UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
__________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8782
GLEASON CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 16-1224655
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 University Avenue, Rochester, New York 14692
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (716) 473-1000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (X) No ( ).
The number of shares outstanding of the registrant's Common
stock, par value $1 per share, at March 31, 1997 was 4,979,870
shares.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
(Dollars in thousands)
MARCH 31 DECEMBER 31
Assets 1997 1996
<S> <C> <C>
Current assets
Cash and equivalents $ 5,394 $ 7,199
Trade accounts receivable 67,802 65,583
Inventories 30,035 27,986
Deferred income taxes 6,894 6,894
Other current assets 3,869 4,038
Total current assets 113,994 111,700
Property, plant and equipment, at cost 167,568 170,084
Less accumulated depreciation 109,215 108,693
58,353 61,391
Deferred income taxes 10,013 10,013
Other assets 7,505 7,570
Total assets $ 189,865 $ 190,674
Liabilities and Stockholders' Equity
Current liabilities
Short-term borrowings $ 622 $ 329
Current portion of long-term debt 5 6
Trade accounts payable 16,942 16,972
Income taxes 10,991 10,224
Other current liabilities 26,461 30,335
Total current liabilities 55,021 57,866
Long-term debt 3,988 4,506
Pension plans and other retiree benefits 37,867 38,220
Other liabilities 5,519 5,218
Total liabilities 102,395 105,810
Stockholders' equity
Common stock 5,797 5,797
Additional paid-in capital 11,454 11,528
Retained earnings 90,759 86,187
Cumulative foreign currency
translation adjustment (3,532) (2,149)
Minimum pension liability adjustment (461) (461)
104,017 100,902
Less treasury stock, at cost 16,547 16,038
Total stockholders' equity 87,470 84,864
Total liabilities and stockholders' equity $ 189,865 $ 190,674
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See notes to consolidated financial statements.
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GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
(Dollars in thousands,except
per share amounts)
THREE MONTHS ENDED
MARCH 31
1997 1996
<S> <C> <C>
Net sales $ 60,335 $ 59,510
Costs and expenses
Cost of products sold 41,016 40,371
Selling, general and
administrative expenses 9,863 10,200
Research and development expenses 1,974 1,788
Interest (income) expense--net (1) 341
Other (income)--net (540) (328)
Income before income taxes 8,023 7,138
Provision for income taxes 2,829 2,538
Net income $ 5,194 $ 4,600
Primary earnings per common share $ 1.01 $ .86
Fully diluted earnings per common share $ 1.01 $ .86
Weighted average number of common shares outstanding:
Primary 5,152,926 5,355,470
Fully diluted 5,152,926 5,377,630
Cash dividends declared per common share $ .125 $ .125
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See notes to consolidated financial statements.
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GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
(Dollars in thousands)
THREE MONTHS ENDED
MARCH 31
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,194 $ 4,600
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 2,901 2,831
(Gain) on disposals of property, plant
and equipment (428) (5)
Provision for deferred income taxes 29 605
Changes in operating assets and liabilities:
(Increase) in accounts receivable (3,352) (2,966)
(Increase) in inventories (2,858) (5,557)
(Increase) in other current assets (9) (356)
Increase (decrease) in trade accounts payable 208 (699)
(Decrease) in all other current operating
liabilities (1,463) (233)
Other, net 228 941
Net cash provided by (used in) operating activities 450 (839)
Cash flows from investing activities:
Capital expenditures (2,127) (1,518)
Proceeds from asset disposals 1,520 10
Proceeds from collection of notes receivable 18 54
Net cash (used in) investing activities (589) (1,454)
Cash flows from financing activities:
Proceeds from short-term borrowings 310 182
Net (repayments) under revolving
credit agreements (550) (5,381)
Proceeds from long-term debt 34 22
(Repayment) of long-term debt (3) (3)
Purchase of treasury stock (609) --
Net stock issues 26 23
Dividends paid (622) (648)
Net cash (used in) financing activities (1,414) (5,805)
Effect of exchange rate changes on cash
and equivalents (252) (87)
(Decrease) in cash and equivalents (1,805) (8,185)
Cash and equivalents, beginning 7,199 9,926
Cash and equivalents, ending $ 5,394 $ 1,741
</TABLE>
See notes to consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(Unaudited)
1. In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments
necessary to present fairly (a) the results of operations
for the three-month periods ended March 31, 1997 and 1996
(b) the financial position at March 31, 1997 and December
31, 1996, and (c) the cash flows for the three-month periods
ended March 31, 1997 and 1996, of Gleason Corporation and
subsidiaries.
2. The results of operations for the three-month period ended
March 31, 1997 are not necessarily indicative of the results
to be expected for the full year.
3. All significant intercompany transactions are eliminated in
consolidation.
4. The components of inventories were as follows:
(In thousands) 3/31/97 12/31/96
Raw materials and
purchased parts $ 5,582 $ 5,269
Work in process 20,719 18,063
Finished goods 3,734 4,654
$ 30,035 $ 27,986
5. Net cash payments for income taxes were $788,000 and
$288,000 for the three months ended March 31, 1997 and 1996,
respectively. Interest payments were $24,000 and $154,000
for the three months ended March 31, 1997 and 1996,
respectively.
6. In February 1997, the Financial Accounting Standards Board
issued Statement No. 128, Earnings per Share, which is
effective for both interim and annual financial statements
for periods ending after December 15, 1997. At that time,
the Company will be required to change the method currently
being used to compute earnings per share and to restate all
prior periods. Under the new requirements for calculating
primary earnings per share, the dilutive effect of stock
options will be excluded. The impact of this accounting
pronouncement would have resulted in an increase in primary
earnings per share of $.03 for the three-month periods ended
March 31, 1997 and March 31, 1996. There would have been no
impact on fully diluted earnings per share for these periods
under Statement 128.
