SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the year ended April 29, 1994.
Commission file no. 1-5590
Fluke Corporation
(Exact name of registrant as specified in its charter)
Washington
(State of incorporation or organization)
91 - 0606624
(I.R.S. Employer Identification No.)
6920 Seaway Boulevard Everett, Washington 98203
(Address of principal executive offices)
(206) 347 - 6100
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, par value $.25 American Stock Exchange and
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common Stock Purchase Rights
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
the filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of July 8, 1994, there were 7,749,860 shares of $0.25 par value common
stock outstanding and the aggregate market value of the common shares (based
upon the closing price of the shares on the American Stock Exchange) held by
nonaffiliates was approximately $141 million.
Documents Incorporated By Reference
The following documents are incorporated by reference in the listed parts of
this Annual Report on Form 10-K:
Document Part of 10-K
1. Annual Report to Stockholders for the year ended
April 29, 1994 (only the portions listed in this report) Parts I and II
2. Proxy Statement dated August 5, 1994 (only the portions listed
in this report) Part III
PART I
ITEM 1 - BUSINESS
Fluke Corporation (the Company) was founded in 1948 and was incorporated
under the laws of the State of Washington on October 7, 1953. In August,
1993, the Company changed its name from John Fluke Mfg. Co., Inc. to Fluke
Corporation. The Company is engaged in the design, manufacture and sale of
commercial electronic test and measurement instruments with a focus on the
new and growing markets for compact, professional electronic test tools. The
Company's products are used in service, manufacturing test and quality
functions in a variety of industries throughout the world.
On May 26, 1993, with an effective date of May 1, 1993, the Company acquired
the test and measurement business of Philips Electronics N.V. (Philips) of
Eindhoven, the Netherlands. Since 1987, the Company and Philips had a
strategic alliance pursuant to which the Company sold, supported and
serviced the Philips test and measurement products in North America and
other selected markets, and Philips did the same for the Company's products
in Europe and other selected markets.
The Company acquired engineering groups in the Netherlands and Germany as
well as manufacturing operations in the Netherlands which now make up the
Diagnostic Tools Division of the Company which is headquartered in Almelo,
the Netherlands. The division is responsible for ScopeMeter (registered
trademark) test tools, oscilloscope, function generator and logic analyzer
product lines. The Company also acquired direct sales and service
operations in fourteen European countries with the European sales and
service headquarters located in Eindhoven, the Netherlands.
The Company paid for this acquisition with one million shares of the
Company's common stock and $22.4 million in cash. As part of the
transaction, Philips also converted the preferred stock that they had
previously purchased as part of the alliance into 538,144 shares of common
stock at the rate established in the original preferred stock agreement.
After the transaction, Philips owned 1,538,144 shares of common stock or
approximately 19.5% of the shares outstanding. There are restrictions on
Philips' ability to sell the shares, and the Company has the option to
purchase the shares before they can be offered to a third party.
PRODUCTS AND SERVICES
The Company is in a single line of business- the manufacture and sale of
compact, professional electronic test tools. Although the products vary in
capability, sophistication, use, size and price, they all fundamentally test
and measure electrical parameters. The Company is focusing its resources on
the professional electronic test tools portion of the electronic instrument
market because of the increasing electronic content of products outside the
traditional test lab environment and the rapidly increasing demand for more
compact tools that can be used at the point of service by technicians who
have a wide variety of technical backgrounds. The overall test and
measurement (T&M) market is forecast to be approximately $8.0 billion in
size in 1994, according to industry analysts, and has actually declined in
each of the past three years. This decline, most significantly impacting
the more traditional T&M product categories, occurred for a number of
reasons which include among others the increased utilization of computer-
aided design and engineering workstations which eliminated the need for
certain T&M equipment, the utilization of self-test in many instruments made
possible through the use of new microprocessors, and the economic impact of
the slowdown in the defense industries.
The major categories of the Company's products are described below:
Handheld Digital Multimeters measure the magnitude of voltage, resistance,
current and other electrical parameters. These tools are also sold in
versions which are modified to fit specific service applications such as the
automotive field, where a full set of automotive measurement functions
including rpm, frequency, duty cycle and pulse width are added. These meters
are designed to be used by technicians to troubleshoot and service
electrical and electronic equipment. Numerous accessories are also
available to maximize the utility of these tools for various applications.
Service tools designed specifically for the electrical market include power
harmonics meters which measure the power quality in industrial applications,
clamp meters which measure electrical current and digital multimeters which
are modified for the specific needs of the electrical market.
ScopeMeter test tools offer the capabilities of an oscilloscope to measure
the time and amplitude properties of electrical signals such as voltage,
current and power, as well as the ability of a digital multimeter to measure
the magnitude of voltage, resistance, current and other electrical
parameters. This handheld tool is designed for use in "away from the bench"
service environments in the electronic, electrical and automotive areas.
Calibrators and Standards are precise adjustable or programmable sources of
voltage, current or resistance. The precision outputs of these instruments
are used in the calibration of other electronic equipment, as the stimulus
for equipment under test and as secondary standards in laboratories of
research, industry and aerospace facilities.
Data Loggers and Data Acquisition Systems scan a predetermined number of
inputs representing voltage, temperature, flow, pressure and many other
varying phenomena and convert each input (channel) to a digital value which
can be displayed on the instrument, sent by hard wire or by radio signal to
a printer, video terminal or personal computer for analysis. Data loggers
and the more sophisticated systems with compatible application-specific
software packages are used in production testing, field research,
laboratories and in a variety of industrial production processes where data
accumulation and control are required.
Oscilloscopes measure the time and amplitude properties of electrical
signals such as voltage, current and power. They are used for a detailed
study of just one signal or for comparing an incoming signal with a stored
reference. The oscilloscope is a tool used in complicated service repair and
for the development and testing of electronic circuits and systems.
LAN testers are portable troubleshooting tools for computer network cable
installers and local area network computer managers. These tools include a
series of cable testers for insuring the proper installation of network
cabling as well as troubleshooting tools which can detect problems in both
Token Ring and Ethernet computer networks.
The Company, through its customer service and support organization, provides
support and maintenance service and parts for products that the Company
sells. In geographic areas where the Company does not have direct
operations, authorized representatives often provide such service.
NEW PRODUCTS
Fluke added five new products in its line of Local Area Network (LAN)
troubleshooting tools in fiscal 1994. Fluke LAN products are designed to
help both LAN managers and LAN cable installers locate and diagnose problems
in their networks and cabling quickly and easily.
To help LAN managers keep their networks up and running, Fluke introduced
the 672 LANMeter (registered trademark) test tool, a Token Ring version of
its 670 Ethernet LANMeter, and the 675 LANMeter, a combination version for
both Ethernet and Token Ring. All three of these products are used to test
and troubleshoot a vast array of LAN problems.
Designed specifically for problems facing network cable installers, Fluke
introduced the 610 LAN CableMapper (registered trademark), which can
identify major faults in the cabling and verify if the wiring in a network
is properly terminated; the new 620 CableMeter (registered trademark),
which allows cable installers to position cable properly without using a
remote unit at the other end of the cable, thus enabling installers to work
alone rather than in pairs; and the 652 LAN CableMeter, which includes all
the features of the Fluke 650 CableMeter (introduced in fiscal year 1993),
plus adds a backlit screen and a measurement range of 20 megahertz.
The Fluke 2625A/WL Wireless Logger (registered trademark) is a 21-channel
wireless data logger designed to be set up and used in locations once
considered too remote, inaccessible or environmentally hostile for a real
time monitoring system. Using spread spectrum technology, the Wireless
Logger is capable of collecting and transmitting data back to a PC from up
to 800 feet away and could be used in such industries as electric
utilities/generating stations, automotive and process industries, as well as
a variety of manufacturing facilities.
Three new products introduced by Fluke in fiscal 1994 were developed
specifically for applications in the electrical market. The Models 40 and
41 Power Harmonics Meters were designed for plant electricians, electrical
contractors, facilities managers and others who need to manage and
troubleshoot power distribution problems, diagnose the effects of harmonic
problems and take preventive or corrective action. The low-cost Model 30
Clamp Meter is designed to complement the Fluke Models 31 and 33 Clamp
Meters by providing basic average sensing ac measurements capabilities.
The new PM 3384E CombiScope (registered trademark) oscilloscope was
developed specifically for use in research, manufacturing test and product
verification for diesel and combustion engine monitoring. The PM 3384E is
based on the general purpose line of Fluke CombiScopes with modifications
that make it ideal for the growing diesel and turbine engine marketplace.
The 80T-IR Infrared Temperature Probe can make noncontact temperature
measurements using a digital multimeter. This is ideal for situations where
the object is electrically live, moving, hard to reach or can be
contaminated by touch.
SALES AND DISTRIBUTION
The Company utilizes three main sales channels - direct sales, distribution
sales and representative organizations - to match the needs of the customer.
Direct sales is utilized where the needs of the customer require direct
contact and support of an account manager and generally involve the sale of
the more technically complex products. The direct sales force is also
somewhat involved in creating the market in some regions of the world for
the products which are sold through distribution and representative
organizations.
Distribution sales are generally utilized for the Company's less expensive,
handheld tools where the customers do not need specific application
instruction and support or are accustomed to using a distributor to serve
their needs. Distributors, including electrical wholesalers, automotive
warehouses, industrial distributors and catalog houses, buy directly from
the Company and resell to a variety of end-users.
Representative organizations are utilized where particular expertise is more
closely aligned with the customers' requirements of certain targeted markets
such as in the LAN field or where the Company does not have a direct sales
organization.
The Company has direct sales and service organizations in the United States,
Canada, Japan, Singapore fourteen countries in Europe and a representative
office in the People's Republic of China. The Company is represented
throughout the remainder of the world by representative organizations.
Overall, international sales accounted for approximately 53 percent of all
sales made during fiscal 1994.
SUPPLIERS
Most of the raw materials and components used by the Company in its
manufacturing operation are available from numerous sources. Those products
only available from sole sources are generally protected by long-term
contracts with suppliers. Fluke's efforts to partner with suppliers has
helped to assure a continuity of supply even during difficult allocation
times.
PATENTS AND TRADEMARKS
The Company holds or has pending certain United States and foreign patents
to protect product designs, processes and techniques for the duration of
their value to the Company. No significant patents have been adjudicated
and no representation is made as to the validity or the degree of protection
afforded by any patent. While the Company considers its existing and
pending patents to be important and expects to apply for patents with
respect to any significant developments it regards as patentable, it does
not consider its business as dependent to any material extent upon any one
or more of such patents, nor would its present business be materially
adversely affected if any of the patents were held invalid. The Company also
owns trademarks, copyrights and proprietary information, which are
considered by the Company to have significant value.
SEASONAL TRENDS AND WORKING CAPITAL REQUIREMENTS
While the Company is subject to minor seasonality effects associated with
conducting business in various regions of the world, the impact of these
seasonal trends is immaterial to the Company as a whole. The Company does
not have any extraordinary working capital requirements.
CUSTOMERS
The Company's customers are generally involved in the installation, service,
repair or calibration of electronic or electrical equipment. They are also
involved in research and development activities.
No one customer accounted for more than 10 percent of the Company's sales in
fiscal year 1994.
BACKLOG
The Company's backlog of unfilled orders amounted to approximately $37.0
million as of April 29, 1994, approximately $32.0 million as of April 30,
1993 and approximately $35.6 million as of September 25, 1992. The Company
expects to satisfy nearly all such unfilled orders in fiscal 1995. The
backlog consists of many different customer orders with no one customer
being a material component. The Company does not believe the level of
backlog is a meaningful indicator of future business.
COMPETITION
The principal means of competition include price, performance, service and
warranty. Although no single element clearly dominates, the Company's
products are often preferred because they typically combine unique and
desired features with superior quality, reliability and ruggedness. There
are numerous firms engaged in the production of electronic test and
measurement products, and the primary competing firms vary significantly
among the Company's various product lines. Some of these firms are
substantially larger than the Company and, as such, have greater financial
resources.
RESEARCH AND DEVELOPMENT
The Company's research activities are directed toward the development of new
products that will complement and expand the present product line and toward
the creation of new manufacturing techniques. Research and development
expense was approximately $35.0 million for the year ended April 29, 1994
which was 9.8 percent of the Company's fiscal 1994 revenues. Research and
development expense was $13.7 million for the seven months ended April 30,
1993, $22.5 million for fiscal year ended September 1992 and $22.1 million
for fiscal 1991 which were 10.3, 8.3 and 9.2 percent of the Company's total
revenues, respectively. No research contracts are obtained from customers,
nor does the Company conduct any research work under government development
contracts.
ENVIRONMENTAL CONTROLS
The Company does not anticipate any material effects upon its capital
expenditures, earnings or competitive position as a result of compliance
with federal, state and local provisions regulating the discharge of
materials into the environment or otherwise relating to the protection of
the environment.
EMPLOYEES
The Company had 2,583 full-time employees as of April 29, 1994.
FOREIGN OPERATIONS AND EXPORT SALES
Information related to foreign operations and export sales is incorporated
herein by reference to Note 11 of the Consolidated Financial Statements on
page 42 of the Company's 1994 Annual Report to Stockholders, a copy of which
is filed as Exhibit 13 to this Report.
The increase in revenues from outside of the United States has added some
complexity and risk to the Company. These risks include increased exposure
to the risk of foreign currency fluctuations and the potential economic and
political impacts from doing business in foreign countries, including
changes in labor and tax laws, import and export controls and changes in
governmental policies.
EXECUTIVE OFFICERS OF THE REGISTRANT
The Executive Officers, who serve at the pleasure of the Board of Directors
of the Company, as of July 9, 1994, are as follows:
WILLIAM G. PARZYBOK, JR. Mr. Parzybok, age 52, has been Chairman of the
Board, Chief Executive Officer and a Director of the Company since 1991. He
previously had been employed for 22 years by The Hewlett-Packard Company
where his most recent position was Vice President and General Manager of
Engineering Applications Group from 1988 to 1991. Mr. Parzybok serves on
the Executive Committee of the Board. He is also a Director of PENWEST,
Ltd.
GEORGE M. WINN. Mr. Winn, age 50, has been President, Chief Operating
Officer and a Director of the Company since 1982. He previously served as
Chief Executive Officer of the Company from 1987 to 1991. Mr. Winn serves
on the Executive Committee of the Board. He is also a Director of Heart
Technology, Inc.
RICHARD W. VAN SAUN. Mr. Van Saun, age 57, is Senior Vice President of the
Company and was named Group Manager of the Diagnostic Tools Division in
1992. He served as Vice President and Group Manager of the Service
Equipment Group from 1986 to 1992.
RONALD R. WAMBOLT. Mr. Wambolt, age 59, is a Senior Vice President of the
Company and Director of Worldwide Sales and Service. He previously served
as Senior Vice President and Director of Worldwide Sales from 1987 to 1991.
DONALD R. HALL. Mr. Hall, age 64, has been a Vice President of the Company
and General Manager of the Service Tools Division since 1992. He previously
served as Director of Marketing for the Service Equipment Group from 1989 to
1992.
WILLIAM R. HOFFMAN. Mr. Hoffman, age 58, is Vice President of the Company
and Manager of Corporate Services. He is also a General Manager of
Calibration for the Verification Tools Division. He previously served as
Vice President of Marketing Services and the Philips T&M Group from 1991 to
1992 and as Vice President of the Company and Group Manager of the Philips
T&M Group from 1987 to 1991.
DAVID E. KATRI. Mr. Katri, age 44, has been a Vice President of the Company
and General Manager of the Verification Tools Division since 1992. He
previously served as Vice President of the Company and Group Manager of the
Manufacturing/R&D Group from 1991 to 1992 and as Group Manager of the
Manufacturing/R&D Group from 1988 to 1990.
DOUGLAS G. MCKNIGHT. Mr. McKnight, age 45, has served as Vice President,
General Counsel of the Company since 1986 and as Corporate Secretary since
1983.
BARRY L. ROWAN. Mr. Rowan, age 37, has been Vice President and Chief
Financial Officer of the Company since 1992. He previously had been
employed by Comlinear Corporation where he served as President from 1989 to
1992 and, prior to that, as Vice President of Finance and Administration
from 1983 to 1989.
JOHN R. SMITH. Mr. Smith, age 53, has been Vice President, Treasurer of the
Company since 1987.
<PAGE>
<TABLE>
ITEM 2 - PROPERTIES
Pertinent information concerning principal properties of the Company and its
subsidiaries as of April 29, 1994 is as follows:
<CAPTION>
LOCATION TYPE OF FACILITY
OWNED PROPERTIES
Location Type of Use Acreage (Land)/
Sq. Footage (Building)
<S> <C> <C>
Everett, WA Principal executive offices, 139.00 acres /
engineering, manufacturing 480,000 sq. ft.
and marketing
Everett, WA Manufacturing, warehousing 17.35 acres /
200,000 sq. ft.
Everett, WA Service, distribution,
warehousing 8.20 acres /
102,600 sq. ft.
Paramus, NJ Sales and service 1.50 acres /
25,000 sq. ft.
Palatine, IL Sales and service 4.80 acres /
27,000 sq. ft.
SIGNIFICANT LEASED PROPERTIES
Location Type of Use Acreage (Land)/
Sq. Footage (Building)
Almelo, The Netherlands Engineering, 138,400 sq. ft.
manufacturing and
marketing
Eindhoven, The Netherlands European headquarters 17,600 sq. ft.
for sales and service
Herleen, The Netherlands Manufacturing 35,300 sq. ft.
</TABLE>
The Company has approximately 222,000 square feet of additional leased
facilities throughout the world which are utilized for sales and service.
The Company believes that its existing facilities are in good condition and
are suitable and adequate for its business. The manufacturing facilities
are fully utilized on a one-shift basis and, in most cases, partially
utilized on a second- and third-shift basis. Most of the manufacturing and
testing equipment, fixtures and furnishings are owned by the Company and are
considered by the Company to be modern, efficient and adequate for the
Company's immediate requirements. Most of the electronic data processing
equipment used for sales analysis, inventory and production control is
leased.
The facilities owned by the Company in Everett, Washington and the leased
properties in Almelo, Eindhoven and Heerlen, The Netherlands involve
significant investments. These properties could be duplicated, if
necessary, with some disruption to operations. The other facilities are not
considered material investments and could be replaced without significant
disruption to operations. All facilities owned by the Company are insured
at their estimated replacement cost.
ITEM 3 - LEGAL PROCEEDINGS
Not applicable.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information required by this Item is incorporated herein by reference to
Stock Price Information on page 48 of the Company's 1994 Annual Report to
Stockholders, a copy of which is filed as Exhibit 13 to this Report.
ITEM 6 - SELECTED FINANCIAL DATA
The information required by this Item is incorporated herein by reference to
the Financial Summary on pages 46 and 47 of the Company's 1994 Annual Report
to Stockholders, a copy of which is filed as Exhibit 13 to this Report.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item is incorporated herein by reference to
pages 22 through 26 of the Company's 1994 Annual Report to Stockholders, a
copy of which is filed as Exhibit 13 to this Report.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated herein by reference to
pages 27 through 43 and the Selected Quarterly Financial Data (unaudited) on
page 48 of the Company's 1994 Annual Report to Stockholders, a copy of which
is filed as Exhibit 13 to this Report.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10 - DIRECTORS OF THE REGISTRANT
The information required by this Item relating to Directors is incorporated
herein by reference to pages 5 through 7 and pages 16 through 17 of the
Company's proxy statement dated August 5, 1994, to be filed with the
Securities and Exchange Commission pursuant to Section 14(a) of the
Securities Exchange Act of 1934.
ITEM 11 - EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by reference to
pages 8 through 15 of the Company's proxy statement dated August 5, 1994, to
be filed with the Securities and Exchange Commission pursuant to Section
14(a) of the Securities Exchange Act of 1934.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein by reference to
pages 3 and 4 of the Company's proxy statement dated August 5, 1994, to be
filed with the Securities and Exchange Commission pursuant to Section 14(a)
of the Securities Exchange Act of 1934.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein by reference to
page 12 of the Company's proxy statement dated August 5, 1994, to be filed
with the Securities and Exchange Commission pursuant to Section 14(a) of the
Securities Exchange Act of 1934.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements of the Company
The following financial statements of Fluke Corporation and Subsidiaries are
incorporated herein by reference to pages 27 through 43 of the Company's
1994 Annual Report to Stockholders, a copy of which is filed as Exhibit 13
to this Report.
1. Consolidated Balance Sheets as of April 29, 1994, April 30, 1993 and
September 25, 1992.
2. Consolidated Statements of Income for the year ended April 29, 1994, the
seven months ended April 30, 1993 and for each of the two years in the
period ended September 25, 1992.
3. Consolidated Statements of Cash Flows for the year ended April 29, 1994,
the seven months ended April 30, 1993 and for each of the two years in the
period ended September 25, 1992.
4. Consolidated Statements of Stockholders' Equity for the year ended April
29, 1994, the seven months ended April 30, 1993 and for each of the two
years in the period ended September 25, 1992.
5. Notes to Consolidated Financial Statements.
(a)(2) Financial Statement Schedules
The following additional information should be read in conjunction with the
Consolidated Financial Statements of the Company described in Item 14(a)(1):
Schedule V Property, Plant and Equipment
Schedule VI Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment
Schedule VIII Valuation and Qualifying Accounts
Schedule IX Short-term Borrowings
Schedule X Supplementary Income Statement Information
Schedules other than those listed above are omitted because they are not
required or are not applicable, or because the information is furnished
elsewhere in the financial statements or the notes thereto.
(a)(3) Index to Exhibits
Exhibit Page No.
No. Exhibit Sequential
Numbering System
3. Articles of Incorporation and Bylaws.
3.1 Restated copy of Articles of
Incorporation as amended on August 11, 1993.
3.2 Conformed Copy of Bylaws as amended
through November 12, 1992 (incorporated by
reference to Exhibit 3.2 to the Company's Form
10-K Report for Fiscal Year ended September 25,
1992).
4. Instruments Defining the Rights of
Security Holders, Including Indentures.
4.1 Stockholders Rights Plan (incorporated
by reference to the Company's Form 8A Report
dated July 11, 1988), the First Amendment to the
Stockholders Rights Plan (incorporated by
reference to the Company's Form 8A Report dated
May 2, 1989) and the Second Amendment to the
Stockholders Rights Plan (incorporated by
reference to the Company's Form 8A report dated
February 15, 1990).
10. Material Contracts.
10.1 1990 Stock Incentive Plan of the Company
(incorporated by reference to Exhibit 10.11 of
the Company's Form 10-K Report for the Fiscal
Year ended September 27, 1991).
