Keithley Instruments, Inc. (Keithley) has reported net sales of $31.1 million for the first quarter of fiscal 2009, down 19%, compared with the revenues of $38.4 million in the year-ago quarter. It has also reported a net loss of $32.4 million, or $2.07 loss per diluted share, for the first quarter of fiscal 2009, compared with the net income of $889,000 million, or $0.05 per diluted share, in the year-ago quarter.
First Quarter Fiscal 2009 Results:
Sales outside of the Americas represented about 75% of total sales for the first quarter of fiscal 2009. Two percentage points of the sales decrease as compared to the prior year was the result of a stronger US dollar. Sales decreased 6% compared to the fourth quarter of fiscal 2008, about half of which was the result of a stronger US dollar.
For the first quarter of fiscal 2009, the company reported a net loss of $2.4 million, or $0.15 per share, excluding a non-cash special charge. This compared to net income of $0.9 million, or $0.05 per share, for the first quarter of fiscal 2008. Including the special charge, the reported net loss for the first quarter of fiscal 2009 was $32.4 million, or $2.07 per share. The special charge is for a non-cash discrete tax adjustment of $30.0 million, or $1.92 per share, to reserve for the company’s US deferred tax assets. The loss before taxes was $2.1 million for the first quarter of fiscal 2009 versus income before taxes of $1.0 million in the prior year’s first quarter. The decrease in earnings before taxes was primarily the result of lower sales volume and lower gross margins. Selling, general and administrative costs in the first quarter of fiscal 2009 decreased $2.0 million from the first quarter of last year, primarily the result of the cost reductions that were previously announced as well as the impact of variable compensation awards.
The company recorded tax expense of $30.2 million during the first quarter of fiscal 2009, which included the previously mentioned discrete tax adjustment of $30.0 million. Additionally, the company was unable to record a tax benefit on the current quarter’s US loss, and recorded income in certain foreign operations which resulted in tax expense for the quarter. This compares to tax expense of $0.1 million during the first quarter of fiscal 2008.
Orders of $27.7 million for the first quarter of fiscal 2009 decreased 32% from last year’s first quarter orders of $40.6 million. Geographically, orders decreased 28% in the Americas, 41% in Asia, and 24% in Europe when compared to the prior year. Orders from the company’s semiconductor customers decreased about 35%, orders from wireless communications customers decreased about 80%, and orders from both precision electronic component/subassembly manufacturers and from research and education customers each decreased about 15% compared to the prior year’s first quarter. For the first quarter, semiconductor customer orders comprised about 25% of the total, wireless communications customer orders were about five%, precision electronic component/subassembly manufacturers orders were about 25%, and research and education customer orders made up about 35%. Orders decreased 21% compared to the fourth quarter of fiscal 2008. Order backlog decreased $3.4 million during the quarter to $15.0 million at December 31, 2008.
“Global economic and industry conditions continued to deteriorate during the latter part of calendar 2008. We saw our order levels continue to decline this past quarter and, accordingly, we announced several costs reduction actions to improve our financial performance,” stated Joseph P. Keithley, the company’s chairman, president and chief executive officer. “Our focus is on managing our liquidity.”
Recent Developments and New Product Update:
During November, the company announced ACS Basic Edition, characterization and curve tracer software for component test applications. This software product is the latest addition to Keithley’s powerful Automated Characterization Suite (ACS) family, which provides an integrated solution for test management and analysis with Keithley’s SourceMeter® Instrument family that performs comprehensive device parameter analysis as well as basic curve tracing at a low cost of ownership. While initial ACS systems were designed for larger semiconductor lab applications, ACS Basic Edition systems provide an economical bench-top solution for component test applications.
The company’s KTEI (Keithley Test Environment Interactive) V7.1 software for the Model 4200-SCS (Semiconductor Characterization System) was recently named one of EDN magazine’s Hot 100 Electronic Products of 2008. KTEI V7.1 software broadens the capabilities of the Model 4200, enabling characterization of high-power semiconductor devices.
Balance Sheet and Cash Flow:
The company used $3.6 million in cash from operations during the quarter. Cash and investments in Auction Rate Securities decreased by $5.4 million to $29.2 million at December 31, 2008. Total debt was $0.6 million at December 31, 2008. Inventory of $18.0 million decreased $1.8 million from September 30, 2008. Turns were 2.7 at December 31, 2008, versus 4.2 a year ago and 2.7 at September 30, 2008. Trade receivables were $14.4 million, down $1.9 million from September 30, 2008. Days sales outstanding were 47 at December 31, 2008, versus 49 a year ago, and 47 at September 30, 2008.
Legal Proceeding Update:
On January 20, 2009, the United States District Court for the Northern District of Ohio issued an order granting the company’s and the other defendants’ motion to dismiss in its entirety the Second Amended Complaint in the previously disclosed shareholder derivative litigation. The plaintiffs have thirty days from the date of the order to appeal the dismissal.
Stock Buyback Program:
During the first quarter of fiscal 2009, the company repurchased 155,000 shares for $0.7 million at an average cost of $4.80 per share under the terms of the company’s previously announced stock repurchase program (the Program). From the Program’s inception through December 31, 2008, the company has repurchased 942,600 shares for $8.5 million at an average cost of $8.97 per share, of the 2,000,000 Common Shares that may be purchased through February 2009.
Operations Outlook:
“Our customers’ spending has dramatically decreased as a result of current macroeconomic conditions, and we are particularly uncertain about their future capital spending. We remain focused on executing against our business plan and on aligning our cost structure with the current economic reality,” stated Keithley.
Based upon current expectations, the company is estimating sales for the second quarter of fiscal 2009, which will end March 31, 2009, to range between $22 and $29 million. The company expects a loss for the second quarter. For the remainder of fiscal year 2009, the company expects to record tax expense as a result of taxes generated in foreign jurisdictions.
During the second quarter of fiscal 2009, the company expects to incur about $1.3 million for the costs associated with the previously announced reduction in its worldwide workforce that was implemented during January, 2009, slightly less than previously announced. The actions taken were the result of the order decline realized during the latter part of fiscal 2008 and into fiscal 2009. The cost reduction actions that the company has taken, including pay and benefit reductions, workforce reductions, and discretionary cost reductions, are expected to result in a cost savings during fiscal 2009 of about 20% of the company’s operating costs incurred during fiscal 2008.