<PAGE> 1
================================================================================
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, 2000
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: (440) 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 1, 2000 the Registrant had outstanding 13,636,374 Common
Shares, without par value, and 2,264,132 Class B Common Shares, without par
value.
================================================================================
<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,
2000 1999 1999
--------- --------- ---------
<S> <C> <C> <C>
Assets
------
Current assets:
Cash and cash equivalents $ 16,381 $ 13,530 $ 13,426
Accounts receivable and other, net 26,348 15,244 19,633
Inventories:
Raw materials 10,879 3,888 4,853
Work in process 6,612 4,082 4,009
Finished products 3,608 2,213 2,187
--------- --------- ---------
Total inventories 21,099 10,183 11,049
Deferred income taxes 10,467 3,511 3,074
Other current assets 543 438 519
--------- --------- ---------
Total current assets 74,838 42,906 47,701
--------- --------- ---------
Property, plant and equipment, at cost 40,296 38,422 38,293
Less-Accumulated depreciation 27,403 25,767 25,617
--------- --------- ---------
Total property, plant and equipment, net 12,893 12,655 12,676
--------- --------- ---------
Deferred income taxes 6,502 8,652 7,801
Other assets 6,663 5,886 6,573
--------- --------- ---------
Total assets $ 100,896 $ 70,099 $ 74,751
========= ========= =========
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Short-term debt $ 244 $ -- $ --
Accounts payable 10,681 5,518 8,119
Accrued payroll and related expenses 6,910 5,401 5,872
Other accrued expenses 6,558 5,854 6,046
Income taxes payable 3,832 3,636 3,382
--------- --------- ---------
Total current liabilities 28,225 20,409 23,419
--------- --------- ---------
Long-term debt 3,000 3,000 3,000
Other long-term liabilities 4,878 3,788 4,543
Deferred income taxes 67 11 8
Shareholders' equity:
Paid-in-capital 13,889 9,182 9,270
Earnings reinvested in the business 55,699 39,563 42,623
Accumulated other comprehensive income (428) (11) 112
Unamortized portion of restricted stock (206) (250) (239)
Common shares held in treasury, at cost (4,228) (5,593) (7,985)
--------- --------- ---------
Total shareholders' equity 64,726 42,891 43,781
--------- --------- ---------
Total liabilities and shareholders' equity $ 100,896 $ 70,099 $ 74,751
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<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,
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 40,492 $ 25,947 $ 107,523 $ 71,215
Cost of goods sold 15,435 9,962 41,655 28,520
Selling, general and administrative expenses 12,892 9,976 35,642 27,962
Product development expenses 3,224 2,682 8,975 7,760
Gain on sale of business -- -- (477) (4,808)
Net financing income (111) (30) (248) (104)
--------- --------- --------- ---------
Income before income taxes 9,052 3,357 21,976 11,885
Income taxes (benefit) 3,269 (1,255) 7,857 1,506
--------- --------- --------- ---------
Net income $ 5,783 $ 4,612 $ 14,119 $ 10,379
========= ========= ========= =========
Basic earnings per share $ 0.39 $ 0.32 $ 0.97 $ 0.69
========= ========= ========= =========
Diluted earnings per share $ 0.36 $ 0.31 $ 0.88 $ 0.67
========= ========= ========= =========
Cash dividends per Common Share $ 0.0275 $ 0.0165 $ 0.0755 $ 0.0495
========= ========= ========= =========
Cash dividends per Class B
Common Share $ 0.022 $ 0.0132 $ 0.0604 $ 0.0396
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<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,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 5,783 $ 4,612 $ 14,119 $ 10,379
Expenses not requiring outlay of cash 1,319 (1,077) 3,225 478
Gain on sale of business -- -- (477) (4,808)
Changes in working capital (5,408) (1,791) (11,839) (714)
Other operating activities 193 1,049 1,303 813
-------- -------- -------- --------
Net cash provided by operating activities 1,887 2,793 6,331 6,148
-------- -------- -------- --------
Cash flows from investing activities:
Payments for property, plant, and equipment (1,163) (409) (3,214) (914)
Sale of assets-net -- 85 -- 8,011
Other investing activities-net 52 32 55 51
-------- -------- -------- --------
Net cash provided by (used in)
investing activities (1,111) (292) (3,159) 7,148
-------- -------- -------- --------
Cash flows from financing activities:
Net increase in short term debt 96 -- 247 --
Net borrowing (repayment) of long term debt -- (3,000) -- (3,056)
Cash dividends (400) (222) (1,042) (685)
Other transactions-net 1,754 (1,734) 930 (5,137)
-------- -------- -------- --------
Net cash provided by (used in)
financing activities 1,450 (4,956) 135 (8,878)
-------- -------- -------- --------
Effect of exchange rate changes on cash (91) (71) (352) (209)
-------- -------- -------- --------
Increase (decrease) in cash and cash equivalents 2,135 (2,526) 2,955 4,209
Cash and cash equivalents at beginning of period 14,246 16,056 13,426 9,321
-------- -------- -------- --------
Cash and cash equivalents at end of period $ 16,381 $ 13,530 $ 16,381 $ 13,530
======== ======== ======== ========
Supplemental disclosures of cash flow information
-------------------------------------------------
Cash paid during the period for:
Income taxes $ 2,828 $ 497 $ 5,416 $ 2,874
Interest 17 62 55 145
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.
