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, 1995.
[ ] 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. (X)
The aggregate market value of registrant's voting stock held
by non-affiliates as of March 14, 1996 was approximately
$220,941,317.
The number of shares of Common Stock, $1.00 par value,
outstanding as of March 14, 1996 was 5,183,374 shares.
Documents Incorporated by Reference
Portions of the Company's Annual Report to Stockholders for
the year ended December 31, 1995 are incorporated by
reference into Parts I and II of this Form 10-K.
Portions of the Company's proxy statement, dated March 29,
1996, filed in connection with its 1996 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 1995, the Company acquired certain assets and technology
of Hurth Maschinen und Werkzeuge GmbH, a Munich, Germany-based
leader in the design and production of cylindrical gear machinery
and tooling. Further information regarding the acquisition is
presented in Note 2 of the Notes to the Consolidated Financial
Statements in the Company's Annual Report to Stockholders
for the year ended December 31, 1995, which is incorporated
herein by reference.
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
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presented in Note 3 of the Notes to the Consolidated Financial
Statements in the Company's Annual Report to Stockholders for
the year ended December 31, 1995, which is incorporated herein
by reference.
Description of Business
The Company operates in one business segment engaged in
the design, manufacture and sale of gear production machinery and
equipment. The Company has manufacturing operations in
Rochester, New York, Munich, Germany 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 successor company serves as a contract
manufacturer for some of the Company's products.
Foreign and domestic operations, export sales and major
customer financial information is presented in Note 14 of the
Notes to the Consolidated Financial Statements in the Company's
Annual Report to Stockholders for the year ended December 31,
1995, which is incorporated herein by reference.
Products
Bevel Gear 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 axle of an automobile. The gears produced by Gleason
machines are used in drive trains of automobiles, sport utility
vehicles, trucks, buses, aircraft, marine, agricultural and
construction machinery, and must meet a wide range of complex
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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 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, and gear design software.
Cylindrical Gear Products
The Company also manufactures machines for the production
of spur and helical gears up to 20 inches in diameter. Spur and
helical or cylindrical 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.
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In 1993, the Company began making shipments of its first
PHOENIX machine for cylindrical gear production. This machine,
the 125GH gear hobber has significantly increased the Company's
sales in this market.
The acquisition of Hurth in 1995 added complementary
product lines which strengthen the Company's position in the
cylindrical gear equipment market. Hurth has been a leader in
the technology and production processes for shaving and fine
finishing of cylindrical gears. Similar to the Company's other
gear equipment, the Company offers tooling, spare parts and field
service for its cylindrical gear machines.
Marketing
The Company's sales and service functions in North America
and Europe are 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 65 percent and
53 percent in 1995 and 1994, respectively. The majority of
overseas sales were to European and Asian customers. Sales to
overseas markets in 1995 were higher as a percentage of total
sales primarily due to the addition of Hurth sales which were
more heavily concentrated in Europe.
The domestic and foreign automotive and truck industries
accounted for approximately 74 percent and 73 percent of sales in
1995 and 1994, respectively.
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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.
Backlog
Backlog (unshipped orders), is an important measure of
short-term business activity. Because of the nature of the
industry, backlog is subject to fluctuation. As of December 31,
1995 backlog totaled $124.5 million compared to $54.7 million as
of December 31, 1994. Backlog for the Hurth operation included
in the December 31, 1995 totals was $49.3 million. The remaining
increase of $20.5 million in backlog was driven primarily by the
increased demand for bevel gear machine products, with orders for
for these products up 41 percent in 1995 over 1994 levels. The
Company expects substantially all of the December 31, 1995
backlog to be shipped by the end of 1996.
Research and Development
Amounts expended for research and development are presented
in the Consolidated Statements of Operations of the
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Company's Annual Report to Stockholders for the year ended
December 31, 1995, 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, 1995, the Company had 1,455 employees.
Many employees possess a high degree of engineering, technical
and mechanical skills. Employee relations are considered good.
With the exception of government-mandated Workers Council
representation in Germany, the Company's employees are not
represented by any collective bargaining agent.
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, Munich, Germany and Plymouth, England.
A table of the major facilities and products manufactured is
displayed below:
Plant Principal
Location Square Footage Products
Owned Facilities
Rochester, New York 721,400 Gear production machines,
workholding equipment
and cutting tools
Plymouth, England 106,000 Cutting tools
Leased Facilities
Munich, Germany 248,000 Cylindrical gear
production machines and
tooling
The Munich facility is being leased for a five year term
ending in 2000. The Company owns approximately 250 acres of
undeveloped land in Monroe County, New York and leases 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. In 1995, the Company sold the land
and building of its former Alliance Metal Stamping and
Fabricating division.
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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.
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, 1995 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, 1995 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, 1995 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, 1995 are incorporated herein by reference:
Consolidated Statements of Operations - Years ended December
31, 1995, 1994 and 1993.
Consolidated Balance Sheets - December 31, 1995 and 1994.
Consolidated Statements of Cash Flows - Years ended December
31, 1995, 1994 and 1993.
Consolidated Statements of Stockholders' Equity - Years
ended December 31, 1995, 1994 and 1993.
Notes to Consolidated Financial Statements - December 31,
1995.
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, 1995, 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. 61 1966 Chairman and President since
Gleason January 1985.
David J. 41 1992 Executive Vice President since
Burns August 1995; Vice President -
Machine Products Group from
November 1992 to July 1995;
General Manager-Standard
Products Group from February
1991 to October 1992; Plant
Manager of Gleason Works-
Rochester from April 1989 to
January 1991.
John B. 54 1986 Vice President-Administration
Kodweis and Human Resources since
December 1992; Vice President-Human
Resources and Public Affairs from May
1986 to November 1992.
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EXECUTIVE
OFFICER POSITIONS AND
NAME AGE SINCE OFFICES HELD
Ralph E. 62 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. 35 1993 Vice President - Finance since
Perrotti August 1995; Vice President -
Controller from August 1993 to July
1995; Controller from December 1992
to July 1993; Director of Accounting
and Reporting from January 1988 to
November 1992.
John W. 33 1995 Controller since August 1995;
Pysnack Director of Accounting and Reporting
from January 1995 to July 1995;
Finance Manager from October 1991 to
December 1994.
Gleason Works:
Robert J. 54 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.
Gary J. 52 1992 Vice President-Engineering
Kimmet since December 1988.
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, 1995, 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, 1995, 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, 1995 which are
incorporated herein by reference:
Consolidated Statements of Operations - Years ended
December 31, 1995, 1994 and 1993.
