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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended May 31, 1997 or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to
Commission file number 1-4837
TEKTRONIX, INC.
(Exact name of Registrant as specified in its charter)
OREGON 93-0343990
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
26600 S.W. PARKWAY AVENUE
WILSONVILLE, OREGON 97070
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code:
(503) 627-7111
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ------------------------
Common Shares, New York Stock Exchange
without par value Pacific Stock Exchange
Series A No Par Preferred New York Stock Exchange
Shares Purchase Rights Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
/X/
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant was approximately $2,056,125,318 at August 4, 1997.
At August 4, 1997 there were 33,616,112 Common Shares of the Registrant
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT PART OF 10-K INTO WHICH INCORPORATED
-------- ------------------------------------
Registrant's Proxy Statement Part III
dated August 20, 1997
1997 Annual Report to Shareholders Parts I, II and IV
PART I
ITEM 1. BUSINESS.
Tektronix is an Oregon corporation organized in 1946. Its principal
executive offices are located at 26600 S.W. Parkway Avenue, Wilsonville, Oregon
97070, approximately 18 miles south of Portland. Its telephone number is (503)
627-7111. References herein to "Tektronix" or the "Company" are to Tektronix,
Inc. and its wholly-owned subsidiaries unless the context indicates otherwise.
Tektronix' products cover a wide range of electronic equipment.
Measurement business products include general purpose test instruments, such as
digital and analog oscilloscopes, logic analyzers, digital multimeters, VXI
card-modular products, and probes; RF and wireless test instruments, such as
spectrum analyzers, communication test sets and high frequency signal sources;
telecommunications instruments, such as optical time domain reflectometers
(OTDRs), cable testers and communications test sets; and television test
instruments, such as audio and video measurement sets, waveform monitors,
vectorscopes, signal generators, and RF/cable measurement products. Color
printing and imaging products include color printers, ink and related products
and supplies. Video and networking products include studio production equipment,
signal processing and distribution equipment, transmission systems, video
editing systems, video disk recorders, network computers (X terminals) and
related products.
PRODUCTS
The table below sets forth the contribution to total net sales of the
Company's product groupings for the last three fiscal years (in thousands of
dollars).
Measurement Color Printing Video and
Business and Imaging Networking Other
Products Products Products Products (1)
---------------- ------------------ ------------------ --------------------
Amount Percent Amount Percent Amount Percent Amount Percent
---------------- ------------------ ------------------ --------------------
1995 $731,061 48.8% $454,961 30.4% $303,213 20.2% $ 8,727 0.6%
1996 $812,250 45.9% $561,642 31.8% $394,966 22.3% $ - 0.0%
1997 $852,827 44.0% $638,456 32.9% $448,799 23.1% $ - 0.0%
(1) The Other Products grouping includes the historic net sales to third
parties by the non-strategic components and other business operations that the
Company divested in 1995.
MEASUREMENT BUSINESS PRODUCTS
Because of their wide range of capabilities, measurement business products
are used in a variety of applications, including research, design, testing,
installation, manufacturing and service in the computer, commercial aerospace,
military, process control, telecommunications, television and automotive
industries.
1
Tektronix pioneered the development of high precision oscilloscopes over 50
years ago, and the oscilloscope is the Company's primary measurement product.
Oscilloscopes are used by engineers and technicians when an electrical signal
needs to be viewed, measured, tested or calibrated. Oscilloscopes are used
extensively in the computer, communications, aerospace and other industries for
design, manufacturing and maintenance. In addition to electrical signals,
oscilloscopes can be adapted to measure mechanical motion (vibration), sound,
light, heat, pressure, strain and velocity.
Oscilloscopes produce graphic representations of electrical signals on a
cathode ray tube or other display device. Normally, the display shows the signal
as a graph of its amplitude over a certain period of time, which may range from
minutes to less than a billionth of a second. Oscilloscopes provide a convenient
way to visually monitor and interpret analog electrical fluctuations, mechanical
motion and sound.
The development of the microprocessor and associated growth in
microprocessor-based devices stimulated both the existing analog markets and
new digital markets. The microprocessor made possible significant
improvements in oscilloscope design and performance. Many of the
oscilloscopes and other measurement products manufactured by Tektronix
feature digital storage and conversion functions, programmable operations,
the ability to work in conjunction with personal computers and workstations
and combinations of these capabilities. Trends toward smaller
microelectronic devices have opened new segments for specialized measurement
equipment, such as connectors, probes, adapters, and cameras and plotters to
record displayed wave forms.
Tektronix has designed a substantial portion of its oscilloscope product
line to provide a consistent "architecture" across products and to enhance ease
of use. Because the Company manufactures oscilloscopes in a wide range of
configurations, bandwidths and other performance characteristics and in sizes
ranging from hand-held to large laboratory units, this design provides customers
with reduced learning time and higher productivity. The design also reduces the
time required by the Company to develop new products because many essential user
interface aspects have been standardized. Some elements of this design also
have been patented and provide the Company with certain competitive advantages.
