S E C U R I T I E S A N D E X C H A N G E C O M M I S S I O N
Washington, D. C. 20549
FORM 10-K
___________
[X] Annual Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the fiscal year ended December 31, 1994.
[ ] Transition Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
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
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $1.00 Par Value New York
Stock Exchange
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 ____
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( )
The aggregate market value of registrant's voting stock held
by non-affiliates as of March 9, 1995 was approximately
$92,994,732.
The number of shares of Common Stock, $1.00 par value,
outstanding as of March 9, 1995 was 5,166,374 shares.
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Documents Incorporated by Reference
Portions of the Company's Annual Report to Stockholders for
the year ended December 31, 1994 are incorporated by
reference into Parts I and II of this Form 10-K.
Portions of the Company's proxy statement, dated March 31,
1995, filed in connection with its 1995 Annual Meeting of
Stockholders are incorporated by reference into Part III of
this Form 10-K.
Certain documents previously filed with the SEC have been
incorporated by reference into Part IV of this Form 10-K.
The exhibit index follows the Signature page.
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PART I
ITEM 1. BUSINESS
General
Gleason Corporation was incorporated in the State of
Delaware in 1984 and in May of 1984, by virtue of a merger,
became a holding company which owns all the outstanding stock of
The Gleason Works. The Gleason Works was incorporated in New
York State in 1903 as successor to the businesses of two
corporations and has, with its predecessors, been in business
since 1865. As used herein, unless the context otherwise
indicates, "Company" includes Gleason Corporation and its
subsidiaries and divisions.
In 1989, the Company announced that its Components Group,
which consisted of four businesses that manufacture industrial
products including powder metal parts, metal stampings and
precision plastic parts, was for sale. In December 1991, the
Company sold Pennsylvania Pressed Metals, Inc., the largest of
its four Components Group operations. In 1992, the Company sold
two of the three remaining businesses, Alliance Precision
Plastics and Alliance Carolina Tool and Mold. In 1994, the
Company ceased operations at the last remaining Components Group
business, Alliance Metal Stamping and Fabricating, and sold the
machinery and equipment located at this division's facility.
Further information regarding discontinued operations is
presented in Note 3-Discontinued Operations of the Notes to the
Consolidated Financial Statements of the Company's Annual Report to
Stockholders for the year ended December 31, 1994, which is
incorporated herein by reference.
The Company's continuing operations are engaged in the
design, manufacture and sale of gear production machinery and
equipment. The Company has manufacturing operations in
Rochester, New York, and Plymouth, England. The Company sold its
former Belgian manufacturing operation to a new company owned by
former employees of the Company in the fourth quarter of 1993.
The new company serves as a contract manufacturer for some of the
Company's products.
Operations are reported in a single industry segment.
Foreign and domestic operations, export sales and major customer
financial information is presented in Note 14-Business Segment
and Foreign Operations of the Notes to the Consolidated Financial
Statements of the Company's Annual Report to Stockholders for the
year ended December 31, 1994, which is incorporated herein by
reference.
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Description of Business
In 1991 and 1992, the Company made significant investments
in major new product development and capital spending programs
totaling approximately $40 million for the development of new
gear production machines and the creation of an advanced
manufacturing facility. The Company began making shipments of
these new machines, which are produced in its new manufacturing
facility, in the first half of 1993.
Products
The Company believes it is the world leader in the
technology, design, application and methods of production of
hypoid and other bevel gears, and in the manufacture of machines
for the production of these gears.
Hypoid and other bevel gears are used to transmit
mechanical power at an angle, such as from the drive shaft to the
rear driven axles of an automobile. The gears produced by
Gleason machines are used in drive trains of automobiles, trucks,
buses, aircraft, marine, agricultural and construction machinery,
and must meet a wide range of complex specifications which are
determined by the function required of a particular gear set.
The Company sells over 30 models of machines for the
production and testing of hypoid and other bevel gears. Some of
these machines can produce gears as small as 1/4 of an inch in
diameter, weighing only 1/2 ounce, while others can produce gears
as large as 36 inches in diameter, weighing more than 1,000
pounds. The latest design of these machines incorporates full
computer numerical controls (CNC) which contribute to improved
quality and productivity.
In December 1989, the Company sold its first Phoenix
(Registered Trademark) gear production machine. This line of
machines incorporates state-of-the-art, full CNC design for the
production of spiral bevel and hypoid gears. CNC machine
features include the elimination of manual set-ups, permitting a
significant reduction in the overall cost of manufacturing spiral
bevel and hypoid gears. Phoenix products now account for the
vast majority of bevel gear machine sales.
The Company also produces machines for cutting spur and
helical gears up to 20 inches in diameter. Spur and helical or
parallel axis gears are used for the straight-line or parallel
transmission of mechanical power. This type of gearing has a
broad range of applications, such as the main drive axles of
passenger cars with front-wheel-drive and transverse mounted
engines, automotive transmissions, speed reducers, pumps and gear
motors. In 1993, the Company began making shipments of its new
Phoenix gear hobbing machine manufactured in its new production
facility.
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In 1994, the Company began making shipments of a parallel
axis gear grinding machine jointly developed with Okamoto Machine
Tool Works, Ltd. of Japan. These machines are being built by
Okamoto in Japan with, in many instances, certain components
added and assembly operations performed by Gleason at its
Rochester location.
The Company designs and produces tooling, including cutting
tools and workholding equipment, principally for use on its bevel
gear production machines. Other products include spare parts,
service, software and computer timesharing.
Marketing
The Company's sales and service functions in North America
and Europe are in general performed directly by employees of the
Company. Sales in other territories are generally handled by
independent foreign machinery dealers.
In 1994, the Company acquired a 20 percent interest in OGA
Corporation, its exclusive sales and service representative in
Japan and Taiwan, in order to strengthen its presence and enhance
growth in that region.
Overseas markets are important to the Company. The
percentage of sales outside the United States was 53 percent and
57 percent in 1994 and 1993, respectively. The majority of
overseas sales were to European and Asian customers. Sales to
overseas markets in 1994 were lower as a percentage of total
sales with the economic recovery in Europe and Japan still
generally lagging the U.S.
The domestic and foreign automotive and truck industries
accounted for approximately 73 percent and 72 percent of sales in
1994 and 1993, respectively.
The Company has no contracts or subcontracts with U.S.
government agencies that are significant.
Competition
The Company believes that it produces the largest number
and greatest variety of machines for the manufacture of bevel and
hypoid gears. However, it does have competition from other
producers of such machinery, particularly foreign producers, as
well as from producers of equipment for the production of bevel
and hypoid gears by processes other than machining, such as
forging and sintered powder metal processes.
The Company faces greater competition from manufacturers of
spur and helical gear equipment. Competition is primarily from
Japanese and German companies.
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Backlog
Backlog (unshipped orders), while still an important
measure of business activity, may be less important than in the
past in predicting future shipment levels given the shorter lead
times required for many of the machines manufactured in the
Company's new factory. Because of the nature of the industry,
backlog is subject to fluctuation. As of December 31, 1994
backlog totaled $54.7 million compared to $26.2 million as of
December 31, 1993. The higher backlog was driven primarily by
the increased demand for machine products, with machine orders
for 1994 up 98 percent over 1993 levels. The Company expects
substantially all of the December 31, 1994 backlog to be shipped
by the end of 1995.
Research and Development
Amounts expended for research and development are presented
in the Consolidated Statements of Operations of the
Company's Annual Report to Stockholders for the year ended
December 31, 1994, which is incorporated herein by reference.
Patents
The Company owns a substantial number of United States and
foreign patents and patent applications. The Company is not
significantly dependent upon any one patent or group of patents
for its business.
Employees
At December 31, 1994, the Company had 1,079 employees.
Many employees possess a high degree of engineering, technical
and mechanical skills. Employee relations are considered good.
None of the Company's major operations have union representation.
Other Information
The Company is not significantly dependent on any one
source for raw materials essential to its business.
The Company is not aware of any federal, state or local
provisions which have been enacted or adopted regarding discharge
of material into the environment, compliance with which might
have a material effect on the consolidated capital expenditures,
earnings or competitive position of the Company. The Company
makes expenditures for environmental control equipment on an
ongoing basis in its efforts to comply with applicable
environmental regulations.
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ITEM 2. PROPERTIES
The Company's corporate office is located in Rochester, New
York and its manufacturing operations are conducted at plants in
Rochester and England.
A table of the major facilities and products manufactured
is displayed below:
Plant Principal
Location Square Footage Products
Rochester, New York 721,400 Gear production
machines, workholding
equipment and cutting
tools
Plymouth, England 106,000 Cutting tools
The Company owns approximately 250 acres of undeveloped land in
Monroe County, New York and leases other office space in various
locations around the world. The Company has retained ownership
of the land and buildings of Alliance Precision Plastics and
Alliance Carolina Tool and Mold, which were sold in 1992. These
properties are being leased to the new owners of these
businesses. The Company continues to seek a buyer for the land
and buildings of its former Alliance Metal Stamping and
Fabricating division.
The Company's plants consist of well-lighted, well-
maintained buildings and provide good working conditions.
Production machinery and equipment are generally owned by the
Company and suited to its manufacturing requirements.
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ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiaries is a party
to any material pending legal proceedings required to be
disclosed under this item.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security
holders during the fourth quarter of the fiscal year covered by
this report.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS
Information regarding the market for the Company's common
stock and related stockholder matters presented in the
Company's Annual Report to Stockholders for the year ended
December 31, 1994 is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented in the Five Year
Review of the Company's Annual Report to Stockholders for the
year ended December 31, 1994 is incorporated herein by reference.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion of Financial Condition and Results
of Operations is presented in the Company's Annual Report to
Stockholders for the year ended December 31, 1994 and is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements and
supplementary data of the Company and its subsidiaries
presented in the Company's Annual Report to
Stockholders for the year ended December 31, 1994 are
incorporated herein by reference:
Consolidated Statements of Operations - Years ended December
31, 1994, 1993 and 1992.
Consolidated Balance Sheets - December 31, 1994 and 1993.
Consolidated Statements of Cash Flows - Years ended December
31, 1994, 1993 and 1992.
Consolidated Statements of Stockholders' Equity - Years
ended December 31, 1994, 1993 and 1992.
Notes to Consolidated Financial Statements - December 31,
1994.
Quarterly Results of Operations.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Certain information required to be furnished by Items 401
and 405 of Regulation S-K are described in a definitive proxy
statement which will be filed with the Securities and Exchange
Commission pursuant to Regulation 14-A within 120 days after the
close of the fiscal year ended December 31, 1994, which information
is incorporated herein by reference. Additional information
required to be furnished by Item 401 of Regulation S-K is as
follows:
List of Executive Officers of the Registrant
EXECUTIVE
OFFICER POSITIONS AND
NAME AGE SINCE OFFICES HELD
Gleason Corporation:
James S. 60 1966 Chairman and President since
Gleason January 1985.
John B. 53 1986 Vice President-Administration
Kodweis and Human Resources since December
1992; Vice President-Human Resources
and Public Affairs from May 1986 to
November 1992.
Ralph E. 61 1989 Vice President, Secretary
Harper & Treasurer since August 1993; Vice
President, Secretary & Corporate
Counsel since December 1992;
Secretary and Corporate Counsel from
October 1989 to November 1992.
John J. 34 1993 Vice President - Controller
Perrotti since August 1993; Corporate
Controller since December 1992;
Director of Accounting and Reporting
from January 1988 to November 1992.
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EXECUTIVE
OFFICER POSITIONS AND
NAME AGE SINCE OFFICES HELD
Gleason Works:
Robert J. 53 1991 Vice President-Tooling Products
Ball Group and General Manager of Gleason
Works Limited since February 1991;
Managing Director of Gleason Works
Limited from November 1989 to
January 1991.
