FOR IMMEDIATE RELEASE
Contact: Mark J. Plush
Keithley Instruments Reports Results for Fiscal 2003 Third Quarter
Cleveland, Ohio -- July 30, 2003 -- Keithley Instruments, Inc. (NYSE:KEI), a leader in solutions for emerging measurement needs, today announced results for its fiscal 2003 third quarter that ended June 30, 2003.
Third Quarter Fiscal 2003 Results
Net sales of $25.3 million for the third quarter of fiscal 2003 decreased 3 percent from sales of $26.0 million in last year's third quarter. Sales were down 28 percent in the United States, flat in Europe, and up 19 percent in the Pacific Basin region. Without the benefit of favorable currency adjustments, net sales would have decreased 7 percent from the prior year's quarter. Sequentially, sales were down 3 percent from the second quarter. The company reported a net loss of $1.9 million, or $0.12 per share, compared to a net loss of $0.9 million, or $0.06 per share, in last year's quarter. The results include severance charges of $0.02 per share and $0.06 per share in the third quarter of fiscal year 2003 and the third quarter of fiscal year 2002, respectively.
The company announced its second strongest order quarter in two years, after last year's third quarter, driven primarily by significantly stronger orders in Asia and the semiconductor industry. Orders of $30.1 million for the quarter decreased 3 percent from last year's third quarter orders of $30.9 million. Geographically, orders were down 22 percent in the United States, flat in Europe and up 43 percent in the Pacific Basin. Strong orders in Japan and Korea more than offset lower orders in China during May and June due to the SARS virus. Compared to the prior year's third quarter, orders from semiconductor customers decreased 20 percent, wireless communications customers decreased 5 percent, while orders from electronic components and subassembly manufacturers increased 20 percent, and research and education customers increased 30 percent. Sequentially, orders increased 22 percent from the second quarter due to strong orders from semiconductor, and research and education customers. Order backlog increased $4.6 million to $16.3 million at June 30, 2003 from $11.7 million at March 31, 2003.
For the nine months ending June 30, 2003, net sales were $77.4 million, up 13 percent from $68.5 million last year. The net loss for the nine months of fiscal 2003 was $3.4 million, or $0.22 per share, compared with a net loss of $3.8 million, or $0.24 per share, last year.
Orders of $77.7 million for the nine months ending June 30, 2003, increased 6 percent from $73.6 million last year. Geographically, orders decreased 10 percent in the United States and three percent in Europe, but increased 51 percent in the Pacific Basin. For the first nine months, semiconductor orders comprised approximately 30 percent of the total, research and education made up about 20 percent, electronic components and subassembly manufacturers comprised about 20 percent, and wireless communications made up about 15 percent of the total.
Cash and short-term investments totaled $35.1 million, while short-term debt was $0.6 million. Inventory of $11.1 million decreased $1.3 million from year ago levels, with turns at 3.7. Days sales outstanding were 48 at June 30, 2003 compared to 52 at this time last year. The total number of worldwide employees on June 30, 2003 was 603, down from 615 the end of March, and 649 at June 30, 2002.
"During the course of the past two years, we have implemented programs to strengthen our business as we waited for the electronics industry to recover," stated Joseph P. Keithley, the company's Chairman, President and Chief Executive Officer. "Our strong balance sheet has afforded us the financial strength, as well as the confidence, to pursue these initiatives. We believe our strategy is sound. We are clear on who our customers are and what applications we want to serve. However, the upturn has been slower to arrive than anticipated, and we can no longer wait for the upturn to help return us to profitability and cash generation. Therefore, strengthened by our completed initiatives of the past two years, we have acted to reduce costs to return to profitability in fiscal year 2004."
"Part of our expected cost savings will come from improvements in gross margins. During the last year, we have made major changes to the way we purchase and manufacture as we adopted lean manufacturing principles. While we have seen some of the benefits of lean, such as increased turns and lower inventory balances, our overall manufacturing costs have increased. Our next phase of the lean implementation involves fine-tuning our processes and improving our execution. We expect to see significant improvements during fiscal 2004," stated Keithley.
"During the quarter we won an important benchmark from a large semiconductor manufacturer in Japan. This customer has selected our S630 parametric test system to support development of its newest generation of semiconductors targeted at mobile products. We have not yet received a large volume of orders; however, we view this win as a significant development in partnering with a leading edge semiconductor manufacturer that is often seen as setting the standard in the industry," stated Keithley.
The company provided an update on several other initiatives it has undertaken:
The cost cutting actions and improvements to the company's lean manufacturing process are expected to result in annualized cost savings of approximately $6 million beginning in fiscal year 2004. Not all of the cost savings will be realized in its results, as the company expects these savings to be partially offset by normal cost increases in fiscal 2004. In conjunction with the reduction in force, the company expects to record approximately $200,000 of additional charges in the September 2003 quarter.
"While conditions throughout the electronics industry have improved, the outlook remains hard to predict. Our sales are order dependent, and we are currently estimating sales for the September quarter to range between $25 and $28 million. Including the additional severance charge, we would expect a pretax loss in the teens as a percentage of sales at the low end of the sales range. At the high end of the sales range, we would expect a loss in the single digits as a percentage of sales," stated Keithley.
Stock Buyback Program
During the third quarter of fiscal 2003, the company repurchased 32,500 common shares at an average cost of $12.89 per share including commissions. For the nine months ending June 30, 2002, the company spent $2.8 million repurchasing 243,200 common shares at an average cost per share of $11.41 including commissions. Under the current repurchase program, the company may purchase an additional 1,223,800 shares through December 2003.
Forward Looking Statements
Statements in the "Business Initiatives" and "Business Outlook" sections of this release are forward-looking statements 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 and business conditions in the semiconductor, wireless, optoelectronics and other industries which the company serves and the severity and duration of the current downturn of these as well as the overall electronics industry, customers delaying or canceling orders in backlog, the company's ability to continue to develop an effective direct sales force in the United States, 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 implement and execute an effective lean manufacturing system without incurring significant costs or disruptions in production, the company's ability to implement and effectively manage CRM and ERP systems without interruptions in its accounting, order entry, billing, manufacturing and other customer support functions, the company's ability to control costs, changes in effective tax rates, foreign currency fluctuations which could affect worldwide operations, and the effects of terrorist activities and armed conflicts, as well as the spread of contagious diseases, that could cause disruptions in general economic activity. 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 Wednesday, July 30, 2003 at 10:00 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 web site at http://www.keithley.com. Interested parties may also listen to a replay of the quarterly conference call by visiting the web site. The replay will be available for approximately 45 days.
About Keithley Instruments, Inc.
Keithley Instruments, Inc. provides optical and electrical measurement solutions from DC to RF (radio frequency) to the wireless, semiconductor, optoelectronics, and other electronics manufacturing industries. Engineers and scientists around the world use Keithley's advanced hardware and software for process monitoring, production test, and basic research.
KEITHLEY INSTRUMENTS, INC.
KEITHLEY INSTRUMENTS, INC.
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