1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT of 1934
For Quarter Ended October 31, 1995 Commission File Number 0-10761
LTX CORPORATION
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2594045
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
LTX Park at University Avenue, Westwood, Massachusetts 02090
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(Address of principal executive offices and zip code)
Registrant's telephone number, including area code (617) 461-1000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at December 1, 1995
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Common Stock, par value $0.05 per share 34,677,546
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LTX CORPORATION
INDEX
Page Number
Part I. FINANCIAL INFORMATION
Consolidated Balance Sheet 1
October 31, 1995 and July 31, 1995
Consolidated Statement of Operations
Three months ended October 31, 1995
and October 31, 1994 2
Consolidated Statement of Cash Flows
Three months ended October 31, 1995
and October 31, 1994 3
Notes to Consolidated Financial Statements 4
Management's Discussion and Analysis of
Financial Condition and Results of Operations 5 - 7
Part II. OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Securit 8
Item 6 - Exhibits and Reports on Form 8-K 8
SIGNATURES 9
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LTX CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands)
October 31, July 31,
1995 1995
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ASSETS
Current assets:
Cash and equivalents $84,369 $29,183
Accounts receivable, less allowances of
$763 and $700 31,556 32,785
Inventories 52,041 47,101
Other current assets 5,039 4,929
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Total current assets 173,005 113,998
Property and equipment, net 29,390 28,407
Other assets 3,501 3,512
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$205,896 $145,917
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of
long-term liabilities $8,490 $8,816
Accounts payable 21,191 21,744
Accrued expenses and restructuring charge 13,103 14,099
Unearned service revenues and customer
advances 6,471 7,157
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Total current liabilities 49,255 51,816
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Long-term liabilities, less current
portion 20,791 20,959
Convertible subordinated debentures 7,308 7,308
Deferred compensation 428 427
Stockholders' equity:
Common stock, $0.05 par value 1,733 1,463
Additional paid-in capital 187,316 131,425
Accumulated deficit (60,935) (67,481)
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Total stockholders' equity 128,114 65,407
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$205,896 $145,917
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See accompanying Notes to Consolidated Financial Statements.
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LTX CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
Three Months
Ended
October 31,
------------------------
1995 1994
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Net sales $62,158 $46,790
Cost of sales 38,728 30,929
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Gross margin 23,430 15,861
Engineering and product development expenses 5,342 4,722
Selling, general and administrative expenses 10,978 9,102
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Income from operations 7,110 2,037
Interest expense, net 350 1,251
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Income before income taxes 6,760 786
Provision for income taxes 214 0
------- -------
Net income $ 6,546 $ 786
======= =======
Primary and fully diluted net income per share $0.19 $0.03
Weighted average shares 34,165 28,339
See accompanying Notes to Consolidated Financial Statements.
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LTX CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months
Ended
October 31,
-----------------------
1995 1994
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CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income $ 6,546 $ 786
Add (deduct) non-cash items:
Depreciation and amortization 2,677 2,299
Original issue discount amortization 66
Exchange (gain) loss (478) 146
(Increase) decrease in:
Accounts receivable 584 (6,087)
Inventories (4,940) (2,611)
Other current assets (110) (707)
Other assets (83) 11
Increase (decrease) in:
Accounts payable (358) 6,307
Accrued expenses and restructuring charges (692) (2,371)
Unearned service revenues and custome (686) 296
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Net cash provided by (used in) operating
advances 2,460 (1,865)
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CASH USED IN INVESTING ACTIVITIES:
Expenditures for property and equipment, net (3,660) (2,770)
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Net cash used in investing activities (3,660) (2,770)
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CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from stock purchase and option plans 350 36
Increase in bank debt 659 889
Payments of long-term debt (116) (65)
Sale of Common Stock 55,811
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Net cash provided by financing activities 56,704 860
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Effect of exchange rate changes on cash (318) 78
Net increase (decrease) in cash and equivalents 55,186 (3,697)
Cash and equivalents at beginning of period 29,183 17,226
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Cash and equivalents at end of period $84,369 $13,529
======= =======
Supplemental Cash Flow Disclosures
Cash paid during the period for:
Interest $470 $1,605
Income taxes $180 $30
See accompanying Notes to Consolidated Financial Statements.
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LTX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying financial statements have been prepared by the
Company, without audit, and reflect all adjustments which, in the opinion of
management, are necessary for a fair statement of the results of the interim
periods presented. Certain information and footnote disclosures normally
included in the annual financial statements which are prepared in accordance
with generally accepted accounting principles have been condensed or omitted.
