##### 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, 2008
    
    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
(Title of Each Class)
    
    New York Stock Exchange
(Name of Each Exchange on Which Registered)
 None
 o þ
 o þ
 þ o
 þ
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



Keithley Instruments, Inc.
10-K Annual Report
 Table of Contents
 PAGEPART I:Item 1 Business
    
    
    2Item 1A Risk Factors
    
    
    5Item 1B Unresolved Staff Comments
    
    
    7Item 2 Properties
    
    
    7Item 3 Legal Proceedings
    
    
    7Item 4 Submission of Matters to a Vote of Security Holders
    
    
    8PART II:Item 5 Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    9Item 6 Selected Financial Data
    
    
    11Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 7A Quantitative and Qualitative Disclosures About Market Risk
    
    
    18Item 8 Financial Statements and Supplementary Data
    
    
    19Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    40Item 9A Controls and Procedures
    
    
    40Item 9B Other Information
    
    
    40PART III:Item 10 Directors and Executive Officers of the Registrant
    
    
    41Item 11 Executive Compensation
    
    
    41Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    41Item 13 Certain Relationships and Related Transactions
    
    
    41Item 14 Principal Accountant Fees and Services
    
    
    41PART IV:Item 15 Exhibits and Financial Statement Schedules
    
    
    42SIGNATURES
    
    
    44EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2
  - 1 -




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Forward-Looking Statements
     
 PART I
 
 ITEM 1  BUSINESS
 General
     Business Strategy
    - 2 -




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Product Offerings
  New Products During Fiscal Year 2008
   TM
      Geographic Markets and Distribution
   - 3 -




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Sources and Availability of Raw Materials
  Patents
  Seasonal Trends and Working Capital Requirements
  Customers
  Backlog
  Competition
  Research and Development
  Government Regulations
  Employees
  Foreign Operations and Export Sales
   - 4 -




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Executive Officers Of The Registrant
 Name
    
    Position
    
    AgeJoseph P. Keithley
    
    Chairman of the Board of Directors, President and Chief Executive Officer
    
    
    59Steven A. Chipchase
    
    Vice President Operations
    
    
    45Philip R. Etsler
    
    Vice President Human Resources
    
    
    58Mark A. Hoersten
    
    Vice President Marketing
    
    
    50Larry L. Pendergrass
    
    Vice President New Product Development
    
    
    53Mark J. Plush
    
    Vice President and Chief Financial Officer
    
    
    59Linda C. Rae
    
    Executive Vice President and Chief Operating Officer
    
    
    43
        
 ITEM 1A  RISK FACTORS
  Cyclicality of the electronics industry and timing of large orders
  - 5 -




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Effects of cost reductions
 Rapid technology changes
 Competitive factors
 Dependence on key suppliers
 International operations, political and economic conditions
 Changes in manufacturing processes
 Tax planning strategies
 Information technology management systems
  Fixed cost of sales force
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Historical stock option grant practices
 Compliance with NYSE listing standards
 
 ITEM 1B  UNRESOLVED STAFF COMMENTS
  
 ITEM 2  PROPERTIES
  
 ITEM 3  LEGAL PROCEEDINGS
   
    
    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.
 - 7 -




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ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  - 8 -




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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
2008First Quarter
    
    $
    11.53
    
    
    $
    8.71
    
    
    $
    .0375
    
    
    $
    .0300Second Quarter
    
    
    11.86
    
    
    
    8.46
    
    
    
    .0375
    
    
    
    .0300Third Quarter
    
    
    11.80
    
    
    
    9.15
    
    
    
    .0375
    
    
    
    .0300Fourth Quarter
    
    
    10.26
    
    
    
    7.91
    
    
    
    .0375
    
    
    
    .0300Fiscal 2007First Quarter
    
    $
    13.85
    
    
    $
    11.79
    
    
    $
    .0375
    
    
    $
    .0300Second Quarter
    
    
    16.44
    
    
    
    12.75
    
    
    
    .0375
    
    
    
    .0300Third Quarter
    
    
    15.73
    
    
    
    11.80
    
    
    
    .0375
    
    
    
    .0300Fourth Quarter
    
    
    14.45
    
    
    
    9.30
    
    
    
    .0375
    
    
    
    .0300
  Equity Compensation Plan Information as of September 30, 2008
 Number of securities remainingavailable for future issuanceNumber of securities to be
    
    Weighted-average
    
    under equity compensationissued upon exercise of
    
    exercise price of
    
    plans (excluding securitiesoutstanding options
    
    outstanding options
    
    reflected in column (a))Plan category
    
    (a)
    
    (b)
    
    (c)Equity compensation plans
approved
by security holders
    
    
    3,938,481
    (1)
    
    $
    19.90
    
    
    
    1,147,492
    (2)Equity compensation plans not
approved by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    3,938,481
    (1)
    
    $
    19.90
    
    
    
    1,147,492
    (2)
 
 (1)
    
    Includes stock options outstanding of 3,027,131 under the Companys stock option plans,
52,600 restricted award units and 858,750 performance award units, 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 H.
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.(2)
    
    Includes 475,129 shares available for issuance under the 2005 Employee Stock Purchase and
Dividend Reinvestment Plan. Issuer Purchases of Equity Securities
  Total number of shares
    
    Maximum number ofpurchased as part of
    
    shares that may yetTotal number of
    
    Average price
    
    publicly announced
    
    be purchased underPeriod
    
    shares purchased
    
    paid per share (1)
    
    plans or programs
    
    the plans or programsJuly 1 - 31, 2008
    
    
    50,400
    
    
    $
    9.86
    
    
    
    50,400
    
    
    
    1,316,300August 1 - 31, 2008
    
    
    52,150
    
    
    $
    9.60
    
    
    
    52,150
    
    
    
    1,264,150September 1 - 30, 2008
    
    
    51,750
    
    
    $
    8.99
    
    
    
    51,750
    
    
    
    1,212,400Total
    
    
    154,300
    
    
    $
    9.48
    
    
    
    154,300
    
    
    
    1,212,400
 
 (1)
    
    Price includes commissions. - 9 -




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Stock Performance Graph
 COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
 
 
 
  9/03
    

    9/04
    

    9/05
    

    9/06
    

    9/07
    

    9/08Keithley Instruments, Inc.
    
    
    100.00
    
    
    
    124.32
    
    
    
    105.00
    
    
    
    92.74
    
    
    
    78.05
    
    
    
    62.61Russell 2000
    
    
    100.00
    
    
    
    118.77
    
    
    
    140.09
    
    
    
    154.00
    
    
    
    173.00
    
    
    
    147.94S&P Information Technology
    
    
    100.00
    
    
    
    101.96
    
    
    
    115.67
    
    
    
    119.44
    
    
    
    147.30
    
    
    
    112.87
 - 10 -




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ITEM 6  SELECTED FINANCIAL DATA
  For the years ended September 30,(In thousands of dollars except for per share data)
    
    
    2008
    
    
    
    2007
    
    
    
    2006
    
    
    
    2005
    
    
    
    2004Operating Results:Net sales
    
    $
    152,468
    
    
    
    143,658
    
    
    
    155,212
    
    
    
    141,552
    
    
    
    140,248Gross margin percentage
    
    
    58.9
    %
    
    
    59.8
    %
    
    
    61.3
    %
    
    
    60.7
    %
    
    
    61.1
    %(Loss) income before income taxes
    
    $
    (4,536
    )
    
    
    (1,685
    )
    
    
    9,913
    
    
    
    14,087
    
    
    
