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
THIRD QUARTER OF FISCAL 2005
Quarter Highlighted by Strong Product Introductions and
Significant Industry Awards
BEAVERTON, Ore., March 17, 2005 - Tektronix, Inc. (NYSE: TEK) today reported net
sales of $256.3 million and net earnings from continuing operations of $23.4
million or $0.26 per share for the third quarter ended February 26, 2005. This
compares with net sales of $243.5 million and net earnings from continuing
operations of $43.9 million or $0.50 per share for the same period last year,
which includes one-time net credits of $21.6 million or $0.17 per share,
resulting largely from the sale of the Japan headquarters building. Excluding
acquisition-related costs, business realignment and one-time items, net earnings
from continuing operations were $28.1 million or $0.31 per share for the third
quarter ended February 26, 2005, as compared with $29.1 million or $0.33 per
share for the same period last year. Included in acquisition-related costs for
the third quarter ended February 26, 2005 are items related to the acquisition
of Inet Technologies, Inc., including the ongoing non-cash amortization of
acquisition-related intangibles.
"We saw steady order growth, and sales that were consistent with our
expectations," said Rick Wills, Tektronix Chairman and CEO. "We were able to
deliver solid earnings as we continued to realize strong gross margins that were
far above historical levels."
"Additionally, we had several significant new product introductions in the
quarter. In the middle of the quarter we introduced the world's fastest
oscilloscope at 15 GHz real-time bandwidth, receiving very positive response
from customers. This oscilloscope, which began shipping in volume this week, is
the first product from Tektronix to showcase breakthrough technologies which
will be incorporated into many of our products in the coming year," said Wills.
"We also introduced new communications network diagnostic solutions for 3G
network tests, including a high data rate load test and network simulation
system and a network and service analyzer suite of applications for UTRAN
troubleshooting and optimization that enables customers to improve quality of
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Tektronix Third Quarter 2005 Results.../2
service and lower operating costs of 3G networks," continued Wills. "And, during
the last week, two of our products won significant industry awards in the test
and measurement category -- the EDN Innovation Award, and the EE Times Ultimate
Product of the Year Award."
"Our integration of Inet Technologies is going well," Wills said. "We continue
to hit the key milestones for integration and see increasing opportunities for
strategic synergy with each key accomplishment, and orders for this unit to date
were ahead of our expectations."
For the fourth quarter of fiscal 2005, including Inet, the company expects net
sales to be $265 - $270 million and earnings per share from continuing
operations of $0.33 to $0.35, excluding acquisition-related costs.
"We continue to be encouraged by the success we are seeing and believe we are
beginning to see the benefits of our increased investments in R&D. We are
encouraged about our progress in integrating Inet and the opportunity this
provides to build on the success of our mobile protocol test business by adding
Inet's leadership in its target markets - especially in mobile data," concluded
Wills.
Recent highlights include the following:
. Significant new oscilloscope products were introduced including the
TDS6000C family of real-time digital storage oscilloscopes which
includes the TDS6154C, the world's fastest at 15 GHz, and the 12 GHz
TDS6124C which offers customers uncompromised industry-leading
performance for designs based on second-generation serial data standards
such as second-generation PCI-Express, SATAIII and double XAUI.
. Several new communications network diagnostic and management products
were released including two important technology advancements for
improving quality and optimizing 3G networks -- the LTS21 Load Test
System featuring a patent-pending graphical user interface; the Network
and Service Analyzer for UTRAN, a new 3G software application for the
industry leading K15 monitoring platform which provides network
operators with first-to-market capabilities to improve troubleshooting
and optimize performance -- and a software-only edition of the Spectra2
network diagnostic product that offers a robust remote testing
capability for VoIP testers and product development engineers.
. Tektronix was one of 17 winners of Intel's most prestigious award for
suppliers, the Supplier Continuous Quality Improvement (SCQI) award, for
outstanding commitment to quality and performance excellence in 2004.
The SCQI recognizes companies that provided products and services deemed
essential to Intel's business success. Tektronix was the only test and
measurement company honored with this significant award.
. Tektronix received two significant test and measurement awards - the EDN
Innovation Award presented by EDN Magazine in the Test & Measurement
category for the TDS5000B Digital Phosphor Oscilloscopes with MyScope
(which also won the DesignVision Award given by the International
Engineering Consortium in the Test & Measurement Equipment category) and
an award by EE Times for the TPS2000 Portable Digital Storage
Oscilloscope, which was named the Ultimate Product of the Year as part
of the inaugural EE Times ACE (Annual Creativity in Electronics) Award
in the Test & Measurement category.
