================================================================================
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 29, 1999 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 (Zip Code)
offices)
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
Series A No Par Preferred New York Stock Exchange
Shares Purchase Rights
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. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant was approximately $879,268,521 at August 2, 1999.
At August 2, 1999 there were 47,077,115 Common Shares of the Registrant
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Part of 10-K into
Document which incorporated
-------- ------------------
Registrant's Proxy Statement Part III
dated August 20, 1999
1999 Annual Report to Shareholders Parts I, II and IV
================================================================================
<PAGE>
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 manufactures and distributes electronic products within three
broad segments through three major business divisions: Measurement, Color
Printing and Imaging, and Video and Networking. Measurement products include a
broad range of instruments designed to allow an engineer or technician to view,
measure, test or calibrate electrical circuits, mechanical motion, sound or
radio waves. Color Printing and Imaging products include a comprehensive line of
computer network capable color printers, ink and related supplies. Video and
Networking products include video distribution, production, storage and newsroom
automation products.
On June 24, 1999, Tektronix, Inc. announced that its Board of Directors
approved a plan to separate the Company into two independent publicly traded
companies. One will contain Tektronix' Measurement Business Division, and the
other will contain the Color Printing and Imaging Division. Tektronix plans an
initial public offering for approximately 15% of the new color printing and
imaging company prior to the end of the current fiscal year. The remaining
shares would be distributed to Tektronix shareholders at some time after the
offering.
On August 9, 1999, the Company announced that it had reached an agreement
to sell substantially all of the Company's Video and Networking Division,
excluding the VideoTele.com product family, to a private investment group. The
VideoTele.com product family merged into the Measurement Business Division
effective May 30, 1999. The new privately held company will be named Grass
Valley Group Inc., and Tektronix will hold a 10 percent equity interest. The
companies have signed a tentative agreement, subject to adjustments at the date
of consummation, and expect to close the transaction by the end of September
1999.
Products
--------
The table below sets forth the business divisions' contributions to total
net sales of the Company for the last three fiscal years (in thousands of
dollars).
<TABLE>
<CAPTION>
Measurement Color Printing Video and
Business and Imaging Networking
------------------- ------------------- -------------------
Amount Percent Amount Percent Amount Percent
--------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
1997 $ 852,827 44.0% $ 638,456 32.9% $ 448,799 23.1%
1998 $ 962,858 46.2% $ 728,697 34.9% $ 394,247 18.9%
1999 $ 844,882 45.4% $ 725,354 39.0% $ 291,254 15.6%
</TABLE>
Revenues, earnings from operations and other financial data of the
Company's business segments for the three years ended May 29, 1999, are set
forth on page 34 of the Company's 1999 Annual Report to Shareholders and are
incorporated herein by reference.
Measurement Business Products
-----------------------------
Tektronix has provided high quality test and measurement equipment for more
than fifty years. 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 semiconductor,
computer, telecommunications, video, communication network, aerospace, consumer
electronics and education industries.
1
<PAGE>
Semiconductors and Computers
Tektronix' Measurement Business products, including oscilloscopes and logic
analyzers are used by customers in connection with the development of
high-performance semiconductors and computers.
o Tektronix pioneered the development of high precision oscilloscopes
over 50 years ago and holds the leading market share in this category.
The oscilloscope is the primary debug tool for the design engineer.
Oscilloscopes are used when an electrical signal needs to be viewed,
measured, tested or verified. Tektronix oscilloscopes are available in
a wide range of configurations (handheld to desktop), bandwidths and
other performance characteristics. Tektronix has designed a
substantial portion of its oscilloscope product line to provide
consistent "architecture." This consistency allows customers reduced
learning time and reduces the time required by the Company to develop
new products. Oscilloscopes are useful across a wide range of
industries in manufacturing, test and design applications and can be
adapted to measure mechanical motion (vibration), sound, light, heat,
pressure, strain and velocity.
Introduced by Tektronix in fiscal 1999, the next generation Digital
Phosphor Oscilloscope technology gives design engineers a new tool for
quickly finding faults in complex electronic circuits, such as those
in cell phones, pagers, high speed modems and embedded digital
electronics.
o Logic analyzers are also important debug tools for the design engineer
to capture, display and examine streams of data coded as binary digits
(bits), including streams that occur simultaneously over many
channels. Tektronix logic analyzers, the TLA 700 series, utilize
Microsoft's Windows operating system and offer performance leadership
to develop next generation microprocessor systems and high speed
computer architectures.
Communications and Video
Reliable, accurate, and repeatable testing is the only way to offer high
quality links that support ever-expanding communications services. The products
developed by companies in the semiconductor and computer industries are critical
components of products created by communications and video equipment
manufacturers. Tektronix Measurement Business products, including protocol
analyzers, transmission test sets, radio frequency (RF) analyzers and digital
video test products are used in the communications and video industries.
o The Tektronix protocol analysis product line was acquired from Siemens
in 1997. These industry-leading products monitor and simulate the
exchange of data between telecommunications and information technology
facilities, measuring and testing standardized interfaces of network
components and instruments.
o Transmission test products help operators verify network functionality
from the physical to the protocol layers. Tektronix offers a full
complement of communications test sets for optical DWDM systems to
ensure transmission quality. For optical-layer testing, Tektronix
provides optical spectrum analyzers, power meters, optical time domain
reflectometers (OTDRs), and wave length meters. Products used for
physical-layer test include oscilloscopes, BERTs, O/E converters, and
logic analyzers. Link-layer test equipment includes the ST2400
SDH/SONET Test Set and the CTS850 SDH/PDH and Jitter/Wander Test Set.
o RF analyzers display and measure signal amplitude versus frequency
rather than amplitude versus time (as is the case for oscilloscopes).
These products are used to design, check and adjust communications
transmitting and receiving equipment. In addition to manufacturing its
own line of RF analyzers, Tektronix sells and supports the wireless RF
test products from Rohde & Schwarz in the United States, Canada and
Mexico. In particular, these products provide solutions in the areas
of Personal Communications Services (PCS) mobile phones and base
stations. Tektronix also distributes RF test products from Advantest
in the United States, Canada and Mexico.
2
<PAGE>
o Digital video test products include MPEG digital video compression
testers and picture quality analysis and monitoring products.
Tektronix also offers the broadest line of digital test and
measurement instruments for video and audio, ranging from handheld
devices to full rack instruments. Tektronix has a long history with
the television broadcast industry and has been awarded eight Emmy
awards for technical excellence.
Communication Network Operations
As the telecom industry evolves to digital video and Internet-based data
networks, operators must be able to perform complete compliance testing for the
many standards that govern telecom transmission -- on the physical,
transmission, protocol, and other layers. The equipment created by
communications and video equipment manufacturers is used by the communications
network operators to operate the global networks that carry Internet, video and
wired/wireless voice traffic. Many Tektronix Measurement Business products,
including cable and fiber optic test products, network monitoring, and high
quality streaming video products, are used in this industry, with equipment
manufacturers recommending test products that are appropriate for the
installation and maintenance of the communications and video equipment they
produce.
o Tektronix network monitoring technologies and related product lines
were acquired in February 1999 from Necsy SpA, located in Padova,
Italy. These products perform services designed to measure voice, data
and fax transmission quality for fixed and mobile networks. Other
products include systems to stress mobile networks from air interface
to base station and perform tests for software verification, load,
roaming and system integration for all components in the system.
o VideoTele.com products support the transmission, storage and
distribution of video over networks, addressing the growing need to
move digital video data. The VideoTele.com (VTC) business within the
Measurement Business Division provides high quality streaming video
products to networking, telecommunications and broadcast service
providers who deploy broadcast-quality video through their standard
network infrastructure for remote video collaboration and video
trunking.
Color Printing and Imaging Products
-----------------------------------
Tektronix' color printing and imaging products include color printers and
related supplies. Color printers produce full color hard copies of images
produced by personal computers, workstations and terminals. The use of color in
computing and printing has been stimulated by enhancements in the underlying
microprocessor technology of personal computers and workstations, by large
system and peripheral storage capabilities, by enhancements in computer display
capability, and by the increased use of the Internet and business intranets. As
businesses look to enhance productivity and corporate branding and identity,
they are increasingly depending on fast color printing for a wide range of
documents, including letterhead, presentations created by computer programs such
as Microsoft's PowerPoint, printed Web pages and newsletters.
Tektronix has been manufacturing and distributing color printers for over
thirteen years. Early users were graphics artists, engineers and scientists.
Workgroup office users have now become significant users of the Company's color
printers. The Company's Phaser(R) printers, are compatible with the industry
standard Adobe PostScript 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. Phaser color printers utilize laser technology and a proprietary
printing technology that consumes solid ink sticks marketed as ColorStix(R). The
solid ink, of the Company's own formulation, is melted and then jetted onto
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. Solid ink color printers combine laser-class speed, low cost
per page, and high quality output. Tektronix' printers are controlled by
software designed and implemented by the Company.
3
<PAGE>
Color printing products include:
o The Phaser 740 and 780 color laser printers and the Phaser 840 color
solid ink printer with a variety of configurations designed to meet
customer needs from general office use to graphics design.
o Related supplies, including solid ink, transparencies, and laser toner
cartridges.
Video and Networking Products
-----------------------------
Driven by government mandates for digital signal transmission, emerging
opportunities in cable and digital satellite channels, and the rise of the
Internet as a content-distribution medium, broadcasters and video professionals
are steadily converting their content production and distribution facilities
from analog to digital technologies. With airtime worth hundreds of thousands of
dollars per second and viewers willing to switch channels at the first hint of
an interruption, these facilities must have high levels of reliability and
performance. Tektronix' video products are used in the transition to digital at
major broadcast outlets and video production companies around the world.
The Company's video products, which are produced at its facilities in
Nevada City, California, are used by the television industry for production and
distribution of digital content or programming. Tektronix offers award-winning
production equipment, including switchers, routers, modular products, and
digital video servers.
Tektronix Grass Valley brand of production switchers take video signals
from a variety of sources (for example, archived video from a Tektronix
Profile(R) digital video server, shots from a camera in the field, and another
set in the studio), combine or mix them with effects (such as the background
behind a weatherman), and send them to different places in the studio or
actually air them. Tektronix Grass Valley routing or master control products
provide a central point for video, audio and data to enter and then be switched
to another location. Signals from various sources (for example, cameras, digital
disks, VTRs, etc.) in broadcast facilities need to be "routed" to other
locations to create a finished product. Tektronix Grass Valley modular products
are sometimes referred to as facility "glue," because they combine video signals
coming into, going out of, and moving around television facilities. Modular
products are relatively small and inexpensive devices that fall into a number of
general categories (for example, distribution amplifiers, timing products,
converters such as encoders and decoders, and signal processors). Modular
products convert, translate, distribute and process various video and audio
signals so that they may be used by other devices.
Tektronix' Profile digital video server is used in the worldwide
broadcast/video digital transition. The Profile digital video server is
basically a computer-based digital video recorder which eliminates manual
exchange of and maintenance costs associated with video tapes. The Profile
digital video server saves time for deadline-driven journalists and broadcasters
who need to instantaneously and simultaneously view and edit material. For
example, the server allows the editing and playback of stories and highlights
while they are being fed from the field to the station. Profile's ability to
store and manipulate vast amounts of video "data" is key to helping
broadcasters, cable networks, direct-to-home satellite services, and
professional TV production facilities make the transition to digital. Profile
products also contribute to creating network revenue, as they are used to insert
commercials into broadcasts and to "regionalize" national broadcasts for local
audiences.
Video and networking products include:
o Video distribution products covering multiple video formats used by
the broadcast industry in standard and high-definition television,
including master control switchers and routing and control systems.
o Video production products used by broadcasters and their production
artists for live broadcast, mobile news, sports production and
post-production applications, including video production switchers and
video editing and special effects tools.
4
<PAGE>
o Profile digital video servers used for signal storage and media
access.
o Newsroom automation products. These products are primarily
manufactured by Avstar Systems, LLC and distributed exclusively by
Tektronix.
During the second quarter of fiscal 1999, the Company sold to Network
Computing Devices, Inc., the assets associated with the Network Displays
business unit of the Video and Networking Division.
During the third quarter of fiscal 1999, the Company entered into an
agreement with Avid Technology, Inc. to jointly form Avstar Systems, LLC, a
venture to fund and develop newsroom computer systems and related software
applications by combining companies' newsroom computer systems technology and
personnel. Avstar Systems products are available exclusively through Tektronix'
worldwide sales channels.
During fiscal 1999, Video and Networking discontinued development,
manufacturing and sales of non-linear digital editing products sold under the
Lightworks name.
Manufacturing
-------------
During fiscal 1994, the Company sold its integrated circuits operation to
Maxim Integrated Products, Inc. (Maxim) and transferred its hybrid circuits
operation to a joint venture with Maxim. In early 1995, the Company 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 component operation divestitures, the Company's
manufacturing operations are no longer highly integrated. The Company purchases
components from each of the aforementioned companies. Tektronix currently holds
27% of the outstanding common stock of Merix.
Tektronix also purchases raw materials, additional components, data
processing equipment and computer peripheral devices for use in its products and
systems from a variety of third-party suppliers. Although supply shortages are
experienced from time to time, the Company currently believes that it will be
able to acquire the required materials and components as needed. Because some of
these components are unique, disruptions in supply can have an effect on the
Company's manufacturing operations.
Tektronix owns substantially all of its manufacturing facilities. Its
primary manufacturing facilities are located in or near the Portland, Oregon
metropolitan area. Additional software and product development occurs in Boston,
Massachusetts and Bangalore, India. Some of Tektronix' products, components and
accessories are assembled in the People's Republic of China. A logistics center
is maintained in Heerenveen, The Netherlands. Grass Valley products are
manufactured in Nevada City, California. In June of 1998, the Company purchased
certain assets of CAM Advanced Technologies (M) Sdn Bhd, a printer component
manufacturer with manufacturing facilities in Penang, Malaysia. The acquisition
allows for lower cost color printer component manufacturing capacity.
Telecommunications test products are manufactured at a plant in Berlin acquired
in connection with the purchase from Siemens described above. See Item 2,
"Properties," for additional information regarding 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 for sale worldwide 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, Poland,
Spain, The Netherlands, Belgium, Sweden, Denmark, Norway, Finland, Switzerland,
Australia, Austria, Hong Kong, Taiwan, Korea, Singapore, China, India, Argentina
and Mexico are made through the Company, its subsidiaries and their field
offices, or independent distributors and resellers located in principal market
areas. Certain of the Company's independent distributors also sell products
manufactured
5
<PAGE>
by the Company's competitors. Except for Grass Valley and VTC products, sales in
Japan are made by Sony/Tektronix Corporation. Grass Valley products are sold in
Japan through a subsidiary. Tektronix' principal customers are electronic and
computer equipment component manufacturers and service providers, communications
companies, 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 to both equipment users and original
equipment manufacturers.
Most Tektronix product sales are sold as standard catalog items. Tektronix
attempts to fill its orders as promptly as possible.
At May 29, 1999, Tektronix' unfilled product orders amounted to
approximately $137 million, as compared to approximately $134 million at May 30,
1998. Tektronix expects that substantially all unfilled product orders at May
29, 1999 will be filled during its current fiscal year. Orders received by the
Company are subject to cancellation by the customer.
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):
<TABLE>
<CAPTION>
U.S. Sales International Sales
--------------------- ---------------------
Amount Percent Amount Percent
----------- ------- ----------- -------
<S> <C> <C> <C> <C>
1997 $ 1,027,294 53.0% $ 912,788 47.0%
1998 $ 1,077,649 51.7% $ 1,008,153 48.3%
1999 $ 946,036 50.8% $ 915,454 49.2%
</TABLE>
See "Business Segments" in the Notes to Consolidated Financial Statements
on page 34 of the Company's 1999 Annual Report to Shareholders, containing
information on sales and long-lived assets by geographic area (with sales based
upon the location of the purchaser), which is incorporated by reference.
