##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 1, 2007
 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 001-04837
 TEKTRONIX, INC.
  OREGON
    
    93-0343990(State or Other Jurisdiction of 
Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)14200 SW KARL BRAUN DRIVE 
BEAVERTON, OREGON
(Address of Principal Executive Offices)
    
    97077
(Zip Code)
 (503) 627-7111
 NOT APPLICABLE
 þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
 o þ




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##### 



TEKTRONIX, INC. AND SUBSIDIARIES
 INDEX
 PAGE NO.FORWARD-LOOKING STATEMENTS
    
    1PART I. FINANCIAL INFORMATIONItem 1.
    
    Financial Statements.Condensed
Consolidated Statements of Operations (Unaudited) for the
Fiscal Quarter ended September 1, 2007and the Fiscal Quarter ended August 26, 2006
    
    2Condensed
Consolidated Balance Sheets (Unaudited)  at September 1, 2007 and May 26, 2007
    
    3Condensed
Consolidated Statements of Cash Flows (Unaudited)   for the
Fiscal Quarter ended September 1, 2007and the Fiscal Quarter ended August 26, 2006
    
    4Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    5Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
    
    21Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk.
    
    31Item 4.
    
    Controls and Procedures.
    
    32PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings.
    
    32Item 1A.
    
    Risk Factors.
    
    32Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds.
    
    36Item 4.
    
    Submission of Matters to a Vote of Security Holders.
    
    37Item 6.
    
    Exhibits.
    
    37SIGNATURES
    
    38EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2




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Forward-Looking Statements
     1




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Part I. FINANCIAL INFORMATION
 
 Item 1.    Financial Statements.
 Tektronix, Inc.
 
 Condensed Consolidated Statements of Operations (Unaudited)
 Fiscal quarter ended(In thousands, except per share amounts)
    
    Sept. 1, 2007
    
    
    Aug. 26, 2006Net sales
    
    $
    291,494
    
    
    $
    268,113Cost of sales
    
    
    124,559
    
    
    
    104,763Gross profit
    
    
    166,935
    
    
    
    163,350Research and development expenses
    
    
    49,163
    
    
    
    50,869Selling, general and administrative expenses
    
    
    86,518
    
    
    
    79,873Business realignment costs
    
    
    1,057
    
    
    
    2,596Acquisition related costs and amortization
    
    
    1,720
    
    
    
    1,471Loss on disposition of assets, net
    
    
    3
    
    
    
    554Operating income
    
    
    28,474
    
    
    
    27,987Interest income
    
    
    5,533
    
    
    
    4,670Interest expense
    
    
    (1,415
    )
    
    
    (99
    )Other non-operating expense, net
    
    
    (1,102
    )
    
    
    (1,011
    )Earnings before taxes
    
    
    31,490
    
    
    
    31,547Income tax expense
    
    
    11,434
    
    
    
    11,434Net earnings from continuing operations
    
    
    20,056
    
    
    
    20,113Gain from discontinued operations, net of income taxes
    
    
    20
    
    
    
    7Net earnings
    
    $
    20,076
    
    
    $
    20,120Earnings per share:Continuing operations  basic
    
    $
    0.27
    
    
    $
    0.25Continuing operations  diluted
    
    $
    0.26
    
    
    $
    0.24Net earnings  basic
    
    $
    0.27
    
    
    $
    0.25Net earnings  diluted
    
    $
    0.26
    
    
    $
    0.24Weighted average shares outstanding:Basic
    
    
    75,237
    
    
    
    82,074Diluted
    
    
    77,078
    
    
    
    83,542Cash dividends declared per share
    
    $
    0.06
    
    
    $
    0.06
  2




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##### Table of Contents



Tektronix, Inc.
 
 Condensed Consolidated Balance Sheets (Unaudited)
 (In thousands)
    
    Sept. 1, 2007
    
    
    May 26, 2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    453,986
    
    
    $
    95,887Short-term marketable investments
    
    
    26,903
    
    
    
    87,873Trade accounts receivable, net of allowance for
doubtful accounts of $3,243 and $3,380, respectively
    
    
    156,261
    
    
    
    188,070Inventories
    
    
    166,716
    
    
    
    176,267Other current assets
    
    
    69,011
    
    
    
    71,743Total current assets
    
    
    872,877
    
    
    
    619,840Property, plant and equipment, net
    
    
    128,955
    
    
    
    129,914Long-term marketable investments
    
    
    91,583
    
    
    
    174,307Deferred tax assets
    
    
    43,818
    
    
    
    21,464Goodwill, net
    
    
    329,045
    
    
    
    326,468Pension asset
    
    
    34,050
    
    
    
    32,115Other long-term assets
    
    
    113,362
    
    
    
    105,190Total assets
    
    $
    1,613,690
    
    
    $
    1,409,298LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued liabilities
    
    $
    91,960
    
    
    $
    134,349Accrued compensation
    
    
    61,560
    
    
    
    75,761Deferred revenue
    
    
    88,203
    
    
    