David J. 40 1992 Vice President-Machine Products
Burns Group since November 1992; General
Manager-Standard Products Group from
February 1991 to October 1992; Plant
Manager of Gleason Works-Rochester
from April 1989 to January 1991.
Gary J. 51 1992 Vice President-Engineering
Kimmet since December 1988.
Richard 62 1993 Vice President-Technology
Johnstone since May 1989.
ITEM 11. EXECUTIVE COMPENSATION
The information required to be furnished by Item 402 of
Regulation S-K is included in a definitive proxy statement which
will be filed with the Securities and Exchange Commission
pursuant to Regulation 14-A within 120 days after the close of
the fiscal year ended December 31, 1994, which information is
incorporated herein by reference.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Certain information regarding security ownership of certain
beneficial owners and management required to be furnished by Item
403 of Regulation S-K is included in a definitive proxy statement
which will be filed with the Securities and Exchange Commission
pursuant to Regulation 14-A within 120 days after the close of
the fiscal year ended December 31, 1994, which information is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
(a) (1). The following is a list of the consolidated financial
statements of the Company and its subsidiaries and Report of
Independent Auditors presented in its Annual Report to
Stockholders for the year ended December 31, 1994 which are
incorporated herein by reference:
Consolidated Statements of Operations - Years ended
December 31, 1994, 1993 and 1992.
Consolidated Balance Sheets - December 31, 1994 and
1993.
Consolidated Statements of Cash Flows - Years
ended December 31, 1994, 1993 and 1992.
Consolidated Statements of Stockholders' Equity - Years
ended December 31, 1994, 1993 and 1992.
Notes to Consolidated Financial Statements -
December 31, 1994.
Report of Independent Auditors
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(2) All schedules for which provision is made in the
applicable accounting regulation of the Securities and Exchange
Commission are not required under the related instructions or are
inapplicable, and therefore have been omitted.
(3) Exhibits required to be listed including exhibits
incorporated by reference under this Item and filed as exhibits
under (c) of this Item 14 pursuant to Item 601 Table I of
Regulation S-K are as follows:
(3) Articles of Incorporation and By-Laws.
(a) The Restated Certificate of Incorporation of
Gleason Corporation, as filed with the
Delaware Secretary of State on May 5, 1987,
is incorporated by reference to Exhibit A of
the Registrant's Form 10-Q for the quarter
ended March 31, 1987.
(b) By-laws, as amended, are incorporated by
reference to Exhibit 3(b) of Gleason
Corporation Form 10-K, file number 1-8782,
for the year ended December 31, 1991.
(4) Instruments defining the rights of security
holders, including indentures.
(a) See 3(a) and 3(b) above.
(b) Gleason Corporation Preferred Stock Purchase
Rights Agreement, dated as of June 8, 1989,
as amended, is incorporated by reference to
the Registrant's Form 8-A Registration
Statement dated June 8, 1989, Form 8
Amendment No. 1, dated March 2, 1990, and
Form 8 Amendment No. 2, dated February 6,
1992.
(10) Material contracts.
(a) Gleason Corporation Annual Management
Incentive Compensation Plan is filed as an
exhibit to this Form 10-K. Refer to the
Index to Exhibits.
(b) Gleason Corporation Supplemental Retirement
Plan, as restated, is incorporated by
reference to Exhibit 10(c) of Gleason
Corporation Form 10-K, file number 1-8782,
for the year ended December 31, 1993.
(c) A Supplemental Retirement Benefit Agreement
between the Company and Richard Johnstone
dated August 25, 1993 is incorporated by
reference to Exhibit 10(d) of Gleason
Corporation Form 10-K, file number 1-8782,
for the year ended December 31, 1993.
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(d) The Company's 1992 Stock Plan, as amended, is
incorporated by reference to Exhibit 10(a) of
Gleason Corporation Form 10-K, file number 1-
8782, for the year ended December 31, 1992.
(e) Loan Agreement between Gleason Corporation
and Chase Manhattan Bank, N.A. dated January
24, 1992 is incorporated by reference to
Exhibit 10(b) of Gleason Corporation Form 10-
K, file number 1-8782, for the year ended
December 31, 1991. There is an identical
agreement with NBD Bank, N.A.
Amendment No. 1 to the Loan Agreement dated
May 6, 1993 is incorporated by reference to
Exhibit (a) of Gleason Corporation Form 10-Q
for the quarter ended March 31, 1993.
The loan agreement between Gleason
Corporation and Chase Manhattan Bank, N.A.
was extended through January 1, 1996. There
is an identical extension agreement with NBD
Bank, N.A.
(f) Executive Agreement between the Company and
its executive officers (for which there are
identical agreements for those officers
listed in Part III, Item 10 of this Form 10-
K) is incorporated by reference to Exhibit
10(c) of Gleason Corporation Form 10-K, file
number 1-8782, for the year ended December
31, 1991.
(g) The Company's 1981 Stock Plan, as amended
January 23, 1990, is incorporated by
reference to Exhibit I of Gleason Corporation
Form 10-K, file number 1-8782, for the year
ended December 31, 1989.
(h) Trust Agreement for Gleason Corporation
executive agreements and Supplemental
Retirement Plan is incorporated by reference
to Exhibit L of Gleason Corporation Form 10-
K, file number 1-8782, for the year ended
December 31, 1989.
(i) Gleason Corporation Plan for Deferral of
Directors Fees is incorporated by reference
to Exhibit J of Gleason Corporation Form 10-
K, file number 1-8782, for the year ended
December 31, 1988.
(j) Gleason Corporation Executive Life Insurance
Program is incorporated by reference to
Exhibit L of Gleason Corporation Form 10-K,
file number 1-8782, for the year ended
December 31, 1987.
(k) Gleason Corporation Long Term Disability Plan
is incorporated by reference to Exhibit I of
Gleason Corporation Form 10-K, file number 1-
8782, for the year ended December 31, 1986.
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(l) Gleason Corporation 1986 Deferred
Compensation Plan is incorporated by
reference to Exhibit J of Gleason Corporation
Form 10-K, file number 1-8782, for the year
ended December 31, 1986.
(13) Portions of the Annual Report to Stockholders of
the registrant for the year ended December 31,
1994 expressly incorporated by reference
into this Report. Refer to the Index to Exhibits.
(21) Subsidiaries of the registrant. Refer to the
Index to Exhibits.
(23) Consent of Independent Auditors. Refer to the
Index to Exhibits.
(24) Power of Attorney. Refer to the Index to Exhibits.
(27) Financial Data Schedules. Refer to Index to
Exhibits.
(b) Reports on Form 8-K filed in the fourth quarter of 1994:
None.
(c) and (d) Exhibits required by Item 601 of Regulation S-K and
required by Article 5 of Regulation S-X under Item 8 are
filed as exhibits to this Report on Form 10-K.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
James S. Gleason
James S. Gleason
Chairman, President and Director
John J. Perrotti
John J. Perrotti
Vice President - Controller
(Principal Financial and
Accounting Officer)
Date: March 28, 1995
Pursuant to the requirements of the Securities Exchange Act of
1934, each of the following named directors has personally
authorized the signing of this report on their behalf by
the Attorney in Fact named below.
Julian W. Atwater )
Robert W. Bjork )
J. David Cartwright ) Directors
James S. Gleason )
Donald D. Lennox )
Robert A. Sherman )
By: Ralph E. Harper
Ralph E. Harper
Attorney in Fact
Date: March 28, 1995
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GLEASON CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS
Certain exhibits to this report on Form 10-K have been
incorporated by reference. For a list of these exhibits, see
Item 14 hereof.
The following exhibits are being filed herewith:
Exhibit
No.
(10) Material Contracts
(a) Annual Management Incentive
Compensation Plan
(13) Portions of the Annual Report to
Stockholders of the Registrant for
the year ended December 31, 1994
expressly incorporated by reference
into the Form 10-K
(21) Subsidiaries of the Registrant
(23) Consents of Experts and Counsel
(a) Consent of Ernst & Young LLP,
Independent Auditors
(24) Power of Attorney
(27) Financial Data Schedules
THE GLEASON CORPORATION
ANNUAL MANAGEMENT INCENTIVE COMPENSATION PLAN
(as amended effective for Plan Year 1995)
________________________________________________________
I. OBJECTIVES
1. The Gleason Corporation Annual Management Incentive
Compensation Plan is designed to:
2. Effectively motivate and compensate key management
employees commensurate with their contributions to
organizational success.
3. Direct the energies of key management employees
toward earning a premium rate of return and the
achievement of agreed upon personal performance
goals.
4. Assist in attracting and retaining qualified
managerial and technical employees by providing a
total compensation opportunity competitive with the
marketplace.
5. Equate personal financial success with organizational
success.
II. DEFINITIONS:
1. Achievement Level: Percentage performance (not to
exceed 150%) by a Participant in a Plan Year of a
Performance Goal.
2. Award: The sum of all the Participant's Segment
Awards for a Plan Year, converted to dollars as
follows: The total number of dollars in the
Incentive Pool will be divided by the total number of
Units represented by all Awards and the quotient will
be the value of a Performance Unit. A Participant's
Award will be the result of multiplying his total
Performance Units by the dollar value of a
Performance Unit, subject to the limitation that no
Award shall exceed 150% of what the Participant's
Award would be if the Target value of a Performance
Unit was $1.00.
3. C*: The Company's weighted average cost of capital
for a Plan Year.
4. Company: Gleason Corporation and its consolidated
subsidiaries.
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5. EVA: Economic Value Added, which is the product of
multiplying (a) a percentage which is (i) the
numerical amount by which RNOA for a Plan Year
exceeds C* for that Plan Year, or (ii) the amount by
which C* exceeds RNOA for the Plan Year (in which
event EVA will be a negative number), by (b) the
Company's average net operating assets for that Plan
Year (e.g., if RNOA is 15% and C* is 10.5% and
average net operating assets are $110,000,000, EVA
will be equal to 4.5% of $110,000,000, or
$4,950,000).
6. Executive Compensation Committee: The Executive
Compensation Committee of the Board of Directors of
Gleason Corporation.
7. Incentive Pool: The aggregate amount available for
Awards under the Plan for a Plan Year, which shall be
determined based on EVA for the Plan Year pursuant to
a formula approved by the Executive Compensation
Committee prior to commencement of the Plan Year.
8. Management Committee: The Gleason Works Management
Committee.
9. Participant: A member of the Management Committee or
an eligible employee selected by the Management
Committee to participate in the Plan for a Plan Year.
10. Participant Account: An Account established for a
Participant who elects to defer payment of part or
all of his or her Award as provided in Article IX.
11. Participant's Segments: The Segments determined by
the Management Committee, or, in the case of a member
of that Committee, by the Executive Compensation
Committee, to be applicable to a Participant.
12. Performance Goal: In the case of Company, group and
unit segments, the EVA established prior to
commencement of the Plan Year by the Management
Committee, with approval of the Executive
Compensation Committee, as entitling a Participant to
100% of his or her Segment Target Award for that
Segment, or such other goals as the Management
Committee, with approval of the Executive
Compensation Committee, determines are more
appropriate to that Segment. In the case of a
personal Segment, the personal performance goals
established prior to commencement of the Plan Year
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for the Participant by his or her manager, with the
approval of the Management Committee, or, in the case
of a member of that Committee, with the approval of
the Executive Compensation Committee, as they may be
modified during the Plan Year for any Participant by
such manager with the approval of the appropriate
Committee.
13. Performance Units: Units determined and applied as
provided in Sections 2, 18 and 20 of this Article II.
14. Plan: The Gleason Corporation Annual Management
Incentive Compensation Plan.