Tektronix products are sold worldwide. European sales are made principally
to customers in Germany, France, the United Kingdom, Switzerland, Italy, Spain,
Sweden, and The Netherlands. Other international sales are principally to
customers located 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 foreign
currency 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 foreign currency exchange rate fluctuation, although the
Company is unable to predict the effect of these factors on its business. The
Company hedges certain foreign currency exchange rate 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 for research and development during fiscal years ended May 31,
1997, May 30, 1998 and May 29, 1999 amounted to approximately $188,192,000,
$203,312,000 and $204,655,000, respectively. Substantially 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 business
divisions. 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.
6
<PAGE>
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 of 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 processes 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 customer service,
product performance, technology, 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,
and a leader in the rapidly growing telecommunications market. In general,
Tektronix competes with a number of companies in specialized areas of other test
and measurement products and one large broad line measurement products supplier,
Agilent (formerly the measurement business of Hewlett Packard).
Tektronix is also the leader in unit sales of office workgroup laser-class
color printers, including color laser and solid ink jet 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 printers 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 the leading supplier of multi-channel disk-based recording
devices to the professional television industry.
Employees
---------
At May 29, 1999, Tektronix had 7,571 employees, of whom 2,178 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. Although future
regulatory actions cannot be predicted with certainty, compliance with
environmental laws has not had and
7
<PAGE>
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:
<TABLE>
<CAPTION>
Has Served As
An Executive
Officer of
Name Position Age Tektronix Since
- ------------------- --------------------------------- --- ---------------
<S> <C> <C> <C>
Jerome J. Meyer Chairman of the Board, 61 1990
Chief Executive Officer
and President
William D. Walker Vice Chairman of the Board, 68 1992 (also
Director served in 1990
and from 1969
to 1984)
Carl W. Neun Senior Vice President 55 1993
and Chief Financial Officer
James F. Dalton Vice President, General 40 1998
Counsel and Secretary
Gerald K. Perkel Vice President and President, 43 1995
Color Printing and Imaging
Division
Richard H. Wills Vice President and President, 44 1997
Measurement Business Division
Timothy E. Vice President and 46 1991
Thorsteinson President, Video and
Networking Division
</TABLE>
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 named executive officers have been employed by Tektronix in
management positions for the last five years except for Mr. William D. Walker,
who is not an employee of the Company and has been a director of the Company
since 1980.
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 20 buildings arranged in a
campus-like setting and containing an aggregate of approximately 2.2 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 has entered into an agreement to sell
approximately 55 acres on
8
<PAGE>
the Vollum site, subject to a number of contingencies. The Company owns an 8.8
acre parcel of unimproved land, located immediately to the west of Howard Vollum
Park. This parcel is in the process of being sold. Within the past six months,
Tektronix made a road dedication of 19 acres to Washington County.
A facility leased in Bend, Oregon contains 42,000 square feet of vacant
manufacturing space currently available for sub-lease.
The Company's Color Printing and Imaging Division and corporate
headquarters occupy four buildings containing approximately 800,000 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
Nevada City, California comprised of approximately 151,000 square feet on owned
property. The Company has entered into an agreement to sell the Video and
Networking Division and to lease the Nevada City site to the new company.
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 92,600 square foot logistics center leased by Tektronix is located in
Heerenveen, The Netherlands. Tektronix owns a manufacturing plant for color
printer components, consisting of approximately 160,000 square feet in Penang,
Malaysia.
Field offices near London (83,000 square feet) and Sydney, Australia
(23,000 square feet) are located in buildings owned by the Company. Both of
these offices are currently in use but are for sale. Tektronix expects to close
the sales of these properties within the next six months. Field Offices in other
foreign countries occupy leased premises of approximately 911,000 square feet.
Tektronix' U.S. Sales and Service field offices aggregate approximately
239,666 square feet of leased space, of which 28,000 square feet is vacant.
Tektronix also owns a facility in Nanticoke, Pennsylvania (approximately 9,000
square feet), which is leased to another company.
Item 3. Legal Proceedings.
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.
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: worldwide economic
and business conditions in the electronics industry, including the continuing
effects of the Asian economic crisis and its secondary effects on demand for the
Company's products; competitive factors, including pricing pressures,
technological developments and new products offered by competitors; changes in
product and sales mix, and the related effects on gross margins; the Company's
ability to deliver
9
<PAGE>
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; and 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.
Risk factors related to the plan to separate the Measurement and Color
Printing and Imaging businesses include, but are not limited to: the ability of
Tektronix to successfully separate and operate the Measurement and Color
Printing and Imaging businesses and complete the strategic restructuring plan;
the potential disruption in the Company's business and to its employee base
during this process; risks that a proposed initial public offering for the
separated Color Printing and Imaging entity and the subsequent distribution of
stock to Tektronix shareholders will not be feasible or will not be successfully
consummated; and risks that the Company will be unable to complete the sale of
the Video and Networking Division.
Tektronix has other risk factors in its business, including but not limited
to: the Company's ability to successfully implement the strategic direction and
restructuring actions announced in fiscal 1999, including reducing its
expenditures; the effects of year 2000 compliance issues; the timely
introduction of new products scheduled during the current year, which could be
affected by engineering or other development program slippage, the ability to
ramp up production or to develop effective sales channels; customers' acceptance
of and demand for new products; changes in the regulatory environment affecting
the transition to high-definition television within the time frame anticipated
by the Company; the significant operational and strategic uncertainties the
Company faces within the Video and Networking Division; and other risk factors.
The Company may make other forward-looking statements from time to time.
Forward-looking statements speak only as of the date made. The Company
undertakes no obligation to publicly release the result of any revisions to
forward-looking statements which may be made to reflect subsequent events or
circumstances or to reflect the occurrence of unanticipated events.
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 39 of the
Company's 1999 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 40 of the
Company's 1999 Annual 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 19 through 24 of
the Company's 1999 Annual Report to Shareholders and is incorporated herein by
reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information required by this item is included on pages 22 and 23 of the
Company's 1999 Annual Report to Shareholders and is incorporated herein by
reference.
10
<PAGE>
Item 8. Financial Statements and Supplementary Data.
The information required by this item is included on pages 26 through 39 of
the Company's 1999 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 9 of the
Company's Proxy Statement dated August 20, 1999.
The information required by this item regarding executive 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 20 of the
Company's Proxy Statement dated August 20, 1999.
Item 11. Executive Compensation.
The information required by this item is included under "Directors'
Compensation" and "Executive Compensation" on pages 9 through 14 of the
Company's Proxy Statement dated August 20, 1999.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by this item is included under "Security Ownership
of Certain Beneficial Owners" and "Election of Directors" on pages 1 and 2 and 7
though 9 of the Company's Proxy Statement dated August 20, 1999.
Item 13. Certain Relationships and Related Transactions.
None.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8 - K
(a) The following documents are filed as part of this report:
(1) Financial Statements.
The following documents are included in the Company's 1999 Annual Report to
Shareholders at the pages indicated and are incorporated herein by reference:
Page in 1999 Annual
Report to Shareholders
----------------------
Independent Auditors' Report 25
Consolidated Statements of Operations 26
Consolidated Balance Sheets 27
Consolidated Statements of Cash Flows 28
Consolidated Statements of Shareholders' Equity 29
Notes to Consolidated Financial Statements 30 through 39
11
<PAGE>
(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 October 9, 1998, 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.
(iii) 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.
(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 (Jerome J.
Meyer) 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) Amendment to Supplemental Executive Retirement Agreement
(Jerome J. Meyer). Incorporated by reference to Exhibit
10(ii) of Form 10-Q dated October 7, 1994, SEC File No.
1-4837.
12
<PAGE>
+(x) Amendment to Supplemental Executive Retirement Agreement
(Jerome J. Meyer) dated June 16, 1998. Incorporated by
reference to Exhibit (10)(x) of Form 10-K for the fiscal
year ended May 30, 1998, SEC File No. 1-4837.
+(xi) Executive Compensation and Benefits Agreement (Carl W.
Neun) 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.
+(xii) Amendment to Supplemental Executive Retirement Agreement
(Carl W. Neun) dated September 24, 1997. Incorporated by
reference to Exhibit 10(i) of Form 10-Q dated January 13,
1998, SEC File No. 1-4837.
(xiii) 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.
+(xiv) 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.
+(xv) Supplemental Executive Retirement Plan for named
executive officers dated September 26, 1996. Incorporated
by reference to Exhibit 10(xvi) of Form 10-K dated May
31, 1997, SEC File No. 1-4837.
+(xvi) Severance and Bonus Agreement with Tim Thorsteinson,
dated April 9, 1999.
+(xvii) Amendment to Non-Employee Directors Stock Compensation
Plan, effective June 23, 1999.
+(xviii) 1998 Stock Option Plan. Incorporated by reference to
Exhibit 10(i) of Form 10-Q for the quarter ended August
19, 1998, SEC File No. 1-4837.
(xix) Standstill Agreement among the Company and Relational
Investors, et al, dated July 6, 1999. Incorporated by
reference to Exhibit 5 of Schedule 13D filed July 6,
1999, SEC File No. 5-10548.
(13) Portions of the 1999 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.
13
<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 CARL W. NEUN
--------------------------------------
Carl W. Neun, Senior Vice President
and Chief Financial Officer
Dated: August 26, 1999
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
- --------- -------- ----
JEROME J. MEYER* Chairman, Chief August 26, 1999
- ----------------------------- Executive Officer,
Jerome J. Meyer and President
CARL W. NEUN Senior Vice President August 26, 1999
- ----------------------------- and Chief Financial
Carl W. Neun Officer, Principal
Financial and
Accounting Officer
PAULINE LO ALKER * Director August 26, 1999
- -----------------------------
Pauline Lo Alker
A. GARY AMES * Director August 26, 1999
- -----------------------------
A. Gary Ames
GERRY B. CAMERON * Director August 26, 1999
- -----------------------------
Gerry B. Cameron
DAVID N. CAMPBELL * Director August 26, 1999
- -----------------------------
David N. Campbell
PAUL C. ELY, JR. * Director August 26, 1999
- -----------------------------
Paul C. Ely, Jr.
14
<PAGE>
Signature Capacity Date
- --------- -------- ----
FRANK C. GILL * Director August 26, 1999
- -----------------------------
Frank C. Gill
A.M. GLEASON * Director August 26, 1999
- -----------------------------
A.M. Gleason
MERRILL A. MCPEAK * Director August 26, 1999
- -----------------------------
Merrill A. McPeak
RALPH V. WHITWORTH * Director August 26, 1999
- -----------------------------
Ralph V. Whitworth
*By JAMES F. DALTON August 26, 1999
-----------------------------
James F. Dalton
as attorney-in-fact
15
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number Description
------- -----------
(3)(i) Restated Articles of Incorporation, as amended.
Incorporated by reference to Exhibit (3) of Form 10-Q
dated October 9, 1998, 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.
(iii) 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.
(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 25,
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 (Jerome J.
Meyer) 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.
<PAGE>
Exhibit
Number Description
------- -----------
+(ix) Amendment to Supplemental Executive Retirement Agreement
(Jerome J. Meyer). Incorporated by reference to Exhibit
10(ii) of Form 10-Q dated October 7, 1994, SEC File No.
1-4837.
+(x) Amendment to Supplemental Executive Retirement Agreement
(Jerome J. Meyer) dated June 16, 1998. Incorporated by
reference to Exhibit (10)(x) of Form 10-K for the fiscal
year ended May 30, 1998, SEC File No. 1-4837.
+(xi) Executive Compensation and Benefits Agreement (Carl W.
Neun) 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.
+(xii) Amendment to Supplemental Executive Retirement Agreement
(Carl W. Neun) dated September 24, 1997. Incorporated by
reference to Exhibit 10(i) of Form 10-Q dated January 13,
1998, SEC File No. 1-4837.
(xiii) 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.
+(xiv) 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.
+(xv) Supplemental Executive Retirement Plan for named
executive officers dated September 26, 1996. Incorporated
by reference to Exhibit 10(xvi) of Form 10-K dated May
31, 1997, SEC File No. 1-4837.
+(xvi) Severance and Bonus Agreement with Tim Thorsteinson,
dated April 9, 1999.
+(xvii) Amendment to Non-Employee Directors Stock Compensation
Plan, effective June 23, 1999.
+(xviii) 1998 Stock Option Plan. Incorporated by reference to
Exhibit 10(i) of Form 10-Q for the quarter ended August
19, 1998, SEC File No. 1-4837.
(xix) Standstill Agreement among the Company and Relational
Investors, et al, dated July 6, 1999. Incorporated by
reference to Exhibit 5 of Schedule 13D filed July 6,
1999, SEC File No. 5-10548.
(13) Portions of the 1999 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
As Amended through July 6, 1999
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
1
<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.
2
<PAGE>
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. 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
3
<PAGE>
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 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
4
<PAGE>
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.
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. Effective as of the July 6, 1999 Special Board
meeting, the number of directors of the corporation shall be eleven, consisting
of four Class I directors, four 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
5
<PAGE>
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 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
6
<PAGE>
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 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
7
<PAGE>
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.
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
8
<PAGE>
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 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.
9
<PAGE>
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.
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.
10
<PAGE>
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.
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
11
<PAGE>
(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.
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
12
<PAGE>
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 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.
13
<PAGE>
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 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.
14
<PAGE>
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.
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
15
<PAGE>
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 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
16
<PAGE>
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 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, and as amended with regard to Article II at a meeting of the board of
directors of the company held on March 17, 1999, and as amended with regard to
Article II at a meeting of the board of directors of the company held on July 6,
1999.
JAMES F. DALTON
-----------------------------------
Secretary
17
[Tektronix logo] INTER-OFFICE COMMUNICATION
- --------------------------------------------------------------------------------
To: Tim Thorsteinson 58-760 April 9, 1999
From: Jerry Meyer
Subject: Project Mayflower
As you know, the Company has decided to explore strategic alternatives relating
to the Profile and Grass Valley businesses (VCP). In your capacity as President
of VND, I have asked you to lead this project from an operational perspective.
In the event we close a transaction to sell VCP to a third party, it is likely
your employment with Tektronix will be impacted. This memo describes the impact
of a transaction on your employment and related compensation matters.
Severance Pay. In the event you are asked to go with the new company, and you
agree to do so for a minimum of six months (or some lesser time period
determined by me at my discretion), you will be entitled to those benefits under
the Executive Severance Agreement dated September 22, 1993, as amended ("ESA"),
except that you will not be entitled to any FY00 APIP prorated payment under
section 3.3. In lieu of FY00 APIP, you will be eligible for the transaction
bonus described below. Your eligibility for FY99 APIP will be unaffected by this
memo. The one-year base pay will be based on a salary of $330,000. You will be
entitled to participate in the results program during your period of continued
employment. If you are not asked to go with the new company (or you are asked to
go with the new company but you elect not to do so) and you remain employed by
Tektronix, you will not be entitled to any severance pay and the ESA will remain
in effect according to its terms. If you are not asked to go with the new
company (or you are asked to go with the new company but you elect not to do so)
and are laid off by Tektronix, you will be entitled to the ESA benefits
described above.
Transaction Bonus. In the event we close a transaction, you will be entitled to
a lump sum payment of $330,000 if the transaction is completed with no negative
impact to Tektronix. This means that the transaction must be completed without
any additional loss or charge to Tektronix. The transaction proceeds and
reserves already taken must be sufficient to cover the net book value of the VCP
assets and all related transaction and transition costs. These costs include
provisions for contingent liabilities and for any costs associated with
severance. We will apply generally accepted accounting principles to
<PAGE>
Page 2
make these determinations to the extent possible and I will make any judgments
if necessary.
If Tektronix or the new company ask you to go with the new company for a minimum
of six months (or some other lesser time period or milestone-based transition
agreed to by Tektronix and the new company at our discretion), and you elect not
to do so, you will receive no Transaction Bonus. If you are not asked to go with
the new company and remain employed with Tektronix, you will receive no
Transaction Bonus. If you are not asked to go with the new company and are laid
off from Tektronix within one year of the closing date, you will be entitled to
100% of the Transaction Bonus.
