-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GYhSiT/j/t++3d3/dITuXgtVwF2oq+M7tThX3Sh97/1H0ugacH6OBHXCXlHhTsA+ nofzQBo9eQqi06edEnTpig== 0000912057-97-029149.txt : 19970828 0000912057-97-029149.hdr.sgml : 19970828 ACCESSION NUMBER: 0000912057-97-029149 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19970531 FILED AS OF DATE: 19970827 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEKTRONIX INC CENTRAL INDEX KEY: 0000096879 STANDARD INDUSTRIAL CLASSIFICATION: INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825] IRS NUMBER: 930343990 STATE OF INCORPORATION: OR FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04837 FILM NUMBER: 97670204 BUSINESS ADDRESS: STREET 1: 2660 SW PKWY CITY: WILSONVILLE STATE: OR ZIP: 97070 BUSINESS PHONE: 5036277111 MAIL ADDRESS: STREET 1: P O BOX 100 CITY: WILSONVILLE STATE: OR ZIP: 97070-1000 10-K 1 10K-405 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 EX-3.2 2 EXHIBIT 3.2 BYLAWS As Amended through June 26, 1997 BYLAWS OF TEKTRONIX, INC. ARTICLE I SHAREHOLDERS Section 1. ANNUAL MEETING. The annual meeting of shareholders shall be held on the date and at the time each year as shall be fixed by the board of directors and stated in the notice of meeting, for the purpose of electing directors and for the transaction of such other business as may properly come before the meeting. Section 2. SPECIAL MEETINGS. Special meetings of the shareholders may be called by the Chairman of the Board or by the board of directors, and shall be called by the Chairman of the Board at the request of the holders of not less than one tenth of all the outstanding shares of the corporation entitled to vote at the meeting. Section 3. PLACE OF MEETINGS. The place of each annual meeting and any special meeting of the shareholders shall be determined by the board of directors. Section 4. NOTICE OF MEETING. Written or printed notice stating the date, time and place of the shareholders meeting and, in the case of a special meeting or a meeting for which special notice is required by law, the purposes for which the meeting is called, shall be delivered by the corporation to each shareholder entitled to vote at the meeting and, if required by law, to any other shareholders entitled to receive notice, not earlier than sixty days nor less than thirty days before the meeting date. If mailed, the notice shall be deemed delivered when it is mailed to the shareholder with postage prepaid at the shareholder's address shown in the corporation's record of shareholders. Section 5. CLOSING OF TRANSFER RECORDS OR FIXING OF RECORD DATE. The board of directors may fix a future date as the record date to determine the shareholders entitled to notice of a shareholders meeting, demand a special meeting, vote, take any other action or receive payment of any share or cash dividend or other distribution. This date shall not be earlier than seventy days or, in the case of a meeting, later than thirty-five days before the meeting or action requiring a determination of shareholders. The record date for any meeting, vote or other action of the shareholders shall be the 1 same for all voting groups. If not otherwise fixed by the board of directors, the record date to determine shareholders entitled to notice of and to vote at an annual or special shareholders meeting is the close of business on the day before the notice is first mailed or delivered to shareholders. If not otherwise fixed by the board of directors, the record date to determine shareholders entitled to receive payment of any share or cash dividend or other distribution is the close of business on the day the board of directors authorizes the share or cash dividend or other distribution. Section 6. VOTING LISTS. After a record date for a meeting is fixed, the corporation shall prepare an alphabetical list of all shareholders entitled to notice of the shareholders meeting. The list shall be arranged by voting group and, within each voting group, by class or series of shares, and it shall show the address of and number of shares held by each shareholder. The shareholders list shall be available for inspection by any shareholder, upon proper demand as may be required by law, beginning two business days after notice of the meeting is given and continuing through the meeting, at the corporation's principal office or at a place identified in the meeting notice in the city where the meeting will be held. The corporation shall make the shareholders list available at the meeting, and any shareholder or the shareholder's agent or attorney shall be entitled to inspect the list at any time during the meeting or any adjournment. Refusal or failure to prepare or make available the shareholders list does not affect the validity of action taken at the meeting. Section 7. QUORUM; ADJOURNMENT. (a) Shares entitled to vote as a separate voting group may take action on a matter at a meeting only if a quorum of those shares exists with respect to that matter. A majority of the votes entitled to be cast on the matter by the voting group constitutes a quorum of that voting group for action on that matter. (b) A majority of votes represented at the meeting, although less than a quorum, may adjourn the meeting from time to time to a different time and place without further notice to any shareholder of any adjournment. At an adjourned meeting at which a quorum is present, any business may be transacted that might have been transacted at the meeting originally held. (c) Once a share is represented for any purpose at a meeting, it shall be present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for the adjourned meeting. A new record date must be set if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting. Section 8. VOTING. If a quorum exists, action on a matter, other than the election of directors, by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless a greater number of affirmative votes is required by law or the Restated Articles of Incorporation. 2 Unless otherwise provided in the Restated Articles of Incorporation, directors are elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present. Section 9. PROXIES. At all meetings of shareholders, a shareholder may vote by proxy executed in writing by the shareholder or by his duly authorized attorney in fact. Such proxy shall be filed with the secretary of the corporation before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy. Section 10. VOTING OF SHARES BY CERTAIN HOLDERS. (a) Shares standing in the name of another corporation may be voted by such officer, agent or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such other corporation may determine. (b) Shares held by an administrator, executor, guardian or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name. (c) Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority so to do be contained in an appropriate order of the court by which such receiver was appointed. (d) A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. (e) Neither treasury shares nor shares held by the corporation in a fiduciary capacity, nor shares held by another corporation if a majority of the shares entitled to vote for the election of directors of such other corporation is held by the corporation, shall be voted at any meeting or counted in determining the total number of outstanding shares at any given time. Section 11. PROPER BUSINESS FOR SHAREHOLDERS' MEETING. To be properly brought before the meeting, business must be either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the board of directors, (b) otherwise properly brought before a meeting by or at the direction of the board of directors, or (c) otherwise properly brought before the meeting by a shareholder. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a shareholder, the shareholder must have 3 given timely notice thereof in writing to the Secretary of the corporation. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive office of the corporation not less than 50 days nor more than 75 days prior to the meeting; PROVIDED, HOWEVER, that in the event that less than 65 days' notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made, whichever first occurs. A shareholder's notice to the Secretary shall set forth (a) one or more matters appropriate for shareholder action that the shareholder proposes to bring before the meeting, (b) a brief description of the matters desired to be brought before the meeting and the reasons for conducting such business at the meeting, (c) the name and record address of the shareholder, (d) the class and number of shares of the corporation that the shareholder owns or is entitled to vote and (e) any material interest of the shareholder in such matters. Notwithstanding anything in these bylaws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedure set forth in this Section 11; PROVIDED, HOWEVER, that nothing in this Section 11 shall be deemed to preclude discussion by any shareholder of any business properly brought before the annual meeting. The Chairman of the Board shall, if the facts warrant, determine and declare to the meeting that the business was not properly brought before the meeting in accordance with the provisions of this Section 11, and if the Chairman of the Board should so determine, shall so declare to the meeting any such business not properly brought before the meeting shall not be transacted. Section 12. SHAREHOLDER NOMINATION OF DIRECTORS. Not less than 50 days nor more than 75 days prior to the date of any annual meeting of shareholders, any shareholder who intends to make a nomination at the annual meeting shall deliver a notice to the Secretary of the corporation setting forth (a) as to each nominee whom the shareholder proposes to nominate for election or reelection as a director, (i) the name, age, business address and residence address of the nominee, (ii) the principal occupation or employment of the nominee, (iii) the class and number of shares of capital stock of the corporation that are beneficially owned by the nominee and (iv) any other information concerning the nominee that would be required, under the rules of the Securities and Exchange Commission, in a proxy statement soliciting proxies for the election of such nominee; and (b) as to the shareholder giving the notice, (i) the name and record address of the shareholder and (ii) the class and number of shares of capital stock of the corporation that are beneficially owned by the shareholder; PROVIDED, HOWEVER, that in the event that less than 65 days' notice or prior public disclosure of the date of the annual meeting is given or made to shareholders, notice by the shareholder to be timely must be so delivered not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made, whichever first occurs. Such notice shall include a signed consent to serve as a director of the corporation, if elected, of each such nominee. The corporation may require any proposed nominee to furnish such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as a director of the corporation. 4 Section 13. SHAREHOLDER NOMINATION OF DIRECTORS - SPECIAL MEETINGS. Any shareholder who intends to make a nomination at any special meeting of shareholders held for the purpose of electing directors shall deliver a timely notice to the Secretary of the corporation setting forth (a) as to each nominee whom the shareholder proposes to nominate for election or reelection as a director, (i) the name, age, business address and residence address of the nominee, (ii) the principal occupation or employment of the nominee, (iii) the class and number of shares of capital stock of the corporation that are beneficially owned by the nominee and (iv) any other information concerning the nominee that would be required, under the rules of the Securities and Exchange Commission, in a proxy statement soliciting proxies for the election of such nominee; and (b) as to the shareholder giving the notice, (i) the name and record address of the shareholder and (ii) the class and number of shares of capital stock of the corporation that are beneficially owned by the shareholder. To be timely for these purposes, such notice must be given (a) if given by the shareholder (or any of the shareholders) who or that made a demand for a meeting pursuant to which such meeting is to be held, concurrently with the delivery of such demand, and (b) otherwise, not later than the close of business on the 10th day following the day on which the notice of the special meeting was mailed. Such notice shall include a signed consent to serve as a director of the corporation, if elected, of each such nominee. The corporation may require any proposed nominee to furnish such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as a director of the corporation. ARTICLE II BOARD OF DIRECTORS Section 1. GENERAL POWERS. The business and affairs of the corporation shall be managed by its board of directors. Section 2. NUMBER, TENURE AND QUALIFICATIONS. The directors of the corporation shall be divided into three classes of directors designated Class I, Class II and Class III. Until immediately following the September 1997 Board meeting, the number of directors of the corporation shall be ten, consisting of three Class I directors, four Class II directors, and three Class III directors. Effective immediately following the September 1997 Board meeting, the number of directors of the corporation shall be nine, consisting of three Class I directors, three Class II directors, and three Class III directors. At each annual meeting of shareholders following such initial classification and election, directors elected to succeed those directors whose terms expire shall be elected to serve three-year terms and until their successors are elected and qualified, so that the term of one class of directors will expire each year. When the number of directors is changed by amendment of this Section 2, any newly created directorships, or any decrease in directorships, shall be so apportioned among the classes so as to make all classes as nearly equal as possible, provided that no decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent 5 director. Directors need not be residents of the State of Oregon or shareholders of the corporation. Section 3. ANNUAL AND REGULAR MEETINGS. The annual meeting of the board of directors may be held before or after the annual meeting of shareholders, on the day and at the time and place designated by the Chairman of the Board. The board of directors may provide by resolution, the time and place, either within or without the State of Oregon, for the holding of regular meetings without notice other than such resolution. Section 4. SPECIAL MEETINGS. Special meetings of the board of directors may be called by or at the request of the Chairman of the Board or any two directors. The person or persons authorized to call special meetings of the board of directors may fix any place, either within or without the State of Oregon, as the place for holding any special meeting of the board of directors called by them. Section 5. NOTICE. Notice of the date, time and place of any special meeting of the board of directors shall be given at least three days prior to the meeting by notice communicated in person, by telephone, telegraph, teletype, other form of wire or wireless communication, mail or private carrier. If written, notice shall be effective at the earliest of (a) when received, (b) five days after its deposit in the United States mail, as evidenced by the postmark, if mailed postpaid and correctly addressed, or (c) on the date shown on the return receipt, if sent by registered or certified mail, return receipt requested and the receipt is signed by or on behalf of the addressee. Notice by all other means shall be deemed effective when received by or on behalf of the director. Notice of any regular or special meeting need not describe the purposes of the meeting unless required by law or the Restated Articles of Incorporation. Section 6. QUORUM. A majority of the number of directors fixed by Section 2 of this Article II shall constitute a quorum for the transaction of business at any meeting of the board of directors, but if less than such majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time without further notice. Section 7. MANNER OF ACTING. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors, unless a greater number is required by law or these bylaws. Section 8. VACANCIES. Any vacancy on the board of directors, including a vacancy resulting from an increase in the number of directors, may be filled by the shareholders, the board of directors, the remaining directors if less than a quorum (by the vote of a majority thereof) or by a sole remaining director. Any vacancy not filled by the directors shall be filled by election at an annual meeting or at a special meeting of shareholders called for that purpose. A vacancy that will occur at a specified later 6 date, by reason of a resignation or otherwise, may be filled before the vacancy occurs, but the new director may not take office until the vacancy occurs. Section 9. COMPENSATION. By resolution of the board of directors, the directors may be paid their expenses, if any, of attendance at each meeting of the board of directors, and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Section 10. PRESUMPTION OF ASSENT. A director of the corporation who is present at a meeting of the board of directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. It shall be the duty of the person acting as secretary of the meeting to record in the minutes any negative votes, abstentions or dissents if requested to do so by the director so voting, abstaining or dissenting. Section 11. INFORMAL ACTION BY DIRECTORS. Any action required to be taken at a meeting of directors, or any action which may be taken at a meeting of directors, may be taken without a meeting if a consent in writing setting forth the action so taken shall be signed by all the directors entitled to vote with respect to the subject matter thereof. Such consent shall have the same effect as a unanimous vote of the directors. Section 12. REMOVAL. The shareholders may remove one or more directors with or without cause at a meeting called expressly for that purpose, unless the Restated Articles of Incorporation provide for removal for cause only. Section 13. TRANSACTIONS WITH DIRECTORS. Any contract or other transaction between the corporation and one or more of its directors, or between the corporation and another party in which one or more of its directors are interested shall be valid notwithstanding the presence or participation of such director or directors in a meeting of the board of directors which acts upon or in reference to such contract or transaction, if the fact of such interest shall be disclosed or known to the board of directors and it shall authorize and approve such contract or transaction by a vote of a majority of the directors present. Such interested director or directors may be counted in determining whether a quorum is present at any such meeting, but shall not be counted in calculating the majority necessary to carry such vote. This section shall not invalidate any contract or other transaction which would otherwise be valid under applicable law. 7 Section 14. MEETING BY TELEPHONE CONFERENCE CALL. A meeting of the board of directors may be held by means of conference telephone or similar communications equipment through which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this section shall constitute presence in person at the meeting. Notice (including waiver of notice) and quorum requirements as specified in Sections 5 and 6 of this Article shall apply to meetings pursuant to this section. A record shall be kept of the action taken for insertion into the minute book. ARTICLE III COMMITTEES Section 1. DESIGNATION. The board of directors, by resolution adopted by a majority of the number of directors fixed by Section 2 of Article II of these bylaws, may designate from among its members an executive committee and one or more other committees. The designation of a committee, and the delegation of authority to it, shall not operate to relieve the board of directors, or any member thereof, of any responsibility imposed upon it or him by law. No member of any committee shall continue to be a member thereof after he ceases to be a director of the corporation. The board of directors shall have the power at any time, by resolution adopted by a majority of the number of directors fixed by Section 2 of Article II of these bylaws, to increase or decrease the number of members of any committee, to fill vacancies thereon, to change any member thereof, and to change the functions or terminate the existence thereof. Section 2. POWERS. During the interval between meetings of the board of directors, and subject to such limitations as may be imposed by resolution of the board of directors, the executive committee shall have and may exercise all the authority of the board of directors in the management of the corporation. Any other committee shall have such authority of the board of directors as the board shall delegate by resolution adopted by a majority of the number of directors fixed by Section 2 of Article II of these bylaws. Notwithstanding the foregoing, neither the executive committee nor any other committee shall have the authority of the board of directors in reference to amending the articles of incorporation; adopting a plan of merger or consolidation; recommending to the shareholders the sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all the property and assets of the corporation otherwise than in the usual and regular course of its business; recommending to the shareholders a voluntary dissolution of the corporation or revocation thereof; or amending the bylaws of the corporation. Reports on actions taken by a committee shall be submitted to the next succeeding meeting of the board of directors. Section 3. PROCEDURE; MEETINGS; QUORUM. Each committee shall appoint a chairman from among its members and a secretary who may, but need not, be a 8 member of the committee or of the board of directors. The chairman shall preside at all committee meetings and the secretary shall keep a record of its proceedings. Regular meetings of a committee, of which no notice shall be necessary, shall be held on such days and at such places as shall be fixed by resolution adopted by a majority of the committee. Special meetings of a committee shall be called at the request of any member of the committee, and shall be held upon notice by letter or telegram mailed or delivered for transmission not later than during the second day preceding the day of the meeting, or by word of mouth or telephone received not later than the day immediately preceding the day of the meeting. Any notice required by this section may be waived in writing signed by the member or members entitled to the notice, whether before, or after the meeting time stated therein. Attendance of any member of a committee at a special meeting shall constitute a waiver of notice of such meeting. A majority of the committee, from time to time, shall be necessary to constitute a quorum for the transaction of business, and the act of a majority of the members present at a meeting at which a quorum is present shall be the act of the committee. The board of directors may vote to the members of any committee a reasonable fee as compensation for attendance at meetings of such committee. Section 4. MEETING BY TELEPHONE CONFERENCE CALL. A meeting of a committee may be held by means of conference telephone or similar telephone communications equipment through which all persons participating in the meeting can hear each other. Participation in the meeting pursuant to this section shall constitute presence in person at the meeting. Notice (including waiver of notice) and quorum requirements as specified in Section 3 of this Article shall apply to meetings pursuant to this section. A record shall be kept of action taken for insertion into the minute book. Section 5. INFORMAL ACTION BY COMMITTEE. Any action which may be taken at a meeting of a committee may be taken without a meeting if a consent in writing setting forth the actions so taken shall be signed by all members of the committee entitled to vote with respect to the subject matter thereof. The action shall be effective on the date when the last signature is placed on the consent or at such earlier time as is set forth therein. The consent shall have the same effect as a unanimous vote of the committee. ARTICLE IV OFFICERS Section 1. NUMBER. The officers of the corporation shall be a Chairman of the Board of Directors (the "Chairman of the Board"); a President; a Secretary; and such other officers and assistant officers as may be elected or appointed from time to time by the board of directors. The officers of the corporation shall have such powers and duties as may be prescribed by the board of directors. Any two or more offices may be held by the same person. 9 Section 2. ELECTION AND TERM OF OFFICE. The officers of the corporation shall be elected annually by the board of directors at the first meeting of the board of directors held after the annual meeting of the shareholders. If the election of officers shall not be held at the meeting, it shall be held as soon thereafter as is convenient. Each officer shall hold office until a successor shall have been duly elected and shall have qualified or until the officer's death, resignation or removal in the manner hereinafter provided. Section 3. REMOVAL. Any officer or agent elected or appointed by the board of directors may be removed by the board of directors at any time with or without cause. Election or appointment of an officer or agent shall not of itself create contract rights. Section 4. VACANCIES. A vacancy in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the board of directors for the unexpired portion of the term. Section 5. CHAIRMAN OF THE BOARD. The Chairman of the Board of Directors shall be the chief executive officer of the corporation and, subject to the control of the board of directors, shall in general supervise and control all of the business and affairs of the corporation. The Chairman of the Board may execute in behalf of the corporation all contracts, agreements, stock certificates and other instruments. The Chairman of the Board shall from time to time report to the board of directors all matters within the Chairman's knowledge affecting the corporation which should be brought to the attention of the board. The Chairman of the Board, or such other individuals as may be designated by the Board of Directors from time to time, shall vote all shares of stock in other corporations owned by the corporation, and shall be empowered to execute proxies, waivers of notice, consents and other instruments in the name of the corporation with respect to such stock. He shall preside at all meetings of the board of directors and shareholders. The Chairman of the Board shall perform such other duties as may be prescribed from time to time by the board of directors. Section 6. PRESIDENT. The President shall be the chief operating officer of the corporation and shall supervise the operations of the corporation, subject to the direction of the board of directors and the Chairman of the Board. The President shall perform such other duties as may be prescribed from time to time by the board of directors or the Chairman of the Board. Section 7. SECRETARY. The Secretary shall keep the minutes of all meetings of the directors and shareholders, and shall have custody of the minute books and other records pertaining to the corporate business. The Secretary shall countersign all stock certificates and other instruments requiring the seal of the corporation and shall perform such other duties as may be prescribed from time to time by the board of directors. 10 Section 8. SALARIES. The salaries of the officers shall be fixed from time to time by the board of directors and no officer shall be prevented from receiving such salary because the officer is also a director of the corporation. ARTICLE IV-A NON-CORPORATE OFFICERS A. The Chairman of the Board of the corporation shall have the power, in the exercise of his or her discretion, to appoint persons to hold positions and titles such as vice president, treasurer, assistant vice president, assistant secretary, president of a division, or similar titles as the business of the corporation may require, subject to such limits in appointment power as the board of directors may determine. Each such appointee shall have such title, shall serve in such capacity, and shall have such authority and perform such duties as the Chairman of the Board of the corporation shall determine; provided that no such appointee shall have executive powers, be in charge of a principal business unit, division or function or perform similar policy making functions. The board of directors shall be advised of any such appointment at a meeting of the board of directors, and the appointment shall be noted in the minutes of the meeting. The minutes shall state that such persons are non-corporate officers appointed pursuant to this Article IV-A of these bylaws. B. Any such appointee, absent specific election by the board of directors as an elected corporate officer (i) shall not be considered an officer elected by the board of directors pursuant to Article IV of these bylaws, (ii) shall not be considered an 'officer' of the corporation for the purposes of Rule 3b-2 promulgated under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (collectively, the "Act"), or an 'executive officer' of the corporation for the purposes of Rule 3b-7 promulgated under the Act, and similarly shall not be considered an 'officer' of the corporation for the purposes of Section 16 of the Act, or an 'executive officer' of the corporation for the purposes of Section 14 of the Act, and (iii) shall be empowered to represent himself or herself to third parties as an appointed vice president, etc., only, and shall be empowered to execute documents, bind the corporation, or otherwise act on behalf of the corporation only as authorized by the Chairman of the Board or the President of the corporation or by resolution of the board of directors. An elected corporate officer of the corporation may also be appointed to a position pursuant to this Article IV-A. C. A person appointed to a position pursuant to this Article IV-A may be removed at any time by the Chairman of the Board or by the board of directors of the corporation. 11 ARTICLE V INDEMNITY OF DIRECTORS AND OFFICERS A. The corporation shall indemnify to the fullest extent then permitted by law any person who is made, or threatened to be made, a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, investigative or otherwise (including an action, suit or proceeding by or in the right of the corporation) by reason of the fact that the person is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise against all expenses (including attorneys' fees), judgments, amounts paid in settlement and fines actually and reasonably incurred in connection therewith. B. Expenses incurred in connection with an action, suit or proceeding may be paid or reimbursed by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay such amounts if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation. C. The indemnification provided hereby shall not be deemed exclusive of any other rights to which those indemnified may be entitled under the Restated Articles of Incorporation, any statute, agreement, or vote of shareholders or directors or otherwise, both as to action in any official capacity and as to action in another capacity while holding an office, and shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such person. D. The corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or fiduciary with respect to any employee benefit plans of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent, or as a fiduciary of an employee benefit plan, of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against and incurred by the person in any such capacity, or arising out of the person's status as such, whether or not the corporation would have the power to indemnify the person against such liability under the provisions of the Restated Articles of Incorporation or the Oregon Business Corporation Act. E. Any person other than a director or officer who is or was an employee or agent of the corporation, or fiduciary within the meaning of the Employee Retirement Income Security Act of 1974 with respect to any employee benefit plans of the corporation, or is or was serving at the request of the corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise may 12 be indemnified to such extent as the board of directors in its discretion at any time or from time to time may authorize. ARTICLE VI CONTRACTS, LOANS, CHECKS AND DEPOSITS Section 1. CONTRACTS. The board of directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances. Section 2. LOANS. No loans shall be contracted on behalf of the corporation and no evidence of indebtedness shall be issued in its name unless authorized by a resolution of the board of directors. Such authority may be general or confined to specific instances. Section 3. CHECKS, DRAFT, ETC. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation, shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall from time to time be determined by or pursuant to resolution of the board of directors. Section 4. DEPOSITS. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositories as the board of directors may select. ARTICLE VII CERTIFICATES FOR SHARES AND THEIR TRANSFER Section 1. CERTIFICATES FOR SHARES. Certificates representing shares of the corporation shall be in such form as shall be determined by the board of directors. Such certificates shall be signed by the Chairman of the Board or a Vice President and by the Secretary or an Assistant Secretary and may be sealed with the seal of the corporation or a facsimile thereof. All certificates for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the share transfer records of the corporation. All certificates surrendered to the corporation for transfer shall be cancelled and no new certificate shall be issued until the former certificate for a like number of shares shall have been 13 surrendered and cancelled, except that in case of a lost, destroyed or mutilated certificate a new one may be issued therefore upon such terms and indemnity to the corporation as the board of directors may prescribe. Section 2. TRANSFER OF SHARES. Transfer of shares of the corporation shall be made only on the share transfer records of the corporation by the holder of record thereof or by his legal representative, who shall furnish proper evidence of authority to transfer, or by his attorney thereunto authorized by power of attorney duly executed and filed with the secretary of the corporation. The person in whose name shares stand on the books of the corporation shall be deemed by the corporation to be the owner thereof for all purposes. Section 3. TRANSFER AGENT AND REGISTRAR. The board of directors may from time to time appoint one or more transfer agents and one or more registrars for the shares of the corporation, with such powers and duties as the board of directors shall determine by resolution. The signatures of the president or vice president and the secretary or assistant secretary upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar other than the corporation itself or an employee of the corporation. Section 4. OFFICER CEASING TO ACT. In case any officer who has signed or whose facsimile signature has been placed upon a stock certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the date of its issuance. Section 5. FRACTIONAL SHARES. The corporation shall not issue certificates for fractional shares. ARTICLE VIII FISCAL YEAR The fiscal year of the corporation shall end on the last Saturday in May of each year. ARTICLE IX DIVIDENDS The board of directors may from time to time declare, and the corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law. 14 ARTICLE X SEAL The seal of the corporation shall be in the form of a circle containing therein "TEKTRONIX, INC. CORPORATE SEAL OREGON." ARTICLE XI AMENDMENTS These bylaws may be altered, amended or repealed and new bylaws may be adopted by the board of directors at any regular or special meeting. I HEREBY CERTIFY that the foregoing are the bylaws of TEKTRONIX, INC. adopted at a meeting of the board of directors of the company held on September 9, 1963, and as amended with regard to Article IV at a meeting of the board of directors of the company held on December 22, 1966, and as amended with regard to Article IV at a meeting of the board of directors of the company held on January 30, 1969, and as amended with regard to Article II at a meeting of the board of directors of the company held on July 17, 1969, and as amended with regard to Article IV at a meeting of the board of directors of the company held on September 24, 1970, and as amended with regard to Article IV at a meeting of the board of directors of the company held on September 30, 1971, and as amended with regard to Article V at a meeting of the board of directors of the company held on September 27, 1973, and as amended with regard to Article IV at a meeting of the board of directors of the company held on September 26, 1974, and as amended with regard to Article I at a meeting of the board of directors of the company held on April 28, 1977, and as amended with regard to Article I at a meeting of the board of directors of the company held on May 20, 1977, and as amended with regard to Article IV at a meeting of the board of directors of the company held on January 18, 1979, and as amended with regard to Article II at a meeting of the board of directors of the company held on February 28, 1980, and as amended with regard to Article II at a meeting of the board of directors of the company held on May 22, 1980, and as amended with regard to Articles I, II and III at a meeting of the board of directors of the company held on June 25, 1980, and as amended with regard to Article II at a meeting of the board of directors of the company held on September 9, 1980, with the amendment to be effective September 27, 1980, and as amended with regard to Article I at a meeting of the board of directors of the company held on July 23, 1981, and approved by the shareholders at a meeting held on September 26, 1981, and as amended with regard to Article VI at a meeting of the board of directors of the company held on May 3, 1983, and as amended with regard to Article II at a meeting of the board of directors of the company held on June 30, 1983, and as amended with 15 regard to Articles III and IV at a meeting of the board of directors of the company held on March 1, 1984, and as amended with regard to Article I at a meeting of the board of directors of the company held on December 6, 1984, and as amended with regard to Article II at a meeting of the board of directors of the company held on August 13, 1985, and as amended with regard to Article II at a meeting of the board of directors of the company held on October 24, 1985, and as amended with regard to Article II at a meeting of the board of directors of the company held on July 17, 1986, and as amended with regard to Article V at a meeting of the board of directors of the company held on September 27, 1986, and as amended with regard to Article II at a meeting of the board of directors of the company held on June 23, 1988, and as amended with regard to Article II at a meeting of the board of directors of the company held on July 21, 1988, and as amended with regard to Article II at a meeting of the board of directors of the company held on July 20, 1989, and as amended with regard to Articles I, II and IV at a meeting of the board of directors of the company held on November 29, 1989, and as amended with regard to Articles II and IV at a meeting of the board of directors of the company held on April 25, 1990, and as amended with regard to Article I at a meeting of the board of directors of the company held on June 20, 1990, and as amended with regard to Article II at a meeting of the board of directors of the company held on July 19, 1990, and as amended with regard to Articles II and IV at a meeting of the board of directors of the company held on October 24, 1990, and as amended with regard to Article II at a meeting of the board of directors of the company held on March 20, 1991, and as amended with regard to Article I at a meeting of the board of directors of the company held on July 17, 1991, and as amended with regard to Articles I, II, IV, and VII at a meeting of the board of directors of the company held on September 26, 1991, and as amended with regard to Article II at a meeting of the board of directors of the company held on January 29, 1992, and as amended with regard to Article II by action of the board of directors of the company without a meeting, effective July 10, 1992, and as amended with regard to Article IV at a meeting of the board of directors of the company held on September 23, 1992, and as amended with regard to Article II by action of the board of directors of the company without a meeting, effective September 24, 1992, and as amended with regard to Article I at a meeting of the board of directors of the company held on October 18, 1992, and as amended with regard to Article II at a meeting of the board of directors of the company held on December 2, 1992, and as amended with regard to Article IV-A at a meeting of the board of directors of the company held on March 31, 1993, and as amended with regard to Articles I and II at a meeting of the board of directors of the company held on June 23, 1994, and as amended with regard to Article II at a meeting of the board of directors of the company held on December 15, 1994, and as amended with regard to Article II by action of the board of directors of the company without a meeting, effective March 1, 1995, and as amended with regard to Article I at a meeting of the board of directors of the company held on September 20, 1995, and as amended with regard to Article II at a meeting of the board of directors of the company held on 16 January 17, 1996, and as amended with regard to Articles II and IV at a meeting of the board of directors of the company held on June 19, 1996, and as amended with regard to Article II at a meeting of the board of directors of the company held on March 19, 1997, and as amended with regard to Article II at a meeting of the board of directors of the company held on May 15, 1997, and as amended with regard to Article II at a meeting of the board of directors of the company held on June 26, 1997. ------------------------- Secretary 17 EX-10.16 3 EXHIBIT 10.16 TEKTRONIX, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (EFFECTIVE SEPTEMBER 26, 1996) TEKTRONIX, INC. AN OREGON CORPORATION PO BOX 500 BEAVERTON, OREGON 97077 TEKTRONIX Tektronix desires to provide a supplemental retirement opportunity to a select group of its senior management employees in recognition of their contributions to, and to encourage their long-term retention by, Tektronix and to ensure that they can retire from Tektronix with a level of retirement benefits (including benefits provided by previous employers) consistent with their peers in competing companies. This Supplemental Executive Retirement Plan (the "Plan") is intended to supplement the retirement income available to certain designated elected officers and senior executives of Tektronix by (i) crediting to book-entry accounts maintained for their benefit under this Plan (the "ACCOUNTS") a one-time start-up credit and annual credits based on corporate performance, and (ii) crediting earnings to their Accounts at the same intervals and in the same manner as occurs under the Tektronix Deferred Compensation Plan (the "DC PLAN") investment funds. Subject to the Plan's vesting and forfeiture provisions, payment of a participant's Account balance will be made upon retirement at age 62 or later or, in the event of an earlier termination of employment, at age 62. Participants will be permitted to defer receipt of payment by electing to receive payment in no more than ten level annual installments beginning on the normal lump sum payment date. I. PLAN ADMINISTRATION. This Plan will be administered by the Organization and Compensation Committee (the "COMMITTEE") of the Board of Directors of Tektronix (the "BOARD"). The Committee will have full discretionary authority to interpret this Plan and make determinations regarding eligible executives' participation in and rights under the Plan. Any decision by the Committee or its delegate within its authority will be final and binding on all parties. The Committee may delegate any or all of its duties with respect to this Plan, other than its duties to review and approve executives' initial and continued eligibility and to review denied claims or requests under Section 8.4, and/or the administration of Accounts and benefit payments to Tektronix (acting through its Human Resources Department) or a third party acting as agent of the Committee. 1. PARTICIPATION. 1.1 ELIGIBILITY CRITERIA. Eligibility for participation in this Plan is limited to those elected officers and senior executives who, in the judgment of the Chief Executive Officer of Tektronix (the "CEO") and the Committee, have the greatest potential to impact significantly the long-term financial performance of Tektronix. An executive who is a party to a separate supplemental retirement agreement with Tektronix will not be eligible to participate in this Plan. 1.2 ANNUAL NOMINATION. In order to become a participant or to receive a performance-based credit for any particular Fiscal Year, an executive must be nominated for participation by the CEO, whose nomination must be approved by the Committee before it becomes effective. An eligible executive will become a participant on the date his or her initial nomination is approved by the Committee pursuant to the preceding sentence. Receipt of performance-based credits under this Plan for any particular Fiscal Year does not guarantee or infer assurance of continued eligibility for any future Fiscal Year. 1.3 DURATION OF PARTICIPATION. After an executive first becomes a participant, his or her continued eligibility to receive performance-based credits under this Plan for future Fiscal Years will depend on his or her being nominated and approved for the applicable Fiscal Year pursuant to Section 2.2 and the continued existence of the Plan. Once an executive has become a participant pursuant to Section 2.2, he or she will continue as a participant throughout the remainder of his or her employment with Tektronix; PROVIDED, HOWEVER, that no performance-based credits will be added to a participant's Account for any Fiscal Year unless he or she is nominated and approved for continued eligibility for the applicable Fiscal Year pursuant to Section 2.2. 2. CREDITS AND ADJUSTMENTS TO ACCOUNTS. 2.1 START-UP CREDIT. Tektronix will credit to each participant's Account an amount equal to fifty percent (50%) of his or her combined annual base salary and target award amount under the Tektronix Annual Performance Improvement Plan (the "APIP") at the rate in effect at the close of the fiscal year he or she first becomes a participant pursuant to Section 2.2. Taking into account retirement-type benefits from prior employers and upon the recommendation of the CEO, the Committee may specify that a percentage other than fifty percent (50%) will be applied in determining the start-up credit to be credited to a participant's Account in connection with its approval of his or her initial nomination pursuant to Section 2.2. This start-up credit will be credited to the participant's Account as of the July 1 that next follows the date an executive first becomes a participant pursuant to Section 2.2, in addition to any performance-based credit added to the Account as of that date. 2.2 ANNUAL PERFORMANCE-BASED CREDITS. For each Fiscal Year, Tektronix will add a performance-based credit to the Account of each participant who is nominated and approved for continued eligibility to receive such a credit for the applicable Fiscal Year pursuant to Section 2.2 (an "ELIGIBLE PARTICIPANT"). (a) ANNUAL CREDIT AMOUNT. The annual amount of the performance-based credit is ten percent (10%) of an Eligible Participant's combined annual base salary and target APIP award amount at the rate in effect at the close of the applicable Fiscal Year. (b) ACTUAL ANNUAL AMOUNT. The actual annual credit amount to be added to an Eligible Participant's Account will be determined by multiplying the Annual Credit Amount (as defined in Section 3.2(a)) by Tektronix' annual corporate APIP performance factor for the applicable Fiscal Year. The actual annual credit for the initial year of participation will be prorated for that portion of the fiscal year following the date he or she first became a participant pursuant to Section 2.2. (c) TIMING OF CREDITS. These performance-based credits will be credited to Eligible Participants' Accounts as of the July 1 that next follows the close of the Fiscal Year to which they relate. 2.3 ADJUSTMENTS TO ACCOUNTS. Until the earlier of the date (i) a participant's Account is forfeited pursuant to Article 4 or Section 5.3(d), or (ii) full payment of the Account has been made to the participant or his or her beneficiary(ies) under this Plan, Tektronix will adjust the balance credited to the Account on a calendar quarterly basis, as follows: (a) OVERALL METHODOLOGY. At the close of every calendar quarter for which a participant's Account has a positive balance, earnings will be credited in the same manner as occurs under the DC Plan. (b) INSTALLMENT PAYMENTS. If an Account is being paid in installments pursuant to Section 5.2, the unpaid Account balance will continue to be adjusted in the above manner during the installment payment period, with the last adjustment being that made as of the first day of the calendar quarter in which the last installment is paid. (c) TIMING OF ADJUSTMENTS. These adjustments to Eligible Participants' Accounts will be made at the same intervals as occurs under the DC Plan. 2.4 BOOK-ENTRY ACCOUNTS. Each participant's Account will be maintained on the books of Tektronix until the earlier of the date (i) a participant's Account is forfeited pursuant to Article 4 or Section 5.3(d), or (ii) full payment of the Account has been made to the participant or his or her beneficiary(ies) under this Plan. No funds will be set aside or earmarked for the Account, which will be purely a bookkeeping device. 