15. Plan Year: Calendar Year.
16. RNOA: Return on net operating assets of the Company,
a group, or unit, as the case may be, which shall be
determined by dividing its operating earnings for the
Plan Year (calculated in accordance with Corporate
Accounting Manual, Section 1, Memo No. 1, as then in
effect) by its average net operating assets for the
Plan Year (non-interest bearing assets (operating
assets) less non-interest bearing liabilities
(operating liabilities)), the quotient being
expressed as a percentage.
17. Segments: (a) and (d), and for any Participant, if
the Management Committee or Executive Compensation
Committee, as appropriate, believes it appropriate,
(b) and/or (c), as follows:
(a) Company financial performance
(b) Group financial performance (i.e., Tooling
Group, Special Products Group, Standard
Products Group)
(c) Unit financial performance (i.e.,
Rochester, Plymouth)
(d) Personal performance based on
accomplishment of personal objectives
18. Segment Award: The product, expressed in Performance
Units, of multiplying a Participant's Achievement
Level for a Segment times his or her Segment Target
Award for that Segment, as provided in Article VI.
19. Segment Target Award: The portion of a Participant's
Target Award allocated by the Management Committee,
or, in the case of a member of that Committee, by the
Executive Compensation Committee, to one of the
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Participant's Segments. The sum of all of a
Participant's Segment Target Awards will equal his or
her Target Award.
20. Target Award: The number of Performance Units equal
to the number of dollars which are a specified
percentage (determined by the Management Committee,
or, in the case of a member of that Committee, by the
Executive Compensation Committee) of a Participant's
salary grade midpoint for the applicable Plan Year.
III. ADMINISTRATION
1. Executive Compensation Committee
The Executive Compensation Committee shall approve
the Incentive Pool for each Plan Year and shall
administer and interpret the Plan with respect to
Participants who are members of the Management
Committee.
2. Management Committee
The Plan shall otherwise be administered by the
Management Committee which shall, with respect to
Participants who are not members of that Committee,
interpret the Plan and select the employees to
participate in the Plan, and shall establish
procedures for the administration of the Plan. The
Gleason Works Human Resources Department will have
the primary responsibility for assisting the
Management Committee in fulfilling its administrative
responsibilities.
IV. ELIGIBILITY
1. Selection
Members of the Management Committee shall
automatically participate in the Plan. Participants
in the Plan, other than members of the Management
Committee, shall be selected annually by the
Management Committee with the approval of the CEO
prior to commencement of the Plan Year. Participants
shall be selected from key managerial employees of
the Company and its units who can directly influence
the critical operating results of the Company.
Participation in the Plan in any Plan Year does not
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automatically mean participation in a subsequent Plan
Year.
2. Notification
Each Participant shall be advised in writing of his
or her participation in the Plan prior to the start
of the Plan Year during which such key employee will
participate.
V. TARGET AWARDS:
1. Determination
Target Awards for each salary grade for a Plan Year,
which shall be applicable to each Participant in that
grade, shall be determined annually by the Management
Committee, or, in the case of a member of that
Committee, by the Executive Compensation Committee,
prior to commencement of the Plan Year and set forth
on a Schedule (Schedule A).
2. Allocation among Segments
Each Participant's Target Award shall be allocated by
the Management Committee, or, in the case of a member
of that Committee, by the Executive Compensation
Committee, prior to commencement of the Plan Year
among the Participant's Segments and shall be set
forth on a Schedule (Schedule B).
3. Objective of Segments
The objective of a Participant's Segments is to
reflect the Participant's primary area of
responsibility as well as those activities which
contribute to the organization's success but may not
be directly reflected in the financial results.
4. Performance Goals
Performance Goals shall be determined annually prior
to commencement of the Plan Year and shall be set
forth on a Schedule (Schedule C) for each Participant
describing the minimum Company Achievement Level
below which no Segment Award will be payable, the
targeted Performance Goal, and the Achievement level
(150% of target) above which no additional Segment
Award will be granted.
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VI. AWARD DETERMINATION:
1. Required Performance
(a) A Participant's minimum Achievement Level of his
or her personal Performance Goals for a Plan
Year must be at least 80% or the Participant
will not be eligible for any Award for that Plan
Year.
(b) (i) The Company must achieve an RNOA which is
at least 50% of C* for there to be any personal
performance Segment Awards.
(ii) Any personal performance Segment Award
may, in the discretion of the Executive
Compensation Committee, be paid in whole or in
part in shares of restricted stock granted
pursuant to the Company's 1992 Stock Plan.
(c) The Company must achieve an RNOA which is at
least 80% of C* for there to be any Company
Segment Awards.
(d) The Company must have a positive net operating
profit after taxes and a unit must achieve an
RNOA which is at least 80% of C* for there to be
any unit Segment Awards for that unit.
(e) The Company must have a positive net operating
profit after taxes and a group must achieve an
RNOA which is at least 80% of C* for there to
be any group Segment Awards for that group.
2. Determination of Awards
(a) The Executive Compensation Committee will prior
to the commencement of each Plan Year approve a
Schedule (Schedule D) setting forth the minimum
and maximum Incentive Pool for the Plan Year,
the EVAs for that year below which no Awards
will be given, and at and above which the
maximum Company Segment awards will be, and
maximum personal Segment awards may be, given,
respectively, and the size of the Incentive Pool
it deems appropriate at intermediate EVA levels.
(b) Achievement Level for Personal Performance Goals
shall be determined by a Participant's manager
with the approval of the Management Committee,
or, in the case of a member of that Committee,
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with the approval of the Executive Compensation
Committee.
(c) A Participant's Award, if any, shall be the sum
of the results of multiplying the Participant's
Achievement Level for each of his or her
Segments by the Segment Target Award for that
Segment.
(d) No Participant shall receive an Award for any
Segment in excess of 150% of his or her Target
Award for that Segment.
VII. CHANGE IN EMPLOYMENT STATUS
1. Promotion, etc.
Awards of a Participant who is promoted during a Plan
Year within or among groups or units, shall be based
on his or her new salary grade.
2. Retirement, etc.
Awards of a Participant (or his or her beneficiaries
or legal representatives) who retires, becomes
disabled, or dies during a Plan Year shall be based
on the portion of the Plan Year during which the
Participant was actively performing his or her
duties. In such a case, the Achievement Level of the
Participant's personal Performance Goals shall be
deemed to be 100%.
3. Other Termination
A Participant whose employment terminates, other than
for retirement, disability, or death, or is on a
leave of absence or extended illness at any time
during the Plan Year shall be entitled to receive an
Award only with the approval of the CEO and, in the
case of a member of the Management Committee, the
approval of the Executive Compensation Committee.
VIII. PAYMENT OF AWARDS
1. Awards under the Plan shall, unless deferred pursuant
to Article IX, be paid in cash as soon as practicable
after the Company's annual financial results have
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been determined and audited; except that any portion
payable in restricted stock pursuant to the Company's
1992 Stock Plan, as provided in Section 1(b)(ii) of
Article VI of this Plan, will be payable in that
number of whole shares of restricted stock that most
nearly equals without exceeding the number of shares
of Company stock having a value equal to the portion
of the Award payable in restricted stock based on the
mean price of Company stock in New York Stock
Exchange Composite Trading on the date the Executive
Compensation Committee makes or approves such Award,
or, if there is no such trading on such date, on the
last preceding date on which there was such trading,
and retrictions on such stock shall lapse in
accordance with the terms of such Award pursuant to
the 1992 Stock Plan.
IX. DEFERRAL OF AWARDS
1. Amount of Deferral
A Participant may elect to defer receipt of all or a
specified portion of his or her Award, except any
portion awarded in shares of restricted stock
pursuant to the Company's 1992 Stock Plan, as
provided in Section 1(b)(ii) of Article VI of this
Plan.
2. Time for Electing Deferral
Any election to defer an Award, or to change an
existing election, must be made prior to commencement
of the Plan Year to which the Award relates, and
shall remain in effect until so changed.
3. Participant Accounts
(a) A Participant Account shall be established for
each Participant who elects a deferral. Each
Participant Account shall be credited with the
amounts deferred on behalf of a Participant plus
assumed interest at a rate equal to the prime
rate as listed in the "Wall Street Journal" on
the first business day of the calendar quarter
for which interest is being credited to the
Participant Account.
(b) Assumed interest shall be compounded quarterly
and treated as earned from the day of crediting
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to the date of withdrawal. The value of each
Participant Account shall be adjusted no less
frequently than annually to reflect
contributions to the Account, payments from the
Account as hereinafter provided, and assumed
interest.
(c) The maintenance of individual Participant
Accounts is for bookkeeping purposes only. The
Company is not obligated to acquire or set aside
any particular assets for the discharge of its
obligations, nor is any Participant to have any
property rights in any particular assets held by
the Company, whether or not held for the purpose
of funding the Company's obligations.
4. Payment of Deferred Amounts
(a) No withdrawal may be made from a Participant
Account except as provided in this Section 4.
Payments from a Participant Account shall be
made at such time as the Participant has elected
in accordance with Section 5 of this Article IX.
In the case of financial hardship, the
Management Committee, or, in the case of a
Participant who is then a member of that
Committee, the Executive Compensation Committee,
may in its sole discretion distribute all or a
portion of a Participant Account prior to the
time designated by the Participant in accordance
with Section 5. The amount of such a hardship
distribution shall not exceed the amount needed
to relieve the hardship.
(b) All payments shall be made only in cash in the
form of either a lump sum payment or monthly
installments over a period of years not to
exceed ten (10). Where payments are made in
monthly installments, the balance credited to a
Participant Account shall continue to be
adjusted for assumed interest earnings as
provided in Section 3.
(c) If installment payments are elected, the first
installment shall equal the value of the
Participant Account at such time multiplied by a
fraction, the numerator of which is one and the
denominator of which is the total number of
monthly installments to be made. All subsequent
installments shall equal the value of the
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<PAGE>
Participant Accounts as of the last valuation
date preceding the installment which is to be
paid multiplied by a fraction the numerator of
which is one and the denominator of which is the
total number of installments elected minus the
number of installments already paid.
(d) In the event of a Participant's death before he
or she has received all of the deferred payments
to which he or she is entitled hereunder, the
then value of his or her Participant Account
shall be paid to his or her estate in a single
payment.
(e) Notwithstanding a Participant's election of
installment payments, the Company in its sole
discretion, shall have a right to accelerate any
such payments or to make payment of the balance
of a Participant Account in a lump sum.
5. Manner of Electing Deferral
A Participant shall elect a deferral by giving
written notice to the Management Committee in a form
substantially the same as the Election Form attached
hereto as Schedule D. The notice shall include (1)
the portion of the Award to be deferred; (2) the time
as of which deferral is to commence; (3) an election
of a lump sum payment or the number of monthly
installments (number of years not to exceed 10) for
the payment of the deferred amounts; and (4) the date
of the lump sum payment or the first installment
payment (not later than the first day of the month
following the Participant's 70th birthday).
6. Participant's Rights Unsecured
The right of any Participant or his or her estate to
receive future installments under the provisions of
this Plan shall be an unsecured claim against the
general assets of the Company.
7. Statement of Account
Statements will be sent to Participants no less
frequently than annually as to the value of their
Participant Accounts.
X. COMMITTEE DISCRETION
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<PAGE>
1. Conclusiveness of Committee Decisions
All decisions of the Executive Compensation Committee
and the Management Committee shall be made in their
sole discretion, respectively, and shall be
conclusive. No member of either Committee shall be
liable for any action taken or decision made in good
faith relating to the Plan or any Award thereunder.
2. Adjustment during Plan Year
Notwithstanding any other provision of this Plan, in
the event of unusual circumstances, previously
approved Performance Goals of the Company and/or any
divisions, subsidiaries or units, Target Awards
and/or Segment Target Awards, may be adjusted during
the Plan Year when the Management Committee, with the
concurrence of the Executive Compensation Committee,
believes it to be in the best interests of the
Company.
