-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OHjQEDLjTMk7/moLDC00CX1p47oiCi+AmlJm004FXg9716I3KKyHuYTr5ylDJG8L wTwjpYJS7iJ1FYl4+h7nrQ== 0000950005-97-000613.txt : 19970701 0000950005-97-000613.hdr.sgml : 19970701 ACCESSION NUMBER: 0000950005-97-000613 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970630 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WATKINS JOHNSON CO CENTRAL INDEX KEY: 0000105006 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY, NEC [3559] IRS NUMBER: 941402710 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 11-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05631 FILM NUMBER: 97632428 BUSINESS ADDRESS: STREET 1: 3333 HILLVIEW AVE CITY: PALO ALTO STATE: CA ZIP: 94304 BUSINESS PHONE: 4154934141 MAIL ADDRESS: STREET 1: 3333 HILLVIEW AVENUE CITY: PALO ALTO STATE: CA ZIP: 94304-1223 11-K 1 FORM 11-K FORM 11-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996: A. Full title of Plan: Watkins-Johnson Employees' Investment Plan B. Name of issuer of the securities held pursuant to the Plan and the address of its principal executive office: Stanford Research Park 3333 Hillview Avenue Palo Alto, CA 94304-1223 Item 1. Changes in the Plan Effective January 1, 1996, the Company eliminated the service requirement for eligibility and offered loans against 401(k) funds. During April 1996, the Company merged the Watkins-Johnson Company Employee Stock Ownership Plan (ESOP) into the Watkins- Johnson Employees' Investment Plan and the Plan document was amended and restated to combine the plans. Item 2. Changes in investment policy No material changes occurred during the 1996 year with respect to the nature of securities or other investments in which funds held under the Plan were invested. Item 3. Contributions under the Plan The Watkins-Johnson Company makes matching and ESOP contributions to the Plan. The Company matched 100% of the first 2% of regular compensation contributed by each participant and 50% of the next 2% of regular compensation contributed, for a total maximum of 3% of regular compensation in 1996. The Company made an ESOP contribution equal to 1% of participants' regular compensation to eligible participants in 1996. Page 1 of 22 Item 4. Participating employees The Plan had approximately 2,200 participating employees at December 31, 1996. Item 5. Administration of the Plan The Plan is administered by a committee comprising employees of the Watkins-Johnson Company. No person receives compensation from the Plan in the role of administrative committee member. Name of Position held committee member with issuer Address - ---------------- ------------- ------- Scott Buchanan Chairman of Committee Stanford Research Park VP & CFO 3333 Hillview Avenue Palo Alto, CA 94304-1223 K.G. Marianelli Human Resources Stanford Research Park Manager 3333 Hillview Avenue Palo Alto, CA 94304-1223 S.B. Witmer Manager of Stanford Research Park Corporate Communications 3333 Hillview Avenue Palo Alto, CA 94304-1223 J.M. Varrone Treasurer Stanford Research Park 3333 Hillview Avenue Palo Alto, CA 94304-1223 Item 6. Custodian of investments The custodian of Plan assets is Fidelity Management Trust Company, 100 Magellan Way, Covington, KY 41015. The Plan did not pay Fidelity Management Trust Company any compensation as custodian of investments as all administrative fees are paid by the Company. Item 7. Reports to participating employees Participants receive quarterly reports from the Plan administrator summarizing the transactions and market value changes. Page 2 of 22 Item 8. Financial statements and exhibits (a) Financial statements - Audited financial statements of the Watkins-Johnson Employees' Investment Plan as of and for the years ended December 31, 1996 and 1995. (b) Exhibit 1 - Consent of Mohler, Nixon & Williams Independent Accountants Page 3 of 22 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the administrator has duly caused this annual report to be signed by the undersigned thereunto duly authorized. WATKINS-JOHNSON EMPLOYEES' INVESTMENT PLAN Date By ------------------- -------------------------------- /S/ Scott Buchanan Chairman of Committee VP & CFO Page 4 of 22 WATKINS-JOHNSON EMPLOYEES' INVESTMENT PLAN FINANCIAL STATEMENTS DECEMBER 31, 1996 AND 1995 Page 5 of 22 WATKINS-JOHNSON EMPLOYEES' INVESTMENT PLAN Financial Statements and Supplemental Schedules Years ended December 31, 1996 and 1995 Table of Contents Independent Accountants' Report .............................................7 Consent of Independent Accountants...........................................8 Financial Statements: Statements of Net Assets Available for Plan Benefits ........................9 Statements of Changes in Net Assets Available for Plan Benefits, With Fund Information .....................................10 Notes to Financial Statements...............................................11 Supplemental Schedules as of and for the year ended December 31, 1996 ........................................................18 27a, Part I - Schedule of Assets Held for Investment Purposes 27b, Part III - Schedule of Loans or Fixed Income Obligations 27d, Part V - Schedule of Reportable Transactions Page 6 of 22 To the Participants and Plan Administrator of the Watkins-Johnson Employees' Investment Plan INDEPENDENT ACCOUNTANTS' REPORT We were engaged to audit the financial statements and supplemental schedules of the Watkins-Johnson Employees' Investment Plan (the Plan) as of December 31, 1996, and for the year then ended, as listed in the accompanying table of contents. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audit. Other auditors were engaged to audit the financial statements and supplemental schedules of the Plan as of and for the year ended December 31, 1995 and in their report dated May 24, 1996, they expressed an unqualified opinion on those statements. We conducted our audit 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 the Plan's management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for plan benefits of the Plan as of December 31, 1996, and the changes in net assets available for plan benefits for the year then ended in conformity with generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information, as listed in the accompanying table of contents, is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The fund information in the statement of changes in net assets available for plan benefits is presented for purposes of additional analysis rather than to present the changes in net assets available for plan benefits for each fund. The supplemental information and fund information have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. MOHLER, NIXON & WILLIAMS Accountancy Corporation Campbell, California June 6, 1997 Page 7 of 22 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the use of our name on our report, dated June 6, 1997, with respect to the financial statements and schedules of the Watkins-Johnson Employees' Investment Plan for the years ended December 31, 1996 and 1995, included in the Annual Report on Form 11-K which is filed electronically with the Securities and Exchange Commission. MOHLER, NIXON & WILLIAMS Accountancy Corporation Campbell, California June 6, 1997 Page 8 of 22 WATKINS-JOHNSON COMPANY EMPLOYEES' INVESTMENT PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS December 31, ------------------------------ 1996 1995 ------------- -------------- Investments, at fair value $ 90,950,924 $ 79,214,003 Investments, at contract value 41,903,240 37,601,324 Cash and cash equivalents 541,976 305,418 ------------- ------------- Assets held for investment purposes 133,396,140 117,120,745 Employer's contribution receivable 183,242 -- Accrued income receivable -- 18,948 ------------- ------------- Total assets 133,579,382 117,139,693 Expenses payable -- (14,388) Purchase of securities and interest -- (36,194) ------------- ------------- Net assets available for plan benefits $ 133,579,382 $ 117,089,111 ============= ============= See independent accountants' report and accompanying notes to financial statements. Page 9 of 22 WATKINS-JOHNSON COMPANY EMPLOYEES' INVESTMENT PLAN STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS For the years ended December 31, 1996 and 1995 ----------------------------------------------