10.2 Stock Option Plan for Outside Directors
(incorporated by reference to Exhibit 10.12 of
the Company's Form 10-K Report for the Fiscal
Year ended September 27, 1991).
10.3 Employment Agreement dated September 5,
1991 between the Company and William G.
Parzybok, Jr. (incorporated by reference to
Exhibit 10.7 of the Company's Form 10-K Report
for the Fiscal Year ended September 27, 1992).
10.4 Employment Agreement dated September 5,
1991 between the Company and George M. Winn
(incorporated by reference to Exhibit 10.8 of
the Company's Form 10-K Report for the Fiscal
Year ended September 27, 1992).
10.5 Employment Agreement dated September 5,
1991 between the Company and Ronald R. Wambolt
(incorporated by reference to Exhibit 10.9 of
the Company's Form 10-K Report for the Fiscal
Year ended September 27, 1992).
10.6 Employment Agreement dated September 5,
1991 between the Company and Richard W. Van Saun
(incorporated by reference to Exhibit 10.10 of
the Company's Form 10-K Report for the Fiscal
Year ended September 27, 1992).
10.7 Change of Control Agreement dated
September 5, 1991 between the Company and John
R. Smith. Other executive officers of the
Company have identical Change Of Control
Agreements with the Company (incorporated by
reference to Exhibit 10.12 of the Company's Form
10-K Report for the Fiscal Year ended April 30,
1993).
10.8 Annual Variable Compensation Policy
(incorporated by reference to Exhibit 10.17 of
the Company's Form 10-K Report for the Fiscal
Year ended April 30, 1993).
10.9 Purchase Agreement between the Company
and Philips Electronics N.V. dated February 26,
1993 (incorporated by reference to Exhibit 10.18
of the Company's Form 10-K Report for the Fiscal
Year ended April 30, 1993).
10.10 Stock Purchase Agreement between the
Company and Philips Electronics N.V. dated May
26, 1993 (incorporated by reference to Exhibit
10.19 of the Company's Form 10-K Report for the
Fiscal Year ended April 30, 1993).
10.11 Fluke Corporation 1988 Stock Incentive
Plan as amended on June 10, 1993 and approved by
stockholders on September 29, 1993.
10.12 Deferred Compensation Plan for Directors
of Fluke Corporation as amended on April 29,
1994.
10.13 Fluke Corporation Supplemental
Retirement Income Plan as amended on June 22,
1994.
11. Computation of Earnings Per Share.
13. 1994 Annual Report to Stockholders.
18. Preferability letter from Ernst & Young,
independent auditors, dated July 22, 1993
regarding Change in Accounting Principle
(incorporated by reference to Exhibit 18 of the
Company's Form 10-K Report for the Fiscal Year
ended April 30, 1993).
21 Subsidiaries.
23.1 Consent of Ernst & Young, independent
auditors, dated July 28, 1994.
Item 14 (b) Reports on Form 8-K.
No reports on Form 8-K were filed during the
last quarter of the Company's Fiscal Year ended
April 29, 1994.
Item 14 (c) Exhibits: See "Index to Exhibits"
at Item 14(a)(3) above.
Item 14 (d) Financial Statement Schedules:
Schedules required to be filed in response to
this portion of Item 14 are listed above in Item
14 (a)(2).
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FLUKE CORPORATION
(Registrant)
/s/ George M. Winn President
George M. Winn Chief Operating Officer July 25, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Signature Title Date
/s/ William G. Parzybok, Jr. Chairman of the Board July 25, 1994
William G. Parzybok, Jr. Chief Executive Officer
/s/ George M. Winn President, Chief Operating July 25, 1994
George M. Winn Officer and Director
/s/ Barry L. Rowan Vice President July 25, 1994
Barry L. Rowan Chief Financial Officer
/s/ John R. Smith Vice President, Treasurer July 25, 1994
John R. Smith
/s/ J. Peter Bingham Director July 25, 1994
J. Peter Bingham
/s/ Philip M. Condit Director July 25, 1994
Philip M. Condit
/s/ John D. Durbin Director July 25, 1994
John D. Durbin
/s/ David L. Fluke Director July 25, 1994
David L. Fluke
/s/ John M. Fluke, Jr. Director July 25, 1994
John M. Fluke, Jr.
/s/ Robert S. Miller, Jr. Director July 25, 1994
Robert S. Miller, Jr.
/s/ Dr. David S. Potter Director July 25, 1994
Dr. David S. Potter
/s/ N. Stewart Rogers Director July 25, 1994
N. Stewart Rogers
/s/ Stephen C. Tumminello Director July 25, 1994
Stephen C. Tumminello
/s/ James E. Warjone Director July 25, 1994
James E. Warjone
<PAGE>
<TABLE>
Schedule V
PROPERTY, PLANT AND EQUIPMENT
(in thousands)
<CAPTION>
Column A Column B Column C Column D Column E Column F
Balance at Balance at
Beginning Other End of
Classification of Period Additions Retirements Changes Period
<S> <C> <C> <C> <C> <C>
Year ended September 27, 1991:
Land $ 5,622 --- --- --- $ 5,622
Buildings 45,416 $ 1,162 $ 274 --- 46,304
Machinery and Equipment 75,686 9,249 6,345 --- 78,590
Construction in Progress 5,935 538 --- --- 6,473
$132,659 $10,949 $ 6,619 --- $136,989
Year ended September 25, 1992:
Land $ 5,622 $ 499 --- --- $ 6,121
Buildings 46,304 218 $ 21 $ (421) 46,080
Machinery and Equipment 78,590 13,618 6,312 421 86,317
Construction in Progress 6,473 (4,252) --- --- 2,221
$136,989 $10,083 $ 6,333 --- $140,739
Seven months ended April 30, 1993:
Land $ 6,121 $ 60 --- --- $ 6,181
Buildings 46,080 374 $ 20 --- 46,434
Machinery and Equipment 86,317 5,631 4,080 --- 87,868
Construction in Progress 2,221 96 --- --- 2,317
$140,739 $ 6,161 $ 4,100 --- $142,800
Year ended April 29, 1994:
Land $ 6,181 --- --- --- $ 6,181
Buildings 46,434 $ 530 $ 303 --- 46,661
Machinery and Equipment 87,868 12,397 13,660 $6,801 93,406
Construction in Progress 2,317 123 --- --- 2,440
$142,800 $13,050 $13,963 $6,801 $148,688
</TABLE>
Column E contains items reclassified from Buildings to Machinery and
Equipment, and the Property, Plant and Equipment obtained in the acquisition
of the Philips test and measurement business.
<PAGE>
<TABLE>
Schedule VI
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
(in thousands)
<CAPTION>
Column A Column B Column C Column D Column E Column F
Balance at Charged to Balance at
Beginning Costs and Other End of
Classification of Period Expenses Retirements Changes Period
<S> <C> <C> <C> <C> <C>
Year ended September 27, 1991:
Buildings $17,218 $ 1,902 $ 136 --- $18,984
Machinery and Equipment 58,679 8,127 6,067 --- 60,739
$75,897 $10,029 $ 6,203 --- $79,723
Year ended September 25, 1992:
Buildings $18,984 $ 1,629 $ 20 $(315) $20,278
Machinery and Equipment 60,739 9,268 5,971 315 64,351
$79,723 $10,897 $ 5,991 --- $84,629
Seven months ended April 30, 1993:
Buildings $20,278 $ 944 $ 15 --- $21,207
Machinery and Equipment 64,351 5,626 3,475 --- 66,502
$84,629 $ 6,570 $ 3,490 --- $87,709
Year ended April 29, 1994:
Buildings $21,207 $ 1,635 $ 207 $(548) $22,087
Machinery and Equipment 66,502 12,851 13,576 548 66,325
$87,709 $14,486 $13,783 --- $88,412
</TABLE>
Column E contains items reclassified from Buildings to Machinery and
Equipment.
The annual provision for depreciation has been computed in accordance with
the following ranges of useful lives:
Buildings, including improvements 5 - 40 years
Machinery and Equipment 3 - 8 years
<PAGE>
<TABLE>
Schedule VIII
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<CAPTION>
Column A Column B Column C<F1> Column D Column F
Balance at Additions Balance at
Beginning Charged to End of
Classification of Period Costs and Expense Deductions <F2> Period
<S> <C> <C> <C> <C>
Year ended September 27, 1991:
Allowance for Doubtful
Accounts Receivable $437 $236 $219 $454
Year ended September 25, 1992:
Allowance for Doubtful
Accounts Receivable $454 $228 $276 $406
Seven months ended April 30, 1993:
Allowance for Doubtful
Accounts Receivable $406 $121 $ 51 $476
Year ended April 29, 1994:
Allowance for Doubtful
Accounts Receivable $476 $440 $330 $586
<FN>
<F1> Column C(2) has been omitted because the answer would be none.
<F2> Write-off of uncollectible accounts receivable less recoveries.
</TABLE>
<PAGE>
<TABLE>
Schedule IX
SHORT-TERM BORROWINGS
(in thousands)
<CAPTION>
Column A Column B Column C Column D Column E Column F
Maximum Amount Average Amount Weighted Average
Balance at Outstanding Outstanding Interest Rate
Category of Aggregate End Weighted Average During the During the During the
Short-Term Borrowing of Period Interest Rate<F1> Period Period<F2> Period<F3>
<S> <C> <C> <C> <C> <C>
Year ended
September 27, 1991:
Notes Payable to Banks $704 8.1% $2,579 $402 8.1%
Year ended
September 25, 1992:
Notes Payable to Banks $781 5.5% $1,720 $714 6.5%
Seven months ended
April 30, 1993:
Notes Payable to Banks --- --- $ 887 $331 5.6%
Year ended
April 29, 1994:
Notes Payable to Banks --- --- $ 935 $203 4.5%
<FN>
<F1> The weighted average interest rate (Column C) is the actual interest
rate being paid at year-end on Column B.
<F2> The average amount outstanding during the period (Column E) was
computed by dividing the total of the month-end outstanding principal
balances including the beginning of the year balance by 13.
<F3> The weighted average interest rate during the period (Column F) was
computed by dividing the actual interest expense by the actual short-term
debt incurred during the period.
</TABLE>
<PAGE>
<TABLE>
Schedule X
SUPPLEMENTARY INCOME STATEMENT INFORMATION CHARGED TO COSTS AND EXPENSES
(in thousands)
<CAPTION>
Item Year Ended Seven Months Ended Year Ended Year Ended
April 29, 1994 April 30, 1993 September 25, 1992 September 27, 1991
<S> <C> <C> <C> <C>
Maintenance and repair $ 4,963 $2,557 $ 4,869 $ 4,874
Depreciation and
amortization of
intangible assets $17,071 $7,091 $11,460 $10,752
Taxes, other than
payroll and income taxes $ 1,798 $ 681 $ 1,562 $ 1,433
Advertising costs $15,461 $6,521 $ 9,804 $ 9,129
</TABLE>
Specified items omitted from the above summary are less than 1 percent of
revenues.
EXHIBIT 3.1
RESTATED ARTICLES OF INCORPORATION OF FLUKE CORPORATION
ARTICLE I
Name
The name of this Corporation shall be Fluke Corporation.
ARTICLE II
Purposes
The purposes of the Corporation shall be:
A. To maximize the long-term growth of the value of the Corporation
through the generation of profit on the capital invested and through the
long-term growth of the capital base. The Board of Directors,
management and employees of the Corporation will continually work to
fulfill this purpose by:
1. Gaining and retaining customers through a commitment to quality
products, service and support;
2. Recognizing the necessity of earning an adequate profit that
reasonably balances the risks and rewards of various business
opportunities;
3. Emphasizing that people are the most important asset of the
Corporation and insuring that each employee will be provided with an
equal opportunity for individual growth through training, advancement,
recognition of achievement and involvement in the business process;
4. Identifying and developing strategic business opportunities where
the Corporation has the ability to contribute and be rewarded for the
advancement of technology, manufacturing processes or marketing;
5. Recognizing the necessity of corporate growth so that the
Corporation has the ability to attract and retain superior personnel and
provide employment and advancement opportunities;
6. Developing and maintaining a corporate environment that encourages
creativity, initiative, freedom of thought and fairness within the
context of a superior management and organizational structure;
7. Recognizing the need to conduct all business activities within the
law and according to the highest ethical standards; and
8. Committing to be actively involved as a responsible corporate
citizen and as a defender and promoter of the free enterprise system.
B. To transact any and all lawful business for which corporations may
be organized under the Washington Business Corporation Act.
ARTICLE III
Duration
The duration of this Corporation shall be in perpetuity.
ARTICLE IV
Capital Stock
A. The total number of shares of all classes of stock which the
Corporation is authorized to issue is twenty-two million shares
(22,000,000) of $.25 par value, divided into two classes, consisting of
a class of twenty million (20,000,000) shares of Common Stock of $.25
par value, and a class of two million (2,000,000) shares of Preferred
Stock of $.25 par value.
B. The Preferred Stock may be issued from time to time in one or more
series in any manner permitted by law and the provisions of the Articles
of Incorporation of the Corporation, as determined from time to time by
the Board of Directors and stated in the resolution or resolutions
providing for the issuances thereof, prior to the issuances of any
shares thereof. The Board of Directors shall have the authority to fix
and determine, subject to the provisions hereof, the rights and
preferences of the shares of any series so established. Unless
otherwise provided in the resolution establishing a series of shares of
Preferred Stock, prior to the issue of any shares of a series so
established or to be established, the Board of Directors may, by
resolution, amend the relative rights and preferences of the shares of
such series, and, after the issue of shares of a series whose number has
been designated by the Board of Directors, the resolution establishing
the series may be amended by the Board of Directors to decrease (but not
below the number of shares of such series then outstanding) the number
of shares of that series.
ARTICLE V
Certain Repurchases of Shares
A. For purposes of this Article V:
1. A "person" shall mean any individual, firm, corporation,
partnership, association, joint stock company, trust, unincorporated
organization, government or political subdivision thereof, or other
entity.
2. "Interested Stockholder" shall mean any person (other than the
Corporation or any Subsidiary) who or which:
(a) is the beneficial owner, directly or indirectly, of 5% or more
of the voting power of the outstanding Common Stock; or
(b) at any time within the two-year period immediately prior to the
date in question was the beneficial owner, directly or indirectly, of 5%
or more of the voting power of the then outstanding Common Stock; or
(c) is an assignee of, or has otherwise succeeded to, any shares of
Common Stock which were at any time within the two-year period
immediately prior to the date in question beneficially owned by an
Interested Stockholder, if such assignment or succession shall have
occurred in the course of a transaction or series of transactions not
involving a public offering within the meaning of the Securities Act of
1933.
3. A person shall be a "beneficial owner" of any Common Stock:
(a) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; or
(b) which such person or any of its Affiliates or Associates has
(i) the right to acquire (whether such right is exercisable immediately
or only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise, or (ii) the right to
vote pursuant to any agreement, arrangement or understanding; or
(c) which are beneficially owned, directly or indirectly, by any
other person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares of
Common Stock.
The term "beneficially owned" shall have the meaning ascribed to such
term in Rule 13d-3 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in
effect on May 29, 1986. For the purpose of determining the percentage
of stock beneficially owned, the number of shares of Common Stock deemed
to be outstanding shall include shares deemed owned through application
of this paragraph 3, but shall not include any other shares of Common
Stock which may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or
options, or otherwise.
4. An "Affiliate" of a specified person is a person that directly, or
indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the person specified.
5. The term "Associate" used to indicate a relationship with any
person means (a) any corporation or organization (other than the
Corporation or a Subsidiary) of which such person is an officer or
partner or is, directly or indirectly, the beneficial owner of 10
percent or more of any class of equity securities, (b) any trust or
estate in which such person has a substantial beneficial interest or as
to which such person serves as trustee or in a similar fiduciary
capacity, and (c) any relative or spouse of such person, or any relative
of such spouse, who has the same home as such person or who is a
Director or officer of the Corporation or any of its parents or
Subsidiaries.
6. "Subsidiary" means any corporation of which a majority of each
class or series of equity security is owned, directly or indirectly, by
the Corporation.
7. "Market price" means the average closing price for the ten trading
days prior to the offering date of the Company's Common Stock as
recorded on the principal United States securities exchange on which
such Common Stock is listed or if such Common Stock is not listed on any
such exchange, the average closing bid quotation for the ten trading
days prior to the offering date of the National Association of
Securities Dealers, Inc. Automated Quotations System or any other system
of reporting or ascertaining quotations then in use. The offering date
shall be the date that a written offer to sell Common Stock is received
by the Company from an Interested Stockholder.
B. Any purchase by the Corporation, directly or indirectly, of shares
of Common Stock from an Interested Stockholder (other than pursuant to
an offer to the holders (other than Interested Stockholders) of all of
the outstanding shares of Common Stock and to such Interested
Stockholders, if any, as the Board of Directors may include in such
offer) at a price per share in excess of the Market Price at the time of
such purchase must be approved by the affirmative vote of the holders of
two-thirds of the voting power of the shares of Common Stock entitled to
be counted under this Article V. All outstanding shares of Common Stock
shall be entitled to be counted under this Article, except shares owned
by or voted under the control of any Interested Stockholder whose shares
are proposed to be purchased shall not be counted to determine whether
stockholders have approved a purchase for purposes of this Article. The
vote of shares owned by or voted under the control of an Interested
Stockholder whose shares are proposed to be purchased shall be counted
in determining whether a transaction is approved under the Washington
Business Corporation Act and other Articles hereof (except to the extent
limited therein) and for purposes of determining a quorum.
ARTICLE VI
Certain Business Transactions
A. 1. From and after the time that the Corporation is made aware of
the existence of a Substantial Stockholder (as hereinafter defined) and
so long as there continues to be a Substantial Stockholder, in addition
to any affirmative vote required by law or these Articles of
Incorporation, and except as otherwise expressly provided in paragraph B
of this Article VI:
(a) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) or any exchange of shares of the
Corporation or any Subsidiary pursuant to a plan of exchange;
(b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with
the Corporation or any Subsidiary of any assets, securities or
commitments of any person having an aggregate Fair Market Value (as
hereinafter defined) of Ten Million Dollars ($10,000,000) or more;
(c) any reclassification of securities (including any combination
of shares or reverse stock split), or recapitalization or reorganization
of the Corporation, or any merger or consolidation of the Corporation
with any of its Subsidiaries;
(d) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of, or any security arrangement, investment, loan, advance,
guarantee, agreement to purchase, agreement to pay, extension of credit,
joint-venture participation or other arrangement involving any assets,
securities or commitments of the Corporation or any Subsidiary, or any
issuance, transfer or sale of any securities of the Corporation or any
Subsidiary, or any combination of the foregoing (whether in one
transaction or a series of transactions), having an aggregate Fair
Market Value of, and/or involving an aggregate amount of, Ten Million
Dollars ($10,000,000) or more, and/or constituting substantially all, or
an integral part of, the assets or business of a line of business of the
Corporation or any Subsidiary, and/or involving aggregate commitments of
Ten Million Dollars ($10,000,000) or more;
(e) the adoption of any plan or proposal for the liquidation or
dissolution (or revocation thereof) of the Corporation, including any
plan or proposal for shortening the duration of the Corporation; or
(f) any agreement, contract or other arrangement providing for any
one or more of the actions specified in the foregoing clauses (a) to
(e);
shall require the affirmative vote of the holders of at least eighty
percent (80%) of the voting power of the outstanding shares of Common
Stock, in addition to any other vote required for such action by law or
the provisions of any other class or series of stock of the Corporation.
Such affirmative vote shall be required notwithstanding the fact that
no vote may be required, or that a lesser percentage may be specified,
by law or in any agreement with any national securities exchange or
otherwise.
2. The term "Business Transaction" used in this Article VI shall mean
any transaction which is referred to in any one or more of clauses (a)
through (f) of paragraph A.1 of this Article VI.
3. This paragraph A of this Article VI shall not apply with respect
to purchases and/or sales of goods, services and products, made in the
ordinary course of the Corporation's business, consistent with its past
practice.
B. The provisions of paragraph A of this Article VI shall not be
applicable to any Business Transaction, and such Business Transaction
shall require only such affirmative vote as is required by law or any
other provision of these Articles of Incorporation, if the Business
Transaction shall have been approved by a majority of the Continuing
Directors (as hereinafter defined), voting separately and as a subclass
of directors.
C. For the purposes of this Article VI:
1. "Continuing Director" means any member of the Board of Directors
who was a member of the Board of Directors on May 29, 1986 or who is
elected to the Board of Directors after May 29, 1986 upon the
recommendation of a majority of the Continuing Directors, voting
separately and as a subclass of Directors on such recommendation.
2. "Fair Market Value" means: (a) in the case of stock, the highest
closing sale price during the thirty-day period immediately preceding
the date in question of a share of such stock on the principal United
States securities exchange registered under the Exchange Act on which
such stock is listed, or, if such stock is not listed on any such
exchange, the highest closing bid quotation with respect to a share of
such stock during the thirty-day period preceding the date in question
on the National Association of Securities Dealers, Inc. Automated
Quotations System or any system then in use or if no such quotations are
available, the fair market value on the date in question of a share of
such stock as determined in good faith by majority vote of the
Continuing Directors; and (b) in the case of property other than cash or
stock, the fair market value of such property on the date in question as
determined in good faith by majority vote of the Continuing Directors.
3. "Substantial Stockholder" at any particular time means any person
(other than the Corporation or any Subsidiary), who or which:
(a) is at such time the beneficial owner, directly or indirectly,
of shares of the Corporation having ten percent (10%) or more of the
votes entitled to be cast by the holders of all outstanding shares of
Common Stock;
(b) at any time within the two-year period immediately prior to
such time was the beneficial owner, directly or indirectly, of shares of
the Corporation having ten percent (10%) or more of the votes entitled
to be cast by the holders of all outstanding shares of Common Stock; or
(c) is at such time an assignee of or has otherwise succeeded to
the beneficial ownership of any shares of Common Stock which were at any
time within the two-year period immediately prior to such time
beneficially owned by any Substantial Stockholder, if such assignment or
succession shall have occurred in the course of a transaction or series
of transactions not involving a public offering within the meaning of
the Securities Act of 1933;
provided, however, that "Substantial Stockholder" shall not mean any
person who or which, as of May 29, 1986, met any of the conditions set
forth in clauses (a), (b) or (c).