    89,340Total current liabilities
    
    
    241,723
    
    
    
    299,450Convertible notes
    
    
    345,000
    
    
    
    Pension and postretirement benefit liabilities
    
    
    71,043
    
    
    
    70,103Long-term liabilities
    
    
    70,977
    
    
    
    49,899Shareholders equity:Common stock, no par value (authorized 200,000 shares;
issued and outstanding 75,062 and 78,488 shares
at September 1, 2007 and May 26, 2007, respectively)
    
    
    546,415
    
    
    
    539,799Retained earnings
    
    
    426,382
    
    
    
    545,399Accumulated other comprehensive loss
    
    
    (87,850
    )
    
    
    (95,352
    )Total shareholders equity
    
    
    884,947
    
    
    
    989,846Total liabilities and shareholders equity
    
    $
    1,613,690
    
    
    $
    1,409,298
  3




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Tektronix, Inc.
 
 Condensed Consolidated Statements of Cash Flows (Unaudited)
 Fiscal quarter ended(In thousands)
    
    Sept. 1, 2007
    
    
    Aug. 26, 2006CASH FLOWS FROM OPERATING ACTIVITIESNet earnings
    
    $
    20,076
    
    
    $
    20,120Adjustments to reconcile net earnings to net cash provided by
operating activities:Depreciation and amortization expense
    
    
    7,363
    
    
    
    7,297Amortization of acquisition related intangible assets
    
    
    7,181
    
    
    
    5,947Share-based compensation expense
    
    
    7,323
    
    
    
    4,201Net loss on the disposition of assets
    
    
    3
    
    
    
    554Gain from discontinued operations
    
    
    (20
    )
    
    
    (7
    )Deferred income tax expense (benefit)
    
    
    3,270
    
    
    
    (2,518
    )Changes in operating assets and liabilities:Trade accounts receivable, net
    
    
    31,569
    
    
    
    4,165Inventories
    
    
    9,389
    
    
    
    (8,587
    )Other current assets
    
    
    2,415
    
    
    
    861Accounts payable and accrued liabilities
    
    
    (33,484
    )
    
    
    9,189Accrued compensation
    
    
    (14,201
    )
    
    
    (6,544
    )Deferred revenue
    
    
    (867
    )
    
    
    5,738Other long-term assets and liabilities, net
    
    
    5,768
    
    
    
    (1,790
    )Net cash provided by continuing operating activities
    
    
    45,785
    
    
    
    38,626Net cash used in discontinued operating activities
    
    
    (20
    )
    
    
    (9
    )Net cash provided by operating activities
    
    
    45,765
    
    
    
    38,617CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of property, plant and equipment
    
    
    (4,668
    )
    
    
    (6,124
    )Proceeds from the disposition of property and equipment
    
    
    54
    
    
    
    30Proceeds from maturities and sales of marketable investments
    
    
    461,538
    
    
    
    40,477Purchases of short-term and long-term marketable investments
    
    
    (319,716
    )
    
    
    (48,343
    )Net cash provided by (used in) investing activities
    
    
    137,208
    
    
    
    (13,960
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issuance of convertible notes
    
    
    345,000
    
    
    
    Purchase of convertible note hedges in connection with convertible notes
    
    
    (74,520
    )
    
    
    Proceeds from sale of warrants in connection with convertible notes
    
    
    43,987
    
    
    
    Payment of convertible notes issuance costs
    
    
    (8,930
    )
    
    
    Proceeds from employee stock plans
    
    
    33,347
    
    
    
    4,501Repurchase of common stock
    
    
    (164,015
    )
    
    
    (39,722
    )Dividends paid
    
    
    (4,542
    )
    
    
    (4,980
    )Tax benefit of share-based compensation
    
    
    3,961
    
    
    
    91Net cash provided by (used in) financing activities
    
    
    174,288
    
    
    
    (40,110
    )Effect of exchange rate changes on cash
    
    
    838
    
    
    
    226Net increase (decrease) in cash and cash equivalents
    
    
    358,099
    
    
    
    (15,227
    )Cash and cash equivalents at beginning of period
    
    
    95,887
    
    
    
    215,587Cash and cash equivalents at end of period
    
    $
    453,986
    
    
    $
    200,360
  4




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Tektronix, Inc.
 
