<PAGE> 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, 1994 Commission File Number 0-10761
LTX CORPORATION
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2594045
- ---------------------------- ----------------------
(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
------- -------
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 2, 1994
- --------------------------------------------- -------------------------------
Common Stock, par value $0.05 per share 26,278,967
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<TABLE>
LTX CORPORATION
INDEX
<CAPTION>
Page Number
<S> <C>
Part I. FINANCIAL INFORMATION
Consolidated Balance Sheet 1
October 31, 1994 and July 31, 1994
Consolidated Statement of Operations
Three months ended October 31, 1994
and October 31, 1993 2
Consolidated Statement of Cash Flows
Three months ended October 31, 1994
and October 31, 1993 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 Security Holders 8
Item 6 - Exhibits and Reports on Form 8-K 8
SIGNATURES 9
</TABLE>
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<TABLE>
LTX CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands)
<CAPTION>
October 31, July 31,
1994 1994
----------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 13,529 $ 17,226
Accounts receivable, less allowances of $700 and $700 39,506 33,323
Inventories 45,283 42,672
Other current assets 4,565 3,848
-------- --------
Total current assets 102,883 97,069
Property and equipment, net 29,417 28,946
Other assets 4,629 4,621
-------- --------
$136,929 $130,636
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of
long-term liabilities $ 8,425 $ 7,307
Accounts payable 21,881 15,545
Accrued expenses and restructuring charges 19,183 21,497
Unearned service revenues and customer advances 4,163 3,867
-------- --------
Total current liabilities 53,652 48,216
-------- --------
Long-term liabilities, less current portion 21,173 21,204
Convertible subordinated debentures 20,261 20,195
Deferred compensation 428 428
Stockholders' equity:
Common stock, $0.05 par value 1,312 1,311
Additional paid-in capital 117,492 117,457
Accumulated deficit (77,389) (78,175)
-------- --------
Total stockholders' equity 41,415 40,593
-------- --------
$136,929 $130,636
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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<TABLE>
LTX CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<CAPTION>
Three Months
Ended
October 31,
---------------------
1994 1993
-------- --------
<S> <C> <C>
Net sales:
Product $40,828 $42,466
Service 5,962 4,698
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Total net sales 46,790 47,164
Cost of sales:
Product 27,409 29,275
Service 3,520 2,944
------- -------
Total cost of sales 30,929 32,219
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Gross profit 15,861 14,945
Engineering and product development
expenses 4,722 5,041
Selling, general and administrative expenses 9,102 10,658
------- -------
Income (loss) from operations 2,037 (754)
Interest expense, net 1,251 851
------- -------
Income (loss) before income taxes 786 (1,605)
Provision for income taxes 0 0
------- -------
Net income (loss) 786 (1,605)
======= =======
Net income (loss) per share:
Primary $0.03 $(0.06)
Fully diluted $0.03 $(0.06)
Weighted average shares:
Primary 27,959 24,806
Fully diluted 28,339 24,806
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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<TABLE>
LTX CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In thousands)
<CAPTION>
Three Months
Ended
October 31,
--------------------
1994 1993
------- --------
<S> <C> <C>
CASH USED IN OPERATING ACTIVITIES:
Net income (loss) $ 786 $ (1,605)
Add (deduct) non-cash items:
Depreciation and amortization 2,299 2,137
Original issue discount amortization 66 56
(Increase) decrease in:
Accounts receivable (6,183) (12,934)
Inventories (2,611) (4,440)
Other current assets (717) (250)
Other assets (8) (565)
Increase (decrease) in:
Accounts payable 6,336 1,654
Accrued expenses and restructuring charges (2,314) (224)
Unearned service revenues and customer advances 296 231
------- --------
Net cash used in operating activities (2,050) (15,940)
------- --------
CASH USED IN INVESTING ACTIVITIES:
Expenditures for property and equipment, net (2,770) (4,757)
------- --------
Net cash used in investing activities (2,770) (4,757)
------- --------
CASH PROVIDED BY FINANCING ACTIVITIES:
Proceeds from stock purchase and option plans 36 394
Increase in bank debt 1,119 4,843
Sale and leaseback of equipment 0 1,142
Payments of long-term debt (32) (37)
------- --------
Net cash provided by financing activities 1,123 6,342
------- --------
Net decrease in cash and equivalents (3,697) (14,355)
Cash and equivalents at beginning of period 17,226 21,725
------- --------
Cash and equivalents at end of period $13,529 $ 7,370
======= ========
Supplemental Cash Flow Disclosures
Cash paid during the period for:
Interest $1,605 $1,617
Income taxes $30 $124
</TABLE>
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.