XI. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
1. The Executive Compensation Committee may, at any
time, amend, suspend or terminate the Plan, provided
that no such amendment, suspension or termination
shall, without the consent of the Participant,
adversely affect a Participant's accruals in his or
her Participant Account, and, except as provided in
Article X, such action does not reduce or eliminate a
Participant's Target Award or Segment Target Awards
for the then current Plan Year.
XII. MISCELLANEOUS
1. Rights Non-Assignable
No right to receive payment of an Award or from a
Participant Account shall be assignable or
transferable by a Participant except by will or by
the laws of descent and distribution.
2. No Right of Employment
Designation of a Participant does not confer any
right on the Participant to continue in the
employment of the Company or any subsidiary or affect
the right of the Company or subsidiary to terminate
such Participant's employment.
<TABLE>
FIVE YEAR REVIEW
Gleason Corporation and Subsidiaries
<CAPTION>
Dollars in thousands,
except per share amounts 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Summary of Operations
Net sales $128,462 $103,870 $147,274 $177,522 $176,554
Income (loss) from continuing operations 4,332 (2,873) (23,764) 4,355 6,534
Gain on disposal of discontinued operations 2,956 -- -- 2,305 613
Cumulative effect of change in
accounting for postretirement benefits
other than pensions -- -- (37,472) -- --
Net income (loss) 7,288 (2,873) (61,236) 6,660 7,147
Per common share:
Continuing operations .84 (.56) (4.35) .76 1.14
Disposal of discontinued operations .57 -- -- .40 .10
Cumulative effect of change in
accounting for postretirement benefits
other than pensions -- -- (6.86) -- --
Net income (loss) 1.41 (.56) (11.21) 1.16 1.24
Cash dividends declared .40 .40 .40 .20 .15
Financial Position at Year-End
Cash and equivalents 3,173 4,155 7,105 44,451 18,571
Net property, plant and equipment 53,604 60,286 67,479 61,168 49,040
Total assets 122,016 121,849 140,089 194,875 194,611
Long-term debt 2,600 14,575 6,172 11,688 23,903
Total debt 3,283 15,115 7,388 18,720 34,622
Stockholders' equity 42,199 35,009 41,458 123,562 119,239
Other Data
Capital expenditures 3,527 5,484 24,526 22,242 11,109
Depreciation and amortization 9,293 9,221 9,641 7,852 7,611
New orders 156,962 94,970 108,274 125,322 165,854
Backlog 54,700 26,200 35,100 74,100 126,300
Number of employees (continuing operations) 1,079 1,049 1,420 1,706 1,911
</TABLE>
<PAGE>
<PAGE>
Management's Discussion and Analysis
of Results of Operations and Financial Condition
About the Company
The Company operates within one business segment. The
principal activity is the design, manufacture and sale of
machinery and equipment for the production of gears. The
Company manufactures a complete line of machines and tooling
for bevel gears. Bevel gears transmit power at an angle,
such as from the drive shaft to rear-driven axles of
vehicles. The Company also manufactures machines for
producing parallel axis gears. Parallel axis gears transmit
power in a straight line and have a variety of applications,
including transmissions of front-wheel-drive vehicles.
The Company's major customers are in the automotive
and truck industries, which normally account for about
three-fourths of its total sales each year. Other
industries served include aerospace, construction, farm and
marine. The Company's markets are worldwide; historically
two-thirds of total sales each year have been to customers
located outside of the U.S.
Business Conditions
Because of the Company's dependence on global markets,
economic conditions and trends in the world's major
industrial markets significantly influence overall sales and
operating results.
During 1994, the U.S. truck and automotive industries
had an excellent year with higher sales and improved
profitability. The higher vehicle production volumes, the
increased requirement for improved productivity and quality,
combined with the relatively old average age of the
installed base of gear-making equipment currently in use
stimulated increased demand for the Company's products. The
fastest growing segments of these industries were the truck,
light truck and sport utility vehicle markets, most of which
require bevel gears. This trend should accelerate the rate
of future equipment replacement of the older bevel gear
production capacity in the U.S.
The U.S. has been a particularly key market for the
Company's new parallel axis gear products where a
significant percentage of sales for these products were to
new customers. In addition, these products have had success
with the Company's traditional customers in the U.S., who
have been actively pursuing programs to modernize or add
capacity.
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Economic conditions in the Company's major overseas
markets began to improve in 1994. Most of the industries
the Company serves in these regions, including truck and
automotive, had increased production volumes compared to
1993. In almost all of its key overseas markets the Company
had higher sales in 1994 for its tooling products, which
correlate more closely with short-term volume swings.
Significant changes in demand patterns for capital goods,
including the Company's machines, generally lag the cycle
and occur once there is more evidence of a longer-term,
sustained recovery. The outlook for continued recovery and
the Company's improved competitive position because of its
new bevel and parallel axis gear products should lead to
further opportunities for sales increases in these
territories in 1995.
Results of Operations
1994 Compared to 1993
Earnings:
The Company had income from continuing operations of
$4.3 million, or $.84 per share, in 1994, compared to a net
loss of $2.9 million, or $.56 per share, in 1993. Net
income for the year was $7.3 million, or $1.41 per share,
which included an after-tax gain from discontinued
operations of $3.0 million, or $.57 per share, related to
lower than expected costs associated with the closure of the
Company's Alliance Metal Stamping and Fabricating Division.
The improvement in operating earnings from 1993 resulted
from higher sales, improved margins and lower spending
levels.
Orders and Backlog:
Order levels in 1994 increased 65 percent compared to
1993 to $157 million. Order levels for all product lines
were higher with the largest increase in machine orders.
Order levels for bevel and parallel axis gear machinery each
increased about $23 million, for a combined increase of $46
million, or about 98 percent, compared to the prior year.
Backlog increased to $54.7 million at December 31, 1994 from
$26.2 million at December 31, 1993. Backlog, while still an
important measure of business activity, may be less
important than in the past in predicting future shipment
levels given the shorter lead times required for many of the
machines now manufactured in the Company's new factory.
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Net Sales:
Net sales were $128.5 million in 1994, or 24 percent
higher than in 1993. Sales of all product lines increased
compared to the prior year. Machine sales increased 30
percent, with parallel axis gear machinery increasing 66
percent, to their highest level in the Company's history.
In 1994, the Company began making shipments of its first
parallel axis gear grinding machine, which was jointly
developed with Okamoto Machine Tool Works, Ltd., and
had a full year of shipments of its new Phoenix gear hobbing
machine for which the Company first began deliveries in mid-
1993. Parallel axis gear machines accounted for 37 percent
of total machine sales compared to 29 percent in 1993.
Machines introduced in the past four years, including both
bevel and parallel axis gear equipment, accounted for about
80 percent of total machine sales in 1994.
Sales of the Company's tooling products, which include
workholding equipment and bevel gear cutting tools,
increased 13 percent from 1993. The largest increase was in
cutting tools, primarily due to higher vehicle production
worldwide. Workholding equipment sales also increased,
principally due to higher sales of equipment for parallel
axis gear applications.
Other product categories, including spare parts,
service, customer training, software and application
support, increased as well, a result of the overall
improvement in the major markets served by the Company.
Costs and Expenses:
Cost of goods sold as a percentage of sales was 73.9
percent compared to 76.7 percent in 1993. The lower
percentage was primarily attributable to improved margins on
tooling products. Margins increased for these products due
to higher production volumes and cost reduction programs.
Machine margins also improved from the prior year.
The Company began to realize the benefits of its new factory
as higher machine volumes were produced in that facility.
Further cost reductions on machines produced in the new
factory are expected to occur in 1995. However, strong
price competition among machine producers continued to
pressure margins, particularly for parallel axis gear
machinery.
Selling, general and administrative expenses were
$24.5 million, or 19.1 percent of sales, compared to $24.4
million, or 23.5 percent of sales, in 1993. Spending within
the Company's worldwide sales and service offices increased
during 1994 as the Company expanded its direct
representation in Europe. The Company now has direct sales
and service representation throughout North America and
Europe. Commissions paid to dealers increased from the
prior year, but were relatively constant as a percentage of
sales. These higher expenses were largely offset by lower
administrative and support spending resulting from cost
reduction initiatives.
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Research and development spending was $4.7 million, or
3.7 percent of sales. Spending was 7 percent lower than in
1993 as the prior year had a greater number of new machine
introductions, including Phoenix bevel and parallel axis
gear machines. Major 1994 programs included a new Phoenix
bevel gear lapping machine, for which shipments began in the
first quarter of 1995, and a parallel axis gear grinding
machine for which shipments began in 1994.
Income Taxes:
In 1994, the Company recorded a tax provision of $.8
million for continuing operations on pre-tax income of $5.2
million, or an effective rate of 16 percent. Taxes on
foreign income of $1.1 million were reduced by a refund of
previously paid income taxes due to a repatriation of funds
in 1994. The net domestic tax benefit of $.3 million
included an increase to the deferred tax asset of $1.4
million. The Company had a domestic deferred tax asset of
approximately $3.7 million at December 31, 1994 recorded to
offset future taxable income. Under FAS No. 109, the
Company has been limited in the amount of the deferred tax
asset it has been able to record based on future income.
Management has determined that it is more likely than not
that future income will be sufficient to fully realize the
deferred tax asset recorded at December 31, 1994. As future
domestic income is generated additional deferred tax
benefits can be recognized.
Outlook:
The Company expects continued growth in sales in 1995
based on the success of its new products and improving
economic conditions in most of its markets. The Company
also expects further benefits from its new manufacturing
facility which should result in increased operating margins
and inventory turns.
<PAGE>
<PAGE>
1993 Compared to 1992
Earnings:
The Company's net loss in 1993 was $2.9 million, or
$.56 per share, compared to income before special charges of
$5.1 million, or $.94 per share, in 1992. The net loss for
1992 of $61.2 million, or $11.21 per share, included special
charges for a change in accounting for retiree medical and
life insurance benefits of $37.5 million, or $6.86 per
share, restructuring costs of $26.0 million, or $4.76 per
share, and environmental costs of $2.9 million, or $.52 per
share.
The operating loss for 1993 resulted from sharply
lower sales and margins on gear production machinery. Lower
demand for vehicles in Europe and Asia forced producers in
those regions to significantly reduce their level of
investment in new factory equipment. That reduction
resulted in lower machine volumes which drove down average
selling prices for many of the products where
significant competition exists. Those effects were
somewhat offset by the savings resulting from the Company's
restructuring and cost reduction programs, which reduced the
level of overhead spending supporting operations by
approximately 30 percent over the preceding two years.
Orders and Backlog:
Order levels fell 12 percent to $95.0 million from
$108.3 million in 1992. Approximately half of the $13.3
million decline in orders was for machines with the
remaining half being for tooling and spare parts. Lower
vehicle production levels in Europe and Asia created lower
demand for cutting tools and spare parts. Backlog declined
to $26.2 million at December 31, 1993 from $35.1 million at
December 31, 1992.
Net Sales:
Net sales were $103.9 million in 1993 compared to
$147.3 million in 1992. This 30 percent decline was
primarily attributable to lower shipments of bevel gear
production machines. Sales of parallel axis gear machines
more than doubled from 1992 levels primarily due to the
success of the Company's new small gear hobbing machine.
Parallel axis gear machines represented 29 percent of total
machine sales in 1993 compared to 8 percent in 1992.
Sales of other product lines, including cutting tools,
workholding equipment and spare parts were 13 percent lower
compared to 1992 levels because of lower production levels
at many of the Company's overseas customers. These product
lines primarily support bevel gear production activities.
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On a geographic basis, essentially the entire sales
decrease was attributable to the Japanese and Korean
markets. Sales to these markets, which almost exclusively
are for bevel products, decreased by $43 million compared to
1992. Sales to European customers declined by 5 percent
compared to 1992 primarily due to lower shipments of tooling
and spare parts. Despite difficult market conditions, the
Company was able to sustain its level of machine sales in
Europe. Sales to North and South America increased by 9
percent due to higher sales in the U.S. and Mexico. Total
sales to the U.S. market increased by about 4 percent
compared to 1992.
