Keithley Instruments reports fiscal 2009 results

Keithley Instruments, Inc. (NYSE:KEI), a provider of advanced electrical test instruments and systems, today announced results for its fourth quarter and year ended September 30, 2009.

Fourth Quarter Fiscal 2009 Results
Net sales were $24.1 million for the fourth quarter of fiscal 2009, a decrease of $9.1 million, or 27 percent from net sales of $33.1 million in last year's fourth quarter. The decline was driven primarily by continued weak global economic conditions. Sales outside of the Americas represented approximately 70 percent of total sales for the fourth quarter of fiscal 2009. The effect of a stronger U.S. dollar negatively impacted sales growth by less than one percentage point, during the fourth quarter of fiscal 2009. Sequentially, net sales increased three percent from the third quarter of fiscal 2009.

During the fourth quarter of fiscal 2009, the Company reported a non-GAAP loss before taxes of $1.6 million, exclusive of $2.7 million of special charges associated with a worldwide workforce reduction.

This compared to a non-GAAP loss before taxes of $2.8 million during the fourth quarter of fiscal 2008, exclusive of $4.0 million of special charges associated with a reduction in its worldwide workforce, an unusual excess and obsolete inventory reserve charge and impairment of long term investments in a company. Even as sales declined $9.1 million, the Company decreased its non-GAAP loss before taxes by $1.1 million from the prior year's fourth quarter, primarily as a result of reducing operating costs by $7.3 million, or 32 percent, which excludes the special charges above.

The Company reported a GAAP loss before income taxes of $4.4 million during the fourth quarter of fiscal 2009, compared to a GAAP loss before income taxes of $6.8 million during the fourth quarter of fiscal 2008.

The Company recorded tax expense of $0.1 million during the fourth quarter of fiscal 2009 compared to a tax benefit of $2.2 million in the fourth quarter of fiscal 2008. The Company was unable to record a tax benefit on the current quarter's U.S. loss.

The Company reported a net loss of $4.4 million, or $0.28 per share, for the fourth quarter of fiscal 2009 compared to a net loss of $4.6 million, or $0.29 per share, during last year's fourth quarter.

The Company used $1.0 million in cash from operations during the fourth quarter of fiscal 2009. Cash and short-term investments were $25.4 million at September 30, 2009, a decrease of $1.5 million from the prior quarter, after making a non-mandatory contribution of $0.8 million to the Company's pension plan.

Orders of $25.4 million for the fourth quarter of fiscal 2009 increased seven percent sequentially from the third quarter of fiscal 2009. Orders decreased $9.8 million, or 28 percent, compared with orders of $35.1 million for the fourth quarter of last year. Orders decreased 14 percent in the Americas, 24 percent in Asia, and 45 percent in Europe. Compared to the prior year's fourth quarter, orders from both the Company's semiconductor and wireless communications customers decreased approximately 35 percent, orders from precision electronics customers decreased approximately 30 percent, and orders from research and education customers decreased approximately 15 percent. Order backlog increased $0.7 million during the quarter to $12.2 million at September 30, 2009.

"Many of our customers have recently reported improved sales; however, that improvement had not yet translated into materially increased spending among our customers for test equipment during the most recent quarter," stated Joseph P. Keithley, the Company's Chairman, President and Chief Executive Officer. "We are encouraged however, that we have experienced sequential increases in orders during each of our last two quarters, from their low in the March 2009 quarter. In response to the low levels of orders we continued to receive, we took additional action during the fourth quarter to further reduce our operating cost structure with the expectation that we will return to profitability in fiscal 2010."

Recent Developments During the Quarter and New Product Update

During the quarter, the Company announced its Model 2920A, an upgrade to its RF Vector Signal Generator line with capabilities that reduce signal generation times and enhance signal quality. The Model 2920A's operating mode flexibility is suitable for MIMO device and system R&D applications, as well as in production settings.

Keithley also recently announced that it has enhanced its ACS Basic Edition software by adding support for a broader range of source measure instrumentation. This enhancement will prove useful in expanding support for testing solar cells and discrete power semiconductors.

Fiscal Year 2009 Results
Net sales for fiscal 2009 were $102.5 million, a decrease of $49.9 million, or 33 percent, from $152.5 million in fiscal 2008. The effect of a four percent stronger U.S. dollar negatively impacted sales growth by approximately two percentage points.

