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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended May 31, 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 AVENUE
WILSONVILLE, OREGON 97070
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code:
(503) 627-7111
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ------------------------
Common Shares, New York Stock Exchange
without par value Pacific Stock Exchange
Series A No Par Preferred New York Stock Exchange
Shares Purchase Rights Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
/X/
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant was approximately $2,056,125,318 at August 4, 1997.
At August 4, 1997 there were 33,616,112 Common Shares of the Registrant
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
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<CAPTION>
DOCUMENT PART OF 10-K INTO WHICH INCORPORATED
-------- ------------------------------------
<S> <C>
Registrant's Proxy Statement Part III
dated August 20, 1997
1997 Annual Report to Shareholders Parts I, II and IV
</TABLE>
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PART I
ITEM 1. BUSINESS.
Tektronix is an Oregon corporation organized in 1946. Its principal
executive offices are located at 26600 S.W. Parkway Avenue, Wilsonville, Oregon
97070, approximately 18 miles south of Portland. Its telephone number is (503)
627-7111. References herein to "Tektronix" or the "Company" are to Tektronix,
Inc. and its wholly-owned subsidiaries unless the context indicates otherwise.
Tektronix' products cover a wide range of electronic equipment.
Measurement business products include general purpose test instruments, such as
digital and analog oscilloscopes, logic analyzers, digital multimeters, VXI
card-modular products, and probes; RF and wireless test instruments, such as
spectrum analyzers, communication test sets and high frequency signal sources;
telecommunications instruments, such as optical time domain reflectometers
(OTDRs), cable testers and communications test sets; and television test
instruments, such as audio and video measurement sets, waveform monitors,
vectorscopes, signal generators, and RF/cable measurement products. Color
printing and imaging products include color printers, ink and related products
and supplies. Video and networking products include studio production equipment,
signal processing and distribution equipment, transmission systems, video
editing systems, video disk recorders, network computers (X terminals) and
related products.
PRODUCTS
The table below sets forth the contribution to total net sales of the
Company's product groupings for the last three fiscal years (in thousands of
dollars).
<TABLE>
<CAPTION>
Measurement Color Printing Video and
Business and Imaging Networking Other
Products Products Products Products (1)
---------------- ------------------ ------------------ --------------------
Amount Percent Amount Percent Amount Percent Amount Percent
---------------- ------------------ ------------------ --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $731,061 48.8% $454,961 30.4% $303,213 20.2% $ 8,727 0.6%
1996 $812,250 45.9% $561,642 31.8% $394,966 22.3% $ - 0.0%
1997 $852,827 44.0% $638,456 32.9% $448,799 23.1% $ - 0.0%
</TABLE>
(1) The Other Products grouping includes the historic net sales to third
parties by the non-strategic components and other business operations that the
Company divested in 1995.
MEASUREMENT BUSINESS PRODUCTS
Because of their wide range of capabilities, measurement business products
are used in a variety of applications, including research, design, testing,
installation, manufacturing and service in the computer, commercial aerospace,
military, process control, telecommunications, television and automotive
industries.
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Tektronix pioneered the development of high precision oscilloscopes over 50
years ago, and the oscilloscope is the Company's primary measurement product.
Oscilloscopes are used by engineers and technicians when an electrical signal
needs to be viewed, measured, tested or calibrated. Oscilloscopes are used
extensively in the computer, communications, aerospace and other industries for
design, manufacturing and maintenance. In addition to electrical signals,
oscilloscopes can be adapted to measure mechanical motion (vibration), sound,
light, heat, pressure, strain and velocity.
Oscilloscopes produce graphic representations of electrical signals on a
cathode ray tube or other display device. Normally, the display shows the signal
as a graph of its amplitude over a certain period of time, which may range from
minutes to less than a billionth of a second. Oscilloscopes provide a convenient
way to visually monitor and interpret analog electrical fluctuations, mechanical
motion and sound.
The development of the microprocessor and associated growth in
microprocessor-based devices stimulated both the existing analog markets and
new digital markets. The microprocessor made possible significant
improvements in oscilloscope design and performance. Many of the
oscilloscopes and other measurement products manufactured by Tektronix
feature digital storage and conversion functions, programmable operations,
the ability to work in conjunction with personal computers and workstations
and combinations of these capabilities. Trends toward smaller
microelectronic devices have opened new segments for specialized measurement
equipment, such as connectors, probes, adapters, and cameras and plotters to
record displayed wave forms.
Tektronix has designed a substantial portion of its oscilloscope product
line to provide a consistent "architecture" across products and to enhance ease
of use. Because the Company manufactures oscilloscopes in a wide range of
configurations, bandwidths and other performance characteristics and in sizes
ranging from hand-held to large laboratory units, this design provides customers
with reduced learning time and higher productivity. The design also reduces the
time required by the Company to develop new products because many essential user
interface aspects have been standardized. Some elements of this design also
have been patented and provide the Company with certain competitive advantages.
The Company also offers modular instruments delivered on printed circuit
cards that can be mixed and matched by customers and plugged directly into the
backplane of industry-standard VXI-based card cages. These are controlled by
personal computers or workstations to form complete instrument systems tailored
to customers' particular requirements. A number of measurement products are now
available in the VXI standard, which products are used primarily in
manufacturing applications. Tektronix has been instrumental in the development
of VXI-based hardware and software industry standards.
Measurement business products also include video and audio test products.
Video and audio test products include vectorscopes, waveform monitors, signal
generators, automated test equipment, demodulators, aural modulation monitors
and synchronizers which are used primarily by the television industry to test
and display the quality of video and audio signals. The resolution of images
and the fidelity of sounds, as well as the stability of the signals that carry
them, are essential to program quality. Tektronix' video and audio test
products excel at the many forms of test and measurement vital to creating and
maintaining signals of the highest quality. With the transition to digital
television and video compression, new products include an MPEG based signal
generator and analyzer, and digital television test products.
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Market changes are driving the development of new categories of products
from Tektronix. The proliferation of electronic technology requires technicians
and field engineers to use smart electronic tools for servicing, maintaining and
troubleshooting problems in electrical equipment. Tektronix' broad line of
hand-held instruments, sold through distributors, are smart, rugged products
designed specifically to address these needs.
Tektronix offers a full range of sophisticated, easy-to-use handheld
instruments, including digital multimeters and the award-winning TekScope-TM-, a
handheld oscilloscope/digital multimeter combination. Tektronix' handheld
instruments range in suggested retail price from below $100 up to about $3,400.
The Company also makes benchtop basic instruments. Applications include
education, light manufacturing, electronic troubleshooting and basic electronic
design.
Logic analyzers are a principal tool for electronic designers, engineers
and technicians in testing and trouble-shooting computers, computer
peripheral devices and digital electronic systems and instruments. Logic
analyzers capture, display and examine streams of data coded as binary digits
(bits), which are transmitted simultaneously over many channels. The Company
offers several lines of logic analyzers, including the 3000 Series, a
standalone, mid-range analyzer targeted at medium sized designs, the newer
TLA 500 Series, a high performance, mid-priced analyzer optimized for
embedded software debug, the DAS-Registered Trademark- Digital Analysis
System, a broad application logic analyzer that combines logic analysis and
pattern generation by using card modular plug-in units to permit a range of
performance in one system, and the new TLA 700 series, which incorporates
Microsoft's Windows -Registered Trademark- operating system, which has a
novel high speed front-end and is designed specifically for engineers that
design electronic products. DAS systems are also used by software engineers
in the development and optimization of microprocessor-based designs.
Spectrum analyzers are used in communications and other industries to
display and measure signal amplitude versus frequency rather than amplitude
versus time (the latter being what an oscilloscope displays). It is an
essential tool used to design, check and adjust communications transmitting and
receiving equipment.
Products designed for the telecommunications industry play an increasingly
important role in the Company's measurement business portfolio. Tektronix is a
leading supplier of a broad range of test solutions for emerging networks,
designed for ensuring integrity and optimizing performance of networks, and
verifying design and assuring quality of communications equipment. Cable testers
and fiber optic testers use time-domain-reflectometry techniques to locate
faults in metallic and fiber optic cables. Essentially, these instruments send
signals from one end of a cable and then measure the reflection time of the
signals to determine the location of the fault. Cable testers and fiber optic
testers are widely used in the telecommunication and cable television
industries. The Company also provides RF test instruments for the cable
television market, and has developed a series of products for SDH or SONET
transmission testing in the telecommunications industry. The Company's 1995
acquisition of Microwave Logic, Inc., strengthens the Company's offerings in
this product area, as well as in the area of ATM asynchronous transfer mode
products. Tektronix also sells and supports German manufacturer Rohde & Schwarz'
wireless communications and TV products in the United States and Canada,
including the first measurement solutions for Personal Communications Services
(PCS), mobile
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phones and base stations available to North American manufacturers. Rohde &
Schwarz also works with Tektronix to facilitate distribution of Tektronix'
measurement products in Russia, the Middle East and Eastern European countries.
Tektronix' distributorship arrangement with Advantest, the Japanese
instruments manufacturer, expands the Company's offering within North America
and Mexico, adding more than 100 solutions to the communications test product
portfolio.
Other measurement business products include digitizers, signal sources,
curve tracers, wireless and modular lines of general purpose test instruments.
COLOR PRINTING AND IMAGING PRODUCTS
Tektronix' color printing and imaging products include color printers and
related products and supplies. Color printers produce full color hard copies of
images produced by personal computers, workstations and terminals. The Company's
Phaser-Registered Trademark- brand printers are compatible with the
PostScript-Registered Trademark- industry standard page description language,
which specifies how an image is transferred to hard copy. By adopting the
Postscript standard, color printers can be used in conjunction with a wide range
of third-party graphics software. Tektronix produces Phaser color printers using
thermal wax, liquid ink jet, dye sublimation and laser technologies. In
addition, Tektronix has developed a proprietary printing technology that uses
sticks of solid ink, of the Company's own formulation, that are melted and then
jetted onto the paper. This technology produces vivid and stable images, allows
printing on plain rather than coated paper, and can be applied to a wide range
of sizes and gauges of paper. Tektronix' printers are controlled by software
designed and implemented by the Company.
The use of color in computing and printing has been stimulated by
enhancements in the underlying microprocessor technology of personal computers
and workstations, by increasingly larger system and peripheral storage
capabilities, and by enhancements in computer display capability. As personal
computers increasingly become capable of displaying complex, colorful images,
there has been an accompanying growth in demand for printers that can print such
images in color.
Tektronix has been manufacturing and selling color printers for over twelve
years. Early users were graphics artists, engineers and scientists. In recent
years, workgroup office users have also become significant users of the
Company's color printers.
In September of 1996, the Company introduced its Phaser 350 printer, and in
July of 1997, its Phaser 560 printer. These are improved, follow-on products
to the Phaser 340 introduced in 1995, and the Phaser 550 introduced in January
of 1996. The Phaser 350 is a solid-ink color printer combining laser-class
speed, low cost per page, and high quality output. The Phaser 560 is a
high-performance color laser printer. Both are intended to broaden the appeal
of color for the average business user and help move color into the office
printing environment.
In November of 1996, the Company introduced its Phaser 600 printer, and in
September of 1996, the 300x, expanding the Company's offering of high-quality
output color printers for the specialty graphics and office markets. The Phaser
600 is a new solid-ink color printer that prints vivid, saturated color on any
paper up to 36 inches wide. The wide-format color printer targets two
fast-expanding markets for large color prints: in-house departments (including
design departments within Fortune 1000 companies, government, and advertising
agencies) and "pay for print" businesses (including service bureaus,
reprographic shops, color photo labs, and quick-print
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shops). In January of 1996, the Company introduced the Phaser 450 printer,
an improved follow-on product to the Phaser 440. This printer produces
photographic quality color prints using dye sublimation technology, and
is also targeted to the specialty printing market.
Also included in color printing and imaging products are supplies for use
with the Company's color printers, including inks, toner, transfer ribbons,
maintenance kits and media (paper and transparencies). These supplies are a
very significant source of ongoing color printing and imaging revenue and
profit. The Company also markets a scanner accessory that enables a color
printer to function as a color copier.
VIDEO AND NETWORKING PRODUCTS
As television continues to move to digital, non-tape based technologies
while expanding its offering content and distribution, markets have emerged for
products capable of supporting development of content through the integration of
computer applications. These trends, coupled with the increasing use of cable
and satellite to distribute content, are expanding the market for Tektronix'
video products. These trends may result in increased demand for lower cost
production products based on industry standard platforms and for systems that
support the development and distribution of new forms of content.
Most of the Company's video products are produced at its facility in Grass
Valley, California. Grass Valley-TM- products are used by the television
industry for program production and distribution. Products include studio
production equipment, signal processing and distribution equipment and
transmission systems. Studio production equipment is used in the creative
process of television program production and assembly. Production equipment
products include production switchers, special effects devices and editing
controllers. Production switchers allow an operator to select signals from
various sources, such as cameras, video tape recorders and network or remote
transmissions, and to combine these signals into the continuous program seen by
the viewing audience. Signal processing and distribution equipment is used in
the process of moving signals within a television production facility or between
facilities. Such equipment includes routing switchers, amplifiers, timing
systems and signal conversion devices. Transmission systems are used in the
process of transporting signals between facilities. Transmission system
products include fiber optic video transmitter/receiver systems, digital video
coders/decoders, cross-connect switches and interactive conferencing systems
including distance learning systems. Customers for Grass Valley products
include the television networks, local television stations, post-production
houses (which assemble commercials and television programs from recorded
footage), telephone and cable companies and corporate and educational users.
Tektronix U.K. Development Centre Limited (previously named Lightworks
Editing Systems Limited), a United Kingdom subsidiary of the Company, designs,
manufactures and distributes non-linear editing systems used for film and video
editing. Video products also include the Company's Profile-Registered Trademark-
disk-based, multi-channel video storage and playback system. In contrast to
conventional tape storage technology, the Profile system provides instant access
to stored video images and better reliability due to the durability of the
media. The Company's line of professional video disk recording products is
manufactured at its facility in Beaverton, Oregon. High-speed computer
networking interfaces sold by the Company allow the connection of a number of
Profile disk recorders to allow sharing of material between multiple users.
Customers for these products include major television networks, local broadcast
stations, satellite program providers and postproduction companies.
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The Company's main networking product is a line of network computers, which
are X windows-based graphics terminals that provide multiple windowing and
networking capability. Also commonly referred to as X terminals, network
computers allow users to communicate with one or more host computers and other
devices such as printers, that make up a networked computing system. Most
applications include a central "server" (containing applications and data)
connected to multiple network computers, thereby allowing a number of users to
access those applications and data. The Company no longer manufactures its
older line of proprietary graphics terminals, but it still has a service
business for its installed base for such products. This service business has
continually declined as the installed base of these proprietary graphics
terminals declines.
The Company's networking products also include WinDD-TM- software, which
allows network computer users on a Unix-Registered Trademark- network to run
Microsoft Windows based applications in native mode (that is, without
translation or emulation).
The Company produces the NewStar-TM- line of television newsroom computer
systems. These products provide a complete computer based environment for the
collection, management and presentation of television news stories. They
provide management of incoming wire service and video feeds, computerized script
development and story lineup for transmission to air. EditStar-TM- , a
combination of the NewStar journalist software and the Company's Profile video
disk recorder, provides a unique tool for concurrent editing of the script and
video. Customers for NewStar systems include large and small television news
operations worldwide.
MANUFACTURING
During fiscal 1994, the Company sold its integrated circuits operation to
Maxim Integrated Products, Inc. and transferred its hybrid circuits operation to
a joint venture with Maxim, and in early 1995 completed the sale of
approximately 65% of the stock of its printed circuit board operation in the
initial public offering of Merix Corporation. As a result of these activities
and other recent component operation divestitures, the Company's manufacturing
operations are no longer highly integrated. The Company purchases products from
each of the companies now operating the respective component operations.
Tektronix also purchases raw materials, additional components, data
processing equipment and computer peripheral devices for use in its products and
systems. In addition, the Company purchases components of its products from a
variety of third party suppliers. Such purchased materials and components are
generally available to Tektronix as needed. Although shortages are experienced
from time to time, the Company currently believes that it will be able to
acquire the required components as needed. Because some of these components are
unique, disruptions in supply can have an effect on Company operations.
Tektronix owns substantially all of its manufacturing facilities. Its
primary manufacturing facilities are located in or near the Portland, Oregon
metropolitan area. Some of Tektronix' products, components and accessories are
assembled in the Peoples Republic of China. A logistics center is maintained in
Heerenveen, The Netherlands. The Grass Valley products are manufactured in
Nevada City, California. See Item 2, "Properties", for a more detailed
description of the Company's manufacturing facilities.
Certain Tektronix products are manufactured for the Japanese market at a
plant in Gotemba, Japan by Sony/Tektronix Corporation, a Japanese corporation
equally owned by Tektronix and Sony Corporation. Sony/Tektronix also designs
and manufactures arbitrary waveform and function generators and benchtop
semiconductor testers in Japan for sale worldwide
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by Tektronix.
SALES AND DISTRIBUTION
Tektronix maintains its own worldwide sales and field maintenance
organization, staffed with technically trained personnel. Sales in the United
States, Canada, Brazil, the United Kingdom, Germany, France, Italy, Spain, The
Netherlands, Belgium, Sweden, Denmark, Norway, Finland, Switzerland, Australia,
Austria, Hong Kong, Taiwan, Korea, Singapore, China and Mexico are made through
the Company and its subsidiaries and their field offices or distribution
channels located in principal market areas. In most countries, all sales are
made either directly by Tektronix or by independent distributors to whom
Tektronix provides direct technical and administrative assistance. Certain of
the Company's independent distributors also sell products manufactured by the
Company's competitors. Sales of joint venture products in the Peoples Republic
of China are made by three companies which are joint ventures between Tektronix
and three different Peoples Republic of China corporations. Except for Grass
Valley products, sales in Japan are made by Sony/Tektronix Corporation. Sales
in India are made by Tektronix (India) Limited, an Indian company which is 68%
owned by Tektronix and the balance is held publicly. A number of the Tektronix
field offices in the U.S. also perform major maintenance and reconditioning
operations. Tektronix' principal customers are electronic and computer equipment
manufacturers and service providers, private industrial concerns engaged in
commercial or governmental projects, military and nonmilitary agencies of the
United States and of foreign countries, public utilities, educational
institutions, radio and television stations and networks, graphics arts
companies and users of sophisticated office products. Certain products are sold
both to equipment users and to original equipment manufacturers.
During the last fiscal year, United States Government agencies accounted
directly for approximately 1.2% of Tektronix' consolidated sales as compared
with approximately 1.4% for the prior year. During the last five years, direct
sales to United States Government agencies ranged from 1% to 4%. The balance of
sales during each year was distributed among several thousand other customers,
with no other single customer accounting for as much as 2%. The Company
believes that sales directly related to United States Government expenditures
(excluding sales to the United States Government) were approximately 1% of
Tektronix' consolidated sales for the last fiscal year. Contracts involving the
United States Government are subject, as is customary, to termination by the
Government at its convenience.
