Tektronix Reports Results for the Fourth Quarter and Full Year of Fiscal 2007

BEAVERTON, Ore., June 21 /PRNewswire-FirstCall/ -- Tektronix, Inc. today reported net sales of $298.5 million and net earnings from continuing operations of $28.0 million or $0.35 per share for the fourth quarter ended May 26, 2007. This compares with net sales of $289.3 million and net earnings from continuing operations of $31.9 million or $0.37 per share for the same period last year. Excluding acquisition-related costs, business realignment costs, share-based compensation, and one-time items, non-GAAP net earnings from continuing operations were $35.6 million or $0.45 per share for the fourth quarter as compared with $36.4 million or $0.43 per share for the same period last year.

"Sales were up 3% over last year and were our highest in six years. Gross margins were strong and drove our best earnings per share this year," said Rick Wills, Tektronix Chairman and CEO. "Orders were down 7% impacted by a very difficult comparison to last year's fourth quarter."

Instruments business orders were up 3% and sales were up 10% from last year. Orders were strong in all geographies except Japan which declined in the quarter. "Orders were especially good in our two newer product categories -- signal sources, where we successfully launched our new AWG5000 and in spectrum analyzers where demand continues to be exceptionally strong," continued Wills.

Orders in the Communications business were down 26% year-over-year although they improved 17% sequentially. "Orders were again impacted by continued weakness in the overall market and by a difficult comparison to this quarter last year where we had several large strategic network management wins," commented Wills. Sales were down 17% over last year on lower orders and a sequential increase in backlog.

"This was another great quarter for new products in the Instruments business with the introduction of the MSO4000, a new family of mixed signal oscilloscopes which represents an expansion of our leading oscilloscope offering and sets a new performance benchmark for this class of product. In addition, we introduced the AWG5000 -- an extension of our recently introduced arbitrary waveform generator platform that uniquely addresses digital RF technologies," said Wills. "In the Communications business, we expanded our VoIP monitoring solution to offer active test capability and the ability for service providers and cable companies to extend VoIP management services to their enterprise customers. In addition, we continued to execute our strategy with the addition of several new customers."

Full Year Results

For the fiscal year ended May 26, 2007, Tektronix reported net sales of $1.105 billion and net earnings from continuing operations of $87.3 million or $1.07 per share. This compares with net sales of $1.040 billion and net earnings from continuing operations of $90.9 million or $1.08 per share for the prior fiscal year. Excluding acquisition-related costs, business realignment costs, share-based compensation, and one-time items, non-GAAP net earnings from continuing operations were $124.9 million or $1.53 per share for the fiscal year, as compared with $114.6 million or $1.36 per share for the prior fiscal year.

"This was a strong year for Tektronix in many ways. Our orders and sales were the highest in six years. Excluding share-based compensation, we saw very good earnings per share growth in fiscal 2007," said Wills. "Orders in our Instruments business were especially strong driven by our general purpose test products which grew over 15% year-over-year, and we introduced an unprecedented number of major products. In our Communications business, we grew sales 4% in a difficult market environment and continued to deliver market-leading solutions. Overall, we continued to take market share in virtually all of our product categories according to preliminary external market data."

"Looking forward, we believe we have the strongest portfolio of products in our history and a pipeline of future products that will continue to build our product leadership position. In spite of continuing challenges in the communications market we are also encouraged by the continued success we are having with communications customers and the market-leading solutions we offer to support the technology transition to next-generation, converged networks. And, we have a balanced focus on growth and on delivering value to our shareholders as we continue to execute on our proven business strategy," concluded Wills.

