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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| For fiscal year ended, SEPTEMBER 30, 2002 |
|
Commission file number 1-9965 |
KEITHLEY INSTRUMENTS, INC.
(Exact name of registrant as specified in its charter)
| Ohio |
|
34-0794417 |
| (State of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
| |
| 28775 Aurora Road, Solon, Ohio |
|
44139 |
| (Address of principal executive offices) |
|
(Zip Code) |
Registrant’s telephone number, including area code (440) 248-0400
Securities registered pursuant to Section 12(b) of the Act:
| Common Shares, Without Par Value |
|
New York Stock Exchange |
| (Title of each class) |
|
(Name of exchange on which registered) |
Indicate by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best
of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
As of December 5, 2002, there were outstanding 13,243,209 Common Shares, without par value (net of shares held in treasury), and 2,150,502 Class B Common Shares, without par value. At that date, the
aggregate market value of the Common Shares of the Registrant held by non-affiliates was $157,961,726 and the aggregate market value of the Class B Common Shares of the Registrant held by non-affiliates was $240,590 for a total aggregate market
value of all classes of Common Shares held by non-affiliates of $158,202,316. While the Class B Common Shares are not listed for public trading on any exchange or market system, shares of that class are convertible into Common Shares at any time on
a share-for-share basis. The market values indicated were calculated based upon the last sale price of the Common Shares as reported by the New York Stock Exchange on December 5, 2002, which was $12.26.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy
Statement for the registrant’s Annual Meeting to Shareholders to be held on February 15, 2003 (the “2003 Annual Meeting”) are incorporated by reference in Part III in this Annual Report on Form 10-K (this “Annual Report”)
and are identified under the appropriate items in this Annual Report.
PART I.
ITEM 1—BUSINESS.
General
Keithley Instruments, Inc. is a corporation that was founded in 1946 and organized under the laws of the State of Ohio on October 1, 1955. Its principal executive offices
are located at 28775 Aurora Road, Solon, Ohio 44139; telephone (440) 248-0400. References herein to the “Company” or “Keithley” are to Keithley Instruments, Inc. and its subsidiaries unless the context indicates otherwise.
The Company focuses its product and market development efforts toward production test applications in industries it believes to hold
good long-term growth potential including the wireless, semiconductor and optoelectronics industries, flat panel displays, and other growth segments of the electronics industry.
Keithley’s business is to design, develop, manufacture and market complex electronic instruments and systems geared to the specialized needs of electronics manufacturers for high-performance
production testing, process monitoring, product development and research. The Company’s primary products are integrated systems used to source, measure, connect, control or communicate DC, radio frequency (RF) or optical signals. The
Company’s customers are engineers, technicians and scientists in manufacturing, product development and research functions. During fiscal 2002, approximately 30 percent of the Company’s orders were received from the semiconductor industry.
Approximately 20 percent came from the Company’s research and education customers. Approximately 15 percent came from the wireless customer group. Approximately 10 percent came from the electronic components and subassemblies manufacturers
customer group, which includes customers in the automotive industry, computer and peripherals manufacturers, and manufacturers of components other than optoelectronic components. Less than 5 percent came from the optoelectronics customer group, with
the remainder coming from customers in a variety of other industries. Although the Company’s products vary in capability, sophistication, use, size and price, they generally test, measure and analyze electrical, RF, optical or physical
properties. As such, the Company considers its business to be in a single industry segment.
Business Strategy
The Company’s strategy for sales growth consists of several key points. First, the Company has focused its efforts on identifying specific targeted industries mentioned above, which are
driving global communications. Management believes that these industries will grow over the long term, providing growth for the Company.
Next, the Company is expanding its measurement capabilities to include RF and optical measurements along with its existing expertise in DC electrical measurements. This will allow it to make market share gains by increasing the
numbers of applications it serves within its targeted industries. The Company works closely with its customers in an effort to anticipate their current and future measurement needs. A thorough understanding of their applications, coupled with the
Company’s precision measurement technology, enables Keithley to add value to its customers’ processes, improving the quality, throughput and yield of their products, as well as determine which test applications the Company will choose to
serve. The Company also can grow sales by adding new customers to its existing customer base utilizing its applications expertise. In addition to its production test customers, the Company also recognizes the importance of traditional research
customers. Whether these customers are doing basic or applied research in a university or an industrial laboratory, they give the Company a first-hand look at new industry trends and technologies, as well as establish long-lasting relationships.
