<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------
FORM 10-Q
(MARK ONE)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-9965
KEITHLEY INSTRUMENTS, INC.
(Exact name of registrant as specified in its charter)
OHIO 34-0794417
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
28775 AURORA ROAD, SOLON, OHIO 44139
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (216) 248-0400
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
--- ---
As of July 31, 1995 there were outstanding 2,414,225 Common Shares and
Common Share equivalents, without par value, and 1,463,448 Class B Common
Shares, without par value.
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<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
------------------------------
KEITHLEY INSTRUMENTS, INC.
CONSOLIDATED BALANCE SHEET
(In Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
--------------- -------------
1995 1994 1994
---- ---- ----
<S> <C> <C> <C>
Assets
------
Current assets:
Cash and cash equivalents $ 2,856 $ 2,584 $ 2,712
Accounts receivable and other, net 18,295 14,614 14,462
Inventories:
Raw materials 5,577 3,972 4,137
Work in process 3,920 2,858 2,646
Finished products 3,261 2,807 2,908
------- -------- -------
Total inventories 12,758 9,637 9,691
Other current assets 2,323 1,764 2,139
------- -------- -------
Total current assets 36,232 28,599 29,004
------- ------- ------
Property, plant and equipment, at cost 32,036 30,604 31,244
Less-Accumulated depreciation 21,578 19,951 20,177
------- ------- ------
Total property, plant and equipment, net 10,458 10,653 11,067
------- ------- ------
Intangible assets, net 6,317 6,781 6,665
Other assets 8,982 6,886 7,674
------- ------- -------
Total assets $61,989 $52,919 $54,410
====== ====== ======
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Short-term debt and current
installments on long-term debt $ 73 $ 1,043 $ 217
Accounts payable 5,941 6,229 6,366
Accrued payroll and related expenses 5,089 3,083 3,389
Other accrued expenses 4,234 3,974 3,781
Income taxes payable 1,823 1,185 1,545
------- ------- -------
Total current liabilities 17,160 15,514 15,298
------ ------ ------
Long-term debt 6,706 4,144 4,599
Other long-term liabilities 2,867 2,286 2,567
Shareholders' equity:
Paid-in-capital 3,818 3,609 3,647
Earnings reinvested in the business 30,788 27,031 27,943
Cumulative translation adjustment and other 650 335 356
-------- --------- --------
Total shareholders' equity 35,256 30,975 31,946
------ ------ ------
Total liabilities and shareholders' equity $61,989 $52,919 $54,410
====== ====== ======
</TABLE>
2
<PAGE> 3
KEITHLEY INSTRUMENTS, INC.
CONSOLIDATED STATEMENT OF INCOME
(In Thousands of Dollars Except for Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 28,975 $ 21,913 $80,350 $65,815
Cost of goods sold 11,135 8,650 31,074 26,124
Selling, general and administrative expenses 11,649 10,305 33,211 28,550
Product development expenses 3,852 2,661 10,748 7,924
Purchased technology --- 3,300 --- 3,300
Amortization of intangible assets 116 116 348 354
Financing expenses (net of investment income) 231 190 758 557
--------- -------- ------- -------
Income (loss) before income taxes 1,992 (3,309) 4,211 (994)
Income taxes 498 (1,474) 1,053 (826)
--------- -------- ------- -------
Net income (loss) $ 1,494 $ (1,835) $ 3,158 $ (168)
========= ======== ======= =======
Net income (loss) per share $ 0.39 $ (0.52) $ 0.86 $ (0.05)
========= ======== ======= =======
Fully diluted net income (loss) per share $ 0.39 $ (0.52) $ 0.83 $ (0.05)
========= ======== ======= =======
Cash dividends per Common Share $ .05 $ .05 $ .15 $ .15
========= ======== ======= =======
Cash dividends per Class B
Common Share $ .04 $ .04 $ .12 $ .12
========= ======== ======= =======
</TABLE>
3
<PAGE> 4
KEITHLEY INSTRUMENTS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,494 $(1,835) $ 3,158 $ (168)
Expenses not requiring outlay of cash 925 1,283 2,926 3,213
Changes in working capital 718 840 (4,921) 2,593
Other operating activities (1,227) (3,575) (1,165) (576)
------- ------- ------- -------
Net cash provided by (used in) operating activities 1,910 (3,287) (2) 5,062
Cash flows from investing activities:
Payments for property, plant, and equipment (579) (398) (1,886) (2,557)
