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 September 30, 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 September 30, 1997 was
9,964,912 shares.
<PAGE>
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
(Dollars in thousands)
SEPTEMBER 30 DECEMBER 31
Assets 1997 1996
<S> <C> <C>
Current assets
Cash and equivalents $ 12,109 $ 7,199
Trade accounts receivable 90,888 65,583
Inventories 75,350 27,986
Deferred tax asset 6,894 6,894
Other current assets 6,690 4,038
Total current assets 191,931 111,700
Property, plant and equipment, at cost 235,667 170,084
Less accumulated depreciation 113,822 108,693
121,845 61,391
Deferred tax asset 11,713 10,013
Goodwill 17,804 --
Other assets 10,274 7,570
Total assets $ 353,567 $ 190,674
Liabilities and Stockholders' Equity
Current liabilities
Short-term borrowings $ 7,337 $ 329
Current portion of long-term debt 1,513 6
Trade accounts payable 29,392 16,972
Income taxes 11,242 10,224
Other current liabilities 69,845 30,335
Total current liabilities 119,329 57,866
Long-term debt 68,292 4,506
Pension plans and other retiree benefits 59,998 38,220
Other liabilities 10,614 5,218
Total liabilities 258,233 105,810
Stockholders' equity
Common stock 11,594 11,594
Additional paid-in capital 5,438 5,731
Retained earnings 100,091 86,187
Cumulative foreign currency translation
adjustment (4,555) (2,149)
Minimum pension liability adjustment (461) (461)
112,107 100,902
Less treasury stock, at cost 16,773 16,038
Total stockholders' equity 95,334 84,864
Total liabilities and stockholders' equity $ 353,567 $ 190,674
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
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<PAGE>
<TABLE>
GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
(Dollars in thousands, except
per share amounts)
THREE MONTHS ENDED
SEPTEMBER 30
1997 1996
<S> <C> <C>
Net sales $ 89,713 $ 53,467
Costs and expenses
Cost of products sold 63,084 35,722
Selling, general and
administrative expenses 16,159 9,970
Research and development expenses 1,994 1,832
Interest expense--net 403 133
Other (income) expense--net 146 (234)
Income before income taxes 7,927 6,044
Provision for income taxes 2,932 2,279
Net income $ 4,995 $ 3,765
Primary earnings per common share $ .48 $ .35
Fully diluted earnings per common share $ .48 $ .35
Weighted average number of common shares
outstanding:
Primary 10,388,997 10,723,136
Fully diluted 10,398,481 10,745,104
Cash dividends declared per common share $ .0625 $ .0625
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<PAGE>
<TABLE>
GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
(Dollars in thousands, except
per share amounts)
NINE MONTHS ENDED
SEPTEMBER 30
1997 1996
<S> <C> <C>
Net sales $ 212,432 $ 178,134
Costs and expenses
Cost of products sold 146,783 120,581
Selling, general and
administrative expenses 35,781 31,546
Research and development expenses 5,628 5,618
Interest expense--net 282 660
Other (income)--net (679) (851)
Income before income taxes 24,637 20,580
Provision for income taxes 8,871 7,477
Net income $ 15,766 $ 13,103
Primary earnings per common share $ 1.53 $ 1.22
Fully diluted earnings per common share $ 1.52 $ 1.22
Weighted average number of common shares
outstanding:
Primary 10,326,069 10,731,260
Fully diluted 10,394,860 10,746,766
Cash dividends declared per common share $ .1875 $ .1875
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<PAGE>
<TABLE>
GLEASON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
(Dollars in thousands)
NINE MONTHS ENDED
SEPTEMBER 30
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 15,766 $ 13,103
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 9,527 8,296
(Gain) on disposals of property, plant
and equipment (432) (2)
Provision for deferred income taxes 312 1,150
Changes in operating assets and liabilities:
Decrease in accounts receivable 5,417 13,346
(Increase) in inventories (4,164) (5,459)
(Increase) decrease in other current assets (247) 533
Increase (decrease) in trade accounts payable 1,400 (1,883)
Increase in all other current operating
liabilities 5,746 2,323
Other, net (679) (824)
Net cash provided by operating activities 32,646 30,583
Cash flows from investing activities:
Capital expenditures (8,196) (5,123)
Investment in subsidiary, net of cash acquired (29,757) --