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GLEASON CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial Condition
The following are management's comments relating to significant
changes in the results of operations for the three-month periods
ended March 31, 1997 and 1996 and in the Company's financial
condition during the three months ended March 31, 1997.
Results of Operations
The Company had net income for the first quarter ended March 31,
1997 of $5.2 million, or $1.01 per share, compared to $4.6
million, or $.86 per share, for the 1996 first quarter.
Operating earnings before interest and taxes for the first
quarter were $8.0 million, or $1.56 per share, compared to $7.5
million, or $1.40 per share, in the 1996 first quarter.
New orders totaled $55.4 million for the first quarter compared
to $55.1 million in the 1996 first quarter. Order levels for
both bevel and cylindrical gear equipment products were
relatively flat compared to the prior year. Order volumes for
cylindrical gear products, other than those produced by the
Company's Gleason-Hurth subsidiary ("Hurth"), were about $5
million higher than in the 1996 first quarter; however this was
offset by lower incoming orders for cylindrical gear products
produced by Hurth. Order levels at Hurth stated in U.S. dollars
compared to the 1996 first quarter were negatively impacted by a
foreign exchange translation effect of approximately $3.9 million
due to the stronger dollar versus the German mark. In April of
the current year, Hurth received a large order totaling
approximately $14.2 million from a European customer. This
order, which was not included in the first quarter order totals,
has deliveries scheduled for late 1997, 1998 and early 1999.
With this large order, the incoming order rate for cylindrical
gear products is well ahead of last year, and the Company expects
orders for these products to be higher in 1997 than in 1996.
Consolidated backlog was $117.9 million at March 31,1997 compared
to $122.8 million at December 31,1996 and $120.1 million at March
31,1996. Forward looking statements related to the level and
timing of incoming orders is subject to a number of risk factors
which could cause actual results to differ materially from those
expected. These risk factors include, but are not limited to,
actions taken by competitors, the stability of customers' capital
spending plans and changes in general economic conditions in the
world markets the Company serves.
Net sales were $60.3 million for the first quarter, compared to
$59.5 million in the 1996 first quarter. Machine product sales
approximately equaled the 1996 first quarter levels with higher
shipments of new bevel gear production machines offset by lower
sales of remanufactured machine products and cylindrical gear
production machines, primarily at Hurth. First quarter shipments
were approximately $1.9 million lower due to the weaker German
mark to U.S. dollar translation rates for the 1997 first quarter
compared to the first quarter of 1996.
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Sales of tooling products were down approximately 4 percent
compared to the first quarter of 1996 due to lower shipments of
workholding equipment. Bevel cutting tool sales were flat year
over year. Other products sales, including spare parts, service
and software, were higher than in the 1996 first quarter.
Cost of products sold as a percentage of sales was 68.0 percent
for the three-month period ended March 31, 1997 compared to 67.8
percent for the comparable 1996 period. Margins are heavily
impacted by the mix of products sold. For example, machines, in
general, tend to carry higher cost of sales percentages than
tooling or other products. Margins for all major product
categories were approximately the same as last year. There were
no major shifts in product mix which materially affected margins.
Selling, general and administrative expenses were $9.9 million,
or 16.3 percent of sales, for the first quarter of 1997 compared
to $10.2 million, or 17.1 percent of sales, in the 1996 first
quarter. This decrease was attributable to lower commissions
paid to outside dealers. Commissions were higher in the 1996
first quarter with higher shipments to Brazil, where the Company
is represented by an independent machine dealer.
Research and development expenses were $2.0 million in the first
quarter of 1997, an increase of 10 percent compared to the 1996
period. Development spending in 1997 exceeded 1996 levels
because of increased spending for new product development
programs for both bevel and cylindrical gear products and
manufacturing technology initiatives for the Company's tooling
operations.
Other income totaled $0.5 million in the first quarter compared to
$0.3 million in the prior year's first quarter. Other income
in the current quarter included a $0.4 million gain on the sale
of property associated with one of the Company's former Components
Group businesses. The property had been leased to the purchaser
of that operation since its sale in 1992.
The Company recorded a tax provision of $2.8 million, or an
effective tax rate of 35.3 percent, in the first quarter of 1997,
compared to $2.5 million, or an effective tax rate of 35.6
percent, for the prior year quarter. The effective tax rates for
both the 1997 and 1996 periods approximated the U.S. statutory
rate. The impact of the higher statutory rates on foreign
earnings (primarily in Germany) was offset by the utilization of
certain foreign tax credits and foreign operating loss
carryforwards in 1997 and 1996.
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Liquidity and Capital Resources
Borrowings under the Company's revolving credit facilities
decreased to $3.4 million at March 31, 1997 from $3.9 million at
December 31, 1996. Cash and cash equivalents decreased $1.8
million in the first three months of 1997 to $5.4 million.
Available unused short and long-term credit lines with banks,
including revolving credit facilities, totaled $36.9 million at
March 31, 1997. Dividend payments to stockholders totaled $0.6
million in the first quarter.
Operating activities in the first quarter provided cash of $0.5
million compared to net cash used in operating activities of $0.8
million in the comparable 1996 period. Cash provided by
operations was higher in the 1997 first quarter due to smaller
increases in working capital, primarily inventories.
Investing activities used $0.6 million of cash in the 1997 first
quarter versus $1.5 million in the comparable prior year period.
Capital expenditures totaled $2.1 million compared to $1.5
million in the 1996 first quarter. Capital expenditures for the
1997 full year are planned to increase from last year's level of
$10.3 million, with the majority of the spending planned for
further investments to upgrade existing production capabilities.
Cash flows from investing activities in the 1997 first quarter
also included $1.5 million in cash from the sale of the property
of one of the former Components Group businesses.
