---

---

UNITED STATESSECURITIES AND EXCHANGE COMMISSION
  Washington, D.C. 20549______________Form 10-Q

||X|                                                         | QUARTERLY REPORT
      PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIESEXCHANGE ACT OF 1934 
|----------------------------------------------------------- | ---------------------------------------------------------------------------------------------
|                                                           
|For the
      quarterly period ended March 1, 2003
      OR
|                                                            |                                                                                              
||_|                                                         | TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIESEXCHANGE ACT OF 1934

For the
  transition period from ________________ to ________________ .

Commission
  File Number 1-04837______________TEKTRONIX, INC.
  (Exact name of registrant as specified in its charter)

|OREGON                                         | 93-0343990               
|---------------------------------------------- | -------------------------
|(State or
      other jurisdiction of          | (IRS Employer            
|incorporation
      or organization)           | Identification
      No.)
|                                               |                          
|14200
      SW KARL BRAUN DRIVE                |                          
|BEAVERTON, OREGON                              | 97077                    
|(Address of principal
      executive offices) | (Zip Code)               
|                                               |                          

(503) 627-7111
  Registrants telephone number, including area code

Indicate by check
  mark whether the Registrant (1) has filed all reports required to be filed by
  Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
  12 months (or for such shorter period that the Registrant was required to file
  such reports), and (2) has been subject to such filing requirements for the
  past 90 days. Yes |X|  No |_|

AT MARCH 29,
  2003 THERE WERE 84,826,761 COMMON SHARES OF TEKTRONIX, INC. OUTSTANDING

(Indicate the
  number of shares outstanding of each of the issuers classes of common
  stock, as of the latest practicable date.)

---

---

---



TEKTRONIX, INC. AND SUBSIDIARIES
  
  -----------------------------------------------------
  INDEX---------

|                                      | PAGE
      NO.
      ----------------                                 
|------------------------------------- | ----------------------------------------------------------------------
|PART
      I.  FINANCIAL INFORMATION  |                                                                       
|                                      |                                                                       
|Item
      1.                         | Financial
      Statements:                                           
|                                      |                                                                       
|                                      | Condensed
      Consolidated Statements of Operations (Unaudited)    
|                                      | for
      the Quarter ended March 1, 2003                             
|                                      | and
      the Quarter ended February 23, 2002                         
|                                      | for
      the Three Quarters ended March 1, 2003                      
|                                      | and
      the Three Quarters ended February 23, 2002                  
|                                      |                                                                       
|                                      | Condensed
      Consolidated Balance Sheets (Unaudited)              
|                                      | as
      of March 1, 2003 and May 25, 2002                            
|                                      |                                                                       
|                                      | Condensed
      Consolidated Statements of Cash Flows (Unaudited)    
|                                      | for
      the Three Quarters ended March 1, 2003                      
|                                      | and
      the Three Quarters ended February 23, 2002                  
|                                      |                                                                       
|                                      | Notes
      to Condensed Consolidated Financial Statements (Unaudited)
|                                      |                                                                       
|Item
      2.                         | Managements
      Discussion and Analysis of Financial               
|                                      | Condition
      and Results of Operations                             
|                                      |                                                                       
|Item
      3.                         | Quantitative
      and Qualitative Disclosures About Market Risk      
|                                      |                                                                       
|Item
      4.                         | Controls
      and Procedures                                         
|                                      |                                                                       
|PART
      II.OTHER
      INFORMATION |                                                                       
|                                      |                                                                       
|Item
      6.                         | Exhibits
      and Reports on Form 8-K                                
|                                      |                                                                       
|SIGNATURE
      AND CERTIFICATIONS    | 38                                                                    

1

---



Part
  I

Item 1. Financial Statements

Condensed
  Consolidated Statements of Operations
  (Unaudited)

|                                                            | **Quarter
      ended** |         | **Three
      Quarters ended** |  
|----------------------------------------------------------- | ----------------------- | ------- | ------------------------------ | -
|**(In
      thousands, except per share amounts)**          | **March
      1, 2003** |         | **Feb.
      23, 2002**        |  
|                                                           
|Net sales                                                   | $                       | 188,349 |                                | $
|Cost of
      sales                                         |                         | 87,961  |                                |  
|                                                            |                         |         |                                |  
|Gross
      profit                                          |                         | 100,388 |                                |  
|                                                            |                         |         |                                |  
|Research and
      development expenses                     |                         | 26,674  |                                |  
|Selling, general
      and administrative expenses          |                         | 63,815  |                                |  
|Equity in
      business ventures loss                     |                         |        |                                |  
|Business realignment
      costs                            |                         | 14,173  |                                |  
|Acquisition
      related costs                             |                         | 795     |                                |  
|(Gain) loss
      on disposition of assets                  |                         | (81     | )                              |  
|                                                            |                         |         |                                |  
|Operating
      (loss) income                               |                         | (4,988  | )                              |  
|Interest
      income                                       |                         | 6,782   |                                |  
|Interest
      expense                                      |                         | (1,221  | )                              |  
|Other expense,
      net                                    |                         | (417    | )                              |  
|                                                            |                         |         |                                |  
|Income
      before taxes                                   |                         | 156     |                                |  
|Income tax
      (benefit) expense                          |                         | (709    | )                              |  
|                                                            |                         |         |                                |  
|Income from
      continuing operations                     |                         | 865     |                                |  
|Discontinued
      operations:                              |                         |         |                                |  
|Loss from
      operations of optical parametric test       |                         |         |                                |  
|business
      (less applicable income tax benefit of       |                         |         |                                |  
|$8,521,
      $0, $9,296 and $0)                            |                         | (15,824 | )                              |  
|Loss on sale
      of VideoTele.com (less applicable income |                         |         |                                |  
|tax
      benefit of $64, $0, $275 and $0)                  |                         | (118    | )                              |  
|Loss from
      operations of VideoTele.com (less           |                         |         |                                |  
|applicable
      income tax benefit of $0, $780,            |                         |         |                                |  
|$1,413
      and $368)                                      |                         |        |                                |  
|Gain on sale
      of Color Printing and Imaging division   |                         |         |                                |  
|(less applicable
      income tax expense of $7,000,        |                         |         |                                |  
|$0,
      $7,000 and $505)                                  |                         | 13,000  |                                |  
|                                                            |                         |         |                                |  
|Net (loss)
      earnings                                   | $                       | (2,077  | )                              | $
|                                                            |                         |         |                                |  
|Net (loss)
      earnings per share  basic                 | $                       | (0.02   | )                              | $
|Net (loss)
      earnings per share  diluted               |                         | (0.02   | )                              |  
|Income per
      share from continuing operations           |                         |         |                                |  
|
      basic and diluted                                   |                         | 0.01    |                                |  
|(Loss) earnings
      per share from discontinued           |                         |         |                                |  
|operations
       basic and diluted                        |                         | (0.03   | )                              |  
|                                                           
|Weighted average
      shares outstanding  basic           |                         | 86,750  |                                |  
|Weighted average
      shares outstanding  diluted         |                         | 86,945  |                                |  

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

2

---



Condensed
  Consolidated Balance Sheets
  (Unaudited)

|**(In
      thousands)**                                   | **March
      1, 2003** |           | **May
      25, 2002** |  
|---------------------------------------------------------- | ----------------------- | --------- | ---------------------- | -
|                                                          
|                                                           |                         |           |                        |  
|ASSETS                                                     |                         |           |                        |  
|Current
      assets:                                      |                         |           |                        |  
|Cash
      and cash equivalents                            | $                       | 155,250   |                        | $
|Short-term
      marketable investments                    |                         | 122,125   |                        |  
|Trade
      accounts receivable, net of allowance for      |                         |           |                        |  
|doubtful
      accounts of $3,061 and $3,708, respectively |                         | 104,957   |                        |  
|Inventories                                                |                         | 102,936   |                        |  
|Assets
      of discontinued operations                    |                         | 4,847     |                        |  
|Other
      current assets                                 |                         | 79,314    |                        |  
|                                                           |                         |           |                        |  
|Total
      current assets                                 |                         | 569,429   |                        |  
|                                                           |                         |           |                        |  
|Property,
      plant and equipment, net                   |                         | 152,597   |                        |  
|Long-term
      marketable investments                     |                         | 412,324   |                        |  
|Deferred
      tax assets                                  |                         | 89,748    |                        |  
|Other
      long-term assets                               |                         | 114,996   |                        |  
|                                                           |                         |           |                        |  
|Total
      assets                                         | $                       | 1,339,094 |                        | $
|                                                           |                         |           |                        |  
|                                                           |                         |           |                        |  
|LIABILITIES
      AND SHAREHOLDERS EQUITY                 |                         |           |                        |  
|Current
      liabilities:                                 |                         |           |                        |  
|Accounts
      payable and accrued liabilities             | $                       | 107,876   |                        | $
|Accrued
      compensation                                 |                         | 52,181    |                        |  
|Current
      portion of long-term debt                    |                         | 57,778    |                        |  
|Deferred
      revenue                                     |                         | 19,467    |                        |  
|Liabilities
      of discontinued operations               |                         | 1,787     |                        |  
|                                                           |                         |           |                        |  
|Total
      current liabilities                            |                         | 239,089   |                        |  
|                                                           |                         |           |                        |  
|Long-term
      debt                                       |                         | 56,137    |                        |  
|Other
      long-term liabilities                          |                         | 175,014   |                        |  
|                                                           |                         |           |                        |  
|Shareholders
      equity:                                |                         |           |                        |  
|Common
      stock, no par value (authorized 200,000       |                         |           |                        |  
|shares;
      issued and outstanding 85,518 and            |                         |           |                        |  
|90,509
      shares, respectively)                         |                         | 223,982   |                        |  
|Retained
      earnings                                    |                         | 714,137   |                        |  
|Accumulated
      other comprehensive loss                 |                         | (69,265   | )                      |  
|                                                           |                         |           |                        |  
|Total
      shareholders equity                           |                         | 868,854   |                        |  
|                                                           |                         |           |                        |  
|Total
      liabilities and shareholders equity           | $                       | 1,339,094 |                        | $
|                                                           |                         |           |                        |  

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

3

---



Condensed
  Consolidated Statements of Cash Flows(Unaudited)

|                                                                                       | **Three
      Quarters ended** |         
|-------------------------------------------------------------------------------------- | ------------------------------ | --------
|**(In
      thousands)**                                                               | **March
      1, 2003**        |         
|                                                                                      
|CASH
      FLOWS FROM OPERATING ACTIVITIES                                             |                                |         
|Net earnings                                                                           | $                              | 22,434  
|Adjustments
      to reconcile net earnings to net cash provided by                    |                                |         
|operating
      activities:                                                            |                                |         
|Gain
      on the sale of Color Printing and Imaging division                          |                                | (13,000 
|Loss
      on the sale of VideoTele.com                                                |                                | 508     
|Loss
      from VideoTele.com discontinued operations                                  |                                | 2,624   
|Loss
      from optical parametric test business discontinued operations               |                                | 17,264  
|Depreciation
      and amortization expense                                            |                                | 26,168  
|Loss
      on the disposition/impairment of assets                                     |                                | 8,516   
|Loss
      on the disposition of marketable equity securities                          |                                |        
|Bad
      debt expense                                                                 |                                | 207     
|Tax
      benefit of stock option exercises                                            |                                | 312     
|Deferred
      income tax (benefit) expense                                            |                                | (8,091  
|Equity
      in business ventures loss                                                |                                | 2,893   
|Changes
      in operating assets and liabilities:                                     |                                |         
|Accounts
      receivable                                                              |                                | 13,383  
|Inventories                                                                            |                                | 29,864  
|Other
      current assets                                                             |                                | 2,624   
|Accounts
      payable                                                                 |                                | (47,813 
|Accrued
      compensation                                                             |                                | (9,840  
|Deferred
      revenue                                                                 |                                | 2,641   
|Other
      long-term assets and liabilities, net                                      |                                | (7,874  
|                                                                                       |                                |         
|Net cash
      provided by continuing operating activities                             |                                | 42,820  
|Net cash
      provided by (used in) discontinued operating activities                 |                                | (4,214  
|                                                                                       |                                |         
|Net cash
      provided by operating activities                                        |                                | 38,606  
|                                                                                       |                                |         
|CASH
      FLOWS FROM INVESTING ACTIVITIES                                             |                                |         
|Cash acquired
      in Sony/Tektronix acquisition                                      |                                | 23,915  
|Acquisition
      of property, plant and equipment                                     |                                | (11,650 
|Proceeds
      from the disposition of fixed assets                                    |                                | 6,590   
|Proceeds
      from maturities and sales of short-term and                             |                                |         
|long-term
      available-for-sale securities                                          |                                | 382,255 
|Purchases
      of short-term and long-term available-for-sale securities              |                                | (414,063
|Proceeds
      from maturities of short-term and long-term held-to-maturity securities |                                |        
|Purchases
      of short-term and long-term held-to-maturity securities                |                                |        
|                                                                                       |                                |         
|Net cash
      (used in) provided by investing activities                              |                                | (12,953 
|                                                                                       |                                |         
|CASH
      FLOWS FROM FINANCING ACTIVITIES                                             |                                |         
|Net change
      in short-term debt                                                    |                                |        
|Repayment
      of long-term debt                                                      |                                | (41,760 
|Proceeds
      from employee stock plans                                               |                                | 7,076   
|Repurchase
      of common stock                                                       |                                | (97,020 
|                                                                                       |                                |         
|Net cash
      used in financing activities                                            |                                | (131,704
|Net decrease
      in cash and cash equivalents                                        |                                | (106,051
|Cash and
      cash equivalents at beginning of period                                 |                                | 261,301 
|                                                                                       |                                |         
|Cash and
      cash equivalents at end of period                                       | $                              | 155,250 
|                                                                                       |                                |         
|SUPPLEMENTAL
      DISCLOSURES OF CASH FLOWS                                           |                                |         
|Income taxes
      (refunded) paid, net                                                | $                              | (2,404  
|Interest
      paid                                                                    |                                | 6,291   
|                                                                                       |                                |         
|NON-CASH
      INVESTING AND FINANCING ACTIVITIES                                      |                                |         
|Assets acquired
      from Sony/Tektronix (excluding cash received)                    |                                | 159,308 
|Assumption
      of long-term debt from Sony/Tektronix acquisition                     |                                | 53,506  
|Assumption
      of other liabilities from Sony/Tektronix acquisition                  |                                | 89,877  
|Non-cash
      proceeds from the sale of VideoTele.com                                 |                                | 7,303   

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

4

---



|Notes
        to Condensed Consolidated Financial Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Tektronix,
      Inc. (Tektronix or the Company) manufactures, markets
      and services test, measurement and monitoring solutions to a wide variety
      of customers in many industries, including computing, communications, semiconductors,
      broadcast, education, government, military/aerospace, automotive and consumer
      electronics. Tektronix enables its customers to design, manufacture, deploy,
      monitor and service next-generation global communications networks, computing
      and advanced technologies. Revenue is derived principally through the development
      and marketing of a broad range of products including: oscilloscopes; logic
      analyzers; communication test equipment, including mobile protocol test
      equipment and radio frequency test equipment; video test equipment; and
      related components, support services and accessories. The Company maintains
      operations in four major geographies: the Americas, including the United
      States, Mexico, Canada and South America; Europe, including the Middle East
      and Africa; the Pacific, excluding Japan; and Japan.                                                                                                                                                                                                                                                                                                                                                                          
|2.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|The
      condensed consolidated financial statements and notes thereto have been
      prepared by the Company without audit. Certain information and footnote
      disclosures normally included in annual financial statements, prepared in
      accordance with accounting principles generally accepted in the United States
      of America, have been condensed or omitted. The consolidated financial statements
      include the accounts of Tektronix and its majority-owned subsidiaries. Investments
      in joint ventures and minority-owned companies where the Company exercises
      significant influence are accounted for under the equity method with the
      Companys percentage of earnings included in Equity in business ventures
      loss on the Condensed Consolidated Statements of Operations. Significant
      intercompany transactions and balances have been eliminated. Certain prior
      year amounts have been reclassified to conform to the current years
      presentation with no effect on previously reported earnings. The Companys
      fiscal year is the 52 or 53 weeks ending the last Saturday in May. Fiscal
      year 2003 is 53 weeks, while fiscal year 2002 was 52 weeks. Due to this
      convention, the first quarter of fiscal year 2003 was 14 weeks compared
      to the first quarter of fiscal year 2002, which was 13 weeks. The second
      and third quarters of fiscal years 2003 and the comparative prior year quarters
      each include 13 weeks.
|The
      presentation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to
      make estimates and assumptions. These estimates and assumptions, including
      those used to record the results of discontinued operations, affect the
      reported amounts of assets and liabilities and disclosure of contingent
      assets and liabilities at the date of the consolidated financial statements
      and the revenues and expenses reported during the period. Examples include
      the allowance for doubtful accounts; estimates of contingent liabilities;
      intangible asset valuation; inventory valuation; pension plan assumptions;
      determining when investment impairments are other-than-temporary; and the
      assessment of the valuation of deferred income taxes and income tax reserves.
      Actual results may differ from estimated amounts. Management believes that
      the condensed consolidated statements include all necessary adjustments,
      which are of a normal and recurring nature and are adequate to fairly present
      the financial position, results of operations and cash flows for the interim
      periods. The condensed information should be read in conjunction with the
      financial statements and notes thereto in the Companys annual report
      on Form 10-K for the year ended May 25, 2002.                                                           
|3.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Sony/Tektronix
      Redemption                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|During
      the second quarter of fiscal year 2003, the Company acquired from Sony Corporation
      (Sony), its 50% interest in Sony/Tektronix Corporation (Sony/Tektronix)
      through redemption of Sonys shares by Sony/Tektronix for 8 billion
      Yen (Sony/Tektronix Aquisition), or approximately $65.7 million
      at                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|5                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