    15,541Net (loss) income
    
    $
    (2,593
    )
    
    
    (349
    )
    
    
    8,361
    
    
    
    10,128
    
    
    
    11,381Basic (loss) earnings per share
    
    $
    (0.16
    )
    
    
    (0.02
    )
    
    
    0.51
    
    
    
    0.62
    
    
    
    0.71Diluted (loss) earnings per share
    
    $
    (0.16
    )
    
    
    (0.02
    )
    
    
    0.50
    
    
    
    0.61
    
    
    
    0.69Common Stock Information:Cash dividends per Common Share
    
    $
    0.150
    
    
    
    0.150
    
    
    
    0.150
    
    
    
    0.150
    
    
    
    0.150Cash dividends per Class B Common Share
    
    $
    0.120
    
    
    
    0.120
    
    
    
    0.120
    
    
    
    0.120
    
    
    
    0.120Weighted average number of shares
outstanding- diluted
    
    
    15,854
    
    
    
    16,207
    
    
    
    16,567
    
    
    
    16,591
    
    
    
    16,544At fiscal year-end:Dividend payout ratio
    
    
    n/m
    
    
    
    n/m
    
    
    
    30.0
    %
    
    
    24.6
    %
    
    
    21.7
    %Shareholders equity per share
    
    $
    6.12
    
    
    
    6.76
    
    
    
    7.03
    
    
    
    6.81
    
    
    
    6.26Closing market price
    
    $
    8.37
    
    
    
    10.60
    
    
    
    12.75
    
    
    
    14.60
    
    
    
    17.45Balance Sheet Data:Total assets
    
    $
    137,978
    
    
    
    146,406
    
    
    
    148,892
    
    
    
    142,364
    
    
    
    136,666Current ratio
    
    
    3.3
    
    
    
    3.8
    
    
    
    4.2
    
    
    
    4.2
    
    
    
    3.3Short-term debt
    
    $
    23
    
    
    
    799
    
    
    
    872
    
    
    
    
    
    
    
    440Long-term obligations
    
    $
    12,939
    
    
    
    11,102
    
    
    
    9,792
    
    
    
    8,240
    
    
    
    7,348Shareholders equity
    
    $
    103,302
    
    
    
    113,024
    
    
    
    116,503
    
    
    
    111,976
    
    
    
    101,577Total debt-to-capital
    
    
    0.0
    %
    
    
    0.7
    %
    
    
    0.7
    %
    
    
    
    
    
    
    0.4
    %Other Data:Return on average shareholders equity
    
    
    -2.4
    %
    
    
    -0.3
    %
    
    
    7.3
    %
    
    
    9.5
    %
    
    
    12.2
    %Return on average total assets
    
    
    -1.8
    %
    
    
    -0.2
    %
    
    
    5.7
    %
    
    
    7.3
    %
    
    
    9.1
    %Return on net sales
    
    
    -1.7
    %
    
    
    -0.2
    %
    
    
    5.4
    %
    
    
    7.2
    %
    
    
    8.1
    %Number of employees
    
    
    696
    
    
    
    698
    
    
    
    673
    
    
    
    651
    
    
    
    632Sales per employee
    
    $
    218.7
    
    
    
    209.6
    
    
    
    234.5
    
    
    
    220.7
    
    
    
    226.2Cash flow:Net cash provided by operating activities
    
    $
    1,706
    
    
    
    5,641
    
    
    
    5,985
    
    
    
    10,543
    
    
    
    15,045Ten-year compound annual growth rate:Net sales
    
    
    2.6
    %
    
    
    1.5
    %
    
    
    2.7
    %
    
    
    2.6
    %
    
    
    4.6
    %Net income
    
    
    n/m
    
    
    
    n/m
    
    
    
    n/m
    
    
    
    7.5
    %
    
    
    28.8
    %
 
 n/m   These ratios are not meaningful due to the reported net losses in 1996, 2007 and 2008. - 11 -




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ITEM 7 
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
  Introduction and Overview
  Business Overview
      Critical Accounting Policies and Estimates
  Use of estimates:
  - 12 -




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Revenue recognition:
  Inventories:
  Income taxes:
   Pension plan:
     - 13 -




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Stock compensation plans:
   Results of Operations
   2008
    
    
    2007
    
    
    2006Net sales
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Cost of goods sold
    
    
    41.1
    
    
    
    40.2
    
    
    
    38.7Gross profit
    
    
    58.9
    
    
    
    59.8
    
    
    
    61.3Selling, general and administrative expenses
    
    
    43.6
    
    
    
    44.5
    
    
    
    40.9Product development expenses
    
    
    16.7
    
    
    
    18.0
    
    
    
    15.3Severance and related charges
    
    
    0.9
    
    
    
    0.0
    
    
    
    0.0Operating (loss) income
    
    
    (2.3
    )
    
    
    (2.7
    )
    
    
    5.1Investment income
    
    
    1.0
    
    
    
    1.5
    
    
    
    1.3Interest expense
    
    
    (0.0
    )
    
    
    (0.0
    )
    
    
    (0.0
    )Impairment of long-term investments
    
    
    (1.7
    )
    
    
    (0.0
    )
    
    
    (0.0
    )(Loss) income before income taxes
    
    
    (3.0
    )
    
    
    (1.2
    )
    
    
    6.4(Benefit) provision for income taxes
    
    
    (1.3
    )
    
    
    (1.0
    )
    
    
    1.0Net (loss) income
    
    
    (1.7
    )
    
    
    (0.2
    )
    
    
    5.4
   - 14 -




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Financial Condition, Liquidity and Capital Resources
 Working Capital
  2008
    
    
    2007Current assets:Cash and cash equivalents
    
    $
    22,073
    
    
    $
    12,888Short-term investments
    
    
    5,700
    
    
    
    32,340Refundable income taxes
    
    
    230
    
    
    
    136Accounts receivable and other, net
    
    
    17,035
    
    
    
    19,510Total inventories
    
    
    19,823
    
    
    
    14,675Deferred income taxes
    
    
    5,483
    
    
    
    3,961Other current assets
    
    
    2,079
    
    
    
    2,026Total current assets
    
    
    72,423
    
    
    
    85,536Current liabilities:Short-term debt
    
    
    23
    
    
    
    799Accounts payable
    
    
    7,325
    
    
    
    8,018Accrued payroll and related expenses
    
    
    7,073
    
    
    
    4,799Other accrued expenses
    
    
    6,142
    
    
    
    4,753Income taxes payable
    
    
    1,174
    
    
    
    3,911Total current liabilities
    
    
    21,737
    
    
    
    22,280Working capital
    
    $
    50,686
    
    
    $
    63,256
  Sources and Uses of Cash
  2008
    
    
    2007Cash provided by (used in):Operating activities
    
    $
    1,706
    
    
    $
    5,641Investing activities
    
    
    16,031
    
    
    
    (525
    )Financing activities
    
    
    (8,844
    )
    
    
    (3,152
    )
 Operating activities.
  Investing activities.
 Financing activities.
 - 16 -




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Payments Due by PeriodContractual Obligations (c)
    
    Total
    
    Less than 1 year
    
    1-3 years
    
    3-5 years
    
    More than 5 yearsShort-Term Debt
    
    $
    23
    
    
    $
    23
    
    
    $
    
    
    
    $
    
    
    
    $
    Operating Lease Obligations
    
    
    6,372
    
    
    
    2,762
    
    
    
    2,655
    
    
    
    781
    
    
    
    174Payments Under Deferred Compensation 
Agreements (a)
    
    
    3,668
    
    
    
