<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, 1996
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 August 5, 1996 the Registrant had outstanding 4,646,465 Common
Shares, without par value, and 2,794,278 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,
----------------- -------------
1996 1995 1995
---- ---- ----
ASSETS
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 3,969 $ 2,856 $ 3,890
Accounts receivable and other, net 19,370 18,295 20,856
Inventories:
Raw materials 8,017 5,577 4,917
Work in process 5,704 3,920 3,981
Finished products 4,711 3,261 3,762
-------- -------- --------
Total inventories 18,432 12,758 12,660
Other current assets 2,631 2,323 2,290
-------- -------- --------
Total current assets 44,402 36,232 39,696
-------- -------- --------
Property, plant and equipment, at cost 36,592 32,036 32,527
Less-Accumulated depreciation 24,259 21,578 21,984
-------- -------- --------
Total property, plant and equipment, net 12,333 10,458 10,543
-------- -------- --------
Intangible assets, net 7,973 6,317 6,201
Other assets 9,548 8,982 9,669
-------- -------- --------
Total assets $ 74,256 $ 61,989 $ 66,109
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current
installments on long-term debt $ 84 $ 73 $ 71
Accounts payable 7,032 5,941 6,759
Accrued payroll and related expenses 5,232 5,089 6,142
Other accrued expenses 5,246 4,234 4,575
Income taxes payable 1,956 1,823 2,580
-------- -------- --------
Total current liabilities 19,550 17,160 20,127
-------- -------- --------
Long-term debt 11,308 6,706 6,042
Other long-term liabilities 3,125 2,867 3,038
Shareholders' equity:
Paid-in-capital 5,074 3,818 4,162
Earnings reinvested in the business 34,911 30,788 32,157
Cumulative translation adjustment and other 396 650 583
Common shares held in treasury, at cost (108) -- --
-------- -------- --------
Total shareholders' equity 40,273 35,256 36,902
-------- -------- --------
Total liabilities and shareholders' equity $ 74,256 $ 61,989 $ 66,109
======== ======== ========
</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,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $29,403 $28,975 $89,245 $80,350
Cost of goods sold 11,376 11,135 34,178 31,074
Selling, general and administrative expenses 11,985 11,649 36,263 33,211
Product development expenses 4,664 3,852 13,096 10,748
Amortization of intangible assets 171 116 462 348
Financing expenses (net of investment income) 201 231 536 758
------- ------- ------- -------
Income before income taxes 1,006 1,992 4,710 4,211
Income taxes 245 498 1,319 1,053
------- ------- ------- -------
Net income $ 761 $ 1,494 $ 3,391 $ 3,158
======= ======= ======= =======
Net income per share $ 0.10 $ 0.20 $ 0.43 $ 0.43
======= ======= ======= =======
Fully diluted net income per share $ 0.10 $ 0.20 $ 0.43 $ 0.42
======= ======= ======= =======
Cash dividends per Common Share $ .031 $ .025 $ .094 $ .075
======= ======= ======= =======
Cash dividends per Class B
Common Share $ .025 $ .020 $ .075 $ .060
======= ======= ======= =======
</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,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 761 $ 1,494 $ 3,391 $ 3,158
Expenses not requiring outlay of cash 1,213 925 3,415 2,926
Changes in working capital (2,061) 718 (5,850) (4,921)
Other operating activities (958) (1,227) (281) (1,165)
------- ------- ------- -------
Net cash provided by (used in) operating activities (1,045) 1,910 675 (2)
------- ------- ------- -------
Cash flows from investing activities:
Payments for property, plant, and equipment (964) (579) (4,419) (1,886)
Acquisitions (excluding cash of $11) -- -- (1,408) --
Other investing activities-net 2 9 5 62
------- ------- ------- -------
Net cash used in investing activities (962) (570) (5,822) (1,824)
------- ------- ------- -------
Cash flows from financing activities:
Net increase (decrease) in short term debt 12 16 13 (439)
Net borrowing (repayment) of long term debt 1,686 (1,179) 5,373 2,372
Cash dividends (215) (165) (637) (492)
Other transactions-net 257 186 606 355
------- ------- ------- -------
Net cash provided by (used in) financing activities 1,740 (1,142) 5,355 1,796
------- ------- ------- -------
Effect of exchange rate changes on cash (53) (24) (129) 174
------- ------- ------- -------
Increase (decrease) in cash and cash equivalents (320) 174 79 144
Cash and cash equivalents at beginning of period 4,289 2,682 3,890 2,712
------- ------- ------- -------
Cash and cash equivalents at end of period $ 3,969 $ 2,856 $ 3,969 $ 2,856
======= ======= ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes $ 857 $ 502 $ 1,543 $ 1,280
Interest 158 171 505 647
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES
The company's acquisitions included the following
noncash transactions (See Notes C and D):
Liabilities assumed -- -- $ 916 --
Common Shares issued -- -- 201 --
------- ------- ------- -------
Total noncash transactions -- -- $ 1,117 --
======= ======= ======= =======
</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, 1996 and 1995 and for the
three 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 outstanding used in determining net
income per share for the quarter and nine month periods are summarized
below:
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average shares used
for primary calculation 7,867,335 7,529,548 7,804,342 7,342,624
Weighted average shares used
for fully diluted calculation 7,868,084 7,635,452 7,805,864 7,603,880
</TABLE>
Both Common Shares and Class B Common Shares are included in calculating
the weighted average number of shares outstanding.