The Company also offers modular instruments delivered on printed circuit
cards that can be mixed and matched by customers and plugged directly into the
backplane of industry-standard VXI-based card cages. These are controlled by
personal computers or workstations to form complete instrument systems tailored
to customers' particular requirements. A number of measurement products are now
available in the VXI standard, which products are used primarily in
manufacturing applications. Tektronix has been instrumental in the development
of VXI-based hardware and software industry standards.
Measurement business products also include video and audio test products.
Video and audio test products include vectorscopes, waveform monitors, signal
generators, automated test equipment, demodulators, aural modulation monitors
and synchronizers which are used primarily by the television industry to test
and display the quality of video and audio signals. The resolution of images
and the fidelity of sounds, as well as the stability of the signals that carry
them, are essential to program quality. Tektronix' video and audio test
products excel at the many forms of test and measurement vital to creating and
maintaining signals of the highest quality. With the transition to digital
television and video compression, new products include an MPEG based signal
generator and analyzer, and digital television test products.
2
Market changes are driving the development of new categories of products
from Tektronix. The proliferation of electronic technology requires technicians
and field engineers to use smart electronic tools for servicing, maintaining and
troubleshooting problems in electrical equipment. Tektronix' broad line of
hand-held instruments, sold through distributors, are smart, rugged products
designed specifically to address these needs.
Tektronix offers a full range of sophisticated, easy-to-use handheld
instruments, including digital multimeters and the award-winning TekScope-TM-, a
handheld oscilloscope/digital multimeter combination. Tektronix' handheld
instruments range in suggested retail price from below $100 up to about $3,400.
The Company also makes benchtop basic instruments. Applications include
education, light manufacturing, electronic troubleshooting and basic electronic
design.
Logic analyzers are a principal tool for electronic designers, engineers
and technicians in testing and trouble-shooting computers, computer
peripheral devices and digital electronic systems and instruments. Logic
analyzers capture, display and examine streams of data coded as binary digits
(bits), which are transmitted simultaneously over many channels. The Company
offers several lines of logic analyzers, including the 3000 Series, a
standalone, mid-range analyzer targeted at medium sized designs, the newer
TLA 500 Series, a high performance, mid-priced analyzer optimized for
embedded software debug, the DAS-Registered Trademark- Digital Analysis
System, a broad application logic analyzer that combines logic analysis and
pattern generation by using card modular plug-in units to permit a range of
performance in one system, and the new TLA 700 series, which incorporates
Microsoft's Windows -Registered Trademark- operating system, which has a
novel high speed front-end and is designed specifically for engineers that
design electronic products. DAS systems are also used by software engineers
in the development and optimization of microprocessor-based designs.
Spectrum analyzers are used in communications and other industries to
display and measure signal amplitude versus frequency rather than amplitude
versus time (the latter being what an oscilloscope displays). It is an
essential tool used to design, check and adjust communications transmitting and
receiving equipment.
Products designed for the telecommunications industry play an increasingly
important role in the Company's measurement business portfolio. Tektronix is a
leading supplier of a broad range of test solutions for emerging networks,
designed for ensuring integrity and optimizing performance of networks, and
verifying design and assuring quality of communications equipment. Cable testers
and fiber optic testers use time-domain-reflectometry techniques to locate
faults in metallic and fiber optic cables. Essentially, these instruments send
signals from one end of a cable and then measure the reflection time of the
signals to determine the location of the fault. Cable testers and fiber optic
testers are widely used in the telecommunication and cable television
industries. The Company also provides RF test instruments for the cable
television market, and has developed a series of products for SDH or SONET
transmission testing in the telecommunications industry. The Company's 1995
acquisition of Microwave Logic, Inc., strengthens the Company's offerings in
this product area, as well as in the area of ATM asynchronous transfer mode
products. Tektronix also sells and supports German manufacturer Rohde & Schwarz'
wireless communications and TV products in the United States and Canada,
including the first measurement solutions for Personal Communications Services
(PCS), mobile
3
phones and base stations available to North American manufacturers. Rohde &
Schwarz also works with Tektronix to facilitate distribution of Tektronix'
measurement products in Russia, the Middle East and Eastern European countries.
Tektronix' distributorship arrangement with Advantest, the Japanese
instruments manufacturer, expands the Company's offering within North America
and Mexico, adding more than 100 solutions to the communications test product
portfolio.
Other measurement business products include digitizers, signal sources,
curve tracers, wireless and modular lines of general purpose test instruments.
COLOR PRINTING AND IMAGING PRODUCTS
Tektronix' color printing and imaging products include color printers and
related products and supplies. Color printers produce full color hard copies of
images produced by personal computers, workstations and terminals. The Company's
Phaser-Registered Trademark- brand printers are compatible with the
PostScript-Registered Trademark- industry standard page description language,
which specifies how an image is transferred to hard copy. By adopting the
Postscript standard, color printers can be used in conjunction with a wide range
of third-party graphics software. Tektronix produces Phaser color printers using
thermal wax, liquid ink jet, dye sublimation and laser technologies. In
addition, Tektronix has developed a proprietary printing technology that uses
sticks of solid ink, of the Company's own formulation, that are melted and then
jetted onto the paper. This technology produces vivid and stable images, allows
printing on plain rather than coated paper, and can be applied to a wide range
of sizes and gauges of paper. Tektronix' printers are controlled by software
designed and implemented by the Company.