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
A. MANAGEMENT REPRESENTATION
The consolidated financial statements at June 30, 2000 and 1999 and for the
three month periods then ended have not been examined by independent
accountants, but in the opinion of the management of Keithley Instruments,
Inc. (the "company"), 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. STOCK SPLIT AND EARNINGS PER SHARE DENOMINATOR
On May 8, 2000, the company announced its Board of Directors had approved a
two-for-one stock split of the company's Common Shares and Class B Common
Shares. New shares were issued on June 1 to shareholders of record on May
18. All share and per share amounts have been adjusted to reflect the stock
split on a retroactive basis.
The weighted average number of shares and share equivalents used in
determining basic earnings per share and diluted earnings per share was
14,834,479 and 16,213,650 for the quarter ended June 30, 2000,
respectively, and 14,628,174 and 15,005,186 for the quarter ended June 30,
1999, respectively. The weighted average number of shares and share
equivalents used to determine basic earnings per share and diluted earnings
per share was 14,487,438 and 15,963,366 for the nine months ended June 30,
2000, respectively, and 15,087,774 and 15,418,398 for the nine months ended
June 30, 1999, respectively. Both Common Shares and Class B Common Shares
are included in calculating the weighted average number of shares
outstanding.
C. SALE OF ASSETS
On November 9, 1998, the company sold certain assets used in the operation
of its Quantox product line to KLA-Tencor Corporation for $9,147 in cash.
The agreement, which was effective October 31, 1998, included the sale of
the Quantox inventory, certain machinery, equipment and other tangible
personal property. The company retained the accounts receivable. The sale
resulted in a pretax gain of $4,808, or $0.20 per share after taxes,
recorded in the first quarter of fiscal 1999. Additional pretax gains of
$345, or $0.01 per share after taxes, and of $477 pretax, or $0.02 per
share after taxes, were recorded in the fourth quarter of fiscal 1999 and
the first quarter of fiscal 2000, respectively, for businesses previously
sold. At the time of the sales of these businesses, the company established
liabilities for certain items that were to be settled at future dates. The
additional adjustments represent the settlement of certain of these issues.
D. FAVORABLE INCOME TAX ADJUSTMENT
During the third quarter of fiscal 1999, the company recorded a favorable
income tax adjustment of $2,195, or $.15 per share. The adjustment resulted
from settlements of prior years' tax liabilities and the release of certain
valuation reserves due to improved profitability from U.S. operations.
E. DUTCH AUCTION AND STOCK REPURCHASE PROGRAM
4
<PAGE> 6
On November 11, 1998, the company commenced a tender offer to repurchase up
to 4,000,000 (on a post-split basis) of its Common Shares, or approximately
25 percent of the outstanding Common Shares and Class B Common Shares
combined. The offer was conducted through a procedure commonly known as a
"Dutch Auction" in which shareholders could tender their shares at prices
not in excess of $3.50 nor less than $2.875 per share. The offer expired on
December 10, 1998, and resulted in the purchase of 811,466 Common Shares at
$3.50 per share plus expenses of approximately $0.50 per share.
