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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 25, 1995, 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 27, 1995 THERE WERE 33,542,906 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 25, 1995 and May 27, 1995
Condensed Consolidated Statements of Operations - 3
for the Thirteen Weeks Ended November 25, 1995
and the Thirteen Weeks Ended November 26, 1994
for the Twenty-Six Weeks Ended November 25, 1995
and the Twenty-Six Weeks Ended November 26, 1994
Condensed Consolidated Statements of Cash Flows - 4
for the Twenty-Six Weeks Ended November 25, 1995
and the Twenty-Six Weeks Ended November 26, 1994
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. 25, May 27,
(In thousands) 1995 1995
- --------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 29,517 $ 31,761
Accounts receivable - net 324,829 315,356
Inventories 276,306 245,766
Other current assets 47,503 65,108
---------- ----------
Total current assets 678,155 657,991
Property, plant, and equipment 647,061 624,318
Accumulated depreciation and amortization (369,898) (371,238)
---------- ----------
Property, plant, and equipment - net 277,163 253,080
Property held for sale 29,786 35,912
Deferred tax assets 68,097 76,418
Other long-term assets 202,241 194,901
---------- ----------
Total assets $1,255,442 $1,218,302
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 65,489 $ 87,623
Accounts payable 166,397 173,537
Accrued compensation 81,158 106,660
Deferred revenue 16,075 19,988
---------- ----------
Total current liabilities 329,119 387,808
Long-term debt 153,334 104,984
Other long-term liabilities 123,087 121,295
Shareholders' equity:
Common stock 226,017 216,251
Retained earnings 337,885 298,964
Currency adjustment 61,720 76,948
Unrealized holding gains - net 24,280 12,052
---------- ----------
Total shareholders' equity 649,902 604,215
---------- ----------
Total liabilities and shareholders' equity $1,255,442 $1,218,302
========== ==========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
TEKTRONIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
13 weeks to 13 weeks to 26 weeks to 26 weeks to
Nov. 25, Nov. 26, Nov. 25, Nov. 26,
(In thousands except for per share amounts) 1995 1994 1995 1994
- --------------------------------------------------------------------------------------------------------
Net sales $ 443,598 $ 358,655 $ 844,620 $ 683,507
Cost of sales 257,547 194,842 489,250 362,499
---------- --------- ---------- ---------
Gross profit 186,051 163,813 355,370 321,008
Research and development 40,572 41,228 79,051 83,383
Selling, general, and administrative 108,111 96,338 206,299 186,428
Equity in business ventures' earnings 1,686 1,007 1,093 642
---------- ---------- ---------- ----------
Operating income 39,054 27,254 71,113 51,839
Other expense - net 1,467 2,186 1,141 3,774
---------- ---------- ---------- ----------
Earnings before taxes 37,587 25,068 69,972 48,065
Income taxes 11,277 6,451 20,992 12,083
---------- ---------- ---------- ----------
Net earnings $ 26,310 $ 18,617 $ 48,980 $ 35,982
========== ========== ========== ==========
Earnings per share $ 0.79 $ 0.57 $ 1.47 $ 1.11
Dividends per share 0.15 0.15 0.30 0.30
Average shares outstanding 33,479 32,465 33,363 32,307
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. 25, Nov. 26,
(In thousands) 1995 1994
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings $ 48,980 $ 35,982
Adjustments to reconcile net earnings to cash
from operating activities:
Depreciation expense 21,478 20,544
Deferred taxes 8,321 1,847
Accounts receivable (10,188) 21,915
Inventories (30,613) (30,355)
Accounts payable (9,907) (17,213)
Accrued compensation (25,387) (12,889)
Other assets (9,469) (46,412)
Other-net 7,536 1,681
---------- ----------
Net cash provided (used) by operating activities 751 (24,900)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (46,461) (42,933)
Proceeds from sale of assets 9,936 32,482
Proceeds from sale of investments 4,704 18,832
---------- ----------
Net cash provided (used) by investing activities (31,821) 8,381
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in short-term debt (21,957) 7,251
Issuance of long-term debt 50,029 1,218
Repayment of long-term debt (1,674) (566)
Issuance of common stock 13,039 19,460
Repurchase of common stock -- (8,382)
Dividends (10,059) (9,138)
---------- ----------
