##### Table of Contents



UNITED STATES
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, 2010
 Commission File Number 1-9965
 KEITHLEY INSTRUMENTS, INC.
  Ohio
(State or other jurisdiction of incorporation or organization)
    
    34-0794417
(I.R.S. Employer Identification No.)
 28775 Aurora Road, Solon, Ohio, 44139  (440) 248-0400
 Common Shares, Without Par Value
    
    New York Stock Exchange(Title of Each Class)
    
    (Name of Each Exchange on Which Registered)
 None
  o þ
  o þ
  þ o
 o o
 þ
  Large accelerated filero
    
    Accelerated filerþ
    
    Non-accelerated filer o
    
    Smaller reporting companyo(Do not check if a smaller reporting company)
  o þ




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##### 



Keithley Instruments, Inc.
10-K Annual Report
 Table of Contents
 PAGEPART IItem 1 Business
    
    
    3Item 1A Risk Factors
    
    
    7Item 1B Unresolved Staff Comments
    
    
    9Item 2 Properties
    
    
    9Item 3 Legal Proceedings
    
    
    9PART II:Item 5 Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
    
    
    11Item 6 Selected Financial Data
    
    
    13Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 7A Quantitative and Qualitative Disclosures About Market Risk
    
    
    23Item 8 Financial Statements and Supplementary Data
    
    
    24Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    53Item 9A Controls and Procedures
    
    
    53Item 9B Other Information
    
    
    54PART III:Item 10 Directors; Executive Officers and Corporate Governance
    
    
    54Item 11 Executive Compensation
    
    
    56Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    79Item 13 Certain Relationships and Related Transactions, and Director Independence
    
    
    80Item 14 Principal Accountant Fees and Services
    
    
    80PART IV:Item 15 Exhibits and Financial Statement Schedules
    
    
    81SIGNATURES
    
    
    85Exhibit 22.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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Forward-Looking Statements
     
 PART I
 
 ITEM 1   BUSINESS
 General
      3




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Business Strategy
    Product Offerings
  New Products During Fiscal Year 2010
     4




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Geographic Markets and Distribution
   Sources and Availability of Raw Materials
  Patents
  Seasonal Trends and Working Capital Requirements
  Customers
  Backlog
   5




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Competition
  Research and Development
  Government Regulations
  Employees
  Foreign Operations and Export Sales
   Executive Officers of the Registrant
  Name
    
    Position
    
    AgeJoseph P. Keithley
    
    Chairman of the Board of Directors, President and Chief Executive Officer
    
    
    61Daniel Faia
    
    Vice President Sales and Support
    
    
    43Mark A. Hoersten
    
    Vice President Marketing
    
    
    52Larry L. Pendergrass
    
    Vice President New Product Development
    
    
    55Mark J. Plush
    
    Senior Vice President and Chief Financial Officer
    
    
    61Linda C. Rae
    
    Executive Vice President and Chief Operating Officer
    
    
    45
 Joseph P. Keithley was elected Chairman of the Board of Directors in February 1991. He was
elected Chief Executive Officer in November 1993, and President in May 1994. He has been a
Director since 1986, and was elected Vice Chairman of the Board in February 1988. Mr. Keithley
joined the Company in 1976 and held various positions in production, customer service, sales and
marketing prior to being elected Vice President of Marketing in 1986. From 1986 until his
election to Chief Executive Officer in 1993, Mr. Keithley held various management positions
within the Company. He is Chairman of the Board of Nordson Corporation, a worldwide producer of
precision dispensing equipment and manufacturer of equipment used in the testing and inspection
of electronic components as well as technology-based systems for curing and surface treatment
processes, and a director
of Brush Engineered Materials, Inc., which is an integrated producer of high performance
specialty engineered materials used in a variety of electrical, electronic, thermal and
structural applications.
  6




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Daniel Faia joined the Company in February 2009 as Vice President Sales and Support. Prior to
joining Keithley, Mr. Faia served as Vice President/Worldwide Sales and Marketing at Eagle Test
Systems with responsibility for managing global sales, applications and customer service efforts.
Prior to joining Eagle Test, Mr. Faia was employed by Teradyne, Inc. in various sales and product
marketing positions from March 1997 to April 2004.Mark A. Hoersten was elected Vice President Business Management in May 2003, and in September
2008 his role was expanded to Vice President of Marketing. He joined the Company in June 1980 as
a Design Engineer and held various positions in product development and marketing before becoming
Vice President, including Director of Marketing, Telecommunications Test Business Manager, and
General Manager.Larry L. Pendergrass joined the Company in May 2003 as Vice President New Product Development.
Prior to joining Keithley, Mr. Pendergrass had over 20 years experience in research and
development, product development, and manufacturing engineering in various roles including
Section Manager, Project Manager and Project Leader with Agilent Technologies and
Hewlett-Packard.Mark J. Plush was elected Vice President and Chief Financial Officer in October 1998 and was
named Senior Vice President in February 2010. Mr. Plush joined the Company in March 1982 as
Controller and has been an officer of the Company since 1989.Linda C. Rae was elected Executive Vice President and Chief Operating Officer in December 2005.
Ms. Rae joined the Company in September 1995 as a Product Marketer and has held various marketing
positions with the Company since then, including Component Test Business Manager from July 1999
to June 2000, Business Manager of Optoelectronics from June 2000 to April 2001, General Manager
from April 2001 to May 2003, and Senior Vice President and General Manager from May 2003 to
December 2005.
 Available Information
  
 ITEM 1A   RISK FACTORS
 Cyclicality of the electronics industry and timing of the current economic downturn and large
orders
    7




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Rapid technology changes
  Competitive factors
  Dependence on key personnel
  Dependence on key suppliers
  International operations, political and economic conditions
  Effective tax rates
   8




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Changes in manufacturing processes and capacity
  Information technology management systems
  Fixed cost of sales force
  Impairment charges for definite-lived and long-lived assets
  Historical stock option grant practices
  
 ITEM 1B   UNRESOLVED STAFF COMMENTS
  
 ITEM 2   PROPERTIES
  
 ITEM 3   LEGAL PROCEEDINGS
   9




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
    
    There was no evidence of backdating annual stock option grants prior to the date of
approval by the Board of Directors.
 
    
    There was a multi-day delay by management in setting the exercise price for annual stock
option grants in 2000, 2001 and 2002. The delay resulted in the options having a lower
exercise price than the price on the date of Board approval.
 
    
    Although the Special Committee determined that the terms of the Companys stock incentive
plans required the options to be priced on the date the Board approved them, there was no
finding of intentional misconduct on the part of senior management or any other Keithley
officer, director or employee responsible for the administration of the Companys stock option
grants.
 
    
    Based on evidence gathered and analyzed by the Independent Counsel, the Special Committee
found the dates selected by management for the annual grants in 2000-2002 are the appropriate
measurement dates for accounting purposes. Accordingly, the Company was not required to record
any compensation expense with respect to the annual option grants in 2000-2002, and the
Company was not required to restate its financial statements as a result of these grants.
 
    
    The Special Committee concluded that the Companys public filings regarding annual options
grants during the years reviewed were accurate; there is no evidence that the Company timed
the grant date or pricing of annual stock option grants to take advantage of material
non-public information; and there was no wrong doing or lack of oversight by the Companys
independent directors or the Human Resources and Compensation Committee of the Board of
Directors (the Compensation Committee).
 
    
    The Special Committee also reviewed the Companys practices regarding stock option grants,
other than its annual grants, which are generally grants of smaller numbers of options to new
hires and to existing employees for promotions. The Special Committee concluded that
management exceeded certain of the authority granted to management by the Companys stock
option plans and the Compensation Committee, but that these grants involved small numbers of shares and were largely the result of ministerial errors by management.
    10




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##### Table of Contents



PART II
 
 ITEM 5   MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
   Cash DividendsCash Dividends
    
    
    Per Class BHigh
    
    
    Low
    
    
    Per Common Share
    
    
    Common ShareFiscal 2010First Quarter
    
    $
    5.50
    
    
    $
    3.20
    
    
    $
    .0125
    
    
    $
    .010Second Quarter
    
    
    7.70
    
    
    
    4.50
    
    
    
    .0125
    
    
    
    .010Third Quarter
    
    
    10.89
    
    
    
    6.27
    
    
    
    .0375
    
    
    
    .030Fourth Quarter
    
    
    21.51
    
    
    
    8.15
    
    
    
    .0375
    
    
    
    .030Fiscal 2009First Quarter
    
    $
    8.64
    
    
    $
    2.02
    
    
    $
    .0375
    
    
    $
    .030Second Quarter
    
    
    3.91
    
    
    
    1.86
    
    
    
    .0375
    
    
    
    .030Third Quarter
    
    
    4.59
    
    
    
    2.76
    
    
    
    .0125
    
    
    
    .010Fourth Quarter
    
    
    6.45
    
    
    
    3.47
    
    
    
    .0125
    
    
    
    .010
  Equity Compensation Plan Information as of September 30, 2010
 Number of securities remainingNumber of securities to be
    
    
    Weighted-average
    
    
    available for future issuanceissued upon exercise of
    
    
    exercise price of
    
    
    under equity compensationoutstanding options,
    
    
    outstanding options,
    
    
    plans (excluding securitiesrights or warrants
    
    
    rights or warrants
    
    
    reflected in column (a))Plan category
    
    (a)
    
    
    (b)
    
    
    (c)Equity
compensation plans
approved by
security holders
    
    
    3,127,176
    (1)
    
    $
    14.65
    
    
    
    722,669
    (2)Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    3,127,126
    (1)
    
    $
    14.65
    
    
    
    722,669
    (2)
 (1)
    
    Includes outstanding stock options to purchase 2,516,951 shares, 216,675 restricted award
units and 393,550 performance award units under the Companys stock incentive plan that are
payable in Common Shares. The number of performance award units included above represents the
maximum number of units that may be earned pursuant to performance award units agreements. See
Note I. Restricted award units and performance award units do not have an exercise price, and
therefore, were not included for purposes of computing the weighted-average exercise price.
Subsequent to September 30, 2010, 120,350 of the 221,400 performance award units associated
with the 2008-2010 period were issued as the vesting provisions were attained. Pursuant to the
Merger Agreement, all outstanding stock options, restricted award units and performance award
units were, at the time of closing, fully vested and cancelled in exchange for the merger
consideration of $21.60 for each underlying Common Share, less any exercise price per share.(2)
    
    Includes 452,245 shares available for issuance under the 2005 Employee Stock Purchase and
Dividend Reinvestment Plan.  11




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Stock Performance Graph
  COMPARISON OF CUMULATIVE TOTAL RETURN
 
 Fiscal Year EndingCompany/Index/Market
    
    9/30/2005
    
    
    9/30/2006
    
    
    9/30/2007
    
    
    9/30/2008
    
    
    9/30/2009
    
    
    9/30/2010Keithley Instruments, Inc.
    
    $
    100.00
    
    
    $
    88.32
    
    
    $
    74.33
    
    
    $
    59.63
    
    
    $
    40.75
    
    
    $
    160.24Russell 2000
    
    $
    100.00
    
    
    $
    109.92
    
    
    $
    123.49
    
    
    $
    105.60
    
    
    $
    95.52
    
    
    $
    108.27Russell Micro Cap
    
    $
    100.00
    
    
    $
    107.02
    
    
    $
    117.39
    
    
    $
    90.96
    
    
    $
    83.75
    
    
    $
    89.97S&P Information Technology
    
    $
    100.00
    
    
    $
    103.26
    
    
    $
    127.35
    
    
    $
    97.57
    
    
    $
    105.86
    
    
    $
    117.14
  12




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ITEM 6   SELECTED FINANCIAL DATA
  (In thousands of dollars
    
    For the years ended September 30,except for per share data)
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Operating Results:Net sales
    
    $
    126,870
    
    
    
    102,527
    
    
    
    152,468
    
    
    
    143,658
    
    
    
    155,212Gross margin percentage
    
    
    64.8
    %
    
    
    53.7
    %(1)
    
    
    58.9
    %
    
    
    59.8
    %
    
    
    61.3
    %Severance and related charges
    
    $
    (124
    )
    
    
    6,926
    
    
    
    1,377
    
    
    
    
    
    
    
    Gain on the sale of RF product line
    
    $
    (2,894
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain on the sale of building
    
    $
    (1,862
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Transaction costs associated with pending merger
    
    $
    1,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income (loss) before income taxes
    
    $
    25,397
    
    
    
    (19,366
    )
    
    
    (4,356
    )
    
    
    (1,685
    )
    
    
    9,913Provision (benefit) for income taxes
    
    $
    519
    
    
    
    31,138
    (2)
    
    
    (1,943
    )
    
    
    (1,336
    )
    
    
    1,552Net income (loss)
    
    $
    24,878
    
    
    
    (50,504
    )
    
    
    (2,593
    )
    
    
    (349
    )
    
    
    8,361Basic earnings (loss) per share
    
    $
    1.58
    
    
    
    (3.23
    )
    
    
    (0.16
    )
    
    
    (0.02
    )
    
    
    0.51Diluted earnings (loss) per share
    
    $
    1.53
    
    
    
    (3.23
    )
    
    
    (0.16
    )
    
    
    (0.02
    )
    
    
    0.50Common Stock Information:Cash dividends per Common Share
    
    $
    0.100
    
    
    
    0.100
    
    
    
    0.150
    
    
    
    0.150
    
    
    
    0.150Cash dividends per Class B Common Share
    
    $
    0.080
    
    
    
    0.080
    
    
    
    0.120
    
    
    
    0.120
    
    
    
    0.120Weighted average number of shares outstanding- diluted
    
    
    16,228
    
    
    
    15,648
    
    
    
    15,854
    
    
    
    16,207
    
    
    
    16,567At fiscal year-end:Dividend payout ratio
    
    
    6.5
    %
    
    
    n/m
    
    
    
    n/m
    
    
    
    n/m
    
    
    
    30.0
    %Shareholders equity per share
    
    $
    3.51
    
    
    
    2.14
    
    
    
    6.12
    
    
    
    6.76
    
    
    
    7.03Closing market price
    
    $
    21.51
    
    
    
    5.54
    
    
    
    8.37
    
    
    
    10.60
    
    
    
    12.75Balance Sheet Data:Total assets
    
    $
    104,656
    
    
    
    73,102
    
    
    
    137,978
    
    
    
    146,406
    
    
    
    148,892Current ratio
    
    
    3.4
    
    
    
    2.9
    
    
    
    3.3
    
    
    
    3.8
    
    
    
    4.2Short-term debt
    
    $
    
    
    
    
    
    
    
    
    23
    
    
    
    799
    
    
    
    872Long-term obligations
    
    $
    22,428
    
    
    
    19,382
    
    
    
    12,939
    
    
    
    11,102
    
    
    
    9,792Shareholders equity
    
    $
    56,935
    
    
    
    36,610
    
    
    
    103,302
    
    
    
    113,024
    
    
    
    116,503Total debt-to-capital
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.7
    %
    
    
    0.7
    %Other Data:Return on average shareholders equity
    
    
    53.2
    %
    
    
    -72.2
    %
    
    
    -2.4
    %
    
    
    -0.3
    %
    
    
    7.3
    %Return on average total assets
    
    
    28.0
    %
    
    
    -47.9
    %
    
    
    -1.8
    %
    
    
    -0.2
    %
    
    
    5.7
    %Return on net sales
    
    
    19.6
    %
    
    
    -49.3
    %
    
    
    -1.7
    %
    
    
    -0.2
    %
    
    
    5.4
    %Number of employees at year end
    
    
    490
    
    
    
    557
    
    
    
    696
    
    
    
    698
    
    
    
    673Sales per employee
    
    $
    242.3
    
    
    
    163.7
    
    
    
    218.7
    
    
    
    209.6
    
    
    
    234.5Cash flow:Net cash provided by (used in) operating activities
    
    $
    18,904
    
    
    
    (5,416
    )
    
    
    1,706
    
    
    
    5,641
    
    
    
    5,985Ten-year compound annual growth rate:Net sales
    
    
    (1.7
    )%
    
    
    0.2
    %
    
    
    2.6
    %
    
    
    1.5
    %
    
    
    2.7
    %Net income
    
    
    1.7
    %
    
    
    n/m
    
    
    
    n/m
    
    
    
    n/m
    
    
    
    n/m
 
 n/m 
    
    These ratios are not meaningful due to the reported net losses in fiscal 1996, 2007, 2008
and 2009.(1)
    
    Included in gross margins were $2,540 of costs associated with the exit of a product line.
Excluding those costs, the gross margin percentage for fiscal 2009 would have been 56.2%(2)
    
    Included in the provision for income taxes was a valuation allowance against U.S. deferred
tax assets of $29,967.  13




