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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 for the quarter ended August
30, 1997, 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 for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes ___X___ No______
AT SEPTEMBER 26, 1997 THERE WERE 33,759,757 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.)
<PAGE>
TEKTRONIX, INC. AND SUBSIDIARIES
- --------------------------------
INDEX
- -----
PAGE NO.
--------
Financial Statements:
Condensed Consolidated Balance Sheets - 2
August 30, 1997 and May 31, 1997
Condensed Consolidated Statements of Operations - 3
for the Quarter ended August 30, 1997
and the Quarter ended August 31, 1996
Condensed Consolidated Statements of Cash Flows - 4
for the Quarter ended August 30, 1997
and the Quarter ended August 31, 1996
Notes to Condensed Consolidated Financial Statements 5
Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
Part II. Other Information 9
Signatures 10
1
<PAGE>
TEKTRONIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
Aug. 30, May 31,
(In thousands) 1997 1997
- -------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 133,521 $142,726
Accounts receivable - net 274,146 305,832
Inventories 249,382 238,040
Other current assets 59,565 64,913
---------- ---------
Total current assets 716,614 751,511
Property, plant and equipment - net 349,998 343,130
Deferred tax assets 15,851 12,540
Other long-term assets 200,151 209,560
---------- ----------
Total assets $1,282,614 $1,316,741
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 6,312 $ 6,155
Accounts payable 154,554 181,366
Accrued compensation 68,685 90,946
Deferred revenue 26,332 25,622
---------- ----------
Total current liabilities 255,883 304,089
Long-term debt 150,923 151,579
Other long-term liabilities 86,696 89,790
Shareholders' equity:
Common stock 230,101 226,591
Retained earnings 495,277 473,582
Currency adjustment 33,722 34,447
Unrealized holding gains - net 30,012 36,663
---------- ----------
Total shareholders' equity 789,112 771,283
---------- ----------
Total liabilities and shareholders' equity $1,282,614 $1,316,741
========== ==========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
<PAGE>
TEKTRONIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Quarter ended
Aug. 30, Aug. 31,
(In thousands except for per share amounts) 1997 1996
- -------------------------------------------------------------------------------
Net sales $ 481,274 $ 440,115
Cost of sales 280,001 248,843
---------- ----------
Gross profit 201,273 191,272
Research and development expenses 46,215 46,447
Selling, general, and administrative
expenses 116,908 112,095
Equity in business ventures'
earnings 167 144
---------- ----------
Operating income 38,317 32,874
Other income - net 1,557 531
---------- ----------
Earnings before taxes 39,874 33,405
Income taxes 13,158 10,690
---------- ----------
Net earnings $ 26,716 $ 22,715
========== ==========
Earnings per share $ 0.80 $ 0.69
Dividends per share 0.15 0.15
Average shares outstanding 33,536 32,766
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
TEKTRONIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Quarter ended
Aug. 30, Aug. 31,
(In thousands) 1997 1996
- -------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 26,716 $ 22,715
Adjustments to reconcile net earnings to cash
provided by operating activities:
Depreciation expense 15,517 13,324
Accounts receivable 27,732 67,589
Inventories (13,630) (17,801)
Other current assets 370 16,131
Accounts payable (28,377) (27,158)
Accrued compensation (21,795) (20,883)
Other-net 3,761 (14,076)
---------- ----------
Net cash provided by activities 10,294 39,841
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment (27,829) (19,011)
Proceeds from sale of fixed assets 4,164 2,466
Proceeds from sale of investments 7,316 4,506
---------- ----------
Net cash used by investing activities (16,349) (12,039)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in short-term debt 76 (29,592)
Issuance of long-term debt -- 450
Repayment of long-term debt (656) --
Issuance of common stock 5,233 465
Repurchase of common stock (1,722) --
Dividends (5,021) (4,915)
---------- ----------
Net cash used by financing activities (2,090) (33,592)
Effect of exchange rate changes (1,060) 2,071
---------- ----------
Decrease in cash and cash equivalents (9,205) (3,719)
Cash and cash equivalents at beginning of year 142,726 36,644
---------- ----------
Cash and cash equivalents at end of quarter $ 133,521 $ 32,925
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
Income taxes paid (refunded)- net $ 8,984 $ (4,671)
Interest paid 6,030 7,302
NON-CASH INVESTING ACTIVITIES
Fair value adjustment to securities available-for-sale $ (11,280) $ (1,440)
Income tax effect related to fair value adjustment 4,629 576
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
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 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. The Company's fiscal year is the 52 or 53 weeks ending the last
Saturday in May. Fiscal year 1998 is 52 weeks and fiscal year 1997 was 53
weeks. The first quarter of 1998 was 13 weeks compared to 14 weeks in the
first quarter of 1997.
