Tektronix Reports Results for the Fourth Quarter and Full Year of Fiscal 2006

BEAVERTON, Ore., June 22 /PRNewswire-FirstCall/ -- Tektronix, Inc. today reported net sales of $289.3 million and net earnings from continuing operations of $31.9 million or $0.37 per share for the fourth quarter ended May 27, 2006. This compares with net sales of $261.0 million and net earnings from continuing operations of $21.6 million or $0.25 per share for the same period last year. Excluding acquisition-related costs, business realignment and one-time items, net earnings from continuing operations were $36.4 million or $0.43 per share for the fourth quarter as compared with $27.4 million or $0.31 per share for the same period last year.

"This was an excellent quarter for us. Orders, sales and earnings were at the highest level we've seen this fiscal year reflecting the success of our new products and our continued ability to win in a strong telecommunications market," said Rick Wills, Tektronix Chairman and CEO.

"Orders in the fourth quarter grew over 21% as compared to the same quarter last year, and all regions showed double-digit orders growth," continued Wills. "Instruments business orders grew 7% driven by success from new product introductions. Within the Instruments business, orders for our general purpose test products grew 11% offset modestly by video products. Communications business orders grew a record 65% this quarter with large wins in all regions. We continue to see success with our very strong product offerings aimed at next-generation networks."

"During the quarter, we continued to introduce award winning products. We announced a family of new multi-format video waveform monitors which enable migration to high-definition video. We also introduced Cerify, the first automated system for testing file-based compressed digital video content. This product won the Pick Hit Award from Broadcast Engineering magazine at the National Association of Broadcasters show," Wills continued. "And, just after the close of the quarter, we announced that the DPO7000 oscilloscopes that we introduced last quarter won the Ultimate Product Award from EE Times and eeProductCenter for leading performance and innovation."

Full Year Results

For the fiscal year ended May 27, 2006, Tektronix reported net sales of $1.040 billion and net earnings from continuing operations of $90.9 million or $1.08 per share. This compares with net sales of $1.035 billion and net earnings from continuing operations of $78.9 million or $0.89 per share for the prior fiscal year. Excluding acquisition-related costs, business realignment costs and one-time items, net earnings from continuing operations were $114.6 million or $1.36 per share for the fiscal year, as compared with $126.9 million or $1.44 per share for the prior fiscal year.

"The fiscal year started slowly, with our first quarter reflecting market softness. However, every subsequent quarter showed sequential growth in orders, sales and earnings. Orders for the fiscal year were the strongest we've seen in five years. We saw strong double-digit orders growth from both of our new product areas -- with signal sources and spectrum analyzers growing approximately 30% each. And, our Communications business finished strong with 54% orders growth for the year."

"Looking forward, we remain confident in our strategy. We had a significant number of major new product introductions last year and are planning an even greater number this year. In addition, we continue to be optimistic about our ability to capitalize on the significant investment being made by network operators in next-generation telecommunications networks," concluded Wills.

First Quarter Guidance

For the first quarter of fiscal 2007, the company expects net sales to be approximately $255 - $265 million. Earnings per share from continuing operations are expected to be between $0.31 and $0.34 before mostly non-cash acquisition-related costs, business realignment costs, one-time items and share-based compensation expense.

