##### 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 November 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.
  OREGON
(State or Other Jurisdiction of
    
    93-0343990Incorporation 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
 þ o
 o þ




---



##### 



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 November 26, 2005 and the Fiscal quarter ended November 27,
2004
    
    
    2for the Two fiscal quarters ended November 26, 2005 and the Two fiscal quarters ended November 27, 2004Condensed Consolidated Balance Sheets (Unaudited)  at November 26, 2005 and May 28, 2005
    
    
    3Condensed Consolidated Statements of Cash Flows (Unaudited)  for the Two fiscal quarters ended November 26, 2005 and the Two fiscal quarters ended November 27,
2004
    
    
    4Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    5Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
    
    
    19Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk.
    
    
    42Item 4.
    
    Controls and Procedures.
    
    
    42PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings.
    
    
    43Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds.
    
    
    43Item 6.
    
    Exhibits.
    
    
    44SIGNATURES
    
    
    
    
    45EXHIBIT 10.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2




---



##### Table of Contents



Forward-Looking Statements
     1




---



##### Table of Contents



Part I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 
 Condensed Consolidated Statements of Operations (Unaudited)
 
  Fiscal quarter ended
    
    
    Two fiscal quarters ended(In thousands, except per share amounts)
    
    Nov. 26, 2005
    
    
    Nov. 27, 2004
    
    
    Nov. 26, 2005
    
    
    Nov. 27, 2004Net sales
    
    $
    253,396
    
    
    $
    266,828
    
    
    $
    488,456
    
    
    $
    517,293Cost of sales
    
    
    101,171
    
    
    
    106,505
    
    
    
    200,274
    
    
    
    208,451Gross profit
    
    
    152,225
    
    
    
    160,323
    
    
    
    288,182
    
    
    
    308,842Research and development expenses
    
    
    45,673
    
    
    
    41,878
    
    
    
    89,278
    
    
    
    75,457Selling, general and administrative expenses
    
    
    73,103
    
    
    
    76,320
    
    
    
    141,668
    
    
    
    141,386Acquisition related costs and amortization
    
    
    2,095
    
    
    
    34,941
    
    
    
    5,531
    
    
    
    35,728Business realignment costs
    
    
    1,880
    
    
    
    244
    
    
    
    4,361
    
    
    
    2,283Loss (gain) on disposition of assets, net
    
    
    23
    
    
    
    57
    
    
    
    27
    
    
    
    (1,834
    )Operating income
    
    
    29,451
    
    
    
    6,883
    
    
    
    47,317
    
    
    
    55,822Interest income
    
    
    2,888
    
    
    
    3,904
    
    
    
    5,980
    
    
    
    9,366Interest expense
    
    
    (146
    )
    
    
    (335
    )
    
    
    (243
    )
    
    
    (418
    )Other non-operating expense, net
    
    
    (1,993
    )
    
    
    (1,067
    )
    
    
    (2,979
    )
    
    
    (3,291
    )Earnings before taxes
    
    
    30,200
    
    
    
    9,385
    
    
    
    50,075
    
    
    
    61,479Income tax expense
    
    
    10,322
    
    
    
    11,964
    
    
    
    16,029
    
    
    
    27,592Net earnings (loss) from continuing
operations
    
    
    19,878
    
    
    
    (2,579
    )
    
    
    34,046
    
    
    
    33,887Gain (loss) from discontinued operations,
net of income taxes
    
    
    17
    
    
    
    (255
    )
    
    
    (65
    )
    
    
    (313
    )Net earnings (loss)
    
    $
    19,895
    
    
    $
    (2,834
    )
    
    $
    33,981
    
    
    $
    33,574Earnings (loss) per share:Continuing operations  basic
    
    $
    0.24
    
    
    $
    (0.03
    )
    
    $
    0.41
    
    
    $
    0.40Continuing operations  diluted
    
    $
    0.24
    
    
    $
    (0.03
    )
    
    $
    0.40
    
    
    $
    0.39Discontinued operations  basic and
diluted
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Net earnings (loss)  basic
    
    $
    0.24
    
    
    $
    (0.03
    )
    
    $
    0.41
    
    
    $
    0.39Net earnings (loss)  diluted
    
    $
    0.24
    
    
    $
    (0.03
    )
    
    $
    0.40
    
    
    $
    0.39Weighted average shares outstanding:Basic
    
    
    82,833
    
    
    
    87,020
    
    
    
    83,718
    
    
    
    85,401Diluted
    
    
    83,584
    
    
    
    87,020
    
    
    
    84,438
    
    
    
    86,949Cash dividends declared per share
    
    $
    0.06
    
    
    $
    0.06
    
    
    $
    0.12
    
    
    $
    0.10
  2




---



##### Table of Contents



Condensed Consolidated Balance Sheets (Unaudited)
 (In thousands)
    
    Nov. 26, 2005
    
    
    May 28, 2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    136,015
    
    
    $
    131,640Short-term marketable investments
    
    
    96,808
    
    
    
    120,881Trade accounts receivable, net of allowance for
doubtful accounts of $3,274 and $3,406, respectively
    
    
    162,418
    
    
    
    155,332Inventories
    
    
    130,088
    
    
    
    131,096Other current assets
    
    
    74,835
    
    
    
    80,177Total current assets
    
    
    600,164
    
    
    
    619,126Property, plant and equipment, net
    
    
    124,110
    
    
    
    120,546Long-term marketable investments
    
    
    130,681
    
    
    
    226,892Deferred tax assets
    
    
    51,742
    
    
    
    56,560Goodwill, net
    
    
    301,954
    
    
    
    301,934Other long-term assets
    
    
    127,171
    
    
    
    135,285Total assets
    
    $
    1,335,822
    
    
    $
    1,460,343LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued liabilities
    
    $
    116,338
    
    
    $
    115,058Accrued compensation
    
    
    61,484
    
    
    
    78,938Deferred revenue
    
    
    59,319
    
    
    
    57,509Total current liabilities
    
    
    237,141
    
    
    
    251,505Long-term liabilities
    
    
    180,473
    
    
    
    223,015Shareholders equity:Common stock, no par value (authorized 200,000 shares;
issued and outstanding 81,833 and 85,144 shares
at November 26, 2005 and May 28, 2005, respectively)
    
    
    492,896
    
    
    
    501,886Retained earnings
    
    
    591,557
    
    
    
    639,720Accumulated other comprehensive loss
    
    
    (166,245
    )
    
    
    (155,783
    )Total shareholders equity
    
    
    918,208
    
    
    
    985,823Total liabilities and shareholders equity
    
    $
    1,335,822
    
    
    $
    1,460,343
  3




---



##### Table of Contents



Condensed Consolidated Statements of Cash Flows (Unaudited)
 Two fiscal quarters ended(In thousands)
    