First Quarter Guidance

For the first quarter of fiscal 2008, the company expects net sales to be approximately $280 - $290 million. Earnings per share from continuing operations are expected to be between $0.36 and $0.40 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: -- The availability of the new MSO4000, an all-in-one tool for embedded design debug which sets a new benchmark for performance and usability for mixed signal oscilloscopes. This new product family combines the capabilities of an advanced real-time oscilloscope and logic analyzer with the breakthrough Wave Inspector waveform search engine into one small and lightweight portable device. -- The introduction of the new AWG5000 Series of Arbitrary Waveform Generators -- the performance leading generator for testing mixed signal devices -- providing engineers with a signal generator for both baseband and IF test needs of digital RF technologies in a single instrument. -- The introduction of the PQA500 Picture Quality Analyzer, a new generation picture quality analysis tool for digital video test. Incorporating eight new Tektronix patents, the PQA500 provides the most complete suite of measurement and diagnostic tools for picture quality analysis including full support of high definition formats. -- The introduction of new capabilities for the MTS400 Series MPEG Test Systems, including enhanced support for IPTV, Video over IP and DTV which will significantly advance the development and deployment of next-generation video networks and services. -- The expansion of the Active Assurance active test solutions to include new active test probes and capabilities that enable service providers and cable companies to deploy, monitor and maintain VoIP services for their enterprise customers. -- The availability of the newest release of the Spectra2 diagnostic test solution with new IMS and converged network enhancements for network operators and equipment manufacturers developing platforms and service offerings for VoIP, IMS and converged networks. -- The enhancement of the RF Scout Interference Hunter tool's applications to include a radio frequency benchmarking capability, enabling competitive measurements of carrier network quality and coverage. Key customer wins, including: -- The decision by Telkomsel to extend its existing Tektronix test infrastructure to include a test platform comprising Tektronix' K1297-G35 and Spectra2 equipment to address mobile network element simulation and load testing before live network deployment. -- The expansion of Tektronix' association with Vodafone Italia to provide the Beamer customer experience management product for the network operator's 2.5G/3G mobile data services. -- The announcement that the China Academy of Broadcasting Science (ABS) standardized on new Tektronix instruments for its Digital TV and high definition standards development, compliance testing and certification. ABS is the broadcasting R&D institution of the Chinese government that defines and develops the nation's technical standards for FM radio, Digital Audio Broadcasting, satellite broadcasting, CATV and HDTV. Product awards, including: -- The RSA6100A Series Real-Time Spectrum Analyzers received the Editor's Choice Award in Electronic Engineering Times-China (EE Times-China) Annual Creativity in Electronics (ACE) Awards for the most significant technical solution in the past 12 months. The editors evaluated 224 products from 83 companies to determine which would best enable China's design engineers to develop advanced electronics. -- The new WFM 7120/7020/6120 video waveform monitors introduced at the National Association of Broadcasters (NAB) tradeshow in April were awarded a 2007 STAR (Super Technology Award Recipient). The award selection is determined by the editorial staff of TV Technology magazine based upon a review of new products at the NAB2007 convention. In addition, -- Tektronix was named a recipient of Intel Corporation's Preferred Quality Supplier (PQS) award for outstanding performance in providing products and services deemed essential to Intel's success. -- Tektronix was named a finalist for the 2007 Vodafone Global Supplier Performance Awards which recognize suppliers who have demonstrated understanding of Vodafone's needs and delivered excellent service and value.

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 30, 2007 to shareholders of record as of the close of market on July 6, 2007.

Tektronix will be discussing its fourth quarter results and future guidance on a conference call today, beginning at 1:30 p.m. Pacific. 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 non-GAAP measures of net earnings and net earnings per share from continuing operations that exclude the effects of acquisition-related costs, business realignment costs, share-based compensation and one-time items. The "Reconciliation of GAAP to Non-GAAP Results" reconciles net earnings in accordance with generally accepted accounting principles (GAAP) to the non-GAAP net earnings. Tektronix presents non-GAAP net earnings to help readers differentiate the results of ongoing activity from results that include acquisition-related costs, business realignment costs, share-based compensation 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 non-GAAP net earnings excludes the effects of share-based compensation under FAS123R. Management of Tektronix uses these non-GAAP measures to evaluate the Company's results of operations and for forecasting purposes, as well as to compensate employees.