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Tektronix Third Quarter 2005 Results.../3
. ESPN STAR Sports, Asia's number one sports broadcaster, selected the
Tektronix WVR600 Series Rasterizers to ensure consistent quality
control. The WVR600 Series is designed to monitor analog and digital
video and audio signals and ensure quality of service.
In addition, today Tektronix declared a quarterly cash dividend of $0.06 per
share on the outstanding common shares of the Company, payable on April 25, 2005
to shareholders of record as of the close of market on April 8, 2005.
Tektronix will be discussing its third quarter results and future guidance on a
conference call today, beginning at 1:30 p.m. Pacific Standard Time (PST). A
live Webcast of the conference call will be available at www.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 business realignment 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 business realignment costs and
one-time items. 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, market position and market growth opportunities, and
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; business conditions in the electronics, communications, computer and
advanced technologies industries, changes in order rates and customer
cancellations, including changes in seasonal buying habits; 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;
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 and/or produce
lead free products; inventory risks due to changes in market demand or the
Company's business strategies; resolution of indemnities relating to certain
acquisitions and divestitures; changes in effective tax rates; currency
fluctuations; the ability to develop effective sales channels; and risks
associated with the integration of Inet Technologies including realization of
expected growth opportunities. 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, Inc. is a test, measurement, and monitoring company providing
measurement solutions to the communications, computer, and semiconductor
industries worldwide. With more than 55 years of
Tektronix Third Quarter 2005 Results.../4
experience, Tektronix enables its customers to design, build, deploy, and manage
next-generation global communications networks and advanced technologies.
Headquartered in Beaverton, Oregon, Tektronix has operations in 19 countries
worldwide. Tektronix' Web address is www.tektronix.com.
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Tektronix Third Quarter 2005 Results.../5
Consolidated Statements of Operations
Quarter Ended Three Quarters Ended
----------------------- -----------------------
Feb. 26, Feb. 28, Feb. 26, Feb. 28,
(In thousands, except per share amounts) 2005 2004 2005 2004
- ------------------------------------------------- ---------- ---------- ---------- ----------
Net sales $ 256,332 $ 243,506 $ 773,625 $ 662,865
Cost of sales 102,946 102,326 311,397 290,740
---------- ---------- ---------- ----------
Gross profit 153,386 141,180 462,228 372,125
Research and development expenses 43,380 32,772 118,837 93,277
Selling, general and administrative expenses 78,750 69,519 220,136 200,353
Business realignment costs 382 3,706 2,665 20,050
Acquisition related costs (credits), net 2,590 (18,034) 38,318 (52,399)
Loss (gain) on disposition of assets 754 741 (1,080) 741
---------- ---------- ---------- ----------
Operating income 27,530 52,476 83,352 110,103
Interest income 3,798 5,118 13,164 16,240
Interest expense (113) (198) (531) (1,981)
Other non-operating income (expense), net 1,422 7,177 (1,869) 6,718
---------- ---------- ---------- ----------
Earnings before taxes 32,637 64,573 94,116 131,080
Income tax expense 9,246 20,702 36,838 39,324
---------- ---------- ---------- ----------
Net earnings from continuing operations 23,391 43,871 57,278 91,756
Gain (loss) from discontinued operations,
net of income taxes 3,430 (258) 3,117 (1,780)
---------- ---------- ---------- ----------
Net earnings $ 26,821 $ 43,613 $ 60,395 $ 89,976
========== ========== ========== ==========
Earnings (loss) per share:
Continuing operations - basic $ 0.26 $ 0.52 $ 0.66 $ 1.08
Continuing operations - diluted $ 0.26 $ 0.50 $ 0.65 $ 1.06