Net cash provided by financing activities 29,378 9,843
Effect of exchange rate changes (552) 375
---------- ----------
Decrease in cash and cash equivalents (2,244) (6,301)
Cash and cash equivalents at beginning of year 31,761 43,453
---------- ----------
Cash and cash equivalents at end of quarter $ 29,517 $ 37,152
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS:
Income taxes paid $ 18,493 $ 4,803
Interest paid 7,456 6,367
NON-CASH INVESTING ACTIVITIES:
Fair value adjustment to securities
available-for-sale $ 20,381 $ 25,502
Income tax effect related to fair value adjustment 8,153 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 con-
densed or omitted. Management believes that the condensed statements
include all necessary adjustments which are of a normal and recurring
nature and are adequate to present financial position, results of
operations and cash flows for the interim periods. The condensed informa-
tion 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. 25, May 27,
(In thousands) 1995 1995
- --------------------------------------------------------------------------------------------------------
Materials and work in process $ 152,748 $ 144,259
Finished goods 123,558 101,507
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Inventories $ 276,306 $ 245,766
========== ==========
ACQUISITIONS
In the first quarter of fiscal 1996, the Company completed its
acquisition of all of the outstanding shares of Lightworks Editing Systems
Limited and Lightworks Editing System, Inc.(Lightworks), which designs and
develops non-linear editing systems. The Company has issued 1,644,000
common shares to complete the acquisition. The acquisition was accounted
for as a pooling of interests and the financial statements have been
restated to include the results and financial position of Lightworks for
all prior periods.
The restatement did not have a material effect on the Company's
previously reported 1995 results or financial position except for the
impact on earnings per share from the issuance of the shares to complete
the acquisition. The restatement reduced the Company's previously reported
earnings per share for fiscal year 1995 by $0.13 per share primarily
because of the issuance of additional shares to complete the acquisition.
The impact of the restatement on earnings per share in each quarter of
fiscal 1995 was as follows: an increase of $0.02 in the first quarter; a
decrease of $0.02 in the second quarter; a decrease of $0.05 in the third
quarter; and a decrease of $0.08 in the fourth quarter.
SHORT-TERM AND LONG-TERM DEBT
In the first quarter of fiscal 1996, the Company issued $50.0 million
of 7.625% Notes due August 15, 2002.
5
INCOME TAXES
The provision for income taxes consisted of:
13 weeks to 13 weeks to 26 weeks to 26 weeks to
Nov. 25, Nov. 26, Nov. 25, Nov. 26,
(In thousands) 1995 1994 1995 1994
- --------------------------------------------------------------------------------------------------------
United States $ 6,553 $ 1,905 $ 8,089 $ 3,864
State 1,639 477 2,029 966
Foreign 3,085 4,069 10,874 7,253
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Income taxes $ 11,277 $ 6,451 $ 20,992 $ 12,083
========== ========== ========== ==========
The provision for income taxes was calculated at estimated annual
effective rates of 30% and 26%, respectively, for the quarters ended
November 25, 1995 and November 26, 1994.
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 25, 1995), the Company maintained bank credit
facilities totaling $300.4 million, of which $236.8 million was unused.
The unused facilities include $137.2 million in lines of credit and $99.6
million under a revolving credit agreement from United States and foreign
banks.
Current assets increased by $20.2 million from the year end balance at
May 27, 1995 due to higher accounts receivable and inventories, partly off-
6
set by a decline in other current assets. Accounts receivable were slightly
higher due to increased sales in certain geographies which have longer col-
lection terms. Increased inventories were due primarily to higher order
rates and a buildup of some components caused by longer lead times and
changes in the mix of product orders. Other current assets declined primar-
ily because of the collection of a portion of a note receivable from the
sale of a building, and the reduction of short-term deferred tax assets.