    Nov. 26, 2005
    
    
    Nov. 27, 2004CASH FLOWS FROM OPERATING ACTIVITIESNet earnings
    
    $
    33,981
    
    
    $
    33,574Adjustments to reconcile net earnings to net cash provided by
operating activities:Write-off of in-process research and development
    
    
    365
    
    
    
    32,195Amortization of acquisition related intangible assets
    
    
    11,850
    
    
    
    3,926Loss from discontinued operations
    
    
    65
    
    
    
    313Depreciation and amortization expense
    
    
    13,937
    
    
    
    13,878Loss (gain) on disposition of assets, net
    
    
    27
    
    
    
    (1,834
    )Tax benefit of stock option exercises
    
    
    801
    
    
    
    3,285Deferred income tax expense (benefit)
    
    
    6,079
    
    
    
    (2,582
    )Loss on sale of corporate equity securities
    
    
    (90
    )
    
    
    Changes in operating assets and liabilities, net of effects of acquisition:Trade accounts receivable, net
    
    
    (6,567
    )
    
    
    2,283Inventories
    
    
    1,010
    
    
    
    (2,734
    )Other current assets
    
    
    2,065
    
    
    
    866Accounts payable and accrued liabilities
    
    
    656
    
    
    
    6,387Accrued compensation
    
    
    (17,467
    )
    
    
    (19,762
    )Deferred revenue
    
    
    1,735
    
    
    
    2,715Cash funding for defined benefit plans
    
    
    (38,400
    )
    
    
    (46,516
    )Other long-term assets and liabilities, net
    
    
    1,598
    
    
    
    10,631Net cash provided by continuing operating activities
    
    
    11,645
    
    
    
    36,625Net cash used in discontinued operating activities
    
    
    (65
    )
    
    
    Net cash provided by operating activities
    
    
    11,580
    
    
    
    36,625CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of businesses, net of cash acquired
    
    
    (8,422
    )
    
    
    (93,856
    )Acquisition of property, plant and equipment
    
    
    (18,633
    )
    
    
    (14,504
    )Proceeds from the disposition of property and equipment
    
    
    520
    
    
    
    12,593Proceeds from sale of corporate equity securities
    
    
    90
    
    
    
    Proceeds from maturities and sales of marketable investments
    
    
    117,548
    
    
    
    198,657Purchases of short-term and long-term marketable investments
    
    
    
    
    
    
    (50,937
    )Net cash provided by investing activities
    
    
    91,103
    
    
    
    51,953CASH FLOWS FROM FINANCING ACTIVITIESIssuance of short-term debt
    
    
    456
    
    
    
    Repayment of long-term debt
    
    
    (188
    )
    
    
    (228
    )Proceeds from employee stock plans
    
    
    10,379
    
    
    
    14,808Repurchase of common stock
    
    
    (95,979
    )
    
    
    (95,319
    )Dividends paid
    
    
    (10,088
    )
    
    
    (8,771
    )Net cash used in financing activities
    
    
    (95,420
    )
    
    
    (89,510
    )Effect of exchange rate changes on cash
    
    
    (2,888
    )
    
    
    4,483Net increase in cash and cash equivalents
    
    
    4,375
    
    
    
    3,551Cash and cash equivalents at beginning of period
    
    
    131,640
    
    
    
    149,011Cash and cash equivalents at end of period
    
    $
    136,015
    
    
    $
    152,562
  4




---



##### Table of Contents



Notes to Condensed Consolidated Financial Statements (Unaudited)
 1. The Company
  2. Financial Statement Presentation
    Goodwill and Intangible Assets
   5




---



##### Table of Contents



3. Recent Accounting Pronouncements
    6




---



##### Table of Contents



4. Earnings Per Share, Including Pro Forma Effects of Stock-Based Compensation
   Fiscal quarter ended
    
    
    Two fiscal quarters ended(In thousands, except per share amounts)
    
    Nov. 26, 2005
    
    
    Nov. 27, 2004
    
    
    Nov. 26, 2005
    
    
    Nov. 27, 2004Net earnings (loss)
    
    $
    19,895
    
    
    $
    (2,834
    )
    
    $
    33,981
    
    
    $
    33,574Weighted average shares used for
basic earnings per share
    
    
    82,833
    
    
    
    87,020
    
    
    
    83,718
    
    
    
    85,401Incremental dilutive stock options
    
    
    751
    
    
    
    
    
    
    
    720
    
    
    
    1,548Weighted average shares used for
dilutive earnings per share
    
    
    83,584
    
    
    
    87,020
    
    
    
    84,438
    
    
    
    86,949Earnings (loss) per share:Net earnings (loss)  basic
    
    $
    0.24
    
    
    $
    (0.03
    )
    
    $
    0.41
    
    
    $
    0.39Net earnings (loss)  diluted
    
    $
    0.24
    
    
    $
    (0.03
    )
    
    $
    0.40
    
    
    $
    0.39
    7




---



##### Table of Contents



Fiscal quarter ended
    
    
    Two fiscal quarters ended(In thousands, except per share amounts)
    
    Nov. 26, 2005
    
    
    Nov. 27, 2004
    
    
    Nov. 26, 2005
    
    
    Nov. 27, 2004Net earnings (loss) as reported
    
    $
    19,895
    
    
    $
    (2,834
    )
    
    $
    33,981
    
    
    $
    33,574Stock compensation cost included in
net earnings as reported, net of
income taxes
    
    
    609
    
    
    
    456
    
    
    
    1,167
    
    
    
    683Stock compensation cost using the fair
value alternative, net of income taxes
    
    
    (4,904
    )
    
    
    (4,472
    )
    
    
    (9,669
    )
    
    
    (7,877
    )Pro forma net earnings (loss)
    
    $
    15,600
    
    
    $
    (6,850
    )
    
    $
    25,479
    
    
    $
    26,380Earnings (loss) per share:Basic  as reported
    
    $
    0.24
    
    
    $
    (0.03
    )
    
    $
    0.41
    
    
    $
    0.39Basic  pro forma
    
    
    0.19
    
    
    
    (0.08
    )
    
    
    0.30
    
    
    
    0.31Diluted  as reported
    
    $
    0.24
    
    
    $
    (0.03
    )
    
    $
    0.40
    
    
    $
    0.39Diluted  pro forma
    
    
    0.19
    
    
    
    (0.08
    )
    
    
    0.30
    
    
    
    0.30
 SFAS No. 123 Assumptions
  Fiscal quarter ended
    
    Two fiscal quarters endedNov. 26, 2005

    
    Nov. 27, 2004

    
    Nov. 26, 2005

    
    Nov. 27, 2004Expected life in years
    
    
    5.1
    
    
    
    5.1
    
    
    
