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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x  Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934For the quarterly period ended December 31, 2002 OR


o  Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Commission File Number 1-9965

KEITHLEY INSTRUMENTS, INC.

(Exact name of registrant as specified in its charter)

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Ohio                                                           |  | 34-0794417                          
|                                                              
|                                                              
|                                                              
|                                                              
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification No.)

28775 Aurora Road, Solon, Ohio 44139
(Address of principal executive offices) (Zip Code)

Registrants telephone number, including area code: (440) 248-0400

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

YES ü    NO

Indicate by check whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

YES      NO ü

As of February 12, 2003 there were outstanding 13,320,856 Common Shares,
without par value (net of shares held in treasury), and 2,150,502 Class B
Common Shares, without par value.



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TABLE OF CONTENTS



|                                       |                                                                                                |                                            |  |  |  |  |  | 
|-------------------------------------- | ---------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION         
|                                       | ITEM 1. Financial Statements.                                                                 
|                                       |                                                                                                | Consolidated Balance Sheets               
|                                       |                                                                                                | Consolidated Statements of Income         
|                                       |                                                                                                | Consolidated Statements of Cash Flows     
|                                       |                                                                                                | Notes to Consolidated Financial Statements
|                                       | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
|                                       | ITEM 3. Quantitative and Qualitative Disclosure About Market Risk.                            
|                                       | ITEM 4. Controls and Procedures.                                                              
|PART II. OTHER INFORMATION            
|                                       | ITEM 1. Legal Proceedings                                                                     
|                                       | ITEM 6. Exhibits and Reports on Form 8-K                                                      
|SIGNATURES                            
|EX-11 Statement re: Computation of EPS



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##### Table of Contents






PART I. FINANCIAL INFORMATION




ITEM 1. Financial Statements.




KEITHLEY INSTRUMENTS, INC. CONSOLIDATED BALANCE SHEETS (In Thousands of Dollars)
(Unaudited)