Net property, plant and equipment increased by $24.1 million as the
Company continued to invest in facilities consolidation and information
systems.
Current liabilities declined by $58.7 million. Short-term debt was
paid down by $22.1 million with proceeds generated by the issuance of $50
million in long-term notes. Accrued compensation declined $25.5 million
due to the payment of year-end accruals for incentives and commissions,
usage of accrued vacation and the payment of employee severance charged
against restructuring reserves.
Long-term debt increased as a result of the Company's issuance, in the
first quarter, of $50 million in notes due August 15, 2002.
Shareholders' equity increased by $45.7 million due primarily to
earnings net of dividends, the exercising of stock options and an increase
in holding gains on investments in marketable securities available for
sale, partly offset by a negative currency adjustment due to a
strengthening U.S. dollar against the Japanese Yen and certain major
European currencies.
7
Restructuring Charges
The Company is completing its consolidation of facilities and
reduction of workforce for which restructuring charges were provided, as
described in the 1995 Annual Report to shareholders. At the end of the
second quarter, substantially all restructuring reserves have been
utilized.
Results of Operations
26 WEEKS ENDED NOVEMBER 25, 1995
vs.
26 WEEKS ENDED NOVEMBER 26,1994
In the first half of fiscal 1996, net earnings were $49.0 million, or $1.47
per share compared with $36.0 million, or $1.11 per share in the first half
of fiscal 1995.
Net sales were $844.6 million, an increase of 24% from the prior
year's total of $683.5 million. Product orders increased 25% from $649.9
million to $813.1 million. The Company experienced strong sales and order
growth in all three businesses and in all geographic regions.
Measurement Business Division sales of $385.5 million increased 15%
from the prior year, with strong growth in instruments, handheld electronic
tools and communications test products. Product orders increased from
$324.0 million to $383.2 million, or 18%.
8
Color Printing and Imaging Division sales increased 32% to $261.5 million
reflecting continued heavy demand for the current printer lines, especially
the Phaser* 340 solid ink printer. Product orders increased 27% from $190.1
million to $242.3 million. *(Phaser is a registered trademark of Tektronix,
Inc.).
Video and Networking Division experienced a 38% increase in product
orders over the prior year, from $135.8 million to $187.6 million. Sales
increased 40% to $197.6 million, led by strong sales of the Profile* video
disk recorder, Grass Valley Group TV production equipment and X terminals.
*(Profile is a trademark of Tektronix, Inc.).
Sales to customers in the United States increased 21% from $356.9
million to $431.2 million, and represented 51% of total sales.
International sales of $413.5 million were up 30%, with growth in all
regions and particular strength in Europe. Product orders from customers
in the United States of $393.5 million were up 23% from last year while
international product orders of $419.6 million were up 28%.
Cost of sales increased as a percentage of net sales from 53.0% to
57.9% as the Company continued to increase the use of alternative
distribution channels, experienced the impact of increased systems
integration sales from Video and Networking and experienced declines in
Color Printing and Imaging margins as a result of changes in product mix
and the short-term impact of early shipments of the Phaser 340 color
printer.
Research and development and selling, general and administrative
expenses declined sharply as a percentage of sales, from 12.2% to 9.4% and
from 27.3% to 24.4%, respectively, due primarily to the higher sales volume
and continued effective cost controls, particularly in administrative
functions.
9
Operating income as a percentage of sales increased year over year, rising
from 7.6% in the first half of 1995 to 8.4% as lower operating expenses as
a percentage of sales more than offset declining gross margins.
Other expense declined due primarily to higher gains on sales of
stock in other companies, partly offset by higher interest expense.
The provision for income taxes increased from $12.1 million to $21.0
million due to increased earnings before taxes and a higher estimated
effective annual tax rate of 30% for the current year, compared to 25.1%
for the first half of last year.
