##### 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, 2009
 Commission File Number 1-9965
 KEITHLEY INSTRUMENTS, INC.
  Ohio
    
    34-0794417(State or other jurisdiction of incorporation or organization)
    
    (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
 þ
 o o
  Large accelerated
filer o
Accelerated
filer o
Non-accelerated
filer þ(Do not check if a
smaller reporting company)
Smaller reporting
company o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




---



##### 



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
    
    
    8Item 4
    
    Submission of Matters to a Vote of Security Holders
    
    
    8PART II:Item 5
    
    Market for the Registrants Common Equity, and 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
    
    
    19Item 8
    
    Financial Statements and Supplementary Data
    
    
    20Item 9
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    43Item 9A
    
    Controls and Procedures
    
    
    43Item 9B
    
    Other Information
    
    
    44PART III:Item 10
    
    Directors and Executive Officers of the Registrant
    
    
    44Item 11
    
    Executive Compensation
    
    
    44Item 12
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    44Item 13
    
    Certain Relationships and Related Transactions
    
    
    44Item 14
    
    Principal Accountant Fees and Services
    
    
    44PART IV:Item 15
    
    Exhibits and Financial Statement Schedules
    
    
    45SIGNATURES
    
    
    
    
    47EX-14.1EX-22.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2
  -1-




---



##### Table of Contents



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




---



##### Table of Contents



Product Offerings
  New Products During Fiscal Year 2009
         Geographic Markets and Distribution
   -3-




---



##### Table of Contents



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-




---



##### Table of Contents



Executive Officers Of The Registrant
  Name
    
    Position
    
    AgeJoseph P. Keithley
    
    Chairman of the Board of Directors, President and Chief Executive Officer
    
    
    60Daniel Faia
    
    Vice President Sales and Support
    
    
    42Mark A. Hoersten
    
    Vice President Marketing
    
    
    51Larry L. Pendergrass
    
    Vice President New Product Development
    
    
    54Mark J. Plush
    
    Vice President and Chief Financial Officer
    
    
    60Linda C. Rae
    
    Executive Vice President and Chief Operating Officer
    
    
    44
       Available Information
  
 ITEM 1A  RISK FACTORS
  -5-




---



##### Table of Contents



Cyclicality of the electronics industry and timing of the current economic downturn and large
orders
   Rapid technology changes
  Competitive factors
  Dependence on key personnel
  Dependence on key suppliers
  International operations, political and economic conditions
  Effective tax rates
  -6-




---



##### Table of Contents



Compliance with NYSE listing standard
   Cost reduction initiatives
  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
  -7-




---



##### Table of Contents



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




---



##### 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 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
    
    
    
    .010Fiscal 2008First Quarter
    
    $
    11.53
    
    
    $
    8.71
    
    
    $
    .0375
    
    
    $
    .030Second Quarter
    
    
    11.86
    
    
    
    8.46
    
    
    
    .0375
    
    
    
    .030Third Quarter
    
    
    11.80
    
    
    
    9.15
    
    
    
    .0375
    
    
    
    .030Fourth Quarter
    
    
    10.26
    
    
    
    7.91
    
    
    
    .0375
    
    
    
    .030
  Equity Compensation Plan Information as of September 30, 2009
 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
    
    
    3,531,451
    (1)
    
    $
    18.72
    
    
    
    1,098,446
    (2)Equity compensation plans not
approved by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    3,531,451
    (1)
    
    $
    18.72
    
    
    
    1,098,446
    (2)
 
 (1)
    
    Includes outstanding stock options to purchase 2,934,751 shares, 153,550 restricted award units
and 443,150 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, 2009, none of the
184,400 performance award units associated with the 2007-2009 period were issued as the vesting
provisions were not attained. Further, the Company does not expect to issue any of the remaining
258,750 awards associated with the 2008-2010 period as the vesting provisions are not expected to
be met.(2)
    
    Includes 457,263 shares available for issuance under the 2005 Employee Stock Purchase and
Dividend Reinvestment Plan. Issuer Purchases of Equity Securities
  -9-




---



##### Table of Contents



Stock
Performance Graph
  
 9/04
    
    9/05
    
    9/06
    
    9/07
    
    9/08
    
    9/09Keithley Instruments, Inc.
    
    
    100.00
    
    
    
    84.46
    
    
    
    74.60
    
    
    
    62.78
    
    
    
    50.36
    
    
    
    34.42Russell 2000
    
    
    100.00
    
    
    
    117.95
    
    
    
    129.66
    
    
    
    145.65
    
    
    
    124.56
    
    
    
    112.67Russell MicroCap
    
    
    100.00
    
    
    
    116.99
    
    
    
    125.21
    
    
    
    137.33
    
    
    
    106.42
    
    
    
    97.98S&P Information Technology
    
    
    100.00
    
    
    
    113.45
    
    
    
    117.14
    
    
    
    144.47
    
    
    
    110.70
    
    
    
    120.10
 -10-




---



##### Table of Contents



ITEM 6  SELECTED FINANCIAL DATA
  For the years ended September 30,(In thousands of dollars except for per share data)
    
    2009
    
    2008
    
    2007
    
    2006
    
    2005Operating Results:Net sales
    
    $
    102,527
    
    
    
    152,468
    
    
    
    143,658
    
    
    
    155,212
    
    
    
    141,552Gross margin percentage
    
    
    53.7
    %(1)
    
    
    58.9
    %
    
    
    59.8
    %
    
    
    61.3
    %
    
    
    60.7
    %Severance and related charges
    
    $
    6,926
    
    
    
    1,377
    
    
    
    
    
    
    
    
    
    
    
    (Loss) income before income taxes
    
    $
    (19,366
    )
    
    
    (4,356
    )
    
    
    (1,685
    )
    
    
    9,913
    
    
    
    14,087Provision (benefit) for income taxes
    
    $
    31,138
    (2)
    
    
    (1,943
    )
    
    
    (1,336
    )
    
    
    1,552
    
    
    
    3,959Net (loss) income
    
    $
    (50,504
    )
    
    
    (2,593
    )
    
    
    (349
    )
    
    
    8,361
    
    
    
    10,128Basic (loss) earnings per share
    
    $
    (3.23
    )
    
    
    (0.16
    )
    
    
    (0.02
    )
    
    
    051
    
    
    
    0.62Diluted (loss) earnings per share
    
    $
    (3.23
    )
    
