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 October 27, 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 November 24, 1995, there were 8,047,383 shares of $0.25 par value
common stock outstanding.
FLUKE CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets as of October 27, 1995 and April 28, 1995
Consolidated Statements of Income for the quarter and two quarters ended
October 27, 1995 and October 28, 1994
Consolidated Statements of Cash Flows for the two quarters ended October
27, 1995 and October 28, 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 4 Submission of Matters to a Vote of Security Holders
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>
10/27/95 4/28/95
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 24,397 $ 28,880
Accounts receivable, less allowances 76,313 77,222
Inventories 58,256 53,908
Deferred income taxes 14,034 15,159
Prepaid expenses and other current assets 13,764 7,556
Total Current Assets 186,764 182,725
Property, Plant and Equipment
Land 5,980 5,979
Buildings 47,327 47,235
Machinery and equipment 107,672 103,968
Construction in progress 2,845 2,298
Less accumulated depreciation (103,088) (97,611)
Net Property, Plant and Equipment 60,736 61,869
Goodwill and Other Intangibles 22,105 23,033
Other Assets 7,054 7,895
Total Assets $ 276,659 $ 275,522
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 15,263 $ 17,080
Accrued liabilities 36,957 38,733
Income taxes payable 2,226 3,307
Current maturities of long-term obligations 235 230
Total Current Liabilities 54,681 59,350
Long-term Obligations 17,017 21,613
Deferred Income Taxes 10,730 9,409
Other Liabilities 9,656 9,870
Total Liabilities 92,084 100,242
Stockholders' Equity
Common stock 2,012 1,975
Additional paid-in capital 62,895 60,006
Retained earnings 113,899 107,089
Less cost of non-vested shares (151) (145)
Cumulative translation adjustment 5,920 6,355
Total Stockholders' Equity 184,575 175,280
Total Liabilities and Stockholders' Equity $ 276,659 $ 275,522
Total Shares Outstanding 8,048,677 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 TWO QUARTERS ENDED
10/27/95 10/28/94 10/27/95 10/28/94
<S> <C> <C> <C> <C>
Revenues $ 102,872 $ 91,569 $ 201,586 $ 177,569
Cost of Goods Sold 50,088 45,364 97,475 88,542
Gross Margin 52,784 46,205 104,111 89,027
Operating Expenses
Marketing and administrative 35,045 32,538 70,182 63,024
Research and development 9,131 9,364 19,156 18,481
Total Operating Expenses 44,176 41,902 89,338 81,505
Operating Income 8,608 4,303 14,773 7,522
Non-Operating Expenses (Income)
Interest Expense 559 406 855 721
Other 98 (1,202) (480) (2,171)
Total Non-Operating
Expenses (Income) 657 (796) 375 (1,450)
Income Before Income Taxes 7,951 5,099 14,398 8,972
Provision for Income Taxes 2,862 1,937 5,183 3,409
Net Income 5,089 3,162 9,215 5,563
Earnings Per Share $ 0.61 $ 0.40 $ 1.11 $ 0.69
Net Income as a
Percentage of Revenues 4.95% 3.45% 4.57% 3.13%
Average Shares and Share
Equivalents Outstanding 8,303,101 7,981,902 8,272,298 8,022,837
Cash Dividends Per Share $ 0.15 $ 0.14 $ 0.30 $ 0.28
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fluke Corporation and Subsidiaries
unaudited (in thousands)
<CAPTION>
TWO QUARTERS ENDED
10/27/95 10/28/94
<S> <C> <C>
Operating Activities
Net Income $ 9,215 $ 5,563
Items not affecting cash:
Depreciation and amortization 8,469 7,729
Deferred income tax 2,405 220
Stock awards 53 88
Gain on disposal of property, plant
and equipment (68) (518)
Net change in:
Accounts receivable 890 997
Inventories (4,567) 407
Prepaid expenses (6,247) (681)
Accounts payable (1,651) (4,676)
Accrued liabilities (1,689) (2,778)
Accrued liabilities related to restructuring --- (557)
Accrued Pension 113 696
Income taxes payable (1,441) 304
Other assets and liabilities (263) 223
Net Cash Provided by Operating Activities 5,219 7,017
Investing Activities
Additions to property, plant and equipment (6,146) (9,627)
Proceeds from disposal of property, plant
and equipment 201 1,420
Net Cash Used By Investing Activities (5,945) (8,207)
Financing Activities
Proceeds from long-term obligations --- 16,401
Payments on long-term obligations (4,152) (5,891)
Cash dividends paid (2,303) (2,112)
Repurchase of common stock --- (4,579)
Proceeds from issuance of common stock 2,818 116
Net Cash Provided (Used) By Financing
Activities (3,637) 3,935
Effect of Foreign Currency Exchange Rates on
Cash and Cash Equivalents (120) 670
Net Increase (Decrease) In Cash and Cash
Equivalents (4,483) 3,415
Cash and Cash Equivalents at Beginning of Period 28,880 6,520
Cash and Cash Equivalents at End of Period $ 24,397 $ 9,935
Supplemental Cash Flow Information
Income Taxes Paid $ 6,151 $ 2,064
Interest Paid $ 872 $ 722
</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 October 27, 1995 and April 28, 1995 and the
Consolidated Statements of Income for the quarter and two quarters ended
October 27, 1995 and October 28, 1994 and the Statements of Cash Flows
for the two quarters ended October 27, 1995 and October 28, 1994.