---



September 30, 2002. This
  transaction closed on September 30, 2002, at which time the Company obtained
  100% ownership of Sony/Tektronix. This transaction is a long-term strategic
  investment that will provide the Company stronger access to the Japanese market
  and the ability to leverage the engineering resources in Japan. The Company
  accounted for its investment in Sony/Tektronix under the equity method prior
  to this redemption. Prior to the close of this transaction, the Sony/Tektronix
  entity entered into an agreement to borrow up to 9 billion Yen, or approximately
  $73.9 million at an interest rate of 1.75% above the Tokyo Inter Bank Offering
  Rate. This facility, which includes certain financial covenants for this Japan
  subsidiary and the Company, expires September 29, 2006. Sony/Tektronix utilized
  $53.1 million of this credit facility to fund a portion of the redemption of
  shares from Sony and the remainder will provide operating capital for this Japan
  subsidiary. The transaction was accounted for by the purchase method of accounting,
  and accordingly, beginning on the date of acquisition the results of operations,
  financial position and cash flows of Sony/Tektronix were consolidated in the
  Companys financial statements. Assets purchased and liabilities assumed
  as of the purchase date were as follows (in thousands):

|Cash                                           | $ | 23,915 
|---------------------------------------------- | - | -------
|Accounts
      receivable                      |   | 23,333 
|Inventory                                      |   | 15,476 
|Deferred
      tax asset                       |   | 3,431  
|Property,
      plant and equipment            |   | 36,752 
|Goodwill                                       |   | 35,647 
|Intangible
      assets                        |   | 2,200  
|Other long-term
      assets                   |   | 42,469 
|                                               |  
|Total assets                                   | $ | 183,223
|                                               |   |        
|Accounts payable
      and accrued liabilities | $ | 22,394 
|Accrued
      compensation                     |   | 5,071  
|Long-term
      debt                           |   | 53,506 
|Other long-term
      liabilities              |   | 62,412 
|                                               |  
|Total liabilities                              | $ | 143,383

The
  allocation of purchase price to the pension liability assumed in the transaction
  was based on the best available data as of the transaction date, but has not
  been finalized as of March 1, 2003. The allocation of purchase price to the
  pension liability will be adjusted upon completion of the appropriate analysis
  of such liabilities. The pension liability is included in Other long-term liabilities
  on the Condensed Consolidated Balance Sheet as of March 1, 2003.

Pro
  forma summary results of operations of the Company after intercompany eliminations
  of the newly created Japan subsidiary as though the acquisition had been completed
  at the beginning of the period were as follows:

|                                                   | **Quarter
      ended** |         | **Three
      Quarters ended**
|-------------------------------------------------- | ----------------------- | ------- | ------------------------------
|**(In
      thousands, except per share amounts)** | **March
      1, 2003** |         | **Feb.
      23, 2002**       
|                                                  
|Net sales                                          | $                       | 188,349 |                               
|Net (loss)
      earnings                          |                         | (2,077  | )                             
|(Loss) earnings
      per share - diluted          | $                       | (0.02   | )                             

Subsequent
  to closing, the Company incurred $2.6 million in costs specifically associated
  with integrating the operations of this subsidiary which are recorded in Acquisition
  related costs on the Condensed Consolidated Statements of Operations.

Sale of VideoTele.com

On
  November 7, 2002, the Company completed the sale of the VideoTele.com (VT.c)
  subsidiary. VT.c was sold to Tut Systems, Inc. (Tut), a publicly
  traded company, for 3,283,597 shares of Tut common stock valued at $4.2 million
  and a note receivable for $3.1 million due in November 2007. The common stock
  is classified as an available-for-sale security and represents a 19.9% interest
  in Tut and therefore is accounted for on the cost basis. Both the common stock
  and the note receivable are

6

---



included in Other long-term
  assets in the Condensed Consolidated Balance Sheet as of March 1, 2003. Under
  the terms of the sale agreement, the Company is restricted from selling the
  common stock for a period of 1 year. The note receivable accrues interest at
  an annual rate of 8%. As a result of this transaction, employees of VT.c on
  the transaction date became employees of the post-merger entity at the time
  of the closing. The sale of VT.c has been accounted for as a discontinued operation
  in accordance with Financial Accounting Standards Board (FASB) Statement
  of Financial Accounting Standards (SFAS) No. 144, Accounting
  for the Impairment or Disposal of Long-Lived Assets. Accordingly, the
  results of VT.c operations prior to the transaction date, and the loss on this
  sale of $0.5 million for the first three quarters of fiscal year 2003, are excluded
  from continuing operations and recorded as discontinued operations, net of tax,
  in the Condensed Consolidated Statements of Operations.

Sale of Optical Transmission
  Test Products

On
  November 5, 2002 the Company completed the sale of certain assets related to
  the Companys optical transmission test products to Digital Lightwave,
  Inc. (DLI). The assets sold include inventory, fixed assets and
  technology related to specific optical products. Total proceeds on this sale
  were $10.0 million with $9.0 million received at the time of closing with an
  additional $1.0 million to be held in escrow for a period of 12 months pending
  the resolution of certain contingencies. Of the assets sold, $3.4 million were
  fixed assets and the proceeds received equaled the net book value resulting
  in no gain or loss on the sale of fixed assets. The remaining proceeds of $6.6
  million related to the sale of inventory and technology, and are included in
  Net Sales in the Condensed Consolidated Statement of Operations. The net book
  value of inventory and technology assets sold was $6.2 million at the time of the sale.
  In addition, DLI assumed warranty and other related liabilities of $0.6 million.
  The Company has also established a contingent liability for resolution of sale
  related contingencies of $1.0 million. The net book value of the assets sold
  and the contingent liability reserve have been recorded as Cost of sales in
  the Condensed Consolidated Statement of Operations. Liabilities assumed by DLI
  have been recorded as a reduction to cost of sales.

The
  Company had previously accrued certain liabilities related to actions intended
  to reduce the operating costs associated with the design, production and sale
  of the optical transmission test products. As a result of the sale to DLI, certain
  of these liabilities were expected to be mitigated and accordingly, the Company
  reversed $2.0 million of previously accrued expenses as a reduction to Business
  realignment costs in the second quarter of fiscal year 2003 in the Condensed
  Consolidated Statements of Operations. Due to a significant deterioration of
  their financial condition, it appears more likely than not that DLI will not
  fulfill its lease obligation, which it assumed from the Company. Accordingly,
  the Company accrued $1.6 million during the third quarter of fiscal 2003 for
  the estimated exposure associated with this lease obligation which is included
  in Business realignment costs in the Condensed Consolidated Statements of Operations.

Discontinued Operations
   Optical Parametric Test Business

During
  the third quarter of fiscal year 2003, management approved and initiated an
  active plan for the sale of its optical parametric test business. This business
  has been accounted for as a discontinued operation in accordance with SFAS No.
  144. Accordingly, the results of operations of the optical parametric test business
  have been excluded from continuing operations and recorded as discontinued operations.
  The net carrying value of assets, primarily goodwill and other intangible assets,
  have been adjusted to estimated selling price less costs to sell which resulted
  in a $15.3 million writedown, net of income tax benefit of $8.4 million, included
  in loss from discontinued operations of the optical parametric test business
  for the first three quarters of fiscal year 2003.

4.  Sale of Color
  Printing and Imaging Division

On
  January 1, 2000, the Company sold substantially all of the assets of the Color
  Printing and Imaging division (CPID). The Company accounted for
  CPID as a discontinued operation in accordance with Accounting Principles Board
  (APB) Opinion No. 30, Reporting the Results of Operations
  Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
  Unusual and Infrequently Occurring Events and Transactions. The sales
  price was $925.0 million in cash, with certain liabilities of the division assumed
  by the buyer. During fiscal year 2000, Tektronix recorded a net gain of $340.3
  million on this sale. The net gain was calculated as the excess of the proceeds
  received over the

7

---



net
  book value of the assets transferred, $198.5 million in income tax expense,
  a $60.0 million accrual for estimated liabilities related to the sale and $14.4
  million in transaction and related costs. The accrual for estimated liabilities
  related to the sale was $15.4 million and $36.0 million as of March 1, 2003
  and May 25, 2002, respectively. During the third quarter of fiscal year 2003,
  the Company recorded a gain of $13.0 million, net of income tax expense of $7
  million, as a result of the resolution of certain estimated liabilities related
  to the sale. This gain was reported in discontinued operations on the Condensed
  Consolidated Statements of Operations.

5.  Repurchase
  of Common Stock

On
  March 15, 2000, the Board of Directors authorized the purchase of up to $550.0
  million of the Companys common stock on the open market or through negotiated
  transactions. During the third quarter of fiscal year 2003, the Company repurchased
  1.7 million shares for $27.7 million. During the first three quarters of fiscal
  year 2003, the Company repurchased a total of 5.5 million shares for $97.0 million.
  As of March 1, 2003, the Company repurchased a total of 13.8 million shares
  at an average price of $22.11 per share totaling $305.1 million under this authorization.
  The reacquired shares were immediately retired, as required under Oregon corporate
  law.

6.  Business
  Realignment Costs

Business
  realignment costs represent actions to realign the Companys cost structure
  in response to significant events. Restructuring actions taken during fiscal
  year 2002 and 2003 were intended to reduce the Companys worldwide cost
  structure across all major functions in response to the dramatic economic decline,
  which severely impacted markets into which the Company sells its products. Major
  operations impacted include manufacturing, engineering, sales, marketing and
  administrative functions. The Company expects to achieve future cost savings
  primarily by reducing employee headcount. In addition to severance, the Company
  incurred other costs associated with restructuring its organization, which primarily
  represent facilities contracts and other exit costs associated with aligning
  the cost structure to appropriate levels. Management believes that the expected
  cost savings from restructuring actions implemented in fiscal years 2002 and
  2003 have resulted in the costs savings anticipated for those actions.

During
  the third quarter of fiscal year 2003, the Company incurred $14.2 million of
  business realignment costs for employee severance and a facility lease obligation.
  The Company incurred $12.6 million of severance for the termination of 185 employees
  resulting from actions to realign the Companys cost structure, including
  $11.2 million for 155 former employees of Tektronix Japan. In December 2002
  the Company announced a plan to solicit voluntary retirements from employees
  of Tektronix Japan. Under this voluntary plan, early retirement applications
  were received and approved during the third quarter of fiscal year 2003. During
  the third quarter of fiscal year 2003, the Company also incurred $1.6 million
  for a facility lease obligation in the U.S as described in Note 3.

During
  the first three quarters of fiscal year 2003, the Company incurred $27.0 million
  of business realignment costs for employee severance, impairment of an intangible
  asset, a facility lease obligation and closure of other facilities. The Company
  incurred $18.4 million of severance for the termination of 365 employees resulting
  from actions to realign the Companys cost structure, including $11.2 million
  for 155 former employees of Tektronix Japan. Severance liabilities for actions
  taken in fiscal 2002 and 2000 were reduced by $0.5 million largely for employees
  that unexpectedly left voluntarily without severance. An impairment charge of
  $9.1 million was recognized for an intangible asset for acquired Bluetooth technology
  and was impaired due to a lower than previously anticipated market potential
  for the Companys products related to this technology. The impairment was
  determined using the present value of estimated cash flows related to the asset.
  The Company reversed $2.0 million for a facility lease obligation due to the
  sale of the Companys optical transmission test product line in the second
  quarter of fiscal 2003. As the current sub-lessee may not fulfill its lease
  obligation, the Company accrued $1.6 million during the third quarter of fiscal
  2003 as described in Note 3. Finally, $0.4 million was accrued for the closure
  of other facilities. These actions, other than the reduction of severance liabilities,
  do not relate to the previously announced 2000 Plan discussed below.

During
  the first three quarters of fiscal year 2002, the Company incurred $14.7 million
  of net business realignment costs including $14.8 million of expenses to better
  align future operating expense levels with reduced sales levels offset by $0.1
  million of reserve reversals related to the 2000 Plan. The $14.8

8

---



million of business realignment
  costs included $13.4 million of severance related costs for 413 employees and
  $1.4 million to cancel a service contract in India and certain office closures
  in Australia, Mexico, South America, Canada and Europe. These actions do not
  relate to the previously announced 2000 Plan discussed below

During the first three quarters of fiscal year 2003, the Company paid severance
  and other accrued liabilities of $14.4 million for business realignment charges
  recorded in fiscal 2003 and $6.4 million for business realignment charges recorded
  in fiscal 2002.

At
  March 1, 2003, the Company maintained liabilities of $4.1 million related to
  the severance expenses of 70 employees and $0.2 million related to the exit
  from certain operations for business realignment activities recorded in fiscal
  year 2003. At March 1, 2003, the Company maintained liabilities of $1.3 million
  related to the severance expenses of 23 employees and $1.9 million related to
  the exit from certain operations for business realignment activities recorded
  in fiscal year 2002.

The 2000 Plan

In the third quarter of fiscal
  year 2000, the Company recognized a pre-tax charge of $64.8 million for certain
  business realignment actions. As of March 1, 2003, the remaining accrued liabilities
  under this plan was $0.7 million.

7. Earnings
  Per Share

|                                                  | **Quarter
      ended** |        | **Three
      Quarters ended**
|------------------------------------------------- | ----------------------- | ------ | ------------------------------
|                                                  | **March
      1,**      |        |                               
|**(In
      thousands except per share amounts)** | **2003**                |        |                               
|                                                 
|Net (loss)
      earnings                         | $                       | (2,077 | )                             
|                                                  |                         |        |                               
|Weighted
      average shares used for            |                         |        |                               
|basic
      earnings per share                    |                         | 86,750 |                               
|Effect of
      dilutive stock options            |                         | 195    |                               
|                                                  |                         |        |                               
|Weighted
      average shares used for            |                         |        |                               
|dilutive
      earnings per share                 |                         | 86,945 |                               
|                                                  |                         |        |                               
|Net (loss)
      earnings per share - basic       | $                       | (0.02  | )                             
|Net (loss)
      earnings per share - diluted     | $                       | (0.02  | )                             
|                                                  |                         |        |                               
|Antidilutive
      options*                       |                         | 9,230  |                               

| 
|-
|*

8.Marketable
  Investments

The
  Company records its investments as available-for-sale securities which allows
  the Company to maximize the investment returns by reacting to fluctuations in
  interest rates. This requires the investments to be recorded at market value
  with the resulting unrealized gains and losses included, net of tax, in Accumulated
  other comprehensive loss on the Condensed Consolidated Balance Sheets. Realized
  gains and losses from sales of investments classified as available-for-sale
  amounted to $0.5 million and $0.8 million, respectively, in the third quarter
  of fiscal year 2003 and $1.5 million and $1.8 million, respectively, in the
  first three quarters of fiscal year 2003. During the third quarter and first
  three quarters of fiscal 2002, all short-term and long-term investments were
  classified as held-to-maturity. All short-term and long-term investments were
  converted to available-for-sale beginning February 23, 2002.