3. VESTING. 3.1 REQUIREMENTS FOR 100% VESTING. Subject to Article 7 and Sections 4.2, 6.1 and 9.1, each participant's interest in his or her Account will become one hundred percent (100%) vested and nonforfeitable on the later of the date the participant (i) attains age 55 while employed by Tektronix or an affiliate, (ii) completes five years of employment with Tektronix or its affiliates, or (iii) first became a participant pursuant to Section 2.2. 3.2 FORFEITURE. A participant's entire interest in his or her Account will be forfeited if (i) his or her employment with Tektronix terminates before such interest has become vested pursuant to Section 4.1, (ii) notwithstanding the provisions of Section 4.1, his or her employment with Tektronix is involuntarily terminated for cause (as defined in his or her executive severance agreement), or (iii) or the participant fails or refuses to sign a non-compete agreement which is reasonably acceptable to Tektronix upon or in connection with his or her retirement or other termination of employment with Tektronix. 4. TIME AND MANNER OF PAYMENT. 4.1 LUMP SUM PAYMENT. Subject to Articles 4 and 6 and Section 5.4, unless a participant elects an installment payment method pursuant to Section 5.2 no later than 30 days after the date he or she first became a participant pursuant to Section 2.2, his or her Account will be paid in a lump sum payment as soon as practicable after January 1 of the calendar year that next follows the later of the date (i) the participant attains age 62 or (ii) his or her employment with Tektronix and its affiliates terminates. 4.2 INSTALLMENT PAYMENTS. Subject to Articles 4 and 6 and Section 5.4, PROVIDED that an executive elects, no later than 30 days after the date he or she first becomes a participant pursuant to Section 2.2, to have his or her Account paid in an installment payment method permitted under this Section 5.2, the Account will be paid in not more than ten substantially equal annual installments commencing as soon as practicable after January 1 of the calendar year that next follows the later of the date (i) the participant attains age 62 or (ii) his or her employment with Tektronix and its affiliates terminates. 4.3 OTHER RULES REGARDING PAYMENT OF ACCOUNTS. (a) IRREVOCABILITY. A participant's election of an installment payment method pursuant to Section 5.2 will be irrevocable, and if no such election is made within 30 days after the date he or she first becomes a participant pursuant to Section 2.2, the lump sum payment method will apply. (b) TAX WITHHOLDING. Tektronix may withhold from any payment under this Plan any federal, state or local taxes or other amounts as required by law. (c) LEGAL INCOMPETENCY. If any individual to whom a benefit is payable under this Plan is a minor or legally incompetent, the Committee will determine whether payment will be made directly to the individual, any person acting as his or her custodian or legal guardian under the Oregon Uniform Transfers to Minors Act, his or her legal representative or a near relative, or directly for his or her support, maintenance or education. (d) UNDISTRIBUTABLE ACCOUNTS. Each Participant, or (in the event of death) his or her beneficiary(ies), must keep the Committee advised of his or her current address. If the Committee has not located the participant or beneficiary(ies) to whom an Account is payable under this Plan within 35 months after the Account first became payable, the payee's interest in the Account will be forfeited as of the end of the 35th month. If a participant whose Account was forfeited under this Section 5.3(d), or (in the event of death) his or her beneficiary(ies), files a claim for payment of the Account after its forfeiture, and if the Committee determines that the claim is valid, the balance forfeited will be paid in a lump sum payment as soon as practicable. (e) PAYMENT IN CASH. All payments under this Plan will be made in cash or its equivalent. 4.4 FINANCIAL HARDSHIP. Notwithstanding any contrary Plan provision, if a participant incurs a "financial hardship", the Committee (in its sole discretion) may determine that all or part of his or her Account will be paid to him or her immediately; PROVIDED, HOWEVER, that the amount paid pursuant to this Section 5.4 will be limited to the amount reasonably necessary to alleviate the participant's hardship. For this purpose, "FINANCIAL HARDSHIP" means a severe financial emergency which is caused by a sudden and unexpected accident, illness or other event beyond the control of the participant which, without an accelerated distribution from the Plan, would result in a severe financial burden to the Participant or a member of his or her immediate family. A financial hardship does not exist to the extent that the hardship may be relieved by (i) reimbursement or compensation by insurance, (ii) liquidation of the participant's other assets (to the extent such liquidation would not itself cause severe financial hardship), or (iii) any loan available to the participant (to the extent the payments on such loan would not themselves cause severe financial hardship). 5. DEATH OR DISABILITY. 5.1 GENERAL RULE AND VESTING. A participant's Account will be payable under this Article on the participant's death or disability notwithstanding any contrary provision of Article 5. A participant's interest in his or her Account will become one hundred percent (100%) vested and nonforfeitable on the date he or she becomes disabled or dies. 5.2 DEATH. Upon the death of a participant, his or her Account will be paid in a lump sum payment as soon as practicable to his or her beneficiary(ies), as determined in the following order of priority: (a) To the surviving beneficiary(ies) designated by the participant in writing to the Committee. (b) To the surviving beneficiary(ies) designated by the participant in writing in connection with the Tektronix life insurance program. (c) To the participant's surviving spouse. (d) To the participant's estate. 5.3 DISABILITY. A participant who is temporarily disabled while employed or receiving long term disability benefits under a plan described in Section 6.4 will be treated as employed and no payment will be made from his or her Account. If disability benefits stop and disability continues, the Account will be paid in accordance with Article 5 as if his or her employment with Tektronix had terminated at that time. 5.4 "DISABLED" DEFINED. A participant will be deemed to be "DISABLED" for purposes of this Article 6 if the Committee determines that he or she is eligible to receive long term disability benefits under an employee welfare benefit plan maintained by Tektronix or would have been eligible if covered by the plan. 6. AMENDMENT; TERMINATION. 6.1 AMENDMENT. Tektronix may amend this Plan at any time so long as the rights preserved on termination under Section 7.2(b) are not reduced. The power to amend this Plan may be exercised by either the Board or the Committee. 6.2 TERMINATION. Tektronix may terminate this Plan at any time, as follows: (a) Termination will be effected by sending written notice of the termination to all participants or (in the event of death) beneficiary(ies). The termination date will not be earlier than the first day of the month in which such notice is given. (b) After the effective date of termination of this Plan, no participant will be eligible for any benefit under Article 3, except for the balance credited to his or her Account as of the July 1 that next preceded the termination date, as adjusted pursuant to Section 3.3 through the first day of the calendar quarter that next follows the termination date. (c) The power to terminate this Plan may be exercised by either the Board or the Committee. 6.3 ADVERSE IRS RULING. If the Internal Revenue Service rules that any vested Account balance under this Plan will be currently includible in a participant's gross income prior to the date for payment determined under the terms of the Plan (other than in connection with a domestic relations order), all vested Accounts to which the ruling applies will be paid within 30 days to the participants or (in the event of death) beneficiary(ies) involved. 7. CLAIMS PROCEDURE. 7.1 INITIAL CLAIM. Any person claiming a benefit or requesting an interpretation, ruling or information under this Plan will present the request in writing to the Committee which will respond in writing as soon as is practicable. 7.2 RESPONSE TO INITIAL CLAIM. If the claim or request is denied, the written notice of denial will state the following: (a) The reasons for denial, with specific reference to the terms of the Plan provisions on which this denial is based. (b) A description of any additional material or information required and an explanation of why it is necessary. (c) An explanation of the Plan's claims review procedures. 7.3 INITIAL NOTICE OF DENIAL. The initial notice of denial will normally be given within 90 days of the review of the claim. If special circumstances require an extension of time, the claimant will be so notified and the time limit will be 180 days. 7.4 REVIEW OF DENIED CLAIMS. Any person whose claim or request is denied or who has not received a response within 30 days may request review by notice in writing to the Committee. The original decision will be reviewed by the Committee, which may, but will not be required to, have the claimant appear before them. On review, whether or not there is a hearing, the claimant may have representation, examine pertinent documents and submit issues and comments in writing. 7.5 DECISION ON REVIEW. The decision on review will normally be made within 60 days. If an extension of time is required for a hearing or other special circumstances, the claimant will be so notified and the time limit will be 120 days. The decision will be in writing and will state the reasons and the relevant plan provisions. All decisions on review will be final and bind all parties concerned. 8. GENERAL PROVISIONS. 8.1 NONASSIGNABILITY. No interest under this Plan of any participant, or (in the event of death) of his or her spouse, beneficiary or contingent annuitant under the Basic Plan, may be assigned, transferred, seized by legal process or subjected to the claims of creditors in any way. 8.2 NOTICES. Any notice under this Plan will be in writing and will be effective when actually delivered or, if mailed, when deposited postpaid as first class mail. Mail will be directed to Tektronix at the address stated in this Plan, to the participant at the address shown on the Tektronix employment records, or to such other address as a party will specify by notice to the other parties or as the Committee may determine to be appropriate. Notices to the Committee will be sent to Tektronix's address. 8.3 NOT CONTRACT OF EMPLOYMENT. Nothing in this Plan will give any employee the right to continue employment. The Plan will not prevent discharge of any employee at any time for any reason. EX-13 4 EXHIBIT 13 MANAGEMENT REVIEW RESULTS OF OPERATIONS OVERVIEW Tektronix had record orders, sales and earnings in its fiscal year ended May 31, 1997. Net earnings in 1997 of $114.8 million, or $3.48 per share, increased 15% over fiscal 1996 earnings of $99.6 million, or $3.00 per share. Net earnings in 1996 were 22% higher than 1995 earnings of $81.6 million, or $2.50 per share. NET SALES AND PRODUCT ORDERS Net sales in 1997 were $1.940 billion, up 10% from $1.769 billion in 1996. The sales growth resulted from a strong flow of new products from all divisions. Products introduced within the last two years accounted for approximately 73% of 1997 product sales, increasing from 67% in 1996 and 62% in 1995. Sales to customers in the United States of $1.027 billion were 15% above the level for the prior year, and represented 53% of total sales. The improved domestic sales level is primarily the result of the favorable response to new products. International sales rose 4% from $877.9 million to $912.8 million, as strong sales growth in the Pacific region, excluding Japan, and in the Americas was tempered by flat sales in Europe and Japan and the stronger U.S. dollar. Net sales in 1996 were 18% higher than in 1995. U.S. sales of $890.9 million in 1996 were 17% above the prior year. International sales rose 21%, from $724.7 million in 1995 to $877.9 million in 1996, with improvement across all geographic regions, but especially in the Pacific. Product orders for 1997 were $1.829 billion, compared to $1.658 billion in 1996 and $1.413 billion in 1995. The following table summarizes the Company's net sales for the last three years by its three business divisions: IN THOUSANDS 1997 1996 1995 - ------------------------------------------------------------------------- Measurement Business $852,827 $812,250 $731,061 Color Printing and Imaging 638,456 561,642 454,961 Video and Networking 448,799 394,966 303,213 Measurement Business sales in 1997 accounted for 44% of total sales and grew 5% from the prior year. The growth was due to the favorable response to its new products, particularly handheld electronic tools and telecommunications test products, and the introduction of the TDS 200 oscilloscopes and the TLA 700 logic analyzers in the second half of the year. Sales growth was constrained somewhat by component shortages during part of the year and by a decline in orders from Sony/Tektronix, the Company's joint venture in Japan. The Sony/Tektronix order decline was primarily due to a change in its inventory stocking strategy during the year. Measurement Business sales in 1996 were 11% higher than in 1995 with well-received new product introductions in digital oscilloscopes, signal processors, handheld electronic tools and telecommunications test products. Product orders in 1997 were $795.2 million, compared to $754.0 million in 1996 and $667.1 million in 1995. Color Printing and Imaging sales increased 14% from 1996 with the successful launch of the Phaser 350 color solid ink printer for the office market in the second quarter and the Phaser 600 color wide-format printer in the third quarter, which strengthened sales into the specialty printer markets. Also contributing to the sales increase was continued strong demand for the Phaser 550 color laser printer in the office market. Color Printing and Imaging sales made up 33% of total sales. Sales and orders were strong in the U.S. and in the Pacific, excluding Japan. Color Printing and Imaging sales in 1996 increased 23% over 1995, due primarily to market acceptance of new products. Product orders rose 14% to $607.5 million from $531.1 million in 1996. Product orders were $433.9 million in 1995. Video and Networking sales increased 14% from 1996 due to strength in Profile video disk recorders and business network computers. Sales and orders were particularly strong in the fourth quarter due to the introduction of the Profile PDR 200 Profile professional file server and the Lightworks V.I.P nonlinear digital editing system. Video and Networking sales rose 30% in 1996 from 1995, due primarily to the introduction of new products. Product orders, at $426.4 million in 1997, increased 15% from the prior year's $372.4 million. Product orders were $311.6 million in 1995. OPERATING COSTS AND EXPENSES Gross margins increased to 42.9% in 1997 from 41.9% in 1996 due to an improved mix of higher margin supplies sales in Color Printing and Imaging and lower manufacturing costs in Video and Networking. Gross margins decreased to 41.9% in 1996 from 45.3% in 1995, caused primarily by increased sales through alternative distribution channels, the impacts of increased systems integration sales from Video and Networking and changes in product mix. Research and development (R&D) expenses were 9.7% of sales compared with 9.3% in 1996 and 11.1% in 1995. The increase in R&D expenses in 1997 was planned to fund the high level of new product development. The reduction in the rate of R&D spending in 1996 occurred as the Company concentrated on more focused projects and experienced delays in hiring certain technical positions. Page 16 Selling, general and administrative expenses were 24.8% of sales in 1997 and 1996, and 26.7% in 1995. Equity in business ventures' earnings decreased to $1.6 million in 1997 from $5.1 million in 1996 and $4.3 million in 1995, primarily due to lower 1997 profitability