|                                           |                                         |                            |                      |        |              |        |               |        |        |        |         |        |        |        | 
|------------------------------------------ | --------------------------------------- | -------------------------- | -------------------- | ------ | ------------ | ------ | ------------- | ------ | ------ | ------ | ------- | ------ | ------ | ------ | 
|                                           |                                         |                            |                      |        | DECEMBER 31, |        | SEPTEMBER 30,
|                                           |                                         |                            |                      |        |              |        |              
|                                           |                                         |                            |                      |        | 2002         |        | 2001          |        | 2002  
|                                           |                                         |                            |                      |        |              |        |               |        |       
|Assets                                     |                                         |                            |                      |        |              |        |               |        |        |        |         |       
|                                          
|                                          
|                                          
|                                          
|Current assets:                            |                                         |                            |                      |        |              |        |               |        |        |        |         |       
|                                          
|                                          
|                                          
|                                          
|                                           | Cash and cash equivalents               |                            | $                    | 19,482 |              |        | $             | 20,938 |        |        | $       | 21,707 |       
|                                          
|                                          
|                                          
|                                          
|                                           | Short-term investments                  |                            |                      | 27,832 |              |        |               | 26,919 |        |        |         | 28,171 |       
|                                          
|                                          
|                                          
|                                          
|                                           | Refundable income taxes                 |                            |                      | 680    |              |        |               | 6,112  |        |        |         | 954    |       
|                                          
|                                          
|                                          
|                                          
|                                           | Accounts receivable and other, net      |                            |                      | 13,031 |              |        |               | 11,953 |        |        |         | 14,140 |       
|                                          
|                                          
|                                          
|                                          
|                                           | Inventories:                            |                            |                      |        |              |        |               |        |        |        |         |        |       
|                                          
|                                          
|                                          
|                                          
|                                           |                                         | Raw materials              |                      |        | 6,592        |        |               |        | 9,902  |        |         |        | 7,184  |       
|                                          
|                                          
|                                          
|                                          
|                                           |                                         | Work in process            |                      |        | 871          |        |               |        | 2,011  |        |         |        | 1,066  |       
|                                          
|                                          
|                                          
|                                          
|                                           |                                         | Finished products          |                      |        | 1,558        |        |               |        | 2,355  |        |         |        | 1,862  |       
|                                           |                                         |                            |                      |        |              |        |               |        |        |        |         |       
|                                           |                                         |                            | Total inventories    |        |              | 9,021  |               |        |        | 14,268 |         |        |        | 10,112 | 
|                                          
|                                          
|                                          
|                                          
|                                           | Deferred income taxes                   |                            |                      | 4,391  |              |        |               | 10,251 |        |        |         | 3,917  |       
|                                          
|                                          
|                                          
|                                          
|                                           | Other current assets                    |                            |                      | 1,729  |              |        |               | 1,415  |        |        |         | 1,178  |       
|                                           |                                         |                            |                      |        |              |        |               |        |        |        |         |       
|                                           |                                         |                            | Total current assets |        |              | 76,166 |               |        |        | 91,856 |         |        |        | 80,179 | 
|                                           |                                         |                            |                      |        |              |        |               |        |        |        |         |       
|Property, plant and equipment, at cost     |                                         |                            | 44,155               |        |              |        | 42,010        |        |        |        | 43,171  |       
|                                          
|                                          
|                                          
|                                          
|Less-Accumulated depreciation              |                                         |                            | 30,211               |        |              |        | 28,283        |        |        |        | 29,363  |       
|                                           |                                         |                            |                      |        |              |        |               |        |        |        |         |       
|Net property, plant and equipment          |                                         |                            | 13,944               |        |              |        | 13,727        |        |        |        | 13,808  |       
|                                           |                                         |                            |                      |        |              |        |               |        |        |        |         |       
|Deferred income taxes                      |                                         |                            | 17,027               |        |              |        | 5,662         |        |        |        | 17,013  |       
|                                          
|                                          
|                                          
|                                          
|Other assets                               |                                         |                            | 9,782                |        |              |        | 8,954         |        |        |        | 9,371   |       
|                                           |                                         |                            |                      |        |              |        |               |        |        |        |         |       
|Total assets                               |                                         | $                          | 116,919              |        |              | $      | 120,199       |        |        | $      | 120,371 |       
|                                           |                                         |                            |                      |        |              |        |               |        |        |        |         |       
|Liabilities and Shareholders Equity       |                                         |                            |                      |        |              |        |               |        |        |        |         |       
|                                          
|                                          
|                                          
|                                          
|Current liabilities:                       |                                         |                            |                      |        |              |        |               |        |        |        |         |       
|                                          
|                                          
|                                          
|                                          
|                                           | Short-term debt                         |                            | $                    | 573    |              |        | $             |       |        |        | $       | 539    |       
|                                          
|                                          
|                                          
|                                          
|                                           | Accounts payable                        |                            |                      | 6,166  |              |        |               | 5,731  |        |        |         | 7,170  |       
|                                          
|                                          
|                                          
|                                          
|                                           | Accrued payroll and related expenses    |                            |                      | 4,124  |              |        |               | 4,650  |        |        |         | 4,380  |       
|                                          
|                                          
|                                          
|                                          
|                                           | Other accrued expenses                  |                            |                      | 4,950  |              |        |               | 3,844  |        |        |         | 4,335  |       
|                                          
|                                          
|                                          
|                                          
|                                           | Income taxes payable                    |                            |                      | 4,418  |              |        |               | 1,609  |        |        |         | 4,329  |       
|                                           |                                         |                            |                      |        |              |        |               |        |        |        |         |       
|                                           |                                         | Total current liabilities  |                      |        | 20,231       |        |               |        | 15,834 |        |         |        | 20,753 |       
|                                           |                                         |                            |                      |        |              |        |               |        |        |        |         |       
|Long-term debt                             |                                         |                            |                     |        |              |        | 3,000         |        |        |        |        |       
|                                          
|                                          
|                                          
|                                          
|Other long-term liabilities                |                                         |                            | 6,964                |        |              |        | 5,994         |        |        |        | 6,632   |       
|                                          
|                                          
|                                          
|                                          
|Deferred income taxes                      |                                         |                            | 552                  |        |              |        | 7             |        |        |        | 538     |       
|                                          
|                                          
|                                          
|                                          
|Shareholders equity:                      |                                         |                            |                      |        |              |        |               |        |        |        |         |       
|                                          
|                                          
|                                          
|                                          
|                                           | Paid-in-capital                         |                            |                      | 26,685 |              |        |               | 26,532 |        |        |         | 26,766 |       
|                                          
|                                          
|                                          
|                                          
|                                           | Earnings reinvested in the business     |                            |                      | 71,018 |              |        |               | 75,250 |        |        |         | 72,087 |       
|                                          
|                                          
|                                          
|                                          
|                                           | Accumulated other comprehensive loss    |                            |                      | (345   | )            |        |               | (914   | )      |        |         | (349   | )     
|                                          
|                                          
|                                          
|                                          
|                                           | Unamortized portion of restricted stock |                            |                      | (98    | )            |        |               | (141   | )      |        |         | (108   | )     
|                                          
|                                          
|                                          
|                                          
|                                           | Common shares held in treasury, at cost |                            |                      | (8,088 | )            |        |               | (5,363 | )      |        |         | (5,948 | )     
|                                           |                                         |                            |                      |        |              |        |               |        |        |        |         |       
|                                           |                                         | Total shareholders equity |                      |        | 89,172       |        |               |        | 95,364 |        |         |        | 92,448 |       
|                                           |                                         |                            |                      |        |              |        |               |        |        |        |         |       
|Total liabilities and shareholders equity |                                         | $                          | 116,919              |        |              | $      | 120,199       |        |        | $      | 120,371 |       
|                                           |                                         |                            |                      |        |              |        |               |        |        |        |         |       

The accompanying notes are an integral part of the financial statements.

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KEITHLEY INSTRUMENTS, INC. CONSOLIDATED STATEMENTS OF INCOME (In Thousands of Dollars Except for Per Share Data)
(Unaudited)


|                                             |  |                      |        |      |  |   |        |  
|-------------------------------------------- |  | -------------------- | ------ | ---- |  | - | ------ | -
|                                             |  | FOR THE THREE MONTHS
|                                             |  | ENDED DECEMBER 31,  
|                                             |  |                     
|                                             |  | 2002                 |        | 2001
|                                             |  |                      |        |     
|Net sales                                    |  | $                    | 26,199 |      |  | $ | 20,424 |  
|                                            
|                                            
|                                            
|                                            
|Cost of goods sold                           |  |                      | 11,557 |      |  |   | 9,181  |  
|                                            
|                                            
|                                            
|                                            
|Selling, general and administrative expenses |  |                      | 12,384 |      |  |   | 10,390 |  
|                                            
|                                            
|                                            
|                                            
|Product development expenses                 |  |                      | 3,210  |      |  |   | 3,576  |  
|                                            
|                                            
|                                            
|                                            
|Net financing income                         |  |                      | (171   | )    |  |   | (266   | )
|                                             |  |                      |        |      |  |   |        |  
|Loss before income taxes                     |  |                      | (781   | )    |  |   | (2,457 | )
|                                            
|                                            
|                                            
|                                            
|Income tax benefit                           |  |                      | (274   | )    |  |   | (823   | )
|                                             |  |                      |        |      |  |   |        |  
|Net loss                                     |  | $                    | (507   | )    |  | $ | (1,634 | )
|                                             |  |                      |        |      |  |   |        |  
|Basic loss per share                         |  | $                    | (0.03  | )    |  | $ | (0.10  | )
|                                             |  |                      |        |      |  |   |        |  
|Diluted loss per share                       |  | $                    | (0.03  | )    |  | $ | (0.10  | )
|                                             |  |                      |        |      |  |   |        |  
|Cash dividends per Common Share              |  | $                    | 0.0375 |      |  | $ | 0.0375 |  
|                                             |  |                      |        |      |  |   |        |  
|Cash dividends per Class B
Common Share      |  | $                    | 0.0300 |      |  | $ | 0.0300 |  
|                                             |  |                      |        |      |  |   |        |  

The accompanying notes are an integral part of the financial statements.