    5.1
    
    
    
    5.1Risk-free interest rate
    
    
    4.13
    %
    
    
    3.71
    %
    
    
    4.10
    %
    
    
    3.72
    %Volatility
    
    
    31.91
    %
    
    
    33.32
    %
    
    
    31.96
    %
    
    
    33.18
    %Dividend yield
    
    
    0.95
    %
    
    
    0.78
    %
    
    
    0.96
    %
    
    
    0.74
    %
 5. Acquisition of Inet Technologies, Inc.
  8




---



##### Table of Contents



Cash paid
    
    $
    247,561Stock issued
    
    
    247,543Stock options assumed
    
    
    9,658Restricted share rights assumed
    
    
    321Transaction costs
    
    
    5,224Unearned stock-based compensation
    
    
    (3,403
    )Liabilities assumed
    
    
    36,735Total purchase price
    
    $
    543,639
  Cash and cash equivalents
    
    $
    158,821Accounts receivable
    
    
    18,504Inventories
    
    
    18,025Tax benefits from transaction costs
    
    
    1,209Other current assets
    
    
    6,708Property, plant, and equipment
    
    
    10,662Intangible assets
    
    
    121,953Goodwill
    
    
    219,653Other long term assets
    
    
    811In-process research and development
    
    
    32,237Deferred income taxes
    
    
    (44,944
    )Total assets acquired, net of deferred income taxes
    
    $
    543,639
  (in years)WeightedAverage
    
    
    
    
    
    
    Accumulated(In thousands)
    
    Useful Life
    
    
    Cost
    
    
    Amortization
    
    
    NetDeveloped technology
    
    
    4.8
    
    
    $
    87,004
    
    
    $
    (21,577
    )
    
    $
    65,427Customer relationships
    
    
    4.8
    
    
    
    22,597
    
    
    
    (5,622
    )
    
    
    16,975Covenants not to compete
    
    
    4.0
    
    
    
    1,200
    
    
    
    (350
    )
    
    
    850Tradename
    
    Not amortized
    
    
    11,152
    
    
    
    
    
    
    
    11,152Total intangible assets purchased
    
    
    
    
    
    $
    121,953
    
    
    $
    (27,549
    )
    
    $
    94,404
  Fiscal quarter ended
    
    
    Two fiscal quarters ended(In thousands)
    
    Nov. 26, 2005
    
    
    Nov. 27, 2004
    
    
    Nov. 26, 2005
    
    
    Nov. 27, 2004Cost of sales
    
    $
    4,624
    
    
    $
    3,080
    
    
    $
    9,248
    
    
    $
    3,080Acquisition related costs and amortization
    
    
    1,279
    
    
    
    846
    
    
    
    2,558
    
    
    
    846Total
    
    $
    5,903
    
    
    $
    3,926
    
    
    $
    11,806
    
    
    $
    3,926
 9




---



##### Table of Contents



AcquisitionRelated Costs
    
    
    TotalCost of
    
    
    and
    
    
    for the(In thousands)
    
    Sales
    
    
    Amortization
    
    
    Fiscal YearFiscal Year2006
    
    $
    18,495
    
    
    $
    5,117
    
    
    $
    23,6122007
    
    
    18,495
    
    
    
    5,117
    
    
    
    23,6122008
    
    
    16,670
    
    
    
    4,621
    
    
    
    21,2912009
    
    
    15,759
    
    
    
    4,174
    
    
    
    19,9332010
    
    
    5,256
    
    
    
    1,354
    
    
    
    6,610Total
    
    $
    74,675
    
    
    $
    20,383
    
    
    $
    95,058
  Fiscal quarter ended
    
    
    Two fiscal quarters ended(In thousands, except per share amounts)
    
    Nov. 27, 2004
    
    
    Nov. 27, 2004Pro formaSales
    
    
    $     280,530
    
    
    
    $    553,973Net earnings
    
    
    30,700
    
    
    
    64,629Net earnings per share  basic
    
    

$          0.34
    
    
    

$         0.71Net earnings per share  diluted
    
    
    0.34
    
    
    
    0.70
   6. Discontinued Operations
  Fiscal quarter ended
    
    
    Two fiscal quarters ended(In thousands)
    
    Nov. 26, 2005
    
    
    Nov. 27, 2004
    
    
    Nov. 26, 2005
    
    
    Nov. 27, 2004Loss on sale of VideoTele.com
(less applicable income tax benefit
of $1, $8, $1 and $9)
    
    $
    (2
    )
    
    $
    (14
    )
    
    $
    (3
    )
    
    $
    (15
    )Loss on sale of optical parametric
test business (less applicable income
tax benefit of $76, $45, $112 and $85)
    
    
    (140
    )
    
    
    (86
    )
    
    
    (208
    )
    
    
    (158
    )Gain (loss) on sale of Gage (less applicable
income tax benefit (expense) of ($86), $83,
($80) and $75)
    
    
    159
    
    
    
    (155
    )
    
    
    148
    
    
    
    (140
    )Loss on sale of Color Printing and Imaging
Division (less applicable income tax benefit
of $0, $0, $1 and $0)
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    Gain (loss) from discontinued operations,
net of income taxes
    
    $
    17
    
    
    $
    (255
    )
    
    $
    (65
    )
    
    $
    (313
    )
 10




---



##### Table of Contents



7. Business Realignment Costs
    11




---



##### Table of Contents



CostsBalance
    
    
    Incurred
    
    
    
    
    
    
    
    
    
    
    BalanceMay 28,
    
    
    and Other
    
    
    Cash
    
    
    Non-cash
    
    
    Nov. 26,(In thousands)
    
    2005
    
    
    Adjustments
    
    
    Payments
    
    
    Adjustments
    
    
    2005Fiscal Year 2006 Actions:Employee severance and
related benefits
    
    $
    
    
    
    $
    4,192
    
    
    $
    (1,921
    )
    
    $
    
    
    
    $
    2,271Contractual obligations
    
    
    
    
    
    
    111
    
    
    
    (111
    )
    
    
    
    
    
    
    Accumulated currency
translation loss, net
    
    
    
    
    
    
    (36
    )
    
    
    
    
    
    
    36
    
    
    
    Total
    
    
    
    
    
    
    4,267
    
    
    
    (2,032
    )
    
    
    36
    
    
    
    2,271Fiscal Year 2005 Actions:Employee severance and
related benefits
    
    
    568
    
    
    
    
    
    
    
    (528
    )
    
    
    (1
    )
    
    
    39Contractual obligations
    
    
    103
    
    
    
    49
    
    
    
    (123
    )
    
    
    
    
    
    
    29Total
    
    
    671
    
    
    
    49
    
    
    
    (651
    )
    
    
    (1
    )
    