4. "Subsidiary" means any corporation of which a majority of any
class or series of equity security is owned, directly or indirectly, by
the Corporation; provided, however, that for the purposes of the
definition of Substantial Shareholder set forth in paragraph C. 3 of
this Article VI, the term "Subsidiary" shall mean only a corporation of
which a majority of each class or series of equity security is owned,
directly or indirectly, by the Corporation.
5. The terms "Affiliate," "Associate," "beneficially owned,"
"beneficial owner" and "person" shall have the respective definitions
given to them in Article V of these Articles of Incorporation, which
definitions are hereby incorporated by reference into this Article VI.
D. For the purposes of this Article VI, the Continuing Directors shall
have the power and duty to determine, by majority vote, on the basis of
information known to them after reasonable inquiry, whether any
transaction specified in paragraphs A.1(b) and A.1(d) meets the monetary
tests set forth herein.
E. The provisions of this Article VI shall not be construed to impose
any fiduciary duty, obligation or responsibility on the Board of
Directors, or any member thereof, to approve such Business Transaction
or recommend its adoption or approval to the stockholders, nor shall any
provision of this Article VI be construed as limiting, prohibiting or
otherwise restricting in any manner the Board of Directors, or any
member thereof, with respect to evaluations of or actions and responses
taken with respect to such Business Transaction.
F. No action taken by, or omission of, a Continuing Director in the
exercise (or nonexercise) of the authority and discharge of the
responsibilities conferred or imposed upon Continuing Directors by this
Article VI shall be deemed to be, or involve, a breach of the fiduciary
duty of such Continuing Director to the stockholders of the Corporation
unless it can be demonstrated by the person asserting such breach that
the Continuing Director acted (or failed to act) in bad faith and in a
manner inconsistent with the provisions and spirit of this Article VI.
G. All reasonable expenses (including, without limitation, attorneys'
fees and disbursements) incurred by the Continuing Directors in the
exercise of this authority and discharge of the responsibilities,
conferred or imposed upon them by this Article VI (or incurred by reason
or as a consequence of the exercise of such authority or the discharge
of such responsibilities, including, without limitation, all attorneys'
fees and disbursements incurred in asserting or defending any claim
arising out of such exercise) shall be paid by the Corporation. The
provisions of this paragraph G of this Article VI shall be deemed to be
a contract between the Corporation and the Continuing Directors, and it
shall be the duty of the Chief Financial Officer of the Corporation to
make prompt payment thereof on the written request of a majority of the
Continuing Directors, accompanied by appropriate vouchers and invoices.
The rights conferred upon the Continuing Directors, and the obligations
imposed upon the Corporation, by this paragraph G of this Article VI
shall be in addition to the rights of the Continuing Directors, as
directors, to indemnification under the Bylaws of the Corporation;
provided, however, that the Corporation shall not, by reason of this
sentence, be obliged to make duplicate payments of any item of expense
incurred by a Continuing Director.
ARTICLE VII
Directors
A. The original number of Directors of the Corporation shall be three
and thereafter the number of Directors shall be fixed by the Bylaws.
When the Board of Directors shall consist of nine or more members, the
Directors shall be divided into three classes, each class to be as
nearly equal in number as possible, the term of office of Directors of
the first class to expire at the first annual meeting of stockholders
after their election, that of the second class to expire at the second
annual meeting after their election, and that of the third class to
expire at the third annual meeting after their election. At each annual
meeting after such classification, the number of Directors equal to the
number of the class whose term expires at the time of such meeting shall
be elected to hold office until the third succeeding annual meeting.
B. Any Director or the entire Board of Directors (to the extent elected
by the holders of Common Stock) may be removed from office only for
cause and only by the affirmative vote of the holders of eighty percent
(80%) of the voting power of the outstanding shares of Common Stock.
C. In evaluating an offer by another party to make a tender offer or
exchange offer for securities of the Corporation, or to effect a merger
or consolidation involving the Corporation, or to acquire all or
substantially all the assets of the Corporation, or otherwise to acquire
control of the Corporation, the Board of Directors, in considering the
best interests of the Corporation, may consider the extent to which any
such offer furthers the purposes of the Corporation as stated herein and
may consider the social, legal, economic or other effects of any such
offer upon employees, customers, suppliers and other constituencies of
the Corporation, communities in which the Corporation is located or
operates, and all other relevant factors.
D. Advance notice of nominations for the election of directors, other
than nominations by the Board of Directors or a committee thereof, and
advance notice of business to be conducted at any annual meeting of
stockholders, other than business proposed by the Board of Directors or
a committee thereof, shall be given within the time and in the manner
provided in the Bylaws.
ARTICLE VIII
No Preemptive Rights
No holder of any share of the capital stock of any class of the
Corporation shall have any preemptive or preferential right of
subscription to any class of stock of the Corporation, whether now or
hereafter authorized, or to any obligations converted into capital stock
of the Corporation, which may be issued or sold, nor any right of
subscription other than such, if any, as the Board of Directors in its
discretion may from time to time determine and at such price as the
Board of Directors from time to time may fix.
ARTICLE IX
Special Meetings of Stockholders
Special meetings of the stockholders of the Corporation may be called
only by the Board of Directors or by a committee of the Board of
Directors.
ARTICLE X
Actions Relating to the Bylaws
The Bylaws of the Corporation may be adopted, altered, amended or
repealed or new Bylaws enacted only: (A) upon receiving the affirmative
vote of a majority of the entire Board of Directors and of a majority of
the Continuing Directors (as defined in Article VI), voting separately
and as a subclass of directors; or (B) at any annual meeting of the
stockholders, if notice thereof is contained in the notice of such
meeting, (or at any special meeting thereof duly called for that
purpose) by the affirmative vote of the holders of eighty percent (80%)
of the voting power of the outstanding shares of Common Stock, in
addition to any other vote required for such action by law or the
provisions of any other class or series of stock of the Corporation.
ARTICLE XI
Limitation on Director Liability
To the fullest extent permitted by Washington law as now or hereafter in
effect, a Director of this Corporation shall not be liable to this
Corporation or its stockholders for monetary damages for his or her
conduct as a Director. Any amendment to or repeal of this Article XI
shall not adversely affect any right of a Director of this Corporation
hereunder with respect to any acts or omissions of such Director
occurring prior to such amendment or repeal.
ARTICLE XII
Indemnification of Directors
To the fullest extent permitted by Washington law as now or hereafter in
effect, this Corporation is authorized to indemnify any Director of this
Corporation. The Board of Directors shall be entitled to determine the
terms of such indemnification, including advance of expenses, and to
give effect thereto through the adoption of Bylaws, approval of
agreements, or by any other manner approved by the Board of Directors.
Any amendment to or repeal of this Article XII shall not adversely
affect any right of a Director of this Corporation hereunder with
respect to any right to indemnification that arises prior to such
amendment or repeal.
ARTICLE XIII
Certain Amendments to These Articles
Notwithstanding any other provision of these Articles of Incorporation
or the Bylaws of the Corporation (and notwithstanding the fact that a
lesser percentage may be specified by law, these Articles of
Incorporation or such Bylaws), any proposal to amend or repeal, or
directly or indirectly to adopt any provisions inconsistent with,
Article V, Article VI, Article VII, Article IX, Article X, or this
Article XI shall require either: (A) the approval of a majority of the
entire Board of Directors, and the approval of a majority of the
Continuing Directors (as defined in Article VI), voting separately and
as a subclass of Directors, and the affirmative vote at a duly called
meeting of stockholders of the holders of at least sixty-six and two-
thirds percent (66-2/3%) of the voting power of the outstanding shares
of Common Stock, or (B) the affirmative vote at a duly called meeting of
stockholders of the holders of at least eighty percent (80%) of the
voting power of the outstanding shares of Common Stock, in either case
in addition to any other vote required for such action by law or the
provisions of any other class or series of stock of the Corporation.
Restated as of August 11, 1993
EXHIBIT 10.11
FLUKE CORPORATION
1988 STOCK INCENTIVE PLAN
Section 1
Purpose
1.1 The purpose of The Fluke Corporation 1988 Stock Incentive Plan
(Plan) is to promote the interests of Fluke Corporation (Company) and
its stockholders by strengthening its ability to attract and retain
officers, employees, and other persons providing significant services to
the Company and its subsidiaries by furnishing suitable recognition of
their ability and industry to contribute materially to the success of
the Company. The Plan provides for the grant of stock options,
restricted stock grants, and/or stock appreciation rights in accordance
with the terms and conditions set forth below.
Section 2
Definitions
2.1 Unless otherwise required by the context, the following terms when
used in the Plan shall have the meanings set forth in this section 2.1:
(a) Board: The Board of Directors of the Company.
(b) Change of Control: As used in this Plan, a Change of Control
shall be deemed to occur (i) upon the date the Company is informed by
receiving a report on Schedule 13D of the Exchange Act or similar report
that any person (as such term is used in sections 13(d) and 14(d)(2) of
the Exchange Act), together with such person's Affiliates and Associates
as defined in Rule 12b-2 of the Exchange Act, is or has become the
"beneficial owner" (as defined in Rule 13d-3 of the Exchange Act;
provided, that a person shall not be deemed to beneficially own
securities acquired pursuant to the Employee Stock Purchase Plan of the
Company or other plans generally applicable to employees, officers or
Directors of the Company), directly or indirectly, of securities of the
Company representing 25 percent or more of the combined voting power of
the Company's then outstanding securities, except that there will not be
a Change of Control as the result of an acquisition of securities by the
Company, which by reducing the number of shares outstanding, increases
the proportionate number of shares beneficially owned by any person to
25 percent or more of the securities of the Company then outstanding;
provided, however, that if a person becomes the beneficial owner of 25
percent or more of the securities of the Company then outstanding by
reason of share purchases by the Company and shall, after such share
purchases by the Company, become the beneficial owner of any additional
securities of the Company, then a Change of Control will occur unless
such person disposes of such additional securities of the Company within
ten days, (ii) upon the first purchase of the Company's Common Stock
pursuant to a tender or exchange offer (other than a tender or exchange
offer made by the Company) seeking to acquire securities representing 25
percent or more of the combined voting power of the Company's then
outstanding securities, or (iii) upon the first date on which Continuing
Directors, as defined in Article VI of the Company's Articles of
Incorporation, cease for any reason to constitute at least a majority of
the Board of Directors.
(c) Code: The Internal Revenue Code of 1986, as amended and in
effect from time to time, and the temporary or final regulations of the
Secretary of the Treasury adopted pursuant to the Code.
(d) Committee: The Compensation Committee of the Board of
Directors.
(e) Common Stock: The Common Stock of the Company, $.25 par value.
(f) Exchange Act: The Securities Exchange Act of 1934, as amended.
(g) Fair Market Value: As applied to a specific date, Fair Market
Value shall be deemed to be the mean between the highest and lowest
quoted selling prices at which the Company's Common Stock was sold on
such date as reported in the Amex Composite Transactions by The Wall
Street Journal on such date or such other report as the Committee may
select, or if no Company Common Stock was traded on such date, on the
next preceding day on which the Company Common Stock was so traded.
Notwithstanding the foregoing, upon the exercise, during the thirty-day
period following a Change of Control, of a stock appreciation right
which is granted in connection with a nonqualified option, Fair Market
Value on the date of exercise shall be deemed to be the greater of (i)
the highest price per share of the Company Common Stock as reported in
the Amex Composite Transactions by The Wall Street Journal or such other
report as the Committee may select during the sixty-day period ending on
the day preceding the date of exercise of the stock appreciation right,
or (ii) if the Change of Control is one described in Clause (ii) of
section 2.1(b) or a transaction described in Section 5.2(b), the highest
price per share paid for the Company's Common Stock in connection with
such Change of Control.
(h) Incentive Stock Option: An Option which meets the requirements
of an Incentive Stock Option as defined in Section 422A of the Code, as
in effect at the time of grant of such option, or any statutory
provision that may hereafter replace such section.
(i) Option Price: The price per share of Common Stock at which an
option is exercisable.
(j Participant: An individual who is selected by the Committee to
participate in the Plan pursuant to Section 4.
(k) Permanent Disability: A Participant shall be deemed to have
become permanently disabled for purposes of this Plan if the Committee
shall find upon the basis of medical evidence satisfactory to it that
the Participant is totally disabled, whether due to physical or mental
condition, so as to be prevented from engaging in further comparable
employment by the Company or any of its subsidiaries and that such
disability will be permanent and continuous during the remainder of his
life.
(l) Nonqualified Option: Options which do not meet the
requirements of an Incentive Stock Option as defined in Section 422A of
the Code.
(m) Subsidiary: An entity that is designated by the Committee as a
subsidiary for purposes of this Plan and that is a corporation (or other
form of business association that is treated as a corporation for tax
purposes) of which shares (or other ownership interests) having more
than 50 percent of the voting power are owned or controlled, directly or
indirectly, by the Company so as to qualify as a "subsidiary
corporation" (within the meaning of Code Section 425(f)).
Section 3
Administration
3.1 The Plan shall be administered by the Compensation Committee of the
Board. No person shall serve as a member of the Committee unless at the
time of his appointment and service he shall be a "disinterested
person," as defined in Rule 16b-3 of the General Rules and Regulations
under the Exchange Act or any successor Act then in effect.
3.2 The Committee shall have full authority to construe and interpret
the Plan, to establish, amend and rescind rules and regulations relating
to the Plan, to select persons eligible to participate in the Plan, to
grant options, restricted stock and/or stock appreciation rights
thereunder, to administer the Plan, to make recommendations to the
Board, to take all such steps and make all such determinations in
connection with the Plan and the options, restricted stock, and/or stock
appreciation rights granted thereunder as it may deem necessary or
advisable, which determination shall be final and binding upon all
Participants.
Section 4
Eligibility
4.1 To be eligible for selection by the Committee to participate in the
Plan, an individual must be an officer, employee or other person
providing significant services to the Company, or of any Subsidiary, as
of the date on which the Committee grants to such individual an option,
restricted stock or stock appreciation right, and who in the judgment of
the Committee holds a position of responsibility and is able to
contribute substantially to the Company's continued success, provided
that non-employee Directors are not eligible under the terms of this
Plan. Each chosen individual to whom a stock option, restricted stock
grant or stock appreciation right is granted is hereinafter referred to
as a "Participant."
Section 5
Shares Available and Certain Adjustments
5.1 Subject to section 5.2(a) hereof, the maximum number of shares for
which stock options, restricted stock grants and stock appreciation
rights may at any time be granted under the Plan is 1,500,000 shares of
Common Stock, from shares repurchased by the Company or out of the
authorized but unissued shares of the Company, or partly out of each, as
shall be determined by the Board of Directors. Upon the expiration,
cancellation or termination in whole or in part of (a) unexercised
options, (b) restricted stock grants reverting to the Company, (c)
shares of Common Stock covered by an option, or portion thereof, which
are surrendered upon exercise of a stock appreciation right, and (d)
unexercised stock appreciation rights, shares of Common Stock which were
subject thereto shall again be available under the Plan.
5.2
(a) In the event of any change in the Common Stock through
reorganization, recapitalization, reclassification, stock dividend of 10
percent or greater, stock split, amendment to the Articles of
Incorporation of the Company, or reverse stock split, the Board shall
make an appropriate and proportionate adjustment in the number of shares
of Common Stock subject to an option, without any change in the
aggregate purchase price of the shares subject to an option, but with
corresponding adjustment to the exercise price per share and in the
number of shares covered by outstanding stock appreciation rights.
(b) Upon the effective date of a merger, consolidation or plan of
exchange (other than a merger, consolidation or plan of exchange
involving the Company in which the holders of voting securities of the
Company immediately prior to such transaction own at least 50 percent of
the voting power of the outstanding securities of the surviving
corporation or a parent of the surviving corporation after such
transaction), or a sale of all or substantially all the assets of the
Company, or a liquidation or dissolution of the Company, the Plan and
any option and stock appreciation right ("SAR") theretofore granted
hereunder shall terminate, unless provisions be made in writing in
connection with such transaction for the continuance of the Plan and for
the assumption of options and SARs theretofore granted, or the
substitution for such options and SARs of new options and new SARs
covering the shares of a successor corporation, or a parent, affiliate
or subsidiary thereof, with appropriate adjustments as to number and
kind of shares and prices thereof, in which event the Plan and the
options and SARs granted under it, or the new options and new SARs
substituted therefor, shall continue in the manner and under the terms
so provided.
(c) If provision is not made pursuant to the preceding section
5.2(b) in connection with such a transaction for the continuance of the
Plan and for the assumption of options and SARs, or the substitution for
such options and SARs of new options and new SARs covering the shares of
a successor employer corporation or a parent, affiliate or subsidiary
thereof, then each Participant under the Plan shall be entitled, prior
to the effective date of any such transaction, to purchase the full
number of shares under the option which the Participant otherwise would
have been entitled to purchase during the remaining term of such option,
and to exercise any SAR for the full number of shares under the SAR to
which the Participant otherwise would have been entitled to acquire upon
such exercise during the remaining term of such SAR, without regard to
any limitation on exercise which may be contained therein.
(d) Upon the occurrence of a Change of Control (unless the Board
shall consist of a majority of Continuing Directors, as defined in
Article VI of the Company's Articles of Incorporation, and the Board
shall determine otherwise by notice to Participants prior to or within
thirty days after such Change of Control), all outstanding options and
SARs shall become immediately exercisable in full for the remainder of
their terms, and the transferability restrictions on all outstanding
restricted stock grants shall automatically lapse.
Adjustments under this section shall be made by the Board, whose
determination as to what adjustments shall be made, and the extent
thereof, shall be final, binding and conclusive. No fractional share of
Common Stock shall be issued under the Plan or any such adjustment.
Section 6
Grant of Options
6.1 Options may be granted in such number and at such times during the
term of this Plan as the Committee shall determine, taking into account
the duties of the respective individuals, their present and potential
contributions to the success of the Company and such other factors as
the Committee shall deem relevant in accomplishing the purposes of the
Plan. The granting of an option shall take place when the Committee by
resolution, written consent or other appropriate action determines to
grant such an option to a particular Participant at a particular price.
Each option shall be evidenced by a written instrument delivered by or
on behalf of the Company containing provisions not inconsistent with the
Plan and such other or additional terms as the Committee may approve.
6.2 An option granted under the Plan may be either an Incentive Stock
Option or a Nonqualified Option, as designated by the Committee and as
indicated in the option agreement.
Section 7
Terms and Conditions of Options
7.1 Each provision of the Plan and each Incentive Stock Option granted
hereunder shall be construed so that such option shall qualify as an
Incentive Stock Option, and any provision thereof that cannot be so
construed shall be disregarded. Incentive Stock Options, in addition to
complying with the other provisions of the Plan relating to options
generally, shall be subject to the following conditions:
(a) Only officers and other employees of the Company, or of any
Subsidiary are eligible to be granted Incentive Stock Options.
(b) Except as provided in paragraph (c), the option price of the
Incentive Stock Options shall be 100 percent of the Fair Market Value of
the stock on the date of grant.
(c) An officer or other employee must not, at the time an Incentive
Stock Option is granted, own stock representing more than 10 percent of
the voting power of all classes of stock of the Company or of a
Subsidiary. This requirement is deemed waived if (i) the Option Price
of the Incentive Stock Option to be granted is at least 110 percent of
the Fair Market Value of the stock subject to the option, determined at
the time the option is granted, and (ii) the option is not exercisable
more than five years from the date the option is granted.
(d) The aggregate Fair Market Value (determined at the time of the
grant of the option) of the stock with respect to which Incentive Stock
Options are exercisable for the first time by an officer or other
employee during any calendar year may not exceed $100,000.
(e) Any other terms and conditions will be added which the
Committee determines, upon advice of counsel, must be imposed for the
option to be an Incentive Stock Option.
7.2 Except as otherwise provided in section 7.1, all Incentive Stock
Options and Nonqualified Options under the Plan shall be granted subject
to the following terms and conditions:
(a) The option price per share shall be determined by the Committee
at the time of grant. The option price may be more or less than or
equal to the fair market value of the shares covered by the option on
the date the option is granted, and the option price may fluctuate based
on criteria determined by the Committee, provided that in no event shall
the exercise price be less than 50 percent of the fair market value of
the shares on the date of grant.
(b) Options shall be exercisable at such time and under such
conditions as set forth in the option grant, but in no event shall any
Incentive Stock Option be exercisable later than the 10th anniversary of
the date of its grant and unless otherwise expressly provided therein,
no option shall extend for more than ten years.
(c) Shares of Common Stock covered by an option may be purchased at
one time or in such installments over the balance of the option period
as may be provided in the option grant. Any shares not purchased on the
applicable installment date may be purchased at one time or in such
installments over the balance of the option period as may be provided in
the option grant. Any shares not purchased on the applicable
installment date may be purchased thereafter at any time prior to the
final expiration of the option. To the extent that the right to
purchase shares has accrued thereunder, options may be exercised from
time to time by written notice to the Corporate Secretary of the Company
stating the number of shares with respect to which the option is being
exercised.
(d) The purchase price of shares purchased under options shall be
paid in full to the Company upon the exercise of the option either (i)
in cash or check, or (ii) at the discretion of the Committee, by
delivery at Fair Market Value, of Common Stock already owned by the
Participant, or any combination of cash and Common Stock. The Fair
Market Value of such Common Stock as delivered shall be valued as of the
day prior to delivery. A Participant shall have none of the rights of a
stockholder until the shares of Common Stock are issued to him.
(e) The Committee shall determine, with respect to each option, the
nature and extent of the restrictions, if any, to be imposed on the
shares of Common Stock which may be purchased thereunder including, but
not limited to, restrictions on the transferability of such shares
acquired through the exercise of such options for such periods as the
Committee may determine and, further, that in the event a Participant's
employment by the Company, or a Subsidiary, terminates during the period
in which such shares are nontransferable, the Participant shall be
required to sell such shares back to the Company at such prices as the
Committee may specify in the option.
(f) During a Participant's lifetime, the option may be exercisable
only by him and options shall not be transferable, other than by will or
the laws of descent and distribution. In the event of death of a
Participant, the option may be exercisable only by the Participant's
legal representative or beneficiaries, as provided in section 7.2(j).
(g) Upon the termination of a Participant's service for any reason
other than retirement, Permanent Disability or death, any option held by
such Participant shall be exercisable only to the extent that it was
then exercisable (unless the Committee shall determine in a particular
case that specific limitations and restrictions of the option shall not
apply), and such option shall expire, unless it sooner expires under
Section 7.2(b) or its terms, three (3) months after termination of
service, unless extended by special action of the Committee. Leaves of
absence for such periods and purposes conforming to the personnel policy
of the Company, or of its Subsidiaries as applicable, shall not be
deemed terminations or interruptions of employment. In case of an
Incentive Stock Option, a leave of absence of no more than ninety (90)
days (or, if longer, where a Participant's right to reinstatement by the
Company is guaranteed by statute or by contract) approved in writing by
the Board of Directors shall not be deemed a termination of a
Participant's employment with or contract to provide services to the
Company.
