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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 for the 13 weeks ended
November 26, 1994, or,
[ ] Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 for the transition period
from ________________ to _____________________.
Commission File Number 1-4837
TEKTRONIX, INC.
(Exact name of registrant as specified in its charter)
OREGON 93-0343990
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
26600 S.W. PARKWAY
WILSONVILLE, OREGON 97070-1000
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (503) 627-7111
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes ___X___ No______
AT DECEMBER 28, 1994 THERE WERE 30,804,860 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
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PAGE NO.
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Financial Statements:
Condensed Consolidated Balance Sheets - 2
November 26, 1994 and May 28, 1994
Consolidated Statements of Operations - 3
for the Thirteen Weeks Ended November 26, 1994
and the Thirteen Weeks Ended November 27, 1993
for the Twenty-Six Weeks Ended November 26, 1994
and the Twenty-Six Weeks Ended November 27, 1993
Condensed Consolidated Statements of Cash Flows - 4
for the Twenty-Six Weeks Ended November 26, 1994
and the Twenty-Six Weeks Ended November 27, 1993
Notes to Condensed Consolidated Financial Statements 5
Management's Discussion and Analysis of Financial 6
Condition and Results of Operations
Part II. Other Information 13
Signatures 14
1
TEKTRONIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
Nov. 26, May 28,
(In thousands) 1994 1994
- -------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 36,770 $ 42,919
Accounts receivable - net 248,559 267,405
Inventories 201,631 171,267
Other current assets 58,682 59,054
---------- ----------
Total current assets 545,642 540,645
Property, plant, and equipment 600,550 653,709
Accumulated depreciation and amortization (379,895) (430,387)
---------- ----------
Property, plant, and equipment - net 220,655 223,322
Property held for sale 35,428 39,776
Deferred tax assets 67,484 79,552
Other long-term assets 167,746 107,854
---------- ----------
Total assets $1,036,955 $ 991,149
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 24,529 $ 17,084
Accounts payable 148,247 161,757
Accrued compensation 66,728 78,877
Deferred revenue 17,656 18,124
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Total current liabilities 257,160 275,842
Long-term debt 103,652 104,146
Other long-term liabilities 145,360 141,672
Shareholders' equity:
Common stock 196,212 180,883
Retained earnings 261,019 235,795
Currency adjustment 58,251 52,811
Unrealized holding gains on certain
marketable equity securities 15,301 --
---------- ----------
Total shareholders' equity 530,783 469,489
---------- ----------
Total liabilities and shareholders' equity $1,036,955 $ 991,149
========== ==========
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
Nov. 26, Nov. 27, Nov. 26, Nov. 27,
(In thousands except for per share amounts) 1994 1993 1994 1993
- -------------------------------------------------------------------------------------------
Net sales $ 348,411 $ 317,165 $ 661,139 $ 607,235
Operating costs and expenses:
Cost of sales 188,866 171,951 350,115 326,152
Research and development 40,337 37,105 81,643 73,237
Selling, general, and administrative 93,335 88,703 180,081 172,635
---------- ---------- ---------- ----------
Total operating costs and expenses 322,538 297,759 611,839 572,024
Equity in business ventures net
earnings (losses) 1,007 (299) 642 (1,416)
---------- --------- ---------- ----------
Operating income 26,880 19,107 49,942 33,795
Other expense - net 2,054 1,750 3,507 5,143
---------- ---------- ---------- ----------
Earnings before taxes 24,826 17,357 46,435 28,652
Income taxes 6,454 5,902 12,073 7,466
---------- --------- ---------- ----------
Net earnings $ 18,372 $ 11,455 $ 34,362 $ 21,186
Earnings per share $ 0.60 $ 0.37 $ 1.13 $ 0.69
Dividends per share 0.15 0.15 0.30 0.30
Average shares outstanding 30,537 30,608 30,380 30,558
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. 26, Nov. 27,
(In thousands) 1994 1993
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings $ 34,362 $ 21,186
Adjustments to reconcile net earnings to cash
from operating activities:
Depreciation expense 20,268 27,623
Deferred tax assets 1,847 41
Accounts receivable 21,977 16,988
Inventories (28,208) (12,774)
Other current assets 1,084 9,087
Accounts payable (17,740) (21,573)
Accrued compensation (12,977) (26,636)
Other assets (46,260) (4,344)
Other-net 1,022 5,317
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Net cash provided
(used) by operating activities (24,625) 14,915
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant, and equipment (41,269) (27,072)
Proceeds from sale of assets 32,124 6,505
Proceeds from sale of investments 18,832 9,378
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Net cash provided (used) by investing activities 9,687 (11,189)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in short-term debt 7,081 (26,917)
