EXHIBIT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FINANCIAL RESULTS 1996 VS 1995
All years referenced below are for the Company's fiscal years which end on the
last Friday of April. 1996 ended with revenues exceeding $400 million for the
first time in the Company's history. 1996 revenues of $414 million were 8
percent higher than the revenues of $382 million in 1995. Growth in
international revenues was responsible for the overall growth as revenues from
international markets increased 16 percent after conversion to U.S. dollars.
Revenues in the United States decreased 2 percent.
The growth in international revenues was led by countries outside of Europe
such as The People's Republic of China, South Korea, Brazil, India, Taiwan,
Thailand and Singapore. The significant revenue increase in these countries
led to a 26 percent growth in revenues in countries outside Europe and the
United States. Asian markets have provided significant growth over the last
few years. It is expected that opportunities for growth in many of the Asian
markets will continue for the foreseeable future. In order to capitalize on
these opportunities the Company is making investments in several countries.
The Company formed a joint venture in May 1996 which will sell the Company's
products to the Korean market. The joint venture, known as Fluke Korea Co.,
Ltd., will be staffed with personnel from the two representative organizations
that have been successfully selling the Company's products in Korea. The
Company's revenues in South Korea have been growing rapidly over the last few
years and this investment is necessary to capture future opportunities. In
addition, the Company opened two representative offices in May 1996, one in
the city of Chengdu in The People's Republic of China and one in Malaysia.
These two investments will provide a more focused effort in these two
important markets. The Company continues to look for ways to strengthen its
international sales efforts.
European revenues increased 12 percent in 1996 over 1995, of which 8 percent
was a result of stronger European currencies. The softening economies of many
of the European countries have contributed to the moderate growth in local
currency revenue in Europe. Although overall growth has been moderate, many
of the products introduced in the last two years have been selling well in
Europe. Spain, Finland, Sweden and Italy were countries that had relatively
good growth in revenues in 1996 over 1995. Beginning January 1996, the
European Union required that all electrical instruments sold within Europe
have a `CE' mark, which indicates compliance with certain electromagnetic
emission and susceptibility regulations. The Company modified its products to
conform to the `CE' requirements by the January 1, 1996 deadline.
The Company's revenues in the United States have been relatively flat in the
last two years, with a 2 percent decrease in revenues in 1996 from 1995. The
decline in revenues in 1996 can be attributed to several factors. The
continuing introduction of products that are more effectively sold through
indirect sales channels such as distributors, dealers, catalog houses, etc.,
caused the Company's direct business to be reduced to a level that could no
longer be handled efficiently by a direct sales force exclusively dedicated to
Fluke products. Therefore, effective at the beginning of fiscal 1996, the
Company converted the selling responsibility of its direct sales force in the
United States to independent manufacturing representatives. Those employees
impacted by the transition were either transferred to positions supporting
indirect sales channels, hired by the representative organizations or left the
Company. 1996 was a transition year for the new sales organization which
contributed to the lack of growth in the United States. The cost of the
transition was recorded in 1995. The Company continues to face competitive
challenges throughout the world, including the distribution channels in the
U.S. which are experiencing an increased level of competition. In 1996, the
Company responded by refocusing its marketing functions and by new product
introductions. The Company believes its 1997 marketing efforts and new
product introductions will lead to future revenue growth in the United States.
The 8 percent increase in the Company's revenues during 1996 was led by
significant growth in products which test computer networks. The growth in
these products, particularly in international markets, and the future
potential in this market has led management to create a new Fluke Networks
division to focus resources and raise the awareness of network products.
Current network product offerings include the Fluke DSP-100 LAN CableMeter
which tests cable used in computer networks and the Fluke 685 Enterprise
LanMeter which tests the networks themselves. These tools are instrumental to
people who install and maintain computer networks.
Subsequent to the end of 1996, the Company completed the acquisition of Forte'
Networks, Inc. (Forte'). Forte' designs products that test computer networks.
Most of the Fluke product offerings in network troubleshooting have been
designed and produced by Forte'. The Company formerly had exclusive rights to
the Forte' products and this acquisition brings the design, marketing,
manufacturing and selling organizations together to better meet the needs of
the customer. The Company also expects to realize an improvement in gross
margin on these network products as a result of this transaction. The
acquisition was completed through a merger and an exchange of shares and will
be treated as a pooling-of-interests combination for accounting purposes. For
more information see Note 3, Subsequent Event, in the Notes to the Financial
Statements on page 42.
The Company's calibration products also experienced good revenue growth,
again, primarily in the international markets. The movement throughout the
world to comply with ISO 9000 requirements has been one reason for the
increased calibration revenues.
At April 26, 1996 the Company had order backlog of $32 million which was a
reduction from $45 million at April 28, 1995. The backlog at April 28, 1995
was higher than normal due to some government orders received late in 1995 and
some product delivery delays in a product line. The reduction in 1996 leaves
the backlog at a level that is appropriate for meeting customer delivery
requirements.
As indicated above, the Company has significant operations overseas and the
financial results are therefore impacted by movements in foreign currencies.