Stock Options. If you do not remain employed by Tektronix after the close of the
transaction (whether by layoff or termination of employment through transfer to
the new company, but not through voluntary resignation), we will accelerate 100%
of your outstanding but unvested stock options to vest on your last day of
employment. No other terms of the stock option agreement will be altered,
including the provision that the options will lapse if not exercised within 90
days of your termination of employment.
There are no other changes to any other plan or agreement you may have in place
with Tektronix, including the SERP, pension, 401(k), LTIP, change in control, or
welfare benefit plans. Your rights and obligations under those plans are
governed by their terms. All benefits provided for in this letter are
conditioned upon your execution of the Release of Claims as provided in your
ESA.
If we are unable to close a transaction with a third party, and we determine to
continue to operate the business within Tektronix or spin it off into an
independent operation, we will address the impact on your employment separately
and this memo will have no application to those alternatives. If we fail to
close a transaction by October 31, 1999, all terms of this memo will terminate.
I look forward to successfully consummating a transaction that will be in the
best interests of our shareholders, customers, and employees.
gb
AGREED
TIM THORSTEINSON J.J. MEYER
- -----------------------------
Tim Thorsteinson
Date: 4/12/99
TEKTRONIX, INC.
NON-EMPLOYEE DIRECTORS STOCK COMPENSATION PLAN
AMENDMENT NO. 2 (Effective June 23, 1999)
Insert:
7. Election to Receive Chair and Meeting Fees in Common Shares of the Company.
7.1 Each non-employee director of the Company may elect to receive Common
Shares of the Company instead of a cash payment for committee chair
fees, committee meeting fees, and board meeting fees (collectively,
the "Fees").
7.2 The election shall be made by delivering a notice of election to the
Company Secretary on or before December 20, and shall be effective as
to all Fees earned for the next calendar year, beginning January 1 and
ending December 31. Once made, an election may be terminated by notice
to the Secretary on or before December 20, effective as to all fees
earned for the immediately following calendar year.
7.3 As soon as reasonably practicable, but not more often than once each
calendar quarter, the Administrator shall cause to be purchased Common
Shares of the Company in the open market in an amount equal to the
accumulated Fees since last purchase. The number of shares acquired
shall be equal to the accumulated fees, less appropriate commissions
and transaction fees, divided by the purchase price of the stock. The
Administrator may delay purchases in accordance with paragraph 3.2 (b)
above, depending on market conditions and securities law requirements.
In the event that shares must be purchased in a fashion requiring
multiple purchases at different prices, such purchases shall be
allocated in a fashion that treats each director equally.
7.4 Purchased shares shall be in the name of and distributed to the
director, except that if the director has elected to defer receipt of
the stock pursuant to the Deferral Plan described in paragraph 3.2(d),
the shares shall be delivered to the trustee in accordance with that
plan.
Re-number No. 7, Amendment or Termination: Miscellaneous, to Section 8.
Financial Highlights
<TABLE>
<CAPTION>
DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
FOR THE YEARS ENDED MAY 29,1999 MAY 30,1998 MAY 31,1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 1,861,490 $ 2,085,802 $ 1,940,082
Measurement 844,882 962,858 852,827
Color Printing and Imaging 725,354 728,697 638,456
Video and Networking 291,254 394,247 448,799
United States 946,036 1,077,649 1,027,294
International 915,454 1,008,153 912,788
Operating margin (3.7)% 5.5% 8.5%
Return on equity (7.3)% 10.6% 15.9%
Net earnings (loss) $ (51,161) $ 82,285 $ 114,785
Basic earnings (loss) per share $ (1.07) $ 1.63 $ 2.32
Diluted earnings (loss) per share (1.07) 1.60 2.29
Dividends per share 0.48 0.46 0.40
</TABLE>
<PAGE>
Management Review
GENERAL
Tektronix, Inc. (Tektronix or the Company) operates in three major business
divisions: Measurement, Color Printing and Imaging, and Video and Networking, as
well as in five major geographies: the United States; Europe; the Americas,
including Mexico, Canada and South America; the Pacific, excluding Japan; and
Japan. The Measurement division derives revenue principally through the
development and marketing of seven key product groups: oscilloscopes, signal
sources, probing solutions, digital systems development products, handheld
communication test instruments, and video and audio test instruments. The Color
Printing and Imaging division derives revenue principally through the
development and marketing of color printers and supplies. The Company's color
printer technologies include solid ink and color laser. The Video and Networking
division derives revenue principally through the development and marketing of
digital storage products, production switchers, digital picture manipulators,
routing switchers, linear editing systems, on-air master control solutions and
video transmission products. All three divisions also derive revenue through
providing support services for products sold worldwide.
In June 1999, the Company's Board of Directors unanimously approved a plan that
is intended to result in the formation of two separate publicly traded
companies. One company will be comprised of the current Measurement division,
and the other will be comprised of the current Color Printing and Imaging
division. Management believes that this plan will enable each business to pursue
its optimal long-term strategy without the limitations necessarily imposed by a
larger, more diverse company. The new measurement company will retain the
Tektronix name and be headquartered in Beaverton, Oregon. The new color printing
and imaging company, which has not yet been named, will be headquartered in
Wilsonville, Oregon. Tektronix is considering an initial public offering (IPO)
for approximately 15% of the new color printing and imaging company prior to the
end of fiscal year 2000. Subject to the successful completion of an IPO and
receipt of a favorable tax ruling from the Internal Revenue Service, the
remaining shares will be distributed, on a tax-free basis, to Tektronix
shareholders at some time after the offering. Although the Company expects that
the separation of the businesses will have no significant impact on employment
levels, execution of this plan may result in future non-recurring charges. Such
amounts cannot be estimated at this time.
Management also announced in June 1999 that the Company intends to sell or
secure a strategic alliance for its Video and Networking division, excluding the
VideoTele.com product family. The VideoTele.com product family merged into the
Measurement division effective May 30, 1999. Prior to the sale or strategic
alliance of Video and Networking, the division plans to consolidate many
functions in order to allow for improved profitability at lower revenue levels.
During the first quarter of fiscal year 2000, Video and Networking plans to take
the following actions: consolidate all manufacturing and customer support
activities at the Grass Valley site; move administrative functions, including
sales operations, information systems, finance, and human resources, to Grass
Valley; form two focused marketing teams tied to the Profile and Grass Valley
product lines; and combine the U.S. sales operation into one function.
RESULTS OF OPERATIONS
OVERVIEW
Tektronix recognized a net loss for 1999 of $51.2 million, or $1.07 per diluted
share, while 1998 net earnings were $82.3 million, or $1.60 per diluted share,
and 1997 net earnings were $114.8 million, or $2.29 per diluted share. The
fiscal year 1999 net loss reflects pre-tax non-recurring charges of $120.5
million, including net restructuring charges of $110.6 million and net other
non-recurring charges of $9.9 million for related actions. Fiscal year 1998 net
earnings include pre-tax non-recurring charges of $79.0 million related to the
$60.0 million restructuring of the Video and Networking division, $17.0 million
of acquired in-process research and development (IPR&D) and $2.0 million of
severance costs associated with the acquisition of Siemens' Communications Test
Equipment GmbH (CTE). Excluding the non-recurring charges, 1999 net earnings
would have been $30.8 million or $0.64 per diluted share, while 1998 net
earnings would have been $135.2 million or $2.63 per diluted share.
Results of operations, excluding non-recurring charges and as reported, for the
fiscal year ended May 29, 1999 were as follows:
<TABLE>
<CAPTION>
EXCLUDING NON- NON-RECURRING RESULTS AS
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS RECURRING CHARGES CHARGES REPORTED
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 1,866,610 $ (5,120) $ 1,861,490
Cost of sales 1,125,485 25,767 1,151,252
----------- ----------- -----------
Gross profit (loss) 741,125 (30,887) 710,238
Research and development expenses 200,636 4,019 204,655
Selling, general and administrative expenses 479,911 803 480,714
Equity in business ventures' loss 9,230 - 9,230
Non-recurring charges - 84,780 84,780
----------- ----------- -----------
Operating income (loss) 51,348 (120,489) (69,141)
Interest expense 15,712 - 15,712
Other income - net 9,616 - 9,616
----------- ----------- -----------
Earnings (loss) before taxes 45,252 (120,489) (75,237)
Income tax expense (benefit) 14,481 (38,557) (24,076)
----------- ----------- -----------
Net earnings (loss) $ 30,771 $ (81,932) $ (51,161)
=========== =========== ===========
Basic earnings (loss) per share $ 0.65 $ (1.72) $ (1.07)
Diluted earnings (loss) per share 0.64 (1.71) (1.07)
Average shares outstanding - basic 47,700 47,700 47,700
Average shares outstanding - diluted 48,032 48,032 47,700
</TABLE>
19
<PAGE>
NON-RECURRING CHARGES
In the second quarter of fiscal year 1999, the Company announced and began to
implement a series of actions intended to align worldwide operations with
current market conditions and to improve the profitability of its operations.
The Company expects that, when fully implemented, these actions will reduce
ongoing annual costs by approximately $70.0 million. The actions include a net
reduction of approximately 15% of the Company's worldwide workforce, the exit
from certain facilities and the streamlining of product and service offerings.
Management expects that the majority of the actions will be completed by the end
of the second quarter of fiscal year 2000 and expects to require $52.6 million
in cash to be used in connection with actions not yet completed, primarily for
severance and lease cancellations.
Major actions can be summarized by each of the three business divisions.
Measurement's service business is being consolidated from several depots in the
United States and Europe into two depots in each of these geographies. This
consolidation will result in headcount reduction and the write-down and disposal
of redundant inventory. These actions are in process and will be completed in
the first quarter of fiscal year 2000. Measurement closed the Bend, Oregon,
manufacturing facility during the third quarter of 1999 and consolidated that
process into its Beaverton, Oregon, facilities. This action resulted in
headcount reduction and lease settlements. Measurement reduced headcount
throughout the division, primarily in manufacturing, and will continue to reduce
headcount through the first quarter of fiscal year 2000. During the year, Color
Printing and Imaging discontinued three product lines - wide format, dye
sublimation and B-size solid ink. This action resulted and will continue to
result in write-offs of disposed inventory through the first quarter of fiscal
year 2000. Color Printing and Imaging also reduced headcount throughout the
division, primarily in manufacturing during the third and fourth quarters of
1999. During 1999, Video and Networking discontinued development, manufacturing,
and sales of non-linear digital editing products sold under the Lightworks name.
This decision resulted in headcount reduction, write-offs of disposed inventory,
incremental sales returns and bad debts, and costs to fulfill commitments to
deliver software enhancements on previously sold product. Additional write-offs
of disposed inventory will be completed by the end of the first quarter of
fiscal year 2000. Outside of the divisions, selective involuntary terminations
have occurred and will occur throughout corporate functions and in the Company's
foreign subsidiaries through the second quarter of fiscal year 2000.
The Company recorded pre-tax non-recurring charges of $125.7 million to account
for these actions, including restructuring charges of $115.8 million and other
non-recurring charges of $9.9 million for related actions. The non-recurring
charges include a $5.1 million charge to sales for expected returns of
discontinued products and $27.1 million in charges to cost of sales for the
write-off of excess inventory resulting from discontinued product lines and
consolidation of service centers worldwide. Combined, these two charges resulted
in a decrease in gross profit of $32.2 million. Also included in the
non-recurring charges are $4.0 million in research and development expense to
complete customer committed software upgrades in discontinued product lines,
$0.8 million in charges to bad debt expense for doubtful accounts with balances
related to discontinued products, $56.9 million in severance expense related to
employee separation, $14.8 million in charges to facilities for lease
cancellation fees and $17.0 million in charges to long-term assets associated
with discontinued product lines. The $9.9 million of other non-recurring charges
for actions related to the restructuring consist of the charge to sales, the
charge to research and development, and the charges to bad debt expense, while
the remaining charges comprise the $115.8 million in restructuring charges.
In the second quarter of fiscal year 1998, the Company announced and began to
implement a restructuring plan designed to return the Video and Networking
division to profitable growth and recorded a pre-tax reserve of $60.0 million to
account for these actions. The plan provided for headcount reduction and the
discontinuation of certain products within the Lightworks and Grass Valley
product lines, as well as the discontinuation of the Network Displays business.
During 1999, it was determined that $4.1 million of this reserve would not be
needed, and as such, the amount was reversed to the locations of the original
charges in the Consolidated Statement of Operations. The original plan
anticipated closing the Network Displays business and provided reserves for
employee severance and inventory disposals. During the third quarter of 1999,
the Network Displays business was sold, resulting in less severance and
inventory disposals than originally planned. The $4.1 million includes $4.3
million and $1.3 million in excess reserves for severance and inventory
write-offs, respectively, that were reversed, net of additional reserves
recorded of $0.7 million for lease cancellation fees and $0.8 million for
miscellaneous payables. As of May 29, 1999, the implementation of this plan was
substantially complete.
Also in the second quarter of fiscal year 1998, the Company expensed $17.0
million for the acquisition of IPR&D and $2.0 million in severance costs
associated with the acquisition of CTE. During the third quarter of 1999, it was
determined that $1.1 million of this $2.0 million severance reserve for CTE
would not be needed, as originally anticipated, because certain employees who
were to be terminated left the Company voluntarily, without receiving severance
benefits. Accordingly, such amount was reversed to non-recurring charges.
NET SALES AND ORDERS
Net sales for 1999 were $1.862 billion, an 11% decrease from sales of $2.086
billion in 1998. Sales were down in all geographies except Europe, which posted
modest increases over 1998. The United States and Japan experienced the largest
declines, down 12% or $131.6 million and 37% or $50.4 million, respectively. The
decline in sales to the United States can be attributed mainly to lower
Measurement and Video and Networking sales. Sales to Japan decreased across all
business divisions, primarily due to the effects of the Asian economic crisis.
Net sales for 1998 were 8% higher than sales of $1.940 billion for 1997. Sales
for 1998 were up over 1997 in all geographies, with the United States and Europe
experiencing the largest increases, up 5% or $50.4 million and 9% or $43.5
million, respectively.
20
<PAGE>
The following table summarizes the Company's net sales for the last three years
by its three business divisions:
<TABLE>
<CAPTION>
IN THOUSANDS 1999 1998 1997
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Measurement $ 844,882 $ 962,858 $ 852,827
Color Printing and Imaging 725,354 728,697 638,456
Video and Networking 291,254 394,247 448,799
</TABLE>
Measurement sales for 1999 were $844.9 million, down 12% or $118.0 million from
sales for 1998. The decline was realized across all geographies, except Europe,
which posted modest increases over 1998. The largest decline was realized in
sales to the United States, down 17% or $81.8 million, with an additional
decline in Japan, down 34% or $31.0 million. With respect to products, most of
the sales decline was in wireless communication test equipment and
general-purpose equipment such as oscilloscopes and logic analyzers. These
declines reflect the effects of the Asian economic crisis, including its effects
on other regions of the world, and softness in the semiconductor industry
throughout the first half of the year. Measurement sales for 1998 were 13%
higher than for 1997, driven by sales of logic analyzers and telecommunications
test products, including those from CTE.
Although Measurement sales were down each quarter of 1999 from sales for
corresponding quarters of 1998, the business finished the year with a strong
fourth quarter. Sales of $230.6 million for the fourth quarter of 1999 were 12%
to 14% higher than sales realized in each of the first three quarters of the
year, with significant growth in the Pacific as this region shows signs of
recovery. This level of sequential growth did not occur at the end of 1998.
Fourth quarter sales for 1998 were $247.3 million, up 0% to 9% over sales for
each of the first three quarters of the year.
Color Printing and Imaging sales were $725.4 million for 1999, down slightly
from sales of $728.7 million for 1998. Sales to Europe increased 8% or $17.8
million, year over year, while sales to all other regions declined. First and
second quarter sales were flat or declined from sales for respective quarters in
1998, due mainly to cautionary capital spending and significantly lower average
selling prices. Sales for the third and fourth quarters of 1999, however, were
up 8% and 5%, respectively, over sales for corresponding periods in 1998. This
late-year growth was caused by an increase in unit sales of 59% and 50% for the
third and fourth quarters, respectively, over unit sales for corresponding
periods in 1998. This unit growth was generated by positive market response to
printer products introduced during the second quarter of 1999. Sales did not
increase proportionate to unit growth due to a significant decrease in the
average selling price of its printers. Sales for 1998 increased 14% over 1997,
due to positive market response to three new printers introduced during the year
and increased sales of printing supplies.