(h) Upon the termination of a Participant's service due to
retirement, any option held by such Participant shall become exercisable
in full (unless the Committee shall determine otherwise), and such
option shall expire, unless it sooner expires under Section 7.2(b) or
its terms, twelve (12) months after such Participant's retirement from
the Company or any Subsidiary (three (3) months if the option is an
Incentive Stock Option).
(i) Upon the termination of a Participant's service due to
Permanent Disability, any option held by such Participant shall become
exercisable in full (unless the Committee shall determine otherwise),
and such option shall expire, unless it sooner expires under Section
7.2(b) or its terms, twelve (12) months after such termination of
service.
(j) Upon the death of a Participant, whether during his period of
service or during the twelve-month period or the three-month period, as
the case may be, referred to in section 7.2(h) or 7.2(i), any option
held by such Participant shall become exercisable in full (unless the
Committee shall determine otherwise), and such option shall expire,
unless it sooner expires under Section 7.2(b) or its terms, twelve
months after the date of his death.
Section 8
Stock Appreciation Rights
8.1 The Committee may grant stock appreciation rights to any
Participant in connection with any options granted under the Plan,
either at the time of the grant of such option or at any time thereafter
during the term of the option. Such stock appreciation rights shall
cover the same shares covered by the options (or such lesser number of
shares of Common Stock as the Committee may determine) and shall, except
as provided in section 8.3 hereof, be subject to the same terms and
conditions as the related options including without limitation Section
5.2 of this Plan, and such further terms and conditions not inconsistent
with the Plan as shall from time to time be determined by the Committee.
8.2 Each stock appreciation right shall entitle the holder of the
related option to surrender to the Company unexercised the related
option, or any portion thereof, and to receive from the Company in
exchange therefor an amount equal to the excess of the Fair Market Value
of one share of Common Stock on the date the right is exercised over the
Option Price per share times the number of shares covered by the option,
or portion thereof, which is surrendered. Payment shall be made in
shares of Common Stock valued at Fair Market Value as of the date the
right is exercised rounded up to next full share. Stock appreciation
rights may be exercised from time to time upon actual receipt by the
Company of written notice stating the number of shares of Common Stock
with respect to which the stock appreciation right is being exercised.
8.3
(a) The right of a Participant to exercise a stock appreciation
right shall be cancelled if and to the extent the related option is
exercised. To the extent that a stock appreciation right is exercised,
the related option shall be deemed to have been surrendered,
unexercised.
(b) A holder of stock appreciation rights shall have none of the
rights of a stockholder until shares of Common Stock are issued to him
pursuant to his exercise of such rights.
Section 9
Restricted Stock Grants
9.1 The Committee may make grants of restricted stock in such number
and at such times as the Committee shall determine. The Committee may
make restricted stock grants to any Participant. The restricted stock
grants shall take place when the Committee by resolution, written
consent or other appropriate action, establishes a restricted stock
grant date, the Participants who will receive such grants, and the
number of granted shares for each Participant.
9.2 Stock certificates representing the number of restricted shares
granted to each Participant shall be issued as soon as practical after
the date of grant and delivered to each Participant, and each
Participant, by accepting delivery of the shares, agrees to be bound by
the terms of the grant as determined by the Committee. Such shares
shall bear a legend restricting transferability in accordance with the
terms of the grant. After the date of grant, any stock splits or stock
dividends paid on the shares would be granted subject to the same
transferability restrictions as the underlying shares upon which they
were paid. Shares subject to restrictions under the Plan may not be
sold, given, assigned, pledged, levied upon, nor may the shares or any
interest in the shares be transferred in any fashion. Any attempt to so
transfer the shares or any interest shall be void, and shall subject the
shares to return to the Company.
9.3 Restrictions on the shares will lapse over a period of time or in
compliance with the conditions as established by the Committee or
pursuant to any waiver of conditions by the Committee. The Committee
shall establish a procedure for the removal of the legend from
certificates representing shares no longer subject to the restrictions.
9.4 Restrictions shall automatically lapse upon the retirement, death,
or Permanent Disability of a Participant.
9.5 If a Participant's service with the Company or any of its
subsidiaries is terminated for any reason (other than retirement, death
or Permanent Disability), any shares still subject to the restrictions
must be returned to the Company unless the Committee expressly waives
the return provision for such Participant. A leave of absence approved
in writing by the Committee shall not constitute a termination of
service. Cash paid in lieu of fractional shares and cash dividends paid
upon shares granted under this Plan shall not be subject to any
transferability restrictions or reversion to the Company.
Section 10
Regulatory Approvals and Listing
10.1 The Committee shall have the right to require that each
Participant or other person who shall exercise an option, receive a
restricted stock grant, or exercise a stock appreciation right under the
Plan, and each person into whose name shares of Common Stock shall be
issued pursuant to the exercise of an option, restricted stock grant or
stock appreciation right represent and agree that any and all shares of
Common Stock purchased pursuant to this Plan are being purchased for
investment and not with a view to the distribution or resale thereof and
that such shares will not be sold except in accordance with such
restrictions or limitations as may be set forth in the option. This
section 10.1 shall be inoperative during any period of time when the
Company has obtained all necessary or advisable approvals from
governmental agencies and has completed all necessary or advisable
registrations or other qualifications of shares of Common Stock as to
which options may from time to time be granted as contemplated in
section 10.2 hereof.
10.2 No shares shall be issued and delivered upon exercise of any
option or stock appreciation right unless and until, in the opinion of
counsel for the Company, any applicable registration requirements of the
Securities Act of 1933, as amended, any applicable listing requirements
of any national securities exchange on which stock of the same class is
then listed, and any other requirements of law or of any regulatory
bodies having jurisdiction over such issuance and delivery, shall have
been fully complied with.
Section 11
Term of Plan
11.1 This Plan shall be void unless it is approved by the stockholders
of the Company within twelve months before or after the date the Plan is
adopted by the Board of Directors. Subject to the foregoing condition,
options, restricted stock grants and stock appreciation rights may be
granted pursuant to the Plan from time to time within the period
commencing with and ending ten years after the earlier of the adoption
of the Plan by the Board of Directors or the approval of the Plan by the
stockholders. Options and stock appreciation rights theretofore granted
may extend beyond that date and the terms and conditions of the Plan
shall continue to apply thereto and to shares of Common Stock acquired
upon exercise thereof.
Section 12
General Provisions
12.1 Nothing contained in the Plan, or in any option, restricted stock
grant or stock appreciation right granted pursuant to the Plan, shall
confer upon any employee any right with respect to continuance of
employment by the Company or a Subsidiary, nor interfere in any way with
the right of the Company or a Subsidiary to terminate the employment of
such employee at any time with or without assigning any reason therefor.
12.2 Appropriate provision shall be made for all taxes including any
tax imposed by Code Section 4999, required to be withheld in connection
with options, restricted stock grants and stock appreciation rights and
the exercise thereof under the applicable laws or regulations of any
governmental authority, whether federal, state or local and whether
domestic or foreign. The Company may withhold such taxes or may require
a Participant to pay such taxes in connection with such grant or
exercise.
Section 13
Amendment, Termination or Discontinuance of the Plan
13.1 Subject to the Board of Directors and section 13.2, the Committee
may from time to time make such amendments to the Plan as it may deem
proper and in the best interest of the Company without further approval
of the Board of Directors or stockholders of the Company, including, but
not limited to, any amendment necessary to ensure that the Company may
obtain any regulatory approval referred to in section 10 hereof;
provided, however, that no change in any option, restricted stock grant
or stock appreciation right theretofore granted may be made without the
consent of the Participant which would impair the right of the
Participant to acquire or retain Common Stock which he may have acquired
as a result of the Plan.
13.2 The Committee and the Board of Directors may not amend the Plan
without the approval of the stockholders of the Company as required by
applicable law to (a) increase the maximum number of shares of the
Company subject to the Plan, except as permitted by section 5.2, (b)
extend the period for the exercise of an option or a stock appreciation
right beyond the limit set forth in section 7.2(b), (c) extend the term
of the Plan, (d) reduce the option price at which options may be granted
under the Plan, or (e) change the class of eligible persons.
13.3 The Board of Directors may at any time suspend the operation of or
terminate the Plan with respect to any shares of the Company's Common
Stock not at the time subject to option or grant. Termination shall not
affect any right to repurchase shares or the forfeitability of shares
issued under the Plan.
Amended as of June 10, 1993 and approved by the Stockholders on
September 29, 1993
EXHIBIT 10.12
DEFERRED COMPENSATION PLAN
FOR DIRECTORS OF
FLUKE CORPORATION
(As Amended April 29, 1994)
ARTICLE I
Purpose of The Plan
The purpose of the Deferred Compensation Plan for Directors (the "Plan")
is to provide additional benefits for Directors of Fluke Corporation
following termination of service as a Director.
ARTICLE II
Definitions
Unless the context clearly indicates otherwise, the following words and
phrases shall have the meanings hereinafter indicated:
1. Account. A Participant's Cash Account and/or Stock Account.
Accounts are unfunded liabilities of the Company.
2. Annual Fee. The annual retainer fee to which a Director is entitled
for service on the Board of Directors.
3. Board of Directors. The Board of Directors of Fluke Corporation.
4. Cash Account. The bookkeeping account maintained for each
Participant that is credited with (1) Deferred Compensation which a
Participant does not elect to have invested in Stock and (2) interest
imputed pursuant to Section 3(b) of Article VI.
5. Committee. The Compensation Committee of the Board of Directors as
is, from time to time, appointed or constituted by the Board of
Directors.
6. Company. Fluke Corporation and its successors.
7. Compensation. The Annual Fee and the Meeting Fees to which a
Director is entitled for service on the Board of Directors.
8. Crediting Date. The first day in any fiscal quarter of the Company.
9. Deferred Compensation. The portion of Compensation which a
Participant elects to defer.
10. Director. A member of the Board of Directors.
11. Meeting Fees. The monetary amounts to which a Director is entitled
for attending meetings of the Board of Directors, or a committee
thereof.
12. Participant. Any Director who elects to defer Compensation in
accordance with the Plan.
13. Payment Eligibility Date. The date on which a Participant attains
the age of 65 years, or ceases to be a Director, whichever is later.
14. Plan. This Deferred Compensation Plan for Directors, as amended
from time to time.
15. Plan Year. The fiscal year of the Company.
16. Secretary. The Corporate Secretary of the Company.
17. Stock. Common stock of the Company.
18. Stock Account. The bookkeeping account maintained for each
Participant that is credited with (1) the Deferred Compensation which a
Participant elects to be invested in Stock and (2) earnings credited
thereto pursuant to Section 4(a)(2) of Article VI.
19. Trust. The irrevocable grantor trust which is established to
acquire and hold the shares of Stock allocated to each Participant's
Stock Account and under which the assets are subject to the claims of
the Company's creditors.
20. Trustee. The Trustee or Trustees, whether original or successor,
appointed under the Trust.
ARTICLE III
Participation
A Director shall become a Participant in the Plan by electing to defer
all or a portion of Compensation. Such election shall be made by filing
with the Secretary a "Director's Deferral Election Form" which complies
with the requirements of Articles IV and V.
ARTICLE IV
Election of Deferred Amount
1. Election. Prior to the end of each Plan Year, a Director may elect
to defer Compensation for the ensuing Plan Year. Such election shall
specify:
a. The percentage of each payment of Annual Fee to be deferred,
and/or
b. The percentage of each payment of Meeting Fees to be deferred.
2. Election by New Directors. A Director who is first elected during a
Plan Year may elect to defer Compensation for the remainder of that Plan
Year by filing such election within thirty days of becoming a Director.
Such election shall be effective for all Compensation for that Plan
Year which is earned after the election is filed with the Secretary.
3. Effect of Annual Election. The annual election made by a
Participant for any Plan Year shall be irrevocable with respect to such
year. However, such election shall not be binding with respect to
Compensation attributable to any succeeding Plan Year. A separate
election must be filed for each Plan Year.
ARTICLE V
Investment Elections
1. Annual Election. Coincident with an election under Article IV, a
Participant shall file an investment election with the Secretary
designating the percentage of the Compensation deferred for the Plan
Year which is to be credited to his Cash Account and the percentage of
the Deferred Compensation which is to be credited to his Stock Account.
Failure by a Participant to designate an investment option for any
portion of his Deferred Compensation will be deemed to be an election
for such Deferred Compensation to be credited to his Cash Account.
2. Effect of Annual Election. The investment election made by a
Participant for any Plan Year shall be irrevocable with respect to
deferrals of Compensation in such year. A separate investment election
must be filed for each Plan Year.
3. Reallocation Election.
a. Coincident with an election under Article IV, a Participant may
elect to transfer as of the first day of a Plan Year, all or a portion
of his Cash Account to his Stock Account or to transfer all or a portion
of his Stock Account to his Cash Account by filing an election with the
Secretary.
b. If a Participant desires to transfer any portion of his Cash
Account to his Stock Account, his election shall state the amount to be
transferred. Such amount shall be debited to the Participant's Cash
Account and credited to his Stock Account.
c. If a Participant desires to transfer any portion of his Stock
Account to his Cash Account, his election shall state the number of
shares of Stock and the amount of any cash to be transferred. Upon
receipt of such election, the Committee shall instruct the Trustee to
sell, on the first day of the Plan Year (or the first business day
thereafter) on which the Reallocation Election is effective, the number
of shares of Stock designated in the Participant's election and to
deliver the proceeds to the Company. The number of shares of Stock sold
and the amount of any cash to be transferred shall be debited to the
Participant's Stock Balance, and an amount equal to the sales proceeds
and any transferred cash shall be credited to his Cash Account. The
amount of the sales proceeds shall be deemed to be the consideration
received for the shares of Stock minus any commissions or other expenses
of selling the Stock.
ARTICLE VI
Participant Accounts
1. General. A Cash Account and a Stock Account shall be maintained for
each Participant.
2. Stock Balance and Cash Balance Under the Stock Account. Each
Participant's Stock Account shall consist of a Stock Balance and a Cash
Balance. Each participant's Cash Balance shall reflect the amount of
the Participant's Deferred Compensation which has been allocated to the
Stock Account but which has not yet been exchanged for an allocation of
shares of Stock. The Cash Balance need not be credited with interest.
Each Participant's Stock Balance shall reflect the number of shares of
Stock which have been allocated thereto pursuant to the provisions of
this Plan.
3. Allocations to Cash Account. There shall be credited to each
Participant's Cash Account as of each Crediting Date, the following
amounts:
a. The portion of Compensation which the Participant has elected to
defer and be allocated to his Cash Account and which has not previously
been credited to either his Cash Account or Stock Account.
b. Imputed interest which rate shall be established for each Plan
Year by reference to the 90-day Treasury bill rate on the first day of
each Plan Year. For purposes of computing such interest which shall be
credited and compounded annually on the last day of each Plan Year, it
shall be assumed that all deferrals to the Cash Account during a Plan
Year will have been in the account for six months of the Plan Year,
regardless of when the funds were actually deferred.
c. Any amount which the Participant has elected to be transferred
from his Stock Account pursuant to Article V.
4. Allocations to Stock Account.
a. Allocation to Cash Balance. There shall be credited to each
Participant's Cash Balance the following amounts:
1) The portion of Compensation which the Participant has elected to
defer and invest in Stock and which has not previously been credited to
either his Cash Account or Stock Account;
2) The amount of any cash dividend paid by the Company related to
shares of Stock which were allocated to the Participant's Stock Account
on the date such dividend was paid; and
3) Any amount which the Participant has directed to be transferred
from his Cash Account pursuant to Article V.
b. Acquisition of Stock. Within ten business days following each
Crediting Date, the Company shall deliver to the Trustee cash equal to
the Deferred Compensation credited to the Participant's Cash Balance
under paragraphs (a)(1) and (a)(3) above. The Committee shall instruct
the Trustee to immediately purchase, on the open market, the maximum
number of whole shares of Stock that can be purchased with the amount
allocated to the Participant's Cash Balance. Commissions and other
expenses of purchasing Stock shall be deemed to be part of the purchase
price for such Stock.
c. Allocation of Stock. Upon the Trustee's purchase of Stock
pursuant to the instructions described in paragraph (b) above, the
Participant's Stock Balance shall be credited with the number of shares
of Stock so acquired by the Trustee, and the Participant's Cash Balance
shall be debited by an amount equal to the purchase price paid by the
Trustee for such shares of Stock.
d. Stock Dividends and Stock Splits. Whenever the Stock is subject
to a split, stock dividend, reverse stock split, recapitalization, or
like change, the number of shares of Stock allocated to each
Participant's Stock Account shall be adjusted accordingly.
5. Reallocation in the Event of a Termination of the Trust. In the
event the Trust is terminated at a time when any amounts are allocated
to a Participant's Stock Account, then the following reallocations shall
be made as of the date of the termination (the "Termination Date"):
a. The Participant's Stock Account shall be debited by the amount of
the cash and the number of shares of Stock then allocated to his Stock
Account.
b. The Participant's Cash Account shall be credited with an amount
equal to the sum of (i) the amount of cash debited to his Stock Account
under (a) above and (ii) an amount equal to the number of shares debited
to his Stock Account in (a) above multiplied by the closing price of the
Stock on the national stock exchange upon which the Company's stock is
listed on the Termination Date as reported in the Western Edition of the
Wall Street Journal.
6. Voting; Tender Offers.
a. Voting. The Trustee shall independently vote the shares held
under the Trust.
b. Tender Offers. In the event of any transaction which is evidenced
by the filing of a Statement on Schedule 14D-1 with the Securities and
Exchange Commission or in the event of any other similar transaction (a
"Tender Offer"), then the Committee shall seek confidential written
instructions from each Participant as to whether the Stock allocated to
the Participant's Stock Account should be tendered. If a Participant
does not submit instructions to the Committee, the Participant shall be
deemed to have elected not to have the shares credited to such
Participant's Stock Account tendered. The Committee shall instruct the
Trustee whether or not to tender shares of Stock, and the number of
shares of Stock, if any, to be tendered in accordance with the
Participants' elections. If a Participant directs that any shares
allocated to his Stock Account be tendered, then his Stock Account shall
be debited by the number of shares tendered and an amount equal to the
proceeds received in exchange for those shares shall be credited to his
Cash Account.
ARTICLE VII
Distributions
1. Time and Amount of Distribution. Each Participant shall be entitled
to receive a distribution of benefits under this Plan as soon as
practicable following his Payment Eligibility Date. The distribution
payable to a Participant shall be the amount of cash and the number of
shares of Stock allocated to his Accounts as of his Payment Eligibility
Date; provided, however, that if the distribution is made in
installments, then amounts remaining credited to the Participant's
Accounts shall continue to be credited with interest and/or dividend
additions until distributed.
2. Form of Distribution. Benefits shall be distributed to a
Participant in accordance with the Participant's election which shall be
filed with the Secretary within ten days after the Payment Eligibility
Date. A Participant may elect to receive his Accounts in a lump sum or
in equal annual installments not to exceed ten annual installments.
3. Discretionary Exceptions.
a. In the event that a Participant ceases to be a Director prior to
age 65, the Committee may, in its sole discretion, determine that such
Participant's Accounts be paid out in the manner as elected by such
Participant but commencing at a date earlier than such Participant's
Payment Eligibility Date.
b. In the event that a Participant dies prior to the Participant's
Payment Eligibility Date, the Committee shall pay over to such
Participant's designated beneficiary the balance of such Participant's
Accounts through the last Crediting Date preceding such death.
c. In the event that a Participant dies following the commencement of
payout on an installment basis, the Committee shall pay the remaining
balance of such Participant's Accounts to the designated beneficiary of
such Participant.
4. To Whom Payments are to be Made. Each payment under the Plan shall
be made to the Participant, except that, in the event of the
Participant's death, payments will thereafter be made to the beneficiary
or beneficiaries whom the Participant has designated and filed with the
Secretary. If no such beneficiary has been designated, or the
designated beneficiary fails to survive the Participant, then such post-
death payments shall be made in accordance with the law of the
Participant's domicile at the date of death.
5. Special Payout Period. In the event that the Plan is amended,
modified, suspended or terminated, the Committee may, at its option,
direct a special payout period not to exceed five years of all amounts
accumulated and unpaid in each Participant's Account hereunder, provided
that it deems such payout period to be in the best interests of the
Company. In this event, all amounts accumulated and unpaid in each
Participant's Account will continue to be credited with interest and/or
dividends, as specified in Article VI, throughout the special payout
period. If no such special payout is directed, each Participant's
Account shall continue to be credited with interest and/or dividend
additions until paid out in full under the provisions of the Plan.
ARTICLE VIII
Administration
1. Appointment of Committee. The Plan shall be administered by the
Committee.
2. Powers and Duties of Committee. The Committee shall have such
powers and duties as are conferred on it by the Plan and the Board of
Directors. The Committee shall have the authority to take any and all
actions that it deems necessary or appropriate in the administration of
the Plan. The Committee may adopt such rules and procedures for the
administration of the Plan as it deems advisable to implement such rules
and procedures. The Committee shall act at meetings by affirmative vote
of a majority of the members of the Committee. Any action permitted to
be taken at a meeting may be taken without a meeting if, prior to such
action, a written consent to the action is signed by all members of the
Committee and such written consent is filed with the minutes of the
proceedings of the Committee.
3. Construction and Interpretation. The Committee shall have the full
discretion to construct and interpret the terms and provisions of the
Plan and all determinations made by the Committee shall be final.
4. Reliance Upon Information. The Committee and the Board of Directors
may rely upon any information supplied to them by any officer of the
Company, the Company's legal counsel or by the Company's independent
public accountants in connection with the administration of the Plan,
and shall not be liable for any decision or action in reliance thereon.
5. Expenses. All expenses of the administration of the Plan shall be
borne by the Company, except to the extent commissions and other
expenses related to Stock acquisitions and dispositions are charged
against Participant's Accounts in accordance with other provisions of
the Plan.
6. Annual Statement. Under procedures to be established by the
Committee, a Participant shall receive an annual statement with respect
to such Participant's Accounts.
