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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[ X ] Quarterly Report Pursuant to Section 12 or 15(d) of the Securities
Exchange Act of 1934 for the 13 weeks ended November 27, 1993, or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from
________________ to _____________________ .
Commission File Number 1-4837
TEKTRONIX, INC.
(Exact name of registrant as specified in its charter)
OREGON 93-0343990
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
26600 S.W. PARKWAY
WILSONVILLE, OREGON 97070-1000
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (503) 627-7111
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes ___X___ No______
AT JANUARY 03, 1994 THERE WERE 30,302,695 COMMON SHARES OF TEKTRONIX, INC.
OUTSTANDING.
(Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.)
TEKTRONIX, INC. AND SUBSIDIARIES
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INDEX PAGE NO.
- ----- --------
Financial Statements:
Condensed Consolidated Balance Sheets - 2
May 29, 1993 and November 27, 1993
Consolidated Statements of Operations - 3
for the Thirteen Weeks Ended November 27, 1993
and the Thirteen Weeks Ended November 28, 1992
for the Twenty-Six weeks Ended November 27, 1993
and the Twenty-Six Weeks Ended November 28, 1992
Condensed Consolidated Statements of Cash Flows - 4
for the Twenty-Six Weeks Ended November 27, 1993
and the Twenty-Six Weeks Ended November 28, 1992
Notes to Condensed Consolidated Financial Statements 5
Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
Part II. Other Information 11
Signatures 11
1
TEKTRONIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
Nov. 27, May 29,
(In thousands) 1993 1993
- --------------------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 27,528 $ 30,004
Accounts receivable - net 223,627 248,514
Inventories 182,077 171,416
Other current assets 55,967 65,778
--------- ---------
Total current assets 489,199 515,712
Property, plant, and equipment 775,534 793,174
Accumulated depreciation and amortization (550,536) (557,340)
--------- ---------
Property, plant, and equipment - net 224,998 235,834
Property held for sale 39,157 38,489
Long term deferred tax assets 90,954 88,629
Other long-term assets 99,164 105,841
--------- ---------
Total assets $ 943,472 $ 984,505
========= =========
Liabilities and shareholders' equity
Current liabilities:
Short-term debt $ 41,552 $ 69,481
Accounts payable 132,056 157,555
Accrued compensation 78,610 106,464
--------- ---------
Total current liabilities 252,218 333,500
Long-term debt 100,034 70,073
Other long-term liabilities 147,137 145,988
Shareholders' equity:
Common stock 193,041 190,984
Retained earnings 205,245 193,221
Currency adjustment 45,797 50,739
--------- ---------
Total shareholders' equity 444,083 434,944
--------- ---------
Total liabilities and shareholders' equity $ 943,472 $ 984,505
========= =========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
TEKTRONIX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
13 weeks to 13 weeks to 26 weeks to 26 weeks to
(In thousands Nov. 27, Nov. 28, Nov. 27, Nov. 28,
(except for per share amounts) 1993 1992 1993 1992
- -------------------------------------------------------------------------------------------
Net sales $ 317,165 $ 333,485 $ 607,235 $ 638,109
Operating costs and expenses:
Cost of sales 171,951 169,645 326,152 329,763
Research and development 37,105 39,998 73,237 78,043
Selling, general, and administrative 88,703 104,616 172,635 196,309
--------- --------- --------- ---------
Total operating costs and expenses 297,759 314,259 572,024 604,115
Equity in joint venture (losses) (299) (98) (1,416) (1,551)
--------- --------- --------- ---------
Operating income 19,107 19,128 33,795 32,443
Other expense - net 1,750 6,351 5,143 10,337
--------- --------- --------- ---------
Earnings before taxes 17,357 12,777 28,652 22,106
Income taxes 5,902 4,344 7,466 7,516
--------- --------- --------- ---------
Earnings before cumulative effects
of accounting changes 11,455 8,433 21,186 14,590
Cumulative effects of accounting changes:
Income taxes -- -- -- 38,100
Postretirement benefits (net of tax) -- -- -- (34,775)
--------- --------- --------- ---------
Net earnings $ 11,455 $ 8,433 $ 21,186 $ 17,915
Earnings per share before cumulative
effects of accounting changes $ 0.37 $ 0.28 $ 0.69 $ 0.49
Earnings per share 0.37 0.28 0.69 0.60
Dividends per share 0.15 0.15 0.30 0.30
Average shares outstanding 30,608 29,915 30,558 29,806
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
TEKTRONIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
26 weeks to 26 weeks to
Nov. 27, Nov. 28,
(In thousands) 1993 1992
- --------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net Earnings $ 21,186 $ 17,915
Adjustments to reconcile net earnings to
cash flows from operating activities:
Cumulative effect of accounting changes:
Income taxes -- (38,100)
Postretirement benefits -- 34,775