The use of color in computing and printing has been stimulated by
enhancements in the underlying microprocessor technology of personal computers
and workstations, by increasingly larger system and peripheral storage
capabilities, and by enhancements in computer display capability. As personal
computers increasingly become capable of displaying complex, colorful images,
there has been an accompanying growth in demand for printers that can print such
images in color.
Tektronix has been manufacturing and selling color printers for over twelve
years. Early users were graphics artists, engineers and scientists. In recent
years, workgroup office users have also become significant users of the
Company's color printers.
In September of 1996, the Company introduced its Phaser 350 printer, and in
July of 1997, its Phaser 560 printer. These are improved, follow-on products
to the Phaser 340 introduced in 1995, and the Phaser 550 introduced in January
of 1996. The Phaser 350 is a solid-ink color printer combining laser-class
speed, low cost per page, and high quality output. The Phaser 560 is a
high-performance color laser printer. Both are intended to broaden the appeal
of color for the average business user and help move color into the office
printing environment.
In November of 1996, the Company introduced its Phaser 600 printer, and in
September of 1996, the 300x, expanding the Company's offering of high-quality
output color printers for the specialty graphics and office markets. The Phaser
600 is a new solid-ink color printer that prints vivid, saturated color on any
paper up to 36 inches wide. The wide-format color printer targets two
fast-expanding markets for large color prints: in-house departments (including
design departments within Fortune 1000 companies, government, and advertising
agencies) and "pay for print" businesses (including service bureaus,
reprographic shops, color photo labs, and quick-print
4
shops). In January of 1996, the Company introduced the Phaser 450 printer,
an improved follow-on product to the Phaser 440. This printer produces
photographic quality color prints using dye sublimation technology, and
is also targeted to the specialty printing market.
Also included in color printing and imaging products are supplies for use
with the Company's color printers, including inks, toner, transfer ribbons,
maintenance kits and media (paper and transparencies). These supplies are a
very significant source of ongoing color printing and imaging revenue and
profit. The Company also markets a scanner accessory that enables a color
printer to function as a color copier.
VIDEO AND NETWORKING PRODUCTS
As television continues to move to digital, non-tape based technologies
while expanding its offering content and distribution, markets have emerged for
products capable of supporting development of content through the integration of
computer applications. These trends, coupled with the increasing use of cable
and satellite to distribute content, are expanding the market for Tektronix'
video products. These trends may result in increased demand for lower cost
production products based on industry standard platforms and for systems that
support the development and distribution of new forms of content.
Most of the Company's video products are produced at its facility in Grass
Valley, California. Grass Valley-TM- products are used by the television
industry for program production and distribution. Products include studio
production equipment, signal processing and distribution equipment and
transmission systems. Studio production equipment is used in the creative
process of television program production and assembly. Production equipment
products include production switchers, special effects devices and editing
controllers. Production switchers allow an operator to select signals from
various sources, such as cameras, video tape recorders and network or remote
transmissions, and to combine these signals into the continuous program seen by
the viewing audience. Signal processing and distribution equipment is used in
the process of moving signals within a television production facility or between
facilities. Such equipment includes routing switchers, amplifiers, timing
systems and signal conversion devices. Transmission systems are used in the
process of transporting signals between facilities. Transmission system
products include fiber optic video transmitter/receiver systems, digital video
coders/decoders, cross-connect switches and interactive conferencing systems
including distance learning systems. Customers for Grass Valley products
include the television networks, local television stations, post-production
houses (which assemble commercials and television programs from recorded
footage), telephone and cable companies and corporate and educational users.
Tektronix U.K. Development Centre Limited (previously named Lightworks
Editing Systems Limited), a United Kingdom subsidiary of the Company, designs,
manufactures and distributes non-linear editing systems used for film and video
editing. Video products also include the Company's Profile-Registered Trademark-
disk-based, multi-channel video storage and playback system. In contrast to
conventional tape storage technology, the Profile system provides instant access
to stored video images and better reliability due to the durability of the
media. The Company's line of professional video disk recording products is
manufactured at its facility in Beaverton, Oregon. High-speed computer
networking interfaces sold by the Company allow the connection of a number of
Profile disk recorders to allow sharing of material between multiple users.
Customers for these products include major television networks, local broadcast
stations, satellite program providers and postproduction companies.
5
The Company's main networking product is a line of network computers, which
are X windows-based graphics terminals that provide multiple windowing and
networking capability. Also commonly referred to as X terminals, network
computers allow users to communicate with one or more host computers and other
devices such as printers, that make up a networked computing system. Most
applications include a central "server" (containing applications and data)
connected to multiple network computers, thereby allowing a number of users to
access those applications and data. The Company no longer manufactures its
older line of proprietary graphics terminals, but it still has a service
business for its installed base for such products. This service business has
continually declined as the installed base of these proprietary graphics
terminals declines.