ARTICLE IX
Miscellaneous
1.Rights and Interests. No rights or interests under this Plan shall be
assignable, transferable or subject to encumbrance, pledge or charge of
any nature, except that a Participant may designate a beneficiary to
receive any benefits arising hereunder upon such Participant's death.
No Participant shall have any right or interest in the Plan or any
benefits hereunder unless and until all of the terms, conditions and
provisions of the Plan that affect the Participant shall have been
complied with as herein specified. Additionally, the Participant shall
complete such forms and furnish such information as the Committee may
require in the administration of the Plan.
2. Withholding. There shall be deducted from each payment made under
the Plan all taxes which are required to be withheld by the Company or
Trustee in respect to such payment. The Company and Trustee shall have
the right to reduce any payment by the amount sufficient to provide the
amount of said taxes.
3. Unsecured General Creditors. Participants and their beneficiaries
shall have no legal or equitable rights, claims, or interest in any
specific property or assets of the Company. Any and all of the
Company's assets, including the assets held under the Trust, shall be,
and remain, the general, unpledged, unrestricted assets of the Company.
The Company's obligation under the Plan shall be merely that of an
unfunded and unsecured promise, and the rights of the Participants and
their beneficiaries shall be no greater than those of unsecured general
creditors.
4. Amendment, Modification, Suspension or Termination. The Committee
may amend, modify, suspend or terminate the Plan in whole or in part,
except that no amendment, modification, suspension or termination shall
reduce any amounts allocated previously to a Participant's Accounts,
provided that any amendment to or change in the Plan adopted by the
Committee, which will either significantly increase any benefits under
the Plan or will substantially alter the general principles of the Plan,
shall not become effective unless ratified by the Board of Directors.
5. Governing Law. The place of administration of the Plan shall be
conclusively deemed to be within the State of Washington; and the
validity, construction, interpretation and effect of the Plan and all
rights of any and all persons having or claiming any interest in such
Plan shall be governed by the laws of the State of Washington.
ARTICLE X
Effective Date
The Plan shall be applicable to and shall be effective as to
Compensation for Plan Years commencing on and after September 30, 1989.
EXHIBIT 10.13
FLUKE CORPORATION
SUPPLEMENTAL RETIREMENT INCOME AND PRE-RETIREMENT DEATH BENEFIT PLAN
THIS AGREEMENT is entered into between Fluke Corporation, a Washington
corporation (the Company), and each individual listed in the attached
Appendix A (the Participants), as amended from time to time pursuant to
Article IV.
WITNESSETH:
WHEREAS, the Participants are valued employees of the Company, and it is
the desire of the Company to continue the employment of each of the
Participants because of their respective experience, reputation and
contacts in the industry, and knowledge of the affairs of the Company;
and
WHEREAS, the Company wants the Participants to concentrate their efforts
on the development and growth of the Company and to provide the
financial security of a competitive level of retirement income; and
WHEREAS, the Company desires the Participants to remain in its service
as consultants and wishes to receive the benefit of their knowledge,
experience, reputation and contacts during their retirement; and
WHEREAS, the Company is desirous of the Participants retaining a
friendly interest in the business of the Company and not entering into
any business which might be competitive after retirement from active
employment; and
WHEREAS, the Company, in consideration of each Participant's past and
current service and such Participant's agreement to be available after
retirement as a consultant, and not to enter into a competitive
business, is willing to offer the respective Participants a Supplemental
Retirement Income and Pre-Retirement Death Benefit Plan with disability
and death benefits; and
WHEREAS, the Company and the Participants have previously entered into a
Supplemental Retirement Income Plan dated November 14, 1991, and it is
deemed in the best interests of the Company and the Participants to
amend and restate said Agreement;
THEREFORE, effective June 22, 1994, the parties agree as follows:
ARTICLE I
Definitions
For purposes of this Agreement, the following words shall have the
indicated meaning:
A. Plan - This Supplemental Retirement Income and Pre-Retirement Death
Benefit Plan as amended and restated as of June 22, 1994.
B. Supplemental Retirement Income Fund - The aggregate of the annual
allocations and allocated earnings set aside as a matter of record upon
the books of the Company for purposes of this Plan and representing an
unsecured contractual liability of the Company but not a particular
asset or pool of assets.
C. Participant - An employee or former employee of the Company who has
entered into this Agreement, as amended from time to time, and who has
been credited with an allocated share of an annual allocation by the
Company to the Supplemental Retirement Income Fund.
D. Participant/Beneficiary - A Participant who becomes entitled to a
distribution of such Participant's allocated credits under this Plan due
to retirement or inability to continue gainful employment by reason of
sickness and disability.
E. Beneficiary - One to whom the distributions of allocated credits
and/or life insurance proceeds pursuant to Article VI shall be paid in
the event of the death of a Participant or Participant/Beneficiary.
F. Retirement Date - The last day of the month following the later of:
the date the Participant reaches his 55th birthday or the date the
Participant retires from employment with the Company.
G. Fiscal Year - The annual accounting period adopted by the Company.
ARTICLE II
Company Contributions
The Company agrees to establish a corporate liability for amounts
credited under the Plan in a manner determined by the Board of Directors
of the Company in its sole discretion, which will adequately provide for
the accrual of Participant benefits at the times, in the amounts and
subject to the conditions hereinafter set forth.
ARTICLE III
Covenants by Participants
Each Participant, individually and not jointly, agrees as follows:
A. During Active Employment. During the period of such Participant's
active employment, to faithfully perform assigned duties to the best of
such Participant's ability and in accordance with directions of the
Company; and to devote to the performance of such duties full time and
attention, and not become associated with or engage in or render service
to any other business, except that such Participant may invest in and
have an interest in a noncompeting business so long as it does not
appreciably interfere with such Participant's active service with the
Company.
B. Services During Retirement or Other Termination of Employment.
During the period of a Participant's retirement, or after the
termination of his employment with the Company for any reason, to render
to the Company such services of an advisory or consultive nature as the
Company may reasonably request so that the Company may continue to have
the benefit of the Participant's experience and knowledge of the affairs
of the Company and reputation and contacts in the industry. The
Participant shall be available for advice and counsel to the Company at
all reasonable times by telephone, letter or in person; provided,
however, a failure to render such service or to give such service or
counsel by reason of illness or other incapacity shall not affect the
Participant's right to receive supplemental retirement income hereunder
during any such period.
C. Noncompetition and Investment During Retirement. During the period
of a Participant's retirement or after the termination of employment
with the Company for any reason, not to become associated with or engage
in or render any service to any other business competitive to the
business of the Company for a period of three (3) years without the
prior written approval of the Company's Board of Directors; provided,
however, that this shall not prohibit the Participant from purchasing
stock or other securities of any corporation and, provided further, that
the Participant shall not be prohibited hereunder from making any
investment in a noncompeting business or from becoming a director of any
corporation conducting a noncompeting business.
ARTICLE IV
Eligible Employees
A. Current Eligible Employees. The current eligible employees shall be
the Participants listed in Appendix A.
B. Additional Eligible Employees. Additional employees may be approved
from time to time by the Board of Directors of the Company for
eligibility hereunder as Participants, provided that the Company and
each employee thereafter execute a copy of an agreement to participate
in this Plan. Such additional Participants shall have no interest in
allocations already credited hereunder to other Participants.
C. Removal from List of Eligible Employees. Any present or future
Participant may be removed from the list of employees eligible for
participation in this Plan at any time at the sole discretion of the
Board of Directors of the Company, subject to a Participant's right to
allocated amounts already credited or accrued at the time of such
removal.
ARTICLE V
Allocation of Contribution
A. Record Keeping. The Company shall maintain a separate record to
which it shall credit each Participant's annual allocation and allocated
earnings thereon, as defined below, adding the same to the individual
Participant's previously allocated and credited account. At least once
each fiscal year the Company shall furnish each Participant with a
statement of such Participant's current account balance.
B. Participant Allocations.
1. Each Participant's account balance is the aggregate sum of all
contributions credited to such Participant's account which have been
authorized by the Board of Directors in their sole discretion and all
allocated earnings thereon.
2. With the fiscal year beginning April 30, 1994, the amount credited
annually on the last day of the fiscal year to each Participant's
account shall be:
a) the lesser of twenty-one percent (21 percent) of the
Participant's base salary on November 1 of such fiscal year, or the
annual contribution limitation amount pursuant to Article VII, section D
of the Plan, and
b) the allocated earnings on the Participant's aggregate account
balance during such fiscal year which shall be computed using an assumed
interest rate of 1 percent over the average three-month Treasury bill
rate for the fiscal year.
3. The amount credited to a Participant's account for the fiscal year
during which the Participant retires shall be prorated based upon the
number of days of participation during the fiscal year.
4. Once a Participant becomes entitled under the provisions of
Article VII hereof to distribution of the credits allocated to such
Participant under the provisions of this Article V, such Participant
shall no longer be entitled to annual allocations for future years, but
as a Participant/Beneficiary shall be entitled to the allocated earnings
defined in 2 b) above.
5. For those Participants who retire prior to the end of fiscal 1999,
a calculation of the present value of the Company's pension benefit will
be made as if the maximum amount of annual compensation which could be
taken into account in the computation of pension benefits is $235,840,
the maximum level prior to the enactment of the Revenue Reconciliation
Act of 1993. Any difference between the present value of the actual
pension benefit to be paid and the present value of the pension benefit
using the $235,840 limit (the equalization amount) will be accrued as an
additional allocation to the Participant's account in such Participant's
year of retirement. The Company has increased by 1 percent the annual
allocation to each Participant's account beginning in fiscal 1995. This
additional 1 percent allocation will be deducted from any equalization
amount paid to a Participant pursuant to this paragraph.
6. The foregoing allocations may be modified for future years at any
time at the sole discretion of the Board of Directors of the Company to
meet corporate objectives.
ARTICLE VI
Split-Dollar Provisions
A. Life Insurance Policy.
1. In furtherance of the purposes of this Plan to provide pre-
retirement death benefits, life insurance (the Policy) has been applied
for on the lives of Participants listed in Appendix A (the Insured
Participant) from one or more insurance companies (the Insurer). The
Participants agree to cooperate in the application for such Policies and
agree that the Company shall have an insurable interest in each
Participant or Participant/Beneficiary. Appendix B lists the basic
particulars of the Policies issued in connection with the Split-Dollar
Provisions of this Plan.
2. These Split-Dollar Provisions are effective as to a particular
Policy upon execution, or upon issuance and acceptance of such Policy,
whichever is later.
B. Ownership Rights and Duties under the Policy.
1. The Company shall be the owner of all rights and incidents of
ownership in the Policy. The Insured Participant's only right shall be
to designate to the Company the beneficiary of Part Two of the proceeds
of such Policy, as defined in section F below.
2. The Company shall be responsible for safeguarding the Policy.
3. The Company shall execute and promptly deliver any appropriate
documents, including the Policy, as required by the Insurer. The
Company agrees to designate the beneficiary of Part Two of such Policy
in accordance with the written direction of the Insured Participant.
C. Policy Loans and Withdrawals. The Company shall have all rights of
ownership of Policy cash values, including, but not limited to, the
right to obtain loans secured by the Policy as well as withdrawals. The
amount of any withdrawals or loans, together with the unpaid interest
thereon, shall at no time exceed that amount that the Company would be
entitled to as determined by section F of this Article VI. The interest
due on any Policy loans shall be a debt of the Company owed to the
Insurer. The Insured Participant shall have no rights or interests in
Policy cash values or in any part of the Company's interests in the
Policy. All Policy interests owned by the Company through these Split-
Dollar Provisions shall be subject to the claims of the Company's
general creditors and shall in no way be viewed as security or an asset
from which the Company is required to meet its obligations to the
Insured Participant.
D. Payment of Premiums. All premiums due on the Policy shall be paid
by the Company.
E. Payment of Proceeds. On the Insured Participant's death, the
Company shall receive Part One of the Policy, and such party or parties
as designated by the Insured Participant in writing pursuant to Article
VII, section C.2. shall be the beneficiary of Part Two of the Policy.
The fiduciary designation and claims procedure is attached as Appendix
C.
F. Definitions.
1. Part One is an amount payable to the Company equal to the cash
value of the Policy, plus any proceeds in excess of the Part Two amount
defined below.
2. Part Two is an amount equal to the insurance proceeds in excess of
the cash value of the Policy, with a maximum of three times the current
base salary of the Insured Participant.
G. Termination of Split-Dollar Provisions. The Split-Dollar Provisions
of this Plan shall terminate immediately as to an Insured Participant
for any of the following reasons:
1. Performance of its terms, following the death of the Insured
Participant;
2. Reaching the Insured Participant's Retirement Date;
3. Termination of the Insured Participant's employment with the
Company for reasons other than death or disability;
4. The Company's delivery of written notice to the Insured
Participant of its decision to terminate such Split-Dollar Provisions by
amendment of this Plan.
H. Repayment for Reasons Other than Death.
1. In all instances of termination of the Policy other than death,
the Company shall certify as required by the Insurer that such repayment
shall release the Insurer from any liability to the Company.
2. Such repayment to the Company of the amounts owed it shall be made
from the total cash values of the Policy. All parties shall execute the
documents necessary to facilitate such use of the total cash values.
I. Liability of Insurer.
1. The Insurer is not a party to the Split-Dollar Provisions of the
Plan. With respect to any Policy issued pursuant to the Split-Dollar
Provisions of the Plan, the Insured shall have no liability except as
set forth in the Policy. Such Insurer shall not be bound to inquire
into or take notice of any of the terms of this Plan or as to the
application of the proceeds of such Policies.
2. The Insured shall be discharged from all liability by making
payments of the proceeds of the Policy as directed by the Company and in
permitting rights and privileges under a Policy to be exercised pursuant
to the provisions of the Policy.
ARTICLE VII
Distribution of Allocated Credit
A. Conditions
1. Attainment of Retirement Date, Termination of Employment or
Disability. Except as provided in section C.5. of this Article VII, no
amounts credited to a Participant shall be distributed to such
Participant or to any other person or entity on such Participant's
behalf or as designated by such Participant to receive the same unless
the Participant shall have reached the Retirement Date and ceased
employment with the Company, died, or become disabled, as herein
provided.
2. Forfeitures. The balance in the Participant's account shall be
forfeited and, if applicable, any distribution or continued distribution
of a Participant's or Participant/Beneficiary's account shall stop if
the Participant or Participant/Beneficiary shall:
a) engage in a business within the three-year covenant period
(described in Article III, section C hereof) which, in the opinion of
the Board of Directors of the Company, competes with the Company;
b) be terminated by the Company for violation of any corporate
policies to which such Participant is subject;
c) engage in business practices which, in the opinion of the Board
of Directors of the Company, are detrimental to the interests of the
Company;
d) fail to be available for consultation and advice after
retirement from or termination of employment with the Company; or
e) encumber or seek to encumber such Participant's interest in or
benefit in this Plan.
3. Disbursement of Forfeited Account. No Participant shall have any
rights whatsoever to the balance of any forfeited account. Any
forfeited balance shall reduce the Company's liability under the Plan.
B. Vesting. Distributions to all Participant/ Beneficiaries under this
Plan shall be further limited to those amounts allocated to each
Participant which have been vested according to the number of years such
Participant shall have been continuously employed by the Company or its
subsidiaries as of the end of the fiscal year in which such Participant
becomes entitled to such distribution or terminates employment with the
Company, whichever occurs first, and according to the following
schedule:
Number of Years Employed Percent Vested
less than 1 year 0 percent
1 year 20 percent
2 years 40 percent
3 years 60 percent
4 years 80 percent
5 years 100 percent
Upon termination of employment with the Company, a Participant's
aggregate account balance shall be adjusted according to the above
schedule. Any non-vested balance shall reduce the Company's liability
under the Plan.
C. Payments to Participant/Beneficiary or Beneficiaries.
1. Retirement. Upon Participant's Retirement Date, the Company,
subject to the conditions and vesting provisions set forth in sections A
and B of this Article VII, shall pay to the Participant/Beneficiary in
approximately equal monthly installments over a ten-year period an
amount equal to the Participant's aggregate account balance. The first
installment must be paid within the first month after such Participant's
Retirement Date, unless the Participant requests a deferral of such
first payment for a period not exceeding twelve months and such deferral
is approved by the Board. During each fiscal year following the first
year of distributions to a Participant/Beneficiary, the allocated
earnings on the remaining balance of the Participant/Beneficiary's
aggregate account balance from the prior fiscal year shall be divided by
twelve and paid out to the Participant/Beneficiary as equal additions to
the normal monthly installments.
2. Death. Each Participant shall designate a Beneficiary or
Beneficiaries on a form to be filed with the Company. If a Participant
is married when the Beneficiary designation is made and such designation
is someone other than the spouse, the designation will not be valid
without the written consent of the spouse. If no designation is filed
with the Company or if the designated Beneficiary shall not survive such
Participant, then the payments from the account of the deceased
Participant shall be paid to the surviving spouse, if any, or, if none,
then to the Participant's personal legal representative.
If a Participant dies while still in the Company's employ before
reaching his Retirement Date, the Beneficiary or Beneficiaries named by
the Participant prior to his death shall receive a life insurance death
benefit in accordance with the Split-Dollar Provisions of Article VI of
this Plan equal to three times the current base salary of the
Participant. If the Participant's current aggregate account balance
plus $250,000 is greater than the life insurance benefit, the difference
shall be paid to the Beneficiary or Beneficiaries by the Company. The
Participant aggregate account balance at death shall be computed as if
such Participant was fully vested pursuant to paragraph B of this
Article VII. If the Participant is not an employee of the Company at
the time of death or dies after retirement but before distribution of
all benefits to which such Participant/Beneficiary may have been
entitled, the aggregate account balance at the time of death shall be
paid to the Beneficiary or Beneficiaries named by the Participant in
installment payments as described in section C.1. of this Article. The
first of such installment payments must be paid to the Beneficiary or
Beneficiaries within three (3) months after the date of the
Participant's death, if none have been paid before such death, but the
first installment payment shall be paid within one (1) month after the
Participant/Beneficiary's death, if payments under Article VI had
already commenced prior to such death.
3. Disability
a) In the event a Participant, prior to reaching such Participant's
Retirement Date and still in the employ of the Company, becomes disabled
so such Participant is no longer able to continue in gainful employment,
the aggregate amount credited to the Participant's account as of the
occurrence of the disability shall be paid to such Participant in
installments pursuant to section C1 of this Article VII as if such
Participant is fully vested pursuant to section B of this Article VII.
b) Disability shall be established by the certificate of a
physician selected by the Participant and approved by the Company, that
the Participant, by reason of mental or physical disability, is
incapable of further gainful employment. In the event the Participant
becomes disabled as defined herein, and thereafter again becomes capable
of gainful employment, the Participant may be reemployed by the Company
on such terms and with such participation under this Agreement as the
Board of Directors, in its sole discretion, shall then determine.
4. Distribution to Minors or Incompetents. Distribution to minors or
incompetents may be made by the Company, at its sole discretion, a)
directly to said persons, b) to the legal guardians of said persons, or
c) to the parent of said minor. The Company shall not be required to
see to the application of any such distributions so made to any of said
persons and such payments shall be a full discharge of the Company's
liability under this Plan.
5. Lump Sum or Periodic Payments. Upon a Participant's termination
of employment with the Company, the Board of Directors may, in its
discretion, regardless of the Participant's reaching Retirement Date,
allow the Participant to receive such Participant's account balance in a
lump sum or in the form of periodic installments payable over any fixed
or contingent period not exceeding the life expectancy of the
Participant and the Participant's spouse, if any. The Board may, under
these circumstances, require the repayment of such distributions if the
Participant violates the terms of Article VII, section A.2.
D. Annual Contribution Limitation. The maximum annual contribution to
a Participant's account under this Agreement shall be limited at each
attained age to the amount which, when added to the Participant's
current account balance and to the lump-sum value of the Participant's
accrued pension from the Fluke Corporation Pension Plan, so as not to
exceed the following percentage of the Participant's compensation.
Age Last Percent of Age Last Percent of
Birthday Compensation Birthday Compensation
35 107% 49 314%
36 115% 50 339%
37 125% 51 366%
38 135% 52 395%
39 145% 53 427%
40 157% 54 461%
41 170% 55 498%
42 183% 56 505%
43 198% 57 511%
44 214% 58 517%
45 231% 59 521%
46 249% 60 525%
47 269% 61 528%
48 291% 62 and older 531%
Compensation for purposes of this limitation shall be the average of a
Participant's highest three fiscal years total of base salary, senior
management variable compensation and semi-annual profit-sharing bonus
(including amounts deferred into the Company's Retirement Plus program
or any flexible benefit plan).
ARTICLE VIII
Provision Against Anticipation
At no time shall any Participant, or Participant/Beneficiary, have the
right or power to alienate, anticipate, commute, pledge, encumber or
assign any of the benefits, proceeds or avails of the funds credited to
such Participant under this Agreement and no such benefits, proceeds or
avails shall be subject to seizure by any creditor of the Participant,
or Participant/Beneficiary, under any writ or proceedings at law or in
equity.
ARTICLE IX
Termination of Employment
Nothing herein provided shall abrogate or modify in any way the
Company's right to terminate the Company's employment of any Participant
at any time, with or without cause.
ARTICLE X
Amendment and Termination of Agreement
A. Right to Amend and Terminate. The Board of Directors of the Company
shall have the right to terminate this Plan at any time or to modify,
alter or amend it in whole or in part, subject to the Company's
obligations to pay all sums then credited to Participants,
Participant/Beneficiaries and Beneficiaries under the terms of this
Plan.
B. Termination of Plan. This Plan shall terminate upon written notice
by the Board of Directors of the Company, upon complete discontinuance
of contributions by the Company for a period of three (3) years, in the
event of the bankruptcy or receivership of the Company or upon the
dissolution or merger of the Company unless a successor to the business
agrees to continue the Plan by executing an appropriate supplemental
agreement. In the event that the Company is taken over by a successor
who agrees to continue the Plan, the employment of any employee who is
continued in the employ of such successor shall not be deemed to have
been terminated or severed for any purpose hereunder.
C. Payment on Termination. Upon termination of this Plan, the
aggregate account balances of all Participants then employed by the
Company shall fully vest. The vested interests of all Participants,
Participants/Beneficiaries and Beneficiaries of former Participants in
the Supplemental Retirement Income Fund shall be distributed to them by
the Company or its successors or assigns in a lump sum within one (1)
month of the termination date.
