lines with banks,
including revolving credit facilities, totaled $17.8 million at
March 31, 1996. Dividend payments to stockholders totaled $.6
million in the first quarter.
Operating activities in the first quarter used cash of $.8
million compared to net cash provided by operating activities of
$4.0 million in the comparable 1995 period. Operating cash flows
were lower in the 1996 quarter primarily due to an increase in
trade accounts receivable and a decrease in accounts payable and
advance payments received from customers compared to their 1995
year-end balances. The 1995 first quarter operating cash flows
were favorably impacted by a decrease in accounts receivable and
an increase in trade payables. Sales in the first quarter of
1995 were 37 percent lower than in the preceding quarter which
contributed to the reduction in accounts receivable in the 1995
first quarter. Sales in the first quarter of 1996 were only 15
percent lower than those in the 1995 fourth quarter. These
factors gave rise to additional uses of cash in the 1996 first
quarter which were partially offset by the favorable effects of
higher operating earnings and lower income tax payments.
Investing activities used $1.5 million of cash in the first
quarter versus $1.0 million in the comparable prior year period.
Capital expenditures totaled $1.5 million compared to $1.1
million in the 1995 first quarter. Capital expenditures for the
1996 full year are planned to increase from last year's level of
$8.3 million, with the majority of the spending planned for
further investments to upgrade existing production capabilities.
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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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
The Corporation's Annual Meeting of Stockholders
was held on May 7, 1996. Matters voted at the meeting
were as follows:
For Withheld
(1) Election of directors for
three year terms:
Julian W. Atwater 4,276,842 387,540
Robert W. Bjork 4,276,792 387,590
Donald D. Lennox 4,275,894 388,488
For Against Abstain
(2) Approval of an amendment to the
Certificate of Incorporation
to increase the number of shares
of Common Stock that the Company
is authorized to issue from
8,750,000 shares, par value
$1.00 per share, to 20,000,000
shares, par value $1.00 per share 3,642,910 1,009,068 12,404
For Against Abstain
(3) Appointment of Ernst & Young LLP
as Independent Auditors for 1996. 4,646,106 9,393 8,883
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 3: Certificate of Amendment of Certificate of
Incorporation of Gleason Corporation filed in the Office
of the Secretary of State of Delaware on May 8, 1996.
Exhibit 27: Financial Data Schedule
(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: May 9, 1996
John J. Perrotti
John J. Perrotti
Vice President - Finance
(Chief Financial Officer)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
GLEASON CORPORATION
Pursuant to Section 242 of the Delaware General Corporation
Law
GLEASON CORPORATION, a corporation duly organized
and existing under the Delaware General Corporation Law,
hereby certifies that:
FIRST: The Board of Directors of the Corporation
duly adopted a resolution setting forth a proposed
amendment of the Certificate of Incorporation of the
Corporation, declaring said amendment to be advisable, such
resolution setting forth the proposed amendment being as
follows:
RESOLVED: That the Board deems it advisable
that the first sentence of Article FOURTH of the
Certificate of Incorporation of the Corporation
be amended to increase the number of shares of
common stock, par value One Dollar ($1.00) per
share, that the Corporation is authorized to
issue from Eight Million Seven Hundred Fifty
Thousand (8,750,000) shares, par value One Dollar
($1.00) per share, to Twenty Million (20,000,000)
shares, par value One Dollar ($1.00) per share,
and to increase the total number of shares of all
classes of stock which the Corporation is
authorized to issue from Nine Million Two Hundred
Fifty Thousand (9,250,000) shares to Twenty
Million Five Hundred Thousand (20,500,000)
shares, so that, as amended, the first sentence
of said Article FOURTH shall read as follows:
FOURTH: The total number of shares of all
classes of stock which the Corporation shall
have authority to issue is Twenty Million Five
Hundred Thousand (20,500,000) shares of which Twenty
Million (20,000,000) shares shall be Common
Stock with a par value of One Dollar ($1.00)
per share and Five Hundred Thousand
(500,000) shares shall be Preferred Stock
with a par value of One Dollar ($1.00) per
share.
SECOND: The Board directed that such amendment
be considered at the 1996 Annual Meeting of Stockholders of
the Corporation, and at such meeting a majority of the
outstanding stock entitled to vote thereon was voted in
favor of the amendment.
THIRD: Said amendment was duly adopted in
accordance with the provisions of Section 242 of the
Delaware General Corporation Law.
IN WITNESS WHEREOF, the Corporation has caused
this Certificate to be signed by its Chairman and President
this 7th day of May, 1996.
James S. Gleason
James S. Gleason
Chairman and President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1741
<SECURITIES> 0
<RECEIVABLES> 67728
<ALLOWANCES> 0
<INVENTORY> 34826
<CURRENT-ASSETS> 114135
<PP&E> 162533
<DEPRECIATION> 103113
<TOTAL-ASSETS> 195366
<CURRENT-LIABILITIES> 54508
<BONDS> 0
<COMMON> 5797
0
0
<OTHER-SE> 70973
<TOTAL-LIABILITY-AND-EQUITY> 195366
<SALES> 59510
<TOTAL-REVENUES> 59510
<CGS> 40371
<TOTAL-COSTS> 40371
<OTHER-EXPENSES> 11660
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 341
<INCOME-PRETAX> 7138
<INCOME-TAX> 2538
<INCOME-CONTINUING> 4600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4600
<EPS-PRIMARY> .86
<EPS-DILUTED> .86
</TABLE>
