For Immediate Release | Media Contact: | Alisha Goff | ||
503/627-7075 | ||||
alisha.goff@tektronix.com | ||||
Analyst Contact: | Paul Oldham | |||
503/627-4027 | ||||
paul.r.oldham@tektronix.com |
Tektronix Reports Results for the
First Quarter of Fiscal 2007
First Quarter of Fiscal 2007
Strong Sales, Earnings Leverage and Continued
Flow of Innovative New Products
Flow of Innovative New Products
BEAVERTON, Ore., Sept. 14, 2006 — Tektronix, Inc. (NYSE: TEK) today reported net sales of $268.1 million and net earnings from continuing operations of $20.1 million or $0.24 per share for the first quarter ended August 26, 2006. This compares with net sales of $235.1 million and net earnings from continuing operations of $14.2 million or $0.17 per share for the same period last year. Excluding acquisition-related costs, business realignment costs, one-time items, and share-based compensation expense, net earnings from continuing operations were $29.2 million or $0.35 per share for the first quarter as compared with $21.3 million or $0.25 per share for the same period last year.
“This was a very good quarter for Tektronix with particular strength in sales and earnings,” said Rick Wills, Tektronix Chairman and CEO. “Sales grew 14% over last year with both the Instruments and the Communications businesses showing double-digit growth. Earnings outpaced sales growth with earnings per share up 40% over last year, demonstrating our ability to leverage our cost structure.”
Orders for the Instruments business were up 13% with strong growth from the oscilloscope and spectrum analyzer product categories. Growth in this business was the result of new products and a stable market overall. Wills noted, “We saw record orders for our spectrum analyzers as the market continues to respond favorably to our innovative real-time technology.”
Orders for the Communications business were down 19% due to the timing of a few large orders. “We saw orders for this business grow over 65% in the previous quarter and we again expect double-digit order growth next quarter,” Wills continued. “Sales were up 21% as some of the orders we received last year converted to revenue. Overall, this continues to be a healthy market
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driven by investment in next-generation telecommunications networks. Our ability to capitalize on this investment should continue to create opportunities for additional growth.”
During the quarter, we continued to execute our growth strategy by delivering a robust pipeline of major new products including a new oscilloscope series – the DPO70000, targeted at high-speed design applications, and the DSA70000 aimed at serial data designers. These products extend the uncompromised performance characteristics of the midrange DPO7000 series introduced earlier this calendar year. We also announced a new capability for the MTM400 Transport Stream Monitor that is designed to help simplify and strengthen network monitoring for Video over IP and IPTV applications.
In addition, in early August we began taking orders for a new Real-Time Spectrum Analyzer series that contributed to the record orders growth for this product category. These products provide breakthrough capabilities targeted at digital RF applications. Wills added, “The introduction of the RSA6100A series spectrum analyzers demonstrates our strategy to selectively enter new product categories and develop industry-leading products – which should enable us to grow faster than the market.”
Finally, in our Communications business, we introduced the K1297-G35, a new mobile test platform that provides the highest performance available for reliable testing of 3G and 3.5G broadband wireless network elements. This product enables customers to test modern mobile networks under simulated, yet realistic, conditions.
“Looking forward, we are encouraged by the progress of our recently introduced products and are excited about the strong product flow in our Instruments business in the coming quarters. In addition, we continue to be optimistic about our ability to capitalize on the significant investment being made by network operators in next-generation telecommunications networks,” concluded Wills.
Second Quarter Guidance
For the second quarter of fiscal 2007, the company expects net sales to be approximately $270 - $280 million. Earnings per share from continuing operations are expected to be between $0.33 and $0.37 before mostly non-cash acquisition-related costs, business realignment costs, one-time items and share-based compensation expense.
