SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended July 29, 1994
Commission File No. 1-5590
Fluke Corporation
(Exact name of registrant as specified in its charter)
Washington
(State of incorporation of organization)
91 - 0606624
(I.R.S. Employer Identification No.)
6920 Seaway Boulevard Everett, Washington 98203
(Address of principal executive offices) (Zip Code)
(206) 347-6100
(Registrant's telephone number, including area code)
(Former name if changed since last report)
(Former fiscal year if changed since last report)
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
As of August 26, 1994, there were 7,752,400 shares of $0.25 par value
common stock outstanding.
<PAGE>
INDEX
Fluke Corporation
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets as of July 29, 1994 and April 29, 1994
Consolidated Statements of Income for the quarters ended July 29, 1994
and July 30, 1993
Consolidated Statements of Cash Flows for the quarters ended July 29,
1994 and July 30, 1993
Notes to Consolidated Financial Statements
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 - Computation of Earnings Per Share
(b) Reports on Form 8-K
SIGNATURES
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
<TABLE>
CONSOLIDATED BALANCE SHEETS
Fluke Corporation and Subsidiaries
unaudited (in thousands except shares)
<CAPTION>
July 29, 1994 April 29, 1994
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 8,769 $ 6,520
Accounts receivable, less allowances 64,760 70,510
Inventories 56,540 54,365
Deferred income taxes 12,816 13,109
Prepaid expenses and other current assets 10,548 9,914
Total Current Assets 153,433 154,417
Property, Plant and Equipment
Land 6,074 6,181
Buildings 46,518 46,661
Machinery and equipment 96,001 93,406
Construction in progress 4,264 2,440
Less accumulated depreciation (91,049) (88,412)
Net Property, Plant and Equipment 61,808 60,276
Goodwill and Other Intangibles 25,521 24,995
Other Assets 6,767 5,913
Total Assets $ 247,529 $ 245,602
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 14,035 $ 19,413
Accrued liabilities 32,275 35,454
Accrued liabilities related to restructuring 153 676
Income taxes payable 339 665
Current maturities of long-term obligations 230 235
Total Current Liabilities 47,032 56,443
Long-term Obligations 26,476 14,712
Deferred Income Taxes 8,872 9,152
Other Liabilities 8,228 7,466
Total Liabilities 90,608 87,773
Stockholders' Equity
Common stock 2,202 2,202
Additional paid-in capital 81,081 81,081
Retained earnings 97,870 96,553
Less cost of repurchased and non-vested shares (24,387) (19,904)
Cumulative translation adjustment 155 (2,103)
Total Stockholders' Equity 156,921 157,829
Total Liabilities and Stockholders' Equity $ 247,529 $ 245,602
Total Shares Outstanding 7,749,750 7,898,690
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
Fluke Corporation and Subsidiaries
unaudited (in thousands except shares and per share amounts)
<CAPTION>
QUARTER ENDED
July 29, 1994 July 30,1993
<S> <C> <C>
Revenues $ 86,000 $ 84,687
Cost of Goods Sold 43,178 43,932
Gross Margin 42,822 40,755
Operating Expenses
Marketing and administrative 29,961 29,458
Research and development 9,117 8,607
Total Operating Expenses 39,078 38,065
Operating Income 3,744 2,690
Non-Operating Expenses (Income)
Interest Expense 315 425
Other (444) (6)
Total Non-Operating
Expenses (Income) (129) 419
Income Before Income Taxes 3,873 2,271
Provision for Income Taxes 1,472 851
Net Income 2,401 1,420
Earnings Per Share $ 0.30 $ 0.18
Net Income as a Percentage of Revenues 2.79% 1.68%
Average Shares and Share
Equivalents Outstanding 8,067,538 8,014,112
Cash Dividends Per Share $ 0.14 $ 0.13
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fluke Corporation and Subsidiaries
unaudited (in thousands)
<CAPTION>
QUARTER ENDED
July 29, 1994 July 30, 1993
<S> <C> <C>
Operating Activities
Net Income $ 2,401 $ 1,420
Items not affecting cash:
Depreciation and amortization 4,535 4,201
Deferred income tax 253 (165)
Stock awards 45 80
