==============================================================================
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 March
1, 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 MARCH 29, 1997 THERE WERE 33,276,160 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
March 1, 1997 and May 25, 1996
Condensed Consolidated Statements of Operations - 3
for the Quarter ended March 1, 1997
and the Quarter ended February 24, 1996
for the Three quarters ended March 1, 1997
and the Three quarters ended February 24, 1996
Condensed Consolidated Statements of Cash Flows - 4
for the Three quarters ended March 1, 1997
and the Three quarters ended February 24, 1996
Notes to Condensed Consolidated Financial Statements 5
Management's Discussion and Analysis of Financial 6
Condition and Results of Operations
Part II. Other Information 9
Signatures 10
<PAGE>
<TABLE>
<CAPTION>
TEKTRONIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
Mar. 1, May 25,
(In thousands) 1997 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 78,747 $ 36,644
Accounts receivable - net 274,252 375,309
Inventories 256,729 264,624
Other current assets 55,628 77,003
---------- ----------
Total current assets 665,356 753,580
Property, plant, and equipment 683,510 676,543
Accumulated depreciation and amortization (359,034) (368,980)
---------- ----------
Property, plant and equipment - net 324,476 307,563
Property held for sale 13,566 18,903
Deferred tax assets 23,067 28,247
Other long-term assets 209,217 220,203
---------- ----------
Total assets $1,235,682 $1,328,496
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 6,985 $ 44,645
Accounts payable 168,939 178,353
Accrued compensation 71,191 120,044
Deferred revenue 7,669 22,295
---------- ----------
Total current liabilities 254,784 365,337
Long-term debt 151,475 201,955
Other long-term liabilities 90,012 85,882
Shareholders' equity:
Common stock 215,700 204,370
Retained earnings 441,743 378,606
Currency adjustment 38,472 52,069
Unrealized holding gains - net 43,496 40,277
---------- ----------
Total shareholders' equity 739,411 675,322
---------- ----------
Total liabilities and shareholders' equity $1,235,682 $1,328,496
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
TEKTRONIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Quarter ended Three quarters ended
Mar. 1, Feb. 24, Mar. 1, Feb. 24,
(In thousands except for per share amounts) 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 478,886 $ 433,500 $1,396,167 $1,278,120
Cost of sales 273,653 253,665 799,900 741,673
---------- ---------- ---------- ----------
Gross profit 205,233 179,835 596,267 536,447
Research and development expenses 45,621 40,045 137,684 119,096
Selling, general, and administrative
expenses 117,496 109,400 345,535 316,941
Equity in business ventures'
earnings (loss) (861) 1,061 (467) 2,154
---------- ---------- ---------- ----------
Operating income 41,255 31,451 112,581 102,564
Other income (expense) - net 1,042 617 2,026 (524)
---------- ---------- ---------- ----------
Earnings before taxes 42,297 32,068 114,607 102,040
Income taxes 13,535 9,620 36,674 30,612
---------- --------- ---------- ----------
Net earnings $ 28,762 $ 22,448 $ 77,933 $ 71,428
========== ========== ========== ==========
Earnings per share $ 0.87 $ 0.67 $ 2.37 $ 2.14
Dividends per share 0.15 0.15 0.45 0.45
Average shares outstanding 33,077 33,381 32,908 33,353
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
TEKTRONIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three quarters ended
Mar. 1, Feb. 24,
(In thousands) 1997 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 77,933 $ 71,428
Adjustments to reconcile net earnings to cash provided
by operating activities:
Depreciation expense 41,768 34,939
Gains on sale of assets (15,100) (13,326)
Deferred taxes 3,585 12,711
Accounts receivable 98,032 (29,269)
Inventories 8,152 (28,412)
Other current assets 24,562 26,932
Accounts payable (12,032) (17,106)
Accrued compensation (48,305) (34,778)
Other-net (2,070) (4,623)
---------- ----------
Net cash provided by operating activities 176,525 18,496
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (66,419) (75,006)
Proceeds from sale of fixed assets 1,845 13,072
