<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 April 30, 1995 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
-------------------------------------------------------------
(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 June 9, 1995
- --------------------------------------- ---------------------------
Common Stock, par value $0.05 per share 26,692,587
<PAGE> 2
<TABLE>
LTX CORPORATION
Index
<CAPTION>
Page Number
<S> <C>
Part I. FINANCIAL INFORMATION
Consolidated Balance Sheet 1
April 30, 1995 and July 31, 1994
Consolidated Statement of Operations
Three months and nine months ended
April 30, 1995 and April 30, 1994 2
Consolidated Statement of Cash Flows
Nine months ended April 30, 1995
and April 30, 1994 3
Notes to Consolidated Financial Statements 4
Management's Discussion and Analysis of
Financial Condition and Results of Operations 5 - 9
Part II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 10
SIGNATURES 11
</TABLE>
<PAGE> 3
LTX CORPORATION
<TABLE>
CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands, except share data)
<CAPTION>
April 30, July 31,
1995 1994
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 27,627 $ 17,226
Accounts receivable, less allowance of $700 30,133 33,323
Inventories 45,845 42,672
Other current assets 4,943 3,848
-------- --------
Total current assets 108,548 97,069
Property and equipment, net 28,824 28,946
Other assets 4,355 4,621
-------- --------
$141,727 $130,636
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of
long-term liabilities $8,019 $7,307
Accounts payable 18,672 15,545
Accrued expenses and restructuring charges 17,851 21,497
Unearned service revenues and customer advances 8,322 3,867
-------- --------
Total current liabilities 52,864 48,216
Long-term liabilities, less current portion 21,474 21,632
Convertible subordinated debentures 20,392 20,195
Stockholders' equity:
Common stock, $0.05 par value 1,328 1,311
Additional paid-in capital 118,230 117,457
Accumulated deficit (72,561) (78,175)
-------- --------
Total stockholders' equity 46,997 40,593
-------- --------
$141,727 $130,636
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
- 1 -
<PAGE> 4
LTX CORPORATION
<TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<CAPTION>
Three Months Nine Months
Ended Ended
April 30, April 30,
-------------------- --------------------
1995 1994 1995 1994
------- ------- -------- --------
<S> <C> <C> <C> <C>
Net sales:
Product $47,318 $34,164 $132,010 $109,541
Service 6,253 6,052 18,368 15,958
------- ------- -------- --------
Total net sales 53,571 40,216 150,378 125,499
------- ------- -------- --------
Cost of sales:
Product 31,451 25,485 87,743 78,742
Service 3,429 3,237 10,614 9,363
Provision for excess inventories -- -- -- 3,500
------- ------- -------- --------
Total cost of sales 34,880 28,722 98,357 91,605
------- ------- -------- --------
Gross profit 18,691 11,494 52,021 33,894
Engineering and product
development expenses 5,077 4,794 14,514 14,927
Selling, general and
administrative expenses 9,544 10,353 28,265 32,523
Restructuring charges -- -- -- 14,376
------- ------- -------- --------
Income (loss) from operations 4,070 (3,653) 9,242 (27,932)
Interest expense, net 1,055 994 3,429 2,745
------- ------- -------- --------
Income (loss) before income
taxes and minority interest 3,015 (4,647) 5,813 (30,677)
Provision for income taxes 104 -- 199 --
------- ------- -------- --------
Income (loss) before minority interest 2,911 (4,647) 5,614 (30,677)
Minority interest in net loss of subsidiary -- 316 -- 736
------- ------- -------- --------
Net income (loss) $ 2,911 $(4,331) $ 5,614 $(29,941)
======= ======= ======== ========
Primary and fully diluted net income $0.10 ($0.17) $0.20 ($1.18)
(loss) per share
Weighted average shares 29,038 26,021 28,631 25,295
</TABLE>
See accompanying Notes to Consolidated Financial Statements
- 2 -
<PAGE> 5
LTX CORPORATION
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In thousands)
<CAPTION>
Nine Months
Ended
April 30,
-----------------
1995 1994
-------- --------
<S> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income (loss) $ 5,614 $(29,941)
Add (deduct) non-cash items:
Depreciation and amortization 7,100 6,866
Minority interest in subsidiary net loss (736)
Original issue discount amortization 197 191
Translation loss 290 430