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 1. The Company
    2. Financial Statement Presentation
    5




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3. Recent Accounting Pronouncements
    4. Earnings Per Share
   Fiscal quarter ended(In thousands, except per share amounts)
    
    Sept. 1, 2007
    
    
    Aug. 26, 2006Net earnings
    
    $
    20,076
    
    
    $
    20,120Weighted average shares used for
basic earnings per share
    
    
    75,237
    
    
    
    82,074Incremental dilutive shares
    
    
    1,841
    
    
    
    1,468Weighted average shares used for
diluted earnings per share
    
    
    77,078
    
    
    
    83,542Earnings per share:Net earnings  basic
    
    $
    0.27
    
    
    $
    0.25Net earnings  diluted
    
    $
    0.26
    
    
    $
    0.24
   6




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5. Share-Based Compensation
   Fiscal quarter ended(In thousands)
    
    Sept. 1, 2007
    
    
    Aug. 26, 2006Cost of sales
    
    $
    932
    
    
    $
    Research and development expenses
    
    
    1,889
    
    
    
    1,228Selling, general and administrative expenses
    
    
    4,501
    
    
    
    2,973Total share-based compensation expense
    
    $
    7,322
    
    
    $
    4,201
     7




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6. Acquisitions
      (In years)WeightedAverage


    
    
    
    
    
    Accumulated(In thousands)
    
    Useful Life


    
    Cost
    
    
    Amortization
    
    
    NetDeveloped technologies
    
    
    4.8
    

    
    $
    90,455
    
    
    $
    (54,575
    )
    
    $
    35,880Customer relationships
    
    
    5.0
    

    
    
    25,998
    
    
    
    (14,528
    )
    
    
    11,470Covenants not to compete
    
    
    4.1
    

    
    
    1,874
    
    
    
    (1,018
    )
    
    
    856Patents
    
    
    5.0
    

    
    
    2,943
    
    
    
    (1,113
    )
    
    
    1,830Tradenames
    
    Not amortized

    
    
    11,617
    
    
    
    
    
    
    
    11,617Total intangible assets purchased
    
    
    
    

    
    $
    132,887
    
    
    $
    (71,234
    )
    
    $
    61,653
  Fiscal quarter ended(In thousands)
    
    Sept. 1, 2007
    
    
    Aug. 26, 2006Cost of sales
    
    $
    5,582
    
    
    $
    4,663Acquisition related costs and amortization
    
    
    1,599
    
    
    
    1,284Total
    
    $
    7,181
    
    
    $
    5,947
 8




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AcquisitionCost of
    
    
    Related Costs(In thousands)
    
    Sales
    
    
    and Amortization
    
    
    TotalFiscal Year2008
    
    $
    17,509
    
    
    $
    6,621
    
    
    $
    24,1302009
    
    
    16,597
    
    
    
    5,525
    
    
    
    22,1222010
    
    
    6,090
    
    
    
    2,671
    
    
    
    8,7612011
    
    
    468
    
    
    
    841
    
    
    
    1,3092012
    
    
    49
    
    
    
    580
    
    
    
    6292013
    
    
    
    
    
    
    266
    
    
    
    266Total
    
    $
    40,713
    
    
    $
    16,504
    
    
    $
    57,217
 7. Business Realignment Costs
    9




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##### Table of Contents



CostBalance
    
    
    Incurred
    
    
    
    
    
    
    
    
    
    
    BalanceMay 26,
    
    
    and Other
    
    
    Cash
    
    
    Non-cash
    
    
    Sept. 1,(In thousands)
    
    2007
    
    
    Adjustments
    
    
    Payments
    
    
    Adjustments
    
    
    20072008 Actions:Employee severance and
related benefits
    
    $
    
    
    
    $
    1,412
    
    
    $
    (649
    )
    
    $
    (19
    )
    
    $
    744Contractual obligations
    
    
    
    
    
    
    16
    
    
    
    (16
    )
    
    
    
    
    
    
    Accumulated currency
translation loss, net
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    2
    
    
    
    Total
    
    
    
    
    
    
    1,426
    
    
    
    (665
    )
    
    
    (17
    )
    
    
    7442007 Actions:Employee severance and
related benefits
    
    
    6,286
    
    
    
    (342
    )
    
    
    (2,239
    )
    
    
    4
    
    
    
    3,709Total
    
    
    6,286
    
    
    
    (342
    )
    
    
    (2,239
    )
    
    
    4
    
    
    
    3,7092006 Actions:Employee severance and
related benefits
    
    
    969
    
    
    
    (20
    )
    
    
    (427
    )
    
    
    
    
    
    
    522Total
    
    
    969
    
    
    
    (20
    )
    
    
    (427
    )
    
    
    
    
    
    
    5222004 Actions:Employee severance and
related benefits
    
    
    245
    
    
    
    (7
    )
    
    
    (80
    )
    
    
    
    
    
    
    158Total
    
    
    245
    
    
    
    (7
    )
    
    
    (80
    )
    
    
    
    
    
    
    158Total of all actions
    
    $
    7,500
    
    
    $
    1,057
    
    
    $
    (3,411
    )
    
    $
    (13
    )
    
    $
    5,133
 10




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##### Table of Contents



8. Marketable Investments
    Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Market(In thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueCorporate notes and bonds
    
    $
    22,774
    
    
    $
    
    
    
    $
    (109
    )
    
    $
    22,665U.S. Agencies
    
    
    4,131
    
    
    
    
    
    
    
    (2
    )
    
    
    4,129Asset backed securities
    
    
    69
    
    
    
    
    
    
    
    
    
    
    
    69U.S. Treasuries
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    37Mortgage backed securities
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3Short-term marketable investments
    