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ITEM 7   MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Introduction and Overview
  Business Overview
      14




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Critical Accounting Policies and Estimates
  Use of estimates:
  Revenue recognition:
  Inventories:
  Income taxes:
   15




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Pension plans:
      16




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Stock compensation plans:
    Risk-free interest rate
    
    
    1.25
    %Volatility
    
    
    78
    %
   Restructuring and cost reduction programs:
   17




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Results of Operations
   2010
    
    
    2009
    
    
    2008Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of goods sold
    
    
    35.2
    
    
    
    43.8
    
    
    
    41.1Inventory write off and accelerated depreciation for exit of product line
    
    
    0.0
    
    
    
    2.5
    
    
    
    0.0Gross profit
    
    
    64.8
    
    
    
    53.7
    
    
    
    58.9Selling, general and administrative expenses
    
    
    38.1
    
    
    
    48.4
    
    
    
    43.6Product development expenses
    
    
    9.6
    
    
    
    17.6
    
    
    
    16.7Gain on the sale of RF product line
    
    
    (2.3
    )
    
    
    
    
    
    
    Gain on the sale of building
    
    
    (1.5
    )
    
    
    
    
    
    
    Severance and related charges
    
    
    
    
    
    
    6.8
    
    
    
    0.9Operating income (loss)
    
    
    20.9
    
    
    
    (19.1
    )
    
    
    (2.3
    )Investment income
    
    
    0.1
    
    
    
    0.3
    
    
    
    1.0Interest expense
    
    
    
    
    
    
    (0.1
    )
    
    
    Transaction costs associated with pending merger
    
    
    (1.0
    )
    
    
    
    
    
    
    Impairment of long-term investments
    
    
    
    
    
    
    
    
    
    
    (1.7
    )Earnings (loss) before income taxes
    
    
    20.0
    
    
    
    (18.9
    )
    
    
    (3.0
    )Provision (benefit) for income taxes
    
    
    0.4
    
    
    
    30.4
    
    
    
    (1.3
    )Net income (loss)
    
    
    19.6
    %
    
    
    (49.3
    )%
    
    
    (1.7
    )%
      18




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Financial Condition, Liquidity and Capital Resources
 Working Capital
  2010
    
    
    2009Current assets:Cash and cash equivalents
    
    $
    50,790
    
    
    $
    24,114Restricted cash
    
    
    537
    
    
    
    569Short-term investments
    
    
    3,912
    
    
    
    759Refundable income taxes
    
    
    1,030
    
    
    
    466Accounts receivable and other, net
    
    
    19,111
    
    
    
    11,738Total inventories
    
    
    9,072
    
    
    
    9,937Deferred income taxes
    
    
    659
    
    
    
    303Other current assets
    
    
    1,518
    
    
    
    1,753Total current assets
    
    
    86,629
    
    
    
    49,639Current liabilities:Short-term debt
    
    
    
    
    
    
    Accounts payable
    
    
    5,903
    
    
    
    4,916Accrued payroll and related expenses
    
    
    11,602
    
    
    
    5,648Other accrued expenses
    
    
    5,166
    
    
    
    5,424Income taxes payable
    
    
    2,622
    
    
    
    1,122Total current liabilities
    
    
    25,293
    
    
    
    17,110Working capital
    
    $
    61,336
    
    
    $
    32,529
  Sources and Uses of Cash
  2010
    
    
    2009
    
    
    2008Cash provided by (used in):Operating activities
    
    $
    18,904
    
    
    $
    (5,416
    )
    
    $
    1,706Investing activities
    
    
    8,966
    
    
    
    9,178
    
    
    
    16,031Financing activities
    
    
    (1,374
    )
    
    
    (2,029
    )
    
    
    (8,844
    )
 Operating activities
  20




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##### Table of Contents



Investing
activities
 Financing
activities
      Payments Due by PeriodContractual Obligations
    
    Total
    
    
    Less than 1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    More than 5 yearsShort-Term Debt
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Operating Lease Obligations (a)
    
    
    5,367
    
    
    
    1,890
    
    
    
    2,081
    
    
    
    786
    
    
    
    610Payments Under Deferred Compensation Agreements (b)
    
    
    2,250
    
    
    
    193
    
    
    
    296
    
    
    
    156
    
    
    
    1,605Pension Benefits (c)
    
    
    
    
    
    
    
    
    
    
    (c
    )
    
    
    (c
    )
    
    
    (c
    )Non-cancelable Purchase Commitments
    
    $
    288
    
    
    $
    288
    
    
    
    
    
    
    
    
    
    
    
    Total Contractual Obligations
    
    $
    7,905
    
    
    $
    2,371
    
    
    $
    2,377
    
    
    $
    942
    
    
    $
    2,215
 (a)
    
    Agilent assumed the Santa Rosa lease associated with the RF product line: however, the
Company remains a guarantor in the event of default. Agilent will indemnify the Company for
any amounts paid by the Company to the landlord in event of any default. Accordingly,
obligations of approximately $305 and $178 under that lease are not included in the above
table as they are not expected to be incurred by the Company for fiscal 2011 and 2012,
respectively.(b)
    
    Includes amounts due under deferred compensation agreements with current and former
employees. At September 30, 2010, investment in insurance assets to fund future deferred
compensation payments were $1,842. Amounts exclude additional interest and investment gains or
losses that may be earned or incurred from September 30, 2010 through the time of payment.(c)
    
    The obligation related to pension benefits is actuarially determined and is reflective of
obligations as of September 30, 2010. The Company made a voluntary pension contribution of
$2,000 in fiscal 2010, and a $2,000 contribution was made in October 2010 to satisfy the
requirement for fiscal 2011. No further contributions are anticipated. We are not able to
reasonably estimate our future required contributions beyond 2011 due to uncertainties
regarding significant assumptions involved in estimating future required contributions to our
defined benefit pension plans, including interest rate levels, the amount and timing of asset
returns; what, if any, changes may occur in legislation; and how contributions in excess of
the minimum requirements could impact the amounts and timing of future contributions.  21




---



##### Table of Contents



Off-Balance Sheet Arrangements
  Recently Adopted Accounting Pronouncements
          22




---



##### Table of Contents



Recently Issued Accounting Pronouncements
     
 ITEM 7A
    
     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     23




---



##### Table of Contents



ITEM 8   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 Report of Independent Registered Public Accounting Firm
  Internal Control  Integrated Framework
    
  24




---



##### Table of Contents



Consolidated Statements of Operations
  2010
    
    
    2009
    
    
    2008Net sales
    
    $
    126,870
    
    
    $
    102,527
    
    
    $
    152,468Cost of goods sold
    
    
    44,645
    
    
    
    44,890
    
    
    
    62,623Inventory writedowns and accelerated depreciation for exit of product line
    
    
    
    
    
    
    2,540
    
    
    
    Gross profit
    
    
    82,225
    
    
    
    55,097
    
    
    
    89,845Selling, general and administrative expenses
    
    
    48,385
    
    
    
    49,764
    
    
    
    66,413Product development expenses
    
    
    12,145
    
    
    
    18,024
    
    
    
    25,504Gain on the sale of RF product line
    
    
    (2,894
    )
    
    
    
    
    
    
    Gain on the sale of building
    
    
    (1,862
    )
    
    
    
    
    
    
    Severance and related charges
    
    
    (124
    )
    
    
    6,926
    
    
    
    1,377Operating income (loss)
    
    
    26,575
    
    
    
    (19,617
    )
    
    
    (3,449
    )Investment income
    
    
    95
    
    
    
    303
    
    
    
    1,603Interest expense
    
    
    (23
    )
    
    
    (52
    )
    
    
    (70
    )Transaction costs associated with pending merger
    
    
    (1,250
    )
    
    
    
    
    
    
    Impairment of long-term investments
    
    
    
    
    
    
    
    
    
    
    (2,620
    )Earnings (loss) before income taxes
    
    
    25,397
    
    
    
    (19,366
    )
    
    
    (4,536
    )Provision (benefit) for income taxes
    
    
    519
    
    
    
    31,138
    
    
    
    (1,943
    )Net income (loss)
    
    $
    24,878
    
    
    $
    (50,504
    )
    
    $
    (2,593
    )Basic earnings (loss) per share
    
    $
    1.58
    
    
    $
    (3.23
    )
    
    $
    (0.16
    )Diluted earnings (loss) per share
    
    $
    1.53
    
    
    $
    (3.23
    )
    
    $
    (0.16
    )
   25




---



##### Table of Contents



Consolidated Balance Sheets
  2010
    
    
    2009AssetsCurrent assets:Cash and cash equivalents
    
    $
    50,790
    
    
    $
    24,114Restricted cash
    
    
    537
    
    
    
    569Short-term investments
    
    
    3,912
    
    
    
    759Refundable income taxes
    
    
    1,030
    
    
    
    466Accounts receivable and other, net of allowance for doubtful accounts of $649 and $598 as of September 30,
2010 and 2009, respectively
    
    
    19,111
    
    
    
    11,738Inventories:Raw materials
    
    
    6,060
    
    
    
    5,760Work in process
    
    
    768
    
    
    
    613Finished products
    
    
    2,244
    
    
    
    3,564Total inventories
    
    
    9,072
    
    
    
    9,937Deferred income taxes
    
    
    659
    
    
    
    303Prepaid expenses
    
    
    1,518
    
    
    
    1,753Total current assets
    
    
    86,629
    
    
    
    49,639Property, plant and equipment, at cost:Land
    
    
    923
    
    
    
    1,325Buildings and leasehold improvements
    
    
    10,819
    
    
    
    18,053Manufacturing, laboratory and office equipment
    
    
    26,242
    
    
    
    34,70337,984
    
    
    
    54,081Less-Accumulated depreciation and amortization
    
    
    32,271
    
    
    
    42,981Total property, plant and equipment, net
    
    
    5,713
    
    
    
    11,100Deferred income taxes
    
    
    1,942
    
    
    
    748Intangible assets
    
    
    
    
    
    
    910Other assets
    
    
    10,372
    
    
    
    10,705Total assets
    
    $
    104,656
    
    
    $
    73,102Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    5,903
    
    
    $
    4,916Accrued payroll and related expenses
    
    
    11,602
    
    
    
    5,648Other accrued expenses
    
    
    5,166
    
    
    
    5,424Income taxes payable
    
    
    2,622
    
    
    
    1,122Total current liabilities
    
    
    25,293
    
    
    
    17,110Long-term deferred compensation
    
    
    180
    
    
    
    2,111Long-term income taxes payable
    
    
    2,985
    
    
    
    2,852Other long-term liabilities
    
    
    19,263
    
    
    
    14,419Commitments and contingencies (See Note L)Shareholders equity:Common Shares, stated value $.0125:Authorized  80,000,000; issued and outstanding  15,031,420 and 14,950,093 in 2010 and 2009, respectively
    
    
    188
    
    
    
    187Class B Common Shares, stated value $.0125:Authorized  9,000,000; issued and outstanding  2,150,502 in 2010 and 2009
    
    
    27
    
    
    
    27Capital in excess of stated value
    
    
    41,495
    
    
    
    39,121Retained earnings
    
    
    51,972
    
    
    
    28,629Accumulated other comprehensive loss
    
    
    (21,170
    )
    
    
    (15,900
    )Common Shares held in treasury, at cost
    
    
    (15,577
    )
    
    
    (15,454
    )Total shareholders equity
    
    
    56,935
    
    
    
    36,610Total liabilities and shareholders equity
    
    $
    104,656
    
    
    $
    73,102
   26




---



##### Table of Contents



Consolidated Statements of Shareholders Equity
  Capital
    
    
    
    
    
    
    Accumulated
    
    
    CommonClass B
    
    
    in excess
    
    
    
    
    
    
    other
    
    
    Shares
    
    
    TotalCommon
    
    
    Common
    
    
    of stated
    
    
    Retained
    
    
    comprehensive
    
    
    held in
    
    
    shareholdersShares
    
    
    Shares
    
    
    value
    
    
    earnings
    
    
    loss
    
    
    treasury
    
    
    equityBalance September 30, 2007
    
    $
    182
    
    
    $
    27
    
    
    $
    36,436
    
    
    $
    85,676
    
    
    $
    (946
    )
    
    $
    (8,351
    )
    
    $
    113,024Comprehensive Loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,593
    )Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85Pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (720
    )Net unrealized gain on derivative securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    132Net unrealized investment loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (424
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,520
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    1,832
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,832Cash dividends:Common Shares ($.15 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,049
    )
    
    
    
    
    
    
    
    
    
    
    (2,049
    )Class B Common Shares ($.12 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (258
    )
    
    
    
    
    
    
    
    
    
    
    (258
    )Adoption of FIN 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17
    )
    
    
    
    
    
    
    
    
    
    
    (17
    )Shares issued under stock plans, net of taxes
    
    
    2
    
    
    
    
    
    
    
    451
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    453Common Shares acquired for settlement of deferred
Directors fees
    
    
    
    
    
    
    
    
    
    
    234
    
    
    
    
    
    
    
    
    
    
    
    (234
    )
    
    
    Common Shares reissued in settlement of Directors fees
    
    
    
    
    
    
    
    
    
    
    (23
    )
    
    
    
    
    
    
    
    
    
    
    23
    
    
    
    Repurchase of Common Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,163
    )
    
    
    (6,163
    )Balance September 30, 2008
    
    
    184
    
    
    
    27
    
    
    
    38,930
    
    
    
    80,759
    
    
    
    (1,873
    )
    
    
    (14,725
    )
    
    
    103,302Comprehensive Loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,504
    )Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    424Pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,756
    )Net unrealized gain on derivative Securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (137
    )Net unrealized investment gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    442Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (64,531
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    (53
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (53
    )Implementation of pension measurement date change
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (105
    )
    
    
    
    
    
    
    
    
    
    
    (105
    )Cash dividends:Common Shares ($.10 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,349
    )
    
    
    
    
    
    
    
    
    
    
    (1,349
    )Class B Common Shares ($.08 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (172
    )
    
    
    
    
    
    
    
    
    
    
    (172
    )Shares issued under stock plans, net of taxes
    
    
    3
    
    
    
    
    
    
    
    302
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    305Common Shares acquired for settlement of deferred
Directors fees
    
    
    
    
    
    
    
    
    
    
    228
    
    
    
    
    
    
    
    
    
    
    
    (228
    )
    
    
    Common Shares reissued in settlement of Directors fees
    
    
    
    
    
    
    
    
    
    
    (286
    )
    
    
    
    
    
    
    
    
    
    
    286
    
    
    
    Repurchase of Common Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (787
    )
    
    
    (787
    )Balance September 30, 2009
    
    
    187
    
    
    
    27
    
    
    
    39,121
    
    
    
    28,629
    
    
    
    (15,900
    )
    
    
    (15,454
    )
    
    
    36,610Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,878Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    302Pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,555
    )Net unrealized gain on derivative Securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,608Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    2,092
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,092Cash dividends:Common Shares ($.10 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,363
    )
    
    
    
    
    
    
    
    
    
    
    (1,363
    )Class B Common Shares ($.08 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (172
    )
    
    
    
    
    
    
    
    
    
    
    (172
    )Shares issued under stock plans, net of taxes
    
    
    1
    
    
    
    
    
    
    
    171
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    172Common Shares acquired for settlement of deferred
Directors fees
    
    
    
    
    
    
    
    
    
    
    158
    
    
    
    
    
    
    
    
    
    
    
    (158
    )
    
    
    Common Shares reissued in settlement of Directors fees
    
    
    
    
    
    
    
    
    
    
    (47
    )
    
    
    
    
    
    
    
    
    
    
    47
    
    
    
    Repurchase of Common Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12
    )
    
    
    (12
    )Balance September 30, 2010
    
    $
    188
    
    
    $
    27
    
    
    $
    41,495
    
    
    $
    51,972
    
    
    $
    (21,170
    )
    
    $
    (15,577
    )
    
    $
    56,935
   27




---



##### Table of Contents



Consolidated Statements of Cash Flows
  2010
    
    
    2009
    
    
    2008Cash flows from operating activities:Net income (loss)
    
    $
    24,878
    
    
    $
    (50,504
    )
    
    $
    (2,593
    )Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:Depreciation
    
    
    2,157
    
    
    
    3,626
    
    
    
    4,157Amortization
    
    
    47
    
    
    
    280
    
    
    
    210Deferred income taxes
    
    
    (1,332
    )
    
    
    30,412
    
    
    
    (3,174
    )Deferred compensation
    
    
    236
    
    
    
    18
    
    
    
    (76
    )Stock-based compensation
    
    
    2,092
    
    
    
    (53
    )
    
    
    1,832Non-cash charges for exit of product line
    
    
    
    
    
    
    4,498
    
    
    
    Gain on the sale of assets
    
    
    (4,756
    )
    