During fiscal 2009, the Company reported a non-GAAP pre-tax loss of $9.9 million, excluding $9.5 million of special charges for the discontinuance of a product line and a 20 percent reduction in the Company's worldwide workforce. This compares to a non-GAAP pre-tax loss of $0.4 million during fiscal 2008, excluding special charges of $4.9 million associated with a reduction in its worldwide workforce, an unusual excess and obsolete inventory reserve charge and impairment of long term investments in a company. The increase in the non-GAAP loss before taxes, as compared to the prior year, excluding the aforementioned special charges, was primarily the result of a 33 percent decrease in net sales resulting in $34.7 million of lower gross margins. Partially offsetting the reduction in gross margins was a decrease of $24.1 million, or 26 percent, in product development and selling, general and administrative costs from $91.9 million incurred during fiscal 2008, excluding special charges. During fiscal 2009, the Company reported a GAAP loss before income taxes of $19.4 million compared to a GAAP loss before income taxes of $4.5 million during fiscal 2008.

The Company recorded tax expense of $31.1 million during fiscal 2009, which included a non-cash charge of $30.0 million recorded in the first quarter of fiscal 2009 to reserve for the Company's U.S. deferred tax assets. Additionally, the Company was unable to record a tax benefit on its fiscal 2009 U.S. loss while it recorded tax expense for certain profitable foreign operations. During fiscal 2008, the Company recorded a tax benefit of $1.9 million.

The net loss for fiscal 2009 was $50.5 million, or $3.23 per share, which includes the aforementioned tax charges, severance charges, and the costs associated with the discontinuance of a product line. This compares to a net loss of $2.6 million, or $0.16 per share, last year.

Orders for fiscal 2009 were $98.5 million, a decrease of 37 percent, from $155.2 million in the prior year. Geographically, orders decreased 27 percent in the Americas, 46 percent in Asia, and 33 percent in Europe. Orders from the Company's semiconductor customers decreased approximately 50 percent, orders from wireless communications customers decreased approximately 75 percent, orders from precision electronics customers decreased approximately 30 percent, and orders from research and education customers decreased approximately 10 percent compared to fiscal 2008. For fiscal year 2009, semiconductor customers' orders comprised approximately 20 percent of the total, wireless communications customers' orders were about five percent, precision electronics customers' orders were approximately 30 percent, and research and education customers' orders were about 40 percent.

Commenting on the full fiscal year results, Mr. Keithley added, "We began our fiscal year as the worst financial crisis since the Great Depression was beginning to unfold. We took decisive actions this year to quickly respond as credit markets froze and customers dramatically curtailed their capital spending in every geographic region we serve. Our cost saving measures were designed to increase our efficiency and refine our competitive focus. These actions included global workforce reductions, significant reductions in discretionary spending, and the discontinuance of our S600 product line. These actions were taken to help return us to profitability in fiscal 2010."

Balance Sheet and Cash Flow

The Company used $5.4 million in cash from operations during fiscal 2009. Cash and short-term investments totaled $25.4 million at September 30, 2009 and the Company reported no outstanding debt. Inventory of $9.9 million decreased $9.9 million from year-ago levels, including a $4.0 million reduction for the product line discontinuance during the second quarter of fiscal 2009. Inventories also decreased $0.5 million sequentially. Inventory turns were 4.5 at September 30, 2009, compared to 2.7 a year ago and 4.1 at June 30, 2009. Trade receivables were $11.5 million, down $4.8 million from year-ago levels and up $0.7 million from June 30, 2009. Days sales outstanding were 47 at September 30, 2009, the same as a year ago, and compared to 42 at June 30, 2009.

Operations Outlook

"Our customers' capital spending remains at greatly reduced levels as a result of current macroeconomic conditions, and their plans remain unclear as to when they will materially increase their spending for test and measurement equipment for their manufacturing applications. However, we feel that we are benefiting from initiatives around the world relating to energy efficiency applications. We remain committed to serving the challenging materials, device, and process measurement requirements that enable innovation within the electronics industry. We remain focused on executing against our business plan, and we plan to return to profitability in fiscal 2010.
Additionally, we will continue our efforts in effectively managing our cash, short-term investments and working capital," stated Keithley.

Based upon current expectations, the Company is estimating sales for the first quarter of fiscal 2010, which will end December 31, 2009, to range between $23 and $27 million and earnings before taxes to range from a loss to a profit. The Company expects the effective tax rate for fiscal 2010 to range between lower to upper 20 percent, depending on earnings. It is projected that the quarterly tax rate will fluctuate significantly, depending upon earnings by specific geography.

Conference Call on the Web

Interested parties may listen to a replay of the quarterly conference call by visiting the website at www.keithley.com.