INVENTORIES
Inventories consisted of:
Aug 30, May 31,
(In thousands) 1997 1997
- -------------------------------------------------------------------------------
Materials and work in process $ 132,901 $ 134,743
Finished goods 116,481 103,297
---------- ----------
Inventories $ 249,382 $ 238,040
========== ==========
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of:
Aug 30, May 31,
(In thousands) 1997 1997
- -------------------------------------------------------------------------------
Land $ 5,912 $ 6,096
Buildings 187,809 199,396
Machinery and equipment 512,559 493,791
---------- ----------
706,280 699,283
Accumulated depreciation and amortization (356,282) (356,153)
---------- ----------
Property, plant and equipment - net $ 349,998 $ 343,130
========== ==========
5
<PAGE>
INCOME TAXES
The provision for income taxes consisted of:
Quarter ended
Aug. 30, Aug. 31,
(In thousands) 1997 1996
- -------------------------------------------------------------------------------
United States $ 9,211 $ 5,939
State 1,887 1,485
Foreign 2,060 3,266
---------- ----------
Income taxes $ 13,158 $ 10,690
========== ==========
The provision for income taxes was calculated at estimated annual effective
rates of 33% and 32%, respectively, for the quarters ended August 30, 1997,
and August 31, 1996.
COMMON STOCK SPLIT AND DIVIDEND INCREASE
On September 24, 1997, the Company's Board of Directors approved a three-
for-two stock split of the Company's common stock, to be effected in the
form of a 50% stock dividend, to holders of record on October 10, 1997.
The Board of Directors also approved a 20% increase in the quarterly cash
dividend to holders of record on October 10, 1997. The cash dividend rate
will be twelve cents on each post-split share. Distribution of the stock
dividend and the cash dividend will begin on October 31, 1997. Financial
information contained in this report has not been restated to reflect the
impact of the pending common stock split.
FUTURE ACCOUNTING CHANGES
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share." SFAS No. 128 requires all companies whose capital structures
include convertible securities and options to make a dual presentation of
basic and diluted earnings per share. The new standard becomes effective
beginning with the Company's third quarter ending on February 28, 1998.
The pro forma diluted earnings per share under SFAS No. 128 is $0.78 for
the quarter ended August 30, 1997 and $0.68 for the quarter ended
August 31, 1996, based upon average shares outstanding of 34.3 million
and 33.3 million, respectively.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes requirements for disclosure of
comprehensive income and becomes effective for the Company's fiscal year
ending May 1999. Reclassification of earlier financial statements for
comparative purposes is required.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS No. 131
establishes standards for disclosure about operating segments in annual
financial statements and selected information in interim financial reports.
It also establishes standards for related disclosures about products and
services, geographic areas, and major customers. This statement supersedes
SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise."
The new standard becomes effective for the Company's fiscal year ending May
1999, and requires that comparative information from earlier years be
restated to conform to the requirements of this standard.
6
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SUBSEQUENT EVENT
On September 2, 1997 the Company announced an agreement to purchase Siemens
Communications Test Equipment GmbH (SCTE), a wholly owned subsidiary of
Siemens based in Berlin, Germany, for approximately $46 million. The cash
transaction closed on September 30, 1997 and will be accounted for by the
purchase method of accounting in the second quarter. SCTE had revenues of
approximately $60 million in its last fiscal year. The Company will take a
one-time charge of $19 million in the second quarter to write off research
and development projects currently underway at SCTE and to account for
other integration expenses associated with the acquisition.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONs
Financial Condition
The Company's financial condition is strong. Cash flows from operating
activities and borrowing capacity from existing lines of credit are
expected to be sufficient to meet current and anticipated future needs. At
the end of the first quarter (August 30, 1997), the Company maintained bank
credit facilities totaling $307.9 million, of which $300.9 million was
unused. Unused facilities include $150.9 million in lines of credit and
$150.0 million under a revolving credit agreement from United States and
foreign banks.