Issuance of long-term debt -- 100,000
Repayment of long-term debt (566) (70,039)
Issuance of common stock 19,419 675
Repurchase of common stock (8,382) --
Dividends (9,138) (9,162)
---------- ----------
Net cash provided (used) by financing activities 8,414 (5,443)
Effect of exchange rate changes 375 (759)
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Decrease in cash and cash equivalents (6,149) (2,476)
Cash and cash equivalents at beginning of year 42,919 30,004
---------- ----------
Cash and cash equivalents at end of quarter $ 36,770 $ 27,528
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS:
Income taxes paid $ 4,803 $ 2,632
Interest paid 6,224 2,339
NON-CASH INVESTING ACTIVITIES:
Fair value adjustment to securities available-for-sale 25,502 --
Income tax effect related to fair value adjustment 10,201 --
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 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:
Nov. 26, May 28,
(In thousands) 1994 1994
- -------------------------------------------------------------------------------------------
Materials and work in process $ 105,134 $ 89,341
Finished goods 96,497 81,926
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Inventories $ 201,631 $ 171,267
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INVESTMENTS
At the beginning of the year, the Company adopted SFAS No. 115,
Accounting for Certain Investments in Debt and Equity Securities.
SFAS No. 115 supersedes SFAS No. 12 which generally required
investments in marketable equity securities to be carried at the lower
of aggregate market or amortized cost. Under SFAS No. 115, the
Company now classifies its minority equity investments in certain
marketable securities as available-for-sale and reports them at fair
value in the consolidated balance sheet. The aggregate fair value of
these investments at November 26, 1994 was $29.7 million. The
unrealized gain of $25.5 million, net of the related deferred income
tax effect of $10.2 million, is reported as a separate component of
shareholders' equity.
SHORT-TERM AND LONG-TERM DEBT
Subsequent to the end of the quarter ending November 26, 1994,
the Company extended the $150.0 million revolving credit agreement
with Morgan Guaranty Trust Company of New York as agent from a
maturity date of March 10, 1996 to December 1, 1998.
5
INCOME TAXES
The provision for income taxes consisted of:
13 weeks to 13 weeks to 26 weeks to 26 weeks to
Nov. 26, Nov. 27, Nov. 26, Nov. 27,
(In thousands) 1994 1993 1994 1993
- -------------------------------------------------------------------------------------------
United States $ 1,908 $ 4,957 $ 3,864 $ 5,402
State 477 735 966 1,350
Foreign 4,069 210 7,243 714
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Income taxes $ 6,454 $ 5,902 $ 12,073 $ 7,466
========== ========== ========== ==========
The provision for income taxes was calculated at estimated annual
effective rates of 26% and 34% ,respectively, for the quarters ended
November 26, 1994 and November 27, 1993. The provision for the 26
weeks ended November 27, 1993 was reduced by a first quarter gain of
$2.3 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%.
CONTINGENCIES
The Company has reported on certain claims asserted by Jerome J.
Lemelson in Item 3., Legal Proceedings, of its Annual Report on Form
10-K for the fiscal year ended May 28, 1994. The Company believes
that ultimate resolution of these claims will not have a material
adverse effect on its financial position or results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition
The Company's financial condition is strong. Cash flow from
operating activities and borrowing capacity from existing lines of
credit are sufficient to meet current and anticipated future needs.
At the end of the second quarter (November 26, 1994), the Company
maintained bank credit facilities totaling $305.6 million, of which
$282.3 million was unused. The unused facilities include $132.3
million in lines of credit and $150.0 million under a revolving credit
agreement from United States and foreign banks.
6
Current assets increased by $5.0 million from the prior year end,
May 28, 1994, due to an increase in inventories, partly offset by
reductions in cash and accounts receivable. Accounts receivable
declined by $18.8 million because of the lower average weekly sales in
the second quarter compared to the prior year's fourth quarter.
Inventories increased by $30.4 million during the first six months as
a result of the Company's preparation to introduce a significant
number of new products including new color printers and oscilloscopes
and the normal seasonal increase in inventories.
Net property, plant and equipment declined by $2.6 million as
depreciation and dispositions, including the divestiture of the
Circuit Board Division, exceeded new capital additions. Long-term
deferred tax assets decreased by $12.1 million primarily due to the
tax impact from recognition of unrealized holding gains on investments
under SFAS 115, Accounting for Certain Investments in Debt and Equity
Securities, discussed further below under other long-term assets.