2. The results of operations for the quarter ended October 27, 1995 are
not necessarily indicative of the results to be expected for the full
year.
3. The Company paid a $0.15 per share quarterly cash dividend on August
15, 1995 to stockholders of record on July 28, 1995. On September 13,
1995, the Company's Board of Directors declared a $ 0.15 per share
quarterly cash dividend for stockholders of record on October 27, 1995
which was paid on November 17, 1995.
4. The components of inventories are as follows:
<TABLE>
(in thousands)
<CAPTION>
October 27, 1995 April 28, 1995
<S> <C> <C>
Finished Goods $19,852 $17,483
Work-in-Process 10,445 10,818
Purchased Parts and Materials 27,959 25,607
Total Inventories $58,256 $53,908
</TABLE>
5. Certain items from the quarter ended October 28, 1994 have been
reclassified to conform to the presentation of the quarter ended October
27, 1995 with no effect on previously reported net income.
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Fluke Corporation and Subsidiaries
RESULTS OF OPERATIONS
Revenues of $102.9 million in the quarter ended October 27, 1995 were 12
percent greater than the revenues of $91.6 million in the quarter ended
October 28, 1994. The increase in revenues was led by a 25 percent
increase in revenues from outside the United States. Revenues in the
United States decreased 2 percent. Revenues of $201.6 million in the
two quarters ended October 27, 1995 were 14 percent greater than the
$177.6 million in the two quarters ended October 28, 1994. For the two
quarter period, revenues from outside the United States increased 24
percent while revenues in the U.S. increased by 2 percent.
For the quarter, the 25 percent increase in international revenues
resulted from a 26 percent increase in Europe and a 22 percent increase
in other international markets. Approximately one half of the increase
in European revenues was a result of converting the local currency
revenues to the weaker U.S. dollar in the quarter ended October 27,
1995. The other international markets were not significantly impacted
by currency movements. The increase in international markets, when
exluding the currency impact, was led by products introduced in the last
two years, with a number of countries in Europe and in Asia having
significant increases. For the two quarter period, European revenues
increased 21 percent and revenues from non European international
markets, lead by southeast Asian countries, increased 30 percent.
The decline in revenues in the U.S. in the quarter ended October 27,
1995 from the quarter ended October 28, 1994 was the result of various
factors. In the quarter ended October 27, 1995, revenues from some of
the new products did not meet expectations in the U.S., and some of the
Company's general purpose test tools sold through distribution
experienced a decline in sales volumes. Sales in the U.S. are made
through a number of different sales channels. In the fourth quarter of
fiscal 1995, one of these channels, the Company's direct sales force,
was transferred to a number of independent sales representatives. It is
expected that these sales representatives will provide better coverage
of the Company's customers for products sold through this channel.
However, there are still some effects of the transition as sales through
the sales representatives in the quarter ended October 27, 1995 did not
show any growth over the revenues recorded by the Company's direct sales
force in the quarter ended October 28, 1994. For the two quarter
period, revenues in the U.S. had only minimal growth for the reasons
mentioned above.
Cost of goods sold continues to decline as a percentage of revenues.
This improvement is attributable to the revenue growth of new products,
which generally have higher gross margins than some of the older
products. The improvement in the cost of goods sold has led to gross
margin as a percentage of revenues increasing to 51 percent and 52
percent in the quarter and two quarters ended October 27, 1995.
Operating expenses increased 5 percent in the quarter ended October 27,
1995 over the quarter ended October 28, 1994, with marketing and
administrative expense increasing 8 percent and research and development
expense decreasing 3 percent. The increase in marketing and
administrative expense was due to increased marketing costs for the
recently introduced products and the currency impact of converting the
expenses of international operations to U.S. dollars in the quarter
ended October 27, 1995. The decrease in research and development
expense was due to a smaller number of new products nearing completion
than in the second quarter of last year. For the two quarter period
ended October 27, 1995, operating expenses increased 10 percent over the
two quarter period ended October 28, 1994, with marketing and
administrative expense increasing 11 percent and research and
development expense increasing 4 percent. The impact of stronger
foreign currencies when converting the expense of international
operations to U.S. dollars caused some of the increase. Also
contributing to the higher expenses in fiscal 1996 were development
expenses for new automotive products in the first quarter and higher
marketing costs for new product introductions in fiscal 1996.