The Company's networking products also include WinDD-TM- software, which
allows network computer users on a Unix-Registered Trademark- network to run
Microsoft Windows based applications in native mode (that is, without
translation or emulation).
The Company produces the NewStar-TM- line of television newsroom computer
systems. These products provide a complete computer based environment for the
collection, management and presentation of television news stories. They
provide management of incoming wire service and video feeds, computerized script
development and story lineup for transmission to air. EditStar-TM- , a
combination of the NewStar journalist software and the Company's Profile video
disk recorder, provides a unique tool for concurrent editing of the script and
video. Customers for NewStar systems include large and small television news
operations worldwide.
MANUFACTURING
During fiscal 1994, the Company sold its integrated circuits operation to
Maxim Integrated Products, Inc. and transferred its hybrid circuits operation to
a joint venture with Maxim, and in early 1995 completed the sale of
approximately 65% of the stock of its printed circuit board operation in the
initial public offering of Merix Corporation. As a result of these activities
and other recent component operation divestitures, the Company's manufacturing
operations are no longer highly integrated. The Company purchases products from
each of the companies now operating the respective component operations.
Tektronix also purchases raw materials, additional components, data
processing equipment and computer peripheral devices for use in its products and
systems. In addition, the Company purchases components of its products from a
variety of third party suppliers. Such purchased materials and components are
generally available to Tektronix as needed. Although shortages are experienced
from time to time, the Company currently believes that it will be able to
acquire the required components as needed. Because some of these components are
unique, disruptions in supply can have an effect on Company operations.
Tektronix owns substantially all of its manufacturing facilities. Its
primary manufacturing facilities are located in or near the Portland, Oregon
metropolitan area. Some of Tektronix' products, components and accessories are
assembled in the Peoples Republic of China. A logistics center is maintained in
Heerenveen, The Netherlands. The Grass Valley products are manufactured in
Nevada City, California. See Item 2, "Properties", for a more detailed
description of the Company's manufacturing facilities.
Certain Tektronix products are manufactured for the Japanese market at a
plant in Gotemba, Japan by Sony/Tektronix Corporation, a Japanese corporation
equally owned by Tektronix and Sony Corporation. Sony/Tektronix also designs
and manufactures arbitrary waveform and function generators and benchtop
semiconductor testers in Japan for sale worldwide
6
by Tektronix.
SALES AND DISTRIBUTION
Tektronix maintains its own worldwide sales and field maintenance
organization, staffed with technically trained personnel. Sales in the United
States, Canada, Brazil, the United Kingdom, Germany, France, Italy, Spain, The
Netherlands, Belgium, Sweden, Denmark, Norway, Finland, Switzerland, Australia,
Austria, Hong Kong, Taiwan, Korea, Singapore, China and Mexico are made through
the Company and its subsidiaries and their field offices or distribution
channels located in principal market areas. In most countries, all sales are
made either directly by Tektronix or by independent distributors to whom
Tektronix provides direct technical and administrative assistance. Certain of
the Company's independent distributors also sell products manufactured by the
Company's competitors. Sales of joint venture products in the Peoples Republic
of China are made by three companies which are joint ventures between Tektronix
and three different Peoples Republic of China corporations. Except for Grass
Valley products, sales in Japan are made by Sony/Tektronix Corporation. Sales
in India are made by Tektronix (India) Limited, an Indian company which is 68%
owned by Tektronix and the balance is held publicly. A number of the Tektronix
field offices in the U.S. also perform major maintenance and reconditioning
operations. Tektronix' principal customers are electronic and computer equipment
manufacturers and service providers, private industrial concerns engaged in
commercial or governmental projects, military and nonmilitary agencies of the
United States and of foreign countries, public utilities, educational
institutions, radio and television stations and networks, graphics arts
companies and users of sophisticated office products. Certain products are sold
both to equipment users and to original equipment manufacturers.
During the last fiscal year, United States Government agencies accounted
directly for approximately 1.2% of Tektronix' consolidated sales as compared
with approximately 1.4% for the prior year. During the last five years, direct
sales to United States Government agencies ranged from 1% to 4%. The balance of
sales during each year was distributed among several thousand other customers,
with no other single customer accounting for as much as 2%. The Company
believes that sales directly related to United States Government expenditures
(excluding sales to the United States Government) were approximately 1% of
Tektronix' consolidated sales for the last fiscal year. Contracts involving the
United States Government are subject, as is customary, to termination by the
Government at its convenience.
Most Tektronix product sales are sold as standard catalog items. Tektronix
attempts to fill its orders as promptly as possible. In Video and Networking,
the Company is moving towards complete system sales, as well as stand-alone
systems.
At May 31, 1997, Tektronix' unfilled product orders amounted to
approximately $175 million, as compared to approximately $163 million at May 25,
1996. Tektronix expects that substantially all unfilled product orders at May
31, 1997 will be filled during its current fiscal year. Orders received by the
Company are subject to cancellation by the customer.