Costs and Expenses:
Cost of products sold as a percentage of sales
increased to 76.7 percent from 72.3 percent in 1992. The
higher percentage was primarily attributable to lower
margins on machine sales.
Machine margins decreased due to lower production
volumes, increased competitive pricing pressure, and a lower
percentage of bevel gear machines in the sales mix. The
Company generally realizes better margins on bevel gear
machines compared to parallel axis gear machines because of
its more favorable competitive position.
During 1993, the Company began commercial production
of machines in its new manufacturing facility. The new
facility and the supporting business philosophy offers
increased automation, flexibility and precision in producing
machines while requiring lower support costs. However, the
start-up in the new facility with new machine models,
combined with lower than expected volumes, limited full
realization of these benefits in 1993.
Margins for tooling and other products remained about
the same as in the prior year, but contributed favorably to
overall margins as they were a larger proportion of the
sales mix. These products generally carry higher margins
than machines.
Selling, general and administrative expenses were
$24.4 million, or 23.5 percent of sales, compared to $31.7
million, or 21.6 percent of sales, in 1992. The increase
as a percentage of sales was attributable to the
significantly lower sales base. Commission expense
decreased as a percentage of sales due to lower shipments
into Japan and Korea, where the Company is represented by
machine dealers. Selling and administrative overhead
spending was approximately 9 percent lower compared to 1992
due to staffing and spending reductions.
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Research and development expenses decreased 34 percent
compared to 1992 to $5.1 million, or 4.9 percent of sales,
in 1993. This lower spending was planned as the majority of
the design and prototype development for the record number
of new gear production machine introductions was incurred in
1992. Research and development efforts in 1993 included the
substantial completion of the development efforts on
additions to the Phoenix product line, including a small
parallel axis gear hobbing machine and bevel gear cutting
and grinding machines. Other development programs included
the joint effort with Okamoto Machine Tool Works, Ltd. of
Japan on a parallel axis gear grinding machine, shipments of
which began in the first quarter of 1994.
Interest income, net of interest expense, decreased to
$.2 million from $2.1 million in 1992. Interest income
decreased $1.4 million due to lower average outstanding cash
balances during 1993 at the Company's foreign subsidiaries.
Approximately $19.0 million was repatriated in 1992 which
was primarily used to reduce domestic borrowings.
Interest expense increased in 1993 primarily due to the
capitalization of $.6 million of interest expense in 1992
associated with the construction of the new manufacturing
facility in Rochester.
Other income increased by $.6 million compared to 1992
primarily due to the reductions of certain contingent
liabilities accrued in prior years for certain legal and
environmental matters.
Income Taxes:
In 1993, the Company recorded a tax benefit of $1.1
million on pre-tax losses of $4.0 million, or an effective
rate of 28 percent. The current domestic tax benefit
reflected the carryback of the operating loss for a refund
of previously paid income taxes. The Company had a domestic
deferred tax asset of approximately $2.3 million recorded to
offset future taxable income. Management determined that it
was more likely than not that future income would be
sufficient to fully realize this net deferred tax asset.
This determination was based upon management's belief that
future sales levels would be higher given the successful
launch of the Company's new products and the likelihood that
global economic conditions would improve, combined with the
much lower breakeven point the Company had achieved through
restructuring and cost reduction programs. The Company has
never had any loss carryforwards expire unused.
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Liquidity and Capital Resources
The Company's financial condition strengthened during
1994, as total debt decreased from $15.1 million at December
31, 1993 to $3.3 million at December 31, 1994. Unused short
and long-term credit lines with banks, including revolving
credit facilities, totaled $27.4 million at December 31,
1994.
Net cash provided by operating activities for 1994
improved by $12.0 million to $10.8 million. Higher
operating income, lower payments for salary continuation
programs, cash generated from the closure of a discontinued
operation, and refunds of previously paid income taxes were
the primary reasons for the improvement in operating cash
flow. Salary continuation payments were $1.0 million
compared to $6.6 million in 1993. Inventories at December
31, 1994 were lower compared to 1993 year-end despite a much
higher backlog of orders. The improved inventory turns
reflect much shorter production lead times for the Company's
new products manufactured in its new factory. Trade
accounts receivable were significantly higher at year-end
because of the heavy fourth quarter shipments, which were 74
percent higher than in the 1993 fourth quarter.
Investing activities provided $2.1 million of cash in
1994 compared to $7.4 million of cash used in 1993.
Proceeds from asset disposals included $3.6 million from the
sale of machinery and equipment of discontinued operations.
Proceeds from collection of notes receivable associated with
the sales of former businesses totaled $3.3 million.
Capital expenditures decreased to $3.5 million in 1994 from
$5.5 million in 1993. The Company expects an increase in
capital spending for 1995 with the implementation of a
revitalization program for its tooling manufacturing
operations. Capital spending is expected to be at least
equal to depreciation expense in 1995. Investing activities
also included a $1.5 million investment for a 20 percent
interest in OGA Corporation, the Company's exclusive sales
and service representative in Japan and Taiwan.
<PAGE>
<PAGE>
In January 1995, the Company announced it will resume
the repurchasing of shares of Company common stock
pursuant to the authorization by its Board of Directors in
1992 for the repurchase of up to $25 million of the
Company's common stock. The Company had previously
purchased 580,000 shares for $9.7 million since the Board
authorized such repurchases, but has not purchased
additional shares recently pending improvement in economic
conditions.
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.
Dividends:
In January 1995, the Board of Directors approved a 25
percent increase in the Company's quarterly dividend from
$.10 per share to $.125. Total dividend payments were
$2,065,000, $2,062,000 and $2,202,000 for 1994, 1993 and
1992, respectively.
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS of OPERATIONS
Gleason Corporation and Subsidiaries
_______________________________________________________________________________
Dollars in thousands, except per share amounts Year Ended December 31
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Net sales $128,462 $103,870 $147,274
Costs and expenses
Cost of products sold 94,935 79,672 106,524
Selling, general and
administrative expenses 24,539 24,431 31,737
Research and development expenses 4,729 5,091 7,656
Interest (income) expense--net 11 (152) (2,127)
Restructuring costs - - 26,029
Environmental costs - - 2,850
Other (income)--net (909) (1,182) (563)
123,305 107,860 172,106
Income (loss) from continuing operations
before income taxes 5,157 (3,990) (24,832)
Provision (benefit) for income taxes 825 (1,117) (1,068)
Income (loss) from continuing operations 4,332 (2,873) (23,764)
Gain on disposal of discontinued
operations 2,956 - -
Income (loss) before cumulative effect
of change in accounting principle 7,288 (2,873) (23,764)
Cumulative effect to January 1, 1992 of
change in accounting for postretirement
benefits other than pensions - - (37,472)
Net income (loss) $ 7,288 $ (2,873) $(61,236)
Weighted average number of common shares
outstanding 5,162,877 5,156,231 5,463,686
Income (loss) per common share
Income (loss) from continuing operations $ .84 $ (.56) $ (4.35)
Gain on disposal of discontinued operations .57 - -
Cumulative effect to January 1, 1992 of
change in accounting for postretirement
benefits other than pensions - - ( 6.86)
Net income (loss) $ 1.41 $ (.56) $ (11.21)
Cash dividends declared per common share $ .40 $ .40 $ .40
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
Gleason Corporation and Subsidiaries
<CAPTION>
Dollars in thousands December 31 1994 1993
<S> <C> <C>
Assets
Current assets
Cash and equivalents $ 3,173 $ 4,155
Trade accounts receivable 42,363 28,543
Inventories 11,244 12,899
Refundable income taxes 607 2,292
Other current assets 3,304 4,744
Net current assets of discontinued operations - 1,441
Total current assets 60,691 54,074
Property, plant and equipment - net 53,604 60,286
Other assets 6,191 3,962
Net assets of discontinued operations 1,530 3,527
Total assets $122,016 $121,849
</TABLE>
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity
<S> <C> <C>
Current liabilities
Short-term borrowings $ 613 $ 408
Current portion of long-term debt 70 132
Trade accounts payable 10,335 6,100
Income taxes 3,324 1,103
Other current liabilities 17,753 17,552
Total current liabilities 32,095 25,295
Long-term debt 2,600 14,575
Pension plans and other retiree benefits 42,543 45,269
Other liabilities 2,579 1,701
Total liabilities 79,817 86,840
Stockholders' equity
Preferred Stock, par value $1 per share;
authorized 500,000 shares; issued: none
Common Stock, par value $1 per share;
authorized 8,750,000 shares; issued:
5,795,546 shares in 1994 and 1993 5,796 5,796
Additional paid-in capital 11,909 11,909
Retained earnings 40,870 35,647
Cumulative foreign currency translation adjustment (917) (1,315)
Minimum pension liability adjustment (5,009) (6,585)
52,649 45,452
Less treasury stock of 632,992 shares in 1994
and 632,542 shares in 1993, at cost 10,450 10,443
Total stockholders' equity 42,199 35,009
Total liabilities and stockholders' equity $122,016 $121,849
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Gleason Corporation and Subsidiaries
<CAPTION>
Year Ended December 31
Dollars in thousands 1994 1993 1992
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 7,288 $ (2,873) $(61,236)
Adjustments to reconcile net income (loss)
to net cash from operating activities:
Cumulative effect of change in accounting
principle - - 37,472
Restructuring costs - - 26,029
Depreciation and amortization 9,293 9,221 9,641
(Gain) loss on disposals of property,
plant and equipment (36) 12 239
Provision (benefit) for deferred income
taxes (1,426) 99 463
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (13,774) 2,806 7,088
Decrease in inventories 3,288 2,329 5,067
(Increase) decrease in other current assets 901 (1,350) (133)
Increase (decrease) in accounts payable 3,355 (2,328) (4,010)
Increase (decrease) in all other current
operating liabilities 3,261 (9,747) (11,443)
Other, net (451) 490 (1,273)
(Gain) on disposal of discontinued
operations (3,356) - -
Discontinued operations 2,441 146 (2,315)
Net cash provided by (used in)
operating activities 10,784 (1,195) 5,589
Cash flows from investing activities:
Capital expenditures (3,527) (5,484) (24,526)
Investment in unconsolidated affiliate (1,489) - -
Proceeds from sales of businesses and
asset disposals 3,787 55 6,112
Proceeds from collection of notes receivable 3,281 411 304
Investment activities of discontinued
operations - (103) (291)
Cash of subsidiary sold - (2,284) -
Net cash provided by (used in)
investing activities 2,052 (7,405) (18,401)
Cash flows from financing activities:
Net proceeds (repayments) of
short-term borrowings 183 (161) (584)
Net proceeds (repayments) under
revolving credit agreements (12,148) 8,969 (9,800)
Proceeds from long-term debt 83 65 56
Repayment of long-term debt (139) (957) (735)
Dividends paid (2,065) (2,062) (2,202)
Purchase of treasury stock (7) - (9,646)
Net cash provided by (used in) financing
activities (14,093) 5,854 (22,911)
Effect of exchange rate changes on cash
and equivalents 275 (204) (1,623)
(Decrease) in cash and equivalents (982) (2,950) (37,346)
Cash and equivalents, beginning of year 4,155 7,105 44,451
Cash and equivalents, end of year $ 3,173 $ 4,155 $ 7,105
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS of STOCKHOLDERS' EQUITY
Gleason Corporation and Subsidiaries
<CAPTION>
Years Ended December 31, Cumulative
1994, 1993, 1992 Foreign Minimum Total
Additional Currency Pension Stock-
Common Paid-in Retained Translation Liability Treasury holders'
Dollars in thousands Stock Capital Earnings Adjustment Adjustment Stock Equity
________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1991 $5,792 $11,897 $104,020 $ 2,776 $ - $ (923) $123,562
Net (loss) (61,236) (61,236)
Dividends declared (2,202) (2,202)
Shares issued under
Stock Plans (34) 34 -
Foreign currency
translation adjustment (4,673) (4,673)
Change in minimum pension
liability adjustment (4,347) (4,347)
Purchase of treasury stock (9,646) (9,646)
________________________________________________________________________________________________________________________
Balance at December 31, 1992 5,792 11,863 40,582 (1,897) (4,347) (10,535) 41,458
Net (loss) (2,873) (2,873)
Dividends declared (2,062) (2,062)
Shares issued under
Stock Plans 4 46 92 142
Foreign currency
translation adjustment (981) (981)
Sale of foreign subsidiary 1,563 1,563
Change in minimum pension
liability adjustment (2,238) (2,238)
________________________________________________________________________________________________________________________
Balance at December 31, 1993 5,796 11,909 35,647 (1,315) (6,585) (10,443) 35,009
Net income 7,288 7,288
Dividends declared (2,065) (2,065)
Foreign currency
translation adjustment 398 398
Change in minimum pension
liability adjustment 1,576 1,576
Purchase of treasury stock (7) (7)
_______________________________________________________________________________________________________________________
Balance at December 31, 1994 $5,796 $11,909 $ 40,870 $ (917) $(5,009) $(10,450) $ 42,199
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>
NOTES to CONSOLIDATED FINANCIAL STATEMENTS
Gleason Corporation and Subsidiaries
December 31, 1994
Note 1--Summary of Significant Accounting Policies
Changes in Accounting Principles: In the fourth quarter of fiscal
year 1992, the Company elected early adoption of FAS No. 106,
"Employers' Accounting for Postretirement Benefits Other than
Pensions," and FAS No. 109, "Accounting for Income Taxes," both
effective as of the beginning of fiscal 1992.