Other long-term assets increased by $59.8 million as a result of
the Company's investment in equity and notes of Merix Corporation
(formerly the Circuit Board Division) and the accounting for certain
investments in accordance with SFAS 115. Under SFAS 115, certain
investments in marketable securities are classified as available for
sale and reported at fair value. The adjustment to fair value added
$25.5 million to other long term assets, and the unrealized gains,
less deferred taxes, are reported in unrealized holding gains as a
separate component of shareholders' equity. The Company accounts for
its investment in Merix Corporation on the equity method with the
earnings impact included in equity in business ventures net earnings
(losses) in the consolidated statements of operations. The Company
also recorded several long-term receivables on sales of real estate
and licensing of technologies in the current year.
7
Current liabilities declined by $18.7 million. Short-term debt
increased $7.4 million. Accounts payable decreased $13.5 million, and
accrued compensation decreased $12.2 million, due to the timing of
some trade payables and restructuring charges, the payment of year-end
accruals for incentives and commissions, the payment of employee
severance charged against restructuring reserves and lower accrual
requirements because of the disposition of non-strategic businesses.
Shareholders' equity increased by $61.3 million due
primarily to earnings net of dividends, the addition of unrealized
holding gains in accordance with SFAS 115 and the exercise of stock
options.
Restructuring Charges
The Company continues its consolidation of facilities and
reduction of workforce, as described in the 1994 Annual Report to
shareholders, reducing restructuring reserves to approximately $29
million at the end of the current quarter. The Company is also
proceeding with the discontinuance of older, low-volume products.
8
Results of Operations
26 WEEKS ENDED NOVEMBER 26, 1994
vs.
26 WEEKS ENDED NOVEMBER 27, 1993
In the first half of fiscal 1995, net earnings were $34.4
million, or $1.13 per share compared with $21.2 million, or $0.69 per
share in the first half of fiscal 1994.
Net Sales were $661.1 million, an increase of 9% from the prior
year's total of $607.2 million. All continuing businesses showed
good sales growth except Network Displays Division. Other sales,
which include the non-strategic businesses disposed of at the end of
last year and during the first quarter, declined from $49.7 million to
$8.0 million. Sales for continuing business increased by 17% from
$557.5 million in 1994 to $653.2 million in 1995.
Measurement Business Division sales of $332.8 million increased
9% from the prior year, with strong growth in communications and TV
test and electronic tools and improvement in instruments. Color
Printing and Imaging Division sales increased 44% to $197.9 million
reflecting continued heavy demand for the current printer lines.
Video Systems Division sales increased 14% to $82.9 million,
benefiting from stronger markets worldwide and from licensing
revenues. Network Display Division sales declined by 7% to $39.6
million as a result of the reduction in large one-time X terminal
sales in the United States and the continued decline in service
revenue from the Company's old terminals business.
Sales to customers in the United States increased slightly from
$348.5 million to $349.8 million, representing 53% of total sales.
The majority of the
9
non-strategic operations sales, represented by the
Other product class, were in the United States, and if these sales
are excluded from both years, United States sales increased by 14%.
International sales of $311.4 million were up 14%, due to
improvements in all major markets.
Cost of sales decreased as a percentage of net sales from 53.7%
to 53.0% due to a better geographic mix of sales, the reduction of
low margin component sales, and improved product mix, partly offset
by the increasing use of alternative distribution channels and the
higher cost of components. The Company continues to expect cost of
sales as a percentage of sales to slowly trend higher as more products
are sold through alternative distribution channels.
Research and development (R&D) remained relatively flat as a
percent of sales at 12.3%. R&D increased by 11.5% from $73.2 million
to $81.6 million due principally to higher new product development
funding. Selling, general and administrative expense (SG&A) declined
as a percent of sales from 28.4% to 27.2%. SG&A rose 4.3% in dollar
terms because of higher marketing and distribution expenses associated
with higher sales volumes. Both R&D and SG&A were also impacted by
increased variable compensation due to the Company's improved
performance.
Equity in business ventures net earnings of $0.6 million
compared to losses of $1.4 million in the prior year primarily because
of the Company's equity in earnings of Merix Corporation (formerly the
Company's Circuit Board Division) in the current year. The Circuit
Board Division was still a part of the Company in 1994.
Other expense declined due primarily to higher gains on sales of
stock in other companies.
