Tektronix Reports Results for the First Quarter of Fiscal 2006
PRNewswire-FirstCall
BEAVERTON, Ore.

Tektronix, Inc. today reported net sales of $235.1 million and net earnings from continuing operations of $14.2 million or $0.17 per share for the first quarter ended August 27, 2005. This compares with net sales of $250.5 million and net earnings from continuing operations of $36.5 million or $0.43 per share for the same period last year. Excluding acquisition-related costs, business realignment costs and one-time items, net earnings from continuing operations were $21.3 million or $0.25 per share for the first quarter ended August 27, 2005, as compared with $36.9 million or $0.43 per share for the same period last year.

"We are very satisfied with our overall performance this quarter," said Rick Wills, Tektronix Chairman and CEO. "We managed through a comparatively tough period, and delivered earnings which were in line with our expectations. In addition, we were encouraged by a pick up in demand in August after a slower start at the beginning of the quarter."

"The Inet acquisition continued to yield solid results. We had a number of significant customer wins in the quarter including orders for network management systems for UMTS, GPRS and VoIP, which contributed to the strongest order performance to date for this business. In addition, we recorded double digit, year-over-year growth in our two newer product areas -- signal sources and real-time spectrum analyzers -- fueled by strong new products. Initial orders for our AFG3000 family of signal sources, which began shipping late in the quarter, exceeded our expectations. These transformational products, featuring our innovative and powerful 'Generator on a Chip' based architecture, offer unprecedented performance and ease of use at a very attractive price. Additionally, we have continued to see good customer demand for our recently introduced TDS6000C, the world's fastest real-time oscilloscope," said Wills.

For the second quarter of fiscal 2006, the company expects net sales to be approximately $240 - $250 million. Earnings per share from continuing operations are expected to be between $0.25 and $0.29 before mostly non-cash costs related to the acquisition of Inet Technologies, business realignment costs, and other one-time items.

"As we said last quarter, assuming stable markets, normal seasonality and the strength of new products in the second half, we expect the first quarter to represent the low point for the year in terms of both sales and earnings per share," said Wills.

"We are encouraged by the continued success from the Inet acquisition and from recently introduced products, as well as the continued progress we are making on the pipeline of products set to introduce over the next few quarters," concluded Wills.

  Recent highlights include the following:

   *    The availability of the AFG3000 family of signal sources, six models
        whose ease of use and innovative performance establish a new
        benchmark for this class of product.
   *    An award by Beijing International Radio, Film and Television
        Equipment Exhibition (BIRTV), the region's largest exhibition for
        radio and TV service providers and equipment manufacturers, for the
        "Outstanding Product" for the MTS430 MPEG Analyzer. The submission
        was judged by an independent panel of China's foremost experts in
        broadcast technology and presented at BIRTV 2005 in Beijing, China.
   *    The addition of the High-Speed Downlink Packet Access software
        option to the market leading NetTek™ Wireless RF Field Tester,
        making Tektronix the first manufacturer to provide HSDPA test and
        measurement capabilities in a handheld form factor.
   *    The introduction of a new radio frequency identification (RFID)
        software measurement suite for WCA200A, RSA3300A and RSA3408A Real-
        Time Spectrum Analyzers which continues to advance the capabilities
        of Tektronix' real-time spectrum analyzers by adding new
        measurements and troubleshooting features specifically designed to
        help the RFID engineer.
   *    The expansion of the TDS1000 and TDS2000 series, the world's best
        selling line of oscilloscopes in units, by adding two new models -
        one of which, the TDS1001, is the lowest priced digital oscilloscope
        available from any major vendor.
   *    Significant wins from major network operators around the world for
        network management systems for UMTS, GPRS and VoIP, as well as
        service assurance and customer assurance software solutions.
   *    The appointment of Rich McBee to Senior Vice President of the
        Communications Business. McBee, a proven senior executive at
        Tektronix, has held a broad range of positions and has experience
        running a significant portion of the Tektronix organization.

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 24, 2005 to shareholders of record as of the close of market on October 7, 2005.

Tektronix will hold its Annual Meeting of Shareholders on Thursday, September 22, 2005, at 10:00 a.m. Central Daylight Time (CDT) at the Hotel Crescent Court, 400 Crescent Court, Dallas, Texas.

Tektronix will be discussing its first quarter results and future guidance on a conference call today, beginning at 1:30 p.m. Pacific Daylight Time (PDT). 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 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. 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 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; 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; 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, 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; 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 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.