During the first quarter of 1997, the Company used $0.6 million in
cash to repurchase shares of its common stock under a program
authorized by its Board of Directors in July of 1996. As of
March 31, 1997, the Company had used approximately $6.8 million
in cash to repurchase 222,300 shares under this program.
In the third quarter of 1996, the Company announced its
intention to acquire the operations of the Hermann Pfauter
Group ("Pfauter"). Pfauter is a leading manufacturer of cylindrical
gear production equipment headquartered in Ludwigsburg, Germany with
major operating locations in Germany, the United States and Italy.
While some points between the parties still have not been resolved and
regulatory approval for the acquisition has not yet been received
in Germany, the Company expects that they will be resolved and a
favorable decision rendered, and that the acquisition will be
consummated by the end of the second quarter.
The Company is in the process of restructuring its credit
facilities to finance the acquisition of Pfauter and its other
investment and working capital requirements. Management expects
these credit facilities to be in place at the time of closing of
the acquisition.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
The Corporation's Annual Meeting of Stockholders
was held on May 6, 1997. Matters voted at the meeting
were as follows:
For Withheld
(1) Election of directors for
three year terms:
David J. Burns 4,571,100 16,891
J. David Cartwright 4,571,816 16,175
James S. Gleason 4,571,647 16,344
For Against Abstain
(2) Approval of an amendment to the
Company's 1992 Stock Plan to 4,396,075 149,870 42,046
increase the automatic annual
grant of options to each director,
who is not an employee of the
Company or any subsidiary, from
1,000 to 3,000 shares.
For Against Abstain
(3) Appointment of Ernst & Young LLP
as Independent Auditors for 1997. 4,562,056 10,815 15,120
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 3: Gleason Corporation 1992 Stock Plan,
as amended.
Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
GLEASON CORPORATION
Registrant
DATE: May 14, 1997
John J. Perrotti
John J. Perrotti
Vice President - Finance
(Chief Financial Officer)
GLEASON CORPORATION
1992 STOCK PLAN
(as amended through 5/6/97)
1. DEFINITIONS
The terms defined in this Section 1 shall, for all purposes
of this Plan, have the meanings herein specified:
"Affiliate" shall mean any corporation which directly or
indirectly controls, is controlled by, or is under common
control with the Company.
"Award" shall mean a designation of an individual as
recipient of either Options (with or without Stock
Appreciation Rights) or Restricted Stock pursuant to the
Plan.
"Board of Directors" shall mean not less than a quorum of
the whole Board of Directors of the Company.
"Cause" shall mean an act of dishonesty, moral turpitude or
an intentional or grossly negligent act detrimental to the
best interests of the Company or a Subsidiary.
"Change of Control" shall mean any purchase of the Company's
Common Stock pursuant to a tender or exchange offer by any
person, entity or group (other than the Company) owning less
than 30% of the outstanding Common Stock if upon termination
of such offer such person, entity or group owns 30% or more
of the outstanding Common Stock.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Common Stock" shall mean the Company's presently authorized
Common Stock, par value $1.00 per share, except as this
definition may be modified as provided in Section 12.
"Company" shall mean Gleason Corporation, a Delaware corporation.
"Compensation Committee" shall mean the Executive Compensation
Committee of the Board of Directors, which shall consist of at
least three directors who are Non-Employee Directors, as defined
in Rule 16b-3(b)(3)(i) pursuant to the Securities Exchange Act of
1934; provided that, if such committee has any additional members
who are not Non-Employee Directors, as defined in such Rule, any
such members who are not Non-Employee Directors shall abstain
or recuse themselves from any action involving a grant or award
to any person who is subject to Section 16 of the Securities
Exchange Act, as provided in the SEC No-Action Letter to the
American Society of Corporate Secretaries (December 11, 1996).
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"Derivative Security" shall mean any Option, Stock Appreciation
Right or Special Right.
"Employee" shall mean a person (who may also be a director
or officer) who is employed by the Company or a Subsidiary
thereof on a full-time basis and compensated for such
employment by a regular salary.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time.
"Fair Market Value" as of a specified date shall be
determined by the Compensation Committee, but whenever
possible shall mean the mean between the highest and the
lowest sale price of the Common Stock on the New York Stock
Exchange Consolidated Tape on such date or, if there are no
sales on such date, the mean of the bid and asked prices for
the Common Stock on the New York Stock Exchange on such
date.
"Grant" shall mean a grant of Restricted Stock.
"Grantee" shall mean an Employee who is granted Restricted
Stock.
"Incentive Option" shall mean only an Option which is
specifically designated as an incentive stock option by the
Compensation Committee at the time of grant and which
qualifies as an "incentive stock option" as defined in
Section 422 of the Code.
"Non-Statutory Option" shall mean any Option other than an
Incentive Option.
"Option" shall mean either an Incentive or Non-Statutory
Option granted by the Company pursuant to the Plan to
purchase shares of Common Stock.
"Option Price" shall mean the price to be paid for a share
of Common Stock pursuant to a Stock Option Agreement.
"Optionee" shall mean an Employee or director who is granted
an Option.
"Plan" shall mean the Gleason Corporation 1992 Stock Plan.
"Restricted Period" shall mean the period established by the
Compensation Committee during which shares of Common Stock
granted to an Employee as described in Section 11 shall be
Restricted Stock.
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"Restricted Stock" shall mean Common Stock subject to the
restrictions described in Section 11.
"Retirement" shall mean retirement from active service with
the Company or a Subsidiary after attaining age 55 and
completion of at least five years of continuous employment
with the Company and its Subsidiaries.
"Special Right" shall mean the right to receive cash or
Common Stock upon exercise of an Option or upon exercise of
Stock Appreciation Rights in connection with a Change of
Control as described in Section 8(B).