    1,143
    
    
    
    387
    
    
    
    197
    
    
    
    1,941Pension Benefit (b)
    
    
    
    (b)
    
    
    
    
    
    
    
    (b)
    
    
    
    (b)
    
    
    
    (b)Non-cancelable Purchase Commitments
    
    
    264
    
    
    
    264
    
    
    
    
    
    
    
    
    
    
    
    Total Contractual Obligations
    
    $
    10,327
    
    
    $
    4,192
    
    
    $
    3,042
    
    
    $
    978
    
    
    $
    2,115
 
 (a)
    
    Includes amounts due under deferred compensation agreements with current and former
employees and a Director. Amounts exclude additional interest and investment gains or losses
that will be earned or incurred from September 30, 2008 through the time of payment.(b)
    
    The obligation related to pension benefits is actuarially determined and is reflective of
obligations as of September 30, 2008. The Company made a 2008 pension contribution of $1,500
in fiscal 2008, and as such does not have a required contribution due in fiscal 2009. We are
not able to reasonably estimate our future required contributions beyond 2008 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.(c)
    
    The Company does not consider its net uncertain tax liabilities of $3,432 to be a contractual
obligation as this represents contingent liabilities that may or may not be realized.
Furthermore, many of these uncertain tax liabilities, if realized, would result in a decrease
to the deferred tax assets rather than a cash payment. Therefore the Company has not reflected
the uncertain tax positions in the contractual obligations table. Off-Balance Sheet Arrangements
  Recent Accounting Pronouncements
    - 17 -




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ITEM 7A  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    - 18 -




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ITEM 8  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 Report of Independent Registered Public Accounting Firm
     
 - 19 -




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Consolidated Statements of Operations
  2008
    
    2007
    
    2006Net sales
    
    $
    152,468
    
    
    $
    143,658
    
    
    $
    155,212Cost of goods sold
    
    
    62,623
    
    
    
    57,724
    
    
    
    60,037Gross profit
    
    
    89,845
    
    
    
    85,934
    
    
    
    95,175Selling, general and administrative expenses
    
    
    66,413
    
    
    
    64,008
    
    
    
    63,554Product development expenses
    
    
    25,504
    
    
    
    25,863
    
    
    
    23,671Severance and related charges
    
    
    1,377
    
    
    
    
    
    
    
    Operating (loss) income
    
    
    (3,449
    )
    
    
    (3,937
    )
    
    
    7,950Investment income
    
    
    1,603
    
    
    
    2,307
    
    
    
    1,972Interest expense
    
    
    (70
    )
    
    
    (55
    )
    
    
    (9
    )Impairment of long-term investments
    
    
    (2,620
    )
    
    
    
    
    
    
    (Loss) income before income taxes
    
    
    (4,536
    )
    
    
    (1,685
    )
    
    
    9,913(Benefit) provision for income taxes
    
    
    (1,943
    )
    
    
    (1,336
    )
    
    
    1,552Net (loss) income
    
    $
    (2,593
    )
    
    $
    (349
    )
    
    $
    8,361Basic (loss) earnings per share
    
    $
    (0.16
    )
    
    $
    (0.02
    )
    
    $
    0.51Diluted (loss) earnings per share
    
    $
    (0.16
    )
    
    $
    (0.02
    )
    
    $
    0.50
  - 20 -




---



##### Table of Contents



Consolidated Balance Sheets
  2008
    
    
    2007AssetsCurrent assets:Cash and cash equivalents
    
    $
    22,073
    
    
    $
    12,888Short-term investments
    
    
    5,700
    
    
    
    32,340Refundable income taxes
    
    
    230
    
    
    
    136Accounts receivable and other, net of allowance for doubtful accounts of
$555 and $500 as of September 30, 2008 and 2007, respectively
    
    
    17,035
    
    
    
    19,510Inventories:Raw materials
    
    
    12,325
    
    
    
    9,599Work in process
    
    
    1,261
    
    
    
    984Finished products
    
    
    6,237
    
    
    
    4,092Total inventories
    
    
    19,823
    
    
    
    14,675Deferred income taxes
    
    
    5,483
    
    
    
    3,961Prepaid expenses
    
    
    2,079
    
    
    
    2,026Total current assets
    
    
    72,423
    
    
    
    85,536Property, plant and equipment, at cost:Land
    
    
    1,325
    
    
    
    1,325Buildings and leasehold improvements
    
    
    17,240
    
    
    
    17,262Manufacturing, laboratory and office equipment
    
    
    35,761
    
    
    
    33,36854,326
    
    
    
    51,955Less-Accumulated depreciation and amortization
    
    
    41,174
    
    
    
    38,256Total property, plant and equipment, net
    
    
    13,152
    
    
    
    13,699Deferred income taxes
    
    
    26,097
    
    
    
    23,823Intangible assets
    
    
    1,190
    
    
    
    1,400Other assets
    
    
    25,116
    
    
    
    21,948Total assets
    
    $
    137,978
    
    
    $
    146,406Liabilities and Shareholders EquityCurrent liabilities:Short-term debt
    
    $
    23
    
    
    $
    799Accounts payable
    
    
    7,325
    
    
    
    8,018Accrued payroll and related expenses
    
    
    7,073
    
    
    
    4,799Other accrued expenses
    
    
    6,142
    
    
    
    4,753Income taxes payable
    
    
    1,174
    
    
    
    3,911Total current liabilities
    
    
    21,737
    
    
    
    22,280Long-term deferred compensation
    
    
    2,561
    
    
    
    3,924Deferred income taxes
    
    
    65
    
    
    
    74Long-term income taxes payable
    
    
    2,919
    
    
    
    Other long-term liabilities
    
    
    7,394
    
    
    
    7,104Commitments and contingencies (See Note K)Shareholders equity:Common Shares, stated value $.0125:Authorized - 80,000,000; issued and outstanding  14,722,585 and
14,580,978 in 2008 and 2007
    
    
    184
    
    
    
    182Class B Common Shares, stated value $.0125:Authorized - 9,000,000; issued and outstanding  2,150,502 in 2008 and
2007
    
    
    27
    
    
    
    27Capital in excess of stated value
    
    
    38,930
    
    
    
    36,436Retained earnings
    
    
    80,759
    
    
    
    85,676Accumulated other comprehensive loss
    
    
    (1,873
    )
    
    
    (946
    )Common Shares held in treasury, at cost
    
    
    (14,725
    )
    
    
    (8,351
    )Total shareholders equity
    
    
    103,302
    
    
    
    113,024Total liabilities and shareholders equity
    
    $
    137,978
    
    
    $
    146,406
  - 21 -




---



##### 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
    
    income
    
    treasury
    
    equityBalance September 30, 2005
    
    $
    179
    
    
    $
    27
    
    
    $
    30,155
    
    
    $
    82,425
    
    
    $
    397
    
    
    $
    (1,207
    )
    
    $
    111,976Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,361Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    182Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9Net unrealized loss on derivative securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15
    )Net unrealized investment gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,579Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    2,240
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,240Cash dividends:Common Shares ($.15 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,135
    )
    
    
    
    
    
    
    
    
    
    
    (2,135
    )Class B Common Shares ($.12 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (258
    )
    
    
    
    
    
    
    
    
    
    
    (258
    )Shares issued under stock plans, net of taxes
    
    
    1
    
    
    
    
    
    
    
    1,127
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,128Common Shares acquired for
settlement of deferred Directors fees
    
    
    
    
    
    
    
    
    
    
    222
    
    
    
    
    
    
    
    
    
    
    