At the conclusion of the Dutch Auction, the company's Board of Directors
approved a program to repurchase up to 2,000,000 Common Shares on the open
market over a two-year period. The shares repurchased under both the Dutch
Auction and the stock repurchase program are expected to be held as
treasury stock, and from time to time, may be reissued in settlement of
stock options and the company's employee stock purchase plan. The company
did not repurchase any Common Shares during the third quarter of fiscal
2000. Since the start of the repurchase programs, the company has
repurchased a total of 2,190,406 Common Shares, or approximately 14 percent
of the combined Common and Class B Common Shares, at an average cost of
$5.20 per share including commissions. The program, as authorized by the
company's Board of Directors, allows for the repurchase of an additional
621,060 shares through December 2000. During the third quarter of fiscal
2000, the company reissued 719,208 shares (1,517,246 total since the start
of the repurchase program) in settlement of shares purchased through the
company's employee stock option and employee stock purchase plans.
F. COMPREHENSIVE INCOME
On October 1, 1998, the company adopted Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income ("SFAS 130"), which
establishes rules for reporting comprehensive income and its components.
The company's only item of other comprehensive income is foreign currency
translation adjustments recorded in shareholders' equity. The adoption of
SFAS 130 did not impact the company's net income or total shareholders'
equity. Comprehensive income for the three and nine months ended June 30,
2000 and 1999 is as follows:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income $ 5,783 $ 4,612 $ 14,119 $ 10,379
Foreign currency translation
adjustments (4) (123) (541) (440)
-------- -------- -------- --------
Comprehensive income $ 5,779 $ 4,489 $ 13,578 $ 9,939
======== ======== ======== ========
</TABLE>
G. SEGMENT AND GEOGRAPHIC INFORMATION
The company adopted FASB Statement of Financial Accounting Standards No.
131, Disclosures about Segments of an Enterprise and Related Information,
for the fiscal year ended September 30, 1999. This statement designated the
internal organization, that is used by management, for making
5
<PAGE> 7
operating decisions and assessing performance as the source of the
company's reportable segments. It also required disclosures about products
and service, geographic areas and major customers.
The company's business is to develop measurement-based solutions to verify
customers' product performance. All the company's products are computer
based (multi-point) systems operating under software control. The company's
customers are engineers, technicians and scientists in manufacturing,
product development and research functions within a range of industries.
The company's advanced hardware and software is used for process
monitoring, production test and basic research. Although the company's
products vary in capability, sophistication, use, size and price, they
basically test, measure and analyze electrical and physical properties. As
such, the company's management determined the company operates in a single
industry segment. The operations by geographic area are presented below.
The basis for attributing revenues from external customers to a geographic
area is the location of the customer.
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
2000 1999 2000 1999
-------- -------- -------- --------
NET SALES:
United States $ 19,930 $ 14,610 $ 53,778 $ 36,680
Europe 13,366 6,897 34,508 22,642
Pacific Basin 4,955 2,951 14,717 8,812
Other 2,241 1,489 4,520 3,081
-------- -------- -------- --------
$ 40,492 $ 25,947 $107,523 $ 71,215
======== ======== ======== ========
AT JUNE 30,
2000 1999
------- -------
LONG-LIVED ASSETS:
United States $16,596 $15,458
Germany 2,641 2,766
Other 319 317
------- -------
$19,556 $18,541
======= =======
H. RECENT ACCOUNTING STANDARDS CHANGES
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin 101, Revenue Recognition in Financial Statements
("SAB 101"), which provides guidance related to revenue recognition based
on interpretations and practices followed by the SEC. In June 2000, the SEC
announced that it would delay implementation of SAB 101 and is therefore,
now effective the fourth quarter of the company's fiscal year 2001. SAB 101
requires the reporting of any changes in revenue recognition as a
cumulative change in accounting principle at the time of implementation in
accordance with Accounting Principles Board Opinion 20, Accounting Changes.
The company will adopt SAB 101 and is currently in the process of
evaluating what impact, if any, SAB 101 will have on the financial position
or results of operations of the company.
6
<PAGE> 8
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
------ -----------------------------------------------------------------------
of Operations.