In addition to the industries mentioned above, the Company also serves other industries where it can leverage its applications expertise
and product platforms. Keithley technology is deployed in hundreds of applications where the most accurate and precise measurements are required, known as “high-reliability” measurements, in such fields as high-performance production test,
military/aerospace, medical electronics and automotive electronics. By concentrating on interrelated industries and product technologies, the Company is able to gain unusual insight into measurement problems experienced by one set of customers that
can be solved for others. The Company’s applications knowledge and technology solutions in one area build credibility as it expands to related fields, often using the same measurement platforms that are proven among a variety of customers. The
Company also focuses resources on new, emerging technologies that it believes may provide long-term growth, such as organic light emitting devices (OLEDs), nanotechnology and fuel cells.
Finally, the Company believes it can grow market share by improving response times and providing first-hand applications knowledge to its customers throughout the world utilizing a direct
sales force instead of independent sales representatives. The Company has been using its own employees to work with its customers throughout most of Asia and Europe for several years. In April 2002, it began serving its Japanese customers with a
direct sales force and now has offices in Tokyo, Osaka and Tsukuba. Additionally, in September 2002, the Company announced that effective January 1, 2003, it would replace a system of independent sales representatives with its own direct sales force
throughout the United States. The move allows Keithley to build a sales network of focused, highly trained sales engineers who will specialize in measurement expertise and problem-solving for customers, enhancing its ability to build important
customer relationships.
1
Product Offerings
The Company has approximately 500 products used to source, measure, connect, control or communicate DC, radio frequency (RF) or optical signals. Product offerings include integrated systems
solutions, along with instruments and PC plug-in boards that can be used as system components or stand-alone solutions. Prices per product vary. Parametric test systems used by semiconductor wafer manufacturers generally range in price from $250,000
to $400,000 depending upon the configuration specified by the customer. The Company’s semiconductor characterization system ranges in price from $30,000 to $75,000 depending upon the configuration and options. Bench top instruments generally
range in price from $1,000 to $10,000 on a stand-alone basis and from $15,000 to $25,000 when used as a system. Switch systems generally range in price from $20,000 to $50,000. PC plug-in boards are used for process control and data collection
applications, and machine builders and system integrators in production test. Selling prices generally range from $200 to $4,000.
New
Products During Fiscal Year 2002
New products may be developed for a specific industry application or for general purposes to serve a larger customer constituency. New
products introduced during fiscal 2002 included the following:
The Company continued to expand its product offering for research and
education customers with the addition of the Model 6485 picoammeter. This instrument can also serve applications for the Company’s optoelectronics customers, as well as OEMs (original equipment manufacturers) and system integrators. The Model
6485 picoammeter has been recognized by Research & Development Magazine as one of the 100 most technologically significant products of the year, marking the 18th R&D 100 Award the Company has received. The Model 6485 was also recognized by
the Northeast Ohio Technology Coalition with a 2002 NorTech Innovation Award. This is the fifth time in six years that Keithley has been honored with a NorTech award.
The Company also expanded its offerings for the semiconductor industry with its Model S630DC/RF Automated Parametric Test (APT) System for integrated DC and RF wafer measurements. The Model S630DC/RF
APT System is a single-insertion DC/RF parametric test solution for probing communications and high speed digital devices at the wafer level. When used with a suitable test structure layout, the system can execute independent DC and RF tests in
parallel on separate probes, greatly reducing the time and cost of testing on today’s advanced devices. The S630DC/RF system is an example of how the Company leverages capabilities gained in one industry and applies them to another.
The Company continued to add to its product offering for optoelectronics customers with the introduction of several new products. The
Model 2502 Fiber Alignment Photodiode Meter combines the steps of laser diode fiber alignment and light-current-voltage (LIV) characterization, both of which are crucial to the manufacturing of laser diode modules (LDMs). When fiber alignment is
coupled with LIV measurements, manufacturers can perform both operations on the same test stand, eliminating a production bottleneck and greatly improving the throughput of this manufacturing phase. The Company also introduced the Model 2520INT
Integrated Sphere for Pulsed Measurements. Together, the Model 2520INT and Keithley’s Model 2520 Integrated Sphere for Pulsed Measurements, introduced in 2001, can be used for production testing of EDFA pump lasers, Raman amplifiers,
telecommunication laser diodes, and high power telecommunication vertical cavity surface emitting lasers (VCSELs). The Company also introduced new 1x16 optical switches, an expansion of its Model 7090 Optical Switching Card line introduced in 2001.
