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 January 26, 1996
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 February 23, 1996, there were 8,067,065 shares of $0.25 par value
common stock outstanding.
<PAGE>
INDEX
Fluke Corporation
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets as of January 26, 1996 and April 28, 1995
Consolidated Statements of Income for the quarter and three quarters
ended January 26, 1996 and January 27, 1995
Consolidated Statements of Cash Flows for the three quarters ended
January 26, 1996 and January 27, 1995
Notes to Consolidated Financial Statements
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 - Computation of Earnings Per Share
(b) Reports on Form 8-K
SIGNATURES
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
<TABLE>
CONSOLIDATED BALANCE SHEETS
Fluke Corporation and Subsidiaries
unaudited (in thousands except shares)
<CAPTION>
01/26/96 4/28/95
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 29,349 $ 28,880
Accounts receivable, less allowances 71,056 77,222
Inventories 58,713 53,908
Deferred income taxes 13,895 15,159
Prepaid expenses and other current assets 12,380 7,556
Total Current Assets 185,393 182,725
Property, Plant and Equipment
Land 5,801 5,979
Buildings 46,230 47,235
Machinery and equipment 109,382 103,968
Construction in progress 2,072 2,298
Less accumulated depreciation (105,368) (97,611)
Net Property, Plant and Equipment 58,117 61,869
Goodwill and Other Intangibles 20,265 23,033
Other Assets 6,867 7,895
Total Assets $ 270,642 $ 275,522
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 13,702 $ 17,080
Accrued liabilities 36,324 38,733
Income taxes payable 2,476 3,307
Current maturities of long-term obligations 219 230
Total Current Liabilities 52,721 59,350
Long-term Obligations 10,741 21,613
Deferred Income Taxes 10,597 9,409
Other Liabilities 10,020 9,870
Total Liabilities 84,079 100,242
Stockholders' Equity
Common stock 2,013 1,975
Additional paid-in capital 63,077 60,006
Retained earnings 118,673 107,089
Less cost of non-vested shares (148) (145)
Cumulative translation adjustment 2,948 6,355
Total Stockholders' Equity 186,563 175,280
Total Liabilities and Stockholders' Equity $ 270,642 $ 275,522
Total Shares Outstanding 8,051,825 7,898,674
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
Fluke Corporation and Subsidiaries
unaudited (in thousands except shares and per share amounts)
<CAPTION>
QUARTER ENDED THREE QUARTERS ENDED
01/26/96 01/27/95 01/26/96 01/27/95
<S> <C> <C> <C> <C>
Revenues $105,701 $ 99,090 $ 307,287 $ 276,659
Cost of Goods Sold 50,868 48,196 148,343 136,738
Gross Margin 54,833 50,894 158,944 139,921
Operating Expenses
Marketing and administrative 36,189 33,364 106,371 96,473
Research and development 9,231 9,197 28,387 27,678
Total Operating Expenses 45,420 42,561 134,758 124,151
Operating Income 9,413 8,333 24,186 15,770
Non-Operating Expenses (Income)
Interest Expense 341 416 1,196 1,137
Other (274) 1,101 (754) (1,155)
Total Non-Operating
Expenses (Income) 67 1,517 442 (18)
Income Before Income Taxes 9,346 6,816 23,744 15,788
Provision for Income Taxes 3,365 2,591 8,548 6,000
Net Income 5,981 4,225 15,196 9,788
Earnings Per Share $ 0.72 $ 0.53 $ 1.84 $ 1.22
Net Income as a
Percentage of Revenues 5.66% 4.26% 4.95% 3.54%
Average Shares and Share
Equivalents Outstanding 8,277,702 7,978,789 8,271,783 8,003,680
Cash Dividends Per Share $ 0.15 $ 0.14 $ 0.45 $ 0.42
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fluke Corporation and Subsidiaries
unaudited (in thousands)
<CAPTION>
THREE QUARTERS ENDED
01/26/96 01/27/95
<S> <C> <C>
Operating Activities
Net Income $15,196 $ 9,788
Items not affecting cash:
Depreciation and amortization 12,636 11,194
Deferred income tax 2,118 398
Stock awards 86 140
Loss (gain) on disposal of property, plant
and equipment 84 (312)
Net change in:
Accounts receivable 4,499 3,393
Inventories (6,540) 4,383
Prepaid expenses (5,049) 1,535
Accounts payable (2,936) (6,225)
Accrued liabilities (1,514) (1,899)
Accrued liabilities related to restructuring --- (521)
Accrued Pension 3,133 721
Income taxes payable (742) 384
Other assets and liabilities (1,869) (1,205)
Net Cash Provided by Operating Activities 19,102 21,774
Investing Activities
Additions to property, plant and equipment (9,156) (10,648)
Proceeds from disposal of property, plant
and equipment 1,335 1,462
Net Cash Used by Investing Activities (7,821) (9,186)
Financing Activities
Proceeds from long-term debt --- 25,037
Payments on long-term obligations (9,882) (18,542)
Cash dividends paid (3,510) (3,198)
Repurchase of common stock --- (4,579)
Proceeds from stock options 3,004 558
Net Cash Used By Financing Activities (10,388) (724)
Effect of Foreign Currency Exchange Rates on
Cash and Cash Equivalents (424) 661
Net Increase In Cash and Cash Equivalents 469 12,525
Cash and Cash Equivalents at Beginning of Year 28,880 6,520
Cash and Cash Equivalents at End of Quarter $29,349 $ 19,045
Supplemental Cash Flow Information
Income Taxes Paid $ 8,478 $ 3,881
Interest Paid $ 1,188 $ 1,138
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fluke Corporation and Subsidiaries
1. The accompanying unaudited Consolidated Financial Statements do not
purport to be full presentations and do not include all information and
disclosures required for fair presentation by generally accepted
accounting principles, but rather include only that information required
by the instructions to Form 10-Q. However, in the opinion of
management, the accompanying unaudited Consolidated Financial Statements
contain all adjustments (consisting of normal recurring accruals)
considered necessary to present fairly the Consolidated Balance Sheets
of the Company at January 26, 1996 and April 28, 1995 and the
Consolidated Statements of Income for the quarter and three quarters
ended January 26, 1996 and January 27, 1995 and the Statements of Cash
Flows for the three quarters ended January 26, 1996 and January 27,
1995.