Discontinued operations - basic and diluted $ 0.04 $ - $ 0.04 $ (0.02)
Net earnings - basic $ 0.30 $ 0.51 $ 0.70 $ 1.06
Net earnings - diluted $ 0.30 $ 0.50 $ 0.68 $ 1.04
Weighted average shares outstanding:
Basic 89,307 84,921 86,703 84,724
Diluted 90,690 87,682 88,236 86,676
Cash dividend declared per share $ 0.06 $ 0.04 $ 0.16 $ 0.08
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Tektronix Third Quarter 2005 Results.../6
Consolidated Balance Sheets
(In thousands) February 26, 2005 May 29, 2004
- ---------------------------------------------- ----------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents $ 151,132 $ 149,011
Short-term marketable investments 119,466 90,956
Trade accounts receivable, net 158,476 133,150
Inventories 130,156 102,101
Other current assets 56,016 69,812
----------------- -----------------
Total current assets 615,246 545,030
Property, plant and equipment, net 115,472 105,310
Long-term marketable investments 280,885 463,878
Deferred tax assets 66,672 105,886
Goodwill, net 302,076 79,774
Other long-term assets 144,154 30,825
----------------- -----------------
Total assets $ 1,524,505 $ 1,330,703
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 131,602 $ 134,048
Accrued compensation 73,177 89,212
Deferred revenue 50,123 25,247
----------------- -----------------
Total current liabilities 254,902 248,507
Long-term liabilities 177,523 211,616
Shareholders' equity:
Common stock 523,242 257,267
Retained earnings 694,346 748,381
Accumulated other comprehensive loss (125,508) (135,068)
----------------- -----------------
Total shareholders' equity 1,092,080 870,580
----------------- -----------------
Total liabilities and shareholders' equity $ 1,524,505 $ 1,330,703
================= =================
Shares outstanding 89,028 84,179
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Tektronix Third Quarter 2005 Results.../7
SELECTED ADDITIONAL FINANCIAL DATA
Quarter Ended Three Quarters Ended
----------------------- -----------------------
(Dollars in thousands, % Feb. 26, Feb. 28, % Feb. 26, Feb. 28,
except per share amounts) Growth 2005 2004 Growth 2005 2004
- -------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Product Orders and Sales Data:
Orders 13% $ 241,105 $ 213,233 5% $ 680,293 $ 646,955
U.S 2% 74,200 73,004 (13%) 223,462 255,936
International 19% 166,905 140,229 17% 456,831 391,019
Total - excluding Rohde and Schwarz & Inet 8% 207,875 191,733 7% 626,106 586,696
Net Sales 5% $ 256,332 $ 243,506 17% $ 773,625 $ 662,865
U.S (8%) 86,170 94,142 8% 296,139 273,595
International 14% 170,162 149,364 23% 477,486 389,270
Total - excluding Rohde and Schwarz & Inet 4% 228,339 218,555 16% 701,955 604,328
---------- ---------- ---------- ---------- ---------- ----------
BOOK TO BILL RATIO CALCULATION:
Product Orders $ 241,105 $ 213,233 $ 680,293 $ 646,955
Product Sales $ 235,288 $ 226,580 $ 712,388 $ 614,432
Book to Bill ratio 1.02 0.94 0.95 1.05
---------- ---------- ---------- ----------
RECONCILIATION OF PRO FORMA MEASURES TO GAAP:
Net earnings from continuing operations - GAAP $ 23,391 $ 43,871 $ 57,278 $ 91,756
Effect of:
Acquisition related items reported in
cost of sales 4,582 - 9,217 -
Acquisition related items reported in
operating expenses 2,590 (18,034) 38,318 (52,399)
Business realignment costs 382 3,706 2,665 20,050
Gain on sale of corporate equity securities - (7,293) - (7,293)
Gain on sale of Nevada City property - - (2,161) -
Tax effect of above items (2,809) 6,846 (5,787) 11,893
---------- ---------- ---------- ----------
Net earnings from continuing
operations - Pro Forma $ 28,136 $ 29,096 $ 99,530 $ 64,007
Diluted earnings per share - Pro Forma $ 0.31 $ 0.33 $ 1.13 $ 0.74
---------- ---------- ---------- ----------
INCOME STATEMENT ITEMS AS A PERCENTAGE OF
NET SALES:
Cost of sales 40% 42% 40% 44%
Research and development expenses 17% 13% 15% 14%
Selling, general and administrative expenses 31% 29% 28% 30%
Business realignment costs 0% 2% 0% 3%
Acquisition related costs (credits), net 1% (7%) 5% (8%)
Loss (gain) on disposition of assets 0% 0% 0% 0%
Operating income 11% 22% 11% 17%
---------- ---------- ---------- ----------