    
    (0.16
    )
    
    
    (0.02
    )
    
    
    0.50
    
    
    
    0.61Common Stock Information:Cash dividends per Common Share
    
    $
    0.100
    
    
    
    0.150
    
    
    
    0.150
    
    
    
    0.150
    
    
    
    0.150Cash dividends per Class B Common Share
    
    $
    0.080
    
    
    
    0.120
    
    
    
    0.120
    
    
    
    0.120
    
    
    
    0.120Weighted average number of shares
outstanding- diluted
    
    
    15,648
    
    
    
    15,854
    
    
    
    16,207
    
    
    
    16,567
    
    
    
    16,591At fiscal year-end:Dividend payout ratio
    
    
    n/m
    
    
    
    n/m
    
    
    
    n/m
    
    
    
    30.0
    %
    
    
    24.6
    %Shareholders equity per share
    
    $
    2.14
    
    
    
    6.12
    
    
    
    6.76
    
    
    
    7.03
    
    
    
    6.81Closing market price
    
    $
    5.54
    
    
    
    8.37
    
    
    
    10.60
    
    
    
    12.75
    
    
    
    14.60Balance Sheet Data:Total assets
    
    $
    73,102
    
    
    
    137,978
    
    
    
    146,406
    
    
    
    148,892
    
    
    
    142,364Current ratio
    
    
    2.9
    
    
    
    3.3
    
    
    
    3.8
    
    
    
    4.2
    
    
    
    4.2Short-term debt
    
    $
    
    
    
    
    23
    
    
    
    799
    
    
    
    872
    
    
    
    Long-term obligations
    
    $
    19,382
    
    
    
    12,939
    
    
    
    11,102
    
    
    
    9,792
    
    
    
    8,240Shareholders equity
    
    $
    36,610
    
    
    
    103,302
    
    
    
    113,024
    
    
    
    116,503
    
    
    
    111,976Total debt-to-capital
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.7
    %
    
    
    0.7
    %
    
    
    Other Data:Return on average shareholders equity
    
    
    -72.2
    %
    
    
    -2.4
    %
    
    
    -0.3
    %
    
    
    7.3
    %
    
    
    9.5
    %Return on average total assets
    
    
    -47.9
    %
    
    
    -1.8
    %
    
    
    -0.2
    %
    
    
    5.7
    %
    
    
    7.3
    %Return on net sales
    
    
    -49.3
    %
    
    
    -1.7
    %
    
    
    -0.2
    %
    
    
    5.4
    %
    
    
    7.2
    %Number of employees at year end
    
    
    557
    
    
    
    696
    
    
    
    698
    
    
    
    673
    
    
    
    651Sales per employee
    
    $
    163.7
    
    
    
    218.7
    
    
    
    209.6
    
    
    
    234.5
    
    
    
    220.7Cash flow:Net cash (used in) provided by operating activities
    
    $
    (5,416
    )
    
    
    1,706
    
    
    
    5,641
    
    
    
    5,985
    
    
    
    10,543Ten-year compound annual growth rate:Net sales
    
    
    0.2
    %
    
    
    2.6
    %
    
    
    1.5
    %
    
    
    2.7
    %
    
    
    2.6
    %Net income
    
    
    n/m
    
    
    
    n/m
    
    
    
    n/m
    
    
    
    n/m
    
    
    
    7.5
    %
 
 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. -11-




---



##### Table of Contents



ITEM 7  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Introduction and Overview
   Business Overview
       -12-




---



##### Table of Contents



Critical Accounting Policies and Estimates
  Use of estimates:
  Revenue recognition:
  Inventories:
  Income taxes:
   Pension plans:
   -13-




---



##### Table of Contents



Stock compensation plans:
   Restructuring and Cost Reduction Programs:
  Results of Operations
  -14-




---



##### Table of Contents



2009
    
    
    2008
    
    
    2007Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of goods sold
    
    
    43.8
    
    
    
    41.1
    
    
    
    40.2Inventory write off and accelerated depreciation for
exit of product line
    
    
    2.5
    
    
    
    0.0
    
    
    
    0.0Gross profit
    
    
    53.7
    
    
    
    58.9
    
    
    
    59.8Selling, general and administrative expenses
    
    
    48.4
    
    
    
    43.6
    
    
    
    44.5Product development expenses
    
    
    17.6
    
    
    
    16.7
    
    
    
    18.0Severance and related charges
    
    
    6.8
    
    
    
    0.9
    
    
    
    0.0Operating loss
    
    
    (19.1
    )
    
    
    (2.3
    )
    
    
    (2.7
    )Investment income
    
    
    0.3
    
    
    
    1.0
    
    
    
    1.5Interest expense
    
    
    (0.1
    )
    
    
    0.0
    
    
    
    0.0Impairment of long-term investments
    
    
    0.0
    
    
    
    (1.7
    )
    
    
    0.0Loss before income taxes
    
    
    (18.9
    )
    
    
    (3.0
    )
    
    
    (1.2
    )Provision (benefit) for income taxes
    
    
    30.4
    
    
    
    (1.3
    )
    
    
    (1.0
    )Net loss
    
    
    (49.3
    )%
    
    
    (1.7
    )%
    
    
    (0.2
    )%
         -15-




---



##### Table of Contents



Financial Condition, Liquidity and Capital Resources
 Working Capital
  2009
    
    
    2008Current assets:Cash and cash equivalents
    
    $
    24,114
    
    
    $
    22,073Restricted cash
    
    
    569
    
    
    
    Short-term investments
    
    
    759
    
    
    
    5,700Refundable income taxes
    
    
    466
    
    
    
    230Accounts receivable and other, net
    
    
    11,738
    
    
    
    17,035Total inventories
    
    
    9,937
    
    
    
    19,823Deferred income taxes
    
    
    303
    
    
    
    5,483Other current assets
    
    
    1,753
    
    
    
    2,079Total current assets
    
    
    49,639
    
    
    
    72,423Current liabilities:Short-term debt
    
    
    
    
    
    
    23Accounts payable
    
    
    4,916
    
    
    
    7,325Accrued payroll and related expenses
    
    
    5,648
    
    
    
    7,073Other accrued expenses
    
    
    5,424
    
    
    
    6,142Income taxes payable
    
    
    1,122
    
    
    
    1,174Total current liabilities
    
    
    17,110
    
    
    