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KEITHLEY INSTRUMENTS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of Dollars)
(Unaudited)


|                                                     |                                                     |              |        |                      |    |      |        |        |     | 
|---------------------------------------------------- | --------------------------------------------------- | ------------ | ------ | -------------------- | -- | ---- | ------ | ------ | --- | 
|                                                     |                                                     |              |        | FOR THE THREE MONTHS
|                                                     |                                                     |              |        | ENDED DECEMBER 31,  
|                                                     |                                                     |              |        |                     
|                                                     |                                                     |              |        | 2002                 |    | 2001
|                                                     |                                                     |              |        |                      |    |     
|Cash flows from operating activities:                |                                                     |              |        |                      |    |      |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net loss                                            |              | $      | (507                 | )  |      | $      | (1,634 | )  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Expenses not requiring outlay of cash               |              |        | 1,112                |    |      |        | 955    |    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Changes in working capital                          |              |        | 969                  |    |      |        | (1,024 | )  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other operating activities                          |              |        | (299                 | )  |      |        | 96     |    
|                                                     |                                                     |              |        |                      |    |      |        |       
|                                                     | Net cash provided by (used in) operating activities |              |        | 1,275                |    |      |        | (1,607 | )  
|                                                     |                                                     |              |        |                      |    |      |        |       
|Cash flows from investing activities:                |                                                     |              |        |                      |    |      |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Payments for property, plant, and equipment         |              |        | (1,098               | )  |      |        | (969   | )  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Purchase of investments                             |              |        | (5,073               | )  |      |        | (6,035 | )  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Sale of investments                                 |              |        | 5,240                |    |      |        |       |    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other investing activities, net                     |              |        |                     |    |      |        | 4      |    
|                                                     |                                                     |              |        |                      |    |      |        |       
|                                                     | Net cash used in investing activities               |              |        | (931                 | )  |      |        | (7,000 | )  
|                                                     |                                                     |              |        |                      |    |      |        |       
|Cash flows from financing activities:                |                                                     |              |        |                      |    |      |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Increase in short-term debt                         |              |        | 26                   |    |      |        |       |    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Cash dividends                                      |              |        | (561                 | )  |      |        | (570   | )  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Purchase of treasury stock                          |              |        | (2,355               | )  |      |        |       |    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from employee stock purchase plans         |              |        | 65                   |    |      |        | 54     |    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other                                               |              |        |                     |    |      |        | 67     |    
|                                                     |                                                     |              |        |                      |    |      |        |       
|                                                     | Net cash used in financing activities               |              |        | (2,825               | )  |      |        | (449   | )  
|                                                     |                                                     |              |        |                      |    |      |        |       
|Effect of changes in foreign currency exchange rates |                                                     |              | 256    |                      |    |      | (97    | )     
|                                                     |                                                     |              |        |                      |    |      |        |       
|Change in cash and cash equivalents                  |                                                     |              | (2,225 | )                    |    |      | (9,153 | )     
|                                                    
|                                                    
|                                                    
|                                                    
|Cash and cash equivalents at beginning of period     |                                                     |              | 21,707 |                      |    |      | 30,091 |       
|                                                     |                                                     |              |        |                      |    |      |        |       
|Cash and cash equivalents at end of period           |                                                     | $            | 19,482 |                      |    | $    | 20,938 |       
|                                                     |                                                     |              |        |                      |    |      |        |       
|Supplemental disclosures of cash flow information    |                                                     |              |        |                      |    |      |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Cash (refunded) paid during the period for:         |              |        |                      |    |      |        |        |    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                     | Income taxes |        | $                    | (6 | )    |        | $      | 316 | 
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                     | Interest     |        |                      | 40 |      |        |        | 27  | 



Disclosure of accounting
policy For purposes of this statement, the Company considers all highly liquid
investments with maturities of three months or less when purchased to be cash
equivalents.


The accompanying notes are an integral part of the financial statements.

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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (In thousands of dollars, except for share data)




|A. |  | Management Representation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The consolidated financial statements at December 31, 2002 and 2001, and for
the three month periods then ended have not been examined by independent
accountants, but in the opinion of the management of Keithley Instruments,
Inc., (the Company or Keithley) all adjustments necessary to a fair
statement of the consolidated balance sheet, consolidated statement of
income and consolidated statement of cash flows for those periods have been
included. All adjustments included are of a normal recurring nature.
|  
|B. |  | Earnings Per Share Denominator                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   |  | The weighted average number of shares and share equivalents used in
determining earnings per share was 15,488,886 for the quarter ended December
31, 2002, and 15,624,502 for the quarter ended December 31, 2001. Both
Common Shares and Class B Common Shares are included in calculating the
weighted average number of shares outstanding.                                                                                                                                                                                  
|  
|C. |  | Stock Repurchase Programs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  
|   |  | On December 11, 2000, the Company announced its Board of Directors had
approved an open market stock repurchase program. Under the terms of the
program, the Company may purchase up to 2,000,000 Common Shares, or
approximately 13 percent of shares outstanding, over a three-year period.
The purpose of the repurchase program is to offset the dilutive effect of
stock option and stock purchase plans. Common Shares held in treasury may
be reissued in settlement of stock purchases under these plans.               
|  
|   |  | The following table summarizes the Companys stock repurchase activity for
the three months ended December 31, 2002:                                                                                                                                                                                                                                                                                                                                                                                                            