    
    
    
    
    
    Loss on the disposition/impairment of assets
    
    
    284
    
    
    
    110
    
    
    
    2,775Change in current assets and liabilities:Refundable income taxes
    
    
    (562
    )
    
    
    (191
    )
    
    
    516Accounts receivable and other
    
    
    (7,384
    )
    
    
    5,494
    
    
    
    2,330Inventories
    
    
    (957
    )
    
    
    5,945
    
    
    
    (5,210
    )Prepaid expenses
    
    
    (62
    )
    
    
    465
    
    
    
    (90
    )Other current liabilities
    
    
    4,399
    
    
    
    (5,541
    )
    
    
    1,208Other operating activities
    
    
    (136
    )
    
    
    25
    
    
    
    (179
    )Net cash provided by (used in) operating activities
    
    
    18,904
    
    
    
    (5,416
    )
    
    
    1,706Cash flows from investing activities:Proceeds from the sale of assets
    
    
    12,800
    
    
    
    
    
    
    
    Capital expenditures
    
    
    (713
    )
    
    
    (1,994
    )
    
    
    (3,831
    )Restricted cash
    
    
    32
    
    
    
    (569
    )
    
    
    Purchase of investments and other
    
    
    (3,153
    )
    
    
    (759
    )
    
    
    (13,225
    )Proceeds from maturities and sales of investments
    
    
    
    
    
    
    12,500
    
    
    
    33,087Net cash provided by investing activities
    
    
    8,966
    
    
    
    9,178
    
    
    
    16,031Cash flows from financing activities:Net repayment of short-term debt
    
    
    0
    
    
    
    (25
    )
    
    
    (861
    )Proceeds from employee stock purchase and option plans
    
    
    201
    
    
    
    212
    
    
    
    347Tax benefit of stock purchase and stock-based compensation arrangements
    
    
    (28
    )
    
    
    92
    
    
    
    140Repurchase of Common Shares
    
    
    (12
    )
    
    
    (787
    )
    
    
    (6,163
    )Cash dividends
    
    
    (1,535
    )
    
    
    (1,521
    )
    
    
    (2,307
    )Net cash used in financing activities
    
    
    (1,374
    )
    
    
    (2,029
    )
    
    
    (8,844
    )Effect of changes in foreign currency exchange rates on cash and cash equivalents
    
    
    180
    
    
    
    308
    
    
    
    292Increase in cash and cash equivalents
    
    
    26,676
    
    
    
    2,041
    
    
    
    9,185Cash and cash equivalents at beginning of period
    
    
    24,114
    
    
    
    22,073
    
    
    
    12,888Cash and cash equivalents at end of period
    
    $
    50,790
    
    
    $
    24,114
    
    
    $
    22,073Supplemental disclosures of cash flow informationCash paid during the year for:Income taxes
    
    $
    227
    
    
    $
    1,229
    
    
    $
    1,945Interest
    
    
    29
    
    
    
    53
    
    
    
    59
   28




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Note A  Summary of Significant Accounting Policies
 Principles of consolidation
  Nature of operations
   Revenue recognition
  Foreign currency translation
  Advertising
  Intangible assets
   29




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##### Table of Contents



Product development expenses
  Fair Value Measurements
  
    
    Level 1  Valuation is based upon quoted prices (unadjusted) for identical assets or
liabilities in active markets.
 
    
    Level 2  Valuation is based upon quoted prices for similar assets and liabilities in active
markets, or other inputs that are observable for the asset or liability, either directly or
indirectly, for substantially the full term of the financial instrument.
 
    
    Level 3  Valuation is based upon other unobservable inputs that are significant to the fair
value measurement.
  Cash and cash equivalents
  Restricted cash
  Accounts receivable and allowance for doubtful accounts
  2010
    
    
    2009
    
    
    2008Balance at beginning of year
    
    $
    598
    
    
    $
    555
    
    
    $
    500Additions
    
    
    59
    
    
    
    79
    
    
    
    63Write-offs, net of recoveries
    
    
    (5
    )
    
    
    (43
    )
    
    
    (6
    )Foreign exchange revaluation
    
    
    (3
    )
    
    
    7
    
    
    
    (2
    )Balance at end of year
    
    $
    649
    
    
    $
    598
    
    
    $
    555
 Inventories
   30




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##### Table of Contents



Property, plant and equipment
  Capitalized software
  Impairment of long-lived assets
  Capital stock
   Class B
    
    
    Common SharesCommon Shares
    
    
    Common Shares
    
    
    held in treasuryBalance at September 30, 2007
    
    
    14,580,978
    
    
    
    2,150,502
    
    
    
    (740,048
    )Common Shares acquired for settlement of deferred Directors fees
    
    
    
    
    
    
    
    
    
    
    (26,162
    )Common Shares reissued in settlement of directors fees
    
    
    
    
    
    
    
    
    
    
    1,616Shares issued under stock plans
    
    
    141,607
    
    
    
    
    
    
    
    Repurchase of Common Shares
    
    
    
    
    
    
    
    
    
    
    (636,600
    )Balance at September 30, 2008
    
    
    14,722,585
    
    
    
    2,150,502
    
    
    
    (1,401,194
    )Common Shares acquired for settlement of deferred Directors fees
    
    
    
    
    
    
    
    
    
    
    (64,643
    )Common Shares reissued in settlement of directors fees
    
    
    
    
    
    
    
    
    
    
    34,530Shares issued under stock plans
    
    
    227,508
    
    
    
    
    
    
    
    Repurchase of Common Shares
    
    
    
    
    
    
    
    
    
    
    (166,733
    )Balance at September 30, 2009
    
    
    14,950,093
    
    
    
    2,150,502
    
    
    
    (1,598,040
    )Common Shares acquired for settlement of deferred Directors fees
    
    
    
    
    
    
    
    
    
    
    (28,658
    )Common Shares reissued in settlement of directors fees
    
    
    
    
    
    
    
    
    
    
    5,890Shares issued under stock plans
    
    
    81,327
    
    
    
    
    
    
    
    Repurchase of Common Shares
    
    
    
    
    
    
    
    
    
    
    (2,649
    )Balance at September 30, 2010
    
    
    15,031,420
    
    
    
    2,150,502
    
    
    
    (1,623,457
    )
  31




---



##### Table of Contents



Accumulated other comprehensive loss
  2010
    
    
    2009
    
    
    2008Translation adjustment
    
    $
    1,973
    
    
    $
    1,671
    
    
    $
    1,247Net unrealized (loss) gain on derivative securities
    
    
    (108
    )
    
    
    (91
    )
    
    
    46Net unrealized investment loss
    
    
    
    
    
    
    
    
    
    
    (442
    )Benefit plan obligation
    
    
    (23,035
    )
    
    
    (17,480
    )
    
    
    (2,724
    )Accumulated other comprehensive loss
    
    $
    (21,170
    )
    
    $
    (15,900
    )
    
    $
    (1,873
    )
 Income taxes
  Restructuring and Cost Reduction Programs
  Use of estimates
  Earnings per share
  2010
    
    
    2009
    
    
    2008Net income (loss) in thousands
    
    $
    24,878
    
    
    $
    (50,504
    )
    
    $
    (2,593
    )Weighted average shares outstanding
    
    
    15,762,760
    
    
    
    15,648,258
    
    
    
    15,853,938Assumed exercise of stock options, weighted average of incremental shares
    
    
    465,116
    
    
    
    
    
    
    
    Diluted shares  adjusted weighted-average shares and assumed conversions
    
    
    16,227,876
    
    
    
    15,648,258
    
    
    
    15,853,938Basic earnings (loss) per share
    
    $
    1.58
    
    
    $
    (3.23
    )
    
    $
    (0.16
    )Diluted earnings (loss) per share
    
    $
    1.53
    
    
    $
    (3.23
    )
    
    $
    (0.16
    )
   32




---



##### Table of Contents



Stock-based compensation
  Derivatives and Hedging Activities
    Recently Adopted Accounting Pronouncements
      33




---



##### Table of Contents



Recently Issued Accounting Pronouncements
     Note B  Product Warranties
   34




---



##### Table of Contents



2010
    
    
    2009Beginning balance
    
    $
    466
    
    
    $
    701Accruals for warranties issued during the period
    
    
    1,063
    
    
    
    984Accruals related to pre-existing warranties (including changes in estimates and expiring warranties)
    
    
    (149
    )
    
    
    (116
    )Settlements made (in cash or in kind) during the period
    
    
    (765
    )
    
    
    (1,103
    )Ending balance
    
    $
    615
    
    
    $
    466
 Note C  Repurchase of Common Shares
   Fiscal Year 2009Total number of shares purchased
    
    155,000Average price paid per share (including commissions)
    
    $4.80Identity of broker-dealer used to effect the purchases
    
    National Financial Securities LLCNumber of shares purchased as part of a publicly announced repurchase program
    
    155,000Maximum number of shares that remain to be purchased under the program
    
    0
    Note D  Investments and Notes Receivable
   35




---



##### Table of Contents



Adjusted cost
    
    
    Unrealized gains
    
    
    Unrealized losses
    
    
    Market valueShort Term:Certificates of deposits
    
    $
    3,912
    
    
    $
    
    
    
    $
    
    
    
    $
    3,912
  Adjusted cost
    
    
    Unrealized gains
    
    
    Unrealized losses
    
    
    Market valueShort Term:Certificates of deposits
    
    $
    759
    
    
    $
    
    
    
    $
    
    
    
    $
    759
  2010
    
    
    2009Non-marketable equity securities
    
    $
    150
    
    
    $
    150Venture capital fund
    
    
    32
    
    
    
    32Notes receivable, net of reserve of $1,711 and $1,500 at September 30, 2010 and 2009
    
    
    1,753
    
    
    
    1,753$
    1,935
    
    
    $
    1,935
   Note E  Financing Arrangements
    36




---



##### Table of Contents



Note F  Derivatives and Hedging Activities
   2010
    
    
    2009Assets:Contract value
    
    $
    901
    
    
    $
    371Fair value
    
    
    900
    
    
    
    360Total asset
    
    
    1
    
    
    
    11Liabilities:Contract value
    
    
    3,969
    
    
    
    4,350Fair value
    
    
    4,177
    
    
    
    4,531Total liability
    
    
    (208
    )
    
    
    (181
    )Net liability
    
    $
    (207
    )
    
    $
    (170
    )
   Financial Statement Line Item
    
    2010
    
    
    2009
    
    
    2008Cost of goods sold
    
    $
    6
    
    
    $
    245
    
    
    $
    314
  Note G  Foreign Currency
    37




---



##### Table of Contents



Note H  Employee Benefit and Incentive Compensation Plans
     United States Plan
    
    
    German Plan*2010
    
    
    2009
    
    
    2010
    
    
    2009Change in projected benefit obligations:Benefit obligation at beginning of year
    
    $
    44,183
    
    
    $
    36,594
    
    
    $
    7,520
    
    
    $
    7,384Service cost
    
    
    1,472
    
    
    
    1,895
    
    
    
    170
    
    
    
    182Interest cost
    
    
    2,611
    
    
    
    3,194
    
    
    
    444
    
    
    
    438Actuarial loss (gain)
    
    
    4,535
    
    
    
    5,147
    
    
    
    2,333
    
    
    
    (495
    )Benefits paid
    
    
    (1,345
    )
    
    
    (1,537
    )
    
    
    (281
    )
    
    
    (270
    )Curtailments
    
    
    
    
    
    
    (1,110
    )
    
    
    
    
    
    
    Foreign currency exchange rate changes
    
    
    
    
    
    
    
    
    
    
    (314
    )
    
    
    281Benefit obligation at year end
    
    $
    51,456
    
    
    $
    44,183
    
    
    $
    9,872
    
    
    $
    7,520Accumulated benefit obligation at year end
    
    $
    48,805
    
    
    $
    41,115
    
    
    $
    9,223
    
    
    $
    7,000Change in plan assets:Fair value of plan assets at beginning of year
    
    $
    37,230
    
    
    $
    44,549
    
    
    $
    1,628
    
    
    $
    1,493Actual return (loss) on pension assets
    
    
    4,150
    
    
    
    (6,532
    )
    
    
    (125
    )
    
    
    100Employer contributions
    
    
    2,000
    
    
    
    750
    
    
    
    63
    
    
    
    67Participants contributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Benefits paid
    
    
    (1,345
    )
    
    
    (1,537
    )
    
    
    (49
    )
    
    
    (42
    )Foreign currency exchange rate changes
    
    
    
    
    
    
    
    
    
    
    (85
    )
    
    
    10Fair value of plan assets at end of year
    
    
    42,035
    
    
    
    37,230
    
    
    
    1,432
    
    
    
    1,628Pension liability recognized
    
    $
    (9,421
    )
    
    $
    (6,953
    )
    
    $
    (8,440
    )
    
    $
    (5,892
    )
 *
    
    The Company has purchased indirect insurance which is expected to be available to the Company
as German pension liabilities mature. The caption, Other assets, on the Companys
Consolidated Balance Sheets includes $6,215 and $6,607 at September 30, 2010 and 2009,
respectively, for this asset. In accordance with U.S. GAAP, this Company asset is not included
in the German plan assets.
   United States Plan
    
    
    German Plan2010
    
    
    2009
    
    
    2010
    
    
    2009Unrecognized actuarial (loss) gain
    
    $
    (23,520
    )
    
    $
    (19,834
    )
    
    $
    (1,684
    )
    
    $
    978Unrecognized prior service cost
    
    
    (159
    )
    
    
    (189
    )
    
    
    (11
    )
    
    
    (17
    )Accumulated other comprehensive (loss) income
    
    $
    (23,679
    )
    
    $
    (20,023
    )
    
    $
    (1,695
    )
    
    $
    961
  38




---



##### Table of Contents



United States Plan
    
    
    German Plan2010
    
    
    2009
    
    
    2010
    
    
    2009Balance at beginning of year
    
    $
    (20,023
    )
    
    $
    (4,914
    )
    
    $
    961
    
    
    $
    435Net actuarial (loss) gain arising during the year
    
    
    (4,084
    )
    
    
    (15,310
    )
    
    
    (2,534
    )
    
    
    467Amortization of actuarial net loss
    
    
    398
    
    
    
    55
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    30
    
    
    
    101
    
    
    
    5
    
    
    
    5Adjustment to apply new measurement provision guidance
(as of October 1, 2008)
    
    
    
    
    
    
    45
    
    
    
    
    
    
    
    Exchange rate effects
    
    
    
    
    
    
    
    
    
    
    (127
    )
    
    
    54Balance at end of year
    
    $
    (23,679
    )
    
    $
    (20,023
    )
    
    $
    (1,695
    )
    
    $
    961
   United States Plan
    
    
    German Plan2010
    
    
    2009
    
    
    2010
    
    
    2009Service cost-benefits earned during the year
    
    $
    1,472
    
    
    $
    1,505
    
    
    $
    213
    
    
    $
    170Interest cost on projected benefit obligation
    
    
    2,611
    
    
    
    2,565
    
    
    
    427
    
    
    
    444Expected return on plan assets
    
    
    (3,699
    )
    
    
    (3,780
    )
    
    
    (63
    )
    
    
    (76
    )Curtailment loss
    
    
    
    
    
    
    44
    
    
    
    
    
    
    
    Amortization of transition asset
    
    
    
    
    
    
    
    
    
    
    55
    
    
    
    (16
    )Amortization of prior service cost
    
    
    30
    
    
    
    57
    
    
    
    5
    
    
    
    5Amortization of actuarial net loss
    
    
    398
    
    
    
    55
    
    
    
    
    
    
    
    Net periodic pension cost
    
    $
    812
    
    
    $
    446
    
    
    $
    637
    
    
    $
    527
  September 30, 2010
    
    
    September 30, 2009Equity securities
    
    
    61
    %
    
    
    63
    %Fixed income
    
    
    20
    
    
    
    17Market neutral hedge fund
    
    
    13
    
    
    
    14Cash equivalent (money market fund)
    
    
    4
    
    
    
    4Real estate
    
    
    2
    
    
    