"Stock Appreciation Right" shall mean the right to receive
cash or Common Stock with respect to shares of Common Stock
subject to an Option in lieu of exercising such Option, as
described in Section 8.
"Stock Option Agreement" shall mean the written agreement
between the Company and Optionee confirming the Option and
setting forth the terms and conditions upon which it may be
exercised.
"Stock Option Committee" shall mean the Stock Option
Committee appointed pursuant to Section 4.
"Subsidiary" shall mean any corporation in which the Company
owns, directly or indirectly through one or more
Subsidiaries, at least 50% of the total combined voting
power of all classes of stock.
"Successor" shall mean the person or persons entitled to
exercise an Option or receive formerly Restricted Stock,
including a guardian or other duly appointed legal
representative of an Optionee or Grantee who has been
declared incompetent, and in the case of a deceased Optionee
or Grantee a person named as beneficiary under a designation
filed with the Stock Option Committee by the Optionee or
Grantee or, if no designation has been filed, the person or
persons so entitled under the will of the Optionee or
Grantee or, if the Optionee or Grantee shall have failed to
make testamentary disposition of such Award or shall have
died intestate, the legal representative or representatives
of the Optionee or Grantee.
References herein to the masculine gender shall be deemed to
include references to the feminine gender and the singular
form shall include the plural.
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2. PURPOSES
The purposes of the Plan are to promote the growth and
profitability of the Company by enabling it to attract and
retain the best available personnel for positions of
substantial responsibility, and to provide directors and key
Employees with an opportunity for investment in the
Company's Common Stock and give them an additional incentive
to increase their efforts on behalf of the Company and its
Subsidiaries.
3. EFFECTIVE DATE AND TERMINATION
The effective date of the Plan is May 5, 1992, the date on
which the Plan was approved by the shareholders of the
Company. No Award may be granted under the Plan after
May 4, 2002, the date 10 years after the effective date.
4. ADMINISTRATION
(A) The Plan shall be administered by the Compensation
Committee, which, in its discretion, may delegate such
of its administrative functions as it deems appropriate
to a Stock Option Committee, consisting of at least
three Employees of the Company appointed by the
Compensation Committee, provided, however, that, except
for Options granted pursuant to Section 16, the
selection of Employees to receive a Grant or Award and
the timing, pricing and amount of any Grant or Award to
an Employee shall be determined only by decision of the
Compensation Committee. References herein to the
Compensation Committee shall include the Stock Option
Committee to the extent of delegation to it of
administrative functions by the Compensation Committee.
The Stock Option Committee shall make recommendations
to the Compensation Committee concerning the grant of
Options and Restricted Stock.
(B) Membership on the Compensation Committee shall not
affect or impair such member's rights under any Award
granted to him more than one year prior to his becoming
a member of the Committee or granted to him under
Section 16.
(C) In any matters respecting action under this Plan,
the Compensation and Stock Option Committees shall keep
minutes of their meetings; a majority of each Committee
shall constitute a quorum thereof and the acts of a
majority of the members present at any meeting at which
quorum is present, or acts approved in writing by the
entire Committee, shall be the acts of the Committee.
5. ELIGIBILITY
Subject to the provisions of the Plan, the Compensation
Committee shall from time to time determine and designate
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those key Employees of the Company or its Subsidiaries to
whom Awards are to be made and the number of shares of
Common Stock to be optioned and/or the size of a Restricted
Stock Grant to each such individual. In determining the
eligibility of an Employee to receive an Award and the
number and type of Options to be awarded or shares to be
granted to such Employee, the Compensation Committee shall
consider the position and responsibilities of the Employee,
the nature and value to the Company or a Subsidiary of his
services and accomplishments, his present and potential
contribution to the success of the Company or its
Subsidiaries and such other factors as the Committee may
deem relevant. More than one Award (whether of the same or
different types) may be granted to an individual, but:
(A) An Incentive Option granted to an individual who,
at the time of such grant "owns" (as defined in
Sections 422 and 424 of the Code) stock possessing more
than 10% of the total combined voting power of all
classes of stock of the Company or a Subsidiary shall
have an Option Price of at least 110% of Fair Market
Value and a term of not more than 5 years, or such
lesser price (but not less than Fair Market Value) or
longer term (but not more than 10 years) as may at the
time of such grant be permitted by the Code, or the
regulations thereunder, for an Incentive Option granted
to such an individual.
(B) The aggregate Fair Market Value (determined as of
the date of grant) of the stock with respect to which
Incentive Options are exercisable for the first time by
an Employee during any calendar year under the Plan and
all other stock option plans of the Company and any
Subsidiaries shall not exceed $100,000, or such other
sum as may from time to time be permitted under
Section 422 of the Code.
6. NUMBER OF SHARES SUBJECT TO AWARDS
Subject to possible adjustment under Section 12 of the Plan,
500,000 shares of Common Stock may be issued pursuant to
Awards under the Plan, but no more than 150,000 shares of
Common Stock may be granted as Restricted Stock. Shares
issued pursuant to Awards under the Plan may be authorized
and unissued shares or may be treasury shares. If an Option
granted under the Plan upon expiration or cancellation
thereof remains unexercised as to any shares, they may be
the subject of further Award; however, to the extent that
Stock Appreciation Rights granted in conjunction with an
Option are exercised, such Option shall be deemed to have
been exercised and the shares of Common Stock which
otherwise would have been issued upon the exercise of such
Option shall not be subject to further Award. The number of
shares available for Award under the Plan shall be reduced
to the extent of any shares issued in fulfillment of Special
Rights upon exercise of an Option, and to the extent, if
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any, that shares issued in fulfillment of Special rights
upon exercise of Stock Appreciation Rights, when added to
the number of shares covered by the Option with respect to
which the Stock Appreciation Rights were exercised. Shares
which are forfeited to the Company by reason of termination
of employment as provided in Section 11, shares received by
the Company in payment for exercise of an Option as
permitted by Section 9(C)(4)(a) and shares withheld by the
Company to satisfy tax withholding requirements as provided
in Section 15 may not be the subject of further Award.