Most Tektronix product sales are sold as standard catalog items. Tektronix
attempts to fill its orders as promptly as possible. In Video and Networking,
the Company is moving towards complete system sales, as well as stand-alone
systems.
At May 31, 1997, Tektronix' unfilled product orders amounted to
approximately $175 million, as compared to approximately $163 million at May 25,
1996. Tektronix expects that substantially all unfilled product orders at May
31, 1997 will be filled during its current fiscal year. Orders received by the
Company are subject to cancellation by the customer.
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INTERNATIONAL SALES
The following table sets forth the breakdown between U.S. and international
sales, based upon purchaser location, for each of the last three fiscal years
(in thousands of dollars):
U.S. SALES INTERNATIONAL SALES
AMOUNT PERCENT AMOUNT PERCENT
1995 $ 766,991 51.2% $730,971 48.8%
1996 $ 890,930 50.4% $877,928 49.6%
1997 $1,027,294 53.0% $912,788 47.0%
See "Business Segments" in the Notes to Consolidated Financial Statements at
page 25 of the Company's 1997 Annual Report to Shareholders, containing
information on sales, operating income and assets by geographic area based upon
the location of the seller, which is incorporated by reference.
Tektronix products are sold worldwide. European sales are made principally
in Germany, France, the United Kingdom, Switzerland, Italy, Spain, Sweden, and
The Netherlands. Other international sales are principally in Japan, Korea,
Canada, Australia, the People's Republic of China and Hong Kong. International
sales include both export sales from the United States and sales by non-U.S.
subsidiaries. Fluctuating exchange rates and other factors beyond the control
of Tektronix, such as the stability of international monetary conditions, tariff
and trade policies and domestic and foreign tax and economic policies, affect
the level and profitability of international sales. The Company does not
believe it is materially exposed to exchange rate fluctuation, although the
Company is unable to predict the effect of these factors on its business. The
Company hedges against certain currency exposures in order to minimize their
impact.
RESEARCH AND DEVELOPMENT
Tektronix operates in an industry characterized by rapid technological
change and research and development are important elements in its business.
Expenditures during fiscal years ended May 27, 1995, May 25, 1996, and May 31,
1997 for research and development amounted to approximately $166,171,000,
$164,292,000, and $188,192,000 respectively. Almost all of these funds were
Company generated.
Research and development activities are conducted by research and design
groups and specialized product development groups within the three product
groups. These activities include: (i) research on basic devices and techniques
(ii) the design and development of products and components and specialized
equipment and (iii) the development of processes needed for production. Most of
Tektronix' research and development is devoted to enhancing and developing its
own products.
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PATENTS AND INTELLECTUAL PROPERTY
It is Tektronix' policy to seek patents in the United States and
appropriate foreign countries for its significant patentable developments.
However, electronic equipment as complex as most Tektronix products is generally
not patentable in its entirety. The Company also seeks to protect significant
trademarks and software through trademark and copyright registration. The
Company has entered into license arrangements for components important to the
manufacturing of some of its printers. The Company's printer business relies on
an integrated strategy of licensed and internally developed technology to
produce its industry leading products. This technology includes software,
equipment, printing process and ink developments. As with any company whose
business involves intellectual property, Tektronix is subject to claims of
infringement. There are no material pending claims.
COMPETITION
The electronics industry continues to become more competitive, both in the
United States and abroad. Primary competitive factors are product performance,
technology, customer service, product availability and price. Tektronix
believes that its reputation in the marketplace is a significant positive
competitive factor. With respect to many of its products, the Company competes
with companies that have substantially larger resources.
Tektronix is the world's largest manufacturer of oscilloscopes and no
single competitor offers as complete a product line. The Company is also the
leader in sales of test and measurement equipment for the television industry.
Tektronix competes with a number of companies in specialized areas of other test
and measurement products, and it competes with one very large company that sells
a broad line of test and measurement products.
Tektronix is also the leader in unit sales of office workgroup laser-class
color printers, including color laser, solid ink jet and thermal wax color
printers. While the market for color printers is currently growing rapidly, it
is still much smaller than the market for monochrome printers. Moreover, it is
characterized by intense and increasing competition, resulting in a competitive
pricing environment. Because the market for color hard copy is still small
compared to the market for monochrome printers, distribution of products from
manufacturer to end user is less efficient. The Company expects distribution
channels to expand as color hard copy becomes a more prominent feature in
computer applications.
Tektronix competes with a number of large, worldwide electronics firms that
manufacture specialized equipment for the television industry, both with respect
to its television test and measurement products and its Grass Valley products.
Grass Valley products include leading high-performance production switchers and
high-performance distribution/processing equipment.
Tektronix is a leading supplier of network computers. Network computers
products are based on standard architecture originally developed by the
Massachusetts Institute of Technology. Consequently, it is difficult for any
manufacturer to develop a proprietary advantage in either the underlying
hardware or in elements of the operating system, and competition in the
network computer market is accordingly intense.
Tektronix is the leading supplier of multi-channel disk-based recording
devices to the professional television industry. The Company expects this
market to experience significant
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growth as broadcasters and other professional video users replace video tape
recorders with disk-based products.
EMPLOYEES
At May 31, 1997, Tektronix had 8,392 employees, of whom 1,863 were located
in foreign countries. Tektronix' employees in the United States and most
foreign countries are not covered by collective bargaining agreements. The
Company believes that relations with its employees are good.
ENVIRONMENT
The Company's facilities are subject to numerous laws and regulations
concerning the discharge of materials into the environment, or otherwise
relating to protection of the environment. The Company operates a licensed
hazardous waste management facility at its Beaverton campus. Compliance with
environmental laws has not had and is not expected to have a material effect
upon the capital expenditures, earnings or competitive position of the Company.
EXECUTIVE OFFICERS OF THE COMPANY
The following are the executive officers of the Company:
Has Served As
An Executive
Officer of
Name Position Age Tektronix Since
- ---- -------- --- ---------------
Jerome J. Meyer Chairman of the 59 1990
Board, Chief
Executive Officer
and President
William D. Walker Vice Chairman of 66 1992 (also
the Board, Director served in
1990 and
from 1969
to 1984)
John P. Karalis Senior Vice President, 59 1992
Corporate Development
and Secretary
Carl W. Neun Senior Vice President 53 1993
and Chief Financial
Officer
Claude H. Balleyguier Vice President and 45 1996
President, European
Operations
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Has Served As
An Executive
Officer of
Name Position Age Tektronix Since
- ---- -------- --- ---------------
Daniel R. Brophy Vice President and 59 1996
President, Americas
Operations
Lucie J. Fjeldstad Vice President and 53 1995
President, Video and
Networking Division
Gerald Perkel Vice President and 41 1995
President, Color
Printing and
Imaging Division
Daniel Terpack Vice President and 56 1993
President, Measurement
Business Division
Timothy E. Vice President and 44 1991
Thorsteinson President, Pacific
Operations
The executive officers are elected by the board of directors of the Company
at its annual meeting, except for interim elections to fill vacancies.
Executive officers hold their positions until the next annual meeting or until
their successors are elected, or until such tenure is terminated by death,
resignation or removal in the manner provided in the bylaws. There are no
arrangements or understandings between executive officers or any other person
pursuant to which the executive officers were elected and none of the executive
officers are related.
All of the executive officers named have been employed by Tektronix in
management positions for the last five years except: Mr. John P. Karalis who
joined Tektronix in September 1992 and prior to that time was with the law firm
of Brown and Bain (from 1989 to 1992) and Vice President and General Counsel of
Apple Computer, Inc. (from 1987 to 1989); Mr. Carl W. Neun who joined Tektronix
in March 1993 and prior to that time served as Senior Vice President of
Administration and Chief Financial Officer of Conner Peripherals, Inc., (from
1987 to 1993); Ms. Lucie Fjeldstad who joined Tektronix in January 1995 and
prior to that time was President and CEO of Fjeldstad International (from 1993
to 1995) and Vice President and General Manager, Multimedia of IBM Corporation
(from 1990 to 1993); Mr. William D. Walker, who is not an employee of the
Company and has been a director of the Company since 1980; Mr. Daniel R. Brophy,
who joined the Company in December 1994 and prior to that time served as
Assistant Vice President of Ascom Timeplex, a division of Ascom Holding AG, an
international telecommunications company; and Mr. Claude H. Balleyguier, who
joined Tektronix in September 1996 and previously was with Sony Corporation from
1986 to September of 1996, as Vice President, South and Eastern European
Operations, Broadcast and Professional Video Division (1994 to September 1996);
Vice President, Business and Industrial European Operations, Professional Video
Division (1992 to 1994); and
11
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Managing Director of Sony France, Broadcast and Professional Video Division
(1986 to 1992).
ITEM 2. PROPERTIES.
The Company's offices are located at 26600 S.W. Parkway, Wilsonville,
Oregon. Listed below are the principal facilities All properties are
maintained in good working order and, except for those held for sale or lease,
are substantially utilized and are suitable for the conduct of its business. The
Company believes that its facilities are adequate for their intended uses.
Tektronix owns an industrial park (the "Howard Vollum Park") near
Beaverton, Oregon. The Howard Vollum Park includes 22 buildings arranged in a
campus-like setting and containing an aggregate of approximately 2.6 million
gross square feet of enclosed floor space. A substantial portion of the
company's product manufacturing and administrative activities are located at
Howard Vollum Park. Most of the Company's Measurement Business Division and a
variety of the Video Networking Division products are manufactured at Howard
Vollum Park. The Company leases certain excess space at the Howard Vollum Park
to other corporations. The Company also owns property near Howard Vollum Park
which is leased to another corporation.
The Company's Color Printing and Imaging Division and corporate
headquarters occupy three buildings containing approximately 596,000 square feet
on property owned by the Company in Wilsonville, Oregon, approximately 16 miles
south of Howard Vollum Park.
Tektronix' Video and Networking Division also has operating facilities in
the Grass Valley area, California, which includes buildings containing a total
of approximately 190,000 square feet of floor space on an owned site in Bitney
Springs, California, and buildings containing a total of approximately 151,000
square feet on an owned site in the neighboring town of Nevada City. The
Company intends to consolidate these operations on the Nevada City site, and the
Bitney Springs, California site is currently offered for sale.
The buildings described above were constructed after 1957. Warehouses,
production facilities and other critical operations are protected by fire
sprinkler installations. Most manufacturing, office and engineering areas are
air-conditioned.
A 109,000 square foot logistics center owned by Tektronix is located in
Heerenveen, The Netherlands.
Field offices near London (83,000 square feet) and Sydney, Australia
(23,000 square feet) are located in buildings owned by the Company. The
Lightworks video editing manufacturing operations are located on leased premises
in Reading, U.K. Field Offices in other foreign countries occupy leased
premises.
Tektronix' U.S. Sales and Service field offices aggregate approximately
298,000 square feet of leased space. A surplus office in Chicago, Illinois,
consisting of approximately 60,000 square feet is offered for sale. Tektronix
also owns an approximately 9,000 square foot facility in Nanticoke,
Pennsylvania, which is leased to another company.
12
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ITEM 3. LEGAL PROCEEDINGS.
During April of this year's fourth quarter, the Company settled the
lawsuit brought against it by Fluke Corporation as described in Item 3 of the
Company's 10-K Report for 1996. There are no material pending legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
FORWARD LOOKING STATEMENTS
Statements and information included in this Form 10-K 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, or statements made by
its employees, may contain other forward looking statements. 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 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 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
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The information required by this item is included on page 32 of the
Company's 1997 Annual Report to Shareholders and is incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this item is included on page 33 of the
Company's 1997 Annual
13
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Report to Shareholders and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information required by this item is included on pages 16 through 18 of
the Company's 1997 Annual Report to Shareholders and is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is included on pages 20 through 32 of
the Company's 1997 Annual Report to Shareholders and is incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this item regarding directors is included under
"Board of Directors" and "Election of Directors" on pages 3 through 8 of the
Company's Proxy Statement dated August 20, 1997.
The information required by this item regarding officers is contained under
"Executive Officers of the Company" in Item 1 of Part I hereof.
The information required by Item 405 of Regulation S-K is included under
"Section 16(a) Beneficial Ownership Reporting Compliance" on page 18 of the
Company's Proxy Statement dated August 20, 1997.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is included under "Directors'
Compensation" and "Executive Compensation" on pages 7 through 13 of the
Company's Proxy Statement dated August 20, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is included under "Ownership of
Shares" and "Election of Directors" on pages 2 and 4 though 7 of the Company's
Proxy Statement dated August 20, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8 - K
14
<PAGE>
(a) The following documents are filed as part of this report:
(1) Financial Statements.
The following documents are included in the Company's 1997 Annual Report to
Shareholders at the pages indicated and are incorporated herein by reference:
Page in 1997 Annual
Report to Shareholders
Independent Auditors' Report 19
Consolidated Statements of Operations 20
Consolidated Balance Sheets 21
Consolidated Statements of Cash Flows 22
Consolidated Statements of Shareholders' Equity 23
Notes to Consolidated Financial Statements 24 through 32
(2) Financial Statement Schedules.
No financial statement schedules are required to be filed with
this report.
Separate financial statements for the registrant have been
omitted because the registrant is primarily an operating company and the
subsidiaries included in the consolidated financial statements are substantially
totally held. All subsidiaries of the registrant are included in the
consolidated financial statements. Summarized financial information for 50
percent or less owned persons in which the registrant has an interest, and for
which summarized financial information must be provided, is included in the
Notes to Consolidated Financial Statements appearing in the Company's Annual
Report to Shareholders.
(3) Exhibits:
(3) (i) Restated Articles of Incorporation, as amended.
Incorporated by reference to Exhibit (3) of Form 10-Q
dated September 28, 1990, SEC File No. 1-4837.
(ii) Bylaws, as amended.
(4) (i) Indenture dated as of November 16, 1987, as amended by
First Supplemental Indenture Dated as of July 13,
1993, covering the registrant's 7-1/2% notes due
August 1, 2003,and the registrant's 7-5/8% notes due
August 15, 2002. Indenture incorporated by reference
to Exhibit 4(i) of Form 10-K dated August 22, 1990,
SEC File No. 1-4837.
(ii) Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the
registrant agrees to furnish to the Commission upon request copies of agreements
relating to other indebtedness.
15
<PAGE>
+(10) (i) 1982 Stock Option Plan, as amended. Incorporated by
reference to Exhibit 10(iii) of Form 10-K dated August 22,
1989, SEC File No. 1-4837.
+(ii) Stock Incentive Plan, as amended. Incorporated by reference
to Exhibit 10(ii)of Form 10-Q dated April 9, 1993, SEC File
No. 1-4837.
+(iii) Restated Annual Performance Improvement Plan. Incorporated
by reference to Exhibit 10( i) of Form 10-Q dated April 9,
1993, SEC File No. 1-4837.
+(iv) Restated Deferred Compensation Plan. Incorporated by
reference to Exhibit 10( i)of Form 10-Q dated December 20,
1984, SEC File No. 1-4837.
+(v) Retirement Equalization Plan, Restatement, Incorporated by
reference to Exhibit (10) (v) of Form 10-K dated August 20,
1996, SEC File No. 1-4837.
+(vi) Indemnity Agreement entered into between the Company and its
named officers and directors. Incorporated by reference to
Exhibit 10(ix) of Form 10-K dated August 18, 1996, SEC File
No. 1-4837.
+(vii) Form of Executive Severance Agreement entered into between
the Company and its named officers. Incorporated by
reference to Exhibit 10(ix)
of Form 10-K dated August 9, 1995, SEC File No. 1-4837.
+(viii) Executive Compensation and Benefits Agreement dated as of
October 24, 1990. Incorporated by reference to Exhibit
10(ii) of Form 10-Q dated December 21, 1990, SEC File No.
1-4837.
+(ix) Executive Compensation and Benefits Agreement dated as of
March 29, 1993. Incorporated by reference to Exhibit
10(xiv) of Form 10-K dated August 11, 1994, SEC File No.
1-4837.
(x) Rights Agreement dated as of August 16, 1990. Incorporated
by reference to Exhibit 1 of Form 8-K dated August 27, 1990,
SEC File No. 1-4837.
+(xi) Non-Employee Directors' Deferred Compensation Plan, 1995
Restatement dated July 1, 1995. Incorporated by reference
to Exhibit 10 ( xv) of Form 10-K dated August 9, 1995, SEC
File No. 1-4837.
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<PAGE>
+(xii) Non-Employee Directors Stock Compensation Plan.
Incorporated by reference to Exhibit 10(xvi) of Form 10-K
dated August 9, 1995, SEC File No. 1-4837.
+(xiii) Executive Severance Agreement, as amended. Incorporated by
reference to Exhibit 10(i) of Form 10-Q dated October 7,
1994, SEC File No. 1-4837.
+(xiv) Amendment to Supplemental Executive Retirement Agreement.
Incorporated by reference to Exhibit 10(ii) of Form 10-Q
dated October 7, 1994, SEC File No. 1-4837.
+(xv) Employment Agreement dated January 20, 1995, Incorporated by
reference to Exhibit (10) (xvi) of Form 10-K dated August
20, 1996, SEC File No. 1-4837
+(xvi) Supplemental Executive Retirement Plan for named executive
officers dated September 26, 1996.
(13) Portions of the 1997 Annual Report to Shareholders that are
incorporated herein by reference.
(21) Subsidiaries of the registrant.
(23) Independent Auditors' Consent.
(24) Powers of Attorney.
(27) Financial Data Schedule.
+ Compensatory Plan or Arrangement
(b) No reports on Form 8-K have been filed during the last quarter of the
period covered by this Report.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
TEKTRONIX, INC.
By /S/ CARL W. NEUN
--------------------------------
Carl W. Neun, Senior Vice President
and Chief Financial Officer
Dated: August 21, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Capacity Date
/S/ JEROME J. MEYER* Chairman, Chief August 21, 1997
- --------------------
Jerome J. Meyer Executive Officer,
and President
CARL W. NEUN Senior Vice President August 21, 1997
- ------------ and Chief Financial
Carl W. Neun Officer, Principal
Financial and
Accounting Officer
/S/ PAULINE LO ALKER* Director August 21, 1997
- --------------------
Pauline Lo Alker
/S/ A. GARY AMES * Director August 21, 1997
- -----------------
A. Gary Ames
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<PAGE>
SIGNATURE CAPACITY DATE
/S/ GERRY B. CAMERON * Director August 21, 1997
- --------------------
Gerry B. Cameron
/S/ PAUL C. ELY, JR. * Director August 21, 1997
- --------------------
Paul C. Ely, Jr.