Recent highlights include the following:
New product introductions, including:
• | The DPO70000 Digital Phosphor Oscilloscope and the DSA70000 Digital Serial Analyzer. A new high-performance oscilloscope series, the DPO70000 provides industry-leading capabilities for high-speed design and analysis. The DSA70000 series has the same base |
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performance but is optimized for the serial data designer, providing an ideal test platform for high-speed standards including PCI-Express, XAUI, FB-DIMM and Serial ATA. | ||
• | The TDS1000B/TDS2000B series of digital storage oscilloscopes, a replacement for the world’s most popular oscilloscope, the TDS1000/TDS2000. These new versions of the ultra-lightweight, portable instruments add both Tektronix OpenChoice™ PC communication software and National Instruments SignalExpress™ Tektronix Edition interactive measurement software with USB connectivity. | |
• | A new monitoring solution for Video over IP and IPTV applications – the addition of the IP/GigE capability for the MTM400 MPEG Transport Stream Monitor is designed to help simplify and strengthen network monitoring by allowing network engineers to view Multi or Single Program Transport Streams over Gigabit Ethernet networks and identify signal degradation issues. | |
• | A new mobile test platform for 3G and 3.5G broadband wireless networks – the K1297-G35 Protocol Tester for mobile equipment manufacturers and mobile operators. This new platform offers the highest performance available for reliable testing of these networks with 14.4 Mbps on four inputs at the same time. | |
• | And, just after the close of the quarter, we publicly announced the RSA6100A Series Real-Time Spectrum Analyzers which provide an unmatched combination of real-time performance, capture bandwidth, and dynamic range to meet the needs of a broad range of cutting-edge digital RF applications. These new capabilities reveal never before seen phenomena for digital RF designers. |
And a product award:
• | The Tektronix WFM7100 Video Waveform Monitor was awarded the “Outstanding Product” award for video production and broadcasting by Beijing International Radio, Film and Television Equipment Exhibition (BIRTV), for fast, reliable and easy content monitoring and measurement. This is the third year in a row that Tektronix’ video products have won the outstanding product award. BIRTV is the region’s largest exhibition for radio and TV service providers and equipment manufacturers. |
In addition, today Tektronix declared a quarterly cash dividend of $0.06 per share on the outstanding common shares of the Company, payable on October 23, 2006 to shareholders of record as of the close of market on October 6, 2006.
Tektronix will hold its Annual Meeting of Shareholders on Thursday, September 21, 2006, at 10:00 a.m. Pacific at the company’s headquarters in Beaverton, Oregon.
Tektronix will be discussing its first quarter results and future guidance on a conference call today, beginning at 1:30 p.m. Pacific. A live Webcast of the conference call will be available atwww.tektronix.com/ir. A replay of the Webcast will be available at the same Web site for one year.
Tektronix presents pro forma measures of net earnings and net earnings per share from continuing operations that exclude the effects of acquisition-related costs, business realignment costs and one-time items. The “Reconciliation of Pro Forma Measures to GAAP” reconciles the results of operations in accordance with generally accepted accounting principles (GAAP) to the pro forma results of operations. Tektronix presents pro forma results of operations to help readers differentiate the results of ongoing operating activity from results that include acquisition-related costs, business realignment costs and one-time items. Some of these items pertain to events that have not yet occurred and are not possible to ascertain with a reasonable degree of accuracy. Therefore, no reconciliation to GAAP for projected amounts is provided. In addition, in line with common industry practice and in order to enable comparability with other technology companies, guidance for pro forma results of operations excludes the effects of share based compensation
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under FAS123R. Management of Tektronix uses these pro forma measures to evaluate the Company’s results of operations and for forecasting purposes.