CAPITAL EXPENDITURES AND DEPRECIATION:
Capital expenditures $ 6,636 $ 5,601 $ 21,140 $ 14,841
Depreciation and amortization expense $ 7,635 $ 6,721 $ 21,513 $ 20,997
---------- ---------- ---------- ----------
Quarter Ended Year Ended
February 26, 2005 May 29, 2004
----------------- -----------------
BALANCE SHEET:
Cash and Marketable Investments:
Cash and cash equivalents $ 151,132 $ 149,011
Short-term marketable investments 119,466 90,956
Long-term marketable investments 280,885 463,878
----------------- -----------------
Cash and Marketable Investments $ 551,483 $ 703,845
Accounts receivable as a percentage of net sales 15.0% 12.7%
Days sales outstanding 56.3 52.6
Average days sales outstanding 54.6 46.2
Inventory as a percentage of net sales 12.3% 10.6%
Inventory turns 3.3 4.1
----------------- -----------------
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Tektronix Third Quarter 2005 Results.../8
Discontinued Operations
Quarter Ended Three Quarters Ended
------------------- --------------------
Feb. 26, Feb. 28, Feb. 26, Feb. 28,
(In thousands) 2005 2004 2005 2004
- ---------------------------------------------------- -------- -------- -------- --------
Loss on sale of VideoTele.com (less applicable
income tax benefit of $3, $13, $12 and $16) $ (7) $ (23) $ (22) $ (28)
Loss on sale of optical parametric test business
(less applicable income tax benefit of $10, $25,
$95 and $114) (18) (47) (176) (213)
Loss on sale of Gage (less applicable income
tax benefit of $28, $101, $103 and $616) (53) (188) (193) (1,145)
Loss from operations of Gage (less applicable income
tax benefit of $0, $0, $0 and $212) - - - (394)
Gain on sale of Color Printing and Imaging (less
applicable income tax expense of $1,889, $0,
$1,889 and $0) 3,508 - 3,508 -
-------- -------- -------- --------
Gain (loss) from discontinued operations,
net of income taxes $ 3,430 $ (258) $ 3,117 $ (1,780)
======== ======== ======== ========
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Tektronix Third Quarter 2005 Results.../9
RECONCILIATION OF PRO FORMA MEASURES TO GAAP
Quarter Ended
(In thousands, except per share amounts) February 26, 2005
- --------------------------------------------------- ----------------------------------------------------
Adjustments
------------------------
GAAP Inet Other PRO FORMA
---------- ---------- ---------- ----------
Net sales $ 256,332 - - $ 256,332
Cost of sales 102,946 (4,582) -(A) 98,364
---------- ---------- ---------- ----------
Gross profit 153,386 4,582 - 157,968
Gross margin 59.8% 61.6%
Research and development expenses 43,380 - - 43,380
Selling, general and administrative expenses 78,750 - - 78,750
Business realignment costs 382 - (382) -
Acquisition related costs (credits):
Write-off of IPR&D 42 (42) - -
Amortization of acquired intangible assets 1,288 (1,288) - -
Amortization of stock option compensation 307 (307) - -
Transition expenses 953 (496) (457) -
Net gain on assets held for sale - - - -
---------- ---------- ---------- ----------
Total acquisition related costs (credits) 2,590 (2,133) (457) -
Loss on disposition of assets 754 - - 754
---------- ---------- ---------- ----------
Operating income 27,530 6,715 839 35,084
Operating margin 10.7% 13.7%
Other income, net 5,107 - - 5,107
---------- ---------- ---------- ----------
Earnings before taxes 32,637 6,715 839 40,191
Income tax expense 9,246 2,557 252 12,055
---------- ---------- ---------- ----------
Net earnings from continuing operations $ 23,391 4,158 587 $ 28,136
Earnings per share - diluted $ 0.26 $ 0.31
Weighted average shares outstanding - diluted 90,690 90,690
Quarter Ended
(In thousands, except per share amounts) February 28, 2004
- --------------------------------------------------- ----------------------------------------
Adjustments
------------
GAAP PRO FORMA
---------- ----------
Net sales $ 243,506 - $ 243,506
Cost of sales 102,326 - 102,326
---------- ----------- ----------
Gross profit 141,180 - 141,180
Gross margin 58.0% 58.0%
Research and development expenses 32,772 - 32,772
Selling, general and administrative expenses 69,519 - 69,519
Business realignment costs 3,706 (3,706) -
Acquisition related costs (credits):