The 1x16 switches allow the Company’s Models 7001 and 7002 switch mainframes to control more optical signals in a single instrument than ever before. True optical switching on the Model 7090 cards allows manufacturers of laser diodes and
fiberoptic communication devices to automate test applications more effectively.
The Company also introduced the Model 2701
Ethernet-Based DMM/Data Acquisition System, its first instrument with a built-in Ethernet port for communicating with computers. Although this is the standard for network connectivity in today’s workplace, test and measurement equipment on the
market today utilizes IEEE-488 communications, which requires installing specialized cards inside computers, special cabling and proprietary software drivers. By making instruments Ethernet compatible, the Company’s customers will be able to
take advantage of the ease of use, speed, and popularity of this interface. Ethernet connectivity enables customers to control the instrument from anywhere on their network, and is especially appropriate for applications that require remote,
distributed, or long-distance measurements such as burn-in, lab monitoring, and production test.
The Company also introduced several new
multiplexer modules for use with its Integra Series Data Acquisition products introduced in 2000 and 2001. The new Model 7710 Solid-State Multiplexer Module is a 20-channel, differential multiplexer with automatic cold junction compensation (CJC)
capability for temperature measurement with thermocouples. The Models 7711 and 7712 RF switch modules give manufacturers of telecommunications devices and related products economical, wideband signal routing solutions that complement the already
powerful DC/low frequency switching and measurement capabilities of the Integra Series mainframes. When used with either mainframe, the Model 7712 is the only solution of this type that offers RF switching to 3.5GHz for applications like 3G telecom,
wireless LAN, and Bluetooth module testing. The companion Model 7711 provides low cost, general purpose RF switching to 2GHz.
2
Geographic Markets and Distribution
During fiscal 2002, all of the Company’s products were manufactured in Ohio and were sold throughout the world in over 70 countries. The Company’s principal
markets are the United States, Europe and the Pacific Basin.
In the United States, the Company’s products are sold by the
Company’s sales personnel, independent sales representatives and through direct marketing and catalog mailings. The Company announced that in January 2003, it will replace independent sales representatives used in the United States with its own
direct sales force. Outside the U.S., the Company markets its products directly in countries in which it has sales offices and through distributors in other countries. The Company’s subsidiaries have sales and service offices located in Great
Britain, Germany, France, the Netherlands, Italy and Japan. The Company also has sales offices in Belgium, Finland, Sweden, China, Korea, Taiwan and India. Sales in markets outside the above named locations are made through independent sales
representatives and distributors.
Sources and Availability of Raw Materials
The Company’s products require a wide variety of electronic and mechanical components, most of which are purchased. The Company has multiple sources for the vast majority of the components and materials it uses;
however, there are some instances where the components are obtained from a sole-source supplier. If a sole-source supplier ceased to deliver, the Company could experience a temporary adverse impact on its operations; however, management believes
alternative sources could be developed quickly. Although shortages of purchased materials and components have been experienced from time to time, these items have generally been available to the Company as needed.
Patents
Electronic instruments of the nature the Company designs, develops and
manufactures cannot generally be patented in their entirety. Although the Company holds patents with respect to certain of its products, it does not believe that its business is dependent to any material extent upon any single patent or group of
patents, because of the rapid rate of technological change in the industry.
Seasonal Trends and Working Capital Requirements
Although the Company is not subject to significant seasonal trends, portions of its business are cyclical, particularly those areas tied to the global communications and
broadband sectors. The current cyclical downturn in the electronics industry has adversely affected the Company’s business. The Company does not have any unusual working capital requirements.
Customers
The Company’s customers generally are involved in production test,
engineering research and development, electronic service or repair, and educational and governmental research. During the fiscal year ended September 30, 2002, no one customer accounted for more than 10% of the Company’s sales. Management
believes that the loss of any one of its customers would not materially affect the sales or net income of the Company.
Backlog
The Company’s backlog of unfilled orders amounted to approximately $14,777,000 as of September 30, 2002 and approximately $12,176,000 as of September 30, 2001. It is
expected that substantially all of the orders included in the 2002 backlog will be delivered during fiscal 2003. The Company’s past experience indicates that a portion of orders included in backlog may be canceled; however, management does not
believe that cancellations will materially affect the future sales or net income of the Company.
