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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[ X ] Quarterly Report Pursuant to Section 12 or 15(d) of the
Securities Exchange Act of 1934 for the 13 weeks ended February 26, 1994,
or,
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ________________ to
_____________________ .
Commission File Number 1-4837
TEKTRONIX, INC.
(Exact name of registrant as specified in its charter)
OREGON 93-0343990
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
26600 S.W. PARKWAY
WILSONVILLE, OREGON 97070-1000
(Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code: (503) 627-7111
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes ___X___ No______
AT MARCH, 31, 1994 THERE WERE 30,204,919 COMMON SHARES OF TEKTRONIX, INC.
OUTSTANDING.
(Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.)
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TEKTRONIX, INC. AND SUBSIDIARIES
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INDEX
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PAGE NO.
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Financial Statements:
Condensed Consolidated Balance Sheets - 2
May 29, 1993 and February 26, 1994
Consolidated Statements of Operations - 3
for the Thirteen Weeks Ended February 26, 1994
and the Thirteen Weeks Ended February 27, 1993
for the Thirty-Nine Weeks Ended February 26, 1994
and the Thirty-Nine Weeks Ended February 27, 1993
Condensed Consolidated Statements of Cash Flows - 4
for the Thirty-Nine Weeks Ended February 26, 1994
and the Thirty-Nine Weeks Ended February 27, 1993
Notes to Condensed Consolidated Financial Statements 5
Management's Discussion and Analysis of Financial 6
Condition and Results of Operations
Part II. Other Information 10
Signatures 10
1
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TEKTRONIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
Feb. 26, May 29,
(In thousands) 1994 1993
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 32,471 $ 30,004
Accounts receivable - net 239,715 248,514
Inventories 177,351 171,416
Other current assets 58,402 65,778
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Total current assets 507,939 515,712
Property, plant, and equipment 749,892 793,174
Accumulated depreciation and amortization (531,499) (557,340)
--------- ---------
Property, plant, and equipment - net 218,393 235,834
Property held for sale 41,221 38,489
Long term deferred tax assets 84,938 88,629
Other long-term assets 100,247 105,841
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Total assets $ 952,738 $ 984,505
========== ==========
Liabilities and shareholders' equity
Current liabilities:
Short-term debt $ 61,756 $ 69,481
Accounts payable 145,236 157,555
Accrued compensation 80,828 106,464
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Total current liabilities 287,820 333,500
Long-term debt 100,034 70,073
Other long-term liabilities 128,353 145,988
Shareholders' equity:
Common stock 173,912 190,984
Retained earnings 216,299 193,221
Currency adjustment 46,320 50,739
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Total shareholders' equity 436,531 434,944
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Total liabilities and shareholders' equity $ 952,738 $ 984,505
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
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TEKTRONIX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
13 weeks to 13 weeks to 39 weeks to 39 weeks to
(In thousands Feb. 26, Feb. 27, Feb. 26, Feb. 27,
(except for per share amounts) 1994 1993 1994 1993
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 332,825 $ 311,233 $ 940,060 $ 949,342
Operating costs and expenses:
Cost of sales 180,922 160,071 507,074 489,834
Research and development 38,402 38,269 111,639 116,312
Selling, general, and administrative 89,657 94,460 262,292 290,769
---------- ---------- ---------- ----------
Total operating costs and expenses 308,981 292,800 881,005 896,915
Equity in joint venture (losses) (1,049) (825) (2,465) (2,376)
---------- ---------- ---------- ----------
Operating income 22,795 17,608 56,590 50,051
Other (income) expense - net (657) 3,768 4,486 14,105
---------- ---------- ---------- ----------
Earnings before taxes 23,452 13,840 52,104 35,946
Income taxes 7,973 4,706 15,439 12,222
---------- ---------- ---------- ----------
Earnings before cumulative effects
of accounting changes 15,479 9,134 36,665 23,724
Cumulative effects of accounting changes:
Income taxes -- -- -- 38,100
Postretirement benefits (net of tax) -- -- -- (34,775)
---------- ---------- ---------- ----------
Net earnings $ 15,479 $ 9,134 $ 36,665 $ 27,049
Earnings per share before cumulative
effects of accounting changes $ 0.51 $ 0.30 $ 1.20 $ 0.79
Earnings per share 0.51 0.30 1.20 0.90
Dividends per share 0.15 0.15 0.45 0.45
Average shares outstanding 30,269 30,084 30,441 29,902
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
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TEKTRONIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
39 weeks to 39 weeks to
Feb. 26, Feb. 27,
(In thousands) 1994 1993