2. The results of operations for the quarters ended January 26, 1996
and January 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
November 17, 1995 to stockholders of record on October 27, 1995. On
December 12, 1995 the Company's Board of Directors declared a $ 0.15 per
share quarterly cash dividend for stockholders of record on January 26,
1996 which was paid on February 16, 1996.
4. The components of inventories are as follows:
<TABLE>
(in thousands)
<CAPTION>
January 26, 1996 April 28, 1995
<S> <C> <C>
Finished Goods $19,965 $17,483
Work-in-Process 10,679 10,818
Purchased Parts and Materials 28,069 25,607
Total Inventories $58,713 $53,908
</TABLE>
<PAGE>
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Fluke Corporation and Subsidiaries
RESULTS OF OPERATIONS
Revenues of $105.7 million for the quarter ended January 26, 1996 were 7
percent greater than the $99.1 million in the quarter ended January 27,
1995. This increase was achieved in spite of a decline in order inflow
of 2 percent in the quarter ended January 26, 1996 from the comparable
quarter a year ago. The decline in order inflow can be attributed to
several factors, an expected decline in orders from some of the older
bench instruments, disappointing results from one of the new products,
and a decline in orders in the United States. The decline in some of
the older bench instruments has been expected as the Company has reduced
the investment in research and development for these products. The 860
Graphical Multimeter, introduced in the third quarter of last year, has
been below expectations, but there have been recent improvements in
sales levels. The decline of orders in the United States occurred
across most products and sales channels. The pattern indicates a
general softness in the purchasing of test tools in the United States,
although the two items mentioned above and competitive pricing pressures
have contributed. The decline in orders resulted in a reduction in
backlog but the level of backlog is not expected to have any impact on
the ability to meet future revenue expectations. Revenues of $307.3
million for the three quarter period ended January 26, 1996 were 11
percent higher than the three quarter period ended January 27, 1995.
Revenues in the United States for the quarter ended January 26, 1996
were 10 percent lower than a year ago while international revenues
increased 18 percent. For the three quarter period ended January 26,
1996 revenues in the United States were 2 percent lower and
international revenues increased 22 percent over the same period a year
ago. Revenues in the United States have been particularly affected by
the reasons mentioned above.
Revenues from Europe have increased 14 percent and 18 percent in the
quarter and three quarters ended January 26, 1996 compared to the
quarter and three quarters ended January 27, 1995. The European
currencies have strengthened in the quarter and three quarters ended
January 26, 1996 which has favorably impacted the Company's European
revenues by approximately 7 percent for those periods.
Revenues in international markets outside of Europe (Intercon) recorded
growth of 31 percent and 30 percent in the quarter and three quarter
periods over comparable periods a year ago. Many of these markets, such
as the People's Republic of China, Korea and the ASEAN countries,
consisting of Singapore, Malaysia, Indonesia, Thailand, Philippines,
Brunei and Vietnam, have historically been among the fastest growing
markets for the Company. It is expected that these markets will
continue to provide very good growth opportunities for the Company in
the foreseeable future. The Intercon markets have not only had good
growth in the Company's new products, but some of the older products
have also sold particularly well in these markets.
Operating expenses increased 7 percent and 9 percent over the quarter
and three quarter periods of a year ago. In the quarter and three
quarter periods ended January 26, 1996, the increase in expenses
occurred primarily in the marketing and administrative areas, which
increased 9 percent and 10 percent, respectively. Research and
development expense was up slightly over those periods. The increase in
marketing and administrative expense can be partially attributed to a
more direct focus on selling to specific customer groups. This includes
producing several market specific catalogs instead of one general
catalog, increased advertising to specific market segments and increased
sales support for the indirect sales channels.
