Keithley Instruments reports 31% sales growth and net income of $5.6 million for third quarter fiscal 2010
Cleveland, Ohio - 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.
• 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 from customers in Asia. Included in orders for the first nine months of fiscal 2010 were approximately $7.0 million for final purchases of S600 products.
The Company recorded tax expense of $0.5 million for the first nine months of fiscal 2010, an effective rate of 3.1 percent. 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. This compared to tax expense of $31.1 million for the first nine months of fiscal 2009, which included a charge of $30.0 million, recorded in the first quarter of fiscal 2009, to fully reserve the Company's U.S. deferred tax assets.
Net income for the first nine months of fiscal 2010 was $15.8 million, or $0.98 per share, compared to a net loss of $46.1 million, or $2.95 per share, in the same period last year.
Balance Sheet and Cash Flow
Cash and short-term investments totaled $42.1 million at June 30, 2010, an increase of $2.3 million from March 31, 2010 and a $15.1 million increase from year-ago levels.
The Company generated $3.1 million in cash from operations during the third quarter and $9.2 million during the first nine months of fiscal 2010. The Company contributed $2.0 million to its pension plan in June 2010. Total debt was less than $0.1 million at June 30, 2010. Inventory of $9.1 million increased $0.8 million during the third quarter of fiscal 2010, but decreased $1.2 million from year-ago levels. Inventory turns were 5.0 at June 30, 2010, versus 4.1 a year ago. Trade receivables were $14.7 million, up $1.3 million from March 31, 2010 and $3.9 million from year-ago levels. Days sales outstanding were 43 at June 30, 2010, compared to 39 at March 31, 2010 and 42 days a year ago.
"We are encouraged that instrumentation orders for this quarter marked their fifth consecutive sequential increase since their low point reached in March 2009. The global electronics industry appears to be recovering faster than other industries, led by increased demand for consumer electronics, automotive electronics and capital equipment spending by companies for computer hardware and software. We believe the growth for our core business will be driven by the growth in the electronics industry during the near future. While there is still uncertainty about the sustainability of the global economic recovery, given our current cost structure and the prospect of modest improvement in the markets we serve, we will be well positioned to continue to generate improved earnings performance as net sales increase," stated Keithley.
Based upon current expectations, the Company is estimating net sales for the fourth quarter of fiscal 2010, which will end September 30, 2010, to range between $29 and $34 million. The Company expects gross margins as a percentage of net sales and operating costs to be similar to the levels incurred during the most recent quarter. Gross margins will fluctuate depending upon geography and product mix and foreign currency rates. The Company anticipates the pre-tax return on sales percentage to range in the low- to high-teens, excluding the anticipated gain on the sale of the Bainbridge Road building. The Company expects the effective tax rate for the fourth quarter of fiscal 2010 to range in the low- to mid-teens, depending upon the level of pre-tax earnings.
Use of Non-GAAP Financial Measures
Non-GAAP gross profits and non-GAAP operating income (loss) are "non-GAAP" financial measures. The tables included in this release contain a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures. Neither non-GAAP measure is a measurement of financial performance under GAAP and should not be considered as an alternative to gross profit, operating income (loss) or other measures of performance determined in accordance with GAAP. The Company also discloses percentages of sales for these non-GAAP measures.
Non-GAAP gross profits and non-GAAP operating income (loss) reflect an additional way of viewing aspects of the Company's business, and when viewed with and reconciled to the corresponding GAAP measures, management believes they provide a more complete understanding of the Company's results and help identify trends in the Company's business. A general limitation of these non-GAAP measures is that use of these measures (as compared to the related GAAP measures) may reduce comparability with other companies that may calculate similar non-GAAP measures differently.
Conference Call on the Web
Interested parties may listen to the Keithley Instruments quarterly conference call (held July 28) replay on the web by registering on the investor relations portion of the Company's website at www.keithley.com. 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. 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 products for their critical measurement needs and a rich understanding of their applications to improve the quality of their products and reduce their cost of test.
Keithley Instruments, Inc. Marc Plush Phone: +1-440-248 04 00 email@example.com PRismaPR UK Monika Cunnington Phone: +44-1462-64 07 79 firstname.lastname@example.org PRismaPR Gabriele Amelunxen Phone: +49-8106-24 72 33