---

UNITED
STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C.  20549

---

FORM 10-Q

|x                                                      | QUARTERLY REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934 
|------------------------------------------------------ | --------------------------------------------------------------------------------------------------
|                                                       |                                                                                                   
|For the quarterly period ended
      February 26, 2005
|                                                       |                                                                                                   
|OR                                                    
|                                                       |                                                                                                   
|o                                                      | 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
1-04837

|TEKTRONIX,
      INC.                                       
|------------------------------------------------------------
|(Exact Name of
      Registrant as Specified in Its
Charter)

|OREGON                                                                                         |  | 93-0343990                               
|---------------------------------------------------------------------------------------------- |  | -----------------------------------------
|(State or Other
      Jurisdiction ofIncorporation or Organization)                            |  | (I.R.S.
      EmployerIdentification No.)
|                                                                                               |  |                                          
|14200 SW KARL BRAUN
      DRIVEBEAVERTON, OREGON(Address of
      Principal Executive Offices) |  | 97077(Zip
      Code)                    

(503)
627-7111Registrants Telephone Number, Including Area Code

NOT
APPLICABLE(Former Name,
Former Address and Former Fiscal Year, if Changed Since Last
Report)

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 o

Indicate by
check mark whether the registrant is an accelerated filer (as defined in rule
12-b-2 of the Exchange Act).     Yes
xNoo

AT MARCH 26, 2005 THERE WERE 88,507,433
COMMON SHARES OF TEKTRONIX, INC.
OUTSTANDING.          (Indicate
the number of shares outstanding of each of the issuers classes of common
stock, as of the latest practicable date.)

---



TEKTRONIX, INC. AND
SUBSIDIARIES

INDEX

|                                 |                             |    |                                                                                                    |                                                                                                                        | PAGE
      NO.
|-------------------------------- | --------------------------- | -- | -------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------- | --------------
|                                 |                             |    |                                                                                                    |                                                                                                                        |               
|FORWARD-LOOKING
      STATEMENTS |                             | 1 
|                                 |                             |    |                                                                                                    |                                                                                                                        |               
|PART I.                          | FINANCIAL
      INFORMATION |    |                                                                                                   
|                                 |                             |    |                                                                                                    |                                                                                                                        |               
|                                 | Item 1.                     |    | Financial
      Statements.                                                                        |                                                                                                                        |               
|                                 |                             |    |                                                                                                    |                                                                                                                        |               
|                                 |                             |    | Condensed
      Consolidated Statements of Operations (Unaudited) -                                |                                                                                                                        | 2             
|                                 |                             |    |                                                                                                    | for the
      Fiscal quarter ended February 26, 2005 and the Fiscal quarter ended
      February 28, 2004              |               
|                                 |                             |    |                                                                                                    |                                                                                                                        |               
|                                 |                             |    |                                                                                                    | for the
      Three fiscal quarters ended February 26, 2005and the Three fiscal
      quarters ended February 28, 2004 |               
|                                 |                             |    |                                                                                                    |                                                                                                                        |               
|                                 |                             |    | Condensed
      Consolidated Balance Sheets  (Unaudited)                                          |                                                                                                                        | 3             
|                                 |                             |    |                                                                                                    | at
      February 26, 2005 and May 29, 2004                                                                            |               
|                                 |                             |    |                                                                                                    |                                                                                                                        |               
|                                 |                             |    | Condensed
      Consolidated Statements of Cash Flows (Unaudited) -                                |                                                                                                                        | 4             
|                                 |                             |    |                                                                                                    | for the
      Three fiscal quarters ended February 26, 2005                                                            |               
|                                 |                             |    |                                                                                                    | and the
      Three fiscal quarters ended February 28, 2004                                                            |               
|                                 |                             |    |                                                                                                    |                                                                                                                        |               
|                                 |                             |    | Notes
      to Condensed Consolidated Financial Statements
    (Unaudited)                         |                                                                                                                        | 5             
|                                 |                             |    |                                                                                                    |                                                                                                                        |               
|                                 | Item 2.                     |    | Managements
      Discussion and Analysis of Financial Condition and Results of
      Operations. |                                                                                                                        | 24            
|                                 |                             |    |                                                                                                    |                                                                                                                        |               
|                                 | Item 3.                     |    | Quantitative
      and Qualitative Disclosures About Market Risk.                                  |                                                                                                                        | 49            
|                                 |                             |    |                                                                                                    |                                                                                                                        |               
|                                 | Item 4.                     |    | Controls
      and Procedures.                                                                     |                                                                                                                        | 49            
|                                 |                             |    |                                                                                                    |                                                                                                                        |               
|PART II.                         | OTHER
      INFORMATION     |    |                                                                                                   
|                                 |                             |    |                                                                                                    |                                                                                                                        |               
|                                 | Item 1.                     |    | Legal
      Proceedings.                                                                           |                                                                                                                        | 50            
|                                 |                             |    |                                                                                                    |                                                                                                                        |               
|                                 | Item 2.                     |    | Unregistered
      Sales of Equity Securities and Use of Proceeds.                                 |                                                                                                                        | 50            
|                                 |                             |    |                                                                                                    |                                                                                                                        |               
|                                 | Item 6.                     |    | Exhibits.                                                                                          |                                                                                                                        | 51            
|                                 |                             |    |                                                                                                    |                                                                                                                        |               
|SIGNATURE                        |                             | 52



Forward-Looking Statements

Statements
and information included in this Quarterly Report on Form 10-Q by Tektronix,
Inc. (Tektronix) that are not purely historical are forward-looking statements
within the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995.  Forward-looking statements in this Quarterly Report on Form
10-Q include statements regarding Tektronix expectations, intentions, beliefs
and strategies regarding the future, including statements regarding trends,
cyclicality, seasonality and growth in the markets Tektronix sells into,
strategic direction, future effective
tax rates, new product introductions,
liquidity position, ability to generate cash from continuing operations,
expected growth, the potential impact of adopting new accounting pronouncements,
obligations under Tektronix retirement benefit plans, savings from business
realignment programs, the integration of Inet Technologies, Inc., and the
existence or length of an economic recovery.  These forward-looking
statements involve risks and uncertainties.  Tektronix may make other
forward-looking statements from time to time, including such statements in press
releases and public conference calls and webcasts.  All forward-looking
statements made by Tektronix are based on information available to Tektronix at
the time such statements are made, and Tektronix assumes no obligation to update
any forward-looking statements.  It is important to note that actual
results are subject to a number of risks and uncertainties that could cause
actual results to differ materially from those included in such forward-looking
statements.  Some of these risks and uncertainties are discussed in the
Risks and Uncertainties section of Managements Discussion and Analysis of
Financial Condition and Results of Operations.

1



Part I.
  FINANCIAL INFORMATION

|Item
      1. | Financial
      Statements.
|------------- | ---------------------------

Condensed Consolidated Statements of Operations
(Unaudited)

|                                                                    |  | Fiscal quarter
      ended |         | Three fiscal
      quarters ended |  
|------------------------------------------------------------------- |  | -------------------------- | ------- | --------------------------------- | -
|                                                                    |  |                            |         |                                   |  
|(In thousands, except per share
      amounts)                      |  | Feb. 26,
      2005        |         | Feb. 28,
      2004               |  
|                                                                    |  |                            |         |                                   |  
|Net sales                                                           |  | $                          | 256,332 |                                   | $
|Cost of sales                                                       |  |                            | 102,946 |                                   |  
|                                                                    |  |                            |         |                                   |  
|Gross profit                                                        |  |                            | 153,386 |                                   |  
|Research and development
    expenses                               |  |                            | 43,380  |                                   |  
|Selling, general and administrative
      expenses                  |  |                            | 78,750  |                                   |  
|Acquisition related costs (credits) and
      amortization, net     |  |                            | 2,590   |                                   |  
|Business realignment costs                                          |  |                            | 382     |                                   |  
|Loss (gain) on disposition of assets,
      net                     |  |                            | 754     |                                   |  
|                                                                    |  |                            |         |                                   |  
|Operating income                                                    |  |                            | 27,530  |                                   |  
|Interest income                                                     |  |                            | 3,798   |                                   |  
|Interest expense                                                    |  |                            | (113    | )                                 |  
|Other non-operating income (expense),
      net                     |  |                            | 1,422   |                                   |  
|                                                                    |  |                            |         |                                   |  
|Earnings before taxes                                               |  |                            | 32,637  |                                   |  
|Income tax expense                                                  |  |                            | 9,246   |                                   |  
|                                                                    |  |                            |         |                                   |  
|Net earnings from continuing
      operations                       |  |                            | 23,391  |                                   |  
|Gain (loss) from discontinued operations,
      net of income taxes |  |                            | 3,430   |                                   |  
|                                                                    |  |                            |         |                                   |  
|Net earnings                                                        |  | $                          | 26,821  |                                   | $
|                                                                    |  |                            |         |                                   |  
|Earnings (loss) per share:                                          |  |                            |         |                                   |  
|Continuing operations  basic                                       |  | $                          | 0.26    |                                   | $
|Continuing operations 
diluted                                     |  | $                          | 0.26    |                                   | $
|Discontinued operations  basic and
      diluted                   |  | $                          | 0.04    |                                   | $
|Net earnings  basic                                                |  | $                          | 0.30    |                                   | $
|Net earnings  diluted                                              |  | $                          | 0.30    |                                   | $
|Weighted average shares
      outstanding:                          |  |                            |         |                                   |  
|Basic                                                               |  |                            | 89,307  |                                   |  
|Diluted                                                             |  |                            | 90,690  |                                   |  
|Cash dividends declared per
    share                               |  | $                          | 0.06    |                                   | $

The accompanying notes are
an integral part of these condensed consolidated financial
statements.

2



Condensed Consolidated Balance Sheets (Unaudited)

|(In thousands)                                                                                                                                                          |  | Feb. 26,
      2005 |           | May 29,
      2004 |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------- | --------- | ------------------ | -
|                                                                                                                                                                        |  |                     |           |                    |  
|ASSETS                                                                                                                                                                  |  |                     |           |                    |  
|Current assets:                                                                                                                                                         |  |                     |           |                    |  
|Cash and cash equivalents                                                                                                                                               |  | $                   | 151,132   |                    | $
|Short-term marketable
    investments                                                                                                                                   |  |                     | 119,466   |                    |  
|Trade accounts receivable, net of allowance
      for doubtful accounts of $3,685 and $3,013, respectively                                                              |  |                     | 158,476   |                    |  
|Inventories                                                                                                                                                             |  |                     | 130,156   |                    |  
|Other current assets                                                                                                                                                    |  |                     | 56,016    |                    |  
|                                                                                                                                                                        |  |                     |           |                    |  
|Total current assets                                                                                                                                                    |  |                     | 615,246   |                    |  
|Property, plant and equipment,
    net                                                                                                                                  |  |                     | 115,472   |                    |  
|Long-term marketable
    investments                                                                                                                                    |  |                     | 280,885   |                    |  
|Deferred tax assets                                                                                                                                                     |  |                     | 66,672    |                    |  
|Goodwill, net                                                                                                                                                           |  |                     | 302,076   |                    |  
|Other long-term assets                                                                                                                                                  |  |                     | 144,154   |                    |  
|                                                                                                                                                                        |  |                     |           |                    |  
|Total assets                                                                                                                                                            |  | $                   | 1,524,505 |                    | $
|                                                                                                                                                                        |  |                     |           |                    |  
|LIABILITIES AND
      SHAREHOLDERS EQUITY                                                                                                                              |  |                     |           |                    |  
|Current liabilities:                                                                                                                                                    |  |                     |           |                    |  
|Accounts payable and accrued
      liabilities                                                                                                                          |  | $                   | 131,602   |                    | $
|Accrued compensation                                                                                                                                                    |  |                     | 73,177    |                    |  
|Deferred revenue                                                                                                                                                        |  |                     | 50,123    |                    |  
|                                                                                                                                                                        |  |                     |           |                    |  
|Total current liabilities                                                                                                                                               |  |                     | 254,902   |                    |  
|Long-term liabilities                                                                                                                                                   |  |                     | 177,523   |                    |  
|Shareholders equity:                                                                                                                                                   |  |                     |           |                    |  
|Common stock, no par value (authorized
      200,000 shares; issued and outstanding 89,028 and 84,179 shares at
      February 26, 2005 and May 29, 2004, respectively) |  |                     | 523,242   |                    |  
|Retained earnings                                                                                                                                                       |  |                     | 694,346   |                    |  
|Accumulated other comprehensive
      loss                                                                                                                              |  |                     | (125,508  | )                  |  
|                                                                                                                                                                        |  |                     |           |                    |  
|Total shareholders equity                                                                                                                                              |  |                     | 1,092,080 |                    |  
|                                                                                                                                                                        |  |                     |           |                    |  
|Total liabilities and shareholders
      equity                                                                                                                        |  | $                   | 1,524,505 |                    | $
|                                                                                                                                                                        |  |                     |           |                    |  

The accompanying notes are
an integral part of these condensed consolidated financial
statements.

3



Condensed Consolidated Statements of Cash Flows
(Unaudited)

|                                                                                          |  | Three fiscal
      quarters ended |         
|----------------------------------------------------------------------------------------- |  | --------------------------------- | --------
|                                                                                          |  |                                   |         
|(In thousands)                                                                            |  | Feb. 26,
      2005               |         
|                                                                                          |  |                                   |         
|CASH FLOWS FROM OPERATING
      ACTIVITIES                                                |  |                                   |         
|Net earnings                                                                              |  | $                                 | 60,395  
|Adjustments to reconcile net earnings to net
      cash provided by operating activities: |  |                                   |         
|Write-off of in-process research and
      development                                    |  |                                   | 32,237  
|Amortization of acquisition related
      intangible assets                               |  |                                   | 9,840   
|Loss (gain) from discontinued
      operations                                            |  |                                   | (3,117  
|Gain on Japan pension
      restructuring                                                 |  |                                   |        
|Depreciation and amortization
      expense                                               |  |                                   | 21,513  
|Gain on disposition of assets,
    net                                                    |  |                                   | (1,367  
|Tax benefit of stock option
      exercises                                               |  |                                   | 3,881   
|Deferred income tax benefit                                                               |  |                                   | (4,422  
|Net gain on sale of corporate equity
      securities                                     |  |                                   | (2,101  
|Changes in operating assets and liabilities,
      net of effects of acquisition:         |  |                                   |         
|Trade accounts receivable, net                                                            |  |                                   | (6,822  
|Inventories                                                                               |  |                                   | (10,030 
|Other current assets                                                                      |  |                                   | 2,990   
|Accounts payable and accrued
      liabilities                                            |  |                                   | (5,456  
|Accrued compensation                                                                      |  |                                   | (20,051 
|Deferred revenue                                                                          |  |                                   | 9,101   
|Cash funding for domestic pension
      plan                                              |  |                                   | (46,516 
|Other long-term assets and liabilities,
      net                                         |  |                                   | 10,055  
|                                                                                          |  |                                   |         
|Net cash provided by continuing operating
      activities                                |  |                                   | 50,130  
|Net cash provided by discontinued operating
      activities                              |  |                                   |        
|                                                                                          |  |                                   |         
|Net cash provided by operating
      activities                                           |  |                                   | 50,130  
|CASH FLOWS FROM INVESTING
      ACTIVITIES                                                |  |                                   |         
|Cash paid for acquisition of Inet, net of
      cash acquired                             |  |                                   | (93,856 
|Acquisition of property, plant and
      equipment                                        |  |                                   | (21,140 
|Proceeds from the disposition of property
      and equipment                             |  |                                   | 19,750  
|Proceeds from sales of corporate equity
      securities                                  |  |                                   | 3,348   
|Proceeds from maturities and sales of
      marketable investments                        |  |                                   | 239,684 
|Purchases of short-term and long-term
      marketable investments                        |  |                                   | (90,750 
|                                                                                          |  |                                   |         
|Net cash provided by investing
      activities                                           |  |                                   | 57,036  
|CASH FLOWS FROM FINANCING
      ACTIVITIES                                                |  |                                   |         
|Repayment of long-term debt                                                               |  |                                   | (318    
|Proceeds from employee stock
    plans                                                    |  |                                   | 20,217  
|Repurchase of common stock                                                                |  |                                   | (114,788
|Dividends paid                                                                            |  |                                   | (14,131 
|                                                                                          |  |                                   |         
|Net cash used in financing
      activities                                               |  |                                   | (109,020
|Effect of exchange rate changes on
      cash                                             |  |                                   | 3,975   
|                                                                                          |  |                                   |         
|Net increase (decrease) in cash and cash
      equivalents                                |  |                                   | 2,121   
|Cash and cash equivalents at beginning of
      period                                    |  |                                   | 149,011 
|                                                                                          |  |                                   |         
|Cash and cash equivalents at end of
      period                                          |  | $                                 | 151,132 
|                                                                                          |  |                                   |         

The accompanying notes are
an integral part of these condensed consolidated financial
statements.

4



Notes to
Condensed Consolidated Financial Statements

1.  The
Company

Tektronix,
Inc. (Tektronix) manufactures, markets and services test, measurement and
monitoring solutions to a wide variety of customers in many industries,
including computing, communications, semiconductors, broadcast, education,
government, military/aerospace, research, automotive and consumer
electronics.  Tektronix enables its customers to design, manufacture,
deploy, monitor and service next-generation global communications networks,
computing, and advanced and pervasive technologies.  Revenue is derived
principally through the development, manufacturing and marketing of a broad
range of products including: oscilloscopes; logic analyzers; network management
and diagnostics equipment, including mobile protocol test and network monitoring
solutions; video test equipment; signal sources; radio frequency test equipment,
including wireless field test and spectrum analysis equipment; and related
components, support services and accessories.  Tektronix maintains
operations in four major geographies: the Americas, including the United States,
Mexico, Canada and South America; Europe, including Europe, Russia, the Middle
East and Africa; the Pacific, including China, India, Korea, and Singapore; and
Japan.

2.  Financial Statement
Presentation

The condensed
consolidated financial statements and notes thereto have been prepared by
Tektronix without audit.  Certain information and footnote disclosures
normally included in annual financial statements, prepared in accordance with
accounting principles generally accepted in the United States of America, have
been condensed or omitted as permitted by Article 10 of Regulation S-X. 
The condensed consolidated financial statements include the accounts of
Tektronix and its majority-owned subsidiaries.  Significant intercompany
transactions and balances have been eliminated.  Certain prior period
amounts have been reclassified to conform to the current periods presentation
with no effect on previously reported earnings.  Tektronix fiscal year is
the 52 or 53 week period ending on the last Saturday in May.  Fiscal years
2005 and 2004 are both 52 weeks long.  The first three quarters of fiscal
years 2005 and 2004 were each 13 weeks long.

The
presentation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions.  These estimates and assumptions, including
those used to record the results of discontinued operations, 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
revenues and expenses reported during the period.  Examples include revenue
recognition; the allowance for doubtful accounts; product warranty accrual;
estimates of contingencies; intangible asset valuation; inventory valuation;
pension plan assumptions; determining when investment impairments are
other-than-temporary; and the assessment of the valuation of deferred income
taxes and income tax contingencies.  Actual results may differ from
estimated amounts.

Management
believes that the condensed consolidated financial statements include all
necessary adjustments, which are of a normal and recurring nature and are
adequate to fairly present the financial position, results of operations and
cash flows for the interim periods.  The condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and accompanying notes in Tektronix annual report on Form 10-K for
the fiscal year ended May 29, 2004.

Revenue
Recognition

Tektronix
recognizes product revenue when persuasive evidence of an arrangement exists,
delivery has occurred, the sales price is fixed or determinable and
collectibility is probable.  These criteria are met at the time the product
is shipped under FOB shipping point shipping terms.  The majority of
Tektronix products are sold in this manner.  Upon shipment, Tektronix also
provides for estimated costs that may be incurred for product warranties and
sales returns.  When other significant obligations remain after products
are delivered, revenue is recognized only after such obligations are
fulfilled.

The majority
of the contracts for network monitoring solution products, which were acquired
in the Inet acquisition, contain multiple billing milestones, such as contract
award, shipment, installation, ready for acceptance and acceptance, not all of
which are associated with revenue recognition.  Except as otherwise
discussed below, revenues from these products and license fees are recognized in
the period

5



that Tektronix has completed all hardware
manufacturing and/or software development to contractual specifications, factory
testing has been completed, the product has been shipped to the customer, the
fee is fixed and determinable and collection of the fee is considered
probable.  Revenues from arrangements that include significant acceptance
terms and/or provisions are recognized when acceptance has occurred.

Contracts for
network monitoring solution products often involve multiple deliverables. 
Tektronix determines the fair value of each of the contract deliverables using
vendor-specific objective evidence, or VSOE.  VSOE for each element of the
contract is based on the price for which Tektronix sells the element on a
stand-alone basis.  Elements of the contracts include product support
services, which include the correction of software problems, hardware
replacement, telephone access to Tektronix technical personnel and the right to
receive unspecified product updates, upgrades and enhancements, when and if they
become available.  Revenues from these services, including post-contract
support included in initial licensing fees, are recognized ratably over the
service periods.  Post-contract support included in the initial licensing
fee is allocated from the total contract amount based on the fair value of these
services determined using VSOE.  If Tektronix determines that it does not
have VSOE on an undelivered element of an arrangement, Tektronix will not
recognize revenue until all elements of the arrangement are delivered. 
This occurrence could materially impact Tektronix financial results because of
the significant dollar amount of many of its contracts and the significant
portion of total revenues that a single contract may represent in any particular
period.

Revenue
earned from service is recognized ratably over the contractual periods or as the
services are performed.  Shipping and handling costs are recorded as Cost of
sales on the Condensed Consolidated Statements of Operations.  Amounts
billed or collected in advance of the period in which the related product or
service qualifies for revenue recognition are recorded as Deferred revenue on
the Condensed Consolidated Balance Sheets.