    $
    27,014
    
    
    $
    
    
    
    $
    (111
    )
    
    $
    26,903
  Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Market(In thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueAsset backed securities
    
    $
    40,539
    
    
    $
    38
    
    
    $
    (296
    )
    
    $
    40,281Mortgage backed securities
    
    
    24,068
    
    
    
    
    
    
    
    (651
    )
    
    
    23,417Corporate notes and bonds
    
    
    17,563
    
    
    
    22
    
    
    
    (251
    )
    
    
    17,334U.S. Agencies
    
    
    7,042
    
    
    
    
    
    
    
    (105
    )
    
    
    6,937U.S. Treasuries
    
    
    3,655
    
    
    
    
    
    
    
    (41
    )
    
    
    3,614Long-term marketable investments
    
    $
    92,867
    
    
    $
    60
    
    
    $
    (1,344
    )
    
    $
    91,583
  Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Market(In thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueMunicipal bonds
    
    $
    72,661
    
    
    $
    
    
    
    $
    (16
    )
    
    $
    72,645Certificates of deposit
    
    
    5,251
    
    
    
    1
    
    
    
    
    
    
    
    5,252Corporate notes and bonds
    
    
    5,210
    
    
    
    
    
    
    
    (52
    )
    
    
    5,158U.S. Agencies
    
    
    4,109
    
    
    
    
    
    
    
    (22
    )
    
    
    4,087Asset backed securities
    
    
    653
    
    
    
    
    
    
    
    
    
    
    
    653Mortgage backed securities
    
    
    74
    
    
    
    
    
    
    
    
    
    
    
    74U.S. Treasuries
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    4Short-term marketable investments
    
    $
    87,962
    
    
    $
    1
    
    
    $
    (90
    )
    
    $
    87,873
 11




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Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Market(In thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueMunicipal bonds
    
    $
    80,483
    
    
    $
    23
    
    
    $
    (242
    )
    
    $
    80,264Asset backed securities
    
    
    45,378
    
    
    
    45
    
    
    
    (432
    )
    
    
    44,991Mortgage backed securities
    
    
    26,172
    
    
    
    
    
    
    
    (761
    )
    
    
    25,411Corporate notes and bonds
    
    
    13,545
    
    
    
    
    
    
    
    (365
    )
    
    
    13,180U.S. Agencies
    
    
    7,049
    
    
    
    
    
    
    
    (156
    )
    
    
    6,893U.S. Treasuries
    
    
    3,656
    
    
    
    
    
    
    
    (88
    )
    
    
    3,568Long-term marketable investments
    
    $
    176,283
    
    
    $
    68
    
    
    $
    (2,044
    )
    
    $
    174,307
  (In thousands)
    
    Amortized Cost BasisAfter 1 year through 5 years
    
    $
    68,799Mortgage backed securities
    
    
    24,068Total
    
    $
    92,867
   12 months or more
    
    
    Less than 12 months
    
    
    TotalGross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossEstimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealized(In thousands)
    
    Market Value
    
    
    Losses
    
    
    Market Value
    
    
    Losses
    
    
    Market Value
    
    
    LossesAsset backed securities
    
    $
    32,927
    
    
    $
    (288
    )
    
    $
    3,513
    
    
    $
    (8
    )
    
    $
    36,440
    
    
    $
    (296
    )Mortgage backed securities
    
    
    21,419
    
    
    
    (649
    )
    
    
    611
    
    
    
    (2
    )
    
    
    22,030
    
    
    
    (651
    )Corporate notes and bonds
    
    
    18,317
    
    
    
    (308
    )
    
    
    17,467
    
    
    
    (51
    )
    
    
    35,784
    
    
    
    (359
    )U.S. Agencies
    
    
    11,066
    
    
    
    (108
    )
    
    
    
    
    
    
    
    
    
    
    11,066
    
    
    
    (108
    )U.S. Treasuries
    
    
    3,651
    
    
    
    (41
    )
    
    
    
    
    
    
    
    
    
    
    3,651
    
    
    
    (41
    )Total
    
    $
    87,380
    
    
    $
    (1,394
    )
    
    $
    21,591
    
    
    $
    (61
    )
    
    $
    108,971
    
    
    $
    (1,455
    )
 12




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##### Table of Contents



9. Inventories
   (In thousands)
    
    Sept. 1, 2007
    
    
    May 26, 2007Materials
    
    $
    51,361
    
    
    $
    58,312Work in process
    
    
    21,559
    
    
    
    23,957Finished goods
    
    
    93,796
    
    
    
    93,998Inventories
    
    $
    166,716
    
    
    $
    176,267
 10. Other Current Assets
  (In thousands)
    
    Sept. 1, 2007
    
    
    May 26, 2007Current deferred tax assets
    
    $
    37,636
    
    
    $
    37,953Prepaid expenses
    
    
    19,255
    
    
    
    17,322Income taxes receivable
    
    
    2,740
    
    
    
    5,160Other receivables
    
    
    7,777
    
    
    