/S/ A.M. GLEASON * Director August 21, 1997
- ----------------
A. M. Gleason
/S/ WAYLAND R. HICKS * Director August 21, 1997
- --------------------
Wayland R. Hicks
/S/ KEITH R. MCKENNON * Director August 21, 1997
- ---------------------
Keith R. McKennon
/S/ MERRILL A. MCPEAK * Director August 21, 1997
- ---------------------
Merrill A. McPeak
/S/ WILLIAM D. WALKER * Director August 21, 1997
- ---------------------
William D. Walker
*By /S/ JOHN P. KARALIS August 21, 1997
----------------------
John P. Karalis
as attorney-in-fact
19
<PAGE>
As Amended through June 26, 1997
BYLAWS
OF
TEKTRONIX, INC.
ARTICLE I
SHAREHOLDERS
Section 1. ANNUAL MEETING. The annual meeting of shareholders shall
be held on the date and at the time each year as shall be fixed by the board of
directors and stated in the notice of meeting, for the purpose of electing
directors and for the transaction of such other business as may properly come
before the meeting.
Section 2. SPECIAL MEETINGS. Special meetings of the shareholders
may be called by the Chairman of the Board or by the board of directors, and
shall be called by the Chairman of the Board at the request of the holders of
not less than one tenth of all the outstanding shares of the corporation
entitled to vote at the meeting.
Section 3. PLACE OF MEETINGS. The place of each annual meeting and
any special meeting of the shareholders shall be determined by the board of
directors.
Section 4. NOTICE OF MEETING. Written or printed notice stating the
date, time and place of the shareholders meeting and, in the case of a special
meeting or a meeting for which special notice is required by law, the purposes
for which the meeting is called, shall be delivered by the corporation to each
shareholder entitled to vote at the meeting and, if required by law, to any
other shareholders entitled to receive notice, not earlier than sixty days nor
less than thirty days before the meeting date. If mailed, the notice shall be
deemed delivered when it is mailed to the shareholder with postage prepaid at
the shareholder's address shown in the corporation's record of shareholders.
Section 5. CLOSING OF TRANSFER RECORDS OR FIXING OF RECORD DATE. The
board of directors may fix a future date as the record date to determine the
shareholders entitled to notice of a shareholders meeting, demand a special
meeting, vote, take any other action or receive payment of any share or cash
dividend or other distribution. This date shall not be earlier than seventy
days or, in the case of a meeting, later than thirty-five days before the
meeting or action requiring a determination of shareholders. The record date
for any meeting, vote or other action of the shareholders shall be the
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<PAGE>
same for all voting groups. If not otherwise fixed by the board of directors,
the record date to determine shareholders entitled to notice of and to vote at
an annual or special shareholders meeting is the close of business on the day
before the notice is first mailed or delivered to shareholders. If not
otherwise fixed by the board of directors, the record date to determine
shareholders entitled to receive payment of any share or cash dividend or other
distribution is the close of business on the day the board of directors
authorizes the share or cash dividend or other distribution.
Section 6. VOTING LISTS. After a record date for a meeting is fixed,
the corporation shall prepare an alphabetical list of all shareholders entitled
to notice of the shareholders meeting. The list shall be arranged by voting
group and, within each voting group, by class or series of shares, and it shall
show the address of and number of shares held by each shareholder. The
shareholders list shall be available for inspection by any shareholder, upon
proper demand as may be required by law, beginning two business days after
notice of the meeting is given and continuing through the meeting, at the
corporation's principal office or at a place identified in the meeting notice in
the city where the meeting will be held. The corporation shall make the
shareholders list available at the meeting, and any shareholder or the
shareholder's agent or attorney shall be entitled to inspect the list at any
time during the meeting or any adjournment. Refusal or failure to prepare or
make available the shareholders list does not affect the validity of action
taken at the meeting.
Section 7. QUORUM; ADJOURNMENT.
(a) Shares entitled to vote as a separate voting group may take
action on a matter at a meeting only if a quorum of those shares exists with
respect to that matter. A majority of the votes entitled to be cast on the
matter by the voting group constitutes a quorum of that voting group for action
on that matter.
(b) A majority of votes represented at the meeting, although less
than a quorum, may adjourn the meeting from time to time to a different time and
place without further notice to any shareholder of any adjournment. At an
adjourned meeting at which a quorum is present, any business may be transacted
that might have been transacted at the meeting originally held.
(c) Once a share is represented for any purpose at a meeting, it
shall be present for quorum purposes for the remainder of the meeting and for
any adjournment of that meeting unless a new record date is or must be set for
the adjourned meeting. A new record date must be set if the meeting is
adjourned to a date more than 120 days after the date fixed for the original
meeting.
Section 8. VOTING. If a quorum exists, action on a matter, other
than the election of directors, by a voting group is approved if the votes cast
within the voting group favoring the action exceed the votes cast opposing the
action, unless a greater number of affirmative votes is required by law or the
Restated Articles of Incorporation.
2
<PAGE>
Unless otherwise provided in the Restated Articles of Incorporation, directors
are elected by a plurality of the votes cast by the shares entitled to vote in
the election at a meeting at which a quorum is present.
Section 9. PROXIES. At all meetings of shareholders, a shareholder
may vote by proxy executed in writing by the shareholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the secretary of
the corporation before or at the time of the meeting. No proxy shall be valid
after eleven months from the date of its execution, unless otherwise provided in
the proxy.
Section 10. VOTING OF SHARES BY CERTAIN HOLDERS.
(a) Shares standing in the name of another corporation may be voted
by such officer, agent or proxy as the bylaws of such corporation may prescribe,
or, in the absence of such provision, as the board of directors of such other
corporation may determine.
(b) Shares held by an administrator, executor, guardian or
conservator may be voted by him, either in person or by proxy, without a
transfer of such shares into his name. Shares standing in the name of a trustee
may be voted by him, either in person or by proxy, but no trustee shall be
entitled to vote shares held by him without a transfer of such shares into his
name.
(c) Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name if authority so to do
be contained in an appropriate order of the court by which such receiver was
appointed.
(d) A shareholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the pledgee,
and thereafter the pledgee shall be entitled to vote the shares so transferred.
(e) Neither treasury shares nor shares held by the corporation in a
fiduciary capacity, nor shares held by another corporation if a majority of the
shares entitled to vote for the election of directors of such other corporation
is held by the corporation, shall be voted at any meeting or counted in
determining the total number of outstanding shares at any given time.
Section 11. PROPER BUSINESS FOR SHAREHOLDERS' MEETING. To be
properly brought before the meeting, business must be either (a) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the board of directors, (b) otherwise properly brought before a meeting by or
at the direction of the board of directors, or (c) otherwise properly brought
before the meeting by a shareholder. In addition to any other applicable
requirements, for business to be properly brought before an annual meeting by a
shareholder, the shareholder must have
3
<PAGE>
given timely notice thereof in writing to the Secretary of the corporation. To
be timely, a shareholder's notice must be delivered to or mailed and received at
the principal executive office of the corporation not less than 50 days nor more
than 75 days prior to the meeting; PROVIDED, HOWEVER, that in the event that
less than 65 days' notice or prior public disclosure of the date of the meeting
is given or made to shareholders, notice by the shareholder to be timely must be
so received not later than the close of business on the 10th day following the
day on which such notice of the date of the annual meeting was mailed or such
public disclosure was made, whichever first occurs. A shareholder's notice to
the Secretary shall set forth (a) one or more matters appropriate for
shareholder action that the shareholder proposes to bring before the meeting,
(b) a brief description of the matters desired to be brought before the meeting
and the reasons for conducting such business at the meeting, (c) the name and
record address of the shareholder, (d) the class and number of shares of the
corporation that the shareholder owns or is entitled to vote and (e) any
material interest of the shareholder in such matters. Notwithstanding anything
in these bylaws to the contrary, no business shall be conducted at the annual
meeting except in accordance with the procedure set forth in this Section 11;
PROVIDED, HOWEVER, that nothing in this Section 11 shall be deemed to preclude
discussion by any shareholder of any business properly brought before the annual
meeting. The Chairman of the Board shall, if the facts warrant, determine and
declare to the meeting that the business was not properly brought before the
meeting in accordance with the provisions of this Section 11, and if the
Chairman of the Board should so determine, shall so declare to the meeting any
such business not properly brought before the meeting shall not be transacted.
Section 12. SHAREHOLDER NOMINATION OF DIRECTORS. Not less than 50
days nor more than 75 days prior to the date of any annual meeting of
shareholders, any shareholder who intends to make a nomination at the annual
meeting shall deliver a notice to the Secretary of the corporation setting forth
(a) as to each nominee whom the shareholder proposes to nominate for election or
reelection as a director, (i) the name, age, business address and residence
address of the nominee, (ii) the principal occupation or employment of the
nominee, (iii) the class and number of shares of capital stock of the
corporation that are beneficially owned by the nominee and (iv) any other
information concerning the nominee that would be required, under the rules of
the Securities and Exchange Commission, in a proxy statement soliciting proxies
for the election of such nominee; and (b) as to the shareholder giving the
notice, (i) the name and record address of the shareholder and (ii) the class
and number of shares of capital stock of the corporation that are beneficially
owned by the shareholder; PROVIDED, HOWEVER, that in the event that less than 65
days' notice or prior public disclosure of the date of the annual meeting is
given or made to shareholders, notice by the shareholder to be timely must be so
delivered not later than the close of business on the 10th day following the day
on which such notice of the date of the meeting was mailed or such public
disclosure was made, whichever first occurs. Such notice shall include a signed
consent to serve as a director of the corporation, if elected, of each such
nominee. The corporation may require any proposed nominee to furnish such other
information as may reasonably be required by the corporation to determine the
eligibility of such proposed nominee to serve as a director of the corporation.
4
<PAGE>
Section 13. SHAREHOLDER NOMINATION OF DIRECTORS - SPECIAL MEETINGS.
Any shareholder who intends to make a nomination at any special meeting of
shareholders held for the purpose of electing directors shall deliver a timely
notice to the Secretary of the corporation setting forth (a) as to each nominee
whom the shareholder proposes to nominate for election or reelection as a
director, (i) the name, age, business address and residence address of the
nominee, (ii) the principal occupation or employment of the nominee, (iii) the
class and number of shares of capital stock of the corporation that are
beneficially owned by the nominee and (iv) any other information concerning the
nominee that would be required, under the rules of the Securities and Exchange
Commission, in a proxy statement soliciting proxies for the election of such
nominee; and (b) as to the shareholder giving the notice, (i) the name and
record address of the shareholder and (ii) the class and number of shares of
capital stock of the corporation that are beneficially owned by the shareholder.
To be timely for these purposes, such notice must be given (a) if given by the
shareholder (or any of the shareholders) who or that made a demand for a meeting
pursuant to which such meeting is to be held, concurrently with the delivery of
such demand, and (b) otherwise, not later than the close of business on the 10th
day following the day on which the notice of the special meeting was mailed.
Such notice shall include a signed consent to serve as a director of the
corporation, if elected, of each such nominee. The corporation may require any
proposed nominee to furnish such other information as may reasonably be required
by the corporation to determine the eligibility of such proposed nominee to
serve as a director of the corporation.
ARTICLE II
BOARD OF DIRECTORS
Section 1. GENERAL POWERS. The business and affairs of the
corporation shall be managed by its board of directors.
Section 2. NUMBER, TENURE AND QUALIFICATIONS. The directors of the
corporation shall be divided into three classes of directors designated Class I,
Class II and Class III. Until immediately following the September 1997 Board
meeting, the number of directors of the corporation shall be ten, consisting of
three Class I directors, four Class II directors, and three Class III directors.
Effective immediately following the September 1997 Board meeting, the number of
directors of the corporation shall be nine, consisting of three Class I
directors, three Class II directors, and three Class III directors. At each
annual meeting of shareholders following such initial classification and
election, directors elected to succeed those directors whose terms expire shall
be elected to serve three-year terms and until their successors are elected and
qualified, so that the term of one class of directors will expire each year.
When the number of directors is changed by amendment of this Section 2, any
newly created directorships, or any decrease in directorships, shall be so
apportioned among the classes so as to make all classes as nearly equal as
possible, provided that no decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent
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<PAGE>
director. Directors need not be residents of the State of Oregon or
shareholders of the corporation.
Section 3. ANNUAL AND REGULAR MEETINGS. The annual meeting of the
board of directors may be held before or after the annual meeting of
shareholders, on the day and at the time and place designated by the Chairman of
the Board. The board of directors may provide by resolution, the time and place,
either within or without the State of Oregon, for the holding of regular
meetings without notice other than such resolution.
Section 4. SPECIAL MEETINGS. Special meetings of the board of
directors may be called by or at the request of the Chairman of the Board or any
two directors. The person or persons authorized to call special meetings of the
board of directors may fix any place, either within or without the State of
Oregon, as the place for holding any special meeting of the board of directors
called by them.
Section 5. NOTICE. Notice of the date, time and place of any special
meeting of the board of directors shall be given at least three days prior to
the meeting by notice communicated in person, by telephone, telegraph, teletype,
other form of wire or wireless communication, mail or private carrier. If
written, notice shall be effective at the earliest of (a) when received, (b)
five days after its deposit in the United States mail, as evidenced by the
postmark, if mailed postpaid and correctly addressed, or (c) on the date shown
on the return receipt, if sent by registered or certified mail, return receipt
requested and the receipt is signed by or on behalf of the addressee. Notice by
all other means shall be deemed effective when received by or on behalf of the
director. Notice of any regular or special meeting need not describe the
purposes of the meeting unless required by law or the Restated Articles of
Incorporation.
Section 6. QUORUM. A majority of the number of directors fixed by
Section 2 of this Article II shall constitute a quorum for the transaction of
business at any meeting of the board of directors, but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice.
Section 7. MANNER OF ACTING. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the board of directors, unless a greater number is required by law or these
bylaws.
Section 8. VACANCIES. Any vacancy on the board of directors,
including a vacancy resulting from an increase in the number of directors, may
be filled by the shareholders, the board of directors, the remaining directors
if less than a quorum (by the vote of a majority thereof) or by a sole remaining
director. Any vacancy not filled by the directors shall be filled by election
at an annual meeting or at a special meeting of shareholders called for that
purpose. A vacancy that will occur at a specified later
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date, by reason of a resignation or otherwise, may be filled before the vacancy
occurs, but the new director may not take office until the vacancy occurs.
Section 9. COMPENSATION. By resolution of the board of directors,
the directors may be paid their expenses, if any, of attendance at each meeting
of the board of directors, and may be paid a fixed sum for attendance at each
meeting of the board of directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
Section 10. PRESUMPTION OF ASSENT. A director of the corporation who
is present at a meeting of the board of directors at which action on any
corporate matter is taken shall be presumed to have assented to the action taken
unless his dissent shall be entered in the minutes of the meeting or unless he
shall file his written dissent to such action with the person acting as the
secretary of the meeting before the adjournment thereof or shall forward such
dissent by registered mail to the secretary of the corporation immediately after
the adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action. It shall be the duty of the person
acting as secretary of the meeting to record in the minutes any negative votes,
abstentions or dissents if requested to do so by the director so voting,
abstaining or dissenting.
Section 11. INFORMAL ACTION BY DIRECTORS. Any action required to be
taken at a meeting of directors, or any action which may be taken at a meeting
of directors, may be taken without a meeting if a consent in writing
setting forth the action so taken shall be signed by all the directors entitled
to vote with respect to the subject matter thereof. Such consent shall have the
same effect as a unanimous vote of the directors.
Section 12. REMOVAL. The shareholders may remove one or more
directors with or without cause at a meeting called expressly for that purpose,
unless the Restated Articles of Incorporation provide for removal for cause
only.
Section 13. TRANSACTIONS WITH DIRECTORS. Any contract or other
transaction between the corporation and one or more of its directors, or between
the corporation and another party in which one or more of its directors are
interested shall be valid notwithstanding the presence or participation of such
director or directors in a meeting of the board of directors which acts upon or
in reference to such contract or transaction, if the fact of such interest shall
be disclosed or known to the board of directors and it shall authorize and
approve such contract or transaction by a vote of a majority of the directors
present. Such interested director or directors may be counted in determining
whether a quorum is present at any such meeting, but shall not be counted in
calculating the majority necessary to carry such vote. This section shall not
invalidate any contract or other transaction which would otherwise be valid
under applicable law.
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Section 14. MEETING BY TELEPHONE CONFERENCE CALL. A meeting of the
board of directors may be held by means of conference telephone or similar
communications equipment through which all persons participating in the meeting
can hear each other. Participation in a meeting pursuant to this section shall
constitute presence in person at the meeting. Notice (including waiver of
notice) and quorum requirements as specified in Sections 5 and 6 of this Article
shall apply to meetings pursuant to this section. A record shall be kept of the
action taken for insertion into the minute book.
ARTICLE III
COMMITTEES
Section 1. DESIGNATION. The board of directors, by resolution
adopted by a majority of the number of directors fixed by Section 2 of Article
II of these bylaws, may designate from among its members an executive committee
and one or more other committees. The designation of a committee, and the
delegation of authority to it, shall not operate to relieve the board of
directors, or any member thereof, of any responsibility imposed upon it or him
by law. No member of any committee shall continue to be a member thereof after
he ceases to be a director of the corporation. The board of directors shall
have the power at any time, by resolution adopted by a majority of the number of
directors fixed by Section 2 of Article II of these bylaws, to increase or
decrease the number of members of any committee, to fill vacancies thereon, to
change any member thereof, and to change the functions or terminate the
existence thereof.
Section 2. POWERS. During the interval between meetings of the board
of directors, and subject to such limitations as may be imposed by resolution of
the board of directors, the executive committee shall have and may exercise all
the authority of the board of directors in the management of the corporation.
Any other committee shall have such authority of the board of directors as the
board shall delegate by resolution adopted by a majority of the number of
directors fixed by Section 2 of Article II of these bylaws. Notwithstanding the
foregoing, neither the executive committee nor any other committee shall have
the authority of the board of directors in reference to amending the articles of
incorporation; adopting a plan of merger or consolidation; recommending to the
shareholders the sale, lease, exchange, mortgage, pledge or other disposition of
all or substantially all the property and assets of the corporation otherwise
than in the usual and regular course of its business; recommending to the
shareholders a voluntary dissolution of the corporation or revocation
thereof; or amending the bylaws of the corporation. Reports on actions
taken by a committee shall be submitted to the next succeeding meeting of the
board of directors.