    (222
    )
    
    
    Common Shares reissued in settlement
of Directors fees
    
    
    
    
    
    
    
    
    
    
    (41
    )
    
    
    
    
    
    
    
    
    
    
    41
    
    
    
    Repurchase of Common Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,027
    )
    
    
    (5,027
    )Balance September 30, 2006
    
    
    180
    
    
    
    27
    
    
    
    33,703
    
    
    
    88,393
    
    
    
    615
    
    
    
    (6,415
    )
    
    
    116,503Comprehensive Income:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (349
    )Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    459Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )Net unrealized loss on derivative securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (126
    )Net unrealized investment gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65Adjustment to initially apply SFAS No. 158,
net of taxes of $1,081
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,975
    )
    
    
    
    
    
    
    (1,975
    )Stock-based compensation
    
    
    1
    
    
    
    
    
    
    
    1,508
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,509Cash dividends:Common Shares ($.15 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,110
    )
    
    
    
    
    
    
    
    
    
    
    (2,110
    )Class B Common Shares ($.12 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (258
    )
    
    
    
    
    
    
    
    
    
    
    (258
    )Shares issued under stock plans, net of taxes
    
    
    1
    
    
    
    
    
    
    
    1,011
    
    
    
    
    
    
    
    
    
    
    
    (172
    )
    
    
    840Common Shares acquired for
settlement of deferred Directors fees
    
    
    
    
    
    
    
    
    
    
    255
    
    
    
    
    
    
    
    
    
    
    
    (255
    )
    
    
    Common Shares reissued in settlement
of Directors fees
    
    
    
    
    
    
    
    
    
    
    (41
    )
    
    
    
    
    
    
    
    
    
    
    41
    
    
    
    Repurchase of Common Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,550
    )
    
    
    (1,550
    )Balance 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
    )
    
    $
    103,302
  - 22 -




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##### Table of Contents



Consolidated Statements of Cash Flows
  2008
    
    2007
    
    2006Cash flows from operating activities:Net (loss) income
    
    $
    (2,593
    )
    
    $
    (349
    )
    
    $
    8,361Adjustments to reconcile net income to
net cash provided by operating activities:Depreciation
    
    
    4,157
    
    
    
    4,380
    
    
    
    4,194Amortization
    
    
    210
    
    
    
    
    
    
    
    Deferred income taxes
    
    
    (3,174
    )
    
    
    (4,517
    )
    
    
    1,041Deferred compensation
    
    
    (76
    )
    
    
    519
    
    
    
    208Stock-based compensation
    
    
    1,832
    
    
    
    1,509
    
    
    
    2,240Loss on the disposition/impairment of assets
    
    
    2,775
    
    
    
    181
    
    
    
    256Change in current assets and liabilities:Refundable income taxes
    
    
    516
    
    
    
    449
    
    
    
    (195
    )Accounts receivable and other
    
    
    2,330
    
    
    
    8,031
    
    
    
    (7,458
    )Inventories
    
    
    (5,210
    )
    
    
    107
    
    
    
    (1,459
    )Prepaid expenses
    
    
    (90
    )
    
    
    91
    
    
    
    31Other current liabilities
    
    
    1,208
    
    
    
    (2,155
    )
    
    
    (510
    )Other operating activities
    
    
    (179
    )
    
    
    (2,605
    )
    
    
    (724
    )Net cash provided by operating activities
    
    
    1,706
    
    
    
    5,641
    
    
    
    5,985Cash flows from investing activities:Capital expenditures
    
    
    (3,831
    )
    
    
    (4,511
    )
    
    
    (4,910
    )Purchase of investments and other
    
    
    (13,225
    )
    
    
    (32,927
    )
    
    
    (35,665
    )Proceeds from maturities and sales of investments
    
    
    33,087
    
    
    
    36,913
    
    
    
    36,393Net cash provided by (used in) investing activities
    
    
    16,031
    
    
    
    (525
    )
    
    
    (4,182
    )Cash flows from financing activities:Net (repayment) borrowing of short-term debt
    
    
    (861
    )
    
    
    (79
    )
    
    
    865Proceeds from employee stock purchase and option plans
    
    
    347
    
    
    
    487
    
    
    
    428Tax benefit of stock purchase and stock-based
compensation arrangements
    
    
    140
    
    
    
    358
    
    
    
    266Repurchase of Common Shares
    
    
    (6,163
    )
    
    
    (1,550
    )
    
    
    (5,027
    )Cash dividends
    
    
    (2,307
    )
    
    
    (2,368
    )
    
    
    (2,393
    )Net cash used in financing activities
    
    
    (8,844
    )
    
    
    (3,152
    )
    
    
    (5,861
    )Effect of changes in foreign currency exchange
rates on cash and cash equivalents
    
    
    292
    
    
    
    423
    
    
    
    162Increase (decrease) in cash and cash equivalents
    
    
    9,185
    
    
    
    2,387
    
    
    
    (3,896
    )Cash and cash equivalents at beginning of period
    
    
    12,888
    
    
    
    10,501
    
    
    
    14,397Cash and cash equivalents at end of period
    
    $
    22,073
    
    
    $
    12,888
    
    
    $
    10,501Supplemental disclosures of cash flow informationCash paid during the year for:Income taxes
    
    $
    1,945
    
    
    $
    1,565
    
    
    $
    2,003Interest
    
    
    59
    
    
    
    50
    
    
    
    51
  - 23 -




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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
  Product development expenses
  Cash and cash equivalents
  Accounts receivable and allowance for doubtful accounts
  2008
    
    2007
    
    2006Balance at beginning of year
    
    $
    500
    
    
    $
    448
    
    
    $
    451Additions
    
    
    63
    
    
    
    48
    
    
    
    86Write-offs, net of recoveries
    
    
    (6
    )
    
    
    (11
    )
    
    
    (94
    )Foreign exchange revaluation
    
    
    (2
    )
    
    
    15
    
    
    
    5Balance at end of year
    
    $
    555
    
    
    $
    500
    
    
    $
    448
 - 24 -




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##### Table of Contents



Inventories
  Property, plant and equipment
  Capitalized software
  Impairment of long-lived assets
  Capital stock
   Class B
    
    Common SharesCommon Shares
    
    Common Shares
    
    held in treasuryBalance September 30, 2005
    
    
    14,300,676
    
    
    
    2,150,502
    
    
    
    (137,418
    )Common Shares acquired for
settlement of deferred
Directors fees
    
    
    
    
    
    
    
    
    
    
    (17,563
    )Common Shares reissued in
settlement of directors fees
    
    
    
    
    
    
    
    
    
    
    8,856Shares issued under stock plans
    
    
    109,569
    
    
    
    
    
    
    
    Repurchase of Common Shares
    
    
    
    
    
    
    
    
    
    
    (405,500
    )Balance at September 30, 2006
    
    
    14,410,245
    
    
    
    2,150,502
    
    
    
    (551,625
    )Common Shares acquired for
settlement of deferred
Directors fees
    
    
    
    
    
    
    
    
    
    
    (21,542
    )Common Shares reissued in
settlement of directors fees
    
    
    
    
    
    
    
    
    
    
    1,934Shares issued under stock plans
    
    
    170,733
    
    
    
    
    
    
    
    Repurchase of Common Shares
    
    
    
    
    
    
    
    
    
    
    (168,815
    )Balance 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
    )
 - 25 -




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##### Table of Contents



Accumulated other comprehensive income
  2008
    
    
    2007Translation adjustment
    
    $
    1,247
    
    
    $
    1,162Net unrealized gain (loss) on derivative securities
    
    
    46
    
    
    