    
    68Fiscal Year 2004 Actions:Employee severance and
related benefits
    
    
    681
    
    
    
    
    
    
    
    (167
    )
    
    
    
    
    
    
    514Total
    
    
    681
    
    
    
    
    
    
    
    (167
    )
    
    
    
    
    
    
    514Fiscal Year 2003 and 2002 Actions:Employee severance and
related benefits
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    3Contractual obligations
    
    
    926
    
    
    
    45
    
    
    
    (245
    )
    
    
    
    
    
    
    726Total
    
    
    928
    
    
    
    45
    
    
    
    (245
    )
    
    
    1
    
    
    
    729Total of all actions
    
    $
    2,280
    
    
    $
    4,361
    
    
    $
    (3,095
    )
    
    $
    36
    
    
    $
    3,582
 8. Inventories
   (In thousands)
    
    Nov. 26, 2005
    
    
    May 28, 2005Materials
    
    $
    5,816
    
    
    $
    7,015Work in process
    
    
    52,392
    
    
    
    63,091Finished goods
    
    
    71,880
    
    
    
    60,990Inventories
    
    $
    130,088
    
    
    $
    131,096
 12




---



##### Table of Contents



9. Other Current Assets
  (In thousands)
    
    Nov. 26, 2005
    
    
    May 28, 2005Current deferred tax asset
    
    $
    46,446
    
    
    $
    49,537Prepaid expenses
    
    
    16,376
    
    
    
    12,877Other receivables
    
    
    8,127
    
    
    
    7,401Income taxes receivable
    
    
    3,460
    
    
    
    9,928Notes receivable
    
    
    3
    
    
    
    18Other current assets
    
    
    423
    
    
    
    416Other current assets
    
    $
    74,835
    
    
    $
    80,177
 10. Property, Plant and Equipment, Net
  (In thousands)
    
    Nov. 26, 2005
    
    
    May 28, 2005Land
    
    $
    1,086
    
    
    $
    1,086Buildings
    
    
    131,412
    
    
    
    129,983Machinery and equipment
    
    
    252,240
    
    
    
    246,032Accumulated depreciation and amortization
    
    
    (260,628
    )
    
    
    (256,555
    )Property, plant and equipment, net
    
    $
    124,110
    
    
    $
    120,546
 11. Goodwill, Net
   Balance at May 28, 2005
    
    $
    301,934Inet purchase price adjustment
    
    
    (1,230
    )Other acquisitions
    
    
    7,342Currency translation
    
    
    (6,092
    )Balance at November 26, 2005
    
    $
    301,954
 12. Other Long-Term Assets
  (In thousands)
    
    Nov. 26, 2005
    
    
    May 28, 2005Other intangibles, net
    
    $
    99,436
    
    
    $
    107,652Notes, contracts and leases
    
    
    13,730
    
    
    
    12,377Corporate equity securities
    
    
    7,937
    
    
    
    8,285Pension asset
    
    
    817
    
    
    
    868Other assets
    
    
    5,251
    
    
    
    6,103Other long-term assets
    
    $
    127,171
    
    
    $
    135,285
 13




---



##### Table of Contents



13. Accounts Payable and Accrued Liabilities
  (In thousands)
    
    Nov. 26, 2005
    
    
    May 28, 2005Trade accounts payable
    
    $
    32,705
    
    
    $
    36,407Other accounts payable
    
    
    39,266
    
    
    
    35,444Accounts payable
    
    
    71,971
    
    
    
    71,851Income taxes payable
    
    
    16,890
    
    
    
    17,348Contingent liabilities (see Note 16)
    
    
    10,073
    
    
    
    10,539Warranty reserve
    
    
    5,657
    
    
    
    6,508Accrued expenses and other liabilities
    
    
    11,747
    
    
    
    8,812Accrued liabilities
    
    
    44,367
    
    
    
    43,207Accounts payable and accrued liabilities
    
    $
    116,338
    
    
    $
    115,058
 14. Long-Term Liabilities
  (In thousands)
    
    Nov. 26, 2005
    
    
    May 28, 2005Pension liability
    
    $
    135,881
    
    
    $
    174,841Deferred compensation
    
    
    17,083
    
    
    
    15,708Postretirement benefits
    
    
    12,479
    
    
    
    12,828Other liabilities
    
    
    15,030
    
    
    
    19,638Long-term liabilities
    
    $
    180,473
    
    
    $
    223,015
  14




---



##### Table of Contents



15. Pension and Other Postretirement Benefits
  Pension Benefits
    
    
    Other Postretirement BenefitsFiscal quarter ended
    
    
    Fiscal quarter ended(In thousands)
    
    Nov. 26, 2005
    
    
    Nov. 27, 2004
    
    
    Nov. 26, 2005
    
    
    Nov. 27, 2004Service cost
    
    $
    1,861
    
    
    $
    1,561
    
    
    $
    24
    
    
    $
    21Interest cost
    
    
    9,630
    
    
    
    9,620
    
    
    
    214
    
    
    
    226Expected return on plan assets
    
    
    (12,732
    )
    
    
    (12,568
    )
    
    
    
    
    
    
    Amortization of transition asset
    
    
    28
    
    
    
    29
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    (567
    )
    
    
    (556
    )
    
    
    
    
    
    
    Amortization of unrecognized actuarial
net loss
    
    
    5,448
    
    
    
    3,340
    
    
    
    
    
    
    
    Net periodic benefit cost
    
    $
    3,668
    
    
    $
    1,426
    
    
    $
    238
    
    
    $
    247
 Pension Benefits
    
    
    Other Postretirement BenefitsTwo fiscal quarters ended
    
    
    Two fiscal quarters ended(In thousands)
    
    Nov. 26, 2005
    
    
    Nov. 27, 2004
    
    
    Nov. 26, 2005
    
    
    Nov. 27, 2004Service cost
    
    $
    3,701
    
    
    $
    3,111
    
    
    $
    48
    
    
    $
    42Interest cost
    
    
    19,247
    
    
    
    19,199
    
    
    
    428
    
    
    
    452Expected return on plan assets
    
    
    (25,450
    )
    
    
    (25,105
    )
    
    
    
    
    
    
    Amortization of transition asset
    
    
    56
    
    
    
    57
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    (1,134
    )
    
    
    (1,113
    )
    
    
    
    
    
    
    Amortization of unrecognized actuarial
net loss
    
    
    10,894
    
    
    
    6,669
    
    
    
    
    
    
    
    Net periodic benefit cost
    
    $
    7,314
    
    
    $
    2,818
    
    
    $
    476
    
    
    $
    494
 16. Contingencies
  Sale of Color Printing and Imaging
   Environmental and Other
  15