The Committee cannot approve cancellation of an Option
granted under the Plan prior to its expiration and the
substitution therefor of a new Option at a lower Option
price.
7. TYPES OF OPTIONS AND RELATED RIGHTS
(A) The Compensation Committee shall have full and
complete authority in its discretion, subject to
Section 16 and the other provisions of the Plan, to
grant Options containing such terms and conditions as
shall be requisite, in its judgment, to constitute
either Incentive Options or Non-Statutory Options.
(B) The Compensation Committee may grant Stock
Appreciation Rights (as provided by Section 8 hereof)
in connection with an Option, except for Options
granted pursuant to Section 16, at the time of grant of
the Option or, in the case of a Non-Statutory Option,
at a later date.
(C) If Stock Appreciation Rights are not specifically
granted by the Compensation Committee, the grant of an
Option shall carry with it conditional Stock
Appreciation Rights which shall be exercisable by the
Optionee only during the 30 days after termination of a
tender or exchange offer which results in a Change of
Control.
(D) All Option grants shall also be deemed to include
associated Special Rights.
8. STOCK APPRECIATION RIGHTS AND SPECIAL RIGHTS
(A) Stock Appreciation Rights shall entitle the holder
of an Option in connection with which such Stock
Appreciation Rights are granted, upon exercise of the
Stock Appreciation Rights, to surrender the Option, or
any applicable portion thereof, to the extent
unexercised, and to receive a number of shares of
Common Stock, cash, or cash and shares of Common Stock,
determined pursuant to subparagraph (C)(2) and
paragraph (D) of this Section 8.
<PAGE>
<PAGE>
(B) Special Rights shall entitle the holder of an
Option to the additional compensation described below.
If there has been outstanding, within 30 days prior to
the date on which an Option or related Stock
Appreciation Right is exercised, a tender or exchange
offer which resulted in a Change of Control, then upon
exercise of such Option, without any payment by the
holder thereof other than the Option Price, or upon
exercise of such Stock Appreciation Rights, the
Optionee's Special Rights shall also be deemed to have
been exercised and shall entitle him, in addition to
the shares to which he is entitled upon such exercise,
to receive as additional compensation such additional
number of shares (subject to the limitations of
Section 6) as shall be equal in aggregate Fair Market
Value to the product of multiplying the number of
shares in respect of which the Option or Stock
Appreciation Rights shall have been exercised times the
amount, if any, by which the highest price paid per
share pursuant to such tender or exchange offer
exceeded the Fair Market Value per share on the date of
exercise.
(C) Stock Appreciation Rights shall be subject to the
following terms and conditions and to such other terms
and conditions not inconsistent with the Plan as shall
from time to time be approved by the Compensation
Committee:
(1) Stock Appreciation Rights shall be exercisable
only by such person or persons, at such time or times,
and to the extent, that the Option to which they relate
shall be exercisable, and only when the Fair Market Value
per share exceeds the Option Price per share.
(2) Upon exercise of Stock Appreciation Rights, the
holder thereof shall be entitled to receive such number
of shares, and cash for any fractional share, as shall be
equal in aggregate Fair Market Value to the amount by
which the Fair Market Value per share on the date
of such exercise shall exceed the Option Price per
share of the related Option, multiplied by the
number of shares in respect of which the Stock
Appreciation Rights shall have been exercised.
(3) To the extent that Stock Appreciation Rights are
exercised, the Option in connection with which such
Stock Appreciation Rights were granted shall be deemed
to have been exercised.
(D) The Company may settle all or any part of its
obligation arising out of an exercise of Stock
Appreciation Rights and Special Rights by the payment
of cash in an amount equal to the aggregate Fair Market
Value of shares (including a fraction of a share)
<PAGE>
<PAGE>
determined on the date of exercise that it would
otherwise be obligated to deliver under paragraph (B)
or subparagraph (C)(2), or both, but for the cash
payment. Such cash settlement may be made either
(i) in the sole discretion of the Committee or
(ii) pursuant to an election by the Optionee approved
by the Committee.
9. TERMS OF OPTIONS
The grant of each Option shall be confirmed by a Stock
Option Agreement (in the form prescribed by the Compensation
Committee) which shall be executed by the Company and the
Optionee as promptly as practicable after such grant. The
Stock Option Agreement shall expressly state whether the
Option is an Incentive Option or a Non-Statutory Option and
shall incorporate by reference the provisions of this Plan.
(A) The Option Price in all cases shall be 100% of the
Fair Market Value of the Company's Common Stock on the
date the Option is granted, subject to adjustment as
provided in Section 12, and except as specified in
Section 5(A).
(B) The term of each Option granted under this Plan,
except for Options granted pursuant to Section 16,
shall be for such period as the Compensation Committee
shall determine, but not more than 10 years from the
date of grant thereof (or such lesser period is
specified in Section 5(A)), subject to earlier
termination of the Option as provided in Subsection D
of this Section 9.
(C) Each Option granted under this Plan may be
exercised during its term for such number of shares as
shall be prescribed by the provisions of the Stock
Option Agreement evidencing such Option, provided that:
(1) An Option granted under this Plan may not be exercised
to any extent until at least six months after the date
of the grant of the Option, provided that an Option
may be exercised in full within 30 days following
termination of a tender or exchange which results
in a Change of Control, subject to the provisions
of Sections 5(B) and 10(A).