    (86
    )Net unrealized investment loss
    
    
    (442
    )
    
    
    (18
    )Benefit plan obligation
    
    
    (2,724
    )
    
    
    (2,004
    )Accumulated other comprehensive loss
    
    $
    (1,873
    )
    
    $
    (946
    )
 Income taxes
  Use of estimates
  Earnings per share
  2008
    
    
    2007
    
    
    2006Net (loss) income in thousands
    
    $
    (2,593
    )
    
    $
    (349
    )
    
    $
    8,361Weighted average shares outstanding
    
    
    15,853,938
    
    
    
    16,206,698
    
    
    
    16,395,407Assumed
exercise of stock options, weighted average of incremental
shares
    
    
    
    
    
    
    
    
    
    
    170,495Assumed
purchase of stock under stock purchase plan, weighted
average
    
    
    
    
    
    
    
    
    
    
    1,262Diluted
shares  adjusted weighted-average shares and
assumed conversions
    
    
    15,853,938
    
    
    
    16,206,698
    
    
    
    16,567,164Basic (loss) earnings per share
    
    $
    (0.16
    )
    
    $
    (0.02
    )
    
    $
    0.51Diluted (loss) earnings per share
    
    $
    (0.16
    )
    
    $
    (0.02
    )
    
    $
    0.50
  Stock-based compensation
  - 26 -




---



##### Table of Contents



Derivatives and Hedging Activities
    Reclassifications
  Recent accounting pronouncements
      - 27 -




---



##### Table of Contents



Note B  Guarantors Disclosure Requirements
 Guarantee of original lease:
  Product warranties:
   2008
    
    
    2007Beginning balance
    
    $
    722
    
    
    $
    992Accruals for warranties issued during the period
    
    
    1,345
    
    
    
    1,125Accruals related to pre-existing warranties
(including changes in estimates and expiring warranties)
    
    
    (178
    )
    
    
    (68
    )Settlements made (in cash or in kind) during the period
    
    
    (1,188
    )
    
    
    (1,327
    )Ending balance
    
    $
    701
    
    
    $
    722
 Note C  Repurchase of Common Shares
    2008
    
    2007Total number of shares purchased
    
    
    636,600
    
    
    
    168,815Average price paid per share (including commissions)
    
    $
    9.68
    
    
    $
    10.20Identity of broker-dealer used to effect the purchases
    
    National Financial
    
    National FinancialSecurities LLC
    
    Securities LLCNumber of
shares purchased as part of a publicly announced repurchase program
    
    
    636,600
    
    
    
    151,000Maximum number of shares that remain to be purchased under the program
    
    
    1,212,400
    
    
    
    1,849,000
  - 28 -




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##### Table of Contents



Note D  Investments and Notes Receivable
  Adjusted cost
    
    
    Unrealized gains
    
    
    Unrealized losses
    
    
    Market valueShort Term:Corporate notes and bonds
    
    $
    4,700
    
    
    $
    
    
    
    $
    
    
    
    $
    4,700Auction rate securities
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    1,000Long-term:Auction rate securities
    
    
    6,800
    
    
    
    
    
    
    
    (680
    )
    
    
    6,120Total available-for-sale investments
    
    $
    12,500
    
    
    $
    
    
    
    $
    (680
    )
    
    $
    11,820
   Adjusted cost
    
    
    Unrealized gains
    
    
    Unrealized losses
    
    
    Market valueShort Term:U.S. government and agency securities
    
    $
    7,270
    
    
    $
    
    
    
    $
    (27
    )
    
    $
    7,243Corporate notes and bonds
    
    
    3,172
    
    
    
    
    
    
    
    
    
    
    
    3,172Auction rate securities
    
    
    21,925
    
    
    
    
    
    
    
    
    
    
    
    21,925Total short-term investments
    
    $
    32,367
    
    
    $
    
    
    
    $
    (27
    )
    
    $
    32,340
  2008
    
    
    2007Less than 1 year
    
    $
    
    
    
    $
    13,7431 year to 5 years
    
    
    
    
    
    
    5 to 10 years
    
    
    
    
    
    
    67210 to 15 years
    
    
    
    
    
    
    Greater than 15 years
    
    
    11,820
    
    
    
    17,925Total available-for-sale investments
    
    $
    11,820
    
    
    $
    32,340
    2008
    
    
    2007Non-marketable equity securities
    
    $
    150
    
    
    $
    1,250Venture capital fund
    
    
    53
    
    
    
    74Notes receivable, net of reserve of $1,500 and $0
at September 30, 2008 and 2007, respectively
    
    
    1,797
    
    
    
    3,073$
    2,000
    
    
    $
    4,397
 - 29 -




---



##### Table of Contents



Note E  Financing Arrangements
   Note F  Foreign Currency
    Note G  Employee Benefit Plans
  Adoption
of SFAS No. 158
   - 30 -




---



##### Table of Contents



United
States Plan
    
    German Plan2008
    
    
    2007
    
    
    2008
    
    
    2007Change in projected benefit obligations:Benefit obligation at beginning of year
    
    $
    37,567
    
    
    $
    33,800
    
    
    $
    7,306
    
    
    $
    7,135Service cost
    
    
    1,677
    
    
    
    1,420
    
    
    
    231
    
    
    
    250Interest cost
    
    
    2,356
    
    
    
    2,203
    
    
    
    417
    
    
    
    344Actuarial (gain) loss
    
    
    (3,804
    )
    
    
    1,271
    
    
    
    (263
    )
    
    
    (1,092
    )Benefits paid
    
    
    (1,202
    )
    
    
    (1,127
    )
    
    
    (203
    )
    
    
    (193
    )Foreign currency exchange rate changes
    
    
    
    
    
    
    
    
    
    
    (104
    )
    
    
    862Benefit obligation at year end
    
    $
    36,594
    
    
    $
    37,567
    
    
    $
    7,384
    
    
    $
    7,306Accumulated benefit obligation at year end
    
    $
    33,128
    
    
    $
    33,571
    
    
    $
    6,802
    
    
    $
    6,770Change in plan assets:Fair value of plan assets at beginning of year
    
    $
    45,177
    
    
    $
    37,883
    
    
    $
    1,439
    
    
    $
    1,219Actual return on pension assets
    
    
    (1,926
    )
    
    
    5,921
    
    
    
    42
    
    
    
    26Employer contributions
    
    
    2,500
    
    
    
    2,500
    
    
    
    19
    
    
    
    24Participants contributions
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    48Benefits paid
    
    
    (1,202
    )
    
    
    (1,127
    )
    
    
    (34
    )
    
    
    (32
    )Foreign currency exchange rate changes
    
    
    
    
    
    
    
    
    
    
    (23
    )
    
    
    154Fair value of plan assets at end of year
    
    
    44,549
    
    
    
    45,177
    
    
    
    1,493
    
    
    
    1,439Funded status  over (under) funded
    
    
    7,955
    
    
    
    7,610
    
    
    
    (5,891
    )
    
    
    (5,867
    )Contributions after measurement date
    
    
    
    
    
    
    1,000
    
    
    
    
    
    
    
    Prepaid pension assets (pension liability)
recognized
    
    $
    7,955
    
    
    $
    8,610
    
    
    $
    (5,891
    )
    
    $
    (5,867
    )
    2008
    
    
    2007United States Plan
    
    $
    (3,194
    )
    
    $
    (2,289
    )German Plan
    
    
    314
    
    
    
    121Other
    
    
    179
    
    
    
