Keithley Instruments Reports Fiscal 2009 Results

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 fin