Under FAS No. 106, the Company is required to accrue the estimated
cost of retiree benefits other than pensions during the employees'
active service period. The Company had previously expensed the cost
of these benefits, which are principally health care and life
insurance, as premiums and claims were paid. The Company elected
immediate recognition of the transition obligation at January 1, 1992.
Refer to Note 8 - Postretirement Health and Life Insurance Benefits.
FAS No. 109 retains many of the provisions of its predecessor, FAS
No. 96, principally the use of the liability method for recording
deferred income taxes. This new statement changes the criteria
related to the recognition of deferred tax assets and the financial
statement presentation and disclosure of deferred income taxes. Refer
to Note 10 - Income Taxes.
Consolidation: The consolidated financial statements include the
accounts of the Company and its subsidiaries, all of which are wholly-
owned. All significant intercompany transactions are eliminated in
consolidation.
Revenue Recognition: Sales generally are recognized by the Company
when products are shipped or services have been provided. Sales are
reported net of returns and allowances.
Foreign Currency Translation: All asset and liability accounts of
foreign operations are translated at the current exchange rate, income
statement items are translated at average exchange rates, and the
resulting translation adjustments are made directly to a separate
component of stockholders' equity designated as "cumulative foreign
currency translation adjustment." Gains and losses from foreign
currency transactions are reported in operations and had a minimal
impact on the Company in 1994, 1993 and 1992.
Cash and Equivalents: The Company considers all highly liquid
investments with a maturity of three months or less when purchased to
be cash equivalents.
Inventories: Inventories are valued at the lower of cost or
market, with substantially all inventories valued at cost using the
last-in, first-out (LIFO) method. The remaining inventories are
determined on the first-in, first-out (FIFO) method.
<PAGE>
Property and Depreciation: Property, plant and equipment are
recorded at cost. Depreciation is computed on the straight-line
method over estimated useful lives of 10 to 32 years for buildings and
improvements and 4 to 12 years for machinery and equipment. Upon
retirement or disposal of an asset, the asset and related accumulated
depreciation are eliminated with any gain or loss reported in
earnings.
Earnings Per Share: Net earnings per common share are determined
by dividing the weighted average number of common shares outstanding
during the year into net earnings. Common share equivalents in the
form of stock options are excluded from the calculation since they
have no material dilutive effect on per share figures.
Reclassification: Certain reclassifications have been made to
prior years' financial statements to conform to the 1994 presentation.
Additional accounting policies are described in the applicable
notes.
Note 2--Restructuring Costs
In 1993, the Company sold its Belgian subsidiary to a corporation
owned by former employees of the Company. The loss arising from the
sale was reported as part of the restructuring costs recorded in 1992.
During 1992, the Company recorded restructuring charges aggregating
$26,029,000 related to continuing actions to modernize and consolidate
manufacturing capabilities, lower operating costs and phase out
unprofitable products. These charges included provisions for the
estimated loss on the sale of the Company's Belgian manufacturing
operations, work force reduction programs, and write-downs of certain
fixed assets and inventories. No tax benefits were recorded on these
charges.
Restructuring costs included provisions for work force reductions
of $6,829,000 in 1992.
<PAGE>
Note 3--Discontinued Operations
In November 1989, the Board of Directors adopted a plan to sell the
Company's Components Group. The Components Group consisted of four
divisions: Pennsylvania Pressed Metals, Inc., Alliance Metal Stamping
and Fabricating, Alliance Precision Plastics and Alliance Carolina
Tool and Mold, all of which manufacture industrial products.
During 1994, the Company ceased operations at the last of these
divisions, Alliance Metal Stamping and Fabricating and sold the
machinery and equipment located at this division's facility for
$3,550,000. The Company recognized a gain from discontinued
operations of $2,956,000, net of applicable income taxes of $400,000,
as the loss from the disposition of this division was lower than the
amount previously estimated.
During the first quarter of 1992, the Company sold substantially
all of the assets of Alliance Precision Plastics and Alliance Carolina
Tool and Mold in two separate transactions for cash proceeds totaling
$6,108,000 and notes receivable of $2,147,000. In both transactions,
the Company retained the real estate and entered into lease
arrangements with the buyers. The estimated combined loss on the sale
of these two businesses and the Alliance Metal Stamping and
Fabricating division, was provided for in 1991 as explained in the
next paragraph.
On December 31, 1991, the Company sold all of its stock in
Pennsylvania Pressed Metals, Inc., a wholly-owned subsidiary, to a
group of investors. The gain from this sale, offset by provisions for
the estimated loss on the disposal of the three remaining businesses
was reported in 1991.
The operating results of the Components Group businesses for 1994,
1993, and 1992 were provided for in the reserves established in 1991.
Net sales for discontinued operations were $7,508,000, $11,559,000,
and $14,952,000 for the years ended December 31, 1994, 1993 and 1992,
respectively.
Accrued costs related to the disposal of discontinued operations at
December 31, 1994 are presented in the Consolidated Balance Sheets as
follows: $2,007,000 ($3,233,000 in 1993) in other current
liabilities, and $1,473,000 ($682,000 in 1993) in other liabilities.
These liabilities principally consisted of certain remaining costs
associated with the former businesses and estimated expenses for
environmental matters related to the properties of these businesses.
Refer to Note 15 - Environmental Matters.
The net assets of discontinued operations have been segregated in
the Consolidated Balance Sheets as follows:
(In thousands) 1994 1993
Net current assets:
Current assets $ -- $ 1,957
Current liabilities -- (516)
$ -- $ 1,441
Noncurrent assets:
Net property, plant and equipment $ 1,530 $ 3,527
<PAGE>
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.
Note 4--Inventories
The components of inventories were as follows:
(In thousands) 1994 1993
Raw materials and purchased parts $ 1,405 $ 1,519
Work in process 6,955 7,360
Finished products 2,884 4,020
$11,244 $12,899
If the first-in, first-out (FIFO) method of accounting was used for
all inventories, the amounts stated for inventories would have been
$23,835,000 and $23,500,000 higher than reported at December 31, 1994
and 1993, respectively.
Note 5--Property, Plant and Equipment
The components of property, plant and equipment were as follows:
(In thousands) 1994 1993
Land $ 840 $ 834
Buildings and improvements 48,300 47,543
Machinery, equipment and fixtures 96,582 98,208
145,722 146,585
Less accumulated depreciation 92,118 86,299
$ 53,604 $ 60,286
Note 6--Other Current Liabilities
The components of other current liabilities were as follows:
(In thousands) 1994 1993
Salaries, wages and vacations $ 3,654 $ 3,438
Advance payments from customers 2,922 1,095
Pension and other retiree
benefit plan contributions 5,327 4,501
Restructuring costs 253 1,843
Costs related to disposal of
discontinued operations 2,007 3,233
Other current liabilities 3,590 3,442
$17,753 $17,552
<PAGE>
Note 7--Employee Retirement Plans
The Company has a defined contribution retirement plan and a
defined benefit retirement plan which cover most domestic employees.
The employees of certain foreign operations participate in various
postemployment benefit arrangements, some of which are considered to
be defined benefit plans for financial reporting purposes.
Effective December 31, 1990, the Company amended its domestic
defined benefit plan to provide for the freezing of all active
employee accrued defined benefits and full vesting of all active
employees in the plan. In addition, the plan amendment provides that
upon settlement of the plan, if the fair value of plan assets exceeds
the accrued defined benefit obligation, any surplus will be
distributed on a pro rata basis as additional benefits to active
employees. If the plan assets are not sufficient to fund the accrued
defined benefit obligation, the Company will make any required
additional contributions. All active employees in the defined benefit
plan were enrolled in the defined contribution plan effective January
1, 1991.
The Company's funding policy is to contribute amounts to the plan
sufficient to meet the minimum funding requirements set forth in the
Employee Retirement Income Security Act of 1974, plus such additional
amounts as the Company may determine to be appropriate from time to
time.
A summary of the components of net periodic pension costs relating
to the domestic defined benefit plan is presented below:
(In thousands) 1994 1993 1992
Interest cost on projected
benefit obligation $ 6,387 $ 6,429 $ 6,365
Negative (positive) return
on plan assets 2,012 (7,134) (3,927)
Net amortization and
deferral (8,249) 928 (2,403)
Net periodic pension costs $ 150 $ 223 $ 35
The expected long-term rate of return on plan assets used in
determining net periodic pension costs was 8.25% for 1994, 1993 and
1992.
<PAGE>
The following table sets forth the domestic defined benefit plan's
funded status and amounts recognized in the Company's consolidated
financial statements at December 31, 1994 and 1993:
(In thousands) 1994 1993
Actuarial present value of benefit
obligations:
Accumulated benefit obligation
including vested benefits of
$74,180 in 1994 and
$83,653 in 1993 $77,900 $88,282
Projected benefit obligation $77,900 $88,282
Plan assets at market value 71,912 80,142
Projected benefit obligation
in excess of plan assets 5,988 8,140
Unrecognized prior service cost (977) (1,085)
Unrecognized net (loss) (4,759) (6,585)
Adjustment to recognize minimum
pension liability 5,736 7,670
Pension liability recognized
in the consolidated balance sheet $ 5,988 $ 8,140
The discount rates used in determining the projected benefit
obligation were 8.75% for December 31, 1994 and 7.50% for December 31,
1993. The nonvested portion of the accumulated benefit obligation
primarily represents certain early retirement benefits for individuals
not currently eligible. The accumulated benefit obligation is
calculated using the 1983 Group Annuity Mortality Table.
In accordance with FAS No. 87, "Employers' Accounting for
Pensions," the Company must recognize a pension liability at least
equal to the minimum pension liability. The minimum pension liability
is the excess of the accumulated benefit obligation over plan assets.
A corresponding amount is recognized as either an intangible asset or
a reduction of equity. The Company recorded an additional liability
of $5,736,000 ($7,670,000 in 1993), an intangible asset of $977,000
($1,085,000 in 1993) and an equity reduction of $4,759,000 ($6,585,000
in 1993). The minimum pension liability adjustment decreased in 1994
primarily due to an increase in the discount rate.