Recent highlights include the following: New product introductions, including: -- A new family of multi-format video waveform monitors that offer customers the widest range of product configurations and upgrades, and industry-first capabilities that enable the seamless migration from composite video configurations to complete HD/SD/composite solutions. -- Cerify, the world's first fully-automated system capable of verifying the quality of file-based, compressed digital video and audio prior to transmission or use, ensuring higher levels of end-customer viewing satisfaction. Tektronix also announced the availability of integrated content storage and quality control using Tektronix Cerify and Omneon media servers to provide customers with a QC system that interoperates seamlessly within the broadcast chain. -- The addition of the RF Scout Interference Hunter to the NetTek portfolio, an industry-first handheld platform that provides all of the tools necessary to hunt for RF interference and check signal quality both in-building and outdoors for wireless network optimization. -- The introduction of RSAVu offline-analysis software that enables customers to acquire signals using their Tektronix Real-Time Spectrum Analyzer (RSA) and then analyze the captured data in an off-line PC. The PC-based RSAVu software can provide the same analysis capabilities that exist on the RSA. -- A joint effort between Tektronix and TZero, the only IC supplier that enables broadcast quality video over wireless networks, to establish a Gold standard for ultra wideband testing. Customer wins announced during the quarter, including: -- Sony's adoption of Tektronix' Real-Time Spectrum Analyzers for measuring and analyzing RFID communication conditions between contactless wireless cards equipped with Sony FeliCa IC card technology which will be used as a form of e-money. -- China's Chung Huang University Engineering College's choice of Tektronix' AFG3000 arbitrary/function generators for deployment across four labs to facilitate the delivery of courses including electronics, microprocessor, VLSI and FPGA, and to assist students in their research projects. -- Danish Broadcasting Corporation's installation of Tektronix' video equipment to provide cost-effective and easy-to-use monitoring solutions for advanced HD/SD testing for use in their new broadcast center. -- Vodafone Germany's purchase of products from Tektronix' Unified Assurance suite for its network-wide, real-time GPRS and UMTS monitoring system which provides end-to-end network and service monitoring independent of network infrastructure and underlying technologies. -- Vodafone Italia's decision to deploy Tektronix' Unified Assurance solution, including the industry leading GeoProbe, APM and Orion products, to proactively monitor the quantity and quality of data services delivered to its customers roaming abroad and to visitors from other countries who want to access Vodafone Italia's high-quality data services. -- BellSouth's decision to deploy the GeoProbe Voice-over-IP (VoIP) monitoring solution from Tektronix' Unified Assurance suite throughout its IP network. GeoProbe will provide BellSouth with end-to-end performance monitoring that enables rapid troubleshooting as well as identification of service degradations and network problems that may impact VoIP service quality. Product awards, including: -- The NAB Pick Hit Award from Broadcast Engineering magazine for Tektronix' Cerify. -- The Ultimate Product 2.4 from the editors and readers of EE Times and eeProductCenter for the DPO7000 family of oscilloscopes. The award was given for leading performance and innovation in the Test & Measurement category.

In addition, today Tektronix declared a quarterly cash dividend of $0.06 per share on the outstanding common shares of the Company, payable on July 24, 2006 to shareholders of record as of the close of market on July 7, 2006.

Tektronix will be discussing its fourth 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 http://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. Some of these items pertain to events that have not yet occurred and are not possible to ascertain with a reasonable degree of accuracy. Therefore, no reconciliation to GAAP for projected amounts is provided. In addition, in line with common industry practice and in order to enable comparability with other technology companies, guidance for pro forma results of operations excludes the effects of share-based compensation under FAS123R. 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; customer acceptance of large orders with delayed acceptance criteria; 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 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; and the ability to develop effective sales channels. 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 leading test, measurement, and monitoring company providing measurement solutions to the communications, computer, and semiconductor industries worldwide. With over 60 years of experience, Tektronix provides general purpose test and measurement, video test and monitoring and communications network management and diagnostic products that enable 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 http://www.tektronix.com/.

