Keithley Instruments Reports Results for Fiscal 2007 Third Quarter

    CLEVELAND, July 26 /PRNewswire-FirstCall/ -- Keithley Instruments, Inc.
 (NYSE:   KEI), a leader in solutions for emerging measurement needs, today
 announced results for its fiscal 2007 third quarter ended June 30, 2007.
     Third Quarter Fiscal 2007 Results
     Net sales of $33.4 million for the third quarter of fiscal 2007
 decreased 13 percent compared with net sales of $38.4 million in last
 year's third quarter. The effect of a weaker U.S. dollar positively
 impacted sales growth by approximately one percentage point. Sequentially,
 sales increased two percent from the second quarter of fiscal 2007. The
 Company reported a net loss of $0.5 million, or $0.03 per share, for the
 third quarter of fiscal 2007 compared to net income of $1.7 million, or
 $0.10 per share, during last year's third quarter. The decrease in earnings
 was primarily the result of lower sales volume, lower gross margins, and an
 increase in the investment in new product development compared to the prior
 year's third quarter. Earnings were positively impacted by lower selling,
 general, and administrative costs and a favorable tax rate for the quarter.
 During the third quarter of fiscal 2007, the Company recorded an 81.2
 percent tax benefit compared to a 3.5 percent tax expense for the third
 quarter of fiscal 2006. The favorable tax rate was primarily due to
 research tax credits and extraterritorial income exclusion benefits.
     Orders of $36.0 million for the third quarter decreased 17 percent
 compared to last year's orders of $43.2 million. Geographically, orders
 decreased 23 percent in the Americas, increased eight percent in Asia, and
 decreased 36 percent in Europe when compared to the prior year. Orders from
 the Company's semiconductor customers decreased approximately 30 percent,
 orders from wireless communications customers decreased approximately ten
 percent, orders from precision electronic component and subassembly
 manufacturers decreased approximately ten percent, and research and
 education customer orders increased approximately 20 percent compared to
 the prior year's third quarter. Sequentially, orders increased eight
 percent from the second quarter of fiscal 2007, primarily due to an
 increase in orders from semiconductor customers. Order backlog increased
 $2.6 million during the quarter to $16.0 million as of June 30, 2007.
     "We were disappointed with our results for the third quarter that
 continued to reflect a cautious attitude among our customers with regard to
 their capital equipment spending," stated Joseph P. Keithley, the Company's
 Chairman, President and Chief Executive Officer. "We achieved the cost
 reductions that we previously announced in selling and general
 administration during the quarter by reducing our discretionary spending."
     Keithley added, "We remain committed to our level of investment in new
 product development. In June, as a result of our program to expand our RF
 product offering, we introduced a series of new capabilities including
 improved measurement accuracy in our Model 2910 RF Vector Signal Generator.
 We also announced the release of the Model 2100 6 1/2 - Digit Digital
 Multimeter (DMM), which provides USB connectivity. This high precision,
 low- cost DMM is the first introduction of our next generation DMMs. In
 July, we announced a migration to the Linux Operating System for our S600
 Series Parametric Test Systems. This new capability provides a more stable
 operating system and provides for a longer service life which ultimately
 reduces our customers' overall cost of test."
     "Additionally, we have entered into a Joint Development Partnership
 surrounding semiconductor device material testing technology with CEA Leti
 (Electronic and Information Technology Laboratory of the French Atomic
 Energy Commission), one of the main European applied research centers in
 electronics. Our partnership with CEA Leti is a unique opportunity to
 create new measurement technology at the point where many of our customers'
 technologies converge -- semiconductor, RF/wireless, and nanotechnology,"
 stated Keithley.
     Nine Month Results
     For the nine months ending June 30, 2007, net sales were $107.4
 million, down six percent from $113.9 million last year. The Company
 reported net income for the first nine months of fiscal 2007 of $0.5
 million, or $0.03 per share compared with net income of $5.7 million, or
 $0.34 per share, last year. The decrease in earnings was primarily the
 result of lower sales volume, lower gross margins, higher product
 development costs, and higher selling, general, and administrative costs.
 Partially offsetting the decrease in earnings for the first nine months of
 fiscal 2007 was a tax benefit of $0.9 million, or $0.05 per share,
 associated with the retroactive application of research tax credits that
 expired on December 31, 2005, as well as an overall favorable effective tax
 rate. Including the research tax credit, the Company recorded a tax benefit
 of $2.5 million, resulting in an effective tax benefit rate of 127.2
 percent, for the first nine months of fiscal 2007. For the first nine
 months of fiscal 2006, the Company recorded tax expense at an effective tax
 rate of 22.6 percent.
     Orders of $106.2 million for the nine months ending June 30, 2007
 decreased ten percent from $117.6 million last year. Geographically, orders
 decreased 25 percent in the Americas, increased 19 percent in Asia, and
 decreased 22 percent in Europe. For the first nine months of fiscal 2007,
 semiconductor customer orders comprised approximately 35 percent of the
 total, wireless communications customer orders were approximately ten
 percent of the total, precision electronic components and subassembly
 manufacturers' orders were approximately 25 percent of the total, and
 research and education customer orders were approximately 20 percent of the
 total.
     The Company generated $5.4 million in cash from operations during the
 first nine months of fiscal 2007. Cash and short-term investments totaled
 $47.3 million at June 30, 2007, and total debt was less than $0.1 million.
 Inventory of $13.9 million decreased $1.6 million from year ago levels and
 turns were 4.2 at June 30, 2007, the same as a year ago. Trade receivables
 were $18.7 million, down $2.4 million from June 30, 2006. Days sales
 outstanding were 46 at both June 30, 2007 and the prior year.
     Stock Buyback Program
     During the third quarter of fiscal 2007, the Company did not repurchase