Proceeds from sale of investments 22,519 5,232
---------- ----------
Net cash used by investing activities (42,055) (56,702)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in short-term debt (37,622) 5,327
Issuance of long-term debt 358 50,236
Repayment of long-term debt (50,708) (2,459)
Issuance of common stock 11,330 11,894
Repurchase of common stock -- (12,469)
Dividends (14,796) (15,044)
---------- ----------
Net cash provided (used) by financing activities (91,438) 37,485
Effect of exchange rate changes (929) (2,136)
---------- ----------
Increase (decrease) in cash and cash equivalents 42,103 (2,857)
Cash and cash equivalents at beginning of year 36,644 31,761
---------- ----------
Cash and cash equivalents at end of quarter $ 78,747 $ 28,904
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS:
Income taxes paid - net $ 7,455 $ 22,533
Interest paid 14,408 14,647
NON-CASH INVESTING ACTIVITIES:
Fair value adjustment to securities
available-for-sale $ 3,314 $ 30,608
Income tax effect related to fair value adjustment (95) (12,243)
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
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 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 1997 is 53 weeks. The first three quarters
of 1997 were 40 weeks compared to 39 weeks in the first three quarters of
1996.
ACCOUNTS RECEIVABLE
On September 10, 1996, the Company entered into a five year revolving
Receivable Purchase Agreement with Citibank NA to sell, without recourse,
an undivided interest of up to $50.0 million in a defined pool of trade
accounts receivable. The amount of receivables sold under this agreement
is reflected as a reduction of accounts receivable in the balance sheet at
March 1, 1997, and as operating cash flows in the statements of cash flows
for the three quarters ended March 1, 1997.
INVENTORIES
Inventories consisted of:
<TABLE>
<CAPTION>
Mar.1, May 25,
(In thousands) 1997 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Materials and work in process $ 141,656 $ 141,798
Finished goods 115,073 122,826
---------- ----------
Inventories $ 256,729 $ 264,624
========== ==========
</TABLE>
INCOME TAXES
The provision for income taxes consisted of:
<TABLE>
<CAPTION>
Quarter ended Three quarters ended
Mar. 1, Feb. 24, Mar. 1, Feb. 24,
(In thousands) 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
United States $ 8,000 $ 5,912 $ 21,442 $ 14,001
State 1,999 1,471 5,360 3,500
Foreign 3,536 2,237 9,872 13,111
---------- ---------- ---------- ----------
Income taxes $ 13,535 $ 9,620 $ 36,674 $ 30,612
========== ========== ========== ==========
</TABLE>
The provision for income taxes was calculated at estimated annual
effective rates of 32% and 30%, respectively, for the three quarters ended
March 1, 1997, and February 24, 1996.
5
<PAGE>
EARNINGS PER SHARE
In February, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per
Share. SFAS 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 for the interim statements issued
after December 15, 1997. The effect on earnings per share for all periods
reported is immaterial.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Condition
The Company's 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 (March 1, 1997), the Company maintained bank credit
facilities totaling $303.4 million, of which $295.8 million was unused.
The unused facilities include $145.8 million in lines of credit and $150.0
million under revolving credit agreements from United States and foreign
banks.
Current assets decreased by $88.2 million, or 12%, from the year end
balance at May 25, 1996, due primarily to reduced accounts receivable
resulting from improved sales terms and collections and the $50 million
securitization of receivables, partly offset by the increase in cash
generated from operations during the year.
Current liabilities decreased by $110.6 million, or 30%. Short-term
debt was reduced by $37.7 million due to strong operating cash flows.
Accrued compensation decreased $48.9 million due primarily to the payment
of pension liabilities of $39 million and lower nine month accruals for
incentives and commissions than last year's full year accruals.
Shareholders' equity increased by $64.1 million due primarily to
earnings net of dividends.