at Merix Corporation, which had accounted for a substantial portion of the business ventures' earnings in the previous two years. Operating margins increased year over year, rising from 7.7% in 1995 to 8.1% in 1996 and 8.5% in 1997. The improvement in 1997 was due primarily to higher gross margins, partly offset by higher R&D spending and lower equity in business ventures' earnings. The improvement in 1996 was due to lower operating expenses as a percentage of sales, partly offset by lower gross margins. Video and Networking improved operating results in 1997, but continued to operate at a loss for the year. The Company expects Video and Networking to be profitable in 1998. Interest expense declined in 1997 compared to 1996 due to lower borrowings, which was the result of increased cash flows from operations. The increase in interest expense from 1995 to 1996 was due to higher borrowings to fund working capital needs. Other income was $15.9 million in 1997 compared with income of $12.9 million in 1996 and $4.7 million in 1995. The improvement primarily reflected higher gains on sales of stock in other companies. The Company continues to hold equity positions that it intends to liquidate over time. The Company recorded taxes on 1997 results at the effective rate of 32%, compared with 30% in 1996 and 26% in 1995, with the increase in the rate due to increased domestic earnings and the consumption of certain foreign tax credits. Net earnings of $114.8 million for 1997 were 15% higher than for the prior year due to the increase in sales and the improvement in operating margins, partly offset by the higher effective tax rate. The growth in sales and improved operating margins in 1996, partly offset by the higher effective tax rate, resulted in a 22% increase in net earnings over 1995. The Company expects fiscal 1998 sales and earnings growth to be in the range of 10 to 15 percent. FINANCIAL CONDITION OVERVIEW Tektronix continues to focus on improving the efficient management of the capital invested in its business. To monitor that progress, the Company is using the economic value added (EVA) measure. EVA is determined by the Company by deducting taxes and a cost of capital charge from operating income, which management believes provides an objective means of determining if the Company's earnings are able to cover the cost of financing its invested capital. Invested capital is the average net assets of the Company excluding cash and debt. In 1997, the Company generated EVA of $21.8 million compared to $11.9 million in 1996 and $11.7 million in 1995. The improvement in 1997 is a result of both the record earnings for the year and the significant improvement in invested capital, especially in the reduction of accounts receivable and inventories. LIQUIDITY The Company's financial condition is strong. Cash flows from operating activities and borrowing capacity from existing lines of credit are expected to be sufficient to meet current and anticipated future needs. In 1997, cash provided by operating activities totaled $262.3 million, which was partially used in investing activities of $69.1 million and financing activities of $86.3 million. At May 31, 1997, the Company maintained bank credit facilities totaling $300.3 million, of which $293.4 million was unused. Unused facilities include $143.4 million in lines of credit and $150.0 million under a revolving credit agreement from United States and foreign banks. Additional details, including maturity dates of agreements and certain financial covenants, are included under "Short-term and Long-term Debt" in the Notes to Consolidated Financial Statements. BALANCE SHEET Current assets decreased by $2.1 million as lower accounts receivable, inventories and other current assets were offset by a $106.1 million increase in cash. Accounts receivable decreased by $69.5 million, due primarily to improved sales terms and collections and the $50.0 million securitization of receivables, partially offset by an increase in year over year sales in the fourth quarter of $53.2 million. Inventories decreased by $26.6 million as the Company focused additional attention on working capital efficiencies. Other current assets decreased because of a reduction in prepaid income taxes. Net property, plant and equipment increased by $35.6 million due to capital expenditures of $112.0 million in 1997, primarily related to facilities improvements and implementation of information systems. The Company expects to increase capital expenditures in 1998 to approximately $150 million, due primarily to increased investment in the growth of Color Printing and Imaging. Deferred tax assets declined by $15.7 million due to the reversal of temporary differences between book and tax income. Other long-term assets declined by $24.6 million due to the disposition of some of the Company's equity investments and a decline in the translated U.S. dollar book value of the Company's business venture in Japan caused by the stronger dollar. Current liabilities decreased by $61.2 million, primarily due to reductions in short-term debt and accrued compensation. Short-term debt was reduced by $38.5 million due to strong operating cash flows. Accrued compensation decreased by $29.1 million due to the payment of pension liabilities of $39.1 million, partly offset by higher payroll, Page 17 incentive and commission accruals. Long-term debt decreased due to the redemption of $50.0 million of commercial paper that had been classified as long-term debt in 1996. Shareholders' equity increased by $96.0 million, or 14%, due to earnings net of dividends. Additional equity resulting from the Company's issuance of common stock for the exercise of stock options was offset by declines in currency adjustment and unrealized holding gains. DERIVATIVES AND FOREIGN EXCHANGE The Company has exposure to interest rate risk, primarily from its use of short-term and long-term borrowings to finance operations, and to investment risk, primarily from its equity investment portfolio. The Company has not entered into any significant derivatives to hedge against these interest rate or investment risks. The Company is also exposed to exchange rate risk on transactions and commitments denominated in foreign currencies and uses foreign exchange contracts to offset this risk. Changes in foreign exchange rates are not expected to have a significant effect on the Company's financial position, results of operations or cash flows. The Company's policy is to only enter into derivative transactions when it has an identifiable exposure to risk, and to only enter into such transactions with creditworthy financial institutions. FUTURE ACCOUNTING CHANGES In February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." SFAS No. 128 requires all companies whose capital structures include convertible securities and options to make a dual presentation of basic and diluted earnings per share. The new standard becomes effective beginning with the Company's third quarter ending on February 28, 1998. The pro forma diluted earnings per share under SFAS No. 128 is $3.43 in 1997 and $2.93 in 1996, based upon average shares outstanding of 33.5 million and 34.0 million, respectively. In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes requirements for disclosure of comprehensive income and becomes effective for the Company's fiscal year ending May 1999. Reclassification of earlier financial statements for comparative purposes is required. In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." SFAS No. 131 establishes standards for disclosure about operating segments in annual financial statements and selected information in interim financial reports. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. This statement supersedes SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise." The new standard becomes effective for the Company's fiscal year ending May 1999, and requires that comparative information from earlier years be restated to conform to the requirements of this standard. FORWARD LOOKING STATEMENTS Statements and information included in the Chairman's letter and Management Review that relate to the Company's goals, strategies and expectations as to future results and events 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. Risk factors include, but are not limited to: worldwide economic and business conditions in the electronics industry; customer order patterns, demand and acceptance of new or recently introduced products; competitive factors, including pricing pressures, technological developments and new products; changes in product and sales mix; timing of new products; availability of reasonably priced parts from suppliers; inventory valuation risks; the timing and importance of orders received during a quarter, making prediction of quarterly revenues and earnings difficult; currency fluctuations; 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; changes in effective tax rates; and other risk factors listed from time to time in the Company's Securities and Exchange Commission reports, including, but not limited to, the quarterly reports on Form 10-Q, the annual report on Form 10-K and press releases. Page 18 MANAGEMENT'S LETTER The consolidated financial statements of Tektronix, Inc. and subsidiaries have been prepared by management and have been audited by Tektronix' independent auditors, Deloitte & Touche LLP, as stated in their independent auditors' report. Management is responsible for the consolidated financial statements, which have been prepared in conformity with generally accepted accounting principles and include amounts based on management's judgment. Management is also responsible for maintaining internal control, including systems designed to provide reasonable assurance that assets are safeguarded and that transactions are executed and recorded in accordance with established policies and procedures. Tektronix' controls and systems were developed by Tektronix management and have the full support and endorsement of the Board of Directors. Compliance is mandatory. The Board of Directors is responsible for the Company's financial and accounting policies, practices and reports. Its Audit Committee, composed entirely of outside directors, meets regularly with the independent auditors, representatives of management, and the internal auditors to review accounting, reporting, auditing and internal control matters. Both the independent auditors and the internal auditors have free access to the Audit Committee, with and without management representatives in attendance. MERILL A. MCPEAK Chairman, Audit Committee CARL W. NEUN Senior Vice President and Chief Financial Officer INDEPENDENT AUDITORS' REPORT TO THE DIRECTORS AND SHAREHOLDERS OF TEKTRONIX, INC.: We have audited the accompanying consolidated balance sheets of Tektronix, Inc. and subsidiaries as of May 31, 1997 and May 25, 1996, and the related consolidated statements of operations, shareholders' equity, and cash flows for the years ended May 31, 1997, May 25, 1996, and May 27, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Tektronix, Inc. and subsidiaries at May 31, 1997 and May 25, 1996, and the results of their operations and their cash flows for the years ended May 31, 1997, May 25, 1996, and May 27, 1995, in conformity with generally accepted accounting principles. Portland, Oregon June 23, 1997 Page 19 CONSOLIDATED STATEMENTS OF OPERATIONS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS FOR THE YEARS ENDED MAY 31,1997 MAY 25,1996 MAY 27,1995 - -------------------------------------------------------------------------------- Net sales $1,940,082 $1,768,858 $1,497,962 Cost of sales 1,107,355 1,028,331 819,871 --------------------------------------- Gross profit 832,727 740,527 678,091 Research and development expenses 188,192 164,292 166,171 Selling, general and administrative expenses 481,083 437,949 400,567 Equity in business ventures' earnings 1,556 5,081 4,268 --------------------------------------- Operating income 165,008 143,367 115,621 Interest expense 12,111 13,985 10,203 Other income - net 15,905 12,884 4,744 --------------------------------------- Earnings before taxes 168,802 142,266 110,162 Income taxes 54,017 42,680 28,578 --------------------------------------- Net earnings $ 114,785 $ 99,586 $ 81,584 --------------------------------------- --------------------------------------- Earnings per share $ 3.48 $ 3.00 $ 2.50 Dividends per share $ 0.60 $ 0.60 $ 0.60 Average shares outstanding 33,009 33,197 32,578 The accompanying notes are an integral part of these consolidated financial statements. Page 20 CONSOLIDATED BALANCE SHEETS IN THOUSANDS MAY 31,1997 MAY 25,1996 - ---------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 142,726 $ 36,644 Accounts receivable- net 305,832 375,309 Inventories 238,040 264,624 Other current assets 64,913 77,003 ------------------------- Total current assets 751,511 753,580 Property, plant and equipment - net 343,130 307,563 Property held for sale 13,939 18,903 Deferred tax assets 12,540 28,247 Other long-term assets 195,621 220,203 ------------------------- Total assets $1,316,741 $1,328,496 ------------------------- ------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term debt $ 6,155 $ 44,645 Accounts payable 181,366 178,353 Accrued compensation 90,946 120,044 Deferred revenue 25,622 22,295 ------------------------- Total current liabilities 304,089 365,337 Long-term debt 151,579 201,955 Other long-term liabilities 89,790 85,882 Commitments and contingencies - - Shareholders' equity: Preferred stock, no par value (authorized 1,000 shares; none issued) - - Common stock, no par value (authorized 80,000 shares; issued and outstanding 33,402 in 1997, and 32,687 in 1996) 226,591 204,370 Retained earnings 473,582 378,606 Currency adjustment 34,447 52,069 Unrealized holding gains - net 36,663 40,277 ------------------------- Total shareholders' equity 771,283 675,322 ------------------------- Total liabilities and shareholders' equity $1,316,741 $1,328,496 ------------------------- ------------------------- The accompanying notes are an integral part of these consolidated financial statements. Page 21 CONSOLIDATED STATEMENTS OF CASH FLOWS IN THOUSANDS FOR THE YEARS ENDED MAY 31,1997 MAY 25,1996 MAY 27,1995 - ----------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $114,785 $99,586 $81,584 Adjustments to reconcile net earnings to cash provided (used) by operating activities: Depreciation expense 59,591 47,137 40,857 Deferred taxes 14,425 26,041 (966) Gain on sale of investments (27,678) (20,197) (14,314) Accounts receivable 66,403 (66,647) (29,991) Inventories 26,754 (19,681) (64,923) Other current assets 22,213 864 (8,338) Accounts payable (179) 1,037 (5,059) Accrued compensation (28,580) 14,026 24,602 Other liabilities 5,672 (33,622) (22,866) Other long-term assets 316 (1,424) (48,102) Other - net 8,607 2,085 (10,516) ------------------------------------ Net cash provided (used) by operating activities 262,329 49,205 (58,032) ------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property, plant and equipment (112,005) (106,708) (103,818) Proceeds from sale of fixed assets 9,073 19,776 43,482 Proceeds from sale of investments 33,848 23,263 23,920 ------------------------------------ Net cash used by investing activities (69,084) (63,669) (36,416) ------------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES Net change in short-term debt (38,451) 7,339 67,092 Issuance of long-term debt 358 50,000 1,396 Repayment of long-term debt (50,609) (3,020) (602) Issuance of common stock 26,018 18,104 40,480 Repurchase of common stock (3,797) (29,985) (8,382) Dividends (19,809) (19,944) (18,435) ------------------------------------ Net cash provided (used) by financing activities (86,290) 22,494 81,549 ------------------------------------ Effect of exchange rate changes (873) (3,147) 1,207 ------------------------------------ Increase (decrease) in cash and cash equivalents 106,082 4,883 (11,692) Cash and cash equivalents at beginning of year 36,644 31,761 43,453 ------------------------------------ Cash and cash equivalents at end of year $142,726 $36,644 $31,761 ------------------------------------ ------------------------------------ SUPPLEMENTAL DISCLOSURES OF CASH FLOWS Income taxes paid $13,663 $18,669 $10,018 Interest paid 14,633 16,594 13,775 NONCASH INVESTING ACTIVITIES Fair value adjustment to securities available-for-sale $(8,373) $47,042 $20,086 Income tax effect related to fair value adjustment 4,759 (18,817) (8,034) The accompanying notes are an integral part of these consolidated financial statements. Page 22 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