-------------
(In Thousands of Dollars)
Results of Operations
---------------------
Third Quarter 2000 Compared With Third Quarter 1999
---------------------------------------------------
Net income for the third quarter of fiscal 2000 increased 139 percent to a new
record at $5,783, or $0.36 per share, compared to $2,417 or $0.16 per share, in
last year's third quarter, before a favorable adjustment for income taxes. The
current quarter's results represent the sixth consecutive quarter of record
earnings before gains on sales of businesses and last year's favorable tax
adjustment. The income tax adjustment in last year's quarter resulted from
settlements of prior years' tax liabilities and the release of certain valuation
reserves due to improved profitability from U.S. operations.
Net sales of $40,492 increased 56 percent from $25,947 in the prior year's third
quarter and were a new record high for the fourth consecutive quarter. This was
principally due to strong sales for the company's products serving the
semiconductor, telecommunications and optoelectronics industries. Sales were up
significantly in all major geographies, and were particularly strong in Europe.
Sequentially, sales grew nine percent from the second quarter's record sales.
Orders for the third quarter of fiscal 2000 of $42,552 increased 37 percent from
$31,038 from the prior year's quarter and were a record high for the fourth
consecutive quarter. Orders from the company's semiconductor customers were at
record levels, and orders from the telecommunications and optoelectronics
customers remained strong. Geographically, orders were up in all major areas
with the Pacific Basin and Europe up 68 and 42 percent, respectively.
Additionally, new products introduced since the start of the fiscal year
continue to be well received. Orders for the Model 2510 TEC Source Meter
designed for the optoelectronics industry introduced in February have exceeded
the company's expectations. Orders for the Model 2700 Multimeter/Data
Acquisition System introduced during the first quarter for broader test and
measurement use have also been quite strong. Order backlog grew during the
quarter to a record $30,649 at June 30, 2000.
Cost of goods sold as a percentage of net sales improved slightly to 38.1
percentage points from 38.4 percent. Improved manufacturing efficiencies as a
result of higher sales offset the unfavorable impact of a nine percent stronger
U.S. dollar. The company's hedging activities decreased cost of goods sold as a
percentage of sales for the quarter by 0.2 percentage points versus a decrease
of 0.4 percentage points in the prior year's quarter.
Selling, general and administrative expenses of $12,892 increased 29 percent
from $9,976 in last year's third quarter, but decreased as a percentage of net
sales to 31.8 percent from 38.4 percent, a 6.6 percentage point improvement. The
increase in dollars was due to higher commissions and incentives related to
increased sales and earnings, increased sales promotion and E-business
initiatives, and marketing expenses related to the company's target industry
focus.
Product development expenses of $3,224 increased 20 percent from last year's
$2,682, but decreased as a percentage of net sales to 8.0 percent from 10.3. The
company added engineering resources during the quarter to take advantage of the
opportunities that exist in the semiconductor, telecommunications and
optoelectronics markets. Resources were spent during the quarter on
7
<PAGE> 9
products introduced at the Semicon West trade show in July 2000, including the
Model 2500 dual photodiode meter for testing last diode modules for the
optoelectronics industry, the Model 4200 semiconductor characterization system
created for development groups in semiconductor fabrication laboratories, and
the Model S633 parametric test system designed for semiconductor processes using
copper interconnects, "low-k" dielectrics and 300mm wafers, and other new
products that will be introduced over the next several quarters.
The company generated net financing income during the quarter of $111 versus
$30 in the prior year. Higher average cash balances and higher interest rates
on investments accounted for the improvement.
Nine Months Ended June 30, 2000 Compared With Nine Months Ended June 30, 1999
-----------------------------------------------------------------------------
Net income excluding the gain on the sale of a previously disposed business and
last year's favorable tax adjustment was $13,816, or $0.86 per share, for the
nine months ending June 30, 2000, and $5,093, or $0.32 per share, last year. Net
income as reported, which includes gains recorded in both years for the sales of
product lines and a favorable tax adjustment in 1999, was $14,119, or $0.88 per
share, compared to $10,379, or $0.67 per share, last year's period.