C. On December 5, 1995, the company consummated the purchase of the principal
assets of International Sensor Technology, Inc. (IST) of Pullman,
Washington. IST pioneered the development of laser heating technology in
thermoluminescence dosimetry (TLD) systems for personal radiation
protection. The technology has potential uses in radiation therapy, nuclear
waste management, radiation processing, environmental and radiation-hard
electronics applications in government, medicine and the nuclear industry.
D. On February 15, 1996, the company consummated the purchase of certain
assets of Turner Engineering Technology (Turner) of Roanoke, Texas. Turner
specializes in accelerated test methods for determining the quality of
semiconductor wafers at various stages of manufacturing. These test methods
are designed to save semiconductor manufacturers money by providing process
control feedback to allow optimization and continued semiconductor process
improvement.
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 1996 Compared with Third Quarter 1995
- ---------------------------------------------------
Net income for the third quarter of fiscal 1996 was $761, or $.10 per share,
which decreased from $1,494, or $.20 per share, in last year's quarter. The
decrease in earnings was the result of continued investments in a number of new
business initiatives. Net spending before taxes on new business was
approximately $2,900 in the third quarter of fiscal 1996 versus $1,700 in last
year's quarter.
Net sales of $29,403 increased 1 percent from $28,975 in the prior year's third
quarter. The slight increase resulted from continued strong demand for the
company's bench-top instruments offset by decreases in shipments of the
company's PC-based board level products and automatic parametric test systems.
The company also reported the first shipment of Quantox(TM), the company's oxide
monitoring system designed for semiconductor wafer manufacturers.
Geographically, sales within the United States and Europe increased while sales
to the Pacific Basin region were down. Orders for the third quarter of 1996 of
$27,489 decreased 6 percent from the prior year's quarter. The Instruments
business unit continued to do well; however, orders for the company's automatic
parametric test systems and PC-based boards were down. Backlog was reduced
$1,995 during the quarter to $10,626 at June 30, 1996.
Cost of goods sold as a percentage of net sales increased slightly to 38.7
percent from 38.4 percent. The effect of the company's hedging activities on
cost of goods sold for the quarter was to decrease cost of goods sold by 0.2
percentage points of net sales versus an increase of 0.4 percentage points in
the prior year's quarter. Cost of goods sold as a percentage of net sales is
expected to increase as shipments of Quantox increase.
Selling, general and administrative expenses of $11,985 for the third quarter
increased $336, or 3 percent from $11,649 in the prior year's quarter. Lower
general and administrative expenses were offset by higher marketing expenses.
Lower general and administrative expenses are the result of lower incentive
compensation costs due to lower than plan earnings. Higher marketing costs were
due to costs associated with the exploration of new business opportunities,
including the marketing of Quantox.
Product development expenses of $4,664, or 15.8 percent of net sales for the
quarter, increased $812, or 21 percent from $3,852, or 13.3 percent of net sales
in the prior year's quarter. This was due primarily to higher personnel and
related costs associated with the study and development of new products and
technologies.
Amortization expense increased $55 to $171 from $116 in last year's quarter.
This is due to the amortization of goodwill associated with the acquisitions
discussed in Notes C and D.
6
<PAGE> 7
Nine Months Ended June 30, 1996 Compared with Nine Months Ended June 30, 1995
- -----------------------------------------------------------------------------
Net income of $3,391, or $.43 per share for the nine months ended June 30, 1996,
increased $233, or 7 percent from $3,158, or $.42 per share on a fully diluted
basis reported for the prior year. This was the result of higher sales during
the first nine months of fiscal 1996 versus 1995 offset somewhat by higher
expenses and a higher tax rate. Pretax net spending on new business initiatives
was approximately $3,100 higher during the nine months ended June 30, 1996 than
last year's nine month period.