Video and Networking sales were $291.3 million in 1999, down 26% or $103.0
million from sales for 1998. The decline in sales was realized across all
geographies and nearly all product lines as a result of the Company's
divestiture of the Network Displays business, discounting actions taken in
response to intense competition and market softness in the broadcast industry.
Divestiture of the Network Displays business accounted for approximately 44% or
$44.8 million of the sales decline.
Although Video and Networking sales were down each quarter of 1999 from those
for corresponding quarters of 1998, this division also finished the year with a
strong fourth quarter showing sequential growth of a magnitude greater than in
1998. Sales of $96.0 million for the fourth quarter of 1999 were 37% to 68%
higher than those realized in each of the first three quarters of the year,
compared to fourth quarter sales of $106.9 million in 1998, up 9% to 14% over
sales for each of the first three quarters of the respective year. In 1998,
sales decreased 12% from sales for 1997 to $394.2 million due to a reduction in
product offerings as well as general weakness in the broadcast market.
Orders for 1999 were $1.760 billion, a decrease of 8% from orders of $1.912
billion for 1998. The United States and Japan experienced the largest declines,
down 9% or $89.9 million and 35% or $40.7 million, respectively. Measurement
experienced the largest declines in orders from these regions. Overall orders in
1997 were $1.829 billion.
Measurement orders for 1999 were $786.6 million, down 9% or $74.3 million from
orders of $860.9 million for 1998. The decline was realized across all
geographies except Europe, which posted an order increase of 9% or $17.0 million
for the year. The most significant order declines were realized in the United
States and Japan. Measurement experienced year over year order declines of 12%
or $50.7 million and 33% or $26.6 million, respectively, from these regions.
Orders for 1997 were $795.2 million.
Color Printing and Imaging orders for 1999 were $708.8 million, up 3% from
orders of $687.3 million for 1998. Orders from Japan declined 30% or $5.5
million, while orders from all other regions increased. Orders for 1997 were
$607.5 million.
Video and Networking orders for 1999 were down 27% or $99.0 million to $264.9
million from $363.9 million in 1998. The decline in orders was realized across
all geographies and nearly all product lines as a result of the Company's
divestiture of the Network Displays business, discounting actions taken in
response to intense competition and market softness in the broadcast industry.
Orders in 1997 were $426.4 million.
OPERATING COSTS AND EXPENSES
The Company's gross profit decreased 18% or $155.1 million from 1998 to $710.2
million as a result of declining sales and lower margins. As a percentage of net
sales, gross profit decreased from 41.5% to 38.2%.
Excluding non-recurring charges, gross profit decreased 18% or $162.7 million,
and gross profit as a percentage of sales decreased from 43.3% to 39.7%.
Measurement gross margin remained consistent with the prior year, while Color
Printing and Imaging and Video and Networking margins declined. Color Printing
and Imaging gross margin decreased mainly due to significantly lower sales
prices on printer products and higher costs of components purchased from
Japanese vendors. Video and Networking gross margin decreased due to discounting
actions taken in response to intense competition, as well as the impact of
certain fixed costs of sales on lower sales volume. As a percentage of net
sales, gross profit decreased in 1998 from 42.9% in 1997, due mainly to
non-recurring charges.
21
<PAGE>
Operating expenses were $779.4 million, up 4% or $29.4 million from $750.0
million in 1998, due mainly to an increase in non-recurring charges and loss on
investments accounted for under the equity method, partly offset by a decrease
in selling, general and administrative expenses. Non-recurring charges were
$44.3 million greater than those incurred in 1998, while loss on investments
accounted for under the equity method increased $11.7 million. Selling, general
and administrative expenses were $480.7 million, a decrease of 6% or $28.0
million from 1998 as a result of restructuring and other cost-cutting actions
taken by the Company. Selling, general and administrative expenses were $481.1
million in 1997. Despite lower sales in 1999, the Company continued to invest in
engineering activities. Research and development expenses were $204.7 million,
or 11.0% of net sales, in 1999 and $203.3 million and $188.2 million in 1998 and
1997, respectively, or 9.7% of net sales in both years. Management expects that,
when fully implemented, restructuring actions will reduce ongoing annual
operating costs by approximately $70.0 million.
Interest expense increased 56% to $15.7 million due to an increase in short-term
debt balances in 1999. Interest expense was $10.1 million in 1998, 17% less than
$12.1 million in 1997.
Other income was $9.6 million in 1999, compared with $17.6 million in 1998 and
$15.9 million in 1997. The current year decline primarily reflected $20.5
million less in gains realized on the sale of equity securities in other
companies, offset in part by $14.6 million more in gains on the sale of fixed
assets. The Company continues to hold insignificant equity positions that it
intends to liquidate over time.
Income taxes decreased significantly from expense of $40.5 million in 1998 to
benefit of $24.1 million in 1999 as a result of the current year loss before
taxes. The Company's effective tax rate for 1999 was 32%, compared to 33% in
1998 and 32% in 1997.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities and borrowing capacity are expected to be
sufficient to fund operations and capital expenditures through May 2001. The
Company expects that cash payments required to carry out the remaining
restructuring activities will be approximately $52.6 million. If the Company is
successful in selling the Video and Networking division, any proceeds may be
used to pay down outstanding debt or for other corporate purposes. At May 29,
1999, the Company maintained bank credit facilities totaling $310.0 million, of
which $187.7 million was unused. Unused facilities include $151.2 million in
lines of credit and $36.5 million under a revolving credit agreement from United
States and foreign banks. Additional details, including maturity dates of
agreements, are included under "Short-term and Long-term Debt" in the Notes to
Consolidated Financial Statements.
BALANCE SHEET
The Company realized a decrease in working capital of 44% or $176.3 million from
the end of 1998. Current assets decreased $41.4 million during the year, with
cash and cash equivalents decreasing $80.8 million, accounts receivable
decreasing $33.1 million, inventory increasing $46.6 million, and other current
assets increasing $25.8 million. The decrease in cash and cash equivalents,
combined with the increase in short-term debt of $110.3 million, total
approximately $191.1 million of net cash consumed year to date. Cash
requirements included the repurchase of approximately 3.6 million common shares
for $85.5 million, capital expenditures of $107.5 million, dividends of $22.9
million, severance of $20.8 million, and other operating, investing and
financing requirements. Accounts receivable decreased since the end of 1998 due
to a general decrease in sales during the period. Average days sales outstanding
for the year improved from 51.1 days in 1998 to 47.3 days in 1999. Inventory
increased mainly as a result of significant purchases made in order to take
advantage of vendor discounts and the ramp-up of components and finished goods
related to new printer products introduced during the year. Other current assets
increased primarily from an increase in net current tax benefits due to timing
differences on taxes related to restructuring actions, payment of taxes on 1998
net earnings, and the tax benefit related to the net loss realized for the
fiscal year.
Current liabilities increased $134.8 million during 1999, with an increase in
short-term debt of $110.3 million, an increase in accounts payable of $29.5
million, and an increase in deferred revenue of $4.9 million, offset in part by
a decrease in accrued compensation of $9.8 million. Accounts payable increased
as a result of increased inventory levels, current liabilities associated with
non-recurring charges and the Company's ability to negotiate more favorable
payment terms with a major supplier. Deferred revenue increased due to an
increase in service agreements associated with sales. Accrued compensation
decreased due to lower headcount and lower accruals for incentives, offset in
part by the restructuring reserve for severance.
Other long-term assets decreased $36.9 million from the sale of investments, a
slight decline in the market values of remaining investments held for sale, and
the recognition of losses on investments accounted for under the equity method.
Shareholders' equity decreased by $163.4 million from the end of 1998, due to
the net loss of $51.2 million, dividends of $22.9 million, a net decrease of
$80.3 million in common stock, a $9.3 million decrease in unrealized holding
gains and a $0.3 million increase in the accumulated currency translation
adjustment. Common stock decreased due to the repurchase of common shares offset
by shares issued to employees through stock options and stock awards. The
decrease in unrealized holding gains resulted principally from the sale of
marketable equity securities.
FINANCIAL MARKET RISK MANAGEMENT
The Company is exposed to financial market risks, including interest rate,
equity price, and foreign currency exchange rate risks. Tektronix is exposed to
interest rate risk primarily through its use of short-term and long-term
borrowings to finance operations. A hypothetical 1% fluctuation in interest
rates would not have a material adverse effect on the Company's financial
position, results of operations or cash flows. The Company is exposed to equity
price risk primarily through its mar-
22
<PAGE>
ketable equity securities portfolio. A hypothetical 20% decline in equity prices
of such securities would not have a material adverse effect on the Company's
financial position, results of operations or cash flows. The Company has not
entered into any hedging programs to mitigate interest rate or equity price
risks.
The Company is exposed to foreign currency exchange rate risk primarily through
transactions and commitments denominated in foreign currencies. The Color
Printing and Imaging division, in particular, is a party to a high volume of
Japanese Yen-denominated purchases. The Company utilizes natural hedges as well
as derivative financial instruments, primarily forward foreign currency exchange
contracts, to mitigate this risk. The Company's policy is to only enter into
derivative transactions when the Company has an identifiable exposure to risk,
thus not creating additional foreign currency exchange rate risk. A hypothetical
20% adverse change in foreign currency exchange rates would not have a
significant effect on the Company's financial position, results of operations or
cash flows.
FUTURE ACCOUNTING CHANGES
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The new statement will require recognition
of all derivatives as either assets or liabilities on the balance sheet at fair
value. The new statement is effective for fiscal year 2002, but early adoption
is permitted. Management has not yet completed an evaluation of the effect this
standard will have on the Company's consolidated financial statements.
YEAR 2000 UPDATE
Tektronix, Inc.'s Year 2000 Program (Program) is proceeding as planned. The
Program is addressing the issue of computer programs and embedded computer chips
being unable to distinguish between the year 1900 and the year 2000. To improve
access to business information through common, integrated computing systems
across the Company, Tektronix began a worldwide business systems replacement
program with an enterprise system that uses programs primarily from Oracle
Corporation. This new enterprise system makes substantially all of the Company's
business computer systems year 2000 ready, and is now fully installed. Other
information technology projects have not been delayed due to the implementation
of the Year 2000 Program.
Program
Tektronix' Program is divided into three major sections: (1) infrastructure
(information, logistics and other technology used in the Company's business,
including hardware and software, which is sometimes referred to as IT); (2)
products (hardware and software products delivered to customers); and (3)
external suppliers and providers (vendors, manufacturers and suppliers to the
Company). The general phases common to all sections are: (1) identification and
prioritization of various systems through an extensive inventory of all items
used throughout the Company including customer products and services and
material third party manufacturers, suppliers and vendors; (2) remediation of
material systems through replacement or updates; (3) testing, including the
sending, receiving and processing of various information types to ensure ongoing
functionality, integrity and accuracy; and (4) contingency planning to establish
alternate solutions for any material systems determined not to be year 2000
compliant. Material items are those believed by the Company to have a risk
involving the safety of individuals or that may cause damage to property or the
environment, or affect the continuation of business activities or materially
affect revenues.
The identification and prioritization phase of the Program is complete. Although
the remediation and testing phases of the Program will continue through the end
of the calendar year, these phases were substantially complete as of May 29,
1999, with the exception that external suppliers continue to be evaluated, as
discussed below. Evaluation of suppliers, as well as contingency planning for
all three sections, is in process and is scheduled for substantial completion by
September 1999.
The Company's products that are not year 2000 ready have been identified, and as
a part of the remediation phase of the Program, the Company has determined to
what extent upgrades will be made available to make non-compliant products
ready. Product remediation is now substantially complete. All newly introduced
products will be year 2000 ready. The Company maintains a website for customers
to review product readiness, including product upgrades, customer-serviceable
fixes, and non-compliant products for which upgrades will not be available.
The Company is in the process of assessing whether products or services provided
by external suppliers will be interrupted as a result of their failure to
address the year 2000 problem. To determine their preparedness, the Company has
joined the High Tech Consortium, LLC (HTC). This is a consortium of
approximately 15 other high technology companies, organized for the purpose of
assessing the readiness of common or shared suppliers. HTC has developed an
assessment methodology for suppliers. The supplier certification process
includes written representations from suppliers regarding their year 2000
readiness programs, as well as onsite reviews. Many of Tektronix' material
suppliers will be included in the HTC assessment process. Those that are not
will be reviewed individually by the Company to determine what assurances can be
obtained regarding their readiness.
Costs
Costs associated with modifications to become year 2000 ready, as well as the
total cost of the Year 2000 Program (but not including the costs of the Oracle
enterprise system), are estimated as follows:
IN THOUSANDS
- ------------
Costs incurred through May 29, 1999 $ 2,162
Estimated remaining costs 481
-------
Total costs $ 2,643
=======
The total costs associated with required modifications to become year 2000
ready, as well as the total costs of the Year 2000 Program, are not expected to
be material to the Company's financial position or operating results. Such costs
are expensed as incurred in accordance with generally accepted accounting
principles.
23
<PAGE>
Risks
The failure to correct a material year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the year 2000 problem, resulting in part from the
uncertainty of the year 2000 readiness of third-party suppliers and customers,
the Company is unable to determine at this time whether the consequences of year
2000 failures will have a material impact on the Company's results of
operations, liquidity or financial condition. The Year 2000 Program is expected
to significantly reduce the Company's level of uncertainty about the year 2000
problem and, in particular, about the year 2000 compliance and readiness of its
material third-party suppliers. The Company believes that, with the
implementation of new business systems and completion of the Program as
scheduled, the possibility of significant interruptions of normal operations
should be reduced.
Tektronix believes that its most reasonably likely worst-case year 2000
scenarios would relate to problems with the systems of third parties rather than
with the Company's internal systems or its products. The Company believes the
risks are greatest with transportation supply chains and critical suppliers of
materials, because the Company has less control over assessing and remediating
the year 2000 problems of third parties. A worst-case scenario involving a
transportation supply chain or a critical supplier of materials would be the
partial or complete shutdown of transportation facilities or the supplier, with
the resulting inability to provide critical materials to the Company on a timely
basis. The Company does not maintain the capability to replace most third-party
materials with internal production. Contingency planning will consider
alternatives where efforts to work with critical suppliers to ensure year 2000
capability have not been successful.
The Company is not in a position to identify or to avoid all possible scenarios.
The Company is currently assessing scenarios and taking steps to mitigate the
impacts of various scenarios if they were to occur. This contingency planning
will continue through 1999, as the Company learns more about the preparations
and vulnerabilities of third parties regarding year 2000 issues. Due to the
large number of variables involved, the Company cannot provide an estimate of
the damage it might suffer if any of these scenarios were to occur.
The above contains forward-looking statements including, without limitation,
statements relating to the Company's plans, strategies, objectives,
expectations, intentions and resources and are made pursuant to the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995.
Readers are cautioned that forward-looking statements contained in the "Year
2000 Update" should be read in conjunction with the Company's disclosures under
"Forward-looking Statements."
FORWARD-LOOKING STATEMENTS
Statements and information included in the Chairman's letter and Management
Review and elsewhere in this report that relate to future results and events
(including new products) 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.
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: worldwide economic
and business conditions in the electronics industry, including the continuing
effects of the Asian economic crisis on demand for the Company's products;
competitive factors, including pricing pressures, technological developments and
new 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; and 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.
Risk factors related to the plan to separate the Measurement and Color Printing
and Imaging businesses include, but are not limited to: the ability of Tektronix
to successfully separate and operate the Measurement and Color Printing and
Imaging businesses and complete the strategic restructuring plan; the potential
disruption in the Company's business and to its employee base during this
process; risks that a proposed initial public offering for the separated Color
Printing and Imaging entity and the subsequent distribution of stock to
Tektronix shareholders will not be feasible or will not be successfully
consummated; and risks that the Company will be unable to sell or secure a
strategic partner for its Video and Networking division.