Competition
The Company competes on the basis of quality, performance, service and price, with quality and performance frequently being dominant. There are many firms in the world engaged in the
manufacture of electronic measurement instruments, some of which are larger and have greater financial resources than the Company. In general, the Company competes with a number of companies in specialized areas of other test and measurement
products and one large broad line measurement products supplier, Agilent Technologies, Inc.
Research and Development
The Company’s engineering development activities are directed toward the development of new products that will complement, replace or add to the products currently
included in the Company’s product line. The Company does not perform basic research, but on an ongoing basis utilizes new component and software technologies in the development of its products. The highly technical nature of the Company’s
products and the rapid rate of technological change in the industry require a large and continuing commitment to engineering development efforts. Product development expenses were $13,987,000 in 2002, $14,667,000 in 2001 and $12,387,000 in 2000, or
approximately 14%, 10% and 8% of net sales, respectively, for each of the last three fiscal years.
Government Regulations
The Company believes that its current operations and its current uses of property, plant and equipment conform in all material respects to applicable laws and regulations.
The Company has not experienced, nor does it anticipate, any material claim or material capital expenditure in connection with environmental laws and other regulations.
3
Employees
As of September 30, 2002, the Company employed approximately 612 persons, 165 of whom were located outside the United States. None of the Company’s employees are covered under the terms
of a collective bargaining agreement and the Company believes that relations with its employees are good.
Foreign Operations and
Export Sales
Information related to foreign and domestic operations and export sales is contained in Note L of the Notes to the Consolidated Financial Statements included
in a separate section at the end of this Annual Report.
The Company has significant revenues from outside the United States which
increase the complexity and risk to the Company. These risks include increased exposure to the risk of foreign currency fluctuations and the potential economic and political impacts from conducting business in foreign countries. With the exception
of changes in the value of foreign currencies, which is not possible to predict, the Company believes that its foreign subsidiaries and other larger international markets are in countries where the economic and political climate is generally stable.
ITEM 2—PROPERTIES.
The Company’s principal
administrative, sales, marketing, manufacturing and development activities are conducted at two Company-owned buildings in Solon, Ohio. The two buildings total approximately 200,000 square feet and sit on approximately 33 acres of land. The Company
also owns another 50,000 square foot building on 5.5 acres of land adjacent to its executive offices. This facility is currently being leased to others, but is available for expansion should the Company require additional space. The Company also
maintains a number of sales and service offices in the United States and overseas. The Company believes that the facilities it owns and leases are well maintained, adequately insured and suitable for their present and intended uses.
ITEM 3—LEGAL PROCEEDINGS.
On March 26, 2001, a purported class
action complaint (the “Complaint”) was filed in the United States District Court for the Northern District of Ohio against Keithley Instruments, Inc. and Joseph P. Keithley, the Company’s chairman, president and chief executive
officer, alleging violations of Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934, as amended. The purported class action was filed on behalf of all those who purchased Keithley stock between January 18, 2001 and March 9, 2001
(the “Class Period”). According to the plaintiffs, the Company, with the knowledge and assistance of the individual defendant, made certain false and misleading statements concerning the Company’s business condition and prospects for
the second quarter of fiscal 2001, the three months ending March 31, 2001, during the Class Period. The plaintiffs were seeking unspecified amounts as damages, interest costs and other ancillary relief. The Company and Mr. Keithley had been served
with six additional complaints that are identical to the Complaint described above. These complaints were filed in the United States District Court for the Northern District of Ohio on March 28, 2001, March 29, 2001, March 30, 2001, April 5, 2001,
April 12, 2001 and May 4, 2001. On July 23, 2001, the actions were consolidated and recaptioned In re: Keithley Instruments, Inc., Securities Litigation. On August 29, 2001, plaintiffs filed an Amended Complaint that included additional factual
allegations and also named Gabriel Rosica, an officer of the Company, as a defendant. On December 5, 2001, pursuant to an agreed order, Mr. Rosica was dismissed from the case. On September 30, 2002, the Court dismissed the case with prejudice. The
plaintiffs had 30 days from September 30, 2002 to appeal the ruling, and the ruling was not appealed.
ITEM 4—SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.
4
EXECUTIVE OFFICERS OF THE
REGISTRANT:
The description of executive officers is included pursuant to Instruction 3 to Section (b) of Item 401 of Regulation S-K
under the Securities and Exchange Act of 1934.