Write-off of IPR&D - - -
Amortization of acquired intangible assets - - -
Amortization of stock option compensation - - -
Transition expenses 1,228 (1,228) -
Net gain on assets held for sale (19,262) 19,262 (C) -
---------- ----------- ----------
Total acquisition related costs (credits) (18,034) 18,034 -
Loss on disposition of assets 741 - 741
---------- ----------- ----------
Operating income 52,476 (14,328) 38,148
Operating margin 21.6% 15.7%
Other income, net 12,097 (7,293)(D) 4,804
---------- ----------- ----------
Earnings before taxes 64,573 (21,621) 42,952
Income tax expense 20,702 (6,846) 13,856
---------- ----------- ----------
Net earnings from continuing operations $ 43,871 (14,775) $ 29,096
Earnings per share - diluted $ 0.50 $ 0.33
Weighted average shares outstanding - diluted 87,682 87,682
Three Quarters Ended
(In thousands, except per share amounts) February 26, 2005
- --------------------------------------------------- -------------------------------------------------
Adjustments
-----------------------
GAAP Inet Other PRO FORMA
---------- ---------- ---------- ----------
Net sales $ 773,625 - - $ 773,625
Cost of sales 311,397 (9,217) -(A) 302,180
---------- ---------- ---------- ----------
Gross profit 462,228 9,217 - 471,445
Gross margin 59.7% 60.9%
Research and development expenses 118,837 - - 118,837
Selling, general and administrative expenses 220,136 - - 220,136
Business realignment costs 2,665 - (2,665) -
Acquisition related costs (credits):
Write-off of IPR&D 32,237 (32,237) - -
Amortization of acquired intangible assets 2,134 (2,134) - -
Amortization of stock option compensation 511 (511) - -
Transition expenses 3,436 (1,539) (1,897) -
Net gain on assets held for sale - - - -
Japan pension gain - - - -
---------- ---------- ---------- ----------
Total acquisition related costs (credits) 38,318 (36,421) (1,897) -
Loss (gain) on disposition of assets (1,080) - 2,161(B) 1,081
---------- ---------- ---------- ----------
Operating income 83,352 45,638 2,401 131,391
Operating margin 10.8% 17.0%
Other income, net 10,764 - - 10,764
---------- ---------- ---------- ----------
Earnings before taxes 94,116 45,638 2,401 142,155
Income tax expense 36,838 5,066 721 42,625
---------- ---------- ---------- ----------
Net earnings from continuing operations $ 57,278 40,572 1,680 $ 99,530
Earnings per share - diluted $ 0.65 $ 1.13
Weighted average shares outstanding - diluted 88,236 88,236
Three Quarters Ended
(In thousands, except per share amounts) February 28, 2004
- --------------------------------------------------- ----------------------------------------
Adjustments
-----------
GAAP PRO FORMA
---------- ----------
Net sales $ 662,865 - $ 662,865
Cost of sales 290,740 - 290,740
---------- ----------- ----------
Gross profit 372,125 - 372,125
Gross margin 56.1% 56.1%
Research and development expenses 93,277 - 93,277
Selling, general and administrative expenses 200,353 - 200,353
Business realignment costs 20,050 (20,050) -
Acquisition related costs (credits):
Write-off of IPR&D - - -
Amortization of acquired intangible assets - - -
Amortization of stock option compensation - - -
Transition expenses 3,604 (3,604) -
Net gain on assets held for sale (19,262) 19,262 (C) -
Japan pension gain (36,741) 36,741 -
---------- ----------- ----------
Total acquisition related costs (credits) (52,399) 52,399 -
Loss (gain) on disposition of assets 741 - 741
---------- ----------- ----------
Operating income 110,103 (32,349) 77,754
Operating margin 16.6% 11.7%
Other income, net 20,977 (7,293)(D) 13,684
---------- ----------- ----------
Earnings before taxes 131,080 (39,642) 91,438
Income tax expense 39,324 (11,893) 27,431
---------- ----------- ----------
Net earnings from continuing operations $ 91,756 (27,749) $ 64,007
Earnings per share - diluted $ 1.06 $ 0.74
Weighted average shares outstanding - diluted 86,676 86,676
(A) Amortization of acquired intangible assets and non-cash expense for Inet
inventory step up adjustment to fair value
(B) Gain on sale of Nevada City property
(C) Gain on sale of Japan headquarters building
(D) Gain on sale of Merix Corporation common stock
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