Consolidated Balance Sheets - December 31, 1995 and
1994.
Consolidated Statements of Cash Flows - Years
ended December 31, 1995, 1994 and 1993.
Consolidated Statements of Stockholders' Equity - Years
ended December 31, 1995, 1994 and 1993.
Notes to Consolidated Financial Statements -
December 31, 1995.
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.
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(10) Material contracts.
(a) Loan Agreement between Gleason Corporation
and Chase Manhattan Bank, N.A. and NBD Bank,
dated September 29, 1995 is incorporated by
reference to Exhibit 6(a) of Gleason
Corporation Form 10-Q, file number 1-8782,
for the quarter ended September 30, 1995.
(b) Gleason Corporation Annual Management
Incentive Compensation Plan is incorporated
by reference to Exhibit 10(a) of Gleason
Corporation Form 10-K, file number 1-8782,
for the year ended December 31, 1994.
(c) 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.
(d) 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.
(e) 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.
(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.
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(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.
(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.
(11) Computation of Per Share Earnings. Refer to the
Index to Exhibits.
(13) Annual Report to Stockholders of the registrant
for the year ended December 31, 1995 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 the Index to
Exhibits.
(b) Reports on Form 8-K filed in the fourth quarter of 1995:
None.
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(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 - Finance
John W. Pysnack
John W. Pysnack
Controller
Date: March 28, 1996
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.
Martin L. Anderson )
Julian W. Atwater )
Robert W. Bjork )
J. David Cartwright ) Directors
James S. Gleason )
John W. Guffey, Jr. )
Donald D. Lennox )
Robert A. Sherman )
By: Ralph E. Harper
Ralph E. Harper
Attorney in Fact
Date: March 28, 1996
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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.
(11) Computation of Per Share Earnings
(13) Portions of the Annual Report to
Stockholders of the Registrant for the
year ended December 31, 1995 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
EXHIBIT (11)
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<CAPTION>
GLEASON CORPORATION
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share amounts)
1995 1994 1993
<S> <C> <C> <C>
Primary
Average shares outstanding 5,171 5,163 5,156
Net effect of dilutive stock
options - based on the treasury
stock method using average
market price 110 -- --
Hypothetical shares for the
deferral of directors' fees 19 -- --
Total 5,300 5,163 5,156
Net income $ 30,827 $ 7,228 $ (2,873)
Per share amount $ 5.82 $ 1.41 $ (.56)
Fully Diluted
Average shares outstanding 5,171 5,163 5,156
Net effect of dilutive stock
options - based on the treasury
stock method using ending
market price 150 -- --
Hypothetical shares for the
deferral of directors' fees 19 -- --
Total 5,340 5,163 5,156
Net income $ 30,827 $ 7,228 $ (2,873)
Per share amount $ 5.77 $ 1.41 $ (.56)
</TABLE>
<TABLE>
Five Year Review
GLEASON CORPORATION AND SUBSIDIARIES
<CAPTION>
Dollars in thousands,
except per share amounts 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Summary of Operations
Net sales $197,046 $128,462 $103,870 $147,274 $177,522
Income (loss) from continuing operations 30,382 4,332 (2,873) (23,764) 4,355
Gain on disposal of discontinued operations 445 2,956 -- -- 2,305
Cumulative effect of change in
accounting for postretirement benefits
other than pensions -- -- -- (37,472) --
Net income (loss) 30,827 7,288 (2,873) (61,236) 6,660
Primary earnings per common share:
Continuing operations 5.74 .84 (.56) (4.35) .76
Disposal of discontinued operations .08 .57 -- -- .40
Cumulative effect of change in
accounting for postretirement benefits
other than pensions -- -- -- (6.86) --
Net income (loss) 5.82 1.41 (.56) (11.21) 1.16
Cash dividends declared per common share .50 .40 .40 .40 .20
Financial Position at Year-End
Cash and equivalents 9,926 3,173 4,155 7,105 44,451
Net property, plant and equipment 60,948 53,604 60,286 67,479 61,168
Total assets 197,198 122,016 121,849 140,089 194,875
Long-term debt 25,315 2,600 14,575 6,172 11,688
Total debt 26,810 3,283 15,115 7,388 18,720
Stockholders' equity 73,291 42,199 35,009 41,458 123,562
Other Data
Capital expenditures 8,309 3,527 5,587 24,526 22,242
Depreciation and amortization 9,992 9,293 9,221 9,641 7,852
New orders 226,107 156,962 94,970 108,274 125,322
Backlog 124,500 54,700 26,200 35,100 74,100
Number of employees (continuing operations) 1,455 1,079 1,049 1,420 1,706
</TABLE>
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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 bevel and
cylindrical 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
the rear-driven axle of a vehicle. The Company also
manufactures machines and tooling for producing cylindrical
gears. Cylindrical gears transmit power in a straight line
and have a variety of applications, including transmissions
of front-wheel-drive vehicles. On July 1, 1995, the Company
acquired the technology and certain assets of Hurth
Maschinen und Werkzeuge GmbH ("Hurth") in Munich, Germany
adding complementary product lines which strengthen its
position in the cylindrical gear equipment market.
The Company's major customers are in the automotive
and truck industries, which normally account for 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 United States.
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. In 1995, sales increased in all of these
markets, with 65 percent of the Company's sales outside of
the U.S.
Despite two-thirds of sales coming from outside of the
U.S. in 1995, this region, in terms of sales, remained the
Company's largest, posting impressive gains over 1994. The
Company's increased sales activity in the U.S. was supported
by higher investment by the major vehicle producers, who
reported record-high capital spending in 1995. Demand for
the Company's products was also buoyed by the increasing
popularity of light truck and four-wheel-drive vehicles.
These vehicles, which generally use bevel gears, had higher
sales in 1995, while overall vehicle sales in the U.S. were
lower compared to 1994. The Company also continued to
increase its sales of cylindrical gear products to the U.S.,
primarily as a result of the success of its PHOENIX gear
hobbing machine, which, introduced just two years ago, is
now the Company's best selling machine model.
<PAGE>
The Company's overseas markets showed some recovery
from 1994 levels. The greatest increase in overseas sales
were to Europe, primarily a result of the addition of the
Hurth operations, which have traditionally had the majority
of their sales in this region. Another important trend was
the increase in sales to emerging markets. Sales to these
markets, including China, India and South America, accounted
for 20 percent of total sales compared to only 12 percent in
1994. The economies of these nations are generally growing
at a faster rate than those of more industrialized nations.