|                 |         |              |                    |               |                    |                    |                   |                   |                    |         |                  |  |  |           |  |  | 
|---------------- | ------- | ------------ | ------------------ | ------------- | ------------------ | ------------------ | ----------------- | ----------------- | ------------------ | ------- | ---------------- |  |  | --------- |  |  | 
|                 |         |              |                    |               |                    |                    |                   |                   |                    |         | Number of shares |  |  |           | 
|                 |         |              | Average price paid |               | Identity of        |                    | purchased as part |                   | Maximum number of 
|                 |         |              | per share          |               | broker-dealer used |                    | of a publicly     |                   | shares that remain
|Total number of  |         | (including   |                    | to effect the |                    | announced          |                   | to be purchased  
|shares purchased |         | commissions) |                    | purchases     |                    | repurchase program |                   | under the program
|                 |         |              |                    |               |                    |                    |                   |                  
|                 |         |              |                    |               |                    | Bear, Sterns       |                   |                   |                    |         |                  |  |  |          
|                
|                
|                
|                
|                 | 210,711 |              | $                  | 11.18         |                    |                    | Securities Corp   |                   |                    | 210,711 |                  |  |  | 1,256,300 | 



| |  | At December 31, 2002, 523,649 Common Shares purchased under the Companys
share repurchase programs remained in treasury at an average cost of $13.60
per share including commissions. Also, included in the Common shares held
in treasury, at cost caption of the consolidated balance sheets are shares
repurchased to settle non-employee Directors fees deferred pursuant to the
Keithley Instruments, Inc. 1996 Outside Directors Deferred Stock Plan. The
total number of shares held in treasury at December 31, 2002 was 655,142.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|D. |  | Accounting for Derivatives and Hedging Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | In accordance with the provisions of Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities, all of the Companys derivative instruments are recognized on
the balance sheet at their fair value. To hedge sales, the Company
currently utilizes foreign exchange forward contracts or option contracts to
sell foreign currencies to fix the exchange rates related to near-term sales
and effectively fix the Companys cost of goods sold. Underlying hedged
transactions are recorded at hedged rates, therefore realized and unrealized
gains and losses are recorded when the hedged transactions occur. The
Company also has an interest rate swap instrument. The estimated fair value
of the swap instrument is determined through quotes from the related
financial institutions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   |  | On the date the derivative contract is entered into, the Company designates
its derivative as either a hedge of the fair value of a recognized asset or
liability (fair value hedge), as a hedge of the variability of cash flows
to be received (cash flow hedge), or as a foreign-currency cash flow hedge
(foreign currency hedge). Changes in the fair value of a derivative that
is highly effective as, and that is designated and qualifies as, a fair
value hedge, along with the gain or loss on the hedged asset or liability
that is attributable to the hedged risk are recorded in current-period
earnings. Changes in the fair value of a derivative that is highly
effective and that is designed and qualifies as a cash flow hedge are
recorded in other comprehensive income until earnings are affected by the
transaction in the underlying asset. Changes in the fair value of
derivatives that are highly effective and that qualify as foreign currency
hedges are recorded in either current period income or other comprehensive
income, depending on whether the hedge transaction is a fair value hedge or
a cash flow hedge. At December 31, 2002, the forward exchange forward
contracts were designed as cash flow hedges. The interest rate swap
instrument was determined to be an ineffective hedge and accordingly,
changes in its fair market value are recorded in the Companys records as
income or expense.
|  
|   |  | The Company documents all relationships between hedging instruments and
hedged items, as well as its risk-management objective and strategy for
undertaking various hedge transactions. The Company also assesses whether
the derivatives that are used in hedging transactions are highly effective
in offsetting changes in cash flows of hedged items. When it is determined
that a derivative is not highly effective as a hedge, the Company
discontinues hedge accounting prospectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

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|E. |  | Comprehensive Income                                                                     
|-- |  | -----------------------------------------------------------------------------------------
|  
|   |  | Comprehensive income for the three months ended December 31, 2002 and 2001
is as follows:

|                                                            |  |              |      |      |  |   |        |  
|----------------------------------------------------------- |  | ------------ | ---- | ---- |  | - | ------ | -
|                                                            |  | December 31,
|                                                            |  |             
|                                                            |  | 2002         |      | 2001
|                                                            |  |              |      |     
|Net loss                                                    |  | $            | (507 | )    |  | $ | (1,634 | )
|                                                           
|                                                           
|                                                           
|                                                           
|Unrealized (losses) gains on value
of derivative securities |  |              | (177 | )    |  |   | 91     |  
|                                                           
|                                                           
|                                                           
|                                                           
|Net unrealized investment losses                            |  |              | (113 | )    |  |   | (108   | )
|                                                           
|                                                           
|                                                           
|                                                           
|Foreign currency translation
adjustments                    |  |              | 293  |      |  |   | (189   | )
|                                                            |  |              |      |      |  |   |        |  
|Comprehensive loss                                          |  | $            | (504 | )    |  | $ | (1,840 | )
|                                                            |  |              |      |      |  |   |        |  



|F. |  | Segment and Geographic Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The Companys business is to develop test and measurement-based solutions to
verify customers product performance or aid in their product development
process. The Companys customers are engineers, technicians and scientists
in manufacturing, product development and research functions within a range
of industries. Although the Companys products vary in capability,
sophistication, use and price, they basically test, measure and analyze
electrical and physical properties, and in some cases RF or light. As such,
the Companys management has determined that the Company operates in a
single industry segment. The operations by geographic area are presented
below. The basis for attributing revenues from external customers to a
geographic area is the location of the customer.