In addition to the impact of currency movements, international operations
increase the complexity and risk to the Company. These risks include
increased exposure to the risk of foreign currency fluctuations, changes in
labor and tax laws, import and export controls and changes in governmental
policies. The following table highlights the approximate currency effect on
key items in the statements of income:
(In thousands)
For the For the
Year Year Variance Variance
Ended Ended from from
April 26, 1996 April 28, 1995 Variance Currency Operations
Revenues $413,525 $382,066 8% 3% 5%
Cost of Goods Sold 196,721 185,873 6% 3% 3%
Gross Margin 216,804 196,193 11% 3% 8%
Operating Expenses 183,044 172,008 6% 3% 3%
Operating Income 33,760 24,185 40% -1% 41%
Gross Margin as a percent of revenues improved from 51 percent in 1995 to 52
percent in 1996. This improvement can be partially explained because the
Company's new products are generating higher margins than many of the older
products and because of the higher percentage of international revenues which
generate higher margins than revenues in the United States.
Operating expenses increased 6 percent in 1996 over 1995. Marketing and
administrative expense increased 7 percent and research and development
expense increased 3 percent. At the beginning of 1996 the Company reorganized
its marketing function to bring most of the marketing personnel into one
organization instead of disbursed in the different product divisions. The new
marketing group is organized along the markets to which the Company sells
instead of along product lines, which should provide a better coordination of
marketing programs. As a result, in 1996 there was a more direct focus on
selling to specific customer groups which included 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. This contributed to the increase in marketing and administrative
expenses in 1996 over 1995.
Operating income increased 40 percent in 1996 over 1995. This increase was
generated through the introduction of successful higher margin products while
maintaining control over the growth in operating expenses.
The effective annual tax rate decreased from 38.0 percent in 1995 to 36.5
percent in 1996. The decrease in the rate is primarily a result of improved
profitability in selected European countries in 1996 over 1995.
Net income increased 43 percent in 1996 over 1995. This improvement, as
discussed above, reflects the improvement in gross margin and continued
control over operating expenses.
FINANCIAL RESULTS 1995 VS 1994
The financial results in 1995 showed improvement over 1994. Revenues of $382
million were up 7 percent over revenues of $358 million in 1994.
International revenues, after conversion to U.S. dollars, were up 13 percent
in 1995, while revenues in the United States were down less than one percent.
The increase in international revenues in 1995, as was the case in 1996, were
led by a 30 percent increase in Asian countries. Countries contributing to
this growth were South Korea, Singapore, Japan and Taiwan. Revenues in Europe
increased 9 percent in 1995 over 1994.
Contributing to the flat revenues in the United States was a price increase at
the beginning of fiscal 1995 which caused some movement of business to 1994,
ahead of the price increase. There was no significant price increase at the
beginning of fiscal 1996.
The table below highlights the approximate effect of currency movements on key
items in the statements of income:
(In thousands)
For the For the
Year Year Variance Variance
Ended Ended from from
April 28, 1995 April 29,1994 Variance Currency Operations
Revenues $382,066 $357,904 7% 3% 4%
Cost of Goods Sold 185,873 182,475 2% 3% -1%
Gross Margin 196,193 175,429 12% 3% 9%
Operating Expenses 172,008 161,040 7% 3% 4%
Operating Income 24,185 14,389 68% 3% 65%
Gross margin as a percentage of revenues improved from 49 percent in 1994 to
51 percent in 1995. This improvement is attributed primarily to increased
factory utilization in 1995 over 1994 and the mix of higher margin new
products. Also contributing to the improvement was the shipment of products
in 1994 which were acquired at a higher cost prior to the acquisition of the
Philips test and measurement business. The acquisition is described in Note
2, Acquisition of European Operations, in the Notes to the Financial
Statements on page 41. Gross margin increased 12 percent on the 7 percent
increase in revenues.
Operating expenses increased 7 percent in 1995 over 1994. Approximately 3
percent of the increase was due to the weakening U.S. dollar against the
currencies in countries where the Company has foreign operations. Marketing
and administrative expense increased 7 percent and research and development
expense increased 8 percent in 1995 over 1994. The increase in marketing and
administrative expense was due to several items including higher commission
expense from the sale of the local area network (LAN) products, higher
reserves for bad debts and increased legal costs related to the protection of
intellectual property. Also contributing to the increase in marketing and
administrative expenses was the Company's conversion of selling responsibility
from its Fluke direct sales force in the United States to independent
manufacturing representatives. This change was effective at the beginning of
fiscal 1996; however, the cost of the transition was recorded in fiscal 1995.
Research and development expense increased due to a continued high level of
investment in new products in 1995.
The effective annual tax rate increased from 37.5 percent in 1994 to 38.0
percent in 1995. Although the average statutory rate in Europe is close to
the U.S. statutory rate of 35.0 percent, losses in some of the acquired
country operations with no offsetting benefit caused the effective rate to
exceed the statutory rate.
Net income and earnings per share both increased 69 percent in 1995 over 1994.
This increase resulted from the 12 percent increase in gross margin while
expenses only increased 7 percent. The Company's emphasis on revenue growth
through new products while controlling expenses and improving factory
efficiencies continued in 1996.
LIQUIDITY AND CAPITAL RESOURCES
The cash position of the Company continues to remain strong as cash generated
from operating activities provided $30.8 million of cash flow in 1996. The
Company expects that cash generated from operations will be sufficient to fund
working capital and capital expenditure requirements in the foreseeable
future.
