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, 1998
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, 1998 was 10,498,625
shares.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
(Dollars in thousands)
MARCH 31 DECEMBER 31
Assets 1998 1997
<S> <C> <C>
Current assets
Cash and equivalents $ 10,948 $ 12,478
Trade accounts receivable 93,613 101,024
Inventories 55,667 55,991
Other current assets 13,317 13,367
Total current assets 173,545 182,860
Property, plant and equipment, at cost 247,629 242,399
Less accumulated depreciation 122,318 118,026
125,311 124,373
Goodwill 17,780 18,036
Other assets 20,389 20,384
Total assets $337,025 $345,653
Liabilities and Stockholders' Equity
Current liabilities
Short-term borrowings $ 8,691 $ 5,760
Current portion of long-term debt 75 1,613
Trade accounts payable 29,768 30,810
Income taxes 13,974 13,640
Other current liabilities 62,774 70,614
Total current liabilities 115,282 122,437
Long-term debt 30,431 38,244
Pension plans and other retiree benefits 59,745 60,235
Other liabilities 10,833 10,516
Total liabilities 216,291 231,432
Stockholders' equity
Common stock 11,594 11,594
Additional paid-in capital 12,263 12,061
Retained earnings 113,352 107,797
Cumulative foreign currency translation
adjustment (3,800) (3,889)
Minimum pension liability adjustment (901) (901)
132,508 126,662
Less treasury stock, at cost 11,774 12,441
Total stockholders' equity 120,734 114,221
Total liabilities and stockholders' equity $337,025 $345,653
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<PAGE>
<TABLE>
GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
(Dollars in thousands, except
per share amounts)
THREE MONTHS ENDED
MARCH 31
1998 1997
<S> <C> <C>
Net sales $95,397 $60,335
Costs and expenses
Cost of products sold 65,974 41,016
Selling, general and
administrative expenses 16,610 9,863
Research and development expenses 2,214 1,974
Interest (income) expense -- net 367 (1)
Other (income) expense -- net 11 (540)
Income before income taxes 10,221 8,023
Provision for income taxes 4,011 2,829
Net income $ 6,210 $ 5,194
Earnings per common share:
Basic $ .59 $ .52
Diluted $ .57 $ .50
Weighted average number of common shares
outstanding:
Basic 10,465,962 9,968,050
Diluted 10,892,080 10,305,854
Cash dividends declared per common share $ .0625 $ .0625
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<PAGE>
<TABLE>
GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
THREE MONTHS ENDED
MARCH 31
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,210 $ 5,194
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 5,334 2,901
Loss (gain) on disposals of property, plant
and equipment 6 (428)
Provision for deferred income taxes 188 29
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 6,513 (3,352)
(Increase) in inventories (793) (2,858)
(Increase) in other current assets (21) (9)
Increase (decrease) in trade accounts payable (2,191) 208
(Decrease) in all other current operating
liabilities (4,552) (1,463)
Other, net 222 228
Net cash provided by operating activities 10,916 450
Cash flows from investing activities:
Capital expenditures (6,729) (2,127)
Proceeds from asset disposals 105 1,520
Proceeds from collection of notes receivable -- 18
Net cash (used in) investing activities (6,624) (589)
Cash flows from financing activities:
Proceeds from short-term borrowings 3,080 310
Net (repayments) under term loan and revolving
credit agreements (7,006) (550)
Net proceeds from (repayment of) long-term debt (1,537) 31
Purchase of treasury stock (3) (609)
Net stock issues 415 26
Dividends paid (655) (622)
Net cash (used in) financing activities (5,706) (1,414)
Effect of exchange rate changes on cash
and equivalents (116) (252)
(Decrease) in cash and equivalents (1,530) (1,805)
Cash and equivalents, beginning 12,478 7,199
Cash and equivalents, ending $10,948 $ 5,394
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(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, 1998 and 1997
(b) the financial position at March 31, 1998 and December
31, 1997, and (c) the cash flows for the three-month periods
ended March 31, 1998 and 1997, of Gleason Corporation and
subsidiaries.
2. The results of operations for the three-month period ended
March 31, 1998 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) 3/31/98 12/31/97
Raw materials and
purchased parts $ 10,335 $ 11,215
Work in process 35,443 34,491
Finished goods 9,889 10,285
$ 55,667 $ 55,991
5. Net cash payments for income taxes were $2,681,000 and
$788,000 for the three months ended March 31, 1998 and 1997,
respectively. Interest payments were $617,000 and $24,000
for the three months ended March 31, 1998 and 1997,
respectively.
6. Effective January 1, 1998, the Company adopted Statement of
Financial Standards No. 130, " Reporting Comprehensive Income"
(FAS No. 130). FAS No. 130 establishes standards for the
reporting and display of comprehensive income and its components.
The adoption of FAS No. 130 does not impact the calculation of
net earnings or earnings per share nor does it impact reported
assets, liabilities or total stockholders' equity. This
Statement will result in the presentation of the components of
comprehensive income within the annual financial statement, which
must be displayed with the same prominence as other financial
statements.