Goodwill
and Intangible Assets

Goodwill and
intangible assets are accounted for in accordance with Statement of Financial
Accounting Standards (SFAS) No. 141, Business Combinations, and SFAS No.
142, Goodwill and Other Intangible Assets.  Tektronix performed its
annual goodwill impairment analysis during the second quarter of fiscal year
2005 and identified no impairment.  SFAS No. 142 requires purchased
intangible assets, other than goodwill, to be amortized over their estimated
useful lives, unless an asset has an indefinite life.  Purchased intangible
assets with definite useful lives are carried at cost less accumulated
amortization.  Amortization expense is recognized over the estimated useful
lives of the intangible assets, mostly over three to five years.  For
software-related intangible assets with definite useful lives, Tektronix
amortizes the cost over the estimated economic life of the software product and
assesses impairment in accordance with SFAS No. 86, Accounting for the Costs of
Computer Software to Be Sold, Leased, or Otherwise Marketed.  At each
balance sheet date, the unamortized cost of the software-related intangible
asset is compared to its net realizable value.  The net realizable value is
the estimated future gross revenues from the software product reduced by the
estimated future costs of completing and disposing of that product, including
the costs of performing maintenance and customer support.  The excess of
the unamortized cost over the net realizable value would then be recognized as
an impairment loss.  Amortization expense for intangible assets that are
software-related developed technology is recorded as Cost of sales on the
Condensed Consolidated Statements of Operations.

3.  Recent Accounting
Pronouncements

At the
November 1213, 2003 meeting, the Emerging Issues Task Force (EITF) reached a
consensus on Issue 03-1, The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments, that certain quantitative and qualitative
disclosures should be required for debt and marketable equity securities
classified as available-for-sale or held-to-maturity under SFAS No. 115,
Accounting for Certain Investments in Debt and Equity Securities, that are
impaired at the balance sheet date but for which an other-than-temporary
impairment has not been recognized.  Tektronix adopted the disclosure
requirements in fiscal year 2004.  At the March 17-18, 2004 meeting, the
EITF reached a consensus, which approved an impairment model for debt and equity
securities.  However, on September 30, 2004, the Financial Accounting
Standards Board (FASB) decided to postpone the implementation of the
impairment model for debt and equity securities.  Tektronix does not expect
this consensus to have a

6



significant effect on the consolidated
financial statements upon adoption of the proposed impairment model for debt and
equity securities.

In December
2003, the FASB issued SFAS No. 132 (revised 2003), Employers Disclosures about
Pensions and Other Postretirement Benefits, an amendment of FASB Statements No.
87, 88, and 106, and a revision of FASB Statement No. 132 (SFAS No.
132R).  SFAS No. 132R revised employers disclosures about pension plans
and other postretirement benefit plans.  It does not change the measurement
or recognition of those plans required by SFAS No. 87, Employers Accounting
for Pensions, SFAS No. 88, Employers Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination Benefits, and
SFAS No. 106, Employers Accounting for Postretirement Benefits Other Than
Pensions. The new rules require additional disclosures about the
assets, obligations, cash flows, and net periodic benefit cost of defined
benefit pension plans and other postretirement benefit plans.  The required
information has been provided separately for pension plans and for other
postretirement benefit plans.  Tektronix included the new disclosures in
its fiscal year 2004 consolidated financial statements and interim disclosures
beginning with the first quarter of fiscal year 2005.

In November
2004, the FASB issued SFAS No. 151, Inventory Costs, an amendment of ARB No.
43, Chapter 4.  SFAS No. 151 amends the guidance in ARB No. 43, Chapter 4,
Inventory Pricing, to clarify the accounting for abnormal amounts of idle
facility expense, freight, handling costs, and wasted material (spoilage). 
Paragraph 5 of ARB 43, Chapter 4, previously stated that . . . under some
circumstances, items such as idle facility expense, excessive spoilage, double
freight, and rehandling costs may be so abnormal as to require treatment as
current period charges. . . .  SFAS No. 151 requires that those items be
recognized as current-period charges regardless of whether they meet the
criterion of so abnormal.  In addition, SFAS No. 151 requires that
allocation of fixed production overheads to the costs of conversion be based on
the normal capacity of the production facilities.  The provisions of SFAS
No. 151 will apply to inventory costs beginning in fiscal year 2007.  The
adoption of SFAS No. 151 is not expected to have a significant effect on the
consolidated financial statements of Tektronix.

In December
2004, the FASB issued SFAS No. 123 (Revised 2004), Share-Based Payment (SFAS
No. 123R).  This new pronouncement requires compensation cost relating to
share-based payment transactions be recognized in financial statements. 
That cost will be measured based on the fair value of the equity or liability
instruments issued.  SFAS No. 123R covers a wide range of share-based
compensation arrangements including stock options, restricted stock plans,
performance-based awards, stock appreciation rights, and employee stock purchase
plans.  SFAS No. 123R replaces SFAS No. 123, Accounting for Stock-Based
Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued
to Employees.  SFAS No. 123, as originally issued in 1995, established as
preferable a fair-value-based method of accounting for share-based payment
transactions with employees.  However, SFAS No. 123 permitted entities the
option of continuing to apply the guidance in APB Opinion No. 25, as long as the
footnotes to financial statements disclosed what net income would have been had
the preferable fair-value-based method been used.  Tektronix will be
required to adopt the provisions of SFAS No. 123R in the second fiscal quarter
of fiscal year 2006.  Management is currently evaluating the requirements
of SFAS No. 123R.  The adoption of SFAS No. 123R is expected to have a
significant effect on the consolidated financial statements of Tektronix. 
See Note 4 for the pro forma impact on net earnings and earnings per share from
calculating stock-related compensation costs under the fair value alternative of
SFAS No. 123.  However, the calculation of compensation cost for
share-based payment transactions after the effective date of SFAS No. 123R may
be different from the calculation of compensation cost under SFAS No. 123, but
such differences have not yet been quantified.

In December
2004, the FASB issued two FASB staff positions (FSP): FSP FAS 109-1,
Application of FASB Statement No. 109, Accounting for Income Taxes, for the Tax
Deduction Provided to U.S.-Based Manufacturers by the American Jobs Creation Act
of 2004; and FSP FAS 109-2, Accounting and Disclosure Guidance for the Foreign
Earnings Repatriation Provision within the American Jobs Creation Act of
2004.  FSP FAS 109-1 clarifies that the tax deduction for domestic
manufacturers under the American Jobs Creation Act of 2004 (the Act) should be
accounted for as a special deduction in accordance with SFAS No. 109,
Accounting for Income Taxes.  FSP FAS 109-2 provides enterprises more
time (beyond the financial-reporting period during which the Act took effect) to
evaluate the Acts impact on the enterprises plan for reinvestment or
repatriation of certain foreign earnings for purposes of applying SFAS No.
109.  The FSPs went into effect upon being issued and did not have a
significant effect on the consolidated financial statements of
Tektronix.

7



4.  Earnings Per Share,
Including Pro Forma Effects of Stock-Based Compensation

Basic
earnings per share is calculated based on the weighted average number of common
shares outstanding during each period.  Diluted earnings per share is
calculated based on these same weighted average shares outstanding plus the
effect of potential shares issuable upon assumed exercise of stock options based
on the treasury stock method.  Potential shares issuable upon the exercise
of stock options are excluded from the calculation of diluted earnings per share
to the extent their effect would be antidilutive.

Earnings per
share was calculated as follows:

|                                                                   |  | Fiscal quarter
      ended |        | Three fiscal
      quarters ended |  
|------------------------------------------------------------------ |  | -------------------------- | ------ | --------------------------------- | -
|                                                                   |  |                            |        |                                   |  
|(In thousands, except per share
      amounts)                     |  | Feb. 26,
      2005        |        | Feb. 28,
      2004               |  
|                                                                   |  |                            |        |                                   |  
|Net earnings                                                       |  | $                          | 26,821 |                                   | $
|                                                                   |  |                            |        |                                   |  
|Weighted average shares used for basic
      earnings per share    |  |                            | 89,307 |                                   |  
|Incremental dilutive stock
    options                             |  |                            | 1,383  |                                   |  
|                                                                   |  |                            |        |                                   |  
|Weighted average shares used for dilutive
      earnings per share |  |                            | 90,690 |                                   |  
|                                                                   |  |                            |        |                                   |  
|Earnings per share:                                                |  |                            |        |                                   |  
|Net earnings  basic                                               |  | $                          | 0.30   |                                   | $
|Net earnings  diluted                                             |  | $                          | 0.30   |                                   | $

Options to
purchase 4,897,218 and 3,890,752 shares of common stock were outstanding at
February 26, 2005 and February 28, 2004, respectively, but were not included in
the calculation of diluted net earnings per share because the exercise price of
the options exceeded the average market price and their effect would have been
antidilutive.

Tektronix
accounts for stock options according to APB Opinion No. 25, Accounting for
Stock Issued to Employees.  Under APB Opinion No. 25, no compensation
expense is recognized in Tektronix consolidated financial statements upon
issuance of 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 cost 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 values of options granted
during the fiscal quarters ended February 26, 2005 and February 28, 2004 were
$9.32 and $9.72 per share, respectively.  The weighted average estimated
fair values of options granted during the first three fiscal quarters ended
February 26, 2005 and February 28, 2004 were $9.49 and $9.72 per share,
respectively.

8



The pro forma
impact to both net earnings and earnings per share (EPS) from calculating
stock-related compensation cost consistent with the fair value alternative of
SFAS No. 123 is indicated below:

|                                                                                        |  | Fiscal quarter
      ended |        | Three fiscal
      quarters ended |  
|--------------------------------------------------------------------------------------- |  | -------------------------- | ------ | --------------------------------- | -
|                                                                                        |  |                            |        |                                   |  
|(In thousands, except per share
      amounts)                                          |  | Feb. 26,
      2005        |        | Feb. 28,
      2004               |  
|                                                                                        |  |                            |        |                                   |  
|Net earnings as reported                                                                |  | $                          | 26,821 |                                   | $
|Stock compensation cost included in net
      earnings as reported, net of income taxes |  |                            | 642    |                                   |  
|Stock compensation cost using the fair value
      alternative, net of income taxes     |  |                            | (4,389 | )                                 |  
|                                                                                        |  |                            |        |                                   |  
|Pro forma net earnings                                                                  |  | $                          | 23,074 |                                   | $
|                                                                                        |  |                            |        |                                   |  
|Earnings per share:                                                                     |  |                            |        |                                   |  
|Basic EPS  as reported                                                                 |  | $                          | 0.30   |                                   | $
|Basic EPS  pro forma                                                                   |  | $                          | 0.26   |                                   | $
|                                                                                        |  |                            |        |                                   |  
|Diluted EPS  as reported                                                               |  | $                          | 0.30   |                                   | $
|Diluted EPS  pro forma                                                                 |  | $                          | 0.25   |                                   | $

SFAS No.
123 Assumptions

The fair
values of options were estimated as of the date of grant using a Black-Scholes
option pricing model with the following weighted average assumptions:

|                        |  | Fiscal quarter
      ended |       | Three fiscal
      quarters ended | 
|----------------------- |  | -------------------------- | ----- | --------------------------------- | 
|                        |  |                            |       |                                   | 
|                        |  | Feb. 26,
      2005        |       | Feb. 28,
      2004               | 
|                        |  |                            |       |                                   | 
|Expected life in years  |  |                            | 5.1   |                                   | 
|Risk-free interest rate |  |                            | 3.67  | %                                 | 
|Volatility              |  |                            | 32.70 | %                                 | 
|Dividend yield          |  |                            | 0.83  | %                                 | 

5.  Acquisition of Inet
Technologies, Inc.

On September
30, 2004, Tektronix acquired Inet Technologies, Inc. (Inet), a leading global
provider of communications software solutions that enable network operators to
more strategically and profitably operate their businesses.  Inets
products address next-generation networks, including 2.5G and 3G mobile data and
voice-over-packet (also referred to as voice over Internet protocol or VoIP)
technologies, and traditional networks.  Inet had approximately 500
employees worldwide and had sales of $104 million for the year ended December
31, 2003.  Through the Inet acquisition, Tektronix gains significant
expansion into network monitoring, which is a market that Tektronix had
previously targeted for expansion.  Inets established network monitoring
business, as well as its established customer base, is very complementary with
Tektronix pre-acquisition mobile protocol test business.

Tektronix
acquired all of Inets outstanding common stock for $12.50 per share consisting
of $6.25 per share in cash and $6.25 per share in Tektronix common stock. 
Prior to the close of the transaction on September 30, 2004, Inet had 39.6
million shares of common stock outstanding.  The final exchange ratio used
to determine the number of shares of Tektronix common stock issued was 0.192,
which resulted in the issuance of 7.6 million shares of Tektronix common stock
in the transaction.  The 7.6 million shares were valued at $32.55 per
share, based on the 5-day period ended September 29, 2004, because that was the
earliest date that the final exchange ratio could be determined.  The fair
values of the stock options and restricted share rights assumed were determined
by using the Black-Scholes option pricing model.  The cash consideration of
$247.6 million, the value of Tektronix common stock of $247.5 million, and the
fair values of stock options and restricted share rights assumed are included in
the purchase price that was allocated to the underlying assets acquired and
liabilities assumed based on their estimated fair values.  Analysis
supporting the purchase price allocation includes a valuation of assets and
liabilities as of the closing date, including a third party valuation of
intangible items and a detailed review of the opening balance sheet to determine
other significant adjustments required to recognize

9



assets and liabilities at fair
value.  The purchase price allocation is subject to further changes,
including an analysis of the deductibility of transaction costs and resolution
of ongoing tax audits for pre-acquisition periods.  The purchase price and
resulting allocation to the underlying assets acquired, net of deferred income
taxes, were as follows:

The following
table presents the total purchase price (in thousands):

|Cash paid                             |  | $ | 247,561 |  
|------------------------------------- |  | - | ------- | -
|Stock issued                          |  |   | 247,543 |  
|Stock options assumed                 |  |   | 9,658   |  
|Restricted share rights
assumed       |  |   | 321     |  
|Transaction costs                     |  |   | 5,116   |  
|Unearned stock-based
    compensation |  |   | (3,403  | )
|Liabilities assumed                   |  |   | 32,683  |  
|                                      |  |   |         |  
|Total purchase price                  |  | $ | 539,479 |  
|                                      |  |   |         |  

The following
table presents the allocation of the purchase price to the assets acquired, net
of deferred income taxes, based on their fair values (in thousands):

|Cash and cash equivalents                                 |  | $ | 158,821 |  
|--------------------------------------------------------- |  | - | ------- | -
|Accounts receivable                                       |  |   | 17,565  |  
|Inventories                                               |  |   | 18,025  |  
|Other current assets                                      |  |   | 7,849   |  
|Property, plant, and equipment                            |  |   | 10,662  |  
|Intangible assets                                         |  |   | 121,953 |  
|Goodwill                                                  |  |   | 217,972 |  
|Other long term assets                                    |  |   | 811     |  
|In-process research and
      development                 |  |   | 32,237  |  
|Deferred income taxes                                     |  |   | (46,416 | )
|                                                          |  |   |         |  
|Total assets acquired, net of deferred
      income taxes |  | $ | 539,479 |  
|                                                          |  |   |         |  

The following
table presents the details of the intangible assets purchased in the Inet
acquisition as of February 26, 2005:

|(In thousands)                        |  | (in
      years)WeightedAverageUseful Life |                   | Cost |   | AccumulatedAmortization |  | Net |       
|------------------------------------- |  | ------------------------------------------ | ----------------- | ---- | - | ----------------------- |  | --- | ------
|                                      |  |                                            |                   |      |   |                         |  |     |       
|Developed technology                  |  |                                            | 4.8               |      | $ | 87,004                  |  | $   | (7,707
|Customer relationships                |  |                                            | 4.8               |      |   | 22,597                  |  |     | (2,008
|Covenants not to compete              |  |                                            | 4.0               |      |   | 1,200                   |  |     | (125  
|                                      |  |                                            |                   |      |   |                         |  |     |       
|                                      |  |                                            |                   |      |   | 110,801                 |  |     | (9,840
|Tradename                             |  |                                            | Not
    amortized |      |   | 11,152                  |  |     |      
|                                      |  |                                            |                   |      |   |                         |  |     |       
|Total intangible assets
    purchased |  |                                            |                   |      | $ | 121,953                 |  | $   | (9,840
|                                      |  |                                            |                   |      |   |                         |  |     |       

Amortization
expense for intangible assets purchased in the Inet acquisition was $5.9 million
and $9.8 million for the third quarter and first three quarters of fiscal year
2005.  Amortization expense for intangible assets purchased in the Inet
acquisition has been recorded on the Condensed Consolidated Statements of
Operations as follows:

|                                                                |  | Fiscal quarter
      ended |       | Three fiscal
      quarters ended |  
|--------------------------------------------------------------- |  | -------------------------- | ----- | --------------------------------- | -
|                                                                |  |                            |       |                                   |  
|(In thousands)                                                  |  | Feb. 26,
      2005        |       | Feb. 28,
      2004               |  
|                                                                |  |                            |       |                                   |  
|Cost of sales                                                   |  | $                          | 4,627 |                                   | $
|Acquisition related costs (credits) and
      amortization, net |  |                            | 1,287 |                                   |  
|                                                                |  |                            |       |                                   |  
|Total                                                           |  | $                          | 5,914 |                                   | $
|                                                                |  |                            |       |                                   |  

10



The estimated
amortization expense of intangible assets purchased in the Inet acquisition for
the current fiscal year, including amounts amortized to date, and in future
years will be recorded in the Condensed Consolidated Statements of Operations as
follows:

|(In thousands) |  | Cost of
      sales |        | Acquisitionrelated costs(credits)
      andamortization,net |   | Totalfor
      thefiscal year | 
|-------------- |  | ------------------- | ------ | ----------------------------------------------------------- | - | ----------------------------- | 
|               |  |                     |        |                                                             |   |                               | 
|Fiscal Year    |  |                     |        |                                                             |   |                               | 
|2005           |  | $                   | 12,330 |                                                             | $ | 3,411                         | 
|2006           |  |                     | 18,495 |                                                             |   | 5,117                         | 
|2007           |  |                     | 18,495 |                                                             |   | 5,117                         | 
|2008           |  |                     | 16,670 |                                                             |   | 4,621                         | 
|2009           |  |                     | 15,759 |                                                             |   | 4,174                         | 
|2010           |  |                     | 5,255  |                                                             |   | 1,357                         | 
|               |  |                     |        |                                                             |   |                               | 
|Total          |  | $                   | 87,004 |                                                             | $ | 23,797                        | 
|               |  |                     |        |                                                             |   |                               | 

The $32.2
million allocated to the in-process research and development (IPR&D) asset
was written off at the date of the acquisition in accordance with FASB
Interpretation No. 4, Applicability of FASB Statement No. 2 to Business
Combinations Accounted for by the Purchase Method.  This write-off was
included in acquisition related costs on the Condensed Consolidated Statements
of Operations.  The fair value of IPR&D was based on the net present
value of estimated future cash flows.  Significant assumptions used in the
valuation of IPR&D included a risk adjusted discount rate of 10.2%, revenue
and expense projections, development life cycle and future entry of products to
the market.  As of the acquisition date, there were eight research and
development projects in process that were approximately 87% complete.  The
total estimated cost to complete these projects was approximately $0.8 million
at the acquisition date.  As of February 26, 2005, the total estimated
remaining cost for these substantially complete projects was not
significant.

The Condensed
Consolidated Statements of Operations include the results of operations of Inet
since September 30, 2004.  The following (unaudited) pro forma consolidated
results of operations have been prepared as if the acquisition of Inet had
occurred at June 1, 2003, the beginning of Tektronix fiscal year
2004.

|                                               |  | Fiscal quarter
      ended |         | Three fiscal
      quarters ended |  
|---------------------------------------------- |  | -------------------------- | ------- | --------------------------------- | -
|                                               |  |                            |         |                                   |  
|(In thousands, except per share
      amounts) |  | Feb. 26,
      2005        |         | Feb. 28,
      2004               |  
|                                               |  |                            |         |                                   |  
|Net sales                                      |  | $                          | 256,332 |                                   | $
|Net earnings from continuing
      operations  |  |                            | 23,433  |                                   |  
|Earnings per share:                            |  |                            |         |                                   |  
|Continuing operations  basic                  |  | $                          | 0.26    |                                   | $
|Continuing operations 
diluted                |  | $                          | 0.26    |                                   | $

The write-off
of IPR&D is excluded from the calculation of net earnings and earnings per
share in the table shown above.

The pro forma
information is presented for informational purposes only and is not necessarily
indicative of the results of operations that actually would have been achieved
had the acquisition been consummated as of that time, nor is it intended to be a
projection of future results.

11



6.  Discontinued
Operations

Discontinued
operations presented on the Condensed Consolidated Statements of Operations
included the following:

|                                                                                                                                                |  | Fiscal quarter
      ended |       | Three fiscal
      quarters ended |  
|----------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ----- | --------------------------------- | -
|                                                                                                                                                |  |                            |       |                                   |  
|(In thousands)                                                                                                                                  |  | Feb. 26,
      2005        |       | Feb. 28,
      2004               |  
|                                                                                                                                                |  |                            |       |                                   |  
|Gain on sale of Color Printing and Imaging
      Division (less applicable income tax expense of $1,889, $0, $1,889 and $0)
      (see Note 17) |  | $                          | 3,508 |                                   | $
|Loss on sale of VideoTele.com (less
      applicable income tax benefit of $3, $13, $12 and $16)                                                |  |                            | (7    | )                                 |  
|Loss on sale of optical parametric test
      business (less applicable income tax benefit of $10, $25, $95 and
      $114)                     |  |                            | (18   | )                                 |  
|Loss on sale of Gage (less applicable income
      tax benefit of $28, $101, $103 and $616)                                                     |  |                            | (53   | )                                 |  
|Loss from operations of Gage (less
      applicable income tax benefit of $0, $0, $0 and $212)                                                  |  |                            |      |                                   |  
|                                                                                                                                                |  |                            |       |                                   |  
|Gain (loss) from discontinued operations,
      net of income taxes                                                                             |  | $                          | 3,430 |                                   | $
|                                                                                                                                                |  |                            |       |                                   |  

7.  Business Realignment
Costs

Business
realignment costs represent actions to realign Tektronix cost structure in
response to significant events and primarily include restructuring actions and
impairment of assets resulting from reduced business levels.  Business
realignment actions taken were intended to reduce Tektronix worldwide cost
structure across all major functions in response to the dramatic economic
decline, which severely impacted markets into which Tektronix sells its
products.  Major operations impacted include manufacturing, engineering,
sales, marketing and administrative functions.  In addition to severance,
Tektronix incurred other costs associated with restructuring its organization,
which primarily represented facilities contracts and other exit costs associated
with aligning the cost structure to appropriate levels.