    2100
    %
    
    
    100
    %
    39




---



##### Table of Contents



2010
    
    2009United States Pension Plan:Discount rate
    
    5.375%
    
    6.0%Rate of increase in compensation levels
    
    0.0% for one year, and 3.0% thereafter
    
    0.0% for two years, and 3.5% thereafterGerman Pension Plan:Discount rate
    
    4.5%
    
    6.5%Rate of increase in compensation levels
    
    2.5%
    
    2.5%
  2010
    
    2009
    
    2008United States Pension Plan:Discount rate
    
    6.0%
    
    7.0%/ 6.875%
    
    6.375%Expected long-term rate of return on plan assets
    
    8.0%
    
    8.00%
    
    8.25%Rate of increase in compensation levels
    
    0.0% for FY 2009 and FY
2010, and 3.5% thereafter
    
    4.0%
    
    4.0%German Pension Plan:Discount rate
    
    6.5%
    
    6.25%
    
    5.5%Expected long-term rate of return on plan assets
    
    5.0%
    
    5.0%
    
    5.0%Rate of increase in compensation levels
    
    2.5%
    
    2.5%
    
    2.5%
    United States Plan
    
    
    German Plan2011
    
    $
    1,476
    
    
    $
    3102012
    
    $
    1,661
    
    
    $
    3402013
    
    $
    1,759
    
    
    $
    3602014
    
    $
    1,859
    
    
    $
    3902015
    
    $
    2,104
    
    
    $
    4172016  2020
    
    $
    13,263
    
    
    $
    2,701
     40




---



##### Table of Contents



Fair Value Measurements at September 30, 2010U.S. Pension AssetsTotal
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Cash and Short Term Securities
    
    
    2,250
    
    
    
    2,250
    
    
    
    
    
    
    
    Equity SecuritiesCommon and Preferred Stock:U.S. Companies
    
    
    10,099
    
    
    
    10,099
    
    
    
    
    
    
    
    Non U.S. Companies
    
    
    5,787
    
    
    
    5,787
    
    
    
    
    
    
    
    Mutual Funds
    
    
    7,569
    
    
    
    
    
    
    
    7,569Debt SecuritiesMutual Funds
    
    
    6,973
    
    
    
    
    
    
    
    6,973
    
    
    
    Real EstateMutual Funds
    
    
    779
    
    
    
    
    
    
    
    779
    
    
    
    Other InvestmentsLimited Partnerships
    
    
    8,578
    
    
    
    
    
    
    
    
    
    
    
    8,578Total Plan Assets
    
    
    42,035
    
    
    
    18,136
    
    
    
    15,321
    
    
    
    8,578
         Other InvestmentsLimited PartnershipsBeginning balance
    
    
    6,839Realized gains
    
    
    170Unrealized gains relating to instruments
still held at reporting date
    
    
    432Purchases, sales, issuances and settlements (net)
    
    
    1,247Transfers out of Level 3 assets
    
    
    (110
    )Ending balance
    
    
    8,578
  41




---



##### Table of Contents



Annual Incentive Compensation Plan
   Note I  Stock Plans
     2010
    
    
    2009
    
    
    2008Cost of goods sold
    
    $
    158
    
    
    $
    (59
    )
    
    $
    152Selling, general and administrative expenses
    
    
    1,687
    
    
    
    127
    
    
    
    1,412Product development expenses
    
    
    247
    
    
    
    (121
    )
    
    
    268Stock-based compensation included in operating expenses
    
    
    2,092
    
    
    
    (53
    )
    
    
    1,832Estimated tax impact of stock-based compensation
    
    
    
    
    
    
    
    
    
    
    598Stock-based compensation expense (income), net of tax
    
    $
    2,092
    
    
    $
    (53
    )
    
    $
    1,234Stock-based compensation expense per share, net of tax
    
    $
    0.13
    
    
    $
    0.00
    
    
    $
    0.08
  42




---



##### Table of Contents



Stock Option Activity
  Weighted
    
    
    Weighted AverageNumber
    
    
    Average
    
    
    Remaining
    
    
    Aggregateof Shares
    
    
    Exercise Price
    
    
    Contractual Life (Years)
    
    
    Intrinsic ValueOutstanding at September 30, 2007
    
    
    3,241,580
    
    
    
    20.31
    
    
    
    5.04
    
    
    $
    945Options granted at fair market value
    
    
    146,125
    
    
    
    9.13Options exercised
    
    
    (74,874
    )
    
    
    3.57
    
    
    
    
    
    
    $
    459Options forfeited
    
    
    (32,400
    )
    
    
    13.14Options expired
    
    
    (253,300
    )
    
    
    24.58Outstanding at September 30, 2008
    
    
    3,027,131
    
    
    
    19.90
    
    
    
    4.43
    
    
    $
    276Options granted at fair market value
    
    
    309,050
    
    
    
    3.05Options exercised
    
    
    (35,000
    )
    
    
    4.13
    
    
    
    
    
    
    $
    4Options forfeited
    
    
    (55,810
    )
    
    
    9.37Options expired
    
    
    (310,620
    )
    
    
    18.02Outstanding at September 30, 2009
    
    
    2,934,751
    
    
    $
    18.72
    
    
    
    4.08
    
    
    $
    736Options granted at fair market value
    
    
    187,800
    
    
    
    4.46Options exercised
    
    
    (9,500
    )
    
    
    16.80
    
    
    
    
    
    
    $
    44Options forfeited
    
    
    (53,223
    )
    
    
    4.46Options expired
    
    
    (542,377
    )
    
    
    34.11Outstanding at September 30, 2010
    
    
    2,517,451
    
    
    $
    14.65
    
    
    
    3.88
    
    
    $
    18,466Vested and expected to vest at September 30, 2010
    
    
    2,507,494
    
    
    $
    17.20
    
    
    
    3.86
    
    
    $
    18,295Exercisable at September 30, 2010
    
    
    2,008,225
    
    
    $
    17.20
    
    
    
    2.71
    
    
    $
    9,838
  Outstanding
    
    
    ExercisableWeighted AverageNumber
    
    
    Remaining
    
    
    Weighted
    
    
    Number
    
    
    WeightedRange of
    
    of Shares
    
    
    Contractual
    
    
    Average
    
    
    of Shares
    
    
    AverageExercise Prices
    
    Outstanding
    
    
    Life (years)
    
    
    Exercise Price
    
    
    Exercisable
    
    
    Exercise Price$2.99  $5.48
    
    
    434,975
    
    
    
    8.71
    
    
    $
    3.59
    
    
    
    0
    
    
    $
    0.00$9.12  $13.76
    
    
    508,425
    
    
    
    3.13
    
    
    $
    12.45
    
    
    
    450,621
    
    
    $
    12.86$14.00  $23.13
    
    
    1,504,051
    
    
    
    2.90
    
    
    $
    17.55
    
    
    
    1,487,604
    
    
    $
    17.59$36.85
    
    
    70,000
    
    
    
    0.38
    
    
    $
    36.85
    
    
    
    70,000
    
    
    $
    36.852,517,451
    
    
    
    3.88
    
    
    $
    14.65
    
    
    
    2,008,225
    
    
    $
    17.20
   2010
    
    
    2009
    
    
    2008Expected life (years)
    
    
    4.75
    
    
    
    4.75
    
    
    
    4.75Risk-free interest rate
    
    
    2.12
    %
    
    
    1.90
    %
    
    
    3.84
    %Volatility
    
    
    63
    %
    
    
    49
    %
    
    
    38
    %Dividend yield
    
    
    1.2
    %
    
    
    2.5
    %
    
    
    1.6
    %
  43




---



##### Table of Contents



Performance Award Units
  Performance award unitsFiscal 2010 Grant
  Risk-free interest rate
    
    
    1.25
    %Volatility
    
    
    78
    %
  Performance award unitsGrants prior to Fiscal 2010
      44




---



##### Table of Contents



Weighted AverageGrant DateNumber of Units
    
    
    Fair ValueOutstanding at September 30, 2007
    
    
    220,525
    
    
    
    14.34Awards granted
    
    
    173,225
    
    
    
    9.13Awards forfeited
    
    
    (35,813
    )
    
    
    10.85Adjustment of 2007 awards
    
    
    (61,275
    )
    
    
    13.94Outstanding at September 30, 2008(1)
    
    
    296,662
    
    
    
    11.55Awards issued
    
    
    (71,487
    )
    
    
    15.05Awards granted
    
    
    
    
    
    
    Awards forfeited
    
    
    (49,700
    )
    
    
    10.60Adjustment of 2007 awards
    
    
    (46,100
    )
    
    
    13.95Adjustment of 2008 awards
    
    
    (129,375
    )
    
    
    9.13Outstanding at September 30, 2009
    
    
    
    
    
    
    Awards issued
    
    
    
    
    
    
    Awards granted
    
    
    86,075
    
    
    
    6.73Awards forfeited
    
    
    (18,675
    )
    
    
    9.13Adjustment of 2008 awards
    
    
    139,025
    
    
    
    9.13Outstanding at September 30, 2010(2)
    
    
    206,425
    
    
    $
    8.13
 (1)
    
    Included in the awards outstanding at September 30, 2008 are 71,487 units for the
2006-2008 Plan awards that were vested, but were not yet issued as the performance targets
could only be measured following September 30, 2008. These awards were issued on November
6, 2008 when the Companys previous trading days closing stock price was $3.62 per share.(2)
    
    Included in the awards outstanding at September 30, 2010 are 120,350 units for the
2008-2010 Plan awards that were vested, but were not yet issued as the performance targets
could only be measured following September 30, 2010. These awards were issued on October
27, 2010 when the Companys previous trading days closing stock price was $21.53 per
share.
 Restricted Award Units
   Weighted AverageGrant DateNumber of Units
    
    
    Fair ValueOutstanding at September 30, 2007
    
    
    38,100
    
    
    $
    13.96Awards granted
    
    
    21,725
    
    
    
    9.17Awards vested
    
    
    (5,425
    )
    
    
    12.36Awards forfeited
    
    
    (1,800
    )
    
    
    13.03Outstanding at September 30, 2008
    
    
    52,600
    
    
    
    12.25Awards granted
    
    
    125,800
    
    
    
    2.99Awards vested
    
    
    
    
    
    
    Awards forfeited
    
    
    (24,850
    )
    
    
    8.31Outstanding at September 30, 2009
    
    
    153,550
    
    
    
    5.30Awards granted
    
    
    112,400
    
    
    
    4.27Awards vested
    
    
    (8,625
    )
    
    
    15.05Awards forfeited
    
    
    (40,650
    )
    
    
    5.70Outstanding at September 30, 2010
    
    
    216,675
    
    
    $
    4.30
   45




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##### Table of Contents



Directors Equity Plans
  Employee Stock Purchase Plan
  Note J  Income Taxes
  2010
    
    
    2009
    
    
    2008United States
    
    $
    20,322
    
    
    $
    (18,551
    )
    
    $
    (8,204
    )Non  U.S.
    
    
    5,075
    
    
    
    (815
    )
    
    
    3,668$
    25,397
    
    
    $
    (19,366
    )
    
    $
    (4,536
    )
  2010
    
    
    2009
    
    
    2008Current:Federal
    
    $
    (356
    )
    
    $
    678
    
    
    $
    160Non  U.S.
    
    
    2,130
    
    
    
    22
    
    
    
    985State and local
    
    
    77
    
    
    
    26
    
    
    
    86Total current
    
    
    1,851
    
    
    
    726
    
    
    
    1,231Deferred:Federal, state & local
    
    
    (570
    )
    
    
    30,100
    
    
    
    (3,208
    )Non  U.S.
    
    
    (762
    )
    
    
    312
    
    
    
    34Total deferred
    
    
    (1,332
    )
    
    
    30,412
    
    
    
    (3,174
    )Total provision (benefit)
    
    $
    519
    
    
    $
    31,138
    
    
    $
    (1,943
    )
  46




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##### Table of Contents



2010
    
    
    2009
    
    
    2008Federal income tax (benefit) at statutory rate
    
    $
    8,635
    
    
    $
    (6,585
    )
    
    $
    (1,542
    )U.S. (income) loss without tax (expense) benefit
    
    
    (6,924
    )
    
    
    6,307
    
    
    
    State and local income taxes
    
    
    77
    
    
    
    26
    
    
    
    (199
    )Benefit from 2009 NOL carryback
    
    
    (1,220
    )
    
    
    
    
    
    
    Research tax credit
    
    
    
    
    
    
    
    
    
    
    (243
    )Foreign losses without tax benefit
    
    
    
    
    
    
    669
    
    
    
    324(Benefit) tax on non-U.S. income
    
    
    (348
    )
    
    
    (35
    )
    
    
    576Foreign tax credit carryforwards
    
    
    
    
    
    
    
    
    
    
    (545
    )Valuation allowance
    
    
    
    
    
    
    29,967
    
    
    
    Accruals and tax law changes
    
    
    267
    
    
    
    789
    
    
    
    (316
    )Other
    
    
    32
    
    
    
    
    
    
    
    2Effective provision (benefit) for income taxes
    
    $
    519
    
    
    $
    31,138
    
    
    $
    (1,943
    )Effective provision (benefit) income tax rate
    
    
    2.0
    %
    
    
    160.8
    %
    
    
    (42.8
    )%
    47




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##### Table of Contents



Deferred tax assets:
    
    2010
    
    
    2009Stock options
    
    $
    1,790
    
    
    $
    585Capitalized research and development
    
    
    11,046
    
    
    
    13,936Inventory
    
    
    2,833
    
    
    
    3,425Deferred compensation
    
    
    805
    
    
    
    864Tax credit carryforward
    
    
    12,102
    
    
    
    7,751Depreciation
    
    
    754
    
    
    
    1,743Warranty
    
    
    181
    
    
    
    142Medical
    
    
    202
    
    
    
    204State and local taxes
    
    
    2,240
    
    
    
    2,202Net operating losses
    
    
    1,057
    
    
    
    9,702Pension
    
    
    3,639
    
    
    
    2,647Impaired assets
    
    
    978
    
    
    
    910Other
    
    
    2,520
    
    
    
    1,992Total deferred tax assets
    
    
    40,147
    
    
    
    46,103Total deferred tax liabilities
    
    
    
    
    
    
    Valuation allowance
    
    
    (37,546
    )
    
    
    (45,052
    )Net deferred tax assets
    
    $
    2,601
    
    
    $
    1,051
   2010
    
    
    2009
    
    
    2008Balance at beginning of year
    
    $
    45,052
    
    
    $
    1,058
    
    
    $
    1,180Charged to costs and expenses
    
    
    
    
    
    
    39,088
    
    
    
    415Charged to other comprehensive loss
    
    
    1,355
    
    
    
    5,024
    
    
    
    Charged to other accounts
    
    
    
    
    
    
    60
    
    
    
    (74
    )Deductions
    
    
    (8,861
    )
    
    
    (178
    )
    
    
    (463
    )Balance at end of year
    
    $
    37,546
    
    
    $
    45,052
    
    
    $
    1,058
   Year Expiration CommencesAlternative minimum tax credit
    
    $
    1,896
    
    
    IndefiniteForeign tax credit
    
    
    5,260
    
    
    2016-2019R&D credit
    
    
    4,931
    
    
    2016-2029Foreign net operating losses
    
    
    5,755
    
    
    2010-Indefinite
  48




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##### Table of Contents



2010
    
    
    2009Balance at October 1
    
    $
    5,820
    
    
    $
    5,389Tax positions related to the current year:Additions
    
    
    381
    
    
    
    630Tax positions related to prior years:Additions
    
    
    224
    
    
    
    249Subtractions
    
    
    
    
    
    
    Settlements with tax authorities
    
    
    
    
    
    
    Lapses in statutes of limitation
    
    
    (98
    )
    
    
    (448
    )Balance at September 30
    
    $
    6,327
    
    
    $
    5,820
  Note K  Severance and Other Restructuring Charges
    49




---



##### Table of Contents



Product line exit costsSeverance and other restructuring charges:Severance and related benefits
    
    $
    1,052Sales demonstration inventory write-off
    
    
    1,579Write-down of fixed assets
    
    
    341Pension plan curtailment charge
    
    
    28Lease termination charge
    
    
    103,010Inventory write-off and accelerated
depreciation for exited product line
    
    
    2,540$
    5,550
    BalanceSeptember 30, 2008
    
    $
    1,252Expense recorded
    
    
    4,823Adjustments to previously-recorded expense
    
    
    2Cash payments
    
    
    (4,077
    )BalanceSeptember 30, 2009
    
    
    2,000Expense recorded
    
    
    669Adjustments to previously-recorded expense
    
    
    (124
    )Cash payments
    
    
    (2,463
    )BalanceSeptember 30, 2010
    
    $
    82
 Note L  Commitments and Contingencies
  2011
    
    $
    1,8902012
    
    
    1,2722013
    
    
    8092014
    
    
    4112015
    
    
    375After 2015
    
    
    610Total minimum operating lease payments
    
    $
    5,367
   50




---



##### Table of Contents



Note M Gain on the Sale of RF Product Line
   Note N  Gain on the Sale of Building
  Gross proceeds from sale of building
    
    $
    3,800Less: expenses related to the sale
    
    
    227Less: net book value of assets:Land, Building and improvements
    
    
    1,697Equipment, furniture and fixtures
    
    
    14Net gain on the sale of building
    
    $
    1,862
 Note O  Fair Value Measurements
  Level 1
    
    
    Level 2
    
    
    TotalAssetsCash and cash equivalents (1)
    