There are ambitious long-range plans, in these emerging
economies, to develop key industries, such as automotive and
truck, which should provide long-term growth opportunities
for the Company.
Results of Operations
1995 Compared to 1994
Earnings
The Company had income from continuing operations of
$30.4 million, or $5.74 per share, in 1995, compared to $4.3
million, or $.84 per share, in 1994. Included in the 1995
results was a $13.7 million, or $2.59 per share, fourth
quarter positive adjustment to record deferred tax assets
not previously recognized. Net income for the year was
$30.8 million, or $5.82 per share, including an after-tax
gain from discontinued operations of $.4 million, or $.08
per share. This compares to net income of $7.3 million, or
$1.41 per share, in 1994 which included an after-tax gain
from discontinued operations of $3.0 million, or $.57 per
share.
Operating income (before interest and taxes) in 1995
improved to $21.5 million, or 10.9 percent of sales, from
$5.2 million, or 4 percent of sales in 1994. This
improvement in operating income from 1994 resulted from
higher sales, improved margins and incremental earnings from
the Hurth operations.
Orders and Backlog
Order levels in 1995 increased 44 percent over 1994 to
$226.1 million. Orders for the Hurth operations totaled
$41.2 million for the six-month period since acquisition.
New orders, excluding Hurth operations, increased 18
percent compared to 1994. This increase primarily resulted
from higher order levels for PHOENIX bevel gear machinery
and bevel gear cutting tools. The higher order rate is
attributable to improved demand from the Company's overseas
markets.
<PAGE>
<PAGE>
Backlog was $124.5 million at December 31, 1995,
compared to $54.7 million at December 31, 1994. This
increase in backlog of $69.8 million included $49.3 million
for the Hurth operations. The remaining increase of $20.5
million in backlog was principally for bevel gear machinery.
Net Sales
Net sales were $197.0 million in 1995, a 53 percent
increase from 1994. Sales for the Hurth operations totaled
$32.8 million, accounting for approximately 48 percent of
the total increase. The remaining increase in sales of
$35.8 million, represents a 28 percent improvement from 1994
shipment levels. Sales of all product lines increased
compared to the prior year with higher machine sales
accounting for the largest portion of the improvement.
Machine product sales, excluding Hurth machines,
increased $26.8 million compared to 1994. This increase was
divided relatively equally between bevel and cylindrical
gear machinery. Higher shipments of the Company's PHOENIX
gear hobbing machines accounted for the majority of the
increase in cylindrical gear machine sales. Shipments to
customers in the United States accounted for approximately
60 percent of the full year total cylindrical gear machine
sales and the largest portion of the year over year
increase. Bevel gear machine sales were higher largely due
to increased sales to the Asian market, primarily China and
India.
Sales of the Company's tooling products also showed
strong improvement. Tooling sales were $8.1 million higher,
excluding Hurth operations, with the greatest increase
coming from overseas markets which accounted for
approximately 70 percent of the increase.
Costs and Expenses
Cost of goods sold as a percentage of sales was 69.8
percent compared to 73.9 percent in 1994. The lower
percentage was primarily attributable to improved margins on
machine products. Margin improvement on these products
resulted from lower direct product costs on most machine
product lines and the effect of higher production volumes,
which increased capacity utilization and coverage of fixed
operating costs. Margins on tooling products also increased
compared to 1994. The Hurth operations contributed
favorably to the overall gross margin percentage since its
acquisition in mid-1995.
<PAGE>
Selling, general and administrative expenses were
$33.8 million, or 17.1 percent of sales, compared to $24.5
million, or 19.1 percent of sales, in 1994. Spending
decreased as a percentage of sales due to the higher sales
volumes. Total spending increased in 1995 by $9.3 million
compared to 1994 due to the inclusion of the Hurth
operations in the second half of 1995 and increased variable
selling expenses, including warranty and commissions.
Variable selling expenses as a percentage of sales were
similar to 1994.
Research and development spending in 1995 was $5.6
million, or 2.9 percent of sales, compared to $4.7 million,
or 3.7 percent of sales, in 1994. Major development
programs in 1995 included a new CNC gear testing machine,
shipments of which began in the fourth quarter. In
addition, spending for development programs associated with
new product design and manufacturing technology initiatives
for the Company's tooling operations increased in 1995
compared to 1994. The Company expects research and
development spending levels to be somewhat higher in 1996
than 1995.
Income Taxes
In 1995, the Company recorded a net tax benefit of
$9.4 million for continuing operations on pre-tax income of
$21.0 million. In 1994, the Company recorded a tax
provision of $.8 million for continuing operations on pre-
tax income of $5.2 million. The 1995 tax benefit included
a net deferred benefit of $14.8 million primarily resulting
from a reduction in the valuation allowance recorded for
deferred tax assets. This reduction in the valuation
allowance resulted in an increase in the net deferred tax
asset recorded on the Company's Consolidated Balance Sheet
at December 31, 1995 to $18.2 million from $2.8 million at
December 31, 1994. Under the provisions of FAS No. 109, the
Company had been limited, primarily due to its prior
domestic operating losses, in the amount of the deferred tax
asset it had been able to record. Significant improvements
in domestic operating performance and available tax planning
strategies have provided the necessary positive evidence
that it is more likely than not that future income will be
sufficient to fully realize the deferred tax asset recorded
at December 31, 1995. Of the total $14.8 million deferred
tax benefit included in income from continuing operations
for 1995, $13.7 million was recorded in the fourth quarter
based on the Company's ability to rely on future income. A
valuation allowance for deferred tax assets of $7.0 million
remains at December 31, 1995 for certain tax credits and net
foreign operating loss carryforwards for which realization
can not be anticipated at this time. The Company's
effective tax rate for 1996 should approximate applicable
statutory rates.
<PAGE>
<PAGE>
Outlook
The general outlook for 1996 is for some reduction in
capital spending by vehicle producers in the U.S. The
Company, however, still expects relatively strong demand for
its products, particularly for its bevel gear machinery
which supports the popular light truck and sport utility
vehicle markets. The relatively old average age of the
installed base of bevel gear production machinery also
provides a strong replacement market opportunity for the
Company. The Company remains cautiously optimistic about
growth opportunities in 1996 from its overseas markets,
which showed some recovery in 1995.
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 1994 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 cylindrical gear machinery each
increased about $23 million, for a combined increase of $46
million, or about 98 percent, compared to 1993. Backlog
increased to $54.7 million at December 31, 1994 from $26.2
million at December 31, 1993.