Consolidated Statements of Operations Quarter Ended Fiscal Year Ended May 27, May 28, May 27, May 28, (In thousands, except per 2006 2005 2006 2005 share amounts) Net sales $289,309 $261,029 $1,039,870 $1,034,654 Cost of sales 115,151 104,481 418,428 415,878 Gross profit 174,158 156,548 621,442 618,776 Research and development expenses 49,570 44,637 183,414 163,474 Selling, general and administrative expenses 84,329 80,789 302,344 300,925 Business realignment costs 2,304 435 9,847 3,100 Acquisition related costs and amortization 1,618 3,235 8,567 41,553 Gain on disposition of assets, net (1,514) (620) (1,433) (1,700) Operating income 37,851 28,072 118,703 111,424 Interest income 4,224 3,980 13,585 17,144 Interest expense (144) (289) (483) (820) Other non-operating income (expense), net 535 (1,695) (3,377) (3,564) Earnings before taxes 42,466 30,068 128,428 124,184 Income tax expense 10,558 8,495 37,536 45,333 Net earnings from continuing operations 31,908 21,573 90,892 78,851 Gain (loss) from discontinued operations, net of income taxes (47) (372) 1,463 2,745 Net earnings $31,861 $21,201 $92,355 $81,596 Earnings per share: Continuing operations - basic $0.38 $0.25 $1.09 $0.91 Continuing operations - diluted $0.37 $0.25 $1.08 $0.89 Discontinued operations - basic $-- $-- $0.02 $0.03 Discontinued operations - diluted $-- $-- $0.02 $0.03 Net earnings - basic $0.38 $0.24 $1.11 $0.94 Net earnings - diluted $0.37 $0.24 $1.09 $0.93 Weighted average shares outstanding: Basic 83,681 87,103 83,323 86,803 Diluted 85,365 87,840 84,381 88,151 Cash dividend declared per share $0.06 $0.06 $0.24 $0.22 Reconciliation of Pro Forma Measures to GAAP Quarter Ended (In thousands, except per share May 27, 2006 amounts) Adjustments GAAP Inet Other Pro Forma Net sales $289,309 -- -- $289,309 Cost of sales 115,151 (4,624) (157)(A) 110,370 Gross profit 174,158 4,624 157 178,939 Gross margin 60.2% 61.9% Research and development expenses 49,570 -- -- 49,570 Selling, general and administrative expenses 84,329 -- -- 84,329 Business realignment costs 2,304 -- (2,304) -- Acquisition related costs: Write-off of IPR&D -- -- -- -- Amortization of acquired intangible assets 1,309 (1,279) (30) -- Amortization of stock option compensation 82 (82) -- -- Transition expenses 227 (131) (96) -- Total acquisition related costs 1,618 (1,492) (126) -- Loss (gain) on disposition of assets (1,514) -- 1,635 (B) 121 Operating income 37,851 6,116 952 44,919 Operating margin 13.1% 15.5% Other income, net 4,615 -- -- 4,615 Earnings before taxes 42,466 6,116 952 49,534 Income tax expense 10,558 2,237 291 13,086 Net earnings from continuing operations $31,908 3,879 661 $36,448 Earnings per share - diluted $0.37 $0.43 Weighted average shares outstanding - diluted 85,365 85,365 Quarter Ended (In thousands, except per share May 28, 2005 amounts) Adjustments GAAP Inet Other Pro Forma Net sales $261,029 -- -- $261,029 Cost of sales 104,481 (5,557) -- (A) 98,924 Gross profit 156,548 5,557 -- 162,105 Gross margin 60.0% 62.1% Research and development expenses 44,637 -- -- 44,637 Selling, general and administrative expenses 80,789 -- -- 80,789 Business realignment costs 435 (328) (107) -- Acquisition related costs: Write-off of IPR&D -- -- -- -- Amortization of acquired intangible assets 1,280 (1,280) -- -- Amortization of stock option compensation 274 (274) -- -- Transition expenses 1,681 (685) (996) -- Total acquisition related costs 3,235 (2,239) (996) -- Loss (gain) on disposition of assets (620) -- -- (620) Operating income 28,072 8,124 1,103 37,299 Operating margin 10.8% 14.3% Other income, net 1,996 -- -- 1,996 Earnings before taxes 30,068 8,124 1,103 39,295 Income tax expense 8,495 3,099 331 11,925 Net earnings from continuing operations $21,573 5,025 772 $27,370 Earnings per share - diluted $0.25 $0.31 Weighted average shares outstanding - diluted 87,840 87,840 Fiscal Year Ended May 27, 2006 Adjustments GAAP Inet Other Pro Forma Net sales $1,039,870 -- -- $1,039,870 Cost of sales 418,428 (18,948) (432)(A) 399,048 Gross profit 621,442 18,948 432 640,822 Gross margin 59.8% 61.6% Research and development expenses 183,414 -- -- 183,414 Selling, general and administrative expenses 302,344 -- -- 302,344 Business realignment costs 9,847 -- (9,847) -- Acquisition related costs: Write-off of IPR&D 365 -- (365) -- Amortization of acquired intangible assets 5,194 (5,117) (77) -- Amortization of stock option compensation 339 (339) -- -- Transition expenses 2,669 (1,955) (714) -- Total acquisition related costs 8,567 (7,411) (1,156) -- Loss (gain) on disposition of assets (1,433) -- 1,635 (B) 202 Operating income 118,703 26,359 9,800 154,862 Operating margin 11.4% 14.9% Other income, net 9,725 -- -- 9,725 Earnings before taxes 128,428 26,359 9,800 164,587 Income tax expense 37,536 9,597 2,850 49,983 Net earnings from continuing operations $90,892 16,762 6,950 $114,604 Earnings per share - diluted $1.08 $1.36 Weighted average shares outstanding - diluted 84,381 84,381 Fiscal Year Ended May 28, 2005 Adjustments GAAP Inet Other Pro Forma Net sales $1,034,654 -- -- $1,034,654 Cost of sales 415,878 (14,774) -- (A) 401,104 Gross profit 618,776 14,774 -- 633,550 Gross margin 59.8% 61.2% Research and development expenses 163,474 -- -- 163,474 Selling, general and administrative expenses 300,925 -- -- 300,925 Business realignment costs 3,100 (328) (2,772) -- Acquisition related costs: Write-off of IPR&D 32,237 (32,237) -- -- Amortization of acquired intangible assets 3,414 (3,414) -- -- Amortization of stock option compensation 785 (785) -- -- Transition expenses 5,117 (2,224) (2,893) -- Total acquisition related costs 41,553 (38,660) (2,893) -- Loss (gain) on disposition of assets (1,700) -- 2,161 (B) 461 Operating income 111,424 53,762 3,504 168,690 Operating margin 10.8% 16.3% Other income, net 12,760 -- -- 12,760 Earnings before taxes 124,184 53,762 3,504 181,450 Income tax expense 45,333 8,165 1,052 54,550 Net earnings from continuing operations $78,851 45,597 2,452 $126,900 Earnings per share - diluted $0.89 $1.44 Weighted average shares outstanding - diluted 88,151 88,151 (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 Consolidated Balance Sheets (In thousands) May 27, 2006 May 28, 2005 ASSETS Current assets: Cash and cash equivalents $215,587 $131,640 Short-term marketable investments 121,346 120,881 Trade accounts receivable, net 174,599 155,332 Inventories 156,351 131,096 Other current assets 69,002 80,177 Total current assets 736,885 619,126 Property, plant and equipment, net 127,510 120,546 Long-term marketable investments 103,839 226,892 Deferred tax assets -- 56,560 Goodwill, net 307,189 301,934 Pension asset 239,128 868 Other long-term assets 119,539 134,417 Total assets $1,634,090 $1,460,343 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $133,323 $115,058 Accrued compensation 71,718 78,938 Deferred revenue 66,677 57,509 Total current liabilities 271,718 251,505 Deferred income taxes 65,935 -- Other long-term liabilities 108,868 223,015 Shareholders' equity: Common stock 540,718 501,886 Retained earnings 620,465 639,720 Accumulated other comprehensive income (loss) 26,386 (155,783) Total shareholders' equity 1,187,569 985,823 Total liabilities and shareholders' equity $1,634,090 $1,460,343 Shares outstanding 83,719 85,144 Selected Additional Financial Data Quarter Ended Fiscal Year Ended (Dollars in % May 27, May 28, % May 27, May 28, thousands) Growth 2006 2005 Growth 2006 2005 Product Orders Data: Orders 21% $307,604 $253,365 13% $1,066,176 $945,308 U.S. 19% 108,333 90,812 12% 358,988 319,136 International 23% 199,271 162,553 13% 707,188 626,172 Instruments Business 7% 203,472 190,147 1% 746,512 737,268 Communications Business 65% 104,132 63,218 54% 319,664 208,040 Book to Bill Ratio Calculation: Product Orders $307,604 $253,365 $1,066,176 $945,308 Product Sales $275,251 $247,376 $982,797 $972,910 Book to Bill ratio 1.12 1.02 1.08 0.97 Income Statement Items as a Percentage of Net Sales: Cost of sales 40% 40% 40% 40% Research and development expenses 17% 17% 18% 16% Selling, general and administrative expenses 29% 31% 29% 29% Business realignment costs 1% 0% 1% 0% Acquisition related costs and amortization 1% 1% 1% 4% Gain on disposition of assets, net (1%) 0% 0% 0% Operating income 13% 11% 11% 11% Capital Expenditures and Depreciation: Capital expenditures $6,834 $11,324 $36,283 $32,464 Depreciation and amortization expense $7,128 $7,644 $27,977 $29,157 Balance Sheet: Fourth Third Quarter Quarter Ended Ended Year Ended May 27, Feb. 25, May 28, 2006 2006 2005 Cash and Marketable Investments: Cash and cash equivalents $215,587 $177,512 $131,640 Short-term marketable investments 121,346 94,543 120,881 Long-term marketable investments 103,839 115,699 226,892 Cash and Marketable Investments $440,772 $387,754 $479,413 Accounts receivable as a percentage of net sales 14.3% 15.4% 13.9% Days sales outstanding 54.9 58.3 54.6 Countback days sales outstanding 46.6 56.7 51.8 Inventory as a percentage of net sales 12.4% 12.9% 11.3% Inventory turns 3.2 3.0 3.6 Discontinued Operations Quarter Ended Fiscal Year Ended May 27, May 28, May 27, May 28, (In thousands) 2006 2005 2006 2005 Loss on sale of VideoTele.com (less applicable income tax benefit of $0, $1, $1 and $13) $-- $(1) $(3) $(23) Gain (loss) on sale of optical parametric test business (less applicable income tax benefit (expense) of $41, $18, ($338) and $113) (76) (36) 629 (212) Gain (loss) on sale of Gage (less applicable income tax benefit (expense) of ($2), $79, ($408) and $182) 3 (144) 759 (337) Gain (loss) on sale of Color Printing and Imaging (less applicable income tax benefit (expense) of ($14), $103, ($42) and ($1,786)) 26 (191) 78 3,317 Gain (loss) from discontinued operations, net of income taxes $(47) $(372) $1,463 $2,745