The Company maintains committed and uncommitted lines of credit totaling $118
million. The borrowings outstanding at April 26, 1996 and at April 28, 1995
are for working capital requirements in the European operations. These
borrowings have been paid down, and the remaining balance is expected to be
repaid, with cash generated from the European operations.
The Company made capital expenditures of $12 million in 1996, $14 million in
1995 and $13 million in 1994. Capital expenditures consist primarily of
manufacturing and research and development equipment.
The current ratio was 3.5 to 1 at April 26, 1996 and 3.1 to 1 at April 28,
1995. The increase in the current ratio was caused primarily by an increase
in current assets, including cash, inventories and prepaid expenses.
The Company increased its quarterly cash dividend from $0.14 to $0.15 per
share. The Company has increased the dividend each year since the cash
dividends were initiated in 1989, with the exception of the short transition
period in 1993. In June 1996 the Company continued this trend by declaring a
$0.16 per share dividend for the first quarter of fiscal 1997. The dividend
will be paid on August 16, 1996 to shareholders of record as of July 26, 1996.
The Company paid $4.7 million in cash dividends in 1996.
The Company has a program to hedge some of its foreign exchange exposure using
forward exchange contracts. The contracts cannot be speculative and are
limited to actual transaction exposure. The Company does not currently use
any other form of derivatives in managing its financial risk.
FLUKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except shares and per share amounts)
April 26, 1996 April 28, 1995
ASSETS
Current Assets
Cash and cash equivalents $ 34,609 $ 28,880
Accounts receivable (less allowances:
1996-$1,104; 1995-$1,141) 69,060 77,222
Inventories 59,053 53,908
Deferred income taxes 15,062 15,159
Prepaid expenses 15,540 7,556
Total Current Assets 193,324 182,725
Property, Plant and Equipment
Land 5,801 5,979
Buildings 46,152 47,235
Machinery and equipment 110,977 103,968
Construction in progress 1,804 2,298
164,734 159,480
Less accumulated depreciation (106,783) (97,611)
Net Property, Plant and Equipment 57,951 61,869
Goodwill and Intangible Assets 16,528 23,033
Other Assets 8,285 7,895
Total Assets $276,088 $275,522
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 15,772 $ 17,080
Accrued liabilities 37,622 38,733
Income taxes payable 2,178 3,307
Current maturities of long-term
obligations 180 230
Total Current Liabilities 55,752 59,350
Long-Term Obligations 7,098 21,613
Deferred Income Taxes 10,585 9,409
Other Liabilities 10,593 9,870
Total Liabilities 84,028 100,242
Stockholders' Equity
Preferred stock, $0.25 par value
(authorized 2,000,000 shares) --- ---
Common stock, $0.25 par value
(authorized 20,000,000 shares, issued
shares, 8,075,765 in 1996 and 7,898,674
in 1995) 2,019 1,975
Additional paid-in capital 65,195 59,861
Retained earnings 123,609 107,089
Cumulative translation adjustment 1,237 6,355
Total Stockholders' Equity 192,060 175,280
Total Liabilities and Stockholders' Equity $276,088 $275,522
The accompanying notes are an integral part of the financial statements.
FLUKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except shares and per share amounts)
For the For the For the
year ended year ended year ended
April April April
26, 1996 28, 1995 29, 1994
Revenues $413,525 $382,066 $357,904
Cost of Goods Sold 196,721 185,873 182,475
Gross Margin 216,804 196,193 175,429
Operating Expenses
Marketing and administrative 144,309 134,343 126,088
Research and development 38,735 37,665 34,952
Total Operating Expenses 183,044 172,008 161,040
Operating Income 33,760 24,185 14,389
Nonoperating Expenses (Income)
Interest expense 1,395 1,435 1,529
Other (1,247) (1,284) (1,220)
Total Nonoperating Expenses 148 151 309
Income Before Income Taxes 33,612 24,034 14,080
Provision for Income Taxes 12,269 9,133 5,280
Net Income $ 21,343 $ 14,901 $ 8,800
Earnings Per Share $ 2.58 $ 1.86 $ 1.10
Average Shares and Share Equivalents
Outstanding 8,285,151 7,992,804 8,031,696
The accompanying notes are an integral part of the financial statements.
FLUKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the For the For the
year ended year ended year ended
April April April
26, 1996 28, 1995 29, 1994
Operating Activities
Net income $ 21,343 $14,901 $ 8,800
Items not affecting cash:
Depreciation and amortization 15,483 16,042 17,071
Deferred income tax 777 (982) 2,381
Accrued pension expense (1,734) 1,583 (1,162)
Stock awards 131 189 376
Loss (gain) on disposal of property,
plant and equipment 109 (251) 242
Net change in:
Accounts receivable 5,992 (1,016) (45,023)
Inventories (7,637) 4,049 4,580
Prepaid expenses (4,992) 3,093 (2,356)
Accounts payable (560) (4,319) 12,998
Accrued liabilities 168 18 5,791
Accrued liabilities related to
restructuring --- (497) 892
Income taxes payable 1,137 4,505 394
Other assets and liabilities 590 (1,804) 2,023
Net Cash Provided By Operating
Activities 30,807 35,511 7,007
Investing Activities
Additions to property, plant and equipment (12,391) (14,123) (13,050)
Proceeds from disposal of property,
plant and equipment 2,446 1,774 180
Purchase of Philips test and measurement
business --- --- (26,056)
Net Cash Used By Investing Activities (9,945) (12,349) (38,926)
Financing Activities
Proceeds from short-term debt --- --- 2,329
Payments on short-term debt --- --- (2,329)
Proceeds from long-term obligations --- 24,113 47,879
Payments on long-term obligations (13,351) (20,067) (33,023)
Repurchase of common stock --- (4,579) ---
Cash dividends paid (4,718) (4,287) (3,970)
Proceeds from stock options 3,493 2,800 222
Net Cash Provided (Used) By
Financing Activities (14,576) (2,020) 11,108
Effect of Foreign Currency Exchange Rates
on Cash and Cash Equivalents (557) 1,218 2,916
Net Increase (Decrease) In Cash and Cash
Equivalents 5,729 22,360 (17,895)
Cash and Cash Equivalents at Beginning
of Year 28,880 6,520 24,415
Cash and Cash Equivalents at End of
Year $ 34,609 $28,880 $ 6,520
Supplemental Cash Flow Information:
Income taxes paid $ 12,309 $ 5,809 $ 5,142
Interest paid $ 1,420 $ 1,409 $ 1,529
The accompanying notes are an integral part of the financial statements.
FLUKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands except shares)
Number of Par Par
Common Value of Value of Additional
Shares Preferred Common Paid-In
Outstanding Stock Stock Capital
Balance, April 30, 1993 6,342,455 $ 20 $2,202 $96,072
Net income
Net 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 plans 30
Exercise of stock options 23,200 (355)
Net translation adjustment
Balance, April 29, 1994 7,898,690 --- $2,202 $81,081
Net income
Net forfeiture of shares under stock award plans (934) 3
Vesting of 9,524 shares under stock award plans
Repurchase of common shares (150,000)
Cash dividends declared
Income tax benefit from stock plans 35
Exercise of stock options 150,918 26 1,588
Net translation adjustment
Cancellation of repurchased shares (253) (22,701)
Balance, April 28, 1995 7,898,674 --- $1,975 $60,006
Net income
Net grant of shares under stock award plans 1,915 75
Vesting of 4,786 shares under stock award plans
Cash dividends declared
Income tax benefit from stock plans 1,787
Exercise of stock options 175,176 44 3,449
Net translation adjustment
Balance, April 26, 1996 8,075,765 --- $2,019 $65,317
FLUKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<In thousands except shares)
Repurchased
and Cumulative Total
Retained Nonvested Translation Stockholders'
Earnings Shares Adjustment Equity
Balance, April 30, 1993 $91,856 $(54,963) $ --- $135,187
Net income 8,800 8,800
Net 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 adjustment (2,103) (2,103)
Balance, April 29, 1994 $96,553 $(19,904) $(2,103) $157,829
Net income 14,901 14,901
Net forfeiture of shares under stock award plans (3) ---
Vesting of 9,524 shares under stock award plans 201 201
Repurchase of common shares (4,579) (4,579)
Cash dividends declared (4,365) (4,365)
Income tax benefit from stock award plans 35
Exercise of stock options 1,186 2,800
Net translation adjustment 8,458 8,458
Cancellation of repurchased shares 22,954 ---
Balance, April 28, 1995 $107,089 $ (145) $ 6,355 $175,280
Net income 21,343 21,343
Net grant of shares under stock award plans (75) ---
Vesting of 4,786 shares under stock award plans 98 98
Cash dividends declared (4,823) (4,823)
Income tax benefit from stock award plans 1,787
Exercise of stock options 3,493
Net translation adjustment (5,118) (5,118)
Balance, April 26, 1996 $123,609 $ (122) $ 1,237 $192,060
The accompanying notes are an integral part of the financial statements.
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.
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.
NATURE OF OPERATIONS. The Company is in a single line of business, the
manufacturing and selling of electronic test tools. This single line of
business is primarily made up of two product categories: handheld service
tools and benchtop test instruments, with handheld service tools slightly
larger based on revenues. The Company currently markets its products in more
than 100 countries through both indirect and direct sales channels, with
indirect distribution generally used for handheld service tools and direct
sales channels generally used for benchtop test instruments.
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 at the time of acquisition.
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.
GOODWILL AND INTANGIBLES. Excess cost over the fair value of net assets
acquired (goodwill) is generally amortized on a straight-line basis over 20
years. Intangible assets are generally amortized over 5 years.
IMPAIRMENT OF LONG-LIVED ASSETS. Long-lived assets consist of intangible
assets, goodwill and certain capital assets. The carrying value of these
assets is regularly reviewed to verify they are valued properly. If the facts
and circumstances suggest that the value has been impaired, the carrying value
of the assets will be reduced appropriately.
STOCK-BASED COMPENSATION. The Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation."; effective for fiscal years beginning after December 15,
1995. Under Statement No. 123, stock-based compensation expense is measured
using either the intrinsic value method, as prescribed by Accounting
Principles Board Opinion No. 25, or the fair value method described in
Statement No. 123. Companies choosing the intrinsic value method will be
required to disclose in the footnotes to the financial statements the pro
forma impact of the fair value method on net income and earnings per share.
The Company plans to implement Statement No. 123 in 1997 using the intrinsic
value method.
USE OF ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
Note 2. ACQUISITION OF EUROPEAN OPERATIONS
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.
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
several major products including ScopeMeter test tools, oscilloscopes, and
function generators. The European sales and service headquarters are located
in Eindhoven, the Netherlands.