The plan's assets at December 31, 1994 were primarily invested in a
tactical asset allocation fund, short and intermediate term bond funds
and the Company's common stock which had a market value of $5,680,000
and $5,824,000 at December 31, 1994 and 1993, respectively.
<PAGE>
All domestic employees participate in the defined contribution
retirement plan. Amounts contributed under this plan are based upon
4% of compensation for eligible employees. The amounts expensed under
this plan for continuing operations were $1,267,000, $1,309,000 and
$1,560,000 in 1994, 1993 and 1992, respectively.
The Company also has an unfunded supplemental defined benefit
retirement plan to provide certain executives a minimum level of
retirement pay, up to a maximum of 55% of final average earnings. In
accordance with the provisions of FAS No. 87, the Company recognized
pension expense of $210,000, $204,000 and $192,000 in 1994, 1993 and
1992, respectively. At December 31, 1994, the Company recorded a
minimum pension liability of $1,401,000 ($832,000 in 1993), an
intangible asset of $572,000 ($435,000 in 1993), and an equity
reduction of $250,000 ($0 in 1993).
The costs of foreign benefit plans were $634,000, $540,000 and
$772,000 for the years ended December 31, 1994, 1993 and 1992,
respectively. Liabilities included in the Consolidated Balance Sheets
for certain foreign benefit plans were $1,919,000 and $1,754,000 at
December 31, 1994 and 1993, respectively.
Note 8--Postretirement Health and Life Insurance Benefits
The Company provides certain health and life insurance benefits for
retired domestic employees. Employees hired prior to January 1, 1993
generally become eligible for these benefits if they retire while
working for the Company at age 62 with a minimum of 15 years of
service with the Company. Employees hired after this date are not
eligible to receive benefits. Health benefits are provided through
supplemental insurance policies whose premiums are based on group
rates. Life insurance benefits are paid directly by the Company.
<PAGE>
In the fourth quarter of 1992, the Company adopted FAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions." This statement requires the accrual of the estimated cost
of providing postretirement benefits, including health and life
insurance coverage, during the employees' active service period. The
Company elected to immediately recognize in 1992 the cumulative effect
of change in accounting for postretirement benefits of $37.5 million
which represents the accumulated postretirement benefit obligation
measured at January 1, 1992. No tax benefit was recorded against this
one-time cumulative effect charge.
The components of periodic expense for these postretirement
benefits were as follows:
(In thousands) 1994 1993 1992
Service cost for benefits
earned during the year $ 141 $ 142 $ 166
Interest cost on the
accumulated postretirement
benefit obligation 2,599 2,839 2,791
Total expense $ 2,740 $ 2,981 $ 2,957
The recorded liabilities for this unfunded postretirement benefit
plan were as follows:
(In thousands) 1994 1993
Accumulated postretirement benefit obligation:
Retirees $27,262 $30,739
Fully eligible active plan participants 1,865 2,884
Other active plan participants 1,867 2,743
Total accumulated postretirement benefit
obligation 30,994 36,366
Unrecognized net gain 5,991 1,067
Total liability for postretirement health
and life insurance benefits 36,985 37,433
Less current portion 3,400 3,100
Noncurrent liability for postretirement
health and life insurance benefits $33,585 $34,333
<PAGE>
The discount rates used in determining the accumulated
postretirement benefit obligation were 8.75% and 7.50% at December 31,
1994 and 1993, respectively. The reduction in the total accumulated
postretirement benefit obligation was primarily attributable to an
increase in the discount rate.
The cost of health insurance premiums of this plan are shared
between the Company and the retiree. The future increases in the
Company's share of health insurance premiums are capped as follows:
5% in 1995, 5% in 1996, and no increase thereafter.
Note 9--Debt
Long-term debt at December 31, 1994 and 1993 consisted of the
following:
(In thousands) 1994 1993
Notes payable to banks under revolving
loan agreements $ 2,135 $14,122
Other obligations 535 585
2,670 14,707
Less current maturities 70 132
$ 2,600 $14,575
At December 31, 1994, the Company had unsecured borrowing
facilities that provided for borrowings up to a combined $30 million
on a revolving loan basis through January 1996. Approximately $2
million of the total was allocated for borrowings outside the U.S.
Available borrowings under these facilities at December 31, 1994 were
reduced by approximately $1.7 million for foreign standby letters of
credit issued in the normal course of business. These revolving
credit facilities provide the Company the option to borrow at rates no
higher than the prevailing prime rate (weighted average borrowing rate
was 6.84% at December 31, 1994). The agreements contain covenants
with respect to maintenance of working capital, interest coverage, the
level of indebtedness, tangible net worth and cash flow as a
percentage of indebtedness.
Lines of credit of the consolidated subsidiaries are generally in
connection with bank overdraft and note facilities for which there are
neither material commitment fees nor compensating balance
requirements. Unused short and long-term credit lines with banks,
including the revolving credit facilities, totaled approximately
$27,400,000 at December 31, 1994. The weighted average borrowing
rates under short-term credit facilities were 10.25% and 10% at
December 31, 1994 and 1993, respectively.
Scheduled maturities of long-term debt in each of the next five
years are $70,000, $2,162,000, $7,000, $4,000 and $4,000 in 1995
through 1999, respectively.
Interest expense for each of the three years in the period ended
December 31, 1994 was $415,000, $525,000 and $74,000, respectively.
Interest expense for 1992 is reported net of capitalized interest of
$580,000.
<PAGE>
Note 10--Income Taxes
In 1992, the Company adopted FAS No. 109, "Accounting for Income Taxes."
This statement requires use of the liability method which records deferred
income tax expense and benefits for the temporary differences between the
financial reporting basis and the tax basis of the Company's assets and
liabilities.
For financial reporting purposes, income (loss) from continuing operations
before income taxes included the following:
(In thousands) 1994 1993 1992
United States $ 815 $(7,206) $(13,312)
Foreign 4,342 3,216 (11,520)
Total $ 5,157 $(3,990) $(24,832)
Provisions (benefits) for income taxes included the following:
(In thousands) 1994 1993 1992
Current:
Continuing operations:
Federal $ 1,000 $(2,247) $ (970)
State 148 44 (51)
Foreign 1,103 987 (510)
2,251 (1,216) (1,531)
Discontinued operations 400 -- --
Total current $ 2,651 $(1,216) $(1,531)
Deferred:
Continuing operations:
Federal $(1,447) $ -- $ 342
State -- -- (72)
Foreign 21 99 193
Total deferred $(1,426) $ 99 $ 463
<PAGE>
The differences between the provision (benefit) for income taxes
attributable to continuing operations at the United States federal statutory
income tax rate and the tax provision (benefit) were as follows:
(In thousands) 1994 1993 1992
U. S. federal statutory rate 34% 34% 34%
Taxes at statutory rate $ 1,753 $(1,357) $(8,443)
Provision (benefit) resulting from:
Effect of consolidating foreign
subsidiaries (352) (7) 3,599
Foreign Sales Corporation - (207) (264)
Effect of losses producing no
current benefit - 410 3,371
Federal Alternative Minimum Tax 1,000 - 792
Net operating loss carryovers (1,880) - -
Other 304 44 (123)
Tax provision (benefit) $ 825 $(1,117) $(1,068)
Deferred tax assets and liabilities were comprised of the following:
(In thousands) 1994 1993
Deferred tax assets:
Accrued retiree and other
employee benefits $18,195 $19,060
Tax loss carryforwards 2,200 4,021
Federal and state tax credits 13,500 10,500
Restructuring costs 116 451
Discontinued operations 1,287 1,344
Other 3,756 2,817
Total deferred tax assets 39,054 38,193
Less valuation allowance 28,697 28,119
Deferred tax asset 10,357 10,074
Deferred tax liabilities:
Depreciation 7,463 8,496
Other 93 125
Total deferred tax liabilities 7,556 8,621
Net deferred tax asset $ 2,801 $ 1,453
<PAGE>
The net deferred tax asset of $2,801,000 at December 31, 1994
($1,453,000 in 1993) is presented in the accompanying Consolidated
Balance Sheets as follows: $1,322,000 ($1,300,000 in 1993) in other
current assets; $2,032,000 ($700,000 in 1993) in other assets and
$553,000 ($547,000 in 1993) in other liabilities.
Foreign loss carryforwards totaling $4.8 million, which may be carried
forward indefinitely, are available to reduce future taxable income.
Domestic tax credits of $13.5 million are also available to reduce future
federal and state income taxes and expire at various dates through 2001,
with the exception of the federal alternative minimum tax credits which
can be carried forward indefinitely.
Undistributed earnings of the Company's foreign subsidiaries amounted to
approximately $8.6 million at December 31, 1994. Those earnings are
considered to be indefinitely reinvested and accordingly no provisions for
U.S. federal or state income taxes have been provided thereon. Upon
distribution of these earnings, the Company would be subject to both U.S.
income tax and withholding taxes payable to the foreign country. It is not
practicable to estimate the amount of additional tax that might be payable on
the foreign earnings.
<PAGE>
Note 11--Stock Plans
The Company's 1992 Stock Plan, which became effective May 5, 1992, is a
successor to the Company's 1981 Stock Plan. No additional grants of options
could be made under the 1981 Stock Plan after December 16, 1991.
Under the Company's 1992 Stock Plan, 500,000 common shares have been
reserved for granting of options, stock appreciation rights (SARs) and
restricted stock to key employees. Options are granted at prices not less
than 100% of the market value of the common stock at the date of grant and
may be exercisable beginning six months and ending ten years from the date of
grant. The Executive Compensation Committee of the Company's Board of
Directors at its discretion may at the time of grant of an option provide
further limitations on periods during which options may be exercised. SARs
allow the optionee to surrender the option and receive a number of shares of
common stock, cash, or cash and shares of common stock, as the Executive
Compensation Committee determines, with an aggregate value equal to the
amount by which the fair market value of the shares covered by the
surrendered option exceeds the option price. Increases in the value of SARs
resulting from changes in the market value of common stock will be charged to
expense as they occur. Options automatically carry with them conditional
SARs which are exercisable in the event of a tender offer meeting certain
specified conditions. No SARs have been granted under the Plan.
Under the Plan an option, which is exercisable beginning six months from
the date of grant, to purchase 1,000 shares at the market value per share on
the date of grant, is granted each year to each director of the Company who
is not, and has not been an employee of the Company since the beginning of
the preceding year.
Grants of restricted stock entitle the grantee to vote and receive cash
dividends on the shares, but not to transfer or otherwise dispose of such
shares while they are subject to restrictions. The restriction period cannot
be less than one year or more than ten years from the date of grant. As
restrictions lapse, the difference between the market value on the date of
grant and the grant price, if any, is charged to expense. Any dividends paid
to the grantee during the restriction period is also charged to expense.
There were no grants of restricted shares made during 1994. At December 31,
1994, 2,000 restricted shares were outstanding.
<PAGE>
The following is a summary of option transactions under both Plans:
Shares Price Range
Outstanding December 31, 1991 170,620 $ 8.69 - $19.37
Granted 47,500 $14.94 - $18.63
Exercised (3,917) $ 8.69
Outstanding December 31, 1992 214,203 $12.50 - $19.37
Granted 56,000 $14.44 - $14.63
Forfeited (10,000) $15.81
Outstanding December 31, 1993 260,203 $12.50 - $19.37
Granted 70,000 $11.31 - $15.12
Forfeited (16,000) $13.12 - $18.62
Outstanding December 31, 1994 314,203 $11.31 - $19.37
Exercisable at December 31:
1994 249,203 $11.31 - $19.37
1993 209,203 $12.50 - $19.37
1992 171,703 $12.50 - $19.37
Available for additional grants
at December 31:
1994 324,500
1993 392,500
1992 451,500
1991 --
<PAGE>
Note 12--Preferred Stock Purchase Rights
Pursuant to the Company's Shareholder Rights Plan, each outstanding share
of the Company's common stock carries one Preferred Stock purchase right.