7
INTERNATIONAL SALES
The following table sets forth the breakdown between U.S. and international
sales, based upon purchaser location, for each of the last three fiscal years
(in thousands of dollars):
U.S. SALES INTERNATIONAL SALES
AMOUNT PERCENT AMOUNT PERCENT
1995 $ 766,991 51.2% $730,971 48.8%
1996 $ 890,930 50.4% $877,928 49.6%
1997 $1,027,294 53.0% $912,788 47.0%
See "Business Segments" in the Notes to Consolidated Financial Statements at
page 25 of the Company's 1997 Annual Report to Shareholders, containing
information on sales, operating income and assets by geographic area based upon
the location of the seller, which is incorporated by reference.
Tektronix products are sold worldwide. European sales are made principally
in Germany, France, the United Kingdom, Switzerland, Italy, Spain, Sweden, and
The Netherlands. Other international sales are principally in Japan, Korea,
Canada, Australia, the People's Republic of China and Hong Kong. International
sales include both export sales from the United States and sales by non-U.S.
subsidiaries. Fluctuating exchange rates and other factors beyond the control
of Tektronix, such as the stability of international monetary conditions, tariff
and trade policies and domestic and foreign tax and economic policies, affect
the level and profitability of international sales. The Company does not
believe it is materially exposed to exchange rate fluctuation, although the
Company is unable to predict the effect of these factors on its business. The
Company hedges against certain currency exposures in order to minimize their
impact.
RESEARCH AND DEVELOPMENT
Tektronix operates in an industry characterized by rapid technological
change and research and development are important elements in its business.
Expenditures during fiscal years ended May 27, 1995, May 25, 1996, and May 31,
1997 for research and development amounted to approximately $166,171,000,
$164,292,000, and $188,192,000 respectively. Almost all of these funds were
Company generated.
Research and development activities are conducted by research and design
groups and specialized product development groups within the three product
groups. These activities include: (i) research on basic devices and techniques
(ii) the design and development of products and components and specialized
equipment and (iii) the development of processes needed for production. Most of
Tektronix' research and development is devoted to enhancing and developing its
own products.
8
PATENTS AND INTELLECTUAL PROPERTY
It is Tektronix' policy to seek patents in the United States and
appropriate foreign countries for its significant patentable developments.
However, electronic equipment as complex as most Tektronix products is generally
not patentable in its entirety. The Company also seeks to protect significant
trademarks and software through trademark and copyright registration. The
Company has entered into license arrangements for components important to the
manufacturing of some of its printers. The Company's printer business relies on
an integrated strategy of licensed and internally developed technology to
produce its industry leading products. This technology includes software,
equipment, printing process and ink developments. As with any company whose
business involves intellectual property, Tektronix is subject to claims of
infringement. There are no material pending claims.
COMPETITION
The electronics industry continues to become more competitive, both in the
United States and abroad. Primary competitive factors are product performance,
technology, customer service, product availability and price. Tektronix
believes that its reputation in the marketplace is a significant positive
competitive factor. With respect to many of its products, the Company competes
with companies that have substantially larger resources.
Tektronix is the world's largest manufacturer of oscilloscopes and no
single competitor offers as complete a product line. The Company is also the
leader in sales of test and measurement equipment for the television industry.
Tektronix competes with a number of companies in specialized areas of other test
and measurement products, and it competes with one very large company that sells
a broad line of test and measurement products.
Tektronix is also the leader in unit sales of office workgroup laser-class
color printers, including color laser, solid ink jet and thermal wax color
printers. While the market for color printers is currently growing rapidly, it
is still much smaller than the market for monochrome printers. Moreover, it is
characterized by intense and increasing competition, resulting in a competitive
pricing environment. Because the market for color hard copy is still small
compared to the market for monochrome printers, distribution of products from
manufacturer to end user is less efficient. The Company expects distribution
channels to expand as color hard copy becomes a more prominent feature in
computer applications.
Tektronix competes with a number of large, worldwide electronics firms that
manufacture specialized equipment for the television industry, both with respect
to its television test and measurement products and its Grass Valley products.
Grass Valley products include leading high-performance production switchers and
high-performance distribution/processing equipment.
Tektronix is a leading supplier of network computers. Network computers
products are based on standard architecture originally developed by the
Massachusetts Institute of Technology. Consequently, it is difficult for any
manufacturer to develop a proprietary advantage in either the underlying
hardware or in elements of the operating system, and competition in the
network computer market is accordingly intense.
Tektronix is the leading supplier of multi-channel disk-based recording
devices to the professional television industry. The Company expects this
market to experience significant
9
growth as broadcasters and other professional video users replace video tape
recorders with disk-based products.
EMPLOYEES
At May 31, 1997, Tektronix had 8,392 employees, of whom 1,863 were located
in foreign countries. Tektronix' employees in the United States and most
foreign countries are not covered by collective bargaining agreements. The
Company believes that relations with its employees are good.
ENVIRONMENT
The Company's facilities are subject to numerous laws and regulations
concerning the discharge of materials into the environment, or otherwise
relating to protection of the environment. The Company operates a licensed
hazardous waste management facility at its Beaverton campus. Compliance with
environmental laws has not had and is not expected to have a material effect
upon the capital expenditures, earnings or competitive position of the Company.