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<S> <C> <C>
Cash flows from operating activities:
Net Earnings $ 36,665 $ 27,049
Adjustments to reconcile net earnings to
cash flows from operating activities:
Cumulative effect of accounting changes:
Income taxes -- (38,100)
Postretirement benefits -- 34,775
Depreciation expense 40,871 46,498
Accounts receivable 1,530 3,190
Inventories (7,900) 7,625
Other Current Assets 6,006 (9,469)
Accounts Payable (9,205) (21,083)
Income taxes payable 121 (22,343)
Accrued compensation (24,504) (11,129)
Other long-term liabilities (16,318) 40
Other - net (63) (1,099)
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Net cash provided by operating activities 27,203 15,954
Cash flows from investing activities:
Acquisition of property, plant, and equipment (39,118) (38,226)
Proceeds from sale of assets 9,711 7,907
Proceeds from sale of investments 13,442 --
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Net cash used in investing activities (15,965) (30,319)
Cash flows from financing activities:
Net (decrease) increase in short-term debt (6,692) 24,265
Issuance of long-term debt 100,000 70,000
Repayment of long-term debt (70,039) (75,052)
Issuance of common stock 7,067 7,112
Repurchase of common stock (25,964) --
Dividends (13,587) (13,440)
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Net cash provided (used) by financing activities (9,215) 12,885
Effect of exchange rate changes on cash 444 (2,350)
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(Decrease) increase in cash and cash equivalents (2,467) (3,830)
Cash and cash equivalents at beginning of year 30,004 18,402
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Cash and cash equivalents at end of quarter $ 32,471 $ 14,572
========== ==========
Supplemental disclosures of cash flows:
Income taxes paid $ 4,504 $ 33,042
Interest paid 8,721 9,862
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
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TEKTRONIX, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The condensed consolidated financial statements and notes have been
prepared by the Company without audit. Certain information and footnote
disclosures normally included in annual financial statements, prepared in
accordance with generally accepted accounting principles, have been
condensed or omitted. Management believes that the condensed statements
include all necessary adjustments (which are of a normal and recurring
nature, except for the adjustment to deferred tax assets described below
under 'Income Taxes' and the prior year's changes in accounting methods) and
are adequate to present financial position, results of operations and cash
flows for the interim periods. The condensed information should be read in
conjunction with the financial statements and notes incorporated by
reference in the Company's latest annual report on Form 10-K.
INVENTORIES
Inventories consisted of:
<TABLE>
<CAPTION>
February 26, May 29,
(In thousands) 1994 1993
- --------------------------------------------------------------------------------------------
<S> <C>
Materials and work in process $ 96,501 $ 87,867
Finished goods 80,850 83,549
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Inventories $ 177,351 $ 171,416
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</TABLE>
SHORT-TERM AND LONG-TERM DEBT
In the first quarter of 1994, the Company issued $100.0 million of 7.5%
Notes due August 1, 2003. Proceeds were used to repay bridge financing of
$70.0 million and to reduce short term revolving credit debt.
INCOME TAXES
The provision for income taxes consisted of:
<TABLE>
<CAPTION>
13 weeks to 13 weeks to 39 weeks to 39 weeks to
Feb. 26, Feb. 27, Feb. 26, Feb. 27,
(In thousands) 1994 1993 1994 1993
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
United States $ 5,110 $ 3,087 $ 10,512 $ 5,031
State 1,278 772 2,628 1,258
Foreign 1,585 847 2,299 5,933
---------- ---------- ---------- ----------
Income taxes $ 7,973 $ 4,706 $ 15,439 $ 12,222
========== ========== ========== ==========
</TABLE>
The provision for income taxes was calculated at an estimated annual
effective rate of 34%. The provision for the quarter ended August 28, 1993
was reduced by a gain of $2.2 million on recalculation of deferred income
tax benefits, primarily as a result of the enactment of federal tax
legislation increasing the corporate income tax rate from 34% to 35%.
5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
The Company believes that its financial condition is strong. Cash flow
from operating activities and borrowing capacity from existing lines of
credit are sufficient to meet current and anticipated future needs. At the
end of the third quarter (February 26, 1994), the Company maintained bank
credit facilities totalling $283.4 million, of which $221.8 million was
unused. The unused facilities include $71.8 million in lines of credit and
$150.0 million under a revolving credit agreement from United States and
foreign banks. On August 10, 1993 the Company issued $100.0 million of 7.5%
notes due August 1, 2003. Proceeds were used to repay bridge financing of
$70.0 million and to pay down short term revolving credit debt.