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 1993. Machine sales increased 30 percent, with
cylindrical gear machinery increasing 66 percent. In 1994,
the Company began making shipments of its first cylindrical
gear grinding machine, which was jointly developed with
Okamoto Machine Tool Works, and had a full year of shipments
of its new PHOENIX gear hobbing machine for which the
Company first began deliveries in mid-1993. Cylindrical
gear machines accounted for 37 percent of total machine
sales compared to 29 percent in 1993.
<PAGE>
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 cylindrical
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 1993. The Company
began to realize the benefits of its new factory as higher
machine volumes were produced in that facility. However,
strong price competition among machine producers continued
to pressure margins, particularly for cylindrical 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 has direct sales and
service representation throughout North America and Europe.
Commissions paid to dealers increased from 1993, 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.
Research and development spending was $4.7 million, or
3.7 percent of sales. Spending was 7 percent lower than in
1993 as that year had a greater number of new machine
introductions, including PHOENIX bevel and cylindrical 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 cylindrical gear grinding machine for
which shipments began in 1994.
<PAGE>
<PAGE>
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 had been limited in the amount of the deferred tax
asset it had been able to record based on future income.
Management determined that it was more likely than not that
future income would be sufficient to fully realize the
deferred tax asset recorded at December 31, 1994.
Liquidity and Capital Resources
Borrowings under the Company's revolving credit
facilities increased to $24.7 million at December 31, 1995
from $2.1 million at 1994 year-end. In 1995, the Company
entered into a new three-year $40 million unsecured
revolving credit agreement, with a portion of the facility
allocated to standby letters of credit and bank guarantees.
Available unused short and long-term credit lines with
banks, including revolving credit facilities, totaled $10.6
million at December 31, 1995. Cash and equivalents
increased to $9.9 million at December 31, 1995 from $3.2
million at December 31, 1994.
Operating activities provided $4.7 million of net cash
in 1995, compared to $10.8 million in 1994. Higher working
capital requirements, income tax payments and lower cash
flow from discontinued operations contributed to the
reduction in net cash generated from operations. The largest
increase in working capital requirements was in trade
accounts receivable. This increase resulted from higher
business volumes during the fourth quarter compared to the
same period in 1994. Sales in the fourth quarter of 1995
were $19.2 million higher than in the 1994 fourth quarter.
Inventory levels were also higher at year-end to support
higher sales volumes expected in the first half of 1996.
Other current assets increased in 1995 primarily due to
advance payments made to vendors. The negative cash flow
impacts from these increases were partially offset by higher
operating earnings and an increase in current operating
liabilities.
<PAGE>
Investing activities used $18.6 million of net cash in
1995 compared to $2.1 million of net cash provided in 1994.
The purchase of Hurth accounted for $10.6 million of the
cash used in investing activities in 1995. Capital
expenditures in 1995 increased to $8.3 million, compared to
$3.5 million in 1994 and $5.6 million in 1993. This
increase in capital spending included the purchase of
equipment for the Company's tooling operations associated
with the modernization program underway. Capital
expenditures for 1996 are expected to exceed depreciation
expense with the majority of this spending planned for
further investments to upgrade existing production
capabilities. Cash provided by investing activities in 1994
included collections of notes receivable associated with the
sales of former businesses totaling $3.3 million and
proceeds from the sale of machinery and equipment of
discontinued operations of $3.6 million. Investing
activities for 1994 also included the use of $1.5 million in
cash for a 20 percent investment interest in OGA
Corporation, the Company's exclusive sales and service
representative in Japan and Taiwan.
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 that 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 per share. Total dividend payments
were $2,585,000, $2,065,000 and $2,062,000 for 1995, 1994
and 1993, respectively.
<PAGE>
<PAGE>
<TABLE>
Consolidated Statements of Operations
GLEASON CORPORATION AND SUBSIDIARIES
<CAPTION>
_______________________________________________________________________________
Dollars in thousands, except per share amounts Year Ended December 31
1995 1994 1993
<S> <C> <C> <C>
Net sales $197,046 $128,462 $103,870
Costs and expenses
Cost of products sold 137,461 94,935 79,672
Selling, general and
administrative expenses 33,789 24,539 24,431
Research and development expenses 5,617 4,729 5,091
Interest (income) expense--net 527 11 (152)
Other (income)--net (1,328) (909) (1,182)
176,066 123,305 107,860
Income (loss) from continuing operations
before income taxes 20,980 5,157 (3,990)
Provision (benefit) for income taxes (9,402) 825 (1,117)
Income (loss) from continuing operations 30,382 4,332 (2,873)
Gain on disposal of discontinued
operations 445 2,956 --
Net income (loss) $ 30,827 $ 7,288 $ (2,873)
Primary earnings (loss) per common share:
Income (loss) from continuing operations $ 5.74 $ .84 $ (.56)
Gain on disposal of discontinued operations .08 .57 --
Net income (loss) $ 5.82 $ 1.41 $ (.56)
Fully diluted earnings (loss) per common share:
Income (loss) from continuing operations $ 5.69 $ .84 $ (.56)
Gain on disposal of discontinued operations .08 .57 --
Net income (loss) $ 5.77 $ 1.41 $ (.56)
Weighted average number of common shares
outstanding:
Primary 5,300,117 5,162,877 5,156,231
Fully diluted 5,339,871 5,162,877 5,156,231
Cash dividends declared per common share $ .50 $ .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 1995 1994
<S> <C> <C>
Assets
Current assets
Cash and equivalents $ 9,926 $ 3,173
Trade accounts receivable 65,288 42,363
Inventories 29,565 11,244
Deferred tax asset 4,113 1,322
Other current assets 5,468 2,589
Total current assets 114,360 60,691
Property, plant and equipment - net 60,948 53,604
Deferred tax asset 14,755 2,032
Other assets 7,135 4,159
Net assets of discontinued operations - 1,530
Total assets $197,198 $122,016
Liabilities and Stockholders' Equity
Current liabilities
Short-term borrowings $ 1,489 $ 613
Current portion of long-term debt 6 70
Trade accounts payable 16,153 10,335
Income taxes 2,335 3,324
Other current liabilities 33,968 17,753
Total current liabilities 53,951 32,095
Long-term debt 25,315 2,600
Pension plans and other retiree benefits 38,876 42,274
Other liabilities 5,765 2,848
Total liabilities 123,907 79,817
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:
5,796,446 shares in 1995 and 5,795,546
shares in 1994 5,796 5,796
Additional paid-in capital 11,749 11,909
Retained earnings 69,112 40,870
Cumulative foreign currency translation adjustment (2,156) (917)
Minimum pension liability adjustment (1,093) (5,009)
83,408 52,649
Less treasury stock of 614,591 shares in 1995