<PAGE>
<PAGE>
The components of the Company's total comprehensive income
were:
Three Months Ended
March 31,
(in thousands) 1998 1997
Net income $6,210 $5,194
Foreign currency translation
adjustments 89 (1,383)
Total comprehensive income $6,299 $3,811
7. In February 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No.
132, "Employers' Disclosures about Pension and Other
Postretirement Benefits". This Statement revises employers'
disclosures of pensions and other postretirement benefits,
requires additional information on changes in benefit
obligations and fair value of plan assets and eliminates
certain disclosures. Restatement of disclosures for earlier
periods is required. This Statement is effective for the
Company's financial statements for the year ending December
31, 1998.
<PAGE>
<PAGE>
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, 1998 and 1997 and in the Company's financial
condition during the three months ended March 31, 1998.
Results of Operations
All references to earnings per share reflect basic earnings per
share. Basic and diluted earnings per share for the 1997 first
quarter have been restated to reflect the Company's two-for-one
stock split which occurred in September 1997.
Net income for the first quarter ended March 31, 1998 increased
20% to $6.2 million, or $.59 per share, compared to $5.2 million,
or $.52 per share, for the 1997 first quarter. Operating income
(earnings before interest and taxes) increased 32% in the first
quarter to $10.6 million, or 11.1% of sales, compared to $8.0
million, or 13.3% of sales, in the 1997 first quarter.
New orders totaled $95.8 million for the first quarter compared
to $55.4 million in the 1997 first quarter. Orders for the 1998
first quarter by product type were split 57% for machine products
and 43% for tooling and aftermarket products. Order levels,
excluding the Pfauter operations which the Company acquired in
July 1997, increased 10% compared to the 1997 first quarter to
$60.7 million. The increase in orders on a comparable basis with
the prior year was primarily attributable to the continued
strength of the U.S. market. The Company experienced lower
orders in the Asian market, which accounted for only 10% of the
1998 first quarter order intake. The Company expects continued
weaker demand from the Asian market for the balance of 1998, but
that effect should be offset by more favorable market conditions
in the U.S. and Europe.
Consolidated backlog was $178.1 million at March 31,1998 compared
to $177.8 million at December 31, 1997 and $117.9 million at
March 31,1997. Backlog at March 31, 1998, excluding Pfauter
operations, totaled $109.0 million.
Net sales were $95.4 million for the first quarter, 58% higher
than the 1997 first quarter. Sales, excluding Pfauter, were
$60.6 million compared to $60.3 million in the prior year first
quarter. Higher shipments of cylindrical gear machine products
were offset by lower sales of tooling and aftermarket products.
On a regional basis, higher shipments to the United States were
offset by lower shipments to Asia. Sales, excluding Pfauter, to
customers in the United States accounted for 50% of total sales
in the 1998 first quarter compared to 35% in the first quarter of
1997. Sales to the Asia-Pacific region declined to represent
only 16% of sales in the first quarter, compared to 28% in the
prior year first quarter.
<PAGE>
<PAGE>
Cost of products sold as a percentage of sales was 69.2% for the
three-month period ended March 31, 1998 compared to 68.0% for the
comparable 1997 period. Margins can be heavily impacted by the
mix of products sold. For example, machines, in general, tend to
carry higher cost of sales percentages than tooling or other
products. Margins were lower in the 1998 first quarter primarily
due to higher machine sales. Margins on machine products in the
first quarter were down slightly on a comparable basis with the
first quarter of 1997. Tooling margins were lower in the 1998
first quarter with the inclusion of Pfauter cylindrical gear
cutting tool products.
Selling, general and administrative expenses were $16.6 million,
or 17.4% of sales, for the first quarter of 1998 compared to $9.9
million, or 16.3% of sales, in the 1997 first quarter. Spending
as a percentage of sales increased with the inclusion of the
Pfauter operations in the 1998 first quarter. Excluding Pfauter,
spending as a percentage of sales decreased due to lower
commission expense as a result of lower shipments to Korea where
the Company is represented by an independent machine dealer.
Research and development spending in the first quarter of 1998
was $2.2 million, or 2.3% of sales, compared to $2.0 million, or
3.3% of sales in the 1997 period. The Company expects
development spending to be higher in 1998 than in 1997 with the
inclusion of the Pfauter operations for the full year.
Development spending included new product development programs
for both bevel and cylindrical gear products.
Other income was $0.5 million lower in the first quarter of 1998
compared to the prior year's first quarter. Other income in the
1997 first quarter included a $0.4 million gain on the sale of
property associated with one of the Company's former Components
Group businesses. The property had been leased to the purchaser
of that operation since its sale in 1992.
The Company's provision for income taxes as a percentage of
income before taxes was 39.2% in the first quarter of 1998
compared to 35.3% in the 1997 first quarter. The effective tax
rate for the 1997 period was lower primarily due to the
availability of certain foreign tax credit carryforwards. The
Company expects the effective tax rate to be higher in 1998 than
in 1997 due to a decrease in available tax credit carryforwards.