The purchase price for the Philips test and measurement business was
approximately $41.8 million in cash and stock. The stock component consisted
of one million shares of the Company's common stock, which were issued from
repurchased shares.
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 $8.9 million in 1996, $10.5 million in 1995 and $18.3 million in
1994 for such services and facilities lease rent. In addition, the Company
purchased $18.5 million in 1996, $19.8 million in 1995 and $16.5 million in
1994 of component parts and finished goods from Philips.
Note 3. SUBSEQUENT EVENT
On June 26, 1996, Forte' Networks, Inc. (Forte') was acquired and merged into
the Company. The Company issued 577,190 shares of Fluke common stock in
exchange for the Forte' shares. Forte' has designed and supplied certain
network troubleshooting tools that the Company has sold since 1993. The
transaction was accounted for as a pooling of interest, and accordingly,
historical financial data in future reports will be restated to include Forte'
data. Following are the unaudited pro forma results of the combined company
as if the merger had taken place prior to 1994:
(In thousands except per share amounts)
For the For the For the
Year ended Year ended Year ended
April 26, 1996 April 28, 1995 April 29, 1994
Revenues $413,525 $382,066 $357,904
Net Income <F1> $ 23,704 $ 16,787 $ 8,628
Earnings Per Share <F1> $ 2.67 $ 1.96 $ 1.00
<FN>
<F1> Prior to the merger Forte' operated under sub-chapter S of the Internal
Revenue Code. Forte's taxable income was allocated to its shareholders and no
tax provision was recorded in Forte' statements of income. Therefore, the pro
forma net income and earnings per share do not include a tax provision on
Forte' income.
</FN>
Note 4. INVENTORIES
(In thousands)
April 26, 1996 April 28, 1995
Finished goods $20,947 $17,483
Work-in-process 9,463 10,818
Purchased parts and materials 28,643 25,607
Total Inventories $59,053 $53,908
Note 5. ACCRUED LIABILITIES
(In thousands)
April 26, 1996 April 28, 1995
Compensation payable $11,098 $11,674
Accrued expenses 13,298 14,180
Unearned service revenue 2,355 3,009
Other taxes payable 5,436 6,056
Profit-sharing bonus payable 1,853 1,265
Dividends payable 1,211 1,106
Other items 2,371 1,443
Total Accrued Liabilities $37,622 $38,733
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 European operations
from Philips. The goodwill is being amortized on a straight-line basis over
twenty years. The Company owns intangible assets, most of which were also
acquired from Philips as part of the acquisition. These intangible assets are
being amortized over five years. Amortization expense is recorded in marketing
and administrative expense. Cumulative amortization was $8.3 million at April
26, 1996 and $6.0 million at April 28, 1995.
A reconciliation of goodwill and intangible assets, net of
accumulated amortization, is provided below:
(In thousands)
April 26, 1996 April 28, 1995
Balance at beginning of year $23,033 $24,995
Amortization expense (2,815) (2,764)
Adjustment related to changes to
deferred tax asset valuation
allowance<F1> (2,626) (1,925)
Translation adjustment (1,064) 2,727
Balance at end of year $16,528 $23,033
<FN>
<F1> This adjustment is explained in Note 7, Income Taxes.
</FN>
Note 7. INCOME TAXES
For financial reporting purposes, income before income taxes is as follows:
(In thousands)
For the For the For the
year ended year ended year ended
April 26, 1996 April 28, 1995 April 29, 1994
U.S. $20,067 $13,017 $13,681
Foreign 13,545 11,017 399
Income before income taxes $33,612 $24,034 $14,080
The provision for income taxes is as follows:
(In thousands)
For the For the For the
year ended year ended year ended
April 26, 1996 April 28, 1995 April 29, 1994
Current taxes on income:
U.S. $ 5,883 $ 5,239 $1,791
Foreign 5,113 5,687 986
10,996 10,926 2,777
Deferred income taxes 1,273 (1,793) 2,503
Provision for income taxes $12,269 $ 9,133 $5,280
Significant components of the Company's deferred tax
assets and liabilities are as follows:
(In thousands)
April 26,1996 April 28,1995
Deferred Tax Assets:
Accrued employee benefit expenses $ 3,200 $2,525
Inventory adjustments 5,265 5,329
Net operating loss carryforwards 22,591 25,591
Product warranty accruals 681 721
Other items, net 658 619
Total Deferred Tax Assets 32,395 34,785
Valuation reserve (17,333) (19,626)
Net Deferred Tax Assets $ 15,062 $15,159
Deferred Tax Liabilities:
Fixed asset basis differences $ 5,349 $5,701
Pension 3,562 1,578
Intangible assets 1,108 1,870
Other items, net 566 260
Total Deferred Tax Liabilities $ 10,585 $9,409
The deferred tax asset valuation reserves are primarily related to deferred
tax assets of foreign operations, including Dutch net operating loss (NOL)
carryforwards acquired in connection with the Philips acquisition. The
acquired Dutch NOLs have an unlimited carryover period. A substantial portion
of these NOLs were provided for with a valuation allowance at the time of the
acquisition. The tax benefit from adjusting the valuation allowance of the
acquired NOLs is recorded as a reduction of goodwill. Reductions in goodwill
for NOL benefit were $2,626,000 in 1996 and $1,925,000 in 1995.