    21,737Working capital
    
    $
    32,529
    
    
    $
    50,686
  -16-




---



##### Table of Contents



Sources and Uses of Cash
  2009
    
    2008
    
    2007Cash provided by (used in):Operating activities
    
    $
    (5,416
    )
    
    $
    1,706
    
    
    $
    5,641Investing activities
    
    
    9,178
    
    
    
    16,031
    
    
    
    (525
    )Financing activities
    
    
    (2,029
    )
    
    
    (8,844
    )
    
    
    (3,152
    )
 Operating activities
 Investing activities
  Financing activities
      -17-




---



##### Table of Contents



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)
    
    
    5,788
    
    
    
    2,170
    
    
    
    2,570
    
    
    
    551
    
    
    
    497Payments Under Deferred
Compensation Agreements (b)
    
    
    2,378
    
    
    
    317
    
    
    
    345
    
    
    
    155
    
    
    
    1,561Pension Benefits (c)
    
    
    
    
    
    
    
    
    
    
    
    (c)
    
    
    
    (c)
    
    
    
    (c)Non-cancelable Purchase
Commitments
    
    $
    127
    
    
    $
    127
    
    
    
    
    
    
    
    
    
    
    
    Total Contractual Obligations
    
    $
    8,293
    
    
    $
    2,614
    
    
    $
    2,915
    
    
    $
    706
    
    
    $
    2,058
 
 (a)
    
    Includes $305 and $483 for amounts due in less than one year, and in one to three years,
respectively, for the Santa Rosa lease associated with the RF product line that was sold in
November 2009 (see details in Note N). While Agilent assumed the Santa Rosa lease, 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 $254, $305 and $178 under that lease and included in the above table are not expected
to be incurred by the Company for fiscal 2010, 2011 and 2012, respectively.(b)
    
    Includes amounts due under deferred compensation agreements with current and former employees
and a Director. At September 30, 2009, investment in insurance assets to fund future
deferred compensation payments were $1,756. Amounts exclude additional interest and investment gains or
losses that may be earned or incurred from September 30, 2009 through the time of payment.(c)
    
    The obligation related to pension benefits is actuarially determined and is reflective of
obligations as of September 30, 2009. The Company made a voluntary pension contribution of $750 in
fiscal 2009, and does not have a required contribution due in fiscal 2010. We anticipate making
voluntary contributions ranging from $750 to $1,500 in fiscal 2010. We are not able to reasonably
estimate our future required contributions beyond 2010 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. Off-Balance Sheet Arrangements
  Recently Adopted Accounting Pronouncements
        -18-




---



##### Table of Contents



Recently Issued Accounting Pronouncements
   
 ITEM 7A  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    -19-




---



##### Table of Contents



ITEM 8  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 Report of Independent Registered Public Accounting Firm
  Internal Control 
Integrated Framework
    
 -20-




---



##### Table of Contents



Consolidated Statements of Operations
  2009
    
    2008
    
    2007Net sales
    
    $
    102,527
    
    
    $
    152,468
    
    
    $
    143,658Cost of goods sold
    
    
    44,890
    
    
    
    62,623
    
    
    
    57,724Inventory writedowns and
accelerated depreciation for
exit of product line
    
    
    2,540
    
    
    
    
    
    
    
    Gross profit
    
    
    55,097
    
    
    
    89,845
    
    
    
    85,934Selling, general and administrative
expenses
    
    
    49,764
    
    
    
    66,413
    
    
    
    64,008Product development expenses
    
    
    18,024
    
    
    
    25,504
    
    
    
    25,863Severance and related charges
    
    
    6,926
    
    
    
    1,377
    
    
    
    Operating loss
    
    
    (19,617
    )
    
    
    (3,449
    )
    
    
    (3,937
    )Investment income
    
    
    303
    
    
    
    1,603
    
    
    
    2,307Interest expense
    
    
    (52
    )
    
    
    (70
    )
    
    
    (55
    )Impairment of long-term investments
    
    
    
    
    
    
    (2,620
    )
    
    
    Loss before income taxes
    
    
    (19,366
    )
    
    
    (4,536
    )
    
    
    (1,685
    )Provision (benefit) for income taxes
    
    
    31,138
    
    
    
    (1,943
    )
    
    
    (1,336
    )Net loss
    
    $
    (50,504
    )
    
    $
    (2,593
    )
    
    $
    (349
    )Basic loss per share
    
    $
    (3.23
    )
    
    $
    (0.16
    )
    
    $
    (0.02
    )Diluted loss per share
    
    $
    (3.23
    )
    
    $
    (0.16
    )
    
    $
    (0.02
    )
  -21-




---



##### Table of Contents



Consolidated Balance Sheets
  2009
    
    2008AssetsCurrent assets:Cash and cash equivalents
    
    $
    24,114
    
    
    $
    22,073Restricted cash
    
    
    569
    
    
    
    Short-term investments
    
    
    759
    
    
    
    5,700Refundable income taxes
    
    
    466
    
    
    
    230Accounts receivable and other, net of allowance for doubtful
accounts of
$598 and $555 as of September 30, 2009 and 2008, respectively
    
    
    11,738
    
    
    
    17,035Inventories:Raw materials
    
    
    5,760
    
    
    
    12,325Work in process
    
    
    613
    
    
    
    1,261Finished products
    
    
    3,564
    
    
    
    6,237Total inventories
    
    
    9,937
    
    
    
    19,823Deferred income taxes
    
    
    303
    
    
    
    5,483Prepaid expenses
    
    
    1,753
    
    
    
    2,079Total current assets
    
    
    49,639
    
    
    
    72,423Property, plant and equipment, at cost:Land
    
    
    1,325
    
    
    
    1,325Buildings and leasehold improvements
    
    
    18,053
    
    
    
    17,240Manufacturing, laboratory and office equipment
    
    
    34,703
    
    
    
    35,76154,081
    
    
    
    54,326Less-Accumulated depreciation and amortization
    
    
    42,981
    
    
    
    41,174Total property, plant and equipment, net
    
    
    11,100
    
    
    
    13,152Deferred income taxes
    
    
    748
    
    
    
    26,097Intangible assets
    
    
    910
    
    
    
    1,190Other assets
    
    
    10,705
    
    
    
    25,116Total assets
    
    $
    73,102
    
    
    $
    137,978Liabilities and Shareholders EquityCurrent liabilities:Short-term debt
    
    $
    
    
    
    $
    23Accounts payable
    
    
    4,916
    
    
    