Participant Directed ------------------------------------------------------------------------------------ Fidelity ------------------------------------------------------------------------------------ Retirement Government Fixed Money Income Magellan OTC Balanced Market Fund Fund Portfolio Fund ------------ ------------ ------------ ------------ ------------ Net assets available for plan benefits at December 31, 1994 $ 2,965,683 $ 50,783,918 $ 22,486,966 $ 6,811,937 $ 17,212,821 ------------ ------------ ------------ ------------ ------------ Employer's contribution 76,550 514,244 743,620 309,630 522,109 Participants' contributions/ rollovers 200,175 1,479,579 2,240,400 988,113 1,540,877 Withdrawals/distributions (413,815) (6,368,621) (3,254,828) (1,017,021) (2,248,929) Dividends and interest 187,310 2,987,110 1,786,159 613,324 728,129 Net appreciation (depreciation) in fair value of investments -- -- 6,437,175 2,099,375 1,614,572 Administrative fees (991) (18,645) (8,700) (3,042) (4,840) Transfer in (out) 398,103 (6,068,388) 510,875 942,612 (2,756,544) ------------ ------------ ------------ ------------ ------------ Increase (decrease) in net assets 447,332 (7,474,721) 8,454,701 3,932,991 (604,626) ------------ ------------ ------------ ------------ ------------ Net assests available for plan benefits at December 31, 1995 3,413,015 43,309,197 30,941,667 10,744,928 16,608,195 ------------ ------------ ------------ ------------ ------------ Employer's contribution 113,397 465,617 783,116 350,056 422,709 Participants' contributions/ rollovers 390,244 1,484,836 2,486,806 1,247,029 1,308,870 Withdrawals/distributions (313,685) (3,242,299) (3,185,012) (1,093,961) (1,278,917) Dividends and interest 186,129 2,555,002 4,910,503 1,743,827 736,893 Net appreciation (depreciation) in fair value of investments -- -- (1,556,128) 879,825 589,620 Net loan activities (84,641) (891,180) (644,611) (302,173) (330,796) Administrative fees (13,091) (5,511) (7,043) (3,444) (4,892) Transfer in from another plan -- -- -- -- -- Transfer in (out) 103,063 (611,463) (2,973,239) 930,953 (2,643,741) ------------ ------------ ------------ ------------ ------------ Increase (decrease) in net assets 381,416 (244,998) (185,608) 3,752,112 (1,200,254) ------------ ------------ ------------ ------------ ------------ Net assets available for plan benefits at December 31, 1996 $ 3,794,431 $ 43,064,199 $ 30,756,059 $ 14,497,040 $ 15,407,941 ============ ============ ============ ============ ============
Participant Directed ----------------------------------------------------------------------- Fidelity --------------------------------------------------- Watkins- Growth & Johnson Income Intermediate Overseas Stock Fund Fund Fund Fund ----------- ----------- ----------- ----------- Net assets available for plan benefits at December 31, 1994 -- -- -- $ 3,075,572 ----------- Employer's contribution $ 26,186 $ 5,822 $ 8,735 197,555 Participants' contributions/ rollovers 119,100 22,352 73,027 604,889 Withdrawals/distributions (302,810) (9,771) (27,599) (280,673) Dividends and interest 132,600 29,008 18,501 92,512 Net appreciation (depreciation) in fair value of investments 240,541 17,298 (4,481) 1,063,345 Administrative fees (791) (236) (181) (1,734) Transfer in (out) 3,211,986 1,071,427 732,224 1,957,705 ----------- ----------- ----------- ----------- Increase (decrease) in net assets 3,426,812 1,135,900 800,226 3,633,599 ----------- ----------- ----------- ----------- Net assests available for plan benefits at December 31, 1995 3,426,812 1,135,900 800,226 6,709,171 ----------- ----------- ----------- ----------- Employer's contribution 201,169 47,143 56,347 291,715 Participants' contributions/ rollovers 721,171 142,897 210,432 827,000 Withdrawals/distributions (440,240) (80,232) (90,878) (295,051) Dividends and interest 414,852 94,823 100,866 83,101 Net appreciation (depreciation) in fair value of investments 838,636 (43,813) 69,769 (2,227,474) Net loan activities (42,883) (18,188) (21,642) (117,525) Administrative fees (1,946) (359) (335) (925) Transfer in from another plan -- -- -- -- Transfer in (out) 4,028,461 31,299 631,325 503,342 ----------- ----------- ----------- ----------- Increase (decrease) in net assets 5,719,220 173,570 955,884 (935,817) ----------- ----------- ----------- ----------- Net assets available for plan benefits at December 31, 1996 $ 9,146,032 $ 1,309,470 $ 1,756,110 $ 5,773,354 =========== =========== =========== ===========