A reconciliation from the U.S. statutory rate to the effective tax rate is as
follows:
(In thousands)
For the For the For the
year ended year ended year ended
Apr. 26, 1996 Apr. 28, 1995 Apr. 29, 1994
Amt Pct Amt Pct Amt Pct
Tax at U.S. statutory rate $11,765 35.0% $8,412 35.0% $4,928 35.0%
Foreign tax greater
than U.S. statutory rate 503 1.5 847 3.5 1,528 10.8
Utilization of foreign tax
credits (542) (1.6) (35) (0.1) (1,538)(10.9)
Foreign Sales Corporation tax
benefit (554) (1.6) (436) (1.8) (321) (2.3)
State taxes, net of federal
benefit 326 0.9 211 0.8 222 1.6
Nondeductible goodwill 264 0.8 302 1.3 360 2.6
Other items, net 507 1.5 (168) (0.7) 101 0.7
$12,269 36.5% $9,133 38.0% $5,280 37.5%
Note 8. EMPLOYEE BENEFIT PLANS
The expense related to employee benefit plans is as follows:
(In thousands)
For the For the For the
year ended year ended year ended
April 26, 1996 April 28, 1995 April 29, 1994
Pension Plan, U.S. $1,444 $1,170 $1,147
Pension Plans, Foreign 1,111 1,281 1,519
Profit-sharing Retirement Plan 745 639 652
Profit-sharing Bonus Plan 3,695 2,064 1,296
Other Benefit Plans 618 760 813
Total Employee Benefit Plans $7,613 $5,914 $5,427
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 consecutive 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:
(In thousands)
For the For the For the
year ended year ended year ended
April 26, 1996 April 28, 1995 April 29, 1994
Service cost $ 1,899 $1,990 $ 1,917
Interest cost 3,260 2,955 2,939
Return on plan assets (6,682) (3,873) (2,590)
Net amortization and deferral 2,967 98 (1,119)
Net periodic pension cost $1,444 $1,170 $ 1,147
The funding status of the plan is as follows:
(In thousands)
April 26, 1996 April 28, 1995
Vested benefit obligation $34,786 $29,069
Accumulated benefit obligation 35,711 29,640
Projected benefit obligation 44,911 37,754
Fair market value of plan assets 43,814 36,299
Projected benefit obligation in excess
of plan assets 1,097 1,455
Prior service cost 476 486
Unrecognized net loss (10,007) (5,589)
Unrecognized net transition asset 413 952
Prepaid pension asset $ (8,021) $(2,696)
For purposes of calculating the funding status of the plan, the weighted
average discount rate was 8.0 percent in 1996, 8.8 percent in 1995 and 8.0
percent in 1994. The rate of increase in future compensation levels used in
determining the actuarial present value of the projected benefit obligation
varied by age group and ranged from 4.3 to 5.6 percent in 1996 and 1995 and
from 3.6 to 4.9 percent in 1994.
The expected long-term rate of return on plan assets was 9.5 percent in 1996
and 1995 and 10.8 percent in 1994. For purposes of calculating the net
periodic pension cost, the actuarial assumptions utilized are the actuarial
assumptions in place at the end of the previous fiscal year (e.g., the fiscal
1996 net periodic pension cost was based upon the 1995 actuarial assumptions).
Upon adoption of Statement of Financial Accounting Standards No. 87 (SFAS 87),
"Accounting for Pensions" 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 $355,000 in 1996 and $427,000
in 1995 and $620,000 in 1994. The remaining plans qualify for accounting
under the rules of SFAS 87. The tables below include only those international
pension plans which qualify for SFAS 87 treatment.
Net periodic pension expense of foreign plans under SFAS 87 is as follows:
(In thousands)
For the For the For the
year ended year ended year ended
April 26, 1996 April 28, 1995 April 29, 1994
Service cost $ 746 $ 780 $ 792
Interest cost 1,307 1,101 1,000
Return on plan assets (1,251) (1,015) (893)
Net amortization and deferral (46) (12) ---
Net periodic pension cost $ 756 $ 854 $ 899
The funding status of the plans is as follows:
(In thousands)
April 26, 1996 April 28, 1995
Vested benefit obligation $15,160 $12,498
Accumulated benefit obligation $13,818 $13,279
Projected benefit obligation $21,202 $19,616
Fair market value of plan assets 19,509 19,653
Projected benefit obligation in
excess of (less than) plan assets 1,693 (37)
Unrecognized net gain 141 2,558
Accrued pension liability $ 1,834 $ 2,521
The weighted average discount rate varied from 6.5 percent in 1996, and varied
from 7.0 percent to 7.5 percent in 1995 and 6.5 percent to 7.0 percent in
1994. 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 3.5 percent in 1996 and from 3.0 percent to 5.0 percent in 1995
and 1994. The expected long-term rate of return on plan assets was 7.0
percent in 1996 and 6.5 percent in 1995.
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 employee's 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 semi-annual 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.
OTHER BENEFIT PLANS. The Company has various other employee cash and stock
award plans designed to recognize and compensate key employees for
performance.
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. On March 10, 1995, repurchased shares of the Company
totaling 1,011,937 were canceled and retired. Repurchased shares had been
used to fund stock award and stock option plans.
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 European operations
from Philips, 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 26, 1996 or April
28, 1995.