UNREALIZED C O M M O N S T O C K RETAINED CURRENCY HOLDING SHARES AMOUNT EARNINGS ADJUSTMENT GAINS - NET TOTAL - -------------------------------------------------------------------------------------------------------------- BALANCE MAY 28, 1994 32,197 $184,153 $235,815 $52,811 $ - $472,779 Shares issued to employees 1,179 40,480 40,480 Shares repurchased (293) (8,382) (8,382) Net earnings 81,584 81,584 Dividends- $0.60 per share (18,435) (18,435) Currency adjustment 24,137 24,137 Unrealized holding gains - net 12,052 12,052 --------------------------------------------------------------------------------- BALANCE MAY 27, 1995 33,083 216,251 298,964 76,948 12,052 604,215 Shares issued to employees 444 18,104 18,104 Shares repurchased (840) (29,985) (29,985) Net earnings 99,586 99,586 Dividends - $0.60 per share (19,944) (19,944) Currency adjustment (24,879) (24,879) Unrealized holding gains - net 28,225 28,225 --------------------------------------------------------------------------------- BALANCE MAY 25, 1996 32,687 204,370 378,606 52,069 40,277 675,322 Shares issued to employees 782 26,018 26,018 Shares repurchased (67) (3,797) (3,797) Net earnings 114,785 114,785 Dividends- $0.60 per share (19,809) (19,809) Currency adjustment (17,622) (17,622) Unrealized holding gains - net (3,614) (3,614) --------------------------------------------------------------------------------- BALANCE MAY 31, 1997 33,402 $226,591 $473,582 $34,447 $36,663 $771,283 --------------------------------------------------------------------------------- ---------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements. Page 23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ACCOUNTING POLICIES THE COMPANY Tektronix, Inc. ("Tektronix" or "the Company") is a global high-technology company based on a portfolio of measurement, color printing, and video and networking businesses. Headquartered in Wilsonville, Oregon, Tektronix employs 8,400 people and maintains operations in 23 countries outside the United States. Tektronix was founded in 1946. FINANCIAL STATEMENT PRESENTATION The consolidated financial statements include the accounts of Tektronix and its majority-owned subsidiaries. Investments in joint ventures and minority-owned companies where the Company exercises significant influence are accounted for on the equity basis. Significant intercompany transactions and balances have been eliminated. Certain items have been reclassified to conform with the current year's presentation with no effect on previously reported earnings. Per share amounts are based on the weighted average number of shares outstanding during the year. The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimated. FISCAL YEAR The Company's fiscal year is the 52 or 53 weeks ending the last Saturday in May. Fiscal year 1997 was 53 weeks; fiscal years 1996 and 1995 were 52 weeks. FOREIGN CURRENCY TRANSLATION For most non-U.S. subsidiaries, the local currency is the functional currency and, therefore, assets and liabilities are translated into U.S. dollars at current exchange rates, and net earnings are translated at average exchange rates for the year. Gains and losses resulting from the translation of net assets are reported as a separate component of shareholders' equity. Gains and losses from foreign currency transactions are included in net earnings. DERIVATIVES Gains and losses on foreign exchange contracts used to hedge existing assets and liabilities are recognized in income in the period in which the related hedged transaction occurs. Gains and losses related to hedges of firm commitments are deferred and included in the basis of the hedged transaction when it is completed. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash deposits in banks and highly liquid investments with original maturities of three months or less at the time of purchase. INVENTORIES Inventories are stated at the lower of cost or market. Cost is determined on the first-in, first-out (FIFO) basis. IN THOUSANDS 1997 1996 - --------------------------------------------------------------------------- Materials and work in process $134,743 $141,798 Finished goods 103,297 122,826 ------------------------ Inventories $238,040 $264,624 ------------------------ ------------------------ PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost. Depreciation is based on the estimated useful lives of the assets, ranging from ten to forty years for buildings and three to seven years for machinery and equipment, and is generally provided using the straight-line method. IN THOUSANDS 1997 1996 - ---------------------------------------------------------------------------- Land $ 6,096 $ 6,721 Buildings 199,396 194,644 Machinery and equipment 493,791 475,178 ------------------------ 699,283 676,543 Accumulated depreciation and amortization (356,153) (368,980) ------------------------ Property, plant and equipment - net $343,130 $307,563 ------------------------ ------------------------ Property held for sale is stated at the lower of cost or estimated fair value less costs to sell and includes certain properties no longer used in the Company's operations. INVESTMENTS Investments in marketable equity securities are classified as available-for-sale and reported at fair value in the consolidated balance sheets under other long-term assets. The unrealized holding gains and losses are excluded from earnings and reported, net of deferred income taxes, as a separate component of shareholders' equity. INTANGIBLE ASSETS Intangible assets are included in other long-term assets at cost. Amortization is provided on a straight-line basis over periods generally not exceeding ten years. Intangible assets are continually reviewed to determine that the carrying values have not been impaired. INCOME TAXES Deferred income taxes, reflecting the impact of temporary differences between the assets and liabilities recognized for financial reporting purposes and amounts recognized for tax purposes, are based on tax laws currently enacted. Page 24 Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion of the deferred tax assets will not be realized. ENVIRONMENTAL COSTS The Company accrues environmental costs when it is probable that the Company has incurred a liability and the amount can be reasonably estimated. Environmental costs are expensed or capitalized, as appropriate, depending on their future economic benefit. FUTURE ACCOUNTING CHANGES In February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." SFAS No. 128 requires all companies whose capital structures include convertible securities and options to make a dual presentation of basic and diluted earnings per share. The new standard becomes effective beginning with the Company's third quarter ending on February 28, 1998. The pro forma diluted earnings per share under SFAS No. 128 is $3.43 in 1997 and $2.93 in 1996, based upon average shares outstanding of 33.5 million and 34.0 million, respectively. In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes requirements for disclosure of comprehensive income and becomes effective for the Company's fiscal year ending May 1999. Reclassification of earlier financial statements for comparative purposes is required. In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." SFAS No. 131 establishes standards for disclosure about operating segments in annual financial statements and selected information in interim financial reports. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. This statement supersedes SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise." The new standard becomes effective for the Company's fiscal year ending May 1999, and requires that comparative information from earlier years be restated to conform to the requirements of this standard. BUSINESS SEGMENTS The Company and its affiliates operate predominately in a single industry segment: the design, manufacture, sale and service of electronic measurement, design and display instruments and systems used in science, industry and education. Geographically, the Company operates primarily in the industrialized world. Net sales, earnings before taxes and total assets in the United States, Europe and other geographical areas were: IN THOUSANDS 1997 1996 1995 - ----------------------------------------------------------------------------- Net sales: United States sales to customers $1,027,294 $ 890,930 $ 766,991 United States export sales to customers 258,984 271,446 224,657 United States transfers to affiliates 824,520 720,969 434,959 ----------------------------------- United States sales 2,110,798 1,883,345 1,426,607 ----------------------------------- European sales to customers 483,949 470,840 392,070 European transfers to affiliates 5,006 3,183 3,783 ----------------------------------- European sales 488,955 474,023 395,853 ----------------------------------- Other area sales to customers 169,855 135,642 114,244 Other area transfers to affiliates 22,975 23,815 15,184 ----------------------------------- Other area sales 192,830 159,457 129,428 ----------------------------------- Eliminations (852,501) (747,967) (453,926) ----------------------------------- Net sales $1,940,082 $1,768,858 $1,497,962 ----------------------------------- ----------------------------------- Earnings before taxes: United States $ 178,930 $ 124,618 $ 123,800 Europe 33,093 25,867 (6,618) Other areas (8,555) 8,174 6,678 Corporate and eliminations (34,666) (16,393) (13,698) ----------------------------------- Earnings before taxes $ 168,802 $ 142,266 $ 110,162 ----------------------------------- ----------------------------------- Total assets: United States $ 991,928 $ 988,578 $ 851,435 Europe 181,757 198,220 217,808 Other areas 89,663 69,883 47,530 Corporate and eliminations 53,393 71,815 101,529 ----------------------------------- Total assets $1,316,741 $1,328,496 $1,218,302 ----------------------------------- ----------------------------------- Transfers of products and services are made at arms-length prices between geographic areas. The profit on transfers between geographic areas is not recognized until sales are made to unaffiliated customers. Area earnings before taxes include all directly incurred and allocable costs, except identified corporate expenses. Assets are those that are specifically associated with the operations of each geographic area. Net sales to the United States government were not more than 2% of net sales in any of the past three years, and no other customer accounted for more than 2% of net sales. NON-U.S. AFFILIATES The Company has operating subsidiaries located in Australia, Austria, Belgium, Brazil, Canada, China, Denmark, Finland, France, Germany, India, Italy, Japan, Korea, Mexico, The Netherlands, Norway, Singapore, Spain, Sweden, Switzerland, Taiwan, and the United Kingdom. The assets, liabilities, net Page 25 sales and net earnings of non-U.S. subsidiaries are included in the consolidated financial statements in these amounts: IN THOUSANDS 1997 1996 1995 - ------------------------------------------------------------------------------ Current assets $214,776 $207,333 $223,651 Property, plant and equipment - net 39,631 34,295 28,214 Other long-term assets 11,612 11,835 18,420 Current liabilities 65,769 65,303 93,104 Other long-term liabilities 21,486 18,030 33,991 --------------------------------- Net sales $653,804 $606,482 $506,314 Gross profit 125,440 132,237 130,598 Operating income 27,585 36,502 4,192 Earnings before taxes 24,538 34,041 60 Net earnings (loss) 13,656 22,738 (908) The Company has a 50% investment in a business venture in Japan. The Company's share of the assets, liabilities, net sales and net earnings of this business venture, as well as the Company's arms-length sales to, purchases from, and accounts receivable consisted of: IN THOUSANDS 1997 1996 1995 - ------------------------------------------------------------------------------ Current assets $ 55,322 $ 74,946 $ 84,787 Property, plant and equipment - net 19,913 23,371 28,080 Other long-term assets 12,129 12,743 14,123 Current liabilities 18,511 32,775 29,002 Other long-term liabilities 8,988 9,323 10,148 --------------------------------- Net sales $152,054 $147,860 $113,645 Gross profit 40,742 44,756 40,246 Operating income (loss) 3,068 113 (1,422) Earnings before taxes 2,792 53 204 Net earnings (loss) 1,184 (306) (28) --------------------------------- Sales to $112,770 $114,307 $83,217 Purchases from 19,596 13,650 10,259 Accounts receivable 9,866 9,524 5,199 There are no significant restrictions that prevent dividends to the parent company from non-U.S. affiliates. The Company received dividends from business ventures of $0.6 million in 1997 and $4.7 million in 1996. There were no dividends received in 1995. ACCOUNTS RECEIVABLE On September 10, 1996, the Company entered into a five-year revolving receivable purchase agreement with Citibank NA to sell, without recourse, an undivided interest of up to $50.0 million in a defined pool of trade accounts receivable. Receivables of $50.0 million sold under this agreement are reflected as a reduction of accounts receivable in the balance sheet at May 31, 1997, and as operating cash flows in the statements of cash flows for the year ended May 31, 1997. Accounts receivable have been reduced by an allowance for doubtful accounts, which was $3.1 million in 1997 and $6.3 million in 1996. The net charges to this reserve have not been material. OTHER LONG-TERM ASSETS IN THOUSANDS 1997 1996 - --------------------------------------------------------------------------- Investment in business ventures $ 85,696 $ 97,409 Investment in marketable equity securities 66,709 78,117 Licensing agreements and other intangibles - net 37,151 28,873 Other 6,065 15,804 ----------------------- Other long-term assets $195,621 $220,203 ----------------------- ----------------------- Investment in business ventures includes the business venture in Japan discussed in the "Non-U.S. Affiliates" note and a 35% interest in Merix Corporation. At May 31, 1997, the carrying value of the Company's investment in Merix was $21.1 million, with a fair value, based upon quoted market price, of $34.2 million. The Company's portion of the undistributed earnings of the business ventures was $20.2 million in 1997 and $19.2 million in 1996. Proceeds from the sales of marketable equity securities in 1997, 1996 and 1995 were $33.8 million, $23.3 million and $23.9 million, respectively. Realized gains were computed based on the average cost of the underlying securities and are disclosed in the "Other Income - Net" note. At the end of 1997, 1996 and 1995, net unrealized holding gains of $58.8 million, $67.2 million and $20.1 million (less deferred taxes of $22.1 million, $26.9 million and $8.0 million), respectively, were included as a separate component of shareholders' equity. Licensing agreements and other intangibles have been reduced by accumulated amortization of $17.5 million in 1997 and $10.9 million in 1996. SHORT-TERM AND LONG-TERM DEBT The Company's short-term debt consisted of: IN THOUSANDS 1997 1996 - ---------------------------------------------------------------------------- Lines of credit $4,486 $12,564 Commercial paper - 30,663 --------------------- Short-term instruments 4,486 43,227 Current maturities of long-term debt 1,669 1,418 --------------------- Short-term debt $6,155 $44,645 --------------------- --------------------- Page 26 The Company has a $150.0 million revolving credit agreement with Morgan Guaranty Trust Company of New York, as agent, that matures in July 2001. The Company has an agreement with U.S. National Bank of Oregon to issue up to $100.0 million in commercial paper, backed by the revolving credit agreement. At May 31, 1997, the Company maintained bank credit facilities of $300.3 million, of which $293.4 million was unused. Unused facilities include $143.4 million in lines of credit and $150.0 million under the revolving credit agreement. A $20.0 million line of credit expires in October 1997 with all remaining lines providing no specific expiration date. The Company's long-term debt consisted of: IN THOUSANDS 1997 1996 - ---------------------------------------------------------------------------- 7.5% Notes due August 1, 2003 $100,000 $100,000 7.625% Notes due August 15, 2002 50,000 50,000 Other long-term agreements 3,248 3,387 Commercial paper - 49,986 ----------------------- Long-term instruments 153,248 203,373 Current maturities (1,669) (1,418) ----------------------- Long-term debt $151,579 $201,955 ----------------------- ----------------------- Certain of the Company's debt agreements require the maintenance of specified interest rate coverage ratios and a minimum consolidated tangible net worth. At May 31, 1997, the Company had unrestricted retained earnings of $167.1 million after meeting those requirements. Aggregate long-term debt payments will be $1.7 million in 1998, $1.2 