Accrued pension 353 73
Loss (gain) on disposal of property, plant
and equipment (133) 29
Net change in:
Accounts receivable 3,454 (25,304)
Inventories (704) 4,677
Prepaid expenses (419) (979)
Accounts payable (5,889) 6,936
Accrued liabilities (4,492) 2,694
Accrued liabilities related to restructuring (523) (1,838)
Income taxes payable (324) (133)
Other assets and liabilities 1,071 2,701
Net Cash Used By Operating Activities (372) (5,608)
Investing Activities
Additions to property, plant and equipment (4,466) (1,702)
Proceeds from disposal of property, plant
and equipment 603 32
Purchase of Philips test and measurement business --- (34,356)
Net Cash Used By Investing Activities (3,863) (1,670)
Financing Activities
Proceeds from short-term debt --- 935
Proceeds from long-term debt 11,198 31,799
Payments on long-term obligations --- (1,000)
Cash dividends paid (1,027) (894)
Repurchase of common stock (4,579) ---
Other financing activities, net 14 ---
Net Cash Provided (Used) By Financing
Activities 5,606 (3,516)
Effect of Foreign Currency Exchange Rates on
Cash and Cash Equivalents 878 (403)
Net Increase (Decrease) In Cash and Cash
Equivalents 2,249 (11,197)
Cash and Cash Equivalents at Beginning of Year 6,520 24,415
Cash and Cash Equivalents at End of Quarter $ 8,769 $13,218
Supplemental Cash Flow Information
Income Taxes Paid $ 549 $ 162
Interest Paid $ 315 $ 425
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fluke Corporation and Subsidiaries
1. The accompanying unaudited Consolidated Financial Statements do not
purport to be full presentations and do not include all information and
disclosures required for fair presentation by generally accepted
accounting principles, but rather include only that information required
by the instructions to form 10-Q. However, in the opinion of
management, the accompanying unaudited Consolidated Financial Statements
contain all adjustments (consisting of normal recurring accruals)
considered necessary to present fairly the Consolidated Balance Sheets
of the Company at July 29, 1994 and April 29, 1994 and the Consolidated
Statements of Income and the Statements of Cash Flows for the quarters
ended July 29, 1994 and July 30, 1993.
2. The results of operations for the quarters ended July 29, 1994 and
July 30, 1993 are not necessarily indicative of the results to be
expected for the full year.
3. The Company paid a $0.13 per share quarterly cash dividend on May
20, 1994 to stockholders of record on April 29, 1994. On June 24, 1994,
the Company's Board of Directors declared a $0.14 per share quarterly
cash dividend for stockholders of record on July 29, 1994 which was paid
on August 19, 1994.
4. The Company purchased 150,000 shares of stock from Philips
Electronics N.V. (Philips) for $4.5 million or $30.53 per share. The
share price represents the average closing price for the 10 consecutive
trading days prior to the offer as established in the agreement. The
purchase of the shares was made pursuant to an agreement between the two
companies which allows Philips to sell a set number of shares within
defined six month periods. Under the agreement the Company has the
right of first refusal to purchase any shares Philips offers for sale or
can allow them to be sold on the open market, under certain conditions.
5. The components of inventories are as follows:
<TABLE>
(in thousands)
<CAPTION>
July 29, 1994 April 29, 1994
<S> <C> <C>
Finished Goods $18,200 $17,904
Work-in-Process 10,520 10,390
Purchased Parts and Materials 27,820 26,071
Total Inventories $56,540 $54,365
</TABLE>
<PAGE>
Item 2 MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Fluke Corporation and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Revenues of $86.0 million for the first quarter of fiscal 1995, ended
July 29, 1994, were 1.6 percent higher than the revenues of $84.7
million in the quarter ended July 30, 1993. Revenues from United States
customers decreased 2.6% while international revenues increased 5.5%.