9

---



Short-term
  marketable investments held at March 1, 2003 consisted of:

|**(In
      thousands)**                                                   |        | **Amortized****cost** |     | **Unrealized****gains** |        | **Unrealized****losses** |        | **Market****value**
|-------------------------------------------------------------------------- | ------ | --------------------- | --- | ----------------------- | ------ | ------------------------ | ------ | -------------------
|                                                                           |        |                       |     |                         |        |                          |       
|Corporate
      notes and bonds                                            | $      | 57,747                |     | $                       | 690    |                          | $      |                   
|Asset backed
      securities                                              | 38,147 |                       | 26  |                         | (44    | )                        | 38,129
|Mortgage
      backed securities                                           | 2,631  |                       |    |                         | (28    | )                        | 2,603 
|Federal
      agency notes and bonds                                       | 22,725 |                       | 231 |                         |       |                          | 22,956
|                                                                           |        |                       |     |                         |        |                          |       
|Short-term
      marketable investments                                    | $      | 121,250               |     | $                       | 947    |                          | $      | (72                
|                                                                           |        |                       |     |                         |        |                          |       
|                                                                           |        |                       |     |                         |        |                          |       
|                                                                           |        |                       |     |                         |        |                          |       
|Short-term
      marketable investments held at May 25, 2002 consisted of: |        |                       |    
|                                                                           |        |                       |     |                         |        |                          |        |                    
|**(In
      thousands)**                                                   |        | **Amortized****cost** |     | **Unrealized****gains** |        | **Unrealized****losses** |        | **Market****value**
|                                                                           |        |                       |     |                         |        |                          |       
|                                                                           |        |                       |     |                         |        |                          |        |                    
|Commercial
      paper                                                     | $      | 10,962                |     | $                       |       |                          | $      |                   
|Certificates
      of deposit                                              |        | 9,358                 |     |                         | 6      |                          |        |                   
|Corporate
      notes and bonds                                            |        | 87,056                |     |                         | 1,099  |                          |        | (46                
|Asset backed
      securities                                              |        | 65,841                |     |                         | 234    |                          |        | (291               
|Mortgage
      backed securities                                           |        | 4,555                 |     |                         |       |                          |        | (26                
|Federal
      agency notes and bonds                                       |        | 14,878                |     |                         | 18     |                          |        |                   
|                                                                           |        |                       |     |                         |        |                          |       
|Short-term
      marketable investments                                    | $      | 192,650               |     | $                       | 1,357  |                          | $      | (363               
|                                                                           |        |                       |     |                         |        |                          |       
|                                                                           |        |                       |     |                         |        |                          |        |                    
|                                                                           |        |                       |     |                         |        |                          |        |                    
|Long-term
      marketable investments held at March 1, 2003 consisted of: |        |                       |    
|                                                                           |        |                       |     |                         |        |                          |        |                    
|**(In
      thousands)**                                                   |        | **Amortized****cost** |     | **Unrealized****gains** |        | **Unrealized****losses** |        | **Market****value**
|                                                                           |        |                       |     |                         |        |                          |        |                    
|                                                                           |        |                       |     |                         |        |                          |        |                    
|Corporate
      notes and bonds                                            | $      | 67,969                |     | $                       | 2,387  |                          | $      |                   
|Asset backed
      securities                                              |        | 71,206                |     |                         | 2,924  |                          |        |                   
|Mortgage
      backed securities                                           |        | 147,235               |     |                         | 3,277  |                          |        |                   
|Federal
      agency notes and bonds                                       |        | 79,763                |     |                         | 1,369  |                          |        |                   
|U.S. Treasuries                                                            |        | 35,408                |     |                         | 786    |                          |        |                   
|                                                                           |        |                       |     |                         |        |                          |       
|Long-term
      marketable investments                                     | $      | 401,581               |     | $                       | 10,743 |                          | $      |                   
|                                                                           |        |                       |     |                         |        |                          |       
|                                                                           |        |                       |     |                         |        |                          |        |                    
|Long-term
      marketable investments held at May 25, 2002 consisted of:  |        |                       |    
|                                                                           |        |                       |     |                         |        |                          |        |                    
|**(In
      thousands)**                                                   |        | **Amortized****cost** |     | **Unrealized****gains** |        | **Unrealized****losses** |        | **Market****value**
|                                                                           |        |                       |     |                         |        |                          |        |                    
|                                                                           |        |                       |     |                         |        |                          |        |                    
|Corporate
      notes and bonds                                            | $      | 52,059                |     | $                       | 951    |                          | $      | (10                
|Asset backed
      securities                                              |        | 48,929                |     |                         | 663    |                          |        | (3                 
|Mortgage
      backed securities                                           |        | 90,510                |     |                         | 665    |                          |        | (54                
|Federal
      agency notes and bonds                                       |        | 85,891                |     |                         | 519    |                          |        | (11                
|U.S. Treasuries                                                            |        | 20,984                |     |                         | 15     |                          |        | (4                 
|                                                                           |        |                       |     |                         |        |                          |        |                    
|                                                                           |        |                       |     |                         |        |                          |       
|Long-term
      marketable investments                                     | $      | 298,373               |     | $                       | 2,813  |                          | $      | (82                
|                                                                           |        |                       |     |                         |        |                          |       

10

---



Investments
  in corporate equity securities are classified as available-for-sale and reported
  at fair market value on the Condensed Consolidated Balance Sheets and are included
  in Other long-term assets. The related unrealized holding gains and losses are
  excluded from earnings and included, net of tax, in Accumulated other comprehensive
  loss on the Condensed Consolidated Balance Sheets. Corporate equity securities
  classified as available-for-sale and the related unrealized holding gains were
  as follows:

|**(In
      thousands)**                                    | **March
      1,
      2003** | ****  | **May
      25,
      2002**
|----------------------------------------------------------- | ----------------------------- | ----- | ----------------------------
|                                                           
|Unamortized
      cost basis of corporate equity securities | $                             | 8,427 |                             
|Gross unrealized
      holding (losses) gains               |                               | (344  | )                           
|                                                            |                               |       |                             
|Fair value
      of corporate equity securities             | $                             | 8,083 |                             
|                                                            |                               |       |                             

9.  Inventories

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

|**(In
      thousands)** | **March
      1,
      2003** | ****    | **May
      25,
      2002**
|------------------------ | ----------------------------- | ------- | ----------------------------
|                        
|Materials                | $                             | 7,124   |                             
|Work in
      process    |                               | 39,037  |                             
|Finished
      goods     |                               | 56,775  |                             
|                         |                               |         |                             
|Inventories              | $                             | 102,936 |                             
|                         |                               |         |                             

10. Other Current Assets

Other
  current assets consisted of the following:

|**(In
      thousands)**         | **March
      1,
      2003** | ****   | **May
      25,
      2002**
|-------------------------------- | ----------------------------- | ------ | ----------------------------
|                                
|Current
      deferred tax asset | $                             | 45,505 |                             
|Other receivables                |                               | 11,234 |                             
|Prepaid
      expenses           |                               | 13,053 |                             
|Other current
      assets       |                               | 1,347  |                             
|Held-for-sale
      assets       |                               | 8,142  |                             
|Notes receivable                 |                               | 33     |                             
|                                 |                               |        |                             
|Other current
      assets       | $                             | 79,314 |                             
|                                 |                               |        |                             

11

---



**11.**
  Property, Plant and Equipment

Property,
  plant and equipment consisted of the following:

|**(In
      thousands)**                        | **March
      1,
      2003** | ****     | **May
      25,
      2002** |  
|----------------------------------------------- | ----------------------------- | -------- | ---------------------------- | -
|                                               
|Land                                            | $                             | 14,623   |                              | $
|Buildings                                       |                               | 180,206  |                              |  
|Machinery
      and equipment                   |                               | 273,765  |                              |  
|Accumulated
      depreciation and amortization |                               | (315,997 | )                            |  
|                                                |                               |          |                              |  
|Property,
      plant and equipment, net        | $                             | 152,597  |                              | $
|                                                |                               |          |                              |  

Property,
  plant and equipment as of March 1, 2003 includes the land, buildings and machinery,
  as well as the associated accumulated depreciation, acquired as part of the
  of Sony/Tektronix share redemption described in Note 3.

**12.**Other
  Long-Term Assets

Other
  long-term assets consisted of the following:

|**(In
      thousands)**                       | **March
      1,
      2003** | ****    | **May
      25,
      2002**
|---------------------------------------------- | ----------------------------- | ------- | ----------------------------
|                                              
|Goodwill,
      net                            | $                             | 77,032  |                             
|Corporate
      equity securities              |                               | 8,083   |                             
|Notes, contracts
      and leases              |                               | 9,030   |                             
|Investment
      in Sony/Tektronix Corporation |                               |        |                             
|Other intangible
      assets, net             |                               | 20,851  |                             
|                                               |                               |         |                             
|Other long-term
      assets                   | $                             | 114,996 |                             
|                                               |                               |         |                             

The
  Company adopted SFAS No. 141, Business Combinations and SFAS No.
  142, Goodwill and Other Intangible Assets on accounting for business
  combinations and goodwill as of the beginning of fiscal year 2002. Accordingly,
  the Company no longer amortizes goodwill from acquisitions, but continues to
  amortize other acquisition-related intangibles and costs. The increase in goodwill
  during the first three quarters of fiscal year 2003 was due to the $35.6 million
  addition from the acquisition of Sony/Tektronix Corporation on September 30,
  2002 and $5.7 million effect of foreign currency translation as of March 1,
  2003.

In
  conjunction with the implementation of the new accounting rules for goodwill,
  the Company completed a goodwill impairment analysis as of the beginning of
  fiscal year 2002 with an update during the second quarter ended November 24,
  2001, and found no impairment. As required by the new rules, the Company performed
  an impairment analysis during the second quarter ended November 30, 2002, and
  again found no impairment. The impairment review is based on a discounted cash
  flow approach that uses estimates of future market performance and revenues
  and costs for the reporting units as well as appropriate discount rates. The
  estimates used are consistent with the plans and estimates that the Company
  uses to manage the underlying businesses.

In
  the third quarter of fiscal 2003, management approved and initiated an active
  plan for the sale of the optical parametric test business. Accordingly, the
  Company classified other long-term assets of the optical parametric test business,
  primarily goodwill and other intangible assets, totaling $24.4 million as Assets
  of discontinued operations in the Condensed Consolidated Balance Sheets. The
  Company recognized a pre-tax writedown of $23.6 million included in loss from
  discontinued operations in the Condensed Consolidated Statements of Operations
  for the third quarter of fiscal year 2003. As of March 1, 2003, the remaining
  net book value of $0.8 million for other long-term assets attributable to the
  optical

12

---



parametric test business was
  included in Assets of discontinued operations in the Condensed Consolidated
  Balance Sheet.

13. Other Long-Term Liabilities

Other
  long-term liabilities consisted of the following:

|**(In
      thousands)**          | **March
      1,
      2003** | ****    | **May
      25,
      2002**
|--------------------------------- | ----------------------------- | ------- | ----------------------------
|                                 
|Pension
      liability           | $                             | 140,178 |                             
|Deferred
      compensation       |                               | 33,407  |                             
|Other                             |                               | 1,429   |                             
|                                  |                               |         |                             
|Other long-term
      liabilities | $                             | 175,014 |                             
|                                  |                               |         |                             

Other
  long-term liabilities at March 1, 2003 includes pension and other long-term
  liabilities assumed as part of the Sony/Tektronix share redemption described
  in Note 3.

14. Long-Term Debt

Long-term
  debt consisted of the following:

|**(In
      thousands)**                                                                | **March
      1,
      2003** | ****    | **May
      25,
      2002** |  
|--------------------------------------------------------------------------------------- | ----------------------------- | ------- | ---------------------------- | -
|                                                                                        |                              
|TIBOR+1.75%
      facility due September 29, 2006, interest at 1.8375% on March 1, 2003 | $                             | 54,982  |                              | $
|7.5% notes
      due August 1, 2003                                                     |                               | 57,300  |                              |  
|7.625% notes
      due August 15, 2002                                                  |                               |        |                              |  
|Other long-term
      agreements                                                        |                               | 1,633   |                              |  
|Less: current
      portion                                                             |                               | (57,778 | )                            |  
|                                                                                        |                               |         |                              |  
|Long-term
      debt                                                                    | $                             | 56,137  |                              | $
|                                                                                        |                               |         |                              |  

The
  TIBOR+1.75% debt facility agreement requires the Company to comply with certain
  financial covenants measured on tangible net worth and certain financial ratios.
  This agreement also contains a cross default clause which could trigger acceleration
  of outstanding debt should the Company default on other financial indebtedness,
  as defined in the agreement. The agreement for the 7.5% notes due August 1,
  2003 also contains a cross default clause applicable to other indebtedness of
  more than $10 million. The Company was in compliance with its debt covenants
  as of March 1, 2003, and there were no events that could trigger the cross default
  clauses.

13

---



**15.**
  Comprehensive Income

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

|                                                   | **Quarter
      ended**       |        | **Three
      Quarters ended** |  
|-------------------------------------------------- | ----------------------------- | ------ | ------------------------------ | -
|**(In
      thousands)**                           | **March
      1,
      2003** |        | **Feb.
      23,
      2002**  |  
|                                                  
|Net (loss)
      earnings                          | $                             | (2,077 | )                              | $
|Other comprehensive
      income (loss):           |                               |        |                                |  
|Currency translation
      adjustment, net of      |                               |        |                                |  
|taxes
      of $4,769, $(2,243), $11,491           |                               |        |                                |  
|and
      $(2,356), respectively                   |                               | 7,153  |                                |  
|Unrealized
      (loss) gain on available-for-     |                               |        |                                |  
|sale
      securities, net of taxes of $(281),     |                               |        |                                |  
|$1,222,
      $(926), and $(257),                  |                               |        |                                |  
|respectively                                       |                               | (421   | )                              |  
|Additional
      minimum pension liability, net of |                               |        |                                |  
|taxes
      of $(1,137), zero, $(3,837)            |                               |        |                                |  
|and
      zero, respectively                       |                               | (2,117 | )                              |  
|                                                   |                               |        |                                |  
|Total comprehensive
      income                   | $                             | 2,538  |                                | $
|                                                   |                               |        |                                |  

Accumulated
  other comprehensive loss consisted of the following:

|**(In
      thousands)**          |   | **Foreign
      currency
      translation** |  | **Unrealized
      holding gains
      (losses) on
      available-for-
      sale securities** |        |   | **Additional
      minimum
      pension
      liability** |         | **Accumulated
      other
      comprehensive
      loss** |  
|--------------------------------- | - | -------------------------------------------- |  | ----------------------------------------------------------------------------------------------- | ------ | - | ---------------------------------------------------------- | ------- | ---------------------------------------------------------- | -
|                                 
|Balance
      as of May 25, 2002  | $ | 5,461                                        |  | $                                                                                               | 8,154  |   | $                                                          | (91,739 | )                                                          | $
|First quarter
      activity      |   | 9,859                                        |  |                                                                                                 | (1,656 | ) |                                                            | (2,073  | )                                                          |  
|Second quarter
      activity     |   | 225                                          |  |                                                                                                 | 688    |   |                                                            | (2,799  | )                                                          |  
|Third quarter
      activity      |   | 7,153                                        |  |                                                                                                 | (421   | ) |                                                            | (2,117  | )                                                          |  
|                                  |   |                                              |  |                                                                                                 |        |   |                                                            |        
|Balance
      as of March 1, 2003 | $ | 22,698                                       |  | $                                                                                               | 6,765  |   | $                                                          | (98,728 | )                                                          | $
|                                  |   |                                              |  |                                                                                                 |        |   |                                                            |        

16. Business Segments

The
  Companys revenue is derived principally through the development and marketing
  of a range of test and measurement products in several operating segments that
  have similar economic characteristics as well as similar customers, production
  processes and distribution methods. Accordingly, the Company reports as a single
  Measurement segment. It is impracticable to report net sales by product group.

|                                                              | Quarter
      ended       |         | Three
      Quarters ended
|------------------------------------------------------------- | ------------------------- | ------- | --------------------------
|(In
      thousands)                                          | March
      1,
      2003 |         | Feb.
      23,
      2002 
|                                                             
|                                                              |                           |         |                           
|Consolidated
      net sales to external customers by region:
|Americas                                                      |                           |         |                           
|United
      States                                           | $                         | 70,591  |                           
|Other
      Americas                                          |                           | 5,042   |                           
|Europe                                                        |                           | 45,164  |                           
|Pacific                                                       |                           | 35,884  |                           
|Japan                                                         |                           | 31,668  |                           
|                                                              |                           |         |                           
|Net
      sales                                               | $                         | 188,349 |                           
|                                                              |                           |         |                           

14

---



**17.** Product
  Warranty Accrual

The
  Companys product warranty accrual reflects managements best estimate
  of probable liability under its product warranties. Management determines the
  warranty accrual based on historical experience and other currently available
  evidence.