EXECUTIVE OFFICERS OF THE COMPANY
The following are the executive officers of the Company:
Has Served As
An Executive
Officer of
Name Position Age Tektronix Since
- ---- -------- --- ---------------
Jerome J. Meyer Chairman of the 59 1990
Board, Chief
Executive Officer
and President
William D. Walker Vice Chairman of 66 1992 (also
the Board, Director served in
1990 and
from 1969
to 1984)
John P. Karalis Senior Vice President, 59 1992
Corporate Development
and Secretary
Carl W. Neun Senior Vice President 53 1993
and Chief Financial
Officer
Claude H. Balleyguier Vice President and 45 1996
President, European
Operations
10
Has Served As
An Executive
Officer of
Name Position Age Tektronix Since
- ---- -------- --- ---------------
Daniel R. Brophy Vice President and 59 1996
President, Americas
Operations
Lucie J. Fjeldstad Vice President and 53 1995
President, Video and
Networking Division
Gerald Perkel Vice President and 41 1995
President, Color
Printing and
Imaging Division
Daniel Terpack Vice President and 56 1993
President, Measurement
Business Division
Timothy E. Vice President and 44 1991
Thorsteinson President, Pacific
Operations
The executive officers are elected by the board of directors of the Company
at its annual meeting, except for interim elections to fill vacancies.
Executive officers hold their positions until the next annual meeting or until
their successors are elected, or until such tenure is terminated by death,
resignation or removal in the manner provided in the bylaws. There are no
arrangements or understandings between executive officers or any other person
pursuant to which the executive officers were elected and none of the executive
officers are related.
All of the executive officers named have been employed by Tektronix in
management positions for the last five years except: Mr. John P. Karalis who
joined Tektronix in September 1992 and prior to that time was with the law firm
of Brown and Bain (from 1989 to 1992) and Vice President and General Counsel of
Apple Computer, Inc. (from 1987 to 1989); Mr. Carl W. Neun who joined Tektronix
in March 1993 and prior to that time served as Senior Vice President of
Administration and Chief Financial Officer of Conner Peripherals, Inc., (from
1987 to 1993); Ms. Lucie Fjeldstad who joined Tektronix in January 1995 and
prior to that time was President and CEO of Fjeldstad International (from 1993
to 1995) and Vice President and General Manager, Multimedia of IBM Corporation
(from 1990 to 1993); Mr. William D. Walker, who is not an employee of the
Company and has been a director of the Company since 1980; Mr. Daniel R. Brophy,
who joined the Company in December 1994 and prior to that time served as
Assistant Vice President of Ascom Timeplex, a division of Ascom Holding AG, an
international telecommunications company; and Mr. Claude H. Balleyguier, who
joined Tektronix in September 1996 and previously was with Sony Corporation from
1986 to September of 1996, as Vice President, South and Eastern European
Operations, Broadcast and Professional Video Division (1994 to September 1996);
Vice President, Business and Industrial European Operations, Professional Video
Division (1992 to 1994); and
11
Managing Director of Sony France, Broadcast and Professional Video Division
(1986 to 1992).
ITEM 2. PROPERTIES.
The Company's offices are located at 26600 S.W. Parkway, Wilsonville,
Oregon. Listed below are the principal facilities All properties are
maintained in good working order and, except for those held for sale or lease,
are substantially utilized and are suitable for the conduct of its business. The
Company believes that its facilities are adequate for their intended uses.
Tektronix owns an industrial park (the "Howard Vollum Park") near
Beaverton, Oregon. The Howard Vollum Park includes 22 buildings arranged in a
campus-like setting and containing an aggregate of approximately 2.6 million
gross square feet of enclosed floor space. A substantial portion of the
company's product manufacturing and administrative activities are located at
Howard Vollum Park. Most of the Company's Measurement Business Division and a
variety of the Video Networking Division products are manufactured at Howard
Vollum Park. The Company leases certain excess space at the Howard Vollum Park
to other corporations. The Company also owns property near Howard Vollum Park
which is leased to another corporation.
The Company's Color Printing and Imaging Division and corporate
headquarters occupy three buildings containing approximately 596,000 square feet
on property owned by the Company in Wilsonville, Oregon, approximately 16 miles
south of Howard Vollum Park.
Tektronix' Video and Networking Division also has operating facilities in
the Grass Valley area, California, which includes buildings containing a total
of approximately 190,000 square feet of floor space on an owned site in Bitney
Springs, California, and buildings containing a total of approximately 151,000
square feet on an owned site in the neighboring town of Nevada City. The
Company intends to consolidate these operations on the Nevada City site, and the
Bitney Springs, California site is currently offered for sale.
The buildings described above were constructed after 1957. Warehouses,
production facilities and other critical operations are protected by fire
sprinkler installations. Most manufacturing, office and engineering areas are
air-conditioned.
A 109,000 square foot logistics center owned by Tektronix is located in
Heerenveen, The Netherlands.
Field offices near London (83,000 square feet) and Sydney, Australia
(23,000 square feet) are located in buildings owned by the Company. The
Lightworks video editing manufacturing operations are located on leased premises
in Reading, U.K. Field Offices in other foreign countries occupy leased
premises.