Costs
incurred during the current quarter primarily relate to restructuring actions
Tektronix planned in prior years which were executed in the current
quarter.  Many of the restructuring actions planned take significant time
to execute, particularly if they are being conducted in countries outside the
United States.

Business
realignment costs of $0.4 million in the third quarter of fiscal year 2005 were
primarily for severance and related costs for residual activity in Europe. 
For the first three quarters of fiscal year 2005, business realignment costs of
$2.7 million included severance and related costs of $1.7 million for 30
employees, $0.9 million for contractual obligations, and $0.2 million for
accelerated depreciation of assets, offset by a $0.1 million credit from net
accumulated currency translation gains.  Business realignment costs in the
first three quarters of fiscal year 2005 largely related to residual activities
for actions taken in Europe.  Expected future annual salary cost savings
from actions taken in the first three quarters of fiscal year 2005 to reduce
employee headcount is not significant.  At February 26, 2005, the remaining
liabilities for employee severance and related benefits were maintained for 21
employees.

12



Activity in
the accrual for business realignment costs for the above described actions
during the first three quarters of fiscal year 2005 was as follows:

|(In thousands)                                   |  | BalanceMay
      29,2004 |       | Costs
      incurredand other adjustments |   | Cashpayments |   | Non-cashadjustments |        | BalanceFeb.
      26,2005 |  
|------------------------------------------------ |  | ------------------------ | ----- | ----------------------------------------- | - | ------------ | - | ------------------- | ------ | ------------------------- | -
|                                                 |  |                          |       |                                           |   |              |   |                     |        |                           |  
|Fiscal Year 2005
    Actions:                    |  |                          |       |                                           |   |              |   |                     |        |                           |  
|Employee severance and related
      benefits    |  | $                        |      |                                           | $ | 1,934        |   | $                   | (1,404 | )                         | $
|Asset impairments                                |  |                          |      |                                           |   | 289          |   |                     |       |                           |  
|Contractual obligations                          |  |                          |      |                                           |   | 525          |   |                     | (577   | )                         |  
|Accumulated currency translation gain,
      net |  |                          |      |                                           |   | (124         | ) |                     |       |                           |  
|                                                 |  |                          |       |                                           |   |              |   |                     |        |                           |  
|Total                                            |  |                          |      |                                           |   | 2,624        |   |                     | (1,981 | )                         |  
|                                                 |  |                          |       |                                           |   |              |   |                     |        |                           |  
|Fiscal Year 2004
    Actions:                    |  |                          |       |                                           |   |              |   |                     |        |                           |  
|Employee severance and related
      benefits    |  |                          | 5,335 |                                           |   | (220         | ) |                     | (4,266 | )                         |  
|Contractual obligations                          |  |                          | 409   |                                           |   | 379          |   |                     | (789   | )                         |  
|Asset impairments                                |  |                          |      |                                           |   | (107         | ) |                     |       |                           |  
|                                                 |  |                          |       |                                           |   |              |   |                     |        |                           |  
|Total                                            |  |                          | 5,744 |                                           |   | 52           |   |                     | (5,055 | )                         |  
|                                                 |  |                          |       |                                           |   |              |   |                     |        |                           |  
|Fiscal Year 2003
    Actions:                    |  |                          |       |                                           |   |              |   |                     |        |                           |  
|Employee severance and related
      benefits    |  |                          | 294   |                                           |   | (20          | ) |                     | (271   | )                         |  
|Contractual obligations                          |  |                          | 1,240 |                                           |   |             |   |                     | (331   | )                         |  
|                                                 |  |                          |       |                                           |   |              |   |                     |        |                           |  
|Total                                            |  |                          | 1,534 |                                           |   | (20          | ) |                     | (602   | )                         |  
|                                                 |  |                          |       |                                           |   |              |   |                     |        |                           |  
|Fiscal Year 2002
    Actions:                    |  |                          |       |                                           |   |              |   |                     |        |                           |  
|Employee severance and related
      benefits    |  |                          | 152   |                                           |   | 9            |   |                     | (161   | )                         |  
|Contractual obligations                          |  |                          | 54    |                                           |   |             |   |                     | (24    | )                         |  
|                                                 |  |                          |       |                                           |   |              |   |                     |        |                           |  
|Total                                            |  |                          | 206   |                                           |   | 9            |   |                     | (185   | )                         |  
|                                                 |  |                          |       |                                           |   |              |   |                     |        |                           |  
|Total of all actions                             |  | $                        | 7,484 |                                           | $ | 2,665        |   | $                   | (7,823 | )                         | $
|                                                 |  |                          |       |                                           |   |              |   |                     |        |                           |  

8.  Marketable
Investments

Marketable
investments are recorded at fair value with the resulting unrealized gains and
temporary losses included, net of tax, in Accumulated other comprehensive loss
on the Condensed Consolidated Balance Sheets.  Fair values of marketable
investments are based on quoted market prices.  Realized gains and losses
on sales of marketable investments were insignificant and $0.2 million,
respectively, during the quarter ended February 26, 2005, and $1.3 million and
$1.8 million, respectively, for the three quarters ended February 26,
2005.  Realized gains and losses on sales of marketable investments were
$0.7 million and $0.6 million, respectively, during the quarter ended February
28, 2004, and $2.4 million and $2.3 million, respectively, for the three
quarters ended February 28, 2004.  Realized gains and losses on sales of
marketable investments are included in Other non-operating income (expense), net,
on the Condensed Consolidated Statements of Operations.

13



Short-term
marketable investments held at February 26, 2005 consisted of:

|(In thousands)                        |  | Amortizedcost |         | Unrealizedgains |   | Unrealizedlosses |  | Fair
      value |     
|------------------------------------- |  | ------------- | ------- | --------------- | - | ---------------- |  | ---------------- | ----
|                                      |  |               |         |                 |   |                  |  |                  |     
|Corporate notes and bonds             |  | $             | 49,685  |                 | $ | 25               |  | $                | (321
|U.S. Treasuries                       |  |               | 26,326  |                 |   |                 |  |                  | (200
|U.S. Agencies                         |  |               | 26,135  |                 |   |                 |  |                  | (198
|Asset backed securities               |  |               | 9,712   |                 |   |                 |  |                  | (60 
|Mortgage backed securities            |  |               | 8,531   |                 |   |                 |  |                  | (169
|                                      |  |               |         |                 |   |                  |  |                  |     
|Short-term marketable
    investments |  | $             | 120,389 |                 | $ | 25               |  | $                | (948
|                                      |  |               |         |                 |   |                  |  |                  |     

Long-term
marketable investments held at February 26, 2005 consisted of:

|(In thousands)                       |  | Amortizedcost |         | Unrealizedgains |   | Unrealizedlosses |  | Fair
      value |       
|------------------------------------ |  | ------------- | ------- | --------------- | - | ---------------- |  | ---------------- | ------
|                                     |  |               |         |                 |   |                  |  |                  |       
|Mortgage backed securities           |  | $             | 76,110  |                 | $ | 167              |  | $                | (1,081
|Corporate notes and bonds            |  |               | 57,253  |                 |   | 251              |  |                  | (584  
|Asset backed securities              |  |               | 75,047  |                 |   | 303              |  |                  | (485  
|U.S. Agencies                        |  |               | 61,234  |                 |   | 75               |  |                  | (988  
|U.S. Treasuries                      |  |               | 13,692  |                 |   | 3                |  |                  | (112  
|                                     |  |               |         |                 |   |                  |  |                  |       
|Long-term marketable
    investments |  | $             | 283,336 |                 | $ | 799              |  | $                | (3,250
|                                     |  |               |         |                 |   |                  |  |                  |       

Short-term
marketable investments held at May 29, 2004 consisted of:

|(In thousands)                        |  | Amortizedcost |        | Unrealizedgains |   | Unrealizedlosses |  | Fair
      value |     
|------------------------------------- |  | ------------- | ------ | --------------- | - | ---------------- |  | ---------------- | ----
|                                      |  |               |        |                 |   |                  |  |                  |     
|Corporate notes and bonds             |  | $             | 46,899 |                 | $ | 191              |  | $                | (118
|U.S. Treasuries                       |  |               | 5,313  |                 |   | 96               |  |                  |    
|U.S. Agencies                         |  |               | 2,972  |                 |   | 2                |  |                  |    
|Asset backed securities               |  |               | 30,657 |                 |   | 1                |  |                  | (363
|Mortgage backed securities            |  |               | 5,358  |                 |   |                 |  |                  | (52 
|                                      |  |               |        |                 |   |                  |  |                  |     
|Short-term marketable
    investments |  | $             | 91,199 |                 | $ | 290              |  | $                | (533
|                                      |  |               |        |                 |   |                  |  |                  |     

Long-term
marketable investments held at May 29, 2004 consisted of:

|(In thousands)                       |  | Amortizedcost |         | Unrealizedgains |   | Unrealizedlosses |  | Fair
      value |       
|------------------------------------ |  | ------------- | ------- | --------------- | - | ---------------- |  | ---------------- | ------
|                                     |  |               |         |                 |   |                  |  |                  |       
|Mortgage backed securities           |  | $             | 176,266 |                 | $ | 715              |  | $                | (2,684
|Corporate notes and bonds            |  |               | 89,562  |                 |   | 817              |  |                  | (587  
|Asset backed securities              |  |               | 76,052  |                 |   | 999              |  |                  | (261  
|U.S. Agencies                        |  |               | 79,878  |                 |   | 155              |  |                  | (962  
|U.S. Treasuries                      |  |               | 44,166  |                 |   |                 |  |                  | (238  
|                                     |  |               |         |                 |   |                  |  |                  |       
|Long-term marketable
    investments |  | $             | 465,924 |                 | $ | 2,686            |  | $                | (4,732
|                                     |  |               |         |                 |   |                  |  |                  |       

14



Contractual
maturities of long-term marketable investments at February 26, 2005 are as
follows:

|(In thousands)                       |  | AmortizedCost
      Basis |        
|------------------------------------ |  | ------------------------- | -------
|                                     |  |                           |        
|After 1 year through 5 years         |  | $                         | 207,226
|Mortgage backed securities           |  |                           | 76,110 
|                                     |  |                           |        
|Long-term marketable
    investments |  | $                         | 283,336
|                                     |  |                           |        

Tektronix
reviews investments in debt and equity securities for other than temporary
impairment whenever the fair value of an investment is less than amortized cost
and evidence indicates that an investments carrying amount is not recoverable
within a reasonable period of time.  In the evaluation of whether an
impairment is other-than-temporary, Tektronix considers the reasons for the
impairment, its ability and intent to hold the investment until the market price
recovers, compliance with its investment policy, the severity and duration of
the impairment and expected future performance.  As Tektronix primarily
invests in high quality debt securities, unrealized losses are largely driven by
increased market interest rates.  These unrealized losses were not
significant on an individual investment security basis.  Based on this
evaluation, no impairment was considered to be other-than-temporary.  The
following table presents the fair value of marketable investments with
unrealized losses at February 26, 2005:

|                                 |  | 12 months or
      more |        | Less than 12
      months |   | Total            | 
|-------------------------------- |  | ----------------------- | ------ | ------------------------- | - | ---------------- | 
|                                 |  |                         |        |                           |   |                  | 
|(In thousands)                   |  | Fair
      Value        |        | UnrealizedLosses          |   | Fair
      Value | 
|                                 |  |                         |        |                           |   |                  | 
|Corporate notes and
    bonds    |  | $                       | 7,180  |                           | $ | 69               | 
|Asset backed
    securities      |  |                         | 897    |                           |   | 21               | 
|Mortgage backed
      securities |  |                         | 4,620  |                           |   | 98               | 
|U.S. Agencies                    |  |                         | 4,929  |                           |   | 93               | 
|U.S. Treasuries                  |  |                         | 0      |                           |   | 0                | 
|                                 |  |                         |        |                           |   |                  | 
|Total                            |  | $                       | 17,626 |                           | $ | 281              | 
|                                 |  |                         |        |                           |   |                  | 

15



9.  Inventories

Inventories
are stated at the lower of cost or market.  Cost is determined based on a
currently-adjusted standard basis, which approximates actual cost on a first-in,
first-out basis.  Market is determined based on net realizable value. 
Tektronix periodically reviews its inventory for obsolete or slow-moving
items.  Inventories consisted of the following:

|(In thousands)  |  | Feb. 26,
      2005 |         | May 29,
      2004 |  
|--------------- |  | ------------------- | ------- | ------------------ | -
|                |  |                     |         |                    |  
|Materials       |  | $                   | 8,189   |                    | $
|Work in process |  |                     | 54,077  |                    |  
|Finished goods  |  |                     | 67,890  |                    |  
|                |  |                     |         |                    |  
|Inventories     |  | $                   | 130,156 |                    | $
|                |  |                     |         |                    |  

10.  Other Current
Assets

Other current
assets consisted of the following:

|(In thousands)             |  | Feb. 26,
      2005 |        | May 29,
      2004 |  
|-------------------------- |  | ------------------- | ------ | ------------------ | -
|                           |  |                     |        |                    |  
|Current deferred tax asset |  | $                   | 36,049 |                    | $
|Prepaid expenses           |  |                     | 9,686  |                    |  
|Other receivables          |  |                     | 9,495  |                    |  
|Held-for-sale assets       |  |                     |       |                    |  
|Income taxes receivable    |  |                     |       |                    |  
|Other current assets       |  |                     | 776    |                    |  
|Notes receivable           |  |                     | 10     |                    |  
|                           |  |                     |        |                    |  
|Other current assets       |  | $                   | 56,016 |                    | $
|                           |  |                     |        |                    |  

At May 29,
2004, held-for-sale assets included property located in Nevada City, California
and Gotemba, Japan. During the first quarter of fiscal year 2005, Tektronix
completed the sale of property located in Nevada City, California.  Net
proceeds of $9.9 million were received from the sale of the Nevada City assets
with a carrying value of $7.7 million, resulting in a gain on sale of $2.2
million during the first quarter of fiscal year 2005. During the third quarter
of fiscal year 2005, Tektronix completed the sale of properties including
buildings and land located in Gotemba, Japan which were acquired in the
Sony/Tektronix redemption in fiscal year 2003.  Net proceeds of $8.8
million were received from the sale of Gotemba assets with a carrying valued of
$8.5 million, resulting in a gain on sale of $0.3 million during the third
quarter of fiscal year 2005.

11.  Property, Plant and
Equipment, Net

Property,
plant and equipment, net consisted of the following:

|(In thousands)                                  |  | Feb. 26,
      2005 |          | May 29,
      2004 |  
|----------------------------------------------- |  | ------------------- | -------- | ------------------ | -
|                                                |  |                     |          |                    |  
|Land                                            |  | $                   | 1,086    |                    | $
|Buildings                                       |  |                     | 130,301  |                    |  
|Machinery and equipment                         |  |                     | 275,010  |                    |  
|Accumulated depreciation and
      amortization |  |                     | (290,925 | )                  |  
|                                                |  |                     |          |                    |  
|Property, plant and equipment,
    net          |  | $                   | 115,472  |                    | $
|                                                |  |                     |          |                    |  

16



12.  Goodwill,
Net

Goodwill and
intangible assets are accounted for in accordance with SFAS No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. 
Accordingly, Tektronix does not amortize goodwill from acquisitions, but
continues to amortize other acquisition-related intangibles.

Changes in
goodwill during the three fiscal quarters ended February 26, 2005 were as
follows (in thousands):

|Balance at May 29, 2004              |  | $ | 79,774  | 
|------------------------------------ |  | - | ------- | 
|Acquisition of Inet (see Note
    5) |  |   | 217,972 | 
|Currency translation                 |  |   | 4,330   | 
|                                     |  |   |         | 
|Balance at February 26, 2005         |  | $ | 302,076 | 
|                                     |  |   |         | 

13.  Other Long-Term
Assets

Other
long-term assets consisted of the following:

|(In thousands)              |  | Feb. 26,
      2005 |         | May 29,
      2004 |  
|--------------------------- |  | ------------------- | ------- | ------------------ | -
|                            |  |                     |         |                    |  
|Other intangibles, net      |  | $                   | 114,611 |                    | $
|Corporate equity securities |  |                     | 11,692  |                    |  
|Notes, contracts and leases |  |                     | 14,073  |                    |  
|Other assets                |  |                     | 3,778   |                    |  
|                            |  |                     |         |                    |  
|Other long-term assets      |  | $                   | 144,154 |                    | $
|                            |  |                     |         |                    |  

Intangible
assets of $112.1 million as of February 26, 2005, included in Other intangibles,
net, resulted from the acquisition of Inet in the second quarter of fiscal year
2005, as described in Note 5.

Corporate
equity securities are classified as available-for-sale and reported at fair
value.  The related unrealized holding gains and temporary losses are
excluded from earnings and included, net of tax, in Accumulated other
comprehensive loss on the Condensed Consolidated Balance Sheets.  Corporate
equity securities classified as available-for-sale and the related unrealized
holding gains at February 26, 2005 and May 29, 2004 were as follows:

|(In thousands)                                              |  | Feb. 26,
      2005 |        | May 29,
      2004 |  
|----------------------------------------------------------- |  | ------------------- | ------ | ------------------ | -
|                                                            |  |                     |        |                    |  
|Unamortized cost basis of corporate equity
      securities |  | $                   | 4,743  |                    | $
|Gross unrealized holding gains                              |  |                     | 6,949  |                    |  
|                                                            |  |                     |        |                    |  
|Fair value of corporate equity
      securities             |  | $                   | 11,692 |                    | $
|                                                            |  |                     |        |                    |  

During the
third quarter of fiscal year 2005, Tektronix sold 1.0 million shares of common
stock of Tut Systems, Inc.  Net proceeds from the sale were $3.3 million,
which resulted in a realized gain of $2.1 million recorded in Other
non-operating income (expense), net, on the Condensed Consolidated Statements of
Operations.

17



14.  Accounts Payable and
Accrued Liabilities

Accounts
payable and accrued liabilities consisted of the following:

|(In thousands)                                 |  | Feb. 26,
      2005 |         | May 29,
      2004 |  
|---------------------------------------------- |  | ------------------- | ------- | ------------------ | -
|                                               |  |                     |         |                    |  
|Trade accounts payable                         |  | $                   | 39,382  |                    | $
|Other accounts payable                         |  |                     | 34,611  |                    |  
|                                               |  |                     |         |                    |  
|Accounts payable                               |  |                     | 73,993  |                    |  
|Contingent liabilities (see Note
      17)     |  |                     | 13,043  |                    |  
|Income taxes payable                           |  |                     | 28,333  |                    |  
|Warranty reserves                              |  |                     | 7,704   |                    |  
|Accrued expenses and other
      liabilities   |  |                     | 8,529   |                    |  
|                                               |  |                     |         |                    |  
|Accrued liabilities                            |  |                     | 57,609  |                    |  
|                                               |  |                     |         |                    |  
|Accounts payable and accrued
      liabilities |  | $                   | 131,602 |                    | $
|                                               |  |                     |         |                    |  

15.  Long-Term
Liabilities

Long-term
liabilities consisted of the following:

|(In thousands)              |  | Feb. 26,
      2005 |         | May 29,
      2004 |  
|--------------------------- |  | ------------------- | ------- | ------------------ | -
|                            |  |                     |         |                    |  
|Pension liability           |  | $                   | 135,308 |                    | $
|Postretirement benefits     |  |                     | 13,258  |                    |  
|Deferred compensation       |  |                     | 16,187  |                    |  
|Other                       |  |                     | 12,770  |                    |  
|                            |  |                     |         |                    |  
|Other long-term liabilities |  | $                   | 177,523 |                    | $
|                            |  |                     |         |                    |  

Tektronix
made a voluntary contribution of $46.5 million in the first quarter of fiscal
year 2005 to the U.S. Cash Balance pension plan, which represents the expected
funding for the fiscal year.  This contribution directly reduced the
balance of pension liability.

18



16.  Pension and Other
Postretirement Benefits

Components of
net periodic benefit cost (credit) for defined benefit pension plans and other
postretirement benefits were as follows:

|                                       |  | Pension Benefits           |         | Other
      Postretirement Benefits |  
|-------------------------------------- |  | -------------------------- | ------- | ----------------------------------- | -
|                                       |  |                            |         |                                     |  
|                                       |  | Fiscal quarter
      ended |         | Fiscal quarter
      ended          |  
|                                       |  |                            |         |                                     |  
|(In thousands)                         |  | Feb. 26,
      2005        |         | Feb. 28,
      2004                 |  
|                                       |  |                            |         |                                     |  
|Service cost                           |  | $                          | 1,589   |                                     | $
|Interest cost                          |  |                            | 9,709   |                                     |  
|Expected return on plan assets         |  |                            | (12,619 | )                                   |  
|Amortization of transition
    asset   |  |                            | 31      |                                     |  
|Amortization of prior service
    cost |  |                            | (556    | )                                   |  
|Amortization of actuarial net
    loss |  |                            | 3,343   |                                     |  
|                                       |  |                            |         |                                     |  
|Net periodic benefit cost
    (credit) |  | $                          | 1,497   |                                     | $
|                                       |  |                            |         |                                     |  

|                                       |  | Pension
      Benefits            |         | Other
      Postretirement Benefits |  
|-------------------------------------- |  | --------------------------------- | ------- | ----------------------------------- | -
|                                       |  |                                   |         |                                     |  
|                                       |  | Three fiscal
      quarters ended |         | Three fiscal
      quarters ended   |  
|                                       |  |                                   |         |                                     |  
|(In thousands)                         |  | Feb. 26,
      2005               |         | Feb. 28,
      2004                 |  
|                                       |  |                                   |         |                                     |  
|Service cost                           |  | $                                 | 4,700   |                                     | $
|Interest cost                          |  |                                   | 28,908  |                                     |  
|Expected return on plan assets         |  |                                   | (37,724 | )                                   |  
|Amortization of transition
    asset   |  |                                   | 88      |                                     |  
|Amortization of prior service
    cost |  |                                   | (1,670  | )                                   |  
|Amortization of actuarial net
    loss |  |                                   | 10,013  |                                     |  
|                                       |  |                                   |         |                                     |  
|Net periodic benefit cost
    (credit) |  | $                                 | 4,315   |                                     | $
|                                       |  |                                   |         |                                     |  

17.  Contingencies

As of
February 26, 2005, Tektronix had $13.0 million of contingencies recorded in
Accounts payable and accrued liabilities on the Condensed Consolidated Balance
Sheets, which included $5.0 million of contingencies relating to the sale of the
Color Printer and Imaging Division (CPID) in fiscal year 2000, $3.0 million
for environmental exposures and $5.0 million for other contingent
liabilities.  It is reasonably possible that managements estimates of
these contingencies could change in the near term and that such changes could be
material to Tektronix consolidated financial statements.