    7,325Accrued payroll and related expenses
    
    
    5,648
    
    
    
    7,073Other accrued expenses
    
    
    5,424
    
    
    
    6,142Income taxes payable
    
    
    1,122
    
    
    
    1,174Total current liabilities
    
    
    17,110
    
    
    
    21,737Long-term deferred compensation
    
    
    2,111
    
    
    
    2,561Deferred income taxes
    
    
    
    
    
    
    65Long-term income taxes payable
    
    
    2,852
    
    
    
    2,919Other long-term liabilities
    
    
    14,419
    
    
    
    7,394Commitments and contingencies (See Note L)Shareholders equity:Common Shares, stated value $.0125:Authorized
 80,000,000; issued and outstanding 
14,950,093 and 14,722,585 in 2009 and 2008, respectively
    
    
    187
    
    
    
    184Class B Common Shares, stated value $.0125:Authorized
 9,000,000; issued and outstanding  2,150,502
in 2009 and 2008
    
    
    27
    
    
    
    27Capital in excess of stated value
    
    
    39,121
    
    
    
    38,930Retained earnings
    
    
    28,629
    
    
    
    80,759Accumulated other comprehensive loss
    
    
    (15,900
    )
    
    
    (1,873
    )Common Shares held in treasury, at cost
    
    
    (15,454
    )
    
    
    (14,725
    )Total shareholders equity
    
    
    36,610
    
    
    
    103,302Total liabilities and shareholders equity
    
    $
    73,102
    
    
    $
    137,978
  -22-




---



##### 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, 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
accounting change
to recognize funded status of pension
plans,
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
    )
    
    
    103,302Comprehensive 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
    )
    
    $
    36,610
  -23-




---



##### Table of Contents



Consolidated Statements of Cash Flows
  2009
    
    2008
    
    2007Cash flows from operating activities:Net loss
    
    $
    (50,504
    )
    
    $
    (2,593
    )
    
    $
    (349
    )Adjustments to reconcile net loss to net cash
(used in) provided by
operating activities:Depreciation
    
    
    3,626
    
    
    
    4,157
    
    
    
    4,380Amortization
    
    
    280
    
    
    
    210
    
    
    
    Deferred income taxes
    
    
    30,412
    
    
    
    (3,174
    )
    
    
    (4,517
    )Deferred compensation
    
    
    18
    
    
    
    (76
    )
    
    
    519Stock-based compensation
    
    
    (53
    )
    
    
    1,832
    
    
    
    1,509Non-cash charges for exit of product line
    
    
    4,498
    
    
    
    
    
    
    
    Loss on the disposition/impairment of assets
    
    
    110
    
    
    
    2,775
    
    
    
    181Change in current assets and liabilities:Refundable income taxes
    
    
    (191
    )
    
    
    516
    
    
    
    449Accounts receivable and other
    
    
    5,494
    
    
    
    2,330
    
    
    
    8,031Inventories
    
    
    5,945
    
    
    
    (5,210
    )
    
    
    107Prepaid expenses
    
    
    465
    
    
    
    (90
    )
    
    
    91Other current liabilities
    
    
    (5,541
    )
    
    
    1,208
    
    
    
    (2,155
    )Other operating activities
    
    
    25
    
    
    
    (179
    )
    
    
    (2,605
    )Net cash (used in) provided by operating activities
    
    
    (5,416
    )
    
    
    1,706
    
    
    
    5,641Cash flows from investing activities:Capital expenditures
    
    
    (1,994
    )
    
    
    (3,831
    )
    
    
    (4,511
    )Restricted cash
    
    
    (569
    )
    
    
    
    
    
    
    Purchase of investments and other
    
    
    (759
    )
    
    
    (13,225
    )
    
    
    (32,927
    )Proceeds from maturities and sales of investments
    
    
    12,500
    
    
    
    33,087
    
    
    
    36,913Net cash provided by (used in) investing activities
    
    
    9,178
    
    
    
    16,031
    
    
    
    (525
    )Cash flows from financing activities:Net repayment of short-term debt
    
    
    (25
    )
    
    
    (861
    )
    
    
    (79
    )Proceeds from employee stock purchase and option
plans
    
    
    212
    
    
    
    347
    
    
    
    487Tax benefit
of stock purchase and stock-based compensation arrangements
    
    
    92
    
    
    
    140
    
    
    
    358Repurchase of Common Shares
    
    
    (787
    )
    
    
    (6,163
    )
    
    
    (1,550
    )Cash dividends
    
    
    (1,521
    )
    
    
    (2,307
    )
    
    
    (2,368
    )Net cash used in financing activities
    
    
    (2,029
    )
    
    
    (8,844
    )
    
    
    (3,152
    )Effect of changes in foreign currency exchange
rates on cash and cash equivalents
    
    
    308
    
    
    
    292
    
    
    
    423Increase in cash and cash equivalents
    
    
    2,041
    
    
    
    9,185
    
    
    
    2,387Cash and cash equivalents at beginning of period
    
    
    22,073
    
    
    
    12,888
    
    
    
    10,501Cash and cash equivalents at end of period
    
    $
    24,114
    
    
    $
    22,073
    
    
    $
    12,888Supplemental disclosures of cash flow informationCash paid during the year for:Income taxes
    
    $
    1,229
    
    
    $
    1,945
    
    
    $
    1,565Interest
    
    
    53
    
    
    
    59
    
    
    
    50
  -24-




---



##### 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
  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
  2009
    
    2008
    
    2007Balance at beginning of year
    
    $
    555
    
    
    $
    500
    
    
    $
    448Additions
    
    
    79
    
    
    
    63
    
    
    
    48Write-offs, net of recoveries
    
    
    (43
    )
    
    
    (6
    )
    
    
    (11
    )Foreign exchange revaluation
    
    
    7
    
    
    
    (2
    )
    
    
    15Balance at end of year
    
    $
    598
    
    
    $
    555
    
    
    $
    500
 -25-




---



##### 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 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
    )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
    )
 -26-




---



##### Table of Contents



Accumulated other comprehensive loss
  2009
    
    2008
    
    2007Translation adjustment
    
    $
    1,671
    
    
    $
    1,247
    
    
    $
    1,162Net unrealized gain (loss) on
derivative securities
    
    
    (91
    )
    
    
    46
    
    
    
    (86
    )Net unrealized investment loss
    
    
    
    
    
