Tektronix Reports Results for the Second Quarter of Fiscal 2006

BEAVERTON, Ore., Dec. 15 /PRNewswire-FirstCall/ -- Tektronix, Inc. today reported net sales of $253.4 million and net earnings from continuing operations of $19.9 million or $0.24 per share for the second quarter ended November 26, 2005. This compares with net sales of $266.8 million and a net loss from continuing operations of $2.6 million or $0.03 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 $25.8 million or $0.31 per share for the second quarter ended November 26, 2005, as compared with $34.5 million or $0.39 per share for the same period last year.

"Overall, we are very encouraged by our results in the second quarter," said Rick Wills, Tektronix Chairman and CEO. "Business levels firmed considerably during the quarter and we saw modest year-over-year growth in orders. The improvement in our markets at the end of last quarter continued during the second quarter. Our communications products, as well as our video products, each had double-digit order growth in the second quarter. Orders for general purpose products were down slightly from last year but were up significantly from the first quarter."

"Our two newer product categories -- signal sources and real-time spectrum analyzers -- continued to grow rapidly with over 50% year-over-year growth in the quarter, demonstrating our ability to penetrate targeted new market segments which is a key element of our growth strategy. And, we made excellent progress on our wave of new products set to introduce in the third quarter and over the next several quarters," said Wills.

For the third quarter of fiscal 2006, the company expects net sales to be approximately $255 - $265 million. Earnings per share from continuing operations are expected to be between $0.30 and $0.34 before mostly non-cash acquisition-related costs, business realignment costs, and one-time items.

"We continue to be encouraged by the recent strengthening of the market. We are very excited about the success of our recently introduced products as well as the major new products we expect to introduce this quarter and in the coming quarters," concluded Wills.

Recent highlights include the following: * The acquisition of Vqual Ltd, a leading provider of software tools for analysis, test and optimization of compressed digital media, based in Bristol, UK. The acquisition will enable Tektronix to offer its customers a complete suite of in-house compressed video analysis products. * The selection by VIA Technologies of high-speed digital systems analysis tools from Tektronix to develop digital products based upon serial data standards such as second generation PCI-Express and SATA III. * The selection by Framestore CFC, Europe's largest visual effects and computer animation studio, of Tektronix' WFM700 High Definition Waveform Monitors. * The integration of Tektronix' Unified Assurance solution for IP networks with Psytechnics' Speech IP Monitor to provide customers with industry-leading network management and service management capabilities for IP networks. * The receipt of the Innovation Award in the Test and Measurement category for the TDS6000 family of digital storage oscilloscopes, the first award of its kind from EDN China. And the introduction of several new products and capabilities including: * A PC-based protocol analysis platform which facilitates deployment of triple play services through flexible and scalable protocol testing and analysis. The NSA18 provides portable troubleshooting and optimization of 3G UMTS networks. * New software utilities for validating Ultra Wideband and WiMedia applications which extend the debug and analysis capabilities of the TDS6000 oscilloscopes to include real-time analysis of Ultra Wideband RF and electrical signals. * Software for the market-leading Spectra diagnostics product line which helps carriers ensure interoperability between legacy and VoIP signaling technologies and validate equipment performance across converged networks. * Intelligent Application Services for mobile network operators to its Unified Assurance offering -- a solution which provides the ability to analyze, detect and correct improper configuration of subscriber handsets to improve service levels.

In addition, today Tektronix declared a quarterly cash dividend of $0.06 per share on the outstanding common shares of the Company, payable on January 23, 2006 to shareholders of record as of the close of market on January 6, 2006.

Tektronix will be discussing its second 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 http://www.tektronix.com/ir. A replay of the Webcast will be available at the same Web site for one year.

In addition, Tektronix will hold an investor event on January 12, 2006 at the company's facilities near Dallas, Texas featuring the company's communications network management and diagnostics business.

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; 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 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; 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 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 http://www.tektronix.com/.