Section 3. PROCEDURE; MEETINGS; QUORUM. Each committee shall appoint
a chairman from among its members and a secretary who may, but need not, be a
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member of the committee or of the board of directors. The chairman shall
preside at all committee meetings and the secretary shall keep a record of its
proceedings. Regular meetings of a committee, of which no notice shall be
necessary, shall be held on such days and at such places as shall be fixed by
resolution adopted by a majority of the committee. Special meetings of a
committee shall be called at the request of any member of the committee, and
shall be held upon notice by letter or telegram mailed or delivered for
transmission not later than during the second day preceding the day of the
meeting, or by word of mouth or telephone received not later than the day
immediately preceding the day of the meeting. Any notice required by this
section may be waived in writing signed by the member or members entitled to the
notice, whether before, or after the meeting time stated therein. Attendance of
any member of a committee at a special meeting shall constitute a waiver of
notice of such meeting. A majority of the committee, from time to time, shall
be necessary to constitute a quorum for the transaction of business, and the act
of a majority of the members present at a meeting at which a quorum is present
shall be the act of the committee. The board of directors may vote to the
members of any committee a reasonable fee as compensation for attendance at
meetings of such committee.
Section 4. MEETING BY TELEPHONE CONFERENCE CALL. A meeting of a
committee may be held by means of conference telephone or similar telephone
communications equipment through which all persons participating in the meeting
can hear each other. Participation in the meeting pursuant to this section
shall constitute presence in person at the meeting. Notice (including waiver of
notice) and quorum requirements as specified in Section 3 of this Article shall
apply to meetings pursuant to this section. A record shall be kept of action
taken for insertion into the minute book.
Section 5. INFORMAL ACTION BY COMMITTEE. Any action which may be
taken at a meeting of a committee may be taken without a meeting if a consent in
writing setting forth the actions so taken shall be signed by all members of the
committee entitled to vote with respect to the subject matter thereof. The
action shall be effective on the date when the last signature is placed on the
consent or at such earlier time as is set forth therein. The consent shall have
the same effect as a unanimous vote of the committee.
ARTICLE IV
OFFICERS
Section 1. NUMBER. The officers of the corporation shall be a
Chairman of the Board of Directors (the "Chairman of the Board"); a President; a
Secretary; and such other officers and assistant officers as may be
elected or appointed from time to time by the board of directors. The
officers of the corporation shall have such powers and duties as may be
prescribed by the board of directors. Any two or more offices may be held by
the same person.
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Section 2. ELECTION AND TERM OF OFFICE. The officers of the
corporation shall be elected annually by the board of directors at the first
meeting of the board of directors held after the annual meeting of the
shareholders. If the election of officers shall not be held at the meeting, it
shall be held as soon thereafter as is convenient. Each officer shall hold
office until a successor shall have been duly elected and shall have qualified
or until the officer's death, resignation or removal in the manner hereinafter
provided.
Section 3. REMOVAL. Any officer or agent elected or appointed
by the board of directors may be removed by the board of directors at any
time with or without cause. Election or appointment of an officer or agent
shall not of itself create contract rights.
Section 4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the board
of directors for the unexpired portion of the term.
Section 5. CHAIRMAN OF THE BOARD. The Chairman of the Board of
Directors shall be the chief executive officer of the corporation and, subject
to the control of the board of directors, shall in general supervise and control
all of the business and affairs of the corporation. The Chairman of the Board
may execute in behalf of the corporation all contracts, agreements, stock
certificates and other instruments. The Chairman of the Board shall from time
to time report to the board of directors all matters within the Chairman's
knowledge affecting the corporation which should be brought to the attention of
the board. The Chairman of the Board, or such other individuals as may be
designated by the Board of Directors from time to time, shall vote all shares
of stock in other corporations owned by the corporation, and shall be empowered
to execute proxies, waivers of notice, consents and other instruments in the
name of the corporation with respect to such stock. He shall preside at all
meetings of the board of directors and shareholders. The Chairman of the Board
shall perform such other duties as may be prescribed from time to time by the
board of directors.
Section 6. PRESIDENT. The President shall be the chief operating
officer of the corporation and shall supervise the operations of the
corporation, subject to the direction of the board of directors and the Chairman
of the Board. The President shall perform such other duties as may be
prescribed from time to time by the board of directors or the Chairman of the
Board.
Section 7. SECRETARY. The Secretary shall keep the minutes of all
meetings of the directors and shareholders, and shall have custody of the minute
books and other records pertaining to the corporate business. The
Secretary shall countersign all stock certificates and other instruments
requiring the seal of the corporation and shall perform such other duties as may
be prescribed from time to time by the board of directors.
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Section 8. SALARIES. The salaries of the officers shall be fixed
from time to time by the board of directors and no officer shall be prevented
from receiving such salary because the officer is also a director of the
corporation.
ARTICLE IV-A
NON-CORPORATE OFFICERS
A. The Chairman of the Board of the corporation shall have the power, in
the exercise of his or her discretion, to appoint persons to hold positions and
titles such as vice president, treasurer, assistant vice president, assistant
secretary, president of a division, or similar titles as the business of the
corporation may require, subject to such limits in appointment power as the
board of directors may determine. Each such appointee shall have such title,
shall serve in such capacity, and shall have such authority and perform such
duties as the Chairman of the Board of the corporation shall determine; provided
that no such appointee shall have executive powers, be in charge of a principal
business unit, division or function or perform similar policy making functions.
The board of directors shall be advised of any such appointment at a meeting of
the board of directors, and the appointment shall be noted in the minutes of the
meeting. The minutes shall state that such persons are non-corporate officers
appointed pursuant to this Article IV-A of these bylaws.
B. Any such appointee, absent specific election by the board of directors
as an elected corporate officer (i) shall not be considered an officer elected
by the board of directors pursuant to Article IV of these bylaws, (ii) shall not
be considered an 'officer' of the corporation for the purposes of Rule 3b-2
promulgated under the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder (collectively, the "Act"), or an
'executive officer' of the corporation for the purposes of Rule 3b-7 promulgated
under the Act, and similarly shall not be considered an 'officer' of the
corporation for the purposes of Section 16 of the Act, or an 'executive officer'
of the corporation for the purposes of Section 14 of the Act, and (iii) shall be
empowered to represent himself or herself to third parties as an appointed vice
president, etc., only, and shall be empowered to execute documents, bind the
corporation, or otherwise act on behalf of the corporation only as authorized by
the Chairman of the Board or the President of the corporation or by resolution
of the board of directors. An elected corporate officer of the corporation may
also be appointed to a position pursuant to this Article IV-A.
C. A person appointed to a position pursuant to this Article IV-A may be
removed at any time by the Chairman of the Board or by the board of directors of
the corporation.
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ARTICLE V
INDEMNITY OF DIRECTORS AND OFFICERS
A. The corporation shall indemnify to the fullest extent then permitted
by law any person who is made, or threatened to be made, a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, investigative or otherwise (including an action, suit
or proceeding by or in the right of the corporation) by reason of the fact that
the person is or was a director or officer of the corporation or is or was
serving at the request of the corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise against all
expenses (including attorneys' fees), judgments, amounts paid in settlement and
fines actually and reasonably incurred in connection therewith.
B. Expenses incurred in connection with an action, suit or proceeding may
be paid or reimbursed by the corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of the director or officer to repay such amounts if it shall ultimately be
determined that such person is not entitled to be indemnified by the
corporation.
C. The indemnification provided hereby shall not be deemed exclusive of
any other rights to which those indemnified may be entitled under the Restated
Articles of Incorporation, any statute, agreement, or vote of shareholders or
directors or otherwise, both as to action in any official capacity and as to
action in another capacity while holding an office, and shall continue as to a
person who has ceased to be a director or officer and shall inure to the benefit
of the heirs, executors and administrators of such person.
D. The corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or fiduciary with respect to any employee benefit plans of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent, or as a fiduciary of an employee benefit
plan, of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against and incurred by the person in
any such capacity, or arising out of the person's status as such, whether or not
the corporation would have the power to indemnify the person against such
liability under the provisions of the Restated Articles of Incorporation or the
Oregon Business Corporation Act.
E. Any person other than a director or officer who is or was an employee
or agent of the corporation, or fiduciary within the meaning of the Employee
Retirement Income Security Act of 1974 with respect to any employee benefit
plans of the corporation, or is or was serving at the request of the corporation
as an employee or agent of another corporation, partnership, joint venture,
trust or other enterprise may
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be indemnified to such extent as the board of directors in its discretion at any
time or from time to time may authorize.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. CONTRACTS. The board of directors may authorize any
officer or officers, agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
Section 2. LOANS. No loans shall be contracted on behalf of the
corporation and no evidence of indebtedness shall be issued in its name unless
authorized by a resolution of the board of directors. Such authority may be
general or confined to specific instances.
Section 3. CHECKS, DRAFT, ETC. All checks, drafts or other orders
for the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation, shall be signed by such officer or officers, agent or
agents of the corporation and in such manner as shall from time to time be
determined by or pursuant to resolution of the board of directors.
Section 4. DEPOSITS. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositories as the board of directors
may select.
ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. CERTIFICATES FOR SHARES. Certificates representing shares
of the corporation shall be in such form as shall be determined by the board of
directors. Such certificates shall be signed by the Chairman of the Board or a
Vice President and by the Secretary or an Assistant Secretary and may be sealed
with the seal of the corporation or a facsimile thereof. All certificates for
shares shall be consecutively numbered or otherwise identified. The name and
address of the person to whom the shares represented thereby are issued, with
the number of shares and date of issue, shall be entered on the share transfer
records of the corporation. All certificates surrendered to the corporation for
transfer shall be cancelled and no new certificate shall be issued until the
former certificate for a like number of shares shall have been
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surrendered and cancelled, except that in case of a lost, destroyed or mutilated
certificate a new one may be issued therefore upon such terms and indemnity to
the corporation as the board of directors may prescribe.
Section 2. TRANSFER OF SHARES. Transfer of shares of the corporation
shall be made only on the share transfer records of the corporation by the
holder of record thereof or by his legal representative, who shall furnish
proper evidence of authority to transfer, or by his attorney thereunto
authorized by power of attorney duly executed and filed with the secretary
of the corporation. The person in whose name shares stand on the books of the
corporation shall be deemed by the corporation to be the owner thereof for all
purposes.
Section 3. TRANSFER AGENT AND REGISTRAR. The board of directors may
from time to time appoint one or more transfer agents and one or more registrars
for the shares of the corporation, with such powers and duties as the board of
directors shall determine by resolution. The signatures of the president or
vice president and the secretary or assistant secretary upon a certificate may
be facsimiles if the certificate is countersigned by a transfer agent or
registered by a registrar other than the corporation itself or an employee of
the corporation.
Section 4. OFFICER CEASING TO ACT. In case any officer who has
signed or whose facsimile signature has been placed upon a stock certificate
shall have ceased to be such officer before such certificate is issued, it may
be issued by the corporation with the same effect as if he were such officer at
the date of its issuance.
Section 5. FRACTIONAL SHARES. The corporation shall not issue
certificates for fractional shares.
ARTICLE VIII
FISCAL YEAR
The fiscal year of the corporation shall end on the last Saturday in
May of each year.
ARTICLE IX
DIVIDENDS
The board of directors may from time to time declare, and the
corporation may pay, dividends on its outstanding shares in the manner and upon
the terms and conditions provided by law.
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ARTICLE X
SEAL
The seal of the corporation shall be in the form of a circle
containing therein "TEKTRONIX, INC. CORPORATE SEAL OREGON."
ARTICLE XI
AMENDMENTS
These bylaws may be altered, amended or repealed and new bylaws may be
adopted by the board of directors at any regular or special meeting.
I HEREBY CERTIFY that the foregoing are the bylaws of TEKTRONIX,
INC. adopted at a meeting of the board of directors of the company held on
September 9, 1963, and as amended with regard to Article IV at a meeting of the
board of directors of the company held on December 22, 1966, and as amended with
regard to Article IV at a meeting of the board of directors of the company held
on January 30, 1969, and as amended with regard to Article II at a meeting of
the board of directors of the company held on July 17, 1969, and as amended with
regard to Article IV at a meeting of the board of directors of the company held
on September 24, 1970, and as amended with regard to Article IV at a meeting of
the board of directors of the company held on September 30, 1971, and as amended
with regard to Article V at a meeting of the board of directors of the company
held on September 27, 1973, and as amended with regard to Article IV at a
meeting of the board of directors of the company held on September 26, 1974, and
as amended with regard to Article I at a meeting of the board of directors of
the company held on April 28, 1977, and as amended with regard to Article I at a
meeting of the board of directors of the company held on May 20, 1977, and as
amended with regard to Article IV at a meeting of the board of directors of the
company held on January 18, 1979, and as amended with regard to Article II at a
meeting of the board of directors of the company held on February 28, 1980, and
as amended with regard to Article II at a meeting of the board of directors of
the company held on May 22, 1980, and as amended with regard to Articles I, II
and III at a meeting of the board of directors of the company held on June 25,
1980, and as amended with regard to Article II at a meeting of the board of
directors of the company held on September 9, 1980, with the amendment to be
effective September 27, 1980, and as amended with regard to Article I at a
meeting of the board of directors of the company held on July 23, 1981, and
approved by the shareholders at a meeting held on September 26, 1981, and as
amended with regard to Article VI at a meeting of the board of directors of the
company held on May 3, 1983, and as amended with regard to Article II at a
meeting of the board of directors of the company held on June 30, 1983, and as
amended with
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regard to Articles III and IV at a meeting of the board of directors of the
company held on March 1, 1984, and as amended with regard to Article I at a
meeting of the board of directors of the company held on December 6, 1984, and
as amended with regard to Article II at a meeting of the board of directors of
the company held on August 13, 1985, and as amended with regard to Article II at
a meeting of the board of directors of the company held on October 24, 1985, and
as amended with regard to Article II at a meeting of the board of directors of
the company held on July 17, 1986, and as amended with regard to Article V at a
meeting of the board of directors of the company held on September 27, 1986, and
as amended with regard to Article II at a meeting of the board of directors of
the company held on June 23, 1988, and as amended with regard to Article II at a
meeting of the board of directors of the company held on July 21, 1988, and as
amended with regard to Article II at a meeting of the board of directors of the
company held on July 20, 1989, and as amended with regard to Articles I, II and
IV at a meeting of the board of directors of the company held on November 29,
1989, and as amended with regard to Articles II and IV at a meeting of the board
of directors of the company held on April 25, 1990, and as amended with regard
to Article I at a meeting of the board of directors of the company held on June
20, 1990, and as amended with regard to Article II at a meeting of the board of
directors of the company held on July 19, 1990, and as amended with regard to
Articles II and IV at a meeting of the board of directors of the company held on
October 24, 1990, and as amended with regard to Article II at a meeting of the
board of directors of the company held on March 20, 1991, and as amended with
regard to Article I at a meeting of the board of directors of the company held
on July 17, 1991, and as amended with regard to Articles I, II, IV, and VII at a
meeting of the board of directors of the company held on September 26, 1991, and
as amended with regard to Article II at a meeting of the board of directors of
the company held on January 29, 1992, and as amended with regard to Article II
by action of the board of directors of the company without a meeting, effective
July 10, 1992, and as amended with regard to Article IV at a meeting of the
board of directors of the company held on September 23, 1992, and as amended
with regard to Article II by action of the board of directors of the company
without a meeting, effective September 24, 1992, and as amended with regard to
Article I at a meeting of the board of directors of the company held on October
18, 1992, and as amended with regard to Article II at a meeting of the board of
directors of the company held on December 2, 1992, and as amended with regard to
Article IV-A at a meeting of the board of directors of the company held on March
31, 1993, and as amended with regard to Articles I and II at a meeting of the
board of directors of the company held on June 23, 1994, and as amended with
regard to Article II at a meeting of the board of directors of the company held
on December 15, 1994, and as amended with regard to Article II by action of the
board of directors of the company without a meeting, effective March 1, 1995,
and as amended with regard to Article I at a meeting of the board of directors
of the company held on September 20, 1995, and as amended with regard to Article
II at a meeting of the board of directors of the company held on
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January 17, 1996, and as amended with regard to Articles II and IV at a meeting
of the board of directors of the company held on June 19, 1996, and as amended
with regard to Article II at a meeting of the board of directors of the company
held on March 19, 1997, and as amended with regard to Article II at a meeting of
the board of directors of the company held on May 15, 1997, and as amended with
regard to Article II at a meeting of the board of directors of the company held
on June 26, 1997.
-------------------------
Secretary
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TEKTRONIX, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(EFFECTIVE SEPTEMBER 26, 1996)
TEKTRONIX, INC.
AN OREGON CORPORATION
PO BOX 500
BEAVERTON, OREGON 97077 TEKTRONIX
Tektronix desires to provide a supplemental retirement opportunity to a
select group of its senior management employees in recognition of their
contributions to, and to encourage their long-term retention by, Tektronix and
to ensure that they can retire from Tektronix with a level of retirement
benefits (including benefits provided by previous employers) consistent with
their peers in competing companies.
This Supplemental Executive Retirement Plan (the "Plan") is intended to
supplement the retirement income available to certain designated elected
officers and senior executives of Tektronix by (i) crediting to book-entry
accounts maintained for their benefit under this Plan (the "ACCOUNTS") a
one-time start-up credit and annual credits based on corporate performance, and
(ii) crediting earnings to their Accounts at the same intervals and in the same
manner as occurs under the Tektronix Deferred Compensation Plan (the "DC PLAN")
investment funds. Subject to the Plan's vesting and forfeiture provisions,
payment of a participant's Account balance will be made upon retirement at
age 62 or later or, in the event of an earlier termination of employment, at
age 62. Participants will be
<PAGE>
permitted to defer receipt of payment by electing to receive payment in no more
than ten level annual installments beginning on the normal lump sum payment
date.
I. PLAN ADMINISTRATION.
This Plan will be administered by the Organization and Compensation
Committee (the "COMMITTEE") of the Board of Directors of Tektronix (the
"BOARD"). The Committee will have full discretionary authority to interpret
this Plan and make determinations regarding eligible executives' participation
in and rights under the Plan. Any decision by the Committee or its delegate
within its authority will be final and binding on all parties. The Committee
may delegate any or all of its duties with respect to this Plan, other than its
duties to review and approve executives' initial and continued eligibility and
to review denied claims or requests under Section 8.4, and/or the administration
of Accounts and benefit payments to Tektronix (acting through its Human
Resources Department) or a third party acting as agent of the Committee.
1. PARTICIPATION.
1.1 ELIGIBILITY CRITERIA. Eligibility for participation in this Plan
is limited to those elected officers and senior executives who, in the judgment
of the Chief Executive Officer of Tektronix (the "CEO") and the Committee, have
the greatest potential to impact significantly the long-term financial
performance of Tektronix. An executive who is a party to a separate
supplemental retirement agreement with Tektronix will not be eligible to
participate in this Plan.
1.2 ANNUAL NOMINATION. In order to become a participant or to
receive a performance-based credit for any particular Fiscal Year, an executive
must be nominated
<PAGE>
for participation by the CEO, whose nomination must be approved by the Committee
before it becomes effective. An eligible executive will become a participant on
the date his or her initial nomination is approved by the Committee pursuant to
the preceding sentence. Receipt of performance-based credits under this Plan
for any particular Fiscal Year does not guarantee or infer assurance of
continued eligibility for any future Fiscal Year.