                  Consolidated Statements of Operations

                                                    Quarter Ended
                                              August 27,       August 28,
  (In thousands, except per share amounts)       2005             2004

  Net sales                                    $235,060         $250,465

  Cost of sales                                  99,103          101,946

      Gross profit                              135,957          148,519

  Research and development expenses              43,605           33,579

  Selling, general and administrative expenses   68,565           65,066

  Business realignment costs                      2,481            2,039

  Acquisition related costs and amortization      3,436              787

  Loss (gain) on disposition of assets, net           4           (1,891)

      Operating income                           17,866           48,939

  Interest income                                 3,092            5,462

  Interest expense                                  (97)             (83)

  Other non-operating expense, net                 (986)          (2,224)

      Earnings before taxes                      19,875           52,094

  Income tax expense                              5,707           15,628

      Net earnings from continuing operations    14,168           36,466

  Loss from discontinued operations,
   net of income taxes                              (82)             (58)


  Net earnings                                  $14,086          $36,408

  Earnings per share:

      Continuing operations - basic               $0.17            $0.44

      Continuing operations - diluted             $0.17            $0.43

      Discontinued operations - basic               $--              $--

      Discontinued operations - diluted             $--              $--

      Net earnings - basic                        $0.17            $0.43

      Net earnings - diluted                      $0.17            $0.43

  Weighted average shares outstanding:
      Basic                                      84,603           83,782

      Diluted                                    85,297           85,211

  Cash dividend declared per share                $0.06            $0.04


                         Consolidated Balance Sheets

  (In thousands)                            August 27, 2005     May 28, 2005

  ASSETS
    Current assets:
      Cash and cash equivalents                 $95,002           $131,640
      Short-term marketable investments         111,477            120,881
      Trade accounts receivable, net            161,346            155,332
      Inventories                               130,544            131,096
      Other current assets                       86,657             80,177
        Total current assets                    585,026            619,126

    Property, plant and equipment, net          122,062            120,546
    Long-term marketable investments            162,009            226,892
    Deferred tax assets                          53,340             56,560
    Goodwill, net                               303,166            301,934
    Other long-term assets                      131,099            135,285
        Total assets                         $1,356,702         $1,460,343

  LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities:
      Accounts payable and accrued
       liabilities                             $108,582           $115,058
      Accrued compensation                       55,411             78,938
      Deferred revenue                           54,639             57,509
        Total current liabilities               218,632            251,505

    Long-term liabilities                       189,855            223,015

  Shareholders' equity:
    Common stock                                496,848            501,886
    Retained earnings                           608,987            639,720
    Accumulated other comprehensive loss       (157,620)          (155,783)
      Total shareholders' equity                948,215            985,823
      Total liabilities and
       shareholders' equity                  $1,356,702         $1,460,343

    Shares outstanding                           83,360             85,144


  Selected Additional Financial Data
                                                        Quarter Ended
  (Dollars in thousands,                        %    August 27,  August 28,
  except per share amounts)                   Growth    2005       2004

  Product Orders and Sales Data:

  Orders                                         13%  $230,434  $204,287
    U.S.                                         19%    76,428    64,251
    International                                10%   154,006   140,036

    Total - excluding Rohde and Schwarz
     & Inet                                      (9%)  185,613   204,380

  Net Sales                                      (6%) $235,060  $250,465
    U.S.                                        (20%)   84,403   105,764
    International                                 4%   150,657   144,701

    Total - excluding Rohde and Schwarz & Inet  (11%)  203,265   229,267


  Book to Bill Ratio Calculation:

  Product Orders                                      $230,434  $204,287
  Product Sales                                       $221,835  $231,500

  Book to Bill ratio                                      1.04      0.88


  Reconciliation of Pro Forma Measures to GAAP:

  Net earnings from continuing operations - GAAP       $14,168   $36,466

  Effect of:
      Acquisition related items reported
       in cost of sales                                  5,112        --
      Acquisition related items reported
       in operating expenses                             3,436       787
      Business realignment costs                         2,481     2,039
      Gain on sale of Nevada City property                  --    (2,161)
      Tax effect of above items                         (3,943)     (200)

  Net earnings from continuing operations
   - Pro Forma                                         $21,254   $36,931

  Diluted earnings per share - Pro Forma                 $0.25     $0.43


  Income Statement Items as a Percentage
   of Net Sales:

  Cost of sales                                            42%       41%
  Research and development expenses                        19%       13%
  Selling, general and administrative expenses             29%       26%
  Business realignment costs                                1%        1%
  Acquisition related costs and amortization                1%        0%
  Loss (gain) on disposition of assets, net                 0%       (1%)
  Operating income                                          8%       20%


  Capital Expenditures and Depreciation:

  Capital expenditures                                  $8,744    $7,506
  Depreciation and amortization expense                 $7,006    $6,678