The increase in international revenues came primarily from countries
outside of Europe, particularly Korea, up 42%, and Mexico, up 71%.
Although the revenues increased slightly, the Company experienced lower
order volume in all geographic areas during this quarter as compared to
the first quarter of last year. The effect of the lower orders was a
reduction in the Company's backlog to $30.4 million at July 29, 1994.
Three primary factors caused order levels to decline in the first
quarter. Distribution orders decreased in the first quarter of fiscal
1995 as a result of significant stocking orders for several product
lines in the fourth quarter of fiscal 1994. This was driven by a price
increase which took effect April 1, 1994. Secondly, preliminary
information to distributors about the new additions to the Scopemeter
(trademark) test tool family, caused stocking for the existing
Scopemeter line to be lower in anticipation of the new products. The
Company started taking orders for the new Scopemeter products in August
and will ship in quantity in September. The third factor contributing
to the decline was a number of large government contracts expected in
the quarter that slid to the second quarter.
Cost of goods sold decreased 1.7 percent from $43.9 million to $43.2
million on a first quarter to first quarter comparison. As a percentage
of revenues, cost of goods sold decreased from 51.9 percent to 50.2
percent. Part of the decrease in cost of goods sold is due to the sale
<PAGE>
of inventory related to the acquisition of the Philips test and
measurement business in the first quarter of last year. The majority of
this inventory, carried at a higher acquisition value, was shipped
during fiscal 1994.
Operating expenses increased 2.7 percent in the quarter ended July 29,
1994 over the quarter ended July 30, 1993. In the quarter ended July
29, 1994, the Company received a $617,000 arbitration award and related
interest of $170,000. Operating expenses were reduced by the $617,000
arbitration award, while the interest income reduced nonoperating
expenses. Excluding the arbitration award, operating expenses increased
4.3 percent.
Marketing and administrative expense increased 1.7 percent. However,
excluding the arbitration award marketing and administrative expense
increased 3.8 percent. This increase was caused by several factors
including higher commission expenses on sales in the United States,
higher legal costs and other general increases in administrative costs.
Research and development expense increased 5.9 percent as several major
projects were in their final development stage.
The Company's operating income increased 39.2 percent over the same
quarter last year. This increase in operating margin resulted primarily
from the increase in gross margin, which, as indicated above, was
favorably impacted by the lower cost of goods sold.
Nonoperating expense(income) went from expense of $419,000 in the
quarter ended July 30, 1993 to income of $129,000 in the quarter ended
July 29, 1994. Interest expense declined 25.9 percent in spite of
higher interest rates due to the lower debt balances outstanding, on
average, during the current quarter. The Company also had other
nonoperating income items such as interest income, currency exchange
gains, a gain on the sale of a building, and the interest income on the
arbitration award, mentioned above. These income items more than offset
the $610,000 in amortization of goodwill and intangible assets.
<PAGE>
The estimated effective annual tax rate of 38.0 percent is slightly
higher than the 37.5 percent rate last year because the Company does not
have the foreign tax credit carryforwards it had available to utilize
during the last few years.
The Company's earnings per share increased from $0.18 per share in the
quarter ended July 30, 1993 to $0.30 per share in the quarter ended July
29, 1994. The current quarter includes the arbitration award and
related interest which combined for a $0.06 per share favorable impact.
LIQUIDITY AND CAPITAL RESOURCES
The Company increased its borrowing during the quarter from $14.7
million at April 29, 1994 to $26.5 million at July 29, 1994. The
Company made a stock purchase (as mentioned in Note 4) and had capital
expenditures and working capital requirements in the quarter ended July
29, 1994 that required the additional borrowing. The Company
anticipates an increase in cash flow from operations throughout the year
which will allow for a reduction in the level of debt outstanding by
fiscal year end.