million in 1999, $0.3 million in 2000, $0.1 million in 2001 and none in 2002. OTHER LONG-TERM LIABILITIES IN THOUSANDS 1997 1996 - -------------------------------------------------------------------------------- Accrued postretirement benefits $41,778 $46,953 Accrued pension 30,019 23,037 Other 17,993 15,892 --------------------- Other long-term liabilities $89,790 $85,882 --------------------- --------------------- OTHER INCOME - NET IN THOUSANDS 1997 1996 1995 - -------------------------------------------------------------------------------- Gain on sale of marketable equity securities $27,678 $20,197 $14,314 Loss on disposition of fixed assets (5,031) (1,844) (447) Currency losses (753) (1,322) (2,231) Other (5,989) (4,147) (6,892) ------------------------------- Other income - net $15,905 $12,884 $ 4,744 ------------------------------- ------------------------------- COMMITMENTS AND CONTINGENCIES The Company leases a portion of its capital equipment and certain of its facilities under operating leases that expire at various dates. Rental expense was $27.4 million in 1997, $25.3 million in 1996, and $28.0 million in 1995. In addition, the Company has long-term or minimum purchase agreements with various suppliers. The future minimum obligations under operating leases and other commitments having an initial or remaining noncancelable term in excess of one year as of May 31, 1997 were: IN THOUSANDS OPERATING LEASES COMMITMENTS - ------------------------------------------------------------------------ 1998 $16,518 $ 8,257 1999 12,764 4,287 2000 7,114 3,856 2001 4,849 1,424 2002 3,658 - Future years 18,563 - ---------------------- Total $63,466 $17,824 ---------------------- ---------------------- In the normal course of business, the Company and its subsidiaries are parties to various legal claims, actions and complaints, including matters involving patent infringement and other intellectual property claims. Although it is not possible to predict with certainty whether or not the Company and its subsidiaries will ultimately be successful in any of these legal matters or, if not, what the impact might be, the Company believes that disposition of these matters will not have a material adverse effect on the Company's financial position, results of operations or cash flows. SHAREHOLDERS' EQUITY STOCK OPTION AND INCENTIVE COMPENSATION PLANS The Company has stock option plans for selected employees. There were 4,085,000 shares reserved for issuance under these plans at May 31, 1997. Under the terms of the plans, incentive stock options are granted at an option price not less than the market value at the date of grant. Nonqualified stock options may not be granted at less than 100% of the market value on the valuation date selected by the Board of Directors. Options granted prior to January 1, 1997, generally vest over four years and expire ten years from the date of grant. Certain options granted after January 1, 1997, vest over two years and expire five years from the date of grant. There were 1,025 employees holding options at May 31, 1997. Page 27 Additional information with respect to option activity is set forth below: OUTSTANDING EXERCISABLE ------------------------- ------------------------- WEIGHTED WEIGHTED AVERAGE AVERAGE NUMBER EXERCISE NUMBER EXERCISE OPTIONS IN THOUSANDS OF SHARES PRICE OF SHARES PRICE - ---------------------------------------------------------------------------- May 28, 1994 2,866 $21 1,262 $20 Granted 812 36 Exercised (1,102) 20 Canceled (217) 25 --------------------------------------------------- May 27, 1995 2,359 $26 868 $21 Granted 980 45 Exercised (501) 22 Canceled (190) 35 --------------------------------------------------- May 25, 1996 2,648 $34 989 $25 Granted 725 48 Exercised (650) 26 Canceled (141) 41 --------------------------------------------------- May 31, 1997 2,582 $39 952 $31 --------------------------------------------------- --------------------------------------------------- The following table summarizes information about options outstanding and exercisable at May 31, 1997: OPTIONS IN THOUSANDS OUTSTANDING EXERCISABLE -------------------------------------- --------------------- WEIGHTED AVERAGE WEIGHTED WEIGHTED RANGE OF REMAINING AVERAGE AVERAGE EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE PRICES OF SHARES LIFE PRICE OF SHARES PRICE - ---------------------------------------------------------------------------- $13 - 19 55 4.4 years $17 55 $17 20 - 29 503 5.5 years 24 418 24 31 - 46 1,398 8.2 years 40 403 37 49 - 60 626 5.5 years 52 76 51 - --------------------------------------------------------------------------- 2,582 6.9 years $39 952 $31 - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- The Company has elected to continue to account for stock options according to APB Opinion No. 25, "Accounting for Stock Issued to Employees." Under APB No. 25, no compensation expense is recognized in the Company's consolidated financial statements for employee stock options because the exercise price of the options equals the market price of the underlying stock on the date of grant. Alternatively, under the fair value method of accounting provided for by SFAS No. 123, "Accounting for Stock-Based Compensation," the measurement of compensation expense is based on the fair value of employee stock options at the grant date and requires the use of option pricing models to value the options. The weighted average estimated fair value of options granted during 1997 and 1996 was $17 and $15 per share, respectively. The Company also has plans for certain executives that provide for stock awards based on financial performance over one- and three-year periods. Under APB No. 25, compensation expense is measured based on the market price of the stock at the date the terms of the award become fixed. Under the fair value approach of SFAS No. 123, compensation expense is measured based on the market price of the stock at the grant date. The weighted average grant-date fair value of performance-based stock awards granted during 1997 and 1996 was $46 and $38 per share, respectively. The total shares issued under these plans and the corresponding compensation expense recognized in income was not material for both 1997 and 1996. The pro forma impact to both net earnings and earnings per share from calculating stock-related compensation expense consistent with the fair value alternative of SFAS No. 123 is indicated below: 1997 1996 - --------------------------------------------------------------- Pro forma net earnings (in thousands) $109,240 $97,015 Pro forma earnings per share $ 3.31 $ 2.92 The fair value of each option was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions: 1997 1996 - ---------------------------------------------------------------- Expected life (in years) 5.0 5.0 Risk-free interest rate 6.3% 5.7% Volatility 35.2% 33.9% Dividend yield 1.3% 1.4% For purposes of the pro forma disclosures, the estimated fair value of the stock-based awards is amortized over the vesting period. Because SFAS No. 123 is applicable only to awards granted after May 27, 1995, the pro forma effect will not be fully reflected until 1999. SHAREHOLDER RIGHTS AGREEMENT In August 1990, the Company's Board of Directors approved a shareholder rights agreement and declared a dividend of one right for each outstanding common share. Each right entitles the holder to purchase one one-thousandth of a share of no par preferred stock at an exercise price of $60, subject to adjustment. Generally, the rights become exercisable ten days after a person or group acquires or commences a tender offer that would result in beneficial ownership of 20% or more of the common shares. In addition, the rights become exercisable if any party becomes the beneficial owner of 10% or more of the outstanding common shares and is determined by the Board to be an adverse party. Upon the occurrence of certain additional events specified in the shareholder rights agreement, each right would entitle its holder to purchase common shares of the Company (or, in some cases, a potential acquiring company) or other property having a value of twice the right's exercise price. The rights, which are not currently exercisable, expire in September 2000, but may be redeemed by action of the Board prior to that time, under certain circumstances, for $0.01 per right. Page 28 BENEFIT PLANS PENSION PLANS The Company has defined benefit retirement plans covering most employees. Benefits upon retirement or termination are based on length of service and final average compensation at retirement. The Company's funding policy is to contribute amounts determined annually on an actuarial basis that provide for current and future benefits in accordance with funding requirements of applicable laws and regulations of the countries in which the plans are located. Assets of funded benefit plans are held primarily in trust accounts. The majority of the assets are invested in common stocks, bonds and real estate, with the balance primarily in cash and short-term investments. The following tables set forth the funded status and the amounts recognized in the consolidated financial statements for the Company's defined benefit retirement plans: 1997 ------------------------- ASSETS ACCUMULATED EXCEED BENEFITS ACCUMULATED EXCEED IN THOUSANDS BENEFITS ASSETS - -------------------------------------------------------------------------------- Actuarial present value of benefit obligations: Vested benefit obligation $422,737 $12,794 ----------------------- ----------------------- Accumulated benefit obligation $428,453 $15,093 ----------------------- ----------------------- Projected benefit obligation $478,503 $17,442 Plan assets at fair value 474,222 - ----------------------- Projected benefit obligation in excess of plan assets 4,281 17,442 Unrecognized initial net asset (obligation) 3,415 (1,680) Unrecognized prior service cost 10,529 (695) Unrecognized net gain (loss) (10,490) 2,349 ----------------------- Pension liability $ 7,735 $17,416 ----------------------- ----------------------- 1996 ------------------------- ASSETS ACCUMULATED EXCEED BENEFITS ACCUMULATED EXCEED IN THOUSANDS BENEFITS ASSETS - -------------------------------------------------------------------------------- Actuarial present value of benefit obligations: Vested benefit obligation $48,647 $391,149 ---------------------- ---------------------- Accumulated benefit obligation $52,672 $399,571 ---------------------- ---------------------- Projected benefit obligation $61,329 $453,778 Plan assets at fair value 55,982 349,571 ---------------------- Projected benefit obligation in excess of plan assets 5,347 104,207 Unrecognized initial net asset (obligation) (342) 4,255 Unrecognized prior service cost (715) 7,943 Unrecognized net loss (6,398) (58,968) ---------------------- Pension (asset) liability $(2,108) $ 57,437 ---------------------- ---------------------- Assumptions used in the accounting for the defined benefit plans were:
1997 1996 1995 - ----------------------------------------------------------------------------------------------- Overall weighted average discount rates 7.8% 7.6% 8.1% Overall rates of increase in compensation levels 3.8% 3.8% 4.8% Expected long-term rate of return on plan assets 10.2% 9.3% 9.3% Net pension expense includes the following components: IN THOUSANDS 1997 1996 1995 - ----------------------------------------------------------------------------------------------- Service cost $12,084 $ 9,469 $ 8,983 Interest cost 37,627 37,414 33,693 Actual return on plan assets (56,863) (76,138) (36,587) Net amortization and deferral 17,585 40,948 3,987 -------------------------------------- Net periodic pension expense 10,433 11,693 10,076 Other benefit plans 1,327 1,454 928 -------------------------------------- Net pension expense $11,760 $13,147 $11,004 -------------------------------------- --------------------------------------
POSTRETIREMENT BENEFITS In 1995, the Company modified its postretirement welfare programs to eliminate company-paid benefits for employees who retire after July 31, 1995. Subsidies provided to pre-1995 retirees were phased out gradually and were eliminated effective January 1, 1997. Current and future retirees who have accumulated certain insurance credits, however, may continue to apply them toward the purchase of medical and life insurance benefits. These revisions resulted in an unrecognized prior service cost gain of $26.7 million that will be amortized over ten years as a reduction in postretirement benefit expense. The status of the Company's unfunded postretirement benefit obligation was: IN THOUSANDS 1997 1996 - --------------------------------------------------------------------------- Accumulated postretirement benefit obligation (APBO): Current retirees $ 9,459 $10,453 Active employees eligible to retire 3,067 3,467 Other active employees 2,544 3,033 ---------------------- Total accumulated obligation 15,070 16,953 Unrecognized net gain 11,110 10,532 Unrecognized prior service cost gain 18,697 21,368 ---------------------- Accrued postretirement benefits $44,877 $48,853 ---------------------- ---------------------- Page 29 The net postretirement benefit credit includes the following components: IN THOUSANDS 1997 1996 1995 - ---------------------------------------------------------------------------- Service cost $ 177 $ 168 $ 184 Interest cost 1,244 1,359 1,286 Net amortization (3,302) (3,385) (3,587) -------------------------------------- Postretirement benefit credit $(1,881) $(1,858) $(2,117) -------------------------------------- -------------------------------------- The discount rate and rate of salary increase used in determining the APBO for 1997 was 8.0% and 3.8%, respectively. For 1996, these rates were 7.8% and 3.8%. The health care cost trend rates used in measuring the APBO at May 31, 1997, ranged from 7.8% to 9.8%, depending on the specific plan, and are assumed to decrease gradually until they reach 5.3% to 5.8% in the year 2006 and remain at 5.3% thereafter. The health care cost trend rates in 1996 ranged from 8.2% to 10.8%, and were assumed to decline to 5.3% over a similar period. The health care cost trend rate assumptions can have a significant effect on the amounts reported. However, because of the plan amendments adopted in 1995, increasing the assumptions by one percent would not have a material impact on either the APBO at May 31, 1997, or the postretirement benefit credit for 1997. EMPLOYEE SAVINGS PLAN The Company has an employee savings plan that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Participating U.S. employees may defer up to 15% of their compensation, subject to certain regulatory limitations. Employee contributions are invested, at the employees' direction, among a variety of investment alternatives. The Company matches the contributions up to 3% of compensation. In addition, the Company makes a contribution to the plan for each qualifying employee equal to 2% of compensation. The Company's contributions, which are invested entirely in Company stock, were approximately $14.2 million in 1997, $12.1 million in 1996, and $11.1 million in 1995. DERIVATIVE FINANCIAL INSTRUMENTS The Company utilizes derivative financial instruments to reduce the impact of foreign exchange risks where internal netting strategies cannot be effectively employed. The Company does not hold or issue derivative financial instruments for trading purposes. The Company's derivative activities do not create risk because fluctuations in the value of the instruments used for hedging purposes are offset by fluctuations in the value of the underlying exposures being hedged. The notional or contract amounts of the hedging instruments do not represent amounts exchanged by the parties and, thus, are not a measure of the Company's exposure due to the use of derivatives. The amounts exchanged are calculated on the basis of the notional amounts and other terms of the instruments. The Company is exposed to credit-related losses in the event of nonperformance by counterparties to financial instruments. However, the Company has entered into these instruments with creditworthy financial institutions and considers the risk of nonperformance to be remote. FOREIGN EXCHANGE RISK MANAGEMENT The Company uses foreign exchange contracts to hedge its exchange rate risks. At the end of 1997 and 1996, the notional amount of the Company's outstanding contracts was $32.1 million and $97.6 million, respectively. Generally, these contracts have maturities that do not exceed one year and require the Company to exchange foreign currencies for U.S. dollars at maturity. The purpose of the Company's hedging activities is to reduce the risk that the eventual cash flows of the underlying assets, liabilities and firm