Tektronix has other risk factors in its business, including but not limited to:
the Company's ability to successfully implement the strategic direction and
restructuring actions announced in fiscal 1999, including reducing its
expenditures; the effects of year 2000 compliance issues; the timely
introduction of new products scheduled during the current year, which could be
affected by engineering or other development program slippage, the ability to
ramp up production or to develop effective sales channels; customers' acceptance
of and demand for new products; changes in the regulatory environment affecting
the transition to high-definition television within the time frame anticipated
by the Company; the significant operational and strategic uncertainties the
Company faces within the Video and Networking division; worldwide economic and
business conditions in the electronics industry, including the continuing
effects of the Asian economic crisis and its secondary effects on demand for the
Company's products; competitive factors, including pricing pressures,
technological developments and new products of competitors; and other risk
factors listed from time-to-time in the Company's Securities and Exchange
Commission reports and press releases.
24
<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 access to the Audit Committee, with and without
management representatives in attendance.
MERRILL A. MCPEAK
Chairman, Audit Committee
CARL W. NEUN
Senior Vice President and
Chief Financial Officer
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 29, 1999 and May 30, 1998, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
the years ended May 29, 1999, May 30, 1998, and May 31, 1997. 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 29, 1999 and May 30, 1998, and the results of their
operations and their cash flows for the years ended May 29, 1999, May 30, 1998,
and May 31, 1997, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Portland, Oregon
June 23, 1999
25
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Operations
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
FOR THE YEARS ENDED MAY 29,1999 MAY 30,1998 MAY 31,1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 1,861,490 $ 2,085,802 $ 1,940,082
Cost of sales 1,151,252 1,220,475 1,107,355
----------- ----------- -----------
Gross profit 710,238 865,327 832,727
Research and development expenses 204,655 203,312 188,192
Selling, general and administrative expenses 480,714 508,749 481,083
Equity in business ventures' earnings (loss) (9,230) 2,513 1,556
Non-recurring charges 84,780 40,478 -
----------- ----------- -----------
Operating income (loss) (69,141) 115,301 165,008
Interest expense 15,712 10,076 12,111
Other income - net 9,616 17,589 15,905
----------- ----------- -----------
Earnings (loss) before taxes (75,237) 122,814 168,802
Income tax expense (benefit) (24,076) 40,529 54,017
----------- ----------- -----------
Net earnings (loss) $ (51,161) $ 82,285 $ 114,785
=========== =========== ===========
Basic earnings (loss) per share $ (1.07) $ 1.63 $ 2.32
Diluted earnings (loss) per share (1.07) 1.60 2.29
Dividends per share 0.48 0.46 0.40
Average shares outstanding - basic 47,700 50,438 49,513
Average shares outstanding - diluted 47,700 51,320 50,236
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
IN THOUSANDS MAY 29,1999 MAY 30,1998
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 39,747 $ 120,541
Accounts receivable - net 313,274 346,342
Inventories 273,370 226,770
Other current assets 93,267 67,432
----------- -----------
Total current assets 719,658 761,085
Property, plant and equipment - net 442,257 425,153
Deferred tax assets 56,405 25,102
Other long-term assets 141,045 177,893
----------- -----------
Total assets $ 1,359,365 $ 1,389,233
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 115,687 $ 5,442
Accounts payable 251,349 221,834
Accrued compensation 110,001 119,842
Deferred revenue 20,009 15,102
----------- -----------
Total current liabilities 497,046 362,220
Long-term debt 150,722 150,681
Other long-term liabilities 90,035 91,391
Commitments and contingencies - -
Shareholders' equity:
Preferred stock, no par value
(authorized 1,000 shares; none issued) - -
Common stock, no par value
(authorized 200,000 shares; issued and outstanding
46,909 in 1999, and 50,345 in 1998) 143,263 223,527
Retained earnings 458,613 532,679
Accumulated other comprehensive income 19,686 28,735
----------- -----------
Total shareholders' equity 621,562 784,941
----------- -----------
Total liabilities and shareholders' equity $ 1,359,365 $ 1,389,233
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
IN THOUSANDS
FOR THE YEARS ENDED MAY 29,1999 MAY 30,1998 MAY 31,1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ (51,161) $ 82,285 $ 114,785
Adjustments to reconcile net earnings (loss)
to cash provided (used) by
operating activities:
Depreciation and amortization expense 74,792 67,425 59,591
Inventory write-down related to restructuring 25,767 38,482 -
Non-recurring charges 94,722 40,478 -
Deferred taxes (24,196) (6,336) 14,425
Loss (gain) on sale of fixed assets (12,121) 2,441 5,031
Gain on sale of investments (7,737) (28,244) (27,678)
Equity in business ventures' (earnings) loss 9,230 (2,513) (1,556)
Changes in operating assets and liabilities:
Accounts receivable 32,265 (28,810) 66,403
Inventories (78,113) (18,312) 26,754
Other current assets (26,705) (5,119) 22,213
Accounts payable 4,906 31,829 (179)
Accrued compensation (61,144) 3,363 (28,580)
Other - net 11,139 (9,340) 10,247
----------- ----------- -----------
Net cash provided (used) by operating activities (8,356) 167,629 261,456
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment (107,525) (155,066) (112,005)
Acquisition of businesses (4,300) (46,600) -
Proceeds from sale of fixed assets 24,187 3,601 9,073
Proceeds from sale of investments 8,929 36,114 33,848
----------- ----------- -----------
Net cash used by investing activities (78,709) (161,951) (69,084)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in short-term debt 110,069 (713) (38,451)
Issuance of long-term debt - 125 358
Repayment of long-term debt (629) (1,023) (50,609)
Issuance of common stock 5,260 35,358 26,018
Repurchase of common stock (85,524) (38,422) (3,797)
Dividends (22,905) (23,188) (19,809)
----------- ----------- -----------
Net cash provided (used) by financing activities 6,271 (27,863) (86,290)
----------- ----------- -----------
Increase (decrease) in cash and cash equivalents (80,794) (22,185) 106,082
Cash and cash equivalents at beginning of year 120,541 142,726 36,644
----------- ----------- -----------
Cash and cash equivalents at end of year $ 39,747 $ 120,541 $ 142,726
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
Income taxes paid $ 10,100 $ 19,981 $ 13,663
Interest paid 16,662 12,571 14,633
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Shareholders' Equity
ACCUMULATED
COMMON STOCK OTHER
IN THOUSANDS, ----------------------- RETAINED COMPREHENSIVE
EXCEPT PER SHARE AMOUNTS SHARES AMOUNT EARNINGS INCOME TOTAL
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE MAY 25, 1996 49,031 $ 204,370 $ 378,606 $ 92,346 $ 675,322
Components of comprehensive income:
Net earnings - - 114,785 - 114,785
Currency adjustment - - - (17,622) (17,622)
Unrealized holding
gains - net - - - (3,614) (3,614)
----------
Total comprehensive income 93,549
----------
Shares issued to
employees 1,173 26,018 - - 26,018
Shares repurchased (100) (3,797) - - (3,797)
Dividends - $0.40 per share - - (19,809) - (19,809)
-------- ---------- ---------- ---------- ----------
BALANCE MAY 31, 1997 50,104 226,591 473,582 71,110 771,283
======== ========== ========== ========== ==========
Components of comprehensive income:
Net earnings - - 82,285 - 82,285
Currency adjustment - - - (13,634) (13,634)
Unrealized holding
gains - net - - - (28,741) (28,741)
----------
Total comprehensive income 39,910
----------
Shares issued to employees 1,151 35,358 - - 35,358
Shares repurchased (910) 38,422) - - (38,422)
Dividends - $0.46 per share - - (23,188) - (23,188)
-------- ---------- ---------- ---------- ----------
BALANCE MAY 30, 1998 50,345 223,527 532,679 28,735 784,941
======== ========== ========== ========== ==========
Components of comprehensive
income (loss):
Net loss - - (51,161) - (51,161)
Currency adjustment - - - 281 281
Unrealized holding
losses - net - - - (9,330) (9,330)
----------
Total comprehensive loss (60,210)
----------
Shares issued to employees 127 5,260 - - 5,260
Shares repurchased (3,563) (85,524) - - (85,524)
Dividends - $0.48 per share - - (22,905) - (22,905)
-------- ---------- ---------- ---------- ----------
BALANCE MAY 29, 1999 46,909 $ 143,263 $ 458,613 $ 19,686 $ 621,562
======== ========== ========== ========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
29
<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 Imaging, and Video and
Networking business divisions. Headquartered in Wilsonville, Oregon, Tektronix
employs more than 7,500 people and maintains operations in 26 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 prior year amounts have been reclassified to conform to the
current year's presentation with no effect on previously reported earnings. The
Company's fiscal year is the 52 or 53 weeks ending the last Saturday in May.
Fiscal years 1999 and 1998 were 52 weeks; fiscal year 1997 was 53 weeks.
USE OF ESTIMATES
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 may differ from those
estimated.
EARNINGS PER SHARE
Basic earnings per share was calculated based on the weighted average number of
common shares outstanding during each period. For the year in which the Company
reported a net loss, diluted earnings per share was calculated based on the same
shares as basic earnings per share. For the years in which the Company reported
net earnings, diluted earnings per share was calculated based on these same
shares plus the potential shares issuable upon assumed exercise of outstanding
stock options based on the treasury stock method. All share, per share and
option amounts have been restated to give effect to the three-for-two stock
split effective October 31, 1997.
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 included in accumulated other comprehensive income. Gains and losses
from foreign currency transactions are included in the determination of net
earnings.
DERIVATIVES
Gains and losses on foreign exchange contracts that are identified as and are
effective as hedges of existing assets and liabilities are recognized in the
determination of net earnings for the period in which the exchange rate changes.
Gains and losses related to hedges of firm commitments are deferred and included
in the basis of the hedged transaction when it is completed. The deferred gains
or losses attributable to foreign exchange contracts are not material.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash deposits in banks and highly liquid
investments with maturities of three months or less from the time of purchase.
ACCOUNTS RECEIVABLE
Accounts receivable have been reduced by an allowance for doubtful accounts,
which was $5.1 million in 1999 and $4.8 million in 1998. The charges to this
reserve have not been material.
In September 1996, the Company entered into a five-year revolving receivables
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 $40.0 million were sold under this agreement as of May 29, 1999
and are therefore not reflected in the accounts receivable balance in the
accompanying Consolidated Balance Sheet.
In February 1999, the Company entered into a one-year receivables purchase
agreement with NationsBanc Commercial Corporation to sell, without recourse, an
undivided interest in a defined pool of trade accounts receivable. Receivables
of $15.0 million were sold under this agreement as of May 29, 1999 and are
therefore not reflected in the accounts receivable balance in the accompanying
Consolidated Balance Sheet.
At May 30, 1998, $50.0 million of receivables were sold under the agreement with
Citibank NA described above. The $5.0 million increase from 1998 in receivables
sold is shown as cash provided by operating activities in the Consolidated
Statement of Cash Flows for the year ended May 29, 1999.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined based
on a currently adjusted standard basis, which approximates actual cost on a
first-in, first-out basis. The Company periodically reviews its inventory for
obsolete or slow-moving items. Inventories at fiscal year ends were as follows:
<TABLE>
<CAPTION>
IN THOUSANDS 1999 1998
- ---------------------------------------------------------------------------------
<S> <C> <C>
Materials and work in process $ 118,624 $ 88,712
Finished goods 154,746 138,058
----------- ------------
Inventories $ 273,370 $ 226,770
=========== ============
</TABLE>
30
<PAGE>
SOFTWARE DEVELOPMENT COSTS
Development costs incurred in the research and development of new software
products and enhancements to existing software products are expensed as incurred
until technological feasibility has been established. After technological
feasibility has been established, any additional development costs are
capitalized in accordance with Statement of Financial Accounting Standards
(SFAS) No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased
or Otherwise Marketed." Such capitalized costs are amortized over the lesser of
five years or the economic life of the related product. The Company performs a
quarterly review of the recoverability of capitalized software costs. Any costs
determined to be non-recoverable are written off.
Software development costs capitalized and amortized during the year ended May
29, 1999 were as follows:
IN THOUSANDS
- -----------------------------------------------------------------
Balance - net May 30, 1998 $ 3,949
Software development costs capitalized 5,322
Amortization of capitalized costs (855)
Adjustments due to non-recoverability
(included in non-recurring charges) (708)
-------
Balance - net May 29, 1999 $ 7,708
=======
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. Property, plant and equipment at fiscal
year ends were as follows:
<TABLE>
<CAPTION>
IN THOUSANDS 1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
Land $ 5,764 $ 5,932
Buildings 255,314 217,036
Machinery and equipment 591,210 594,677
----------- -----------
852,288 817,645
Accumulated depreciation and amortization (410,031) (392,492)
----------- -----------
Property, plant and equipment - net $ 442,257 $ 425,153
=========== ===========
</TABLE>
INVESTMENTS
Investments in marketable equity securities are classified as available-for-sale
and reported at fair market value in the Consolidated Balance Sheets as other
long-term assets. The unrealized holding gains and losses are excluded from
earnings and included, net of deferred income taxes, in accumulated other
comprehensive income.
INTANGIBLE ASSETS
Intangible assets, primarily goodwill, patents and trademarks, are included as
other long-term assets and are stated at cost. Amortization is provided on a
straight-line basis over periods generally not exceeding fifteen years.
Long-lived assets and intangibles are reviewed for impairment when events or
circumstances indicate costs may not be recoverable. Impairment exists when the
carrying value of the intangible asset is greater than the net undiscounted
future cash flows expected to be provided by the asset. If impairment exists,
the asset's book value will be written down to its fair value. Fair value is
determined through quoted market values or through the calculation of the net
present value of discounted future cash flows expected to be provided by the
asset.
REVENUE RECOGNITION
Revenue from product sales is generally recognized at the time the product is
shipped. Upon shipment, the Company also provides for the estimated cost that
may be incurred for product warranties and post-sales support. Service revenue
is deferred and recognized over the contract period or as services are rendered.
INCOME TAXES
Deferred income taxes, reflecting the impact of temporary differences between
assets and liabilities recognized for financial reporting and tax purposes, are
based on tax laws currently enacted. 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.
ADVERTISING
Advertising costs are charged to operations when the advertising first takes
place. The Company does not incur any direct-response advertising costs.
Advertising expenses were $54.1 million, $56.8 million and $49.2 million in
1999, 1998 and 1997, respectively.
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.
FUTURE ACCOUNTING CHANGES
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The new
statement will require recognition of all derivatives as either assets or
liabilities on the balance sheet at fair value. The new statement is effective
for fiscal year 2002, but early adoption is permitted. Management has not yet
completed an evaluation of the effect this standard will have on the Company's
consolidated financial statements.
ACQUISITIONS
On February 1, 1999, the Company acquired the assets of the Network Monitoring
and Mobile Test Systems business of Necsy Network Control Systems, S.p.A.
(Necsy), a Padova, Italy based, wholly owned subsidiary of Italtel, an Italian
telecommunications manufacturer, which is a joint venture between Telecom Italia
and Siemens AG. The cash purchase price and related goodwill are not material.
The transaction was accounted for by the purchase method of accounting, and
accordingly, the results of operations of Necsy have been included in the
Company's financial statements since the date of acquisition. Pro forma
comparative results of operations are not presented because they are not
materially different from the Company's reported results of operations.
On September 30, 1997, the Company acquired Siemens' Communications Test
Equipment GmbH (CTE), a wholly owned subsidiary of Siemens AG based in Berlin,
Germany, for approximately $46.6 million in cash,
31
<PAGE>
including direct acquisition costs. The transaction was accounted for by the
purchase method of accounting, and accordingly, the results of operations of CTE
have been included in the Company's financial statements since the date of
acquisition. Pro forma comparative results of operations are not presented
because they are not materially different from the Company's reported results of
operations. The purchase price was allocated as follows:
IN THOUSANDS
- ------------
Fair value of identified net assets acquired $ 6,600
Acquired in-process research and development 17,000
Identified intangibles 23,000
----------
Total purchase price $ 46,600
==========
The acquired in-process research and development (IPR&D) of $17.0 million was
comprised of several projects in the telecommunication test equipment market.
