Tek gets a jump on '95

Electronic News, Sept 19, 1994

WILSONVILLE, ORE. - Strength in international sales accompanied by expanded gross margins helped drive Tektronix Inc. to what some analysts called "a blowout quarter." Tek reported first-quarter 1995 net jumped 64 percent to $16.0 million, or 53 cents per share, from $9.7 million, or 32 cents per share, for the same period a year ago.

Quarter sales for the company as a whole were up 8 percent to $312.7 million from $290.1 million. Beginning in 1995, Tek said it is reporting sales for its four businesses and a group of nonstrategic operations that it recently divested or intends to divest. Sales for continuing business in the quarter were up 15 percent to $306.1 million from $265.1 million.

Product orders rose 24 percent to $294.2 million from $236.7 million in the year-ago quarter.

"Operating leverage is finally working in favor of the company," said Jarrod Cohen of Cowen Asset Management, New York City.

"It was a blowout quarter. Way above consensus," said Tom Carley, Jensen Securities, Portland, Ore. "Revenues were a little better than expected. The real surprise was expansion of gross margins. Gross margins were 48.4 percent of revenues, a big increase over what they had been running the last three quarters and over what the guidance was from management."

He continued: "The results were a function of improvement in international business, which carries higher margins. Plus, a more favorable product mix that stressed higher margin products. Good margins across all business units. Also contributing a little was a lower than expected tax rate but this dims in comparison with the gross margins."

For the first quarter ended Aug. 27, Tek's Measurement Business Division sales grew 8 percent to $154.1 million from $142.8 million in first-quarter 1994; Color Printing and Imaging Division sales grew 38 percent to $89.5 million from $64.7 million; Video Systems Division sales grew 13 percent to $42.8 million from $37.7 million, Network Displays Division sales came to $19.7 million versus $19.9 million in the same quarter a year ago. Network Displays' flat sales performance was due to the continued decline in the product and service revenue from the company's old terminals business that offset the strong increase in X terminal sales, Tek said.

U.S. sales for the quarter came to $169.5 million versus $168.4 million for first-quarter 1994. The majority of non-strategic operations sales were in the U.S., so for continuing business, U.S. sales grew 13 percent. International sales grew 18 percent to $143.2 million in first-quarter 1995 from $121.7 million in the year-ago quarter.

"This stage of our transformation calls for a focus on profitable growth," said Jerome J. Meyer, Tek chairman and CEO. "Our new products and market initiatives clearly are starting to have a positive impact. We saw excellent results across the company's businesses and in all geographies, including Europe."

He continued: "The Pacific continues to be a strong growth arena for us, and we are also seeing improvements in Japan. We are especially encouraged by our performance in Europe...."

Mr. Meyer added that operating income increased 57, percent year-over year, mostly from higher revenues. "We were also pleased with gross margins during the quarter but continue to expect they will trend down as we sell more of our products through alternative distribution channels. We continue to closely manage costs. In the first quarter, we approved major R&D expenses that we expect will bear fruit later in the year, which increased our operating expenses," he said.

Measurement Division order rates were said to be up 15 percent; Color Printing and Imaging up 15 percent, Video Systems Division up 21 percent, Network Displays up 7 percent. U.S. orders were said to be up 14 percent, with international orders up 37 percent.