Net sales of $107,523 increased 51 percent from $71,215 reported for the
nine-month period last year. Excluding sales from Quantox in last year's period,
net sales increased 52 percent. The sales increase was principally due to strong
sales to the company's semiconductor, telecommunications and optoelectronics
customers. Sales were up significantly in all major geographies. Orders for the
nine-month period, excluding Quantox in the prior year, were up 49 percent
versus last year. Strong orders for the company's products serving the
semiconductor, telecommunications and optoelectronics industries accounted for
the increase. Year-to-date, orders from semiconductor customers were just over
one-third of total orders, while orders from telecommunications and
optoelectronics customers were just under one-third of the total. Order growth
rates for the nine-month period over the prior year exceeded 65 percent for
semiconductor, 100 percent for telecommunications and 250 percent for
optoelectronics. Orders were up significantly in all major geographies.
Cost of goods sold as a percentage of net sales decreased to 38.7 percent from
40.0 percent for the nine-month period last year. Improved manufacturing
efficiencies as a result of higher sales offset the unfavorable impact of a nine
percent stronger dollar. The effect of foreign exchange hedging on cost of goods
as a percentage of sales was a decrease of 0.2 percentage points in both
periods.
Selling, general and administrative expenses of $35,642 increased 27 percent
from $27,962 in the same period last year, but decreased as a percentage of net
sales to 33.2 percent from 39.3 percent. The majority of the increase in dollars
was due to higher expenses related to increased sales, increased promotion and
E-business initiatives, and marketing expenses related to the company's target
industry focus.
8
<PAGE> 10
Product development expenses of $8,975, or 8.3 percent of net sales, increased
16 percent from $7,760, or 10.9 percent of sales, in the prior year. The
increase is primarily due to development costs for new products introduced
during the year including the Model 2700 multimeter/data acquisition system, PCI
data acquisition boards, the Model 2510 TEC source meter, the Model 2500 dual
photodiode meter, the Model 4200 semiconductor characterization system, and the
Model S633 parametric test system, as well as products that will be introduced
during the next several quarters.
On November 9, 1998, the company sold certain assets used in the operation of
its Quantox product line to KLA-Tencor Corporation. The sale was effective
October 31, 1998, and resulted in a gain of $4,808 pretax, or $0.20 per share
after taxes, recorded in the first quarter of fiscal 1999. During the first
quarter of fiscal 2000, an additional pretax gain of $477, or $0.02 per share
after taxes, was recorded for the sale. At the time of the sale of this
business, the company established liabilities for certain items that were to be
settled at future dates. The additional adjustment recorded in the first quarter
of fiscal 2000 represents the settlement of certain of these issues. (See Note
C)
The company generated net financing income of $248 for the current year's
nine-month period versus $104 last year. Higher average cash and cash
equivalents, along with higher interest rates on investments accounted for the
improvement.
The effective tax rate was 35.75 for the current nine-month period compared
with 12.7 percent for the prior year's nine-month period. Last year's tax rate
was the result of a combination of factors: the gain on the sale of the Quantox
product line recorded at the statutory rate including state and local taxes, a
tax benefit resulting from the release of certain valuation reserves due to the
settlement of prior year's tax liabilities and the utilization of tax credits.
This resulted in an estimated 24.3 percent rate applied to normal operating
earnings. The increase in the rate in 2000 was due to higher earnings and the
aforementioned non-recurring benefits realized in 1999.
Liquidity and Capital Resources
-------------------------------
Cash generated from operations was $1,887 for the third quarter and $6,331 for
the nine months ended June 30, 2000. Cash used to fund working capital needs
totaled $5,408 and $11,839, and capital expenditures totaled $1,163 and $3,214
for the third quarter and nine-month period ending June 30, 2000, respectively.
At June 30, 2000, inventory totaled $21,099 an increase of $4,204 from the March
31, 2000 level. The company is making an investment in inventory to improve the
lead times on certain higher volume products. At June 30, 2000, cash and cash
equivalents totaled $16,381, total debt was $3,244 and the debt-to-capital ratio
was 4.8 percent.
The company recorded a deferred tax asset of $7,446 and a corresponding credit
to paid in capital as the tax benefit that will be realized as a result of the
exercise of stock options in the third quarter of 2000. The cash savings from
this tax benefit are expected to be realized during fiscal 2001.
The company expects to finance capital spending, the stock repurchase program
and working capital requirements with cash on hand and cash provided by
operations. At June 30, 2000, the company had available unused lines of credit
with domestic and foreign banks aggregating $26,748, of which $4,748 were short
term and $22,000 were long term.
