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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 MARCH 31, 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
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As of April 30, 1996 the Registrant had outstanding 4,590,947 Common
Shares, without par value, and 2,801,278 Class B Common Shares, without
par value.
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PART I. FINANCIAL INFORMATION
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ITEM 1. Financial Statements.
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KEITHLEY INSTRUMENTS, INC.
CONSOLIDATED BALANCE SHEET
(In Thousands of Dollars)
(Unaudited)
MARCH 31, SEPTEMBER 30,
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1996 1995 1995
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Assets
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Current assets:
Cash and cash equivalents $ 4,289 $ 2,682 $ 3,890
Accounts receivable and other, net 20,297 18,223 20,856
Inventories:
Raw materials 6,908 5,111 4,917
Work in process 5,356 4,340 3,981
Finished products 4,223 3,233 3,762
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Total inventories 16,487 12,684 12,660
Other current assets 2,851 2,748 2,290
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Total current assets 43,924 36,337 39,696
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Property, plant and equipment, at cost 35,843 31,908 32,527
Less-Accumulated depreciation 23,471 21,214 21,984
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Total property, plant and equipment, net 12,372 10,694 10,543
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Intangible assets, net 8,108 6,433 6,201
Other assets 8,735 7,732 9,669
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Total assets $73,139 $61,196 $66,109
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Liabilities and Shareholders' Equity
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Current liabilities:
Short-term debt and current
installments on long-term debt $ 72 $ 85 $ 71
Accounts payable 7,440 6,517 6,759
Accrued payroll and related expenses 5,104 4,168 6,142
Other accrued expenses 5,492 4,018 4,575
Income taxes payable 2,696 1,875 2,580
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Total current liabilities 20,804 16,663 20,127
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Long-term debt 9,685 7,898 6,042
Other long-term liabilities 3,138 2,828 3,038
Shareholders' equity:
Paid-in-capital 4,789 3,813 4,162
Earnings reinvested in the business 34,365 29,280 32,157
Cumulative translation adjustment and other 439 714 583
Common shares held in treasury, at cost (81) -- --
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Total shareholders' equity 39,512 33,807 36,902
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Total liabilities and shareholders' equity $73,139 $61,196 $66,109
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KEITHLEY INSTRUMENTS, INC.
CONSOLIDATED STATEMENT OF INCOME
(In Thousands of Dollars Except for Per Share Data)
(Unaudited)
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED MARCH 31, ENDED MARCH 31,
1996 1995 1996 1995
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Net sales $30,019 $27,850 $59,842 $51,375
Cost of goods sold 10,967 10,842 22,802 19,939
Selling, general and administrative expenses 12,336 11,150 24,278 21,562
Product development expenses 4,336 3,691 8,432 6,896
Amortization of intangible assets 159 116 291 232
Financing expenses (net of investment income) 176 313 335 527
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Income before income taxes 2,045 1,738 3,704 2,219
Income taxes 560 420 1,074 555
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Net income $ 1,485 $ 1,318 $ 2,630 $ 1,664
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Net income per share - primary and fully diluted $ 0.19 $ 0.18 $ 0.34 $ 0.23
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Cash dividends per Common Share $ .031 $ .025 $ .063 $ .050
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Cash dividends per Class B
Common Share $ .025 $ .020 $ .050 $ .040
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KEITHLEY INSTRUMENTS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands of Dollars)
(Unaudited)
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED MARCH 31, ENDED MARCH 31,
1996 1995 1996 1995
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Cash flows from operating activities:
Net income $ 1,485 $ 1,318 $ 2,630 $ 1,664
Expenses not requiring outlay of cash 1,084 994 2,202 2,001
Changes in working capital (3,237) (3,174) (3,789) (5,639)
Other operating activities (415) (506) 677 62
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Net cash provided by (used in) operating activities (1,083) (1,368) 1,720 (1,912)
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Cash flows from investing activities:
Payments for property, plant, and equipment (2,267) (729) (3,455) (1,307)
Acquisitions (excluding cash of $11) (1,208) -- (1,408) --
Other investing activities-net 3 35 3 53
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Net cash used in investing activities (3,472) (694) (4,860) (1,254)
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Cash flows from financing activities:
Net increase (decrease) in short term debt 1 (86) 1 (455)
Net borrowing (repayment) of long term debt 4,256 1,044 3,687 3,551
Cash dividends (213) (164) (422) (327)
Other transactions-net 142 167 349 169
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Net cash provided by financing activities 4,186 961 3,615 2,938
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Effect of exchange rate changes on cash (69) 218 (76) 198
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Increase (decrease) in cash and cash equivalents (438) (883) 399 (30)
Cash and cash equivalents at beginning of period 4,727 3,565 3,890 2,712
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Cash and cash equivalents at end of period $ 4,289 $ 2,682 $ 4,289 $ 2,682
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Supplemental disclosures of cash flow information
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Cash paid during the period for:
Income taxes $ 528 $ 300 $ 686 $ 618
Interest 128 228 347 476
Supplemental schedule of noncash investing activities
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The company's acquisitions included the following
noncash transactions (See Notes C and D):
Liabilities assumed $ 359 -- $ 916 --
Common Shares issued 201 -- 201 --
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Total noncash transactions $ 560 -- $ 1,117 --
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Disclosure of accounting policy
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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.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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A. The consolidated financial statements at March 31, 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 six month periods are summarized
below:
For the Three Months For the Six Months
Ended March 31, Ended March 31,
1996 1995 1996 1995
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Weighted average shares used
for primary calculation 7,782,654 7,134,914 7,764,418 7,122,040
Weighted average shares used
for fully diluted calculation 7,782,780 7,134,914 7,764,854 7,122,040
Prior to the quarter ended June 30, 1995, fully diluted net income per
share had not been materially different from net income per share. 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.