    9,555Notes receivable
    
    
    1,152
    
    
    
    1,151Other current assets
    
    
    451
    
    
    
    602Other current assets
    
    $
    69,011
    
    
    $
    71,743
 11. Property, Plant and Equipment, Net
  (In thousands)
    
    Sept. 1, 2007
    
    
    May 26, 2007Land
    
    $
    698
    
    
    $
    698Buildings
    
    
    140,832
    
    
    
    140,528Machinery and equipment
    
    
    272,007
    
    
    
    266,595Accumulated depreciation and amortization
    
    
    (284,582
    )
    
    
    (277,907
    )Property, plant and equipment, net
    
    $
    128,955
    
    
    $
    129,914
  12. Goodwill, Net
   Balance at May 26, 2007
    
    $
    326,468Currency translation
    
    
    2,577Balance at September 1, 2007
    
    $
    329,045
 13




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##### Table of Contents



13. Other Long-Term Assets
  (In thousands)
    
    Sept. 1, 2007
    
    
    May 26, 2007Intangibles, net
    
    $
    62,902
    
    
    $
    70,253Notes, contracts and leases
    
    
    19,023
    
    
    
    18,873Deferred debt issuance costs, net
    
    
    9,131
    
    
    
    Corporate equity securities
    
    
    941
    
    
    
    1,139Other long-term assets
    
    
    21,365
    
    
    
    14,925Other long-term assets
    
    $
    113,362
    
    
    $
    105,190
     14. Accounts Payable and Accrued Liabilities
  (In thousands)
    
    Sept. 1, 2007
    
    
    May 26, 2007Trade accounts payable
    
    $
    29,625
    
    
    $
    38,038Other accounts payable
    
    
    27,546
    
    
    
    45,381Accounts payable
    
    
    57,171
    
    
    
    83,419Current income taxes payable
    
    
    8,834
    
    
    
    24,664Contingent liabilities (Note 18)
    
    
    7,953
    
    
    
    8,105Product warranty accrual (Note 21)
    
    
    8,096
    
    
    
    7,243Accrued expenses and other liabilities
    
    
    9,906
    
    
    
    10,918Accrued liabilities
    
    
    34,789
    
    
    
    50,930Accounts payable and accrued liabilities
    
    $
    91,960
    
    
    $
    134,349
  14




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15. Convertible Notes
      Interest
    
    
    Principal(In thousands)
    
    Payments
    
    
    Payments
    
    
    TotalFiscal Year2008
    
    $
    3,053
    
    
    $
    
    
    
    $
    3,0532009
    
    
    5,606
    
    
    
    
    
    
    
    5,6062010
    
    
    5,606
    
    
    
    
    
    
    
    5,6062011
    
    
    5,606
    
    
    
    
    
    
    
    5,6062012
    
    
    5,606
    
    
    
    
    
    
    
    5,6062013
    
    
    2,803
    
    
    
    345,000
    
    
    
    347,803Total
    
    $
    28,280
    
    
    $
    345,000
    
    
    $
    373,280
    15




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##### Table of Contents



16. Long-Term Liabilities
  (In thousands)
    
    Sept. 1, 2007
    
    
    May 26, 2007Long-term income taxes payable
    
    $
    20,305
    
    
    $
    Deferred compensation
    
    
    18,784
    
    
    
    18,617Long-term deferred revenue
    
    
    14,881
    
    
    
    14,611Other long-term liabilities
    
    
    17,007
    
    
    
    16,671Long-term liabilities
    
    $
    70,977
    
    
    $
    49,899
  17. Pension and Other Postretirement Benefits
  Pension Benefits
    
    
    Other Postretirement BenefitsFiscal quarter ended
    
    
    Fiscal quarter endedSept. 1,
    
    
    Aug. 26,
    
    
    Sept. 1,
    
    
    Aug. 26,(In thousands)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Service cost
    
    $
    1,844
    
    
    $
    1,936
    
    
    $
    17
    
    
    $
    20Interest cost
    
    
    9,577
    
    
    
    10,045
    
    
    
    217
    
    
    
    224Expected return on
plan assets
    
    
    (12,428
    )
    
    
    (12,638
    )
    
    
    
    
    
    
    Amortization of transition
asset
    
    
    10
    
    
    
    40
    
    
    
    
    
    
    
    Amortization of prior
service cost
    
    
    (557
    )
    
    
    (546
    )
    
    
    
    
    
    
    Amortization of net loss
    
    
    5,178
    
    
    
    5,155
    
    
    
    11
    
    
    
    Net periodic benefit costs
    
    $
    3,624
    
    
    $
    3,992
    
    
    $
    245
    
    
    $
    244
 16




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18. Contingencies
       17




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##### Table of Contents



19. Shareholders Equity
  AccumulatedOtherCommon Stock
    
    
    Retained
    
    
    Comprehensive(In thousands)
    
    Shares
    
    
    Amount
    
    
    Earnings
    
    
    Loss
    
    
    TotalBalance at May 26, 2007
    
    
    78,488
    
    
    $
    539,799
    
    
    $
    545,399
    
    
    $
    (95,352
    )
    