Non- Participant Directed Participant Contribution ESOP Loans Receivable Total ------------- ------------- ------------- -------------- Net assets available for plan benefits at December 31, 1994 -- -- -- $ 103,336,897 ------------- Employer's contribution -- -- -- 2,404,451 Participants' contributions/ rollovers -- -- -- 7,268,512 Withdrawals/distributions -- -- -- (13,924,067) Dividends and interest -- -- -- 6,574,653 Net appreciation (depreciation) in fair value of investments -- -- -- 11,467,825 Administrative fees -- -- -- (39,160) Transfer in (out) -- -- -- -- ------------- Increase (decrease) in net assets -- -- -- 13,752,214 ------------- Net assests available for plan benefits at December 31, 1995 -- -- -- 117,089,111 ------------- Employer's contribution $ 699,989 -- $ 183,242 3,614,500 Participants' contributions/ rollovers -- -- -- 8,819,285 Withdrawals/distributions (329,920) ($ 71,457) -- (10,421,652) Dividends and interest 47,525 96,277 -- 10,969,798 Net appreciation (depreciation) in fair value of investments (1,655,825) -- -- (3,105,390) Net loan activities -- 2,453,639 -- -- Administrative fees (1,095) -- -- (38,641) Transfer in from another plan 6,652,371 -- -- 6,652,371 Transfer in (out) -- -- -- -- ------------- ------------- ------------- -------------- Increase (decrease) in net assets 5,413,045 2,478,459 183,242 16,490,271 ------------- ------------- ------------- -------------- Net assets available for plan benefits at December 31, 1996 $ 5,413,045 $ 2,478,459 $ 183,242 $ 133,579,382 ============= ============= ============= ============= See independent accountants' report and accompanying notes to financial statements.
Page 10 of 22 WATKINS-JOHNSON EMPLOYEES' INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS December 31, 1996 and 1995 Note 1 - The Plan and its significant accounting policies: The following description of the Watkins-Johnson Employees' Investment Plan (the Plan) provides only general information. Participants should refer to the Plan document for a more complete description of the Plan's provisions. The Plan is a defined contribution plan that was established in 1967 by Watkins- Johnson Company (the Company) to provide benefits to eligible employees. For 1996, the Plan covers all employees of the Company on U.S. payroll and not otherwise covered by a collective bargaining agreement or an independent contractor. During 1995, an employee was also required to have 90 days of service to be eligible to participate. Effective January 1,1996, the Company eliminated the service requirement for eligibility and offered loans against 401(k) funds. During April 1996, the Company merged the Watkins-Johnson Company Employee Stock Ownership Plan (ESOP) into the Watkins- Johnson Employees' Investment Plan and the Plan document was amended and restated to combine the plans. Effective January 1, 1995, the Company terminated the profit sharing portion of the Plan and restated the Plan as the Watkins-Johnson Employees' Investment Plan. A provision for a Company match was added to the Plan to replace the profit sharing portion. The Plan administrator believes the Plan is currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code and the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Administration - The Company has appointed an Administrative Committee (the Committee) to control the operation and administration of the Plan. A third-party administrator, appointed by the Committee, processes and maintains the records of participant data. The Company has contracted with Wells Fargo Bank to act as the trustee and Fidelity Management Trust Company (Fidelity) to act