Proceeds from asset disposals 1,572 41
Proceeds from collection of notes receivable 54 54
Net cash (used in) investing activities (36,327) (5,028)
Cash flows from financing activities:
Net proceeds of short-term borrowings 695 489
Net borrowings (repayments) under revolving
and term loan credit agreements 62,513 (23,746)
Proceeds from long-term debt 217 106
Repayment of long-term debt (51,503) (130)
Purchase of treasury stock (1,360) (450)
Net stock issues 332 --
Dividends paid (1,862) (1,945)
Net cash provided by (used in) financing
activities 9,032 (25,676)
Effect of exchange rate changes on cash
and equivalents (441) (75)
Increase (decrease) in cash and equivalents 4,910 (196)
Cash and equivalents, beginning 7,199 9,926
Cash and equivalents, ending $ 12,109 $ 9,730
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 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 and nine-month periods ended September 30, 1997 and 1996,
(b) the financial position at September 30, 1997 and December 31,
1996, and (c) the cash flows for the nine-month periods ended
September 30, 1997 and 1996, of Gleason Corporation and
subsidiaries.
2. The results of operations for the three and nine-month
periods ended September 30, 1997 are not necessarily indicative
of the results that may be achieved for the full year.
3. All significant intercompany transactions have been
eliminated in the consolidation.
4. On July 31, 1997, the Company purchased all of the general
and limited partnership interests of Hermann Pfauter GmbH & Co.,
a manufacturer of cylindrical gear production equipment, and
Pfauter-Maag Cutting Tools L.P., a cutting tool manufacturer
(collectively referred to as "Pfauter"). The acquisition of
Pfauter positions the Company to be a world leader in gear
production equipment and related technology by combining
Pfauter's extensive line of cylindrical gear production machinery
and cutting tools with the Company's leading position in bevel
gear production equipment. In addition, the Pfauter acquisition
expands the Company's customer base to include a broad range of
non-automotive customers, from small-gear machine users such as
power tool and precision instrument manufacturers to producers of
large gears utilized in off-highway equipment and heavy
industrial applications. Pfauter has major operations in Germany,
Italy and the United States.
The acquisition was completed for a total consideration of
$91.8 million, including $34.8 million in cash and the
assumption of $57.0 million in bank debt. The acquisition
was financed through a new multi-currency credit agreement
dated July 31, 1997 providing for term loans, revolving
credit and standby letters of credit totaling up to $170
million.
The Company accounted for the acquisition under the purchase
method. The aggregate cost of the acquisition, including
professional fees and other related costs totaling $2.5
million, was allocated to assets purchased and liabilities
assumed based upon the fair values at the date of
acquisition. The excess of the purchase price over the fair
values of the net assets acquired was $17.6 million, which
has been recorded as goodwill, and is being amortized on a
straight-line basis over 30 years. The aggregate cost of
the acquisition was allocated as follows:
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<PAGE>
(In thousands)
Current assets, excluding cash $ 77,966
Property, plant and equipment 63,595
Other assets 3,100
Goodwill 17,630
Current liabilities, including
short-term borrowings (75,776)
Long-term debt (29,384)
Pension and other retiree benefits (21,218)
Other liabilities (5,034)
Total acquisition cost, net of cash
acquired $ 30,879
In the allocation of the acquisition costs, current
liabilities and other liabilities include $7.0 million and
$2.0 million, respectively, of costs associated with the
restructuring of Pfauter's operations. These costs represent
the Company's estimate of the expenses associated with the
consolidation of certain sales and manufacturing operations
and elimination of redundant activities. The Company
expects these restructuring activities will take
approximately two years to complete. Any adjustments to
these estimated costs will adjust the goodwill recorded in
the acquisition.