Current assets decreased by $7.8 million, or 2%, from the prior year
end, primarily due to reductions in accounts receivable and other current
assets, partly offset by an increase in inventories. The reduction in
accounts receivable resulted from a lower weekly average sales rate compared
to the prior year's fourth quarter rate. Inventories increased by $5.9
million primarily in anticipation of higher levels of sales. Other current
assets declined due to amortization of prepaid taxes and other expenses.
Net property, plant and equipment declined by $17.4 million as
depreciation, dispositions and currency effects exceeded new capital
additions. Long-term deferred tax assets decreased by $3.7 million because
of the reclassification of $6 million to current assets, partially offset by
a $2.2 million addition in the first quarter due to the recently enacted
federal tax legislation which raised the corporate tax rate from 34% to 35%
and thus enhanced the value of the Company's deferred tax assets. In order
for the Company to realize all deferred tax assets currently recognized,
future taxable income must be at least comparable to recent amounts.
Although the Company believes such taxable income levels will be achieved,
lower amounts could negatively affect the provision for income taxes in
future years. Other long-term assets decreased by $5.6 million due
primarily to the sale of a portion of the Company's investments in Credence
Systems Corporation, TriQuint Semiconductor, Inc and Planar Systems, Inc.
Current liabilities declined by $45.7 million or 14%. Short-term debt
decreased $7.7 million as part of the proceeds from issuance of the 7.5%
notes due August 1, 2003 was applied to repayment of revolving credit debt.
Accounts payable decreased $12.3 million primarily because of the timing of
trade payables. Accrued compensation decreased $25.6 million due to the
payment of employee severance charged against restructuring reserves, the
payment of year-end accruals for incentives and commissions, and seasonal
reductions in vacation accruals.
Other long-term liabilities were reduced by the reclassification of $18
million of restructuring reserves from long-term to current.
6
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Shareholders' equity increased by $1.6 million as the increase in
retained earnings was partially offset by declines in common stock and
currency adjustment. Retained earnings increased by $23.1 million as net
earnings exceeded dividends paid. Common stock decreased $17.1 million due
to the repurchase of approximately one million shares, partly offset by
issuances of shares under the Company's stock incentive plans. The
reduction in currency adjustment of $4.4 million resulted from the effect on
the Company's investments in subsidiaries and affiliates of decreases in the
value of European currencies versus the U.S. dollar, partly offset by the
strength in the Japanese Yen.
RESULTS OF OPERATIONS
39 WEEKS ENDED FEBRUARY 26, 1994
VS.
39 WEEKS ENDED FEBRUARY 27, 1993
In the first nine months of fiscal 1994, net earnings were $36.7
million, or $1.20 per share compared with $27.0 million, or $0.90 per share
in the first half of fiscal 1993. The current year includes a gain of $2.2
million or $0.07 per share from recalculation of deferred tax benefits
because of the enactment of tax legislation increasing the corporate income
tax rate, and gains of $4.4 million after taxes, or $0.14 per share, from
the sale of a portion of the Company's investments in TriQuint
Semiconductor, Inc and Planar Systems, Inc. The prior year includes the net
effect of two accounting changes which increased earnings by $3.3 million,
or $0.11 per share.
Net Sales were $940.1 million, or 1% below the prior year's total of
$949.3 million. Test and Measurement sales and Television Systems sales
declined, while Computer Graphics sales continued to show good growth
compared to the same period of the prior year.
Test and Measurement sales of $461.5 million were down 8% from the
prior year reflecting the impacts of recessionary economies in Europe and
Japan and weakness in some major industrial markets.
Computer Graphics sales increased 16% to $292.9 million, with strong
growth in both color printers and X terminals, partly offset by the
continuing decline in revenue from older graphics terminals and related
service.
Television Systems sales declined 6% to $185.6 million, with most of
the decline coming in television production equipment. Both television
production equipment and television test equipment sales were impacted by
the weak economies in Europe and Japan. Television production equipment
sales were particularly strong early in the prior year, reflecting high
initial shipments of the Model 3000 digital switcher which was introduced in
the spring of 1992.
7
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Sales to customers in the United States increased 2%, from $514.8
million to $526.1 million, representing 56% of total sales. International
sales of $413.9 million were down 5%, due to the weak economies mentioned
above.
Cost of sales increased as a percentage of net sales from 51.6% to
53.9%. The increase was caused by the geographic mix of sales, a reduction
in the historically higher margin on international sales, a continuing shift
in the mix of sales toward products with lower margins due to the use of
alternative distribution channels, and by impacts of a stronger Yen on
certain component costs.
Research and development expenses declined by 4% to $111.6 million as
the Company continues to focus its resources on its three core businesses.