 any shares. Under the terms of the Company's previously announced stock
 repurchase program, the Company may repurchase up to 2,000,000 Common
 Shares through February 2009.
     Operations Outlook
     "We continue to believe that our strategy of pursuing a focused set of
 applications will allow us to grow faster than the overall test and
 measurement industry. Our ability to grow revenue is tied to our ability to
 offer interrelated products with differentiated value that solve our
 customers' most compelling test challenges, coupled with our success in
 penetrating key accounts with our globally deployed sales and service team.
 We expect new product development costs for the fourth quarter of fiscal
 2007 to approximate those in the prior year's fourth quarter as we continue
 to build a stronger, broader and more complete product offering for our
 customers. We remain committed to introducing a number of new products by
 the end of this calendar year, which we believe will provide incremental
 sales growth in 2008," stated Keithley.
     "Our customers are particularly uncertain with regards to their capital
 spending; consequently our visibility is currently more limited than
 usual," stated Keithley. The Company expects sales for the fourth quarter
 of fiscal 2007, which will end September 30, 2007, to range between $31 and
 $38 million. Results will range from a pretax loss to pretax earnings in
 the single digits as a percentage of net sales. The Company expects the
 effective tax rate for the remainder of fiscal 2007 to approximate the
 statutory rate, although the rate will fluctuate based on actual results.
     Forward Looking Statements
     Statements in the "Operations Outlook" section of this release that are
 not historical facts, including those relating to orders, sales, earnings,
 operating efficiency initiatives, expense reductions and spending are
 "forward-looking statements", as defined in the Private Securities
 Litigation Reform Act of 1995, that involve a number of risks and
 uncertainties. Actual results may differ materially from the results stated
 or implied in the forward-looking statements as a result of a number of
 factors that include, but are not limited to: worldwide economic
 conditions; business conditions in the semiconductor, wireless, precision
 electronics and other segments of the worldwide electronics industry; the
 timing of large orders from customers or canceling orders in backlog;
 changes in product and sales mix, and the related effects on gross margins;
 the Company's ability to develop new products in a timely fashion and gain
 market acceptance of those products to remain competitive and gain market
 share; the Company's ability to work with third parties; competitive
 factors, including pricing pressures, loss of key employees, technological
 developments and new products offered by competitors; the Company's ability
 to fine-tune its lean manufacturing system to lower costs without incurring
 significant disruptions in production; the Company's ability to implement
 and effectively manage IT system enhancements without interruption to its
 business processes; the Company's ability to implement planned cost savings
 initiatives without adversely affecting the Company's product development
 program; the potential volatility on earnings as a result of the accounting
 for performance share awards; changes in effective tax rates due to tax law
 changes, changes in tax planning strategies, changes in deferred tax
 assets, or changes in levels of pretax earnings; foreign currency
 fluctuations which could affect worldwide operations; costs and other
 effects of domestic and foreign legal, regulatory and administrative
 proceedings; the availability of parts and supplies from third-party
 suppliers on a timely basis and at reasonable prices; and matters arising
 out of or related to the Company's stock option grants and procedures and
 related matters, including the outcome of the inquiry commenced by the SEC,
 the possibility that the SEC may disagree with the Special Committee's
 findings and may require a restatement of the Company's financial
 statements or additional or different remediation, any other proceedings
 which may be brought against the Company by the SEC or other governmental
 agencies, the outcome of the shareholder derivative actions filed against
 certain of the Company's officers and directors, and the possibility of
 other private litigation relating to such stock option grants and related
 matters. Further information on factors that could cause actual results to
 differ from those anticipated is included in the Company's annual report on
 Form 10-K and quarterly reports on Form 10-Q which are filed with the
 Securities and Exchange Commission. In light of these uncertainties, the
 inclusion of forward-looking information should not be regarded as a
 representation by the Company that its plans or objectives will be
 achieved. Further, the Company is not obligating itself to revise forward-
 looking statements contained herein to reflect events or circumstances
 after the date of this release or to reflect the occurrence of
 unanticipated events.
     Conference Call on the Web
     On Thursday, July 26, 2007, at 10 a.m. Eastern Time, interested parties
 may listen to the Keithley Instruments quarterly conference call live on
 the Web by registering on the investor relations portion of the Company's
 website at www.keithley.com. Interested parties may also listen to a replay
 of the quarterly conference call by visiting the website. The replay will
 be available for approximately 60 days.
     About Keithley Instruments, Inc.
     With more than 60 years of measurement expertise, Keithley Instruments
 has become a world leader in advanced electrical test instruments and
 systems from DC to RF (radio frequency). Our products solve emerging
 measurement needs in production testing, process monitoring, product
 development, and research. Our customers are scientists and engineers in
 the worldwide electronics industry involved with advanced materials
 research, semiconductor device development and fabrication, and the
 production of end products such as portable wireless devices. The value we
 provide them is a combination of precision measurement technology and a
 rich understanding of their applications to improve the quality of their
 products and reduce their cost of test.
                           KEITHLEY INSTRUMENTS, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
              (In Thousands of Dollars Except for Per Share Data)
                                  (Unaudited)
 