The value of the IPR&D was expensed in the second quarter of fiscal year 1998
because at the time of the acquisition, technological feasibility had not been
established and no future alternative uses existed for any of the projects.
To determine the valuation of in-process technology, management considered the
state of development of each project, the expected time and cost to complete
each project, the expected income from the projects, and the risks associated
with the development. These risks include technological feasibility issues,
demand for the final products, and competition. The Income Approach was utilized
in determining the valuation of the IPR&D. This approach determines the net
present value of the future cash flows based on predicted revenues and costs
associated with the first generation of products, using a discount rate
commensurate with the risks identified. A discount rate of 26% was used in the
valuation of the IPR&D.
Research and development costs to bring the projects from the acquired company
to technological feasibility were approximately $5.0 million, and the products
were completed at various dates during fiscal year 1998 and fiscal year 1999.
The identified intangibles of $23.0 million include $18.0 million of completed
technology and $5.0 million of workforce-in-place and are being amortized on a
straight-line basis over 15 years.
The acquired completed technology of $18.0 million consists of several products
in the telecommunications test equipment market that supplemented the Company's
current product offerings. The valuation of the completed technology was
determined by calculating the net present value of future cash flows based on
predicted revenues and expenses associated with the existing products. A
discount rate of 16% was used in the calculation.
NON-RECURRING CHARGES
In the second quarter of fiscal year 1999, the Company announced and began to
implement a series of actions (Fiscal Year 1999 Plan) intended to align
worldwide operations with current market conditions and to improve the
profitability of its operations. These actions include a net reduction of
approximately 15% of the Company's worldwide workforce, the exit from certain
facilities and the streamlining of product and service offerings. Management
expects that the majority of the actions will be completed by the end of the
second quarter of fiscal year 2000 and expects to require $52.6 million in cash
to be used in connection with actions not yet completed, primarily for severance
and lease cancellations.
Major actions can be summarized by each of the three business divisions.
Measurement's service business is being consolidated from several depots in the
United States and Europe into two depots in each of these geographies. This
consolidation will result in headcount reduction and the write-down and disposal
of redundant inventory. These actions are in process and will be completed in
the first quarter of fiscal year 2000. Measurement closed the Bend, Oregon
manufacturing facility during the third quarter and consolidated that process
into its Beaverton, Oregon facilities. This action resulted in headcount
reduction and lease settlements. Measurement reduced headcount throughout the
division, primarily in manufacturing, and will continue to reduce headcount
through the first quarter of fiscal year 2000. During the second quarter of
1999, Color Printing and Imaging discontinued three product lines - wide format,
dye sublimation and B-size solid ink. This action resulted and will continue to
result in write-offs of disposed inventory through the first quarter of fiscal
year 2000. Color Printing and Imaging also reduced headcount throughout the
division, primarily in manufacturing during the third and fourth quarters of
1999. During 1999, Video and Networking discontinued development, manufacturing,
and sales of non-linear digital editing products sold under the Lightworks name.
This decision resulted in headcount reduction, write-offs of disposed inventory,
incremental sales returns and bad debts, and costs to fulfill commitments to
deliver software enhancements on previously sold product. Additional write-offs
of disposed inventory will be completed by the end of the first quarter of
fiscal year 2000. Outside of the divisions, selective involuntary terminations
have occurred and will occur throughout corporate functions and in the Company's
foreign subsidiaries through the second quarter of fiscal year 2000.
The Company recorded pre-tax charges of $125.7 million to account for these
actions, including restructuring charges of $115.8 million and other
non-recurring charges of $9.9 million for related actions. The $115.8 million in
restructuring charges include $27.1 million in charges to cost of sales for the
write-off of excess inventory resulting from discontinued product lines and
consolidation of service centers worldwide, $56.9 million in severance expense
related to employee separation, $14.8 million in charges to facilities for lease
cancellation fees and $17.0 million in charges to long-term assets associated
with discontinued product lines. The $9.9 million for related actions include
$5.1 million of expected sales returns of previously sold product, $0.8 million
of bad debt expense related to existing accounts receivable that will not be
collected and $4.0 million of costs to fulfill commitments to deliver software
enhancements on previously sold product, all associated with exiting the
non-linear digital editing business. The Company decided to exit this business
due to the failure of prior restructuring efforts to return the business to
profitability.
In the second quarter of fiscal year 1998, the Company announced and began to
implement a restructuring plan (Fiscal Year 1998 Plan) designed to return the
Video and
32
<PAGE>
Networking business to profitable growth and recorded a pre-tax reserve of $60.0
million to account for these actions. The plan provided for headcount reduction
and the discontinuation of certain products within the Lightworks and Grass
Valley product lines, as well as the discontinuation of the Network Displays
business. During 1999, it was determined that $4.1 million of this reserve would
not be needed, and as such, the amount was reversed to the locations of the
original charges in the Consolidated Statement of Operations. The original plan
anticipated closing the Network Displays business and provided reserves for
severance and inventory disposals. During the third quarter of 1999, the Network
Displays business was sold, resulting in less severance and inventory disposals
than originally planned. The $4.1 million includes $4.3 million and $1.3 million
in excess reserves for severance and inventory write-offs, respectively, that
were reversed, net of additional reserves recorded of $0.7 million for lease
cancellation fees and $0.8 million for miscellaneous payables. As of May 29,
1999, the implementation of this plan was substantially complete.
Also in the second quarter of fiscal year 1998, the Company expensed $17.0
million for the acquisition of IPR&D and $2.0 million in severance costs
associated with the acquisition of CTE. During the third quarter of 1999, it was
determined that $1.1 million of this $2.0 million severance reserve for CTE
would not be needed as originally anticipated because certain employees who were
to be terminated left the Company voluntarily, without severance.
Accordingly, such amount was reversed to non-recurring charges.
Net non-recurring charges incurred under the Fiscal Year 1998 Plan and Fiscal
Year 1999 Plan impacted the Company's results of operations for the years ended
May 29, 1999 and May 30, 1998 as follows:
<TABLE>
<CAPTION>
LOCATION OF CHARGE IN THE IN THOUSANDS
CONSOLIDATED STATEMENTS OF OPERATIONS 1999 1998
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Severance and benefits Non-recurring charges $ 51,575 $ 14,933
Inventory write-offs Cost of sales 25,767 38,482
Lease buy-outs and
abandonment of facilities Non-recurring charges 17,735 4,139
Asset write-offs and impairments Non-recurring charges 15,470 2,406
Sales returns and allowances Net sales 5,120 -
Commitment for enhancements related Research and development
to discontinued products expenses 4,019 -
Bad debt expense related to Selling, general and
discontinued products administrative expenses 803 -
In-process research and development
acquired in the purchase of CTE Non-recurring charges - 17,000
Severance costs associated
with the purchase of CTE Non-recurring charges - 2,000
--------- ---------
$ 120,489 $ 78,960
========= =========
</TABLE>
The non-recurring charges incurred under the Fiscal Year 1999 Plan affected the
Company's financial position in the following manner:
<TABLE>
<CAPTION>
EQUIPMENT PAYABLES
ACCRUED AND OTHER AND OTHER
IN THOUSANDS COMPENSATION INVENTORIES ASSETS LIABILITIES
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Original charges $ 54,680 $ 27,760 $ 18,200 $ 19,894
Activity:
Cash paid out (20,844) - - (7,415)
Non-cash disposals or
write-offs - (27,070) (17,055) -
Adjustments to plan 2,244 (690) (455) 4,049
----------- ----------- ----------- -----------
Balance May 29, 1999 $ 36,080 $ - $ 690 $ 16,528
=========== =========== =========== ===========
</TABLE>
The charge of $54.7 million in accrued compensation reflects original planned
headcount reduction of 1,371 employees worldwide. This charge was increased by a
net $2.2 million during the year. The $2.2 million consists of an $8.6 million
reserve for severance of an additional 282 employees worldwide across all
responsibilities, offset in part by reversal of a $6.4 million reserve for
pension settlement that was not needed as settlement accounting was not
appropriate during the year. Headcount reduction under the current plan of
reorganization now totals 1,653 employees worldwide. Approximately 865 employees
have been terminated under the plan. Severance of $20.8 million has been paid to
approximately 570 of these employees, while the other 295 employees will be paid
severance in the first quarter of fiscal year 2000. The remaining 788 employees
will be terminated at varying times through the second quarter of fiscal year
2000. The $27.8 million charge to inventories includes inventories related to
the consolidation of Measurement service offerings, the discontinuation of three
Color Printing and Imaging product lines and the discontinuation of non-linear
digital editing products sold under the Lightworks name, which were written off
during the second quarter. The charge of $18.2 million for equipment and other
assets includes asset impairments of $17.4 million and $0.8 million in reserve
for bad debt expense. The impaired assets are primarily related to discontinued
product lines in Color Printing and Imaging and Video and Networking and include
manufacturing assets of $6.2 million, goodwill and other intangibles of $6.5
million, and leasehold improvements and other assets of $4.7 million. All of the
assets included in this impairment charge will be disposed of through
abandonment at varying times through the second quarter of fiscal year 2000. The
$19.9 million charge for payables and other liabilities includes reserves for
lease buy-outs and abandonment of facilities, sales returns and allowances and
commitments for enhancements related to discontinued products. This reserve was
increased by $4.0 million during the year to provide for additional costs to
exit certain sales and service offices worldwide and to fulfill certain
contractual commitments, partly offset by a decrease in original sales returns
allowances.
SUBSEQUENT EVENTS
In June 1999, the Company's Board of Directors unanimously approved a plan that
is intended to result in the formation of two separate, publicly traded
companies. One company will be comprised of the current
33
<PAGE>
Measurement division, and the other will be comprised of the current Color
Printing and Imaging division. Management believes that this plan will enable
each business to pursue its optimal long-term strategy without the limitations
necessarily imposed by a larger, more diverse company. The new measurement
company will retain the Tektronix name and be headquartered in Beaverton,
Oregon. The new color printing and imaging company, which has not yet been
named, will be headquartered in Wilsonville, Oregon. Tektronix is considering an
initial public offering (IPO) for approximately 15% of the new color printing
and imaging company prior to the end of fiscal year 2000. Subject to the
successful completion of an IPO, and receipt of a favorable tax ruling from the
Internal Revenue Service (IRS), the remaining shares will be distributed, on a
tax-free basis, to Tektronix shareholders at some time after the offering.
Although the Company expects the separation of the businesses will have no
significant impact on employment levels, execution of this plan may result in
future non-recurring charges. Such amounts cannot be estimated at this time.
Management also announced in June 1999 that the Company intends to sell or
secure a strategic alliance for its Video and Networking division, excluding the
VideoTele.com product family. This product family merged into the Measurement
division effective May 30, 1999. Prior to the sale or strategic alliance of
Video and Networking, the division plans to consolidate many functions in order
to allow for improved profitability at lower revenue levels. During the first
quarter of fiscal year 2000, Video and Networking plans to take the following
actions: consolidate all manufacturing and customer support activities at the
Grass Valley site; move administrative functions, including sales operations,
information systems, finance and human resources, to Grass Valley; form two
focused marketing teams tied to the Profile and Grass Valley product lines; and
combine the U.S. sales operation into one function.
BUSINESS SEGMENTS
The Company has adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," as of the fiscal year ended May 29, 1999.
Information presented for earlier years has been restated for comparative
purposes.
The Company is organized based on the products and services that it offers.
Under this organizational structure, the Company operates in three main
segments: Measurement, Color Printing and Imaging, and Video and Networking.
Measurement derives revenue principally through the development and marketing of
seven key product groups: oscilloscopes, signal sources, probing solutions,
digital systems development products, handheld communication test instruments,
and video and audio test instruments. Color Printing and Imaging derives revenue
principally through the development and marketing of color printers and
supplies. The Company's color printer technologies include solid ink and color
laser. Video and Networking derives revenue principally through the development
and marketing of digital storage products, production switchers, digital picture
manipulators, routing switchers, linear editing systems, on-air master control
solutions and video transmission products. All three operating segments also
derive revenue through providing support services for products sold worldwide.
No single customer or single foreign country provides 10% or more of the
Company's revenues.
The information provided below is obtained from internal information that is
provided to the Company's chief operating decision-maker for the purpose of
corporate management. Assets, liabilities and expenses attributable to corporate
activity are not allocated to the three operating segments. Depreciation expense
by division is not included in the internal information provided to the chief
operating decision-maker and is therefore not presented below. Inter-segment
sales are not material and are included in net sales to external customers
below.
<TABLE>
<CAPTION>
IN THOUSANDS 1999 1998 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales to external customers (by division):
Measurement $ 844,882 $ 962,858 $ 852,827
Color Printing and Imaging 725,354 728,697 638,456
Video and Networking 291,254 394,247 448,799
----------- ----------- -----------
Net sales $ 1,861,490 $ 2,085,802 $ 1,940,082
----------- ----------- -----------
Net sales to external customers (by region):
United States $ 946,036 $ 1,077,649 $ 1,027,294
Europe 562,592 548,829 505,258
Pacific 182,972 208,874 202,408
Japan 85,227 135,632 126,898
Americas 84,663 114,818 78,224
----------- ----------- -----------
Net sales $ 1,861,490 $ 2,085,802 $ 1,940,082
----------- ----------- -----------
Operating income (loss):
Measurement $ 91,148 $ 133,568 $ 100,381
Color Printing and Imaging 17,982 67,724 71,960
Video and Networking (48,035) (9,912) (8,384)
Non-recurring charges (120,489) (78,960) -
Business ventures' earnings (loss) and other (9,747) 2,881 1,051
----------- ----------- -----------
Operating income (loss) $ (69,141) $ 115,301 $ 165,008
----------- ----------- -----------
</TABLE>
Certain facility, information systems and other expenses are incurred by
Corporate and allocated to the divisions based on a percentage of sales, number
of employees or payroll costs.
<TABLE>
<CAPTION>
IN THOUSANDS 1999 1998 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Segment assets:
Measurement $ 465,576 $ 500,339 $ 435,110
Color Printing and Imaging 464,572 376,092 291,894
Video and Networking 231,906 264,486 283,601
Corporate 197,311 248,316 306,136
----------- ----------- -----------
Segment assets $ 1,359,365 $ 1,389,233 $ 1,316,741
----------- ----------- -----------
Long-lived assets:
United States $ 505,924 $ 523,791 $ 504,478
International 77,378 79,255 48,212
Deferred tax assets 56,405 25,102 12,540
----------- ----------- -----------
Long-lived assets $ 639,707 $ 628,148 $ 565,230
----------- ----------- -----------
Capital expenditures:
Measurement $ 19,633 $ 23,719 $ 18,172
Color Printing and Imaging 23,898 60,111 28,879
Video and Networking 13,196 12,507 13,649
Corporate 50,798 58,729 51,305
----------- ----------- -----------
Capital expenditures $ 107,525 $ 155,066 $ 112,005
----------- ----------- -----------
</TABLE>
34
<PAGE>
OTHER LONG-TERM ASSETS
<TABLE>
<CAPTION>
IN THOUSANDS 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Investment in business ventures $ 73,225 $ 76,226
Licensing agreements and other intangibles - net 49,930 62,610
Notes, contracts and leases 8,410 5,854
Investment in marketable equity securities 5,876 19,450
Other 3,604 13,753
----------- -----------
Other long-term assets $ 141,045 $ 177,893
=========== ===========
</TABLE>
Significant investments in business ventures, accounted for under the equity
method, include a 50% investment in Sony/Tektronix Corporation and a 27%
interest in Merix Corporation (Merix).