The Company purchased 150,000 shares of common stock from Philips
Electronics N.V. (Philips) for $4.5 million or $30.53 per share. The
share price represents the average closing price for the 10 consecutive
trading days prior to the offer as established in the agreement. The
purchase of the shares was made pursuant to an agreement between the two
companies which allows Philips to sell a set number of shares within
defined six month periods. Under the agreement the Company has the
right of first refusal to purchase any shares Philips offers for sale or
can allow them to be sold on the open market, under certain conditions.
After the transaction Philips owns approximately 1.4 million shares.
<PAGE>
The Company had capital expenditures of $4.5 million in the quarter
ended July 29, 1994 compared to $1.7 million in the quarter ended July
30, 1993. Increased investment in new manufacturing equipment is the
cause of the increase in capital expenditures. We anticipate capital
expenditures in the remaining quarters of fiscal year 1995 to be lower
than the first quarter.
The Company's exposure to foreign exchange currency fluctuations has
increased since the addition of operations in Europe resulting from the
purchase of the Philips Electronics N.V. test and measurement business
on May 1, 1993. The currencies of most of the countries in which the
Company operates have strengthened during the quarter ended July 29,
1994. This causes the local currency assets to increase when stated in
U.S. dollars. For instance goodwill, which is primarily Dutch guilder
denominated, increased approximately $1.5 million as a result of the
currency change.
<PAGE>
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 - Computation of Earnings Per Share
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for
which this report is filed.
<PAGE>
SIGNATURES
Fluke Corporation and Subsidiaries
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.
FLUKE CORPORATION
Registrant
September 8, 1994 /s/John R. Smith
Date John R. Smith
Vice President, Treasurer
Chief Accounting Officer
<PAGE>
<TABLE>
Exhibit 11 COMPUTATION OF EARNINGS PER SHARE
Fluke Corporation and Subsidiaries
<CAPTION> QUARTER ENDED
July 29, 1994 July 30, 1993
<C> <C>
<S>
Shares issued at beginning
of period 8,807,391 8,807,391
Less repurchased shares at
beginning of period (908,701) (2,464,936)
Shares outstanding at
beginning of period 7,898,690 6,342,455
Issuance of shares for acquisition --- 1,000,000
Conversion of preferred shares --- 538,144
Repurchase of common shares
weighted average (59,341) ---
Net issuance of shares
under employee stock plans,
weighted average 384 (239)
Weighted average common
shares outstanding 7,839,733 7,880,360
Assumed exercise of stock
options, weighted average
of incremental shares 227,805 133,752
Average shares and
share equivalents
outstanding 8,067,538 8,014,112
Earnings per share $ 0.30 $ 0.18
Net Income $2,401,000 $1,420,000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet and Income Statement and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-28-1995<F1>
<PERIOD-START> APR-29-1994
<PERIOD-END> JUL-29-1994
<CASH> 8,769
<SECURITIES> 0
<RECEIVABLES> 65,499
<ALLOWANCES> (739)
<INVENTORY> 56,540
<CURRENT-ASSETS> 153,433
<PP&E> 152,857
<DEPRECIATION> (91,049)
<TOTAL-ASSETS> 247,529
<CURRENT-LIABILITIES> 47,032
<BONDS> 26,476
<COMMON> 2,202
0
0
<OTHER-SE> 154,719
<TOTAL-LIABILITY-AND-EQUITY> 247,529
<SALES> 86,000
<TOTAL-REVENUES> 86,000
<CGS> 43,178
<TOTAL-COSTS> 39,078
<OTHER-EXPENSES> (444)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 315
<INCOME-PRETAX> 3,873
<INCOME-TAX> 1,472
<INCOME-CONTINUING> 2,401
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,401
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.30
<FN>
<F1>All amounts in this column are in thousands except per share amounts.
</FN>
</TABLE>