<PAGE>
<PAGE>
Liquidity and Capital Resources
Cash and cash equivalents decreased $1.5 million in the first
three months of 1998 to $11.0 million. Borrowings under the
Company's term loan and revolving credit facilities decreased to
$30.2 million at March 31, 1998 from $38.0 million at December
31, 1997. In the first quarter, the Company reduced the total
amount of the facility from $135 million to $120 million, with
the term loan portion decreasing from $25 million to $10 million.
All other terms and conditions remain the same. Available unused
short and long-term credit lines with banks, including the term
loan and revolving credit facilities, totaled $77.6 million at
March 31, 1998. Dividend payments to stockholders totaled $0.7
million in the first quarter.
Operating activities in the first quarter provided cash of $10.9
million compared $0.5 million in the comparable 1997 period.
Operating cash flows were significantly higher in the 1998 first
quarter due to higher operating earnings before depreciation and
amortization and smaller increases in working capital. Working
capital cash requirements were $6.4 million lower in the 1998
first quarter compared to the 1997 first quarter primarily due to
decreases in trade accounts receivable.
Investing activities used $6.6 million of cash in the 1998 first
quarter versus $.6 million in the comparable prior year period.
Capital expenditures totaled $6.8 million in the 1998 first
quarter compared to $2.1 million in the 1997 first quarter.
Capital expenditures for the 1998 full year are expected to
exceed depreciation expense with spending planned for investments
in information technology and equipment to upgrade existing
production facilities. Cash flows from investing activities in
the 1997 first quarter also included $1.5 million in cash from
the sale of the property of one of the Company's former
businesses.
Financing activities in the 1998 first quarter included $.4
million of net stock issues compared to $.6 million of treasury
share repurchases in the 1997 first quarter.
Management believes that the Company's cash balances, borrowing
capacity under its lines of credit, and anticipated funds from
operations will be sufficient to meet its near-term operating and
investing activities and that it will be able to obtain
additional long-term financing if such financing is required.
Forward looking statements related to the level and timing of
incoming orders are subject to a number of risk factors which
could cause actual results to differ materially from those
expected. These risk factors include, but are not limited to,
general economic conditions in the world markets the Company
serves, currency fluctuations, the success of new product
introductions, competitors' actions, and the stability of
customers' capital spending plans.
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults 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 5, 1998. At the meeting, proxies for
approximately 94% of the 10,497,796 outstanding shares were
represented. Matters voted at the meeting were as
follows:
For Withheld
(1) Election of directors:
For three-year terms
Martin L. Anderson 9,841,003 17,040
John W. Guffey, Jr. 9,841,017 17,026
William P. Montague 9,841,007 17,036
For a one-year term:
Robert L. Smialek 9,840,817 17,226
For Against Abstain
(2) Appointment of Ernst & Young LLP
as Independent Auditors for 1998. 9,830,950 18,097 8,996
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 (a): Financial Data Schedule - Three
Months Ended March 31, 1998
Exhibit 27 (b): Financial Data Schedule - Three
Months Ended March 31, 1997
Restated
(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: May 13, 1998
John J. Perrotti
John J. Perrotti
Vice President - Finance
(Chief Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 1998 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-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 10948
<SECURITIES> 0
<RECEIVABLES> 93613
<ALLOWANCES> 0
<INVENTORY> 55667
<CURRENT-ASSETS> 173545
<PP&E> 247629
<DEPRECIATION> 122318
<TOTAL-ASSETS> 337025
<CURRENT-LIABILITIES> 115282
<BONDS> 0
0
0
<COMMON> 11594
<OTHER-SE> 109140
<TOTAL-LIABILITY-AND-EQUITY> 337025
<SALES> 95397
<TOTAL-REVENUES> 95397
<CGS> 65974
<TOTAL-COSTS> 65974
<OTHER-EXPENSES> 18835
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 367
<INCOME-PRETAX> 10221
<INCOME-TAX> 4011
<INCOME-CONTINUING> 6210
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6210
<EPS-PRIMARY> 0.59
<EPS-DILUTED> 0.57
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. EARNINGS PER SHARE HAVE
BEEN RESTATED TO COMPLY WITH FINANCIAL ACCOUNTING STANDARDS NO. 128 "EARNINGS
PER SHARE" AND TO REFLECT A TWO-FOR-ONE STOCK SPLIT IN 1997.
</LEGEND>
<RESTATED>
<CIK> 0000743239
<NAME> GLEASON CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 5394
<SECURITIES> 0
<RECEIVABLES> 67802
<ALLOWANCES> 0
<INVENTORY> 30035
<CURRENT-ASSETS> 113994
<PP&E> 167568
<DEPRECIATION> 109215
<TOTAL-ASSETS> 189865
<CURRENT-LIABILITIES> 55021
<BONDS> 0
0
0
<COMMON> 11594
<OTHER-SE> 75876
<TOTAL-LIABILITY-AND-EQUITY> 189865
<SALES> 60335
<TOTAL-REVENUES> 60335
<CGS> 41016
<TOTAL-COSTS> 41016
<OTHER-EXPENSES> 11297
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1)
<INCOME-PRETAX> 8023
<INCOME-TAX> 2829
<INCOME-CONTINUING> 5194
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5194
<EPS-PRIMARY> 0.52
<EPS-DILUTED> 0.50
</TABLE>