    $
    48,706
    
    
    $
    2,084
    
    
    $
    50,790Restricted cash
    
    
    537
    
    
    
    
    
    
    
    537Certificates of deposit (2)
    
    
    
    
    
    
    3,912
    
    
    
    3,912$
    49,243
    
    
    $
    5,996
    
    
    $
    55,239LiabilitiesForeign currency forward contracts (3)
    
    $
    
    
    
    $
    207
    
    
    $
    207
  51




---



##### Table of Contents



Level 1
    
    
    Level 2
    
    
    TotalAssetsCash and cash equivalents (1)
    
    $
    22,444
    
    
    $
    1,670
    
    
    $
    24,114Restricted cash
    
    
    569
    
    
    
    
    
    
    
    569Certificates of deposit (2)
    
    
    
    
    
    
    759
    
    
    
    759$
    23,013
    
    
    $
    2,429
    
    
    $
    25,442LiabilitiesForeign currency forward contracts (3)
    
    $
    
    
    
    $
    170
    
    
    $
    170
 (1)
    
    Consists of cash, money market funds and certificates of deposit having maturities of less than
90 days.(2)
    
    Included in Short term investments in the unaudited condensed consolidated balance sheets.(3)
    
    Included in Prepaid expenses or Other accrued expenses in the unaudited condensed
consolidated balance sheets, with related unrecognized gains and losses being recorded in
Accumulated other comprehensive losses until realized, at which time they are recorded in Cost
of goods sold in the condensed consolidated statement of operations.
  Note P  Segment and Geographic Information
  2010
    
    
    2009
    
    
    2008Net sales:United States
    
    $
    33,947
    
    
    $
    26,907
    
    
    $
    37,115Other Americas
    
    
    2,310
    
    
    
    1,845
    
    
    
    3,174Germany
    
    
    12,913
    
    
    
    12,786
    
    
    
    20,815Other Europe
    
    
    23,823
    
    
    
    21,117
    
    
    
    31,177Japan
    
    
    15,909
    
    
    
    12,851
    
    
    
    16,574China
    
    
    16,275
    
    
    
    12,998
    
    
    
    18,679Other Asia
    
    
    21,693
    
    
    
    14,023
    
    
    
    24,934$
    126,870
    
    
    $
    102,527
    
    
    $
    152,468Long-lived assets:United States
    
    $
    4,525
    
    
    $
    9,751
    
    
    $
    11,749Other
    
    
    1,188
    
    
    
    1,349
    
    
    
    1,403$
    5,713
    
    
    $
    11,100
    
    
    $
    13,152
 Note Q  Subsequent Events
     52




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##### Table of Contents



Unaudited Quarterly Results of Operations
  First
    
    
    Second
    
    
    Third
    
    
    FourthFiscal 2010Net sales
    
    $
    28,397
    
    
    $
    29,846
    
    
    $
    30,686
    
    
    $
    37,941Gross profit
    
    
    17,881
    
    
    
    19,646
    
    
    
    19,661
    
    
    
    25,037Gain on the sale of RF product line
    
    
    (3,493
    )
    
    
    407
    
    
    
    18
    
    
    
    174Gain on the sale of building
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,862
    )Severance and related charges
    
    
    (30
    )
    
    
    (104
    )
    
    
    39
    
    
    
    (29
    )Transaction costs associated with pending merger
    
    
    
    
    
    
    
    
    
    
    186
    
    
    
    1,064Earnings before income taxes
    
    
    7,029
    
    
    
    4,607
    
    
    
    4,664
    
    
    
    9,097Net income
    
    
    6,057
    
    
    
    4,132
    
    
    
    5,606
    
    
    
    9,083Diluted earnings per share
    
    
    0.38
    
    
    
    0.26
    
    
    
    0.34
    
    
    
    0.55Fiscal 2009Net sales
    
    $
    31,070
    
    
    $
    23,961
    
    
    $
    23,438
    
    
    $
    24,058Gross profit
    
    
    17,775
    
    
    
    11,012
    (1)
    
    
    12,485
    
    
    
    13,825Loss before income taxes
    
    
    (2,135
    )
    
    
    (10,036
    )(2)
    
    
    (2,825
    )
    
    
    (4,394
    )(3)Net loss
    
    
    (32,359
    )(4)
    
    
    (10,279
    )
    
    
    (3,426
    )
    
    
    (4,440
    )Diluted loss per share
    
    
    (2.07
    )
    
    
    (0.66
    )
    
    
    (0.22
    )
    
    
    (0.28
    )
 (1)
    
    Included in gross profit in the second quarter of fiscal 2009 are $2,540 of charges for
inventory write downs and accelerated depreciation incurred in connection with the exit of the
S600 product line.(2)
    
    Included in loss before income taxes for the second quarter of fiscal 2009 are charges of
$2,540 described in (1) above, as well as additional severance charges of $2,242, $1,579 for
the write off of sales demonstration inventory, $341 for write down of fixed assets, and $38
for pension curtailment and lease termination charges.(3)
    
    Included in loss before income taxes for the fourth quarter of fiscal 2009 are severance
charges of $2,583, $128 due to an office consolidation, and $15 for pension curtailment.(4)
    
    Included in net loss is a valuation allowance of $29,967 taken on U.S. deferred tax assets in
the first quarter of fiscal 2009.
 
 ITEM 9  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A   CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
   53




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##### Table of Contents



Managements Report on Internal Control over Financial Reporting
    Changes in Internal Control over Financial Reporting
  Chief Executive and Chief Financial Officer Certifications
  
 ITEM 9B   OTHER INFORMATION
  
 PART III
 
 ITEM 10
    
      DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 Directors and Executive Officers of the Registrant
   Name
    
    Position
    
    AgeJoseph P. Keithley
    
    Chairman of the Board of Directors, President and Chief Executive Officer
    
    
    61Brian R. Bachman
    
    Director since 1996
    
    
    65James B. Griswold
    
    Director since 1989
    
    
    64Leon J. Hendrix, Jr.
    
    Director since 1990
    
    
    70Brian J. Jackman
    
    Director since 2005
    
    
    69Dr. N. Mohan Reddy
    
    Director since 2001
    
    
    57Thomas A. Saponas
    
    Director since 2006
    
    
    61Barbara V. Scherer
    
    Director since 2004
    
    
    54
  54




---



##### Table of Contents



Joseph P. Keithley
 Brian Bachman
 James B. Griswold
 Leon J. Hendrix, Jr
 Brian J. Jackman
 Dr. N. Mohan Reddy
  55




---



##### Table of Contents



Thomas A. Saponas
 Barbara V. Scherer
   Code of Business Conduct and Ethics
  Shareholder Recommendations of Director Candidates
  Audit Committee Members and Financial Expert
  
 ITEM 11   EXECUTIVE COMPENSATION
 Compensation Discussion and Analysis
 
  56




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##### Table of Contents



Executive Compensation Governance
    Executive Compensation Philosophy
  
    
    motivate executives to create shareholder value;
 
    
    align the executives and shareholders short-term and long-term interests; and
 
    
    attract, reward and retain high-performance executives.
    57




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##### Table of Contents



Executive Compensation Methodologies
  
    
    establishing an overall total targeted compensation amount for each individual
executive that is competitive within our industry; and
 
    
    establishing for each individual executive the appropriate mix of base salary, and
target bonus and equity incentive compensation tied to performance goals and the value
of our common shares.
    58




---



##### Table of Contents



th
 
    
    Cascade Microtech, Inc.
    
    
    
    Cohu, Inc.
    
    Electro Scientific Industries, Inc.
    
    
    
    EXFO Electro-Optical Engineering Inc.
    
    FARO Technologies, Inc.
    
    
    
    Intevac, Inc.
    
    Ixia
    
    
    
    LeCroy Corporation
    
    LTX-Credence Corporation
    
    
    
    Mattson Technology, Inc
    
    Nanometrics Incorporated
    
    
    
    Rudolph Technologies, Inc.
    
    Symmetricom, Inc.
    
    
    
    Tollgrade Communications, Inc.
    
    X-Rite, Incorporated
    
    
    
    Zygo Corporation
    59




---



##### Table of Contents



Elements of Executive Compensation
  Base Salary
   % Increase Over 2009 Base
    
    
    % Increase Over 2008Named Executive Officer
    
    Annual Base Salary
    
    
    Salary (1)
    
    
    Base Salary (1)Joseph P. Keithley
    
    $
    425,184
    
    
    
    14
    %
    
    
    0
    %Mark J. Plush
    
    $
    255,589
    
    
    
    14
    %
    
    
    0
    %Linda C. Rae
    
    $
    275,015
    
    
    
    14
    %
    
    
    0
    %Larry L. Pendergrass
    
    $
    224,000
    
    
    
    11
    %
    
    
    0
    %Daniel A. Faia
    
    $
    250,008
    
    
    
    0
    %
    
    
    0
    %
 (1)
    
    The increase reflects the reinstatement, effective January 1, 2010, of salaries in effect
prior to the Company-wide salary reductions implemented on January 1, 2009. Mr. Faia joined
the Company in February 2009 and, therefore, had not been subject to the salary reductions.
  60




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##### Table of Contents



Annual Bonus Program under the Annual Incentive Compensation Plan
     Named Executive
    
    Annual Bonus Target as aOfficer
    
    Percentage of Salary
    
    
    Annual Bonus Target ($)
    
    
    Actual Bonus Payout ($)Joseph P. Keithley
    
    
    80
    %
    
    $
    340,147
    
    
    $
    680,294Mark J. Plush
    
    
    50
    %
    
    $
    127,795
    
    
    $
    255,590Linda C. Rae
    
    
    60
    %
    
    $
    165,008
    
    
    $
    330,016Larry L. Pendergrass
    
    
    40
    %
    
    $
    89,600
    
    
    $
    179,200Daniel A. Faia
    
    
    65
    %
    
    $
    162,505
    
    
    $
    325,010
 Long-Term Compensation Program
   61




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##### Table of Contents



The CompanysTSR Growth RatePercentile
    
    0  < 25th
    
    
    > 25th < 35th
    
    
    > 35th <50th
    
    
    > 50th < 65th
    
    
    > 65th < 75th
    
    
    > 75th < 100th% Payout of Target
    
    
    0
    %
    
    
    4%  40
    %
    
    
    44%  100
    %
    
    
    104%  160
    %
    
    
    164%  200
    %
    
    
    200
    %
    62




---



##### Table of Contents



Median Target
    
    
    
    
    
    
    
    
    
    
    Number of
    
    
    Dollar ValueDollar Value of the
    
    
    Number of
    
    
    Number of
    
    
    Restricted
    
    
    of Long-termLong-Term
    
    
    Stock Options
    
    
    Performance
    
    
    Stock
    
    
    IncentivesCompensation as
    
    
    Awarded in
    
    
    Award Units
    
    
    Granted in
    
    
    Awarded inNamed Executive
    
    determined by
    
    
    Fiscal Year
    
    
    Granted in
    
    
    Fiscal Year
    
    
    Fiscal YearOfficer
    
    Radford
    
    
    2010
    
    
    Fiscal Year 2010
    
    
    2010
    
    
    2010 (1)Joseph P. Keithley
    
    $
    331,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mark J. Plush
    
    $
    149,400
    
    
    
    22,250
    
    
    
    22,250
    
    
    
    
    
    
    $
    141,230Linda C. Rae
    
    $
    151,100
    
    
    
    25,350
    
    
    
    25,350
    
    
    
    
    
    
    $
    160,907Larry L. Pendergrass
    
    $
    100,800
    
    
    
    13,200
    
    
    
    6,600
    
    
    
    4,400
    
    
    $
    74,414Daniel A. Faia
    
    $
    134,100
    
    
    
    18,850
    
    
    
    9,450
    
    
    
    6,300
    
    
    $
    106,442
 (1)
    
    For this purpose, performance award units and restricted stock award units are valued at the
share price at the time of the grant, and stock options are valued at the time of the grant,
based on a Black-Scholes model that represents about 49% of the stock price at the date of
grant. For additional detail about our equity awards and the accounting for them, see the
Grants of Plan-Based Awards for Fiscal Year 2010 and the Outstanding Equity Awards at
September 30, 2010 tables below.
  Change in Control Severance Benefits
  Health and Welfare
   63




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##### Table of Contents



Retirement Plans
  401(k) .
  Defined Benefit Pension Plan .
 Employee Stock Purchase Plan .
  64




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##### Table of Contents



Perquisites
  Other Change in Control and Severance Arrangements
  Equity Award Granting Practices
  
    
    All options will be made in accordance with the 2002 Stock Incentive Plan, 2009 Stock
Incentive Plan or any successor plan.
 
    
    All awards will be granted by the Committee, except for stock options, performance
unit awards, restricted stock or restricted stock units to be granted by the CEO
pursuant to specifically delegated authority, including inducement grants to new hires,
retention grants and promotion grants, which may not exceed a certain number of shares
per fiscal year as established by the Committee. The CEOs delegated authority does not
include any grants to executive officers, which is retained solely by the Committee.
 
    
    All annual grants will generally be made at a Committee meeting held in conjunction
with the first regularly scheduled Board meeting of the fiscal year, which will
generally be scheduled to occur shortly after the announcement of fiscal year-end
earnings. As discussed above, in fiscal year 2010, the Committee deferred
consideration of annual equity grants at its December 2010 meeting due to the pending
announcement of the sale of the Companys RF business.
 
    
    Annual grants will have a grant date of the approval date and will have an exercise
price of the NYSE closing price on the date of approval or the next trading day after
the date of approval if the approval date is not a trading date.
 
    
    Any off-cycle award (awards to new hires or in connection with a promotion or other
special recognition) made by either the Committee or the CEO will have a grant date of
the third trading day following the next release of annual or quarterly earnings and an
exercise price equal to the closing price of the NYSE closing price on the grant date.
  65




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##### Table of Contents




    
    direct or indirect disclosure of trade secret or confidential information;
 
    
    use of confidential information within the three years preceding the recipients
termination from employment with the Company;
 
    
    any material violation by the optionee of the terms of any written agreement between
the recipient and the Company;
 
    
    any act of embezzlement, fraud or breach of fiduciary duty during the recipients
employment with the Company that contributed to a restatement of the Companys financial
statements;
 
    
    any act of embezzlement, fraud, dishonesty, nonpayment of any obligation to the
Company, breach of fiduciary duty or deliberate disregard of Company rules resulting in
a loss, damage or injury to the Company; or
 
    
    any attempt to induce any Company employee or any consultant of the Company to
terminate his or her employment or other contractual relationship with the Company.
  Company Stock Ownership Guidelines
  Job Title
    
    % of Restricted Grant (after tax) to be HeldCEO
    
    
    100
    %COO
    
    
    75
    %CFO
    
    
    75
    %Vice President
    
    
    50
    %
 Compensation Committee Report
  Compensation and Human Resources Committee(1)
 (1)
    
    Until the closing of the merger on December 8, 2010.
  66




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##### Table of Contents



Summary Compensation Table
  Change inPension ValueNon-Equity
    
    
    and Nonqualified
    
    
    AllStock
    
    
    Option
    
    
    Incentive Plan
    
    
    Compensation
    
    
    OtherYear
    
    
    Salary
    
    
    Bonus
    
    
    Awards(1)
    
    
    Awards(1)
    
    
    Compensation(2)
    
    
    Earnings(3)
    
    
    Compensation(4)
    
    
    TotalJoseph P. Keithley
    
    
    2010
    
    
    $
    412,429
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    680,294
    
    
    $
    135,625
    
    
    $
    50,044
    
    
    $
    1,278,392Chairman, President
    
    
    2009
    
    
    
    386,918
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125,306
    
    
    
    50,564
    
    
    
    562,788and CEO
    
    
    2008
    
    
    
    425,184
    
    
    
    
    
    
    
    176,016
    
    
    
    115,061
    
    
    
    
    
    
    
    11,182
    
    
    
    54,315
    
    
    
    781,758Mark J. Plush
    
    
    2010
    
    
    $
    247,921
    
    
    
    
    
    
    $
    149,743
    
    
    $
    46,520
    
    
    $
    255,590
    
    
    $
    98,665
    
    
    $
    35,581
    
    
    $
    834,020Senior Vice President and
    
    
    2009
    
    
    
    232,586
    
    
    
    
    
    
    
    13,754
    
    
    
    29,065
    
    
    
    
    
    
    
    88,705
    
    
    
    33,830
    
    
    
    397,940Chief Financial Officer
    
    
    2008
    
    
    
    255,589
    
    
    
    
    
    
    
    87,552
    
    
    
    38,153
    
    
    
    
    
    
    
    12,292
    
    
    
    35,320
    
    
    