Tektronix' U.S. Sales and Service field offices aggregate approximately
298,000 square feet of leased space. A surplus office in Chicago, Illinois,
consisting of approximately 60,000 square feet is offered for sale. Tektronix
also owns an approximately 9,000 square foot facility in Nanticoke,
Pennsylvania, which is leased to another company.
12
ITEM 3. LEGAL PROCEEDINGS.
During April of this year's fourth quarter, the Company settled the
lawsuit brought against it by Fluke Corporation as described in Item 3 of the
Company's 10-K Report for 1996. There are no material pending legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
FORWARD LOOKING STATEMENTS
Statements and information included in this Form 10-K that relate to the
Company's goals, strategies and expectations as to future results, events and
expectations are based on the Company's current expectations. They constitute
forward looking statements subject to a number of risk factors that could cause
actual results to differ materially from those currently expected or desired.
From time to time, information provided by the Company, or statements made by
its employees, may contain other forward looking statements. As with many high
technology companies, risk factors that could cause the Company's actual results
or activities to differ materially from these forward looking statements include
but are not limited to: world-wide economic and business conditions in the
electronics industry, including the effect on purchases by the Company's
customers; competitive factors, including pricing pressures, technological
developments and 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; inventory risks due to changes in market
demand or the Company's business strategies; changes in effective tax rates;
customer demand; currency fluctuations; the fact that a substantial portion of
the Company's sales are generated from orders received during the quarter,
making prediction of quarterly revenues and earnings difficult; and other risk
factors listed from time to time in the Company's reports filed with the
Securities and Exchange Commission and press releases.
Additional risk factors specific to the Company's current plans and
expectations that could cause the Company's actual results or activities to
differ materially from those stated include: the significant operational issues
the Company faces in executing its strategy in Video and Networking; changes in
the regulatory environment affecting the transition to high-definition
television within the time frame anticipated by the Company; the timely
introduction of new products scheduled during the Company's fiscal year, which
could be affected by engineering or other development program slippages, the
ability to ramp up production or to develop effective sales channels; and the
demand for and acceptance of new and other Company products by the Company's
customers, which could be affected by the current uncertainties in economic
conditions around the world and by activities of the Company's competitors.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The information required by this item is included on page 32 of the
Company's 1997 Annual Report to Shareholders and is incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this item is included on page 33 of the
Company's 1997 Annual
13
Report to Shareholders and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information required by this item is included on pages 16 through 18 of
the Company's 1997 Annual Report to Shareholders and is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is included on pages 20 through 32 of
the Company's 1997 Annual Report to Shareholders and is incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this item regarding directors is included under
"Board of Directors" and "Election of Directors" on pages 3 through 8 of the
Company's Proxy Statement dated August 20, 1997.
The information required by this item regarding officers is contained under
"Executive Officers of the Company" in Item 1 of Part I hereof.
The information required by Item 405 of Regulation S-K is included under
"Section 16(a) Beneficial Ownership Reporting Compliance" on page 18 of the
Company's Proxy Statement dated August 20, 1997.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is included under "Directors'
Compensation" and "Executive Compensation" on pages 7 through 13 of the
Company's Proxy Statement dated August 20, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is included under "Ownership of
Shares" and "Election of Directors" on pages 2 and 4 though 7 of the Company's
Proxy Statement dated August 20, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8 - K
14
(a) The following documents are filed as part of this report:
(1) Financial Statements.
The following documents are included in the Company's 1997 Annual Report to
Shareholders at the pages indicated and are incorporated herein by reference:
Page in 1997 Annual
Report to Shareholders
Independent Auditors' Report 19
Consolidated Statements of Operations 20
Consolidated Balance Sheets 21
Consolidated Statements of Cash Flows 22
Consolidated Statements of Shareholders' Equity 23
Notes to Consolidated Financial Statements 24 through 32
(2) Financial Statement Schedules.
No financial statement schedules are required to be filed with
this report.
Separate financial statements for the registrant have been
omitted because the registrant is primarily an operating company and the
subsidiaries included in the consolidated financial statements are substantially
totally held. All subsidiaries of the registrant are included in the
consolidated financial statements. Summarized financial information for 50
percent or less owned persons in which the registrant has an interest, and for
which summarized financial information must be provided, is included in the
Notes to Consolidated Financial Statements appearing in the Company's Annual
Report to Shareholders.
(3) Exhibits:
(3) (i) Restated Articles of Incorporation, as amended.
Incorporated by reference to Exhibit (3) of Form 10-Q
dated September 28, 1990, SEC File No. 1-4837.
(ii) Bylaws, as amended.
(4) (i) Indenture dated as of November 16, 1987, as amended by
First Supplemental Indenture Dated as of July 13,
1993, covering the registrant's 7-1/2% notes due
August 1, 2003,and the registrant's 7-5/8% notes due
August 15, 2002. Indenture incorporated by reference
to Exhibit 4(i) of Form 10-K dated August 22, 1990,
SEC File No. 1-4837.
(ii) Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the
registrant agrees to furnish to the Commission upon request copies of agreements
relating to other indebtedness.