Operating income increased 100 percent in the quarter ended October 27,
1995 over the quarter ended October 28, 1994 and 96 percent for the two
quarter periods, respectively. The revenue growth coupled with improved
gross margin and continued emphasis on expense control has led to this
improvement.
The change in non operating expense in the quarter and two quarter
periods ended October 27, 1995 from the quarter and two quarter periods
ended October 28, 1994 was due primarily to currency gains incurred a
year ago that were not duplicated this year.
The estimated effective annual tax rate of 36 percent in fiscal 1996 is
lower than the effective annual tax rate of 38 percent in fiscal 1995.
The rate in fiscal 1995 was higher than the U.S. statutory rate due to
losses in some European countries which increases the effective rate.
These countries are not expected to incur losses this year.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated strong cash flow during the first two quarters of
fiscal 1996. The Company maintains lines of credit to finance
occasional working capital needs and potential business opportunities.
The long term obligations on the balance sheet are being used to finance
the European working capital requirements. The Company has renewed its
$30 million domestic line of credit for an additional three years.
The Company made capital expenditures of $3.6 million and $6.1 million
in the quarter and two quarters ended October 27, 1995, respectively,
compared to $5.1 million and $9.6 million in the quarter and two
quarters ended October 28, 1994. In fiscal 1995, investments in
computer systems for the European operations caused the higher
expenditure level.
The Company has a program to hedge some of its foreign exchange exposure
using forward exchange contracts. 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 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Fluke Corporation and Subsidiaries
At the Annual Meeting of Stockholders of the Company held on September
13, 1995, the stockholders voted to elect the following Directors to
serve terms as noted below:
DIRECTOR TOTAL VOTE TOTAL VOTE WITHHELD
FOR EACH DIRECTOR FROM EACH DIRECTOR
For a one year term expiring at the 1996 Annual Meeting:
William H. Neukom 7,649,154 3,882
For three year terms expiring at the 1998 Annual Meeting:
J. Peter Bingham 7,541,842 3,882
William G. Parzybok, Jr. 7,633,424 3,882
James E. Warjone 7,700,963 3,882
George M. Winn 7,632,543 3,882
Continuing Directors
Philip M. Condit Robert S. Miller, Jr.
John D. Durbin N. Stewart Rogers
David L. Fluke Stephen C. Tumminello
John M. Fluke, Jr.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 - Computation of Earnings Per Share
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for
which this report is filed.
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
December 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 TWO QUARTERS ENDED
10/27/95 10/28/94 10/27/95 10/28/94
<C> <C> <C> <C>
<S>
Shares issued at beginning
of period 7,983,466 8,807,391 7,898,674 8,807,391
Less repurchased shares at
beginning of period --- (1,057,641) --- (908,701)
Shares outstanding at
beginning of period 7,983,466 7,749,750 7,898,674 7,898,690
Repurchase of common shares
weighted average --- --- --- (103,846)
Net issuance of shares
under employee stock plans,
weighted average 42,469 2,464 85,471 1,948
Weighted average common
shares outstanding 8,025,935 7,752,214 7,984,145 7,796,792
Assumed exercise of stock
options, weighted average
of incremental shares 277,166 229,688 288,153 226,045
Average shares and
share equivalents
outstanding 8,303,101 7,981,902 8,272,298 8,022,837
Earnings per share $ 0.61 $ 0.40 $ 1.11 $ 0.69
Net Income $5,089,000 $3,162,000 $9,215,000 $5,563,000
</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> 6-MOS
<FISCAL-YEAR-END> APR-26-1996
<PERIOD-START> APR-29-1995
<PERIOD-END> OCT-27-1995<F1>
<CASH> 24,397
<SECURITIES> 0
<RECEIVABLES> 77,635
<ALLOWANCES> 1,322
<INVENTORY> 58,256
<CURRENT-ASSETS> 186,764
<PP&E> 163,824
<DEPRECIATION> 103,088
<TOTAL-ASSETS> 276,659
<CURRENT-LIABILITIES> 54,681
<BONDS> 0
<COMMON> 2,012
0
0
<OTHER-SE> 182,563
<TOTAL-LIABILITY-AND-EQUITY> 276,659
<SALES> 201,586
<TOTAL-REVENUES> 201,586
<CGS> 97,475
<TOTAL-COSTS> 14,773
<OTHER-EXPENSES> 375
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 855
<INCOME-PRETAX> 14,398
<INCOME-TAX> 5,183
<INCOME-CONTINUING> 9,215
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,215
<EPS-PRIMARY> 1.11
<EPS-DILUTED> 1.11
<FN>
<F1>All amounts in the 6-mos column are in thousands except per share amounts.
</FN>
</TABLE>