---



##### Table of Contents



17. Shareholders Equity
  AccumulatedOtherCommon Stock
    
    
    Retained
    
    
    Comprehensive(In thousands)
    
    Shares
    
    
    Amount
    
    
    Earnings
    
    
    Loss
    
    
    TotalBalance at May 28, 2005
    
    
    85,144
    
    
    $
    501,886
    
    
    $
    639,720
    
    
    $
    (155,783
    )
    
    $
    985,823Net earnings
    
    
    
    
    
    
    
    
    
    
    33,981
    
    
    
    
    
    
    
    33,981Additional minimum pension liability,
net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    998
    
    
    
    998Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,731
    )
    
    
    (10,731
    )Unrealized holding loss on available-for-sale securities, net of income
taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (729
    )
    
    
    (729
    )Dividends paid
    
    
    
    
    
    
    
    
    
    
    (10,088
    )
    
    
    
    
    
    
    (10,088
    )Shares issued to employees, net
of forfeitures
    
    
    593
    
    
    
    10,379
    
    
    
    
    
    
    
    
    
    
    
    10,379Shares issued for acquisition
    
    
    87
    
    
    
    2,075
    
    
    
    
    
    
    
    
    
    
    
    2,075Tax benefit of stock option exercises
    
    
    
    

    
    
    801
    
    
    
    
    
    
    
    
    
    
    
    801Amortization of unearned stock-based compensation
    
    
    
    
    
    
    1,678
    
    
    
    
    
    
    
    
    
    
    
    1,678Shares repurchased in open
market
    
    
    (3,991
    )
    
    
    (23,923
    )
    
    
    (72,056
    )
    
    
    
    
    
    
    (95,979
    )Balance at November 26, 2005
    
    
    81,833
    
    
    $
    492,896
    
    
    $
    591,557
    
    
    $
    (166,245
    )
    
    $
    918,208
   16




---



##### Table of Contents



Fiscal quarter ended
    
    
    Two fiscal quarters ended(In thousands)
    
    Nov. 26, 2005
    
    
    Nov. 27, 2004
    
    
    Nov. 26, 2005
    
    
    Nov. 27, 2004Net earnings (loss)
    
    $
    19,895
    
    
    $
    (2,834
    )
    
    $
    33,981
    
    
    $
    33,574Other comprehensive income (loss):Net change in additional minimum pension
liability, net of income taxes of $385,
($329), $473 and ($178), respectively
    
    
    819
    
    
    
    (749
    )
    
    
    998
    
    
    
    (405
    )Foreign currency translation adjustment
    
    
    (9,054
    )
    
    
    12,853
    
    
    
    (10,731
    )
    
    
    11,922Unrealized
holding gain (loss) on available-for-sale securities, net of income taxes
of ($239), $1,938, ($456) and $1,430,
respectively
    
    
    (390
    )
    
    
    3,030
    
    
    
    (729
    )
    
    
    2,236Total comprehensive income
    
    $
    11,270
    
    
    $
    12,300
    
    
    $
    23,519
    
    
    $
    47,327
  UnrealizedAdditional
    
    
    
    
    
    
    Holding Gain
    
    
    AccumulatedMinimum
    
    
    Foreign
    
    
    (Loss), Net on
    
    
    OtherPension
    
    
    Currency
    
    
    Available-for-
    
    
    Comprehensive(In thousands)
    
    Liability
    
    
    Translation
    
    
    Sales securities
    
    
    LossBalance as of May 28, 2005
    
    $
    (198,437
    )
    
    $
    42,127
    
    
    $
    527
    
    
    $
    (155,783
    )First quarter activity
    
    
    179
    
    
    
    (1,677
    )
    
    
    (339
    )
    
    
    (1,837
    )Second quarter activity
    
    
    819
    
    
    
    (9,054
    )
    
    
    (390
    )
    
    
    (8,625
    )Balance as of November 26, 2005
    
    $
    (197,439
    )
    
    $
    31,396
    
    
    $
    (202
    )
    
    $
    (166,245
    )
 18. Business Segments
  Fiscal quarter ended
    
    
    Two fiscal quarters ended(In thousands)
    
    Nov. 26, 2005
    
    
    Nov. 27, 2004
    
    
    Nov. 26, 2005
    
    
    Nov. 27, 2004Consolidated net sales to external customers by region:The Americas:United States
    
    $
    92,079
    
    
    $
    104,205
    
    
    $
    176,482
    
    
    $
    209,969Other Americas
    
    
    5,446
    
    
    
    7,648
    
    
    
    10,713
    
    
    
    15,670Europe
    
    
    68,582
    
    
    
    56,463
    
    
    
    131,329
    
    
    
    104,013Pacific
    
    
    46,641
    
    
    
    56,573
    
    
    
    91,063
    
    
    
    100,852Japan
    
    
    40,648
    
    
    
    41,939
    
    
    
    78,869
    
    
    
    86,789Net sales
    
    $
    253,396
    
    
    $
    266,828
    
    
    $
    488,456
    
    
    $
    517,293
 17




---



##### Table of Contents



19. Product Warranty Accrual
   Two fiscal quarters ended(In thousands)
    
    Nov. 26, 2005
    
    
    Nov. 27, 2004Balance at beginning of period
    
    $
    6,508
    
    
    $
    8,959Payments made
    
    
    (5,135
    )
    
    
    (4,493
    )Provision for warranty expense
    
    
    4,284
    
    
    
    4,186Balance at end of period
    
    $
    5,657
    
    
    $
    8,652
 20. Supplemental Cash Flow Information
 Two fiscal quarters ended(In thousands)
    
    Nov. 26, 2005
    
    
    Nov. 27, 2004Supplemental disclosure of cash flows:Income taxes paid, net
    
    $
    4,910
    
    
    $
    15,132Interest paid
    
    
    149
    
    
    
    69Non-cash transactions from acquisition of Inet:Common stock issued
    
    $
    
    
    
    $
    247,543Stock options assumed
    
    
    
    
    
    
    9,658Restricted share rights assumed
    
    
    
    
    
    
    321Unearned stock-based compensation
    
    
    
    
    
    
    (3,403
    )Liabilities assumed
    
    
    
    
    
    
    34,630Non-cash assets acquired, net of deferred income taxes
    
    
    
    
    
    
    (382,605
    )Net cash paid
    
    $
    
    
    
    $
    (93,856
    )Non-cash transactions from other acquisitions:Common stock issued
    
    $
    2,075
    
    
    $
    
 18




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Introduction and Overview
          19