and 632,992 shares in 1994, at cost 10,117 10,450
Total stockholders' equity 73,291 42,199
Total liabilities and stockholders' equity $197,198 $122,016
<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 1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 30,827 $ 7,288 $ (2,873)
Adjustments to reconcile net income (loss)
to net cash from operating activities:
Depreciation and amortization 9,992 9,293 9,221
(Gain) loss on disposals of property,
plant and equipment (23) (36) 12
Provision (benefit) for deferred income
taxes (14,836) (1,426) 99
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (23,134) (13,774) 2,806
(Increase) decrease in inventories (10,170) 3,288 2,329
(Increase) decrease in other current assets (2,979) 901 (1,350)
Increase (decrease) in accounts payable 5,821 3,355 (2,328)
Increase (decrease) in all other current
operating liabilities 8,114 3,261 (9,747)
Other, net 2,410 (451) 490
(Gain) on disposal of discontinued
operations (674) (3,356) -
Discontinued operations (634) 2,441 146
Net cash provided by (used in)
operating activities 4,714 10,784 (1,195)
Cash flows from investing activities:
Capital expenditures (8,309) (3,527) (5,587)
Investment in unconsolidated affiliate - (1,489) -
Investment in subsidiary (10,582) - -
Proceeds from sales of businesses and
asset disposals 100 3,787 55
Proceeds from collection of notes receivable 199 3,281 411
Cash of subsidiary sold - - (2,284)
Net cash provided by (used in)
investing activities (18,592) 2,052 (7,405)
Cash flows from financing activities:
Net proceeds from (repayments of)
short-term borrowings 876 183 (161)
Net proceeds (repayments) under
revolving credit agreements 22,490 (12,148) 8,969
Proceeds from long-term debt 145 83 65
Repayment of long-term debt (68) (139) (957)
Dividends paid (2,585) (2,065) (2,062)
Net stock activity 173 (7) -
Net cash provided by (used in) financing
activities 21,031 (14,093) 5,854
Effect of exchange rate changes on cash
and equivalents (400) 275 (204)
Increase (decrease) in cash and equivalents 6,753 (982) (2,950)
Cash and equivalents, beginning of year 3,173 4,155 7,105
Cash and equivalents, end of year $ 9,926 $ 3,173 $ 4,155
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
Consolidated Statements of Stockholders' Equity
GLEASON CORPORATION AND SUBSIDIARIES
<CAPTION>
Cumulative
Foreign Minimum Total
Years Ended December 31, Additional Currency Pension Stock-
1995, 1994 and 1993 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, 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 adjustments (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 adjustments 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
Net income 30,827 30,827
Dividends declared (2,585) (2,585)
Shares issued under
Stock Plans (147) 320 173
Foreign currency
translation adjustments (1,239) (1,239)
Change in minimum pension
liability adjustment 3,916 3,916
Purchase of treasury stock (59) (59)
Other shares issued to employees (13) 72 59
________________________________________________________________________________________________________________________
Balance at December 31, 1995 $5,796 $11,749 $69,112 $(2,156) $(1,093) $(10,117) $ 73,291
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>
Notes to Consolidated Financial Statements
GLEASON CORPORATION AND SUBSIDIARIES
December 31, 1995
Note 1--Summary of Significant Accounting Policies
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 1995, 1994 and 1993.
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.
Inventories valued using the last-in, first-out (LIFO) method
comprised 61% and 82% of consolidated inventories at December 31, 1995
and 1994, respectively. Inventories not valued using the LIFO method
are determined on the first-in, first-out (FIFO) method.
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: The computation of primary earnings per common
share is determined by dividing the weighted average number of common
shares and (in periods in which they have a dilutive effect) common
share equivalents outstanding during the year into net earnings.
Common share equivalents include stock options and hypothetical shares
associated with the Company Plan for Deferral of Directors' Fees.
Fully diluted earnings per share in 1995 reflects the additional
dilution related to stock options due to the use of the market price
of the Company's Common Stock at the end of the period, which was
higher than the average price for the period, in the calculation of
the number of common share equivalents.
<PAGE>
Use of Estimates: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes.
Estimates are based on currently available information. Actual results
could differ from the estimates.
Stock Based Compensation: The Company grants stock options for a
fixed number of shares to employees with an exercise price equal to
the market value of the shares at the date of grant. The Company
accounts for stock option grants in accordance with APB Opinion No.
25,"Accounting for Stock Issued to Employees," and accordingly,
recognizes no compensation expense for the stock option grants.
Reclassification: Certain reclassifications have been made to prior
years' financial statements to conform to the 1995 presentation.
Additional accounting policies are described in the applicable notes.
Note 2 -- Hurth Acquisition
Effective July 1, 1995, the Company acquired, for $10,582,000 in
cash, certain assets of Hurth Maschinen und Werkzeuge GmbH ("Hurth"), a
Munich, Germany-based leader in the design and production of
cylindrical gear machinery and tooling. The Company purchased the
assets from the receiver in bankruptcy proceedings. Hurth, which
entered bankruptcy on May 31, 1995, had experienced financial losses
during 1994 and 1993 due to the economic recession in Europe. The
Company acquired patents, trademarks, rights to technology and know-
how, machinery and equipment, and inventories, and retained
approximately 280 employees at the Munich location. Under the
agreement, the Company assumed existing obligations for installation
and warranty of machines previously sold and completion of customer
orders in backlog.
The Company accounted for the acquisition under the purchase
accounting method. The purchase included, stated at fair value,
inventories ($8,350,000), machinery and equipment ($9,310,000),
technology ($1,450,000), current liabilities ($6,428,000), long-term
pension and other employee benefits ($2,100,000). The acquisition was
funded from the Company's revolving credit facility.
<PAGE>
<PAGE>
Results of operations after the acquisition date are included in
the Consolidated Statements of Operations for the year ended December
31, 1995. The following unaudited pro forma information has been
prepared assuming that this acquisition had taken place at the
beginning of the respective periods. The pro forma information
includes adjustments for lower personnel costs associated with the
reduction in headcount and lower fixed costs associated with rental of
the Munich facility, additional depreciation and amortization based on
the fair market value of machinery, equipment and technology acquired,
elimination of a Hurth investment in subsidiary loss for 1994, lower
outside dealer commission expense due to contract terminations and
higher interest expense that would have been incurred to finance the
acquisition. The pro forma financial information is not necessarily
indicative of the results of operations as they would have been had
the transaction been effected on the assumed dates.