1.3 DURATION OF PARTICIPATION. After an executive first becomes a
participant, his or her continued eligibility to receive performance-based
credits under this Plan for future Fiscal Years will depend on his or her being
nominated and approved for the applicable Fiscal Year pursuant to Section 2.2
and the continued existence of the Plan. Once an executive has become a
participant pursuant to Section 2.2, he or she will continue as a participant
throughout the remainder of his or her employment with Tektronix; PROVIDED,
HOWEVER, that no performance-based credits will be added to a participant's
Account for any Fiscal Year unless he or she is nominated and approved for
continued eligibility for the applicable Fiscal Year pursuant to Section 2.2.
<PAGE>
2. CREDITS AND ADJUSTMENTS TO ACCOUNTS.
2.1 START-UP CREDIT. Tektronix will credit to each participant's
Account an amount equal to fifty percent (50%) of his or her combined annual
base salary and target award amount under the Tektronix Annual Performance
Improvement Plan (the "APIP") at the rate in effect at the close of the fiscal
year he or she first becomes a participant pursuant to Section 2.2. Taking into
account retirement-type benefits from prior employers and upon the
recommendation of the CEO, the Committee may specify that a percentage other
than fifty percent (50%) will be applied in determining the start-up credit to
be credited to a participant's Account in connection with its approval of his or
her initial nomination pursuant to Section 2.2. This start-up credit will be
credited to the participant's Account as of the July 1 that next follows the
date an executive first becomes a participant pursuant to Section 2.2, in
addition to any performance-based credit added to the Account as of that date.
2.2 ANNUAL PERFORMANCE-BASED CREDITS. For each Fiscal Year,
Tektronix will add a performance-based credit to the Account of each participant
who is nominated and approved for continued eligibility to receive such a credit
for the applicable Fiscal Year pursuant to Section 2.2 (an "ELIGIBLE
PARTICIPANT").
(a) ANNUAL CREDIT AMOUNT. The annual amount of the
performance-based credit is ten percent (10%) of an Eligible Participant's
combined annual base salary and target APIP award amount at the rate in
effect at the close of the applicable Fiscal Year.
<PAGE>
(b) ACTUAL ANNUAL AMOUNT. The actual annual credit amount to be
added to an Eligible Participant's Account will be determined by
multiplying the Annual Credit Amount (as defined in Section 3.2(a)) by
Tektronix' annual corporate APIP performance factor for the applicable
Fiscal Year. The actual annual credit for the initial year of
participation will be prorated for that portion of the fiscal year
following the date he or she first became a participant pursuant to Section
2.2.
(c) TIMING OF CREDITS. These performance-based credits will be
credited to Eligible Participants' Accounts as of the July 1 that next
follows the close of the Fiscal Year to which they relate.
2.3 ADJUSTMENTS TO ACCOUNTS. Until the earlier of the date
(i) a participant's Account is forfeited pursuant to Article 4 or Section
5.3(d), or (ii) full payment of the Account has been made to the participant or
his or her beneficiary(ies) under this Plan, Tektronix will adjust the balance
credited to the Account on a calendar quarterly basis, as follows:
(a) OVERALL METHODOLOGY. At the close of every calendar quarter
for which a participant's Account has a positive balance, earnings will be
credited in the same manner as occurs under the DC Plan.
(b) INSTALLMENT PAYMENTS. If an Account is being paid in
installments pursuant to Section 5.2, the unpaid Account balance will
continue to be adjusted in the above manner during the installment payment
period, with the last adjustment being that made as of the first day of the
calendar quarter in which the last installment is paid.
<PAGE>
(c) TIMING OF ADJUSTMENTS. These adjustments to Eligible
Participants' Accounts will be made at the same intervals as occurs under
the DC Plan.
2.4 BOOK-ENTRY ACCOUNTS. Each participant's Account will be
maintained on the books of Tektronix until the earlier of the date (i) a
participant's Account is forfeited pursuant to Article 4 or Section 5.3(d), or
(ii) full payment of the Account has been made to the participant or his or her
beneficiary(ies) under this Plan. No funds will be set aside or earmarked for
the Account, which will be purely a bookkeeping device.
3. VESTING.
3.1 REQUIREMENTS FOR 100% VESTING. Subject to Article 7 and
Sections 4.2, 6.1 and 9.1, each participant's interest in his or her Account
will become one hundred percent (100%) vested and nonforfeitable on the later of
the date the participant (i) attains age 55 while employed by Tektronix or an
affiliate, (ii) completes five years of employment with Tektronix or its
affiliates, or (iii) first became a participant pursuant to Section 2.2.
3.2 FORFEITURE. A participant's entire interest in his or her
Account will be forfeited if (i) his or her employment with Tektronix terminates
before such interest has become vested pursuant to Section 4.1,
(ii) notwithstanding the provisions of Section 4.1, his or her employment with
Tektronix is involuntarily terminated for cause (as defined in his or her
executive severance agreement), or (iii) or the participant fails or refuses to
sign
<PAGE>
a non-compete agreement which is reasonably acceptable to Tektronix upon or in
connection with his or her retirement or other termination of employment with
Tektronix.
4. TIME AND MANNER OF PAYMENT.
4.1 LUMP SUM PAYMENT. Subject to Articles 4 and 6 and Section 5.4,
unless a participant elects an installment payment method pursuant to
Section 5.2 no later than 30 days after the date he or she first became a
participant pursuant to Section 2.2, his or her Account will be paid in a lump
sum payment as soon as practicable after January 1 of the calendar year that
next follows the later of the date (i) the participant attains age 62 or
(ii) his or her employment with Tektronix and its affiliates terminates.
4.2 INSTALLMENT PAYMENTS. Subject to Articles 4 and 6 and
Section 5.4, PROVIDED that an executive elects, no later than 30 days after the
date he or she first becomes a participant pursuant to Section 2.2, to have his
or her Account paid in an installment payment method permitted under this
Section 5.2, the Account will be paid in not more than ten substantially equal
annual installments commencing as soon as practicable after January 1 of the
calendar year that next follows the later of the date (i) the participant
attains age 62 or (ii) his or her employment with Tektronix and its affiliates
terminates.
4.3 OTHER RULES REGARDING PAYMENT OF ACCOUNTS.
(a) IRREVOCABILITY. A participant's election of an installment
payment method pursuant to Section 5.2 will be irrevocable, and if no such
election is made within 30 days after the date he or she first becomes a
participant pursuant to Section 2.2, the lump sum payment method will
apply.
<PAGE>
(b) TAX WITHHOLDING. Tektronix may withhold from any payment
under this Plan any federal, state or local taxes or other amounts as
required by law.
(c) LEGAL INCOMPETENCY. If any individual to whom a benefit is
payable under this Plan is a minor or legally incompetent, the Committee
will determine whether payment will be made directly to the individual, any
person acting as his or her custodian or legal guardian under the Oregon
Uniform Transfers to Minors Act, his or her legal representative or a near
relative, or directly for his or her support, maintenance or education.
(d) UNDISTRIBUTABLE ACCOUNTS. Each Participant, or (in the
event of death) his or her beneficiary(ies), must keep the Committee
advised of his or her current address. If the Committee has not located
the participant or beneficiary(ies) to whom an Account is payable under
this Plan within 35 months after the Account first became payable, the
payee's interest in the Account will be forfeited as of the end of the 35th
month. If a participant whose Account was forfeited under this Section
5.3(d), or (in the event of death) his or her beneficiary(ies), files a
claim for payment of the Account after its forfeiture, and if the Committee
determines that the claim is valid, the balance forfeited will be paid in a
lump sum payment as soon as practicable.
(e) PAYMENT IN CASH. All payments under this Plan will be made
in cash or its equivalent.
<PAGE>
4.4 FINANCIAL HARDSHIP. Notwithstanding any contrary Plan provision,
if a participant incurs a "financial hardship", the Committee (in its sole
discretion) may determine that all or part of his or her Account will be paid to
him or her immediately; PROVIDED, HOWEVER, that the amount paid pursuant to this
Section 5.4 will be limited to the amount reasonably necessary to alleviate the
participant's hardship. For this purpose, "FINANCIAL HARDSHIP" means a severe
financial emergency which is caused by a sudden and unexpected accident, illness
or other event beyond the control of the participant which, without an
accelerated distribution from the Plan, would result in a severe financial
burden to the Participant or a member of his or her immediate family. A
financial hardship does not exist to the extent that the hardship may be
relieved by (i) reimbursement or compensation by insurance, (ii) liquidation of
the participant's other assets (to the extent such liquidation would not itself
cause severe financial hardship), or (iii) any loan available to the participant
(to the extent the payments on such loan would not themselves cause severe
financial hardship).
<PAGE>
5. DEATH OR DISABILITY.
5.1 GENERAL RULE AND VESTING. A participant's Account will be
payable under this Article on the participant's death or disability
notwithstanding any contrary provision of Article 5. A participant's interest
in his or her Account will become one hundred percent (100%) vested and
nonforfeitable on the date he or she becomes disabled or dies.
5.2 DEATH. Upon the death of a participant, his or her Account will
be paid in a lump sum payment as soon as practicable to his or her
beneficiary(ies), as determined in the following order of priority:
(a) To the surviving beneficiary(ies) designated by the
participant in writing to the Committee.
(b) To the surviving beneficiary(ies) designated by the
participant in writing in connection with the Tektronix life insurance
program.
(c) To the participant's surviving spouse.
(d) To the participant's estate.
5.3 DISABILITY. A participant who is temporarily disabled while
employed or receiving long term disability benefits under a plan described in
Section 6.4 will be treated as employed and no payment will be made from his or
her Account. If disability benefits stop and disability continues, the Account
will be paid in accordance with Article 5 as if his or her employment with
Tektronix had terminated at that time.
5.4 "DISABLED" DEFINED. A participant will be deemed to be
"DISABLED" for purposes of this Article 6 if the Committee determines that he or
she is eligible to
<PAGE>
receive long term disability benefits under an employee welfare benefit plan
maintained by Tektronix or would have been eligible if covered by the plan.
6. AMENDMENT; TERMINATION.
6.1 AMENDMENT. Tektronix may amend this Plan at any time so long as
the rights preserved on termination under Section 7.2(b) are not reduced. The
power to amend this Plan may be exercised by either the Board or the Committee.
6.2 TERMINATION. Tektronix may terminate this Plan at any time, as
follows:
(a) Termination will be effected by sending written notice of
the termination to all participants or (in the event of death)
beneficiary(ies). The termination date will not be earlier than the first
day of the month in which such notice is given.
(b) After the effective date of termination of this Plan, no
participant will be eligible for any benefit under Article 3, except for
the balance credited to his or her Account as of the July 1 that next
preceded the termination date, as adjusted pursuant to Section 3.3 through
the first day of the calendar quarter that next follows the termination
date.
(c) The power to terminate this Plan may be exercised by either
the Board or the Committee.
6.3 ADVERSE IRS RULING. If the Internal Revenue Service rules that
any vested Account balance under this Plan will be currently includible in a
participant's gross income prior to the date for payment determined under the
terms of the Plan (other than in
<PAGE>
connection with a domestic relations order), all vested Accounts to which the
ruling applies will be paid within 30 days to the participants or (in the event
of death) beneficiary(ies) involved.
7. CLAIMS PROCEDURE.
7.1 INITIAL CLAIM. Any person claiming a benefit or requesting an
interpretation, ruling or information under this Plan will present the request
in writing to the Committee which will respond in writing as soon as is
practicable.
7.2 RESPONSE TO INITIAL CLAIM. If the claim or request is denied,
the written notice of denial will state the following:
(a) The reasons for denial, with specific reference to the terms
of the Plan provisions on which this denial is based.
(b) A description of any additional material or information
required and an explanation of why it is necessary.
(c) An explanation of the Plan's claims review procedures.
7.3 INITIAL NOTICE OF DENIAL. The initial notice of denial will
normally be given within 90 days of the review of the claim. If special
circumstances require an extension of time, the claimant will be so notified and
the time limit will be 180 days.
7.4 REVIEW OF DENIED CLAIMS. Any person whose claim or request is
denied or who has not received a response within 30 days may request review by
notice in writing to the Committee. The original decision will be reviewed by
the Committee, which may, but will not be required to, have the claimant appear
before them. On review,
<PAGE>
whether or not there is a hearing, the claimant may have representation, examine
pertinent documents and submit issues and comments in writing.
7.5 DECISION ON REVIEW. The decision on review will normally be made
within 60 days. If an extension of time is required for a hearing or other
special circumstances, the claimant will be so notified and the time limit will
be 120 days. The decision will be in writing and will state the reasons and the
relevant plan provisions. All decisions on review will be final and bind all
parties concerned.
8. GENERAL PROVISIONS.
8.1 NONASSIGNABILITY. No interest under this Plan of any
participant, or (in the event of death) of his or her spouse, beneficiary or
contingent annuitant under the Basic Plan, may be assigned, transferred, seized
by legal process or subjected to the claims of creditors in any way.
8.2 NOTICES. Any notice under this Plan will be in writing and will
be effective when actually delivered or, if mailed, when deposited postpaid as
first class mail. Mail will be directed to Tektronix at the address stated in
this Plan, to the participant at the address shown on the Tektronix employment
records, or to such other address as a party will specify by notice to the other
parties or as the Committee may determine to be appropriate. Notices to the
Committee will be sent to Tektronix's address.
8.3 NOT CONTRACT OF EMPLOYMENT. Nothing in this Plan will give any
employee the right to continue employment. The Plan will not prevent discharge
of any employee at any time for any reason.
<PAGE>
MANAGEMENT REVIEW
RESULTS OF OPERATIONS
OVERVIEW Tektronix had record orders, sales and earnings in its fiscal year
ended May 31, 1997. Net earnings in 1997 of $114.8 million, or $3.48 per share,
increased 15% over fiscal 1996 earnings of $99.6 million, or $3.00 per share.
Net earnings in 1996 were 22% higher than 1995 earnings of $81.6 million, or
$2.50 per share.
NET SALES AND PRODUCT ORDERS Net sales in 1997 were $1.940 billion, up 10%
from $1.769 billion in 1996. The sales growth resulted from a strong flow of
new products from all divisions. Products introduced within the last two years
accounted for approximately 73% of 1997 product sales, increasing from 67% in
1996 and 62% in 1995. Sales to customers in the United States of $1.027 billion
were 15% above the level for the prior year, and represented 53% of total sales.
The improved domestic sales level is primarily the result of the favorable
response to new products. International sales rose 4% from $877.9 million to
$912.8 million, as strong sales growth in the Pacific region, excluding Japan,
and in the Americas was tempered by flat sales in Europe and Japan and the
stronger U.S. dollar. Net sales in 1996 were 18% higher than in 1995. U.S.
sales of $890.9 million in 1996 were 17% above the prior year. International
sales rose 21%, from $724.7 million in 1995 to $877.9 million in 1996, with
improvement across all geographic regions, but especially in the Pacific.
Product orders for 1997 were $1.829 billion, compared to $1.658 billion in 1996
and $1.413 billion in 1995.
The following table summarizes the Company's net sales for the last three
years by its three business divisions:
IN THOUSANDS 1997 1996 1995
- -------------------------------------------------------------------------
Measurement Business $852,827 $812,250 $731,061
Color Printing and Imaging 638,456 561,642 454,961
Video and Networking 448,799 394,966 303,213
Measurement Business sales in 1997 accounted for 44% of total sales and grew 5%
from the prior year. The growth was due to the favorable response to its new
products, particularly handheld electronic tools and telecommunications test
products, and the introduction of the TDS 200 oscilloscopes and the TLA 700
logic analyzers in the second half of the year. Sales growth was constrained
somewhat by component shortages during part of the year and by a decline in
orders from Sony/Tektronix, the Company's joint venture in Japan. The
Sony/Tektronix order decline was primarily due to a change in its inventory
stocking strategy during the year. Measurement Business sales in 1996 were 11%
higher than in 1995 with well-received new product introductions in digital
oscilloscopes, signal processors, handheld electronic tools and
telecommunications test products. Product orders in 1997 were $795.2 million,
compared to $754.0 million in 1996 and $667.1 million in 1995.
Color Printing and Imaging sales increased 14% from 1996 with the
successful launch of the Phaser 350 color solid ink printer for the office
market in the second quarter and the Phaser 600 color wide-format printer in the
third quarter, which strengthened sales into the specialty printer markets.
Also contributing to the sales increase was continued strong demand for the
Phaser 550 color laser printer in the office market. Color Printing and Imaging
sales made up 33% of total sales. Sales and orders were strong in the U.S. and
in the Pacific, excluding Japan. Color Printing and Imaging sales in 1996
increased 23% over 1995, due primarily to market acceptance of new products.
Product orders rose 14% to $607.5 million from $531.1 million in 1996. Product
orders were $433.9 million in 1995.
Video and Networking sales increased 14% from 1996 due to strength in
Profile video disk recorders and business network computers. Sales and orders
were particularly strong in the fourth quarter due to the introduction of the
Profile PDR 200 Profile professional file server and the Lightworks V.I.P
nonlinear digital editing system. Video and Networking sales rose 30% in 1996
from 1995, due primarily to the introduction of new products. Product orders,
at $426.4 million in 1997, increased 15% from the prior year's $372.4 million.
Product orders were $311.6 million in 1995.
OPERATING COSTS AND EXPENSES Gross margins increased to 42.9% in 1997 from
41.9% in 1996 due to an improved mix of higher margin supplies sales in Color
Printing and Imaging and lower manufacturing costs in Video and Networking.
Gross margins decreased to 41.9% in 1996 from 45.3% in 1995, caused primarily by
increased sales through alternative distribution channels, the impacts of
increased systems integration sales from Video and Networking and changes in
product mix.
Research and development (R&D) expenses were 9.7% of sales compared with
9.3% in 1996 and 11.1% in 1995. The increase in R&D expenses in 1997 was
planned to fund the high level of new product development. The reduction in the
rate of R&D spending in 1996 occurred as the Company concentrated on more
focused projects and experienced delays in hiring certain technical positions.
Page 16
<PAGE>
Selling, general and administrative expenses were 24.8% of sales in 1997 and
1996, and 26.7% in 1995.
Equity in business ventures' earnings decreased to $1.6 million in 1997
from $5.1 million in 1996 and $4.3 million in 1995, primarily due to lower 1997
profitability at Merix Corporation, which had accounted for a substantial
portion of the business ventures' earnings in the previous two years.
Operating margins increased year over year, rising from 7.7% in 1995 to
8.1% in 1996 and 8.5% in 1997. The improvement in 1997 was due primarily to
higher gross margins, partly offset by higher R&D spending and lower equity in
business ventures' earnings. The improvement in 1996 was due to lower operating
expenses as a percentage of sales, partly offset by lower gross margins. Video
and Networking improved operating results in 1997, but continued to operate at a
loss for the year. The Company expects Video and Networking to be profitable in
1998.