(2) An Option granted pursuant to Section 16 may during
its term be exercised by the Optionee during the
continuance of the Optionee's service as a director
of the Company and for three months after termination of
service as a director. If an Optionee holding an
Option granted pursuant to Section 16 dies while a
<PAGE>
<PAGE>
Director or within three months after cessation of
service as a Director, any outstanding Options may
be exercised by the Successor of the Optionee at
any time prior to the expiration date of such
Options or within one year of the date of the
Optionee's death, whichever is the shorter period.
Any other Option may during its term be exercised
by the Optionee (a) during the continuance of the
Optionee's employment by the Company or a
Subsidiary or (b) after cessation of the
Optionee's employment by the Company or a
Subsidiary to the extent provided in Subsection D
of this Article 9.
(3) An Option may be exercised by the Optionee or
a Successor only by written notice to the
Company (in the form prescribed by the
Compensation Committee) specifying the number of
shares to be purchased, together with payment or
payment arrangements in accordance with paragraph
(4) below.
(4) The aggregate Option Price of the shares as to
which an Option is exercised shall be, in the
discretion of the Compensation Committee (a) paid
in full by any one or any combination of the
following: cash, personal check, or delivery of
Common Stock certificates endorsed in blank or accompanied
by executed stock powers with signatures guaranteed
by a national bank or trust company or a member of
a national securities exchange evidencing shares
of Common Stock having an aggregate Fair Market
Value on the date of exercise equal to or greater
than the Option Price, (b) paid on a deferred
basis upon such terms and conditions, including
provisions for securing payment as the
Compensation Committee, in its discretion, shall
specify, or (c) deemed to be paid in full provided
the notice of exercise of the Option is
accompanied by a copy of irrevocable instructions
to a broker (in a form satisfactory to the Stock
Option Committee) to promptly deliver to the
Company the amount of sale or loan proceeds
sufficient to cover the Option Price. Payment of
the Option Price with certificates evidencing
shares of Common Stock as provided above shall not
increase the number of shares available for Award
under the Plan.
(D) If an Optionee ceases to be employed by the
Company or any Subsidiary the following rules shall
apply to any outstanding Options then held by the
Optionee or his or her Successor:
<PAGE>
<PAGE>
(1) If the employment of an Optionee is terminated for
Cause, his rights under any then outstanding Options
shall terminate at the time of such termination of
employment.
(2) If the employment of an Optionee is terminated
by the Company or a Subsidiary because, in
the opinion of the Compensation Committee, the
Optionee has become physically incapacitated, any
outstanding Options may be exercised at any time
prior to the expiration date of such Options or
within three months after the date of such
disability termination, whichever is the shorter
period, whether or not such Options were exercisable on
the date of such termination under the provisions
of the applicable Stock Option Agreements relating
thereto. The question whether the termination of
employment shall be considered a disability
termination caused by physical incapacity shall be
determined in each case by the Compensation
Committee and such determination shall be final.
(3) If an Optionee dies while an Employee or within
three months after termination of employment for
disability, any outstanding Options may be exercised
by the Successor of the Optionee at any time prior to the
expiration date of such Options or within one year
of the date of the Optionee's death, whichever is
the shorter period, whether or not such Options
were exercisable on the date of the Optionee's
death under the provisions of the applicable Stock
Option Agreements relating thereto. If an
Optionee dies within three months after his
Retirement or other termination of his employment
without Cause, any outstanding Options may be
exercised by the Successor of the Optionee at any
time prior to the expiration date of such options
or within one year of the Date of the Optionee's
death, whichever is the shorter period, provided
that such Options were exercisable on the date of
the Optionee's termination of employment under the
provisions of the applicable Stock Option
Agreement relating thereto or the Compensation
Committee specifically waives any restrictions
relating to exercisability contained therein.
(4) If the employment of an Optionee is terminated without
Cause for reasons other than those described in
paragraphs (2) and (3), whether by reason of
Retirement of the Optionee or by reason of any other
termination without Cause, any outstanding Options
may be exercised by the Optionee at any time prior to the
expiration date of such Options or within three
months after the date of such termination,
whichever is the shorter period, provided such
<PAGE>
<PAGE>
Options were exercisable on the date of such
termination under the provisions of the applicable
Stock Option Agreement relating thereto or the
Compensation Committee specifically waives any
restrictions relating to exercisability contained
therein.
(5) Anything herein to the contrary notwithstanding,
unless written notification to the contrary is given
to the Optionee or Successor by the Compensation
Committee within 30 days after the Optionee's
death, Retirement, or other termination of
employment without Cause, paragraphs (2) through
(4) above shall be applied as if all references in
such paragraphs to three months were references to
three years.
(E) Options granted pursuant to the Plan shall contain
such other terms, provisions and conditions not
inconsistent herewith as shall be determined by the
Compensation Committee.
10. ISSUANCE AND DELIVERY OF SHARES
(A) As soon as practicable after receipt by the
Company of notice of exercise and of payment in full of
the Option Price of shares with respect to which an
Option has been exercised, or upon exercise of Stock
Appreciation Rights or Special Rights, a certificate or
certificates representing the appropriate number of
shares registered in the name or names of the Optionee
or his Successor shall be delivered to the Optionee or
his Successor.
(B) An Optionee shall have no rights as a stockholder
with respect to any shares for which he is granted an
option until the date of issuance to him of a stock
certificate for such shares and no adjustment shall be
made for any dividends or, except as provided in
Section 12, other rights the record date for which is
prior to the date such stock certificate is issued.
(C) If at any time the Board of Directors shall
determine, in its discretion, that the listing,
registration or qualification of any of the shares
subject to Options under the Plan upon any securities
exchange or under any state or federal law, or the
consent or approval of any governmental regulatory
body, is necessary or desirable as a condition of or in
connection with the purchase or issue of shares
thereunder, no outstanding Options may be exercised in
whole or in part unless such listing, registration,
qualification, consent or approval shall have been
effected or obtained free of any conditions not
acceptable to the Board of Directors. The Board of
Directors may require any person exercising an Option
to make such representations and furnish such
information as it may consider appropriate in
<PAGE>
<PAGE>
connection with the issuance or delivery of the shares
in compliance with applicable law and shall have the
authority to cause the Company at its expense to take
any action related to the Plan which may be required in
connection with such listing, registration,
qualification, consent or approval.