---



##### Table of Contents



Acquisition of Inet Technologies, Inc.
    Cash paid
    
    $
    247,561Stock issued
    
    
    247,543Stock options assumed
    
    
    9,658Restricted share rights assumed
    
    
    321Transaction costs
    
    
    5,224Unearned stock-based compensation
    
    
    (3,403
    )Liabilities assumed
    
    
    36,735Total purchase price
    
    $
    543,639
 20




---



##### Table of Contents



Cash and cash equivalents
    
    $
    158,821Accounts receivable
    
    
    18,504Inventories
    
    
    18,025Tax benefit from transaction costs
    
    
    1,209Other current assets
    
    
    6,708Property, plant, and equipment
    
    
    10,662Intangible assets
    
    
    121,953Goodwill
    
    
    219,653Other long term assets
    
    
    811In-process research and development
    
    
    32,237Deferred income taxes
    
    
    (44,944
    )Total assets acquired, net of deferred income taxes
    
    $
    543,639
  (in years)WeightedAverage
    
    
    
    
    
    
    Accumulated(In thousands)
    
    Useful Life
    
    
    Cost
    
    
    Amortization
    
    
    NetDeveloped technology
    
    
    4.8
    
    
    $
    87,004
    
    
    $
    (21,577
    )
    
    $
    65,427Customer relationships
    
    
    4.8
    
    
    
    22,597
    
    
    
    (5,622
    )
    
    
    16,975Covenants not to compete
    
    
    4.0
    
    
    
    1,200
    
    
    
    (350
    )
    
    
    850Tradename
    
    Not amortized
    
    
    11,152
    
    
    
    
    
    
    
    11,152Total intangible assets purchased
    
    
    
    
    
    $
    121,953
    
    
    $
    (27,549
    )
    
    $
    94,404
  Fiscal quarter ended
    
    
    Two fiscal quarters ended(In thousands)
    
    Nov. 26, 2005
    
    
    Nov. 27, 2004
    
    
    Nov. 26, 2005
    
    
    Nov. 27, 2004Cost of sales
    
    $
    4,624
    
    
    $
    3,080
    
    
    $
    9,248
    
    
    $
    3,080Acquisition related costs and amortization
    
    
    1,279
    
    
    
    846
    
    
    
    2,558
    
    
    
    846Total
    
    $
    5,903
    
    
    $
    3,926
    
    
    $
    11,806
    
    
    $
    3,926
  AcquisitionRelated Costs
    
    
    TotalCost of
    
    
    and
    
    
    for the(In thousands)
    
    Sales
    
    
    Amortization
    
    
    Fiscal YearFiscal Year2006
    
    $
    18,495
    
    
    $
    5,117
    
    
    $
    23,6122007
    
    
    18,495
    
    
    
    5,117
    
    
    
    23,6122008
    
    
    16,670
    
    
    
    4,621
    
    
    
    21,2912009
    
    
    15,759
    
    
    
    4,174
    
    
    
    19,9332010
    
    
    5,256
    
    
    
    1,354
    
    
    
    6,610Total
    
    $
    74,675
    
    
    $
    20,383
    
    
    $
    95,058
 21




---



##### Table of Contents



Fiscal quarter ended
    
    
    Two fiscal quarters ended(In thousands, except per share amounts)
    

Nov. 27, 2004

    
    

Nov. 27, 2004Pro formaSales
    
    $
    280,530
    
    
    $
    553,973Net earnings
    
    
    30,700
    
    
    
    64,629Net earnings per share  basic
    
    $
    0.34
    
    
    $
    0.71Net earnings per share  diluted
    
    
    0.34
    
    
    
    0.70
   Business Realignment Costs
   22




---



##### Table of Contents



CostsBalance
    
    
    Incurred
    
    
    
    
    
    
    
    
    
    
    BalanceMay 28,
    
    
    and Other
    
    
    Cash
    
    
    Non-cash
    
    
    Nov. 26,(In thousands)
    
    2005
    
    
    Adjustments
    
    
    Payments
    
    
    Adjustments
    
    
    2005Fiscal Year 2006 Actions:Employee severance and
related benefits
    
    $
    
    
    
    $
    4,192
    
    
    $
    (1,921
    )
    
    $
    
    
    
    $
    2,271Contractual obligations
    
    
    
    
    
    
    111
    
    
    
    (111
    )
    
    
    
    
    
    
    Accumulated currency
translation loss, net
    
    
    
    
    
    
    (36
    )
    
    
    
    
    
    
    36
    
    
    
    Total
    
    
    
    
    
    
    4,267
    
    
    
    (2,032
    )
    
    
    36
    
    
    
    2,271Fiscal Year 2005 Actions:Employee severance and
related benefits
    
    
    568
    
    
    
    
    
    
    
    (528
    )
    
    
    (1
    )
    
    
    39Contractual obligations
    
    
    103
    
    
    
    49
    
    
    
    (123
    )
    
    
    
    
    
    
    29Total
    
    
    671
    
    
    
    49
    
    
    
    (651
    )
    
    
    (1
    )
    
    
    68Fiscal Year 2004 Actions:Employee severance and
related benefits
    
    
    681
    
    
    
    
    
    
    
    (167
    )
    
    
    
    
    
    
    514Total
    
    
    681
    
    
    
    
    
    
    
    (167
    )
    
    
    
    
    
    
    514Fiscal Year 2003 and 2002 Actions:Employee severance and
related benefits
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    3Contractual obligations
    
    
    926
    
    
    
    45
    
    
    
    (245
    )
    
    
    
    
    
    
    726Total
    
    
    928
    
    
    
    45
    
    
    
    (245
    )
    
    
    1
    
    
    
    729Total of all actions
    
    $
    2,280
    
    
    $
    4,361
    
    
    $
    (3,095
    )
    
    $
    36
    
    
    $
    3,582
 Critical Accounting Estimates
  Revenue Recognition
   23




---



##### Table of Contents



Contingencies
      24




---



##### Table of Contents



Goodwill and Intangible Assets
       25




---



##### Table of Contents



Pension Plans
       26




---



##### Table of Contents



Income Taxes
     27




---



##### Table of Contents



RESULTS OF OPERATIONS
 Fiscal quarter ended
    
    
    Two fiscal quarters endedNov. 26,
    
    
    Nov. 27,
    
    
    %
    
    
    Nov. 26,
    
    
    Nov. 27,
    
    
    %(In millions, except per share amounts)
    
    2005
    
    
    2004
    
    
    Change
    
    
    2005
    
    
    2004
    
    
    ChangeProduct orders
    
    $
    240.8
    
    
    $
    235.6
    
    
    
    2
    %
    
    $
    471.2
    
    
    $
    439.9
    
    
    
    7
    %Net sales
    
    
    253.4
    
    
    
    266.8
    
    
    
    (5
    )%
    
    
    488.5
    
    
    
    517.3
    
    
    
    (6
    )%Cost of sales
    
    
    101.2
    
    
    
    106.5
    
    
    
    (5
    )%
    
    
    200.3
    
    
    