Statements and information in this press release that relate to future events or results (including the Company’s statements and expectations regarding sales and earnings per share, markets, market position and market growth opportunities, strategic direction and the introduction of new products) are based on the Company’s current expectations. They constitute forward-looking statements subject to a number of risk factors, which could cause actual results to differ materially from those currently expected or desired. Those factors include: worldwide geopolitical and economic conditions; current and future business conditions in the electronics, communications, computer and advanced technologies industries; changes in order rates and customer cancellations, including changes in seasonal buying habits and timing of large orders; competitive factors, including pricing pressures, loss of key employees, technological developments and new products offered by competitors; changes in product and sales mix, and the related effects on gross margins; customer acceptance of large orders with delayed acceptance criteria; 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; risks associated with compliance with the “Restriction of Hazardous Substances” worldwide regulatory provisions, including the associated conversion of current and future product designs and manufacturing processes to procure or produce lead-free products, and with export regulations; inventory risks due to changes in market demand or the Company’s business strategies; changes in effective tax rates; currency fluctuations; and the ability to develop effective sales channels. Further information on factors that could cause actual results to differ from those anticipated is included in filings made by the Company from time-to-time with the Securities and Exchange Commission, including but not limited to annual reports on Form 10-K and the quarterly reports on Form 10-Q.
About Tektronix
Tektronix is a leading supplier of test, measurement, and monitoring products, solutions and services for the communications, computer, and semiconductor industries – as well as military/aerospace, consumer electronics, education and a broad range of other industries worldwide. With 60 years of experience, Tektronix enables its customers to design, build, deploy, and manage next-generation global communications networks, advanced and pervasive technologies. Headquartered in Beaverton, Oregon, Tektronix has operations in 19 countries worldwide. Tektronix’ Web address is www.tektronix.com.
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Consolidated Statements of Operations
Quarter Ended | ||||||||
August 26, | August 27, | |||||||
(In thousands, except per share amounts) | 2006 | 2005 | ||||||
Net sales | $ | 268,113 | $ | 235,060 | ||||
Cost of sales | 104,763 | 99,103 | ||||||
Gross profit | 163,350 | 135,957 | ||||||
Research and development expenses | 50,869 | 43,605 | ||||||
Selling, general and administrative expenses | 79,873 | 68,565 | ||||||
Business realignment costs | 2,596 | 2,481 | ||||||
Acquisition related costs and amortization | 1,471 | 3,436 | ||||||
Loss on disposition of assets, net | 554 | 4 | ||||||
Operating income | 27,987 | 17,866 | ||||||
Interest income | 4,670 | 3,092 | ||||||
Interest expense | (99 | ) | (97 | ) | ||||
Other non-operating expense, net | (1,011 | ) | (986 | ) | ||||
Earnings before taxes | 31,547 | 19,875 | ||||||
Income tax expense | 11,434 | 5,707 | ||||||
Net earnings from continuing operations | 20,113 | 14,168 | ||||||
Gain (loss) from discontinued operations, net of income taxes | 7 | (82 | ) | |||||
Net earnings | $ | 20,120 | $ | 14,086 | ||||
Earnings per share: | ||||||||
Continuing operations — basic | $ | 0.25 | $ | 0.17 | ||||