    $
    989,846FIN No. 48 adoption
    
    
    
    
    
    
    
    
    
    
    (3,723
    )
    
    
    
    
    
    
    (3,723
    )Net earnings
    
    
    
    
    
    
    
    
    
    
    20,076
    
    
    
    
    
    
    
    20,076Benefit plan obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,770
    
    
    
    2,770Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,432
    
    
    
    4,432Unrealized holding gain on available-
for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300
    
    
    
    300Dividends paid
    
    
    
    
    
    
    
    
    
    
    (4,542
    )
    
    
    
    
    
    
    (4,542
    )Purchase of convertible note hedges
in connection with convertible
notes issuance, net of income
taxes (Note 15)
    
    
    
    
    
    
    (48,438
    )
    
    
    
    
    
    
    
    
    
    
    (48,438
    )Proceeds from sale of warrants
in connection with convertible notes
issuance (Note 15)
    
    
    
    
    
    
    43,987
    
    
    
    
    
    
    
    
    
    
    
    43,987Shares issued to employees, net
of forfeitures
    
    
    1,397
    
    
    
    33,132
    
    
    
    
    
    
    
    
    
    
    
    33,132Tax benefit of share-based
compensation
    
    
    
    
    
    
    3,961
    
    
    
    
    
    
    
    
    
    
    
    3,961Amortization of share-based
compensation
    
    
    
    
    
    
    7,161
    
    
    
    
    
    
    
    
    
    
    
    7,161Shares repurchased in open
market
    
    
    (4,823
    )
    
    
    (33,187
    )
    
    
    (130,828
    )
    
    
    
    
    
    
    (164,015
    )Balance at September 1, 2007
    
    
    75,062
    
    
    $
    546,415
    
    
    $
    426,382
    
    
    $
    (87,850
    )
    
    $
    884,947
      18




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##### Table of Contents



Fiscal quarter ended(In thousands)
    
    Sept. 1, 2007
    
    
    Aug. 26, 2006Net earnings
    
    $
    20,076
    
    
    $
    20,120Other comprehensive income (loss):Additional minimum pension liability
    
    
    *
    
    
    
    (278
    )Benefit plan obligations
    
    
    2,770
    
    
    
    *Foreign currency translation adjustment
    
    
    4,432
    
    
    
    (1,536
    )Unrealized holding gain (loss) on available-for-
sale securities
    
    
    300
    
    
    
    (934
    )Total comprehensive income
    
    $
    27,578
    
    
    $
    17,372
   UnrealizedHolding
    
    
    AccumulatedBenefit
    
    
    Foreign
    
    
    Loss, Net on
    
    
    OtherPlan
    
    
    Currency
    
    
    Available-for-
    
    
    Comprehensive(In thousands)
    
    Obligations
    
    
    Translation
    
    
    Sales Securities
    
    
    LossBalance as of May 26, 2007
    
    $
    (134,088
    )
    
    $
    39,895
    
    
    $
    (1,159
    )
    
    $
    (95,352
    )First quarter activity
    
    
    2,770
    
    
    
    4,432
    
    
    
    300
    
    
    
    7,502Balance as of September 1, 2007
    
    $
    (131,318
    )
    
    $
    44,327
    
    
    $
    (859
    )
    
    $
    (87,850
    )
 20. Business Segments
  Fiscal quarter ended(In thousands)
    
    Sept. 1, 2007
    
    
    Aug. 26, 2006Consolidated net sales to external customers by groups of similar products:Instruments Business
    
    $
    225,340
    
    
    $
    198,212Communications Business
    
    
    66,154
    
    
    
    69,901Net sales
    
    $
    291,494
    
    
    $
    268,113Consolidated net sales to external customers by region:The Americas:United States
    
    $
    125,620
    
    
    $
    97,979Other Americas
    
    
    9,736
    
    
    
    6,430Europe
    
    
    66,016
    
    
    
    66,078Pacific
    
    
    54,069
    
    
    
    56,369Japan
    
    
    36,053
    
    
    
    41,257Net sales
    
    $
    291,494
    
    
    $
    268,113
 19




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##### Table of Contents



21. Product Warranty Accrual
   Fiscal quarter ended(In thousands)
    
    Sept. 1, 2007
    
    
    Aug. 26, 2006Balance at beginning of period
    
    $
    7,243
    
    
    $
    5,798Warranty parts and service provided
    
    
    (3,401
    )
    
    
    (2,608
    )Provision for warranty expense
    
    
    4,254
    
    
    
    2,465Balance at end of period
    
    $
    8,096
    
    
    $
    5,655
 22. Income Taxes
     23. Supplemental Cash Flow Information
 Fiscal quarter ended(In thousands)
    
    Sept. 1, 2007
    
    
    Aug. 26, 2006Supplemental disclosure of cash flows:Income taxes paid, net
    
    $
    8,093
    
    
    $
    2,175Interest paid
    
    
    174
    
    
    