Other investing activities-net 9 30 62 47
------- ------- ------- -------
Net cash used in investing activities (570) (368) (1,824) (2,510)
Cash flows from financing activities:
Net decrease in short term debt 16 529 (439) (79)
Net borrowing (repayment) of long term debt (1,179) 38 2,372 (1,177)
Cash dividends (165) (163) (492) (486)
Other transactions-net 186 29 355 55
------- ------- ------- -------
Net cash provided by (used in) financing activities (1,142) 433 1,796 (1,687)
Effect of exchange rate changes on cash (24) 87 174 67
------- ------- ------- -------
Increase (decrease) in cash and cash equivalents 174 (3,135) 144 932
Cash and cash equivalents at beginning of period 2,682 5,719 2,712 1,652
------- ------- ------- -------
Cash and cash equivalents at end of period $ 2,856 $ 2,584 $ 2,856 $ 2,584
======= ======= ======= =======
Supplemental disclosures of cash flow information
-------------------------------------------------
Cash paid during the period for:
Income taxes $ 502 $ 291 $ 1,280 $ 402
Interest 171 150 647 660
</TABLE>
Disclosure of accounting policy
-------------------------------
For purposes of this statement, the Company considers all highly liquid
investments with maturities of three months or less when purchased to be cash
equivalents.
4
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
A. The consolidated financial statements at June 30, 1995 and 1994 and
for the three month and nine month periods then ended have not been
examined by independents accountants, but in the opinion of the management
of Keithley Instruments, Inc., all adjustments necessary to a fair
statement of the consolidated balance sheet, consolidated statement of
income and consolidated statement of cash flows for those periods have
been included. All adjustments included are of a normal, recurring
nature.
B. The weighted average number of shares and share equivalents used in
determining net income per share was 3,764,774 for the quarter ended June
30, 1995, and 3,546,598 for the quarter ended June 30, 1994. For the nine
months ended June 30, 1995, and June 30, 1994, the weighted average number
of shares and share equivalents used in determining net income per share
was 3,671,312 and 3,541,690, respectively. The weighted average number of
shares and share equivalents used in determining fully diluted net income
per share was 3,817,726 for the quarter ended June 30, 1995, and 3,546,598
for the quarter ended June 30, 1994. For the nine months ended June 30,
1995, and June 30, 1994, the weighted average number of shares outstanding
used in determining fully diluted net income per share was 3,801,940 and
3,541,690, respectively. Prior to the quarter ended June 30, 1995, fully
diluted net income per share had not been materially different from net
income per share. Common Shares, Class B Common Shares and Common Share
equivalents are included in calculating the weighted average number of
shares outstanding.
5
<PAGE> 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and
------- ---------------------------------------------------------------
Results of Operations.
---------------------
(In Thousands of Dollars)
Results of Operations
---------------------
Third Quarter 1995 Compared with Third Quarter 1994
---------------------------------------------------
Net income for the third quarter of fiscal 1995 was $1,494, or $.39 per
share on a fully diluted basis, compared to a loss of $1,835, or $.52 per share,
in last year's third quarter. Earnings improved as a result of the higher sales
levels and the non-recurrence of $3,300 in pre-tax charges for purchased
technology and $925 in pre-tax charges related to the retirement of Keithley's
former president that were recorded in the third quarter of last year. Earnings
improved despite an increase of approximately $1.2 million pre-tax in spending
in the third quarter for new business development. Adjusting for new business
development in the fiscal 1995 third quarter and the total of $4.2 million of
non-recurring charges in the third quarter of last year, pre-tax earnings were
approximately $3.7 million in the third quarter of fiscal 1995 compared with
$1.4 million in the third quarter of fiscal 1994.