11. RESTRICTED STOCK GRANTS
The Compensation Committee shall have the authority to make
Grants to Employees upon such terms and conditions as it
shall establish, subject to the following provisions:
(A) Except as expressly provided below, Restricted
Stock shall not be sold, transferred, assigned, pledged
or otherwise disposed of by the Grantee during the
Restricted Period established by the Compensation
Committee. The Compensation Committee may establish
different Restricted Periods applicable to different
shares of Restricted Stock evidenced by a single Grant
as it deems appropriate. No Restricted Period shall be
less than one year or more than ten years from the date
of Grant.
(B) Restricted Stock shall be issued as of the date of
the Grant and the certificate evidencing shares shall
be delivered by the Company to the Grantee within a
reasonable period of time after it ceases to be
Restricted Stock upon expiration of the applicable
Restricted Period. The Grantee shall be entitled to
vote and to receive cash dividends on his shares of
Restricted Stock.
(C) In the event of termination of employment of a
Grantee, except termination by reason of death or
disability, and except as the Compensation Committee
may otherwise determine in the case of termination
subsequent to his 55th birthday pursuant to an early
separation plan of the Company, his shares of
Restricted Stock and all rights therein shall be
forfeited to the Company.
(D) In the event of termination of employment of a
Grantee by reason of death or disability, the Grantee
or his Successor shall be entitled to receive a
certificate for a number of shares of Common Stock
equal to that portion of his Restricted Stock remaining
from any Grant determined by multiplying the total
number of shares of Restricted Stock remaining from
such Grant by a fraction, the numerator of which shall
be the number of days of employment from the date of
the Grant to the date of termination, and the
denominator of which shall be the number of days from
the date of the Grant to the date of expiration of the
last to expire of the Restricted Periods applicable to
<PAGE>
<PAGE>
that Grant. All rights of the Grantee in the balance
of the shares of Restricted Stock remaining from such
grant shall be forfeited to the Company.
(E) The effect of approved leaves of absence on the
running of applicable Restricted Periods shall be
determined by the Compensation Committee, provided,
however, that no Restricted Period shall expire during
an approved leave of absence unless expressly so
provided by the Committee.
(F) If a tender or exchange offer results in a Change
of Control, any Restricted Period shall immediately
expire for all Restricted Stock.
12. ADJUSTMENTS
In the event that a dividend shall be declared upon the
Common Stock payable in shares (other than treasury shares)
of Common Stock, the number of shares of Common Stock then
subject to any Award outstanding under the Plan and the
number of shares available for Award pursuant to the Plan
but not yet subject to Award shall be adjusted by adding to
each such share the number of shares which would be
distributable in respect thereof if such shares had been
outstanding on the date fixed for determining the
stockholders of the Company entitled to receive such stock
dividend. In the event that the outstanding shares of
Common Stock shall be changed into or exchanged for a
different number or kind of shares of stock or other
securities of the Company or of another corporation, whether
through reorganization, recapitalization, stock split-up,
combination of shares, merger or consolidation, then there
shall be substituted for each share of Common Stock subject
to any such Award and for each share of Common Stock
available for Award pursuant to the Plan but not yet subject
to Award the number and kind of shares of stock or other
securities into which each outstanding share of Common Stock
shall have been so changed or for which each such share
shall have been exchanged. In the event there shall be any
change, other than as specified above in this Section 12, in
the number or kind of outstanding shares of Common Stock or
of any stock or other securities into which such Common
Stock shall have been changed or for which it shall have
been exchanged, then if the Board of Directors shall in its
sole discretion determine that such change equitably
requires an adjustment in the number or kinds of shares
theretofore available for Award pursuant to the Plan but not
yet subject to Award and of the shares then subject to any
Award then outstanding under the Plan, such adjustment shall
be made by the Board of Directors and shall be effective and
binding for all purposes of the Plan and of each Award
outstanding thereunder. In the case of any such
substitution or adjustment as provided for in this
Section 12, the Option Price set forth in each outstanding
Option for each share covered thereby prior to such
<PAGE>
<PAGE>
substitution or adjustment will be the Option Price for all
shares of stock or other securities which shall have been
substituted for such share or to which such share shall have
been adjusted pursuant to this Section 12. Upon any
adjustment made pursuant to this Section 12 the Company
will, upon request, deliver to the Optionee or his Successor
a certificate of its Secretary setting forth the Option
Price thereafter in effect and the number and kind of shares
or other securities thereafter purchasable on the exercise
of such Option.
13. INTERPRETATION, AMENDMENTS AND TERMINATION
(A) The Compensation Committee may make such rules and
regulations and establish such procedures for the
administration of the Plan as it deems appropriate. In
the event of any dispute or disagreement as to the
interpretation of this Plan or of any rule, regulation
or procedure, or as to any question, right or
obligation arising from or related to the Plan, the
decision of the Compensation Committee shall be final
and binding upon all persons.
(B) The Board of Directors may amend this Plan as it
shall deem advisable, except that the Board of
Directors may not, without further approval of the
stockholders of the Company (a) materially increase the
benefits accruing to Insiders under the Plan,
(b) materially increase the total number of shares for
which Awards may be made to Insiders under the Plan,
either in the aggregate or to any individual Insider,
(c) materially change the class of eligible Insiders,
except to comport with changes in the Code, ERISA or
rules or regulations thereunder, or (d) materially
change the provisions of Section 16 regarding automatic
director Options. The provisions of Section 16 may not
be amended more than once in any six month period even
with approval of the stockholders except to comport
with changes in the Code, ERISA or rules or regulations
thereunder.