Consolidated Statements of Operations Quarter Ended Two Quarters Ended (In thousands, except per Nov. 26, Nov. 27, Nov. 26, Nov. 27, share amounts) 2005 2004 2005 2004 Net sales $253,396 $266,828 $488,456 $517,293 Cost of sales 101,171 106,505 200,274 208,451 Gross profit 152,225 160,323 288,182 308,842 Research and development expenses 45,673 41,878 89,278 75,457 Selling, general and administrative expenses 73,103 76,320 141,668 141,386 Business realignment costs 1,880 244 4,361 2,283 Acquisition related costs and amortization 2,095 34,941 5,531 35,728 Loss (gain) on disposition of assets, net 23 57 27 (1,834) Operating income 29,451 6,883 47,317 55,822 Interest income 2,888 3,904 5,980 9,366 Interest expense (146) (335) (243) (418) Other non-operating expense, net (1,993) (1,067) (2,979) (3,291) Earnings before taxes 30,200 9,385 50,075 61,479 Income tax expense 10,322 11,964 16,029 27,592 Net earnings (loss) from continuing operations 19,878 (2,579) 34,046 33,887 Gain (loss) from discontinued operations, net of income taxes 17 (255) (65) (313) Net earnings (loss) $19,895 $(2,834) $33,981 $33,574 Earnings (loss) per share: Continuing operations - basic $0.24 $(0.03) $0.41 $0.40 Continuing operations - diluted $0.24 $(0.03) $0.40 $0.39 Discontinued operations - basic $-- $-- $-- $-- Discontinued operations - diluted $-- $-- $-- $-- Net earnings - basic $0.24 $(0.03) $0.41 $0.39 Net earnings - diluted $0.24 $(0.03) $0.40 $0.39 Weighted average shares outstanding: Basic 82,833 87,020 83,718 85,401 Diluted 83,584 87,020 84,438 86,949 Cash dividend declared per share $0.06 $0.06 $0.12 $0.10 Consolidated Balance Sheets (In thousands) November 26, 2005 May 28, 2005 ASSETS Current assets: Cash and cash equivalents $136,015 $131,640 Short-term marketable investments 96,808 120,881 Trade accounts receivable, net 162,418 155,332 Inventories 130,088 131,096 Other current assets 74,835 80,177 Total current assets 600,164 619,126 Property, plant and equipment, net 124,110 120,546 Long-term marketable investments 130,681 226,892 Deferred tax assets 51,742 56,560 Goodwill, net 301,954 301,934 Other long-term assets 127,171 135,285 Total assets $1,335,822 $1,460,343 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $116,338 $115,058 Accrued compensation 61,484 78,938 Deferred revenue 59,319 57,509 Total current liabilities 237,141 251,505 Long-term liabilities 180,473 223,015 Shareholders' equity: Common stock 492,896 501,886 Retained earnings 591,557 639,720 Accumulated other comprehensive loss (166,245) (155,783) Total shareholders' equity 918,208 985,823 Total liabilities and shareholders' equity $1,335,822 $1,460,343 Shares outstanding 81,833 85,144 Selected Additional Financial Data (Dollars in thousands, Quarter Ended Two Quarters Ended except per share % Nov. 26, Nov. 27, % Nov. 26, Nov. 27, amounts) Growth 2005 2004 Growth 2005 2004 Product Orders and Sales Data: Orders 2% $240,765 $235,618 7% $471,199 $439,906 U.S. (0%) 85,111 85,404 8% 161,539 149,655 International 4% 155,654 150,214 7% 309,660 290,251 Total - excluding Rohde and Schwarz & Inet (0%) 212,928 213,851 (5%) 398,541 418,231 Net Sales (5%) $253,396 $266,828 (6%) $488,456 $517,293 U.S. (12%) 92,079 104,205 (16%) 176,482 209,969 International (1%) 161,317 162,623 2% 311,974 307,324 Total - excluding Rohde and Schwarz & Inet (11%) 217,953 244,349 (11%) 421,218 473,616 Book to Bill Ratio Calculation: Product Orders $240,765 $235,618 $471,199 $439,906 Product Sales $238,383 $245,600 $460,218 $477,100 Book to Bill ratio 1.01 0.96 1.02 0.92 Reconciliation of Pro Forma Measures to GAAP: Net earnings from continuing operations - GAAP $19,878 $(2,579) $34,046 $33,887 Effect of : Acquisition related items reported in cost of sales 4,703 4,635 9,815 4,635 Acquisition related items reported in operating expenses 2,095 34,941 5,531 35,728 Business realignment costs 1,880 244 4,361 2,283 Gain on sale of Nevada City property -- -- -- (2,161) Tax effect of above items (2,769) (2,778) (6,712) (2,978) Net earnings from continuing operations - Pro Forma $25,787 $34,463 $47,041 $71,394 Diluted earnings per share - Pro Forma $0.31 $0.39 $0.56 $0.82 Income Statement Items as a Percentage of Net Sales: Cost of sales 40% 40% 41% 40% Research and development expenses 18% 16% 18% 15% Selling, general and administrative expenses 29% 29% 29% 27% Business realignment costs 1% 0% 1% 0% Acquisition related costs and amortization 1% 13% 1% 7% Loss (gain) on disposition of assets, net 0% 0% 0% (0%) Operating income 12% 3% 10% 11% Capital Expenditures and Depreciation: Capital expenditures $9,889 $6,998 $18,633 $14,504 Depreciation and amortization expense $6,931 $7,200 $13,937 $13,878 Quarter Ended Year Ended November 26, 2005 May 28, 2005 Balance Sheet: Cash and Marketable Investments: Cash and cash equivalents $136,015 $131,640 Short-term marketable investments 96,808 120,881 Long-term marketable investments 130,681 226,892 Cash and Marketable Investments $363,504 $479,413 Accounts receivable as a percentage of net sales 15.7% 13.9% Days sales outstanding 58.3 54.7 Countback days sales outstanding 49.7 51.8 Inventory as a percentage of net sales 12.9% 11.3% Inventory turns 3.1 3.6 Discontinued Operations Two Quarters Quarter Ended Ended Nov. 26, Nov. 27, Nov. 26, Nov. 27, (In thousands) 2005 2004 2005 2004 Loss on sale of VideoTele.com (less applicable income tax benefit of $1, $8, $1 and $9) $(2) $(14) $(3) $(15) Loss on sale of optical parametric test business (less applicable income tax benefit of $76, $45, $112 and $85) (140) (86) (208) (158) Gain (loss) on sale of Gage (less applicable income tax benefit (expense) of ($86), $83, ($80) and $75) 159 (155) 148 (140) Loss on sale of Color Printing and Imaging (less applicable income tax benefit of $0, $0, $1 and $0) -- -- (2) -- Gain (loss) from discontinued operations, net of income taxes $17 $(255) $(65) $(313) Reconciliation of Pro Forma Measures to GAAP (In thousands, except per share amounts) Quarter Ended November 26, 2005 Adjustments GAAP Inet Other Pro Forma Net sales $253,396 -- -- $253,396 Cost of sales 101,171 (4,624) (79)(A) 96,468 Gross profit 152,225 4,624 79 156,928 Gross margin 60.1% 61.9% Research and development expenses 45,673 -- -- 45,673 Selling, general and administrative expenses 73,103 -- -- 73,103 Business realignment costs 1,880 -- (1,880) -- Acquisition related costs: Write-off of IPR&D -- -- -- -- Amortization of acquired intangible assets 1,293 (1,280) (13) -- Amortization of stock option compensation 84 (84) -- -- Transition expenses 718 (733) 15 -- Total acquisition related costs 2,095 (2,097) 2 -- Loss (gain) on disposition of assets 23 -- -- 23 Operating income 29,451 6,721 1,957 38,129 Operating margin 11.6% 15.0% Other income, net 749 -- 749 Earnings before taxes 30,200 6,721 1,957 38,878 Income tax expense 10,322 2,279 490 13,091 Net earnings (loss) from continuing operations $19,878 