Accordingly, although the Company believes that the disclosures are adequate to
make the information presented not misleading, the financial statements should
be read in conjunction with the footnotes contained in the Company's Annual
Report on Form 10-K.
2. Revenues from product sales are recognized at the time units are
shipped. Service revenues are recognized over the applicable contractual
periods or as services are performed. Revenues from engineering contracts are
recognized over the contract period on a precentage of completion basis.
3. Inventories are stated at the lower of cost (first-in, first-out)
or market and include material manufacturing overhead. Inventories consisted
of the following at:
October 31, July 31,
1995 1995
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(In thousands)
Raw materials $15,787 $12,388
Work-in-process 25,004 24,680
Finished goods 11,250 10,033
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$52,041 $47,101
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4. Product and service sales and cost of sales were as follows:
Three Months
Ended
October 31,
---------------------
1995 1994
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Net sales:
Product $56,107 $40,828
Service 6,051 5,962
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Total net sales $62,158 $46,790
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Cost of sales:
Product $35,566 $27,409
Service 3,162 3,520
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Total cost of sales $38,728 $30,929
======= =======
5. Interest expense and income were as follows:
Three Months
Ended
October 31,
--------------------
1995 1994
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(In thousands)
Expense $662 $1,343
Income (312) (92)
---- ------
Interest expense, net $350 $1,251
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6. Primary and fully diluted net income per share is based on the
weighted average number of shares of common stock and common stock equivalents
outstanding. Common stock equivalents include shares issuable under stock
option plans and warrants to purchase shares. None of the Company's
Convertible Subordinated Debentures are common stock equivalents.
7. In October 1995, the Company completed the sale of 5,250,000 shares
of common stock at $11.25 per share. The Company received net proceeds of $55.8
million, after underwriting commissions and other expenses, from the sale.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the principal
items included in the Consolidated Statement of Operations as a percentage of
total net sales.
Percentage of Net Sale Percentage
---------------------- -------------------
Three Months Increase/(Decrease)
Ended Three Months
October 31 1995
---------------------- Over
1995 1994 1994
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Net sales 100.0% 100.0% 32.8%
Cost of sales 62.3 66.1 25.2
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Gross margin 37.7 33.9 47.7
Engineering and product
development expenses 8.6 10.1 13.1
Selling, general and
administrative expenses 17.7 19.4 20.6
----- -----
Income from operations 11.4 4.4 249.0
Interest expense, net 0.6 2.7 (72.0)
----- -----
Income before income taxes 10.8 1.7 760.0
Provision for income taxes 0.3 0.0 N/M
----- -----
Net income 10.5 1.7 732.8
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<FN>
N/M - Not meaningful
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
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Three Months Ended October 31, 1995 Compared
to the Three Months Ended October 31, 1994
The Company continued to experience strong demand for its products
during the first quarter of fiscal 1996. Orders were strong in all geographic
regions and reflected the continuing capacity expansion in the semiconductor
industry. As a result, the Company increased shipments to a record level and
further expanded its order backlog during the period. Net sales in the three
months ended October 31, 1995 were $62.2 million compared to $46.8 million in
the three months ended October 31, 1994, an increase of 33%. Essentially all
of the increase in sales was from additional shipments of the Company's mixed
signal and digital test systems. Service revenues were $6.1 million in the
three months ended October 31, 1995 compared to $6.0 million in the three
months ended October 31, 1994.
The gross profit margin was 37.7% of net sales in the three months ended
October 31, 1995 compared to 33.9% in the same period of the prior year. The
improvement in the gross profit margin was primarily a result of the combination
of lower fixed manufacturing costs on the higher level of shipments
year-to-year, and benefit from a price increase and cost reduction programs for
the Company's Synchro Series.
Engineering and product development expenses were $5.3 million, or 8.6%
of net sales, in the three months ended October 31, 1995 compared to $4.7
million, or 10.1% of net sales, in the same period of the prior year. The
increase in engineering and product development expenses primarily reflect
additional resources for the Company's continuing product development programs
for its Synchro and Delta Series product lines.
Selling, general and administrative expenses were $11.0 million, or
17.7% of net sales, in the three months ended October 31, 1995, compared to
$9.1 million, or 19.4% of net sales, in the same period of the prior year. The
21% increase in selling, general and administrative expenses primarily reflect
added sales commissions and travel costs on the higher level of sales.
Net interest expense was $0.4 million in the three months ended
October 31, 1995 compared to $1.3 million in the same period of the prior year.