Each right, when exercisable, entitles the holder to purchase from the
Company for $45, one one-hundredth of a share of Series A Junior
Participating Preferred Stock, par value $1 per share, of the Company. The
Rights become exercisable, subject to certain exceptions, upon announcement
that a person or group has acquired 15% or more of the Company's outstanding
common stock, or 10 days, or such other period as the Board may determine,
following commencement of, or announcement of an intention to commence, a
tender or exchange offer consummation of which would result in a person or
group owning 15% or more of the Company's outstanding common stock, whichever
occurs first. If any person or group becomes the beneficial owner of 15% of
the outstanding common stock, other than pursuant to a Permitted Offer, as
defined in the Plan, holders, other than an Acquiring Person as defined in
the Plan, will have the right to purchase from the Company common stock (or,
in certain circumstances, cash, property or other securities of the Company
or to a reduction in the purchase price) having a value equal to two times
the exercise price of $45, or the Board may elect to issue without any
payment common stock and/or equivalents of the Company with a value equal to
the exercise price. If a person or group becomes beneficial owner of 15% or
more of the Company's outstanding common stock and the Company is thereafter
acquired by another entity, by merger, consolidation, or transfer of 50% or
more of the Company's assets, in one or more transactions, holders of Rights,
other than an Acquiring Person, will have the right to receive, upon
exercise, common shares of the acquiring company (including the Company if it
is the surviving company) having a value two times the exercise price ($45)
of the Right. The Rights will expire on June 15, 1999, unless exercised by
the holder or redeemed by the Company prior to that date. The Company may,
subject to certain conditions, redeem the Rights at a price of $.01 per
Right.
Note 13--Supplemental Cash Flow Information
Cash payments (net refunds) for income taxes were ($1,188,000), $79,000 and
$3,248,000 for 1994, 1993 and 1992, respectively. Interest payments, net of
amounts capitalized in 1992, were $444,000, $466,000 and $127,000 in 1994,
1993 and 1992, respectively.
Noncash investing activities in 1992 included notes receivable of
$2,147,000 from the sale of the assets of Alliance Precision Plastics and
Alliance Carolina Tool and Mold. Refer to Note 3 - Discontinued Operations.
<PAGE>
Note 14--Business Segment and Foreign Operations
The Company's operations are conducted within one business segment. The
principal activity is the design, manufacture and sale of machinery and
equipment for the production of gears.
The Company's sales in North America and Europe are in general made
directly by employees of the Company. Sales in other territories are
handled by independent foreign machine dealers.
The Company's major foreign operations are located in Western Europe.
Information about the Company's operations in the United States and
Western Europe for 1994, 1993 and 1992 are summarized as follows:
(In thousands) 1994 1993 1992
Net sales to unaffiliated customers
United States $113,304 $ 81,479 $101,591
Western Europe 15,158 22,391 45,683
$128,462 $103,870 $147,274
Interarea sales and transfers
United States $ 431 $ 913 $ 1,917
Western Europe 6,844 6,920 8,540
$ 7,275 $ 7,833 $ 10,457
Total sales
United States $113,735 $ 82,392 $103,508
Western Europe 22,002 29,311 54,223
135,737 111,703 157,731
Less interarea sales 7,275 7,833 10,457
$128,462 $103,870 $147,274
_______________________________________________________________________
Operating income (loss)
United States $ 3,250 $ (4,528) $(12,285)
Western Europe 4,011 2,100 (12,848)
7,261 (2,428) (25,133)
Less:
Interest (income) expense -- net 11 (152) (2,127)
Corporate and other non-allocable
expenses 2,093 1,714 1,826
Income (loss) from continuing
operations before income taxes $ 5,157 $ (3,990) $(24,832)
_______________________________________________________________________
Identifiable assets
United States $103,871 $100,835 $103,550
Western Europe 13,416 11,852 23,500
117,287 112,687 127,050
Corporate assets 3,199 4,194 7,137
Assets of discontinued operations 1,530 4,968 5,902
Total assets $122,016 $121,849 $140,089
Interarea sales and transfers are generally accounted for at prices to
yield normal returns to the selling company in relation to the costs of
production. Identifiable assets represent assets directly identified with
each geographic region. Corporate assets consist primarily of cash and
equivalents.
<PAGE>
Operating income for the United States included restructuring and
environmental costs of $10,550,000 in 1992. Operating income for Western
Europe included restructuring costs of $18,329,000 in 1992.
United States continuing operations for 1994, 1993 and 1992 included
export sales (exclusive of intercompany sales) to the following geographic
areas:
(In thousands) 1994 1993 1992
Europe / Africa $27,938 $23,659 $20,538
Asia / Pacific 19,114 8,645 34,276
Americas 5,660 6,203 4,601
$52,712 $38,507 $59,415
For the years presented, no single customer accounted for 10% or more
of consolidated sales.
Note 15-Environmental Matters
Environmental expenditures are expensed or capitalized in accordance
with generally accepted accounting principles. Liabilities are recorded
when environmental assessments and/or remedial efforts are probable, and
the costs can be reasonably estimated.
In 1992, the Company made provisions for environmental costs of
$2,850,000. These provisions primarily represented the estimated costs
related to complete remediation of environmental contamination in a
confined area at the Company's Rochester facility which was detected
in 1991. The remediation effort was completed in 1992.
The Company has also made provisions for environmental matters at
certain discontinued operations for which the Company retains respon-
sibility. These provisions were recorded in discontinued operations in
1991 and are believed to be adequate based upon information known
at this time.
The Company is subject to federal, state and local laws and regulations
concerning the environment, and is currently participating in adminis-
trative proceedings involving different sites under these laws, as a
participant in a group of potentially responsible parties. These
proceedings are at various stages, and it is impossible to estimate with
any certainty the ultimate cost, timing and extent of remedial actions
which may be required by governmental authorities, or the amount of the
liability, if any, of the Company alone or in relation to that of the
other responsible parties. Based on the facts presently known, the
Company does not believe that the outcome of any of these proceedings
will have a material effect on its results of operations or financial
position.
<PAGE>
Note 16--Commitments and Contingencies
The Company is involved in various claims and lawsuits incidental to its
business. In the opinion of management, the ultimate liability, if any,
resulting from such actions will not have a material impact on the Company's
future results of operations or financial position.
The Company was contingently liable under standby letters of credit
issued in the normal course of business for $7.2 million at December 31,
1994.
Note 17--Fair Values of Financial Instruments
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount reported in the balance
sheet for cash and cash equivalents approximates its fair value.
Long and short-term debt: The carrying amounts of the Company's short-
term borrowings and variable rate long-term debt approximate their fair
value.
Foreign currency exchange contracts: The Company enters into foreign
currency forward contracts primarily to hedge transactions representing
firm commitments to buy or sell goods in foreign currencies. The aggregate
contract value of agreements to sell certain foreign currencies in exchange
for U.S. dollars was $6.8 million and $6.1 million at December 31, 1994 and
1993, respectively. The aggregate value of contracts for the sale of U.S.
dollars in exchange for foreign currencies was $5.4 million and $1.3 million
at December 31, 1994 and 1993, respectively. The fair values of these
contracts, representing the difference between the contract values and the
estimated settlement values based on the quoted market prices of comparable
contracts at December 31, 1994 and 1993, were not material.
<PAGE>
Report of Independent Auditors
Stockholders and Board of Directors
of Gleason Corporation:
We have audited the accompanying consolidated balance sheets of Gleason
Corporation and subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended December 31,
1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Gleason Corporation and subsidiaries at December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, in 1992 the Company
changed its method of accounting for postretirement benefits other than
pensions.
Syracuse, New York
February 1, 1995 Ernst & Young LLP
<PAGE>
Quarterly Information (Unaudited)
Selected quarterly information for the years 1994 and 1993 are shown below:
Dollars in thousands, 1994
except per share amounts First Second Third Fourth
Net sales $23,699 $27,608 $26,392 $50,763
Cost of products sold 17,801 20,222 18,105 38,807
Income from continuing
operations 65 603 1,032 2,632
Net income 65 2,043 1,032 4,148
Per common share:
Income from continuing
operations .01 .12 .20 .51
Net income .01 .40 .20 .80
Cash dividends declared .10 .10 .10 .10
Stock prices
High 15 1/4 13 1/4 16 1/2 15 7/8
Low 12 1/2 11 10 7/8 14
Dollars in thousands, 1993
except per share amounts First Second Third Fourth
Net sales $24,784 $28,038 $21,907 $29,141
Cost of products sold 17,790 21,202 16,327 24,353
Net income (loss) (641) 122 (999) (1,355)
Per common share:
Net income (loss) (.12) .02 (.19) (.26)
Cash dividends declared .10 .10 .10 .10
Stock prices
High 16 1/8 14 3/4 13 3/4 15 7/8
Low 11 1/2 11 1/2 11 7/8 12 1/2
Note: Net income in 1994 included a gain on the disposal of discontinued
operations of $1,440,000, or $.28 per share, in the second quarter and
$1,516,000, or $.29 per share, in the fourth quarter.
The Company's Common Stock (symbol GLE) is traded on the New York Stock
Exchange. The high and low sales price in each quarter of 1994 and 1993
are shown above. As of December 31, 1994 there were 2,707 holders of
record of the Company's Common Stock.
EXHIBIT (21)
GLEASON CORPORATION AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
State or Country Percent
Subsidiary of Incorporation Ownership
Gleason Foreign Sales Corporation Barbados 100
The Gleason Works New York 100
Alliance Tool Corporation New York 100
Gleason Works (Holdings) Limited United Kingdom 100
Gleason Works Limited United Kingdom 100
Gleason International
Marketing Corporation Delaware 100
Gleason Corporation Sales Michigan 100
Gleason Australia (Services)
Pty. Limited Australia 100
EXHIBIT(23)
Ernst & Young LLP
1800 One MONY Plaza Phone:315 425 8011
Syracuse, New York 13202 Fax: 315 422 5226
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual
Report (Form 10-K) of Gleason Corporation of our report dated
February 1, 1995, included in the 1994 Annual Report to
Stockholders of Gleason Corporation.
We also consent to the incorporation by reference in the
Registration Statement(Form S-8 No. 2-91656) and the Registrant
Statement(Form S-3 No. 2-84220) of Gleason Corporation of our
report dated February 1, 1995, with respect to the consolidated
financial statements of Gleason Corporation and subsidiaries
incorporated by reference in the Annual Report(Form 10-K)
for the year ended December 31, 1994.
Ernst & Young LLP
March 27, 1995
EXHIBIT (24)
POWER OF ATTORNEY
The undersigned, directors of Gleason Corporation
("Company"), hereby constitute and appoint James S. Gleason and
Ralph E. Harper, or either of them, their respective true and
lawful attorneys and agents, each with full power and authority
to act as such without the other, to sign the name of the
undersigned to the Company's fiscal 1994 Annual Report on Form
10-K, and to any amendment thereto, to be filed with the
Securities and Exchange Commission under the Securities Exchange
Act of 1934 and the related rules and regulations thereunder, the
undersigned hereby ratifying and confirming all that said
attorneys and agents, or either one of them, shall do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have signed and
delivered these presents as of this 21st day of February, 1995.
Julian W. Atwater James S. Gleason
_________________ ________________
Julian W. Atwater James S. Gleason
Robert W. Bjork Donald D. Lennox
_______________ ________________
Robert W. Bjork Donald D. Lennox
J. David Cartwright Robert A. Sherman
___________________ _________________
J. David Cartwright Robert A. Sherman
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 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> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
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