R&D expense represented 11.9% of sales, down slightly from 12.2% in the
prior year.
Selling, general, and administrative expenses declined by 10% to $262.3
million resulting from infrastructure reductions, process improvements, the
increasing use of alternative distribution channels and the accrual of
severance payments in the prior year. S,G,&A expenses represented 27.9% of
sales, down from 30.6% in the prior year.
Other expenses declined $9.6 million due primarily to the gains on
sales of investments in TriQuint Semiconductor, Inc. and Planar Systems,
Inc. discussed above.
The Company recorded taxes on current results at the estimated annual
effective rate of 34%, but showed a gain of $2.2 million on recalculation of
deferred tax benefits in the first quarter of this year because of the
enactment of tax legislation increasing the corporate income tax rate. The
current year provision was primarily for United States taxes, while the
prior year provision was primarily for foreign taxes, reflecting the shift
in net earnings from foreign to United States sources.
Net earnings were 36% higher than the prior year, as lower sales and
gross margins were more than offset by lower R&D, S,G,&A and other
expenses.
13 WEEKS ENDED FEBRUARY 26, 1994
VS.
13 WEEKS ENDED FEBRUARY 27, 1993
In the third quarter, net earnings were $15.5 million, or $0.51 per
share compared with $9.1 million, or $0.30 per share in the prior year. The
current quarter included after tax gains of $2.9 million, or $0.10 per
share, from the sale of a portion of the Company's investments in TriQuint
Semiconductor, Inc. and Planar Systems, Inc.
Net Sales were $332.8 million, an increase of 7% over the prior year's
total of $311.2 million. Computer Graphics sales and Television Systems
sales increased, while Test and Measurement sales declined slightly,
compared to the third quarter of the prior year.
8
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Test and Measurement sales of $161.2 million were down 2% from the
prior year reflecting the impact of recessionary economies in Europe and
Japan and weakness in some major industrial markets. T&M sales include a
portion of the revenue from technology royalties discussed below.
Computer Graphics sales increased 27% to $108.7 million, with strong
growth in both color printers and X terminals, partly offset by the
continuing decline in revenue from older graphics terminals and related
service.
Television Systems sales increased 3% to $62.9 million, as an
improvement in television test equipment was partially offset by a decline
in television production equipment.
Sales to customers in the United States increased 7% to $177.6 million,
and represented 53% of total sales. International sales increased 6% to
$155.2 million with strong growth in Asia partly offset by weakness in
Europe.
Product orders were up 15% from the prior year's quarter. While the
Company's product backlog improved in the current quarter, it remains
relatively low. Consequently, the Company's future quarterly results are
dependent on new orders that can be shipped in the same quarter.
The Company realized royalty revenue from two technology transactions
in the quarter of $10.1 million, which is significantly higher than prior
quarters. The Company also experienced higher operating expenses related to
the unusually large number of new product introductions in the quarter, plus
higher results sharing expense. These factors together resulted in net pre-
tax operating income approximately $2 million higher than the prior year's
quarter.
Cost of sales increased as a percentage of net sales from 51.4% to
54.4%. The increase was caused by a continuing shift in the mix of sales
toward products with lower margins due to the use of alternative
distribution channels, by a reduction in the historically higher margin on
international sales, by the higher production costs related to new product
introductions discussed above, and by impacts of a stronger Yen on certain
component costs, partially offset by the positive margin effect of the
revenue from technology royalties.
Research and development expenses of $38.4 million were flat with the
same period of the prior year, but declined as a percentage of sales from
12.3% to 11.5%. R&D expenses were impacted by the high level of new product
introductions in the quarter.
Selling, general, and administrative expenses declined by 5% to $89.7
million resulting from infrastructure reductions, process improvements, the
increasing use of alternative distribution channels and the accrual of
severance payments in the prior year. S,G,&A expenses represented 27.0% of
sales, down from 30.4% in the prior year.
Other income of $0.7 million compared to other expense of $3.8 million
due primarily to the gain on sale of a portion of the Company's investments
in TriQuint Semiconductor, Inc. and Planar Systems, Inc. discussed above.
Income taxes increased from $4.7 million to $8.0 million, reflecting
the higher earnings before taxes.
9
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Net earnings were $6.3 million higher than the prior year due to higher
sales (substantially offset by lower margins), lower S,G,&A expenses and
the gains in other income.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) No reports on Form 8-K have been filed during the quarter
for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
(REGISTRANT) TEKTRONIX, INC.
BY (SIGNATURE) /s/Carl W. Neun
(NAME AND TITLE) Vice President and
Chief Financial Officer
(DATE) April 11, 1994
10