Sale of
Color Printing and Imaging

On January 1,
2000, Tektronix sold substantially all of the assets of CPID.  Tektronix
accounted for CPID as a discontinued operation in accordance with APB Opinion
No. 30, Reporting the Results of Operations  Reporting the Effects of Disposal
of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions.  The sales price was $925.0 million in
cash, with certain liabilities of the division assumed by the purchaser. 
During fiscal year 2000, Tektronix recorded a net gain of $340.3 million on this
sale.  The net gain was calculated as the excess of the proceeds received
over the net book value of the assets transferred, $198.5 million in income tax
expense, $60.0 million of contingencies related to the sale and $14.4 million in
transaction and related costs.

In accordance
with SFAS No. 5, Accounting for Contingencies, it is Tektronix policy to
defer recognition of a gain where it is believed that contingencies exist that
may result in that gain being recognized prior to realization.  Tektronix
analyzes the amount of deferred gain in relation to outstanding

19



contingencies, and recognizes additional
gain when persuasive objective evidence indicates that such contingencies are
believed to be resolved.  With regard to the contingencies associated with
the sale of CPID, persuasive objective evidence includes: a) legal
determinations resulting in the resolution of contingencies, including lapse of
claim periods defined in the final sale agreement, b) the resolution of claims
made by the purchaser, c) evidence that liabilities underlying current or
probable future claims have been resolved and d) interactions with the purchaser
on outstanding claims.  The $60.0 million of contingencies represents the
deferral of a portion of the gain on sale that Tektronix management believed
was not realizable due to certain contingencies contained in the final sale
agreement and approximated the amount that management believed was the maximum
exposure under the contingencies.  The specific nature of these
contingencies was specified in the final sale agreement.

The
contingencies contained in the final sale agreement represented provisions
designed to protect the purchaser in disputes over the net assets included in
the closing balance sheet and breach of certain representations and warranties
by Tektronix.  Tektronix viewed these exposures in terms of the following
categories: balance sheet arbitration, liabilities subject to indemnity, 18
month indemnity for breach of certain representations and warranties and a 36
month indemnity for breach of certain representations and warranties. 
Tektronix estimate of the maximum contingency, including anticipated costs and
expenses to resolve these matters, was $60.0 million.  This estimate was
based on certain limitations on purchase contingencies as defined in the final
sale agreement as well as Tektronix estimates of other exposures not subject to
these limitations.  As the maximum exposure under these categories is
measured in the aggregate by Tektronix and as there are many overlapping
provisions between these categories, Tektronix review of these contingencies
considered both the individual categories as well as the aggregate remaining
exposures.

Subsequent to
the close of the transaction, Tektronix and the purchaser entered into an
arbitration process to determine settlement of certain disputes regarding the
value of the net assets transferred at the closing date.  This arbitration
process was provided to the purchaser under the terms of the final sale
agreement.  This arbitration was resolved in the first quarter of fiscal
year 2002, resulting in an $18.0 million payment by Tektronix to the
purchaser.  This settlement directly reduced the $60.0 million previously
deferred gain.

During fiscal
year 2003, Tektronix recognized $25.0 million of the previously deferred gain as
a result of the resolution of certain of the purchase contingencies related to
the sale, in accordance with the accounting policy described above.  The
$25.0 million of pre-tax gain was recognized in Discontinued operations. 
Of the total $25.0 million recognized in fiscal year 2003, $20.0 million was
recorded during the third quarter of fiscal year 2003.  Persuasive
objective evidence supporting the recognition of $20.0 million included: a) the
expiration of the 36 month deadline for certain claims included in the final
sale agreement, which passed without the receipt of claims from the purchaser,
b) analysis of exposures underlying pending claims previously made by the
purchaser, and c) the interactions with the purchaser regarding these pending
claims, which included the fact that significant time had lapsed since the
purchaser had pursued these claims.  Tektronix recognized an additional
$5.0 million of pre-tax gain in Discontinued operations during the fourth
quarter of fiscal year 2003 based on persuasive objective evidence that certain
previously identified exposures had been resolved without consequence to
Tektronix.

During the
third quarter of fiscal year 2005, Tektronix recognized an additional $5.4
million of pre-tax gain in Discontinued operations.  Persuasive objective
evidence supporting the recognition of $5.4 million included: a) a sustained
reduction in expense activity associated with certain exposures underlying the
contingencies, b) analysis of exposures underlying pending claims previously
made by the purchaser and c) the interactions with the purchaser regarding these
pending claims, which included the fact that significant time had lapsed since
the purchaser had pursued these claims.

Other
payments and adjustments during the period from fiscal years 2001 through the
third quarter of fiscal year 2005, reduced the balance of the contingencies by
$4.6 million.  As of February 26, 2005 and May 29, 2004, the balance of the
contingencies related to the CPID disposition was $5.0 million and $10.4
million, respectively.  The remaining portion may take several years to
resolve.  The continued deferral of this amount is associated with existing
exposures for which Tektronix believes adequate evidence of resolution has not
been obtained.  Tektronix continues to monitor the status of the CPID
related contingencies based on information received.  If unforeseen events
or circumstances arise subsequent to the balance sheet date, changes in the
estimate of these contingencies would occur.  Tektronix, however, does not
expect such changes to be material to the financial statements.

20



Environmental and Other

The $3.0
million for environmental exposures is specifically associated with the closure
and cleanup of a licensed hazardous waste management facility at Tektronix
Beaverton, Oregon campus.  Tektronix established the initial liability in
1998 and bases ongoing estimates on currently available facts and presently
enacted laws and regulations.  Costs for tank removal and cleanup were
incurred in fiscal year 2001.  Costs currently being incurred primarily
relate to ongoing monitoring and testing of the site.  Managements best
estimate of the range of remaining reasonably possible cost associated with this
environmental cleanup, testing and monitoring could be as high as $10.0
million.  Management believes that the recorded liability represents the
low end of the range.  These costs are estimated to be incurred over the
next several years.  If events or circumstances arise that are unforeseen
to Tektronix as of the balance sheet date, actual costs could differ materially
from this estimate.  A preliminary risk investigation and feasibility study
are expected to be completed in the second quarter of fiscal year 2006 which may
have a significant impact on managements estimate.

The remaining
$5.0 million of contingency accruals include amounts related to intellectual
property and employment issues, as well as contingencies related to dispositions
of assets other than CPID.  If events or circumstances arise that are
unforeseen to Tektronix as of the balance sheet date, actual costs could differ
materially from this estimate.

In the normal
course of business, Tektronix and its subsidiaries are parties to various legal
claims, actions and complaints, including matters involving patent infringement
and other intellectual property claims and various other risks.  It is not
possible to predict with certainty whether or not Tektronix will ultimately be
successful in any of these legal matters or, if not, what the impact might
be.  However, Tektronix management does not expect that the results of
these legal proceedings will have a material adverse effect on its results of
operations, financial position or cash flows.

21



18.  Shareholders
Equity

Activity in
shareholders equity for the first three quarters of fiscal year 2005 was as
follows:

|                                                                                    |  | Common
      Stock |        | RetainedEarnings |   | AccumulatedOther ComprehensiveLoss |   |       |          |  
|----------------------------------------------------------------------------------- |  | ------------------ | ------ | ---------------- | - | ---------------------------------- | - | ----- | -------- | -
|                                                                                    |  |                    |        |                  |   |                                    |   |      
|(In thousands)                                                                      |  | Shares             |        | Amount           |   |                                    |   | Total |         
|                                                                                    |  |                    |        |                  |   |                                    |   |       |          |  
|Balance at May 29, 2004                                                             |  |                    | 84,179 |                  | $ | 257,267                            |   | $     | 748,381  |  
|Net earnings                                                                        |  |                    |       |                  |   |                                   |   |       | 60,395   |  
|Additional minimum pension liability, net of
      income taxes                     |  |                    |       |                  |   |                                   |   |       |         |  
|Foreign currency translation adjustment, net
      of income taxes                  |  |                    |       |                  |   |                                   |   |       |         |  
|Unrealized holding gain on
      available-for-sale securities, net of income taxes |  |                    |       |                  |   |                                   |   |       |         |  
|Dividends paid                                                                      |  |                    |       |                  |   |                                   |   |       | (14,131  | )
|Shares issued                                                                       |  |                    | 8,775  |                  |   | 268,114                            |   |       |         |  
|Stock options and share rights assumed from
      Inet acquisition                  |  |                    |       |                  |   | 9,979                              |   |       |         |  
|Unearned stock-based compensation from Inet
      acquisition                       |  |                    |       |                  |   | (3,403                             | ) |       |         |  
|Tax benefit of stock option
      exercises                                         |  |                    |       |                  |   | 3,881                              |   |       |         |  
|Amortization of unearned stock-based
      compensation                             |  |                    |       |                  |   | 1,893                              |   |       |         |  
|Shares repurchased in open
    market                                               |  |                    | (3,926 | )                |   | (14,489                            | ) |       | (100,299 | )
|                                                                                    |  |                    |        |                  |   |                                    |   |       |          |  
|Balance at February 26, 2005                                                        |  |                    | 89,028 |                  | $ | 523,242                            |   | $     | 694,346  |  
|                                                                                    |  |                    |        |                  |   |                                    |   |       |          |  

During the
first three quarters of fiscal year 2005, the net increase in common stock was
largely due to $254.1 million from the Inet acquisition discussed in Note
5.  This amount includes $247.5 million for 7.6 million shares of common
stock issued and $10.0 million for stock options and restricted share rights
assumed, offset by $3.4 million of unearned stock-based compensation.  The
$3.4 million of unearned stock-based compensation was related to the intrinsic
value of in-the-money unvested stock options, restricted stock and restricted
share rights resulting from the Inet acquisition.

In fiscal
year 2000, the Board of Directors authorized the purchase of up to $550.0
million of Tektronix common stock on the open market or through negotiated
transactions.  In September 2004, the Board of Directors authorized the
repurchase of an incremental $400.0 million of Tektronix common stock. 
During the first three quarters of fiscal year 2005, 3.9 million shares were
repurchased for $114.8 million.  As of February 26, 2005, a total of 21.1
million shares have been repurchased at an average price of $23.91 per share
totaling $503.6 million under this authorization.  The reacquired shares
were immediately retired as required under Oregon corporate law.

Subsequent to
the third quarter of fiscal year 2005, the Board of Directors declared a
quarterly cash dividend of $0.06 per share on March 17, 2005.  The dividend
will be paid on April 25, 2005 to shareholders of record as of the close of
market on April 8, 2005.

22



Comprehensive
income and its components, net of income taxes, were as follows:

|                                                                                                                                                       |  | Fiscal quarter
      ended |        | Three fiscal
      quarters ended |  
|------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------- | ------ | --------------------------------- | -
|                                                                                                                                                       |  |                            |        |                                   |  
|(In thousands)                                                                                                                                         |  | Feb. 26,
      2005        |        | Feb. 28,
      2004               |  
|                                                                                                                                                       |  |                            |        |                                   |  
|Net earnings                                                                                                                                           |  | $                          | 26,821 |                                   | $
|Other comprehensive income
    (loss):                                                                                                                 |  |                            |        |                                   |  
|Net change in additional minimum pension
      liability, net of income taxes of ($124), ($516), ($302) and $1,356,
      respectively                 |  |                            | (282   | )                                 |  
|Foreign currency translation adjustment, net
      of income taxes of ($232), $3,512, $7,391 and $9,368,
      respectively                            |  |                            | (364   | )                                 |  
|Unrealized holding gain (loss) on available-
      for-sale securities, net of income taxes of ($2,267), ($107), ($838) and
      $3,120, respectively |  |                            | (3,547 | )                                 |  
|                                                                                                                                                       |  |                            |        |                                   |  
|Total comprehensive income                                                                                                                             |  | $                          | 22,628 |                                   | $
|                                                                                                                                                       |  |                            |        |                                   |  

Accumulated
other comprehensive loss consisted of the following:

|(In thousands)               |  | Foreigncurrencytranslation |        | Unrealizedholdinggains, net onavailable-for-sale
      securities |   | Additionalminimumpensionliability |   | Accumulatedothercomprehensiveloss |         
|---------------------------- |  | -------------------------- | ------ | ----------------------------------------------------------------- | - | --------------------------------- | - | --------------------------------- | --------
|                             |  |                            |        |                                                                   |   |                                   |   |                                   |         
|Balance at May 29, 2004      |  | $                          | 35,192 |                                                                   | $ | 3,488                             |   | $                                 | (173,748
|First quarter activity       |  |                            | (931   | )                                                                 |   | (794                              | ) |                                   | 344     
|Second quarter activity      |  |                            | 12,853 |                                                                   |   | 3,030                             |   |                                   | (749    
|Third quarter activity       |  |                            | (364   | )                                                                 |   | (3,547                            | ) |                                   | (282    
|                             |  |                            |        |                                                                   |   |                                   |   |                                   |         
|Balance at February 26, 2005 |  | $                          | 46,750 |                                                                   | $ | 2,177                             |   | $                                 | (174,435
|                             |  |                            |        |                                                                   |   |                                   |   |                                   |         

19.  Business
Segments

Tektronix
revenue is derived principally through the development and marketing of a range
of test and measurement products in several operating segments that have similar
economic characteristics as well as similar customers, production processes and
distribution methods.  It is impractical to report net sales by product
group.  Accordingly, Tektronix reports as a single segment. 
Inter-segment sales were not material and were included in net sales to external
customers below.

|                                                              |  | Fiscal quarter
      ended |         | Three fiscal
      quarters ended |  
|------------------------------------------------------------- |  | -------------------------- | ------- | --------------------------------- | -
|                                                              |  |                            |         |                                   |  
|(In thousands)                                                |  | Feb. 26,
      2005        |         | Feb. 28,
      2004               |  
|                                                              |  |                            |         |                                   |  
|Consolidated net sales to external
      customers by region: |  |                            |         |                                   |  
|The Americas:                                                 |  |                            |         |                                   |  
|United States                                                 |  | $                          | 86,170  |                                   | $
|Other Americas                                                |  |                            | 6,560   |                                   |  
|Europe                                                        |  |                            | 72,298  |                                   |  
|Pacific                                                       |  |                            | 51,122  |                                   |  
|Japan                                                         |  |                            | 40,182  |                                   |  
|                                                              |  |                            |         |                                   |  
|Net sales                                                     |  | $                          | 256,332 |                                   | $
|                                                              |  |                            |         |                                   |  

23



20.  Product Warranty
Accrual

Tektronix
product warranty accrual, included in Accounts payable and accrued liabilities
on the Condensed Consolidated Balance Sheets, reflects managements best
estimate of probable liability under its product warranties.  Management
determines the warranty accrual based on historical experience and other
currently available evidence.

Changes in
the product warranty accrual were as follows:

|                               |  | Three fiscal
      quarters ended |       
|------------------------------ |  | --------------------------------- | ------
|                               |  |                                   |       
|(In thousands)                 |  | Feb. 26,
      2005               |       
|                               |  |                                   |       
|Balance at beginning of period |  | $                                 | 8,959 
|Payments made                  |  |                                   | (7,498
|Provision for warranty expense |  |                                   | 6,243 
|                               |  |                                   |       
|Balance at end of period       |  | $                                 | 7,704 
|                               |  |                                   |       

21.  Supplemental Cash Flow
Information

|                                                             |  | Three fiscal
      quarters ended |         
|------------------------------------------------------------ |  | --------------------------------- | --------
|                                                             |  |                                   |         
|(In thousands)                                               |  | Feb. 26,
      2005               |         
|                                                             |  |                                   |         
|Supplemental disclosure of cash
      flows:                 |  |                                   |         
|Income taxes paid, net                                       |  | $                                 | 19,164  
|Interest paid                                                |  |                                   | 86      
|Non-cash transactions from acquisition of
      Inet:        |  |                                   |         
|Common stock issued                                          |  | $                                 | 247,543 
|Stock options assumed                                        |  |                                   | 9,658   
|Restricted share rights
assumed                              |  |                                   | 321     
|Unearned stock-based
    compensation                        |  |                                   | (3,403  
|Liabilities assumed                                          |  |                                   | 32,683  
|Non-cash assets acquired, net of deferred
      income taxes |  |                                   | (380,658
|                                                             |  |                                   |         
|Net cash paid                                                |  | $                                 | (93,856 
|                                                             |  |                                   |         

|Item
      2.                   | Managements Discussion and
      Analysis of Financial Condition and Results of
    Operations.
|------------------------------- | ------------------------------------------------------------------------------------------------
|Introduction and
      Overview

Tektronix,
Inc. (Tektronix) manufactures, markets and services test, measurement and
monitoring solutions to a wide variety of customers in many industries,
including computing, communications, semiconductors, broadcast, education,
government, military/aerospace, research, automotive and consumer
electronics.  Unless otherwise indicated by the context, Tektronix refers
to Tektronix as the parent company or its majority-owned subsidiaries. 
This Managements Discussion and Analysis of financial condition and results of
operations is intended to provide investors with an understanding of Tektronix
operating performance and its financial condition.  A discussion of our
business, including our strategy, products and competition is included in Part I
of Tektronix Form 10-K for the fiscal year ended May 29, 2004.  Tektronix
enables its customers to design, manufacture, deploy, monitor and service
next-generation global communications networks, computing, and advanced and
pervasive technologies.  Revenue is derived principally through the
development, manufacturing and marketing of a broad range of products including:
oscilloscopes; logic analyzers; network management and diagnostics equipment,
including mobile protocol test and network monitoring solutions; video test
equipment; signal sources; radio frequency test equipment, including wireless
field test and spectrum analysis equipment; and related components, support
services and accessories.  Tektronix maintains operations in four major
geographies: the Americas, including the United States, Mexico, Canada and South
America; Europe, including Europe, Russia, the Middle East and Africa; the
Pacific, including China, India, Korea, and Singapore; and Japan.

24



Tektronix
results of operations and financial condition may be affected by a variety of
factors.  In our opinion, the most significant of these factors include the
economic strength of the technology markets into which we sell our products, our
ability to develop compelling technology solutions and deliver these to the
marketplace in a timely manner, and the actions of competitors.  These
significant factors are discussed further below.

The markets
that we serve are very diverse and include a cross-section of the technology
industries.  Accordingly, our business is cyclical and tends to correlate
to the overall performance of the technology sector.  During fiscal years
2000 and 2001, we experienced considerable growth and profitability resulting
from the overall growth in the technology markets and successful new product
introductions.  However, we began to experience weakening demand in the
latter part of fiscal year 2001 and subsequently experienced a dramatic decline
in demand during fiscal year 2002.  During fiscal year 2002, product orders
declined 38% from fiscal year 2001.  The technology markets continued to be
depressed into fiscal year 2003.  During the latter part of fiscal year
2003, we began to experience the stabilization of certain markets.  Fiscal
year 2004 saw a more broad-based recovery in the technology sector from the
downturn of preceding years.  During fiscal year 2005,
growth rates moderated as compared with the prior year, which management has
partially attributed to excess demand in fiscal year 2004 resulting from
customers deferring purchasing activity during the downturn years of 2001 to
2003, as well as the higher growth rates during fiscal year 2004 result in a
higher basis for comparison to fiscal year 2005 results.

During fiscal
years 2002 and 2003, Tektronix engaged in a variety of efforts to reduce the
cost structure to better align with the lower sales levels.  The related
business realignment costs continued to be incurred into fiscal year 2004 and to
a lesser extent into the current fiscal year as many of the actions identified
took considerable time to execute.  In addition to incurring costs to
realign our cost structure during fiscal year 2003 and 2004, we also incurred
costs to restructure the operations of the Japan subsidiary acquired through
acquisition of Sony/Tektronix Corporation and also recognized certain costs and
credits directly associated with the integration of this subsidiary. 
Business realignment costs incurred in the first three quarters of fiscal year
2005 largely related to previously planned actions in Europe.

We face
significant competition in many of the markets in which we sell our
products.  Tektronix competes on many factors including product
performance, technology, product availability and price.  To compete
effectively, we must deliver compelling products to the market in a timely
manner.  Accordingly, we make significant investments into the research and
development of new products and the selling channels necessary to deliver
products to the market.  Even during periods where economic conditions have
reduced our revenues, such as those experienced in fiscal years 2002 and 2003,
we continued to invest significantly in the development of new products and
selling channels.  A discussion of our competitors and products is included
in Item 1 of Tektronix Form 10-K for the fiscal year ended May 29,
2004.

A component
of our strategy includes focusing investments in certain product categories to
expand our existing market positions.  Expansion in these certain product
categories may come through internal growth or from acquisitions.  On
September 30, 2004, we acquired Inet Technologies, Inc. (Inet), a company that
engaged primarily in network monitoring.  The acquisition of Inet will
further expand our network monitoring and diagnostics product offering. 
The acquisition of Inet is described below in this Managements Discussion and
Analysis.

For a
discussion of risk factors affecting Tektronix, see the Risks and Uncertainties
section below.

Acquisition of Inet
Technologies, Inc.

During the
second quarter of fiscal year 2005, Tektronix acquired Inet, a leading global
provider of communications software solutions that enable network operators to
more strategically and profitably operate their businesses.  Inets
products address next-generation networks, including 2.5G and 3G mobile data and
voice-over-packet (also referred to as voice over Internet protocol or VoIP)
technologies, and traditional networks.  Inet had approximately 500
employees worldwide and had sales of $104 million for the year ended December
31, 2003.  Through the Inet acquisition, Tektronix gains significant
expansion into network monitoring, which is a market that Tektronix had
previously targeted for expansion.  Inets established network monitoring
business, as well as its established customer base, is very complementary with
our pre-acquisition mobile protocol test business.  When combined with our
pre-existing mobile protocol test business, Tektronix is one of the largest
global providers of these solutions.  We anticipate that the acquisition
will help us accelerate the delivery of products and solutions for
network

25



operators and equipment manufacturers
seeking to implement next-generation technologies such as General Packet Radio
Service (GPRS), Universal Mobile Telecommunications Systems (UMTS) and
VoIP.  The product offerings of the acquired Inet business, along with our
pre-existing mobile protocol test products, collectively comprise our network
monitoring and diagnostics product offerings.