    208.5
    
    
    
    (4
    )%Gross profit
    
    
    152.2
    
    
    
    160.3
    
    
    
    (5
    )%
    
    
    288.2
    
    
    
    308.8
    
    
    
    (7
    )%Gross margin
    
    
    60.1
    %
    
    
    60.1
    %
    
    
    
    
    
    
    59.0
    %
    
    
    59.7
    %Research and development expenses
    
    
    45.7
    
    
    
    41.9
    
    
    
    9
    %
    
    
    89.3
    
    
    
    75.5
    
    
    
    18
    %Selling, general and administrative
expenses
    
    
    73.1
    
    
    
    76.3
    
    
    
    (4
    )%
    
    
    141.7
    
    
    
    141.4
    
    
    
    0
    %Acquisition related costs and
amortization
    
    
    2.1
    
    
    
    34.9
    
    
    
    (94
    )%
    
    
    5.5
    
    
    
    35.7
    
    
    
    (85
    )%Business realignment costs
    
    
    1.9
    
    
    
    0.2
    
    
    
    >100
    %
    
    
    4.4
    
    
    
    2.2
    
    
    
    91
    %Loss (gain) on disposition of assets,
net
    
    
    
    
    
    
    0.1
    
    
    
    (60
    )%
    
    
    
    
    
    
    (1.8
    )
    
    
    *Operating income
    
    
    29.4
    
    
    
    6.9
    
    
    
    >100
    %
    
    
    47.3
    
    
    
    55.8
    
    
    
    (15
    )%Interest income
    
    
    2.9
    
    
    
    3.9
    
    
    
    (26
    )%
    
    
    6.0
    
    
    
    9.4
    
    
    
    (36
    )%Interest expense
    
    
    (0.1
    )
    
    
    (0.3
    )
    
    
    (56
    )%
    
    
    (0.2
    )
    
    
    (0.4
    )
    
    
    (42
    )%Other non-operating expense, net
    
    
    (2.0
    )
    
    
    (1.1
    )
    
    
    87
    %
    
    
    (3.0
    )
    
    
    (3.3
    )
    
    
    (9
    )%Earnings before taxes
    
    
    30.2
    
    
    
    9.4
    
    
    
    >100
    %
    
    
    50.1
    
    
    
    61.5
    
    
    
    (19
    )%Income tax expense
    
    
    10.3
    
    
    
    12.0
    
    
    
    (14
    )%
    
    
    16.1
    
    
    
    27.6
    
    
    
    (42
    )%Net earnings (loss) from continuing
operations
    
    
    19.9
    
    
    
    (2.6
    )
    
    
    *
    
    
    
    34.0
    
    
    
    33.9
    
    
    
    0
    %Gain (loss) from discontinued
operations, net of income
taxes
    
    
    
    
    
    
    (0.2
    )
    
    
    *
    
    
    
    
    
    
    
    (0.3
    )
    
    
    *Net earnings (loss)
    
    $
    19.9
    
    
    $
    (2.8
    )
    
    
    *
    
    
    $
    34.0
    
    
    $
    33.6
    
    
    
    1
    %Earnings (loss) per share:Continuing
operations  basic
    
    $
    0.24
    
    
    $
    (0.03
    )
    
    
    *
    
    
    $
    0.41
    
    
    $
    0.40
    
    
    
    3
    %Continuing
operations  diluted
    
    $
    0.24
    
    
    $
    (0.03
    )
    
    
    *
    
    
    $
    0.40
    
    
    $
    0.39
    
    
    
    3
    %Discontinued
operations  basic and
diluted
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    Net earnings
(loss)  basic
    
    $
    0.24
    
    
    $
    (0.03
    )
    
    
    *
    
    
    $
    0.41
    
    
    $
    0.39
    
    
    
    5
    %Net earnings
(loss)  diluted
    
    $
    0.24
    
    
    $
    (0.03
    )
    
    
    *
    
    
    $
    0.40
    
    
    $
    0.39
    
    
    
    3
    %
  28




---



##### Table of Contents



Second Quarter and First Two Quarters of Fiscal Year 2006 Compared to the Second Quarter and
First Two Quarters of Fiscal Year 2005
 Economic Conditions
     Acquisition of Inet Technologies, Inc.
  Discontinuation of Rohde and Schwarz Distribution Agreement
  29




---



##### Table of Contents



Product Orders
  Fiscal quarter ended
    
    
    Two fiscal quarters endedNov. 26,
    
    
    Nov. 27,
    
    
    %
    
    
    Nov. 26,
    
    
    Nov. 27,
    
    
    %(In millions)
    
    2005
    
    
    2004
    
    
    Change
    
    
    2005
    
    
    2004
    
    
    ChangeConsolidated product orders:Tektronix products
    
    $
    212.9
    
    
    $
    213.9
    
    
    
    0
    %
    
    $
    398.5
    
    
    $
    418.2
    
    
    
    (5
    )%Inet products
    
    
    27.9
    
    
    
    21.6
    
    
    
    29
    %
    
    
    72.7
    
    
    
    21.6
    
    
    
    >100
    %R&S distributed products
    
    
    
    
    
    
    0.1
    
    
    
    (100
    )%
    
    
    
    
    
    
    0.1
    
    
    
    (100
    )%Total product orders
    
    $
    240.8
    
    
    $
    235.6
    
    
    
    2
    %
    
    $
    471.2
    
    
    $
    439.9
    
    
    
    7
    %
    30




---



##### Table of Contents



Fiscal quarter ended
    
    
    Two fiscal quarters endedNov. 26,
    
    
    Nov. 27,
    
    
    %
    
    
    Nov. 26,
    
    
    Nov. 27,
    
    
    %(In millions)
    
    2005
    
    
    2004
    
    
    Change
    
    
    2005
    
    
    2004
    
    
    ChangeConsolidated product orders by region:The Americas:United States
    
    $
    85.2
    
    
    $
    85.4
    
    
    
    0
    %
    
    $
    161.6
    
    
    $
    149.8
    
    
    
    8
    %Other Americas
    
    
    6.2
    
    
    
    7.2
    
    
    
    (14
    )%
    
    
    10.4
    
    
    
    11.4
    
    
    
    (9
    )%Europe
    
    
    65.0
    
    
    
    58.4
    
    
    
    11
    %
    
    
    132.9
    
    
    
    99.9
    
    
    
    33
    %Pacific
    
    
    48.8
    
    
    
    47.8
    
    
    
    2
    %
    
    
    90.0
    
    
    
    93.9
    
    
    
    (4
    )%Japan
    
    
    35.6
    
    
    
    36.8
    
    
    
    (3
    )%
    
    
    76.3
    
    
    
    84.9
    
    
    