Changes
  in the product warranty accrual for the three quarters ended March 1, 2003 were
  as follows (in thousands):

|Balance,
      May 25, 2002       | $ | 11,033 |  
|--------------------------------- | - | ------ | -
|Payments
      made               |   |       |  
|Change
      in warranty accruals |   | (1,728 | )
|                                  |  
|Balance,
      March 1, 2003      | $ | 9,305  |  
|                                  |   |       

The
  decrease in the product warranty accrual resulted from a decline in related
  product revenues for the first three quarters of fiscal 2003.

**18.** Recent
  Accounting Pronouncements

In
  August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
  or Disposal of Long-Lived Assets. This Statement supersedes SFAS No. 121, Accounting
  for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
  Of, and the accounting and reporting provisions of APB Opinion No. 30,
  Reporting the Results of OperationsReporting the Effects of Disposal
  of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
  Events and Transactions, for the disposal of a segment of a business.
  SFAS No. 144 maintains the method for recording an impairment on assets to be
  held under SFAS No. 121 and establishes a single accounting model based on the
  framework established in SFAS No. 121 for long-lived assets to be disposed of
  by sale. This statement also broadens the presentation of discontinued operations
  to include more disposal transactions. The provisions of SFAS No. 144 are effective
  for financial statements issued for fiscal year 2003. The Company adopted the
  provisions of this statement, which did not have a material impact on the financial
  results of the Company, as of the beginning of the first quarter of fiscal year
  2003.

In
  July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
  with Exit or Disposal Activities. The standard requires companies to recognize
  costs associated with exit or disposal activities when they are incurred rather
  than at the date of a commitment to an exit or disposal plan. Costs covered
  by the standard include lease termination costs and certain employee severance
  costs that are associated with a restructuring, discontinued operation, plant
  closing, or other exit or disposal activity. This statement is to be applied
  prospectively to exit or disposal activities initiated after December 31, 2002.
  The Company adopted the provisions of this statement for exit and disposal activities
  beginning January 1, 2003, which did not have a material impact on the financial
  results of the Company.

In
  October 2002, the Emerging Issues Task Force (EITF) issued EITF
  00-21, Accounting for Revenue Arrangements with Multiple Deliverables.
  This standard addresses revenue recognition accounting by a vendor for arrangements
  under which it will perform multiple revenue-generating activities. This statement
  is to be effective for the Companys fiscal year 2004. Management believes

15

---



the adoption of the provisions
  of this statement will not have a material effect on the Companys consolidated
  financial statements.

In
  November 2002, the FASB issued Interpretation 45, Guarantors Accounting
  and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
  Indebtedness of Others. The Interpretation elaborates on the existing
  disclosure requirements for most guarantees, including loan guarantees such
  as standby letters of credit. It also clarifies that at the time a company issues
  a guarantee, the company must recognize an initial liability for the fair value,
  or market value, of the obligations it assumes under the guarantee and must
  disclose that information in its interim and annual financial statements. The
  provisions related to recognizing a liability at inception of the guarantee
  for the fair value of the guarantors obligations does not apply to product
  warranties or to guarantees accounted for as derivatives. The initial recognition
  and initial measurement provisions apply on a prospective basis to guarantees
  issued or modified after December 31, 2002. The Company believes that adoption
  of the recognition and measurement provisions of Interpretation 45 will not
  have a material impact on its financial statements.

In
  December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
  CompensationTransition and Disclosurean amendment of FASB Statement
  No. 123. This standard amends SFAS No. 123, Accounting for Stock-Based
  Compensation, to provide alternative methods of transition for a voluntary
  change to the fair value based method of accounting for stock-based employee
  compensation. In addition, this standard amends the disclosure requirements
  of Statement 123 to require prominent disclosures in both annual and interim
  financial statements about the method of accounting for stock-based employee
  compensation and the effect of the method used on reported results. The transition
  provisions of SFAS No. 148 are not applicable to the Company since SFAS No.
  123 has not been adopted. The disclosure provisions of SFAS No. 148 will be
  effective for the Companys annual report on SEC Form 10-K for fiscal year
  2003 and interim condensed consolidated financial statements on SEC Form 10-Q
  for the first quarter of fiscal year 2004.

In
  January 2003, the FASB issued Interpretation 46, Consolidation of Variable
  Interest Entities.In general, a variable interest entity could
  be a corporation, partnership, trust, or any other legal structure used for
  business purposes that (a) does not have equity investors with voting or decision-making
  rights; (b) has equity investors that do not provide sufficient financial resources
  for the entity to support its activities; (c) holds voting rights that are disproportionately
  low in relation to the actual economics of the investors relationship
  with the entity, and substantially all of the entity's activities involve or
  are conducted on behalf of that investor; (d) other parties protect the equity
  investors from expected losses; or (e) parties, other than the equity holders,
  hold the right to receive the entitys expected residual returns, or the
  equity investors ́ rights to expected residual returns are capped. Interpretation
  46 requires a variable interest entity to be consolidated by a company if that
  company has a variable interest that will absorb a majority of the entitys
  expected losses if they occur, receive a majority of the entitys expected
  residual returns if they occur, or both. The consolidation requirements of Interpretation
  46 apply immediately to variable interest entities created after January 31,
  2003. The consolidation requirements apply to entities created prior to February
  1, 2003 in the first fiscal year or interim period beginning after June 15,
  2003. Certain of the disclosure requirements apply in all financial statements
  issued after January 31, 2003, regardless of when the variable interest entity
  was established. The Company does not expect the provisions of Interpretation
  46 to have a material effect on its financial position or results of operations.

16

---



Item 2. Management's
  Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking
  Statements

Statements
  and information included in this Quarterly Report on Form 10-Q that are not
  purely historical are forward-looking statements within the safe harbor
  provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking
  statements in this Quarterly Report on Form 10-Q include statements regarding
  Tektronix expectations, intentions, beliefs and strategies regarding the
  future, including cost reduction efforts and realignment expenses related to
  the economic and technology downturn, settlement of potential claims, and expected
  benefits from, and restructuring related to, the acquisition of Sony Corporations
  50% interest in Sony/Tektronix Corporation, which prior to September 30, 2002
  was equally owned by Sony Corporation and Tektronix. The Company may make other
  forward-looking statements from time to time, including in press releases and
  public conference calls and webcasts. All forward-looking statements made by
  Tektronix are based on information available to Tektronix at the time the statements
  are made, and Tektronix assumes no obligation to update any forward-looking
  statements. It is important to note that actual results are subject to a number
  of risks and uncertainties that could cause actual results to differ materially
  from those included in such forward-looking statements. Some of these risks
  and uncertainties are discussed below in the Risks and Uncertainties section
  at the end of this Managements Discussion.

General

Tektronix,
  Inc. manufactures, markets and services test, measurement and monitoring solutions
  to a wide variety of customers in many industries, including computing, communications,
  semiconductors, broadcast, education, government, military/aerospace, automotive
  and consumer electronics. Tektronix enables its customers to design, manufacture,
  deploy, monitor and service next-generation global communications networks,
  computing and advanced technologies. Revenue is derived principally through
  the development and marketing of a broad range of products including: oscilloscopes;
  logic analyzers; communication test equipment, including mobile protocol test
  equipment and radio frequency test equipment; video test equipment; and related
  components, support services and accessories. The Company maintains operations
  in four major geographies: the Americas, including the United States, Mexico,
  Canada and South America; Europe, including the Middle East and Africa; the
  Pacific, excluding Japan; and Japan.

Recent
  Transactions

Sony/Tektronix
  Redemption

During
  the second quarter, the Company acquired from Sony Corporation (Sony),
  its 50% interest in Sony/Tektronix Corporation (Sony/Tektronix)
  through redemption of Sonys shares by Sony/Tektronix for 8 billion Yen
  (Sony/Tektronix Acquisition), or approximately $65.7 million at
  September 30, 2002. This transaction closed on September 30, 2002, at which
  time the Company obtained 100% ownership of Sony/Tektronix. This transaction
  is a long-term strategic investment that will provide the Company stronger access
  to the Japanese market and the ability to leverage the engineering resources
  in Japan. The Company accounted for its investment in Sony/Tektronix under the
  equity method prior to this redemption. Prior to the close of this transaction,
  the Sony/Tektronix entity entered into an agreement to borrow up to 9 billion
  Yen, or approximately $73.9 million at an interest rate of 1.75% above the Tokyo
  Inter Bank Offering Rate. This facility, which includes certain financial covenants
  for this Japan subsidiary and the Company, expires September 29, 2006. Sony/Tektronix
  utilized $53.1 million of this credit facility to fund a portion of the redemption
  of shares from Sony and the remainder will provide operating capital for this
  Japan subsidiary. The transaction was accounted for by the purchase method of
  accounting, and accordingly, beginning on the date of acquisition the results
  of operations, financial position and cash flows of Sony/Tektronix were consolidated
  in the Companys financial statements

17

---



Subsequent
  to closing, the Company incurred $2.6 million in costs specifically associated
  with integrating the operations of this subsidiary which are recorded in Acquisition
  related costs on the Condensed Consolidated Statements of Operations.

Sale of VideoTele.com

On
  November 7, 2002, the Company completed the sale of the VideoTele.com (VT.c)
  subsidiary. VT.c was sold to Tut Systems, Inc (Tut), a publicly
  traded company, for 3,283,597 shares of Tut common stock valued at $4.2 million
  and a note receivable for $3.1 million due in November 2007. The common stock
  is classified as an available-for-sale security and both the common stock and
  the note receivable are included in Other long-term assets in the Condensed
  Consolidated Balance Sheet as of March 1, 2003. Under the terms of the sale
  agreement, the Company is restricted from selling the common stock for a period
  of 1 year. The note receivable accrues interest at an annual rate of 8%. As
  a result of this transaction, employees of VT.c on the transaction date became
  employees of the post-merger entity at the time of the closing. The sale of
  VT.c has been accounted for as a discontinued operation in accordance with SFAS
  No. 144. Accordingly, the results of VT.c operations prior to the transaction
  date, and the loss on this sale, are excluded from continuing operations and
  recorded as discontinued operations, net of tax, in the Condensed Consolidated
  Statements of Operations.

Sale of Optical Transmission
  Test Products

On
  November 5, 2002 the Company completed the sale of certain assets related to
  the Companys optical transmission test products to Digital Lightwave,
  Inc. (DLI). The assets sold include inventory, fixed assets and
  technology related to these specific optical products. Total proceeds on this
  sale were $10.0 million with $9 million received at the time of closing with
  an additional $1 million to be held in escrow pending the resolution of certain
  contingencies. Of the assets sold, $3.4 million were fixed assets and the proceeds
  received equaled the net book value resulting in no gain or loss on the sale
  of fixed assets. The remaining proceeds of $6.6 million related to the sale
  of inventory and technology, and are included in Net Sales in the Condensed
  Consolidated Statement of Operations. The net book value of inventory and technology
  assets sold was $6.2 at the time of the sale. In addition, DLI assumed warranty
  and other related liabilities of $0.6 million. The Company has also established
  a contingent liability for resolution of sale related contingencies of $1.0
  million. The net book value of the assets sold and the contingent liability
  reserve have been recorded as Cost of sales in the Condensed Consolidated Statement
  of Operations. Liabilities assumed by DLI have been recorded as a reduction
  to cost of sales.

The
  Company had previously accrued certain liabilities related to actions intended
  to reduce the operating costs associated with the design, production and sale
  of the optical transmission test products. As a result of the sale to DLI, certain
  of these liabilities were expected to be mitigated and accordingly, the Company
  reversed $2.0 million of previously accrued expenses as a reduction to Business
  realignment costs in the second quarter of fiscal year 2003 in the Condensed
  Consolidated Statements of Operations. Due to a significant deterioration of
  their financial condition, it appears more likely than not that DLI will not
  fulfill its lease obligation, which it assumed from the Company. Accordingly,
  the Company accrued $1.6 million during the third quarter of fiscal 2003 for
  the estimated exposure associated with this lease obligation which is included
  in Business realignment costs in the Condensed Consolidated Statements of Operations.

Discontinued Operations
   Optical Parametric Test Business

During
  the third quarter of fiscal year 2003, management approved and initiated an
  active plan for the sale of its optical parametric test business. This business
  has been accounted for as a discontinued operation in accordance with SFAS No.
  144, Accounting for the Impairment or Disposal of Long-Lived Assets.
  Accordingly, the results of operations of the optical parametric test business
  have been excluded from continuing operations and recorded as discontinued operations.
  The net carrying value of assets, primarily goodwill and other intangible assets,
  have been adjusted to estimated selling price less costs to sell which resulted
  in a $15.3 million writedown, net of income tax benefit of $8.4 million, included
  in loss from discontinued operations of the optical parametric test business
  for the third quarter and first three quarters of fiscal year 2003.

18

---



Business
  Realignment Costs

Business
  realignment costs represent actions to realign the Companys cost structure
  in response to significant events. Restructuring actions taken during fiscal
  year 2002 and 2003 were intended to reduce the Companys worldwide cost
  structure across all major functions in response to the dramatic economic decline,
  which severely impacted markets into which the Company sells its products. Major
  operations impacted include manufacturing, engineering, sales, marketing and
  administrative functions. The Company expects to achieve future cost savings
  primarily by reducing employee headcount. In addition to severance, the Company
  incurred other costs associated with restructuring its organization, which primarily
  represent facilities contracts and other exit costs associated with aligning
  the cost structure to appropriate levels. Management believes that the expected
  cost savings from restructuring actions implemented in fiscal years 2002 and
  2003 have resulted in the costs savings anticipated for those actions.

During the third quarter
  of fiscal year 2003, the Company incurred $14.2 million of business realignment
  costs for employee severance and a facility lease obligation. The Company incurred
  $12.6 million of severance for the termination of 185 employees resulting from
  actions to realign the Companys cost structure, including $11.2 million
  for 155 former employees of Tektronix Japan. In December 2002 the Company announced
  a plan to solicit voluntary retirements from employees of Tektronix Japan. Under
  this voluntary plan, early retirement applications were received and approved
  during the third quarter of fiscal year 2003. During the third quarter of fiscal
  year 2003, the Company also incurred $1.6 million for a facility lease obligation
  in the U.S as described in Note 3.

During
  the first three quarters of fiscal year 2003, the Company incurred $27.0 million
  of business realignment costs for employee severance, impairment of an intangible
  asset, a facility lease obligation and closure of other facilities. The Company
  incurred $18.4 million of severance for the termination of 365 employees resulting
  from actions to realign the Companys cost structure, including $11.2 million
  for 155 former employees of Tektronix Japan. Severance liabilities for actions
  taken in fiscal 2002 and 2000 were reduced by $0.5 million largely for employees
  that unexpectedly left voluntarily without severance. An impairment charge of
  $9.1 million was recognized for an intangible asset for acquired Bluetooth technology
  and was impaired due to a lower than previously anticipated market potential
  for the Companys products related to this technology. The impairment was
  determined using the present value of estimated cash flows related to the asset.
  The Company reversed $2.0 million for a facility lease obligation due to the
  sale of the Companys optical transmission test product line in the second
  quarter of fiscal 2003. As the current sub-lessee may not fulfill its lease
  obligation, the Company accrued $1.6 million during the third quarter of fiscal
  2003 as described in Note 3 to the Condensed Consolidated Financial Statements.
  Finally, $0.4 million was accrued for the closure of other facilities. These
  actions, other than the reduction of severance liabilities, do not relate to
  the previously announced 2000 Plan discussed below.