    428,906Linda C. Rae
    
    
    2010
    
    
    $
    266,764
    
    
    
    
    
    
    $
    170,606
    
    
    $
    53,001
    
    
    $
    330,018
    
    
    $
    37,005
    
    
    $
    29,096
    
    
    $
    886,490Executive Vice President
    
    
    2009
    
    
    
    250,263
    
    
    
    
    
    
    
    15,548
    
    
    
    32,765
    
    
    
    
    
    
    
    32,699
    
    
    
    22,863
    
    
    
    354,138and Chief Operating Officer
    
    
    2008
    
    
    
    275,015
    
    
    
    
    
    
    
    88,464
    
    
    
    57,981
    
    
    
    
    
    
    
    59
    
    
    
    35,181
    
    
    
    456,700Larry L. Pendergrass
    
    
    2010
    
    
    $
    218,400
    
    
    
    
    
    
    $
    63,162
    
    
    $
    27,598
    
    
    $
    179,200
    
    
    $
    38,836
    
    
    $
    21,516
    
    
    $
    548,712Vice President,
    
    
    2009
    
    
    
    207,200
    
    
    
    
    
    
    
    17,342
    
    
    
    18,390
    
    
    
    
    
    
    
    29,991
    
    
    
    19,992
    
    
    
    292,915New Product Development
    
    
    2008
    
    
    
    221,793
    
    
    
    
    
    
    
    57,456
    
    
    
    24,935
    
    
    
    
    
    
    
    8,967
    
    
    
    27,452
    
    
    
    340,603Daniel A. Faia(5)
    
    
    2010
    
    
    $
    250,008
    
    
    
    
    
    
    $
    90,437
    
    
    $
    39,411
    
    
    $
    325,010
    
    
    $
    17,554
    
    
    $
    2,525
    
    
    $
    724,945Vice President,
    
    
    2009
    
    
    
    166,672
    
    
    
    
    
    
    
    
    
    
    
    78,245
    
    
    
    
    
    
    
    23,881
    
    
    
    100,000
    
    
    
    368,798Worldwide Sales & Support
    
    
    2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 (1)
    
    The amount reported represents the grant date fair value of stock options, performance
award units and restricted stock units awarded during fiscal year 2010 under the Companys
long-term compensation program and, more specifically, under the Companys 2002 Stock
Incentive Plan. See the Grants of Plans Based Awards for Fiscal 2010 table below and Note I of
Notes to Consolidated Financial Statements included in Part II  Item 8 of this Annual Report
on Form 10-K for fiscal year 2010 (Form 10-K) for information on the grant date fair value
of each award and a description of the assumptions used in that computation. The actual value
realized to the Named Executive Officers with respect to stock awards was the consideration
paid at the closing of the merger.(2)
    
    Represents annual cash incentive awards under the Annual Incentive Compensation Plan. For
fiscal year 2008, the Company did not achieve the threshold targets specified for payout of
bonus awards under the Annual Incentive Compensation Plan. For fiscal year 2009, the awards
under the Annual Incentive Compensation Plan were cancelled. Accordingly, no amounts were
earned under this plan in fiscal years 2009 or 2008. For fiscal year 2010, the Companys
aggregate bonus pool was based on the amount by which the Companys Return on Sales exceeded
5% and a portion of the bonus pool was allocated to each of the Named Executive Officers in
accordance with their target bonus percentage established under the 2010 Annual Incentive
Compensation Plan. See Compensation Discussion and AnalysisElements of Executive
CompensationAnnual Bonus Program under the Annual Incentive Compensation Plan above.(3)
    
    Amounts consist of the change in the annual actuarial present value of the pension benefits
for each Named Executive Officer pursuant to the Companys Defined Benefit Pension Plan, as
also reported in the Pension Benefits at September 30, 2010 table below. The discount rate
used to determine the present value of the pension benefit was 5.375%, 6.0% and 7.0% for
fiscal years 2010, 2009 and 2008, respectively. None of the Named Executive Officers received
above-market or preferential earnings on deferred compensation under the Deferred Compensation
Plan.
  67




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##### Table of Contents



(4)
    
    The following table provides detail for the aggregate All Other Compensation for each Named
Executive Officer:
 401(k)MatchingYear
    
    
    Company Car (a)
    
    
    Contribution
    
    
    Club Dues
    
    
    Financial Planning
    
    
    Life Insurance (c)
    
    
    MiscellaneousJoseph P. Keithley
    
    
    2010
    
    
    $
    13,170
    
    
    $
    3,954
    
    
    $
    15,048
    
    
    $
    12,000
    
    
    $
    5,872
    
    
    
    2009
    
    
    
    14,550
    
    
    
    107
    
    
    
    14,716
    
    
    
    12,000
    
    
    
    9,191
    
    
    
    2008
    
    
    
    15,069
    
    
    
    3,375
    
    
    
    14,681
    
    
    
    12,000
    
    
    
    9,190
    
    
    
    Mark J. Plush
    
    
    2010
    
    
    $
    17,308
    
    
    $
    2,847
    
    
    $
    1,882
    
    
    $
    8,000
    
    
    $
    5,544
    
    
    
    2009
    
    
    
    18,251
    
    
    
    853
    
    
    
    1,946
    
    
    
    7,500
    
    
    
    5,280
    
    
    
    2008
    
    
    
    17,417
    
    
    
    3,375
    
    
    
    2,000
    
    
    
    7,500
    
    
    
    5,028
    
    
    
    Linda C. Rae
    
    
    2010
    
    
    $
    15,155
    
    
    $
    3,094
    
    
    $
    879
    
    
    $
    8,000
    
    
    $
    1,968
    
    
    
    2009
    
    
    
    18,204
    
    
    
    356
    
    
    
    1,003
    
    
    
    1,500
    
    
    
    1,800
    
    
    
    2008
    
    
    
    18,678
    
    
    
    3,375
    
    
    
    1,677
    
    
    
    7,500
    
    
    
    1,786
    
    
    $
    2,165
    (b)Larry L. Pendergrass
    
    
    2010
    
    
    $
    15,207
    
    
    $
    1,400
    
    
    
    
    
    
    $
    1,205
    
    
    $
    3,704
    
    
    
    2009
    
    
    
    14,943
    
    
    
    
    
    
    
    
    
    
    
    1,055
    
    
    
    3,994
    
    
    
    2008
    
    
    
    12,635
    
    
    
    3,323
    
    
    
    
    
    
    
    7,500
    
    
    
    3,994
    
    
    
    Daniel A. Faia
    
    
    2010
    
    
    
    
    
    
    $
    1,875
    
    
    
    
    
    
    
    
    
    
    $
    650
    
    
    
    2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    100,000
    (b)2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 (a)
    
    The amounts were determined based on costs of the car leases, insurance, maintenance
and gasoline.(b)
    
    For Ms. Rae, represents payment made upon the sale of Company car pursuant to the terms
of the lease arrangement and for Mr. Faia, represents a real estate allowance paid in
connection with relocation to Cleveland, Ohio pursuant to the terms of Mr. Faias
employment letter.(c)
    
    Represents premiums for whole life insurance and, for Mr. Keithley, term life
insurance.(5)
    
    Mr. Faia joined the Company in February 2009.
  68




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Grants of Plan-Based Awards for Fiscal Year 2010
  AllOtherStock
    
    
    
    
    
    
    
    
    
    
    GrantAwards:
    
    
    All Other
    
    
    Exercise
    
    
    Date FairNumber
    
    
    Option
    
    
    or
    
    
    Value ofEstimated Future Payouts Under
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    of
    
    
    Awards:
    
    
    Base
    
    
    StockNon-Equity Incentive Plan Awards
    
    
    Estimated Future Payouts Under
    
    
    Shares
    
    
    Number
    
    
    Price of
    
    
    and(1)(2)
    
    
    Equity Incentive Plan Awards(3)
    
    
    of Stock
    
    
    of Securities
    
    
    Option
    
    
    OptionGrant
    
    
    Threshold
    
    
    Target
    
    
    Maximum
    
    
    Threshold
    
    
    Target
    
    
    Maximum
    
    
    or Units
    
    
    Underlying
    
    
    Awards
    
    
    AwardsName
    
    Date
    
    
    $
    
    
    $
    
    
    $
    
    
    #
    
    
    #
    
    
    #
    
    
    # (4)
    
    
    Options # (5)
    
    
    $/Sh (6)
    
    
    $ (7)Joseph P. Keithley
    
    
    12/4/2009
    
    
    
    0
    
    
    
    340,147
    
    
    
    680,294
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mark J. Plush
    
    
    12/4/2009
    
    
    
    0
    
    
    
    127,795
    
    
    
    255,590
    
    
    
    0
    
    
    
    22,250
    
    
    
    44,500
    
    
    
    
    
    
    
    22,250
    
    
    $
    4.26
    
    
    $
    196,263Linda C. Rae
    
    
    12/4/2009
    
    
    
    0
    
    
    
    165,008
    
    
    
    330,016
    
    
    
    0
    
    
    
    25,350
    
    
    
    50,700
    
    
    
    
    
    
    
    25,350
    
    
    $
    4.26
    
    
    $
    223,607Larry L. Pendergrass
    
    
    12/4/2009
    
    
    
    0
    
    
    
    89,600
    
    
    
    179,200
    
    
    
    0
    
    
    
    6,600
    
    
    
    13,200
    
    
    
    4,400
    
    
    
    13,200
    
    
    $
    4.26
    
    
    $
    90,760Daniel A. Faia
    
    
    12/4/2009
    
    
    
    0
    
    
    
    162,505
    
    
    
    325,010
    
    
    
    0
    
    
    
    9,450
    
    
    
    18,900
    
    
    
    6,300
    
    
    
    18,850
    
    
    $
    4.26
    
    
    $
    129,848
 (1)
    
    The options, shares acquired upon exercise of options or vesting or performance award
units and restricted stock awards and any gain realized in connection therewith are subject to
additional forfeiture and recoupment provisions for conduct that is detrimental to the
Company. See Compensation Discussion and Analysis Equity Award Granting Practices above.(2)
    
    Represents possible payouts under the 2010 Annual Incentive Compensation Plan. See
Compensation Discussion and AnalysisElements of Executive CompensationAnnual Bonus
Program under the Annual Incentive Compensation Plan above. The Named Executive Officers
received their maximum payout amounts.(3)
    
    Represents the range of common shares that could be earned pursuant to the performance award
units made under the 2002 Stock Incentive Plan as part of the long-term compensation program.
See Compensation Discussion and AnalysisElements of CompensationLong Term Compensation
Program above.(4)
    
    Represents restricted stock units awarded under the 2002 Stock Incentive Plan as part of the
long-term compensation program that become fully vested on December 4, 2013. Common shares
represented by such vested restricted unit awards are to be delivered promptly after such
vesting date.(5)
    
    Represents stock options awarded under the 2002 Stock Incentive Plan, as part of the
long-term compensation program, having an exercise price equal to the fair market value of the
common shares on the date of grant. The options vest as to 50% of the common shares subject
to the award on the second anniversary of the date of grant and as to 25% of the shares on
each anniversary thereafter. The stock options expire 10 years from the date of grant unless
otherwise expired as described above.(6)
    
    Represents the exercise price of the stock option, which was the closing date market price of
the Companys common shares on the NYSE on the grant date.(7)
    
    The grant date fair value of each award was computed in accordance with FASB ASC Topic 718.
For options, the per share valuation was $2.09, for restricted stock units it was $4.26 per
share and for performance award units it was $6.73. See Note I of Notes to Consolidated
Financial Statements included in Part II  Item 8 of this Form 10-K.
  69




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Outstanding Equity Awards at September 30, 2010
  Stock AwardsMarket
    
    
    
    
    
    
    Equity IncentiveValue
    
    
    
    
    
    
    Plan Awards:Option Awards
    
    
    Number of
    
    
    of Shares or
    
    
    Equity Incentive
    
    
    Market orNumber of
    
    
    Number of
    
    
    
    
    
    
    
    
    
    
    Shares or
    
    
    Units of
    
    
    Plan Awards:
    
    
    PayoutSecurities
    
    
    Securities
    
    
    
    
    
    
    
    
    
    
    Units of
    
    
    Stock
    
    
    Number of
    
    
    Value ofUnderlying
    
    
    Underlying
    
    
    
    
    
    
    
    
    
    
    Stock
    
    
    That
    
    
    Unearned
    
    
    UnearnedUnexercised
    
    
    Unexercised
    
    
    Option
    
    
    
    
    
    
    That Have
    
    
    Have
    
    
    Shares, Units
    
    
    Shares, UnitsOptions
    
    
    Options
    
    
    Exercise
    
    
    Option
    
    
    Not Yet
    
    
    Not Yet
    
    
    or Other Rights
    
    
    or Other Rights#
    
    
    #
    
    
    Price
    
    
    Expiration
    
    
    Vested
    
    
    Vested
    
    
    That Have Not
    
    
    That Have NotName
    
    Exercisable
    
    
    Unexercisable
    
    
    $
    
    
    Date
    
    
    # (1)
    
    
    $ (1)
    
    
    Yet Vested # (2)
    
    
    Yet Vested $ (2)Joseph P. Keithley
    
    
    100,000
    
    
    
    
    
    
    
    18.41
    
    
    
    7/24/2011
    
    
    
    1,308
    (3)
    
    $
    28,135
    
    
    
    0
    
    
    
    0100,000
    
    
    
    
    
    
    
    13.76
    
    
    
    7/23/2012100,000
    
    
    
    
    
    
    
    16.12
    
    
    
    7/18/201370,000
    
    
    
    
    
    
    
    18.75
    
    
    
    7/16/201455,000
    
    
    
    
    
    
    
    15.05
    
    
    
    10/3/201519,150
    
    
    
    19,150
    (4)
    
    
    9.12
    
    
    
    11/9/2017Mark J. Plush
    
    
    38,000
    (5)
    
    
    
    
    
    
    18.41
    
    
    
    7/24/2011
    
    
    
    5,552
    (6)
    
    $
    119,424
    
    
    
    22,250
    
    
    $
    478,59825,029
    
    
    
    
    
    
    
    13.76
    
    
    
    7/23/201233,000
    
    
    
    
    
    
    
    16.12
    
    
    
    7/18/201328,000
    
    
    
    
    
    
    
    18.75
    
    
    
    7/16/201410,400
    
    
    
    
    
    
    
    15.05
    
    
    
    10/3/20156,350
    
    
    
    6,350
    (4)
    
    
    9.12
    
    
    
    11/9/201727,500
    (7)
    
    
    2.99
    
    
    
    2/6/201922,250
    (8)
    
    
    4.26
    
    
    
    12/4/2019Linda C. Rae
    
    
    25,000
    
    
    
    
    
    
    
    18.41
    
    
    
    7/24/2011
    
    
    
    5,200
    
    
    $
    111,852
    
    
    
    25,350
    
    
    $
    545,27830,000
    
    
    
    
    
    
    
    13.76
    
    
    
    7/23/201250,000
    
    
    
    
    
    
    
    16.12
    
    
    
    7/18/201341,000
    
    
    
    
    
    
    
    18.75
    
    
    
    7/16/201425,000
    
    
    
    
    
    
    
    15.05
    
    
    
    10/3/201518,750
    
    
    
    6,250
    (9)
    
    
    14.00
    
    
    
    1/30/20179,650
    
    
    
    9,650
    (4)
    
    
    9.12
    
    
    
    11/9/201931,000
    (7)
    
    
    2.99
    
    
    
    2/6/201925,350
    (8)
    
    
    4.26
    
    
    
    12/4/2019Larry L. Pendergrass
    
    
    20,000
    
    
    
    
    
    
    
    12.43
    
    
    
    5/19/2013
    
    
    
    10,200
    
    
    $
    219,402
    
    
    
    6,600
    
    
    $
    141,96625,000
    
    
    
    
    
    
    
    18.75
    
    
    
    7/16/20148,800
    
    
    
    
    
    
    
    15.05
    
    
    
    10/3/20157,200
    
    
    
    2,400
    (9)
    
    
    14.00
    
    
    
    1/30/20174,150
    
    
    
    4,150
    (4)
    
    
    9.12
    
    
    
    11/9/201717,400
    (7)
    
    
    2.99
    
    
    
    2/6/201913,200
    (8)
    
    
    4.26
    
    
    
    12/4/2019Daniel Faia
    
    
    
    
    
    
    70,000
    (10)
    
    
    3.16
    
    
    
    2/9/2019
    
    
    
    6,300
    
    
    $
    135,513
    
    
    
    9,450
    
    
    $
    203,27018,850
    (8)
    
    
    4.26
    
    
    
    12/4/2019
 (1)
    