|              |  |                            |        |      |  |   |        | 
|------------- |  | -------------------------- | ------ | ---- |  | - | ------ | 
|              |  | For the Three Months Ended
|              |  | December 31,              
|              |  |                           
|              |  | 2002                       |        | 2001
|              |  |                            |        |     
|Net sales:    |  |                            |        |      |  |   |        | 
|             
|             
|             
|             
|United States |  | $                          | 8,925  |      |  | $ | 7,480  | 
|             
|             
|             
|             
|Europe        |  |                            | 8,600  |      |  |   | 8,245  | 
|             
|             
|             
|             
|Pacific Basin |  |                            | 7,587  |      |  |   | 3,591  | 
|             
|             
|             
|             
|Other         |  |                            | 1,087  |      |  |   | 1,108  | 
|              |  |                            |        |      |  |   |        | 
|              |  | $                          | 26,199 |      |  | $ | 20,424 | 
|              |  |                            |        |      |  |   |        | 

|                   |  |                 |        |      |  |   |        | 
|------------------ |  | --------------- | ------ | ---- |  | - | ------ | 
|                   |  | At December 31,
|                   |  |                
|                   |  | 2002            |        | 2001
|                   |  |                 |        |     
|Long-lived assets: |  |                 |        |      |  |   |        | 
|                  
|                  
|                  
|                  
|United States      |  | $               | 19,458 |      |  | $ | 19,406 | 
|                  
|                  
|                  
|                  
|Germany            |  |                 | 3,491  |      |  |   | 2,817  | 
|                  
|                  
|                  
|                  
|Other              |  |                 | 777    |      |  |   | 458    | 
|                   |  |                 |        |      |  |   |        | 
|                   |  | $               | 23,726 |      |  | $ | 22,681 | 
|                   |  |                 |        |      |  |   |        | 

6



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##### Table of Contents





|G. |  | Guarantors Disclosure Requirements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | In November 2002, the Financial Accounting Standards Board issued FASB
Interpretation No. 45, Guarantors Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others
(FIN 45). FIN 45 elaborates on the disclosures to be made by a guarantor
in its financial statements about its obligations under certain guarantees
it has issued. It also clarifies that a guarantor is required to recognize,
at the inception of a guarantee, a liability for the fair value of the
obligation undertaken in issuing the guarantee. The initial recognition and
initial measurement provisions of FIN 45 are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002. The
disclosure requirements are effective for financial statements of interim or
annual periods ending after December 15, 2002.
|  
|   |  | Guarantee of original lease:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   |  | The Company has assigned the lease of its former office space in Reading,
Great Britain to a third party. In the event the third party defaults on
the monthly lease payments, the Company would be responsible for the
payments until the lease expires on July 14, 2009. If the third party were
to default, the maximum amount of future payments (undiscounted) the Company
would be required to make under the guarantee would be approximately $1,239
through July 14, 2009. The Company has not recorded any liability for this
item, as it is does not believe that it is probable that the third party
will default on the lease payments.                                                                                                                                                                                                                                     
|  
|   |  | Product warranties:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   |  | Generally, the Companys products are covered under a one-year warranty;
however, certain products are covered under a three-year warranty. It is
the Companys policy to accrue for all product warranties based upon
historical in-warranty repair data. In addition, the Company accrues for
specifically identified product performance issues.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   |  | A reconciliation of the estimated changes in the aggregated product warranty
liability for the first quarter of fiscal 2003 is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

|                                                                                                     |  |   |       |  
|---------------------------------------------------------------------------------------------------- |  | - | ----- | -
|Balance at October 1, 2002                                                                           |  | $ | 1,415 |  
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Accruals for warranties issued during the period                                                     |  |   | 365   |  
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Accruals related to pre-existing warranties
(including changes in estimates and expiring warranties) |  |   | (208  | )
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Settlements made (in cash or in kind) during the period                                              |  |   | (229  | )
|                                                                                                     |  |   |       |  
|Balance at December 31, 2002                                                                         |  | $ | 1,343 |  
|                                                                                                     |  |   |       |  

7



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ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.

Critical Accounting Policies and Estimates

Management has identified the Companys critical accounting policies. These
policies have the potential to have a significant impact on the Companys
financial statements, either because of the significance of the financial
statement item to which they relate, or because they require judgment and
estimation due to the uncertainty involved in measuring, at a specific point in
time, events which will be settled in the future.

Use of estimates:

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the reported financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
materially from those estimates.

Inventories:

Inventories are stated at the lower of cost or market. Cost is determined
based on a currently-adjusted standard, which approximates actual cost on a
first-in, first-out basis. The Company periodically reviews its recorded
inventory and estimates a reserve for obsolete or slow-moving items. Such
estimates are difficult to make under current economic conditions. If actual
demand and market conditions are less favorable than those projected by
management, additional reserves may be required. If actual market conditions
are more favorable than anticipated, the Companys cost of sales will be lower
than expected in that period.

Income taxes:

The Companys provision for income taxes and the determination of the resulting
deferred tax assets and liabilities involves a significant amount of judgment
by management. The quarterly provision for income taxes or benefits is based
upon an estimate of pretax financial accounting income or loss for the full
year in each of the jurisdictions in which the Company operates, and is
impacted by various differences between financial accounting income or loss and
taxable income or loss. Judgment is also applied in determining whether the
deferred tax assets will be realized in full or in part.