commitments will be adversely affected by changes in exchange rates. The unrecognized loss attributable to foreign exchange contracts at May 31, 1997 was $0.2 million. FAIR VALUE OF FINANCIAL INSTRUMENTS For short-term financial instruments, including cash and cash equivalents, accounts receivable, short-term debt, accounts payable and accrued compensation, the carrying amount approximates the fair value because of the immediate or short-term nature of those instruments. The fair value of marketable equity securities is based on quoted market prices at the reporting date. The fair value of long-term receivables and long-term debt is estimated based on quoted market prices for similar instruments or by discounting expected cash flows at rates currently available to the Company for instruments with similar risks and maturities. The differences between the fair values and carrying amounts of the Company's financial instruments, including derivatives, at May 31, 1997, and May 25, 1996, were not material. Page 30 CONCENTRATIONS OF CREDIT RISK Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of trade accounts receivable. The risk is limited due to the large number of entities comprising the Company's customer base and their dispersion across many different industries and geographies. At May 31, 1997, the Company had no significant concentrations of credit risk. INCOME TAXES The components of earnings before taxes on a geographical basis are contained in the "Business Segments" note. The provision for income taxes consisted of: IN THOUSANDS 1997 1996 1995 - ---------------------------------------------------------------------------- Current: Federal $21,457 $ 9,104 $17,779 State 3,742 1,961 4,041 Non-U.S. 7,854 10,789 6,624 -------------------------------------- 33,053 21,854 28,444 Deferred: Federal 15,921 16,363 4,649 State 2,015 3,338 641 Non-U.S. 3,028 1,125 (5,156) -------------------------------------- 20,964 20,826 134 -------------------------------------- Total provision $54,017 $42,680 $28,578 -------------------------------------- -------------------------------------- The provisions differ from the amounts that would result by applying the U.S. statutory rate to earnings before taxes. A reconciliation of the difference is: IN THOUSANDS 1997 1996 1995 - ---------------------------------------------------------------------------- Income taxes based on U.S. statutory rate $59,081 $49,793 $38,557 Foreign sales corporations (5,935) (4,565) (3,196) Change in beginning of year valuation allowance (3,824) (5,526) (6,842) State income taxes, net of U.S. tax 3,742 3,445 3,043 Other - net 953 (467) (2,984) -------------------------------------- Total provision $54,017 $42,680 $28,578 -------------------------------------- -------------------------------------- Tax benefits of $5.6 million, $5.0 million and $7.3 million associated with the exercise of employee stock options were credited to equity in 1997, 1996 and 1995, respectively. Net deferred tax assets and liabilities are included in the following consolidated balance sheet accounts: IN THOUSANDS 1997 1996 - --------------------------------------------------------------------------- Other current assets $43,106 $40,410 Deferred tax assets 12,540 28,247 ---------------------- Net deferred tax assets $55,646 $68,657 ---------------------- ---------------------- The temporary differences and carryforwards that give rise to deferred tax assets and liabilities were as follows: IN THOUSANDS 1997 1996 - ------------------------------------------------------------------------------ Deferred tax assets: Reserves and other liabilities $ 41,858 $ 48,544 Accrued postretirement benefits 17,502 19,053 AMT and foreign tax credit carryforwards 14,088 20,932 Net operating losses of non-U.S. subsidiaries 10,432 12,727 Accumulated depreciation 9,918 14,999 Accrued pensionliability 6,289 3,765 ----------------------- Gross deferred tax assets 100,087 120,020 Less valuation allowance (3,105) (6,929) ----------------------- Deferred tax assets 96,982 113,091 Deferred tax liabilities: Unrealized gains on marketable equity securities (22,092) (26,851) Software development costs (17,464) (11,993) Unamortized LIFO reserve (1,780) (5,590) ----------------------- Deferred tax liabilities (41,336) (44,434) ----------------------- Net deferred tax assets $55,646 $68,657 ----------------------- ----------------------- At May 31, 1997, there were $3.4 million of unused foreign tax credits that, if not used, will expire in 1998. There were $10.7 million of alternative minimum tax (AMT) credits that can be carried forward indefinitely. U.S. taxes have not been provided on $99.5 million of accumulated unremitted earnings of non-U.S. subsidiaries because such earnings are or will be reinvested in operations or will be offset by appropriate credits for foreign income taxes paid. Page 31 QUARTERLY FINANCIAL DATA (UNAUDITED) In the opinion of management, this unaudited quarterly financial summary includes all adjustments necessary to present fairly the results for the periods represented (in thousands, except per share amounts): AUG. 31, NOV. 30, MAR. 1, MAY 31, QUARTER ENDED 1996 1996 1997 1997 - ------------------------------------------------------------------------------- Net sales $440,115 $477,166 $478,886 $543,915 Gross profit 191,272 199,762 205,233 236,460 Operating income 32,874 38,452 41,255 52,427 Earnings before taxes 33,405 38,905 42,297 54,195 Net earnings 22,715 26,456 28,762 36,852 Earnings per share $ 0.69 $ 0.81 $ 0.87 $ 1.11 Dividends per share 0.15 0.15 0.15 0.15 Common stock prices: High $ 44.88 $ 49.00 $ 52.25 $ 59.75 Low 35.88 37.00 47.38 48.38 AUG. 26, NOV. 25, FEB. 24, MAY 25, QUARTER ENDED 1995 1995 1996 1996 - ------------------------------------------------------------------------------- Net sales $401,022 $443,598 $433,500 $490,738 Gross profit 169,940 186,672 179,835 204,080 Operating income 32,059 39,054 31,451 40,803 Earnings before taxes 32,385 37,587 32,068 40,226 Net earnings 22,670 26,310 22,448 28,158 Earnings per share $ 0.68 $ 0.79 $ 0.67 $ 0.86 Dividends per share 0.15 0.15 0.15 0.15 Common stock prices: High $ 52.38 $ 61.88 $ 57.38 $ 46.88 Low 41.50 43.88 40.75 29.75 The Company's common stock is traded on the New York and Pacific Stock Exchanges. There were 4,059 shareholders of record at June 23, 1997. The market prices quoted above are the composite prices reported by The Wall Street Journal rounded to full cents per share. Dividends are paid at the discretion of the Board of Directors dependent upon their judgment of the Company's future earnings, expenditures and financial condition. Page 32 EX-21 5 EXHIBIT 21 EXHIBIT 21 SUBSIDIARIES OF TEKTRONIX, INC. Percentage of Voting Name of Subsidiary and Securities Owned by Jurisdiction in Which Organized Immediate Parent Tektronix Ges.m.b.H. (Austria) 100% Tektronix GmbH (Germany) 100 Tektronix Canada Inc. (Canada) 100 Tektronix Australia Pty. Limited (Australia) 100 Tektronix S.A.(France) 100 Tektronix N.V. (Belgium) 100 Tektronix, S.A. de C.V. (Mexico) 100 Tektronix A/S (Denmark) 100 Tektronix S.p.A. (Italy) 100 Tektronix Norge A/S (Norway) 100 Tektronix AB (Sweden) 100 Tektronix Oy (Finland) 100 Tektronix Industria e Comercio Ltda. (Brazil) 100 Tektronix Holland N.V. (The Netherlands) 100 Tektronix International A.G. (Switzerland) 100 Tektronix Europe B.V. (The Netherlands) 100 Tektronix U.K. Limited (United Kingdom) 100 Tektronix U.K. Development Centre Limited 100 (United Kingdom) Tektronix Espanola, S.A. (Spain) 100 GVG Japan, Ltd. (Japan) 100 Tektronix Foreign Sales Corporation (Guam) 100 Tektronix China, Limited (Hong Kong) 100 Tektronix Hong Kong Limited (Hong Kong) 100 Tektronix Electronics (China) Co., Ltd. (China) 100 Tektronix Taiwan, Ltd. (Taiwan) 100 Tektronix Southeast Asia Pte Ltd (Singapore) 100 Tektronix Engineering Development (India) Private 100 Limited (India) Tektronix Korea, Ltd. (Korea) 100 Tektronix Development Company (Oregon) 100 Tektronix International, Inc. (Oregon) 100 Tektronix Properties, Inc. (Oregon) 100 Tektronix Federal Systems, Inc. (Oregon) 100 Tektronix Asia, Ltd. (Oregon) 100 Tektronix Export, Inc.(Oregon) 100 - -------------------------------------------------------------------- Subsidiaries - Less than 100% Ownership (Parent Company/Oregon Corp. listed above): Yangzhong Tektronix Electronic Instrument Co., Ltd. 70 (China) Shanghai Tektronix Electronic Instrument Co., Ltd. 65 (China) Chongqing Tektronix Electronic Instrument Co., Ltd. 60 (China) Tektronix (India) Limited (India) 62 Sony/Tektronix Corporation (Japan) 50 MAXTEK Components Corporation 50 EX-23.1 6 EXHIBIT 23.1 EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement Nos. 33-59171, 33-58511, 33-33496, and 33-30648 of Tektronix, Inc. on Form S-8 and Registration Statement Nos. 33-58635, 33-58513, 33-18658, and 33-59648 of Tektronix, Inc. on Form S-3 of our report dated June 23, 1997, incorporated by reference in this Annual Report on Form 10-K of Tektronix, Inc. for the year ended May 31, 1997. DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP Portland, Oregon August 20, 1997 EX-24 7 EXHIBIT 24 POWER OF ATTORNEY The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN and JOHN P. KARALIS and each of them, as the undersigned's true and lawful attorneys and agents, with full power of substitution and resubstitution for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign the Tektronix, Inc. Annual Report on Form 10-K for the year ended May 31, 1997 and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys and agents, and each of them, full power and authority to do any and all acts and things necessary or advisable to be done, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys and agents or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: August 20, 1997 PAUL C. ELY, JR. ------------------------- Paul C. Ely, Jr. POWER OF ATTORNEY The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN and JOHN P. KARALIS and each of them, as the undersigned's true and lawful attorneys and agents, with full power of substitution and resubstitution for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign the Tektronix, Inc. Annual Report on Form 10-K for the year ended May 31, 1997 and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys and agents, and each of them, full power and authority to do any and all acts and things necessary or advisable to be done, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys and agents or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: August 18, 1997 A.M. GLEASON -------------- A. M. Gleason POWER OF ATTORNEY The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN and JOHN P. KARALIS and each of them, as the undersigned's true and lawful attorneys and agents, with full power of substitution and resubstitution for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign the Tektronix, Inc. Annual Report on Form 10-K for the year ended May 31, 1997 and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys and agents, and each of them, full power and authority to do any and all acts and things necessary or advisable to be done, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys and agents or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: August 20, 1997 WAYLAND R. HICKS ---------------- Wayland R. Hicks POWER OF ATTORNEY The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN and JOHN P. KARALIS and each of them, as the undersigned's true and lawful attorneys and agents, with full power of substitution and resubstitution for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign the Tektronix, Inc. Annual Report on Form 10-K for the year ended May 31, 1997 and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys and agents, and each of them, full power and authority to do any and all acts and things necessary or advisable to be done, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys and agents or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: August 20, 1997 JEROME J. MEYER --------------- Jerome J. Meyer POWER OF ATTORNEY The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN and JOHN P. KARALIS and each of them, as the undersigned's true and lawful attorneys and agents, with full power of substitution and resubstitution for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign the Tektronix, Inc. Annual Report on Form 10-K for the year ended May 31, 1997 and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys and agents, and each of them, full power and authority to do any and all acts and things necessary or advisable to be done, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys and agents or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: August 15, 1997 KEITH R. McKENNON ------------------- Keith R. McKennon POWER OF ATTORNEY The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN and JOHN P. KARALIS and each of them, as the undersigned's true and lawful attorneys and agents, with full power of substitution and resubstitution for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign the Tektronix, Inc. Annual Report on Form 10-K for the year ended May 31, 1997 and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys and agents, and each of them, full power and authority to do any and all acts and things necessary or advisable to be done, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys and agents or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: August 20, 1997 A. GARY AMES -------------- A. Gary Ames POWER OF ATTORNEY The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN and JOHN P. KARALIS and each of them, as the undersigned's true and lawful attorneys and agents, with full power of substitution and resubstitution for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign the Tektronix, Inc. Annual Report on Form 10-K for the year ended May 31, 1997 and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys and agents, and each of them, full power and authority to do any and all acts and things necessary or advisable to be done, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys and agents or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: August 20, 1997 WILLIAM D. WALKER ----------------- William D. Walker POWER OF ATTORNEY The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN and JOHN P. KARALIS and each of them, as the undersigned's true and lawful attorneys and agents, with full power of substitution and resubstitution for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign the Tektronix, Inc. Annual Report on Form 10-K for the year ended May 31, 1997 and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys and agents, and each of them, full power and authority to do any and all acts and things necessary or advisable to be done, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys and agents or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: August 18, 1997 GERRY B. CAMERON ---------------- Gerry B. Cameron POWER OF ATTORNEY The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN and JOHN P. KARALIS and each of them, as the undersigned's true and lawful attorneys and agents, with full power of substitution and resubstitution for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign the Tektronix, Inc. Annual Report on Form 10-K for the year ended May 31, 1997 and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys and agents, and each of them, full power and authority to do any and all acts and things necessary or advisable to be done, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys and agents or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: August 15, 1997 MERRILL A. McPEAK ----------------- Merrill A. McPeak POWER OF ATTORNEY The undersigned constitutes and appoints JEROME J. MEYER, CARL W. NEUN and JOHN P. KARALIS and each of them, as the undersigned's true and lawful attorneys and agents, with full power of substitution and resubstitution for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign the Tektronix, Inc. Annual Report on Form 10-K for the year ended May 31, 1997 and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys and agents, and each of them, full power and authority to do any and all acts and things necessary or advisable to be done, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys and agents or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: August 18, 1997 PAULINE LO ALKER ---------------- Pauline Lo Alker EX-27 8 EXHIBIT 27 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000 12-MOS MAY-31-1997 MAY-31-1997 142,726 0 308,925 3,093 238,040 751,511 699,283 356,153 1,316,741 304,089 151,579 0 0 226,591 544,692 1,316,741 0 1,940,082 0 1,107,355 0 0 12,111 168,802 54,017 114,785 0 0 0 114,785 3.48 3.48
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