Nonoperating expenses in the quarter ended January 27, 1995 included
currency losses that did not recur in the quarter ended January 26,
1996. In the three quarters ended January 26, 1996, interest income
offset some currency losses while in the previous year interest income,
some small currency gains and other income were recognized.
The effective tax rate for the quarter and three quarter periods ended
January 26, 1996 was 36.0 percent versus 38.0 percent over the same
periods ended January 27, 1995. The rate in fiscal 1995 was higher than
the U.S. statutory rate due to losses in some European countries which
increased the effective rate. The Company's subsidiaries in these
countries are not expected to incur losses this year.
Operating income increased 13 percent and 53 percent in the quarter and
three quarters ended January 26, 1996, respectively, over the same
periods ended January 27, 1995. These increases were generated from the
continued improvement in the gross margin which has been increasing at a
faster rate than the revenues. The increase in gross margin can be
attributed partially to a change in the geographic mix in the revenues,
as a higher percentage was generated from international markets in the
current year than in the previous year. International sales generally
have a better gross margin than sales in the United States. Net income
increased 42 percent and 55 percent in the quarter and three quarters
ended January 26, 1996, respectively, over the same periods ended
January 27, 1995 due to increased gross margin, the favorable impact of
nonoperating income and the lower tax rate in fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company has maintained strong cash flow from operating activities
which has allowed for a reduction of its outstanding debt since the
beginning of the year. The Company expects to be able to fund its
working capital, capital expenditures and future growth opportunities
with operating cash flows and available credit lines.
The Company made purchases of capital equipment of $3.0 million and $9.2
million in the quarter and three quarter periods ended January 26, 1996
compared to expenditures of $1.0 million and $10.6 million in the
quarter and three quarter periods ended January 27, 1995. The Company
purchases most of its capital equipment and does only limited leasing of
such equipment.
The current ratio improved to 3.5 to 1 at January 26, 1996 from 3.1 to 1
at April 28, 1995 and 3.2 to 1 at January 27, 1995. The improvement
over April 28, 1995 resulted from the reduction in accounts payable and
accrued liabilities while current assets increased slightly. The
improvement over January 27, 1995 was a result of an increase in cash
and other current assets.
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.
<PAGE>
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 - Computation of Earnings Per Share
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for
which this report is filed.
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
March 8, 1996 /s/John R. Smith
Date John R. Smith
Vice President, Treasurer
Principal Accounting Officer
<PAGE>
<TABLE>
Exhibit 11 COMPUTATION OF EARNINGS PER SHARE
Fluke Corporation and Subsidiaries
<CAPTION> QUARTER ENDED THREE QUARTERS ENDED
1/26/96 1/27/95 1/26/96 1/27/95
<C> <C> <C> <C>
<S>
Shares issued at beginning
of period 8,048,677 8,807,391 7,898,674 8,807,391
Less repurchased shares at
beginning of period --- (1,051,765) --- (908,701)
Shares outstanding at
beginning of period 8,048,677 7,755,626 7,898,674 7,898,690
Repurchase of common shares
weighted average --- --- --- (119,231)
Net issuance of shares
under employees stock plans,
weighted average 670 5,942 107,203 5,591
Weighted average common
shares outstanding 8,049,347 7,761,568 8,005,877 7,785,050
Assumed exercise of stock
options, weighted average
of incremental shares 228,355 217,221 265,906 218,630
Average shares and
share equivalents
outstanding 8,277,702 7,978,789 8,271,783 8,003,680
Earnings per Share $ 0.72 $ 0.53 $ 1.84 $ 1.22
Net Income $5,981,000 $4,225,000 $15,196,000 $9,788,000
</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> 9-MOS
<FISCAL-YEAR-END> APR-26-1996
<PERIOD-START> APR-29-1995
<PERIOD-END> JAN-26-1996
<CASH> 29,349<F1>
<SECURITIES> 0
<RECEIVABLES> 72,367
<ALLOWANCES> 1,311
<INVENTORY> 58,713
<CURRENT-ASSETS> 185,393
<PP&E> 163,485
<DEPRECIATION> 105,368
<TOTAL-ASSETS> 270,642
<CURRENT-LIABILITIES> 52,721
<BONDS> 0
0
0
<COMMON> 2,013
<OTHER-SE> 184,550
<TOTAL-LIABILITY-AND-EQUITY> 270,642
<SALES> 307,287
<TOTAL-REVENUES> 307,287
<CGS> 148,343
<TOTAL-COSTS> 134,758
<OTHER-EXPENSES> (754)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,196
<INCOME-PRETAX> 23,744
<INCOME-TAX> 8,548
<INCOME-CONTINUING> 15,196
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,196
<EPS-PRIMARY> 1.84
<EPS-DILUTED> 1.84
<FN>
<F1>Amounts in this column are in thousands except per share amounts.
</FN>
</TABLE>