    
    (442
    )
    
    
    (18
    )Benefit plan obligation
    
    
    (17,480
    )
    
    
    (2,724
    )
    
    
    (2,004
    )Accumulated other comprehensive loss
    
    $
    (15,900
    )
    
    $
    (1,873
    )
    
    $
    (946
    )
 Income taxes
  Restructuring and Cost Reduction Programs
  Use of estimates
  Earnings per share
  2009
    
    2008
    
    2007Net loss in thousands
    
    $
    (50,504
    )
    
    $
    (2,593
    )
    
    $
    (349
    )Weighted average shares outstanding
    
    
    15,648,258
    
    
    
    15,853,938
    
    
    
    16,206,698Assumed exercise of stock
options,weighted average of
incremental shares
    
    
    
    
    
    
    
    
    
    
    Assumed purchase of stock under
stock purchase plan, weighted
average
    
    
    
    
    
    
    
    
    
    
    Diluted shares  adjusted
weighted-average shares and
assumed conversions
    
    
    15,648,258
    
    
    
    15,853,938
    
    
    
    16,206,698Basic loss per share
    
    $
    (3.23
    )
    
    $
    (0.16
    )
    
    $
    (0.02
    )Diluted loss per share
    
    $
    (3.23
    )
    
    $
    (0.16
    )
    
    $
    (0.02
    )
  Stock-based compensation
  Derivatives and Hedging Activities
  -27-




---



##### Table of Contents



Reclassifications
  Recently adopted accounting pronouncements
        Recently issued accounting pronouncements
  -28-




---



##### Table of Contents



Note B  Product Warranties
   2009
    
    2008Beginning balance
    
    $
    701
    
    
    $
    722Accruals for warranties issued during the period
    
    
    984
    
    
    
    1,345Accruals
related to pre-existing warranties (including changes in estimates and expiring warranties)
    
    
    (116
    )
    
    
    (178
    )Settlements made (in cash or in kind) during the
period
    
    
    (1,103
    )
    
    
    (1,188
    )Ending balance
    
    $
    466
    
    
    $
    701
 Note C  Repurchase of Common Shares
    2009
    
    2008Total number of shares purchased
    
    
    166,733
    
    
    
    636,600Average price paid per share
(including commissions)
    
    $
    4.72
    
    
    $
    9.68Identity of broker-dealer used
to effect the purchases
    
    National Financial Securities LLC
    
    National Financial Securities LLCNumber of shares purchased as
part of a publicly announced
repurchase program
    
    
    155,000
    
    
    
    636,600Maximum number of shares that
remain to be purchased under
the program
    
    
    0
    
    
    
    1,212,400
   Note D  Investments and Notes Receivable
  -29-




---



##### Table of Contents



Adjusted cost
    
    Unrealized gains
    
    Unrealized losses
    
    Market valueShort Term:Certificates of deposits and money market funds
    
    $
    759
    
    
    $
    
    
    
    $
    
    
    
    $
    759
  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
   2009
    
    2008Less than 1 year
    
    $
    759
    
    
    $
    1 year to 5 years
    
    
    
    
    
    
    5 to 10 years
    
    
    
    
    
    
    10 to 15 years
    
    
    
    
    
    
    Greater than 15 years
    
    
    
    
    
    
    11,820Total investments
    
    $
    759
    
    
    $
    11,820
   2009
    
    2008Non-marketable equity securities
    
    $
    150
    
    
    $
    150Venture capital fund
    
    
    32
    
    
    
    53Notes receivable, net of reserve of $1,500 at September
30, 2009 and 2008
    
    
    1,753
    
    
    
    1,797$
    1,935
    
    
    $
    2,000
   -30-




---



##### Table of Contents



Note E  Financing Arrangements
   Note F  Derivatives and Hedging Activities
   2009
    
    2008Assets:Contract value
    
    $
    371
    
    
    $
    3,739Fair value
    
    
    360
    
    
    
    3,499Total asset
    
    
    11
    
    
    
    240Liabilities:Contract value
    
    
    4,350
    
    
    
    2,353Fair value
    
    
    4,531
    
    
    
    2,392Total liability
    
    
    (181
    )
    
    
    (39
    )Net (liability) asset
    
    $
    (170
    )
    
    $
    201
   Financial Statement Line Item
    
    2009
    
    2008
    
    2007Cost of goods sold
    
    $
    245
    
    
    $
    314
    
    
    $
    30
  -31-




---



##### Table of Contents



Note G  Foreign Currency
   Note H  Employee Benefit Plans
     United States Plan
    
    German Plan*2009
    
    2008
    
    2009
    
    2008Change in projected benefit obligations:Benefit obligation at beginning of year
    
    $
    36,594
    
    
    $
    37,567
    
    
    $
    7,384
    
    
    $
    7,306Service cost
    
    
    1,895
    
    
    
    1,677
    
    
    
    182
    
    
    
    231Interest cost
    
    
    3,194
    
    
    
    2,356
    
    
    
    438
    
    
    
    417Actuarial loss (gain)
    
    
    5,147
    
    
    
    (3,804
    )
    
    
    (495
    )
    
    
    (263
    )Benefits paid
    
    
    (1,537
    )
    
    
    (1,202
    )
    
    
    (270
    )
    
    
    (203
    )Curtailments
    
    
    (1,110
    )
    
    
    
    
    
    
    
    
    
    
    Foreign currency exchange rate changes
    
    
    
    
    
    
    
    
    
    
    281
    
    
    
    (104
    )Benefit obligation at year end
    
    $
    44,183
    
    
    $
    36,594
    
    
    $
    7,520
    
    
    $
    7,384Accumulated benefit obligation at year
end
    
    $
    41,115
    
    
    $
    33,128
    
    
    $
    7,000
    
    
    $
    6,802Change in plan assets:Fair value of plan assets at beginning
of year
    
    $
    44,549
    
    
    $
    45,177
    
    
    $
    1,493
    
    
    $
    1,439Actual (loss) return on pension assets
    
    
    (6,532
    )
    
    
    (1,926
    )
    
    
    100
    
    
    
    42Employer contributions
    
    
    750
    
    
    
    2,500
    
    
    
    67
    
    
    
    19Participants contributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50Benefits paid
    
    
    (1,537
    )
    
    
    (1,202
    )
    
    
    (42
    )
    
    
    (34
    )Foreign currency exchange rate changes
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    (23
    )Fair value of plan assets at end of year
    