Stock compensation plans:

The Company has two active stock option plans and one inactive plan. The two
active stock option plans are the 2002 Stock Incentive Plan and the 1997
Directors Stock Option Plan. The Company also has an employee stock purchase
plan. The Company has chosen the disclosure provisions of Statement of
Financial Accounting Standards No. 123, Accounting for Stock-based
Compensation (SFAS 123), and as such, no compensation cost for the stock
option and stock purchase plans has been recognized in the Companys
consolidated financial statements. For disclosure purposes, the valuation of
stock issued to employees requires management to determine estimates for the
expected life of the options, the expected risk-free interest rate during the
expected life of the option, the expected volatility of the stock price over
the expected life of

8



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##### Table of Contents



the option, and the expected dividend yield. These
estimations are significant factors in the valuation model and actual results
could differ materially from these estimates. Currently, management expects to
continue to follow the disclosure provisions of SFAS 123 and not record
compensation expense related to these stock compensation plans.

Results of Operations  In Thousands of Dollars Except for Per Share Data

First Quarter Fiscal 2003 Compared with First Quarter Fiscal 2002

The Company reported a net loss for the first quarter of fiscal 2003 of $507,
or $0.03 per share, compared to a net loss of $1,634, or $0.10 per share, in
last years first quarter.

Net sales of $26,199 for the first quarter of fiscal 2003 increased 28 percent
from sales of $20,424 in the prior years first quarter. Sales were higher in
all major geographies with sales in the United States up 19 percent, Europe up
4 percent and the Pacific Basin region up 111 percent from the prior years
quarter. Sequentially, sales decreased 8 percent from the fourth quarter of
fiscal 2002.

Orders of $23,049 for the first quarter increased 15 percent from last years
orders of $20,080. Geographically, orders were up 14 percent in the United
States, up 88 percent in the Pacific Basin, and down 17 percent in Europe when
compared to the prior year. Compared to the prior years first quarter, orders
from semiconductor customers increased 57 percent, wireless communications
customers increased 41 percent, electronic components and subassembly
manufacturers increased 4 percent, and research and education increased 7
percent. For the first quarter, semiconductor orders comprised approximately
20 percent of the total, wireless communications orders were approximately 15
percent, electronic components and subassembly manufacturers orders were
approximately 20 percent, research and education made up about 25 percent,
while optoelectronics orders made up less than 5 percent. Sequentially, orders
decreased 12 percent from the fourth quarter of fiscal 2002. Order backlog
decreased $2,467 during the quarter to $12,310 at December 31, 2002.

Cost of goods sold as a percentage of net sales decreased to 44.1 percent from
44.9 percent in the prior years first quarter. The improvement was due to
better gross margins in Japan resulting from the opening of a direct sales
office in April 2002, an approximately 12 percent weaker U.S. dollar versus
European currencies, and fixed costs being spread over higher sales volumes.
This was partially offset by higher start-up costs related to the Companys
lean manufacturing initiative. The effect of foreign exchange hedging on cost
of goods sold was immaterial in both periods.

Selling, general and administrative expenses of $12,384 increased $1,994, or 19
percent, from last years first quarter, although such expenses decreased as a
percentage of net sales to 47.3 percent from 50.9 percent last year. The
increase in dollars was due to one-time costs for building a direct sales force
in the United States as the Company paid commissions to sales representatives
and salaries to its own sales employees during the quarter, higher costs
associated with the Japanese sales office that opened April 1, 2002, costs
associated with the ERP/CRM implementation, and slightly higher commissions on
higher sales.

9



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##### Table of Contents



Product development expenses for the quarter were $3,210, or 12.3 percent of
sales, down $366, or 10 percent, from last years $3,576, or 17.5
percent of sales. Much of the decrease was associated with lower costs for
consultants and developmental supplies.

The Company generated net financing income during the quarter of $171 versus
$266 in the prior year. Lower interest rates caused financing income to
decrease from the prior year.

The Company recorded a tax benefit for the quarter at a 35.0 percent rate.
Last years first quarter tax benefit was recorded at a 33.5 percent.

At December 31, 2002, the total number of employees was 624 compared to 612 at
September 30, 2002. The increase was primarily due to the hiring of a direct
sales force in the United States. Effective January 1, 2003, the Company began
selling in the United States using its own employees. The sales force is fully
staffed with approximately 30 people.

Liquidity and Capital Resources

During the first quarter, net cash provided by operating activities was $1,275.
Cash was used to purchase 210,700 shares of the Companys common stock through
its stock repurchase program for $2,355. Additionally, the Company used $1,098
for capital expenditures, and $561 to pay dividends during the quarter. Cash
and cash equivalents decreased by $2,225 during the quarter to $19,482 at
December 31, 2002. Short-term investments decreased by $339 to $27,832 at
December 31, 2002. Short-term debt was $573 and there was no long-term debt at
December 31, 2002.

The Company expects to finance capital spending, working capital requirements
and the stock repurchase program with cash on hand and cash provided by
operations. At December 31, 2002, the Company had available unused lines of
credit with domestic and foreign banks aggregating $16,532 of which $6,532 were
short-term and $10,000 were long-term.

Outlook

Conditions throughout the electronics industry remain depressed, especially in
the optoelectronic and wireline telecommunications and semiconductor segments.
Based on current expectations, management believes sales for the second quarter
will range between $23,000 and $26,000. At the low end of the sales range, the
Company would expect a pretax loss in the teens as a percentage of sales. At
the high end of the sales range, the Company would expect a loss in the single
digits as a percentage of sales.