Net earnings were 36% higher than the prior year, due to higher sales
and higher operating income, partly offset by higher taxes.
13 WEEKS ENDED NOVEMBER 25, 1995
vs.
13 WEEKS ENDED NOVEMBER 26,1994
In the second quarter of fiscal 1996, net earnings were $26.3 million,
or $0.79 per share compared with $18.6 million, or $0.57 per share in the
second quarter of fiscal 1995.
Net sales were $443.6 million, up 24% from $358.7 million in the
prior year. Product orders increased from $343.9 million to $424.0
million, a 23% improvement. The Company experienced strong sales and
orders growth in all three businesses and in all geographic regions.
10
Measurement Business sales of $200.2 million were up 11% from $180.3
million in the prior year due to acceptance of new products, particularly
in instruments, handheld electronic tools and communications test products.
The sales increase came despite constraints resulting from parts shortages
during the current quarter. Product orders for Measurement increased from
$175.3 million to $208.2 million, or 19%.
Color Printing and Imaging sales increased 29% from $108.8 million to
$139.9 million, with strong sales of the Phaser 340 solid ink color
printer. Product orders increased by 26% over the prior year, improving
from $101.4 million to $127.9 million.
Video and Networking experienced product orders of $87.9 million, a
31% increase over the $67.2 million reported for the prior year. Sales for
the division grew 52% from $68.2 million to $103.5 million, led by strong
sales of the Profile video disk recorder, Grass Valley Group TV production
equipment and X terminals.
Sales to customers in the United States increased by 19% from $184.6
million to $220.2 million, representing 50% of total sales. International
sales of $223.4 million were up 29% from $172.7 million in the prior year,
with strong growth in all regions particularly in Europe. Product orders
in both U.S. and international operations increased by 23% over the prior
year. U.S. orders increased from $166.3 million to $205.2 million;
internationally, the increase was from $177.6 million to $218.8 million.
Cost of sales increased as a percentage of net sales from 54.3% to
58.1% as the Company continued to increase the percentage of sales through
alternative distribution channels, experienced inefficiencies associated
with parts shortages in some businesses, and continued to be impacted by
increased systems integration sales in Video and Networking. Additionally,
Color Printing and Imaging experienced lower margins in the second
11
quarter of this year compared to the same quarter last year as a result
of changes in product mix, but the margins improved slightly in the second
quarter compared to the first quarter of this year.
Research and development and selling, general and administrative
expenses declined as a percentage of sales, from 11.5% to 9.1% and from
26.9% to 24.4%, respectively, due primarily to the higher sales volume and
continued effective cost controls, particularly in administrative
functions.
Operating income as a percentage of sales increased year over year,
rising from 7.6% in the second quarter of 1995 to 8.8% this year as lower
operating expenses as a percentage of sales more than offset declining
gross margins.
Income taxes increased from $6.5 million to $11.3 million due to
higher earnings before taxes in the current quarter and a higher estimated
effective annual tax rate of 30% for the current year compared to 26% last
year.
Net earnings of $26.3 million were 41% higher than the prior year due
to higher sales and higher operating income, partly offset by higher
taxes.
12
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(10) (.1) Executive Severance Agreement, as amended.
(.2) Supplemental Executive Retirement Agreement.
(27) Financial Data Schedule for the twenty-six weeks
ending November 25, 1995.
(.1) Restated Financial Data Schedule for the twenty-six
weeks ending November 26, 1994.
(b) No reports on Form 8-K have been filed during the quarter for
which this report is filed.
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 4, 1996 TEKTRONIX, INC.
By /s/ CARL W. NEUN
-----------------
Carl W. Neun
Senior Vice President and
Chief Financial Officer
14
EXHIBIT LIST
(10) (.1) Executive Severance Agreement, as amended.
(.2) Supplemental Executive Retirement Agreement.
(27) Financial Data Schedule for the twenty-six weeks
ending November 25, 1995.
(.1) Restated Financial Data Schedule for the twenty-six
weeks ending November 26, 1994.