    
    37,230
    
    
    
    44,549
    
    
    
    1,628
    
    
    
    1,493(Pension liability)/prepaid pension
assets recognized
    
    $
    (6,953
    )
    
    $
    7,955
    
    
    $
    (5,892
    )
    
    $
    (5,891
    )
 * 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 $6,607 and $6,087 at September 30, 2009 and 2008,
respectively, for this asset. In
accordance with U.S. GAAP this Company asset is not included in the German plan assets.
  -32-




---



##### Table of Contents



United States Plan
    
    German Plan2009
    
    2008
    
    2009
    
    2008Unrecognized actuarial (loss) gain
    
    $
    (19,834
    )
    
    $
    (4,579
    )
    
    $
    978
    
    
    $
    456Unrecognized prior service cost
    
    
    (189
    )
    
    
    (335
    )
    
    
    (17
    )
    
    
    (21
    )Accumulated other comprehensive
(loss) income
    
    $
    (20,023
    )
    
    $
    (4,914
    )
    
    $
    961
    
    
    $
    435
  United States Plan
    
    German Plan2009
    
    2008
    
    2009
    
    2008Balance at beginning of year
    
    $
    (4,914
    )
    
    $
    (3,520
    )
    
    $
    435
    
    
    $
    215Net actuarial (loss) gain arising
during the year
    
    
    (15,310
    )
    
    
    (1,656
    )
    
    
    467
    
    
    
    228Amortization of actuarial net loss
    
    
    55
    
    
    
    83
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    101
    
    
    
    179
    
    
    
    5
    
    
    
    6Adjustment to apply new
measurement provision guidance
as of October 1, 2008
    
    
    45
    
    
    
    
    
    
    
    
    
    
    
    Exchange rate effects
    
    
    
    
    
    
    
    
    
    
    54
    
    
    
    (14
    )Balance at end of year
    
    $
    ( 20,023
    )
    
    $
    (4,914
    )
    
    $
    961
    
    
    $
    435
   United States Plan
    
    German Plan2009
    
    2008
    
    2009
    
    2008Service cost-benefits earned
during the year
    
    $
    1,505
    
    
    $
    1,677
    
    
    $
    170
    
    
    $
    231Interest cost on projected
benefit obligation
    
    
    2,565
    
    
    
    2,356
    
    
    
    444
    
    
    
    417Expected return on plan assets
    
    
    (3,780
    )
    
    
    (3,533
    )
    
    
    (76
    )
    
    
    (77
    )Curtailment loss
    
    
    44
    
    
    
    
    
    
    
    
    
    
    
    Amortization of transition asset
    
    
    
    
    
    
    
    
    
    
    (16
    )
    
    
    23Amortization of prior service cost
    
    
    57
    
    
    
    179
    
    
    
    5
    
    
    
    6Amortization of actuarial net loss
    
    
    55
    
    
    
    83
    
    
    
    
    
    
    
    Net periodic pension cost
    
    $
    446
    
    
    $
    762
    
    
    $
    527
    
    
    $
    600
  September 30, 2009
    
    June 30, 2008Equity securities
    
    
    63
    %
    
    
    64
    %Fixed income
    
    
    17
    
    
    
    14Market neutral hedge fund
    
    
    14
    
    
    
    18Cash equivalent (money market fund)
    
    
    4
    
    
    
    2Real estate
    
    
    2
    
    
    
    2100
    %
    
    
    100
    %
   -33-




---



##### Table of Contents



2009
    
    2008United States Pension Plan:Discount rate
    
    
    6.0
    %
    
    
    7.0
    %Rate of increase in compensation levels
    
    0.0% for two years, and 3.5% thereafter
    
    
    4.0
    %German Pension Plan:Discount rate
    
    
    6.5
    %
    
    
    6.25
    %Rate of increase in compensation levels
    
    
    2.5
    %
    
    
    2.5
    %
  2008
    
    2007
    
    2006United States Pension Plan:Discount rate
    
    
    7.0%/ 6.875
    %
    
    
    6.375
    %
    
    
    6.625
    %Expected long-term rate of return on
plan assets
    
    
    8.0
    %
    
    
    8.25
    %
    
    
    8.25
    %Rate of increase in compensation levels
    
    
    4.0
    %
    
    
    4.0
    %
    
    
    4.0
    %German Pension Plan:Discount rate
    
    
    6.25
    %
    
    
    5.5
    %
    
    
    4.5
    %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
    %
    
    
    3.0
    %
    United States Plan
    
    German Plan2010
    
    $
    1,348
    
    
    $
    3042011
    
    $
    1,422
    
    
    $
    3282012
    
    $
    1,608
    
    
    $
    3552013
    
    $
    1,713
    
    
    $
    3762014
    
    $
    1,801
    
    
    $
    4072015 - 2019
    
    $
    11,135
    
    
    $
    2,646
    Note I  Stock Plans
   -34-




---



##### Table of Contents



2009
    
    2008
    
    2007Cost of goods sold
    
    $
    (59
    )
    
    $
    152
    
    
    $
    91Selling, general and administrative expenses
    
    
    127
    
    
    
    1,412
    
    
    
    1,211Product development expenses
    
    
    (121
    )
    
    
    268
    
    
    
    207Stock-based compensation included in operating expenses
    
    
    (53
    )
    
    
    1,832
    
    
    
    1,509Estimated tax impact of stock-based compensation
    
    
    
    
    
    
    598
    
    
    
    497Stock-based compensation (income) expense, net of tax
    
    $
    (53
    )
    
    $
    1,234
    
    
    $
    1,012Stock-based compensation expense per share, net of tax
    
    $
    0.00
    
    
    $
    0.08
    
    
    $
    0.06
  Stock Option Activity
  Weighted
    
    Weighted AverageNumber
    
    Average
    
    Remaining
    
    Aggregateof Shares
    
    Exercise Price
    
    Contractual Life (Years)
    
    Intrinsic ValueOutstanding at September 30, 2006
    
    
    3,322,981
    
    
    $
    20.12
    
    
    
    5.83
    
    
    $
    2,333Options 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
    
    
    
    20.31
    
    
    
    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
    
    
    $
    736Vested and expected to vest
at September 30, 2009
    
    
    2,924,817
    
    
    $
    21.18
    
    
    
    4.06
    
    
    $
    714Exercisable at September 30, 2009
    
    
    2,451,795
    
    
    $
    21.18
    
    
    