    Represents restricted stock units awarded under the 2002 Stock Incentive Plan as part of
the long-term compensation program, which vest four years after the date of grant. The value
is based on the closing price of the common shares on the NYSE on September 30, 2010 of $21.51
per share.(2)
    
    These amounts represent performance award units that were granted in fiscal year 2010 under
the 2002 Stock Incentive Plan as part of the long-term compensation program. The value is
based on the closing price of the common shares on the NYSE on September 30, 2010 of $21.51
per share.(3)
    
    Restricted shares, which vested December 1, 2010.
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(4)
    
    Represents options that vest as follows: 50% of the shares vested on November 9, 2009; 25% of
the shares vested on November 9, 2010; and the final 25% of the shares will vest on November
9, 2011.(5)
    
    Includes an option to purchase 16,251 shares held by Mr. Plushs former wife. Mr. Plush may
exercise the options solely upon the direction of his former wife who is entitled to the
shares issued upon exercise.(6)
    
    Includes 4,600 restricted stock units awarded under the 2002 Stock Incentive Plan as part of
the long-term compensation program, which vest four years after the date of grant and 952
restricted shares vesting on June 1, 2011.(7)
    
    Represents options that vest as follows: 50% of the shares vest on February 6, 2011; 25% of
the shares vest on February 6, 2012; and the final 25% of the shares will vest on February 6,
2013.(8)
    
    Represent options that vest as follows: 50% of the shares vest on December 4, 2011; 25% of
the shares vest on December 4, 2012; and the final 25% of the shares will vest on December 4,
2013.(9)
    
    Represents options that vest as follows: 50% of the shares vest on January 30, 2009; 25% of
the shares vest on January 30, 2010; and the final 25% of the shares will vest on January 30,
2011.(10)
    
    Represents options that vest as follows: 50% of the shares vest on February 9, 2011; 25% of
the shares vest on February 9, 2012; and the final 25% of the shares will vest on February 9,
2013.
 Option Exercises and Stock Vested for Fiscal Year 2010
 Option Awards
    
    
    Stock Awards (1)Number of Shares
    
    
    Value Realized on
    
    
    Number of Shares
    
    
    Value Realized onAcquired on Exercise
    
    
    Exercise
    
    
    Acquired on Vesting
    
    
    VestingName
    
    (#)
    
    
    ($)
    
    
    ($)
    
    
    ($)Joseph P. Keithley
    
    
    
    
    
    
    
    
    
    
    24,125
    
    
    $
    518,929Mark J. Plush
    
    
    
    
    
    
    
    
    
    
    12,000
    
    
    $
    258,120Linda C. Rae
    
    
    
    
    
    
    
    
    
    
    12,125
    
    
    $
    260,809Larry L. Pendergrass
    
    
    
    
    
    
    
    
    
    
    6,300
    
    
    $
    135,513Daniel Faia
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 (1)
    
    These amounts represent performance award units that were granted in fiscal year 2008
under the 2002 Stock Incentive Plan as part of the long-term compensation program and vested
on September 30, 2010. The final payout amounts were established based on and following the
Committees review of the Companys financial performance over the performance period of
fiscal year 2008 through fiscal year 2010. The payouts reflect 125% of the individuals
target award, except for Mr. Pendergrass, which reflects 100% of his target award. The awards
were settled for the number of common shares set forth in the table on October 27, 2010. The
value set forth in the table is based on the closing price of the common shares on the NYSE on
September 30, 2010 of $21.51 per share.
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Pension Benefits at September 30, 2010
 Present Value
    
    
    PaymentsNumber of Years
    
    
    of Accumulated
    
    
    During LastCredited Service
    
    
    Benefit
    
    
    Fiscal YearName
    
    Plan Name
    
    (#)
    
    
    ($) (1)
    
    
    ($)Joseph P. Keithley
    
    Keithley
Instruments, Inc.
Employees Pension
Plan
    
    
    34.4
    
    
    
    783,562
    
    
    
    Mark J. Plush
    
    Keithley
Instruments, Inc.
Employees Pension
Plan
    
    
    28.6
    
    
    
    518,205
    
    
    
    Linda C. Rae
    
    Keithley
Instruments, Inc.
Employees Pension
Plan
    
    
    15.6
    
    
    
    127,535
    
    
    
    Larry L. Pendergrass
    
    Keithley
Instruments, Inc.
Employees Pension
Plan
    
    
    7.3
    
    
    
    128,618
    
    
    
    Daniel Faia
    
    Keithley
Instruments, Inc.
Employees Pension
Plan
    
    
    1.7
    
    
    
    17,554
    
    
    
    
 (1)
    
    The accrued benefits are shown as annual straight life annuities payable at age 65
calculated as of the measurement date of September 30, 2010. The actuarial present value of
the accumulated benefits under the Defined Benefit Plan is based on assumptions consistent
with those used for fiscal year 2010 disclosure under U.S. GAAP, which includes a discount
rate of 5.375%, retirement at age 65 and no pre-retirement decrements. See Compensation
Discussion and AnalysisElements of Executive CompensationRetirement PlansDefined Benefit
Pension Plan above.
 Nonqualified Deferred Compensation for Fiscal Year 2010
 Executive
    
    
    Registrant
    
    
    Aggregate Earnings
    
    
    Aggregate
    
    
    AggregateContributions in
    
    
    Contributions in
    
    
    (Losses) in Last
    
    
    Withdrawals/
    
    
    Balance atLast FY
    
    
    Last Fiscal Year
    
    
    Fiscal Year
    
    
    Distributions
    
    
    Last Fiscal YearName
    
    ($)
    
    
    ($)
    
    
    ($) (1)
    
    
    ($)
    
    
    ($)Joseph P. Keithley (2)
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-Mark J. Plush
    
    
    -0-
    
    
    
    -0-
    
    
    
    15,808
    
    
    
    -0-
    
    
    
    175,783Linda C. Rae
    
    
    -0-
    
    
    
    -0-
    
    
    
    10,209
    
    
    
    -0-
    
    
    
    84,984Larry L. Pendergrass (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Daniel A. Faia (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 (1)
    
    Not reported as compensation to the Named Executive Officers for tax purposes. Until
fiscal 2009, the deferred compensation plan provided the Named Executive Officers with the
opportunity to defer receipt of cash compensation. The Company does not contribute to this
plan. Participants were able to elect to defer all or part of their cash compensation (base
salary and annual bonus) for a specified period of years or until retirement and select from a
variety of investment funds from which the earnings on their deferred cash compensation
account will be determined.(2)
    
    Mr. Keithleys distribution was made pursuant to his previously made election to receive a
lump sum payment at the beginning of the month of his 60th birthday.(3)
    
    Messrs. Pendergrass and Faia are not participants in this plan.
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Potential Payments upon Employment Termination, Death or Change of Control
  Equity Award Plans
   Change in Control Agreements
  
    
    1.0 or, with respect to Mr. Keithley and Ms. Rae, 1.5 times the higher of the
executives annual salary at the time of the Change in Control or the Triggering Event;
 
    
    1.0 or, with respect to Mr. Keithley and Ms. Rae, 1.5 times the higher of (1) the
executives current target bonus or (2) the average of the executives actual target
bonus received for the three fiscal years preceding the Change in Control (or the number
of fiscal years that the executive has been with the Company, if less than three); and
 
    
    a portion of his or her then current year target bonus prorated for the number of
days in the fiscal quarter in which the Triggering Event occurred, less any amount of
such bonus that has already been paid to the executive.
  
    
    continued medical, welfare and other benefit coverage until the earlier of the date
on which he or she is eligible to receive comparable benefits from another employer or
the one-year or, in the case of Mr. Keithley and Ms. Rae, the 18-month anniversary of
the Triggering Event; and
 
    
    outplacement services up to a cost of $25,000.
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Amended Employment Agreement with Mr. Plush
  
    
    continued payment of his monthly salary in effect as of his termination for 18 months
thereafter;
 
    
    full participation in the Annual Incentive Plan if the termination occurs after June
30th;
 
    
    full participation in any performance award if the performance measuring period is
within six months following his termination;
 
    
    30 days to exercise all vested options; provided such 30 days does not extend the
term of the options;
 
    
    a supplemental retirement benefit reflecting the difference between the benefits that
would be payable to Mr. Plush under the Companys pension plan if he were fully vested
and his compensation, as defined in the pension plan, was equal to the highest amount of
annual compensation he earned in the final three years prior to termination, and his
actual benefits payable under the pension plan;
 
    
    all fringe benefits that he was receiving immediately prior to his termination for
the 18-month period following his termination; and
 
    
    outplacement services up to a cost of $10,000.
  
    
    1.5 times the higher of his annual salary at the time of the Change in Control or the
Triggering Event, paid out in monthly installments over a 24-month period;
 
    
    full participation in the annual bonus plan if termination of employment is
subsequent to June 30 of the respective fiscal year;
 
    
    a supplemental retirement benefit reflecting the difference between the benefits that
would be payable to Mr. Plush under the Companys pension plan if he were fully vested
and his compensation, as defined in the pension plan, was equal to the highest amount of
annual compensation he earned in the final three years prior to termination, and his
actual benefits payable under the pension plan;
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
    
    continued medical, welfare and other benefit coverage until the earlier of the date
on which he is eligible to receive comparable benefits from another employer and the
24-month anniversary of the Triggering Event, as well as continued
fringe perquisites to which Mr. Plush was entitled immediately prior to termination for a
period of 18 months following the Triggering Event; and
 
    
    outplacement services up to a cost of $10,000.
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Potential Payments as of September 30, 2010
  Involuntary
    
    
    Voluntary TerminationTermination,
    
    
    Termination
    
    
    for Good Reason or Involuntary
    
    
    ChangeDeath or
    
    
    Other Than for
    
    
    Termination Other than for Cause
    
    
    ofName
    
    Retirement (1)
    
    
    Cause (1) (2)
    
    
    following a Change in Control (3)
    
    
    Control (4)Joseph P. KeithleyLump Sum Salary and Bonus
    
    
    
    
    
    
    
    
    
    $
    1,147,997
    
    
    
    Current Year Bonus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Benefits
    
    
    
    
    
    
    
    
    
    
    32,988
    
    
    
    Outplacement
    
    
    
    
    
    
    
    
    
    
    25,000
    
    
    
    Equity Awards
    
    $
    28,135
    
    
    
    
    
    
    
    265,404
    
    
    $
    265,404Mark J. PlushContinued Salary and Bonus
    
    
    
    
    
    
    $  383,384
    
    
    $
    383,384
    
    
    
    Current Year Bonus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Medical Benefits
    
    
    
    
    
    
    
    
    
    
    21,169
    
    
    
    Fringe Benefits
    
    
    
    
    
    
    50,751
    
    
    
    50,751
    
    
    
    Outplacement
    
    
    
    
    
    
    10,000
    
    
    
    10,000
    
    
    
    Equity Awards
    
    $
    180,010
    
    
    
    
    
    
    
    1,809,109
    
    
    $
    1,569,810Supplemental Retirement
Benefit
    
    
    
    
    
    
    1,269,187
    
    
    
    1,269,187
    
    
    
    Linda C. RaeLump Sum Salary and Bonus
    
    
    
    
    
    
    
    
    
    $
    660,035
    
    
    
    Current Year Bonus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Benefits
    
    
    
    
    
    
    
    
    
    
    23,419
    
    
    
    Outplacement
    
    
    
    
    
    
    
    
    
    
    25,000
    
    
    
    Equity Awards
    
    $
    181,760
    
    
    
    
    
    
    
    2,107,679
    
    
    $
    1,835,040Larry L. PendergrassLump Sum Salary and Bonus
    
    
    
    
    
    
    
    
    
    $
    313,600
    
    
    
    Current Year Bonus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Benefits
    
    
    
    
    
    
    
    
    
    
    17,190
    
    
    
    Outplacement
    
    
    
    
    
    
    
    
    
    
    25,000
    
    
    
    Equity Awards
    
    $
    47,322
    
    
    
    
    
    
    
    1,051,742
    
    
    $
    980,759Daniel A. FaiaLump Sum Salary and Bonus
    
    
    
    
    
    
    
    
    
    $
    412,513
    
    
    
    Current Year Bonus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Benefits
    
    
    
    
    
    
    
    
    
    
    14,217
    
    
    
    Outplacement
    
    
    
    
    
    
    
    
    
    
    25,000
    
    
    
    Equity Awards
    
    $
    67,757
    
    
    
    
    
    
    
    2,050,080
    
    
    $
    1,948,446
 (1)
    
    The amounts shown represent the pro rata payout of performance award units upon a
qualifying retirement. In addition, the 2002 Stock Incentive Plan and related award
agreements and Annual Incentive Compensation Plan provide the Committee with discretion to
grant terminated employees additional vesting of other equity awards or a pro-rated bonus
depending on the circumstances of their termination. Upon termination from employment, the
Keithley Instruments, Inc. Employees Pension Plan may also provide certain benefits to
participants, including executive officers, depending on the reason for termination.(2)
    
    The amounts shown represent an estimate of the aggregate value of benefits that would be
payable by the Company to Mr. Plush under the amended employment agreement if his employment
was terminated without cause (as defined in the amended employment agreement) and not in
connection with or following a Change in Control. These amounts assume there is no match
under the Companys 401(k) beyond the base match and equity award values are calculated as set
forth in footnote (4) below.
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(3)
    
    The amounts shown represent an estimate of the aggregate value of benefits that would be
payable by the Company to the executive officer under the change in control agreement or
amended employment agreement, in the case of Mr. Plush, if his or her employment was
terminated by the executive for good reason (as defined in the applicable agreement) or
without cause (as defined in the applicable agreement) within two years, or three years in the
case of Mr. Plush, following a Change in Control. These amounts assume there is no match
under the Companys 401(k) beyond the base match. All equity awards provide for accelerated
vesting upon a Change in Control and their values were computed based upon the closing price
of the common shares on the NYSE of $21.51 and the number of shares underlying equity awards
held by the executive officer on September 30, 2010. The amounts shown represent the sum of
(a) the product of (i) the number of common shares subject to options held by such executive
officer multiplied by (ii) the excess of $21.51 over the exercise price of such options, (b)
the product of $21.51 multiplied the number of common shares represented by performance award
units at 1.5 times the initial award amount (which assumes the maximum possible payout), and
(c) $21.51 per common share underlying restricted stock units and restricted share.(4)
    
    All equity awards provide for accelerated vesting upon a change in control and their values
were computed based upon the closing price per common share on the NYSE of $21.51 and the
number of shares underlying equity awards held by the executive officer on September 30, 2010.
The amounts shown represent the sum of (a) the product of (i) the number of common shares
subject to options held by such executive officer multiplied by (ii) the excess of $21.51 over
the exercise price of such options, (b) the product of $21.51 multiplied the number of common
shares represented by performance award units at the initial award amount, and (c) $21.51 per
common share underlying restricted stock units and restricted share. The actual value
realized to the Named Executive Officers with respect to such awards was the consideration
paid at the closing of the merger, which was calculated as described in the preceding sentence
using the per share price of $21.60, rather than the closing price on September 30, 2010 of
$21.51.
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Director Compensation
   Annual Retainer
    
    $
    27,000Lead Director
    
    $
    11,000Audit Committee Chairperson
    
    $
    22,000Compensation and Human Resources Committee Chairperson
    
    $
    12,000Other Committee Chairpersons
    
    $
    10,000Audit Committee members excluding Chairperson
    
    $
    12,000Compensation and Human Resources Committee members (excluding Chairperson)
    
    $
    7,000Other Committee members excluding Chairperson
    
    $
    5,000
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##### Table of Contents



Director Compensation for Fiscal Year 2010
 Name
    
    Fees Earned or Paid in Cash ($)
    
    
    Fees Earned or Paid in Stock ($) (1)
    
    
    Total ($)Brian R. Bachman
    
    
    45,000
    
    
    
    56,022
    
    
    
    101,022James B. Griswold
    
    
    12,250
    
    
    
    92,772
    
    
    
    105,022Leon J. Hendrix, Jr.
    