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 $497,000 in 1996, $473,000 in 1995
and $433,000 in 1994.
DIVIDENDS. The Company declared cash dividends of $0.60 per share in 1996,
$0.56 per share in 1995 and $0.52 per share in 1994.
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 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, and,
accordingly no compensation expense has been recorded. 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 26,
1996, April 28, 1995 and April 29, 1994, of which 637,270 shares, 900,380
shares and 1,018,550 shares, respectively, were available for options to be
granted in the future.
Total Options Price Range
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
Granted 145,300 $28.50 to $40.38
Terminated (27,130) $22.44 to $30.75
Exercised (154,900) $11.88 to $30.75
Balance,
April 28, 1995 (532,000 options exercisable) 1,046,120 $11.88 to $40.38
Granted 280,950 $32.63 to $39.94
Terminated (17,840) $11.88 to $40.38
Exercised (179,520) $11.88 to $30.75
Balance,
April 26, 1996 (463,010 options exercisable) 1,129,710 $11.88 to $40.38
Note 10. FINANCING AND COMMITMENTS
The Company has $53.8 million of committed, noncollateralized revolving lines
of credit. The $53.8 million lines of credit include a $30.0 million facility
used for corporate working capital requirements and a $23.8 million facility
to finance the working capital requirements of the European operations. The
committed lines of credit contain certain working capital and other minimum
financial covenants. The Company is in compliance with all covenants on its
lines of credit. Under the $30.0 million revolving line, which was renewed
until 1999, there was zero outstanding at April 26, 1996 and at April 28,
1995. Under the $23.8 million line, there was $7.1 million outstanding at
April 26, 1996 and $21.4 million outstanding at April 28, 1995. The interest
rates on these borrowings were 3.2 percent to 10.3 percent in 1996 and 5.2
percent to 11.0 percent in 1995.
Approximate required aggregate principal payments of all long-term debt will
be as follows: 1998 - $7.1 million.
The Company has $64.0 million in uncommitted lines of credit. There was no
debt outstanding under these lines at April 26, 1996 and April 28, 1995.
Long-term obligations include capital lease obligations.
The Company's operating lease expense, including leases with a term of less
than one year, was $7.5 million in 1996, $7.7 million in 1995 and $6.9 million
in 1994. 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 26, 1996:
(In thousands)
Fiscal Year Facilities Equipment Total
1997 $4,913 $1,731 $6,644
1998 3,093 834 3,927
1999 728 252 980
2000 471 20 491
2001 347 8 355
$ 9,552 $2,845 $12,397
Note 11. OPERATIONS BY GEOGRAPHIC AREAS
The Company is engaged in one line of business, the manufacturing and selling
of electronic test tools. In the schedule below, revenues, 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.
(In thousands)
For the For the For the
year ended year ended year ended
April 26, 1996 April 28, 1995 April 29, 1994
Revenues:
United States:
Sales to
unaffiliated customers $164,023 $167,566 $168,230
Export sales 44,956 34,419 28,410
Interarea transfers 67,073 55,090 45,133
276,052 257,075 241,773
Europe:
Sales to
unaffiliated customers 166,551 148,902 136,820
Interarea transfers 30,432 32,620 24,952
196,983 181,522 161,772
Other areas:
Sales to
unaffiliated customers 37,995 31,179 24,444
Eliminations (97,505) (87,710) (70,085)
Consolidated revenues $413,525 $382,066 $357,904
Income before income taxes:
United States $ 27,967 $ 20,571 $ 20,699
Europe 10,698 7,538 228
Other 4,016 4,316 1,158
Corporate expense and
eliminations (9,069) (8,391) (8,005)
Consolidated income before
income taxes $ 33,612 $ 24,034 $ 14,080
Assets:
United States $166,969 $149,975 $141,014
Europe 100,456 112,783 108,129
Other 12,513 15,201 10,977
Eliminations (3,850) (2,437) (14,518)
Consolidated assets $276,088 $275,522 $245,602
Note 12. FINANCIAL INSTRUMENTS
Financial instruments, which potentially subject the Company to concentrations
of credit risk, consist principally of trade receivables. As of April 26,
1996, the Company had no significant concentrations of credit risk due to a
large and diversified customer base spanning vast geographic areas.
The Company is subject to transaction exposures that arise from foreign
exchange movements between the dates foreign exchange transactions are
recorded and the date they are consummated. The Company's exposure to foreign
currency movements is somewhat mitigated through naturally offsetting currency
positions. Remaining exposure is partially reduced through the purchase of
foreign exchange contracts. At April 26, 1996, the Company had foreign
exchange contracts for various foreign currencies totaling $6.9 million.
Note 13. 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 Company.
