SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended July 28, 1995
Commission File No. 1-5590
Fluke Corporation
(Exact name of registrant as specified in its charter)
Washington
(State of incorporation of organization)
91 - 0606624
(I.R.S. Employer Identification No.)
6920 Seaway Boulevard Everett, Washington 98203
(Address of principal executive offices) (Zip Code)
(206) 347-6100
(Registrant's telephone number, including area code)
(Former name if changed since last report)
(Former fiscal year if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
As of August 25, 1995, there were 8,030,426 shares of $0.25 par value
common stock outstanding.
INDEX
Fluke Corporation
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets as of July 28, 1995 and
April 28, 1995
Consolidated Statements of Income for the quarters ended
July 28, 1995 and July 29, 1994
Consolidated Statements of Cash Flows for the quarters ended
July 28, 1995 and July 29, 1994
Notes to Consolidated Financial Statements
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 - Computation of Earnings Per Share
(b) Reports on Form 8-K
SIGNATURES
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
<TABLE>
CONSOLIDATED BALANCE SHEETS
Fluke Corporation and Subsidiaries
unaudited (in thousands except shares)
<CAPTION>
July 28, 1995 April 28, 1995
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 20,513 $ 28,880
Accounts receivable, less allowances 69,897 77,222
Inventories 57,629 53,908
Deferred income taxes 15,082 15,159
Prepaid expenses and other current assets 12,215 7,556
Total Current Assets 175,336 182,725
Property, Plant and Equipment
Land 5,979 5,979
Buildings 47,181 47,235
Machinery and equipment 106,286 103,968
Construction in progress 1,538 2,298
Less accumulated depreciation (100,298) (97,611)
Net Property, Plant and Equipment 60,686 61,869
Goodwill and Other Intangibles 22,851 23,033
Other Assets 7,592 7,895
Total Assets $ 266,465 $ 275,522
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 15,370 $ 17,080
Accrued liabilities 31,065 38,733
Income taxes payable 2,170 3,307
Current maturities of long-term obligations 234 230
Total Current Liabilities 48,839 59,350
Long-term Obligations 17,279 21,613
Deferred Income Taxes 10,755 9,409
Other Liabilities 10,035 9,870
Total Liabilities 86,908 100,242
Stockholders' Equity
Common stock 1,996 1,975
Additional paid-in capital 61,766 60,006
Retained earnings 110,008 107,089
Less nonvested shares (150) (145)
Cumulative translation adjustment 5,937 6,355
Total Stockholders' Equity 179,557 175,280
Total Liabilities and Stockholders' Equity $ 266,465 $ 275,522
Total Shares Outstanding 7,983,466 7,898,674
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
Fluke Corporation and Subsidiaries
unaudited (in thousands except shares and per share amounts)
<CAPTION>
QUARTER ENDED
July 28, 1995 July 29,1994
<S> <C> <C>
Revenues $ 98,714 $ 86,000
Cost of Goods Sold 47,387 43,178
Gross Margin 51,327 42,822
Operating Expenses
Marketing and administrative 35,137 30,571
Research and development 10,025 9,117
Total Operating Expenses 45,162 39,688
Operating Income 6,165 3,134
Non-Operating Expenses (Income)
Interest Expense 296 315
Other (578) (1,054)
Total Non-Operating
Expenses (Income) (282) (739)
Income Before Income Taxes 6,447 3,873
Provision for Income Taxes 2,321 1,472
Net Income $ 4,126 $ 2,401
Earnings Per Share $ 0.50 $ 0.30
Net Income as a Percentage of Revenues 4.18% 2.79%
Average Shares and Share
Equivalents Outstanding 8,282,025 8,067,538
Cash Dividends Per Share $ 0.15 $ 0.14
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fluke Corporation and Subsidiaries
unaudited (in thousands)
<CAPTION>
QUARTER ENDED
July 28, 1995 July 29, 1994
<S> <C> <C>
Operating Activities
Net Income $ 4,126 $ 2,401
Items not affecting cash:
Depreciation and amortization 4,249 4,535
Deferred income tax 1,378 253
Stock awards 21 45
Accrued pension 112 353
Loss (gain) on disposal of property, plant
and equipment 14 (133)
Net change in:
Accounts receivable 7,458 3,454
Inventories (3,872) (704)
Prepaid expenses (4,681) (419)
Accounts payable (1,649) (5,889)
Accrued liabilities (7,644) (5,015)
Income taxes payable (1,488) (324)
Other assets and liabilities (320) 1,071
Net Cash Used By Operating Activities (2,296) (372)
Investing Activities
Additions to property, plant and equipment (2,475) (4,466)
Proceeds from disposal of property, plant
and equipment 53 603
Net Cash Used By Investing Activities (2,422) (3,863)
Financing Activities
Proceeds from stock options 1,676 14
Proceeds from long-term obligations --- 11,198
Payments on long-term obligations (4,136) ---