Tektronix
acquired all of Inets outstanding common stock for $12.50 per share consisting
of $6.25 per share in cash and $6.25 per share in Tektronix common stock. 
Prior to the close of the transaction on September 30, 2004, Inet had 39.6
million shares of common stock outstanding.  The final exchange ratio used
to determine the number of shares of Tektronix common stock issued was 0.192,
which resulted in the issuance of 7.6 million shares of Tektronix common stock
in the transaction.  The 7.6 million shares were valued at $32.55 per
share, based on the 5-day period ended September 29, 2004, because that was the
earliest date that the final exchange ratio could be determined.  The fair
values of the stock options and restricted share rights assumed were determined
by using the Black-Scholes option pricing model.  The cash consideration of
$247.6 million, the value of Tektronix common stock of $247.5 million, and the
fair values of stock options and restricted share rights assumed are included in
the purchase price that was allocated to the underlying assets acquired and
liabilities assumed based on their estimated fair values.  Analysis
supporting the purchase price allocation includes a valuation of assets and
liabilities as of the closing date, including a third party valuation of
intangible items and a detailed review of the opening balance sheet to determine
other significant adjustments required to recognize assets and liabilities at
fair value.  The purchase price allocation is subject to further changes,
including an analysis of the deductibility of transaction costs and resolution
of ongoing tax audits for pre-acquisition periods.  The purchase price and
resulting allocation to the underlying assets acquired, net of deferred income
taxes, were as follows:

The following
table presents the total purchase price (in thousands):

|Cash paid                             |  | $ | 247,561 |  
|------------------------------------- |  | - | ------- | -
|Stock issued                          |  |   | 247,543 |  
|Stock options assumed                 |  |   | 9,658   |  
|Restricted share rights
assumed       |  |   | 321     |  
|Transaction costs                     |  |   | 5,116   |  
|Unearned stock-based
    compensation |  |   | (3,403  | )
|Liabilities assumed                   |  |   | 32,683  |  
|                                      |  |   |         |  
|Total purchase price                  |  | $ | 539,479 |  
|                                      |  |   |         |  

The following
table presents the allocation of the purchase price to the assets acquired, net
of deferred income taxes, based on their fair values (in thousands):

|Cash and cash equivalents                                 |  | $ | 158,821 |  
|--------------------------------------------------------- |  | - | ------- | -
|Accounts receivable                                       |  |   | 17,565  |  
|Inventories                                               |  |   | 18,025  |  
|Other current assets                                      |  |   | 7,849   |  
|Property, plant, and equipment                            |  |   | 10,662  |  
|Intangible assets                                         |  |   | 121,953 |  
|Goodwill                                                  |  |   | 217,972 |  
|Other long term assets                                    |  |   | 811     |  
|In-process research and
      development                 |  |   | 32,237  |  
|Deferred income taxes                                     |  |   | (46,416 | )
|                                                          |  |   |         |  
|Total assets acquired, net of deferred
      income taxes |  | $ | 539,479 |  
|                                                          |  |   |         |  

26



The following
table presents the details of the intangible assets purchased in the Inet
acquisition as of February 26, 2005:

|(In thousands)                        |  | (in
      years)WeightedAverageUseful Life |                   | Cost |   | AccumulatedAmortization |  | Net |       
|------------------------------------- |  | ------------------------------------------ | ----------------- | ---- | - | ----------------------- |  | --- | ------
|                                      |  |                                            |                   |      |   |                         |  |     |       
|Developed technology                  |  |                                            | 4.8               |      | $ | 87,004                  |  | $   | (7,707
|Customer relationships                |  |                                            | 4.8               |      |   | 22,597                  |  |     | (2,008
|Covenants not to compete              |  |                                            | 4.0               |      |   | 1,200                   |  |     | (125  
|                                      |  |                                            |                   |      |   |                         |  |     |       
|                                      |  |                                            |                   |      |   | 110,801                 |  |     | (9,840
|Tradename                             |  |                                            | Not
    amortized |      |   | 11,152                  |  |     |      
|                                      |  |                                            |                   |      |   |                         |  |     |       
|Total intangible assets
    purchased |  |                                            |                   |      | $ | 121,953                 |  | $   | (9,840
|                                      |  |                                            |                   |      |   |                         |  |     |       

Amortization
expense for intangible assets purchased in the Inet acquisition was $5.9 million
and $9.8 million for the third quarter and first three quarters of fiscal year
2005.  Amortization expense for intangible assets purchased in the Inet
acquisition has been recorded in the Condensed Consolidated Statements of
Operations as follows:

|                                                                |  | Fiscal quarter
      ended |       | Three fiscal
      quarters ended |  
|--------------------------------------------------------------- |  | -------------------------- | ----- | --------------------------------- | -
|                                                                |  |                            |       |                                   |  
|(In thousands)                                                  |  | Feb. 26,
      2005        |       | Feb. 28,
      2004               |  
|                                                                |  |                            |       |                                   |  
|Cost of sales                                                   |  | $                          | 4,627 |                                   | $
|Acquisition related costs (credits) and
      amortization, net |  |                            | 1,287 |                                   |  
|                                                                |  |                            |       |                                   |  
|Total                                                           |  | $                          | 5,914 |                                   | $
|                                                                |  |                            |       |                                   |  

The estimated
amortization expense of intangible assets purchased in the Inet acquisition for
the current fiscal year, including amounts amortized to date, and in future
years will be recorded in the Condensed Consolidated Statements of Operations as
follows:

|(In thousands) |  | Cost of
      sales |        | Acquisitionrelated costs(credits)
      andamortization,net |   | Totalfor
      thefiscal year | 
|-------------- |  | ------------------- | ------ | ----------------------------------------------------------- | - | ----------------------------- | 
|               |  |                     |        |                                                             |   |                               | 
|Fiscal Year    |  |                     |        |                                                             |   |                               | 
|2005           |  | $                   | 12,330 |                                                             | $ | 3,411                         | 
|2006           |  |                     | 18,495 |                                                             |   | 5,117                         | 
|2007           |  |                     | 18,495 |                                                             |   | 5,117                         | 
|2008           |  |                     | 16,670 |                                                             |   | 4,621                         | 
|2009           |  |                     | 15,759 |                                                             |   | 4,174                         | 
|2010           |  |                     | 5,255  |                                                             |   | 1,357                         | 
|               |  |                     |        |                                                             |   |                               | 
|Total          |  | $                   | 87,004 |                                                             | $ | 23,797                        | 
|               |  |                     |        |                                                             |   |                               | 

The $32.2
million allocated to the in-process research and development (IPR&D) asset
was written off at the date of the acquisition in accordance with FASB
Interpretation No. 4, Applicability of FASB Statement No. 2 to Business
Combinations Accounted for by the Purchase Method.  This write-off was
included in acquisition related costs on the Condensed Consolidated Statements
of Operations.  The fair value of IPR&D was based on the net present
value of estimated future cash flows.  Significant assumptions used in the
valuation of IPR&D included a risk adjusted discount rate of 10.2%, revenue
and expense projections, development life cycle and future entry of products to
the market.  As of the acquisition date, there were eight research and
development projects in process that were approximately 87% complete.  The
total estimated cost to complete these projects was approximately $0.8 million
at the

27



acquisition date.  As of February
26, 2005, the total estimated remaining cost for these substantially complete
projects was not significant.

The Condensed
Consolidated Statements of Operations include the results of operations of Inet
since September 30, 2004.  The following (unaudited) pro forma consolidated
results of operations have been prepared as if the acquisition of Inet had
occurred at June 1, 2003, the beginning of Tektronix fiscal year
2004.

|                                               |  | Fiscal quarter
      ended |         | Three fiscal
      quarters ended |  
|---------------------------------------------- |  | -------------------------- | ------- | --------------------------------- | -
|                                               |  |                            |         |                                   |  
|(In thousands, except per share
      amounts) |  | Feb. 26,
      2005        |         | Feb. 28,
      2004               |  
|                                               |  |                            |         |                                   |  
|Net sales                                      |  | $                          | 256,332 |                                   | $
|Net earnings from continuing
      operations  |  |                            | 23,433  |                                   |  
|Earnings per share:                            |  |                            |         |                                   |  
|Continuing operations  basic                  |  | $                          | 0.26    |                                   | $
|Continuing operations 
diluted                |  | $                          | 0.26    |                                   | $

The write-off
of IPR&D is excluded from the calculation of net earnings and earnings
per share in the table shown above.

The pro forma
information is presented for informational purposes only and is not necessarily
indicative of the results of operations that actually would have been achieved
had the acquisition been consummated as of that time, nor is it intended to be a
projection of future results.

Business Realignment
Costs

Business
realignment costs represent actions to realign our cost structure in response to
significant events and primarily include restructuring actions and impairment of
assets resulting from reduced business levels.  Business realignment
actions taken were intended to reduce our worldwide cost structure across all
major functions in response to the dramatic economic decline, which severely
impacted markets into which we sell our products.  Major operations
impacted include manufacturing, engineering, sales, marketing and administrative
functions.  In addition to severance, we incurred other costs associated
with restructuring our organization, which primarily represented facilities
contracts and other exit costs associated with aligning the cost structure to
appropriate levels.  Actions taken have or are expected to result in
reduced operating costs in periods following the period in which the costs were
incurred, primarily through reductions in labor costs.  Management believes
that the restructuring actions implemented in recent fiscal years have resulted
in the costs savings anticipated for those actions.

Costs
incurred during the current quarter primarily related to restructuring actions we
planned in prior years which were executed in the current quarter.  Many of
the restructuring actions planned take significant time to execute, particularly
if they are being conducted in countries outside the United States.

Business
realignment costs of $0.4 million in the third quarter of fiscal year 2005 were
primarily for severance and related costs for residual activity in Europe. 
For the first three quarters of fiscal year 2005, business realignment costs of
$2.7 million included severance and related costs of $1.7 million for 30
employees, $0.9 million for contractual obligations, and $0.2 million for
accelerated depreciation of assets, offset by a $0.1 million credit from net
accumulated currency translation gains.  Business realignment costs in the
first three quarters of fiscal year 2005 largely related to residual activities
for actions taken in Europe.  Expected future annual salary cost savings
from actions taken in the first three quarters of fiscal year 2005 to reduce
employee headcount is not significant.  At February 26, 2005, the remaining
liabilities for employee severance and related benefits were maintained for 21
employees.

28



Activity in
the accrual for business realignment costs for the above described actions
during the first three quarters of fiscal year 2005 was as follows:

|(In thousands)                                   |  | BalanceMay
      29,2004 |       | Costsincurredand otheradjustments |   | Cashpayments |   | Non-cashadjustments |        | BalanceFeb.
      26,2005 |  
|------------------------------------------------ |  | ------------------------ | ----- | --------------------------------- | - | ------------ | - | ------------------- | ------ | ------------------------- | -
|                                                 |  |                          |       |                                   |   |              |   |                     |        |                           |  
|Fiscal Year 2005
    Actions:                    |  |                          |       |                                   |   |              |   |                     |        |                           |  
|Employee severance and related
      benefits    |  | $                        |      |                                   | $ | 1,934        |   | $                   | (1,404 | )                         | $
|Asset impairments                                |  |                          |      |                                   |   | 289          |   |                     |       |                           |  
|Contractual obligations                          |  |                          |      |                                   |   | 525          |   |                     | (577   | )                         |  
|Accumulated currency translation gain,
      net |  |                          |      |                                   |   | (124         | ) |                     |       |                           |  
|                                                 |  |                          |       |                                   |   |              |   |                     |        |                           |  
|Total                                            |  |                          |      |                                   |   | 2,624        |   |                     | (1,981 | )                         |  
|                                                 |  |                          |       |                                   |   |              |   |                     |        |                           |  
|Fiscal Year 2004
    Actions:                    |  |                          |       |                                   |   |              |   |                     |        |                           |  
|Employee severance and related
      benefits    |  |                          | 5,335 |                                   |   | (220         | ) |                     | (4,266 | )                         |  
|Contractual obligations                          |  |                          | 409   |                                   |   | 379          |   |                     | (789   | )                         |  
|Asset impairments                                |  |                          |      |                                   |   | (107         | ) |                     |       |                           |  
|                                                 |  |                          |       |                                   |   |              |   |                     |        |                           |  
|Total                                            |  |                          | 5,744 |                                   |   | 52           |   |                     | (5,055 | )                         |  
|                                                 |  |                          |       |                                   |   |              |   |                     |        |                           |  
|Fiscal Year 2003
    Actions:                    |  |                          |       |                                   |   |              |   |                     |        |                           |  
|Employee severance and related
      benefits    |  |                          | 294   |                                   |   | (20          | ) |                     | (271   | )                         |  
|Contractual obligations                          |  |                          | 1,240 |                                   |   |             |   |                     | (331   | )                         |  
|                                                 |  |                          |       |                                   |   |              |   |                     |        |                           |  
|Total                                            |  |                          | 1,534 |                                   |   | (20          | ) |                     | (602   | )                         |  
|                                                 |  |                          |       |                                   |   |              |   |                     |        |                           |  
|Fiscal Year 2002
    Actions:                    |  |                          |       |                                   |   |              |   |                     |        |                           |  
|Employee severance and related
      benefits    |  |                          | 152   |                                   |   | 9            |   |                     | (161   | )                         |  
|Contractual obligations                          |  |                          | 54    |                                   |   |             |   |                     | (24    | )                         |  
|                                                 |  |                          |       |                                   |   |              |   |                     |        |                           |  
|Total                                            |  |                          | 206   |                                   |   | 9            |   |                     | (185   | )                         |  
|                                                 |  |                          |       |                                   |   |              |   |                     |        |                           |  
|Total of all actions                             |  | $                        | 7,484 |                                   | $ | 2,665        |   | $                   | (7,823 | )                         | $
|                                                 |  |                          |       |                                   |   |              |   |                     |        |                           |  

Critical Accounting
Estimates

Management
has identified the critical accounting estimates, which are those that are
most important to our portrayal of the financial condition and operating results
and require difficult and subjective judgments, often as a result of the need to
make estimates of matters that are inherently uncertain.  Significant
estimates underlying the accompanying consolidated financial statements and the
reported amount of net sales and expenses include revenue recognition,
contingencies, intangible asset valuation, pension plan assumptions and the
assessment of the valuation of deferred income taxes and income tax
contingencies.

Revenue
Recognition

Tektronix
recognizes product revenue when persuasive evidence of an arrangement exists,
delivery has occurred, the sales price is fixed or determinable and
collectibility is probable.  The majority of our products are sold in this
manner.  These criteria are met at the time the product is shipped under
FOB shipping point shipping terms.  Upon shipment, Tektronix also provides
for estimated costs that may be incurred for product warranties and sales
returns.  When other significant obligations remain after products are
delivered, revenue is recognized only after such obligations are
fulfilled.

29



The majority
of the contracts for our network monitoring solution products, which were
acquired in the Inet acquisition, contain multiple billing milestones, such as
contract award, shipment, installation, ready for acceptance and acceptance, not
all of which are associated with revenue recognition.  Except as otherwise
discussed below, revenues from these products and license fees are recognized in
the period that we have completed all hardware manufacturing and/or software
development to contractual specifications, factory testing has been completed,
the product has been shipped to the customer, the fee is fixed and determinable
and collection of the fee is considered probable.  Revenues from
arrangements that include significant acceptance terms and/or provisions are
recognized when acceptance has occurred.

Contracts for
our network monitoring solution products often involve multiple
deliverables.  We determine the fair value of each of the contract
deliverables using vendor-specific objective evidence, or VSOE.  VSOE for
each element of the contract is based on the price for which we sell the element
on a stand-alone basis.  Elements of the contracts include product support
services, which include the correction of software problems, hardware
replacement, telephone access to our technical personnel and the right to
receive unspecified product updates, upgrades and enhancements, when and if they
become available.  Revenues from these services, including post-contract
support included in initial licensing fees, are recognized ratably over the
service periods.  Post-contract support included in the initial licensing
fee is allocated from the total contract amount based on the fair value of these
services determined using VSOE.  If we determine that we do not have VSOE
on an undelivered element of an arrangement, we will not recognize revenue until
all elements of the arrangement are delivered.  This occurrence could
materially impact our financial results because of the significant dollar amount
of many of our contracts and the significant portion of total revenues that a
single contract may represent in any particular period.

Revenue
earned from service is recognized ratably over the contractual periods or as the
services are performed.  Shipping and handling costs are recorded as Cost
of sales on the Condensed Consolidated Statements of Operations.  Amounts
billed or collected in advance of the period in which the related product or
service qualifies for revenue recognition are recorded as Deferred revenue on
the Condensed Consolidated Balance Sheets.

Contingencies

Tektronix is
subject to claims and litigation concerning intellectual property, environmental
and employment issues, and settlement of contingencies related to prior
dispositions of assets.  Accruals have been established based upon
managements best estimate of the ultimate outcome of these matters.  We
review the status of any claims, litigation and other contingencies on a regular
basis, and adjustments are made as additional information becomes
available.  As of February 26, 2005, $13.0 million of contingencies were
recorded in Accounts payable and accrued liabilities on the Condensed
Consolidated Balance Sheets, which included $5.0 million of contingencies
relating to the sale of the Color Printing and Imaging Division (CPID)
described below, $3.0 million for environmental exposures and $5.0 million for
other contingent liabilities.  It is reasonably possible that our estimates
of contingencies could change in the near term and that such changes could be
material to the consolidated financial statements.

At the time
of the sale of CPID on January 1, 2000, we deferred the recognition of $60.0
million of gain on the sale and recorded contingencies of $60.0 million. 
In accordance with Statement of Financial Accounting Standards (SFAS) No. 5,
Accounting for Contingencies, our policy is to defer recognition of a
gain where we believe contingencies exist which may result in that gain being
recognized prior to realization.  We analyze the amount of deferred gain in
relation to outstanding contingencies and recognize additional gain when
objective evidence indicates that such contingencies are believed to be
resolved.  The $60.0 million of contingencies represents the deferral of a
portion of the gain on sale that we believed was not realizable due to certain
contingencies contained in the final sale agreement.  Of the original $60.0
million of contingencies, $22.6 million has been utilized to settle claims and
$32.4 million was recognized in subsequent periods, including $5.4 million in
the third quarter of fiscal year 2005.

As of
February 26, 2005 and May 29, 2004, the balance of the contingencies related to
the CPID disposition was $5.0 million and $10.4 million, respectively.  The
remaining portion may take several years to resolve.  We continue to
monitor the status of the CPID related contingencies based on information
received.

Included in
contingent liabilities is $3.0 million specifically associated with the closure
and cleanup of a licensed hazardous waste management facility at our Beaverton,
Oregon, campus.  The initial liability

30



was established in 1998, and we base
ongoing estimates on currently available facts and presently enacted laws and
regulations.  Costs for tank removal and cleanup were incurred in fiscal
year 2001.  Costs currently being incurred primarily relate to ongoing
monitoring and testing of the site.  Our best estimate of the range of
remaining reasonably possible cost associated with this environmental cleanup,
testing and monitoring could be as high as $10.0 million.  We believe that
the recorded liability represents the low end of the range.  These costs
are expected to be incurred over the next several years.  If events or
circumstances arise that are unforeseen to us as of the balance sheet date,
actual costs could differ materially from this estimate.  A preliminary
risk investigation and feasibility study are expected to be completed in the
second quarter of fiscal year 2006 which may have a significant impact on
managements estimate.

The remaining
$5.0 million of contingency accruals include amounts related to intellectual
property and employment issues, as well as contingencies related to dispositions
of assets other than CPID.  If events or circumstances arise that we did
not foresee as of the balance sheet date, actual costs could differ materially
from the above described estimates of contingencies.

Goodwill
and Intangible Assets

Goodwill and
intangible assets are accounted for in accordance with SFAS No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. 
Accordingly, we do not amortize goodwill and intangible assets with indefinite
useful lives from acquisitions, but we amortize other acquisition-related
intangibles with definite useful lives.  As of February 26, 2005, the
balance of goodwill, net was $302.1 million, which is recorded on the Condensed
Consolidated Balance Sheets.

We performed
our annual goodwill impairment analysis during the second quarter of fiscal year
2005 and identified no impairment.  The impairment analysis is based on a
discounted cash flow approach that uses estimates of future market share and
revenues and costs for the reporting units as well as appropriate discount
rates.  The estimates used are consistent with the plans and estimates that
we use to manage the underlying businesses.  However, if we fail to deliver
new products for these reporting units, if the products fail to gain expected
market acceptance, or if market conditions in the related businesses are
unfavorable, revenue and cost forecasts may not be achieved, and we may incur
charges for impairment of goodwill.

As of
February 26, 2005, we had $114.6 million of non-goodwill intangible assets
recorded in Other long-term assets on the Condensed Consolidated Balance Sheets,
which includes intangible assets from the acquisition of Inet, patents and
licenses for certain technology.  For intangible assets with definite
useful lives that are not software-related, we amortize the cost over the
estimated useful lives and assess any impairment by estimating the future cash
flow from the associated asset in accordance with SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets.  If the estimated
undiscounted cash flow related to these assets decreases in the future or the
useful life is shorter than originally estimated, we may incur charges to impair
these assets.  The impairment would be based on the estimated discounted
cash flow associated with each asset.  Impairment could result if the
underlying technology fails to gain market acceptance, we fail to deliver new
products related to these technology assets, the products fail to gain expected
market acceptance or if market conditions in the related businesses are
unfavorable.  For software-related intangible assets with definite useful
lives, we amortize the cost over the estimated economic life of the software
product and assess impairment in accordance with SFAS No. 86, Accounting for
the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed. 
At each balance sheet date, the unamortized cost of the software-related
intangible asset is compared to its net realizable value.  The net
realizable value is the estimated future gross revenues from the software
product reduced by the estimated future costs of completing and disposing of
that product, including the costs of performing maintenance and customer
support.  The excess of the unamortized cost over the net realizable value
would then be recognized as an impairment loss.   For intangible
assets with indefinite useful lives, we review these annually for impairment and
more frequently if events or circumstances indicate that the asset may be
impaired in accordance with SFAS No. 142.  The impairment test for these
assets is a comparison of the fair value of the intangible asset with its
carrying value.  Any excess of carrying value over fair value will be
recognized as an impairment loss.

31



Pension
Plans

Tektronix
offers defined benefit pension plan benefits to employees in certain
countries.  The Cash Balance plan in the United States is our largest
defined benefit pension plan.  Employees hired after July 31, 2004 do not
participate in the U.S. Cash Balance pension plan.  We maintain less
significant defined benefit plans in other countries including the United
Kingdom, Germany, Holland and Taiwan.