Report of Ernst & Young LLP, 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 26, 1996 and April 28, 1995 and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended April 26, 1996. 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Fluke Corporation and subsidiaries at April 26, 1996 and April 28,
1995 and the consolidated results of their operations and their cash flows for
each of the three years in the period ended April 26, 1996 in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Seattle, Washington
June 3, 1996
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
FINANCIAL SUMMARY
(In thousands except shares and per share amounts)
For the<F4>
seven
For the For the For the months
year ended year ended year ended ended
April April April April
26, 1996 28, 1995 29, 1994 30, 1993
Revenues $413,525 $382,066 $357,904 $132,139
Cost of goods sold $196,721 $185,873 $182,475 $ 72,167
Gross margin $216,804 $196,193 $175,429 $ 59,972
Restructuring --- --- --- ---
Total operating expenses
excluding restructuring $183,044 $172,008 $161,040 $ 56,657
Operating income $ 33,760 $ 24,185 $ 14,389 $ 3,315
Income before income taxes and
cumulative effect of changes
in accounting principles $ 33,612 $ 24,034 $ 14,080 $ 3,957
Cumulative effect of changes in
accounting principles <F2> --- --- --- $ 3,902
Net income $ 21,343 $ 14,901 $ 8,800 $ 6,743
Average shares and share
equivalents outstanding 8,285,151 7,992,804 8,031,696 7,069,463
Income before cumulative effect of
changes in accounting principles
per share $ 2.58 $ 1.86 $ 1.10 $ 0.40
Cumulative effect of changes in
accounting principles per share <F2> --- --- --- $ 0.55
Earnings per share $ 2.58 $ 1.86 $ 1.10 $ 0.95
Net income as a percentage of revenues 5.16% 3.90% 2.46% 5.10%
Cash dividends declared per share $ 0.60 $ 0.56 $ 0.52 $ 0.26
Total assets $276,088 $275,522 $245,602 $172,087
Total stockholders' equity $192,060 $175,280 $157,829 $135,187
Long-term obligations $ 7,098 $ 21,613 $ 14,712 $ 34
Long-term interest expense $ 1,248 $ 1,423 $ 1,327 $ 12
Pro forma net income <F1> $ 21,343 $ 14,901 $ 8,800 $ 4,320
Pro forma earnings per share <F1> $ 2.58 $ 1.86 $ 1.10 $ 0.61
FINANCIAL SUMMARY
In thousands except shares and per share amounts
For the For the
year ended year ended
September September
25, 1992 27, 1991
Revenues $271,819 $239,651
Cost of goods sold $149,776 $129,095
Gross margin $122,043 $110,556
Restructuring --- $ 10,800<F3>
Total operating expenses
excluding restructuring $101,712 $ 97,264
Operating income $ 20,331 $ 2,492
Income before income taxes and
cumulative effect of changes
in accounting principles $ 21,186 $ 3,441
Cumulative effect of changes in
accounting principles <F2> --- ---
Net income $ 15,204 $ 3,205
Average shares and share
equivalents outstanding 7,033,695 6,943,941
Income before cumulative effect of
changes in accounting principles
per share $ 2.16 $ 0.46
Cumulative effect of changes in
accounting principles per share <F2> --- ---
Earnings per share $ 2.16 $ 0.46
Net income as a percentage of revenues 5.59% 1.34%
Cash dividends declared per share $ 0.48 $ 0.40
Total assets $175,806 $165,826
Total stockholders' equity $129,464 $116,265
Long-term obligations $ 391 $ 154
Long-term interest expense $ 31 $ 28
Pro forma net income <F1> $ 14,938 $ 3,156
Pro forma earnings per share <F1> $ 2.12 $ 0.45
<FN>
<F1> The Company changed the method of applying overhead costs related to
inventory in 1993. Pro forma data is presented assuming the change in
accounting for inventory is applied retroactively.
<F2> The effect of the change in accounting for inventories ($2.4 million net
of income tax), explained above in Footnote 1 and the adoption of Statement of
Financial Accounting Standards Number 109, "Accounting for Income Taxes" ($1.5
million), were recorded as cumulative changes in accounting principles.
<F3> In 1991 the Company accrued restructuring costs of $10.8 million. The
restructuring charge included inventory write-offs, fixed asset write-offs and
personnel costs.
<F4> 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 ended April 30, 1993.
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(In thousands except per share amounts)
<F1>
Gross Net Earnings Dividends
Revenues Margin Income Per Share Per Share
Fiscal 1996:
1st Quarter $ 98,714 $ 51,327 $ 4,126 $0.50 $0.15
2nd Quarter 102,872 52,784 5,089 0.61 0.15
3rd Quarter 105,701 54,833 5,981 0.72 0.15
4th Quarter 106,238 57,860 6,147 0.74 0.15
Total $413,525 $216,804 $21,343 $2.58 $0.60
Fiscal 1995:
1st Quarter $ 86,000 $ 42,822 $ 2,401 $0.30 $0.14
2nd Quarter 91,569 46,205 3,162 0.40 0.14
3rd Quarter 99,090 50,894 4,225 0.53 0.14
4th Quarter 105,407 56,272 5,113 0.63 0.14
Total $382,066 $196,193 $14,901 $1.86 $0.56
<FN>
<F1> The sum of the earnings per share on a quarterly basis will not
necessarily equal the earnings per share reported for the year since
the average shares and share equivalents outstanding used in the earnings
per share computation changes throughout the year.
STOCK PRICE INFORMATION
1996 1995
High Low High Low
1st Quarter 42 1/2 37 5/8 32 27 3/4
2nd Quarter 41 35 1/2 31 28
3rd Quarter 37 3/4 32 30 3/4 27 1/2
4th Quarter 39 5/8 34 1/4 40 5/8 29 3/8
Fluke Corporation stock is traded on the New York Stock Exchange. Quarterly
cash dividends of $0.15 per share were paid in 1996, $0.14 per share in 1995
and $0.13 per share in 1994. The number of stockholders of record at April
26, 1996 was 1,682.