The following table sets forth the names of all executive officers
of the Company and certain other information relating to their position held with the Company and other business experience.
| Executive Officer |
|
Age |
|
Recent Business Experience |
| Joseph P. Keithley |
|
53 |
|
Chairman of the Board of Directors since 1991, Chief Executive Officer since November 1993 and President since May 1994. |
| |
| Philip R. Etsler |
|
52 |
|
Vice President Human Resources of the Company since 1990. |
| |
| John A. Pesec |
|
42 |
|
Vice President Worldwide Sales and Support of the Company since September 2002. Previously, Managing Director Worldwide Sales from April 2001 to September 2002,
Director of Sales from March 1999 to April 2001, Director Semiconductor Sales from January 1998 to March 1999, and Director of Pacific Basin Operations from February 1995 to January 1998. |
| |
| Mark J. Plush |
|
53 |
|
Vice President and Chief Financial Officer of the Company since October 1998. Previously, Controller since 1982 and an Officer of the Company since
1989. |
| |
| Gabriel A. Rosica |
|
62 |
|
Executive Vice President since April 2001. Previously Senior Vice President and General Manager of Semiconductor from 1996 to 2001. |
PART II.
ITEM 5—MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company’s Common Shares trade on the New York Stock Exchange under the symbol KEI. The high and low prices shown below are sales prices of the Company’s Common Shares as reported on the NYSE. There is no
established public trading market for the Company’s Class B Common Shares; however, they are readily convertible on a one-for-one basis into Common Shares.
| Fiscal 2002 |
|
High |
|
Low |
|
Cash Dividends Per Common Share |
|
Cash Dividends Per Class B Common Share |
|
|
|
|
|
|
|
|
|
| First Quarter |
|
$19.51 |
|
$13.55 |
|
$.0375 |
|
$.0300 |
| Second Quarter |
|
25.40 |
|
17.00 |
|
.0375 |
|
.0300 |
| Third Quarter |
|
23.10 |
|
13.70 |
|
.0375 |
|
.0300 |
| Fourth Quarter |
|
16.85 |
|
11.56 |
|
.0375 |
|
.0300 |
| |
| Fiscal 2001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| First Quarter |
|
$83.50 |
|
$30.00 |
|
$.0275 |
|
$.0220 |
| Second Quarter |
|
69.60 |
|
14.00 |
|
.0375 |
|
.0300 |
| Third Quarter |
|
32.39 |
|
12.21 |
|
.0375 |
|
.0300 |
| Fourth Quarter |
|
22.75 |
|
11.95 |
|
.0375 |
|
.0300 |
The approximate number of shareholders of record of Common Shares and Class B Common
Shares, including those shareholders participating in the Dividend Reinvestment Plan, as of December 6, 2002 was 2,583 and 4, respectively.
5
ITEM 6—SELECTED FINANCIAL
DATA.
The following table sets forth consolidated selected financial data for the Company. The financial data should be read in
conjunction with the Financial Statements and Notes thereto, included in a separate section at the end of this Annual Report, and with Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in Item 7 of
this Annual Report.
| For the years ended September 30, |
|
(In thousands of dollars except for per share data) |
|
| |
|
2002 |
|
|
2001 |
|
|
2000 |
|
|
1999 |
|
|
1998 |
|
|
|
|
|
|
|
|
|
|
|
|
| Operating Results: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net sales |
|
$96,922 |
|
|
149,692 |
|
|
150,561 |
|
|
100,938 |
|
|
117,776 |
|
| (Loss) income before income taxes |
|
$(5,046 |
) |
|
26,199 |
|
|
32,471 |
|
|
16,717 |
|
|
8,189 |
|
| Net (loss) income |
|
$(3,080 |
) |
|
17,392 |
|
|
21,045 |
|
|
13,708 |
|
|
5,004 |
|
| Basic (loss) earnings per share |
|
$(0.20 |
) |
|
1.11 |
|
|
1.43 |
|
|
0.92 |
|
|
0.32 |
|
| Diluted (loss) earnings per share |
|
$(0.20 |
) |
|
1.05 |
|
|
1.30 |
|
|
0.90 |
|
|
0.31 |
|
| |
| Common Stock Information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash dividends per Common Share |
|
$0.150 |
|
|
0.140 |
|
|
0.103 |
|
|
0.070 |
|
|
0.063 |
|
| Cash dividends per Class B Common Share |
|
$0.120 |
|
|
0.112 |
|
|
0.082 |