Pension plans
are a significant cost of doing business and the related obligations are
expected to be settled far in the future.  Accounting for defined benefit
pension plans results in the current recognition of liabilities and net periodic
pension cost over employees expected service periods based on the terms of the
plans and the impact of our investment and funding decisions.  The
measurement of pension obligations and recognition of liabilities and costs
require significant assumptions, such as the discount rate and the expected
long-term rate of return on the assets of the plan.

Discount rate
assumptions are used to measure pension obligations for the recognition of a net
pension liability on the balance sheet and the service cost and interest cost
components of net periodic pension cost.  We estimate discount rates to
reflect the rates at which the pension benefits could be effectively
settled.  In making those estimates, we evaluate rates of return on
high-quality fixed-income investments currently available and expected to be
available during the settlement of future pension benefits.  The weighted
average of discount rates used in determining our pension obligation as of May
29, 2004, our most recent fiscal year end, was 6.1%.

The long-term
rate of return on plan assets assumption is applied to the market related value
of plan assets to estimate income from return on plan assets.  This income
from return on plan assets offsets the various cost components of net periodic
pension cost.  The various cost components of net periodic pension cost
primarily include interest cost on accumulated benefits, service cost for
benefits earned during the period, and amortization of unrecognized gains and
losses.  The amount of net pension expense recognized has increased from
prior periods due primarily to our beginning to amortize previously unrecognized
losses on the decline in value of plan assets, decline in the return on plan
assets assumption, and reduction in the market related value of plan
assets.  Cumulative income recognized from the long-term rate of return on
plan assets assumption has differed materially from the actual returns on plan
assets.  This has resulted in a net unrecognized loss on plan assets that
contributed a significant portion of the additional minimum pension liability
described below.  To the extent this unrecognized loss is not offset by
future unrecognized gains, there will continue to be a negative impact to net
earnings as this amount is amortized as a cost component of net periodic pension
cost.

Our estimated
weighted average long-term rate of return on plan assets for fiscal year 2005 is
approximately 8.4%.  A one percent change in the estimated long-term rate
of return on plan assets would result in a change in operating income of $5.9
million for fiscal year 2005.

We will
continue to assess assumptions for the expected long-term rate of return on plan
assets and discount rate based on relevant market conditions as prescribed by
accounting principles generally accepted in the United States of America and
will make adjustments to the assumptions as appropriate.  Net pension
expense was $1.5 million and $4.3 million, respectively, in the third quarter
and first three quarters of fiscal year 2005, which included the effect of the
recognition of service cost, interest cost, the assumed return on plan assets
and amortization of a portion of the unrecognized loss noted above.  Net
pension expense was allocated to Cost of sales, Research and development and
Selling, general and administrative expenses in the Condensed Consolidated
Statements of Operations.

We measure
pension obligations, fair value of plan assets, and the impact of significant
assumptions at the end of each fiscal year.  At May 29, 2004, the
accumulated benefit obligation exceeded the fair value of plan assets for
certain pension plans, resulting in an unfunded accumulated benefit obligation
for those plans.  In accordance with SFAS No. 87, Employers Accounting
for Pensions, we recognized an additional minimum pension liability due to the
unfunded accumulated benefit obligation.  Recognition of an additional
minimum liability was required since an unfunded accumulated benefit obligation
exists and an asset has been recognized as prepaid pension cost.  Since the
additional minimum liability exceeded unrecognized prior service cost, the
excess (which would represent a net loss not yet recognized as net periodic
pension cost) has been reported as a component of Accumulated other
comprehensive loss, net of applicable income tax benefit.  As of May 29,
2004, the cumulative additional minimum pension charge included in Accumulated
other comprehensive loss was $173.7 million, net of income tax benefit of $107.9
million.  The implication of the additional minimum pension liability is
that it may reduce net income in future years by reducing the market related
value of plan assets, thereby reducing the asset base upon which we recognize a
return.  We may find it necessary to fund additional pension assets, which
would increase the market related value of plan assets upon which we recognize a
return but would

32



reduce operating cash and future interest
earnings on that cash.  In the first quarter of fiscal year 2005, we made a
voluntary contribution of $46.5 million to the U.S. Cash Balance pension plan,
which represents the expected funding for the fiscal year.

Income
Taxes

We are
subject to taxation from federal, state and international jurisdictions. 
Our annual provision for income taxes and the determination of the resulting
deferred tax assets and liabilities involve a significant amount of management
judgment and are based on the best information available at the time.  The
actual income tax liabilities to the jurisdictions with respect to any fiscal
year are ultimately determined long after the financial statements have been
published.  We maintain reserves for estimated tax exposures in
jurisdictions of operation.  These tax jurisdictions include federal, state
and various international tax jurisdictions.  Significant income tax
exposures include potential challenges of research and experimentation credits,
export-related tax benefits, disposition transactions and intercompany
pricing.  Exposures are settled primarily through the settlement of audits
within these tax jurisdictions, but can also be affected by changes in
applicable tax law or other factors, which could cause our management to believe
a revision of past estimates is appropriate.  Management believes that an
appropriate liability has been established for estimated exposures; however,
actual results may differ materially from these estimates.  The liabilities
are frequently reviewed for their adequacy and appropriateness.  As of
February 26, 2005, we were subject to income tax audits for fiscal years 2001,
2002 and 2003.  The liabilities associated with these years will ultimately
be resolved when events such as the completion of audits by the taxing
jurisdictions occur.  To the extent the audits or other events result in a
material adjustment to the accrued estimates, the effect would be recognized in
Income tax expense in the Consolidated Statements of Operations in the period of
the event.

Judgment is
also applied in determining whether deferred tax assets will be realized in full
or in part.  When it is more likely than not that all or some portion of
specific deferred tax assets such as foreign tax credit carryovers or net
operating loss carryforwards will not be realized, a valuation allowance must be
established for the amount of the deferred tax assets that are determined not to
be realizable.  As of February 26, 2005, we maintained a valuation
allowance against certain deferred tax assets, primarily foreign tax credit
carryforwards.  We have not established valuation allowances against other
deferred tax assets based on tax strategies planned to mitigate the risk of
impairment to these assets.  Accordingly, if our facts or financial results
were to change thereby impacting the likelihood of realizing the deferred tax
assets, judgment would have to be applied to determine changes to the amount of
the valuation allowance required to be in place on the financial statements in
any given period.  We continually evaluate strategies that could allow the
future utilization of our deferred tax assets.

33



RESULTS OF OPERATIONS

|                                                                    |  | Fiscal quarter
      ended |       | Three fiscal
      quarters ended |  
|------------------------------------------------------------------- |  | -------------------------- | ----- | --------------------------------- | -
|                                                                    |  |                            |       |                                   |  
|(In millions, except per share
      amounts)                       |  | Feb.
      26,2005         |       | Feb.
      28,2004                |  
|                                                                    |  |                            |       |                                   |  
|Product orders                                                      |  | $                          | 241.1 |                                   | $
|Net sales                                                           |  |                            | 256.3 |                                   |  
|Cost of sales                                                       |  |                            | 102.9 |                                   |  
|                                                                    |  |                            |       |                                   |  
|Gross profit                                                        |  |                            | 153.4 |                                   |  
|                                                                    |  |                            |       |                                   |  
|Gross margin                                                        |  |                            | 59.8  | %                                 |  
|Research and development
    expenses                               |  |                            | 43.4  |                                   |  
|Selling, general and administrative 
      expenses                 |  |                            | 78.7  |                                   |  
|Acquisition related costs (credits) and
      amortization, net     |  |                            | 2.6   |                                   |  
|Business realignment costs                                          |  |                            | 0.4   |                                   |  
|Loss (gain) on disposition of assets,
      net                     |  |                            | 0.8   |                                   |  
|                                                                    |  |                            |       |                                   |  
|Operating income                                                    |  |                            | 27.5  |                                   |  
|Interest income                                                     |  |                            | 3.8   |                                   |  
|Interest expense                                                    |  |                            | (0.1  | )                                 |  
|Other non-operating income (expense),
      net                     |  |                            | 1.4   |                                   |  
|                                                                    |  |                            |       |                                   |  
|Earnings before taxes                                               |  |                            | 32.6  |                                   |  
|Income tax expense                                                  |  |                            | 9.2   |                                   |  
|                                                                    |  |                            |       |                                   |  
|Net earnings from continuing 
      operations                      |  |                            | 23.4  |                                   |  
|Gain (loss) from discontinued operations,
      net of income taxes |  |                            | 3.4   |                                   |  
|                                                                    |  |                            |       |                                   |  
|Net earnings                                                        |  | $                          | 26.8  |                                   | $
|                                                                    |  |                            |       |                                   |  
|Earnings (loss) per share:                                          |  |                            |       |                                   |  
|Continuing operations  basic                                       |  | $                          | 0.26  |                                   | $
|Continuing operations 
diluted                                     |  | $                          | 0.26  |                                   | $
|Discontinued operations  basic and
      diluted                   |  | $                          | 0.04  |                                   | $
|Net earnings  basic                                                |  | $                          | 0.30  |                                   | $
|Net earnings  diluted                                              |  | $                          | 0.30  |                                   | $

Third Quarter and First Three
Quarters of Fiscal Year 2005 Compared to the Third Quarter and First Three
Quarters of Fiscal Year 2004

Economic
Conditions

As discussed
in our most recent Annual Report on Form-10K, we experienced a severe economic
downturn that negatively affected our results in fiscal years 2002 and
2003.  We began to experience the stabilization of certain markets that
began at the end of fiscal year 2003, which continued into fiscal year
2004.  During fiscal year 2004, we continued to experience a phased
recovery of our end markets, with growth across all regions and most product
lines throughout the fiscal year.  We continued to see growth in demand
broadly across the business during the first three quarters of fiscal year
2005.  From a regional standpoint, we saw the strongest demand for our
products in Japan and the Pacific.  There can be no

34



assurance that our underlying end markets
will continue to improve or that the increased levels of business activity will
continue as a trend into the future.

In response
to the reduced level of orders and associated sales in fiscal year 2002 and
2003, we incurred significant business realignment costs.  We continued to
incur business realignment costs during fiscal year 2004 to further reduce
Tektronix cost structure in order to provide an amount of operating income that
we believed was appropriate at the current sales levels.  In addition to
incurring costs to realign Tektronix cost structure during fiscal year 2003 and
2004, we also incurred costs to restructure the operations of the Japan
subsidiary acquired through the acquisition of Sony/Tektronix Corporation and
also recognized certain costs and credits directly associated with the
integration of this subsidiary.  Many of the costs incurred during fiscal
year 2004 and the first three quarters of fiscal year 2005 were associated with
actions that were identified during prior fiscal years, but for which sufficient
action had not yet been taken to support the recognition of the associated
expense.  Many of the business realignment actions that we identified take
significant time to execute, particularly if they are being conducted in
countries outside the United States.

Acquisition of Inet Technologies,
Inc.

We completed
the acquisition of Inet on September 30, 2004.  Accordingly, the results of
operations for the first three quarters of fiscal year 2005 include five months
of activity from this business.  As there was no Inet related activity in
the prior year comparative periods, an understanding of the impact from the
acquisition of Inet is an important component to understand the current year
results of operations.  In our description of the results of operations
that follow, we have quantified the impact of the Inet acquisition where
meaningful.

Discontinuation of Rohde and Schwarz
Distribution Agreement

On March 18,
2004, we announced the discontinuation of an existing distribution agreement
with Rohde and Schwarz (R&S), under which Tektronix served as the
exclusive distributor for R&S communication test products in the United
States and Canada.  The discontinuation of this distribution agreement was
effective June 1, 2004.  Tektronix had served in this distribution role for
R&S since October 1993.  As we had anticipated, substantially all
product backlog related to R&S distributed product at the end of fiscal year
2004 was shipped and recognized as revenue during the first quarter of fiscal
year 2005.  Accordingly, we have not derived significant revenue from the
shipment of R&S products in quarters after the first quarter of fiscal year
2005.  During the third quarter of fiscal years 2005 and 2004, we generated
net sales of $0.1 million and $25.0 million, respectively, from R&S
distributed products.  During the first three quarters of fiscal years 2005
and 2004, we generated net sales of $23.0 million and $58.5 million, respectively,
from R&S distributed products.  As Tektronix was a distributor
of these products, the corresponding sales generated lower gross margins
compared to sales of products manufactured by Tektronix.  During the third
quarter of fiscal year 2005, gross margins on these distribution sales were not
significant due to nominal net sales compared to 21.2% in the same quarter last
year.  During the first three quarters of fiscal year 2005 and 2004, gross
margins on these distribution sales were 27.3% and 22.3%,
respectively.

35



Product
Orders

The following
table is presented to quantify the impact on product orders from the acquisition
of Inet and the discontinuation of the R&S distribution
agreement.

|                             |  | Fiscal quarter
      ended |       | Three fiscal
      quarters ended |  
|---------------------------- |  | -------------------------- | ----- | --------------------------------- | -
|                             |  |                            |       |                                   |  
|(In millions)                |  | Feb.
      26,2005         |       | Feb.
      28,2004                |  
|                             |  |                            |       |                                   |  
|Consolidated product orders: |  |                            |       |                                   |  
|Tektronix products           |  | $                          | 207.9 |                                   | $
|Inet products                |  |                            | 33.1  |                                   |  
|R&S distributed products     |  |                            | 0.1   |                                   |  
|                             |  |                            |       |                                   |  
|Total product orders         |  | $                          | 241.1 |                                   | $
|                             |  |                            |       |                                   |  

Product
orders consist of cancelable commitments to sell currently produced products to
customers with deliveries scheduled generally within six months of being
recorded.  During the third quarter of fiscal year 2005, product orders
increased by $27.9 million, or 13%, from the same quarter last year.  Product
orders during the first three quarters of fiscal year 2005 increased by $33.3
million, or 5%, from the same period last year.

During the
third quarter of fiscal year 2005, the increase in product orders was
attributable to the net effect of additional orders of $33.1 million from the
acquisition of Inet, offset by a decrease in orders from the discontinuation of
the R&S distribution agreement, and growth in our other product categories,
primarily driven by growth in our general purpose instruments products. 
Growth in general purpose instruments products was primarily attributable to
good acceptance of new products, particularly our oscilloscope and logic
analyzer products, and growth in the underlying markets.  In addition,
product orders were favorably impacted by the weaker US Dollar, which resulted
in approximately $5.0 million of product order growth over the prior year
comparable period.

The $33.3
million increase in product orders during the first three quarters of fiscal
year 2005 as compared with the first three quarters of fiscal year 2004 was the
net effect of $54.0 million of orders resulting from the Inet acquisition and
$39.4 million increase in our other Tektronix products, partially offset by a
$60.1 million decrease resulting from the discontinuation of the R&S
distribution agreement.  The 7% growth in Tektronix produced products
before considering Inet was primarily attributable to growth in our general
instruments products, primarily oscilloscopes and logic analyzers, and growth in
the underlying markets.  The weaker US Dollar favorably impacted product
orders for the first three quarters of fiscal year 2005 by $14.8 million as
compared with the prior year comparable period.

As noted
above, growth in the underlying technology markets contributed to our product
order growth during the current quarter and also fiscal year-to-date.  This
growth in underlying technology markets is attributable to a variety of factors
including regional economic growth.  Regional growth in product orders is
discussed below.  Our product order growth rates have declined from prior
year periods, primarily due to excess demand in the prior year associated with
economic recovery from the downturn in fiscal years 2002 and 2003.

36



The following
table presents product orders by region and product orders excluding the impact
of the acquisition of Inet and the discontinuation of the R&S distribution
agreement.

|                                       |  | Fiscal quarter
      ended |       | Three fiscal
      quarters ended |  
|-------------------------------------- |  | -------------------------- | ----- | --------------------------------- | -
|                                       |  |                            |       |                                   |  
|(In millions)                          |  | Feb.
      26,2005         |       | Feb.
      28,2004                |  
|                                       |  |                            |       |                                   |  
|The Americas:                          |  |                            |       |                                   |  
|United States                          |  | $                          | 74.2  |                                   | $
|Other Americas                         |  |                            | 11.0  |                                   |  
|Europe                                 |  |                            | 66.6  |                                   |  
|Pacific                                |  |                            | 43.8  |                                   |  
|Japan                                  |  |                            | 45.5  |                                   |  
|                                       |  |                            |       |                                   |  
|Total product orders                   |  | $                          | 241.1 |                                   | $
|                                       |  |                            |       |                                   |  
|Product orders, excluding Inet and R&S |  | $                          | 207.9 |                                   | $

Geographically,
product orders increased by 19% internationally, and increased by 2% in the
United States for the third quarter of fiscal year 2005 as compared with the
same quarter last year.  During the first three quarters of fiscal year
2005, product orders increased by 17% internationally, but decreased by 13% in
the United States.  As discussed below, the primary factor creating this
large difference in the United States versus international growth was the
discontinuation of the R&S distribution agreement, under which we
distributed the R&S products in North America, primarily in the United
States.

We
experienced growth in all regions including the Americas, Europe, Pacific and
Japan during the third quarter and in Europe, Pacific, Japan and Other Americas
for the first three quarters of fiscal year 2005.  Growth in Europe was
primarily attributable to the acquisition of Inet, which has significant large
customers in that region.  In addition, Europe was favorably impacted by
fluctuations in the foreign exchange rate of the Euro against the US
Dollar.  Growth in Japan was favorably impacted by the continued economic
recovery in that region as well as strong acceptance of new products. 
Japan was also favorably impacted by fluctuations in the foreign exchange rate
of the Japanese Yen against the US Dollar.  Growth in the Pacific region
was primarily associated with the continued economic recovery in certain
countries and the continued economic expansion in China.

The increase
in product orders in the United States for the current quarter was primarily
attributable to the acquisition of Inet.  The decline in R&S orders was
almost entirely in the United States.  Excluding the impact associated with
discontinuing the R&S distribution agreement and the Inet acquisition,
product orders in  the United States increased 27% and 3%, for the third
quarter and first three quarters of fiscal year 2005, respectively.  The
increase in the United States during the third quarter was attributable to
growth in the underlying technology markets and good acceptance of new
products.  The lower growth rate for the first three quarters of the
current fiscal year was attributable to the high order growth level in the prior
year that was associated with economic recovery in the United States that
resulted in some excess demand from some customers deferring capital purchases
during the extreme downturn of 2002 and 2003.  In addition, we experienced
certain large order activity in the first half of the prior year which did not,
and was not expected to, repeat in the current year.

37



Net
Sales

The following
table is presented to quantify the impact on net sales from the acquisition of
Inet and the discontinuation of the R&S distribution agreement.

|                                   |  | Fiscal quarter
      ended |       | Three fiscal
      quarters ended |  
|---------------------------------- |  | -------------------------- | ----- | --------------------------------- | -
|                                   |  |                            |       |                                   |  
|(In millions)                      |  | Feb.
      26,2005         |       | Feb.
      28,2004                |  
|                                   |  |                            |       |                                   |  
|Consolidated net sales:            |  |                            |       |                                   |  
|Tektronix other sales              |  | $                          | 228.3 |                                   | $
|Inet sales                         |  |                            | 27.9  |                                   |  
|R&S distributed products
    sales |  |                            | 0.1   |                                   |  
|                                   |  |                            |       |                                   |  
|Total net sales                    |  | $                          | 256.3 |                                   | $
|                                   |  |                            |       |                                   |  

Net sales
during the third quarter of fiscal year 2005 increased by $12.8 million, or 5%,
over the same period last year.  Net sales for the first three quarters of
fiscal year 2005 increased $110.7 million, or 17%, over the same period last
year.  The overall increase in net sales for both the third quarter and
first three quarters of fiscal year 2005 reflects a combination of factors
including the addition of Inet sales of $27.9 million during the current quarter
and backlog reductions in the third quarter and first three quarters of the
current fiscal year.  As we increase or decrease the level of product
backlog within any given fiscal period, the direct correlation between product
orders and product sales may vary.  These factors that increased net sales
were partially offset by a reduction in sales due to the discontinuation of the
R&S distribution agreement.

Tektronix other sales, which exclude net sales associated with Inet or R&S distributed products, for the current quarter increased $9.8
million, or 4%, from the prior year comparable period.  This increase in
net sales was primarily attributable to the increase in the related product
orders discussed above.  The relationship between product orders and net
sales was affected by the change in product backlog during the reporting
period.  Excluding backlog associated with Inet or R&S distributed
products, in the current quarter, we reduced product backlog by $2.8
million.  In the prior year third quarter, product backlog, excluding
backlog associated with R&S distributed products, was reduced by $14.7
million.  As the reduction in backlog was lower in the current year third
quarter as compared with the prior year third quarter, the year over year growth
in the net sales was lower than the related growth in the product
orders.

Tektronix other sales, which exclude net sales associated with Inet or R&S distributed products, during the first three quarters of fiscal year
2005 increased $97.6 million, or 16% from the prior year comparable
period.  This increase in the net sales was attributable to the increase in
product orders discussed above and reduction in product backlog during the
relevant period.  As noted above, the related product orders increased 7%
from the prior year.  The increase in net sales of 16% was greater than the
increase in related product orders due to the fact that we reduced our product
backlog in the first three quarters of the current fiscal year, where in the
prior year product backlog increased during this time period.  Excluding
backlog associated with Inet or R&S distributed products, backlog was
reduced by $20.9 million in the first three quarters of the current fiscal year
as compared with an increase of $23.5 million in the prior year comparable
period.

In addition
to product sales, net sales also include service revenues and sales from Maxtek,
our wholly-owned components manufacturing subsidiary that produces components
for third party customers as well as for Tektronix.  As we increase or
decrease the level of product backlog within any given fiscal period, the direct
correlation between product orders and product sales may vary.