    193Total
    
    $
    (2,701
    )
    
    $
    (1,975
    )
   United States Plan
    
    German Plan2008
    
    
    2007
    
    
    2008
    
    
    2007Service cost-benefits earned during the year
    
    $
    1,677
    
    
    $
    1,420
    
    
    $
    231
    
    
    $
    250Interest cost on projected benefit obligation
    
    
    2,356
    
    
    
    2,203
    
    
    
    417
    
    
    
    344Expected return on plan assets
    
    
    (3,533
    )
    
    
    (3,129
    )
    
    
    (77
    )
    
    
    (67
    )Amortization of transition asset
    
    
    
    
    
    
    
    
    
    
    23
    
    
    
    23Amortization of prior service cost
    
    
    179
    
    
    
    179
    
    
    
    6
    
    
    
    5Amortization of net loss
    
    
    83
    
    
    
    65
    
    
    
    
    
    
    
    3Net periodic pension cost
    
    $
    762
    
    
    $
    738
    
    
    $
    600
    
    
    $
    558
 - 31 -




---



##### Table of Contents



June 30,2008
    
    2007Equity securities
    
    
    64
    %
    
    
    65
    %Fixed income
    
    
    14
    
    
    
    11Market neutral hedge fund
    
    
    18
    
    
    
    17Cash equivalent (money market fund)
    
    
    2
    
    
    
    5Real estate
    
    
    2
    
    
    
    2100
    %
    
    
    100
    %
    2008
    
    
    2007United States Pension Plan:Discount rate
    
    
    7.0
    %
    
    
    6.375
    %Rate of increase in compensation levels
    
    
    4.0
    %
    
    
    4.0
    %German Pension Plan:Discount rate
    
    
    6.25
    %
    
    
    5.5
    %Rate of increase in compensation levels
    
    
    2.5
    %
    
    
    2.5
    %
  2008
    

    
    2007
    

    
    2006United States Pension Plan:Discount rate
    
    
    6.375
    %
    
    
    6.625
    %
    
    
    5.375
    %Expected long-term rate of return on plan assets
    
    
    8.25
    %
    
    
    8.25
    %
    
    
    8.25
    %Rate of increase in compensation levels
    
    
    4.0
    %
    
    
    4.0
    %
    
    
    3.5
    %German Pension Plan:Discount rate
    
    
    5.5
    %
    
    
    4.5
    %
    
    
    4.25
    %Expected long-term rate of return on plan assets
    
    
    5.0
    %
    
    
    5.0
    %
    
    
    5.0
    %Rate of increase in compensation levels
    
    
    2.5
    %
    
    
    3.0
    %
    
    
    3.0
    %
   United States Plan
    
    German Plan2009
    
    $
    1,312
    
    
    $
    2332010
    
    $
    1,354
    
    
    $
    2912011
    
    $
    1,451
    
    
    $
    3152012
    
    $
    1,649
    
    
    $
    3422013
    
    $
    1,785
    
    
    $
    3642014  2018
    
    $
    11,552
    
    
    $
    2,417
  - 32 -




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##### Table of Contents



Note H  Stock Plans
   2008
    
    2007
    
    2006Cost of goods sold
    
    $
    152
    
    
    $
    91
    
    
    $
    104Selling, general and administrative expenses
    
    
    1,412
    
    
    
    1,211
    
    
    
    1,868Product development expenses
    
    
    268
    
    
    
    207
    
    
    
    268Stock-based compensation included in operating expenses
    
    
    1,832
    
    
    
    1,509
    
    
    
    2,240Estimated tax impact of stock-based compensation
    
    
    598
    
    
    
    497
    
    
    
    745Stock-based compensation expense, net of tax
    
    $
    1,234
    
    
    $
    1,012
    
    
    
    1,495Stock-based compensation expense per share, net of tax
    
    $
    0.08
    
    
    $
    0.06
    
    
    $
    0.09
  Stock Option Activity
  Weighted
    
    Weighted AverageNumber
    
    Average
    
    Remaining
    
    Aggregateof Shares
    
    Exercise Price
    
    Contractual Life (Years)
    
    Intrinsic ValueOutstanding at September 30, 2005
    
    
    3,342,346
    
    
    $
    20.03Options granted at fair market value
    
    
    165,651
    
    
    
    15.05Options exercised
    
    
    (59,366
    )
    
    
    5.46
    
    
    
    
    
    
    $
    540Options forfeited
    
    
    (1,500
    )
    
    
    13.76Options expired
    
    
    (124,150
    )
    
    
    17.85Outstanding at September 30, 2006
    
    
    3,322,981
    
    
    
    20.12Options granted at fair market value
    
    
    106,025
    
    
    
    13.91Options exercised
    
    
    (122,376
    )
    
    
    4.70
    
    
    
    
    
    
    $
    1,045Options forfeited
    
    
    
    
    
    
    Options expired
    
    
    (65,050
    )
    
    
    29.70Outstanding at September 30, 2007
    
    
    3,241,580
    
    
    
    20.31Options 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
    
    
    $
    276Vested and expected to vest
at September 30, 2008
    
    
    2,724,069
    
    
    $
    20.78
    
    
    
    4.00
    
    
    $
    276Exercisable at September 30, 2008
    
    
    2,724,069
    
    
    $
    20.78
    
    
    
    4.00
    
    
    $
    276
 - 33 -




---



##### Table of Contents



Outstanding
    
    
    
    
    
    ExercisableWeighted AverageNumber
    
    Remaining
    
    Weighted
    
    Number
    
    WeightedRange of
    
    of Shares
    
    Contractual
    
    Average
    
    of Shares
    
    AverageExercise Prices
    
    Outstanding
    
    Life (years)
    
    Exercise Price
    
    Exercisable
    
    Exercise Price$ 3.78
 $9.12
    
    
    201,755
    
    
    
    6.45
    
    
    $
    7.52
    
    
    
    64,130
    
    
    $
    4.07$10.35  $16.12
    
    
    1,242,426
    
    
    
    4.96
    
    
    $
    14.73
    
    
    
    1,076,989
    
    
    $
    14.78$16.23  $32.28
    
    
    1,155,250
    
    
    
    4.45
    
    
    $
    18.75
    
    
    
    1,155,250
    
    
    $
    18.75$36.85  $65.63
    
    
    426,200
    
    
    
    1.93
    
    
    $
    48.84
    
    
    
    426,200
    
    
    $
    43.84$66.75
    
    
    1,500
    
    
    
    1.96
    
    
    $
    66.75
    
    
    
    1,500
    
    
    $
    66.753,027,131
    
    
    
    4.43
    
    
    $
    19.90
    
    
    
    2,724,069
    
    
    $
    20.78
   2008
    
    
    2007
    
    
    2006Expected life (years)
    
    
    4.75
    
    
    
    4.75
    
    
    
    4.5Risk-free interest rate
    
    
    3.84
    %
    
    
    4.785
    %
    
    
    4.3
    %Volatility
    
    
    38
    %
    
    
    42
    %
    
    
    45
    %Dividend yield
    
    
    1.6
    %
    
    
    1.1
    %
    
    
    1.0
    %
  Performance Award Units
  - 34 -




---



##### Table of Contents



Weighted AverageGrant DateNumber of Units
    
    Fair ValueOutstanding at September 30, 2005
    
    
    
    
    
    
    Awards granted
    
    
    164,025
    
    
    $
    15.05Awards forfeited
    
    
    (2,400
    )
    
    
    15.05Outstanding at September 30, 2006
    
    
    161,625
    
    
    