During
  the first three quarters of fiscal year 2002, the Company incurred $14.7 million
  of net business realignment costs including $14.8 million of expenses to better
  align future operating expense levels with reduced sales levels offset by $0.1
  million of reserve reversals related to the 2000 Plan. The $14.8 million of
  business realignment costs included $13.4 million of severance related costs
  for 413 employees and $1.4 million to cancel a service contract in India and
  certain office closures in Australia, Mexico, South America, Canada and Europe.
  These actions do not relate to the previously announced 2000 Plan discussed
  below.

During
  the first three quarters of fiscal year 2003, the Company paid severance and
  other accrued liabilities of $14.4 million for business realignment charges
  recorded in fiscal 2003 and $6.4 million for business realignment charges recorded
  in fiscal 2002.

At
  March 1, 2003, the Company maintained liabilities of $4.1 million related to
  the severance expenses of 70 employees and $0.2 million related to the exit
  from certain operations for business realignment activities recorded in fiscal
  year 2003. At March 1, 2003, the Company maintained liabilities of $1.3 million
  related to the severance expenses of 23 employees and $1.9 million related to
  the exit from certain operations for business realignment activities recorded
  in fiscal year 2002.

19

---



The 2000 Plan

In
  the third quarter of fiscal year 2000, the Company recognized a pre-tax charge
  of $64.8 million for certain business realignment actions. As of March 1, 2003,
  the remaining accrued liabilities under this plan was $0.7 million.

Critical
  Accounting Estimates

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

Contingent
  Liabilities

The
  Company is subject to claims or litigation concerning intellectual property,
  environmental and employment issues, as well as settlement of liabilities related
  to prior dispositions of assets. As a result, liabilities have been established
  based upon managements best estimate of the ultimate outcome of these
  contingent liabilities. The Company reviews the status of its litigation, indemnities
  and other contingencies on a regular basis and adjustments are made as information
  becomes available. As of March 1, 2003, the Company had $25.3 million recorded
  as contingent liabilities in Accounts payable and accrued liabilities on the
  Condensed Consolidated Balance Sheet.

As
  a result of divestiture activities, the Company is subject to certain contingencies
  due to contractual obligations entered into at the time of these divestitures
  and liabilities retained by the Company. Included in these liabilities is a
  reserve for contingent liabilities related to the sale of CPID on January 1,
  2000. During the third quarter of fiscal year 2003, the Company reduced the
  estimated liability by $20 million as a result of the resolution of certain
  estimated liabilities related to the sale. This reversal was reported as a gain
  on sale of CPID in discontinued operations on the Condensed Consolidated Statements
  of Operations. As of March 1, 2003, the Company had $15.4 million recorded as
  a reserve for liabilities associated with the sale of CPID, which is included
  in the $25.3 million of total contingent liabilities noted above. The $15.4
  million of reserves primarily relates to remaining liabilities retained by the
  Company at the time of sale and contingent contractual indemnities.

The Company continues to closely
  monitor the status of the CPID related contingent liabilities based on information
  received. The liability will be adjusted as settlements are completed or more
  information becomes available that will change the likely outcome. Changes to
  the estimate of liabilities or differences between these estimates and the ultimate
  amount of settlement will be recorded in Discontinued operations in the Condensed
  Consolidated Statement of Operations in the period such events occur.

The remaining $9.9 million
  of contingent liabilities includes amounts related to environmental, intellectual
  property and employment issues, as well as liabilities related to other prior
  dispositions of assets.

Intangible
  assets

The
  Company adopted the Financial Accounting Standards Board (FASB)
  Statements of Financial Accounting Standards (SFAS) No. 141, Business
  Combinations and SFAS No. 142, Goodwill and Other Intangible Assets
  on accounting for business combinations and goodwill as of the beginning of
  fiscal year 2002. Accordingly, the Company no longer amortizes goodwill from
  acquisitions, but continues to amortize other acquisition-related intangibles
  and costs. As of March 1, 2003, the Company has $77.0 million of goodwill recorded
  in Other long-term assets on the Condensed Consolidated Balance Sheet.

20

---



In conjunction with the implementation
  of the new accounting rules for goodwill, the Company completed a goodwill impairment
  analysis as of the beginning of fiscal year 2002 with an update during the second
  quarter ended November 24, 2001, and identified no impairment. As required by
  the new rules, the Company performed an impairment analysis during the second
  quarter ended November 30, 2002, and again identified no impairment. The impairment
  review is based on a discounted cash flow approach that uses estimates of future
  market share and revenues and costs for the reporting units as well as appropriate
  discount rates. The estimates used are consistent with the plans and estimates
  that the Company uses to manage the underlying businesses. However, if the Company
  fails to deliver new products for these groups, if the products fail to gain
  expected market acceptance, or if market conditions in the related businesses
  are unfavorable, revenue and cost forecasts may not be achieved, and the Company
  may incur charges for impairment of goodwill.

During
  the third quarter of fiscal year 2003, management approved and initiated an
  active plan for the sale of its optical parametric test business. This business
  has been accounted for as a discontinued operation in accordance with SFAS No.
  144. Accordingly, the results of operations of this the optical parametric test
  business have been excluded from continuing operations and recorded as discontinued
  operations. The net carrying value of assets, primarily goodwill and other intangible
  assets, have been adjusted to estimated selling price less costs to sell which
  resulted in a $15.3 million writedown, net of income tax benefit of $8.4 million,
  included in loss from discontinued operations of the optical parametric test
  business for the first three quarters of fiscal year 2003.

For
  intangible assets with definite useful lives, the Company amortizes the cost
  over the estimated useful life and assesses any impairment by estimating the
  future cash flow from the associated asset in accordance with SFAS No. 144,
  Accounting for the Impairment or Disposal of Long-Lived Assets.
  As of March 1, 2003, the Company had $20.9 million of non-goodwill intangible
  assets recorded in Other long-term assets, which includes patents and licenses
  for certain technology. If the estimated undiscounted cash flow related to these
  assets decreases in the future or the useful life is shorter than originally
  estimated, the Company may incur charges to impair these assets. The impairment
  is based on the estimated discounted cash flow associated with the asset. An
  impairment could result if the underlying technology fails to gain market acceptance,
  the Company fails to deliver new products related to these technology assets,
  the products fail to gain expected market acceptance or if market conditions
  in the related businesses are unfavorable.

During
  the first three quarters of fiscal year 2003, the Company impaired an intangible
  asset related to acquired Bluetooth technology resulting in an expense of $9.1
  million, which is included in Business realignment costs in the Condensed Consolidated
  Statement of Operations.

Inventories

Inventories
  are stated at the lower of cost or market. Cost is determined based on currently-adjusted
  standard costs, which approximates actual cost on a first-in, first-out basis.
  The Companys inventory includes raw materials, work-in-process, finished
  goods and demonstration equipment of $102.9 million as of March 1, 2003. The
  Company reviews its recorded inventory and estimates a write-down for obsolete
  or slow-moving items. These write-downs reduce the inventory value of these
  obsolete or slow-moving items to their net realizable value. Such estimates
  are difficult to make under the current economic conditions. The write-down
  is based on current and forecasted demand and therefore, if actual demand and
  market conditions are less favorable than those projected by management, additional
  write-downs may be required. In addition, excessive amounts of the used equipment
  in the marketplace can negatively impact the net realizable value of the Companys
  demonstration equipment. If actual market conditions are different than anticipated,
  Cost of sales in the Condensed Consolidated Statement of Operations may be different
  than expected in the period in which more information becomes available.

Pension
  plan

Benefit
  plans are a significant cost of doing business and yet represent obligations
  that will be settled far in the future and therefore are subject to certain
  estimates. Pension accounting is intended to reflect the recognition of future
  benefit costs over the employee's approximate service period based on the terms
  of the plans and the investment and funding decisions made by the Company. The
  accounting standards

21

---



require that management make
  assumptions regarding such variables as the expected long-term rate of return
  on assets and the rate applied to determine service cost and interest cost to
  arrive at pension income and cost for the year. As the rate of return on plan
  assets assumption is a long-term estimate, it can differ materially from the
  actual return realized on plan assets in any given year, especially when markets
  are highly volatile.

Excluding
  the pension plan related to the newly acquired Japan subsidiary, the Companys
  estimated long-term rate of return on plan assets for fiscal year 2003 is 9.1%.
  A one percent change in the estimated long-term rate of return on plan assets
  would have resulted in a change in operating income of $4.3 million for the
  three quarters ended March 1, 2003. Included in income for the three quarters
  ended March 1, 2003 is $6.5 million of income generated by the recognition of
  return on plan assets in excess of the associated pension expense. The assumed
  return on plan assets will likely differ from the actual return on plan assets.
  To the degree the actual return on plan assets is greater or less than the assumed
  return, an unrecognized gain or loss will accumulate, which may impact net income
  over future periods.

In
  connection with the Sony/Tektronix Acquisition, the Company assumed the assets
  and liabilities of the Japan subsidiary. Included in the liabilities assumed
  was a net pension liability of $61.1 million as of September 30, 2002, the acquisition
  date. The estimated return on plan assets assumed for this plan is 6.5%. Only
  five months of operations were included in the Consolidated Statement of Operations
  as of March 1, 2003. Through March 1, 2003, $3.6 million of net expense has
  been recognized associated with this Japan based pension plan. This net expense
  is based on estimates, in the same manner discussed for the above plans. To
  the degree the actual return on plan assets is greater or less than the estimated
  return, an unrecognized gain or loss will accumulate, which may impact net income
  in future years.

Management
  will continue to assess the expected long-term rate of return on plan assets
  assumption based on relevant market conditions as prescribed by accounting principles
  generally accepted in the United States of America, and will make adjustments
  to the assumption as appropriate. Pension income or expense is allocated to
  Cost of sales, Research and development and Selling, general and administrative
  expenses in the Condensed Consolidated Statements of Operations.

At
  May 25, 2002, the most recent valuation date, the accumulated benefit obligation
  exceeded the fair value of plan assets for certain pension plans. In accordance
  with SFAS 87, "Employers' Accounting for Pensions", a minimum pension liability
  is recognized for the unfunded accumulated benefit obligation. Recognition of
  an additional minimum liability is required if an unfunded accumulated benefit
  obligation exists and (a) an asset has been recognized as prepaid pension cost,
  (b) the liability already recognized as unfunded accrued pension cost is less
  than the unfunded accumulated benefit obligation, or (c) no accrued or prepaid
  pension cost has been recognized. The Company has recognized an additional minimum
  liability in accordance with SFAS 87. Since the additional minimum liability
  exceeded unrecognized prior service cost, the excess (which would represent
  a net loss not yet recognized as net periodic pension cost) is reported as a
  component of other comprehensive income, net of applicable income tax benefit.
  The Company initially recorded an additional pension liability at the end of
  fiscal year 2002, the first measurement date where the accumulated benefit obligation
  exceeded the fair value of plan assets. As of March 1, 2003 the additional pension
  liability included in other comprehensive income was $98.7 million, net of income
  taxes of $53.2 million. The implication of the additional pension liability
  is that it may reduce net income in future years by reducing the market related
  value of plan assets, thereby reducing the asset base upon which the Company
  recognizes a return. Additionally, the Company may find it necessary to fund
  additional pension assets, which would increase the market related value of
  plan assets upon which the Company recognizes a return, but would reduce operating
  cash and future interest earnings on that cash.

Income
  Taxes

The
  Company is subject to taxation from federal, state and international jurisdictions.
  The Companys annual provision for income taxes and the determination of
  the resulting deferred tax assets and liabilities involves a significant amount
  of management judgment and is based on the best information available at the
  time. The actual income tax liabilities to the jurisdictions with respect to
  any fiscal year are ultimately determined long after the financial statements
  have been published. The Company maintains reserves for

22

---



estimated tax exposures in
  jurisdictions of operation. These tax jurisdictions include federal, state and
  various international tax jurisdictions. Exposures are settled primarily through
  the settlement of audits within these tax jurisdictions, but can also be affected
  by changes in applicable tax law or other factors, which could cause management
  of the Company to believe a revision of past estimates is appropriate. Management
  believes that an appropriate liability has been established for estimated exposures.
  The liabilities are frequently reviewed for their adequacy. As of March 1, 2003,
  the Company was subject to income tax audits for fiscal years 2001 and 2002.
  The liabilities associated with these years will ultimately be resolved when
  events such as the completion of audits by the taxing jurisdictions occur. To
  the extent the audits or other events result in a material adjustment to the
  accrued estimates, the effect would be recognized in Income tax (benefit) expense
  in the Condensed Consolidated Statement of Operations in the period of the event.

In
  September 2002, the Company negotiated a settlement with the United States Internal
  Revenue Service (IRS) with respect to their audit of the fiscal
  years 1998 through 2000. As a result of the audits settled and the current audit
  activity in progress, the Company revised its estimated liability for income
  taxes as of August 31, 2002. The revision resulted in a $12.5 million net reduction
  of previously estimated liabilities. This had the effect of reducing Accounts
  payable and accrued liabilities on the Condensed Consolidated Balance Sheet
  and decreased the Income tax expense on the Condensed Consolidated Statement
  of Operations in the first quarter of fiscal year 2003. With the completion
  of the IRS audit for fiscal years 1998 through 2000, the Companys open
  years for United States federal purposes are now 2001 and 2002. As of March
  1, 2003, the Company maintains estimated liabilities for open IRS and other
  taxing jurisdiction assessments, as discussed above. The settlement of additional
  open audits or changes in other circumstances could result in further material
  adjustment to the estimated liability and the associated tax expense in the
  period in which such events occur.

Judgment
  is also applied in determining whether deferred tax assets will be realized
  in full or in part. When it is more likely than not that all or some portion
  of specific deferred tax assets such as foreign tax credit carryovers or net
  operating loss carryforwards will not be realized, a valuation allowance must
  be established for the amount of the deferred tax assets that are determined
  not to be realizable. As of March 1, 2003, the Company had established a valuation
  allowance against deferred tax assets, and had not established valuation allowances
  against other deferred tax assets based on tax strategies planned to mitigate
  the risk of impairment to these assets. Accordingly, if the Companys facts
  or financial results were to change thereby impacting the likelihood of realizing
  the deferred tax assets, judgment would have to be applied to determine changes
  to the amount of the valuation allowance required to be in place on the financial
  statements in any given period. The Company continually evaluates strategies
  that could allow the future utilization of its deferred tax assets, including
  those related to Tektronix Japan. During the third quarter of fiscal 2003, the
  Company implemented certain operational changes that were consistent with our
  tax planning strategies that are expected to result in the utilization of certain
  deferred tax assets for which valuation allowances had previously been established.

Third Quarter Fiscal
  Year 2003 Compared to Third Quarter Fiscal Year 2002

Economic
  Conditions

Beginning
  in fiscal year 2001 and continuing during fiscal year 2002, economic conditions
  have had a negative impact on many markets into which the Company sells products
  including, but not limited to, optical design and manufacturing, mobile handset
  manufacturing, automated test equipment, telecommunications and semiconductor
  design and manufacturing. Capital spending within these industries, the area
  that most impacts the Company, declined significantly in fiscal year 2002. The
  telecommunications and optical industries experienced the most substantial downturns
  during fiscal year 2002. These conditions adversely impacted the Company throughout
  fiscal year 2002, and have continued into fiscal year 2003. In response to the
  reduced level of orders and associated sales, the Company incurred business
  realignment costs of $27.0 million during fiscal year 2002. These costs were
  incurred in an effort to reduce fixed costs in future periods by reducing headcount
  and restructuring operations in certain foreign and domestic locations. During
  the first three quarters of fiscal year 2003, the Company incurred business
  realignment costs of $27.0 million, as discussed above in Business Realignment
  Costs.

23

---



Management of the Company
  anticipates that business realignment and acquisition related costs of approximately
  $10 million to $12 million will be incurred in the fourth quarter of fiscal
  year 2003 to further reduce the Companys cost structure in order to continue
  to improve its operating model at current sales levels. Management of the Company
  is unable to predict the ultimate severity and duration of the recent economic
  conditions or their impact on the Company.