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, markets, market position and market growth opportunities, strategic direction 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 and timing of large orders; 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; risks related to the implementation of an upgrade to our information technology systems; 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. The first quarter of fiscal year 2008 includes an extra week.

About Tektronix

Tektronix is a leading supplier of test, measurement, and monitoring products, solutions and services for the communications, computer, and semiconductor industries -- as well as military/aerospace, consumer electronics, education and a broad range of other industries worldwide. With 60 years of experience, Tektronix enables its customers to design, build, deploy, and manage next-generation global communications networks, advanced and pervasive 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 26, May 27, May 26, May 27, (In thousands, except per share amounts) 2007 2006 2007 2006 Net sales $298,514 $289,309 $1,105,172 $1,039,870 Cost of sales 117,102 115,151 444,032 418,428 Gross profit 181,412 174,158 661,140 621,442 Research and development expenses 50,586 49,570 199,889 183,414 Selling, general and administrative expenses 93,379 84,329 341,131 302,344 Business realignment costs 6,340 2,304 9,139 9,847 Acquisition related costs and amortization 1,849 1,618 7,912 8,567 Loss (gain) on disposition of assets, net 551 (1,514) 1,032 (1,433) Operating income 28,707 37,851 102,037 118,703 Interest income 3,746 4,224 16,649 13,585 Interest expense (199) (144) (566) (483) Other non-operating (expense) income, net (1,103) 535 (5,285) (3,377) Earnings before taxes 31,151 42,466 112,835 128,428 Income tax expense 3,112 10,558 25,564 37,536 Net earnings from continuing operations 28,039 31,908 87,271 90,892 (Loss) gain from discontinued operations, net of income taxes (95) (47) 3,137 1,463 Net earnings $27,944 $31,861 $90,408 $92,355 Earnings per share: Continuing operations - basic $0.36 $0.38 $1.09 $1.09 Continuing operations - diluted $0.35 $0.37 $1.07 $1.08 Discontinued operations - basic $-- $-- $0.04 $0.02 Discontinued operations - diluted $-- $-- $0.04 $0.02 Net earnings - basic $0.36 $0.38 $1.13 $1.11 Net earnings - diluted $0.35 $0.37 $1.11 $1.09 Weighted average shares outstanding: Basic 77,569 83,681 80,210 83,323 Diluted 79,011 85,365 81,815 84,381 Cash dividend declared per share $0.06 $0.06 $0.24 $0.24 Consolidated Balance Sheets (In thousands) May 26, 2007 May 27, 2006 ASSETS Current assets: Cash and cash equivalents $95,887 $215,587 Short-term marketable investments 87,873 121,346 Trade accounts receivable, net 189,891 174,599 Inventories 176,267 156,351 Other current assets 72,380 69,002 Total current assets 622,298 736,885 Property, plant and equipment, net 129,914 127,510 Long-term marketable investments 174,307 103,839 Deferred tax assets 21,464 -- Goodwill, net 326,468 307,189 Pension asset 32,115 239,128 Other long-term assets 105,189 119,539 Total assets $1,411,755 $1,634,090 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $137,135 $133,323 Accrued compensation 75,761 71,718 Deferred revenue 89,340 66,677 Total current liabilities 302,236 271,718 Deferred income taxes -- 65,935 Other long-term liabilities 120,002 108,868 Shareholders' equity: Common stock 539,470 540,718 Retained earnings 545,399 620,465 Accumulated other comprehensive (loss) income (95,352) 26,386 Total shareholders' equity 989,517 1,187,569 Total liabilities and shareholders' equity $1,411,755 $1,634,090 Shares outstanding 78,488 83,719 Selected Additional Financial Data Quarter Ended Fiscal Year Ended (In thousands, except per share amounts) % May 26, May 27, % May 26, May 27, Growth 2007 2006 Growth 2007 2006 Orders Data: Orders (7%) $302,700 $323,858 2% $1,157,746 $1,129,963 U.S. (6%) 111,943 118,893 8% 431,533 400,708 International (7%) 190,757 204,965 (0%) 726,213 729,255 Instruments Business 3% 225,865 219,832 11% 903,924 810,942 Communications Business (26%) 76,835 104,026 (20%) 253,822 319,021 Sales Data: Net Sales 3% $298,514 $289,309 6% $1,105,172 $1,039,870 U.S. 35% 127,570 94,204 14% 412,951 361,688 International (12%) 170,944 195,105 2% 692,221 678,182 Instruments Business 10% 238,953 217,339 7% 843,660 788,773 Communications Business (17%) 59,561 71,970 4% 261,512 251,097 Reconciliation of GAAP to Non-GAAP Results: Net earnings - GAAP $27,944 $31,861 $90,408 $92,355 Discontinued operations, net of income taxes 95 47 (3,137) (1,463) Net earnings from continuing operations 28,039 31,908 87,271 90,892 Business realignment costs 6,340 2,304 9,139 9,847 Acquisition related costs 6,984 6,399 28,736 27,947 Gain on sale of Nevada City property -- (1,635) -- (1,635) Share-based compensation costs 6,873 -- 22,722 -- Increase to environmental reserves -- -- 4,763 -- Tax effect of above items (7,666) (2,528) (22,785) (12,447) Tax impact from resolution of IRS Audit (4,956) -- (4,956) -- Net earnings - non- GAAP $35,614 $36,448 $124,890 $114,604 Diluted EPS - non- GAAP $0.45 $0.43 $1.53 $1.36 Income Statement Items as a Percentage of Net Sales: Cost of sales 39% 40% 40% 40% Research and development expenses 17% 17% 18% 18% Selling, general and administrative expenses 31% 29% 31% 29% Business realignment costs 2% 1% 1% 1% Acquisition related costs and amortization 1% 1% 1% 1% Loss (gain) on disposition of assets, net 0% (1%) 0% 0% Operating income 10% 13% 9% 11% Capital Expenditures and Depreciation: Capital expenditures $7,978 $6,834 $30,076 $36,283 Depreciation and amortization expense $7,392 $7,128 $29,074 $27,977 Balance Sheet: Quarter Quarter Quarter Ended Ended Ended May 26, February 24, May 27, 2007 2007 2006 Cash and Marketable Investments: Cash and cash equivalents $95,887 $124,379 $215,587 Short-term marketable investments 87,873 61,632 121,346 Long-term marketable investments 174,307 159,597 103,839 Cash and Marketable Investments $358,067 $345,608 $440,772 Accounts receivable as a percentage of net sales 15.2% 17.4% 14.3% Days sales outstanding 57.9 59.3 54.9 Countback days sales outstanding 47.4 52.6 46.6 Inventory as a percentage of net sales 14.4% 15.5% 12.4% Inventory turns 2.7 2.6 3.2 Discontinued Operations Quarter Ended Fiscal Year Ended May 26, May 27, May 26, May 27, (In thousands) 2007 2006 2007 2006 Loss on sale of VideoTele.com (less applicable income tax benefit of $0, $0, $1 and $1) $-- $-- $(1) $(3) Gain (loss) on sale of optical parametric test business (less applicable income tax benefit (expense) of $1, $41, ($8) and ($338)) (1) (76) 15 629 Gain (loss) on sale of Gage (less applicable income tax benefit (expense) of $0, ($2), $0 and ($408)) -- 3 (1) 759 Gain (loss) on sale of Color Printing and Imaging (less applicable income tax benefit (expense) of ($32), ($14), ($1,764) and ($42)) (94) 26 3,124 78 (Loss) gain from discontinued operations, net of tax $(95) $(47) $3,137 $1,463