    15.05Awards granted
    
    
    142,800
    
    
    
    13.95Awards forfeited
    
    
    (4,375
    )
    
    
    14.62Adjustment of 2006 awards
    
    
    (79,525
    )
    
    
    15.05Outstanding 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
    
    
    $
    11.55
 
 (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 issued. These awards were issued on November 6,
2008 when the Companys previous closing stock price was $3.62 per share. Restricted Award Units
   Weighted AverageGrant DateNumber of Units
    
    Fair ValueOutstanding at September 30, 2005
    
    
    
    
    
    
    Awards granted Awards granted
    
    
    16,775
    
    
    $
    14.91Awards forfeited
    
    
    (850
    )
    
    
    15.05Outstanding at September 30, 2006
    
    
    15,925
    
    
    
    14.90Awards granted
    
    
    25,250
    
    
    
    13.59Awards vested
    
    
    (650
    )
    
    
    15.05Awards forfeited
    
    
    (2,425
    )
    
    
    14.57Outstanding 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
    
    
    $
    12.25
  Directors Equity Plans
  - 35 -




---



##### Table of Contents



Employee Stock Purchase Plan
  Note I  Income Taxes
  2008
    
    
    2007
    
    
    2006United States
    
    $
    (8,204
    )
    
    $
    (6,216
    )
    
    $
    8,705Non - U.S.
    
    
    3,668
    
    
    
    4,531
    
    
    
    1,208$
    ( 4,536
    )
    
    $
    (1,685
    )
    
    $
    9,913
  2008
    
    
    2007
    
    
    2006Current:Federal
    
    $
    160
    
    
    $
    633
    
    
    $
    (109
    )Non - U.S.
    
    
    985
    
    
    
    2,503
    
    
    
    617State and local
    
    
    86
    
    
    
    45
    
    
    
    3Total current
    
    
    1,231
    
    
    
    3,181
    
    
    
    511Deferred:Federal, state & local
    
    
    (3,208
    )
    
    
    (4,034
    )
    
    
    962Non - U.S.
    
    
    34
    
    
    
    (483
    )
    
    
    79Total deferred
    
    
    (3,174
    )
    
    
    (4,517
    )
    
    
    1,041Total (benefit) provision
    
    $
    (1,943
    )
    
    $
    (1,336
    )
    
    $
    1,552
  2008
    
    
    2007
    
    
    2006Federal (benefit) income tax at statutory rate
    
    $
    (1,542
    )
    
    $
    (573
    )
    
    $
    3,370State and local income taxes
    
    
    (199
    )
    
    
    29
    
    
    
    612Extraterritorial Income Exclusion
    
    
    
    
    
    
    (306
    )
    
    
    (547
    )Research Tax Credit
    
    
    (243
    )
    
    
    (880
    )
    
    
    (201
    )Tax on non-U.S. income
    
    
    900
    
    
    
    3,265
    
    
    
    265Foreign tax credit carryforwards
    
    
    (545
    )
    
    
    (2,242
    )
    
    
    (400
    )Valuation allowance
    
    
    0
    
    
    
    15
    
    
    
    (1,281
    )Adjustment for prior years taxes
    
    
    (316
    )
    
    
    (752
    )
    
    
    (315
    )Other
    
    
    2
    
    
    
    108
    
    
    
    49Effective (benefit) provision for income taxes
    
    $
    (1,943
    )
    
    $
    (1,336
    )
    
    $
    1,552Effective(benefit) income tax rate
    
    
    (42.8
    )%
    
    
    (79.3
    )%
    
    
    15.7
    %
   - 36 -




---



##### Table of Contents



Deferred tax assets:
    
    2008
    
    
    2007Stock options
    
    $
    1,161
    
    
    $
    1,253Capitalized research and development
    
    
    14,463
    
    
    
    12,470Inventory
    
    
    1,919
    
    
    
    1,516Deferred compensation
    
    
    1,444
    
    
    
    1,467Tax credit carryforward
    
    
    8,387
    
    
    
    9,503Depreciation
    
    
    1,418
    
    
    
    1,201Warranty
    
    
    205
    
    
    
    213Medical
    
    
    134
    
    
    
    122State and local taxes
    
    
    1,208
    
    
    
    976Foreign net operating losses
    
    
    873
    
    
    
    933Impaired assets
    
    
    1,148
    
    
    
    Other
    
    
    2,928
    
    
    
    1,987Total deferred tax assets
    
    
    35,288
    
    
    
    31,641Deferred tax liabilities:Pension
    
    
    2,641
    
    
    
    2,709Other
    
    
    74
    
    
    
    42Total deferred tax liabilities
    
    
    2,715
    
    
    
    2,751Valuation allowance
    
    
    (1,058
    )
    
    
    (1,180
    )Net deferred tax assets
    
    $
    31,515
    
    
    $
    27,710
    2008
    
    
    2007
    
    
    2006Balance at beginning of year
    
    $
    1,180
    
    
    $
    1,141
    
    
    $
    3,000Charged to costs and expenses
    
    
    415
    
    
    
    213
    
    
    
    561Charged to other accounts
    
    
    (74
    )
    
    
    
    
    
    
    Deductions
    
    
    (463
    )
    
    
    (174
    )
    
    
    (2,420
    )Balance at end of year
    
    $
    1,058
    
    
    $
    1,180
    
    
    $
    1,141
   Year Expiration CommencesAlternative minimum tax credit
    
    $
    1,896
    
    
    indefiniteForeign tax credit
    
    
    1,959
    
    
    
    2012-2017R&D credit
    
    
    4,529
    
    
    
    2009-2023Foreign net operating losses
    
    
    873
    
    
    2010-indefinite
   - 37 -




---



##### Table of Contents



Balance at October 1, 2007
    
    $
    6,440Tax positions related to the current year:Additions
    
    
    679Tax positions related to prior years:Additions
    
    
    2,055Subtractions
    
    
    (2,319
    )Settlements with tax authorities
    
    
    (474
    )Lapses in statutes of limitation
    
    
    (992
    )Balance at September 30, 2008
    
    $
    5,389
  Note J  Severance Charges
   Beginning Balance
    
    $
    Expense recognized
    
    
    1,377Payments made
    
    
    (116
    )Foreign currency translation effect
    
    
    (9
    )Ending Balance
    
    $
    1,252
 Note K  Commitments and Contingencies
  2009
    
    $
    2,7622010
    
    
    1,4972011
    
    
    1,1582012
    
    
    4982013
    
    
    283After 2013
    
    
    174Total minimum operating lease payments
    
    $
    6,372
  - 38 -




---



##### Table of Contents




    
    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.
      Note L  Segment and Geographic Information
  2008
    
    
    2007
    
    
    2006Net sales:United States
    
    $
    37,115
    
    
    $
    37,275
    
    
    $
    46,489Other Americas
    
    
    3,174
    
    
    
    2,785
    
    
    
    4,982Germany
    
    
    20,815
    
    
    
    18,238
    
    
    
    19,791Other Europe
    
    
    31,177
    
    
    
    29,416
    
    
    
    30,387Japan
    
    
    16,574
    
    
    
    16,688
    
    
    
    16,691Other Asia
    
    
    43,613
    
    
    
    39,256
    
    
    
    36,872$
    152,468
    
    
    $
    143,658
    
    
    $
    155,212Long-lived assets:United States
    
    $
    31,688
    
    
    $
    29,557
    
    
    $
    30,246Germany
    
    
    6,700
    
    
    
    6,369
    
    
    
    5,406Other
    
    
    1,070
    
    
    