Interest expense declined in 1997 compared to 1996 due to lower borrowings,
which was the result of increased cash flows from operations. The increase in
interest expense from 1995 to 1996 was due to higher borrowings to fund working
capital needs. Other income was $15.9 million in 1997 compared with income of
$12.9 million in 1996 and $4.7 million in 1995. The improvement primarily
reflected higher gains on sales of stock in other companies. The Company
continues to hold equity positions that it intends to liquidate over time.
The Company recorded taxes on 1997 results at the effective rate of 32%,
compared with 30% in 1996 and 26% in 1995, with the increase in the rate due to
increased domestic earnings and the consumption of certain foreign tax credits.
Net earnings of $114.8 million for 1997 were 15% higher than for the prior
year due to the increase in sales and the improvement in operating margins,
partly offset by the higher effective tax rate. The growth in sales and
improved operating margins in 1996, partly offset by the higher effective tax
rate, resulted in a 22% increase in net earnings over 1995.
The Company expects fiscal 1998 sales and earnings growth to be in the
range of 10 to 15 percent.
FINANCIAL CONDITION
OVERVIEW Tektronix continues to focus on improving the efficient management
of the capital invested in its business. To monitor that progress, the Company
is using the economic value added (EVA) measure. EVA is determined by the
Company by deducting taxes and a cost of capital charge from operating income,
which management believes provides an objective means of determining if the
Company's earnings are able to cover the cost of financing its invested capital.
Invested capital is the average net assets of the Company excluding cash and
debt. In 1997, the Company generated EVA of $21.8 million compared to $11.9
million in 1996 and $11.7 million in 1995. The improvement in 1997 is a result
of both the record earnings for the year and the significant improvement in
invested capital, especially in the reduction of accounts receivable and
inventories.
LIQUIDITY 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. In
1997, cash provided by operating activities totaled $262.3 million, which was
partially used in investing activities of $69.1 million and financing activities
of $86.3 million. At May 31, 1997, the Company maintained bank credit
facilities totaling $300.3 million, of which $293.4 million was unused. Unused
facilities include $143.4 million in lines of credit and $150.0 million under a
revolving credit agreement from United States and foreign banks. Additional
details, including maturity dates of agreements and certain financial covenants,
are included under "Short-term and Long-term Debt" in the Notes to Consolidated
Financial Statements.
BALANCE SHEET Current assets decreased by $2.1 million as lower accounts
receivable, inventories and other current assets were offset by a $106.1 million
increase in cash. Accounts receivable decreased by $69.5 million, due primarily
to improved sales terms and collections and the $50.0 million securitization of
receivables, partially offset by an increase in year over year sales in the
fourth quarter of $53.2 million. Inventories decreased by $26.6 million as the
Company focused additional attention on working capital efficiencies. Other
current assets decreased because of a reduction in prepaid income taxes.
Net property, plant and equipment increased by $35.6 million due to capital
expenditures of $112.0 million in 1997, primarily related to facilities
improvements and implementation of information systems. The Company expects to
increase capital expenditures in 1998 to approximately $150 million, due
primarily to increased investment in the growth of Color Printing and Imaging.
Deferred tax assets declined by $15.7 million due to the reversal of
temporary differences between book and tax income. Other long-term assets
declined by $24.6 million due to the disposition of some of the Company's equity
investments and a decline in the translated U.S. dollar book value of the
Company's business venture in Japan caused by the stronger dollar.
Current liabilities decreased by $61.2 million, primarily due to reductions
in short-term debt and accrued compensation. Short-term debt was reduced by
$38.5 million due to strong operating cash flows. Accrued compensation
decreased by $29.1 million due to the payment of pension liabilities of $39.1
million, partly offset by higher payroll,
Page 17
<PAGE>
incentive and commission accruals. Long-term debt decreased due to the
redemption of $50.0 million of commercial paper that had been classified as
long-term debt in 1996.
Shareholders' equity increased by $96.0 million, or 14%, due to earnings
net of dividends. Additional equity resulting from the Company's issuance of
common stock for the exercise of stock options was offset by declines in
currency adjustment and unrealized holding gains.
DERIVATIVES AND FOREIGN EXCHANGE
The Company has exposure to interest rate risk, primarily from its use of
short-term and long-term borrowings to finance operations, and to investment
risk, primarily from its equity investment portfolio. The Company has not
entered into any significant derivatives to hedge against these interest rate or
investment risks.
The Company is also exposed to exchange rate risk on transactions and
commitments denominated in foreign currencies and uses foreign exchange
contracts to offset this risk. Changes in foreign exchange rates are not
expected to have a significant effect on the Company's financial position,
results of operations or cash flows. The Company's policy is to only enter into
derivative transactions when it has an identifiable exposure to risk, and to
only enter into such transactions with creditworthy financial institutions.
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 $3.43 in 1997 and $2.93 in 1996, based upon average shares
outstanding of 33.5 million and 34.0 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.
FORWARD LOOKING STATEMENTS
Statements and information included in the Chairman's letter and Management
Review that relate to the Company's goals, strategies and expectations as to
future results and events 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. Risk factors include, but are not limited to: worldwide economic and
business conditions in the electronics industry; customer order patterns, demand
and acceptance of new or recently introduced products; competitive factors,
including pricing pressures, technological developments and new products;
changes in product and sales mix; timing of new products; availability of
reasonably priced parts from suppliers; inventory valuation risks; the timing
and importance of orders received during a quarter, making prediction of
quarterly revenues and earnings difficult; currency fluctuations; 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; changes in effective tax rates; and other risk factors listed from
time to time in the Company's Securities and Exchange Commission reports,
including, but not limited to, the quarterly reports on Form 10-Q, the annual
report on Form 10-K and press releases.
Page 18
<PAGE>
MANAGEMENT'S LETTER
The consolidated financial statements of Tektronix, Inc. and subsidiaries have
been prepared by management and have been audited by Tektronix' independent
auditors, Deloitte & Touche LLP, as stated in their independent auditors'
report. Management is responsible for the consolidated financial statements,
which have been prepared in conformity with generally accepted accounting
principles and include amounts based on management's judgment.
Management is also responsible for maintaining internal control, including
systems designed to provide reasonable assurance that assets are safeguarded and
that transactions are executed and recorded in accordance with established
policies and procedures.
Tektronix' controls and systems were developed by Tektronix management and
have the full support and endorsement of the Board of Directors. Compliance is
mandatory.
The Board of Directors is responsible for the Company's financial and
accounting policies, practices and reports. Its Audit Committee, composed
entirely of outside directors, meets regularly with the independent auditors,
representatives of management, and the internal auditors to review accounting,
reporting, auditing and internal control matters. Both the independent auditors
and the internal auditors have free access to the Audit Committee, with and
without management representatives in attendance.
MERILL A. MCPEAK
Chairman, Audit Committee
CARL W. NEUN
Senior Vice President and
Chief Financial Officer
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE DIRECTORS AND SHAREHOLDERS OF TEKTRONIX, INC.:
We have audited the accompanying consolidated balance sheets of Tektronix, Inc.
and subsidiaries as of May 31, 1997 and May 25, 1996, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
the years ended May 31, 1997, May 25, 1996, and May 27, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Tektronix, Inc. and
subsidiaries at May 31, 1997 and May 25, 1996, and the results of their
operations and their cash flows for the years ended May 31, 1997, May 25, 1996,
and May 27, 1995, in conformity with generally accepted accounting principles.
Portland, Oregon
June 23, 1997
Page 19
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
FOR THE YEARS ENDED MAY 31,1997 MAY 25,1996 MAY 27,1995
- --------------------------------------------------------------------------------
Net sales $1,940,082 $1,768,858 $1,497,962
Cost of sales 1,107,355 1,028,331 819,871
---------------------------------------
Gross profit 832,727 740,527 678,091
Research and development expenses 188,192 164,292 166,171
Selling, general and administrative
expenses 481,083 437,949 400,567
Equity in business ventures' earnings 1,556 5,081 4,268
---------------------------------------
Operating income 165,008 143,367 115,621
Interest expense 12,111 13,985 10,203
Other income - net 15,905 12,884 4,744
---------------------------------------
Earnings before taxes 168,802 142,266 110,162
Income taxes 54,017 42,680 28,578
---------------------------------------
Net earnings $ 114,785 $ 99,586 $ 81,584
---------------------------------------
---------------------------------------
Earnings per share $ 3.48 $ 3.00 $ 2.50
Dividends per share $ 0.60 $ 0.60 $ 0.60
Average shares outstanding 33,009 33,197 32,578
The accompanying notes are an integral part of these consolidated financial
statements.
Page 20
<PAGE>
CONSOLIDATED BALANCE SHEETS
IN THOUSANDS
MAY 31,1997 MAY 25,1996
- ----------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 142,726 $ 36,644
Accounts receivable- net 305,832 375,309
Inventories 238,040 264,624
Other current assets 64,913 77,003
-------------------------
Total current assets 751,511 753,580
Property, plant and equipment - net 343,130 307,563
Property held for sale 13,939 18,903
Deferred tax assets 12,540 28,247
Other long-term assets 195,621 220,203
-------------------------
Total assets $1,316,741 $1,328,496
-------------------------
-------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 6,155 $ 44,645
Accounts payable 181,366 178,353
Accrued compensation 90,946 120,044
Deferred revenue 25,622 22,295
-------------------------
Total current liabilities 304,089 365,337
Long-term debt 151,579 201,955
Other long-term liabilities 89,790 85,882
Commitments and contingencies - -
Shareholders' equity:
Preferred stock, no par value
(authorized 1,000 shares; none issued) - -
Common stock, no par value
(authorized 80,000 shares; issued
and outstanding 33,402 in 1997,
and 32,687 in 1996) 226,591 204,370
Retained earnings 473,582 378,606
Currency adjustment 34,447 52,069
Unrealized holding gains - net 36,663 40,277
-------------------------
Total shareholders' equity 771,283 675,322
-------------------------
Total liabilities and shareholders'
equity $1,316,741 $1,328,496
-------------------------
-------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
Page 21
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
IN THOUSANDS
FOR THE YEARS ENDED MAY 31,1997 MAY 25,1996 MAY 27,1995
- -----------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $114,785 $99,586 $81,584
Adjustments to reconcile net earnings
to cash provided (used) by operating
activities:
Depreciation expense 59,591 47,137 40,857
Deferred taxes 14,425 26,041 (966)
Gain on sale of investments (27,678) (20,197) (14,314)
Accounts receivable 66,403 (66,647) (29,991)
Inventories 26,754 (19,681) (64,923)
Other current assets 22,213 864 (8,338)
Accounts payable (179) 1,037 (5,059)
Accrued compensation (28,580) 14,026 24,602
Other liabilities 5,672 (33,622) (22,866)
Other long-term assets 316 (1,424) (48,102)
Other - net 8,607 2,085 (10,516)
------------------------------------
Net cash provided (used) by
operating activities 262,329 49,205 (58,032)
------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and
equipment (112,005) (106,708) (103,818)
Proceeds from sale of fixed assets 9,073 19,776 43,482
Proceeds from sale of investments 33,848 23,263 23,920
------------------------------------
Net cash used by investing
activities (69,084) (63,669) (36,416)
------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in short-term debt (38,451) 7,339 67,092
Issuance of long-term debt 358 50,000 1,396
Repayment of long-term debt (50,609) (3,020) (602)
Issuance of common stock 26,018 18,104 40,480
Repurchase of common stock (3,797) (29,985) (8,382)
Dividends (19,809) (19,944) (18,435)
------------------------------------
Net cash provided (used) by
financing activities (86,290) 22,494 81,549
------------------------------------
Effect of exchange rate changes (873) (3,147) 1,207
------------------------------------
Increase (decrease) in cash and cash
equivalents 106,082 4,883 (11,692)
Cash and cash equivalents at beginning
of year 36,644 31,761 43,453
------------------------------------
Cash and cash equivalents at end of year $142,726 $36,644 $31,761
------------------------------------
------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
Income taxes paid $13,663 $18,669 $10,018
Interest paid 14,633 16,594 13,775
NONCASH INVESTING ACTIVITIES
Fair value adjustment to
securities available-for-sale $(8,373) $47,042 $20,086
Income tax effect related to fair
value adjustment 4,759 (18,817) (8,034)
The accompanying notes are an integral part of these consolidated financial
statements.
Page 22
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
<TABLE>
<CAPTION>
UNREALIZED
C O M M O N S T O C K RETAINED CURRENCY HOLDING
SHARES AMOUNT EARNINGS ADJUSTMENT GAINS - NET TOTAL
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE MAY 28, 1994 32,197 $184,153 $235,815 $52,811 $ - $472,779
Shares issued to
employees 1,179 40,480 40,480
Shares repurchased (293) (8,382) (8,382)
Net earnings 81,584 81,584
Dividends-
$0.60 per share (18,435) (18,435)
Currency adjustment 24,137 24,137
Unrealized holding
gains - net 12,052 12,052
---------------------------------------------------------------------------------
BALANCE MAY 27, 1995 33,083 216,251 298,964 76,948 12,052 604,215
Shares issued to
employees 444 18,104 18,104
Shares repurchased (840) (29,985) (29,985)
Net earnings 99,586 99,586
Dividends -
$0.60 per share (19,944) (19,944)
Currency adjustment (24,879) (24,879)
Unrealized holding
gains - net 28,225 28,225
---------------------------------------------------------------------------------
BALANCE MAY 25, 1996 32,687 204,370 378,606 52,069 40,277 675,322
Shares issued to
employees 782 26,018 26,018
Shares repurchased (67) (3,797) (3,797)
Net earnings 114,785 114,785
Dividends-
$0.60 per share (19,809) (19,809)
Currency adjustment (17,622) (17,622)
Unrealized holding
gains - net (3,614) (3,614)
---------------------------------------------------------------------------------
BALANCE MAY 31, 1997 33,402 $226,591 $473,582 $34,447 $36,663 $771,283
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ACCOUNTING POLICIES
THE COMPANY Tektronix, Inc. ("Tektronix" or "the Company") is a global
high-technology company based on a portfolio of measurement, color printing, and
video and networking businesses. Headquartered in Wilsonville, Oregon, Tektronix
employs 8,400 people and maintains operations in 23 countries outside the United
States. Tektronix was founded in 1946.
FINANCIAL STATEMENT PRESENTATION The consolidated financial statements
include the accounts of Tektronix and its majority-owned subsidiaries.
Investments in joint ventures and minority-owned companies where the Company
exercises significant influence are accounted for on the equity basis.
Significant intercompany transactions and balances have been eliminated.
Certain items have been reclassified to conform with the current year's
presentation with no effect on previously reported earnings. Per share amounts
are based on the weighted average number of shares outstanding during the year.
The presentation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions. These estimates and assumptions affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimated.
FISCAL YEAR The Company's fiscal year is the 52 or 53 weeks ending the last
Saturday in May. Fiscal year 1997 was 53 weeks; fiscal years 1996 and 1995 were
52 weeks.
FOREIGN CURRENCY TRANSLATION For most non-U.S. subsidiaries, the local
currency is the functional currency and, therefore, assets and liabilities are
translated into U.S. dollars at current exchange rates, and net earnings are
translated at average exchange rates for the year. Gains and losses resulting
from the translation of net assets are reported as a separate component of
shareholders' equity. Gains and losses from foreign currency transactions are
included in net earnings.
DERIVATIVES Gains and losses on foreign exchange contracts used to hedge
existing assets and liabilities are recognized in income in the period in which
the related hedged transaction occurs. Gains and losses related to hedges of
firm commitments are deferred and included in the basis of the hedged
transaction when it is completed.
CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash deposits in
banks and highly liquid investments with original maturities of three months or
less at the time of purchase.
INVENTORIES Inventories are stated at the lower of cost or market. Cost is
determined on the first-in, first-out (FIFO) basis.
IN THOUSANDS 1997 1996
- ---------------------------------------------------------------------------
Materials and work in process $134,743 $141,798
Finished goods 103,297 122,826
------------------------
Inventories $238,040 $264,624
------------------------
------------------------
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at
cost. Depreciation is based on the estimated useful lives of the assets,
ranging from ten to forty years for buildings and three to seven years for
machinery and equipment, and is generally provided using the straight-line
method.
IN THOUSANDS 1997 1996
- ----------------------------------------------------------------------------
Land $ 6,096 $ 6,721
Buildings 199,396 194,644
Machinery and equipment 493,791 475,178
------------------------
699,283 676,543
Accumulated depreciation and amortization (356,153) (368,980)
------------------------
Property, plant and equipment - net $343,130 $307,563
------------------------
------------------------
Property held for sale is stated at the lower of cost or estimated fair value
less costs to sell and includes certain properties no longer used in the
Company's operations.
INVESTMENTS Investments in marketable equity securities are classified as
available-for-sale and reported at fair value in the consolidated balance sheets
under other long-term assets. The unrealized holding gains and losses are
excluded from earnings and reported, net of deferred income taxes, as a separate
component of shareholders' equity.
INTANGIBLE ASSETS Intangible assets are included in other long-term assets at
cost. Amortization is provided on a straight-line basis over periods generally
not exceeding ten years. Intangible assets are continually reviewed to
determine that the carrying values have not been impaired.
INCOME TAXES Deferred income taxes, reflecting the impact of temporary
differences between the assets and liabilities recognized for financial
reporting purposes and amounts recognized for tax purposes, are based on tax
laws currently enacted.
Page 24
<PAGE>
Deferred tax assets are reduced by a valuation allowance when it is more likely
than not that some portion of the deferred tax assets will not be realized.
ENVIRONMENTAL COSTS The Company accrues environmental costs when it is
probable that the Company has incurred a liability and the amount can be
reasonably estimated. Environmental costs are expensed or capitalized, as
appropriate, depending on their future economic benefit.
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 $3.43 in
1997 and $2.93 in 1996, based upon average shares outstanding of 33.5 million
and 34.0 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.