Product
  Orders

Product
  orders consist of cancelable commitments to purchase currently produced products
  by customers with delivery scheduled generally within six months of being recorded.
  Product orders for the third quarter of fiscal year 2003 were $179.8 million,
  an increase of $7.5 million from product orders of $172.3 million in the third
  quarter of fiscal year 2002. Order growth resulted from strong orders in our
  mobile protocol test and radio frequency test product lines, and the consolidation
  of Tektronix Japan, offset by declines in our optical products and the impact
  of order timing for general purpose products. Product orders for the first three
  quarters of fiscal year 2003 were $550.6 million, an increase of $33.3 million
  or 6% from product orders of $517.3 million in the first three quarters of fiscal
  year 2002. This increase was primarily due the incremental impact of $22.3 million
  from acquisition of the Japan subsidiary contributed to this increase over the
  prior year comparable period. To a lesser extent, the increase was also due
  to an extra week of operations in the Companys first quarter of fiscal
  year 2003, which had 14 weeks as compared to 13 weeks in the first quarter of
  the prior year, as well as higher than average cancellations in the first quarter
  of fiscal year 2002.

In
  the third quarter, orders from the Americas were $71.7 million, a decrease of
  $12.8 million or 15% from the third quarter of the prior year. This decrease
  was primarily attributable to orders decline in the United States, which decreased
  to $66.6 million, or 14%, from $77.2 million in the prior year. The decline
  in the United States as compared with the prior year is primarily related to
  the continued decline in the economic conditions of the end markets into which
  the Company sells its products. See the Economic Conditions section above. Management
  of the Company believes that uncertainty related to geopolitical conditions
  has also contributed to the decrease in orders in the United States.

Orders
  from Japan were $32.3 million, an increase of $15.8 million or 96% from the
  third quarter fiscal year 2002 orders. The increase in Japan is primarily due
  to the incremental impact of inclusion of orders from the newly acquired Japan
  subsidiary. In addition, orders from the Pacific, excluding Japan, were $37.1
  million, up $3.3 million or 10% from the third quarter of the prior year. Orders
  from Europe increased to $38.7 million, an increase of $1.2 million or 3% from
  the third quarter of the prior year.

For
  the first three quarters of fiscal year 2003, orders from the Americas were
  $236.6 million, a decrease of $4.5 million or 2% from the first three quarters
  of the prior year. This decrease was primarily due to orders from the Other
  Americas, which decreased to $16.0 million, or 25% from orders of $21.2 million
  in the prior year. Orders from the United States of $220.6 million for the first
  three quarters of fiscal 2003 increased slightly from $219.9 million in the
  prior year. The slight growth in the United States as compared with the prior
  year is primarily attributable to the extra week in the current fiscal year
  as well as higher than average cancellations in the first quarter of fiscal
  year 2002. Orders from Japan were $72.5 million, an increase of $28.7 million
  or 66% from the first three quarters of fiscal year 2002. This increase in Japan
  orders is primarily due to the $22.3 million incremental impact from inclusion
  of orders from the newly acquired Japan subsidiary in the second quarter of
  fiscal year 2003. In addition, orders from the Pacific, excluding Japan, were
  $120.4 million, up $15.4 million or 15% from the first three quarters of the
  prior year. Orders from Europe declined to $120.9 million, a decrease of $6.4
  million or 5% from the first three quarters of fiscal year 2002 as a result
  of continued difficult economic conditions in the Europe region.

Net
  Sales

Net
  sales for the third quarter of fiscal year 2003 were $188.3 million, a decrease
  of $11.0 million from net sales of $199.3 million in the third quarter of the
  prior year. Net sales for the first three quarters of fiscal year 2003 were
  $593.4 million, a decrease of $21.2 million from net sales of $614.6 million
  in the same period of the prior year. The decreases in net sales are primarily
  attributable to continued weakness in the markets into which the Company sells
  it products as well as lower backlog in the current year as compared with the
  prior year. As backlog levels are reduced, the Company becomes more

24

---



reliant on the timing of
  order receipts within the quarter to convert orders to sales. The decline in
  sales for the third quarter of fiscal year 2003 compared to the prior year was
  partially offset by $14.1 million of sales in the third quarter of fiscal year
  2003 resulting from the incremental impact of consolidation of the newly acquired
  Japan subsidiary. The decline in net sales for the first three quarters of fiscal
  year 2003 compared to the prior year was offset by $20.2 million of sales resulting
  from the incremental impact of consolidation of the newly acquired Japan subsidiary
  and $6.6 million of sales related to the sale of optical transmission test products
  in the second quarter of fiscal year 2003.

In
  the third quarter of fiscal year 2003, net sales from the Americas, including
  the United States, were $75.6 million, a decrease of $25.5 million or 25% from
  $101.1 million in the third quarter of the prior year. Net sales from Japan
  were $31.7 million, an increase of $13.1 million or 71% from the third quarter
  fiscal year 2002 sales, primarily due to a $14.1 million increase resulting
  from the incremental impact of consolidation of the newly acquired Japan subsidiary.
  In addition, sales from the Pacific, excluding Japan, were $35.9 million, up
  $2.4 million or 7% from the third quarter of the prior year. Sales from Europe
  declined to $45.2 million, a decrease of $1.0 million or 2% from the third quarter
  of fiscal year 2002. The decreases in the Americas and Europe reflect the trend
  of orders in these regions during these comparative time frames. The increase
  in the Pacific, excluding Japan was attributable to the ability to ship orders
  based on the timing of orders received within the quarter, as overall demand
  in orders for this region has increased over the prior year.

For
  the first three quarters of fiscal year 2003, net sales from the Americas were
  $273.4 million, a decrease of $48.6 million or 15% from the first three quarters
  of the prior year. This decrease comprised the United States, which decreased
  to $257.5 million, down 14%, from $298.1 million in the prior year and the Other
  Americas, which decreased to sales of $16.0 million, down 33% from $23.9 million
  in the prior year. The decrease in the Americas was primarily the result of
  lower backlog levels, which constrained the Companys ability to generate
  sales through the reduction of backlog.

Net
  sales from Japan were $69.5 million, an increase of $18.8 million or 37% from
  sales in the first three quarters of fiscal year 2002, primarily due to a $20.2
  million increase resulting from the incremental impact of consolidation of the
  newly acquired Japan subsidiary. In addition, sales from the Pacific, excluding
  Japan, were $119.3 million, up $19.2 million or 19% from the first three quarters
  of the prior year. This increase is the result of increased orders in this region
  during these comparative periods. Sales from Europe declined to $131.1 million,
  a decrease of $10.6 million or 8% from the first three quarters of fiscal year
  2002 as a result of the decline in orders during these comparative periods.

Gross
  Profit and Gross Margin

Gross
  profit was $100.4 million for the third quarter of fiscal year 2003, nearly
  flat from gross profit of $99.7 million for the third quarter of fiscal year
  2002. The impact of lower net sales in the current quarter was offset by relatively
  lower cost of sales compared to the prior year. Gross margin as a percentage
  of net sales was 53% in the third quarter of fiscal year 2003 compared to 50%
  in the third quarter of the prior year. A primary reason for this increase in
  gross margin is the positive impact of consolidating Tektronix Japan in the
  current year. Prior to September 30, 2002, sales to Japan were made through
  Sony/Tektronix, the Companys 50% joint venture. Accordingly, these sales
  had lower gross margin under the joint venture structure as they represented
  sales to an unconsolidated distributor. Following the acquisition of Sony/Tektronix
  on September 30, 2002, the results of this entity, now known as Tektronix Japan,
  are consolidated into the Companys results of operations. Therefore, revenue
  and gross margin associated with end-user sales in Japan are now recognized,
  which has the effect of increasing gross margin. An additional reason for the
  increase in gross margin is an increase in the sales mix of higher margin new
  oscilloscope and mobile protocol products in the current year quarter as compared
  with the prior year. Additionally, charges associated with the impairment of
  inventory decreased in the current year as compared with the prior year, declining
  $0.6 million.

For
  the first three quarters of fiscal year 2003, gross profit was $301.5 million,
  a decrease of $4.8 or 2% from gross profit in the same period last year. The
  decrease was attributable to lower sales volume in the current fiscal year.
  Gross margin as a percentage of net sales was 51% for the first three quarters
  of fiscal year 2003 compared to 50% for the same period last year. The slight
  improvement in gross margin was attributable to positive impact of consolidating
  Tektronix Japan since the second quarter of the

25

---



current year and increase
  in the sales mix of higher margin products during the third quarter of the current
  year. In addition, year to date charges associated with the impairment of inventory
  decreased as compared with the prior year comparable period by $1.6 million.

Operating
  Expenses

For
  the third quarter of fiscal year 2003, operating expenses, including business
  realignment and acquisition related costs, were $105.4 million, an increase
  of $20.3 million from $85.1 million for the third quarter of fiscal year 2002.
  Operating expenses for the third quarter of fiscal year 2003 include $13.5 million
  of incremental operating expenses resulting from the consolidation of Tektronix
  Japan. Business realignment costs and acquisition related costs were $15.0 million,
  an increase of $12.6 million from $2.4 million for the third quarter of fiscal
  year 2002. Offsetting decreases in operating expenses for the third quarter
  of fiscal year 2003 were primarily due to reduction in employee headcount resulting
  from cost reduction actions taken in fiscal years 2002 and 2003. This resulted
  in an operating loss of $5.0 million as compared with operating income of $14.6
  million in the same quarter of the prior year.

For
  the first three quarters of fiscal year 2003, operating expenses, including
  business realignment and acquisition related costs, were $290.7 million, an
  increase of $11.6 million from $279.1 million for the first three quarters of
  fiscal year 2002. Operating expenses for the first three quarters of fiscal
  year 2003 include $23.0 million of incremental operating expenses resulting
  from the consolidation of Tektronix Japan. Business realignment costs and acquisition
  related costs were $29.6 million, an increase of $14.9 million from $14.7 million
  for the third quarter of fiscal year 2002. Offsetting decreases in operating
  expenses for the third quarter of fiscal year 2003 were primarily due to reduction
  in employee headcount resulting from cost reduction actions taken in fiscal
  years 2002 and 2003. This resulted in operating income of $10.9 million, or
  2% of net sales during the first three quarters of the current year, compared
  with operating income of $27.2 million, or 4% of net sales in the same period
  of the prior year.

Research
  and development expenses were $26.7 million during the third quarter of fiscal
  year 2003, which decreased slightly from $27.0 million in the same quarter in
  the prior year. The decrease in research and development expenses, largely from
  lower materials spending due to timing of large projects and headcount reductions,
  was offset by incremental expenses of $2.4 million resulting from the consolidation
  of Tektronix Japan. As a percentage of net sales, research and development expenses
  remained flat at 14%. During the first three quarters of fiscal year 2003, Research
  and development expenses were $75.9 million or 13% of net sales, as compared
  with $89.2 million or 15% of net sales in the same period of the prior year.
  These decreases are the net result of higher spending associated with the timing
  of new product launches in fiscal year 2002 partially offset by an extra week
  of operations in fiscal year 2003 and the incremental impact of consolidation
  of research and development expenses of $4.2 million from Tektronix Japan.

Selling,
  general and administrative expenses were $63.8 million or 34% of net sales for
  the third quarter of fiscal year 2003, an increase of $10.0 million from $53.8
  million, or 27% of net sales for the prior year. The increase in selling, general
  and administrative expenses for the third quarter of fiscal year 2003 includes
  incremental expenses of $11.1 million resulting from the consolidation of Tektronix
  Japan. During the first three quarters of fiscal year 2003, Selling, general
  and administrative expenses were $182.9 million or 31% of net sales, an increase
  of $15.0 million, as compared with $167.9 million or 27% in the same period
  in the prior year. The increase in selling, general and administrative expenses
  for the first three quarters of fiscal year 2003 reflects the incremental impact
  of the consolidation of Tektronix Japan of $18.9 million and an extra week of
  operations in fiscal year 2003, partially offset by the impact of headcount
  reductions and other cost restructuring actions enacted by the Company.

Equity
  in business ventures loss represents the Companys 50% share of net
  loss from Sony/Tektronix. During the second quarter of fiscal year 2003, the
  Company completed the acquisition of Sony/Tektronix. Results prior to the date
  of acquisition are included in Equity in business ventures loss at Tektronix
  ownership percentage. Results subsequent to the acquisition date have been consolidated
  in the operating results of the Company. See the discussion in Recent Transactions
  section of the Managements Discussion and Analysis for further information
  on this acquisition. Equity in business ventures loss was $2.9 million
  for the first three quarters of fiscal year 2003, compared with equity losses
  of $3.1 million during the same period a year ago.

26

---



During
  the third quarter of fiscal year 2003, the Company incurred $14.2 million of
  business realignment costs for employee severance and a facility lease obligation.
  The Company incurred $12.6 million of severance for the termination of 185 employees
  resulting from actions to realign the Companys cost structure, including
  $11.2 million for 155 former employees of Tektronix Japan. In December 2002
  the Company announced a plan to solicit voluntary retirements from employees
  of Tektronix Japan. Under this voluntary plan, early retirement applications
  were received and approved during the third quarter of fiscal year 2003. During
  the third quarter of fiscal year 2003, the Company also incurred $1.6 million
  for a facility lease obligation in the U.S as described in Note 3.

During
  the first three quarters of fiscal year 2003, the Company incurred $27.0 million
  of business realignment costs for employee severance, impairment of an intangible
  asset, a facility lease obligation and closure of other facilities. The Company
  incurred $18.4 million of severance for the termination of 365 employees resulting
  from actions to realign the Companys cost structure, including $11.2 million
  for 155 former employees of Tektronix Japan. Severance liabilities for actions
  taken in fiscal 2002 and 2000 were reduced by $0.5 million largely for employees
  that unexpectedly left voluntarily without severance. An impairment charge of
  $9.1 million was recognized to writedown an intangible asset for acquired Bluetooth
  technology that was impaired due to a lower than previously anticipated market
  potential for the Companys products related to this technology. The impairment
  was determined using the present value of estimated cash flows related to the
  asset. The Company reversed $2.0 million for a facility lease obligation due
  to the sale of the Companys optical transmission test product line in
  the second quarter of fiscal 2003. As the current sub-lessee may not fulfill
  its lease obligation, the Company accrued $1.6 million during the third quarter
  of fiscal 2003 as described in Note 3 to the Condensed Consolidated Financial
  Statements. Finally, $0.4 million was accrued for the closure of other facilities.
  These actions, other than the reduction of severance liabilities, do not relate
  to the previously announced 2000 Plan discussed below.

During
  the third quarter and first three quarters of fiscal year 2003, the Company
  incurred acquisition related costs of $0.8 million and $2.6 million, respectively.
  These costs relate to the Sony/Tektronix Acquisition completed during the second
  quarter of fiscal year 2003. See the discussion in Recent Transactions section
  of the Managements Discussion and Analysis for further information on
  this acquisition.

During
  the third quarter and the first three quarters of fiscal year 2003, the Company
  recognized a gain on disposal of fixed assets of $0.1 million and $0.6 million,
  respectively. This compares with a loss on sale of fixed assets of $0.4 million
  for the third quarter of the prior year and $4.2 million for the first three
  quarters of the prior fiscal year. The change from these prior year comparative
  periods is largely due to the $3.2 million impairment of a building in the second
  quarter of the prior fiscal year.

Non-Operating
  Income/Expense

Interest
  expense was $1.2 million for the third quarter of fiscal year 2003, as compared
  with $2.8 million in the same quarter of the prior year. For the first three
  quarters of fiscal year 2003, interest expense was $4.6 million as compared
  with $8.1 million in the same period of the prior year. The overall decrease
  in interest expense is due to a reduction in the average balance of outstanding
  debt due to the Companys retirement of outstanding long-term debt and
  the extinguishment of $41.8 million of long-term debt on the scheduled payment
  date of August 15, 2002.

Interest
  income was $6.8 million in the third quarter of fiscal year 2003 as compared
  with $7.7 million in the same quarter of the prior year. For the first three
  quarters of fiscal year 2003, interest income was $21.6 million as compared
  with $26.3 million in the same period of the prior year. The decrease in interest
  income can be primarily attributed to lower returns on investments in the first
  three quarters of fiscal year 2003 as compared to investment returns in the
  same period of fiscal year 2002 due to decreases in interest rates and to a
  lesser degree, a lower average balance of cash and marketable investments during
  the comparative periods.