The Company continued to experience significant improvements in
working capital. Compared to the first quarter of fiscal 1997, accounts
receivable improved from 17.7% to 14.2% of annualized sales and inventory
improved from 16.1% to 13.0% of annualized sales. These improvements
reduced accounts receivable and inventory required to support the business
by $127 million.
Current assets decreased by $34.9 million from the year end balance at
May 31, 1997, due primarily to lower accounts receivable as a result of the
normal lower sales in the first quarter compared to the fourth quarter of
last year.
Current liabilities declined by $48.2 million, or 16%. Accounts
payable and accrued compensation declined due primarily to timing,
including the payment of year-end accruals for incentives and commissions.
Shareholders' equity increased by $17.8 million due primarily to
earnings net of dividends.
Results of Operations
13 WEEKS ENDED AUGUST 30, 1997
vs.
14 WEEKS ENDED AUGUST 31, 1996
In the first quarter of fiscal 1998, net earnings increased 18% to $26.7
million, or $0.80 per share compared with $22.7 million, or $0.69 per share
in the first quarter of fiscal 1997. Net sales were $481.3 million, up 9%
from $440.1 million in the prior year.
7
<PAGE>
Measurement Business sales of $227.7 million were up 10% from the
prior year reflecting growth across all major product areas, including
digital signal test, logic analyzers, television and telecommunications
test products. Product orders were $209.1 million, an increase of 13%
over product orders of $184.3 million in the first quarter of 1997. Sales
and orders were particularly strong in the United States and Japan.
Color Printing and Imaging sales increased 26% from $124.0 million to
$155.7 million, with strong growth in the office market around the world.
Product orders increased 33% from $112.2 million to $148.9 million. Early
in the current quarter, the Company introduced the Phaser 560 color laser
printer, which saw strong orders and sales in the period.
Video and Networking sales were $97.9 million for the first quarter of
1998, down 10% from $109.3 million in the first quarter of 1997. The
decline in sales was in the network displays business, as the current
results compare with a very strong first quarter of the prior year for that
business. Sales for the video content production business were up
modestly, led by the PDR200 video file server. Product orders were $99.2
million, a decline of 15% over 1997 product orders of $117.2 million.
Video and Networking operated at a loss for the quarter. The Company is
accelerating steps to return the business to profitable growth and expects
to take a charge of approximately $45 million to $55 million in the second
quarter to account for these actions, which include streamlining its
product offerings and reducing the unit's cost structure to increase
operational efficiency.
Sales to customers in the United States increased by 4% from $243.8
million to $252.9 million, representing 53% of total sales. International
sales of $228.4 million were up 16% from $196.3 million in the prior year,
with a rebound in Europe and strong growth in all other regions. Product
orders from customers in the United States of $240.0 million were up 6%
from last year's first quarter while international product orders of $217.2
million rose 16%.
Cost of sales, as a percentage of net sales, increased from 56.5% to
58.2% due primarily to lower margins resulting from competitive pricing on
video production products and the complexity of product offerings in Video
and Networking. Also impacting margins was the strong launch of the Phaser
560 color printer, causing a heavier mix of product sales versus supplies,
which provide higher margins. Research and development and selling,
general and administrative expenses decreased as a percentage of sales,
from 10.6% to 9.6% and from 25.5% to 24.3%, respectively.
Operating income as a percentage of sales improved from 7.5% in the
first quarter of 1997 to 8.0% in the current quarter due to lower operating
expenses partly offset by higher cost of sales.
Income taxes increased from $10.7 million to $13.2 million due to
higher earnings before taxes and to the higher estimated effective annual
tax rate of 33% for the current year, compared to 32% for all of last year.
Net earnings of $26.7 million compared to $22.7 million in the prior
year's quarter, an increase of 18%, primarily due to the higher operating
income.