Factors That May Affect Future Results

Statements included in the Liquidity and Capital Resources and Outlook sections
of Managements Discussion and Analysis of Financial Condition and Results of
Operations and elsewhere in this report constitute forward-looking
statements, as that term is defined in the Private Securities Litigation Reform
Act of 1995. Forward-looking statements generally include

10



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##### Table of Contents



words such as
could, expects, believes, intends, estimates, plans, and similar
expressions. Such statements are subject to certain risks and uncertainties
that could cause actual results to differ materially from those projected.
Some of the factors that may affect future results are discussed below. Except
as otherwise required by applicable securities laws, the Company disclaims any
intention or obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.

The Company is subject to global economic and market conditions, including the
current conditions affecting the results of the Companys customers in certain
segments of the electronics industry. The electronics industry is cyclical and
the Company has experienced a slowdown in orders, primarily from its
semiconductor, wireless and optoelectronics customers, as a result of business
conditions in the electronics industry. The Companys results have been and
could continue to be adversely affected depending upon future business
conditions in these industries. In addition, orders are cancelable by
customers and consequently orders outstanding at the end of a reporting period
may not result in realized sales in the future. The Company may experience a
decline in sales as a result of the current economic conditions and the lack of
visibility relating to future orders. In response to the current economic
conditions, the Company is managing its cost structure to reallocate resources
to areas that it feels will provide the best long-term benefit to its customers
and shareholders. A failure by the Company to reallocate expenses in a timely
manner could adversely affect the Companys future operating results. In
addition, notwithstanding such measures, a continuing decline in the economy
that adversely affects the Companys customers would likely adversely affect
the Company.

The Companys business relies on the development of new high technology
products and services to provide solutions to customers complex measurement
needs. This requires anticipation of customers changing needs and emerging
technology trends. The Company must make long-term investments and commit
significant resources before knowing whether its expectations will eventually
result in products that achieve market acceptance. The Company incurs
significant expenses developing new products that may or may not result in
significant sources of revenue and earnings in the future.

In many cases the Companys products compete directly with those offered by
other manufacturers. If any of the Companys competitors were to develop
products or services that are more cost-effective or technically superior,
demand for the Companys product offerings could slow.

The Companys success depends to a significant degree upon the continued
service of its key executive, sales, development, marketing and operational
personnel. Although management believes the Company offers competitive
salaries and benefits, there can be no assurance that it will be successful in
retaining its existing key personnel. Failure to retain key personnel could
have a material adverse effect on the Companys results of operations.

The Companys products contain large volumes of electronic components and
subassemblies that in some cases are supplied through sole or limited source
third-party suppliers. Although the Company does not anticipate any problems
procuring supplies in the near-term, there can never be any assurance that
parts and supplies will be available in a timely manner and at reasonable
prices. Additionally, the Companys inventory is subject to risks of changes
in market demand

11



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##### Table of Contents



for particular products. The resulting excess and/or obsolete
inventory could have an adverse impact on the Companys results of operations.

The Company currently has subsidiaries or sales offices located in
approximately 15 countries outside the United States, and non-U.S. sales
accounted for 66 percent of the Companys revenue during the first quarter of
fiscal 2003. The Companys future results could be adversely affected by
several factors, including changes in foreign currency exchange rates,
political unrest, wars and other acts of terrorism and changes in other
economic or political conditions, trade protection measures, import or export
licensing requirements, unexpected changes in regulatory requirements and
natural disasters.

For over 40 years, the Company has been distributing its products in Japan
utilizing sales representatives. Beginning on April 1, 2002, the Company began
utilizing its own sales force. The Companys results could be adversely
affected if it is unable to develop an effective sales and support organization
in Japan. Additionally, the Companys earnings could be adversely affected due
to higher than anticipated costs to maintain the direct sales offices.

The Company began to implement a lean manufacturing initiative in its
manufacturing facilities, which are located in Cleveland, Ohio. The Company
incurred start-up costs during the first quarter of fiscal 2003, which
adversely affected gross margins. The Companys results could be adversely
affected if it incurs additional costs that are not offset by cost efficiency
improvements. Additionally, results could be adversely affect if the Company
is unable to meet customer delivery requirements during the implementation
period. The Company expects to benefit from lean manufacturing with shorter
lead times, lower inventory levels and higher inventory turns. The Companys
ability to effectively implement lean manufacturing will determine the extent,
if any, to which these benefits are realized.

The Company pays taxes in several jurisdictions throughout the world. The
Company utilizes available tax credits and other tax planning strategies in an
effort to minimize the Companys overall tax liability. The Companys
estimated tax rate for fiscal 2003 could change from what is currently
anticipated due to changes in tax laws of various countries or changes in the
Companys overall tax planning strategy. As of December 31, 2002, the Company
had established a valuation allowance against certain deferred tax assets, and
had not established valuation allowances against other deferred tax assets
based on tax strategies planned to mitigate the risk of impairment to these
assets. Accordingly, if the Companys facts or financial results were to change
thereby impacting the likelihood of realizing the deferred tax assets, the
Companys tax rate could be adversely affected.

In October 2002, the Company announced that effective January 1, 2003 it would
begin to use its own employees, rather than sales representatives, to sell its
products in the United States. The Companys results could be adversely
affected if it is unable to effectively development a sales organization in the
United States. Additionally, this move will raise the Companys fixed costs.
During times of depressed sales, results could be adversely affected.

Throughout fiscal 2003 and 2004, the Company will be implementing ERP and CRM
systems. The Companys results could be adversely affected if it is unable to
implement the systems

12



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##### Table of Contents



without significant interruptions in accounting systems,
order entry, billing, manufacturing and other customer support functions.