The Company's share of the assets, liabilities, net sales and net earnings of
Sony/Tektronix, as well as the Company's sales to, purchases from, and accounts
receivable consisted of:
<TABLE>
<CAPTION>
IN THOUSANDS 1999 1998 1997
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current assets $ 55,036 $ 60,236 $ 55,322
Property, plant and equipment - net 18,665 18,632 19,913
Other long-term assets 6,795 6,482 12,129
Current liabilities 15,015 20,562 18,511
Other long-term liabilities 10,157 9,162 8,988
----------- ----------- -----------
Net sales $ 98,171 $ 135,704 $ 152,054
Gross profit 25,628 34,436 40,742
Operating income (loss) (6,539) 849 3,068
Earnings (loss) before taxes (6,048) 3,584 2,792
Net earnings (loss) (4,625) 1,277 1,184
----------- ----------- -----------
Sales to $ 77,332 $ 117,173 $ 112,770
Purchases from 20,718 17,810 19,596
Accounts receivable 7,506 12,354 9,866
</TABLE>
Purchases from other related parties Merix, Maxim Integrated Products, Inc. and
Maxtek Components Corporation, totaled $37.3 million, $50.1 million, and $52.1
million for 1999, 1998 and 1997, respectively. All other transactions and
resulting balances with related parties were insignificant.
At May 29, 1999, the carrying value of the Company's investment in Merix was
$12.1 million, with a fair value, based upon quoted market price, of $10.2
million. The Company's portion of the undistributed earnings of the business
ventures was $20.3 million in 1999 and $20.7 million in 1998.
Licensing agreements and other intangibles have been reduced by accumulated
amortization of $22.2 million at fiscal year-end 1999 and $25.3 million at
fiscal year-end 1998.
Proceeds from the sales of marketable equity securities in 1999, 1998 and 1997
were $8.9 million, $36.1 million and $33.8 million, respectively. Realized gains
were computed based on the average cost of the underlying securities and are
disclosed in "Other Income - Net." At the end of 1999, 1998 and 1997, unrealized
holding gains (losses) of $(2.3) million, $12.9 million and $58.8 million (less
deferred taxes [benefit] of $[0.9] million, $5.0 million and $22.1 million),
respectively, were included in accumulated other comprehensive income.
SHORT-TERM AND LONG-TERM DEBT
The Company's short-term debt at year-ends consisted of:
<TABLE>
<CAPTION>
IN THOUSANDS 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Commercial paper $ 69,526 $ -
Revolving credit 44,000 -
Lines of credit 1,655 4,466
----------- -----------
Short-term instruments 115,181 4,466
Current maturities of long-term debt 506 976
----------- -----------
Short-term debt $ 115,687 $ 5,442
=========== ===========
</TABLE>
The Company has a $150.0 million unsecured revolving credit agreement with
Morgan Guaranty Trust Company of New York, as agent, that matures in July 2001.
In addition, 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. The interest rate applicable to the revolving credit agreement is
LIBOR plus 0.3%. At May 29, 1999, the Company maintained unsecured bank credit
facilities of $310.0 million, of which $187.7 million was unused. Unused
facilities included $151.2 million in lines of credit and $36.5 million under
the revolving credit agreement. A $20.0 million unsecured line of credit expires
in October 1999 with all remaining lines providing no specific expiration date.
The Company's long-term debt at year-ends consisted of:
<TABLE>
<CAPTION>
IN THOUSANDS 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
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 1,228 1,657
----------- -----------
Long-term instruments 151,228 151,657
Current maturities (506) (976)
----------- -----------
Long-term debt $ 150,722 $ 150,681
=========== ===========
</TABLE>
Certain of the Company's debt agreements require compliance with debt covenants.
Management believes that the Company is in compliance with such requirements for
the fiscal year ended May 29, 1999. The Company amended its credit agreement
with Morgan Guaranty Trust Company of New York, as agent, effective November 28,
1998, to exclude certain charges from covenant calculations.
Aggregate long-term debt payments will be $0.7 million in 2000, $0.2 million in
2001, $0.1 million in 2002, $50.2 million in 2003 and $100.0 million in 2004.
OTHER LONG-TERM LIABILITIES
<TABLE>
<CAPTION>
IN THOUSANDS 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Accrued postretirement benefits $ 36,050 $ 37,082
Accrued pension 34,067 35,004
Unearned service revenue 11,145 10,740
Other 8,773 8,565
----------- -----------
Other long-term liabilities $ 90,035 $ 91,391
=========== ===========
</TABLE>
OTHER INCOME - NET
<TABLE>
<CAPTION>
IN THOUSANDS 1999 1998 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gain (loss) on disposition of fixed assets $ 12,121 $ (2,441) $ (5,031)
Gain on sale of marketable equity securities 7,737 28,244 27,678
Currency gains (losses) (3,448) (278) 753
Other (6,794) (7,936) (7,495)
----------- ----------- -----------
Other income - net $ 9,616 $ 17,589 $ 15,905
=========== =========== ===========
</TABLE>
35
<PAGE>
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 $31.0 million in 1999, $28.8 million in 1998, and $27.4 million in 1997. In
addition, the Company has long-term or minimum purchase agreements with various
suppliers and vendors. The future minimum obligations under operating leases and
other commitments having an initial or remaining non-cancelable term in excess
of one year as of May 29, 1999 were:
<TABLE>
<CAPTION>
OPERATING
IN THOUSANDS LEASES COMMITMENTS
- -------------------------------------------------------------------------------
<S> <C> <C>
2000 $ 20,987 $ 14,343
2001 16,344 5,937
2002 13,525 2,370
2003 10,796 1,303
2004 8,600 -
Future years 60,459 -
----------- -----------
Total $ 130,711 $ 23,953
=========== ===========
</TABLE>
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 8,819,000
shares reserved for issuance under these plans at May 29, 1999. 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. Most options
granted after January 1, 1997, vest over two years and expire five years from
the date of grant. There were 1,161 employees holding options at May 29, 1999.
Additional information with respect to option activity is set forth below:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
---------------------- ----------------------
WEIGHTED WEIGHTED
NUMBER OF AVERAGE NUMBER OF AVERAGE
SHARES IN EXERCISE SHARES IN EXERCISE
THOUSANDS PRICE THOUSANDS PRICE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
May 25, 1996 3,972 $ 23 1,484 $ 17
Granted 1,088 32
Exercised (975) 17
Canceled (212) 27
- -----------------------------------------------------------------------------------
May 31, 1997 3,873 $ 26 1,428 $ 21
Granted 1,149 40
Exercised (1,093) 23
Canceled (405) 30
- -----------------------------------------------------------------------------------
May 30, 1998 3,524 $ 31 1,509 $ 26
Granted 2,219 26
Exercised (138) 19
Canceled (1,766) 36
- -----------------------------------------------------------------------------------
May 29, 1999 3,839 $ 27 2,065 $ 25
===================================================================================
</TABLE>
The following table summarizes information about options outstanding and
exercisable at May 29, 1999:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
-------------------------------------- ----------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF NUMBER OF REMAINING AVERAGE NUMBER OF AVERAGE
EXERCISE SHARES IN CONTRACTUAL EXERCISE SHARES IN EXERCISE
PRICES THOUSANDS LIFE PRICE THOUSANDS PRICE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$8.80-17.90 915 3.27 years $ 17 711 $ 16
18.00-28.70 1,046 6.16 years 26 905 26
28.80-29.40 1,236 4.62 years 29 0 0
29.50-40.20 625 4.49 years 36 437 36
40.30-43.90 17 3.32 years 44 12 44
--------- ----------- -------- -------- --------
3,839 4.69 years $ 27 2,065 $ 25
========= =========== ======== ======== ========
</TABLE>
The Company accounts for stock options according to Accounting Principles Board
(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 cost 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 1999, 1998
and 1997 was $10, $12 and $11 per share, respectively.
The Company also has plans for certain executives and outside directors that
provide stock-based compensation other than options. Under APB No. 25,
compensation cost for these plans 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 cost is measured based on the market
price of the stock at the grant date. The weighted average grant-date fair value
of the shares granted under these plans during 1999, 1998 and 1997 was $32, $41
and $31 per share, respectively. Compensation cost recognized in income related
to shares granted under these plans was not material.
The pro forma impact to both net earnings and earnings per share from
calculating stock-related compensation cost consistent with the fair value
alternative of SFAS No. 123 is indicated below:
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pro forma net earnings (loss) (in thousands) $ (61,029) $ 74,520 $ 109,240
Pro forma earnings (loss) per share:
Basic $ (1.28) $ 1.48 $ 2.21
Diluted (1.28) 1.45 2.17
</TABLE>
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:
<TABLE>
<CAPTION>
1999 1998 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expected life (in years) 3.0 3.0 5.0
Risk-free interest rate 5.6% 5.8% 6.3%
Volatility 57.8% 40.0% 35.2%
Dividend yield 2.1% 1.2% 1.3%
</TABLE>
36
<PAGE>
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 was
not fully reflected until 1999.
SHAREHOLDER RIGHTS AGREEMENT
In August 1990, the Company's Board of Directors (the Board) 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 $40,
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.
BENEFIT PLANS
PENSION AND POSTRETIREMENT BENEFIT PLANS
Tektronix sponsors one IRS-qualified defined benefit plan, the Tektronix Cash
Balance Plan, and one non-qualified defined benefit plan, the Retirement
Equalization Plan, for eligible employees in the United States. The Company also
sponsors pension plans in Germany, the Netherlands and the United Kingdom. In
addition, the Company provides postretirement life insurance benefits to all
current employees and provides certain retired and active employees with
postretirement health care benefits.
As a result of corporate restructuring and layoffs during fiscal year 1999, the
cash balance plan experienced a decline in the number of active participants. As
of January 31, 1999, the number of employees affected was deemed significant. An
interim measurement was performed and curtailment accounting was implemented. A
$3.3 million curtailment gain was recognized, which reduced pension expense. As
of the remeasurement date, the discount rate was reduced from 7.3% to 7.0%.
In 1998, the U.S. pension plan was amended, converting it from a final average
pay plan to a cash balance plan. As a result of this plan amendment, the pension
benefit obligation was reduced by $38.9 million. The reduction is being
amortized over the average remaining service period of the active participants
in the plan. Upon transition to the cash balance plan on January 1, 1998, the
discount rate was reduced to reflect current market conditions. The impact of
this change was an increase in the pension benefit obligation of $63.9 million
as of January 1998.
The following tables provide information about changes in the benefit obligation
and plan assets and the funded status of the Company's pension and
postretirement benefit plans.
<TABLE>
<CAPTION>
PENSION BENEFITS POSTRETIREMENT BENEFITS
IN THOUSANDS 1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Beginning balance $ 553,729 $ 495,945 $ 15,944 $ 15,070
Service cost 15,001 14,161 201 188
Interest cost 38,082 37,829 1,102 1,145
Actuarial loss 9,455 68,545 1,169 1,252
Curtailment 367 - - -
Plan amendments 825 (38,882) - -
CTE acquisition - 2,732 - -
Benefit payments (36,643) (25,289) (1,953) (1,711)
Exchange rate changes (3,906) (1,736) - -
Participant contributions 626 424 - -
----------- ----------- ----------- -----------
Ending balance $ 577,536 $ 553,729 $ 16,463 $ 15,944
=========== =========== =========== ===========
CHANGE IN FAIR VALUE OF PLAN ASSETS
Beginning balance $ 538,728 $ 474,222 - -
Actual return 49,559 86,512 - -
Employer contributions 3,505 4,208 - -
Benefit payments (36,643) (25,289) - -
Other adjustments (6,524) (925) - -
----------- ----------- ----------- -----------
Ending balance $ 548,625 $ 538,728 - -
=========== =========== =========== ===========
Net unfunded status of the plan $ 28,911 $ 15,000 $ 16,463 $ 15,944
Unrecognized initial net
obligation (1,887) (124) - -
Unrecognized prior service cost 38,047 46,320 13,355 16,026
Unrecognized net gain (loss) (40,410) (37,414) 7,300 9,112
----------- ----------- ----------- -----------
Net liability recognized $ 24,661 $ 23,782 $ 37,118 $ 41,082
=========== =========== =========== ===========
</TABLE>
The projected benefit obligation, accumulated benefit obligation, and fair value
of plan assets for certain non-U.S. plans with accumulated benefit obligations
in excess of plan assets were $22.9 million, $20.2 million and zero,
respectively, for 1999, and $18.7 million, $17.2 million and zero, respectively,
for 1998.
Assumptions used in the accounting for the Tektronix pension and postretirement
benefit plans were:
<TABLE>
<CAPTION>
ASSUMPTIONS ON A WEIGHTED AVERAGE BASIS 1999 1998 1997
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
PENSION BENEFITS
Discount rate 7.0% 7.0% 7.8%
Rate of compensation increase 3.8% 3.7% 3.8%
Expected return on plan assets 10.9% 10.9% 10.2%
POSTRETIREMENT BENEFITS
Discount rate 7.3% 7.3% 8.0%
Rate of compensation increase 3.4% 3.8% 3.8%
</TABLE>
Effective July 1, 1998, the Company replaced its self-funded indemnity health
plan for retirees with an insured indemnity plan. The assumed health care cost
trend rates used to measure the expected cost of benefits under the indemnity
plan were assumed to increase by 13.3% for participants under the age of 65 and
15.6% for participants age 65 and over in the fiscal year 2000. Thereafter,
these rates were assumed to gradually decrease until they reach 5.3% and 5.5%,
respectively, in 2007. For the existing retiree HMO plans, the rate of increase
in the cost of health care benefits was assumed
37
<PAGE>
to be 9.3% for 2000, decreasing gradually to a rate of 5.3% in 2007. A 1.0%
change in these assumptions would not have a material effect on either the
postretirement benefit obligation at May 29, 1999 or the benefit credit reported
for 1999.
The components of net pension benefit cost and postretirement benefit credit
recognized in income were:
<TABLE>
<CAPTION>
IN THOUSANDS 1999 1998 1997
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
PENSION BENEFITS
Service cost $ 15,001 $ 14,161 $ 12,084
Interest cost 38,082 37,829 37,627
Expected return on plan assets (50,890) (48,634) (39,335)
Amortization of transition asset (1,839) (2,059) (1,858)
Amortization of prior service cost (4,039) (2,209) (740)
Curtailment gain (3,311) - -
Recognized actuarial net loss 3,722 1,792 2,655
Other benefit plans 2,294 1,992 1,327
----------- ----------- -----------
Net benefit cost (credit) $ (980) $ 2,872 $ 11,760
=========== =========== ===========
POSTRETIREMENT BENEFITS
Service cost $ 201 $ 188 $ 177
Interest cost 1,102 1,145 1,244
Amortization of prior service cost (2,671) (2,671) (2,671)
Recognized net gain (644) (747) (631)
----------- ----------- -----------
Net benefit credit $ (2,012) $ (2,085) $ (1,881)
=========== =========== ===========
</TABLE>
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's matching
contribution, which was previously invested entirely in Company stock, was
increased from 3% to 4% of compensation effective January 1, 1998, and may now
be invested in any one of the 401(k) plan funds. In addition, the Company
contributes Company stock to the plan for all eligible employees equal to 2% of
compensation. The Company's total contributions were approximately $11.4 million
in 1999, $16.4 million in 1998, and $14.2 million in 1997.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company utilizes derivative financial instruments, primarily forward foreign
currency exchange contracts, to reduce the impact of foreign currency exchange
rate risks where natural hedging strategies cannot be effectively employed. At
the end of 1999 and 1998, the notional amounts of the Company's outstanding
contracts were $75.3 million and $127.4 million, respectively. 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. 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 Company does not hold or issue derivative financial instruments for trading
purposes. 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
Company's derivative activities do not create foreign currency exchange rate
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 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.
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 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 29, 1999, and May 30, 1998,
were not material.
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 29, 1999, the Company had no significant concentrations of credit risk.
COMPREHENSIVE INCOME
The Company adopted SFAS No. 130, "Reporting Comprehensive Income," as of the
first quarter of fiscal year 1999. SFAS No. 130 establishes new rules for the
reporting of comprehensive income and its components, but has no impact on the
Company's net earnings or total shareholders' equity.