10
<TABLE>
Exhibit 11 COMPUTATION OF EARNINGS PER SHARE
Fluke Corporation and Subsidiaries
<CAPTION>
Seven Seven
Year ended months ended months ended Year ended Year ended
April 29, April 30, May 1, September 25, September 27,
1994 1993 1992 1992 1991
<S> <C> <C> <C> <C> <C>
Shares issued at beginning
of period 8,807,391 8,807,391 8,807,391 8,807,391 8,807,391
Less repurchased shares at
beginning of period (2,464,936) (2,472,756) (2,511,214) (2,511,214) (2,293,983)
Shares outstanding at
beginning of period 6,342,455 6,334,635 6,296,177 6,296,177 6,513,408
Net issuance of shares
under stock award plans,
weighted average 5,208 2,398 14,265 23,515 9,716
Shares issued for
acquisiton, weighted average 1,000,000 --- --- --- ---
Shares issued upon conversion
of preferred shares,
weighted average 538,144 --- --- --- ---
Less shares prchased during the
period, weighted average --- --- --- --- (187,042)
Weighted average shares outstanding 7,885,807 6,337,033 6,310,442 6,319,692 6,336,082
Common share equivalents
of convertible preferred
shares, weighted average --- 538,144 542,198 540,578 548,693
Assumed exercise of stock
options, weighted average
of incremental shares 145,889 194,286 162,539 173,425 59,166
Average shares and common
share equivalents
outstanding 8,031,696 7,069,463 7,015,179 7,033,695 6,943,941
Earnings per share based on
weighted average shares
and common share equivalents
outstanding $ 1.10 $ 0.95 $ 1.28 $ 2.16 $ 0.46
Net Income (in thousands) $8,800 $6,743 $8,948 $15,204 $3,205
</TABLE>
EXHIBIT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
ACQUISITION
Effective May 1, 1993, the Company completed the largest acquisition in
its history with the purchase of the test and measurement business of
Philips Electronics N.V. of the Netherlands (Philips). The completion
of the acquisition ended the five-year strategic alliance between the
Company and Philips. Under the terms of the alliance, the Company sold
Philips' products in North America and other selected markets and
Philips sold the Company's products in Europe and other selected
markets. The acquisition provided the Company with the ScopeMeter
(registered trademark) test tools, oscilloscopes, generators and other
product lines, which have been organized into the Company's Diagnostic
Tools Division. It also provided the Company with direct sales and
service operations in fourteen European countries. The acquisition
contributed approximately $105 million in incremental revenues to the
Company in 1994. The increase in revenues occurred primarily in Europe
where some of the acquired product lines have a significant market share
and because of the increase in sales revenues by selling directly
through the acquired European direct sales force rather than selling at
a discount to Philips as the Company's distributor. The addition of the
Diagnostic Tools Division and the European sales operations added over
900 people to the Company, all in Europe. The purchase price was $41.8
million, including $22.4 million in cash and one million shares of the
Company's common stock. Additional financial data regarding the
purchase is found in Note 2 to the financial statements, "Acquisition of
Philips T&M Business."
RESULTS OF OPERATIONS
Financial Results 1994 versus 1993
All references to 1994 are to the fiscal year ended April 29, 1994 and
all references to 1993 are to the seven-month transition period ended
April 30, 1993. Restated 1993 refers to the restated amounts listed in
the unaudited quarterly financial data that have been restated to
present 1993 on a comparable twelve-month period to 1994. The
transition period resulted from a change in the fiscal year-end in 1993
from the last Friday in September to the last Friday in April.
Net income in 1994 was $8.8 million and $1.10 per share. The income and
earnings per share levels were below historical levels; however, the
Company planned a reduced level of profitability during 1994 due to its
investment in new product programs in order to accelerate the growth of
the Company.
Revenues of $357.9 million in 1994 were 45.9 percent higher than the
$245.3 million in restated 1993. Excluding the contribution of the
acquisition, 1994 revenues were up slightly over the revenues of
restated 1993. The geographical shift in the distribution of revenues,
based on the location of customers, was dramatically influenced by the
acquisition. In 1993, the Company's domestic revenues were 65.0 percent
and international revenues were 35.0 percent of total revenues.
European revenues contributed 13.0 percent of the total. In 1994, after
the acquisition, domestic revenues were 47.0 percent and international
revenues were 53.0 percent of total revenues. European revenues in 1994
contributed 38.0 percent of the total. In addition to the increased
growth potential from the international markets, the increase in
revenues from outside the United States has added some complexity and
risk to the Company. These risks include increased exposure to the risk
of foreign currency fluctuations and the potential economic and
political impacts from doing business in foreign countries including
changes in labor and tax laws, import and export controls and changes in
governmental policies.
Cost of goods sold as a percentage of revenues was 51.0 percent in 1994
compared to 54.6 percent in 1993. As a result of the acquisition, the
Company added manufacturing operations in the Netherlands which produce
instruments with a similar cost structure to the Company's facilities in
the United States. Under the alliance agreement, the Company purchased
Philips' products for resale in North America and other selected
markets. These products, now manufactured by the Company, are produced
at a lower cost than the cost of purchasing them from Philips. Although
this reduces the Company's cost of goods sold as a percentage of
revenue, it is offset to some degree by the increase in operating
expenses discussed below.
Operating expenses, as a percentage of revenues, increased from 43.4
percent to 44.3 percent. The addition of the acquired European
operations, which includes marketing, selling, research and development,
and administrative operations, increased the level of the Company's
operating expense. The increased gross margin generated by selling the
Companys's U.S.-built products direct in Europe and the revenues from
the acquired product lines support the increase in expense.
Marketing and administrative expense increased as a percentage of
revenues from 32.5 percent in 1993 to 34.5 percent in 1994. One factor
in this increase is the addition of sales operations in fourteen
European countries where the cost of selling is generally higher than in
the United States. The marketing expense related to the high number of
new product introductions in 1994 also contributed to the increase in
marketing and administrative expense.
Marketing and administrative expense will be impacted by the 1992
revision in the corporate mission, which led the Company into new
product areas and the development of sales channels through which the
Company sells these new products. New products such as Local Area
Network (LAN) test tools, automotive meters and power harmonics meters
require new sales channels to reach the customers of these products.
Developing and managing these new sales channels requires a change in
how the Company's sales force is structured. Over the last several
years the Company has reduced the number of direct salespeople in the
U.S. sales force and increased the number of people managing the
indirect channels such as distributors, dealers and representatives.
International sales organizations are now beginning this process. This
change in the structure of the sales force will, over time, reduce the
cost of the selling organization. This reduction in selling cost is
necessary to offset the discounts that are required to sell through the
indirect sales channels.
New product and development activities have remained a high priority for
the Company. The Company spent 9.8 percent of revenues on research and
development in 1994 compared to 10.3 percent in 1993. The research and
development operations acquired from Philips have redirected their focus
to products that are more closely aligned with the Company's mission.
The Company also continues to have access to the Philips research
facilities through research contracts. In addition, to supplement the
development resources, the Company has purchased, or jointly developed
with third parties, some of its new products, such as the Company's
first LAN product offerings. Through license agreements and related
purchase contracts, the Company is able to get products to the market
faster and subsequently integrate this expertise into the Company.
Goodwill of $20.8 million and intangible assets related to the acquired
technologies and product lines of $7.7 million were recorded as a result
of the acquisition. The goodwill is being amortized over twenty years
and the intangible assets are being amortized over five years. Goodwill
amortization of $1.0 million and most of the amortization expense
related to the intangible assets of $1.6 million are recorded in
nonoperating expense.
The effective annual tax rate increased from 28.2 percent in 1993 to
37.5 percent in 1994. The rate increase was caused primarily by the
addition of the European operations and partially by the increase in the
U.S. statutory rate to 35 percent. Although the average statutory rate
in Europe is comparable to the U.S. statutory rate, losses in some of
the acquired country operations with no offsetting benefit caused the
increase in the overall rate. The effective annual tax rates in 1993,
1992 and 1991 were below the U.S. statutory rate of 34 percent, in those
years, due to the utilization of foreign tax credit carryovers and the
benefit of the Company's Foreign Sales Corporation. The significant
foreign tax credit carryovers have been utilized, and in future years,
foreign tax credits are not expected to have much effect on the
effective annual tax rate.
Financial Results 1993 versus 1992
In this section, all references to 1993 are for the audited seven-month
transition period ended April 30, 1993 and all references to restated
1992 are for the unaudited seven-month period ended May 1, 1992.
During 1993, the Company recorded two changes in accounting policies.
The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." The cumulative effect of adopting the
statement was a positive adjustment to income of $1.5 million. The
Company also changed the method used in applying overhead costs to
inventory whereby overhead costs related to the procurement process are
applied to inventory at the time of the receipt of the inventory.
Previously these costs were applied during the production process. The
cumulative effect of this change was a positive adjustment to income of
$2.4 million, net of tax. Prior years' financial statements were not
restated for either item.
Revenues of $132.1 million in 1993 were 16.7 percent less than revenues
of $158.7 million in restated 1992. Almost every region of the world
experienced revenue declines, including the United States which was down
18.0 percent and Europe, primarily sales to Philips, which decreased
27.6 percent. In 1992, the introduction of the ScopeMeter product line
was very successful. While ScopeMeter continued to be one of the
Company's highest revenue-producing product families during 1993, sales
were down substantially from 1992. The decrease in sales was due to the
high level of distributor stocking orders in 1992 in addition to the
slowdown in the economy in 1993. This downturn in revenues, due to the
economy, was also felt across the Company's other product lines.
ScopeMeter revenues increased in 1994 over 1993, and it continues to be
one of the Company's most successful product lines.
Revenues in the United States were significantly affected by the
depressed economic conditions as customers reduced their capital
purchases in response to economic pressures. The Company continued to
be affected by the decline in purchases by the U.S. government. To
mitigate this decline in U.S. government business, the Company expanded
into new market segments by expanding its product offering in the
automotive test market and entering the LAN market. The Company has
continued to invest in the development of new products; however, only a
few products were introduced in the 1993 transition period.
Operating expenses decreased 4.4 percent in 1993 from restated 1992, but
increased significantly as a percentage of revenues. The Company
instigated several cost-cutting measures in restated 1993 to reduce
expenses, including delaying salary increases for several months and
requiring days off without pay or temporarily reducing the pay of
employees and directors. In addition, the Company reduced employees
through attrition and layoffs.
The decline in marketing and administrative expenses of 7.4 percent was
due primarily to decreased expenses of the U.S. sales operation. During
1992 and 1993, fifteen sales offices in smaller markets were closed and
the salespeople are now working out of their homes. The expense for
research and development increased 6.4 percent in 1993 over restated
1992. The increase had been planned; consequently, the cost-cutting
measures, other than salary reductions, did not impact research and
development to the same extent that other areas were affected.
Financial Results 1992 versus 1991
In this section, references to 1992 and 1991 represent 52/53-week fiscal
years ending on September 25, 1992 and September 27, 1991, respectively.
Revenues of $271.8 million in 1992 were 13.4 percent greater than
revenues of $239.7 million in 1991. This growth in revenues was
primarily the result of new products, most significantly, the ScopeMeter
product line. Revenues in the United States increased 15.3 percent in
1992 over 1991. The majority of the increase came from increased sales
through the Company's network of distributors and sales to the U.S.
government. Revenues from the Company's network of distributors
continue to grow as the types of products the Company is developing
under the new mission are more effectively sold through distributors or
other indirect sales channels.
Revenues from outside the United States increased 10.0 percent in 1992
over 1991. The Company's products had particularly good revenue growth
in Canada, which grew 27.0 percent in spite of a difficult economic
environment, the People's Republic of China, which grew 58.5 percent,
and Taiwan, Mexico and Singapore, which all had revenue increases in
excess of 25.0 percent.
Gross margin, as a percentage of revenues, declined to 44.9 percent in
1992 from 46.1 percent in 1991. This decline was caused by the increase
in the resale of Philips products and other purchased products and the
increased percentage of revenues generated through the distribution
network. Selling through the distributor network generates lower gross
margin because the distributors buy at a larger discount than direct
customers.
In 1991, the Company accrued $10.8 million in restructuring charges for
the cost of discontinuing products and processes that are not consistent
with the Company's revised mission.
LIQUIDITY AND CAPITAL RESOURCES
The Company negotiated two separate committed lines of credit, totaling
$55.0 million, in conjunction with the acquisition. One line of credit
was for the acquisition financing and other domestic working capital
needs and one was for the working capital requirements of the newly
acquired European operations. The Company utilized both these lines of
credit during 1994. The initial borrowings for the acquisition under
the domestic line of credit were repaid during the year and the line was
subsequently utilized for working capital requirements. The foreign
line was utilized throughout the year. The amount of debt outstanding
at April 29, 1994 under both lines of credit was $14.3 million. In
addition to the committed lines of credit, the Company also has
uncommitted lines totaling $44.0 million. There was nothing outstanding
under the uncommitted lines at April 29, 1994. The Company is in
compliance with all covenants of its lines of credit.
The acquisition of the Philips operations required a significant
financial commitment by the Company. The cash flow from operations was
impacted by the costs of the acquisition and the required funding of the
working capital needs of the new European operations. The Company
expects to utilize the lines of credit to fund working capital and
capital expenditure requirements during fiscal year 1995. Cash flow
from operations should be sufficient to allow these lines to be repaid
in fiscal 1996.
The increase in international operations has increased the Company's
risk to fluctuation in foreign currency rates. The increase in assets
and cash flows denominated in foreign currency now represent a
significant part of the Company's assets and cash flows. The Company
has a foreign currency hedging program that reduces this risk. However,
the risk can not be eliminated and the Company monitors this closely.
Capital expenditures were $13.1 million in 1994, $6.2 million in 1993
and $9.3 million in 1992. The addition of the European operations did
not substantially increase the capital expenditure requirements of the
Company. The budgeted capital expenditures for 1995 are approximately
$13 million. Expenditures are primarily for manufacturing and research
and development equipment.
The Company's accounts receivable of $70.5 million was much higher at
April 29, 1994 than the $27.5 million at April 30, 1993. This is due
primarily to the addition of the European customer base and to the
longer sales terms in most of Europe than in the United States. This
will have a slightly negative impact on the Company's cash flow.
The Company continued its cash dividend policy with cash dividends of
$0.13 per share in each quarter of 1994. The Company made $4.0 million
in dividend payments in 1994.
<PAGE>
<TABLE>
FLUKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands except shares and per share amounts)
<CAPTION>
April 29, 1994 April 30, 1993 Sept. 25, 1992
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 6,520 $ 24,415 $ 16,373
Accounts receivable (less allowances:
1994-$586; 1993-$476; 1992-$406) 70,510 27,526 43,734
Inventories 54,365 47,244 43,292
Deferred income taxes 13,109 6,686 7,313
Prepaid expenses 9,914 5,051 3,128
Total Current Assets 154,418 110,922 113,840
Property, Plant and Equipment
Land 6,181 6,181 6,121
Buildings 46,661 46,434 46,080
Machinery and equipment 93,406 87,868 86,317
Construction in progress 2,440 2,317 2,221
148,688 142,800 140,739
Less accumulated depreciation (88,412) (87,709) (84,629)
Net Property, Plant and Equipment 60,276 55,091 56,110
Goodwill and Other Intangible Assets 24,995 --- ---
Other Assets 5,913 6,074 5,856
Total Assets $245,602 $172,087 $175,806
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt --- --- $ 781
Accounts payable $ 19,413 $ 6,673 7,521
Accrued liabilities 35,454 14,107 18,194
Accrued liabilities related to restructuring 676 5,414 6,799
Income taxes payable 665 307 470
Current maturities of long-term
obligations 235 57 292
Total Current Liabilities 56,443 26,558 34,057
Long-Term Obligations 14,712 34 391
Deferred Income Taxes 9,152 6,604 8,137
Other Liabilities 7,466 3,704 3,757
Total Liabilities 87,773 36,900 46,342
Stockholders' Equity
Preferred stock, $0.25 par value (authorized
2,000,000 shares, issued Series A Convertible
Preferred Stock, zero shares in 1994 and
78,462 shares in 1993 and 1992) --- 20 20
Common stock, $0.25 par value (authorized
20,000,000 shares, issued including
repurchased and nonvested shares, 8,807,391) 2,202 2,202 2,202
Additional paid-in capital 81,081 96,072 96,047
Retained earnings 96,553 91,856 86,901
179,836 190,150 185,170
Less repurchased shares, at cost (19,542) (54,263) (54,444)
Less nonvested shares (362) (700) (1,262)
Cumulative translation adjustment (2,103) --- ---
Total Stockholders' Equity 157,829 135,187 129,464
Total Liabilities and Stockholders' Equity $245,602 $172,087 $175,806
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
FLUKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except shares and per share amounts)
<CAPTION>
For the For the seven For the For the
year ended months ended year ended year ended
April 29, 1994 April 30, 1993 Sept. 25, 1992 Sept. 27, 1991
<S> <C> <C> <C> <C>
Revenues $357,904 $132,139 $271,819 $239,651
Cost of Goods Sold 182,475 72,167 149,776 129,095
Gross Margin 175,429 59,972 122,043 110,556
Operating Expenses
Marketing and administrative 123,606 42,986 79,197 75,213
Research and development 34,952 13,671 22,515 22,051
Restructuring --- --- --- 10,800
Total Operating Expenses 158,558 56,657 101,712 108,064
Operating Income 16,871 3,315 20,331 2,492
Nonoperating Expenses (Income)
Interest expense 1,529 24 254 62
Other 1,262 (666) (1,109) (1,011)
Total Nonoperating Expenses (Income) 2,791 (642) (855) (949)
Income Before Income Taxes and
Cumulative Effect of Changes in
Accounting Principles 14,080 3,957 21,186 3,441
Provision for Income Taxes 5,280 1,116 5,982 236
Income Before Cumulative Effect of
Changes in Accounting Principles 8,800 2,841 15,204 3,205
Cumulative Effect on Prior Years
(to September 26, 1992) of a Change
in Accounting for Inventory, Net of Tax --- 2,423 --- ---
Cumulative Effect on Prior Years
(to September 26, 1992) of a Change
in Accounting for Income Taxes --- 1,479 --- ---
Net Income $ 8,800 $ 6,743 $ 15,204 $ 3,205
Per Share Amounts:
Income Before Cumulative Effect of
Changes in Accounting Principles $ 1.10 $ 0.40 $ 2.16 $ 0.46
Cumulative Effect of Accounting Changes:
Accounting for inventory --- $ 0.34 --- ---
Accounting for income taxes --- $ 0.21 --- ---
Earnings Per Share $ 1.10 $ 0.95 $ 2.16 $ 0.46
Average Shares and Share Equivalents
Outstanding 8,031,696 7,069,463 7,033,695 6,943,941
Pro Forma Amounts Assuming the Change
in Accounting for Inventory is
Applied Retroactively:
Net Income $ 8,800 $ 4,320 $ 14,938 $ 3,156
Earnings Per Share $ 1.10 $ 0.61 $ 2.12 $ 0.45
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
FLUKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands except shares and per share amounts)
<CAPTION>
For the For the seven For the For the
year ended months ended year ended year ended
April 29, 1994 April 30, 1993 Sept. 25, 1992 Sept. 27, 1991
<S> <C> <C> <C> <C>
Operating Activities
Net income $ 8,800 $ 6,743 $15,204 $ 3,205
Items not affecting cash:
Change in accounting principles --- (3,902) --- ---
Depreciation and amortization 17,071 7,091 11,460 10,752
Deferred income tax 2,381 573 47 (2,697)
Accrued pension expense (1,162) 103 (837) (192)
Stock awards 376 222 680 860
Loss (gain) on disposal of property,
plant and equipment 242 104 18 (39)
Provision for restructuring --- --- --- 10,800
Net change in:
Accounts receivable (45,023) 16,208 (104) (4,910)
Inventories 4,580 (2,257) (887) 1,749
Prepaid expenses (2,356) (1,923) (752) 1,582
Accounts payable 12,998 (848) (2,138) 3,181
Accrued liabilities 5,791 (3,800) 1,561 2,070
Accrued liabilities related to restructuring 892 (726) (1,285) (254)
Income taxes payable 394 (109) 25 277
Other assets and liabilities 2,023 (895) (299) (2,334)
Net Cash Provided By Operating Activities 7,007 16,584 22,693 24,050
Investing Activities
Additions to property, plant and equipment (13,050) (6,161) (9,337) (10,112)
Proceeds from disposal of property,
plant and equipment 180 575 324 455
Purchase of Philips test and measurement
business (26,056) --- --- ---
Purchase of Summation, Inc., net of
cash acquired --- --- --- (1,442)
Net Cash Used By Investing Activities (38,926) (5,586) (9,013) (11,099)
Financing Activities
Proceeds from short-term debt 2,329 775 3,257 14,901
Payments on short-term debt (2,329) (1,556) (3,180) (17,269)
Proceeds from long-term obligations 47,879 --- --- ---
Payments on long-term obligations (33,023) (592) (261) (518)
Repurchase of common stock --- --- --- (3,317)
Repurchase of preferred stock --- --- (252) ---
Cash dividends paid (3,970) (1,719) (3,153) (2,627)
Other financing activities, net 222 136 626 219
Net Cash Provided (Used) By Financing
Activities 11,108 (2,956) (2,963) (8,611)
Effect of Foreign Currency Exchange Rates
on Cash and Cash Equivalents 2,916 --- --- ---
Net Increase (Decrease) In Cash and Cash
Equivalents (17,895) 8,042 10,717 4,340
Cash and Cash Equivalents at Beginning
of Period 24,415 16,373 5,656 1,316
Cash and Cash Equivalents at End of
Period $ 6,520 $24,415 $16,373 $ 5,656
Supplemental Cash Flow Information:
Income taxes paid $ 5,142 $ 826 $ 5,544 $ 3,258
Interest paid $ 1,529 $ 24 $ 254 $ 62
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
FLUKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands except shares)
<CAPTION>
Number of Par Par
Common Value of Value of Additional
Shares Preferred Common Paid-In
Outstanding Stock Stock Capital
<S> <C> <C> <C> <C>
Balance, September 28, 1990 6,513,408 $ 20 $2,202 $96,867
Net income
Issuance of shares under stock award plans 26,779 (151)
Vesting of 41,933 shares under stock award plans
Cash dividends declared
Income tax charge for stock award plans (114)
Repurchase of common shares (256,300)
Sale of shares under employee stock purchase plan 8,290 (40)
Exercise of stock options 4,000 (25)
Balance, September 27, 1991 6,296,177 $ 20 $2,202 $96,537
Net income
Forfeiture of shares under stock award plans (1,942) 10
Vesting of 41,516 shares under stock award plans
Cash dividends declared
Income tax benefit from stock award plans 60
Repurchase of 1,538 preferred shares (252)
Exercise of stock options 40,400 (308)
Balance, September 25, 1992 6,334,635 $ 20 $2,202 $96,047
Net income
Issuance of shares under stock award plans 220 11
Vesting of 27,394 shares under stock award plans
Cash dividends declared
Income tax benefit from stock award plans 54
Exercise of stock options 7,600 (40)
Balance, April 30, 1993 6,342,455 $ 20 $2,202 $96,072
Net income
Forfeiture of shares under stock award plans (5,109) 145
Vesting of 17,117 shares under stock award plans
Issuance of shares for acquisition 1,000,000 (1,450)
Conversion of preferred shares 538,144 (20) (13,361)
Cash dividends declared
Income tax benefit from stock award plans 30
Exercise of stock options 23,200 (355)
Net translation loss
Balance, April 29, 1994 7,898,690 --- $2,202 $81,081
<PAGE>
FLUKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (continued)
(in thousands except shares)
<CAPTION>
Repurchased
and Cumulative Total
Retained Nonvested Translation Stockholders'
Earnings Shares Adjustment Equity
<S> <C> <C> <C> <C>
Balance, September 28, 1990 $74,533 $(55,556) --- $118,066
Net income 3,205 3,205
Issuance of shares under stock award plans 151 ---
Vesting of 41,933 shares under stock award plans 953 953
Cash dividends declared (2,747) (2,747)
Income tax charge for stock award plans (114)
Repurchase of common shares (3,317) (3,317)
Sale of shares under employee stock purchase plan 192 152
Exercise of stock options 92 67
Balance, September 27, 1991 $74,991 $(57,485) --- $116,265
Net income 15,204 15,204
Forfeiture of shares under stock award plans (10) ---
Vesting of 41,516 shares under stock award plans 855 855
Cash dividends declared (3,294) (3,294)
Income tax benefit from stock award plans 60
Repurchase of 1,538 preferred shares (252)
Exercise of stock options 934 626
Balance, September 25, 1992 $86,901 $(55,706) --- $129,464
Net income 6,743 6,743
Issuance of shares under stock award plans (11) ---
Vesting of 27,394 shares under stock award plans 578 578
Cash dividends declared (1,788) (1,788)
Income tax benefit from stock award plans 54
Exercise of stock options 176 136
Balance, April 30, 1993 $91,856 $(54,963) --- $135,187
Net income 8,800 8,800
Forfeiture of shares under stock award plans (145) ---
Vesting of 17,117 shares under stock award plans 352 352
Issuance of shares for acquisition 20,894 19,444
Conversion of preferred shares 13,381 ---
Cash dividends declared (4,103) (4,103)
Income tax benefit from stock award plans 30
Exercise of stock options 577 222
Net translation loss (2,103) (2,103)
Balance, April 29, 1994 $96,553 $(19,904) $(2,103) $157,829
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING PERIOD. Fluke Corporation utilizes a 52/53-week fiscal year
ending on the last Friday in April. In 1993, the Company changed its fiscal
year-end to the last Friday in April. Fiscal 1993 was a seven-month
transition period ending on April 30, 1993. Prior to fiscal 1993, the
Company utilized a 52/53-week fiscal year ending on the last Friday in
September. The accompanying financial statements include audited
consolidated financial statements for the seven-month transition period
ended April 30, 1993.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include
the accounts of the Company and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
REVENUE RECOGNITION. Revenue is recognized at the time product is shipped
or service is rendered to an unaffiliated customer. Revenue from service
contracts is recognized ratably over the lives of the contracts.