The Company has several stock-based compensation plans for employees and
non-employee Directors. The Company currently adheres to the disclosure
provisions of SFAS No. 123, Accounting for Stock-Based Compensation, and as
such, no compensation cost has been recognized in the Companys financial
statements for the stock option plans and the stock purchase plan. The Company
is currently monitoring the recent discussions related to possible new
regulations regarding the accounting treatment for stock options. The Company
will comply with any changes in the accounting of stock options required by the
Financial Accounting Standards Board.




ITEM 3. Quantitative and Qualitative Disclosure About Market Risk.

The Company is exposed to a variety of risks, including foreign currency
fluctuations, interest rate fluctuations and changes in the market value of its
short-term investments. In the normal course of business, the Company employs
established policies and procedures to manage its exposure to fluctuations in
foreign currency values and interest rates.

The Company is exposed to foreign currency exchange rate risk primarily through
transactions denominated in foreign currencies. The Company currently utilizes
foreign exchange forward contracts or option contracts to sell foreign
currencies to fix the exchange rates related to near-term sales and effectively
fix the Companys margins. Generally, these contracts have maturities of three
months or less. The Companys policy is to only enter into derivative
transactions when the Company has an identifiable exposure to risk, thus not
creating additional foreign currency exchange rate risk. In managements
opinion, a 10 percent adverse change in foreign currency exchange rates would
not have a material effect on these instruments and therefore the Companys
results of operations, financial position or cash flows.

The Company also has an interest rate swap instrument originally entered into
to mitigate the risk of interest rate changes related to long-term debt. The
agreement effectively fixes the interest rate on a notional $3,000 of variable
rate debt; however, the interest rate swap instrument was determined to be an
ineffective hedge and accordingly, changes in the fair market value of the
interest rate swap are recorded in the Companys records as income or expense.
The instrument expires September 19, 2005. In managements opinion, a 10
percent adverse change in interest rates would not have a material effect on
this instrument and therefore the Companys results of operations, financial
position or cash flows.

The Company maintains a short-term investment portfolio consisting of U.S.
government backed notes and bonds, corporate notes and bonds, and mutual funds
consisting primarily of government notes and bonds. An increase in interest
rates would decrease the value of certain of these investments. However, a 10
percent increase in interest rates would not have a material impact on the
Companys results of operations, financial position or cash flows.

13



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##### Table of Contents






ITEM 4. Controls and Procedures.

The Companys Chief Executive Officer and Chief Financial Officer, after
evaluating the effectiveness of the Companys disclosure controls and
procedures pursuant to Exchange Act Rule 13a-14 within 90 days of the filing of
this Quarterly Report, have concluded that the Companys disclosure controls
and procedures were effective to ensure the timely collection, evaluation and
disclosure of information relating to the Company that would potentially be
subject to disclosure under the Securities Exchange Action of 1934, as amended,
and the rules and regulations promulgated thereunder. There were no
significant changes in the Companys internal controls or in other factors that
could significantly affect the internal controls subsequent to the date the
Company carried out its evaluation.




PART II. OTHER INFORMATION

|        |  |                                                         
|------- |  | --------------------------------------------------------
|Item 1. |  | Legal Proceedings                                       
|       
|       
|       
|       
|        |  | None.                                                   
|       
|       
|       
|       
|Item 6. |  | Exhibits and Reports on Form 8-K                        
|       
|       
|       
|       
|        |  | (a) Exhibits. The following exhibits are filed herewith:

| |  |         |    |         |  |                                               
| |  | ------- | -- | ------- |  | ----------------------------------------------
| |  | Exhibit |    |        
| |  | Number  |    | Exhibit
| |  |         |    |        
| |  |         | 11 |         |  | Statement Re Computation of Per Share Earnings

| |  |                                                                                                                
| |  | ---------------------------------------------------------------------------------------------------------------
| |  | (b) Reports on Form 8-K. No reports on Form 8-K were filed
during the quarterly period ended December 31, 2002.

14



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##### Table of Contents






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|      |  |                   |  |                                                                                                                        
|----- |  | ----------------- |  | -----------------------------------------------------------------------------------------------------------------------
|      |  |                   |  | KEITHLEY INSTRUMENTS, INC.
(Registrant)                                                                                
|     
|Date: |  | February 14, 2003 |  | /s/  Joseph P. KeithleyJoseph P. Keithley
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
|     
|Date: |  | February 14, 2003 |  | /s/  Mark J. PlushMark J. Plush
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)

15



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##### Table of Contents



I, Joseph P. Keithley, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Keithley
Instruments, Inc.;                                                                                                                                                                                                                                   
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present
in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented
in this quarterly report;         
|  
|4. |  | The registrants other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                              



| | a) |  | designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the
Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and
the audit committee of registrants board of directors (or persons
performing the equivalent functions):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrants ability to record, process, summarize, and report
financial data and have identified for the registrants auditors
any material weaknesses in internal controls; and
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                         



|6. |  | The registrants other certifying officers and I have indicated in
this report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                        |  |                                                                      
|----------------------- |  | ---------------------------------------------------------------------
|Date: February 14, 2003 |  | /s/ Joseph P. KeithleyChairman, President and Chief Executive Officer

16



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I, Mark J. Plush, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Keithley
Instruments, Inc.;                                                                                                                                                                                                                                   
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present
in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented
in this quarterly report;         
|  
|4. |  | The registrants other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                              



| | a) |  | designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the
Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and
the audit committee of registrants board of directors (or persons
performing the equivalent functions):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d) |  | all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrants ability to record, process, summarize, and report
financial data and have identified for the registrants auditors
any material weaknesses in internal controls; and
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | e) |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                         



|6. |  | The registrants other certifying officers and I have indicated in
this report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                        |  |                                                            
|----------------------- |  | -----------------------------------------------------------
|Date: February 14, 2003 |  | /s/ Mark J. PlushVice President and Chief Financial
Officer

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