Depreciation expense 27,623 30,772
Accounts receivable 16,988 1,509
Inventories (12,774) 23,451
Other Current Assets 9,087 2,864
Accounts Payable (21,573) (30,050)
Income taxes payable 148 (26,491)
Accrued compensation (26,636) (5,852)
Other - net 866 (314)
--------- ---------
Net cash provided by operating activities 14,915 10,479
Cash flows from investing activities:
Acquisition of property, plant, and equipment (27,072) (25,672)
Proceeds from sale of assets 6,505 7,065
Proceeds from sale of investments 9,378 --
---------- ---------
Net cash used in investing activities (11,189) (18,607)
Cash flows from financing activities:
Net (decrease) increase in short-term debt (26,917) 25,123
Issuance of long-term debt 100,000 --
Repayment of long-term debt (70,039) (3,042)
Issuance of common stock 675 4,856
Dividends (9,162) (8,926)
---------- ---------
Net cash provided (used) by financing activities (5,443) 18,011
Effect of exchange rate changes on cash (759) (1,513)
--------- ---------
(Decrease) increase in cash and cash equivalents (2,476) 8,370
Cash and cash equivalents at beginning of year 30,004 18,402
--------- ---------
Cash and cash equivalents at end of quarter $ 27,528 $ 26,772
========= =========
Supplemental disclosures of cash flows:
Income taxes paid $ 2,632 $ 30,950
Interest paid 2,339 5,194
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
TEKTRONIX, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The condensed consolidated financial statements and notes have been
prepared by the Company without audit. Certain information and footnote
disclosures normally included in annual financial statements, prepared in
accordance with generally accepted accounting principles, have been
condensed or omitted. Management believes that the condensed statements
include all necessary adjustments (which are of a normal and recurring
nature, except for the adjustment to deferred tax assets described below
under 'Income Taxes' and the prior year's changes in accounting methods) and
are adequate to present financial position, results of operations and cash
flows for the interim periods. The condensed information should be read in
conjunction with the financial statements and notes incorporated by
reference in the Company's latest annual report on Form 10-K.
INVENTORIES
Inventories consisted of:
November 27, May 29,
(In thousands) 1993 1993
- --------------------------------------------------------------------------------------------
Materials and work in process $ 100,059 $ 87,867
Finished goods 82,018 83,549
--------- ---------
Inventories $ 182,077 $ 171,416
========= =========
SHORT-TERM AND LONG-TERM DEBT
In the first quarter of 1994, the Company issued $100.0 million of 7.5%
Notes due August 1, 2003. Proceeds were used to repay bridge financing of
$70.0 million and to reduce short term revolving credit debt.
5
INCOME TAXES
The provision for income taxes consisted of:
13 weeks to 13 weeks to 26 weeks to 26 weeks to
Nov. 27, Nov. 28, Nov. 27, Nov. 28,
(In thousands) 1993 1992 1993 1992
- --------------------------------------------------------------------------------------------
United States $ 4,957 $ 554 $ 5,402 $ 1,944
State 735 138 1,350 486
Foreign 210 3,652 714 5,086
--------- --------- --------- ---------
Income taxes $ 5,902 $ 4,344 $ 7,466 $ 7,516
========= ========= ========= =========
The provision for income taxes was calculated at an estimated annual
effective rate of 34%. The provision for the quarter ended August 28, 1993
was reduced by a gain of $2.2 million on recalculation of deferred income
tax benefits, primarily as a result of the enactment of federal tax
legislation increasing the corporate income tax rate from 34% to 35%. The
current year provisions were primarily for United States taxes, while the
prior year provisions were primarily for foreign taxes, reflecting the shift
in net earnings from foreign to United States sources.
CONTINGENCIES
The lawsuit described in Item 3., Legal Proceedings, of the Company's
Annual Report on Form 10-K for the fiscal year ended May 29, 1993 has been
settled. The settlement does not have a material adverse effect on the
Company's financial position or results of operations.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition
The Company believes that its financial condition is strong. Cash flow
from operating activities and borrowing capacity from existing lines of
credit are sufficient to meet current and anticipated future needs. At the
end of the second quarter (November 27, 1993), the Company maintained bank
credit facilities totalling $280.9 million, of which $239.3 million was
unused. The unused facilities include $89.3 million in lines of credit and
$150.0 million under a revolving credit agreement from United States and
foreign banks. On August 10, 1993 the Company issued $100.0 million of 7.5%
notes due August 1, 2003. Proceeds were used to repay bridge financing of
$70.0 million and to pay down short term revolving credit debt.