9
<PAGE> 11
Outlook
-------
The company added development and applications resources during the third
quarter and plans to continue to do so the next few quarters to take advantage
of the growth opportunities that exist in its targeted industries, including the
telecommunications, optoelectronics and semiconductor industries. The company's
long-term goal is for product development efforts to total 10 to 11 percent of
net sales.
Due to the record backlog level along with current business activity in the
telecommunications, optoelectronics and semiconductor industries, management
believes that the sales for the fourth quarter of fiscal 2000 will be higher
than those of the third quarter. Earnings should also improve, but will be
impacted by the addition of development and applications engineering resources.
Factors That May Affect Future Results
--------------------------------------
Certain information included above in the last paragraph of the Liquidity and
Capital Resources section and in the Outlook section of Management's Discussion
and Analysis of Financial Condition and Results of Operations relating to
expectations as to the company's capital requirements, sales, and earnings for
the fourth quarter of fiscal 2000 and the cost structure going forward,
constitute "forward-looking" statements, as that term is defined in the Private
Securities Litigation Reform Act of 1995. Such statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those projected. Some of the factors that may affect future results are
discussed below.
Although the company operates in a single industry segment, certain of its
products and product lines are targeted for specific industries including the
semiconductor, telecommunications, optoelectronics, and other electronic
industries. Industry forecasts over the next few years look strong; however,
these industries, particularly the semiconductor industry, can be cyclical in
nature. Growth in demand for semiconductors, new technology and pricing drive
the demand for new semiconductor capital equipment. Historically, sales and
order levels for this business have been volatile which can affect revenue and
earnings for the company. Additionally, a substantial portion of the company's
sales are generated from orders received during the quarter, making predictions
of quarterly revenues and earnings difficult.
In many cases the company's products compete directly with those offered by
other manufacturers. If any of the company's competitors were to develop
products or services that are more cost-effective or technically superior,
demand for the company's product offerings could slow.
The company's success depends to a significant degree upon the continued service
of its key executive, sales, development, marketing and operational personnel.
The company also believes its future success will depend upon its ability to
attract and retain additional highly skilled personnel in these areas. The
competition for qualified personnel in the technology area is intense. Although
management believes the company offers competitive salaries and benefits, there
can be no assurance that it will be successful in retaining its existing key
personnel or attracting and retaining additional key resources. Failure to
attract and retain personnel could have a material adverse effect on the
company's results of operations.
The company's products contain large volumes of electronic components and
subassemblies that in some cases are supplied through sole or limited source
third-party suppliers. Although the company
10
<PAGE> 12
does not anticipate any problems procuring supplies in the near-term, there can
never be any assurance that parts and supplies will be available in a timely
manner and at reasonable prices. Additionally, the company's inventory is
subject to risk due to changes in market demand for particular products. The
resulting excess and/or obsolete inventory could have an adverse impact on the
company's results of operations.
The company's cost structure is comprised of costs that are directly related to
the level of sales, as well as costs that are fixed and do not fluctuate based
on quarterly sales levels. The company's quality of earnings depends on its
ability to control those costs that are fixed or semi-variable.
The company currently has ten subsidiaries or sales offices located outside the
United States, and non-U.S. sales made up half of the company's revenue in the
first nine months of fiscal 2000. The company's future results could be
adversely affected by several factors, including changes in foreign currency
exchange rates, changes in a country's or region's political or economic
conditions, trade protection measures, import or export licensing requirements,
unexpected changes in regulatory requirements and natural disasters.
The company has modified its systems to accommodate the Euro. The cost of these
modifications was immaterial to the company's results of operations. Although
difficult to predict, any competitive implications and any impact on existing
financial instruments are expected to be immaterial to the company's results of
operations, financial condition or cash flows of future periods.
11
<PAGE> 13
PART II. OTHER INFORMATION
--------------------------
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS. The following exhibits are filed herewith:
Exhibit
Number Exhibit
------ -------
11 Statement Re Computation of Per Share Earnings
27 Financial Data Schedule (EDGAR version only)
(b) REPORTS ON FORM 8-K. No reports on Form 8-K were filed during the
quarterly period ended June 30, 2000.
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 3, 2000 /s/ Joseph P. Keithley
---------------------------------------------------
Joseph P. Keithley
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
Date: August 3, 2000 /s/ Mark J. Plush
---------------------------------------------------
Mark J. Plush
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
12