38



The following
table presents net sales by region and net sales excluding the impact of the
acquisition of Inet and the discontinuation of the R&S distribution
agreement.

|                                  |  | Fiscal quarter
      ended |       | Three fiscal
      quarters ended |  
|--------------------------------- |  | -------------------------- | ----- | --------------------------------- | -
|                                  |  |                            |       |                                   |  
|(In millions)                     |  | Feb.
      26,2005         |       | Feb.
      28,2004                |  
|                                  |  |                            |       |                                   |  
|The Americas:                     |  |                            |       |                                   |  
|United States                     |  | $                          | 86.2  |                                   | $
|Other Americas                    |  |                            | 6.5   |                                   |  
|Europe                            |  |                            | 72.3  |                                   |  
|Pacific                           |  |                            | 51.1  |                                   |  
|Japan                             |  |                            | 40.2  |                                   |  
|                                  |  |                            |       |                                   |  
|Total net sales                   |  | $                          | 256.3 |                                   | $
|                                  |  |                            |       |                                   |  
|Net sales, excluding Inet and R&S |  | $                          | 228.3 |                                   | $

Net sales in
the United States decreased by 8% in the third quarter of fiscal year 2005 as
compared with the comparable prior year period, while international net sales
increased by 14%.  During the first three quarters of fiscal year 2005, net
sales in the United States increased by 8% as compared with the first three
quarters of the prior year, while international net sales increased by
23%.  The decline in net sales in the United States in the third quarter of
fiscal year 2005 was primarily attributable to the discontinuation of the
R&S distribution agreement.  For the first three quarters of fiscal
year 2005, net sales in the United States included the shipment of substantially
all backlog related to R&S distributed product.  The increase in
international net sales was generally associated with the geographical mix of
orders received, reflecting the increased order demand in Japan and the Pacific
region, discontinuation of the R&S distribution agreement, and international
sales from the Inet acquisition beginning in the second quarter of fiscal year
2005.

Gross
Profit and Gross Margin

Gross profit
for the third quarter of fiscal year 2005 was $153.4 million, an increase of
$12.2 million or 9%, from gross profit of $141.2 million for the same quarter
last year.  For the first three quarters of fiscal year 2005, gross profit
was $462.2 million, an increase of $90.1 million, or 24%, from gross profit of
$372.1 million for the same period last year.  The increase in gross profit
was attributable to the increase in sales volume described above during the
current fiscal year as well as the increase in gross margin on those
sales.

Gross margin
is the measure of gross profit as a percentage of net sales.  Gross margin
for the third quarter of fiscal year 2005 was 59.8%, an increase of 1.8 points
over gross margin of 58.0% in the same quarter last year.  Gross margin for
the first three quarters of fiscal year 2005 was 59.7%, an increase of 3.6
points over gross margin of 56.1% in the same period last year.  Gross
margin is typically affected by a variety of factors including, among other
items, sales volumes, mix of product shipments, product pricing, inventory
impairments and other costs such as warranty repair and sustaining
engineering.

The
improvement in gross margin during both the third quarter of the current year
and the first three quarters of the current fiscal year was primarily
attributable to favorable mix resulting from the shipment of higher margin
products.  Our favorable mix has primarily resulted from two factors. 
First, the discontinuation of the R&S distribution agreement has favorably
impacted gross margin.  As we were the distributor of those products, the
associated gross margin was lower than margins we typically experience for
Tektronix manufactured product.  Second, we continue to introduce new
products that have been well received in the market.  Typically, new
products tend to yield higher gross margins, and we have experienced this on our
recently introduced new oscilloscope products.  In addition to sales
volumes and favorable mix, the positive impact of our explicit program to
increase gross margin, whereby we reviewed all cost drivers within gross margin
and created a focused effort on reducing these costs where appropriate also
contributed to the year over year increase.

The
improvements in gross margin in the third quarter of fiscal year 2005 were
partially offset by $4.6 million from amortization of acquisition related
intangible assets resulting from the acquisition of Inet.  During the first
three quarters of fiscal year 2005, the improvements in gross margin were
partially offset

39



by the amortization of acquisition
related intangible assets of $7.7 million resulting from the Inet
acquisition.  For additional information on the amortization of acquisition
related intangible assets see the Acquisition of Inet Technologies, Inc. section
above in this Managements Discussion and Analysis.

During the
third quarter of fiscal year 2005, gross margin on R&S distribution sales
was not significant due to nominal net sales as compared with gross margin of
21.2% on these products in the prior year third quarter.  During the first
three quarters of fiscal year 2005 and 2004, gross margins on R&S
distribution sales were 27.3% and 22.3%, respectively.

Operating Expenses

In the
current fiscal period, operating expenses included research and development
expenses, selling, general and administrative expenses, business realignment
costs, acquisition related costs, amortization of acquisition related items and
gains and losses from the sale of fixed assets.  Each of these categories
of operating expenses is discussed further below.  It should be noted that
although a portion of operating expenses is variable and therefore will
fluctuate with operating levels, many costs are fixed in nature and are
therefore subject to increase due to inflation and annual labor cost
increases.  Additionally, we must continue to invest in the development of
new products and the infrastructure to market and sell those products even
during periods where operating results reflect only nominal growth, are flat or
declining.  Accordingly, as we make cost reductions in response to changes
in business levels or other specific business events, these reductions can be
partially or wholly offset by these other increases to our fixed cost
structure.

Research and
development (R&D) expenses are incurred for the design and testing of new
products, technologies and processes, including pre-production prototypes,
models and tools.  Such costs include labor and employee benefits, contract
services, materials, equipment and facilities.  R&D expenses increased
$10.6 million, or 32%, during the third quarter of fiscal year 2005 as compared
with the same quarter last year, and increased by $25.5 million, or 27% during
the first three quarters of fiscal year 2005 as compared with the same period
last year.  Approximately $8.0 million of the increase in the current
quarter was due to the inclusion of R&D expenses from the Inet acquisition.
 The remaining increase in the current quarter and first three quarters of
the current fiscal year was primarily attributable to increased spending on new
product development.  We continuously invest in the development of new
products and technologies, and the timing of these costs varies depending on the
stage of the development process.  During the current quarter and first
three quarters of the current fiscal year we incurred higher expenses associated
with engineering materials as a result of the current projects stages of
development.  As Tektronix was a distributor of R&S products, there was
no R&D expense associated with the sale of those products.

Selling,
general and administrative (SG&A) expenses increased $9.2 million, or 13%
in the current quarter as compared with the same quarter last year, and
increased by $19.7 million, or 10% during the first three quarters of fiscal
year 2005 as compared with the same period last year.   The increase
in SG&A expense associated with the acquisition of Inet was $7.7 million and
$12.0 million for the current quarter and first three quarters of the current
fiscal year, respectively.

The increase
in SG&A not resulting from the Inet acquisition during the current quarter
of $1.5 million was largely attributable to increased spending on our project to
comply with the provisions of Section 404 of the Sarbanes-Oxley Act of 2002 and
less significant increases in other general spending categories including
travel.  During the current quarter, labor related expense was
approximately consistent with the prior year comparable period, the net effect
of annual salary increases offset by lower variable incentive expense in the
current quarter.

The increase
in SG&A not resulting from the Inet acquisition of $7.7 million during the
first three quarters of the current fiscal year as compared with the prior year
comparable period is primarily due to higher labor related spending in the first
half of the current fiscal year and expenses in the current quarter associated
with our project to comply with the provisions of Section 404 of the
Sarbanes-Oxley Act of 2002.  In addition, the timing of program execution
has an impact on the ultimate level of SG&A expense.

Acquisition
related costs (credits) and amortization, net are incurred as a direct result of
the integration of significant acquisitions.  The acquisition related costs
of $2.6 million for the third quarter of fiscal year 2005 primarily relate to
the acquisition of Inet.  These costs included $1.3 million for
amortization of intangible assets and $0.3 million for amortization of unearned
stock-based compensation, which represent amortization of items in the purchase
price and the allocation of the purchase price discussed in the Acquisition of
Inet Technologies, Inc. section above in this Managements

40



Discussion and Analysis.  Also
included in the current quarter are transition expenses of $0.5 million, which
represent incremental expenses to integrate the operations of Inet, and $0.5
million related to our acquisition of Sony/Tektronix in fiscal year 2003 mostly
to accrue for voluntary retention bonuses to certain employees in Gotemba, Japan
as an incentive to remain with Tektronix through August 2005 while we complete
our plan to transition manufacturing operations to other locations. 
Accordingly, Tektronix will recognize a liability for retention bonuses for 48
employees totaling $3.7 million that is being accrued ratably over 18 months
through August 2005.  In the third quarter of the prior fiscal year, the
net acquisition related credit of $18.0 million was largely attributable to a
net gain of $19.3 million on properties in Japan, primarily from the sale of the
Japan headquarters building.

During the
first three quarters of fiscal year 2005, acquisition related costs of $38.3
million primarily related to the acquisition of Inet.  The largest item of
these costs was the $32.2 million write-off of IPR&D in the second
quarter.  Other significant costs included $2.1 million for amortization of
intangible assets and transition expenses of $1.5 million, which represented
incremental expenses to integrate the operations of Inet, and $1.9 million
related to our acquisition of Sony/Tektronix in fiscal year 2003 mostly to
accrue for voluntary retention bonuses to certain employees in Gotemba,
Japan.  During the first three quarters of the prior fiscal year, the net
acquisition related credit of $52.3 million was largely attributable to a $36.7
million gain on pension restructuring which resulted from the substantial
settlement of the defined benefit pension plans in Japan and a net gain of $19.3
million for properties held in Japan, primarily from the sale of the Japan
headquarters building.

Business
realignments costs represent actions to realign our cost structure in response
to dramatic changes in operating levels or a significant acquisition or
divestiture.  These costs primarily comprise severance costs for reductions
in employee headcount and costs associated with the closure of facilities and
subsidiaries.  In recent years, business realignment costs have primarily
been associated with the realignment of our cost structure in response to the
dramatic economic decline experienced in the technology sector beginning during
fiscal years 2001, and continuing into fiscal year 2003, as well as
restructuring costs associated with the acquisition of Sony/Tektronix.  In
many cases, and especially in foreign countries, these actions may take
significant time to execute.  Accordingly, we have continued to experience
business realignment costs in fiscal year 2005 for actions planned in response
to the reductions in operating levels experienced in previous fiscal
years.  During the third quarter of fiscal year 2005 we incurred business
realignment costs of $0.4 million, a reduction from expense of $3.7 million in
the same quarter last year.  During the first three quarters of fiscal year
2005 we incurred business realignment costs of $2.7 million, a reduction from
expense of $20.0 million in the same period last year.  The reduction from
the prior year is the result of the previously planned actions being executed
and recognized with fewer additional actions needing to be planned as business
levels stabilized.  For a full description of the components of business
realignment costs please refer to the Business Realignment Costs section above
in this Managements Discussion and Analysis.

The net gain
on disposition of assets for the first three quarters of fiscal year 2005 was
primarily due to the sale of property located in Nevada City, California in the
first quarter.  Net proceeds of $9.9 million were received from the sale of
the Nevada City assets with a carrying value of $7.7 million, resulting in a
gain on sale of $2.2 million.  This gain was partially offset by losses and
impairments incurred in the ordinary course of business.

Non-Operating Income /
Expense

Interest
income during the third quarter and first three quarters of fiscal year 2005
decreased $1.3 million and $3.1 million, respectively, as compared with the same
period last year.  The decrease in interest income was due to a lower
average balance of invested cash as well as lower yields on invested cash. 
For a discussion of the sources and uses of cash, please see the Financial
Condition, Liquidity and Capital Resources section below in this Managements
Discussion and Analysis.

Interest
expense during the third quarter and first three quarters of fiscal year 2005
decreased $0.1 million and $1.4 million, respectively, as compared with the
prior year comparable period.  The decrease in interest expense for the
first three quarters of fiscal year 2005 was largely due to the retirement of
$56.3 million of outstanding bond debt in the first quarter of fiscal year 2004
and repayment of the outstanding principal balance in full on the TIBOR+1.75%
debt facility during the third and fourth quarters of fiscal year
2004.

41



Other
non-operating income, net, of $1.4 million during the third quarter of fiscal
year 2005, was largely attributable to a gain on sale of certain equity
securities and the resolution of non-operating contingencies, partially offset
by foreign currency losses.  Other non-operating income, net, of $7.2
million in the same quarter last year was largely due to a gain of $7.3 million
from the sale of Merix Corporation common stock.  Other non-operating
expense, net, of $1.9 million for the first three quarters of fiscal year 2005,
was largely due to legal expenses for litigation not related to our current
operations and the impairment of a non-operating asset during the first half of
the fiscal year, partially offset by the net credits in the third quarter
describe above.  Other non-operating income, net, of $6.7 million in the
same period last year was largely due to the gain from sale of Merix Corporation
common stock.

Income
Taxes

Income tax
expense for the third quarter and first three quarters of fiscal year 2005 was
$9.2 million and $36.8 million, respectively.  Income tax expense for the
first three quarters of fiscal year 2005 does not include a tax benefit from the
$32.2 million write-off of IPR&D from the Inet acquisition.  In
addition, the impact of purchase accounting adjustments from the Inet
acquisition, such as the amortization of acquisition related items and non-cash
expense for the inventory step up to fair value, were tax effected at the
statutory rate.  The effective tax rates on earnings before taxes from
continuing operations for the third quarter and the first three quarters of
fiscal year 2005 were 28% and 39%, respectively.  Excluding the impact of
the write-off of IPR&D and purchase accounting adjustments, the effective
tax rate for the current quarter and first three quarters of the current fiscal
year was 30%, which was also the effective tax rate for the prior fiscal
year.  The third quarter of the prior fiscal year included a catch-up
adjustment to increase the year-to-date effective tax rate from 28% to
30%.

The effective
tax rate is impacted by a variety of estimates, including the amount of income
during the remainder of fiscal year 2005, the mix of that income between foreign
and domestic sources and expected utilization of tax credits which have a full
valuation allowance.  In addition, current IRS audits of fiscal years 2001,
2002 and 2003 may be completed in the near future.  To the extent our
estimates and other amounts or circumstances change, the effective tax rate may
change accordingly.

Discontinued Operations

The net gain
from discontinued operations during the third quarter and the first three
quarters of fiscal year 2005 primarily resulted from the resolution of certain
contingencies associated with sale of our Color Printing and Imaging Division
which is described under Contingencies in the Critical Accounting Estimates
section.

During the
first quarter of fiscal year 2004, we sold the operations of Gage Applied
Sciences (Gage) to a third party.  We recorded an after-tax loss of $0.8
million during the first quarter of fiscal year 2004 to reflect adjustments to
the previously estimated after-tax loss of $2.2 million on the disposition of
this discontinued operation which was initially recorded during the fourth
quarter of fiscal year 2003 to write-down the net assets of Gage, primarily for
goodwill, to net realizable value less estimated selling costs.  Losses in
the third quarter of fiscal year 2005 and 2004 included additional settlement
expenses arising after the sale of the business.

Discontinued
operations in the third quarter and first three quarters of the current fiscal
year also included additional losses from the sale of the optical parametric
test business and VideoTele.com due to settlement of additional costs arising
after the sale of these businesses in fiscal year 2003.

Net
Earnings

For the third
quarter of fiscal year 2005, we recognized consolidated net earnings of $26.8
million, a decrease of $16.8 million from net earnings of $43.6 million for the
prior year third quarter.  For the first three quarters of fiscal year
2005, we recognized consolidated net earnings of $60.4 million, a decrease of
$29.6 million from net earnings of $90.0 million for the first three quarters of
the prior year.  These decreases were largely due to the impact of the Inet
acquisition, which included the write-off of IPR&D and amortization of
acquisition related items.  In addition, the impacts of the significant
increases in sales and gross profit in the current quarter and first three
quarters of the current fiscal year were significantly offset by the prior year
net gain from the Japan pension settlement in the second quarter and the net
gain from the sale of Japan properties recognized in the third
quarter.

42



Earnings
Per Share

The decrease
in earnings per share is a result of the decreased net earnings discussed above,
and to a lesser extent, increased weighted average shares outstanding in the
current year as a result of shares issued in the Inet acquisition, which was
partially offset by shares repurchased by Tektronix in the open
market.

Financial Condition, Liquidity and
Capital Resources

Sources and Uses of
Cash

Cash Flows.  The following
table is a summary of our Condensed Consolidated Statements of Cash
Flows:

|                            |  | Three fiscal
      quarters ended |         
|--------------------------- |  | --------------------------------- | --------
|                            |  |                                   |         
|(In thousands)              |  | Feb. 26,
      2005               |         
|                            |  |                                   |         
|Cash provided by (used in): |  |                                   |         
|Operating activities        |  | $                                 | 50,130  
|Investing activities        |  |                                   | 57,036  
|Financing activities        |  |                                   | (109,020

Operating Activities.  Cash
provided by operating activities of $50.1 million for the first three quarters
of fiscal year 2005 decreased by $10.2 million as compared with the same period
last year.  The impact of higher net sales and gross profit in the first
three quarters of fiscal year 2005 were offset by higher cash payments in the
first quarter of $46.5 million for a cash contribution to the U.S. Cash Balance
pension plan and $29.8 million for annual incentive compensation payments
accrued during fiscal year 2004, as compared with payments in the first quarter
last year of $30.0 million for a cash contribution to the U.S. Cash Balance
pension plan and $5.8 million for annual incentive compensation payments accrued
during fiscal year 2003.  Other adjustments to reconcile net earnings to
net cash provided by operating activities in the current year such as the
write-off of IPR&D and amortization of acquisition related items are
presented in the Condensed Consolidated Statements of Cash Flows.

As noted
above, we made a cash contribution of $46.5 million to the U.S. Cash Balance
pension plan in the first quarter of fiscal year 2005.  This funding
reduced Other long-term liabilities on the Condensed Consolidated Balance
Sheets.  Depending on the future market performance of the pension plan
assets, we may make additional large cash contributions to the plan in the
future.

Investing Activities.  Cash
provided by investing activities of $57.0 million for the first three quarters
of fiscal year 2005 increased by $29.1 million as compared with the same period
last year.  The increase in net cash inflow provided by investing
activities was largely attributable to net sales of marketable
investments.  The reduced investment in these securities was a result of
cash needed to fund the $93.9 million net cash portion of the Inet acquisition
in the third quarter of fiscal year 2005 and the contribution to the U.S. Cash
Balance pension plan in the first quarter as discussed above.  We spent
$21.1 million for capital expenditures and realized $19.8 million of proceeds on
sales of fixed assets in the first three quarters of the current fiscal
year.  Sales of fixed assets in the first three quarters of fiscal year
2005 included proceeds of $9.9 million from the sale of the Nevada City, California property
in the first quarter, and proceeds of $8.8 million from the sale of property in
Gotemba, Japan in the third quarter.  During the third quarter of fiscal
year 2005, Tektronix sold 1.0 million shares of common stock of Tut System, Inc.  Net proceeds from the sale were $3.3 million, which resulted in a net realized
gain of $2.1 million.

Financing Activities.  Cash
used in financing activities of $109.0 million for the first three quarters of
fiscal year 2005 decreased by $13.6 million as compared with the same period
last year.  During the first three quarters of fiscal year 2005, we paid
$114.8 million to repurchase 3.9 million shares of Tektronix common stock at an
average price of $29.24 per share, compared with $33.9 million in the same
period last year.  We paid dividends of $14.1 million to shareholders in
the first three quarters of fiscal year 2005, compared with $6.8 million in the
same period last year.  Beginning with the second quarter of fiscal year
2005 we increased the cash dividend per share by 50% to $0.06 from $0.04 in the
first quarter.  We began paying cash dividends of $0.04 per share in the
third quarter of last year.  Financing activities in the first three
quarters of fiscal year 2004 included the August 1, 2003 scheduled 7.5% notes
repayment

43



of $56.3 million and a partial repayment
of $51.8 million on the outstanding balance of the TIBOR+1.75% debt
facility.  These cash outflows were partially offset by proceeds from
employee stock plans of $20.2 million in the first three quarters of fiscal year
2005, a decrease from proceeds of $26.8 million in the same period last
year.  The decrease in proceeds from employee stock plans was largely due
to decreased option exercise activity in the first three quarters of fiscal year
2005 compared with the same period last year.

The above
noted repurchases of common stock were made under an authorization approved by
the Board of Directors.  In fiscal year 2000, the Board of Directors
authorized the purchase of up to $550.0 million of Tektronix common stock on
the open market or through negotiated transactions.  In September 2004, the
Board of Directors authorized an incremental $400.0 million to repurchase shares
of Tektronix common stock.  As of February 26, 2005, we had repurchased a
total of 21.1 million shares at an average price of $23.91 per share totaling
$503.6 million under these authorizations.  The reacquired shares were
immediately retired, in accordance with Oregon corporate law.

Subsequent to
the third quarter of fiscal year 2005, on March 17, 2005, Tektronix declared a
quarterly cash dividend of $0.06 per share.  The dividend is payable on
April 25, 2005 to shareholders of record as of the close of market on April 8,
2005.

At February
26, 2005, we maintained unsecured bank credit facilities totaling $33.8 million,
of which $29.8 million was unused.

Cash on hand,
cash flows from operating activities and current borrowing capacity are expected
to be sufficient to fund operations, acquisitions and potential acquisitions,
capital expenditures and contractual obligations for the next twelve
months.

Working Capital

The following
table summarizes working capital as of February 26, 2005 and May 29,
2004:

|(In thousands)                                                                                             |  | Feb. 26,
      2005 |         | May 29,
      2004 |  
|---------------------------------------------------------------------------------------------------------- |  | ------------------- | ------- | ------------------ | -
|                                                                                                           |  |                     |         |                    |  
|Current assets:                                                                                            |  |                     |         |                    |  
|Cash and cash equivalents                                                                                  |  | $                   | 151,132 |                    | $
|Short-term marketable
    investments                                                                      |  |                     | 119,466 |                    |  
|Trade accounts receivable, net of allowance
      for doubtful accounts of $3,685 and $3,013, respectively |  |                     | 158,476 |                    |  
|Inventories                                                                                                |  |                     | 130,156 |                    |  
|Other current assets                                                                                       |  |                     | 56,016  |                    |  
|                                                                                                           |  |                     |         |                    |  
|Total current assets                                                                                       |  |                     | 615,246 |                    |  
|Current liabilities:                                                                                       |  |                     |         |                    |  
|Accounts payable and accrued
      liabilities                                                             |  |                     | 131,602 |                    |  
|Accrued compensation                                                                                       |  |                     | 73,177  |                    |  
|Deferred revenue                                                                                           |  |                     | 50,123  |                    |  
|                                                                                                           |  |                     |         |                    |  
|Total current liabilities                                                                                  |  |                     | 254,902 |                    |  
|                                                                                                           |  |                     |         |                    |  
|Working capital                                                                                            |  | $                   | 360,344 |                    | $
|                                                                                                           |  |                     |         |                    |  

Working
capital increased in the current year by $63.8 million.  Current assets
increased in the current year by $70.2 million, largely as a result of $43.4
million of non-cash current assets received in the Inet acquisition in the
second quarter of fiscal year 2005 and a $28.5 million increase in short-term
marketable investments resulting from strategic repositioning of our marketable
investment portfolio from long-term to short-term due to the current market
interest rate environment.  Current liabilities increased in the current
fiscal year by $6.4 million, largely as a result of deferred revenue from
products related to the Inet acquisition and accrual of current year annual
incentive compensation.  Offsetting these increases were reductions for
cash payments of annual incentive compensation in the first quarter of fiscal
year 2005 that was accrued in fiscal year 2004 as described in the Sources and
Uses of Cash

44



section above.  Significant changes
in cash and cash equivalents and marketable investments are discussed in the
Sources and Uses of Cash section above.