(Unaudited)
(In thousands, except per share amounts)
Year ended December 31, 1995 1994
Net sales $212,823 $166,724
Income from continuing operations 28,535 1,989
Net income 28,980 4,945
Income from continuing operations
per common share $ 5.38 $ .39
Net income per common share 5.46 .96
Note 3 - Discontinued Operations
In the fourth quarter of 1995, the Company sold the land and
building of its former Alliance Metal Stamping and Fabricating
division and recognized a gain on this disposal of $445,000 (net of
applicable income taxes of $229,000). Proceeds from the sale included
an interest bearing note receivable of $2,100,000 due five years from
the date of sale. The land and building were classified as net assets
of discontinued operations at December 31, 1994.
<PAGE>
During 1994, the Company ceased operations at the Alliance Metal
Stamping and Fabricating division 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 for the disposition
of this division was lower than the amount previously estimated. Net
sales for this discontinued operation were $7,508,000 and $11,559,000
for the years ended December 31, 1994 and 1993, respectively.
Accrued costs related to discontinued operations at December 31,
1995 are presented in the Consolidated Balance Sheets as follows:
$1,179,000 ($2,007,000 in 1994) in other current liabilities, and
$1,500,000 ($1,473,000 in 1994) in other liabilities. These
liabilities principally consisted of estimated expenses for
environmental matters related to the properties of the Company's
former Components Group businesses. Refer to Note 15 - Environmental
Matters for further discussion.
Note 4--Inventories
The components of inventories were as follows:
(In thousands) 1995 1994
Raw materials and purchased parts $ 5,373 $ 1,405
Work in process 18,889 6,955
Finished products 5,303 2,884
$29,565 $11,244
If the valuation of all inventories had been determined on the FIFO
accounting method, inventories would have been $24,209,000 and
$23,835,000 higher at December 31, 1995 and 1994, respectively.
Note 5--Property, Plant and Equipment
The components of property, plant and equipment were as follows:
(In thousands) 1995 1994
Land $ 838 $ 840
Buildings and improvements 48,821 48,300
Machinery and equipment 112,040 96,582
161,699 145,722
Less accumulated depreciation 100,751 92,118
$ 60,948 $ 53,604
<PAGE>
<PAGE>
Note 6--Other Current Liabilities
The components of other current liabilities were as follows:
(In thousands) 1995 1994
Advance payments from customers $ 8,286 $ 2,922
Salaries, wages and related costs 8,109 4,168
Pension and other retiree
benefit plan contributions 6,673 5,327
Warranty, installation and related costs 5,184 1,426
Costs related to discontinued operations 1,179 2,007
Other current liabilities 4,537 1,903
$33,968 $17,753
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.
<PAGE>
A summary of the components of net periodic pension costs relating
to the domestic defined benefit plan is presented below:
(In thousands) 1995 1994 1993
Interest cost on projected
benefit obligation $ 6,625 $ 6,387 $ 6,429
(Positive) negative return
on plan assets (25,171) 2,012 (7,134)
Net amortization and
deferral 19,117 (8,249) 928
Net periodic pension costs $ 571 $ 150 $ 223
The expected long-term rate of return on plan assets used in
determining net periodic pension costs was 9.0% for 1995 and 8.25% for
1994 and 1993.
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, 1995 and 1994:
(In thousands) 1995 1994
Actuarial present value of benefit
obligations:
Accumulated benefit obligation
including vested benefits of
$88,690 in 1995 and
$74,180 in 1994 $92,900 $77,900
Projected benefit obligation $92,900 $77,900
Plan assets at market value 90,430 71,912
Projected benefit obligation
in excess of plan assets 2,470 5,988
Unrecognized prior service cost (868) (977)
Unrecognized net (loss) (1,163) (4,759)
Adjustment to recognize minimum
pension liability 2,031 5,736
Pension liability recognized
in the consolidated balance sheet $ 2,470 $ 5,988
The discount rates used in determining the projected benefit
obligation were 7.0% for December 31, 1995 and 8.75% for December 31,
1994. 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. The increase
in the accumulated benefit obligation was primarily attributable to a
decrease in the discount rate.
<PAGE>
<PAGE>
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 $2,031,000 ($5,736,000 in 1994), an intangible asset of $868,000
($977,000 in 1994) and an equity reduction of $768,000 ($4,759,000 in
1994). The current portion of the pension liability recognized in the
Consolidated Balance Sheets was $1,972,000 at December 31, 1995
($385,000 in 1994). The minimum pension liability adjustment
decreased in 1995 primarily due to an increase in the market value of
plan assets.
The plan's assets at December 31, 1995 were primarily invested in a
tactical asset allocation fund, cash equivalents and the Company's
common stock which had a market value of $12,514,000 and $5,680,000 at
December 31, 1995 and 1994, respectively.
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 $1,490,000 in 1995,
$1,267,000 in 1994 and $1,309,000 in 1993.
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 $272,000, $210,000 and $204,000 in 1995, 1994 and
1993, respectively. At December 31, 1995, the Company recorded a
minimum pension liability of $1,779,000 ($1,401,000 in 1994), an
intangible asset of $490,000 ($572,000 in 1994), and an equity
reduction of $325,000 ($250,000 in 1994).
The Company has a funded defined benefit pension plan which covers
employees at its U.K. subsidiary. The accumulated benefit obligation
for this plan calculated under the provisions of FAS No. 87 at
December 31, 1995 was $8,615,000 ($7,486,000 in 1994). The discount
rate used in determining the accumulated benefit obligation was 8.25%
in 1995 (9% in 1994). The fair market value of plan assets at
December 31, 1995 totaled $8,522,000 ($6,976,000 in 1994). The
Company had a liability for this plan on its Consolidated Balance
Sheets at December 31, 1995 of $326,000 ($419,000 in 1994). The
expense associated with this plan totaled $463,000, $457,000 and
$342,000 in 1995, 1994 and 1993, respectively.
<PAGE>
The Company also has unfunded retirement benefit plans for
employees at certain other foreign operations, including its Hurth
subsidiary. The costs of these foreign benefit plans were $231,000,
$177,000 and $198,000 for 1995, 1994 and 1993, respectively. The
liabilities included in the Consolidated Balance Sheets for these
plans were $3,200,000 and $1,500,000 at December 31, 1995 and 1994,
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.