Results of operations of Pfauter for the two month period
following the acquisition date are included in the
Consolidated Statements of Operations for the three and nine-
month periods ending September 30, 1997. The following
unaudited pro forma information has been prepared assuming
that the Pfauter acquisition had taken place at the
beginning of 1996:
<TABLE>
<CAPTION>
Pro Forma
Nine Months Ended
September 30
(In thousands, except per share amounts) 1997 1996
(Unaudited)
<S> <C> <C>
Net sales $298,044 $295,594
Net income 15,113 11,180
Per common share 1.46 1.04
</TABLE>
The pro forma financial information is not necessarily
indicative of the results that would have been obtained if
the transaction had been effected on the assumed date or the
results that may be achieved by the Company in the future.
The pro forma net income for the periods shown does not
include any adjustments for cost savings expected to be
realized from the restructuring plans or synergies of the
combined business.
5. The components of inventories were as follows:
(In thousands) 9/30/97 12/31/96
Raw materials and
purchased parts $ 13,342 $ 5,269
Work in process 49,639 18,063
Finished goods 12,369 4,654
$ 75,350 $ 27,986
<PAGE>
<PAGE>
6. Net cash payments for income taxes were $6,664,000 and
$2,687,000 for the nine months ended September 30, 1997 and 1996,
respectively. Interest payments were $444,000 and $994,000 for
the nine months ended September 30, 1997 and 1996, respectively.
7. On August 28, 1997 the Company's Board of Directors declared
a two-for-one (2-for-1) stock split on the Company's common
stock, including shares held in treasury, effected in the form of
a 100% common stock distribution payable on September 26, 1997 to
holders of record on September 12, 1997. The distribution
increased the number of shares issued from 5,797,070 to
11,594,140, which included an increase in treasury stock from
814,614 to 1,629,228. As a result of the stock split, $5,797,070
was transferred from additional paid-in capital to common stock,
representing the par value of the additional shares issued.
Common stock and additional paid-in capital as of December 31,
1996 have been restated to reflect the stock split. In addition,
all share and per share data have been restated to reflect the
stock split.
8. 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 $.02 and $.01 for the three-
month periods ended September 30, 1997 and September 30, 1996,
respectively, and an increase in primary earnings per share of
$.06 and $.04 for the nine-month periods ended September 30, 1997
and September 30, 1996, respectively. Fully diluted earnings per
share would have increased by $.01 per share for the nine months
ended September 30, 1997. There would have been no impact on
fully diluted earnings per share for the other periods presented.
9. Certain reclassifications have been made to the prior
period's financial statements to conform such financial
statements to the presentation of the 1997 financial statements.
10. In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related
Information" (FAS No. 131). This statement establishes standards
for the way that public business enterprises report information
about operating segments in annual financial statements and
requires that those enterprises report selected information about
operating segments in interim financial reports issued to
shareholders. It also establishes standards for related
disclosures about products and services, geographic areas, and
major customers. FAS No. 131 is effective for financial
statements for fiscal years beginning after December 15, 1997.
<PAGE>
<PAGE>
The adoption of FAS No. 131 will have no impact on the Company's
consolidated results of operations, financial position or cash
flows, but may impact the disclosure of segment information.
11. In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 130,
"Reporting on Comprehensive Income" (FAS No. 130). This
statement establishes standards for reporting and display of
comprehensive income and its components in a full set of general-
purpose financial statements. The purpose of reporting
comprehensive income is to report a measure of all changes in
equity of an enterprise that result from recognized transactions
and other economic events of the period other than transactions
with owners in their capacity as owners. FAS No. 130 is
effective for financial statements for fiscal years beginning
after December 15, 1997. The adoption of FAS No. 130 will have
no impact on the Company's consolidated results of operations,
financial position or cash flows, but may impact the financial
statement presentation.
<PAGE>
<PAGE>
GLEASON CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial Condition
The following are management's comments relating to significant
changes in the results of operations for the three and nine-month
periods ended September 30, 1997 and 1996 and in the Company's
financial condition during the nine months ended September 30,
1997.