TRANSLATION OF FOREIGN CURRENCIES. The local currency is deemed to be the
functional currency in most of the Company's foreign operations. In these
operations, translation gains and losses resulting from converting the local
financial statements to U.S. dollar financial statements are recorded in the
Cumulative Translation Adjustment account in the equity section of the
balance sheet. In the remaining foreign operations, the U.S. dollar is
deemed to be the functional currency. In these operations, translation
gains or losses are included in the statements of income.
CASH AND CASH EQUIVALENTS. Cash and cash equivalents include cash on hand
and highly liquid, short-term investments with an original maturity of less
than three months.
INVENTORIES. Inventories are valued at the lower of cost or market with
cost being currently adjusted standard cost, which approximates cost on a
first-in, first-out basis.
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment, including
improvements and major renewals, are stated at cost. Maintenance and
repairs are expensed as incurred. Depreciation is calculated over the
estimated useful lives of the related assets on the straight-line basis for
financial statement purposes, while an accelerated method is generally used
for income tax purposes.
INCOME TAXES. The provision for income taxes is computed on pretax income
reported in the financial statements. The provision differs from income
taxes currently payable because certain items of income and expense are
recognized in different periods for financial statement and tax return
purposes. Deferred income taxes have been recorded using the liability
method in recognition of these temporary differences. The Company has
provided for U.S. and foreign taxes on all of the undistributed earnings of
its foreign subsidiaries that are expected to be repatriated.
EARNINGS PER SHARE. Earnings per share is based on the weighted average
number of common shares and share equivalents outstanding during the fiscal
year. Stock options are considered common stock equivalents and their
dilutive effect is included in the earnings per share calculation. In the
periods they were outstanding, the shares of Series A Convertible Preferred
Stock were considered common stock equivalents.
NOTE 2 ACQUISITION OF PHILIPS T&M BUSINESS
On May 26, 1993, the Company completed the acquisition of the test and
measurement business of Philips Electronics N.V. of the Netherlands
(Philips) with an effective date of May 1, 1993. Since 1987, the
Company and Philips had a strategic alliance pursuant to which Philips
sold the Company's products in Europe and other selected markets and the
Company sold Philips' products in North America and other selected
markets. The alliance also included joint product development and
technology agreements.
As the alliance evolved, it became evident to both companies that the best
way to leverage the talents of each company was to merge the businesses and
operate under one management. This led to the Company's purchase of the
Philips test and measurement business.
The Company acquired manufacturing operations in the Netherlands,
engineering groups in the Netherlands and Germany and sales and service
operations in fourteen European countries. The headquarters of the
Company's Diagnostic Tools Division is in Almelo, the Netherlands. The
division is responsible for ScopeMeter test tools, oscilloscope, function
generator and logic analyzer product lines. The European sales and service
headquarters is located in Eindhoven, the Netherlands. The acquisition
added approximately $105 million in annual worldwide revenues in fiscal
1994. The acquisition increased the number of employees of the Company by
over 900 people.
The purchase price for the Philips test and measurement business was
approximately $41.8 million in cash and stock. The cash portion was
financed with the Company's cash and utilization of a portion of its $55.0
million lines of credit obtained specifically to finance the acquisition.
The stock component consisted of one million shares of the Company's common
stock, which were issued from repurchased shares. The Series A Convertible
Preferred Stock that Philips owned was converted to common shares at the
rate stated in the preferred stock agreement, or 538,144 shares of common
stock. After the transaction, Philips owned 1,538,144 shares of the
Company's common stock, or approximately 19.5 percent of the shares
outstanding. There are restrictions on Philips' ability to sell the shares,
and the Company has the option to buy the shares before they can be offered
for sale to a third party. Accordingly, the stock was recorded at a 15
percent discount from the market value at date of issue. Subsequent to
April 29, 1994, Philips offered for sale 150,000 shares, as allowed under
the agreement. The Company exercised its right to purchase the shares at a
price of $30.53 per share for a total of $4.6 million.
The Company recorded the acquisition under the purchase method of
accounting. The components of the purchase price are as follows:
<TABLE>
(in thousands except per share amounts)
<S> <C>
One million shares of the Company's common stock,
at a fair value of $19.44 per share $19,444
Net cash paid for purchase 22,365
Purchase price 41,809
Acquisition costs 3,700
Purchase price and related acquisition costs $45,509
The allocation of the purchase price is as follows:
(in thousands)
Inventory $15,800
Prepaid expenses and other current assets 2,668
Plant, machinery and equipment 6,801
Intangible assets 7,700
Deferred tax assets
Gross value 27,297
less: valuation reserve (18,000)
Net value 9,297
Deferred tax liability (3,001)
Accrued expenses and other liabilities (14,573)
Goodwill 20,817
Purchase price and related acquisition costs $45,509
</TABLE>
Pro forma data combines the financial results of the Company and the Philips
test and measurement business as if they had been combined at the beginning
of the periods presented. Pro forma data is not necessarily indicative of
what the actual results would have been or indicative of futures results.
Pro forma data for the transition period ended April 30, 1993 and the year
ended September 25, 1992 are presented below:
Pro Forma Data (unaudited)
<TABLE>
in thousands except per share amounts
<CAPTION>
Transition Period Year Ended
ended April 30, 1993 September 25, 1992 <F1>
<S> <C> <C>
Revenues $207,704 $429,219
Income before cumulative effects of accounting changes $ 2,880 $ 21,263
Earnings per share $ 0.41 $ 2.65
<FN>
<F1> Pro forma 1992 data is compiled using historical Philips data for the
year ended December 31, 1992 and historical data of the Company for the year
ended September 25, 1992.
</TABLE>
The pro forma consolidated financial results include pro forma adjustments
for an increase in interest expense due to borrowings used to finance both
the acquisition and the working capital requirements of the acquired
European operations and amortization of intangible assets acquired and of
costs in excess of net assets acquired.
As part of the acquisition, the Company entered into service agreements and
facility leases with Philips related to the European operations. The
Company paid Philips $18.3 million for such services and facilities lease
rent during fiscal 1994. In addition, the Company purchased $16.5 million
of component parts and finished goods from Philips during fiscal 1994.
Before the completion of the acquisition in fiscal 1994, aggregate sales and
purchases with Philips totaled approximately $31.3 million in the seven
months ended April 30, 1993, $71.5 million in 1992 and $53.0 million in
1991. Amounts included in accounts receivable that were due from Philips
were approximately $3.1 million in 1993 and $7.6 million in 1992. Amounts
included in accounts payable that were due to Philips were approximately
$2.0 million in 1993 and $3.0 million in 1992.
NOTE 3 RESTRUCTURING
In 1991, the Company accrued $10.8 million in connection with the
announcement of a Board-approved restructuring initiative. This resulted in
an after-tax charge of $6.9 million or $1.00 per share. The Company is
focusing its current efforts on the compact, professional electronic test
tools market, which necessitates discontinuing products and internal
processes that are not consistent with that objective.
These restructuring activities have been essentially completed. As part of
the restructuring initiative, the Company discontinued or sold its signal
generator line, touch screen line, controller lines, most of its digital
test tool (board test) line and other smaller product lines. Charges
against the restructuring accrual have included inventory and fixed asset
write-offs for discontinued product lines, the costs of consolidating the
U.S. sales and service operations, and severance payments.
<TABLE>
NOTE 4 INVENTORIES
(in thousands)
<CAPTION>
April 29, 1994 April 30, 1993 September 25, 1992
<S> <C> <C> <C>
Finished goods $17,904 $17,678 $14,932
Work-in-process 10,390 11,735 11,720
Purchased parts and materials 26,071 17,831 16,640
Total Inventories $54,365 $47,244 $43,292
</TABLE>
Effective in fiscal 1993, the Company changed its method of applying
overhead costs to inventories. Previously, all overhead costs were applied
to inventory during the production process based on various methods such as
labor or machine hours. Under the new method, certain overhead costs are
applied to purchased parts at the time inventory is received based on
related procurement activities, and the remaining overhead costs are applied
to inventory during the production process. The change was made to improve
the valuation of inventory by applying overhead costs to inventory as the
costs are incurred. The change in accounting for inventory is recorded as a
cumulative effect of a change in an accounting principle, which had the
effect of increasing 1993 net income by $2.4 million (net of income tax in
the amount of $952,000). This change had no significant impact on 1993
income before cumulative effect of accounting changes. The financial
statements have not been restated to reflect this accounting change;
however, pro forma information, as if the change were made retroactively, is
shown on the Consolidated Statements of Income.
<TABLE>
NOTE 5 ACCRUED LIABILITIES
(In thousands)
<CAPTION>
April 29, 1994 April 30, 1993 September 25, 1992
<S> <C> <C> <C>
Compensation payable $ 9,674 $ 5,365 $ 6,202
Retirement plans contributions payable 960 476 698
Self-insurance plan 1,003 1,043 1,094
Accrued expenses 15,619 4,105 3,818
Unearned service revenue 2,358 1,160 1,059
Other taxes payable 3,913 784 2,364
Profit-sharing bonus payable 693 --- 1,942
Dividends payable 1,027 895 825
Other items 207 279 192
Total Accrued Liabilities $35,454 $14,107 $18,194
</TABLE>
NOTE 6 GOODWILL AND INTANGIBLE ASSETS
Goodwill represents the excess of the purchase price over the fair market
value of the net assets acquired in the purchase of the Philips test and
measurement business. The goodwill is being amortized on a straight-line
basis over twenty years. The Company owns intangible assets, most of which
were acquired in the purchase of the Philips test and measurement business.
These intangible assets are being amortized over five years. The
accumulated amortization of goodwill and intangible assets at April 29, 1994
was $1.0 million and $1.6 million, respectively. Amortization expense is
recorded in nonoperating expense.
NOTE 7 INCOME TAXES
Effective September 26, 1992, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income taxes." Adoption of
Statement No. 109 required the Company to change from the deferred method to
the liability method of accounting for deferred income taxes. Under the
liability method, deferred income taxes reflect the net tax effects of
temporary differences between carrying amounts of assets and liabilities for
financial reporting and the amounts used for tax purposes. Deferred income
taxes are measured using the enacted tax rates and laws that will be in
effect when the differences are expected to reverse. Prior to the adoption
of Statement No. 109, income tax expense was determined using the deferred
method. Deferred tax expense was based on items of income and expense that
were reported in different years in the financial statements and tax returns
and was measured at the tax rate in effect in the year the difference
originated.
As permitted by Statement No. 109, the Company elected to record the
cumulative effect of adopting the Statement and not restate the financial
statements of prior years. The cumulative effect of the change increased
net income in 1993 by $1.5 million or $0.21 per share.
Significant components of the Company's deferred tax assets and liabilities
as of April 29, 1994, April 30, 1993 and September 25, 1992 are as follows:
<TABLE>
(in thousands)
<CAPTION>
April 1994 April 1993 September 1992
<S> <C> <C> <C>
Deferred Tax Assets:
Accrued restructuring costs $ 237 $1,841 $ 2,312
Accrued employee benefit expenses 4,457 1,639 1,674
Inventory adjustments 4,301 1,831 1,774
Net operating loss carryforward
of acquired company 21,911 491 532
Product warranty accruals 525 486 425
Foreign tax credit carryforwards --- 927 1,056
Other items, net 259 398 333
Total Deferred Tax Assets 31,690 7,613 8,106
Valuation reserve (18,582) (927) (1,056)
Net Deferred Tax Assets $ 13,108 $6,686 $7,050
Deferred Tax Liabilities:
Fixed asset basis differences $ 5,774 $5,403 $ 5,366
Foreign tax accruals and adjustments 231 596 1,029
Pension 1,078 311 ---
Intangible assets 2,057 --- ---
Other items, net 12 294 ---
Total Deferred Tax Liabilities $ 9,152 $6,604 $ 6,395
</TABLE>
For financial reporting purposes, income before income taxes is as follows:
<TABLE>
(in thousands)
<CAPTION>
For the For the seven For the For the
year ended months ended year ended year ended
April 1994 April 1993 September 1992 September 1991
<S> <C> <C> <C> <C>
U.S. $13,681 $3,239 $20,201 $2,250
Foreign 399 718 985 1,191
$14,080 $3,957 $21,186 $3,441
</TABLE>
The provision for income taxes is as follows:
<TABLE>
(in thousands)
<CAPTION>
LIABILITY METHOD DEFERRED METHOD
For the For the seven For the For the
year ended months ended year ended year ended
April 1994 April 1993 September 1992 September 1991
<S> <C> <C> <C> <C>
Current taxes on income:
U.S. $1,791 $ 199 $5,270 $ 2,263
Foreign 986 344 665 670
2,777 543 5,935 2,933
Deferred income taxes 2,503 573 47 (2,697)
$5,280 $1,116 $5,982 $ 236
</TABLE>
The difference between the April 30, 1993 net deferred tax assets and the
April 29, 1994 net deferred tax assets is not equal to the 1994 deferred
income tax provision primarily due to the net deferred tax assets recorded
on May 1, 1993 in connection with the acquisition of the Philips test and
measurement business. In addition, the change in the deferred tax asset
valuation reserve is comprised of a decrease in the reserve due to the
realization of foreign tax credits and an increase due to the acquisition of
foreign net operating losses. The acquired foreign net operating losses
have an unlimited carryover period.
The deferred income tax provision (benefit) under the deferred method was as
follows:
<TABLE>
(in thousands)
<CAPTION>
DEFERRED METHOD
For the For the
year ended year ended
September 1992 September 1991
<S> <C> <C>
Deferred income taxes:
Difference between book and tax depreciation $ 308 $ (28)
Inventory adjustments (855) 349
Accrued employee benefit expenses 248 493
Repatriation of foreign earnings, net of foreign tax credit (551) 3
Accrued restructuring costs 1,277 (3,542)
Other items, net (380) 28
$ 47 $(2,697)
</TABLE>
A reconciliation from the U.S. statutory rate to the effective tax rate is
as follows:
<TABLE>
(in thousands)
<CAPTION>
LIABILITY METHOD DEFERRED METHOD
For the For the seven For the For the
year ended months ended year ended year ended
April 1994 April 1993 September 1992 September 1991
Amount Percent Amount Percent Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tax at U.S. statutory rate $ 4,928 35.0% $1,345 34.0% $7,203 34.0% $1,170 34.0%
Foreign tax greater (less)
than U.S. statutory rate 1,765 12.5 (5) (0.1) 161 0.7 203 5.9
Utilization of foreign tax credits (1,538) (10.9) (129) (3.3) (956) (4.5) (410) (11.9)
Foreign Sales Corporation tax benefit (321) (2.3) (107) (2.7) (592) (2.8) (638) (18.5)
State taxes, net of federal benefit 222 1.6 53 1.3 333 1.6 47 1.3
Nondeductible goodwill 123 0.9 --- --- --- --- --- ---
Other items, net 101 0.7 (41) (1.0) (167) (0.8) (136) (3.9)
$ 5,280 37.5% $1,116 28.2% $5,982 28.2% $ 236 6.9%
</TABLE>
NOTE 8 EMPLOYEE BENEFIT PLANS
The expense related to employee benefit plans is as follows:
<TABLE>
(in thousands)
<CAPTION>
For the For the seven For the For the
year ended months ended year ended year ended
April 1994 April 1993 September 1992 September 1991
<S> <C> <C> <C> <C>
Pension Plan, U.S. $1,147 $ 738 $ 901 $1,416
Pension Plans, Foreign 1,519 139 210 173
Profit-sharing Retirement Plan 652 303 859 719
Profit-sharing Bonus Plan 1,296 --- 3,834 2,472
Supplemental Retirement Plan 437 227 392 315
Stock Award Plans 376 180 680 861
Performance Award Plans --- --- 82 231
Administrative expenses of U.S.
benefit plans 571 314 486 393
Total Employee Benefit Plans $5,998 $1,901 $7,444 $6,580
</TABLE>
PENSION PLAN, U.S. The Company's U.S. pension plan includes all U.S.
employees with a minimum of one year of service. Pension benefits are based
upon years of service with the Company and the highest sixty months' average
compensation earned. The Company's funding policy is to contribute annually
the amount required by ERISA.
Net periodic U.S. pension cost is as follows:
<TABLE>
(in thousands)
<CAPTION>
For the For the seven For the For the
year ended months ended year ended year ended
April 1994 April 1993 September 1992 September 1991
<S> <C> <C> <C> <C>
Service cost $ 1,917 $1,129 $ 1,813 $ 1,830
Interest cost 2,939 1,655 2,639 2,365
Return on plan assets (2,590) (1,602) (2,013) (5,063)
Net amortization and deferral (1,119) (444) (1,538) 2,284
Net periodic pension cost $ 1,147 $ 738 $ 901 $ 1,416
</TABLE>
The funding status of the plan is as follows:
<TABLE>
(in thousands)
<CAPTION>
April 29, 1994 April 30, 1993 September 25, 1992
<S> <C> <C> <C>
Vested benefit obligation $ 30,520 $23,400 $21,570
Accumulated benefit obligation $ 31,266 $24,187 $22,324
Projected benefit obligation $ 40,925 $33,724 $31,660
Fair market value of plan assets 32,968 30,809 29,033
Projected benefit obligation in excess of plan assets 7,957 2,915 2,627
Prior service cost 314 (828) (891)
Unrecognized net loss (11,740) (5,140) (4,346)
Unrecognized net transition asset 1,493 2,032 2,347
Additional minimum liability 94 112 ---
Prepaid pension liability $ (1,882) $ (909) $ (263)
</TABLE>
The weighted average discount rate was 8.0 percent in 1994 and 9.0 percent
in 1993, 1992 and 1991, and the rate of increase in future compensation
levels used in determining the actuarial present value of the projected
benefit obligation was 3.0 percent in 1994 and 5.0 percent in 1993, 1992 and
1991. The expected long-term rate of return on plan assets was 10.8 percent
in 1994 and 11.0 percent in 1993 and 1992. Upon adoption of Statement of
Financial Accounting Standards No. 87 in 1988, the plan had an excess of
plan assets, including accrued contributions, over projected benefit
obligations (net transition asset) of $5.0 million. The net transition
asset is being amortized over a period of 9.3 years.
All of the plan's assets are stated at fair market value and consist
primarily of common stock, fixed income securities and cash equivalents.
PENSION PLANS, FOREIGN. The Company has various pension plans covering its
foreign employees. Most of these plans are defined contribution plans and
are fully funded. The expense for these plans was $620,000 in 1994. The
remaining plans qualify for accounting under the rules of Statement of
Financial Accounting Standards No. 87 (SFAS 87), "Accounting for Pensions."
The tables below include only those international pension plans which
qualify for SFAS 87 treatment.