6
<PAGE>
Results of Operations
THREE QUARTERS ENDED MARCH 1, 1997
vs.
THREE QUARTERS ENDED FEBRUARY 24, 1996
In the first nine months of fiscal 1997, net earnings were $77.9
million, or $2.37 per share compared with $71.4 million, or $2.14 per share
in the first nine months of fiscal 1996. Net sales were $1,396.2 million,
an increase of 9% from the prior year's total of $1,278.1 million.
Measurement Business Division sales of $620.1 million increased 5%
from the prior year, with growth in telecommunications test products and
handheld tools. Strong sales to customers in the United States and Pacific
regions were partially offset by lower sales in Japan, as discussed below.
Product orders increased 2% from $556.0 million to $565.9 million.
Color Printing and Imaging Division sales increased 14% to $449.0
million and product orders increased 16% from $367.0 million to $427.1
million. The increase was due to the successful launch of the Phaser* 600
during the third quarter which strengthened sales into the specialty
printer markets and the continuation of strong sales of the Phaser 350
color solid ink printer and the Phaser 550 color laser printer into the
office market. *(Phaser is a registered trademark of Tektronix, Inc.).
Sales and orders were strong in all geographies.
Video and Networking Division sales increased 11% to $327.1 million,
led by strong sales of the Profile* video disk recorder and netstations.
*(Profile is a registered trademark of Tektronix, Inc.). Product orders
rose 13% from $279.6 million to $315.0 million. Sales and orders were strong
in all geographies.
Sales to customers in the United States increased 16% from $635.0
million to $736.1 million, and represented 53% of total sales.
International sales of $660.1 million were up 3%, with strong growth in
the Pacific region offset by weakness in Europe and Japan. Product orders
from customers in the United States of $668.6 million were up 15% from last
year while international product orders of $639.4 million were 3% higher as
strong orders from the Pacific region were offset by a decline in orders
from Sony/Tektronix, the Company's joint venture in Japan, due to a change
in its inventory stocking policies in the current year.
Cost of sales decreased as a percentage of net sales from 58.0% to
57.3% due to an improved mix of high margin supplies sales in the Color
Printing and Imaging Division and lower costs in the Video and Networking
Division. Research and development expenses increased as a percentage of
sales, from 9.3% to 9.9%, due to the high level of new product development.
Selling, general and administrative expenses decreased slightly as a
percentage of sales from 24.8% to 24.7%.
Operating income as a percentage of sales improved from 8.0% in 1996
to 8.1% due to the improved gross margins, partially offset by the higher
research and development spending. While making significant progress over
the prior year, the Video and Networking business has been operating at a
loss through the first three quarters of the current year. The Company
expects the Video and Networking Division to be at or near breakeven in the
fourth quarter.
The Company reported other income of $2.0 million compared to other
expense of $0.5 million last year due primarily to higher gains on sales of
stock in other companies.
The provision for income taxes increased from $30.6 million to $36.7
million due to increased earnings before taxes and a higher estimated
effective annual tax rate of 32% for the current year, compared to 30% last
year.
7
<PAGE>
QUARTER ENDED MARCH 1, 1997
vs.
QUARTER ENDED FEBRUARY 24, 1996
In the third quarter of fiscal 1997, net earnings were $28.8 million,
or $0.87 per share compared with $22.4 million, or $0.67 per share in the
third quarter of fiscal 1996. Net sales were $478.9 million, up 10% from
$433.5 million in the prior year. Product orders increased 15%, from
$389.5 million to $449.4 million.
Measurement Business sales of $210.0 million were up 2% from the prior
year, as growth was constrained by parts shortages. Product orders were
$189.2 million, an increase of 9% from $172.8 million in the third quarter
of 1996, reflecting strong initial demand for the new TLA 700 logic
analyzer introduced in January, 1997, as well as strong growth in tools and
telecommunications test products.