(Increase) decrease in:
Accounts receivable 3,834 (4,309)
Inventories (3,173) (1,159)
Other current assets (408) (586)
Other assets (277) 179
Increase (decrease) in:
Accounts payable 2,892 (1,963)
Accrued expenses and restructuring charges (4,042) 14,511
Unearned service revenues and customer advances 4,455 (728)
------- --------
Net cash provided by (used in) operating activities 16,482 (17,245)
------- --------
CASH USED IN INVESTING ACTIVITIES:
Expenditures for property and equipment, net (6,978) (11,086)
------- --------
Net cash used in investing activities (6,978) (11,086)
------- --------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from sale of common stock 4,000
Proceeds from stock purchase and option plans 790 915
Increase (decrease) in bank debt (151) 4,745
Proceeds from sale and leaseback of equipment 3,483
Payments of long-term debt (306) (113)
------- --------
Net cash provided by financing activities 333 13,030
------- --------
Effect of exchange rate changes on cash 564 (177)
Net increase (decrease) in cash and equivalents 10,401 (15,478)
Cash and equivalents at beginning of period 17,226 21,725
------- --------
Cash and equivalents at end of period $27,627 $ 6,247
======= ========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid during the period for:
Interest $ 4,005 $ 3,744
Income taxes 262 0
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
- 3 -
<PAGE> 6
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 percentage 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>
April 30, July 31,
1995 1994
--------- --------
(In thousands)
<S> <C> <C>
Raw materials $12,989 $12,075
Work-in-process 21,459 18,810
Finished goods 11,397 11,787
------- -------
$45,845 $42,672
======= =======
</TABLE>
<TABLE>
4 .Interest expense and income were as follows:
<CAPTION>
Three Months Nine Months
Ended Ended
April 30, April 30,
------------------------- ------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Expense $1,168 $1,094 $3,743 $3,082
Income (113) (100) (314) (337)
------ ------ ------ ------
Interest expense, net $1,055 $ 994 $3,429 $2,745
====== ====== ====== ======
</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 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.
- 4 -
<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 percentages of total revenues.
<CAPTION>
Percentage
Percentage of Net Sales Increase/(Decrease)
---------------------------------- ---------------------------
Three Months Nine Months Three Months Nine Months
Ended Ended 1995 1995
April 30, April 30, Over Over
--------------- --------------
1995 1994 1995 1994 1994 1994
------- ------ ------ ------ -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net sales:
Product 88.3% 85.0% 87.8% 87.3% 38.5% 20.5%
Service 11.7 15.0 12.2 12.7 3.3 15.1
----- ----- ----- -----
Total sales 100.0 100.0 100.0 100.0 33.2 19.8
Cost of sales:
Product 58.7 63.4 58.3 62.7 23.4 11.4
Service 6.4 8.0 7.1 7.5 5.9 13.4
Provision for excess inventories 2.8 -- N/M
----- ----- ----- -----
Total cost of sales 65.1 71.4 65.4 73.0 21.4 7.4
----- ----- ----- -----
Gross profit 34.9 28.6 34.6 27.0 62.6 53.5
Engineering and product
development expenses 9.5 11.9 9.7 11.9 5.9 (2.8)
Selling, general and
administrative expenses 17.8 25.8 18.8 25.9 (7.8) ( 13.1)
Restructuring charges -- -- -- 11.5 -- N/M
----- ----- ----- -----
Income (loss) from operations 7.6 (9.1) 6.1 (22.3) N/M N/M
Interest expense, net 2.0 2.5 2.3 2.1 6.1 24.9
----- ----- ----- -----
Income (loss) before income
taxes & minority interest 5.6 (11.6) 3.8 (24.4) N/M N/M
Provision for income taxes 0.2 -- 0.1 -- N/M N/M
----- ----- ----- -----
Income (loss) before minority
interest 5.4 (11.6) 3.7 (24.4) N/M N/M
Minority interest in net loss of
subsidiary -- 0.8 -- 0.5 N/M N/M
----- ----- ----- -----
Net income (loss) 5.4% (10.8)% 3.7 % (23.9)% N/M N/M
===== ===== ===== =====
</TABLE>
- 5 -
<PAGE> 8
RESULTS OF OPERATIONS:
- ----------------------
Three Months Ended April 30, 1995 Compared to the
Three Months Ended April 30, 1994
Net sales were $53.6 million in the third quarter of fiscal 1995 as
compared to $40.2 million in the third quarter of fiscal 1994. The Company
continued to experience increasing demand for its products during the third
quarter of fiscal 1995 as semiconductor industry conditions remained strong.