as the custodian. Substantially all expenses incurred for administering the Plan are paid by the Company except for certain trustee and loan fees which are paid by the Plan. Page 11 of 22 Investments - Investments of the Plan are held by Fidelity and invested based solely upon instructions received from participants for participant directed accounts. The ESOP portion of the plan is non-participant directed and is invested in the Watkins-Johnson Stock Fund and cash. The Plan's investments in mutual funds and Company stock, are valued at fair value as of the last day of the Plan year, as measured by quoted market prices. The Plan's investment in the Fixed Income Fund are recorded at contract value (purchase price plus interest). Liquidation of Plan assets invested in guaranteed investment contracts would result in a market value adjustment as specified in the contract. The Fixed Income Fund principally consists of the following deposits for unsecured contracts with a fixed interest rate:
1996 1995 ---- ---- Continental Assurance Company, interest at 4.90%, matures in June 1997 $ 1,007,313 $ 960,881 Continental Assurance Company, interest at 7.43%, matures in December 1999 2,919,034 2,720,767 New York Life Insurance Company, interest at 7.00%, 50% matures in December 1998, remainder matures in June 1999 8,250,284 7,710,425 People's Security Life Insurance Company, interest at 5.04%, matures in March 2000 4,021,498 4,051,209 Provident Life an Accident Insurance Company, interest at 5.10%, 50% matured in July 1996, remainder matures in June 1997 1,145,177 2,178,916 Sun Life Insurance Company of America, interest at 7.07%, matures in June 1998 2,609,551 2,437,238 Fidelity Managed Income Portfolio II 19,370,486 15,124,963 Transamerica Occidental Life Insurance Co., interest at 6.74%, 50% matured in December 1996, remainder matures in December 1997 2,579,897 2,416,925 ----------- ----------- Total deposit contracts 41,903,240 37,601,324 Fidelity Fixed Income Fund 1,160,959 5,752,804 ----------- ----------- Total Fixed Income Fund $43,064,199 $43,354,128 =========== ===========
Page 12 of 22 Statement of Position 94-4 - The Company is required to adopt Statement of Position 94-4, "Reporting of Investment Contracts Held by Health and Welfare Benefit Plans and Defined Contribution Pension Plans" (SOP 94-4), for the Plan year beginning January 1, 1996. Under the new reporting requirements, investments with fully benefit-responsive features must be reported at contract value. The adoption of SOP 94-4 did not have a material financial impact on the Plan. Cash and cash equivalents - All highly liquid investments purchased with an original maturity of three months or less (generally money market funds) are considered to be cash equivalents. These investments are usually held for a short period of time, pending long-term investment. Vesting - Salary deferral, voluntary, rollover, and employer matching contributions - Participants are 100% vested in their accounts at all times. Profit sharing contributions - Participants are fully vested in their profit sharing contributions if they were employed by the Company on January 1, 1995. Participants who terminated prior to January 1, 1995 are subject to the vesting schedule as defined in the Plan document. ESOP contributions - Participants are fully vested in their ESOP contributions if they were employed by the Company on January 1, 1996. Participants who terminated prior to January 1, 1996 are subject to the vesting schedule as defined in the Plan document. Income taxes - The Plan has been amended since receiving its latest favorable determination letter dated August 1995. However, the Plan administrator believes the Plan continues to qualify under the applicable requirements of the Internal Revenue Code and related state statutes, and is exempt from federal income and state franchise taxes. Reclassifications - Certain reclassifications were made in the 1995 financial statements to conform with the 1996 presentation. Page 13 of 22 Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Risks and uncertainties - The Plan provides for various investment options in any combination of stocks, bonds, fixed income securities, mutual funds, and other investment securities. Investment securities are exposed to various risks, such as interest rate, market and credit. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in risks in the near term would materially affect participants' account balances and the amounts reported in the statement of net assets available for plan benefits and the statement of changes in net assets available for plan benefits. Financial instruments - Certain Fidelity investment options may enter into certain forward contracts to protect securities and related receivables and payables against fluctuations in future foreign currency rates. A forward contract is an agreement to buy or sell currencies of different countries on a specified futures date at a specified rate. Risks associated with such contracts include the movement in the value of the foreign currency relative to the U.S. dollar and the ability of the counterparty to perform. The market value of the contract will fluctuate with changes in currency exchange rates. Fidelity invests in futures contract solely for the purpose of hedging its existing portfolio securities, or securities it intends to purchase, against fluctuations in value caused by changes in prevailing market interest rates. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts; interest rates and the underlying hedged assets, and the possible inability of counterparties to meet the term of their contracts. When the contract is closed, a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time when it was closed is recorded. Page 14 of 22 Note 2 - Participation and benefits: Employee contributions - Participants may elect to have the Company contribute a percentage, from 1% to 15%, of their pre-tax compensation up to the amount allowable under current income tax regulations. Participants who elect to have the Company contribute a portion of their compensation to the Plan agree to accept an equivalent reduction in taxable compensation. Participants may also elect to make after-tax contributions up to 10% of their regular compensation as defined by the Plan. Contributions withheld are invested in accordance with the participant's direction and are allocated to funds in whole percentage increments. Participants are also allowed to make rollover contributions of amounts received from other qualified employer-sponsored retirement plans. Such contributions are deposited in the appropriate investment funds in accordance with the participant's direction and the Plan's provisions. Employer contributions - The Company is allowed to make matching contributions as defined in the Plan and as approved by the Board of Directors. The Company matches 100% of the first 2% of regular compensation contributed by each participant and 50% of the next 2% of regular compensation contributed, for a total maximum of 3% of regular compensation. The Plan also allows for an ESOP contribution which may be paid in the form of cash or Company stock. In 1996, the Board of Directors approved an ESOP contribution equal to 1% of participants' regular compensation. Cash contributions were made to a holding account held by the trust on a quarterly basis to purchase shares of Watkins-Johnson stock which were allocated in February 1997 to eligible participants who were employed by the Company on the last day of the Plan year. Participant accounts - Each participant's account is credited with the participant's contribution, Plan earnings and an allocation of the Company's matching and ESOP contributions, if any. Allocation of the Company's contributions are based on participant contributions or regular compensation, as defined in the Plan. Payment of benefits - Upon termination, the participant or beneficiary will receive the benefits in a lump-sum amount equal to the value of the participant's vested interest in his or her account, or a series of payments comprising a complete distribution of the participant's account within Page 15 of 22 one year. In addition, except for