    (10
    )%Total product orders
    
    $
    240.8
    
    
    $
    235.6
    
    
    
    2
    %
    
    $
    471.2
    
    
    $
    439.9
    
    
    
    7
    %Product orders, excluding Inet and R&S
    
    $
    212.9
    
    
    $
    213.9
    
    
    
    0
    %
    
    $
    398.5
    
    
    $
    418.2
    
    
    
    (5
    )%
    31




---



##### Table of Contents



Net Sales
  Fiscal quarter ended
    
    
    Two fiscal quarters endedNov. 26,
    
    
    Nov. 27,
    
    
    %
    
    
    Nov. 26,
    
    
    Nov. 27,
    
    
    %(In millions)
    
    2005
    
    
    2004
    
    
    Change
    
    
    2005
    
    
    2004
    
    
    ChangeConsolidated net sales:Tektronix net sales
    
    $
    218.0
    
    
    $
    244.3
    
    
    
    (11
    )%
    
    $
    421.2
    
    
    $
    473.6
    
    
    
    (11
    )%Inet net sales
    
    
    35.4
    
    
    
    20.7
    
    
    
    71
    %
    
    
    67.3
    
    
    
    20.7
    
    
    
    >100
    %R&S distributed products sales
    
    
    
    
    
    
    1.8
    
    
    
    (100
    )%
    
    
    
    
    
    
    23.0
    
    
    
    (100
    )%Total net sales
    
    $
    253.4
    
    
    $
    266.8
    
    
    
    (5
    )%
    
    $
    488.5
    
    
    $
    517.3
    
    
    
    (6
    )%
    Gross Profit and Gross Margin
     32




---



##### Table of Contents



Operating Expenses
          33




---



##### Table of Contents



Non-Operating Income / Expense
    Income Taxes
   34




---



##### Table of Contents



Discontinued Operations
  Net Earnings
  Earnings Per Share
  35




---



##### Table of Contents



Financial Condition, Liquidity and Capital Resources
 Sources and Uses of Cash
 Cash Flows.
 Two fiscal quarters ended(In thousands)
    
    Nov. 26, 2005
    
    
    Nov. 27, 2004Cash provided by (used in):Operating activities
    
    $
    11,580
    
    
    $
    36,625Investing activities
    
    
    91,103
    
    
    
    51,953Financing activities
    
    
    (95,420
    )
    
    
    (89,510
    )
 Operating Activities.
  Investing Activities
  Financing Activities.
 36




---



##### Table of Contents



Working Capital
  (In thousands)
    
    Nov. 26, 2005
    
    
    May 28, 2005Current assets:Cash and cash equivalents
    
    $
    136,015
    
    
    $
    131,640Short-term marketable investments
    
    
    96,808
    
    
    
    120,881Trade accounts receivable, net of allowance for
doubtful accounts of $3,274 and $3,406, respectively
    
    
    162,418
    
    
    
    155,332Inventories
    
    
    130,088
    
    
    
    131,096Other current assets
    
    
    74,835
    
    
    
    80,177Total current assets
    
    
    600,164
    
    
    
    619,126Current liabilities:Accounts payable and accrued liabilities
    
    
    116,338
    
    
    
    115,058Accrued compensation
    
    
    61,484
    
    
    
    78,938Deferred revenue
    
    
    59,319
    
    
    
    57,509Total current liabilities
    
    
    237,141
    
    
    
    251,505Working capital
    
    $
    363,023
    
    
    $
    367,621
  37




---



##### Table of Contents



Recent Accounting Pronouncements
     38




---



##### Table of Contents



Risks and Uncertainties
  We compete in a cyclical market.
  The industries we serve experience rapid changes in technology.
   Competition is intense, may intensify and could result in increased downward pricing pressure,
reduced margins and the loss of market share.
  39




---



##### Table of Contents



We obtain various key components, services and licenses from sole and limited source suppliers.
    Changes or delays in the implementation or customer acceptance of our products could harm our
financial results.
   Our network monitoring business and reputation could suffer if we do not prevent security breaches.
  40




---



##### Table of Contents



A significant portion of our revenues have come 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.
  Our success depends on our ability to maintain and protect our intellectual property and the
intellectual property licensed from others.
  We are subject to environmental regulations.
   Our defined benefit pension plans are subject to financial market risks.
  41




---



##### Table of Contents



We face other risk factors.
   
 Item 3. Quantitative and Qualitative Disclosures about Market Risk.
 Financial Market Risk
    
 Item 4. Controls and Procedures.
   42




---



##### Table of Contents



Part II. OTHER INFORMATION
 
 Item 1. Legal Proceedings.
   
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  Total Numberof Shares
    
    
    Maximum DollarAverage
    
    
    
    
    
    
    Purchased as
    
    
    Value of SharesTotal
    
    
    Price
    
    
    Total
    
    
    Part of Publicly
    
    
    that MayNumber
    
    
    Paid Per
    
    
    Amount
    
    
    Announced Plans
    
    
    Yet BeFiscal Period
    
    of Shares
    
    
    Share
    
    
    Paid
    
    
    or Programs
    
    
    PurchasedAugust 28, 2005 to
September 24, 2005
    
    
    193,300
    
    
    $
    25.22
    
    
    $
    4,874,342
    
    
    
    27,332,279
    
    
    $
    295,177,233September 25, 2005 to
October 22, 2005
    
    
    544,800
    
    
    
    24.41
    
    
    
    13,297,146
    
    
    
    27,877,079
    
    
    
    281,880,087October 23, 2005 to
November 26, 2005
    
    
    1,075,500
    
    
    
    23.33
    
    
    
    25,092,968
    
    
    
    28,952,579
    
    
    $
    256,787,119Total
    
    
    1,813,600
    
    
    $
    23.86
    
    
    $
    43,264,456
  43




---



##### Table of Contents



Item 6. Exhibits.
 +(10.1)
    
    Change of Control Agreements. Form of agreement is incorporated by reference to
Exhibit 10(viii) of Form 10-K dated August 18, 1993, SEC File No. 1-4837. Current
list of covered executive officers is filed herewith.(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.
 
 +
    
    Compensatory Plan or Arrangement 44




---



##### Table of Contents



SIGNATURES
  January 4, 2006
    
    TEKTRONIX, INC.By
    
    /s/ COLIN L. SLADEColin L. SladeSenior Vice President
and         Chief Financial Officer
 45




---



##### Table of Contents



EXHIBIT INDEX
 Exhibits No.
    
    Exhibit Description+ (10.1)
    
    Change of Control Agreements. Form of agreement is
incorporated by reference to Exhibit 10(viii) of Form 10-K
dated August 18, 1993, SEC File No. 1-4837. Current list
of covered executive officers is filed herewith.(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.
 
 +
    
    Compensatory Plan or Arrangement