Keithley Instruments Reports 31 Percent Sales Growth and Net Income of $5.6 Million for Third Quarter Fiscal 2010

Keithley Instruments, Inc. (NYSE:KEI), a world leader in advanced electrical test instruments and systems, announced results for its fiscal 2010 third quarter ended June 30, 2010.



Highlights



* Orders of $31.8 million increased 34 percent from same quarter last year; orders from instrumentation products increased approximately 30 percent from same quarter last year

* Net sales of $30.7 million increased 31 percent from same quarter last year

* Pre-tax income of $4.7 million compared to a pre-tax loss of $2.8 million in last year's third quarter

* Net income of $5.6 million and Earnings Per Share (EPS) of $0.34 for the third quarter of fiscal 2010



Third Quarter Fiscal 2010 Results



Keithley Instruments, Inc. posted net sales of $30.7 million and net income of $5.6 million, or $0.34 per share, for the quarter ended June 30, 2010. These results compare to net sales of $23.4 million and a net loss of $3.4 million, or $0.22 per share, in the year-ago quarter.



Net sales of $30.7 million for the third quarter of fiscal 2010 increased $7.2 million, or 31 percent, from net sales of $23.4 million in last year's third quarter. Net sales outside of the Americas represented approximately 70 percent of total sales for the third quarter of fiscal 2010. The effect of a stronger U.S. dollar had a negligible impact on net sales as compared to the prior year's third quarter. Sequentially, net sales increased three percent from the prior quarter. Included in net sales for the third quarter of fiscal 2010 were approximately $1.5 million of sales for final purchases for S600 products.



During the third quarter of fiscal 2010, the Company reported GAAP operating income of $4.7 million compared to a GAAP operating loss of $2.8 million for the third quarter of fiscal 2009. This reflects a $7.5 million increase in operating income on a $7.2 million increase in net sales as a result of improved gross profit on higher net sales. Gross profit as a percentage of net sales increased to 64.1 percent for the third quarter of fiscal 2010 as compared to 53.3 percent for the third quarter of fiscal 2009. Operating expenses were down slightly from the prior year's third quarter. GAAP results for the third quarters of both fiscal 2010 and 2009 are essentially the same as the non-GAAP results for the corresponding periods, which would exclude restructuring charges and expenses associated with the sale of the RF product line.



I am pleased with the results for our current fiscal quarter. They continue to validate our strategy of increasing our focus on our core test and measurement business as well as our ability to sustain the improvements we have made in our cost structure. We are seeing the results of the solid foundation we have put in place, which will enable us to continue to leverage our earnings on any increase in customer demand, said Joseph P. Keithley, the Company's Chairman, President and Chief Executive Officer.



Orders of $31.8 million for the third quarter of fiscal 2010 increased $8.1 million, or 34 percent, from orders of $23.7 million for the same period in fiscal 2009. Orders from the Company's instrumentation products increased 30 percent during the third quarter of fiscal 2010 from the same quarter last year. The increase from the third quarter of fiscal 2009 was driven by continued growth within the electronics industry. Sequentially, orders from instrumentation products increased nine percent and total orders increased three percent from the quarter ended March 31, 2010. As a percentage of total orders, those from semiconductor, research and education, precision electronics and wireless customers represented about 40 percent, 20 percent, 30 percent and five percent, respectively, for the current fiscal quarter. Geographically, orders increased across all regions in the third quarter of fiscal 2010 compared to the year-ago period, with orders from the Americas rising about 25 percent, Europe increasing five percent, while the strongest increase, 70 percent, came from customers in Asia. Included in total orders for the third quarter of fiscal 2010 were approximately $2.0 million for final purchases of S600 products.



Backlog increased to $14.5 million as of June 30, 2010, compared with $13.5 million as of March 31, 2010.



The Company recorded a tax benefit of $0.9 million for the third quarter of fiscal 2010. The effective tax rate is lower than the U.S. statutory rate because the Company recognized income in the U.S. with no corresponding tax expense as a result of fully reserved tax assets. The Company also recorded a tax benefit during the third quarter of fiscal 2010 for the carryback of the net operating losses generated in fiscal 2009. For the third quarter last year, tax expense was $0.6 million.



The Company reported net income of $5.6 million, or $0.34 per share, for the third quarter of fiscal 2010 compared to a net loss of $3.4 million, or $0.22 per share, during last year's third quarter.

Recent Developments and New Product Update



The sale of the Company's Bainbridge Road, Solon, Ohio facility is anticipated to close during July of 2010, and it is expected to result in net proceeds of $3.5 million and a pre-tax gain of $1.6 million.



During May 2010, the Company introduced the Model 3732 Quad 4x28 Ultra-High Density Reed Relay Matrix Card, which was designed for automated switch measure applications that require multiple instrument connections as well as high crosspoint density and high speed. The Company's Series 3700 System Switch/Multimeter and Plug-in Card Family offers users the accuracy and flexibility of instrument-grade switching integrated with low-noise, high performance multimeter instruments.

Nine Month Results



For the nine months ended June 30, 2010, net sales were $88.9 million, an increase of $10.5 million, or 13 percent, from $78.5 million for the same period of last year. The effect of a weaker U.S. dollar positively impacted sales growth by approximately three percentage points.



For the first nine months of fiscal 2010, the Company reported operating income of $16.3 million, compared to an operating loss of $15.2 million during the comparable prior year period. On a non-GAAP basis, the Company reported operating income of $13.1 million for the first nine months of fiscal 2010 compared to a non-GAAP operating loss of $8.5 million for the year-ago period. This reflects an increase of $21.6 million in non-GAAP operating income on $10.5 million of higher net sales. This improvement was due to higher gross profit on higher net sales, as well as improved non-GAAP gross profit as percentage of net sales, which increased to 64.3 percent for the first nine months of fiscal 2010 compared to 55.8 percent for the prior year period. Additionally, total product development and selling, general and administrative expenses decreased $8.2 million, or 16 percent, as compared to those of the first nine months of fiscal 2009. Non-GAAP operating results in fiscal 2010 exclude $0.1 million for the reversal of certain previously-recorded restructuring costs and the $3.1 million net gain on the sale of the RF product line. Non-GAAP results in fiscal 2009 exclude $2.5 million of costs associated with the exit of a product line and $4.2 million of restructuring costs.



Orders of $89.6 million for the first nine months of fiscal 2010 increased $16.5 million, or 23 percent, from orders of $73.1 million for the same period in fiscal 2009. As a percentage of total orders, orders from the semiconductor, research and education, precision electronics and wireless customers represented approximately 35 percent, 25 percent, 25 percent and 5 percent, respectively. Geographically, orders increased across all regions during the first nine months of fiscal 2010 compared with the year-ago period. Orders from the Americas rose 20 percent, Europe increased five percent, with the strongest increase, 45 percent, coming f