Recent Accounting
Pronouncements

At the
November 1213, 2003 meeting, the Emerging Issues Task Force (EITF) reached a
consensus on Issue 03-1, The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments, that certain quantitative and qualitative
disclosures should be required for debt and marketable equity securities
classified as available-for-sale or held-to-maturity under Statement of
Financial Accounting Standards (SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities, that are impaired at the balance
sheet date but for which an other-than-temporary impairment has not been
recognized.  Tektronix adopted the disclosure requirements in fiscal year
2004.  At the March 17-18, 2004 meeting, the EITF reached a consensus, which
approved an impairment model for debt and equity securities.  However, on
September 30, 2004, the Financial Accounting Standards Board (FASB) decided to
postpone the implementation of the impairment model for debt and equity
securities.  Tektronix does not expect this consensus to have a material
effect on the consolidated financial statements upon adoption of the proposed
impairment model for debt and equity securities.

In December
2003, the FASB issued SFAS No. 132 (revised 2003), Employers Disclosures about
Pensions and Other Postretirement Benefits, an amendment of FASB Statements No.
87, 88, and 106, and a revision of FASB Statement No. 132 (SFAS No.
132R).  SFAS No. 132R revised employers disclosures about pension plans
and other postretirement benefit plans.  It does not change the measurement or
recognition of those plans required by SFAS No. 87, Employers Accounting for
Pensions, SFAS No. 88, Employers Accounting for Settlements and Curtailments
of Defined Benefit Pension Plans and for Termination Benefits, and SFAS No.
106, Employers Accounting for Postretirement Benefits Other Than Pensions.
The new rules require additional disclosures about the assets,
obligations, cash flows, and net periodic benefit cost of defined benefit
pension plans and other postretirement benefit plans.  The required
information has been provided separately for pension plans and for other
postretirement benefit plans.  Tektronix included the new disclosures in
its fiscal year 2004 consolidated financial statements and interim disclosures
beginning with the first quarter of fiscal year 2005.

In November
2004, the FASB issued SFAS No. 151, Inventory Costs, an amendment of ARB No.
43, Chapter 4.  SFAS No. 151 amends the guidance in ARB No. 43, Chapter 4,
Inventory Pricing, to clarify the accounting for abnormal amounts of idle
facility expense, freight, handling costs, and wasted material (spoilage). 
Paragraph 5 of ARB 43, Chapter 4, previously stated that . . . under some
circumstances, items such as idle facility expense, excessive spoilage, double
freight, and rehandling costs may be so abnormal as to require treatment as
current period charges. . . .  SFAS No. 151 requires that those items be
recognized as current period charges regardless of whether they meet the
criterion of so abnormal.  In addition, SFAS No. 151 requires that
allocation of fixed production overheads to the costs of conversion be based on
the normal capacity of the production facilities.  The provisions of SFAS
No. 151 will apply to inventory costs beginning in fiscal year 2007.  The
adoption of SFAS No. 151 is not expected to have a significant effect on the
consolidated financial statements of Tektronix.

In December
2004, the FASB issued SFAS No. 123 (Revised 2004), Share-Based Payment (SFAS
No. 123R).  This new pronouncement requires compensation cost relating to
share-based payment transactions be recognized in financial statements. 
That cost will be measured based on the fair value of the equity or liability
instruments issued.  SFAS No. 123R covers a wide range of share-based
compensation arrangements including stock options, restricted stock plans,
performance-based awards, stock appreciation rights, and employee stock purchase
plans.  SFAS No. 123R replaces SFAS No. 123, Accounting for Stock-Based
Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued
to Employees.  SFAS No. 123, as originally issued in 1995, established as
preferable a fair-value-based method of accounting for share-based payment
transactions with employees.  However, SFAS No. 123 permitted entities the option
of continuing to apply the guidance in APB Opinion No. 25, as long as the
footnotes to financial statements disclosed what net income would have been had
the preferable fair-value-based method been used.  Tektronix will be
required to adopt the provisions of SFAS No. 123R in the second fiscal quarter
of fiscal year 2006.  Management is currently evaluating the requirements
of SFAS No. 123R.  The adoption of SFAS No. 123R is expected to have a
significant effect on the consolidated financial statements of Tektronix. 
See Note 4 to the Condensed Consolidated Financial Statements for the pro forma
impact on net earnings and earnings per share from calculating
stock-related compensation cost under the fair value alternative of SFAS No.
123.  However, the

45



calculation of compensation cost for
share-based payment transactions after the effective date of SFAS No. 123R may
be different from the calculation of compensation cost under SFAS No. 123, but
such differences have not yet been quantified.

In December
2004, the FASB issued two FASB staff positions (FSP): FSP FAS 109-1,
Application of FASB Statement No. 109, Accounting for Income Taxes, for the Tax
Deduction Provided to U.S.-Based Manufacturers by the American Jobs Creation Act
of 2004; and FSP FAS 109-2, Accounting and Disclosure Guidance for the Foreign
Earnings Repatriation Provision within the American Jobs Creation Act of
2004.  FSP FAS 109-1 clarifies that the tax deduction for domestic
manufacturers under the American Jobs Creation Act of 2004 (the Act) should be
accounted for as a special deduction in accordance with SFAS No. 109,
Accounting for Income Taxes. FSP FAS 109-2 provides enterprises more time
(beyond the financial-reporting period during which the Act took effect) to
evaluate the Acts impact on the enterprises plan for reinvestment or
repatriation of certain foreign earnings for purposes of applying SFAS No. 109.  The FSPs went into effect upon being issued and did not have a significant
effect on the consolidated financial statements of Tektronix.

Risks and
Uncertainties

Described
below are some of the risks and uncertainties that could cause actual results to
differ materially from the results contemplated by the forward-looking
statements contained in this Quarterly Report.  See Forward-Looking
Statements which precedes Part I of this Form 10-Q.

Market
Risk and Cyclical Downturns in the Markets in Which Tektronix
Competes

Our business
depends on capital expenditures of manufacturers in a wide range of industries,
including the telecommunications, semiconductor, and computer industries. 
Each of these industries has historically been very cyclical and has experienced
periodic downturns, which have had a material adverse impact on the
industries demand for equipment, including test and measurement equipment
manufactured and marketed by us.  During periods of reduced and declining
demand, we may need to rapidly align our cost structure with prevailing market
conditions while at the same time motivating and retaining key employees. 
Our pension plan obligations are affected by changes in market interest rates
and the majority of plan assets are invested in publicly traded debt and equity
securities which are affected by market risks.  Our net sales and operating
results could be adversely impacted by the reversal of any current trends or any
future downturns or slowdowns in the rate of capital investment in these
industries.  In addition, the telecommunications industry has been going through
a period of consolidation in which several major telecommunications operators
have either merged with each other or been acquired.  This consolidation activity
may affect the overall level of capital expenditures made by these operators on
test and measurement equipment, and may also affect the relative competitive
position between Tektronix and its competitors in this market.

Timely
Delivery of Competitive Products

We sell our
products to customers that participate in rapidly changing high technology
markets, which are characterized by short product life cycles.  Our ability
to deliver a timely flow of competitive new products and market acceptance of
those products, as well as the ability to increase production or to develop and
maintain effective sales channels, is essential to growing the business. 
Because we sell test and measurement products that enable our customers to
develop new technologies, we must accurately anticipate the ever-evolving needs
of those customers and deliver appropriate products and new technologies at
competitive prices to meet customer demands.  Our ability to deliver such
products could be affected by engineering or other development program delays as
well as the availability of parts and supplies from third party providers on a
timely basis and at reasonable prices.  In addition, we face risks
associated with bringing products into compliance with the Restriction of
Hazardous Substances worldwide regulatory provisions, which include
removing lead from current and future product designs.  Failure to deliver
compliant competitive products in a timely manner and at reasonable prices, as
well as the costs associated with bringing existing products into compliance,
could have an adverse effect on our results of operations, financial condition
or cash flows.

There are
additional product risks associated with sales of the network monitoring
products, which were acquired in the Inet acquisition.  Sales of these
products are typically recognized upon the completion of system installation or
customer acceptance.  Changes or delays in the implementation or customer
acceptance of our products could harm our financial results.  Sales of our
network monitoring

46



products are made predominantly to a
small number of large communications carriers and involve significant capital
expenditures as well as lengthy sales cycles and implementation processes, which
could harm our financial results.  We rely upon software licensed from
third parties such as Oracle Corporation, Cognos Incorporated and others. 
If we are unable to maintain these software licenses on commercially reasonable
terms, our business, financial condition and results of operations could be
harmed.

In addition,
we expect third party carrier spending for traditional networks to continue to
decrease, which requires that we continue to develop products and applications
for networks based on emerging next-generation wireless and packet-based
technologies and standards.  We may not successfully develop or acquire
additional competitive products for these emerging technologies and
standards.

Further, we
have included security features in some of the network monitoring products that
are intended to protect the privacy and integrity of customer data. 
Despite the existence of these security features, these products may be
vulnerable to breaches in security due to unknown defects in the security
mechanisms, as well as vulnerabilities inherent in the operating system or
hardware platform on which the product runs and/or the networks linked to that
platform.  Security vulnerabilities, regardless of origin, could jeopardize
the security of information stored in and transmitted through the computer
systems of our customers.  Any security problem may require significant
capital expenditures to solve and could materially harm our reputation and
product acceptance.

Competition

We compete
with a number of companies in specialized areas of other test and measurement
products and one large broad line measurement products supplier, Agilent
Technologies.  Other competitors include Acterna Corporation, Anritsu
Corporation, Catapult Communications, LeCroy Corporation, Rohde & Schwarz,
Yokogawa Electric Corporation and many other smaller companies.  In
general, the test and measurement industry is a highly competitive market based
primarily on product performance, technology, customer service, product
availability and price.  Some of our competitors may have greater resources
to apply to each of these factors and in some cases have built significant
reputations with the customer base in each market in which we compete.  We
face pricing pressures that may have an adverse impact on our earnings.  If
we are unable to compete effectively on these and other factors, it could have a
material adverse affect on our results of operations, financial condition or
cash flows.  In addition, we enjoy a leadership position in certain core
product categories, and continually develop and introduce new products designed
to maintain that leadership, as well as to penetrate new markets.  Failure
to develop and introduce new products that maintain a leadership position or
which fail to penetrate new markets may adversely affect operating
results.

Supplier
Risks

Our
manufacturing operations are dependent on the ability of suppliers to deliver
quality components, subassemblies and completed products in time to meet
critical manufacturing and distribution schedules.  We periodically
experience constrained supply of certain component parts in some product lines
as a result of strong demand in the industry for those parts.  Such
constraints, if persistent, may adversely affect operating results until
alternate sourcing can be developed.  There is increased risk of supplier
constraints in periods where we are increasing production volume to meet
customer demands.  Volatility in the prices of these component parts, an
inability to secure enough components at reasonable prices to build new products
in a timely manner in the quantities and configurations demanded or, conversely,
a temporary oversupply of these parts, could adversely affect our future
operating results.  In addition, we use certain sole sourced components,
which are integral to a variety of products.  Disruption in key sole
sourced suppliers could have a significant adverse effect on our results of
operations.

Operating in a Global Environment

We maintain
operations in four major geographies: the Americas, including the United States,
Mexico, Canada and South America; Europe, including Europe, Russia, the Middle
East and Africa; the Pacific, including China, India, Korea and Singapore; and
Japan.  During the last fiscal year, more than half of our revenues were
from international sales.  In addition, some of our manufacturing
operations and key suppliers are located in foreign countries, including China,
where we expect to further expand our operations.  As a result, the
business is subject to the worldwide economic and market conditions risks
generally associated with doing business globally, such as fluctuating exchange
rates; the stability of

47



international monetary conditions; tariff
and trade policies; export license requirements and restrictions on the export
of technology; import regulations; domestic and foreign tax policies; foreign
governmental regulations; political unrest, wars and acts of terrorism; epidemic
disease or other health concerns; and changes in other economic or political
conditions.  These factors, among others, could restrict or adversely
impact our ability to sell in global markets, as well as our ability to
manufacture products or procure supplies and could subject us to additional
costs.  In addition, a significant downturn in the global economy or a
particular region could adversely affect our results of operations, financial
position or cash flows.

Intellectual Property
Risks

As a
technology-based company, our success depends on developing and protecting our
intellectual property.  We rely generally on patent, copyright, trademark
and trade secret laws in the United States and abroad.  Electronic
equipment as complex as most of our products, however, is generally not
patentable in its entirety.  We also license intellectual property from
third parties and rely on those parties to maintain and protect their
technology.  We cannot be certain that actions we take to establish and
protect proprietary rights will be adequate, particularly in countries
(including China) where intellectual property rights are not highly developed or
protected.  If we are unable to adequately protect our technology, or if we
are unable to continue to obtain or maintain licenses for protected technology
from third parties, it could have a material adverse affect on our results of
operations, financial position or cash flows.  From time to time in the
usual course of business, we receive notices from third parties regarding
intellectual property infringement or take action against others with regard to
intellectual property rights.  Even where we are successful in defending or
pursuing such claims, we may incur significant costs.  In the event of a
successful claim against us, we could lose our rights to needed technology or be
required to pay license fees for the infringed rights, either of which could
have an adverse impact on our business.

Environmental Risks

We are
subject to a variety of federal, state, local and foreign environmental
regulations relating to the use, storage, discharge and disposal of our
hazardous chemicals used during our manufacturing process.  We have closed
a licensed hazardous waste management facility at our Beaverton, Oregon, campus
and have entered into a consent order with the Oregon Department of
Environmental Quality requiring certain remediation actions (see Part I, Item 1,
Environment of Form 10-K).  If we fail to comply with the consent order
or any present or future regulations, we could be subject to future liabilities
or the suspension of production.  In addition, such regulations could
restrict our ability to expand our facilities or could require us to acquire
costly equipment, or to incur other significant expenses to comply with
environmental regulations.

Possible
Volatility of Stock Price

The price of
our common stock may be subject to wide, rapid fluctuations.  Such
fluctuations may be due to factors specific to us, such as changes in operating
results or changes in analysts estimates regarding earnings.  Fluctuations
in the stock price may also be due to factors relating to the
telecommunications, semiconductor, and computer industries or to the securities
markets in general.  Fluctuations in stock prices have often been unrelated
to the operating performance of the specific companies whose stocks are
traded.  Shareholders should be willing to incur the risk of such
fluctuations.

Integration of Inet, Technologies,
Inc.

On September
30, 2004, we acquired all of the outstanding common stock of Inet.  We are
continuing to integrate the operations of Inet into Tektronix.  The
successful integration of the Inet business is subject to a number of risk
factors which could materially adversely affect our consolidated results of
operations, financial condition and cash flows.  These risks include the
necessity of coordinating geographically separated organizations, integrating
personnel with diverse business backgrounds, integrating Inets technology and
products, combining different corporate cultures, retaining key employees,
maintaining customer satisfaction and current bid processes, maintaining product
development schedules, coordinating sales and marketing activities and
preserving important distribution relationships; diversion of managements
attention with consequent negative impact upon our execution of our overall
strategy; and failure to realize upon expected cost savings and other synergies
from the merger.

48



Other
Risk Factors

Other risk
factors include but are not limited to; changes in the mix of products sold,
regulatory and tax legislation, changes in effective tax rates, inventory risks
due to changes in market demand or our business strategies, potential litigation
and claims arising in the normal course of business, credit risk of customers,
the fact that a substantial portion of our sales are generated from orders
received during each quarter, and significant modifications to existing information
systems.

|Item 3. | Quantitative and Qualitative
      Disclosures about Market Risk.
|------- | -----------------------------------------------------------------

Financial Market Risk

We are
exposed to financial market risks, including interest rate, equity price and
foreign currency exchange rate risks.

We maintain a
short-term and long-term investment portfolio consisting of fixed rate
commercial paper, corporate notes and bonds, U.S. Treasury and agency notes,
asset backed securities and mortgage securities.  The weighted average
maturity of the portfolio, excluding mortgage securities, was two years or
less.  Mortgage securities may have a weighted average life of less than
seven years and are managed consistent with the Lehman Mortgage Index.  An
increase in interest rates of similar instruments would decrease the value of
certain of these investments.  A 10% rise in interest rates as of February
26, 2005 would reduce the market value by $2.3 million, which would be reflected
in Accumulated other comprehensive loss on the Consolidated Balance Sheets until
sold at which time it would then be recognized in Other non-operating income
(expense), net, on the Condensed Consolidated Statement of Operations.

At February
26, 2004, we had no bond indebtedness.  The bonds were retired on August 1,
2003.

We are
exposed to equity price risk primarily through our marketable equity securities
portfolio, including investments in Merix Corporation, Tut Systems, Inc., and
other companies.  We have not entered into any hedging programs to mitigate
equity price risk.  An adverse change of 20% in the value of these
securities would reduce the market value by $2.3 million, which would likely be
reflected in Accumulated other comprehensive loss on the Consolidated Balance
Sheets until sold.  If the adverse change results in an impairment that is
considered to be other-than-temporary, the loss on impairment would be charged
to net earnings on the Consolidated Statements of Operations.

We are
exposed to foreign currency exchange rate risk primarily through commitments
denominated in foreign currencies.  We utilize derivative financial
instruments, primarily forward foreign currency exchange contracts, generally
with maturities of one to three months, to mitigate this risk where natural
hedging strategies cannot be employed.  Our policy is to only enter into
derivative transactions when we have an identifiable exposure to risk, thus not
creating additional foreign currency exchange rate risk.  At February 26,
2005, a 10% adverse movement in exchange rates would result in a $2.0 million
loss on Euro and Japanese Yen forward contracts with a notional amount of $19.9
million.

|Item
      4. | Controls and
      Procedures.
|------------- | ------------------------------

(a)  Our management has evaluated,
under the supervision and with the participation of, the chief executive officer
and chief financial officer, the effectiveness of the our disclosure controls
and procedures as of the end of the period covered by this report pursuant to
Rule 13a-15(b) under the Securities Exchange Act of 1934.  Based on that
evaluation, the chief executive officer and chief financial officer have
concluded that our disclosure controls and procedures are effective in ensuring
that information required to be disclosed is recorded, processed, summarized and
reported in a timely manner, and that information was accumulated and
communicated to our management, including the chief executive officer and chief
financial officer, to allow timely decisions regarding required
disclosure.

(b) There has been no change in our
internal control over financial reporting that occurred during the last fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.

49



Part
II.  OTHER INFORMATION

|Item 1. | Legal
    Proceedings.
|------- | ----------------------

Tektronix is
involved in various litigation matters, claims and investigations that occur in
the normal course of business, including but not limited to patent, commercial,
personnel and environmental matters.  While the results of such matters
cannot be predicted with certainty, management believes that their final outcome
will not have a material adverse impact on our business, results of operations,
financial condition or cash flows.

|Item 2. | Unregistered Sales of Equity
      Securities and Use of Proceeds.
|------- | ------------------------------------------------------------------

Purchases of
Tektronix common stock during the third quarter ended February 26, 2005 were as
follows:

|Fiscal Period                                |  | TotalNumberof Shares |         | AveragePricePaid PerShare |   | TotalAmountPaid |  | Total Numberof
      SharesPurchased asPart of PubliclyAnnounced Plansor
      Programs |            | Maximum
      DollarValue of Sharesthat MayYet
    BePurchased | 
|-------------------------------------------- |  | -------------------- | ------- | ------------------------- | - | --------------- |  | --------------------------------------------------------------------------------------- | ---------- | -------------------------------------------------------------- | 
|                                             |  |                      |         |                           |   |                 |  |                                                                                         |            |                                                                | 
|November 28, 2004 to December 25,
      2004 |  |                      |        |                           | $ |                |  | $                                                                                       |           |                                                                | 
|December 26, 2004 to January 22,
      2005  |  |                      | 192,900 |                           |   | 28.83           |  |                                                                                         | 5,561,774  |                                                                | 
|January 23, 2005 to February 26,
      2005  |  |                      | 485,100 |                           |   | 28.67           |  |                                                                                         | 13,907,832 |                                                                | 
|                                             |  |                      |         |                           |   |                 |  |                                                                                         |            |                                                                | 
|Total                                        |  |                      | 678,000 |                           | $ | 28.72           |  | $                                                                                       | 19,469,606 |                                                                | 
|                                             |  |                      |         |                           |   |                 |  |                                                                                         |            |                                                                | 

50



|Item 6. | Exhibits.   |  |                                                  
|------- | ----------- |  | -------------------------------------------------
|        |             |  |                                                  
|(a)     | Exhibit No. |  | Exhibit
      Description                        
|        |             |  |                                                  
|        | (31.1)      |  | 302 Certification, Chief Executive
      Officer.
|        | (31.2)      |  | 302 Certification, Chief Financial
      Officer.
|        | (32.1)      |  | 906 Certification, Chief Executive
      Officer.
|        | (32.2)      |  | 906 Certification, Chief Financial
      Officer.

51



SIGNATURE

Pursuant to
the requirements 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.

|April 6, 2005 | TEKTRONIX,
      INC.
|------------- | ---------------------
|              |                      
|              | By                   
|              |                      
|              |                      

52



EXHIBIT INDEX

|Exhibit No. |  | Exhibit Description                              
|----------- |  | -------------------------------------------------
|            |  |                                                  
|(31.1)      |  | 302 Certification, Chief Executive
      Officer.
|            |  |                                                  
|(31.2)      |  | 302 Certification, Chief Financial
      Officer.
|            |  |                                                  
|(32.1)      |  | 906 Certification, Chief Executive
      Officer.
|            |  |                                                  
|(32.2)      |  | 906 Certification, Chief Financial
      Officer.