    3.18
    
    
    $
    0
 -35-




---



##### 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$2.99 - $9.12
    
    
    411,425
    
    
    
    9.01
    
    
    $
    4.76
    
    
    
    
    0
    
    
    $
    0.00$10.35 - $16.12
    
    
    1,083,176
    
    
    
    3.97
    
    
    $
    14.72
    
    
    
    
    1,011,645
    
    
    $
    14.74$16.23 - $36.85
    
    
    1,107,950
    
    
    
    3.33
    
    
    $
    19.88
    
    
    
    
    1,107,950
    
    
    $
    19.88$45.13- $54.25
    
    
    332,200
    
    
    
    0.84
    
    
    $
    45.15
    
    
    
    
    332,200
    
    
    $
    45.152,934,751
    
    
    
    4.08
    
    
    $
    18.72
    
    
    
    
    2,451,795
    
    
    $
    21.18
   2009
    
    2008
    
    2007Expected life (years)
    
    
    4.75
    
    
    
    4.75
    
    
    
    4.75Risk-free interest rate
    
    
    1.90
    %
    
    
    3.84
    %
    
    
    4.785
    %Volatility
    
    
    49
    %
    
    
    38
    %
    
    
    42
    %Dividend yield
    
    
    2.5
    %
    
    
    1.6
    %
    
    
    1.1
    %
  Performance Award Units
   -36-




---



##### Table of Contents



Weighted AverageGrant DateNumber of Units
    
    Fair ValueOutstanding 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
    
    
    
    11.55Awards 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
    
    
    0
    
    
    $
    0.00
 
 (1)
 Restricted Award Units
   Weighted AverageGrant DateNumber of Units
    
    Fair ValueOutstanding 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
    
    
    
    12.25Awards granted
    
    
    125,800
    
    
    
    2.99Awards vested
    
    
    
    
    
    
    Awards forfeited
    
    
    (24,850
    )
    
    
    8.31Outstanding at September 30, 2009
    
    
    153,550
    
    
    $
    5.30
  Directors Equity Plans
  -37-




---



##### Table of Contents



Employee Stock Purchase Plan
  Note J  Income Taxes
  2009
    
    2008
    
    2007United StatesUnited States
    
    $
    (18,551
    )
    
    $
    (8,204
    )
    
    $
    (6,216
    )Non - U.S.
    
    
    (815
    )
    
    
    3,668
    
    
    
    4,531$
    (19,366
    )
    
    $
    (4,536
    )
    
    $
    (1,685
    )
  2009
    
    2008
    
    2007Current:Federal
    
    $
    678
    
    
    $
    160
    
    
    $
    633Non - U.S.
    
    
    22
    
    
    
    985
    
    
    
    2,503State and local
    
    
    26
    
    
    
    86
    
    
    
    45Total current
    
    
    726
    
    
    
    1,231
    
    
    
    3,181Deferred:Federal, state & local
    
    
    30,100
    
    
    
    (3,208
    )
    
    
    (4,034
    )Non - U.S.
    
    
    312
    
    
    
    34
    
    
    
    (483
    )Total deferred
    
    
    30,412
    
    
    
    (3,174
    )
    
    
    (4,517
    )Total provision (benefit)
    
    $
    31,138
    
    
    $
    (1,943
    )
    
    $
    (1,336
    )
  2009
    
    2008
    
    2007Federal income tax (benefit) at statutory rate
    
    $
    (6,585
    )
    
    $
    (1,542
    )
    
    $
    (573
    )U.S. loss without tax benefit
    
    
    6,307
    
    
    
    
    
    
    
    State and local income taxes
    
    
    26
    
    
    
    (199
    )
    
    
    29Extraterritorial income exclusion
    
    
    
    
    
    
    
    
    
    
    (306
    )Research tax credit
    
    
    
    
    
    
    (243
    )
    
    
    (880
    )Foreign losses without tax benefit
    
    
    669
    
    
    
    324
    
    
    
    203(Benefit) tax on non-U.S. income
    
    
    (35
    )
    
    
    576
    
    
    
    3,062Foreign tax credit carryforwards
    
    
    
    
    
    
    (545
    )
    
    
    (2,242
    )Valuation allowance
    
    
    29,967
    
    
    
    
    
    
    
    15Accruals and tax law changes
    
    
    789
    
    
    
    (316
    )
    
    
    (752
    )Other
    
    
    
    
    
    
    2
    
    
    
    108Effective provision (benefit) for income taxes
    
    $
    31,138
    
    
    $
    (1,943
    )
    
    $
    (1,336
    )Effective provision (benefit) income tax rate
    
    
    160.8
    %
    
    
    (42.8
    )%
    
    
    (79.3
    )%
  -38-




---



##### Table of Contents



Deferred tax assets:
    
    2009
    
    2008Stock options
    
    $
    585
    
    
    $
    1,161Capitalized research and development
    
    
    13,936
    
    
    
    14,463Inventory
    
    
    3,425
    
    
    
    1,919Deferred compensation
    
    
    864
    
    
    
    1,444Tax credit carryforward
    
    
    7,751
    
    
    
    8,387Depreciation
    
    
    1,743
    
    
    
    1,418Warranty
    
    
    142
    
    
    
    205Medical
    
    
    204
    
    
    
    134State and local taxes
    
    
    2,202
    
    
    
    1,208Net operating losses
    
    
    9,702
    
    
    
    873Pension
    
    
    2,647
    
    
    
    Impaired assets
    
    
    910
    
    
    
    1,148Other
    
    
    1,992
    
    
    
    2,928Total deferred tax assets
    
    
    46,103
    
    
    
    35,288Deferred tax liabilities:Pension
    
    
    
    
    
    
    2,641Other
    
    
    
    
    
    
    74Total deferred tax liabilities
    
    
    
    
    
    
    2,715Valuation allowance
    
    
    (45,052
    )
    
    
    (1,058
    )Net deferred tax assets
    
    $
    1,051
    
    
    $
    31,515
   2009
    
    2008
    
    2007Balance at
beginning of year
    
    $
    1,058
    
    
    $
    1,180
    
    
    $
    1,141Charged to costs and expenses
    
    
    39,088
    
    
    
    415
    
    
    
    213Charged to other comprehensive loss
    
    
    5,024
    
    
    
    
    
    
    
    Charged to other accounts
    
    
    60
    
    
    