Record high net sales of $28,975 for the third quarter increased 32 percent
from $21,913 in the prior year's third quarter. The increase was fueled by
continued strong demand for semiconductor products and double-digit sales
increases in all other divisions and in all geographic areas. Sales in the
Pacific Basin were up 54 percent and U.S. domestic sales were up 30 percent
principally due to demand for semiconductor products. Europe continued strong
with sales up 29 percent due in part to the 15 percent weakening of the U.S.
dollar from last year's third quarter. Order levels were also at record
levels, up 40 percent over the prior year's quarter. Backlog increased $397
during the quarter and remained strong at $12,000 at June 30, 1995.
Cost of goods sold as a percentage of net sales decreased to 38.4 percent from
39.5 percent. This was the result of a weakening U.S. dollar against European
currencies as well as fixed manufacturing costs being spread over higher sales
volume. The effect of the company's hedging activities on cost of goods sold
for the quarter was an increase of .4 percentage points of net sales.
Selling, general and administrative expenses of $11,649 for the third quarter
increased $1,344 or 13 percent from $10,305 in the prior year's quarter. After
adjusting for the $925 in pre-tax charges related to the retirement of
Keithley's former president recorded in the third quarter of last year,
expenses increased 24 percent due to higher marketing and incentive
compensation related costs. The higher marketing costs resulted from higher
costs related to new product introductions, higher commissions due to increased
sales volume, higher costs in Europe due mainly to a 15 percent weaker U.S.
dollar and additional costs to explore new business opportunities. The
increased incentive compensation costs related to the Company's improved
current fiscal year financial performance.
Product development expenses of $3,852 or 13.3 percent of net sales for the
quarter, increased $1,191 or 45 percent from $2,661 or 12.1 percent of net
sales in the prior year's quarter. This was due primarily to costs associated
with the development of process monitoring products for the semiconductor
manufacturing industry. During the quarter the Company introduced Quantox(TM),
its first product using Direct Wafer Measurement technology. While Quantox is
not expected to generate sales revenue until sometime in fiscal 1996, initial
customer reception has been positive.
6
<PAGE> 7
Third Quarter 1995 Compared with Third Quarter 1994 (cont.)
-----------------------------------------------------------
There was no purchased technology expense in the third quarter of fiscal 1995
compared to the $3,300 recorded in the same quarter last year for the purchase
of Direct Wafer Measurement technology from IBM.
Financing expenses (net of investment income) of $231, increased $41 due to
higher debt levels and higher interest rates on variable rate debt.
The effective tax rate of 25 percent compared to a tax benefit rate of 44.5
percent last year when the company recorded a loss. The decrease from the
statutory rate was primarily due to the utilization of foreign tax credits.
Nine Months Ended June 30, 1995 Compared with Nine Months Ended June 30, 1994
-----------------------------------------------------------------------------
Net income for the nine months ended June 30, 1995 was $3,158, or $.83
per share on a fully diluted basis, compared to a loss of $168, or $.05 per
share, in the same period last year. Earnings improved as a result of higher
sales levels and the non-recurrence of $3,300 in pre-tax charges for purchased
technology and $925 in pre-tax charges related to the retirement of Keithley's
former president that were recorded in the third quarter of last year. The
improved nine-month earnings occurred despite approximately $4.7 million
pre-tax spending for new business development. Adjusting for new business
development spending in both periods and last year's $4.2 million of
non-recurring charges, pre-tax earnings were approximately $8.9 million in the
first nine months of fiscal 1995 compared with $3.6 million in the third
quarter of fiscal 1994.
Net sales of $80,350 increased $14,535 or 22 percent from $65,815 reported for
the nine month period last year. Half of the increase was due to strong demand
for the company's products serving the semiconductor industry. Orders for the
nine month period were up 26 percent from last year principally due to the
semiconductor industry demand. Increased orders were noted across all
geographic areas.