Results of Operations
The Company had net income for the third quarter ended September
30, 1997 of $5.0 million, or $.48 per share, compared to $3.8
million, or $.35 per share, for the 1996 third quarter.
Operating income (earnings before interest and taxes) for the
third quarter was $8.3 million, an increase of 35% compared to
the 1996 third quarter. Third quarter results included two
months of activity from the Pfauter operations, which the Company
acquired on July 31, 1997. The Pfauter operating results and
related effects of the acquisition slightly lowered the Company's
net income for the quarter.
Net income for the nine months ended September 30, 1997 was $15.8
million, or $1.53 per share, compared to $13.1 million, or $1.22
per share, for the 1996 nine-month period. Operating income for
the 1997 nine-month period was $24.9 million, an increase of 17%
compared to the 1996 period.
New orders totaled $79.7 million for the third quarter compared
to $50.1 million in the 1996 third quarter. Order levels for the
quarter, excluding Pfauter, increased slightly to $50.7 million
compared to the 1996 quarter. Orders for the 1997 nine-month
period were $209.6 million compared to $184.6 million in 1996.
Order levels for the three and nine-month periods of 1997,
compared to the prior year periods, were negatively impacted by
foreign exchange translation effects of approximately $2.2
million and $8.0 million, respectively, primarily due to the
stronger U.S. dollar versus the German deutsche mark.
Order levels for machine products, excluding Pfauter, were 12%
higher in the 1997 third quarter compared to the 1996 third
quarter and, for the comparative nine-month periods, were
approximately equal. Excluding Pfauter, orders for cylindrical gear
production machines increased 4% and 43% in the 1997 three and nine-month
periods, respectively, versus the comparable periods in 1996.
Cylindrical gear production machine orders, excluding Pfauter, accounted
for 56% of total machine orders in the 1997 nine-month period versus 39% in
the comparable 1996 period. Incoming orders for the nine months
of 1997 were higher primarily due to increased orders for PHOENIX
(Registered Trademark) gear hobbing machines and Gleason-Hurth gear
honing machines. Order levels for bevel gear production machines
increased 26% in the third quarter of 1997 compared to 1996, but were
30% lower in 1997 than for the comparative nine-month period in 1996,
primarily due to lower order levels from U.S. customers. In the second
quarter of 1996, the Company received large orders totaling $24 million from
two U.S. vehicle and axle manufacturers. The Company expects that 1997
fourth quarter orders for bevel gear production machines will be
higher than in any other quarter of the current year, although orders for
bevel gear production machines are expected to be lower for the 1997
full year than the 1996 full year.
<PAGE>
<PAGE>
Orders for tooling products, including gear cutting tools and
workholding equipment, excluding Pfauter, were lower for both the
three and nine-month periods versus the comparable periods in
1996. Order levels for these products decreased principally due
to foreign currency translation effects and lower order volumes
for gear cutting tools from Europe and the Asia-Pacific region.
Consolidated backlog was $194.9 million at September 30, 1997
compared to $122.8 million at December 31, 1996 and $131.0
million at September 30, 1996. The Pfauter operations accounted
for $81.2 million of the September 30, 1997 backlog.
Net sales were $89.7 million and $212.4 million for the three and
nine-month periods ended September 30, 1997, compared to $53.5
million and $178.1 million in the comparable prior year periods.
Net sales, excluding Pfauter, were $67.1 million for the third
quarter, an increase of 25% compared to the 1996 third quarter.
Net sales for the three and nine-month periods of 1997 versus the
comparable periods in 1996 were negatively impacted by foreign
currency translation effects of approximately $2.2 million and
$5.0 million, respectively, due to the stronger U.S. dollar
versus the German deutsche mark.
Net sales of machine products, excluding Pfauter, increased 41%
and 12% for the three and nine-month periods ended September 30,
1997, respectively, compared to the comparable 1996 periods.