The components of periodic expense for postretirement benefits were
as follows:
(In thousands) 1995 1994 1993
Service cost for benefits
earned during the year $ 87 $ 141 $ 142
Interest cost on the
accumulated postretirement
benefit obligation 2,563 2,599 2,839
Net amortization of prior
(gains) (289) -- --
Total expense $ 2,361 $ 2,740 $ 2,981
The recorded liabilities for this unfunded postretirement benefit
plan were as follows:
(In thousands) 1995 1994
Accumulated postretirement benefit obligation:
Retirees $26,714 $27,262
Fully eligible active plan participants 2,440 1,865
Other active plan participants 2,542 1,867
Total accumulated postretirement benefit
obligation 31,696 30,994
Unrecognized net gain 4,578 5,991
Total liability for postretirement health
and life insurance benefits 36,274 36,985
Less current portion 3,200 3,400
Noncurrent liability for postretirement
health and life insurance benefits $33,074 $33,585
<PAGE>
<PAGE>
The discount rates used in determining the accumulated
postretirement benefit obligation were 7.0% and 8.75% at December 31,
1995 and 1994, respectively. The increase in the total accumulated
postretirement benefit obligation was primarily attributable to a
decrease in the discount rate.
The cost of health insurance premiums of this plan are shared
between the Company and the retiree. There are no future increases in
the Company's share of health insurance premiums.
Note 9--Debt
Long-term debt at December 31, 1995 and 1994 consisted of the
following:
(In thousands) 1995 1994
Notes payable to banks under revolving
loan agreements $24,709 $ 2,135
Other obligations 612 535
25,321 2,670
Less current maturities 6 70
$25,315 $ 2,600
At December 31, 1995, the Company had unsecured borrowing
facilities that provided for borrowings up to a combined $40
million on a revolving loan basis through September 29, 1998.
Approximately $11 million of the total was allocated for borrowings
outside the U.S. Available borrowings under these facilities were
reduced by approximately $10.9 million at December 31, 1995 for bank
guarantees and 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 5.77% at December 31, 1995). 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.
<PAGE>
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
$10,640,000 at December 31, 1995. The weighted average borrowing
rates under short-term credit facilities were 6.50% and 10.25% at
December 31, 1995 and 1994, respectively.
Scheduled maturities of long-term debt in each of the next five
years are $6,000, $30,000, $24,713,000, $4,000 and $4,000 in 1996
through 2000, respectively.
Interest expense for each of the three years in the period ended
December 31, 1995 was $950,000, $415,000 and $525,000, respectively.
Note 10--Income Taxes
For financial reporting purposes, income (loss) from continuing
operations before income taxes included the following:
(In thousands) 1995 1994 1993
United States $ 12,144 $ 815 $(7,206)
Foreign 8,836 4,342 3,216
Total $ 20,980 $ 5,157 $(3,990)
Provisions (benefits) for income taxes included the following:
(In thousands) 1995 1994 1993
Current:
Continuing operations:
Federal $ 1,781 $ 1,000 $(2,247)
State 600 148 44
Foreign 3,053 1,103 987
5,434 2,251 (1,216)
Discontinued operations 229 400 -
Total current $ 5,663 $ 2,651 $(1,216)
Deferred:
Continuing operations:
Federal $(13,038) $(1,447) $ -
State (2,311) - -
Foreign 513 21 99
Total deferred $(14,836) $(1,426) $ 99
<PAGE>
<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) 1995 1994 1993
U.S. federal statutory rate 34% 34% 34%
Taxes at statutory rate $ 7,133 $ 1,753 $(1,357)
Provision (benefit) resulting from:
Change in valuation allowance (15,400) (880) 71
Effect of consolidating foreign
subsidiaries (695) (352) (7)
Foreign Sales Corporation (304) - (207)
Other (136) 304 383
Tax provision (benefit) $ (9,402) $ 825 $(1,117)
Deferred tax assets and liabilities were comprised of the following:
(In thousands) 1995 1994
Deferred tax assets:
Accrued retiree and other
employee benefits $15,497 $18,195
Foreign tax loss carryforwards 2,000 2,200
Federal and state tax credits 10,701 13,500
Discontinued operations 1,000 1,287
Other 4,441 3,872
Total deferred tax assets 33,639 39,054
Less valuation allowance 7,000 28,697
Deferred tax asset 26,639 10,357
Deferred tax liabilities:
Depreciation 7,526 7,463
Other 912 93
Total deferred tax liabilities 8,438 7,556
Net deferred tax asset $18,201 $ 2,801
<PAGE>
In the fourth quarter of 1995 the Company determined it was more likely
than not that there would be sufficient future domestic taxable income
to recognize deferred temporary differences which had previously been
offset by a valuation allowance. This conclusion was based on recent
operating income, the favorable outlook for the future and available tax
planning strategies. A valuation allowance of $7,000,000 is still
required for domestic tax credits expiring before they are utilized and
a German loss carryover that cannot be recognized due to a history of
recent losses. Accordingly, the Company reduced the valuation allowance
and increased the net deferred tax asset to $18,201,000. Management
believes that sufficient income will be earned in the future to fully
realize the net deferred tax asset.
The net deferred tax asset of $18,201,000 at December 31, 1995
($2,801,000 in 1994) is presented in the Consolidated Balance Sheets as
follows: $4,113,000 ($1,322,000 in 1994) in current assets; $14,755,000
($2,032,000 in 1994) in non-current assets and $667,000 ($553,000 in
1994) in other liabilities.
Foreign loss carryforwards totaling $4.4 million, which may be carried
forward indefinitely, are available to reduce future taxable income.
Domestic tax credits of $10.7 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 $13.3 million at December 31, 1995. 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.
Note 11--Stock Plan
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.
<PAGE>
<PAGE>
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 equal to
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. Grants of 400 shares of restricted stock were made during 1995
and restrictions lapsed on 2,000 shares of restricted stock during 1995.
At December 31, 1995, 400 restricted shares were outstanding.
<PAGE>
The following is a summary of option transactions under both Plans:
Shares Price Range
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
Granted 40,500 $21.18 - $34.81
Forfeited (10,000) $13.62
Exercised (27,454) $12.50 - $15.87
Outstanding December 31, 1995 317,249 $11.31 - $34.81
Exercisable at December 31:
1995 283,749 $11.31 - $21.18
1994 249,203 $11.31 - $19.37
1993 209,203 $12.50 - $19.37
Available for additional grants
at December 31:
1995 283,600
1994 324,500
1993 392,500
1992 451,500
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
<PAGE>
<PAGE>
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 $4,378,000,
($1,188,000) and $79,000 for 1995, 1994 and 1993, respectively. Interest
payments were $837,000, $444,000 and $466,000 in 1995, 1994 and 1993,
respectively.