Current assets decreased by $26.5 million, or 5%, from the prior year
end, primarily due to reductions in accounts receivable and other current
assets, partly offset by an increase in inventories. The reduction in
accounts receivable resulted from a lower weekly average sales rate compared
to the prior year's fourth quarter rate. Inventories increased by $10.7
million primarily in anticipation of higher levels of sales. Other current
assets declined due to amortization of prepaid taxes and other expenses.
Net property, plant and equipment declined by $10.8 million as
depreciation, dispositions and currency effects exceeded new capital
additions. Long-term deferred tax assets increased by $2.3 million
primarily due to the recently enacted federal tax legislation which raised
the corporate tax rate from 34% to 35% and thus enhanced the value of the
Company's deferred tax assets. In order for the Company to realize all
deferred tax assets currently recognized, future taxable income must be at
least comparable to recent amounts. Although the Company believes such
taxable income levels will be achieved, lower amounts could negatively
affect the provision for income taxes in future years. Other long-term
assets decreased by $6.7 million due primarily to the sale of a portion of
the Company's minority investments in Credence Systems Corporation and
TriQuint Semiconductor, Inc.
Current liabilities declined by $81.3 million or 24%. Short-term debt
decreased $27.9 million as part of the proceeds from issuance of the 7.5%
notes due August 1, 2003 was applied to repayment of revolving credit debt.
Accounts payable decreased $25.5 million primarily because of the timing of
trade payables, the payment of some restructuring liabilities and the
seasonal payment of accrued property taxes. Accrued compensation decreased
$27.9 million due to the payment of year-end accruals for incentives and
commissions, reductions in vacation accruals by summer time off and the
payment of employee severance charged against restructuring reserves.
7
Shareholders' equity increased by $9.1 million, or 2%. Common stock
rose $2.1 million due to activity under the Company's stock incentive plans,
offset in part by the repurchase of shares. Retained earnings increased by
$12.0 million as net earnings exceeded dividends paid. The reduction in
currency adjustment of $4.9 million resulted from the effect on the
Company's investments in subsidiaries and affiliates of decreases in the
value of European currencies versus the U.S. dollar, partly offset by the
strength in the Japanese Yen.
Results of Operations
26 Weeks Ended November 27, 1993
vs.
26 Weeks Ended November 28, 1992
In the first half of fiscal 1994, net earnings were $21.2 million, or
$0.69 per share compared with $17.9 million, or $0.60 per share in the first
half of fiscal 1993. The current year includes a gain of $2.2 million or
$0.07 per share from recalculation of deferred tax benefits because of the
enactment of tax legislation increasing the corporate income tax rate, and a
gain of $2.2 million, or $0.05 per share after taxes, from the sale of a
portion of the Company's interest in TriQuint Semiconductor, Inc. The prior
year includes the net effect of two accounting changes which increased
earnings by $3.3 million, or $0.11 per share.
Net Sales were $607.2 million, or 5% below the prior year's total of
$638.1 million. Test and Measurement sales and Television Systems sales
declined, while Computer Graphics sales continued to show good growth
compared to the same period of the prior year.
Test and Measurement sales of $300.3 million were down 10% from the
prior year reflecting the continuation of recessionary economies in Europe
and Japan and weakness in some major industrial markets.
Computer Graphics sales increased 11% to $184.3 million, with strong
growth in both color printers and X terminals, partly offset by the
continuing decline in revenue from older graphics terminals and related
service.
Television Systems sales declined 11% to $122.7 million, with most of
the decline coming in television production equipment. Both television
production equipment and television test equipment sales were impacted by
the continued weak economies in Europe and Japan. Television production
equipment sales were particularly strong in the prior year's first quarter,
reflecting high initial shipments of the Model 3000 digital switcher which
was introduced in the spring of 1992.
Sales to customers in the United States declined slightly from $349.6
million to $348.5 million, representing 57% of total sales. International
sales of $258.7 million were down 10%, due to the weak economies mentioned
above.
8
Cost of sales increased as a percentage of net sales from 51.7% to
53.7%. The increase was caused by the geographic mix of sales, a
continuing shift in the mix of sales toward products with lower margins due
to the use of alternative distribution channels, and by impacts of a
stronger Yen.