Cash dividends paid (1,106) (1,027)
Repurchase of common stock --- (4,579)
Net Cash Provided (Used) By Financing
Activities (3,566) 5,606
Effect of Foreign Currency Exchange Rates on
Cash and Cash Equivalents (83) 878
Net Increase (Decrease) In Cash and Cash
Equivalents (8,367) 2,249
Cash and Cash Equivalents at Beginning of Period 28,880 6,520
Cash and Cash Equivalents at End of Period $20,513 $ 8,769
Supplemental Cash Flow Information
Income Taxes Paid $ 2,345 $ 549
Interest Paid $ 328 $ 315
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fluke Corporation and Subsidiaries
1. The accompanying unaudited Consolidated Financial Statements do not
purport to be full presentations and do not include all information and
disclosures required for fair presentation by generally accepted
accounting principles, but rather include only that information required
by the instructions to Form 10-Q. However, in the opinion of
management, the accompanying unaudited Consolidated Financial Statements
contain all adjustments (consisting of normal recurring accruals)
considered necessary to present fairly the Consolidated Balance Sheets
of the Company at July 28, 1995 and April 28, 1995 and the Consolidated
Statements of Income and the Statements of Cash Flows for the quarters
ended July 28, 1995 and July 29, 1994.
2. The results of operations for the quarter ended July 28, 1995 are
not necessarily indicative of the results to be expected for the full
year.
3. The Company paid a $0.14 per share quarterly cash dividend on May
18, 1995 to stockholders of record on April 28, 1995. On June 21, 1995,
the Company's Board of Directors declared a $ 0.15 per share quarterly
cash dividend for stockholders of record on July 28, 1995 which was paid
on August 18, 1995.
4. The components of inventories are as follows:
<TABLE>
(in thousands)
<CAPTION>
July 28, 1995 April 28, 1995
<S> <C> <C>
Finished Goods $18,185 $17,483
Work-in-Process 10,251 10,818
Purchased Parts and Materials 29,192 25,607
Total Inventories $57,629 $53,908
</TABLE>
Item 2 MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Fluke Corporation and Subsidiaries
RESULTS OF OPERATIONS
Revenues of $98.7 million for the quarter ended July 28, 1995 were 15
percent higher than the revenues of $86.0 million for the quarter ended
July 29, 1994. All geographic regions experienced growth in revenues.
Revenues in the United States increased 6 percent while revenues from
international markets increased 23 percent. European revenues, in U.S
dollar terms, increased 15 percent in the quarter ended July 28, 1995
over the quarter ended July 29, 1994. Approximately 14 percent of the
increase is the result of changes in European currencies which
strengthened compared to a year ago. International revenues from outside
of Europe increased 39 percent, of which approximately 6 percent
resulted from strengthening foreign currencies. The People's Republic
of China, several Asian countries, and Canada had particularily strong
growth.
Cost of goods sold increased 10 percent in the quarter ended July 28,
1995 over the quarter ended July 29, 1994. Approximately 6 percent of
the increase is related to the strengthening foreign currencies. Cost
of goods sold, as a percentage of revenues, decreased from 50 percent in
the quarter ended July 29, 1994 to 48 percent in the quarter ended July
28, 1995. The decline is partially due to declining volumes of some
older products which have lower margins and replacing them with higher
margin products that are aligned with the Company's mission.
Gross margin increased 20 percent on the 15 percent increase in revenues
as a result of the factor mentioned in the cost of goods sold
discussion. The strengthening foreign currencies also contributed to
the increase in gross margin. Gross margin increased from 50 percent of
revenues in the quarter end July 29, 1994 to 52 percent of revenues in
the current quarter.
Operating expenses increased 14 percent in the quarter ended July 28,
1995 over the quarter ended July 29, 1994. Approximately half of the
increase was due to strengthening foreign currencies. Research and
development expense increased 10 percent and marketing and
administrative expense increased 15 percent. Excluding the effect of
currency movements, the increase in marketing and administrative expense
was due partially to increased selling costs in some foreign operations
and increases in marketing expense for new products. The increase in
research and development expense, excluding the effect of currency
movements, was impacted by increased development efforts associated with
the introduction of new automotive products.