<TABLE>
3. Inventories are stated at the lower of cost (first-in, first-out) or market
and include material, labor and manufacturing overhead. Inventories
consisted of the following at:
<CAPTION>
October 31, July 31,
1994 1994
----------- --------
(In thousands)
<S> <C> <C>
Raw materials $11,795 $12,075
Work-in-process 22,048 18,810
Finished goods 11,440 11,787
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$45,283 $42,672
======= =======
</TABLE>
<TABLE>
4. Interest expense and income were as follows:
<CAPTION>
Three Months
Ended
October 31,
--------------------
1994 1993
------ -----
(In thousands)
<S> <C> <C>
Expense $1,343 $ 955
Income (92) (104)
------ -----
Interest expense, net $1,251 $ 851
====== =====
</TABLE>
5. Primary and fully diluted net loss per share is based on the weighted
average number of shares of common stock outstanding. 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.
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<PAGE> 7
<TABLE>
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.
<CAPTION>
Percentage
Percentage of Net Sales Increase/(Decrease)
----------------------- -------------------
Three Months Three Months
Ended 1994
October 31 Over
1994 1993 1993
-------- ------- -------
<S> <C> <C> <C>
Net sales:
Product 87.3 % 90.0 % (3.9)%
Service 12.7 10.0 26.9
------ ------ ------
Total net sales 100.0 100.0 (0.8)
Cost of sales:
Product 58.6 62.1 (6.4)
Service 7.5 6.2 19.6
------ ------ ------
Total cost of sales 66.1 68.3 (4.0)
------ ------ ------
Gross profit 33.9 31.7 6.1
Engineering and product
development expenses 10.1 10.7 (6.3)
Selling, general and
administrative expenses 19.4 22.6 (14.6)
------ ------ ------
Income (loss) from operations 4.4 (1.6) N/M
Interest expense, net 2.7 1.8 47.0
------ ------ ------
Income (loss) before income taxes 1.7 (3.4) N/M
Provision for income taxes 0.0 0.0
------ ------ ------
Net income (loss) 1.7 (3.4) N/M
====== ====== ======
</TABLE>
N/M - Not meaningful
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<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
----------------------
Net sales were $46.8 million in the first quarter of fiscal 1995 as
compared to $47.2 million in the first quarter of fiscal 1994. Shipments of
mixed signal systems increased over 50% year-to-year as the Company continued
to experience strong demand for these products, particularly from European
customers. Sales of mixed signal systems to three European customers
accounted for approximately 35% of total revenues in the first quarter of
fiscal 1995. Service revenues increased 27% over the first quarter of
fiscal 1994 as the Company continued to expand its service coverage with its
customer base. However, sales of the Company's digital products in the first
quarter of fiscal 1995 were substantially less than the first quarter of
fiscal 1994 which reflected the lower demand for these systems from
manufacturers of personal computer-related devices. During the first quarter
of fiscal 1995 the Company recorded sales for its first Delta 50 and Delta
100 new generation digital test systems.
The gross profit margin was 33.9% of net sales in the first quarter of
fiscal 1995 compared to 31.7% in the first quarter of fiscal 1994. The
improvement in the gross profit margin largely relates to the increase in
mixed signal system sales at higher margins and the growth in service
revenues. In the first quarter of fiscal 1994, the gross profit margin was
adversely affected by a high level of digital sales at lower selling prices.
Although sales of digital systems in the first quarter of fiscal 1995 were at
higher average prices, this improvement was offset by proportionately high
fixed manufacturing costs on the lower level of digital shipments.
Engineering and product development and selling, general and
administrative expenses in the first quarter of fiscal 1995, combined, were
$1.9 million less than the first quarter of fiscal 1994. The lower level of
operating expenses is a result of the Company's restructuring and cost
reduction measures which were initiated in the second half of fiscal 1994.
This restructuring program consisted of a plan to eliminate excess leased
facilities and a workforce reduction of 100 employees. The effect of these
measures has primarily reduced selling, general and administrative expenses.
The Company has continued to maintain significant engineering resources for
on-going development of its new digital products and enhancements to the
Synchro system.
Interest expense was $0.4 million higher in the first quarter of fiscal
1995 as compared to the first quarter of fiscal 1994. The increase in
interest expense relates to the $20.0 million term loan received from Ando
Electric Co., Ltd. in July 1994.
There was no tax provision in the first quarter of fiscal 1995 as the
Company is in a net operating loss carryforward position in most tax
jurisdictions.
The Company's Japanese subsidiary operated at approximately break-even
in the first quarter of fiscal 1995 and fiscal 1994 and the minority
partner's share of the subsidiary's operating results was insignificant.
As a result of the significantly lower operating expenses, together with
the improvement in the gross profit margin, the Company had net income of
$0.8 million in the first quarter of fiscal 1995 as compared to a net loss of
$1.6 million in the first quarter of fiscal 1994.