Research and development expenses declined by 6% to $73.2 million as
the Company continues to focus its resources on its three core businesses.
R&D expense represented 12.1% of sales, down slightly from 12.2% in the
prior year.
Selling, general, and administrative expenses declined by 12% to
$172.6 million resulting from infrastructure reductions, process improve-
ments, the increasing use of alternative distribution channels and the
accrual of severance payments in the prior year. S,G,&A expenses represented
28.4% of sales, down from 30.8% in the prior year.
Other expenses declined due primarily to the gain on sale of TriQuint
Semiconductor, Inc. discussed above and the impact of improved currency
exchange rate changes during the period.
The income tax provision was approximately comparable to last year
notwithstanding higher earnings before taxes. The Company recorded taxes on
current results at the estimated annual effective rate of 34%, but showed a
gain of $2.2 million on recalculation of deferred tax benefits in the
first quarter of this year because of the enactment of tax legislation
increasing the corporate income tax rate. The current year provision was
primarily for United States taxes, while the prior year provision was
primarily for foreign taxes, reflecting the shift in net earnings from
foreign to United States sources.
Net earnings were 18% higher than the prior year, as lower sales and
gross margins were more than offset by lower R&D and S,G,&A expenses.
13 Weeks Ended November 27, 1993
vs.
13 Weeks Ended November 28, 1992
In the second quarter, net earnings were $11.5 million, or $0.37 per
share compared with $8.4 million, or $0.28 per share in the prior year. The
current quarter included a gain of $2.2 million, or $0.05 per share after
taxes, from the sale of a portion of the Company's interest in TriQuint
Semiconductor, Inc.
Net Sales were $317.1 million, or 5% below the prior year's total of
$333.5 million. Test and Measurement sales and Television Systems sales
declined, while Computer Graphics sales grew compared to the first quarter
of the prior year.
Test and Measurement sales of $159.5 million were down 10% from the
prior year reflecting the continuation of recessionary economies in Europe
and Japan and weakness in some major industrial markets.
9
Computer Graphics sales increased 7% to $97.3 million, with strong
growth in both color printers and X terminals, partly offset by the
continuing decline in revenue from older graphics terminals and related
service.
Television Systems sales declined 8% to $60.4 million, with most of the
decline coming in television production equipment. Both television
production equipment and television test equipment sales were impacted by
the continued weak economies in Europe and Japan.
Sales to customers in the United States were essentially flat at $180.1
million, and represented 57% of total sales. International sales of $137.1
million were down 10%, due to the weak economies mentioned above.
Product orders were up 3% from the prior year's quarter. While the
Company's product backlog improved in the current quarter, it remains
relatively low. Consequently, the Company's future quarterly results are
dependent on new orders that can be shipped in the same quarter.
Cost of sales increased as a percentage of net sales from 50.9% to
54.2%. The increase was caused by the geographic mix of sales, by a
continuing shift in the mix of sales toward products with lower margins due
to the use of alternative distribution channels, and by impacts of a
stronger Yen.
Research and development expenses declined by 7% to $37.1 million as
the Company continues to focus its resources on its three core businesses.
R&D expense represented 11.7% of sales compared to 12.0% in the prior year.
Selling, general, and administrative expenses declined by 15% to $88.7
million resulting from infrastructure reductions, process improvements, the
increasing use of alternative distribution channels and the accrual of
severance payments in the prior year. S,G,&A expenses represented 28.0% of
sales, down from 31.4% in the prior year.
Other expenses declined due primarily to the gain on sale of TriQuint
Semiconductor, Inc. discussed above and the impact of improved currency
exchange rate change during the quarter.
Income taxes increased from $4.3 million to $5.9 million, reflecting
the higher earnings before taxes.
Net earnings were $3.0 million higher than the prior year, as lower
sales and gross margins were more than offset by lower R&D and S,G,&A
expenses and the improvements in other expenses.
10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Howtek patent infringement litigation described in the
Company's 1993 10-K Report has been settled. The settlement will not have a
material adverse effect on the Company's financial position or results of
operations.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(10) (i ) Executive Severance Agreement.
(ii) Severance Agreement.
(21) Subsidiaries of the Registrant.
(b) No reports on Form 8-K have been filed during the quarter
which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
(REGISTRANT) TEKTRONIX, INC.
BY (SIGNATURE) /s/Carl W. Neun
(NAME AND TITLE) Vice President and
Chief Financial Officer
(DATE) January 7, 1994
11