Continuing operations — diluted | $ | 0.24 | $ | 0.17 | ||||
Discontinued operations — basic | $ | — | $ | — | ||||
Discontinued operations — diluted | $ | — | $ | — | ||||
Net earnings — basic | $ | 0.25 | $ | 0.17 | ||||
Net earnings — diluted | $ | 0.24 | $ | 0.17 | ||||
Weighted average shares outstanding: | ||||||||
Basic | 82,074 | 84,603 | ||||||
Diluted | 83,542 | 85,297 | ||||||
Cash dividend declared per share | $ | 0.06 | $ | 0.06 |
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Reconciliation of Pro Forma Measures to GAAP
Quarter Ended | Quarter Ended | |||||||||||||||||||||||||||||||||||||||||||
(In thousands, except per share amounts) | August 26, 2006 | August 27, 2005 | ||||||||||||||||||||||||||||||||||||||||||
Adjustments | Adjustments | |||||||||||||||||||||||||||||||||||||||||||
Share-based | ||||||||||||||||||||||||||||||||||||||||||||
GAAP | Acquisitions | Compensation | Other | Pro Forma | GAAP | Acquisitions | Other | Pro Forma | ||||||||||||||||||||||||||||||||||||
Net sales | $ | 268,113 | — | — | — | $ | 268,113 | $ | 235,060 | — | — | $ | 235,060 | |||||||||||||||||||||||||||||||
Cost of sales | 104,763 | (5,973 | )(A) | — | — | 98,790 | 99,103 | (5,112 | )(A) | — | 93,991 | |||||||||||||||||||||||||||||||||
Gross profit | 163,350 | 5,973 | — | — | 169,323 | 135,957 | 5,112 | — | 141,069 | |||||||||||||||||||||||||||||||||||
Gross margin | 60.9 | % | 63.2 | % | 57.8 | % | 60.0 | % | ||||||||||||||||||||||||||||||||||||
Research and development expenses | 50,869 | — | (1,228 | ) | — | 49,641 | 43,605 | — | — | 43,605 | ||||||||||||||||||||||||||||||||||
Selling, general and administrative expenses | 79,873 | — | (2,973 | ) | — | 76,900 | 68,565 | — | — | 68,565 | ||||||||||||||||||||||||||||||||||
Business realignment costs | 2,596 | — | — | (2,596 | ) | — | 2,481 | — | (2,481 | ) | — | |||||||||||||||||||||||||||||||||
Acquisition related costs: | ||||||||||||||||||||||||||||||||||||||||||||
Write-off of IPR&D | — | — | — | — | — | 365 | (365 | ) | — | — | ||||||||||||||||||||||||||||||||||
Amortization of acquired intangible assets | 1,335 | (1,335 | ) | — | — | — | 1,284 | (1,284 | ) | — | — | |||||||||||||||||||||||||||||||||
Amortization of stock option compensation | 81 | (81 | ) | — | — | — | 90 | (90 | ) | — | — | |||||||||||||||||||||||||||||||||
Transition expenses | 55 | (55 | ) | — | — | — | 1,697 | (1,697 | ) | — | — | |||||||||||||||||||||||||||||||||
Total acquisition related costs | 1,471 | (1,471 | ) | — | — | — | 3,436 | (3,436 | ) | — | — | |||||||||||||||||||||||||||||||||
Loss on disposition of assets | 554 | — | — | — | 554 | 4 | — | — | 4 | |||||||||||||||||||||||||||||||||||
Operating income | 27,987 | 7,444 | 4,201 | 2,596 | 42,228 | 17,866 | 8,548 | 2,481 | 28,895 | |||||||||||||||||||||||||||||||||||
Operating margin | 10.4 | % | 15.8 | % | 7.6 | % | 12.3 | % | ||||||||||||||||||||||||||||||||||||
Other income, net | 3,560 | — | — | — | 3,560 | 2,009 | — | — | 2,009 | |||||||||||||||||||||||||||||||||||
Earnings before taxes | 31,547 | 7,444 | 4,201 | 2,596 | 45,788 | 19,875 | 8,548 | 2,481 | 30,904 | |||||||||||||||||||||||||||||||||||
Income tax expense | 11,434 | 2,753 | 1,462 | 904 | 16,553 | 5,707 | 3,099 | 844 | 9,650 | |||||||||||||||||||||||||||||||||||
Net earnings from continuing operations | $ | 20,113 | 4,691 | 2,739 | 1,692 | $ | 29,235 | $ | 14,168 | 5,449 | 1,637 | $ | 21,254 | |||||||||||||||||||||||||||||||
Earnings per share — diluted | $ | 0.24 | $ | 0.35 | $ | 0.17 | $ | 0.25 | ||||||||||||||||||||||||||||||||||||
Weighted average shares outstanding — diluted | 83,542 | 83,542 | 85,297 | 85,297 | ||||||||||||||||||||||||||||||||||||||||
(A) | Amortization of acquired intangible assets and non-cash expense for inventory step up adjustment to fair value |