Other
  expense, net was $0.4 million in the third quarter of fiscal year 2003 as compared
  with $1.2 million in the same quarter of the prior year. For the first three
  quarters of fiscal year 2003, other expense

27

---



was $2.5 million as compared
  with $4.8 million in the same period of the prior year. This includes items
  such as foreign currency exchange and other miscellaneous fees and expenses.

Income
  Taxes

Income
  tax (benefit) expense from continuing operations was a net benefit of $0.7 million
  in the third quarter of fiscal year 2003 as compared with an expense of $6.4
  million in the same quarter of the prior year. During the third quarter of fiscal
  year 2003, management of the Company reduced the effective tax rate for continuing
  operations from 35% to 32% for the year. This decrease in the effective tax
  rate resulted from the implementation of certain operational changes that were
  consistent with our tax planning strategies. Since the provision for income
  tax expense in the first two quarters of fiscal year 2003 was based on an effective
  tax rate of 35%, a benefit of $0.8 million was recognized in the third quarter
  of fiscal year 2003 to reflect this change in estimate. For the first three
  quarters of fiscal year 2003, the income tax benefit was $4.3 million as compared
  with expense of $14.2 million in the first three quarters of the prior year.
  The benefit for the first three quarters of fiscal year 2003 includes a $12.5
  million income tax benefit resulting from the favorable settlement of the IRS
  audit of the Companys fiscal years 1998, 1999 and 2000. The effective
  tax rate, excluding the effect of the IRS settlements, was 32% and 35% for fiscal
  years 2003 and 2002, respectively.

Income
  from Continuing Operations

For
  the third quarter of fiscal year 2003, income from continuing operations was
  $0.9 million, compared to $11.9 million for the third quarter of fiscal year
  2002. Income from continuing operations for the third quarter of fiscal year
  2003 includes a net loss of $10.3 million from the incremental impact of consolidating
  Tektronix Japan. For the first three quarters of fiscal year 2003, income from
  continuing operations was $29.8 million, compared to $26.4 million for the first
  three quarters of fiscal year 2002. Income from continuing operations for the
  first three quarters of fiscal year 2003 includes a net loss of $13.4 million
  from the incremental impact of consolidating Tektronix Japan.

Discontinued
  Operations

In
  the third quarter of fiscal year 2003, management approved and initiated an
  active plan for the sale of the optical parametric test business. For the third
  quarter of fiscal year 2003 and first three quarters of fiscal year 2003, the
  loss from discontinued operations of the optical parametric test business of
  $15.8 million and $17.3 million, respectively, includes a $15.3 million writedown,
  net of income tax benefit of $8.4 million, of the carrying value of net assets
  which were adjusted to estimated selling price less costs to sell.

During
  the third quarter of fiscal year 2003, the Company reversed accrued liabilities
  totaling $13 million, net of tax, in the third quarter of fiscal year 2003,
  which were originally recorded in connection with the sale of the Color Printing
  and Imaging Division in January 2000. These amounts were reversed as the result
  of the resolution of certain estimated liabilities.

In
  the first quarter of fiscal year 2002, the Company reached settlement on certain
  outstanding contingencies related to the sale of the Color Printing and Imaging
  division. The settlement of these contingencies resulted in an additional gain
  on the sale of $0.9 million, net of tax, for the first three quarters of fiscal
  year 2002.

In
  the third quarter of fiscal year 2003, the Company paid additional transaction-related
  fees of $0.1 million, net of tax, related to the sale of the VT.c subsidiary,
  which was sold on November 7, 2002 as described in the Recent Transactions section
  above. In the third quarter of fiscal year 2002, VT.c had a net loss from operations
  of $1.4 million, which was classified as discontinued operations.

For
  the first three quarters of fiscal year 2003, the Company recognized loss from
  discontinued operations of $3.1 million related to the VT.c subsidiary, which
  comprised a loss of $2.6 million from operations of VT.c during the year prior
  to the sale and a loss of $0.5 million from the sale of the operations.

28

---



For
  the first three quarters of fiscal year 2002, VT.c had a net loss of $0.7 million,
  which were classified as discontinued operations.

Net
  Earnings/Loss

The
  Company recognized a net loss of $2.1 million for the third quarter of fiscal
  year 2003, down from net earnings of $10.4 million for the third quarter of
  fiscal year 2002. This decrease was primarily due to the $15.0 million of pre-tax
  business realignment and acquisition related costs and $15.8 million net loss
  from discontinued operations of the optical parametric test business, offset
  by the $13.0 million reversal of liabilities, net of tax, related to the sale
  of the Color Printing and Imaging division in the third quarter of fiscal year
  2003.

For
  the first three quarters of fiscal year 2003, the Company recognized net earnings
  of $22.4 million, down from $26.6 million recorded for the same period in the
  prior year. This decrease was due to a number of factors, which include a $14.9
  million pre-tax increase in business realignment costs and acquisition related
  costs over the prior year period and $17.3 net loss from discontinued operations
  of the optical parametric test business. These charges were partially offset
  by $13.0 million reversal of liabilities, net of tax, related to the sale of
  the Color Printing and Imaging division discussed above; and the $12.5 million
  income tax benefit from favorable settlement of the IRS audit recorded in the
  first three quarters of fiscal year 2003.

Earnings
  Per Share

For
  the third quarter of fiscal year 2003, the Company recognized a $0.02 net loss
  per share on a basic and diluted basis. For the third quarter of fiscal year
  2002, the Company recognized basic and diluted earnings per share of $0.11.
  The decrease in earnings per share is a result of decreased net earnings discussed
  above partially offset by a decrease in the weighted average basic and diluted
  shares outstanding due to shares repurchased by the Company during fiscal year
  2002 and the first three quarters of fiscal year 2003.

For
  the first three quarters of fiscal year 2003, the Company recognized basic and
  diluted earnings per share of $0.26 and $0.25, respectively. For the first three
  quarters of fiscal year 2002, the Company recognized basic and diluted earnings
  per share of $0.29. The decrease in earnings per share is a result of decreased
  net earnings discussed above and a decrease in the weighted average basic and
  diluted shares outstanding due to shares repurchased by the Company during fiscal
  year 2002 and the first three quarters of fiscal year 2003.

29

---



Financial
  Condition, Liquidity and Capital Resources

Financial
  Condition

At
  March 1, 2003, the Companys net working capital was $330.3 million, a
  decrease of $173.6 million from May 25, 2002. Current assets decreased $208.2
  million primarily due to a decrease in cash and cash equivalents and short-term
  investments as the Company converted $111.2 million of its cash and cash equivalents
  and short-term investments to long-term marketable investments. In addition,
  the Company extinguished $41.8 million of debt at its due date in August 2002
  and repurchased $97.0 million of its common stock. The Company also had $14.4
  million of assets related to the VT.c subsidiary as of May 25, 2002, which were
  sold during the second quarter of fiscal year 2003 and $24.9 million of assets
  related to the optical parametric test business, which were written down to
  estimated selling price less costs to sell during the third quarter of fiscal
  year 2003. These decreases were partially offset by $38.3 million in cash provided
  by operations and $66.2 million of current assets consolidated as a result of
  the Sony/Tektronix Acquisition. Other notable changes in current assets include
  inventories, which decreased $14.4 million to $102.9 million as a result of
  reduction of inventory related to the sale of the optical transmission test
  products described above in Recent Transactions, the Company's ongoing efforts
  to reduce levels of demonstration equipment, improve inventory turns, and to
  a lesser extent, inventory write-offs incurred during the first three quarters
  of fiscal year 2003. This was partially offset by the addition of $17.3 million
  of inventory consolidated as a result of the Sony/Tektronix Acquisition. Current
  liabilities decreased $34.6 million to $239.1 million as of March 1, 2003 from
  $273.7 million at May 25, 2002. This decrease was primarily due to a reduction
  in accounts payable of $46.8 million due to the reversal of contingent liabilities
  related to the sale of CPID; reversal of income tax reserves resulting from the
  favorable IRS audit; and lower operating expenses in fiscal year 2003. This
  was offset by the assumption of $22.4 million in accounts payable and accrued
  liabilities consolidated as a result of the Sony/Tektronix Acquisition. The
  Current portion of long-term debt increased $16.0 million, which is primarily
  due to the reclassification from long-term to short-term of the $57.3 million
  due August 2003, reduced by the $41.8 million payment of debt on August 15,
  2002.

Property,
  plant and equipment, net, increased $21.3 million during the first three quarters
  of fiscal year 2003 to $152.6 million. The increase was due mainly to $36.8
  million of fixed assets acquired in the Sony/Tektronix Acquisition and approximately
  $11.7 million in capital expenditures during the same period. This increase
  was partially offset by $24.4 million of depreciation expense and $3.4 million
  disposed of in the sale of the optical transmission test product line.

The
  Company funded the U.S. pension plan with $15.0 million during the first quarter
  of fiscal year 2003 based on an agreement with the Pension Benefit Guaranty
  Company. This funding reduced Other long-term liabilities on the Condensed Consolidated
  Balance Sheet. The Company consolidated additional pension liability of $61.1
  million from the Sony/Tektronix Acquisition, which is included in Other long-term
  liabilities in the Condensed Consolidated Balance Sheet.

On
  March 15, 2000, the Board of Directors authorized the purchase of up to $550.0
  million of the Companys common stock on the open market or through negotiated
  transactions. During the third quarter of fiscal year 2003, the Company repurchased
  1.7 million shares for $27.7 million. During the first three quarters of fiscal
  year 2003, the Company repurchased a total of 5.5 million shares for $97.0 million.
  As of March 1, 2003, the Company repurchased a total of 13.8 million shares
  at an average price of $22.11 per share totaling $305.1 million under this authorization.
  Reacquired shares are immediately retired under Oregon corporate law. The Company
  will continue to repurchase shares under this authorization when deemed economically
  beneficial.

Liquidity
  and Capital Resources

As
  of March 1, 2003, the Company held $689.7 million in cash and cash equivalents
  and marketable investments excluding corporate equity securities, a decrease
  of $66.4 million from the balance of $756.1 million at May 25, 2002. Activity
  during the first three quarters of fiscal year 2003 included the repurchase
  of common stock, the extinguishment of debt and the funding of the pension plan.
  These uses of cash were offset by net earnings and other positive operating
  cash flows.

The
  Company consolidated $53.1 million of long-term debt through the Sony/Tektronix
  Acquisition, which is due on September 29, 2006. At March 1, 2003, the Company
  maintained unsecured bank credit facilities totaling $146.9 million, of which
  $90.7 million was unused.

30

---



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

Recent
  Accounting Pronouncements

In
  August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
  or Disposal of Long-Lived Assets. This Statement supersedes SFAS No. 121,
  Accounting for the Impairment of Long-Lived Assets and for Long-Lived
  Assets to Be Disposed Of, and the accounting and reporting provisions
  of APB Opinion No. 30, Reporting the Results of Operations Reporting
  the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual
  and Infrequently Occurring Events and Acquisitions, for the disposal of
  a segment of a business. SFAS No. 144 maintains the method for recording an
  impairment on assets to be held under SFAS No. 121 and establishes a single
  accounting model based on the framework established in SFAS No. 121 for long-lived
  assets to be disposed of by sale. This statement also broadens the presentation
  of discontinued operations to include more disposal activities. The provisions
  of SFAS No. 144 are effective for financial statements issued for fiscal year
  2003. The Company adopted the provisions of this statement, which did not have
  a material impact on the financial results of the Company, as of the beginning
  of the first quarter of fiscal year 2003.

In
  July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
  with Exit or Disposal Activities. The standard requires companies to recognize
  costs associated with exit or disposal activities when they are incurred rather
  than at the date of a commitment to an exit or disposal plan. Costs covered
  by the standard include lease termination costs and certain employee severance
  costs that are associated with a restructuring, discontinued operation, plant
  closing, or other exit or disposal activity. This statement is to be applied
  prospectively to exit or disposal activities initiated after December 31, 2002.
  The Company adopted the provisions of this statement for exit and disposal activities
  beginning January 1, 2003, which did not have a material impact on the financial
  results of the Company.

In
  October 2002, the Emerging Issues Task Force (EITF) issued EITF
  00-21, Accounting for Revenue Arrangements with Multiple Deliverables.
  This standard addresses revenue recognition accounting by a vendor for arrangements
  under which it will perform multiple revenue-generating activities. This statement
  is to be effective for the Companys fiscal year 2004. Management believes
  the adoption of the provisions of this statement will not have a material effect
  on the Companys consolidated financial statements.

In
  November 2002, the FASB issued Interpretation 45, Guarantors Accounting
  and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
  Indebtedness of Others. The Interpretation elaborates on the existing
  disclosure requirements for most guarantees, including loan guarantees such
  as standby letters of credit. It also clarifies that at the time a company issues
  a guarantee, the company must recognize an initial liability for the fair value,
  or market value, of the obligations it assumes under the guarantee and must
  disclose that information in its interim and annual financial statements. The
  provisions related to recognizing a liability at inception of the guarantee
  for the fair value of the guarantors obligations does not apply to product
  warranties or to guarantees accounted for as derivatives. The initial recognition
  and initial measurement provisions apply on a prospective basis to guarantees
  issued or modified after December 31, 2002. The Company believes that adoption
  of the recognition and measurement provisions of Interpretation 45 will not
  have a material impact on its financial statements.

In
  December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
  CompensationTransition and Disclosurean amendment of FASB Statement
  No. 123. This standard amends SFAS No. 123, Accounting for Stock-Based
  Compensation, to provide alternative methods of transition for a voluntary
  change to the fair value based method of accounting for stock-based employee
  compensation. In addition, this standard amends the disclosure requirements
  of Statement 123 to require prominent disclosures in both annual and interim
  financial statements about the method of accounting for stock-based employee
  compensation and the effect of the method used on reported results. The transition
  provisions of SFAS No. 148 are not applicable to the Company since SFAS No.
  123 has not been adopted. The disclosure provisions of SFAS No. 148 will be
  effective for the Companys annual report on

31

---



SEC Form 10-K for fiscal
  year 2003 and interim condensed consolidated financial statements on SEC Form
  10-Q for the first quarter of fiscal year 2004.

In
  January 2003, the FASB issued Interpretation 46, Consolidation of Variable
  Interest Entities.In general, a variable interest entity could
  be a corporation, partnership, trust, or any other legal structure used for
  business purposes that (a) does not have equity investors with voting or decision-making
  rights; (b) has equity investors that do not provide sufficient financial resources
  for the entity to support its activities; (c) holds voting rights that are disproportionately
  low in relation to the actual economics of the investors relationship
  with the entity, and substantially all of the entity's activities involve or
  are conducted on behalf of that investor; (d) other parties protect the equity
  investors from expected losses; or (e) parties, other than the equity holders,
  hold the right to receive the entitys expected residual returns, or the
  equity investors ́ rights to expected residual returns are capped. Interpretation
  46 requires a variable interest entity to be consolidated by a company if that
  company has a variable interest that will absorb a majority of the entitys
  expected losses if they occur, receive a majority of the entitys expected
  residual returns if they occur, or both. The consolidation requirements of Interpretation
  46 apply immediately to variable interest entities created after January 31,
  2003. The consolidation requirements apply to entities created prior to February
  1, 2003 in the first fiscal year or interim period beginning after June 15,
  2003. Certain of the disclosure requirements apply in all financial statements
  issued after January 31, 2003, regardless of when the variable interest entity
  was established. The Company does not expect the provisions of Interpretation
  46 to have a material effect on its financial position or results of operations.

Risks
  and Uncertainties

Described
  below are some of the risks and uncertainties that could cause actual results
  to differ materially from the results contemplated by the forward-looking statements
  contained in this report. See Forward-Looking Statements at the
  beginning of this Item 2.