                                       FOR THE THREE MONTHS ENDED JUNE 30,
                                          2007                    2006
     NET SALES                      $33,446   100.0%        $38,427   100.0%
 
     Cost of goods sold              14,059    42.0          15,000    39.0
 
     Gross profit                    19,387    58.0          23,427    61.0
 
     Selling, general and
     administrative expenses         15,288    45.7          15,848    41.3
     Product development expenses     7,116    21.3           6,357    16.5
 
     Operating (loss) income         (3,017)   (9.0)          1,222     3.2
 
     Investment income                  582     1.7             510     1.3
     Interest expense                    11     0.0               2     0.0
 
     (Loss) income before income
      taxes                          (2,446)   (7.3)          1,730     4.5
 
     Income tax (benefit) expense    (1,987)   (5.9)             61     0.2
 
     NET (LOSS) INCOME              $  (459)   (1.4)%       $ 1,669     4.3%
 
     Basic (loss) income per share  $ (0.03)                $  0.10
     Diluted (loss) income per
      share                         $ (0.03)                $  0.10
 
     Cash dividends per Common
      Share                         $ .0375                 $ .0375
     Cash dividends per Class B
      Common Share                    $.030                 $  .030
 
     Weighted average number
      of shares outstanding
     (000) - Diluted                 16,252                 16,616
 
 
 
 
                           KEITHLEY INSTRUMENTS, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
              (In Thousands of Dollars Except for Per Share Data)
                                  (Unaudited)
 
                                         FOR THE NINE MONTHS ENDED JUNE 30,
                                           2007                    2006
     NET SALES                     $107,402   100.0%       $113,896    100.0%
 
     Cost of goods sold              43,461    40.5          44,051     38.7
 
     Gross profit                    63,941    59.5          69,845     61.3
 
     Selling, general and
     administrative expenses         48,255    44.9          46,557     40.9
     Product development expenses    19,363    18.0          17,343     15.2
 
     Operating (loss) income         (3,677)   (3.4)          5,945      5.2
 
     Investment income                1,715     1.5           1,422      1.3
     Interest expense                    38     0.0               8      0.0
 
     (Loss) income before income
      taxes                          (2,000)   (1.9)          7,359      6.5
 
     Income tax (benefit) expense    (2,543)   (2.4)          1,666      1.5
 
     NET (LOSS) INCOME                 $543     0.5%        $ 5,693      5.0%
 
     Basic (loss) income per share   $ 0.03                  $ 0.35
     Diluted (loss) income per
      share                          $ 0.03                  $ 0.34
 
     Cash dividends per Common
      Share                         $ .1125                 $ .1125
     Cash dividends per Class B
      Common Share                    $.090                  $ .090
 
     Weighted average number of
      shares outstanding (000)
      - Diluted                      16,406                  16,648
 
 
 
                           KEITHLEY INSTRUMENTS, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                           (In Thousands of Dollars)
                                  (Unaudited)
 
                                                     June 30,    September 30,
                                                       2007            2006
     ASSETS
 
     Current assets:
        Cash and cash equivalents                     $14,262        $10,501
        Short-term investments                         33,049         36,203
        Refundable income taxes                           393            583
        Accounts receivable and other,
         net of allowances                             19,607         26,836
        Inventory                                      13,891         14,647
        Other current assets                            5,811          5,870
 
           Total current assets                        87,013         94,640
 
        Property, plant and equipment, net             14,297         14,425
        Other assets                                   45,233         39,827
 
           Total assets                              $146,543       $148,892
 
     LIABILITIES AND SHAREHOLDERS' EQUITY
 
     Current liabilities:
        Short-term debt                                   $21           $872
        Accounts payable                                7,595          8,033
        Other current liabilities                      10,019         13,692
 
           Total current liabilities                   17,635         22,597
 
        Long-term debt                                     --             --
        Other long-term liabilities                    10,825          9,792
 
        Shareholders' equity                          118,083        116,503
 
           Total liabilities and
            shareholders' equity                     $146,543       $148,892
 
 

SOURCE Keithley Instruments, Inc.

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