ESOP accounts, benefits may be paid in installments, payable at least annually over a period certain not to exceed life expectancy of the participant and his or her beneficiary. Loans to participants - The Plan allows participants to borrow not less than $1,000 and up to the lesser of $50,000 or 50% of their allowable account balance which excludes voluntary or ESOP money sources in participant accounts. The loans are secured by the participant's vested balance. Such loans bear interest at prime plus 1% and must be repaid to the Plan within a five year period, unless the loan is used for the purchase of a primary residence in which case the maximum repayment period is fifteen years. The specific terms and conditions of such loans are established by the Committee. Note 3 - Transfer of Plan assets: As a result of the merger of the ESOP into the Plan, assets of approximately $6,600,000 were transferred into the ESOP portion of the Plan during April 1996. Note 4 - Investments: The following table includes the fair or contract values of investments and investment funds that represent 5% or more of the Plan's net assets at December 31:
1996 1995 ---- ---- Fidelity: Retirement Government Money Market Fund $ 3,798,210 $ 3,413,260 Fixed Income Fund 43,064,199 43,354,128 Magellan Fund 30,756,059 30,944,009 OTC Portfolio 14,497,040 10,745,759 Balanced Fund 15,407,941 16,609,403 Growth & Income 9,146,032 3,427,187 Intermediate Bond 1,309,470 1,136,000 Overseas Fund 1,756,110 800,312 Cash 541,976 305,418 Watkins-Johnson Stock Fund 10,640,644 6,385,269 Participant Loans 2,478,459 ------------ ------------ Assets held for investment purposes $133,396,140 $117,120,745 ============ ============
Page 16 of 22 Note 5 - Party in interest transactions: ESOP contributions are invested in common stock of the Company. In addition, as allowed in the Plan, participants may elect to invest a portion of their accounts in the common stock of the Company. Aggregate investment in Company common stock at December 31, 1996 and 1995 was as follows:
Date Number of shares Fair value Cost ---- ---------------- ---------- ---- 1996 434,312 $10,640,644 $10,554,346 1995 145,949 $6,385,269 $5,503,120
Note 6 - Plan termination and/or modification: The Company intends to continue the Plan indefinitely for the benefit of its employees; however, it reserves the right to terminate and/or modify the Plan at any time by resolution of its Board of Directors and subject to the provisions of ERISA. Note 7 - Subsequent events: Subsequent to Plan year end, Freedom Funds, Fidelity S&P 500 Index Funds, and Warburg Pincus Emerging Growth Fund were added as investment options under the Plan and the Intermediate Bond Fund and Balanced Fund were replaced with the U.S. Bond Index Fund and Founders Balanced Fund, respectively. In May 1997, the Board of Directors approved the appointment of Fidelity as trustee of the Plan in place of Wells Fargo Bank to be effective August 1, 1997. Page 17 of 22 WATKINS-JOHNSON EMPLOYEES' INVESTMENT PLAN SUPPLEMENTAL SCHEDULES DECEMBER 31, 1996 Page 18 of 22 EIN#: 94-1402710 PLAN#: 001 WATKINS-JOHNSON EMPLOYEES' INVESTMENT PLAN 27a, Part I - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES December 31, 1996
(a) (b) (c) (d) (e) Description of investment including Identity of issue, borrower, lessor, maturity date, rate of interest, Current or similar party collateral, par or maturity value Cost Value - ----- --------------------------------------- ----------------------------------- ------------ ------------ Fidelity Mgmt Trust Company Ret. Gov't Money Market $ 3,798,210 $ 3,798,210 Fidelity Managed Income Port. II Fixed Income Fund 19,370,486 19,370,486 Continental Assurance Company Fixed Income Fund 3,926,347 3,926,347 New York Life Insurance Company Fixed Income Fund 8,250,284 8,250,284 Peoples Security Life Fixed Income Fund 4,021,498 4,021,498 Provident Life and Accident Insur. Co. Fixed Income Fund 1,145,177 1,145,177 Sun America Life Insurance Company Fixed Income Fund 2,609,551 2,609,551 Transamerica Accidental Life Insur. Co. Fixed Income Fund 2,579,897 2,579,897 