    
    8,500
    
    
    
    81,522
    
    
    
    90,022Brian J. Jackman
    
    
    12,500
    
    
    
    93,522
    
    
    
    106,022Dr. N. Mohan Reddy
    
    
    9,750
    
    
    
    85,272
    
    
    
    95,022Thomas A. Saponas
    
    
    9,750
    
    
    
    85,272
    
    
    
    95,022Barbara V. Scherer
    
    
    49,000
    
    
    
    56,022
    
    
    
    105,022
 (1)
    
    Represents the annual common share grant awarded under the Companys 2002 Stock Incentive
Plan described above. The grant date fair value of each award was computed in accordance
with FASB ASC Topic 718. See Note I of Notes to Consolidated Financial Statements included in
Part II  Item 8 of this Form 10-K.(2)
    
    Represents the dollar value of fees that have been deferred in the 1996 Outside Directors
Deferred Stock Plan described above.
   Compensation Policies and Practices as Related to Risk Management
  
 ITEM 12   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  Security Ownership of Certain Beneficial Owners and Management
 th
  79




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##### Table of Contents



ITEM 13   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 Procedures for Review of Related Party Transactions
  Director Independence
  
 ITEM 14   PRINCIPAL ACCOUNTANT FEES AND SERVICES
  Fiscal 2010
    
    
    Fiscal 2009Audit Fees
    
    $
    771,000
    
    
    $
    698,000Audit Related Fees
    
    
    10,000
    
    
    
    10,000Tax Fees
    
    
    267,000
    
    
    
    206,000All Other Fees
    
    
    3,000
    
    
    
    3,000Total
    
    $
    1,051,000
    
    
    $
    917,000
  
    
    Audit Fees consist of fees incurred for professional services rendered for the
audit of Keithley Instruments, Inc.s consolidated financial statements, the audit of
the Companys internal control over financial reporting as required by the
Sarbanes-Oxley Act of 2002, Section 404, review of the interim consolidated financial
statements included in quarterly reports, and services that are normally provided by
PricewaterhouseCoopers LLP in connection with statutory and regulatory filings or
engagements.
 
    
    Audit Related Fees consist of fees incurred for due diligence services related to
the merger.
 
    
    Tax Fees consist of fees incurred for professional services for tax compliance, tax
advice and tax planning for the Companys subsidiaries and sales offices in various tax
jurisdictions throughout the world.
 
    
    All Other Fees consist of licensing fees for an accounting research database
maintained by PricewaterhouseCoopers LLP.
 Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent
Registered Public Accounting Firm
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PART IV
 
 ITEM 15   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a)(1) Financial Statements
  (a)(2) Financial Statement Schedules
  (a)(3) Index to Exhibits
 ExhibitNumber
    
    
    Description2.1
    
    
    Agreement and Plan of Merger, dated as of September 29, 2010, by and among Danaher
Corporation, Aegean Acquisition Corp. and Keithley Instruments, Inc. (Reference is made
to Exhibit 2.1 of the Companys Current Report on Form 8-K dated September 29, 2010 (File
No. 1-9965), which Exhibit is incorporated herein by reference.)3.1
    
    
    Code of Regulations, as amended on February 9, 2008.
(Reference is made to Exhibit 3(a) of the Companys Quarterly Report on Form 10-Q for the period ended March 31, 2008 (File
No. 1-9965), which Exhibit is incorporated herein by reference.)3.2
    
    
    Restated Articles of Incorporation, adopted August 8, 2008. (Reference is made to Exhibit
3.1 of the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended December
31, 2009 (File no. 1-9965), which Exhibit is incorporated herein by reference.)4.1
    
    
    Specimen Share Certificate for the Common Shares, without par value. (Reference is made
to Exhibit 4(a) of the Companys Annual Report on Form 10-K for the year ended September
30, 1999 (File No. 1-9965), which Exhibit is incorporated herein by reference.)10.1
    
    
    Credit Agreement dated as of March 30, 2001 by and among Keithley Instruments, Inc. and
Subsidiary Borrowers and the Lenders and Bank One, NA, as agent. (Reference is made to
Exhibit 10(l) of the Companys Quarterly Report on form 10-Q for the fiscal quarter ended
March 31, 2001 (File No. 1-9965) which Exhibit is incorporated herein by reference.)10.2
    
    
    First Amendment to Credit Agreement, dated August 1, 2002. (Reference is made to Exhibit
10(j) of the Companys Quarterly Report on Form 10-Q for the quarter year ended June 30,
2002 (File No. 1-9965), which Exhibit is incorporated herein by reference.)10.3
    
    
    Second Amendment to Credit Agreement, dated March 28, 2003. (Reference is made to Exhibit
10(l) of the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 2003 (File No. 1-9965), which Exhibit is incorporated herein by reference.)10.4
    
    
    Third Amendment to Credit Agreement, dated March 30, 2004. (Reference is made to Exhibit
10(m) of the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 2004 (File No. 1-9965), which Exhibit is incorporated herein by reference.)10.5
    
    
    Fourth Amendment to Credit Agreement, dated March 30, 2005. (Reference is made to Exhibit
10(n) of the Companys Current Report on Form 8-K dated March 30, 2005 (File No. 1-9965),
which Exhibit is incorporated herein by reference.)10.6
    
    
    Fifth Amendment to Credit Agreement, dated September 27, 2006. (Reference is made to
Exhibit 10(r) of the Companys Annual Report on Form 10-K for the fiscal year ended
September 30, 2006 (File No. 1-9965), which Exhibit is incorporated herein by reference.)10.7
    
    
    Sixth Amendment to Credit Agreement, dated March 31, 2009. (Reference is made to Exhibit
10.1 of the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 2009 (File No. 1-9965), which Exhibit is incorporated herein by reference.)10.8
    
    
    Seventh Amendment to Credit Agreement, dated March 31, 2010. (Reference is made to
Exhibit 10.1 of the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2010 (File No. 1-9965), which Exhibit is incorporated herein by reference.)10.9
    
    
    Pledge, Assignment and Security Agreement by and between the Company and JPMorgan Chase
Bank dated March 31, 2009. (Reference is made to Exhibit 10.2 of the Companys Quarterly
Report filed on Form 10-Q for the fiscal quarter ended March 31, 2009 (File No. 1-9965),
which Exhibit is incorporated herein by reference.)
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##### Table of Contents



ExhibitNumber
    
    
    Description10.10*
    
    
    Form of Indemnification Agreement entered into by the Company and each of Brian R.
Bachman, James B. Griswold, Leon J. Hendrix, Jr., Joseph P. Keithley, Dr. N. Mohan Reddy,
Barbara Scherer and R. Elton White, as members of the Companys Board of Directors On
December 2, 2004. (Reference is made to Exhibit 10.1 of the Companys Current Report on
Form 8-K dated December 2, 2004 (File No. 1-9965), which Exhibit is incorporated herein
by reference.)10.11*
    
    
    Form of Indemnification Agreement entered into by the Company and each Mark J. Plush and
Linda C. Rae, as executive officers of the Company, on December 2, 2004. (Reference is
made to Exhibit 10.2 of the Companys Current Report on Form 8-K dated December 2, 2004
(File No. 1-9965), which Exhibit is incorporated herein by reference.)10.12*
    
    
    Form of Indemnification Agreement entered into by the Company and Brian J. Jackman, as a
member of the Companys Board of Directors on May 5, 2005. (Reference is made to Exhibit
10.1 of the Companys Current Report on Form 8-K dated December 2, 2004 (File No.
1-9965), which Exhibit is incorporated herein by reference.)10.13*
    
    
    Form of Indemnification Agreement entered into by the Company and Thomas A. Saponas, as a
member of the Companys Board of Directors, on May 11, 2007. (Reference is made to
Exhibit 10.1 of the Companys Current Report on Form 8-K dated December 2, 2004 (File No.
001-09965), which Exhibit is incorporated herein by reference.)10.14*
    
    
    Supplemental Executive Retirement Plan. (Reference is made to Exhibit 10(e) of the
Companys Annual Report on Form 10-K for the year ended September 30, 1999 (File No.
1-9965), which Exhibit is incorporated herein by reference.)10.15*
    
    
    Keithley Instruments, Inc. Deferred Compensation Plan (Amended and Restated January 1,
2005). (Reference is made to Exhibit 10.7 of the Companys Quarterly Report on Form 10-Q
for the fiscal quarter ended December 31, 2008 (File No. 1-9965), which Exhibit is
incorporated herein by reference.)10.16*
    
    
    Keithley Instruments, Inc. Supplemental Deferral Plan (as Amended and Restated January 1,
2008). (Reference is made to Exhibit 10.6 of the Companys Quarterly Report on Form 10-Q
for the fiscal quarter ended December 31, 2008 (File No. 1-9965), which Exhibit is
incorporated herein by reference.)10.17*
    
    
    1992 Stock Incentive Plan, as amended. (Reference is made to Exhibit 10(f) of the
Companys Annual Report on Form 10-K for the year ended September 30, 1999 (File No.
1-9965), which Exhibit is incorporated herein by reference.)10.18*
    
    
    1992 Directors Stock Option Plan. (Reference is made to Exhibit 10(g) of the Companys
Annual Report on Form 10-K for the year ended September 30, 1999 (File No. 1-9965), which
Exhibit is incorporated herein by reference.)10.19*
    
    
    1996 Outside Directors Deferred Stock Plan (as Amended and Restated). (Reference is made
to Exhibit 10.2 of the Companys Quarterly Report on Form 10-Q for the fiscal quarter
ended December 31, 2008 (File No. 1-9965), which Exhibit is incorporated herein by
reference.)10.20*
    
    
    1997 Directors Stock Option Plan (as Amended and Restated). (Reference is made to
Exhibit 10.3 of the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended
December 31, 2008 (File No. 1-9965), which Exhibit is incorporated herein by reference.)10.21*
    
    
    Keithley Instruments, Inc. 2005 Employee Stock Purchase and Dividend Reinvestment Plan
(as amended August 2007). (Reference is made to Exhibit 10(z) of the Companys Annual
Report on Form 10-K for the year ended September 30, 2007 (File No. 1-9965), which
Exhibit is incorporated herein by reference.)10.22*
    
    
    Keithley Instruments, Inc. 2002 Stock Incentive Plan (as Amended and Restated January 1,
2007). (Reference is made to Exhibit 10.4 of the Companys Quarterly Report on Form 10-Q
for the fiscal quarter ended December 31, 2008 (File No. 1-9965), which Exhibit is
incorporated herein by reference.)10.23*
    
    
    Keithley Instruments, Inc. form of option agreement for use in connection with awards
granted under the Keithley Instruments, Inc. 2002 Stock Incentive Plan. (Reference is
made to Exhibit 10.1 of the Companys Current Report on Form 8-K dated October 3, 2005
(File No. 1-9965), which Exhibits are incorporated herein by reference.)10.24*
    
    
    Keithley Instruments, Inc. form of option agreement for use in connection with awards
granted under the Keithley Instruments, Inc. 2002 Stock Incentive Plan. (Reference is
made to Exhibit 10(aa) of the Companys Annual Report on Form 10-K for the year ended
September 30, 2007 (File No. 1-9965), which Exhibit is incorporated herein by reference.)10.25*
    
    
    Keithley Instruments, Inc. form of restricted unit award agreement for use in connection
with awards granted under the Keithley Instruments, Inc. 2002 Stock Incentive Plan.
(Reference is made to Exhibit 10.3 of the Companys Current Report on Form 8-K dated
October 3, 2005 (File No. 1-9965), which Exhibits are incorporated herein by reference.)10.26*
    
    
    Keithley Instruments, Inc. form of restricted unit award agreement for use in connection
with awards granted under the Keithley Instruments, Inc. 2002 Stock Incentive Plan.
(Reference is made to Exhibit 10(cc) of the Companys Annual Report on Form 10-K for the
year ended September 30, 2007 (File No. 1-9965), which Exhibit is incorporated herein by
reference.)
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ExhibitNumber
    
    
    Description10.27*
    
    
    Keithley Instruments, Inc. form of Management Restricted Unit Award Agreement for use in
connection with awards granted under the Keithley Instruments, Inc. 2002 Stock Incentive
Plan. (Reference is made to Exhibit 10.9 of the Companys Quarterly Report on Form 10-Q
for the fiscal quarter ended December 31, 2008 (File No. 1-9965), which Exhibits are
incorporated herein by reference.)10.28*
    
    
    Keithley Instruments, Inc. form of performance award agreement for use in connection with
awards granted under the Keithley Instruments, Inc. 2002 Stock Incentive Plan. (Reference
is made to Exhibit 10(bb) of the Companys Annual Report on Form 10-K for the year ended
September 30, 2007 (File No. 1-9965), which Exhibit is incorporated herein by reference.)10.29*
    
    
    Keithley Instruments, Inc. 2009 Stock Incentive Plan. (Reference is made to Exhibit 10.10
of the Companys Form 10-Q for the fiscal quarter ended December 31, 2008 (File No.
1-9965), which Exhibit is incorporated herein by reference.)10.30*
    
    
    Keithley Instruments, Inc. Annual Incentive Compensation Plan (Amended and Restated as of
January 1, 2008). (Reference is made to Exhibit 10.1 of the Companys Quarterly Report on
Form 10-Q dated December 31, 2008 (File No. 1-9965), which Exhibit is incorporated herein
by reference.)10.31*
    
    
    Keithley Instruments, Inc. 2009 Annual Incentive Compensation Plan. (Reference is made to
Exhibit 10.1 of the Companys Current Report on Form 8-K dated October 31, 2008 (File No.
1-9965), which Exhibit is incorporated herein by reference.)10.32*
    
    
    Form of Keithley Instruments, Inc. 2002 & 2009 Stock Incentive Plans Performance Award
Agreement. (Reference is made to Exhibit 10.01 of the Companys Current Report on Form
8-K dated December 4, 2009 (File No. 1-9965), which Exhibit is incorporated herein by
reference.)10.33*
    
    
    Form of Change in Control Agreement entered into by the Company with each of Joseph P.
Keithley and Linda C. Rae. (Reference is made to Exhibit 10.1 of the Companys Current
Report on Form 8-K dated August 9, 2010 (File No. 1-9965), which Exhibit is incorporated
herein by reference.)10.34*
    
    
    Change in Control Agreement entered into by the Company with Larry L. Pendergrass.
(Reference is made to Exhibit 10.2 of the Companys Current Report on Form 8-K dated
August 9, 2010 (File No. 1-9965), which Exhibit is incorporated herein by reference.)10.35*
    
    
    Change in Control Agreement entered into by the Company with Daniel A. Faia. (Reference
is made to Exhibit 10.3 of the Companys Current Report on Form 8-K dated August 9, 2010
(File No. 1-9965), which Exhibit is incorporated herein by reference.)10.36
    
    
    Voting Agreement, dated as of September 29, 2010, by and among Danaher Corporation,
Aegean Acquisition Corp. and Keithley Investment Co. Limited Partnership. (Reference is
made to Exhibit 10.1 of the Companys Current Report on Form 8-K dated September 29, 2010
(File No. 1-9965), which Exhibit is incorporated herein by reference.)10.37*
    
    
    Amended and Restated Employment Agreement, dated September 29, 2010, by and between
Keithley Instruments, Inc. and Mark J. Plush. (Reference is made to Exhibit 10.2 of the
Companys Current Report on Form 8-K dated September 29, 2010 (File No. 1-9965), which
Exhibit is incorporated herein by reference.)10.38*
    
    
    Keithley Instruments, Inc. 2011 Annual Incentive Compensation Plan. (Reference is made
to Exhibit 10.1 of the Companys Current Report on Form 8-K dated October 15, 2010 (File
No. 1-9965), which Exhibit is incorporated herein by reference.)22.1
    
    
    Subsidiaries of the Company31.1
    
    
    Certification of Joseph P. Keithley pursuant to Rule 13a-14(a)-15d-14(a).31.2
    
    
    Certification of Mark J. Plush pursuant to Rule 13a-14(a)-15d-14(a).32.1
    +
    
    Certification of Joseph P. Keithley pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350.32.2
    +
    
    Certification of Mark J. Plush pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350.
 *
    
    Management contract or compensatory plan or arrangement.+
    
    The certifications furnished pursuant to this item will not be deemed filed for purposes of
Section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that
section. Such certification will not be deemed to be incorporated by reference into any filing
under the Securities Act or the Exchange Act, except to the extent that the registrant
specifically incorporates it by reference. Item 15(b) Exhibits: See Index to Exhibits at
Item 15(a)(3) above. Item 15(c) Financial Statement Schedules: Schedules required to be filed
in response to this portion are listed above in Item 15(a)(2).
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ITEM 15(b) EXHIBITS
  ITEM 15(c) FINANCIAL STATEMENT SCHEDULES
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SIGNATURES
  
 By:
    
    /s/ Joseph P. Keithley

Joseph P. Keithley, Chairman, President andChief Executive Officer
   Signature
    
    Title
    
    Date/s/ Joseph P. Keithley

Joseph P. Keithley
    
    Chairman of the Board of Directors,
President andChief Executive Officer
(Principal Executive Officer)
    
    12/15/10/s/ Mark J. Plush

Mark J. Plush
    
    Senior Vice President and Chief Financial
Officer(Principal Financial and
Accounting Officer)
    
    12/15/10/s/ Robert S. Lutz

Robert S. Lutz
    
    Director
    
    12/15/10/s/ Frank T. McFaden

Frank T. McFaden
    
    Director
    
    12/15/10
  85