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Consolidated Balance Sheets
(In thousands) | August 26, 2006 | May 27, 2006 | ||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 200,360 | $ | 215,587 | ||||
Short-term marketable investments | 129,002 | 121,346 | ||||||
Trade accounts receivable, net | 170,434 | 174,599 | ||||||
Inventories | 165,438 | 156,351 | ||||||
Other current assets | 68,161 | 69,002 | ||||||
Total current assets | 733,395 | 736,885 | ||||||
Property, plant and equipment, net | 126,868 | 127,510 | ||||||
Long-term marketable investments | 105,351 | 103,839 | ||||||
Goodwill, net | 306,134 | 307,189 | ||||||
Pension asset | 236,539 | 239,128 | ||||||
Other long-term assets | 111,557 | 119,539 | ||||||
Total assets | $ | 1,619,844 | $ | 1,634,090 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 143,134 | $ | 133,323 | ||||
Accrued compensation | 65,174 | 71,718 | ||||||
Deferred revenue | 72,415 | 66,677 | ||||||
Total current liabilities | 280,723 | 271,718 | ||||||
Deferred income taxes | 62,766 | 65,935 | ||||||
Other long-term liabilities | 106,743 | 108,868 | ||||||
Shareholders’ equity: | ||||||||
Common stock | 540,899 | 540,718 | ||||||
Retained earnings | 605,075 | 620,465 | ||||||
Accumulated other comprehensive income | 23,638 | 26,386 | ||||||
Total shareholders’ equity | 1,169,612 | 1,187,569 | ||||||
Total liabilities and shareholders’ equity | $ | 1,619,844 | $ | 1,634,090 | ||||
Shares outstanding | 82,515 | 83,719 |
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Selected Additional Financial Data
Quarter Ended | ||||||||||||
% | August 26, | August 27, | ||||||||||
(Dollars in thousands) | Growth | 2006 | 2005 | |||||||||
Orders Data: | ||||||||||||
Orders | 4 | % | $ | 255,399 | $ | 245,515 | ||||||
U.S. | 12 | % | 96,194 | 86,131 | ||||||||
International | (0 | %) | 159,205 | 159,384 | ||||||||
Instruments Business | 13 | % | 198,279 | 174,771 | ||||||||
Communications Business | (19 | %) | 57,120 | 70,744 | ||||||||
Sales Data: | ||||||||||||
Net Sales | 14 | % | $ | 268,113 | $ | 235,060 | ||||||
U.S. | 16 | % | 97,979 | 84,403 | ||||||||
International | 13 | % | 170,134 | 150,657 | ||||||||
Instruments Business | 12 | % | 198,212 | 177,369 | ||||||||
Communications Business | 21 | % | 69,901 | 57,691 | ||||||||
Income Statement Items as a Percentage of Net Sales: | ||||||||||||
Cost of sales | 39 | % | 42 | % | ||||||||
Research and development expenses | 19 | % | 19 | % | ||||||||
Selling, general and administrative expenses | 30 | % | 29 | % | ||||||||
Business realignment costs | 1 | % | 1 | % | ||||||||
Acquisition related costs and amortization | 1 | % | 1 | % | ||||||||
Loss on disposition of assets, net | 0 | % | 0 | % | ||||||||
Operating income | 10 | % | 8 | % | ||||||||
Capital Expenditures and Depreciation: | ||||||||||||
Capital expenditures | $ | 6,124 | $ | 8,744 | ||||||||
Depreciation and amortization expense | $ | 7,297 | $ | 7,006 | ||||||||
Balance Sheet: | Quarter Ended | Year Ended | ||||||
August 26, | May 27, | |||||||
2006 | 2006 | |||||||
Cash and Marketable Investments: | ||||||||
Cash and cash equivalents | $ | 200,360 | $ | 215,587 | ||||
Short-term marketable investments | 129,002 | 121,346 | ||||||
Long-term marketable investments | 105,351 | 103,839 | ||||||
Cash and Marketable Investments | $ | 434,713 | $ | 440,772 | ||||
Accounts receivable as a percentage of net sales | 16.1 | % | 15.9 | % | ||||
Days sales outstanding | 57.8 | 61.1 | ||||||
Countback days sales outstanding | 49.3 | 46.6 | ||||||
Inventory as a percentage of net sales | 15.0 | % | 13.8 | % | ||||
Inventory turns | 2.6 | 2.9 | ||||||
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