On September 2, 1997 the Company announced an agreement to purchase
Siemens Communications Test Equipment GmbH (SCTE), a wholly-owned
subsidiary of Siemens based in Berlin, Germany. The cash transaction
closed on September 30, 1997. SCTE had revenues of approximately $60 million in
its last fiscal year. The Company will take a one-time charge of $19
million in the second quarter of fiscal 1998 to write off research and
development projects currently underway at SCTE and to account for other
integration expenses associated with the acquisition.
Forward Looking Statements
Statements and information included in this Form 10-Q that relate to the
Company's goals, strategies and expectations as to future results, events
and expectations are based on the Company's current expectations. They
constitute forward looking statements subject to a number of risk factors
that could cause actual results to differ materially from those currently
expected or desired. From time to time, information provided by the
Company,
8
<PAGE>
or statements made by its employees, may contain other forward looking state-
ments. As with many high technology companies, risk factors that could
cause the Company's actual results or activities to differ materially from
these forward looking statements include but are not limited to:
world-wide economic and business conditions in the electronics industry
including the effect on purchases by the Company's customers; competitive
factors, including pricing pressures, technological developments and
products offered by competitors; changes in product and sales mix, and
the related effects on gross margins; the Company's ability to deliver a
timely flow of competitive new products and market acceptance of these
products; the availability of parts and supplies from third party suppliers
on a timely basis and at reasonable prices; inventory risks due to changes
in market demand or the Company's business strategies; changes in effective
tax rates; customer demand; currency fluctuations; the fact that a sub-
stantial portion of the Company's sales are generated from orders received
during the quarter, making prediction of quarterly revenues and earnings
difficult; and other risk factors listed from time to time in the Company's
reports filed with the Securities and Exchange Commission and press releases.
Additional risk factors specific to the Company's current plans and
expectations that could cause the Company's actual results or activities to
differ materially from those stated include; the significant operational issues
the Company faces in executing its strategy in Video and Networking; changes
in the regulatory environment affecting the transition to high-definition
television within the time frame anticipated by the Company; the timely
introduction of new products scheduled during the Company's fiscal year,
which could be affected by engineering, or other development program
slippages, the ability to ramp up production or to develop effective
sales channels; and the demand for and acceptance of new and other Company
products by the Company's customers, which could be affected by the current
uncertainties in economic conditions around the world and by activities of
the Company's competitors.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
At the Company's annual meeting of shareholders on September 25, 1997,
the shareholders voted on the election of three directors to the Company's
board of directors. Gerry B. Cameron, Jerome J. Meyer, and William D.
Walker were elected to serve a three-year term ending at the Year 2000
annual meeting of shareholders.
The voting for each director was as follows: 29,054,123 shares voted
for Gerry B. Cameron, and 152,443 withheld; 29,047,710 voted for Jerome J.
Meyer, and 158,856 withheld; and 29,056,478 voted for William D. Walker,
and 150,088 withheld.
The term of office of the Company's other directors continued after
the 1997 annual meeting of shareholders, as follows: A.M. Gleason, Wayland
R. Hicks, and Merrill A. McPeak until the 1998 annual meeting of
shareholders; and Pauline Lo Alker, A. Gary Ames, and Paul C. Ely, Jr.
until the 1999 annual meeting of shareholders.
9
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(27) (i) Financial Data Schedule.
(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.
October 10, 1997 TEKTRONIX, INC.
By /S/ CARL W. NEUN
---------------------------
Carl W. Neun
Senior Vice President and
Chief Financial Officer
10
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> AUG-30-1997
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<RECEIVABLES> 277,168
<ALLOWANCES> 3,022
<INVENTORY> 249,382
<CURRENT-ASSETS> 716,614
<PP&E> 706,280
<DEPRECIATION> 356,282
<TOTAL-ASSETS> 1,282,614
<CURRENT-LIABILITIES> 255,883
<BONDS> 150,923
<COMMON> 230,101
0
0
<OTHER-SE> 559,011
<TOTAL-LIABILITY-AND-EQUITY> 1,282,614
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<TOTAL-REVENUES> 481,274
<CGS> 0
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<INCOME-PRETAX> 39,874
<INCOME-TAX> 13,158
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</TABLE>