Fidelity Management Trust Company Fixed Income Fund 1,160,959 1,160,959 Fidelity Management Trust Company Magellan 27,609,512 30,756,059 Fidelity Management Trust Company OTC Portfolio 12,591,611 14,497,040 Fidelity Management Trust Company Balanced Fund 14,109,418 15,407,941 Fidelity Management Trust Company Growth & Income 8,226,605 9,146,032 Fidelity Management Trust Company Intermediate Bond 1,327,517 1,309,470 Fidelity Management Trust Company Overseas Fund 1,711,464 1,756,110 Fidelity Management Trust Company Cash 541,976 541,976 Watkins-Johnson Company Common stock 10,554,346 10,640,644 * Participant loans Loan Fund (9.25%) 2,478,459 ------------ Total $133,396,140 ============ * Parties-in-interest
Page 19 of 22 EIN#: 94-1402710 PLAN#: 001 WATKINS-JOHNSON EMPLOYEES' INVESTMENT PLAN 27b, Part III-SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS December 31, 1996
(a) (b) (c) (d) (e) (f) (g) (h) (i) Unpaid Original balance Identity and address loan at end of obligor amount Principal Interest of year Description of loan Principal Interest - ----- -------------------- -------- --------- -------- ---------- --------------------- --------- -------- * Jack Bradstock $10,000 $73 $9,927 Date of Loan: 7/12/96 $ 9,927 Interest Rate: 9.25% Maturity: 8/3/01 * David Dominguez 3,000 3,000 Date of Loan: 9/3/96 3,000 Interest Rate: 9.25% Maturity: 9/30/98 * Kurt Hansen 15,865 387 15,478 Date of Loan: 4/8/96 15,478 Interest Rate: 9.25% Maturity: 4/30/01 * John Craig 2,500 56 2,444 Date of Loan: 4/17/96 2,444 Interest Rate: 9.25% Maturity: 5/12/99 * Parties-in-interest
Page 20 of 22 EIN#: 94-1402710 PLAN#: 001 WATKINS-JOHNSON EMPLOYEES' INVESTMENT PLAN 27d, PartV - SCHEDULE OF REPORTABLE TRANSACTIONS December 31, 1996
(a) (b) (c) (d) (e) (f) (g) (h) (i) Description of asset Expense Current value (including interest rate incurred of asset on and maturity in case Purchase Selling Lease with Cost of transaction Net gain of a loan) price price rental transaction asset date or (loss) - ----- ---------------------------- ---------- ---------- ------ ----------- ---------- ------------- ----------- Fidelity Management Trust Company: Ret Gov't Money Mkt 5,711,463 -- -- -- 5,711,463 5,711,463 $ -- Ret Gov't Money Mkt -- 5,330,291 -- -- 5,330,291 5,330,291 -- Commonwealth Life -- 291,400 -- -- 219,400 219,400 -- Comingled Pool 5,128,392 2,020,876 -- -- 7,149,268 7,149,268 -- Provident Life & Acc -- 1,116,743 -- -- 1,116,743 1,116,743 -- FMTC Inst. Money Mkt 10,549,845 15,230,198 -- -- 25,780,043 25,780,043 -- Watkins-Johnson Stock Fund 13,957,952 -- -- -- 13,957,952 13,957,952 -- Watkins-Johnson Stock Fund -- 8,434,996 -- -- 8,906,727 8,434,996 (471,731) Magellan Fund 10,930,885 -- -- -- 10,930,885 10,930,885 -- Magellan Fund -- 9,562,707 -- -- 8,895,294 9,562,707 667,413 OTC Portfolio 7,527,908 -- -- -- 7,527,908 7,527,908 -- OTC Portfolio -- 4,656,452 -- -- 4,312,009 4,656,452 344,443 Balanced Fund 3,946,943 -- -- -- 3,946,943 3,946,943 -- Balanced Fund -- 5,738,024 -- -- 5,583,354 5,738,024 154,670 Growth & Income Fund 9,533,439 -- -- -- 9,533,439 9,533,439 -- Growth & Income Fund -- 4,653,230 -- -- 4,498,706 4,653,230 154,524 Intermediate Bond Fund 750,294 -- -- -- 750,294 750,294 -- Intermediate Bond Fund -- 533,011 -- -- 541,710 533,011 (8,699) Overseas Fund 1,902,481 -- -- -- 1,902,481 1,902,481 -- Overseas Fund -- 1,016,453 -- -- 996,438 1,016,453 20,015 Watkins-Johnson Stock Fund 13,957,952 -- -- -- 13,957,952 13,957,952 -- Watkins-Johnson Stock Fund -- 8,434,996 -- -- 8,906,727 8,434,996 (471,731)
Page 21 of 22 EX-1 2 CONSENT OF INDEPENDENT ACCOUNTANTS Exhibit 1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the Registration Statement (Form S-8) pertaining to the Watkins-Johnson Employees' Investment Plan of our report dated June 6, 1997, with respect to the financial statements and schedules of the Watkins-Johnson Employees' Investment Plan included in this Annual Report (Form 11-K) for the year ended December 31, 1996. MOHLER, NIXON & WILLIAMS Accountancy Corporation Campbell, California June 6, 1997 Page 22 of 22 -----END PRIVACY-ENHANCED MESSAGE-----