    1,121
    
    
    
    921$
    39,458
    
    
    $
    37,047
    
    
    $
    36,573
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##### Table of Contents



Unaudited Quarterly Results of Operations
  First
    
    Second
    
    Third
    
    FourthFiscal 2008Net sales
    
    $
    38,438
    
    
    $
    39,938
    
    
    $
    40,955
    
    
    $
    33,137Gross profit
    
    
    22,704
    
    
    
    24,275
    
    
    
    23,764
    
    
    
    19,102Income (loss) before income taxes
    
    
    988
    
    
    
    1,397
    
    
    
    (125
    )
    
    
    (6,796
    )Net income (loss)
    
    
    889
    
    
    
    1,185
    
    
    
    (39
    )
    
    
    (4,628
    )Diluted earnings (loss) per share
    
    
    .05
    
    
    
    .07
    
    
    
    (.00
    )
    
    
    (.29
    )Fiscal 2007Net sales
    
    $
    41,026
    
    
    $
    32,930
    
    
    $
    33,446
    
    
    $
    36,256Gross profit
    
    
    24,914
    
    
    
    19,640
    
    
    
    19,387
    
    
    
    21,993Income (loss) before income taxes
    
    
    3,085
    
    
    
    (2,639
    )
    
    
    (2,446
    )
    
    
    315Net income (loss)
    
    
    3,075
    
    
    
    (2,073
    )
    
    
    (459
    )
    
    
    (892
    )Diluted earnings (loss) per share
    
    
    .19
    
    
    
    (.13
    )
    
    
    (.03
    )
    
    
    (.05
    )
 
 ITEM 9  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A  CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  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
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##### Table of Contents



PART III
 
 ITEM 10  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
   
 ITEM 11  EXECUTIVE COMPENSATION
  
 ITEM 12  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
   
 ITEM 13  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  
 ITEM 14  PRINCIPAL ACCOUNTANT FEES AND SERVICES
  - 41 -




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##### Table of Contents



PART IV
 
 ITEM 15  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a)(1) Financial Statements
 (a)(2) Financial Statement Schedules
   (a)(3) Index to Exhibits
 ExhibitNumber
    
    Description3.1
    
    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
    
    Amended Articles of Incorporation, as amended on February
17, 2001. (Reference is made to Exhibit 3(c) 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.)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*
    
    Keithley Instruments, Inc. Supplemental Deferral Plan as
amended. (Reference is made to Exhibit 10(b) 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.)10.2*
    
    Employment Agreement with Mark J. Plush dated April 7,
1994. (Reference is made to Exhibit 10(k) of the Companys
Annual Report on Form 10-K for the year ended September 30,
1998 (File No. 1-9965), which Exhibit is incorporated
herein by reference.)10.3*
    
    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.)10.4*
    
    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.)10.5*
    
    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.)10.6
    
    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 quarter ended March 31, 2001 (File No. 1-9965)
which Exhibit is incorporated herein by reference.)10.7
    
    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.)10.8
    
    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 quarter ended March
31, 2003 (File No. 1-9965), which Exhibit is incorporated
herein by reference.)10.9
    
    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 quarter ended March
31, 2004 (File No. 1-9965), which Exhibit is incorporated
herein by reference.)10.10
    
    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.)10.11
    
    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.)10.12*
    
    1996 Outside Directors Deferred Stock Plan. (Reference is
made to Exhibit 10(x) of the Companys Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1996 (File
No. 1-9965), which Exhibit is incorporated herein by
reference.)10.13*
    
    1997 Directors Stock Option Plan, adopted in February
1997. (Reference is made to Exhibit 10(z) of the Companys
Annual Report on Form 10-K for the fiscal year ended
September 30, 1997 (File No. 1-9965), which Exhibit is
incorporated herein by reference.)10.14*
    
    Form of Indemnification Agreement entered into by the
Company and each of Brian R. Bachman, James T. Bartlett,
James B. Griswold, Leon J. Hendrix, Jr., William Hudson,
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.)10.15*
    
    Form of Indemnification Agreement entered into by the
Company and each of Philip R. Etsler, 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.)10.16*
    
    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.)
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##### Table of Contents



ExhibitNumber
    
    Description10.17*
    
    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.)10.18*
    
    Keithley Instruments, Inc. 2005 Employee Stock Purchase and Dividend Reinvestment Plan.
(Reference is made to Appendix B of the Companys Definitive Proxy Statement dated
December 29, 2005 (File No. 1-9965), which is incorporated herein by reference.)10.19*
    
    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.)10.20*
    
    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 10.2 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.)10.21*
    
    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.)10.22*
    
    Keithley Instruments, Inc. 2002 Stock Incentive Plan (as amended December 28, 2006).
(Reference is made to Exhibit 10v of the Companys Annual Report on Form 10-K for the year
ended September 30, 2006 (File No. 1-9965), which Exhibit is incorporated herein by
reference.)10.23*
    
    Keithley Instruments, Inc. Annual Incentive Compensation Plan. (Reference is made to
Exhibit 10.1 of the Companys Current Report on Form 8-K dated October 1, 2007 (File No.
1-9965), which Exhibit is incorporated herein by reference.)10.24*
    
    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.)10.25*
    
    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.)10.26*
    
    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.)10.27*
    
    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.)10.28*
    
    Keithley Instruments, Inc. Deferred Compensation Plan, including Amendment No. 1.
(Reference is made to Exhibit 10(dd) 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*
    
    Fourth Amendment to Keithley Instruments, Inc. Supplemental Deferral Plan as amended.
(Reference is made to Exhibit 10(ee) 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.)10.30*
    
    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.)14.1
    
    Code of Ethics. (Reference is made to Exhibit 14 of the Companys Annual Report on Form
10-K for the year ended September 30, 2005 (File No. 1-9965), which Exhibit is
incorporated herein by reference.)21.1
    
    Subsidiaries of the Company.23.1
    
    Consent of PricewaterhouseCoopers LLP.31.1
    
    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
  ITEM 15(c) FINANCIAL STATEMENT SCHEDULES
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##### Table of Contents



SIGNATURES
  
 By:
    
    /s/ Joseph P. KeithleyJoseph P. Keithley, (Chairman, President and Chief Executive Officer)Date:
    
    December 15, 2008
  Signature
    
    Title
    
    Date/s/ Joseph P. Keithley
    
    Chairman of the Board of Directors, President and
    
    12/15/08Joseph P. Keithley
    
    Chief Executive Officer (Principal Executive Officer)/s/ Mark J. Plush
    
    Vice President and Chief Financial Officer
    
    12/15/08Mark J. Plush
    
    (Principal Financial and Accounting Officer)/s/ Brian R. Bachman

Brian R. Bachman
    
    Director
    
    12/15/08/s/ James T. Bartlett

James T. Bartlett
    
    Director
    
    12/15/08/s/ James B. Griswold

James B. Griswold
    
    Director
    
    12/15/08/s/ Leon J. Hendrix, Jr.

Leon J. Hendrix, Jr.
    
    Director
    
    12/15/08/s/ Brian J. Jackman

Brian J. Jackman
    
    Director
    
    12/15/08/s/ N. Mohan Reddy

N. Mohan Reddy
    
    Director
    
    12/15/08/s/ Thomas A. Saponas

Thomas A. Saponas
    
    Director
    
    12/15/08/s/ Barbara V. Scherer

Barbara V. Scherer
    
    Director
    
    12/15/08/s/ R. Elton White

R. Elton White
    
    Director
    
    12/15/08
 - 44 -