The change in net nonoperating expense was primarily a result of foreign
exchange gains recognized in the quarter ended July 29, 1994 that were
not recognized in the current quarter.
The effective tax rate for the quarter ended July 28, 1995 was 36.0
percent compared to 38.0 percent for the quarter ended July 29, 1994.
The decrease in the effective tax rate is primarily due to an
anticipated lower effective tax rate in the Company's foreign operations
in fiscal 1996. In fiscal 1995, several European operations incurred
tax losses with no recognized tax benefit, which caused the effective
tax rate of the combined European operations to be higher than average
statutory rates. In fiscal 1996 it is anticipated that these foreign
operations will generate income which will normalize the overall
effective tax rate.
Net income and earnings per share increased 72 percent and 67 percent,
respectively, in the quarter ended July 28, 1995 over the quarter ended
July 29, 1994. The Company's revenue growth and improvement in gross
margin are the primary drivers for the increase in net income. In
addition the Company remains committed to maintaining a modest level of
expense growth.
LIQUIDITY AND CAPITAL RESOURCES
The cash position of the Company has continued to remain strong even
through the first quarter, which is traditionally the quarter with the
highest use of cash. The borrowing under the Company's long-term line
of credit was approximately $17 million as of July 28, 1995. The
borrowings are being utilized primarily for working capital requirements
in the European operations. It is expected that these borrowings will
be repaid with cash generated from operations.
The Company made capital expenditures of $2.5 million in the quarter
ended July 28, 1995 compared to $4.5 million in the quarter ended July
29, 1994. In fiscal 1994 manufacturing equipment accounted for the
higher level of capital expenditures. There were no major acquisitions
in the quarter ended July 28, 1995.
The current ratio was 3.59 to 1 at July 28, 1995 and 3.08 to 1 at April
28, 1995. The increase is due to the lower level of current liabilities
which was caused in part by a reduction in accounts payable and accrued
expenses, primarily compensation accruals.
The Company has a program to hedge some of its foreign exchange exposure
using forward exchange contracts. Under the Comany's program the
contracts can not be speculative and are limited to actual currency
risk. The Company does not currently use any other form of derivatives
in managing its financial risk.
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 - Computation of Earnings Per Share
(b) Reports on Form 8-K
Report on Form 8-K, dated June 8, 1995 that was filed on
June 9, 1995.
Item reported on Form 8-K:
1) Press release regarding the fourth quarter and fiscal
1995 operating results.
SIGNATURES
Fluke Corporation and Subsidiaries
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FLUKE CORPORATION
Registrant
September 7, 1995 /s/John R. Smith
Date John R. Smith
Vice President, Treasurer
Chief Accounting Officer
<TABLE>
Exhibit 11 COMPUTATION OF EARNINGS PER SHARE
Fluke Corporation and Subsidiaries
<CAPTION> QUARTER ENDED
July 28, 1995 July 29, 1994
<C> <C>
<S>
Shares issued at beginning
of period 7,898,674 8,807,391
Less repurchased shares at
beginning of period --- (908,701)
Shares outstanding at
beginning of period 7,898,674 7,898,690
Repurchase of common shares
weighted average --- (59,341)
Net issuance of shares
under employee stock plans,
weighted average 44,582 384
Weighted average common
shares outstanding 7,943,256 7,839,733
Assumed exercise of stock
options, weighted average
of incremental shares 338,769 227,805
Average shares and
share equivalents
outstanding 8,282,025 8,067,538
Earnings per share $ 0.50 $ 0.30
Net Income $4,126,000 $2,401,000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet and Income Statement and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-26-1996<F1>
<PERIOD-START> APR-29-1995
<PERIOD-END> JUL-28-1995
<CASH> 20,513
<SECURITIES> 0
<RECEIVABLES> 71,107
<ALLOWANCES> 1,210
<INVENTORY> 57,629
<CURRENT-ASSETS> 175,336
<PP&E> 160,984
<DEPRECIATION> 100,298
<TOTAL-ASSETS> 266,465
<CURRENT-LIABILITIES> 48,839
<BONDS> 0
<COMMON> 1,996
0
0
<OTHER-SE> 177,561
<TOTAL-LIABILITY-AND-EQUITY> 266,465
<SALES> 98,714
<TOTAL-REVENUES> 98,714
<CGS> 47,387
<TOTAL-COSTS> 45,162
<OTHER-EXPENSES> (578)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 296
<INCOME-PRETAX> 6,447
<INCOME-TAX> 2,321
<INCOME-CONTINUING> 4,126
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,126
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
<FN>
<F1>All amounts in this column are in thousands except per share amounts.
</FN>
</TABLE>