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<PAGE> 9
Liquidity and Capital Resources:
--------------------------------
Cash and equivalents were $13.5 million at October 31,1994 as compared
to $17.2 million at July 31,1994. The decrease in cash and equivalents of
$3.7 million in the first quarter of fiscal 1995 was a result of $2.0 million
of net cash used in operating activities, $2.8 million of net cash used for
equipment expenditures and $1.1 million of net cash provided by financing
activities.
The Company used $2.0 million of net cash in operating activities as a
result of an increase in working capital requirements in the first quarter of
fiscal 1995. Compared to the fourth quarter of fiscal 1994, net sales
increased $4.0 million and a higher proportion of shipments were made to
Europe, which has a longer collection cycle. As a result, accounts
receivable rose $6.2 million in the first quarter of fiscal 1995.
Inventories increased $2.6 million in the first quarter of fiscal 1995
primarily as a result of materials purchased for early second quarter
delivery requirements, particularly for mixed signal systems. In addition,
inventories relating to the Company's new Delta 50 and Delta 100 digital
systems increased in the first quarter of fiscal 1995. Accounts payable
increased $6.3 million in the first quarter of fiscal 1995 as a result of the
higher level of inventory purchases as compared to the fourth quarter of
fiscal 1994. At October 31,1994, the Company had a restructuring reserve of
$10.8 million remaining to cover the estimated future cash flows relating to
excess leased facilities and severance payments. Cash outflows in the first
quarter of fiscal 1995 were $0.7 million for excess leased facilities and
were $0.2 million for severance payments.
Additions to property and equipment were $2.8 million in the first
quarter of fiscal 1995 and exceeded depreciation charges of $2.3 million.
Capital equipment additions consisted primarily of the Company's test systems
and modules used for product development and customer support.
At October 31,1994, the Company's Japanese subsidiary had $8.0 million
in bank borrowings as compared to $6.9 million in borrowings at July 31,
1994. There were no borrowings outstanding at October 31,1994 under the
Company's domestic bank line.
Management believes the Company has sufficient cash resources to meet
its remaining fiscal 1995 cash requirements through a combination of existing
cash balances, borrowing availability under its domestic and Japanese bank
lines and future net cash flows from operations.
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<PAGE> 10
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 7,
1994.
(b) Stockholders elected Messrs. Roger W. Blethen, Fred J. Butler, and
Roger J. Maggs as Class II Directors to serve a three year term.
(c) Other matters voted upon and the results of the voting were as
follows:
(1) Stockholders voted 17,530,013 shares FOR; 5,356,481 shares
AGAINST; 247,593 shares ABSTAINED and 3,111,332 shares did
not vote to increase the number of shares subject to the 1990
Incentive Stock Option Plan from 1,500,000 to 2,700,000
shares and to provide for the grant of nonstatutory stock
options under the Plan.
(2) Stockholders voted 21,390,598 shares FOR; 1,505,685 shares
AGAINST; 237,804 shares ABSTAINED and 3,111,332 shares did
not vote to approve the 1995 LTX (Europe) Ltd. Approved Stock
Option Plan.
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, 1994.
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<PAGE> 11
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, 1994 By: /s/ Roger W. Blethen
------------------- -----------------------------------
Roger W. Blethen
President
Date: December 14, 1994 By: /s/ Martin S. Francis
------------------- -----------------------------------
Martin S. Francis
President
Date: December 14, 1994 By: /s/ John J. Arcari
------------------- -----------------------------------
John J. Arcari
Treasurer
Chief Financial Officer
(Principal Financial Officer)
Date: December 14, 1994 By: /s/ Glenn W. Meloni
------------------- -----------------------------------
Glenn W. Meloni
Controller
(Principal Accounting Officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF LTX CORPORATION FOR THE QUARTER
ENDED OCTOBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> QTR-1
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> AUG-1-1994
<PERIOD-END> OCT-31-1994
<EXCHANGE-RATE> 1
<CASH> 13,529
<SECURITIES> 0
<RECEIVABLES> 40,206
<ALLOWANCES> 700
<INVENTORY> 45,283
<CURRENT-ASSETS> 102,883
<PP&E> 82,270
<DEPRECIATION> 52,853
<TOTAL-ASSETS> 136,929
<CURRENT-LIABILITIES> 53,652
<BONDS> 41,434
<COMMON> 1,312
0
0
<OTHER-SE> 40,103
<TOTAL-LIABILITY-AND-EQUITY> 136,929
<SALES> 40,828
<TOTAL-REVENUES> 46,790
<CGS> 27,409
<TOTAL-COSTS> 30,929
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,343
<INCOME-PRETAX> 786
<INCOME-TAX> 0
<INCOME-CONTINUING> 786
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 786
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