Net periodic pension expense of foreign plans under SFAS No. 87 is as
follows:
<TABLE>
(in thousands)
<CAPTION>
For the
year ended
April 1994
<S> <C>
Service cost $ 792
Interest cost 1,000
Return on plan assets (893)
Net periodic pension cost $ 899
</TABLE>
<PAGE>
The funding status of the plans is as follows:
<TABLE>
(in thousands)
<CAPTION>
April 29, 1994
<S> <C>
Vested benefit obligation $10,357
Accumulated benefit obligation $11,011
Projected benefit obligation $16,533
Fair market value of plan assets 14,315
Projected benefit obligation in excess of plan assets 2,218
Unrecognized net loss (290)
Accrued pension liability $ 1,928
</TABLE>
The weighted average discount rate varied from 6.5 percent to 7.0 percent
and the rate of increase in future compensation levels used in determining
the actuarial present values of the projected benefit obligation varied from
3.0 percent to 5.0 percent. The long-term rate of return on plan assets was
6.5 percent.
PROFIT-SHARING RETIREMENT PLAN. The Company has a profit-sharing retirement
plan for all U.S. employees, which provides immediate eligibility and
vesting. The Company matches the employees' salary deferrals under section
401(k) of the Internal Revenue Code, subject to certain profitability and
dollar limits.
PROFIT-SHARING BONUS PLAN. The Company has a profit-sharing bonus plan,
which generally provides semiannual cash payments to certain employees. The
amount of each eligible employee's bonus is dependent upon their base salary
in relation to the total base salary of all eligible employees and the
operating performance of the Company. No profit-sharing bonus was paid for
1993.
SUPPLEMENTAL RETIREMENT PLAN. The Company has a supplemental retirement
plan for key executives providing for periodic payments upon retirement.
The long-term liability under this plan was $2.6 million in 1994, $2.5
million in 1993 and $2.6 million in 1992.
STOCK AWARD PLANS. The Company has an Inventor Recognition Stock Award
Plan, which is designed to award individuals responsible for developing
technology that is incorporated into the Company's patents. The Inventor
Recognition Stock Award Plan provides for grants of restricted stock with a
vesting period of two years.
The Company had a Key Contributor Stock Award Plan, which was designed to
reward performance of employees other than senior management. Restrictions
on the stock lapsed equally over five years so that each year 20 percent of
the shares granted in prior years became free of restrictions. The fair
market value of the stock at the date of grant established the compensation
amount, which was amortized over the five-year vesting period. The Key
Contributor Stock Award Plan was discontinued in 1992 and was replaced with
a nonqualified stock option program.
PERFORMANCE AWARD PLAN. The Company had a long-term performance award plan,
which provided cash awards to senior management based on three-year
corporate performance. The plan was discontinued in 1991 and final awards
were paid in 1992.
The long-term liabilities of these benefit plans constitute the major
portion of Other Liabilities on the Balance Sheet.
NOTE 9 STOCKHOLDERS' EQUITY
REPURCHASED SHARES. The balance in the repurchased shares account was
908,701 shares in 1994, 2,464,936 in 1993 and 2,472,756 shares in 1992.
PREFERRED STOCK. There are 2,000,000 shares of preferred stock authorized,
of which 250,000 shares have been designated Series A Convertible Preferred
Stock. On May 26, 1993, as part of the purchase of the Philips test and
measurement business, the 78,462 shares of Series A Convertible Preferred
Stock, which were owned by Philips, were converted into 538,144 shares of
common stock. The conversion rate was established in the original preferred
stock agreement. There were no shares of preferred stock outstanding at
April 29, 1994. There were 78,462 shares outstanding in 1993 and 1992.
STOCK PURCHASE PLAN. The Company has a voluntary employee stock purchase
plan for eligible employees. The Company's contribution is 25 percent of
the amount invested by the employee, plus all commissions and brokerage
fees. The Company's expenses related to the plan were $433,000 in 1994,
$252,000 for the seven months ended April 30, 1993, $443,000 in 1992 and
$430,000 in 1991.
DIVIDENDS. The Company declared cash dividends of $0.52 per share in 1994,
$0.26 per share in the seven months ended April 30, 1993, $0.48 per share in
1992 and $0.40 per share in 1991.
STOCKHOLDER RIGHTS PLAN. The Company has a Stockholder Rights Plan and
issues one Right for each outstanding share of common stock. The Rights
become exercisable only if a person or group (an "Acquiring Person") has
acquired, or obtained the right to acquire, 25 percent or more of the
outstanding shares of common stock of the Company or following the
commencement of a tender or exchange offer for acquiring such same
percentage. In the event that a person or group becomes an Acquiring
Person, each Right, upon exercise, will entitle its holder (except for an
Acquiring Person) to receive common stock of the Company (or, in certain
circumstances, cash, property or other securities of the Company) or of any
company with which the Company shall have entered into certain transactions
having a value equal to two times the exercise price of the Right. In
addition, under certain circumstances, the Continuing Directors can require
that each Right (other than Rights held by an Acquiring Person) be exchanged
for one share of common stock. The Company may redeem the Rights for $0.01
per Right at any time before they become exercisable. The Rights do not
entitle their holders to any voting or dividend rights and, at least until
they become exercisable, have no dilutive effect on the earnings of the
Company. The plan was adopted to encourage a prospective acquirer of the
Company to negotiate acquisition terms with the Board of Directors,
including the Continuing Directors, to assure that the terms are in the best
interests of the stockholders of the Company.
STOCK OPTIONS. The Company has a 1988 and a 1990 Stock Incentive Plan.
Stock options granted under the 1990 plan and those granted after 1989 under
the 1988 plan are nonqualified stock options exercisable 40 percent after
one year, 30 percent after three years and 30 percent after five years and
expire ten years from the date of grant. In addition, the Company has a
Stock Option Plan for outside Directors, which was authorized in 1990 and
annually grants nonqualified stock options to the Company's outside
Directors. Grants under this plan and those made in fiscal years 1988 and
1989 under the 1988 Stock Incentive Plan are exercisable after one year and
expire ten years from the date of grant. All options are granted at the
market value on the date of grant. The Company makes no charge to income in
connection with stock options. Shares reserved for issuance under these
stock option plans totaled 2,185,000 shares at April 29, 1994 and 1,285,000
at April 30, 1993 and September 25, 1992, of which 1,018,550 shares, 337,900
shares, and 460,300 shares, respectively, were available for options to be
granted in the future.
<TABLE>
<CAPTION>
Total Options Price Range
<S> <C> <C>
Balance,
September 28, 1990 (145,900 options exercisable) 359,100 $11.88 to $25.75
Granted 201,400 $16.63 to $20.38
Terminated (6,200) $16.88 to $25.75
Exercised (4,000) $16.88
Balance,
September 27, 1991 (229,500 options exercisable) 550,300 $11.88 to $25.75
Granted 267,900 $23.81 to $30.75
Terminated (5,900) $25.56 to $30.75
Exercised (40,400) $11.88 to $25.75
Balance,
September 25, 1992 (204,600 options exercisable) 771,900 $11.88 to $30.75
Granted 122,400 $26.00 to $26.81
Exercised (7,600) $11.88 to $25.75
Balance,
April 30, 1993 (269,300 options exercisable) 886,700 $11.88 to $30.75
Granted 246,300 $22.44 to $28.19
Terminated (26,950) $11.88 to $30.75
Exercised (23,200) $11.88 to $20.38
Balance,
April 29, 1994 (460,500 options exercisable) 1,082,850 $11.88 to $30.75
</TABLE>
NOTE 10 FINANCING AND COMMITMENTS
The Company has $55.0 million of three-year committed revolving lines of
credit which were arranged specifically for the acquisition of the Philips
test and measurement business. These facilities are reduced in quarterly
increments beginning in 1996. The $55.0 million lines of credit include a
$30.0 million facility to be used to finance the acquisition and corporate
working capital requirements and a $25.0 million multicurrency facility to
finance the working capital requirements of the European operations. The
committed lines of credit require certain working capital and other minimum
financial requirements. The Company is in compliance with all covenants on
its lines of credit. At April 29, 1994 there was $9.5 million outstanding
from the $30 million facility and $4.8 million outstanding from the
multicurrency facility.
The Company has $44.0 million in uncommitted lines of credit. There was no
debt outstanding under these lines at April 29, 1994 or April 30, 1993.
Borrowings under these lines totaled $781,000 at September 25, 1992. Long-
term obligations include capital lease obligations.
The Company's operating lease expense, including leases with a term of less
than one year, was $6.9 million in 1994, ($2.6 million for the seven months
ended April 30, 1993, $4.1 million in 1992 and $3.9 million in 1991). The
principal leases are for various sales offices, storage facilities, data
processing equipment and automobiles. Most facility leases have escalation
clauses to cover increases in direct lease expenses. Below is a schedule of
future minimum lease payments under operating leases that have initial
noncancelable lease terms in excess of one year as of April 29, 1994:
<TABLE>
(in thousands)
<CAPTION>
Fiscal Year Facilities Equipment Total
<S> <C> <C> <C>
1995 $2,646 $1,547 $ 4,193
1996 2,026 1,116 3,142
1997 1,719 586 2,305
1998 1,392 306 1,698
1999 432 915 1,347
$8,215 $4,470 $12,685
</TABLE>
NOTE 11 OPERATIONS BY GEOGRAPHIC AREAS
The Company is engaged in one line of business, the manufacture and sale of
compact, professional electronic test tools. In the schedule below,
revenues are reported based on the location of the customer, while income
before income taxes and assets are reported based on the location of the
Company's facilities. Intercompany transfers of products and services are
made at arm's length between the various geographic areas. Revenue is not
recognized for financial statement purposes until there has been a sale to
an unaffiliated customer. Revenues from United States government agencies
in the aggregate accounted for approximately 4.4 percent of consolidated
revenues in 1994 (8.2 percent for the seven-month transition period ended
April 30, 1993, 9.5 percent in 1992 and 10.0 percent in 1991).
<TABLE>
(in thousands)
<CAPTION>
For the For the seven For the For the
year ended months ended year ended year ended
April 29, 1994 April 30, 1993 Sept. 25, 1992 Sept. 27, 1991
<S> <C> <C> <C> <C>
Revenues:
United States $168,230 $ 86,371 $179,429 $155,687
Europe 137,275 17,220 39,932 36,573
Other 52,399 28,548 52,458 47,391
Consolidated revenues $357,904 $132,139 $271,819 $239,651
Income before income taxes:
United States $ 20,699 $ 6,300 $ 26,301 $ 17,627
Europe 228 --- --- ---
Other 1,158 718 985 1,190
Corporate expense and eliminations <F1> (8,005) (3,061) (6,100) (15,376)
Consolidated income before income taxes $ 14,080 $ 3,957 $ 21,186 $ 3,441
Assets:
United States $141,014 $164,402 $167,731 $157,051
Europe 108,129 331 273 334
Other 10,977 8,211 8,443 9,173
Eliminations (14,518) (857) (641) (732)
Total Assets $245,602 $172,087 $175,806 $165,826
<FN>
<F1> Corporate expense included $10.8 million in restructuring charges in 1991.
</TABLE>
NOTE 12 FINANCIAL INSTRUMENTS
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of trade receivables. As
of April 29, 1994, the Company had no significant concentrations of credit
risk due to a large and diversified customer base spanning vast geographic
areas. At April 29, 1994, the Company had foreign exchange contracts for
various foreign currencies totaling $2.0 million.
NOTE 13 CHANGE IN FISCAL YEAR-END
In 1993, the Company changed its fiscal year-end from the last Friday in
September to the last Friday in April. Fiscal 1993 was a seven-month
transition period. For comparative purposes, selected unaudited financial
data for the seven-month period ended May 1, 1992 are presented below.
<TABLE>
(in thousands except shares and per share amounts)
<CAPTION>
For the
seven months ended
April 30, 1993 May 1, 1992
(unaudited)
<S> <C> <C>
Revenues $132,139 $158,703
Operating Income $ 3,315 $ 12,411
Provision for Income Taxes $ 1,116 $ 3,482
Income Before Cumulative Effect of Changes in
Accounting Principles $ 2,841 $ 8,948
Net Income $ 6,743 $ 8,948
Per Share Amounts:
Income Before Cumulative Effect of Changes in
Accounting Principles $ 0.40 $ 1.28
Earnings Per Share $ 0.95 $ 1.28
Average Shares and Share Equivalents Outstanding 7,069,463 7,015,179
Net Cash Provided by Operating Activities $ 16,584 $ 13,799
Net Cash Used by Investing Activities $ (5,586) $ (5,326)
Net Cash Used by Financing Activities $ (2,956) $ (1,553)
Net Increase In Cash and Cash Equivalents $ 8,042 $ 6,920
</TABLE>
NOTE 14 CONTINGENCIES
The Company is subject to various pending and threatened legal actions that
arise in the normal course of business. In the opinion of management,
liabilities arising from these claims, if any, will not have a material
effect on the financial position of the Company.
<PAGE>
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
Board of Directors and Stockholders
Fluke Corporation
Everett, Washington
We have audited the accompanying consolidated balance sheets of Fluke
Corporation and subsidiaries as of April 29, 1994, April 30, 1993 and
September 25, 1992, and the related consolidated statements of income,
stockholders' equity and cash flows for the year ended April 29, 1994, the
seven months ended April 30, 1993 and for each of the two years in the
period ended September 25, 1992. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Fluke
Corporation and subsidiaries at April 29, 1994, April 30, 1993 and September
25, 1992, and the consolidated results of their operations and their cash
flows for the year ended April 29, 1994, the seven months ended April 30,
1993 and for each of the two years in the period ended September 25, 1992,
in conformity with generally accepted accounting principles.
As discussed in Note 4 and in Note 7 to the financial statements, in 1993
the Company changed its method of applying overhead costs to inventory and
its method of accounting for income taxes.
ERNST & YOUNG
Seattle, Washington
June 10, 1994
<PAGE>
REPORT OF MANAGEMENT
The management of Fluke Corporation (the Company) is responsible for the
preparation and integrity of the Company's consolidated financial statements
and related financial information. The statements have been prepared in
conformity with generally accepted accounting principles and include the
best estimates and judgments of management.
The Company maintains a system of internal control, which is designed to
safeguard the Company's assets and ensure that transactions are recorded in
accordance with Company policies. The Company's internal audit program is
an important part of this control.
The Audit Committee of the Board of Directors is responsible for reviewing
and approving the Company's consolidated financial statements, the system of
internal accounting controls and the selection of independent auditors. The
Audit Committee, which is comprised entirely of outside Directors, has
unrestricted access to both internal and external auditors.
George M. Winn John R. Smith
President, Vice President,
Chief Operating Officer Treasurer
<PAGE>
<TABLE>
FINANCIAL SUMMARY
(in thousands except shares and per share amounts)
<CAPTION>
For the For the seven For the For the For the For the
year ended months ended year ended year ended year ended year ended
April 29, 1994 April 30, 1993 Sept. 25, 1992 Sept. 27, 1991 Sept. 28, 1990 Sept. 29, 1989
<S> <C> <C> <C> <C> <C> <C>
Revenues $357,904 $132,139 $271,819 $239,651 $233,839 $247,695
Cost of goods sold $182,475 $ 72,167 $149,776 $129,095 $123,255 $128,683
Gross margin $175,429 $ 59,972 $122,043 $110,556 $110,584 $119,012
Restructuring --- --- --- $ 10,800 --- ---
Total operating expenses
excluding restructuring $158,558 $ 56,657 $101,712 $ 97,264 $ 95,213 $ 95,926
Operating income $ 16,871 $ 3,315 $ 20,331 $ 2,492 $ 15,371 $ 23,086
Income before income taxes and
cumulative effect of changes
in accounting principles $ 14,080 $ 3,957 $ 21,186 $ 3,441 $ 14,693 $ 36,174
Cumulative effect of changes in
accounting principles --- $ 3,902 --- --- --- ---
Net income $ 8,800 $ 6,743 $ 15,204 $ 3,205 $ 12,178 $ 23,151
Average shares and share equivalents
outstanding 8,031,696 7,069,463 7,033,695 6,943,941 7,073,292 8,279,335
Per Share Amounts:
Income before cumulative effect of
changes in accounting principles $ 1.10 $ 0.40 $ 2.16 $ 0.46 $ 1.72 $ 2.80
Cumulative effect of changes in
accounting principles --- $ 0.55 --- --- --- ---
Earnings per share $ 1.10 $ 0.95 $ 2.16 $ 0.46 $ 1.72 $ 2.80
Pro forma net income <F1> $ 8,800 $ 4,320 $ 14,938 $ 3,156 $ 11,836 $ 23,149
Pro forma earnings per share <F1> $ 1.10 $ 0.61 $ 2.12 $ 0.45 $ 1.67 $ 2.80
Income before cumulative effect
of changes in accounting principles
as a percentage of revenues 2.46% 2.15% 5.59% 1.34% 5.21% 9.35%
Net income as a percentage of revenues 2.46% 5.10% 5.59% 1.34% 5.21% 9.35%
Cash dividends declared per share $ 0.52 $ 0.26 $ 0.48 $ 0.40 $ 0.32 $ 0.20
Total assets $245,602 $172,087 $175,806 $165,826 $151,892 $157,259
Total stockholders' equity $157,829 $135,187 $129,464 $116,265 $118,066 $110,122
Long-term obligations $ 14,712 $ 34 $ 391 $ 154 $ 94 $ 2,253
Long-term interest expense $ 1,327 $ 12 $ 31 $ 28 $ 519 $ 449
<FN>
<F1> Pro forma data is presented assuming the change in accounting for inventory (explained in Note 4) is applied retroactively.
</TABLE>
<TABLE>
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(in thousands except per share amounts)
<CAPTION>
Income Before Earnings
Gross Cumulative Net Per Share Before Earnings Dividends
Revenues Margin Effect Income Cumulative Effect Per Share Per Share
<S> <C> <C> <C> <C> <C> <C> <C>
Fiscal 1994:
1st Quarter $ 84,687 $ 40,755 $1,420 $ 1,420 $0.18 $0.18 $0.13
2nd Quarter 89,554 42,824 1,899 1,899 0.24 0.24 0.13
3rd Quarter 87,615 42,509 2,380 2,380 0.30 0.30 0.13
4th Quarter 96,048 49,341 3,101 3,101 0.38 0.38 0.13
Total $357,904 $175,429 $8,800 $ 8,800 $1.10 $1.10 $0.52
Fiscal 1993: <F1>
1st Quarter $ 66,776 $ 29,004 $2,319 $ 2,319 $0.33 $0.33 $0.12
2nd Quarter <F2> 64,581 29,268 3,132 7,034 0.44 0.99 0.12
3rd Quarter 55,751 24,300 924 924 0.13 0.13 0.13
4th Quarter 58,147 27,866 2,719 2,719 0.39 0.39 0.13
Total $245,255 $110,438 $9,094 $12,996 $1.29 $1.84 $0.50
<FN>
<F1>Quarterly information for fiscal 1993 has been restated to reflect the
new fiscal year structure with quarters ending in July, October, January and
April.
<F2> The second quarter of 1993 includes the cumulative effect of adopting
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," ($1.5 million) and the change in accounting for inventory ($2.4
million).
</TABLE>
<TABLE>
STOCK PRICE INFORMATION
<CAPTION>
1994 1993 <F1>
High Low High Low
<S> <C> <C> <C> <C>
1st Quarter 27 1/2 20 1/4 32 1/8 24 1/4
2nd Quarter 26 5/8 23 3/4 31 25 1/4
3rd Quarter 26 3/4 22 3/4 34 3/8 26 5/8
4th Quarter 28 3/8 25 30 1/2 25 3/8
<FN>
<F1> Quarterly information for fiscal 1993 has been restated to reflect the
new fiscal year structure with quarters ending in July, October, January and
April.
</TABLE>
Fluke Corporation stock is traded on the American and Pacific Stock
Exchanges. Quarterly cash dividends of $0.13 per share were paid in 1994
and 1993 and $0.12 per share in 1992. The number of stockholders of record
at April 29, 1994 was 2,109.
<TABLE>
Exhibit 21
SUBSIDIARIES
The Company owns or controls the common stock (the only class authorized) of
the following subsidiaries:
<CAPTION>
Percentage of State or Country
Name of Corporation Ownership of Incorporation
<S> <C> <C>
Fluke International Corporation 100 <F1> Washington
Fluke Deutschland GmbH 100 <F2> Germany
Fluke Electronics Canada, Inc. 100 <F2> Canada
Fluke Foreign Sales Corporation 100 <F2> Guam
Fluke Holland B.V. 100 <F2> <F3> The Netherlands
Fluke Singapore Pte. Ltd. 100 <F2> Singapore
K. K. Fluke 100 <F2> Japan
Fluke B.V. 100 <F2> The Netherlands
Fluke Europe B.V. 100 <F4> The Netherlands
Fluke Osterreich GmbH 100 <F4> Austria
Fluke Belgium N.V./S.A. 100 <F4> Belgium
Fluke Danmark A.S. 100 <F4> Denmark
Fluke Finland Oy 100 <F4> Finland
Fluke France S.A. 100 <F4> France
Fluke Italia S.r.l. 100 <F4> Italy
Fluke Norge A/S 100 <F4> Norway
Fluke Iberica S.L. 100 <F4> Spain
Fluke Sverige AB 100 <F4> Sweden
Fluke Switzerland AG 100 <F4> Switzerland
Fluke U.K. Ltd. 100 <F4> United Kingdom
Fluke Holding B.V. 100 <F4> The Netherlands
Fluke Industrial B.V. 100 <F5> The Netherlands
Fluke Nederland B.V. 100 <F5> The Netherlands
<FN>
<F1> Owned by Fluke Corporation
<F2> Owned by Fluke International Corporation
<F3> Not active but remains incorporated
<F4> Owned by Fluke B.V.
<F5> Owned by Fluke Holding B.V.
</TABLE>
The accounts of these subsidiaries are included in the accompanying
consolidated financial statements.
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form
10-K) of Fluke Corporation of our report dated June 10, 1994, included
in the 1994 Annual Report to Shareholders of Fluke Corporation.
Our audit also included the financial statement schedules of Fluke
Corporation listed in Item 14(a). These schedules are the
responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, the financial
statement schedules referred to above, when considered in relation to
the basic financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration
Statements (Form S-8 No. 33-20968) pertaining to the Company's Long-term
Stock Performance Plan, (Form S-8 No. 33-30689) pertaining to the
Company's 1988 Stock Option Plan, (Form S-8 No. 33-38507) pertaining to
the Company's 1990 Stock Incentive Plan, and (Form S-8 No. 33-
38506)pertaining to the Company's Stock Option Plan for Outside
Directors of our report dated June 10, 1994, with respect to the
consolidated financial statements incorporated herein by reference and
our report included in the preceding paragraph with respect to the
financial statement schedules included in this Annual Report (Form-10K)
of Fluke Corporation.
ERNST & YOUNG
Seattle, Washington
July 28, 1994