Non-cash investing activities in 1995 included notes receivable of
$2,100,000 from the sale of the land and building of Alliance Metal
Stamping and Fabricating. Refer to Note 3 - Discontinued Operations.
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.
<PAGE>
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 1995, 1994 and 1993 are summarized as follows:
(In thousands) 1995 1994 1993
Net sales to unaffiliated customers
United States $146,344 $113,304 $ 81,479
Western Europe 50,702 15,158 22,391
$197,046 $128,462 $103,870
Interarea sales and transfers
United States $ 468 $ 431 $ 913
Western Europe 7,774 6,844 6,920
$ 8,242 $ 7,275 $ 7,833
Total sales
United States $146,812 $113,735 $ 82,392
Western Europe 58,476 22,002 29,311
205,288 135,737 111,703
Less interarea sales 8,242 7,275 7,833
$197,046 $128,462 $103,870
_______________________________________________________________________
Operating income (loss)
United States $ 14,296 $ 3,250 $ (4,528)
Western Europe 9,622 4,011 2,100
23,918 7,261 (2,428)
Less:
Interest (income) expense -- net 527 11 (152)
Corporate and other non-allocable
expenses 2,411 2,093 1,714
Income (loss) from continuing
operations before income taxes $ 20,980 $ 5,157 $ (3,990)
_______________________________________________________________________
Identifiable assets
United States $137,683 $103,871 $100,835
Western Europe 49,578 13,416 11,852
187,261 117,287 112,687
Corporate assets 9,937 3,199 4,194
Assets of discontinued operations -- 1,530 4,968
Total assets $197,198 $122,016 $121,849
<PAGE>
<PAGE>
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.
United States continuing operations for 1995, 1994 and 1993 included
export sales (exclusive of intercompany sales) to the following geographic
areas:
(In thousands) 1995 1994 1993
Europe / Africa $37,536 $27,938 $23,659
Asia / Pacific 29,197 19,114 8,645
Americas 10,829 5,660 6,203
$77,562 $52,712 $38,507
For the years presented, no single customer accounted for 10% or more of
consolidated sales.
Note 15-Environmental Matters
Environmental expenditures that relate to continuing operations 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.
The Company has made provisions for environmental matters at certain
discontinued operations for which the Company retains responsibility.
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
administrative 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 adverse effect on its results of operations or financial position.
<PAGE>
Note 16 -- Concentrations of Risk
The Company's major customers are predominantly in the automotive and
truck industries. Other markets utilizing the Company's products include
aerospace, manufacturers of power tools, marine, farm and construction
equipment. The Company's markets are worldwide. In 1995, approximately 65
percent of total sales were to customers outside of the U.S. This
geographical sales distribution offsets, to a degree, the cyclical
fluctuations of regional economies. As such, the Company is not
significantly at risk to the economic cycle of a single region.
Note 17--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 $12.7 million at December 31,
1995.
Note 18--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 to hedge transactions involving foreign
currencies primarily for firm commitments to buy or sell goods. The
aggregate contract value of agreements to sell foreign currencies in
exchange for U.S. dollars was $12.5 million and $6.8 million at December
31, 1995 and 1994, respectively. The aggregate value of contracts for the
sale of U.S. dollars in exchange for foreign currencies was $1.3 million
and $5.4 million at December 31, 1995 and 1994, 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, 1995 and 1994, were not
material.
<PAGE>
<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, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statments 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, 1995 and 1994,
and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
Syracuse, New York
January 25, 1996 Ernst & Young LLP
<PAGE>
<PAGE>
Quarterly Information (Unaudited)
Selected quarterly information for the years 1995 and 1994 are shown below:
Dollars in thousands, 1995
except per share amounts First Second Third Fourth
Net sales $31,901 $40,604 $54,550 $69,991
Cost of products sold 21,394 28,429 38,472 49,166
Income from continuing
operations 2,913 3,643 3,772 20,054
Net income 2,913 3,643 3,772 20,499
Primary earnings per common share:
Income from continuing
operations .56 .70 .73 3.75
Net income .56 .70 .73 3.83
Fully diluted earnings per common
share:
Income from continuing
operations .56 .70 .73 3.75
Net income .56 .70 .73 3.83
Cash dividends declared per
common share .125 .125 .125 .125
Stock prices
High 19 25 1/2 37 1/4 35 7/8
Low 14 5/8 17 3/4 22 27 3/8
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
Primary earnings per common share:
Income from continuing
operations .01 .12 .20 .51
Net income .01 .40 .20 .80
Fully diluted earnings per common
share:
Income from continuing
operations .01 .12 .20 .51
Net income .01 .40 .20 .80
Cash dividends declared per
common share .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
Notes: Income from continuing operations for the 1995 fourth quarter
included a $13.7 million, or $2.59 per share, positive adjustment to
record deferred tax assets not previously recognized. Net income
in 1995 included a gain on the disposal of discontinued operations of
$445,000 or $.08 per share, in the fourth quarter. 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 1995 and 1994
are shown above. As of December 31, 1995 there were 3,288 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
Gleason - Hurth Maschinen
und Werkzeuge GmbH Germany 100
Gleason Works (India) Private
Limited India 100
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 January 25, 1996, included in the 1995 Annual Report
to Stockholders of Gleason Corporation.
We also consent to the incorporation by reference in the
Registration Statements (Form S-8 No. 2-91656 and Form S-8 No. 33-62447)
and the Registration Statement (Form S-3 No. 2-84220) of Gleason
Corporation of our report dated January 25, 1996, 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, 1995.
Ernst & Young LLP
Syracuse, New York
March 25, 1996
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 1995 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 15th day of
February, 1996.
Martin L. Anderson Julian W. Atwater
________________________ ________________________
Martin L. Anderson Julian W. Atwater
Robert W. Bjork J. David Cartwright
________________________ ________________________
Robert W. Bjork J. David Cartwright
James S. Gleason John W. Guffey, Jr.
________________________ ________________________
James S. Gleason John W. Guffey, Jr.
Donald D. Lennox Robert A. Sherman
________________________ ________________________
Donald D. Lennox Robert A. Sherman
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THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
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<NAME> GLEASON CORPORATION
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