15
+(10) (i) 1982 Stock Option Plan, as amended. Incorporated by
reference to Exhibit 10(iii) of Form 10-K dated August 22,
1989, SEC File No. 1-4837.
+(ii) Stock Incentive Plan, as amended. Incorporated by reference
to Exhibit 10(ii)of Form 10-Q dated April 9, 1993, SEC File
No. 1-4837.
+(iii) Restated Annual Performance Improvement Plan. Incorporated
by reference to Exhibit 10( i) of Form 10-Q dated April 9,
1993, SEC File No. 1-4837.
+(iv) Restated Deferred Compensation Plan. Incorporated by
reference to Exhibit 10( i)of Form 10-Q dated December 20,
1984, SEC File No. 1-4837.
+(v) Retirement Equalization Plan, Restatement, Incorporated by
reference to Exhibit (10) (v) of Form 10-K dated August 20,
1996, SEC File No. 1-4837.
+(vi) Indemnity Agreement entered into between the Company and its
named officers and directors. Incorporated by reference to
Exhibit 10(ix) of Form 10-K dated August 18, 1996, SEC File
No. 1-4837.
+(vii) Form of Executive Severance Agreement entered into between
the Company and its named officers. Incorporated by
reference to Exhibit 10(ix)
of Form 10-K dated August 9, 1995, SEC File No. 1-4837.
+(viii) Executive Compensation and Benefits Agreement dated as of
October 24, 1990. Incorporated by reference to Exhibit
10(ii) of Form 10-Q dated December 21, 1990, SEC File No.
1-4837.
+(ix) Executive Compensation and Benefits Agreement dated as of
March 29, 1993. Incorporated by reference to Exhibit
10(xiv) of Form 10-K dated August 11, 1994, SEC File No.
1-4837.
(x) Rights Agreement dated as of August 16, 1990. Incorporated
by reference to Exhibit 1 of Form 8-K dated August 27, 1990,
SEC File No. 1-4837.
+(xi) Non-Employee Directors' Deferred Compensation Plan, 1995
Restatement dated July 1, 1995. Incorporated by reference
to Exhibit 10 ( xv) of Form 10-K dated August 9, 1995, SEC
File No. 1-4837.
16
+(xii) Non-Employee Directors Stock Compensation Plan.
Incorporated by reference to Exhibit 10(xvi) of Form 10-K
dated August 9, 1995, SEC File No. 1-4837.
+(xiii) Executive Severance Agreement, as amended. Incorporated by
reference to Exhibit 10(i) of Form 10-Q dated October 7,
1994, SEC File No. 1-4837.
+(xiv) Amendment to Supplemental Executive Retirement Agreement.
Incorporated by reference to Exhibit 10(ii) of Form 10-Q
dated October 7, 1994, SEC File No. 1-4837.
+(xv) Employment Agreement dated January 20, 1995, Incorporated by
reference to Exhibit (10) (xvi) of Form 10-K dated August
20, 1996, SEC File No. 1-4837
+(xvi) Supplemental Executive Retirement Plan for named executive
officers dated September 26, 1996.
(13) Portions of the 1997 Annual Report to Shareholders that are
incorporated herein by reference.
(21) Subsidiaries of the registrant.
(23) Independent Auditors' Consent.
(24) Powers of Attorney.
(27) Financial Data Schedule.
+ Compensatory Plan or Arrangement
(b) No reports on Form 8-K have been filed during the last quarter of the
period covered by this Report.
17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TEKTRONIX, INC.
By /S/ CARL W. NEUN
--------------------------------
Carl W. Neun, Senior Vice President
and Chief Financial Officer
Dated: August 21, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Capacity Date
/S/ JEROME J. MEYER* Chairman, Chief August 21, 1997
- --------------------
Jerome J. Meyer Executive Officer,
and President
CARL W. NEUN Senior Vice President August 21, 1997
- ------------ and Chief Financial
Carl W. Neun Officer, Principal
Financial and
Accounting Officer
/S/ PAULINE LO ALKER* Director August 21, 1997
- --------------------
Pauline Lo Alker
/S/ A. GARY AMES * Director August 21, 1997
- -----------------
A. Gary Ames
18
SIGNATURE CAPACITY DATE
/S/ GERRY B. CAMERON * Director August 21, 1997
- --------------------
Gerry B. Cameron
/S/ PAUL C. ELY, JR. * Director August 21, 1997
- --------------------
Paul C. Ely, Jr.
/S/ A.M. GLEASON * Director August 21, 1997
- ----------------
A. M. Gleason
/S/ WAYLAND R. HICKS * Director August 21, 1997
- --------------------
Wayland R. Hicks
/S/ KEITH R. MCKENNON * Director August 21, 1997
- ---------------------
Keith R. McKennon
/S/ MERRILL A. MCPEAK * Director August 21, 1997
- ---------------------
Merrill A. McPeak
/S/ WILLIAM D. WALKER * Director August 21, 1997
- ---------------------
William D. Walker
*By /S/ JOHN P. KARALIS August 21, 1997
----------------------
John P. Karalis
as attorney-in-fact
19