    83
 20




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
  Basis of Presentation
  Overview
        21




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Acquisitions
     Business Realignment Costs
    22




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##### Table of Contents



Critical Accounting Estimates
   Income Taxes
   23




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##### Table of Contents



RESULTS OF OPERATIONS
 Fiscal quarter endedSept. 1,
    
    Aug. 26,
    
    %(In thousands, except per share amounts)
    
    2007
    
    2006
    
    ChangeOrders
    
    $
    241,809
    
    
    $
    255,399
    
    
    
    (5
    )%Net sales
    
    
    291,494
    
    
    
    268,113
    
    
    
    9
    %Cost of sales
    
    
    124,559
    
    
    
    104,763
    
    
    
    19
    %Gross profit
    
    
    166,935
    
    
    
    163,350
    
    
    
    2
    %Gross margin
    
    
    57.3
    %
    
    
    60.9
    %Research and development expenses
    
    
    49,163
    
    
    
    50,869
    
    
    
    (3
    )%Selling, general and administrative expenses
    
    
    86,518
    
    
    
    79,873
    
    
    
    8
    %Business realignment costs
    
    
    1,057
    
    
    
    2,596
    
    
    
    (59
    )%Acquisition related costs and amortization
    
    
    1,720
    
    
    
    1,471
    
    
    
    17
    %Loss on disposition of assets, net
    
    
    3
    
    
    
    554
    
    
    
    (99
    )%Operating income
    
    
    28,474
    
    
    
    27,987
    
    
    
    2
    %Interest income
    
    
    5,533
    
    
    
    4,670
    
    
    
    18
    %Interest expense
    
    
    (1,415
    )
    
    
    (99
    )
    
    
    >100
    %Other non-operating expense, net
    
    
    (1,102
    )
    
    
    (1,011
    )
    
    
    9
    %Earnings before taxes
    
    
    31,490
    
    
    
    31,547
    
    
    
    0
    %Income tax expense
    
    
    11,434
    
    
    
    11,434
    
    
    
    0
    %Net earnings from continuing operations
    
    
    20,056
    
    
    
    20,113
    
    
    
    0
    %Gain from discontinued operations, net of income taxes
    
    
    20
    
    
    
    7
    
    
    
    >100
    %Net earnings
    
    $
    20,076
    
    
    $
    20,120
    
    
    
    0
    %Earnings per share:Continuing operations  basic
    
    $
    0.27
    
    
    $
    0.25
    
    
    
    8
    %Continuing operations  diluted
    
    $
    0.26
    
    
    $
    0.24
    
    
    
    8
    %Net earnings  basic
    
    $
    0.27
    
    
    $
    0.25
    
    
    
    8
    %Net earnings  diluted
    
    $
    0.26
    
    
    $
    0.24
    
    
    
    8
    %
 24




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##### Table of Contents



First Quarter of 2008 Compared to the First Quarter of 2007
 Executive Summary
  Orders
  Fiscal quarter endedSept. 1,
    
    
    Aug. 26,
    
    
    %(In thousands)
    
    2007
    
    
    2006
    
    
    ChangeInstruments Business
    
    $
    184,840
    
    
    $
    198,279
    
    
    
    (7
    )%Communications Business
    
    
    56,969
    
    
    
    57,120
    
    
    
    0
    %Total orders
    
    $
    241,809

    
    
    $
    255,399

    
    
    
 (5
    )%
 Instruments Business
  Communications Business
    25




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##### Table of Contents



Orders by Region
  Fiscal quarter endedSept. 1,
    
    
    Aug. 26,
    
    
    %(In thousands)
    
    2007
    
    
    2006
    
    
    ChangeUnited States
    
    $
    99,723
    
    
    $
    96,194
    
    
    
    4
    %International
    
    
    142,086
    
    
    
    159,205
    
    
    
    (11
    )%Total orders
    
    $
    241,809
    
    
    $
    255,399
    
    
    
    (5
    )%
  Net Sales
     Gross Profit and Gross Margin
    26




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##### Table of Contents



Operating Expenses
       Non-Operating Income / Expense
    27




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##### Table of Contents



Income Taxes
  Net Earnings
  Earnings Per Share
  Financial Condition, Liquidity and Capital Resources
 Sources and Uses of Cash
 Cash Flows.
 (In thousands)
    
    Sept. 1, 2007
    
    Aug. 26, 2006Cash provided by (used in):Operating activities
    
    $
    45,765
    
    
    $
    38,617Investing activities
    
    
    137,208
    
    
    
    (13,960
    )Financing activities
    
    
    174,288
    
    
    
    (40,110
    )
 Operating Activities.
    Investing Activities.
  28




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##### Table of Contents



Financing Activities
        Contractual Obligations
    29




---



##### Table of Contents



Working Capital
  (In thousands)
    
    Sept. 1, 2007
    
    
    May 26, 2007Current assets:Cash and cash equivalents
    
    $
    453,986
    
    
    $
    95,887Short-term marketable investments
    
    
    26,903
    
    
    