|
|
0.056 |
|
|
0.050 |
|
| Weighted average number of shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| outstanding-diluted (in thousands) |
|
15,687 |
|
|
16,583 |
|
|
16,168 |
|
|
15,315 |
|
|
16,131 |
|
| |
| At fiscal year-end: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Dividend payout ratio |
|
n/m |
|
|
13.3 |
% |
|
7.9 |
% |
|
7.8 |
% |
|
20.2 |
% |
| Price/earnings ratio |
|
n/m |
|
|
13.7 |
|
|
53.8 |
|
|
7.9 |
|
|
8.2 |
|
| Shareholders’ equity per share |
|
$5.81 |
|
|
5.90 |
|
|
4.77 |
|
|
3.08 |
|
|
2.46 |
|
| Closing market price |
|
$12.15 |
|
|
14.35 |
|
|
70.00 |
|
|
7.09 |
|
|
2.53 |
|
| |
| Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total assets |
|
$120,371 |
|
|
123,600 |
|
|
112,338 |
|
|
74,751 |
|
|
71,017 |
|
| Current ratio |
|
3.9 |
|
|
4.5 |
|
|
3.0 |
|
|
2.0 |
|
|
1.9 |
|
| Total debt |
|
$539 |
|
|
3,000 |
|
|
3,225 |
|
|
3,000 |
|
|
6,099 |
|
| Total debt-to-capital |
|
0.6 |
% |
|
3.1 |
% |
|
4.1 |
% |
|
6.4 |
% |
|
13.6 |
% |
| Shareholders’ equity |
|
$92,448 |
|
|
93,946 |
|
|
75,773 |
|
|
43,781 |
|
|
38,742 |
|
| |
| Other Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Return on average shareholders’ equity |
|
-3.3 |
% |
|
20.5 |
% |
|
35.2 |
% |
|
33.2 |
% |
|
14.0 |
% |
| Return on average total assets |
|
-2.5 |
% |
|
14.7 |
% |
|
22.5 |
% |
|
18.8 |
% |
|
6.7 |
% |
| Return on net sales |
|
-3.2 |
% |
|
11.6 |
% |
|
14.0 |
% |
|
13.6 |
% |
|
4.2 |
% |
| Number of employees |
|
612 |
|
|
640 |
|
|
626 |
|
|
526 |
|
|
564 |
|
| Sales per employee |
|
$154.8 |
|
|
236.5 |
|
|
261.4 |
|
|
185.2 |
|
|
187.4 |
|
| |
| Cash flow: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Noncash charges to income |
|
$421 |
|
|
4,712 |
|
|
4,757 |
|
|
3,581 |
|
|
4,709 |
|
| Net cash provided by operating activities |
|
$7,815 |
|
|
38,273 |
|
|
10,549 |
|
|
9,659 |
|
|
13,033 |
|
| |
| Ten-year compound annual growth rate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net sales |
|
0.2 |
% |
|
4.2 |
% |
|
4.1 |
% |
|
1.3 |
% |
|
5.0 |
% |
| Net income |
|
n/m |
|
|
15.2 |
% |
|
20.1 |
% |
|
12.7 |
% |
|
-0.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
n/m—These ratios are not meaningful due to the reported net loss in 2002.
6
ITEM 7—MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Critical Accounting Policies and Estimates
Management has identified the Company’s “critical accounting policies.” These policies have the potential to have a significant impact on the Company’s
financial statements, either because of the significance of the financial statement item to which they relate, or because they require judgment and estimation due to the uncertainty involved in measuring, at a specific point in time, events which
will be settled in the future.
Revenue recognition:
The
Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collectability is reasonably assured. Generally, these criteria are met at the time the product is
shipped. Upon shipment, the Company also provides for estimated costs that may be incurred for product warranties and sales returns.
Use of estimates:
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the reported financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ materially from those estimates.
Inventories:
Inventories are stated at the lower of cost or market. Cost is determined based on a currently-adjusted standard, which approximates actual cost on a first-in, first-out
basis. The Company periodically reviews its recorded inventory and estimates a reserve for obsolete or slow-moving items. Such estimates are difficult to make under current economic conditions. If actual demand and market conditions are less
favorable than those projected by management, additional reserves may be required. If actual market conditions are more favorable than anticipated, the Company’s cost of sales will be lower than expected in that period.
Income taxes