(C) The Board of Directors may, in its discretion,
terminate this Plan at any time.
(D) Amendment or termination of the Plan shall not
without their consent adversely affect the rights of
Optionees, Grantees or their Successors under any
outstanding Award.
14. NO EMPLOYMENT RIGHTS
The Plan and any Award granted under the Plan shall not
confer upon any Optionee or Grantee any right with respect
<PAGE>
<PAGE>
to continuance of employment by the Company or a Subsidiary,
nor shall interfere in any way with the right of the Company
or a Subsidiary by which an Optionee or Grantee is employed
to terminate his employment at any time.
15. WITHHOLDING TAXES
The Company unilaterally or by arrangement with the Optionee
or Grantee shall make appropriate provision for the
satisfaction of withholding taxes in the case of any Award,
Grant, exercise or other event which gives rise to a
withholding requirement. An Optionee, Grantee or other
person receiving shares upon exercise of a Non-Statutory
Option or expiration of the Restricted Period on shares of
Restricted Stock shall be required to pay the Company or any
Subsidiary in cash the amount of any taxes which the Company
or Subsidiary is required to withhold by reason of such
exercise or expiration. Notwithstanding the preceding
sentence, in the case of Options or Restricted Stock, other
than Options granted pursuant to Section 16, the
Compensation Committee in its discretion, and subject to
such rules and limitations as it shall adopt, may permit an
Optionee or Grantee to elect to have shares of Common Stock
which are issuable, transferable or deliverable to him upon
such exercise or expiration withheld to satisfy in whole or
part the minimum federal, state and local withholding tax
requirements with respect to such exercise or expiration.
The portion of any withholding tax represented by a
fractional share must be paid in cash.
16. DIRECTOR OPTIONS
(A) Each director of the Company who is not an
employee of the Company or any subsidiary shall, on the
first business day of June which first occurs following
the director's election at the annual meeting of
stockholders, commencing with June 1, 1997, and on the
first business day of each June thereafter during such
director's term, automatically be granted a
Non-Statutory Option to purchase 3,000 shares of Common
Stock. A director's Option granted hereunder shall not
be exercisable until six months after the date of
grant. Thereafter such an Option shall be exercisable
at any time within 10 years after the date of grant
provided it remains exercisable pursuant to the rules
of Section 9(C)(2).
(B) Automatic director Option grants shall only be
made if, as of each date of grant, the director (i) is
not otherwise an employee of the Company or any
subsidiary, (ii) has not been an employee of the
Company or any subsidiary for any part of the preceding
fiscal year, and (iii) has served on the Board of
Directors continuously since the commencement of his
term.
<PAGE>
<PAGE>
(C) Options granted automatically to directors
pursuant to this Section 16 shall automatically include
conditional Stock Appreciation Rights and Special
Rights, as described in Section 7(C) and in
Section 7(D).
(D) In the event that the number of shares of Common
Stock available for grant under the Plan is
insufficient to make all automatic grants required to
be made on any date pursuant to this Section 16, an
Option shall be granted to each non-employee director
entitled to a grant on such date for that number of
shares equal to the number of shares of Common Stock
then available for grant under the Plan divided by the
number of directors eligible on such date to receive
such grants.
(E) Except as provided in this Section 16,
non-employee director Options shall be subject to the
terms and conditions of Section 9 for Non-Statutory
Options.
17. NONTRANSFERABILITY OF DERIVATIVE SECURITIES
Each Derivative Security awarded under the Plan shall be
nontransferable by the Optionee except by will or the laws
of descent and distribution, or pursuant to a valid
beneficiary designation, and except that the Compensation
Committee may at the time of grant, or any time thereafter,
authorize the transfer in whole or part of Non-Statutory
Options held by an officer of the Company to one or more of
his spouse and/or children and/or grandchildren. Each
Option granted under the Plan shall be exercisable during
the Optionee's lifetime only:
(A) by the Optionee or his or her guardian or other
legal representative;
(B) by such other means as the Compensation Committee
may approve from time to time that is not inconsistent
with or contrary to Section 16(b) of the Securities
Exchange Act of 1934 or Rule 16b-3 thereunder.
Any Stock Appreciation Right granted in conjunction with an
Incentive Option is transferable only when such Option is
transferable and under the same conditions.
18. NOTICES
All notices under the Plan shall be in writing, and if to
the Company, shall be delivered to the Secretary of the
Company or mailed to its principal office, 1000 University
Avenue, Rochester, New York 14692-2970, addressed to the
attention of the Secretary; and if to the Optionee or
Grantee at the address appearing in the payroll records of
the Company or a Subsidiary. Such addresses may be changed
at any time by written notice to the other party.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FORM 10-Q FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000743239
<NAME> GLEASON CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 5394
<SECURITIES> 0
<RECEIVABLES> 67802
<ALLOWANCES> 0
<INVENTORY> 30035
<CURRENT-ASSETS> 113994
<PP&E> 167568
<DEPRECIATION> 109215
<TOTAL-ASSETS> 189865
<CURRENT-LIABILITIES> 55021
<BONDS> 0
0
0
<COMMON> 5797
<OTHER-SE> 81673
<TOTAL-LIABILITY-AND-EQUITY> 189865
<SALES> 60335
<TOTAL-REVENUES> 60335
<CGS> 41016
<TOTAL-COSTS> 41016
<OTHER-EXPENSES> 11297
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1)
<INCOME-PRETAX> 8023
<INCOME-TAX> 2829
<INCOME-CONTINUING> 5194
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5194
<EPS-PRIMARY> 1.01
<EPS-DILUTED> 1.01
</TABLE>