Net sales of $89,245 increased $8,895, or 11 percent from $80,350 reported for
the nine month period last year. The increase was due mainly to increased sales
of the company's bench-top instruments and strong demand for the company's
products serving the semi conductor industry. Orders for the nine month period
were up 7 percent from the same period last year. The majority of the
increase was due to the company's bench-top instruments, along with $2,226 in
orders for Quantox, partially offset by lower orders for the company's PC-based
board level products and automatic parametric test systems.
Cost of goods sold as a percentage of net sales decreased to 38.3 percent from
38.7 percent for the nine month period last year. The company's hedging
activities had no effect on cost of goods sold for the nine months ended June
30, 1996, versus an increase in cost of goods sold by 0.3 percentage points of
net sales in last year's nine month period. Cost of goods sold as a percentage
of net sales is expected to increase as shipments of Quantox increase.
Selling, general and administrative expenses of $36,263, or 40.6 percent of net
sales increased $3,052, or 9 percent from $33,211, or 41.3 percent of net sales
in the same period in the prior year, due primarily to higher marketing costs.
The increased marketing costs related to the market development and introduction
of Quantox and increased personnel and related costs.
Product development expenses of $13,096, or 14.7 percent of net sales for the
period, increased $2,348, or 22 percent from $10,748, or 13.4 percent of net
sales last year. This was due to increased personnel and developments costs
associated with the company's next generation parametric test system introduced
in the second quarter, the development of its new bench-top instruments products
and the exploration of other new business opportunities.
Amortization expense of $462, increased $114 from $348 last year. This is due to
the amortization of goodwill associated with the acquisitions discussed in Notes
C and D.
Financing expenses (net of investment income) decreased $222, or 29 percent
despite higher average debt levels during the period. This was due to lower
interest rates on the variable rate debt and the absence of certain fees related
to the pay-off of a higher interest rate loan in the prior year's second
quarter.
The effective tax rate was 28.0 percent for the nine month period compared with
25.0 percent for the prior year's period. The effective rate is less than the
statutory rate of 34 percent due to the utilization of foreign tax credits and
foreign sales corporation (FSC) benefits. The effective tax rate was higher in
1996 than in 1995 because of additional utilization of foreign tax credit
carryforwards in 1995.
7
<PAGE> 8
Liquidity and Capital Resources
- -------------------------------
Cash used in operations was $1,045 for the third quarter. For the first nine
months, cash provided by operations was $675. Total debt of $11,392 at June 30,
1996, increased $5,279 since the beginning of the year. The increase in debt
funded the company's increase in capital spending and supported increased
working capital requirements due to higher sales. Through interest rate swap
agreements, the company has effectively fixed its long-term interest rate at
under 7 percent for $6,000 of debt. The balance of debt carries variable
interest rates based on U.S. prime, LIBOR or FIBOR. The debt-to-capital ratio at
June 30, 1996, was 22.0 percent.
The company expects to increase capital spending during 1996 and estimates
capital spending will total approximately $3,500 for the fourth quarter. The
increased spending is being used to expand production capacity and facilities.
The Company expects to finance capital spending through cash provided by
operations as well as utilizing its available lines of credit. At June 30, 1996,
the Company had available unused lines of credit with domestic and foreign banks
aggregating $20,103 of which $6,372 were short term and $13,731 were long term.
8
<PAGE> 9
PART II. OTHER INFORMATION
--------------------------
Except to the extent noted below, the items required in Part II have been
omitted because they are inapplicable, or, if applicable would be answered in
the negative.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits.
27 - Financial Data Schedule
(b) REPORTS ON FORM 8-K. No reports on Form 8-K were filed during
the quarterly period ended June 30, 1996.
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 13, 1996 /s/ Joseph P. Keithley
-------------------------
Joseph P. Keithley
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
Date: August 13, 1996 /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-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 3,969
<SECURITIES> 0
<RECEIVABLES> 19,370
<ALLOWANCES> 0
<INVENTORY> 18,432
<CURRENT-ASSETS> 44,402
<PP&E> 36,592
<DEPRECIATION> 24,259
<TOTAL-ASSETS> 74,256
<CURRENT-LIABILITIES> 19,550
<BONDS> 11,308
<COMMON> 189
0
0
<OTHER-SE> 40,084
<TOTAL-LIABILITY-AND-EQUITY> 74,256
<SALES> 89,245
<TOTAL-REVENUES> 89,245
<CGS> 34,178
<TOTAL-COSTS> 34,178
<OTHER-EXPENSES> 13,096
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 536
<INCOME-PRETAX> 4,710
<INCOME-TAX> 1,319
<INCOME-CONTINUING> 3,391
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,391
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.43
</TABLE>