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ITEM 2. Management's Discussion and Analysis of Financial Condition and
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Results of Operations.
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(In Thousands of Dollars)
Results of Operations
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Second Quarter 1996 Compared with Second Quarter 1995
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Net income for the second quarter of fiscal 1996 was $1,485, or $.19 per share,
which increased from $1,318, or $.18 per share, in last year's quarter. The
increase was due to higher sales levels and better gross margins, offset
somewhat by higher operating costs and a higher tax rate.
Record net sales of $30,019 increased 8 percent from $27,850 in the prior year's
second quarter. The increase was fueled by continued strong demand for our
automated parametric test systems used in the semiconductor industry and strong
shipments of the company's bench-top instruments. Geographically, sales within
the United States and to the Pacific Basin increased while European sales were
down. Orders for the second quarter of 1996 of $27,919 increased 7 percent from
the prior year's second quarter. The Instruments business unit continued to have
record orders; however, orders from the company's other divisions were down
slightly. Backlog was reduced $3,059 during the quarter, but remained strong at
$12,621 at March 31, 1996.
Cost of goods sold as a percentage of net sales decreased to 36.5 percent from
38.9 percent. This was primarily due to fixed manufacturing costs spread over
higher sales volume, and favorable sales mix. 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 0.3
percentage points in the prior year's quarter.
Selling, general and administrative expenses of $12,336 for the second quarter
increased $1,186, or 11 percent from $11,150 in the prior year's quarter, due
mainly to higher marketing costs. The higher marketing costs were due to efforts
related to marketing Quantox(TM), the company's first product based on the
process monitoring technology purchased from IBM in 1994, additional costs to
explore other new business opportunities, as well as higher costs related to new
product introductions.
Product development expenses of $4,336, or 14.5 percent of net sales for the
quarter, increased $645, or 17 percent from $3,691, 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 development of the company's model S600 next
generation parametric tester introduced during the quarter. The company expects
to begin to ship the S600 during the first quarter of fiscal 1997.
Despite slightly higher debt levels during the quarter, financing expenses (net
of investment income) of $176, decreased $137, or 44 percent from last year's
second quarter. This was due to lower interest rates on the variable rate debt
and the absence of certain fees related to the pay-off a higher interest rate
loan in the prior year's quarter.
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Six Months Ended March 31, 1996 Compared with Six Months Ended March 31, 1995
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Net income of $2,630, or $.34 per share for the six months ended March 31, 1996,
increased $966, or 58 percent from $1,664, or $.23 per share reported for the
prior year. This was primarily the result of higher sales during the first half
of fiscal 1996 versus 1995.
Net sales of $59,842 increased $8,467, or 16 percent from $51,375 reported for
the six month period last year. The increase was due to increased sales of the
company's bench-top instruments and strong demand for the company's products
serving the semiconductor industry. Orders for the six month period were up 15
percent from last year. The majority of the increase was due to the company's
bench-top instruments, along with $1,662 in orders for Quantox.
Cost of goods sold as a percentage of net sales decreased to 38.1 percent from
38.8 percent for the six month period last year. This was due primarily to fixed
manufacturing costs spread over higher sales volume. The company's hedging
activities had no effect on cost of goods sold for the six months ended March
31, 1996, versus an increase in cost of goods sold by 0.3 percentage points of
net sales in last year's six month period.
Selling, general and administrative expenses of $24,278, or 40.6 percent of net
sales increased $2,716, or 13 percent from $21,562, or 42.0 percent of net sales
in the same period in the prior year, due mainly to higher marketing costs. The
increased marketing costs related to the market development and introduction of
Quantox, increased personnel and related costs, additional costs to explore
other new business opportunities and a 4 percent weaker U.S.
dollar.
Product development expenses of $8,432, or 14.1 percent of net sales for the
first half of fiscal 1996, increased $1,536, or 22 percent from $6,896, or 13.4
percent of net sales in the same period last year. This was due to increased
costs associated with the development of the company's S600 next generation
parametric test system, the development of its new bench-top instruments
products and the exploration of other new business opportunities.
Financing expenses (net of investment income) decreased $192, or 36 percent
despite slightly 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 29.0 percent for the six 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 most of the foreign tax credit carryforwards were used
in 1995.
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Liquidity and Capital Resources
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Cash used in operations was $1,083 for the second quarter. For the first six
months, cash provided by operations was $1,720. Total debt of $9,757 at March
31, 1996, increased $3,644 since the beginning of the year. The increase in debt
supported increased working capital requirements due to higher sales and funded
the company's increase in capital spending. 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
March 31, 1996, was 19.8 percent.
The company currently expects to increase capital spending during 1996 and
estimates capital spending will total approximately $9,000 for the year. The
increased spending will be 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 March 31,
1996, the Company had available unused lines of credit with domestic and foreign
banks aggregating $21,821 of which $6,452 were short term and $15,369 were long
term.
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PART II. OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K.
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(a) EXHIBITS. The following exhibits are filed herewith:
Exhibit
Number Exhibit
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3(c) Amended Articles of Incorporation, as amended on February 10, 1996.
10(x) 1996 Outside Directors Deferred Stock Plan.
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K. No reports on Form 8-K were filed during
the quarterly period ended March 31, 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: May 14, 1996 /s/ Joseph P. Keithley
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Joseph P. Keithley
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
Date: May 14, 1996 /s/ Ronald M. Rebner
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Ronald M. Rebner
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
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