10
The provision for income taxes increased by 62%, which is
consistent with the increase in earnings before taxes. The Company's
calculated effective annual tax rate is 26% compared to 34% in the
prior year, but the effect of this reduction is offset by the $2.3
million gain from recalculation of deferred tax benefits in last
year's first quarter. The reduction in the current year tax rate is
due primarily to the capitalization, for tax purposes, of the costs of
a major research and development project.
Net earnings were 62% higher than the prior year, due to higher
sales and gross margins, improved business venture results and lower
other expense, partly offset by higher R&D and SG&A expenses.
13 WEEKS ENDED NOVEMBER 26, 1994
vs.
13 WEEKS ENDED NOVEMBER 27, 1993
In the second quarter of fiscal 1995, net earnings were $18.4
million, or $0.60 per share compared with $11.5 million, or $0.37 per
share in the second quarter of fiscal 1994.
Net Sales were $348.4 million, up 9.9% from the prior year.
Sales of Measurement Business, Color Printing and Imaging and Video
Systems were higher, while Network Displays' sales declined and Other
sales, which include the non-strategic businesses disposed of at the
end of last year and during the first quarter, dropped sharply from
$24.8 million to $1.4 million. Sales for continuing business
increased by 19% from $292.4 million in 1994 to $347.0 million in
1995.
11
Measurement Business sales of $178.7 million were up 10.1% from
the prior year due to acceptance of new products and improvements in
European and Asian markets. Color Printing and Imaging sales increased
48.7% to $108.4 million, continuing the strong growth trend in both
domestic and international markets. Video Systems sales grew 15.2% to
$40.1 million from generally improving market conditions. Network
Displays sales were 11.6% lower at $19.8 million as a result of the
reduction in large one-time X terminal sales in the United States and
the continued decline in service revenue from the Company's old
terminals business.
Sales to customers in the United States were essentially flat at
$180.3 million, representing 52% of total sales. The majority of the
non-strategic operations sales, represented by the Other product
class, were in the United States, and if these sales are excluded
from both years, United States sales increased by 13%. International
sales of $168.1 million were up 23% from $137.1 million in the prior
year, with strong growth in Japan and the rest of the Pacific, and
good improvement over last year in Europe.
Product orders for the quarter were $334 million versus $281
million in the prior year's quarter, with strong growth in all
international markets and continuing improvement in the United States.
Cost of sales amounted to 54.2% of net sales, flat with the prior
year. A better geographic mix of sales, the reduction of low margin
component sales and improved product mix in each of the businesses
were offset primarily by the increasing use of alternative
distribution channels and the higher cost of components.
Research and development (R&D) remained relatively constant as a
percent of sales at 11.6%. R&D expenditures increased by 8.7% over
last year due principally to higher new product development funding.
Selling, general and administrative
12
expense (SG&A) declined as a
percent of sales from 28.0% to 26.8%, but was 5.2% higher than the
prior year, in dollar terms, because of higher marketing and
distribution expenses associated with higher sales volumes. Both R&D
and SG&A were also impacted by increased variable compensation due to
the Company's improved performance.
Equity in business ventures net earnings of $1.0 million
compared to losses of $0.3 million in the prior year primarily because
of the Company's equity in earnings of Merix Corporation in the
current quarter.
Income taxes increased from $5.9 million to $6.5 million due to
higher earnings before taxes in the current quarter partially offset
by a lower effective annual tax rate. The Company's calculated
effective annual tax rate is 26% compared to 34% in the second quarter
of the prior year.
Net earnings of $18.4 million were 60% higher than the prior year
due primarily to higher sales.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(3) Bylaws,as amended.
(27) Financial Data Schedule
(b) A report on Form 8-K was filed during the quarter for which this
report is filed. The report was dated October 7, 1994 and
covered items 5 and 7. A Consolidated Statement of Operations
for the 52 weeks ended August 27, 1994 was filed as Exhibit 1 to
this report.
13
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.
January 6, 1995 TEKTRONIX, INC.
By /s/ CARL W. NEUN
__________________
Carl W. Neun
Vice President and
Chief Financial Officer
EXHIBIT INDEX
Exhibit
Number Document Description
_______ ____________________
(a) Exhibits
(3) Bylaws, as amended.
(27) Financial Data Schedule.
(b) A report on Form 8-K was filed during the quarter for which this
report is filed. The report was dated October 7, 1994 and
covered items 5 and 7. A Consolidated Statement of Operations
for the 52 weeks ended August 27, 1994 was filed as Exhibit 1 to
this report.
14