Cost of goods sold as a percentage of net sales decreased to 38.7 percent from
39.7 percent for the nine month period last year. This was due primarily to a
weaker U.S. dollar as well as fixed manufacturing costs being spread over
higher sales volume. The effect of the company's hedging activities on cost of
goods sold for the nine months was to increase cost of goods sold by .3
percentage points of net sales.
Selling, general and administrative expenses of $33,211 or 41.3 percent of net
sales increased $4,661 or 16 percent from $28,550 or 43.4 percent of net sales
in the same period in the prior year. This was due mainly to higher marketing
costs and the non-recurrence of the $925 in charges related to the retirement
of the company's former president. The higher marketing costs resulted from
higher costs related to new product introductions, higher costs in Europe due
mainly to a 13 percent weaker U.S. dollar, higher commissions due to a
different geographic channel mix and increased sales levels, and from
additional costs to explore new business opportunities.
7
<PAGE> 8
Nine Months Ended June 30, 1995 Compared with Nine Months Ended June 30, 1994
-----------------------------------------------------------------------------
(cont.)
-------
Product development expenses of $10,748 or 13.4 percent of net sales increased
$2,824 or 36 percent from $7,924 or 12.0 percent of net sales in the same
period last year. This was due primarily to costs associated with the
development of Direct Wafer Measurement technology for semiconductor process
monitoring products.
Financing expenses (net of investment income) increased $201 or 36 percent due
to higher debt levels and higher interest rates on variable rate debt.
The effective tax rate of 25 percent compared to a tax benefit rate of
83.1 percent last year when the company recorded a loss. The decrease from
the statutory rate was primarily due to utilization of foreign tax credits.
Liquidity and Capital Resource
------------------------------
Cash provided by operations was $1,910 for the third quarter which
brought the nine months year-to-date cash from operations to nil. Total debt
of $6,779 at June 30, 1995, has increased $1,963 since the beginning of the
year but decreased $1,204 during the third quarter. The year-to-date increase
in debt is supporting increased working capital requirements due to higher
sales and is funding development and exploration of new business opportunities.
The debt-to-capital ratio at June 30, 1995, was 16 percent. During the quarter,
the Company entered into an interest rate swap agreement with a commercial bank
that is intended to hedge the Company's interest cost and effectively fixes the
Company's interest rate on $3.0 million of variable rate debt at 6.84% for
seven years.
During the remainder of fiscal 1995, the Company expects to finance debt
service, capital spending and working capital requirements through cash
provided by operations. At June 30, 1995, the Company had available unused
lines of credit with domestic and foreign banks aggregating $26,792 of which
$8,389 are short term and $18,403 are long term.
8
<PAGE> 9
PART II. OTHER INFORMATION
-------- -----------------
Item 6. Exhibits and Reports on Form 8-K.
-------- --- ------- -- ---- ---
(b) No reports on Form 8-K were filed during the quarterly period ended
June 30, 1995.
SIGNATURES
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.
KEITHLEY INSTRUMENTS, INC.
(Registrant)
Date: August 10, 1995 /s/ Joseph P. Keithley
--------------------------------
Joseph P. Keithley
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
Date: August 10, 1995 /s/ Ronald M. Rebner
--------------------------------
Ronald M. Rebner
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
9
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 2,856
<SECURITIES> 0
<RECEIVABLES> 18,295
<ALLOWANCES> 0
<INVENTORY> 12,758
<CURRENT-ASSETS> 36,232
<PP&E> 32,036
<DEPRECIATION> 21,578
<TOTAL-ASSETS> 61,989
<CURRENT-LIABILITIES> 17,160
<BONDS> 6,706
<COMMON> 180
0
0
<OTHER-SE> 35,076
<TOTAL-LIABILITY-AND-EQUITY> 61,989
<SALES> 80,350
<TOTAL-REVENUES> 80,350
<CGS> 31,074
<TOTAL-COSTS> 31,074
<OTHER-EXPENSES> 10,748
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 758
<INCOME-PRETAX> 4,211
<INCOME-TAX> 1,053
<INCOME-CONTINUING> 3,158
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,158
<EPS-PRIMARY> .39
<EPS-DILUTED> .39
</TABLE>