Comprehensive income (loss) and its components were as follows:
<TABLE>
<CAPTION>
IN THOUSANDS 1999 1998 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net earnings (loss) (net of tax of
$[24,067], 40,529 and 54,017,
respectively) $ (51,161) $ 82,285 $ 114,785
Other comprehensive income (loss):
Currency translation adjustment
(net of tax of $188, [9,089]
and [11,748], respectively) 281 (13,634) (17,622)
Unrealized gain (loss) on available-
for-sale securities (net of tax of
$878, [2,708] and 3,837, respectively) (4,688) (11,795) 14,566
Reclassification adjustment for realized
gains included in net income (net of
tax of $[3,095], [11,298] and [12,120],
respectively) (4,642) (16,946) (18,180)
----------- ----------- -----------
Total comprehensive income (loss) $ (60,210) $ 39,910 $ 93,549
=========== =========== ===========
</TABLE>
38
<PAGE>
INCOME TAXES
The provision for income taxes consisted of:
<TABLE>
<CAPTION>
IN THOUSANDS 1999 1998 1997
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ (20,003) $ 30,979 $ 21,457
State (1,030) 5,060 3,742
Non-U.S. 21,153 10,826 7,854
----------- ----------- -----------
120 46,865 33,053
Deferred:
Federal (29,178) (180) 15,921
State (1,299) (460) 2,015
Non-U.S. 6,281 (5,696) 3,028
----------- ----------- -----------
(24,196) (6,336) 20,964
----------- ----------- -----------
Total provision $ (24,076) $ 40,529 $ 54,017
=========== =========== ===========
</TABLE>
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:
<TABLE>
<CAPTION>
IN THOUSANDS 1999 1998 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income taxes based on U.S. statutory rate $ (26,333) $ 42,985 $ 59,081
State income taxes, net of U.S. tax (1,514) 2,990 3,742
Foreign sales corporation - (6,391) (5,935)
Change in beginning of year valuation allowance - (505) (3,824)
Other - net 3,771 1,450 953
----------- ----------- -----------
Total provision $ (24,076) $ 40,529 $ 54,017
=========== =========== ===========
</TABLE>
Tax benefits of $0.3 million, $7.8 million and $5.6 million associated with the
exercise of employee stock options were credited to common stock in 1999, 1998
and 1997, respectively.
Net deferred tax assets and liabilities are included in the following
consolidated balance sheet accounts:
<TABLE>
<CAPTION>
IN THOUSANDS 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Other current assets $ 59,325 $ 52,434
Deferred tax assets 56,405 25,102
----------- -----------
Net deferred tax assets $ 115,730 $ 77,536
=========== ===========
</TABLE>
The temporary differences and carryforwards that gave rise to deferred tax
assets and liabilities were as follows:
<TABLE>
<CAPTION>
IN THOUSANDS 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Reserves and other liabilities $ 45,988 $ 43,179
Restructuring costs and separation programs 20,904 7,463
Net operating losses 20,786 5,324
AMT and foreign tax credit carryforwards 20,412 8,243
Accrued postretirement benefits 14,949 16,022
Accumulated depreciation 12,348 9,162
Intangibles 4,909 8,271
Accrued pension liability 3,382 6,632
----------- -----------
Gross deferred tax assets 143,678 104,296
Less valuation allowance (2,600) (2,600)
----------- -----------
Deferred tax assets 141,078 101,696
----------- -----------
Deferred tax liabilities:
Software development costs (26,280) (19,167)
Unrealized gains on marketable
equity securities 932 (4,993)
----------- -----------
Deferred tax liabilities (25,348) (24,160)
----------- -----------
Net deferred tax assets $ 115,730 $ 77,536
=========== ===========
</TABLE>
At May 29, 1999, there were $16.5 million of unused foreign tax credit
carryovers which, if not used, will expire in 2004. There were $3.9 million of
alternative minimum tax (AMT) credits that can be carried forward indefinitely.
There were $15.0 million of U.S. net operating loss carryovers which, if not
used, will expire in 2019.
U.S. taxes have not been provided on $103.2 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.
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):
<TABLE>
<CAPTION>
AUG. 29, NOV. 28, FEB. 27, MAY 29,
QUARTER ENDED 1998 1998 1999 1999
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 418,979 $ 432,164 $ 470,608 $ 539,739
Gross profit 171,468 139,053 189,053 210,664
Operating income (loss) (7,360) (123,618) 28,835 33,002
Earnings (loss) before taxes (6,858) (126,280) 21,327 36,574
Net earnings (loss) (4,663) (85,871) 14,502 24,871
Basic earnings (loss) per share $ (0.09) $ (1.82) $ 0.31 $ 0.53
Diluted earnings (loss) per share (0.09) (1.82) 0.31 0.53
Average shares outstanding:
Basic 49,475 47,077 46,846 46,877
Diluted 49,475 47,077 47,249 47,167
Dividends per share $ 0.12 $ 0.12 $ 0.12 $ 0.12
Common stock prices:
High $ 38.38 $ 25.75 $ 32.38 $ 29.44
Low 16.56 13.69 19.38 17.56
AUG. 30, NOV. 29, FEB. 28, MAY 30,
QUARTER ENDED 1997 1997 1998 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 481,274 $ 529,046 $ 517,570 $ 557,912
Gross profit 201,273 191,995 224,854 247,205
Operating income (loss) 38,317 (32,932) 48,599 61,317
Earnings (loss) before taxes 39,874 (31,667) 51,106 63,501
Net earnings (loss) 26,716 (21,217) 34,241 42,545
Basic earnings (loss) per share $ 0.53 $ (0.42) $ 0.68 $ 0.84
Diluted earnings (loss) per share 0.52 (0.42) 0.67 0.83
Average shares outstanding:
Basic 50,303 50,546 50,483 50,452
Diluted 51,442 50,546 51,408 51,413
Dividends per share $ 0.10 $ 0.12 $ 0.12 $ 0.12
Common stock prices:
High $ 43.50 $ 46.42 $ 46.25 $ 48.19
Low 36.42 37.08 35.56 36.06
</TABLE>
The Company's common stock is traded on the New York and Pacific Stock
Exchanges. There were 3,834 shareholders of record at June 24, 1999. 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.
All share and per share amounts have been restated to give effect to the
three-for-two stock split effective October 31, 1997.
39
<PAGE>
Selected Financial Data
<TABLE>
<CAPTION>
AMOUNTS ARE IN MILLIONS, EXCEPT PER SHARE CONSOLIDATED FINANCIAL PERFORMANCE
AND EMPLOYEES. RETURNS ARE BASED
ON AVERAGE NET ASSETS. 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 1,861.5 $ 2,085.8 $ 1,940.1 $ 1,768.9 $ 1,498.0
Gross margin 38.2% 41.5% 42.9% 41.9% 45.3%
Excluding non-recurring charges (1) 39.7% 43.3% 42.9% 41.9% 45.3%
Research and development expenses 11.0% 9.7% 9.7% 9.3% 11.1%
Selling, general and administrative expenses 25.8% 24.4% 24.8% 24.8% 26.7%
Operating margin (3.7)% 5.5% 8.5% 8.1% 7.7%
Excluding non-recurring charges (1) 2.8% 9.3% 8.5% 8.1% 7.7%
Pretax margin (4.0)% 5.9% 8.7% 8.0% 7.4%
Excluding non-recurring charges (1) 2.4% 9.7% 8.7% 8.0% 7.4%
Earnings margin (2.7)% 3.9% 5.9% 5.6% 5.4%
Excluding non-recurring charges (1) 1.7% 6.5% 5.9% 5.6% 5.4%
Net earnings (loss) $ (51.2) $ 82.3 $ 114.8 $ 99.6 $ 81.6
Excluding non-recurring charges (1) $ 30.8 $ 135.2 $ 114.8 $ 99.6 $ 81.6
Basic earnings (loss) per share $ (1.07) $ 1.63 $ 2.32 $ 2.00 1.67
Excluding non-recurring charges(1) $ 0.65 $ 2.68 $ 2.32 $ 2.00 $ 1.67
Diluted earnings (loss) per share $ (1.07) $ 1.60 $ 2.29 $ 1.95 1.64
Excluding non-recurring charges(1) $ 0.64 $ 2.63 $ 2.29 $ 1.95 $ 1.64
Weighted average shares
Outstanding:
Basic 47.7 50.4 49.5 49.8 48.9
Diluted 47.7 51.3 50.2 51.0 49.8
Dividends per share $ 0.48 $ 0.46 $ 0.40 $ 0.40 $ 0.40
Cash and cash equivalents $ 39.7 $ 120.5 $ 142.7 $ 36.6 31.8
Total assets $ 1,359.4 $ 1,389.2 $ 1,316.7 $ 1,328.5 1,218.3
Long-term debt $ 150.7 $ 150.7 $ 151.6 $ 202.0 105.0
Total debt $ 266.4 $ 156.1 $ 157.7 $ 246.6 192.6
Total capitalization $ 621.6 $ 784.9 $ 771.3 $ 675.3 604.2
Return on equity (7.3)% 10.6% 15.9% 15.6% 15.2%
Excluding non-recurring charges (1) 4.0% 16.8% 15.9% 15.6% 15.2%
Ending shares outstanding 46.9 50.3 50.1 49.0 49.6
Book value per share $ 13.25 $ 15.59 $ 15.39 $ 13.77 $ 12.18
Closing share price $ 23.19 $ 38.25 $ 38.25 $ 25.25 30.67
Capital expenditures $ 107.5 $ 155.1 $ 112.0 $ 106.7 103.8
Depreciation expense $ 71.4 $ 65.9 $ 59.6 $ 47.1 40.9
Square feet in use 3.7 4.0 3.8 4.1 4.3
Employees 7,571 8,630 8,392 7,929 7,712
Net sales per employee
(in thousands) $ 246.1 $ 241.7 $ 231.2 $ 223.1 194.2
Revenue from new products(2) 71% 74% 73% 67% 62%
(1) Amounts for 1999 do not include non-recurring charges of $120.5 million
pre-tax, $81.9 million net of tax ($1.71 per diluted share). Amounts for 1998 do
not include non-recurring charges of $79.0 million pre-tax, $52.9 million net of
tax ($1.05 per basic share, $1.03 per diluted share). See also the "Management
Review" and the "Non-recurring Charges" Note to the Consolidated Financial
Statements.
(2) Represents percentage of total product sales generated by products
introduced within the last two years.
40
</TABLE>
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 Distribution Europe B.V. (The Netherlands) 100
Tektronix Polska Sp. z o.o. (Poland) 100
Tektronix U.K. Limited (United Kingdom) 100
Tektronix U.K. Holdings Limited (United Kingdom) 100
Tektronix Espanola, S.A. (Spain) 100
GVG Japan, Ltd. (Japan) 100
Tektronix Foreign Sales Corporation (Guam) 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) Limited (India) 100
Tektronix Korea, Ltd. (Korea) 100
Tektronix Development Company (Oregon) 100
Tektronix International, Inc. (Oregon) 100
Tektronix Federal Systems, Inc. (Oregon) 100
Tektronix Funding Corporation (Oregon) 100
Tektronix Asia, Ltd. (Oregon) 100
Tektronix Export, Inc.(Oregon) 100
Tektronix (Yangzhong) Co., Ltd. (China) 100
Tektronix Color Printing (Malaysia) Sdn. Bhd. (Malaysia) 100
Tektronix Berlin GmbH & Co., KG (Germany) 100
Tektronix Berlin Verwaltungs GmbH (Germany) 100
Tektronix Padova S.p.A. (Italy) 100
. . . . . . . . . . . . . . . . . . . . . . .
Subsidiaries - Less than 100% Ownership
(Parent Company/Oregon Corp. listed above):
Tektronix (India) Limited (India) 95
Sony/Tektronix Corporation (Japan) 50
MaxTek Components Corporation (U.S.) 50
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-59171, 33-58511, 33-33496, 33-30648, 333-42413, and 333-68607 of Tektronix,
Inc. on Form S-8 and Registration Statement Nos. 33-58635, 33-58513, 33-18658,
33-59648, and 333-73345 of Tektronix, Inc. on Form S-3 of our report dated June
23, 1999, incorporated by reference in this Annual Report on Form 10-K of
Tektronix, Inc. for the year ended May 29, 1999.
DELOITTE & TOUCHE LLP
Portland, Oregon
August 24, 1999
POWER OF ATTORNEY
The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN
and JAMES F. DALTON 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 29, 1999 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 17, 1999 JEROME J. MEYER
-----------------------------------------
(Signature)
Jerome J. Meyer
-----------------------------------------
(Type or Print Name)
<PAGE>
POWER OF ATTORNEY
The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN
and JAMES F. DALTON 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 29, 1999 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 17, 1999 PAULINE LO ALKER
-----------------------------------------
(Signature)
Pauline Lo Alker
-----------------------------------------
(Type or Print Name)
<PAGE>
POWER OF ATTORNEY
The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN
and JAMES F. DALTON 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 29, 1999 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 17, 1999 A. GARY AMES
-----------------------------------------
(Signature)
A. Gary Ames
-----------------------------------------
(Type or Print Name)
<PAGE>
POWER OF ATTORNEY
The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN
and JAMES F. DALTON 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 29, 1999 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, 1999 GERRY B. CAMERON
-----------------------------------------
(Signature)
Gerry B. Cameron
-----------------------------------------
(Type or Print Name)
<PAGE>
POWER OF ATTORNEY
The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN
and JAMES F. DALTON 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 29, 1999 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 17, 1999 DAVID N. CAMPBELL
-----------------------------------------
(Signature)
David N. Campbell
-----------------------------------------
(Type or Print Name)
<PAGE>
POWER OF ATTORNEY
The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN
and JAMES F. DALTON 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 29, 1999 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 17, 1999 PAUL C. ELY, JR.
-----------------------------------------
(Signature)
Paul C. Ely, Jr.
-----------------------------------------
(Type or Print Name)
<PAGE>
POWER OF ATTORNEY
The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN
and JAMES F. DALTON 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 29, 1999 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 16, 1999 FRANK C. GILL
-----------------------------------------
(Signature)
Frank C. Gill
-----------------------------------------
(Type or Print Name)
<PAGE>
POWER OF ATTORNEY
The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN
and JAMES F. DALTON 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 29, 1999 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, 1999 A.M. GLEASON
-----------------------------------------
(Signature)
A.M. Gleason
-----------------------------------------
(Type or Print Name)
<PAGE>
POWER OF ATTORNEY
The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN
and JAMES F. DALTON 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 29, 1999 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 17, 1999 MERRILL A. (TONY) MCPEAK
-----------------------------------------
(Signature)
Merrill A. (Tony) McPeak
-----------------------------------------
(Type or Print Name)
<PAGE>
POWER OF ATTORNEY
The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN
and JAMES F. DALTON 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 29, 1999 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 17, 1999 RALPH V. WHITWORTH
-----------------------------------------
(Signature)
Ralph V. Whitworth
-----------------------------------------
(Type or Print Name)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-29-1999
<PERIOD-END> MAY-29-1999
<CASH> 39,747
<SECURITIES> 0
<RECEIVABLES> 313,274<F1>
<ALLOWANCES> 0
<INVENTORY> 273,370
<CURRENT-ASSETS> 719,658
<PP&E> 852,288
<DEPRECIATION> 410,031
<TOTAL-ASSETS> 1,359,365
<CURRENT-LIABILITIES> 497,046
<BONDS> 150,722
<COMMON> 143,263
0
0
<OTHER-SE> 478,299<F2>
<TOTAL-LIABILITY-AND-EQUITY> 1,359,365
<SALES> 1,861,490
<TOTAL-REVENUES> 1,861,490
<CGS> 1,151,252
<TOTAL-COSTS> 1,151,252
<OTHER-EXPENSES> 779,379
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,712
<INCOME-PRETAX> (75,237)
<INCOME-TAX> (24,076)
<INCOME-CONTINUING> (51,161)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (51,161)
<EPS-BASIC> (1.07)
<EPS-DILUTED> (1.07)
<FN>
<F1> Amount represents net accounts receivable.
<F2> Amount includes retained earnings and other comprehensive income.
</FN>
</TABLE>