4,442 1,467 $25,787 Earnings (loss) per share - diluted $0.24 $0.31 Weighted average shares outstanding - diluted 83,584 83,584 Quarter Ended November 27, 2004 Adjustments GAAP Inet Other Pro Forma Net sales $266,828 -- -- $266,828 Cost of sales 106,505 (4,635) -- (A) 101,870 Gross profit 160,323 4,635 -- 164,958 Gross margin 60.1% 61.8% Research and development expenses 41,878 -- -- 41,878 Selling, general and administrative expenses 76,320 -- -- 76,320 Business realignment costs 244 -- (244) -- Acquisition related costs: Write-off of IPR&D 32,195 (32,195) -- -- Amortization of acquired intangible assets 846 (846) -- -- Amortization of stock option compensation 204 (204) -- -- Transition expenses 1,696 (972) (724) -- Total acquisition related costs 34,941 (34,217) (724) -- Loss (gain) on disposition of assets 57 -- -- 57 Operating income 6,883 38,852 968 46,703 Operating margin 2.6% 17.5% Other income, net 2,502 2,502 Earnings before taxes 9,385 38,852 968 49,205 Income tax expense 11,964 2,509 269 14,742 Net earnings (loss) from continuing operations $(2,579) 36,343 699 $34,463 Earnings (loss) per share - diluted $(0.03) $0.39 Weighted average shares outstanding - diluted 87,020 88,570 Two Quarters Ended November 26, 2005 Adjustments GAAP Inet Other Pro Forma Net sales $488,456 -- -- $488,456 Cost of sales 200,274 (9,697) (118)(A) 190,459 Gross profit 288,182 9,697 118 297,997 Gross margin 59.0% 61.0% Research and development expenses 89,278 -- -- 89,278 Selling, general and administrative expenses 141,668 -- -- 141,668 Business realignment costs 4,361 -- (4,361) -- Acquisition related costs: Write-off of IPR&D 365 -- (365) -- Amortization of acquired intangible assets 2,577 (2,559) (18) -- Amortization of stock option compensation 174 (174) -- -- Transition expenses 2,415 (1,763) (652) -- Total acquisition related costs 5,531 (4,496) (1,035) -- Loss (gain) on disposition of assets 27 -- -- 27 Operating income 47,317 14,193 5,514 67,024 Operating margin 9.7% 13.7% Other income, net 2,758 -- -- 2,758 Earnings before taxes 50,075 14,193 5,514 69,782 Income tax expense 16,029 5,135 1,577 22,741 Net earnings from continuing operations $34,046 9,058 3,937 $47,041 Earnings per share - diluted $0.40 $0.56 Weighted average shares outstanding - diluted 84,438 84,438 Two Quarters Ended November 27, 2004 Adjustments GAAP Inet Other Pro Forma Net sales $517,293 -- -- $517,293 Cost of sales 208,451 (4,635) -- (A) 203,816 Gross profit 308,842 4,635 -- 313,477 Gross margin 59.7% 60.6% Research and development expenses 75,457 -- -- 75,457 Selling, general and administrative expenses 141,386 -- -- 141,386 Business realignment costs 2,283 -- (2,283) -- Acquisition related costs: Write-off of IPR&D 32,195 (32,195) -- -- Amortization of acquired intangible assets 846 (846) -- -- Amortization of stock option compensation 204 (204) -- -- Transition expenses 2,483 (972) (1,511) -- Total acquisition related costs 35,728 (34,217) (1,511) -- Loss (gain) on disposition of assets (1,834) -- 2,161 (B) 327 Operating income 55,822 38,852 1,633 96,307 Operating margin 10.8% 18.6% Other income, net 5,657 -- -- 5,657 Earnings before taxes 61,479 38,852 1,633 101,964 Income tax expense 27,592 2,509 469 30,570 Net earnings from continuing operations $33,887 36,343 1,164 $71,394 Earnings per share - diluted $0.39 $0.82 Weighted average shares outstanding - diluted 86,949 86,949 (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