    87,873Trade accounts receivable, net of allowance for
doubtful accounts of $3,243 and $3,380, respectively
    
    
    156,261
    
    
    
    188,070Inventories
    
    
    166,716
    
    
    
    176,267Other current assets
    
    
    69,011
    
    
    
    71,743Total current assets
    
    
    872,877
    
    
    
    619,840Current liabilities:Accounts payable and accrued liabilities
    
    
    91,960
    
    
    
    134,349Accrued compensation
    
    
    61,560
    
    
    
    75,761Deferred revenue
    
    
    88,203
    
    
    
    89,340Total current liabilities
    
    
    241,723
    
    
    
    299,450Working capital
    
    $
    631,154
    
    
    $
    320,390
    30




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##### Table of Contents



Recent Accounting Pronouncements
    
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  Interest Rate Risk
  Foreign Currency Exchange Rate Risk
  31




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##### Table of Contents



Item 4. Controls and Procedures.
   
 Part II. OTHER INFORMATION
 
 Item 1. Legal Proceedings.
   
 Item 1A. Risk Factors.
  We compete in a cyclical market and a decrease in capital expenditures by our customers could
adversely impact demand for our products.
  Rapid changes in technology require timely introduction of competitive products and any failure to
anticipate such changes and introduce competitive products could adversely affect our results of
operations and financial condition.
  32




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##### Table of Contents



Competition is intense, may further intensify, and could result in the loss of market share,
reduced margins, and increased downward pricing pressure.
  We depend on sole and limited source suppliers to provide various key components, services, and
licenses necessary to meet critical product and delivery schedules, and any inability on the part
of those suppliers to meet our requirements could adversely affect our results of operations.
  33




---



##### Table of Contents



Failure of information technology systems may negatively impact our operating results.
  Cancellations, changes, or delays in the implementation or customer acceptance of our products
could harm our financial results.
   Our network management business and reputation could suffer if we do not prevent security breaches.
  A significant portion of our revenue is from international customers, and, as a result, our
business may be harmed by political and economic conditions in foreign markets and the challenges
associated with operating internationally.
  34




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##### Table of Contents



Failure to maintain and protect our intellectual property and the intellectual property licensed
from others could adversely affect our results of operations, financial condition, and cash flows.
  Failure to comply with environmental regulations could result in suspension of production and could
restrict our ability to expand facilities.
  Our defined benefit pension plans are subject to financial market risks and significant changes in
market interest rates could adversely impact our operating results.
  We face other risk factors.
   35




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##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  CumulativeNumberof Shares
    
    
    Maximum DollarTotal
    
    
    Average
    
    
    
    
    
    
    Purchased as
    
    
    Value of SharesNumber
    
    
    Price
    
    
    Total
    
    
    Part of Publicly
    
    
    that Mayof Shares
    
    
    Paid Per
    
    
    Amount
    
    
    Announced Plans
    
    
    Yet BeFiscal Period
    
    Purchased
    
    
    Share
    
    
    Paid
    
    
    or Programs
    
    
    PurchasedMay 27, 2007 to
June 23, 2007
    
    
    353,900
    
    
    $
    30.65
    
    
    $
    10,848,690
    
    
    
    36,824,179
    
    
    $
    680,017,458June 24, 2007 to
July 28, 2007
    
    
    3,731,200
    
    
    
    34.59
    
    
    
    129,060,450
    
    
    
    40,555,379
    
    
    
    550,957,008July 29, 2007 to
September 1, 2007
    
    
    737,800
    
    
    
    32.67
    
    
    
    24,106,319
    
    
    
    41,293,179
    
    
    $
    526,850,689Total
    
    
    4,822,900
    
    
    $
    34.01
    
    
    $
    164,015,459
   36




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##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders.
   For
    
    WithheldPauline Lo Alker
    
    
    67,614,862
    
    
    
    739,720A. Gary Ames
    
    
    67,629,182
    
    
    
    725,400Gerry B. Cameron
    
    
    67,731,410
    
    
    
    623,172David N. Campbell
    
    
    67,744,199
    
    
    
    610,383Frank C. Gill
    
    
    67,766,198
    
    
    
    588,384Kaj Juul-Pedersen
    
    
    67,716,834
    
    
    
    637,748Robin L. Washington
    
    
    67,736,898
    
    
    
    617,684Richard H. Wills
    
    
    67,620,316
    
    
    
    734,266Cyril J. Yansouni
    
    
    67,751,530
    
    
    
    603,052
  For
    
    Against
    
    Abstain67,678,253
    
    241,936
    
    434,393
 
 Item 6. Exhibits.
 (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.
 37




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##### Table of Contents



SIGNATURES
  October 10, 2007
    
    TEKTRONIX, INC.By
    
    /s/ COLIN L. SLADEColin L. SladeSenior Vice President andChief Financial Officer
 38




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##### Table of Contents



EXHIBIT INDEX
 Exhibits 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.