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

Tektronix
  business depends on capital expenditures of manufacturers in a wide range of
  industries, including the telecommunications, semiconductor, and computer industries.
  Each of these industries has historically been very cyclical and has experienced
  periodic downturns, which have had a material adverse impact on the industries
  demand for equipment, including test and measurement equipment manufactured
  and marketed by Tektronix. In particular, the telecommunications industry, including
  but not limited to the optical segment, have experienced a more dramatic decline
  than other industries. In addition, the severity and length of the downturn
  may also affect overall access to capital which could adversely affect the Companys
  customers across many industries. During periods of reduced and declining demand,
  Tektronix may need to rapidly align its cost structure with prevailing market
  conditions while at the same time motivating and retaining key employees. As
  discussed above in this Item 2, the Companys sales and orders have been
  affected by the current downturn in its markets. The ultimate severity of this
  downturn, and how long it will last, is unknown. No assurance can be given that
  Tektronix net sales and operating results will not be further adversely
  impacted by the current or any future downturns or slowdowns in the rate of
  capital investment in these industries.

Timely
  Delivery of Competitive Products

Tektronix
  sells its products to customers that participate in rapidly changing high technology
  markets, which are characterized by short product life cycles. The Companys
  ability to deliver a timely flow of competitive new products and market acceptance
  of those products, as well as the ability to increase production or to develop
  and maintain effective sales channels, is essential to growing the business.
  Because Tektronix sells test and measurement products that enable its customers
  to develop new technologies, the Company must accurately predict the ever-evolving
  needs of those customers and deliver appropriate products and technologies at
  competitive prices to meet customer demands. The Companys ability to deliver
  such products could be affected by engineering or other development program
  delays as well as the availability of parts and supplies from third party providers
  on a timely basis

32

---



and at reasonable prices.
  Failure to deliver competitive products in a timely manner and at a reasonable
  price could have an adverse effect on the results of operations, financial condition
  or cash flows of the Company.

Competition

In
  general, Tektronix competes with a number of companies in specialized areas
  of other test and measurement products and one large broad line measurement
  products supplier, Agilent Technologies. Other competitors include Acterna Corporation,
  Anritsu, LeCroy Corporation, Spirent, Yokogawa and many other smaller companies.
  Competition in the Companys business is based primarily on product performance,
  technology, customer service, product availability and price. Some of the Companys
  competitors may have greater resources to apply to each of these factors and
  in some cases have built significant reputations with the customer base in each
  market in which Tektronix competes. The Company may face pricing pressures that
  may have an adverse impact on the Companys earnings. If the Company is
  unable to compete effectively on these and other factors, it could have a material
  adverse effect on the Companys results of operations, financial condition
  or cash flows.

Supplier
  Risks

The
  Companys manufacturing operations are dependent on the ability of suppliers
  to deliver quality components, subassemblies and completed products in time
  to meet critical manufacturing and distribution schedules. The Company periodically
  experiences constrained supply of certain component parts in some product lines
  as a result of strong demand in the industry for those parts. Such constraints,
  if persistent, may adversely affect operating results until alternate sourcing
  can be developed. Volatility in the prices of these component parts, an inability
  to secure enough components at reasonable prices to build new products in a
  timely manner in the quantities and configurations demanded or, conversely,
  a temporary oversupply of these parts, could adversely affect the Companys
  future operating results. In addition, the Company uses certain sole sourced
  components which are integral to a variety of products. Disruption in key sole
  sourced suppliers could have a significant adverse effect on the Companys
  results of operations.

Worldwide
  Economic and Market Conditions

The
  Company maintains operations in four major geographies: the Americas, including
  the United States, Mexico, Canada and South America; Europe, including the Middle
  East and Africa; the Pacific, excluding Japan; and Japan. During the first three
  quarters of fiscal 2003, 57% of the Companys revenues were from international
  sales. In addition, some of the Companys manufacturing operations and
  key suppliers are located in foreign countries. As a result, the business is
  subject to the worldwide economic and market conditions risks generally associated
  with doing business globally, such as fluctuating exchange rates, the stability
  of international monetary conditions, tariff and trade policies, domestic and
  foreign tax policies, foreign governmental regulations, political unrest, wars
  and other acts of terrorism and changes in other economic or political conditions.
  These factors, among others, could influence the Companys ability to sell
  in global markets, as well as its ability to manufacture products or procure
  supplies. A significant downturn in the global economy or a particular region
  could adversely affect the Companys results of operations, financial position
  or cash flows.

Intellectual
  Property Risks

As
  a technology-based company, Tektronix success depends on developing and
  protecting its intellectual property. Tektronix relies generally on patent,
  copyright, trademark and trade secret laws in the United States and abroad.
  Electronic equipment as complex as most of the Companys products, however,
  is generally not patentable in its entirety. Tektronix also licenses intellectual
  property from third parties and relies on those parties to maintain and protect
  their technology. The Company cannot be certain that actions the Company takes
  to establish and protect intellectual property rights will be adequate. If the
  Company is unable to adequately protect its technology, or if the Company is
  unable to continue to obtain or maintain licenses for protected technology from
  third parties, it could have a material adverse affect on the Companys
  results of operations, financial position or cash flows. From time to time in
  the usual course of business, the Company receives notices from third parties
  regarding intellectual

33

---



property infringement or
  takes action against others with regard to intellectual property rights. Even
  where the Company is successful in defending or pursuing such claims, the Company
  may incur significant costs. In the event of a successful claim against the
  Company, Tektronix could lose its rights to needed technology or be required
  to pay license fees for the infringed rights, either of which could have an
  adverse impact on the Companys business.

Environmental
  Risks

Tektronix
  is subject to a variety of federal, state, local and foreign environmental regulations
  relating to the use, storage, discharge and disposal of its hazardous chemicals
  used during the Companys manufacturing process. The Company has operated
  and is in the process of closing a licensed hazardous waste management facility
  at its Beaverton, Oregon campus. If Tektronix fails to comply with any present
  and future regulations, the Company could be subject to future liabilities or
  the suspension of production. In addition, such regulations could restrict the
  Companys ability to expand its facilities or could require Tektronix to
  acquire costly equipment, or to incur other significant expenses to comply with
  environmental regulations.

Sony/Tektronix
  Corporation Acquisition

Acquisition
  of Sony Corporations 50% interest in Sony/Tektronix Corporation was completed
  at the end of September 2002. Upon completion of the acquisition, the Companys
  ownership of Sony/Tektronix increased from 50% to 100%, and the Company is now
  exposed to a greater financial impact from Sony/Tektronix operations located
  in Japan. The acquisition could negatively impact the Companys results
  of operations during fiscal year 2003. In addition, operation of Sony/Tektronix
  as a wholly owned business will involve additional risks, including integration
  risks, the risks of doing business as a foreign owner in Japan and risks related
  to the economic environment in Japan.

Possible
  Volatility of Stock Price

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

Other
  Risk Factors

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

34

---



Item 3. Quantitative
  and Qualitative Disclosures About Market Risk

Financial
  Market Risk

The
  Company is exposed to financial market risks, including interest rate, equity
  price and foreign currency exchange rate risks.

The
  Company maintains a short-term and long-term investment portfolio consisting
  of fixed rate commercial paper, corporate notes and bonds, asset backed securities
  and mortgage securities. The weighted average maturity of the portfolio, excluding
  mortgage securities, is two years or less. Mortgage securities may have a weighted
  average life of less than seven years and are managed consistent with the Lehman
  Mortgage Index. An increase in interest rates would decrease the value of certain
  of these investments. A 10% adverse change in interest rates would reduce the
  market value by $2.4 million, which would be reflected in Other comprehensive
  loss on the Condensed Consolidated Balance Sheets until sold.

At
  March 1, 2003, the Companys bond debt obligation had a fixed interest
  rate. The fair value of the bond debt instrument at March 1, 2003 was $58.2
  million compared to the carrying value of $57.3 million. The Companys
  bank loan obligation has a variable interest rate. The fair value of the bank
  loan approximates the carrying value of $55.0 million. A hypothetical 10% adverse
  change in interest rates would have a $0.1 million negative impact on the combined
  fair value, which would not be reflected in the Companys financial statements.

The
  Company is exposed to equity price risk primarily through its marketable equity
  securities portfolio, including investments in Merix Corporation, Tut Systems,
  Inc., and other companies. The Company has not entered into any hedging programs
  to mitigate equity price risk. In managements opinion, an adverse change
  of 20% in the value of these securities would reduce the market value by $2.7
  million, which would be reflected in Other comprehensive loss on the Condensed
  Consolidated Balance Sheets until sold.

The
  Company is exposed to foreign currency exchange rate risk primarily through
  acquisitions and commitments denominated in foreign currencies. The Company
  utilizes derivative financial instruments, primarily forward foreign currency
  exchange contracts, generally with maturities of one to three months, to mitigate
  this risk where natural hedging strategies cannot be employed. The Companys
  policy is to only enter into derivative acquisitions when the Company has an
  identifiable exposure to risk, thus not creating additional foreign currency
  exchange rate risk. At March 1, 2003, we held forward foreign currency exchange
  contracts with a notional amount totaling $18.3 million. The potential loss
  in fair value at March 1,
  2003, for such contracts resulting from a hypothetical 10% adverse change in
  applicable foreign currency exchange rates would be approximately $1.9 million.
  This loss would be mitigated by corresponding gains on the underlying exposures.

35

---



Item 4. Controls and
  Procedures

(a)
  Evaluation of disclosure controls and procedures. The Companys chief executive
  officer and chief financial officer, after evaluating the effectiveness of the
  Companys disclosure controls and procedures (as defined in
  the Securities Exchange Act of 1934 Rules 13a-14(c) and 15-d-14(c)) as of a
  date (the Evaluation Date) within 90 days before the filing date
  of this quarterly report, have concluded that as of the Evaluation Date, the
  Companys disclosure controls and procedures were effective and designed
  to ensure that material information relating to the Company and the Companys
  consolidated subsidiaries would be made known to them by others within those
  entities.

(b)
  Changes in internal controls. There were no significant changes in the Companys
  internal controls or in other factors that could significantly affect those
  controls subsequent to the Evaluation Date.

36

---



Part
  II OTHER INFORMATION

|Item 6.                                        | Exhibits
      and Reports on Form 8-K                                                                   
|---------------------------------------------- | ---------------------------------------------------------------------------------------------------------
|                                               |                                                                                                          
|                                               | (a) Exhibits                                                                                             
|                                               |                                                                                                          
|                                               | +
      (10)(xv                                                                                          
|                                               |                                                                                                          
|                                               | (99.1                                                                                                    
|                                               |                                                                                                          
|                                               | (99.2                                                                                                    
|                                               |                                                                                                          
|                                              
|+       Compensatory
      Plan or Arrangement
|                                               |                                                                                                          
|                                               | (b)
      No reports on Form 8-K have been filed during the quarter for which this
      report is filed.

37

---



SIGNATURE

Pursuant to the requirements
  of the Securities Exchange Act of 1934, the Registrant has duly caused this
  report to be signed on its behalf by the undersigned thereunto duly authorized.

| | April
      14, 2003 | TEKTRONIX,
      INC.
| | -------------------- | ---------------------
| |                      |                      
| |                      | By                   
| |                      |                      
| |                      |                      





38

---



CERTIFICATIONS

I, Richard H. Wills, President
  and Chief Executive Officer of the Company, certify that:

1. I
  have reviewed this quarterly report on Form 10-Q of Tektronix, Inc.;

2.
  Based on my knowledge, this quarterly report does not contain any untrue statement
  of a material fact or omit to state a material fact necessary to make the statements
  made, in light of the circumstances under which such statements were made, not
  misleading with respect to the period covered by this quarterly report;

3.
  Based on my knowledge, the financial statements, and other financial information
  included in this quarterly report, fairly present in all material respects the
  financial condition, results of operations and cash flows of the registrant
  as of, and for, the periods presented in this quarterly report;

4.
  The registrant's other certifying officers and I are responsible for establishing
  and maintaining disclosure controls and procedures (as defined in Exchange Act
  Rules 13a-14 and 15d-14) for the registrant and we have:

a)
  designed such disclosure controls and procedures to ensure that material information
  relating to the registrant, including its consolidated subsidiaries, is made
  known to us by others within those entities, particularly during the period
  in which this quarterly report is being prepared;

b)
  evaluated the effectiveness of the registrant's disclosure controls and procedures
  as of a date within 90 days prior to the filing date of this quarterly report
  (the "Evaluation Date"); and

c)
  presented in this quarterly report our conclusions about the effectiveness of
  the disclosure controls and procedures based on our evaluation as of the Evaluation
  Date;

5.
  The registrant's other certifying officers and I have disclosed, based on our
  most recent evaluation, to the registrant's auditors and the audit committee
  of registrant's board of directors (or persons performing the equivalent function):

a)
  all significant deficiencies in the design or operation of internal controls
  which could adversely affect the registrant's ability to record, process, summarize
  and report financial data and have identified for the registrant's auditors
  any material weaknesses in internal controls; and

b)
  any fraud, whether or not material, that involves management or other employees
  who have a significant role in the registrant's internal controls; and

6.
  The registrant's other certifying officers and I have indicated in this quarterly
  report whether or not there were significant changes in internal controls or
  in other factors that could significantly affect internal controls subsequent
  to the date of our most recent evaluation, including any corrective actions
  with regard to significant deficiencies and material weaknesses.

|Date:
      April 14, 2003 |                                                                   
|-------------------------- | ------------------------------------------------------------------
|                           | /s/
      RICHARD H. WILLS                                        
|                           |                                                                   
|                           | Richard
      H. Wills
      President and Chief Executive Officer

39

---



I, Colin L. Slade, Senior
  Vice President and Chief Financial Officer, certify that:

1. I
  have reviewed this quarterly report on Form 10-Q of Tektronix, Inc.;

2.
  Based on my knowledge, this quarterly report does not contain any untrue statement
  of a material fact or omit to state a material fact necessary to make the statements
  made, in light of the circumstances under which such statements were made, not
  misleading with respect to the period covered by this quarterly report;

3.
  Based on my knowledge, the financial statements, and other financial information
  included in this quarterly report, fairly present in all material respects the
  financial condition, results of operations and cash flows of the registrant
  as of, and for, the periods presented in this quarterly report;

4.
  The registrant's other certifying officers and I are responsible for establishing
  and maintaining disclosure controls and procedures (as defined in Exchange Act
  Rules 13a-14 and 15d-14) for the registrant and we have:

a)
  designed such disclosure controls and procedures to ensure that material information
  relating to the registrant, including its consolidated subsidiaries, is made
  known to us by others within those entities, particularly during the period
  in which this quarterly report is being prepared;

b)
  evaluated the effectiveness of the registrant's disclosure controls and procedures
  as of a date within 90 days prior to the filing date of this quarterly report
  (the "Evaluation Date"); and

c)
  presented in this quarterly report our conclusions about the effectiveness of
  the disclosure controls and procedures based on our evaluation as of the Evaluation
  Date;

5.
  The registrant's other certifying officers and I have disclosed, based on our
  most recent evaluation, to the registrant's auditors and the audit committee
  of registrant's board of directors (or persons performing the equivalent function):

a)
  all significant deficiencies in the design or operation of internal controls
  which could adversely affect the registrant's ability to record, process, summarize
  and report financial data and have identified for the registrant's auditors
  any material weaknesses in internal controls; and

b)
  any fraud, whether or not material, that involves management or other employees
  who have a significant role in the registrant's internal controls; and

6.
  The registrant's other certifying officers and I have indicated in this quarterly
  report whether or not there were significant changes in internal controls or
  in other factors that could significantly affect internal controls subsequent
  to the date of our most recent evaluation, including any corrective actions
  with regard to significant deficiencies and material weaknesses.

|Date:
      April 14, 2003 |                                                                             
|-------------------------- | ----------------------------------------------------------------------------
|                           | /s/
      COLIN L. SLADE                                                    
|                           |                                                                             
|                           | Colin
      L. Slade
      Senior Vice President and Chief Financial Officer

40

---



`EXHIBIT INDEX

Exhibits No.  Exhibit Description

   +(10)(xv)  Stock Deferral Plan, as amended March 5, 2003.

      (99.1)  Certification of Richard H. Wills, Principal Executive
              Officer of Tektronix, Inc. Pursuant to 18 U.S.C. Section
              1350 As Adopted Pursuant to Section 906 of the
              Sarbanes-Oxley Act of 2002.

      (99.2)  Certification of Colin L. Slade, Principal Financial
              Officer of Tektronix, Inc. Pursuant to 18 U.S.C. Section
              1350 As Adopted Pursuant to Section 906 of the
              Sarbanes-Oxley Act of 2002.

----------
+     Compensatory Plan or Arrangement`