BUSINESS SEGMENTS
The Company and its affiliates operate predominately in a single industry
segment: the design, manufacture, sale and service of electronic measurement,
design and display instruments and systems used in science, industry and
education. Geographically, the Company operates primarily in the industrialized
world. Net sales, earnings before taxes and total assets in the United States,
Europe and other geographical areas were:
IN THOUSANDS 1997 1996 1995
- -----------------------------------------------------------------------------
Net sales:
United States sales to customers $1,027,294 $ 890,930 $ 766,991
United States export sales to customers 258,984 271,446 224,657
United States transfers to affiliates 824,520 720,969 434,959
-----------------------------------
United States sales 2,110,798 1,883,345 1,426,607
-----------------------------------
European sales to customers 483,949 470,840 392,070
European transfers to affiliates 5,006 3,183 3,783
-----------------------------------
European sales 488,955 474,023 395,853
-----------------------------------
Other area sales to customers 169,855 135,642 114,244
Other area transfers to affiliates 22,975 23,815 15,184
-----------------------------------
Other area sales 192,830 159,457 129,428
-----------------------------------
Eliminations (852,501) (747,967) (453,926)
-----------------------------------
Net sales $1,940,082 $1,768,858 $1,497,962
-----------------------------------
-----------------------------------
Earnings before taxes:
United States $ 178,930 $ 124,618 $ 123,800
Europe 33,093 25,867 (6,618)
Other areas (8,555) 8,174 6,678
Corporate and eliminations (34,666) (16,393) (13,698)
-----------------------------------
Earnings before taxes $ 168,802 $ 142,266 $ 110,162
-----------------------------------
-----------------------------------
Total assets:
United States $ 991,928 $ 988,578 $ 851,435
Europe 181,757 198,220 217,808
Other areas 89,663 69,883 47,530
Corporate and eliminations 53,393 71,815 101,529
-----------------------------------
Total assets $1,316,741 $1,328,496 $1,218,302
-----------------------------------
-----------------------------------
Transfers of products and services are made at arms-length prices between
geographic areas. The profit on transfers between geographic areas is not
recognized until sales are made to unaffiliated customers. Area earnings before
taxes include all directly incurred and allocable costs, except identified
corporate expenses. Assets are those that are specifically associated with the
operations of each geographic area.
Net sales to the United States government were not more than 2% of net
sales in any of the past three years, and no other customer accounted for more
than 2% of net sales.
NON-U.S. AFFILIATES
The Company has operating subsidiaries located in Australia, Austria, Belgium,
Brazil, Canada, China, Denmark, Finland, France, Germany, India, Italy, Japan,
Korea, Mexico, The Netherlands, Norway, Singapore, Spain, Sweden, Switzerland,
Taiwan, and the United Kingdom. The assets, liabilities, net
Page 25
<PAGE>
sales and net earnings of non-U.S. subsidiaries are included in the consolidated
financial statements in these amounts:
IN THOUSANDS 1997 1996 1995
- ------------------------------------------------------------------------------
Current assets $214,776 $207,333 $223,651
Property, plant and equipment - net 39,631 34,295 28,214
Other long-term assets 11,612 11,835 18,420
Current liabilities 65,769 65,303 93,104
Other long-term liabilities 21,486 18,030 33,991
---------------------------------
Net sales $653,804 $606,482 $506,314
Gross profit 125,440 132,237 130,598
Operating income 27,585 36,502 4,192
Earnings before taxes 24,538 34,041 60
Net earnings (loss) 13,656 22,738 (908)
The Company has a 50% investment in a business venture in Japan. The Company's
share of the assets, liabilities, net sales and net earnings of this business
venture, as well as the Company's arms-length sales to, purchases from, and
accounts receivable consisted of:
IN THOUSANDS 1997 1996 1995
- ------------------------------------------------------------------------------
Current assets $ 55,322 $ 74,946 $ 84,787
Property, plant and equipment - net 19,913 23,371 28,080
Other long-term assets 12,129 12,743 14,123
Current liabilities 18,511 32,775 29,002
Other long-term liabilities 8,988 9,323 10,148
---------------------------------
Net sales $152,054 $147,860 $113,645
Gross profit 40,742 44,756 40,246
Operating income (loss) 3,068 113 (1,422)
Earnings before taxes 2,792 53 204
Net earnings (loss) 1,184 (306) (28)
---------------------------------
Sales to $112,770 $114,307 $83,217
Purchases from 19,596 13,650 10,259
Accounts receivable 9,866 9,524 5,199
There are no significant restrictions that prevent dividends to the parent
company from non-U.S. affiliates. The Company received dividends from business
ventures of $0.6 million in 1997 and $4.7 million in 1996. There were no
dividends received in 1995.
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.
Receivables of $50.0 million sold under this agreement are reflected as a
reduction of accounts receivable in the balance sheet at May 31, 1997, and as
operating cash flows in the statements of cash flows for the year ended May 31,
1997.
Accounts receivable have been reduced by an allowance for doubtful accounts,
which was $3.1 million in 1997 and $6.3 million in 1996. The net charges to this
reserve have not been material.
OTHER LONG-TERM ASSETS
IN THOUSANDS 1997 1996
- ---------------------------------------------------------------------------
Investment in business ventures $ 85,696 $ 97,409
Investment in marketable equity securities 66,709 78,117
Licensing agreements and other intangibles - net 37,151 28,873
Other 6,065 15,804
-----------------------
Other long-term assets $195,621 $220,203
-----------------------
-----------------------
Investment in business ventures includes the business venture in Japan discussed
in the "Non-U.S. Affiliates" note and a 35% interest in Merix Corporation. At
May 31, 1997, the carrying value of the Company's investment in Merix was $21.1
million, with a fair value, based upon quoted market price, of $34.2 million.
The Company's portion of the undistributed earnings of the business ventures was
$20.2 million in 1997 and $19.2 million in 1996.
Proceeds from the sales of marketable equity securities in 1997, 1996 and
1995 were $33.8 million, $23.3 million and $23.9 million, respectively.
Realized gains were computed based on the average cost of the underlying
securities and are disclosed in the "Other Income - Net" note. At the end of
1997, 1996 and 1995, net unrealized holding gains of $58.8 million, $67.2
million and $20.1 million (less deferred taxes of $22.1 million, $26.9 million
and $8.0 million), respectively, were included as a separate component of
shareholders' equity.
Licensing agreements and other intangibles have been reduced by accumulated
amortization of $17.5 million in 1997 and $10.9 million in 1996.
SHORT-TERM AND LONG-TERM DEBT
The Company's short-term debt consisted of:
IN THOUSANDS 1997 1996
- ----------------------------------------------------------------------------
Lines of credit $4,486 $12,564
Commercial paper - 30,663
---------------------
Short-term instruments 4,486 43,227
Current maturities of long-term debt 1,669 1,418
---------------------
Short-term debt $6,155 $44,645
---------------------
---------------------
Page 26
<PAGE>
The Company has a $150.0 million revolving credit agreement with Morgan Guaranty
Trust Company of New York, as agent, that matures in July 2001. The Company has
an agreement with U.S. National Bank of Oregon to issue up to $100.0 million in
commercial paper, backed by the revolving credit agreement. At May 31, 1997, the
Company maintained bank credit facilities of $300.3 million, of which $293.4
million was unused. Unused facilities include $143.4 million in lines of credit
and $150.0 million under the revolving credit agreement. A $20.0 million line of
credit expires in October 1997 with all remaining lines providing no specific
expiration date.
The Company's long-term debt consisted of:
IN THOUSANDS 1997 1996
- ----------------------------------------------------------------------------
7.5% Notes due August 1, 2003 $100,000 $100,000
7.625% Notes due August 15, 2002 50,000 50,000
Other long-term agreements 3,248 3,387
Commercial paper - 49,986
-----------------------
Long-term instruments 153,248 203,373
Current maturities (1,669) (1,418)
-----------------------
Long-term debt $151,579 $201,955
-----------------------
-----------------------
Certain of the Company's debt agreements require the maintenance of specified
interest rate coverage ratios and a minimum consolidated tangible net worth. At
May 31, 1997, the Company had unrestricted retained earnings of $167.1 million
after meeting those requirements.
Aggregate long-term debt payments will be $1.7 million in 1998, $1.2
million in 1999, $0.3 million in 2000, $0.1 million in 2001 and none in 2002.
OTHER LONG-TERM LIABILITIES
IN THOUSANDS 1997 1996
- --------------------------------------------------------------------------------
Accrued postretirement benefits $41,778 $46,953
Accrued pension 30,019 23,037
Other 17,993 15,892
---------------------
Other long-term liabilities $89,790 $85,882
---------------------
---------------------
OTHER INCOME - NET
IN THOUSANDS 1997 1996 1995
- --------------------------------------------------------------------------------
Gain on sale of marketable equity securities $27,678 $20,197 $14,314
Loss on disposition of fixed assets (5,031) (1,844) (447)
Currency losses (753) (1,322) (2,231)
Other (5,989) (4,147) (6,892)
-------------------------------
Other income - net $15,905 $12,884 $ 4,744
-------------------------------
-------------------------------
COMMITMENTS AND CONTINGENCIES
The Company leases a portion of its capital equipment and certain of its
facilities under operating leases that expire at various dates. Rental expense
was $27.4 million in 1997, $25.3 million in 1996, and $28.0 million in 1995. In
addition, the Company has long-term or minimum purchase agreements with various
suppliers. The future minimum obligations under operating leases and other
commitments having an initial or remaining noncancelable term in excess of one
year as of May 31, 1997 were:
IN THOUSANDS OPERATING LEASES COMMITMENTS
- ------------------------------------------------------------------------
1998 $16,518 $ 8,257
1999 12,764 4,287
2000 7,114 3,856
2001 4,849 1,424
2002 3,658 -
Future years 18,563 -
----------------------
Total $63,466 $17,824
----------------------
----------------------
In the normal course of business, the Company and its subsidiaries are parties
to various legal claims, actions and complaints, including matters involving
patent infringement and other intellectual property claims. Although it is not
possible to predict with certainty whether or not the Company and its
subsidiaries will ultimately be successful in any of these legal matters or, if
not, what the impact might be, the Company believes that disposition of these
matters will not have a material adverse effect on the Company's financial
position, results of operations or cash flows.
SHAREHOLDERS' EQUITY
STOCK OPTION AND INCENTIVE COMPENSATION PLANS The Company has stock option
plans for selected employees. There were 4,085,000 shares reserved for issuance
under these plans at May 31, 1997. Under the terms of the plans, incentive stock
options are granted at an option price not less than the market value at the
date of grant. Nonqualified stock options may not be granted at less than 100%
of the market value on the valuation date selected by the Board of Directors.
Options granted prior to January 1, 1997, generally vest over four years and
expire ten years from the date of grant. Certain options granted after January
1, 1997, vest over two years and expire five years from the date of grant.
There were 1,025 employees holding options at May 31, 1997.
Page 27
<PAGE>
Additional information with respect to option activity is set forth below:
OUTSTANDING EXERCISABLE
------------------------- -------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER EXERCISE NUMBER EXERCISE
OPTIONS IN THOUSANDS OF SHARES PRICE OF SHARES PRICE
- ----------------------------------------------------------------------------
May 28, 1994 2,866 $21 1,262 $20
Granted 812 36
Exercised (1,102) 20
Canceled (217) 25
---------------------------------------------------
May 27, 1995 2,359 $26 868 $21
Granted 980 45
Exercised (501) 22
Canceled (190) 35
---------------------------------------------------
May 25, 1996 2,648 $34 989 $25
Granted 725 48
Exercised (650) 26
Canceled (141) 41
---------------------------------------------------
May 31, 1997 2,582 $39 952 $31
---------------------------------------------------
---------------------------------------------------
The following table summarizes information about options outstanding and
exercisable at May 31, 1997:
OPTIONS IN THOUSANDS
OUTSTANDING EXERCISABLE
-------------------------------------- ---------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OF SHARES LIFE PRICE OF SHARES PRICE
- ----------------------------------------------------------------------------
$13 - 19 55 4.4 years $17 55 $17
20 - 29 503 5.5 years 24 418 24
31 - 46 1,398 8.2 years 40 403 37
49 - 60 626 5.5 years 52 76 51
- ---------------------------------------------------------------------------
2,582 6.9 years $39 952 $31
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
The Company has elected to continue to account for stock options according to
APB Opinion No. 25, "Accounting for Stock Issued to Employees." Under APB No.
25, no compensation expense is recognized in the Company's consolidated
financial statements for employee stock options because the exercise price of
the options equals the market price of the underlying stock on the date of
grant. Alternatively, under the fair value method of accounting provided for by
SFAS No. 123, "Accounting for Stock-Based Compensation," the measurement of
compensation expense is based on the fair value of employee stock options at the
grant date and requires the use of option pricing models to value the options.
The weighted average estimated fair value of options granted during 1997 and
1996 was $17 and $15 per share, respectively.
The Company also has plans for certain executives that provide for stock
awards based on financial performance over one- and three-year periods. Under
APB No. 25, compensation expense is measured based on the market price of the
stock at the date the terms of the award become fixed. Under the fair value
approach of SFAS No. 123, compensation expense is measured based on the market
price of the stock at the grant date. The weighted average grant-date fair value
of performance-based stock awards granted during 1997 and 1996 was $46 and $38
per share, respectively. The total shares issued under these plans and the
corresponding compensation expense recognized in income was not material for
both 1997 and 1996.
The pro forma impact to both net earnings and earnings per share from
calculating stock-related compensation expense consistent with the fair value
alternative of SFAS No. 123 is indicated below:
1997 1996
- ---------------------------------------------------------------
Pro forma net earnings (in thousands) $109,240 $97,015
Pro forma earnings per share $ 3.31 $ 2.92
The fair value of each option was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted average
assumptions:
1997 1996
- ----------------------------------------------------------------
Expected life (in years) 5.0 5.0
Risk-free interest rate 6.3% 5.7%
Volatility 35.2% 33.9%
Dividend yield 1.3% 1.4%
For purposes of the pro forma disclosures, the estimated fair value of the
stock-based awards is amortized over the vesting period. Because SFAS No. 123
is applicable only to awards granted after May 27, 1995, the pro forma effect
will not be fully reflected until 1999.
SHAREHOLDER RIGHTS AGREEMENT In August 1990, the Company's Board of Directors
approved a shareholder rights agreement and declared a dividend of one right for
each outstanding common share. Each right entitles the holder to purchase one
one-thousandth of a share of no par preferred stock at an exercise price of $60,
subject to adjustment. Generally, the rights become exercisable ten days after a
person or group acquires or commences a tender offer that would result in
beneficial ownership of 20% or more of the common shares. In addition, the
rights become exercisable if any party becomes the beneficial owner of 10% or
more of the outstanding common shares and is determined by the Board to be an
adverse party. Upon the occurrence of certain additional events specified in the
shareholder rights agreement, each right would entitle its holder to purchase
common shares of the Company (or, in some cases, a potential acquiring company)
or other property having a value of twice the right's exercise price. The
rights, which are not currently exercisable, expire in September 2000, but may
be redeemed by action of the Board prior to that time, under certain
circumstances, for $0.01 per right.
Page 28
<PAGE>
BENEFIT PLANS
PENSION PLANS The Company has defined benefit retirement plans covering most
employees. Benefits upon retirement or termination are based on length of
service and final average compensation at retirement.
The Company's funding policy is to contribute amounts determined annually
on an actuarial basis that provide for current and future benefits in accordance
with funding requirements of applicable laws and regulations of the countries in
which the plans are located. Assets of funded benefit plans are held primarily
in trust accounts. The majority of the assets are invested in common stocks,
bonds and real estate, with the balance primarily in cash and short-term
investments.
The following tables set forth the funded status and the amounts recognized
in the consolidated financial statements for the Company's defined benefit
retirement plans:
1997
-------------------------
ASSETS ACCUMULATED
EXCEED BENEFITS
ACCUMULATED EXCEED
IN THOUSANDS BENEFITS ASSETS
- --------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Vested benefit obligation $422,737 $12,794
-----------------------
-----------------------
Accumulated benefit obligation $428,453 $15,093
-----------------------
-----------------------
Projected benefit obligation $478,503 $17,442
Plan assets at fair value 474,222 -
-----------------------
Projected benefit obligation in excess of plan assets 4,281 17,442
Unrecognized initial net asset (obligation) 3,415 (1,680)
Unrecognized prior service cost 10,529 (695)
Unrecognized net gain (loss) (10,490) 2,349
-----------------------
Pension liability $ 7,735 $17,416
-----------------------
-----------------------
1996
-------------------------
ASSETS ACCUMULATED
EXCEED BENEFITS
ACCUMULATED EXCEED
IN THOUSANDS BENEFITS ASSETS
- --------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Vested benefit obligation $48,647 $391,149
----------------------
----------------------
Accumulated benefit obligation $52,672 $399,571
----------------------
----------------------
Projected benefit obligation $61,329 $453,778
Plan assets at fair value 55,982 349,571
----------------------
Projected benefit obligation in excess of plan assets 5,347 104,207
Unrecognized initial net asset (obligation) (342) 4,255
Unrecognized prior service cost (715) 7,943
Unrecognized net loss (6,398) (58,968)
----------------------
Pension (asset) liability $(2,108) $ 57,437
----------------------
----------------------
Assumptions used in the accounting for the defined benefit plans were:
<TABLE>
<CAPTION>
1997 1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Overall weighted average discount rates 7.8% 7.6% 8.1%
Overall rates of increase in compensation levels 3.8% 3.8% 4.8%
Expected long-term rate of return on plan assets 10.2% 9.3% 9.3%
Net pension expense includes the following components:
IN THOUSANDS 1997 1996 1995
- -----------------------------------------------------------------------------------------------
Service cost $12,084 $ 9,469 $ 8,983
Interest cost 37,627 37,414 33,693
Actual return on plan assets (56,863) (76,138) (36,587)
Net amortization and deferral 17,585 40,948 3,987
--------------------------------------
Net periodic pension expense 10,433 11,693 10,076
Other benefit plans 1,327 1,454 928
--------------------------------------
Net pension expense $11,760 $13,147 $11,004
--------------------------------------
--------------------------------------
</TABLE>
POSTRETIREMENT BENEFITS In 1995, the Company modified its postretirement
welfare programs to eliminate company-paid benefits for employees who retire
after July 31, 1995. Subsidies provided to pre-1995 retirees were phased out
gradually and were eliminated effective January 1, 1997. Current and future
retirees who have accumulated certain insurance credits, however, may continue
to apply them toward the purchase of medical and life insurance benefits. These
revisions resulted in an unrecognized prior service cost gain of $26.7 million
that will be amortized over ten years as a reduction in postretirement benefit
expense.
The status of the Company's unfunded postretirement benefit obligation was:
IN THOUSANDS 1997 1996
- ---------------------------------------------------------------------------
Accumulated postretirement benefit obligation (APBO):
Current retirees $ 9,459 $10,453
Active employees eligible to retire 3,067 3,467
Other active employees 2,544 3,033
----------------------
Total accumulated obligation 15,070 16,953
Unrecognized net gain 11,110 10,532
Unrecognized prior service cost gain 18,697 21,368
----------------------
Accrued postretirement benefits $44,877 $48,853
----------------------
----------------------
Page 29
<PAGE>
The net postretirement benefit credit includes the following components:
IN THOUSANDS 1997 1996 1995
- ----------------------------------------------------------------------------
Service cost $ 177 $ 168 $ 184
Interest cost 1,244 1,359 1,286
Net amortization (3,302) (3,385) (3,587)
--------------------------------------
Postretirement benefit credit $(1,881) $(1,858) $(2,117)
--------------------------------------
--------------------------------------
The discount rate and rate of salary increase used in determining the APBO for
1997 was 8.0% and 3.8%, respectively. For 1996, these rates were 7.8% and 3.8%.