Color Printing and Imaging sales increased 28% to $167.2 million and
product orders rose 30% to $161.9 million, due to the excellent performance
of the Company's Phaser 350 and Phaser 550 office color printers, and
strong sales of the Phaser 600, which began shipping in the quarter, into
the graphic arts market.
Video and Networking sales grew 5% to $101.7 million, which were lower
than the Company's expectations as the introduction of two key products was
delayed to the fourth quarter. Product orders were $98.3 million, an
increase of 7% over 1996 product orders of $92.0 million.
Sales to customers in the United States increased by 16% from $203.9
million to $235.9 million, representing 49% of total sales. International
sales of $243.0 million were up 6% from $229.6 million in the prior year,
with significant growth in the Pacific and modest improvement in Europe
partly offset by weakness in Japan. The lower growth of international sales
was due in part to the strong U.S. dollar. Product orders from customers
in the United States of $227.0 million were up 22% from last year's third
quarter while international product orders of $222.4 million were 9% ahead
of last year.
Cost of sales, as a percentage of net sales, decreased from 58.5% to
57.1% due to the demand for high margin printer supplies and reduced
production costs at the Video and Networking Division. Research and
development expenses increased slightly as a percentage of sales. Selling,
general and administrative expenses declined as a percentage of sales, from
25.2% to 24.5%, due to the higher sales level in the current quarter.
Operating income as a percentage of sales improved from 7.3% in the
third quarter of 1996 to 8.6% in the current quarter due to the improved
gross margins and the decline in operating expenses as a percentage of
sales.
Income taxes increased from $9.6 million to $13.5 million due to the
higher earnings before taxes and the higher estimated effective annual tax
rate of 32% for the current year, compared to 30% for all of last year.
8
<PAGE>
Forward-looking Statements
Information provided by the Company in this Form 10-Q regarding the
Video and Networking Division, or statements made by the Company's
employees, may contain forward-looking statements. As with many high
technology companies, 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: general economic conditions 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, including an increase in indirect and
systems sales by the Company 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 substantial 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 organizational
and operational challenges that could adversely affect the Company's
continuing integration and transformation of its Video and Networking
business; the Company's ability to effectively manage its growing systems
integration business, particularly the large scale contracts in the Video
and Networking Division; parts availability in the Measurement Business;
the ability to timely ship and to ramp up production for recently
introduced products, which could be affected by engineering, development
program slippages or parts availability; and demand for and acceptance of
the new products 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 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(27) (i) Financial Data Schedule.
(b) A report on Form 8-K was filed during the quarter for
which this report is filed. The report was dated December 11,
1996, filed as of December 13, 1996, and covered items 5 and 7.
A Consolidated Statement of Operations for the 12 months ended
August 31, 1996 was filed as Exhibit 1 to this report.
9
<PAGE>
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.
April 10, 1997 TEKTRONIX, INC.
By /S/ Carl W. Neun
Carl W. Neun
Senior Vice President and
Chief Financial Officer
10
<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> 9-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> MAR-01-1997
<CASH> 78,747
<SECURITIES> 0
<RECEIVABLES> 279,735
<ALLOWANCES> 5,483
<INVENTORY> 256,729
<CURRENT-ASSETS> 665,356
<PP&E> 683,510
<DEPRECIATION> 359,034
<TOTAL-ASSETS> 1,235,682
<CURRENT-LIABILITIES> 254,784
<BONDS> 151,475
<COMMON> 215,700
0
0
<OTHER-SE> 523,711
<TOTAL-LIABILITY-AND-EQUITY> 1,235,682
<SALES> 0
<TOTAL-REVENUES> 1,396,167
<CGS> 0
<TOTAL-COSTS> 799,900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,114
<INCOME-PRETAX> 114,607
<INCOME-TAX> 36,674
<INCOME-CONTINUING> 77,933
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 77,933
<EPS-PRIMARY> 2.37
<EPS-DILUTED> 2.37
</TABLE>