The reduction in net interest expense was a result of the conversion of the
Company's 13 1/2% Convertible Subordinated Debentures Due 2011 into common
stock in July 1995 and interest income generated by the proceeds from the sale
of 5.25 million shares of the Company's common stock in early October.
The tax provision of $0.2 million in the three months ended October
31, 1995 reflected certain state and foreign tax provisions. The Company is in
a net operating loss carryforward position in most tax jurisdictions.
The Company had net income of $6.5 million, or $0.19 per share, in the
three months ended October 31, 1995, compared to net income of $0.8 million, or
$0.03 per share, in the same period of the prior year. The significant
improvement in profitability was a result of a combination of the higher
shipment levels, the improvement in the gross profit margin and the reduction
in operating expenses as a percentage of net sales.
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Liquidity and Capital Resources:
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Cash and equivalents were $84.4 million at October 31, 1995 compared to $29.2
million at July 31, 1995. The increase in cash and equivalents was largely a
result of the $55.8 million in net proceeds from the sale of 5.25 million shares
of common stock in early October. The Company generated $2.5 million in net
cash from operating activities and used $3.3 million of net cash for property
and equipment additions.
The positive net cash flow from operating activities was a result of
the net income for the period, before non-cash depreciation charges, reduced by
an increase in working capital requirements in the period, primarily for
inventories. Although sales in the three months ended October 31, 1995 were
33% higher than sales in the same period of the prior year, accounts receivable
increased by only $0.6 million in the period. This improvement reflected the
Company's ability to ship more evenly within the period and achieve a higher
level of collections on those shipments. The increase of $4.9 million in
inventories during the three months ended October 31, 1995 primarily reflected
an increase to meet higher shipment levels. The Company had a restructuring
reserve of $3.3 million remaining at October 31, 1995 to cover the estimated
future cash flow relating primarily to excess leased facilities. During the
three months ended October 31, 1995, cash outflows for excess leased facilities
were $2.6 million and $0.2 million for severance payments. At October 31,
1995, the Company had working capital of $123.8 million and a ratio of current
assets to current liabilities of 3.5 to 1.0.
Additions to property and equipment of $3.7 million in the period
exceeded depreciation charges of $2.7 million. Property and equipment
additions during the period were primarily for product development and customer
support activities, as well as leasehold improvements to a facility in
Massachusetts.
The Company's Japanese subsidiary had bank borrowings of $8.2 million
at October 31, 1995, compared to $8.5 million at July 31, 1995. The Company
had no borrowings outstanding under its domestic bank line at October 31, 1995
or July 31, 1995. The Company is in the process of extending the term of its
credit facility, on an unsecured basis, with its domestic bank.
Management believes that the Company has sufficient cash resources to
meet its fiscal 1996 requirements. These resources include existing cash
balances, borrowing availability under domestic and Japanese bank lines and
future cash flows from operations.
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PART II -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company held its Annual Meeting of Stockholders on December 13,
1995.
(b) Stockholders elected Messrs. Martin S. Francis, Jacques Bouyer, and
Samuel Rubinovitz as Class III Directors to serve a three year
term.
(c) Other matters voted upon and the results of the voting were as
follows:
(1) Stockholders voted 30,351,634 shares FOR; 1,956,862 shares
AGAINST; 106,622 shares ABSTAINED and 2,249,458 shares did
not vote to amend the 1993 Employees' Stock Purchase Plan to
increase the number of shares subject to the Plan from
600,000 to 1,200,000 shares.
(2) Stockholders voted 28,825,773 shares FOR; 3,441,554 shares
AGAINST; 148,091 shares ABSTAINED and 2,249,158 shares did
not vote to amend the 1990 Stock Option Plan to change the
award of options to members of the Board of Directors who are
not employees of LTX Corporation.
(3) Stockholders voted 23,318,812 shares FOR; 8,957,964 shares
AGAINST; 138,642 shares ABSTAINED and 2,249,158 shares did
not vote to amend the 1990 Stock Option Plan to increase the
number of shares subject to the Plan from 2,700,000 to
3,700,000.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) There were no reports on Form 8-K filed during the three months
ended October 31, 1995.
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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.
LTX Corporation
Date: December 14, 1995 By: /s/ Roger W. Blethen
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Roger W. Blethen
President
Date: December 14, 1995 By: /s/ Martin S. Francis
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Martin S. Francis
President
Date: December 14, 1995 By: /s/ John J. Arcari
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John J. Arcari
Treasurer
Chief Financial Officer
(Principal Financial Officer)
Date: December 14, 1995 By: /s/ Glenn W. Meloni
----------------- ----------------------------
Glenn W. Meloni
Controller
(Principal Accounting Officer)
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