Bevel gear production machine sales increased 72% for the 1997
third quarter and 35% for the 1997 nine-month period over the
comparable 1996 periods, primarily due to higher shipments of
PHOENIX gear equipment to customers in the United States. Bevel
gear production machine sales in the 1997 three and nine-month
periods included shipments associated with the large orders
received in the second quarter of 1996. Cylindrical gear
production machine sales, excluding Pfauter, were 8% lower for
the 1997 nine-month period, but 15% higher for the 1997 third
quarter versus the comparable 1996 quarter. The decrease in sales
of cylindrical gear production machines in the 1997 nine-month
period was primarily due to lower shipments of Gleason-Hurth gear
shaving machines and foreign currency translation effects,
partially offset by higher shipments of PHOENIX gear hobbing
machines and cylindrical gear grinding machines. Net sales in
the 1996 nine-month period included a large program for Gleason-
Hurth gear shaving machines associated with an order received in
the 1995 third quarter.
Net sales of tooling products, excluding Pfauter, for the 1997
third quarter approximately equaled the 1996 third quarter level.
Tooling product shipments, excluding Pfauter, for the 1997 nine-
month period were approximately 5% lower than for the comparable
1996 period primarily due to the negative foreign currency
translation effect on sales of Gleason-Hurth tooling and lower
shipments of workholding equipment during the first half of 1997.
Other products sales, including spare parts, service and
software, excluding Pfauter, in the 1997 three and nine-month
periods were slightly higher than in the comparable 1996 periods.
<PAGE>
<PAGE>
Cost of products sold as a percentage of sales was 70.3% and
69.1% for the three and nine-month periods ended September 30,
1997, compared to 66.8% and 67.7% for comparable periods in 1996.
Margins can be significantly impacted by the mix of products
sold. For example, machines generally tend to carry higher cost
of sales percentages than tooling or other products. Margins
were lower for both the 1997 third quarter and nine-month period
because of the higher percentage of machine shipments in the
overall sales mix, lower margins on tooling sales and the effect
of Pfauter's lower margins. Tooling margins were lower due to a
less favorable product mix and increased price discounting in
certain markets.
Selling, general and administrative expenses for the 1997 third
quarter were 18.0 percent of sales, compared to 18.6 percent of
sales in the 1996 third quarter. For the nine months ending
September 30, 1997, these expenses were 16.8 percent of sales,
compared to 17.7 percent of sales for the comparable 1996 nine-month
period. The lower spending as a percentage of sales for both the 1997
third quarter and nine-month period was primarily attributable to lower
commissions paid to outside dealers, partially offset by higher
selling expenses as a percentage of sales for the Pfauter
operations. The reduction in commission expense was due to
decreased sales to South Korea and Brazil, where the Company is
represented by independent dealers.
Research and development expenses were $2.0 million and $5.6
million in the three and nine-month periods ending September 30,
1997, compared to $1.8 million and $5.6 million in the comparable
periods in 1996. Development spending in 1997 included new
product development for both bevel and cylindrical gear
production equipment and manufacturing technology initiatives for
the Company's tooling operations.
Other expense(net) for the 1997 third quarter was $0.1 million
compared to other income(net) of $0.2 million in the 1996 third
quarter. Included in the 1997 third quarter expense was $0.4
million of costs related to the relocation of the Company's sales
office in Stuttgart, Germany to the Pfauter offices in
Ludwigsburg, Germany. Other income(net) totaled $0.7 million in the
first nine months of 1997 compared to $0.9 million in the prior
year's nine-month period. The 1997 nine-month period included a
$0.4 million gain on the sale of property associated with one of
the Company's former Components Group businesses which had been
leased to the purchaser since the sale of that business in 1992.
Net interest expense totaled $0.4 million and $0.3 million for
the three and nine-month periods ended September 30, 1997,
respectively, compared to net interest expense of $0.1 million
and $0.7 million in the comparable 1996 periods. Net interest
expense was higher for the 1997 third quarter due to higher
outstanding debt associated with the acquisition of Pfauter. The
decrease in interest expense for the 1997 nine-month period was
due to lower average borrowings outstanding under the Company's
revolving credit facilities and higher balances in cash and
equivalents during the first half of 1997.