                                                      Quarter
                                                       Ended    Year Ended
                                                     August 27,   May 28,
                                                        2005       2005

  Balance Sheet:

  Cash and Marketable Investments:
     Cash and cash equivalents                         $95,002  $131,640
     Short-term marketable investments                 111,477   120,881
     Long-term marketable investments                  162,009   226,892
       Cash and Marketable Investments                $368,488  $479,413


  Accounts receivable as a percentage of net sales       16.8%     13.9%
  Days sales outstanding                                  62.5      54.7
  Average days sales outstanding                          61.3      50.7

  Inventory as a percentage of net sales                 13.9%     11.3%
  Inventory turns                                          3.0       3.6


                         Discontinued Operations

                                                      Quarter Ended
                                                 August 27,       August 28,
  (In thousands)                                   2005              2004

  Loss on sale of VideoTele.com (less applicable
   income tax benefit of $1 and $1)                 $(1)              $(1)

  Loss on sale of optical parametric test business
   (less applicable income tax benefit of $36
   and $40)                                         (68)              (72)

  Gain (loss) on sale of Gage (less applicable
   income tax benefit (expense) of $6 and $(8))     (11)               15

  Loss on sale of Color Printing and Imaging
   (less applicable income tax benefit of
   $1 and $0)                                        (2)               --


  Loss from discontinued operations, net of
   income taxes                                    $(82)             $(58)


  Reconciliation of Pro Forma Measures to GAAP


  (In thousands, except per                     Quarter Ended
  share amounts)                               August 27, 2005

                                                Adjustments
                                    GAAP     Inet       Other     Pro Forma

  Net sales                       $235,060      --          --     $235,060
  Cost of sales                     99,103  (5,073)(A)     (39)      93,991
     Gross profit                  135,957   5,073          39      141,069
     Gross margin                    57.8%                            60.0%
  Research and development
   expenses                         43,605      --          --       43,605
  Selling, general and
   administrative expenses          68,565      --          --       68,565
  Business realignment costs         2,481      --      (2,481)          --

  Acquisition related costs:
      Write-off of IPR&D               365      --        (365)          --
      Amortization of acquired
       intangible assets             1,284  (1,279)         (5)          --
      Amortization of stock
       option compensation              90     (90)         --           --
      Transition expenses            1,697  (1,030)       (667)          --
        Total acquisition related
         costs                       3,436  (2,399)     (1,037)          --

  Loss (gain) on disposition of
   assets                                4      --          --            4
      Operating income              17,866   7,472       3,557       28,895
      Operating margin                7.6%                            12.3%
  Other income, net                  2,009      --          --        2,009
      Earnings before taxes         19,875   7,472       3,557       30,904
  Income tax expense                 5,707   2,856       1,087        9,650
     Net earnings from continuing
      operations                   $14,168   4,616       2,470      $21,254
  Earnings per share - diluted       $0.17                            $0.25
  Weighted average shares
   outstanding - diluted            85,297                           85,297


  (In thousands, except per share                 Quarter Ended
  amounts)                                       August 28, 2004
                                                   Adjustments
                                          GAAP                   Pro Forma

  Net sales                              $250,465         --      $250,465
  Cost of sales                           101,946         --       101,946
     Gross profit                         148,519         --       148,519
     Gross margin                           59.3%                    59.3%
  Research and development expenses        33,579         --        33,579
  Selling, general and administrative
   expenses                                65,066         --        65,066
  Business realignment costs                2,039     (2,039)           --

  Acquisition related costs:
       Write-off of IPR&D                      --         --            --
       Amortization of acquired
        intangible assets                      --         --            --
       Amortization of stock option
        compensation                           --         --            --
       Transition expenses                    787       (787)           --
         Total acquisition related
          costs                               787       (787)           --

  Loss (gain) on disposition of assets     (1,891)     2,161 (B)       270
      Operating income                     48,939        665        49,604
      Operating margin                      19.5%                    19.8%
  Other income, net                         3,155                    3,155
      Earnings before taxes                52,094        665        52,759
  Income tax expense                       15,628        200        15,828
     Net earnings from continuing
      operations                          $36,466        465       $36,931
  Earnings per share - diluted              $0.43                    $0.43
  Weighted average shares outstanding -
   diluted                                 85,211                   85,211


  (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

SOURCE: Tektronix, Inc.

CONTACT: media, Alisha Goff, +1-503-627-7075, or
alisha.goff@tektronix.com, or analysts, Paul Oldham, +1-503-627-4027, or
paul.r.oldham@tektronix.com, both of Tektronix, Inc.


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