    (74
    )
    
    
    Deductions
    
    
    (178
    )
    
    
    (463
    )
    
    
    (174
    )Balance at end of year
    
    $
    45,052
    
    
    $
    1,058
    
    
    $
    1,180
   Year Expiration CommencesAlternative minimum tax credit
    
    $
    1,896
    
    
    IndefiniteForeign tax credit
    
    
    1,887
    
    
    
    2014-2019R&D credit
    
    
    3,966
    
    
    
    2014-2024U.S. net operating losses
    
    
    23,688
    
    
    
    2029Foreign net operating losses
    
    
    5,755
    
    
    2010-Indefinite
 -39-




---



##### Table of Contents



2009
    
    2008Balance Balance at October 1
    
    $
    5,389
    
    
    $
    6,440Tax positions related to the current year:Additions
    
    
    630
    
    
    
    679Tax positions related to prior years:Additions
    
    
    249
    
    
    
    2,055Subtractions
    
    
    
    
    
    
    (2,319
    )Settlements with tax authorities
    
    
    
    
    
    
    (474
    )Lapses in statutes of limitation
    
    
    (448
    )
    
    
    (992
    )Balance at September 30
    
    $
    5,820
    
    
    $
    5,389
  Note K  Severance and Other Restructuring Charges
    -40-




---



##### 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October 1, 2007
    
    $
    Expense recorded
    
    
    1,377Cash payments
    
    
    (116
    )Foreign currency translation change
    
    
    (9
    )BalanceSeptember 30, 2008
    
    $
    1,252Expense recorded
    
    
    4,823Adjustments to previously-recorded expense
    
    
    2Cash payments
    
    
    (4,077
    )BalanceSeptember 30, 2009
    
    $
    2,000
 Note L  Commitments and Contingencies
  2010
    
    $
    2,1702011
    
    
    1,7192012
    
    
    8512013
    
    
    3942014
    
    
    157After 2014
    
    
    497Total minimum operating lease payments
    
    $
    5,788
    
    
    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.
 -41-




---



##### Table of Contents




    
    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 M  Segment and Geographic Information
  2009
    
    
    2008
    
    
    2007Net sales:United States
    
    $
    26,907
    
    
    $
    37,115
    
    
    $
    37,275Other Americas
    
    
    1,845
    
    
    
    3,174
    
    
    
    2,785Germany
    
    
    12,786
    
    
    
    20,815
    
    
    
    18,238Other Europe
    
    
    21,117
    
    
    
    31,177
    
    
    
    29,416Japan
    
    
    12,851
    
    
    
    16,574
    
    
    
    16,688China
    
    
    12,998
    
    
    
    18,679
    
    
    
    16,084Other Asia
    
    
    14,023
    
    
    
    24,934
    
    
    
    23,172$
    102,527
    
    
    $
    152,468
    
    
    $
    143,658Long-lived assets:United States
    
    $
    9,751
    
    
    $
    11,749
    
    
    $
    12,294Other
    
    
    1,349
    
    
    
    1,403
    
    
    
    1,405$
    11,100
    
    
    $
    13,152
    
    
    $
    13,699
 Note N Subsequent Events
  -42-




---



##### Table of Contents



Unaudited Quarterly Results of Operations
  First
    
    Second
    
    Third
    
    FourthFiscal 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
    )Fiscal 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
    )(5)Net income (loss)
    
    
    889
    
    
    
    1,185
    
    
    
    (39
    )
    
    
    (4,628
    )Diluted earnings (loss) per share
    
    
    .05
    
    
    
    .07
    
    
    
    (.00
    )
    
    
    (.29
    )
 (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 on taken on U.S. deferred tax assets
in the first quarter of fiscal 2009.(5)
    
    Included in loss before income taxes for the fourth quarter of fiscal 2008 are severance and
related charges of $1,377.
 
 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
  -43-




---



##### Table of Contents



Changes in Internal Control Over Financial Reporting
  Chief Executive and Chief Financial Officer Certifications
  
 ITEM 9B  OTHER INFORMATION
  
 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
  -44-




---



##### 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
    
    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
    
    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.)10.9*
    
    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.)10.10*
    
    Amendment to Employment Agreement with Mark J. Plush dated
December 31, 2008. (Reference is made to Exhibit 10.1 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.)10.11*
    
    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.)10.12*
    
    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.)10.13*
    
    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.)10.14*
    
    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.)10.15*
    
    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.)10.16*
    
    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.)
 -45-




---



##### Table of Contents



ExhibitNumber
    
    Description10.17*
    
    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.)10.18*
    
    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.)10.19*
    
    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.)10.20*
    
    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.)10.21*
    
    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.)10.22*
    
    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.)10.23*
    
    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.)10.24*
    
    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 10.1 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.)10.25*
    
    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 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.)10.27*
    
    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. 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.)10.29*
    
    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.)10.30*
    
    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.)10.31*
    
    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.)10.32*
    
    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 Business Conduct & Ethics.22.1
    
    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: 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).
 ITEM 15(b) EXHIBITS
  ITEM 15(c) FINANCIAL STATEMENT SCHEDULES
  -46-




---



##### Table of Contents



SIGNATURES
  Keithley Instruments, Inc.
(Registrant)By:
    /s/ Joseph P. KeithleyJoseph P. Keithley, Chairman, President and Chief Executive OfficerDate:
    
    December 14, 2009  Signature
    
    Title
    
    Date/s/ Joseph P. Keithley

Joseph P. Keithley
    
    Chairman of the Board of Directors, President
and Chief Executive Officer (Principal
Executive Officer)
    
    12/14/09

/s/ Mark J. Plush

Mark J. Plush
    
    Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
    
    12/14/09/s/ Brian R. Bachman

Brian R. Bachman
    
    Director
    
    12/14/09/s/ James B. Griswold

James B. Griswold
    
    Director
    
    12/14/09/s/ Leon J. Hendrix,
Jr.

Leon J. Hendrix, Jr.
    
    Director
    
    12/14/09/s/ Brian J. Jackman

Brian J. Jackman
    
    Director
    
    12/14/09/s/ N. Mohan Reddy

N. Mohan Reddy
    
    Director
    
    12/14/09/s/ Thomas A. Saponas

Thomas A. Saponas
    
    Director
    
    12/14/09/s/ Barbara V. Scherer

Barbara V. Scherer
    
    Director
    
    12/14/09
 -47-