<PAGE>
<PAGE>
The Company's provision for income taxes as a percentage of
income before taxes for the three and nine-month periods ended
September 30, 1997 was 37.0% and 36.0%, respectively, compared to
37.7% and 36.3%, for the comparable 1996 periods. These percentages
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.
Liquidity and Capital Resources
Cash and equivalents increased $4.9 million in the nine months of
1997 to $12.1 million at September 30, 1997. Borrowings under
the Company's revolving credit facilities increased to $67.3
million at September 30, 1997 from $3.9 million at December 31,
1996. Borrowings under these facilities increased due to the
cash paid for the acquisition of Pfauter and the repayment of
most of Pfauter's outstanding bank debt. Available unused short
and long-term credit lines with banks, including revolving and
term loan credit facilities, totaled approximately $87.5 million
at September 30, 1997. Dividend payments to stockholders totaled
$1.9 million in the nine months ended September 30, 1997.
Operating activities provided cash of $32.6 million in the first
nine months of 1997 compared to $30.6 million in the comparable
1996 period. Operating cash flows were higher in the 1997 period
due to higher earnings before depreciation and amortization
expense. Cash provided from reductions in working capital during
the first nine months of 1997 was slightly lower than during the
comparable 1996 period as decreases in trade accounts receivable
were less because of substantially higher 1997 third quarter
sales. Future uses of cash for operating activities are expected to
include approximately $9.0 million which management plans to spend
over the next two years to rationalize Pfauter's operations.
Management estimates that this investment will enable the Company to
achieve subsequent annual cost savings of a similar magnitude.
Investing activities used $36.3 million of cash in the 1997 nine-
month period versus $5.0 million in the comparable prior year
period. Investing activities for 1997 included cash used of
$29.8 million, net of cash acquired of $6.4 million, for the
acquisition of Pfauter. Capital expenditures during the first
nine months of 1997 totaled $8.2 million, compared to $5.1
million in the comparable 1996 period. The Company expects that
1997 and 1998 full year capital expenditures will be greater than the
1996 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 1997 also
included $1.5 million in cash received from the sale of the
property of one of the Company's former businesses.
During the first nine months of 1997, the Company used $1.4
million in cash to repurchase shares of its Common Stock under a
program authorized by its Board of Directors in July 1996. As
of September 30, 1997, the Company had used approximately $7.6
million in cash to repurchase 491,600 shares under this program.
<PAGE>
<PAGE>
In October 1997, the Company filed Registration Statements
on Form S-3 for the sale of 1,600,000 shares of its Common
Stock, (excluding any exercise of the over-allotment
option). The offering consists of 770,104 shares to be sold
by The Retirement Plan of the Gleason Works ("Plan"),
429,896 shares to be sold by Gleason Foundation and 400,000
shares to be sold by the Company. The offering enables the
Plan to sell its holdings of Company stock, which will
position it to be able to settle liabilities to the
beneficiaries of this Plan. Accruals for future benefits
under this defined benefit plan were frozen in 1990 and all
active employees in this plan were enrolled in the Company's
defined contribution retirement plan effective January 1,
1991. Since that time, the Company has been committed to
terminating the Plan and satisfying its obligations to Plan
participants as soon as the assets of the Plan matched or
exceeded its obligations. The current market value of the
Plan's assets is such that termination of the Plan is being
considered at this time. Gleason Foundation is selling a
portion of its shares to diversify its holdings; however,
even after the sale of all its shares registered in this
offering, Gleason Foundation will remain the Company's
largest shareholder. The Company intends to use the proceeds
from the sale of shares to pay down a portion of the debt
incurred in connection with the Pfauter acquisition.
Effective July 31, 1997 the Company entered into a new $170
million revolving and term loan credit facility providing for
multi-currency borrowings and standby letters of credit and bank
guarantees. The revolving credit portion of the facility is $110
million and matures on July 1, 2002. The term loan portion is
$60 million and requires repayment in equal quarterly
installments beginning October 1, 1999. Up to $40 million of the
revolving credit portion of the facility is available for
issuance of letters of credit or bank guarantees. The credit
facility is unsecured (except for pledges of 65% of the stock of
certain designated foreign subsidiaries of the Company) and there
are no prepayment penalties. The interest rate on the credit
facility is LIBOR plus 35 basis points through March 31,1998.