The health care cost trend rates used in measuring the APBO at May 31, 1997,
ranged from 7.8% to 9.8%, depending on the specific plan, and are assumed to
decrease gradually until they reach 5.3% to 5.8% in the year 2006 and remain at
5.3% thereafter. The health care cost trend rates in 1996 ranged from 8.2% to
10.8%, and were assumed to decline to 5.3% over a similar period. The health
care cost trend rate assumptions can have a significant effect on the amounts
reported. However, because of the plan amendments adopted in 1995, increasing
the assumptions by one percent would not have a material impact on either the
APBO at May 31, 1997, or the postretirement benefit credit for 1997.
EMPLOYEE SAVINGS PLAN The Company has an employee savings plan that qualifies
as a deferred salary arrangement under Section 401(k) of the Internal Revenue
Code. Participating U.S. employees may defer up to 15% of their compensation,
subject to certain regulatory limitations. Employee contributions are invested,
at the employees' direction, among a variety of investment alternatives. The
Company matches the contributions up to 3% of compensation. In addition, the
Company makes a contribution to the plan for each qualifying employee equal to
2% of compensation. The Company's contributions, which are invested entirely in
Company stock, were approximately $14.2 million in 1997, $12.1 million in 1996,
and $11.1 million in 1995.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company utilizes derivative financial instruments to reduce the impact of
foreign exchange risks where internal netting strategies cannot be effectively
employed. The Company does not hold or issue derivative financial instruments
for trading purposes. The Company's derivative activities do not create risk
because fluctuations in the value of the instruments used for hedging purposes
are offset by fluctuations in the value of the underlying exposures being
hedged.
The notional or contract amounts of the hedging instruments do not
represent amounts exchanged by the parties and, thus, are not a measure of the
Company's exposure due to the use of derivatives. The amounts exchanged are
calculated on the basis of the notional amounts and other terms of the
instruments. The Company is exposed to credit-related losses in the event of
nonperformance by counterparties to financial instruments. However, the Company
has entered into these instruments with creditworthy financial institutions and
considers the risk of nonperformance to be remote.
FOREIGN EXCHANGE RISK MANAGEMENT The Company uses foreign exchange contracts
to hedge its exchange rate risks. At the end of 1997 and 1996, the notional
amount of the Company's outstanding contracts was $32.1 million and $97.6
million, respectively. Generally, these contracts have maturities that do not
exceed one year and require the Company to exchange foreign currencies for U.S.
dollars at maturity. The purpose of the Company's hedging activities is to
reduce the risk that the eventual cash flows of the underlying assets,
liabilities and firm commitments will be adversely affected by changes in
exchange rates. The unrecognized loss attributable to foreign exchange contracts
at May 31, 1997 was $0.2 million.
FAIR VALUE OF FINANCIAL INSTRUMENTS
For short-term financial instruments, including cash and cash equivalents,
accounts receivable, short-term debt, accounts payable and accrued compensation,
the carrying amount approximates the fair value because of the immediate or
short-term nature of those instruments. The fair value of marketable equity
securities is based on quoted market prices at the reporting date. The fair
value of long-term receivables and long-term debt is estimated based on quoted
market prices for similar instruments or by discounting expected cash flows at
rates currently available to the Company for instruments with similar risks and
maturities. The differences between the fair values and carrying amounts of the
Company's financial instruments, including derivatives, at May 31, 1997, and May
25, 1996, were not material.
Page 30
<PAGE>
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of trade accounts receivable. The risk is
limited due to the large number of entities comprising the Company's customer
base and their dispersion across many different industries and geographies. At
May 31, 1997, the Company had no significant concentrations of credit risk.
INCOME TAXES
The components of earnings before taxes on a geographical basis are contained in
the "Business Segments" note. The provision for income taxes consisted of:
IN THOUSANDS 1997 1996 1995
- ----------------------------------------------------------------------------
Current:
Federal $21,457 $ 9,104 $17,779
State 3,742 1,961 4,041
Non-U.S. 7,854 10,789 6,624
--------------------------------------
33,053 21,854 28,444
Deferred:
Federal 15,921 16,363 4,649
State 2,015 3,338 641
Non-U.S. 3,028 1,125 (5,156)
--------------------------------------
20,964 20,826 134
--------------------------------------
Total provision $54,017 $42,680 $28,578
--------------------------------------
--------------------------------------
The provisions differ from the amounts that would result by applying the U.S.
statutory rate to earnings before taxes. A reconciliation of the difference is:
IN THOUSANDS 1997 1996 1995
- ----------------------------------------------------------------------------
Income taxes based on U.S.
statutory rate $59,081 $49,793 $38,557
Foreign sales corporations (5,935) (4,565) (3,196)
Change in beginning of year
valuation allowance (3,824) (5,526) (6,842)
State income taxes, net of U.S. tax 3,742 3,445 3,043
Other - net 953 (467) (2,984)
--------------------------------------
Total provision $54,017 $42,680 $28,578
--------------------------------------
--------------------------------------
Tax benefits of $5.6 million, $5.0 million and $7.3 million associated with the
exercise of employee stock options were credited to equity in 1997, 1996 and
1995, respectively.
Net deferred tax assets and liabilities are included in the following
consolidated balance sheet accounts:
IN THOUSANDS 1997 1996
- ---------------------------------------------------------------------------
Other current assets $43,106 $40,410
Deferred tax assets 12,540 28,247
----------------------
Net deferred tax assets $55,646 $68,657
----------------------
----------------------
The temporary differences and carryforwards that give rise to deferred tax
assets and liabilities were as follows:
IN THOUSANDS 1997 1996
- ------------------------------------------------------------------------------
Deferred tax assets:
Reserves and other liabilities $ 41,858 $ 48,544
Accrued postretirement benefits 17,502 19,053
AMT and foreign tax credit carryforwards 14,088 20,932
Net operating losses of non-U.S. subsidiaries 10,432 12,727
Accumulated depreciation 9,918 14,999
Accrued pensionliability 6,289 3,765
-----------------------
Gross deferred tax assets 100,087 120,020
Less valuation allowance (3,105) (6,929)
-----------------------
Deferred tax assets 96,982 113,091
Deferred tax liabilities:
Unrealized gains on marketable equity securities (22,092) (26,851)
Software development costs (17,464) (11,993)
Unamortized LIFO reserve (1,780) (5,590)
-----------------------
Deferred tax liabilities (41,336) (44,434)
-----------------------
Net deferred tax assets $55,646 $68,657
-----------------------
-----------------------
At May 31, 1997, there were $3.4 million of unused foreign tax credits that, if
not used, will expire in 1998. There were $10.7 million of alternative minimum
tax (AMT) credits that can be carried forward indefinitely.
U.S. taxes have not been provided on $99.5 million of accumulated
unremitted earnings of non-U.S. subsidiaries because such earnings are or will
be reinvested in operations or will be offset by appropriate credits for foreign
income taxes paid.
Page 31
<PAGE>
QUARTERLY FINANCIAL DATA (UNAUDITED)
In the opinion of management, this unaudited quarterly financial summary
includes all adjustments necessary to present fairly the results for the periods
represented (in thousands, except per share amounts):
AUG. 31, NOV. 30, MAR. 1, MAY 31,
QUARTER ENDED 1996 1996 1997 1997
- -------------------------------------------------------------------------------
Net sales $440,115 $477,166 $478,886 $543,915
Gross profit 191,272 199,762 205,233 236,460
Operating income 32,874 38,452 41,255 52,427
Earnings before taxes 33,405 38,905 42,297 54,195
Net earnings 22,715 26,456 28,762 36,852
Earnings per share $ 0.69 $ 0.81 $ 0.87 $ 1.11
Dividends per share 0.15 0.15 0.15 0.15
Common stock prices:
High $ 44.88 $ 49.00 $ 52.25 $ 59.75
Low 35.88 37.00 47.38 48.38
AUG. 26, NOV. 25, FEB. 24, MAY 25,
QUARTER ENDED 1995 1995 1996 1996
- -------------------------------------------------------------------------------
Net sales $401,022 $443,598 $433,500 $490,738
Gross profit 169,940 186,672 179,835 204,080
Operating income 32,059 39,054 31,451 40,803
Earnings before taxes 32,385 37,587 32,068 40,226
Net earnings 22,670 26,310 22,448 28,158
Earnings per share $ 0.68 $ 0.79 $ 0.67 $ 0.86
Dividends per share 0.15 0.15 0.15 0.15
Common stock prices:
High $ 52.38 $ 61.88 $ 57.38 $ 46.88
Low 41.50 43.88 40.75 29.75
The Company's common stock is traded on the New York and Pacific Stock
Exchanges. There were 4,059 shareholders of record at June 23, 1997. The market
prices quoted above are the composite prices reported by The Wall Street Journal
rounded to full cents per share.
Dividends are paid at the discretion of the Board of Directors dependent
upon their judgment of the Company's future earnings, expenditures and financial
condition.
Page 32
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF TEKTRONIX, INC.
Percentage of Voting
Name of Subsidiary and Securities Owned by
Jurisdiction in Which Organized Immediate Parent
Tektronix Ges.m.b.H. (Austria) 100%
Tektronix GmbH (Germany) 100
Tektronix Canada Inc. (Canada) 100
Tektronix Australia Pty. Limited (Australia) 100
Tektronix S.A.(France) 100
Tektronix N.V. (Belgium) 100
Tektronix, S.A. de C.V. (Mexico) 100
Tektronix A/S (Denmark) 100
Tektronix S.p.A. (Italy) 100
Tektronix Norge A/S (Norway) 100
Tektronix AB (Sweden) 100
Tektronix Oy (Finland) 100
Tektronix Industria e Comercio Ltda. (Brazil) 100
Tektronix Holland N.V. (The Netherlands) 100
Tektronix International A.G. (Switzerland) 100
Tektronix Europe B.V. (The Netherlands) 100
Tektronix U.K. Limited (United Kingdom) 100
Tektronix U.K. Development Centre Limited 100
(United Kingdom)
Tektronix Espanola, S.A. (Spain) 100
GVG Japan, Ltd. (Japan) 100
Tektronix Foreign Sales Corporation (Guam) 100
Tektronix China, Limited (Hong Kong) 100
Tektronix Hong Kong Limited (Hong Kong) 100
Tektronix Electronics (China) Co., Ltd. (China) 100
Tektronix Taiwan, Ltd. (Taiwan) 100
Tektronix Southeast Asia Pte Ltd (Singapore) 100
Tektronix Engineering Development (India) Private 100
Limited (India)
Tektronix Korea, Ltd. (Korea) 100
Tektronix Development Company (Oregon) 100
Tektronix International, Inc. (Oregon) 100
Tektronix Properties, Inc. (Oregon) 100
Tektronix Federal Systems, Inc. (Oregon) 100
Tektronix Asia, Ltd. (Oregon) 100
Tektronix Export, Inc.(Oregon) 100
- --------------------------------------------------------------------
Subsidiaries - Less than 100% Ownership
(Parent Company/Oregon Corp. listed above):
Yangzhong Tektronix Electronic Instrument Co., Ltd. 70
(China)
Shanghai Tektronix Electronic Instrument Co., Ltd. 65
(China)
Chongqing Tektronix Electronic Instrument Co., Ltd. 60
(China)
Tektronix (India) Limited (India) 62
Sony/Tektronix Corporation (Japan) 50
MAXTEK Components Corporation 50
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-59171, 33-58511, 33-33496, and 33-30648 of Tektronix, Inc. on Form S-8
and Registration Statement Nos. 33-58635, 33-58513, 33-18658, and 33-59648
of Tektronix, Inc. on Form S-3 of our report dated June 23, 1997, incorporated
by reference in this Annual Report on Form 10-K of Tektronix, Inc. for the
year ended May 31, 1997.
DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Portland, Oregon
August 20, 1997
<PAGE>
POWER OF ATTORNEY
The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN and JOHN
P. KARALIS and each of them, as the undersigned's true and lawful attorneys and
agents, with full power of substitution and resubstitution for the undersigned
and in the undersigned's name, place and stead, in any and all capacities, to
sign the Tektronix, Inc. Annual Report on Form 10-K for the year ended May 31,
1997 and any and all amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys and agents, and each of them,
full power and authority to do any and all acts and things necessary or
advisable to be done, as fully and to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that said attorneys and agents or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: August 20, 1997 PAUL C. ELY, JR.
-------------------------
Paul C. Ely, Jr.
<PAGE>
POWER OF ATTORNEY
The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN and JOHN
P. KARALIS and each of them, as the undersigned's true and lawful attorneys and
agents, with full power of substitution and resubstitution for the undersigned
and in the undersigned's name, place and stead, in any and all capacities, to
sign the Tektronix, Inc. Annual Report on Form 10-K for the year ended May 31,
1997 and any and all amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys and agents, and each of them,
full power and authority to do any and all acts and things necessary or
advisable to be done, as fully and to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that said attorneys and agents or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: August 18, 1997 A.M. GLEASON
--------------
A. M. Gleason
<PAGE>
POWER OF ATTORNEY
The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN and JOHN
P. KARALIS and each of them, as the undersigned's true and lawful attorneys and
agents, with full power of substitution and resubstitution for the undersigned
and in the undersigned's name, place and stead, in any and all capacities, to
sign the Tektronix, Inc. Annual Report on Form 10-K for the year ended May 31,
1997 and any and all amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys and agents, and each of them,
full power and authority to do any and all acts and things necessary or
advisable to be done, as fully and to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that said attorneys and agents or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: August 20, 1997 WAYLAND R. HICKS
----------------
Wayland R. Hicks
<PAGE>
POWER OF ATTORNEY
The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN and JOHN
P. KARALIS and each of them, as the undersigned's true and lawful attorneys and
agents, with full power of substitution and resubstitution for the undersigned
and in the undersigned's name, place and stead, in any and all capacities, to
sign the Tektronix, Inc. Annual Report on Form 10-K for the year ended May 31,
1997 and any and all amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys and agents, and each of them,
full power and authority to do any and all acts and things necessary or
advisable to be done, as fully and to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that said attorneys and agents or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: August 20, 1997 JEROME J. MEYER
---------------
Jerome J. Meyer
<PAGE>
POWER OF ATTORNEY
The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN and JOHN
P. KARALIS and each of them, as the undersigned's true and lawful attorneys and
agents, with full power of substitution and resubstitution for the undersigned
and in the undersigned's name, place and stead, in any and all capacities, to
sign the Tektronix, Inc. Annual Report on Form 10-K for the year ended May 31,
1997 and any and all amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys and agents, and each of them,
full power and authority to do any and all acts and things necessary or
advisable to be done, as fully and to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that said attorneys and agents or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: August 15, 1997 KEITH R. McKENNON
-------------------
Keith R. McKennon
<PAGE>
POWER OF ATTORNEY
The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN and JOHN
P. KARALIS and each of them, as the undersigned's true and lawful attorneys and
agents, with full power of substitution and resubstitution for the undersigned
and in the undersigned's name, place and stead, in any and all capacities, to
sign the Tektronix, Inc. Annual Report on Form 10-K for the year ended May 31,
1997 and any and all amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys and agents, and each of them,
full power and authority to do any and all acts and things necessary or
advisable to be done, as fully and to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that said attorneys and agents or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: August 20, 1997 A. GARY AMES
--------------
A. Gary Ames
<PAGE>
POWER OF ATTORNEY
The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN and JOHN
P. KARALIS and each of them, as the undersigned's true and lawful attorneys and
agents, with full power of substitution and resubstitution for the undersigned
and in the undersigned's name, place and stead, in any and all capacities, to
sign the Tektronix, Inc. Annual Report on Form 10-K for the year ended May 31,
1997 and any and all amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys and agents, and each of them,
full power and authority to do any and all acts and things necessary or
advisable to be done, as fully and to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that said attorneys and agents or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: August 20, 1997 WILLIAM D. WALKER
-----------------
William D. Walker
<PAGE>
POWER OF ATTORNEY
The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN and JOHN
P. KARALIS and each of them, as the undersigned's true and lawful attorneys and
agents, with full power of substitution and resubstitution for the undersigned
and in the undersigned's name, place and stead, in any and all capacities, to
sign the Tektronix, Inc. Annual Report on Form 10-K for the year ended May 31,
1997 and any and all amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys and agents, and each of them,
full power and authority to do any and all acts and things necessary or
advisable to be done, as fully and to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that said attorneys and agents or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: August 18, 1997 GERRY B. CAMERON
----------------
Gerry B. Cameron
<PAGE>
POWER OF ATTORNEY
The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN and JOHN
P. KARALIS and each of them, as the undersigned's true and lawful attorneys and
agents, with full power of substitution and resubstitution for the undersigned
and in the undersigned's name, place and stead, in any and all capacities, to
sign the Tektronix, Inc. Annual Report on Form 10-K for the year ended May 31,
1997 and any and all amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys and agents, and each of them,
full power and authority to do any and all acts and things necessary or
advisable to be done, as fully and to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that said attorneys and agents or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: August 15, 1997 MERRILL A. McPEAK
-----------------
Merrill A. McPeak
<PAGE>
POWER OF ATTORNEY
The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN and JOHN
P. KARALIS and each of them, as the undersigned's true and lawful attorneys and
agents, with full power of substitution and resubstitution for the undersigned
and in the undersigned's name, place and stead, in any and all capacities, to
sign the Tektronix, Inc. Annual Report on Form 10-K for the year ended May 31,
1997 and any and all amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys and agents, and each of them,
full power and authority to do any and all acts and things necessary or
advisable to be done, as fully and to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that said attorneys and agents or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: August 18, 1997 PAULINE LO ALKER
----------------
Pauline Lo Alker
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS 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> 12-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> MAY-31-1997
<CASH> 142,726
<SECURITIES> 0
<RECEIVABLES> 308,925
<ALLOWANCES> 3,093
<INVENTORY> 238,040
<CURRENT-ASSETS> 751,511
<PP&E> 699,283
<DEPRECIATION> 356,153
<TOTAL-ASSETS> 1,316,741
<CURRENT-LIABILITIES> 304,089
<BONDS> 151,579
0
0
<COMMON> 226,591
<OTHER-SE> 544,692
<TOTAL-LIABILITY-AND-EQUITY> 1,316,741
<SALES> 0
<TOTAL-REVENUES> 1,940,082
<CGS> 0
<TOTAL-COSTS> 1,107,355
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,111
<INCOME-PRETAX> 168,802
<INCOME-TAX> 54,017
<INCOME-CONTINUING> 114,785
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 114,785
<EPS-PRIMARY> 3.48
<EPS-DILUTED> 3.48
</TABLE>