Thereafter, the rate is based on a spread over LIBOR as
determined by certain financial ratios. Facility fees are
calculated on the entire credit facility, regardless of usage,
and are 15 basis points through March 31, 1998 and adjust on the
same basis as interest rates for periods which follow. The credit
facility provides for average borrowing costs which are
approximately 25 basis points lower than the Company's former
revolving credit facility and approximately 100 basis points
lower than Pfauter's average borrowing costs on its former
secured credit facilities. The Credit Agreement relating to the
facility contains customary financial ratio covenants and provisions
which restrict the Company's ability to pay dividends in the event
of a default.
Effective October 31, 1997, the Company reduced the total
amount of the facility from $170 million to $160 million, with
the term loan portion decreasing from $60 million to $50 million.
All other terms and conditions remain the same.
Management believes that the Company's cash balances, borrowing
capacity under its lines of credit, and anticipated funds from
operations will be sufficient to meet its near-term operating and
investing activities or that it will be able to obtain additional
long-term financing if such financing is required.
<PAGE>
<PAGE>
The forward-looking statement related to incoming order levels is
subject to a number of factors that could cause actual results to
differ materially from those expected. These factors include,
but are not limited to, the impact on order levels resulting from
actions taken by competitors, the stability and timing of
customers' capital spending plans and the general economic
conditions in the world markets the Company serves.
PHOENIX is a Registered Trademark of The Gleason Works.
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K
(1) The Company's Current Report on Form 8-K dated August 14,
1997 for Item 2 related to the Company's acquisition of
Hermann Pfauter GmbH & Co.
(2) Amendment No. 1 to the Current Report on Form 8-K dated
August 14, 1997 was filed on Form 8-K/A dated September
25, 1997 for Items 7(a) and (b) related to the Company's
acquisition of Hermann Pfauter GmbH & Co. including the
following financial statements:
Hermann Pfauter GmbH & Co. Audited Financial Statements
Report of Ernst & Young GmbH
Reports of Dugan & Lopatka
Consolidated Balance Sheets as of December 31, 1996
and 1995
Consolidated Income Statements for the Years Ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1996 and 1995
Notes to the Consolidated Financial Statements
Directors' Report - Review of 1994 through 1996
Pro Forma Consolidated Financial Statements of Gleason
Corporation and Hermann Pfauter GmbH & Co. (Unaudited)
Balance Sheet at June 30, 1997
Statement of Operations for the Year Ended December 31,
1996
Statement of Operations for the Six Months Ended June
30, 1997
Notes to Pro Forma Consolidated Financial Statements
<PAGE>
<PAGE>
(3) Amendment No. 2 to the Current Report on Form 8-K dated
August 14, 1997 was filed on Form 8-K/A dated October 2,
1997 for Items 7(a) and (b) related to the Company's
acquisition of Hermann Pfauter GmbH & Co. including the
following financial statements:
Hermann Pfauter GmbH & Co. Audited Financial Statements
Report of Ernst & Young GmbH
Reports of Dugan & Lopatka
Consolidated Balance Sheets as of December 31, 1996
and 1995
Consolidated Income Statements for the Years Ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1996 and 1995
Notes to the Consolidated Financial Statements
Directors' Report - Review of 1994 through 1996
Pro Forma Consolidated Financial Statements of Gleason
Corporation and Hermann Pfauter GmbH & Co (Unaudited)
Balance Sheet at June 30, 1997
Statement of Operations for the Year Ended December 31,
1996
Statement of Operations for the Six Months Ended June
30, 1997
Notes to Pro Forma Consolidated Financial Statements
(4) The Company's Current Report on Form 8-K dated October 2,
1997 for Item 5 was filed on October 3, 1997.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
GLEASON CORPORATION
Registrant
DATE: November 11, 1997 John J. Perrotti
John J. Perrotti
Vice President - Finance
(Chief Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FORM 10-Q FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30,1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<NAME> GLEASON CORPORATION
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