Sales of linear and mixed signal systems increased about 50% in the third
quarter of fiscal 1995 as compared to the third quarter of fiscal 1994. During
the third quarter of fiscal 1995, the Company began volume deliveries of its
new lower cost and smaller sized Synchro ProductionPac system. Shipments of
the Company's digital systems in the third quarter of fiscal 1995 increased
about 25% over the third quarter of fiscal 1994. Shipments during the
third quarter of fiscal 1995 were made to a broader base of customers than in
the first six months of fiscal 1995, with no single customer accounting for more
than 12% of net sales.
The gross profit margin was 34.9% of net sales in the third quarter of
fiscal 1995 as compared to 28.6% in the third quarter of fiscal 1994. The
increase in sales over the third quarter of fiscal 1994 resulted in
proportionately lower fixed manufacturing costs on the higher level of
shipments. In addition, Synchro margins improved over the third quarter of
fiscal 1994, in part due to shipments of the lower cost ProductionPac system.
Engineering and product development expenses were $0.3 million higher
in the third quarter of fiscal 1995 as compared to the third quarter of fiscal
1994. The increase in engineering expenses relates to the on-going product
development programs for the Company's Delta series and Synchro products.
Selling, general and administrative expenses were $0.8 million lower
in the third quarter of fiscal 1995 as compared to the third quarter of fiscal
1994. The lower level of expenses is primarily a result of the cost reduction
measures the Company initiated in March 1994, which included a workforce
reduction and the elimination of excess leased facilities.
Interest expense was $0.1 million higher in the third quarter of
fiscal 1995 as compared to the third quarter of fiscal 1994. The additional
interest on the $20.0 million term loan the Company received in July 1994 was
largely offset by reduced interest on lower average bank borrowings during the
third quarter of fiscal 1995 as compared to the third quarter of fiscal 1994.
The tax provision of $0.1 million in the third quarter of fiscal 1995
relates to certain state and foreign tax provisions. The Company is in a net
operating loss carryforward position in most tax jurisdictions. In the third
quarter of fiscal 1994, the Company had no tax provision due to the loss for
the period.
The Company's Japanese subsidiary operated at a small profit in the
third quarter of fiscal 1995 and the minority partner's share of the
subsidiary's operating results was insignificant. In the third quarter of
fiscal 1994, the minority partner's share of the subsidiary's loss for the
period was $0.3 million.
- 6 -
<PAGE> 9
The Company had net income of $2.9 million in the third quarter of
fiscal 1995 as compared to a net loss of $4.3 million in the third quarter of
fiscal 1994. The improvement in operating results was primarily due to the
$7.2 million increase in gross margin on $13.4 million in additional sales in
the third quarter of fiscal 1995 as compared to the third quarter of fiscal
1994.
Nine Months Ended April 30,1995 Compared to
Nine Months Ended April 30,1994
Net sales were $150.4 million for the nine months ended April 30, 1995
as compared to $125.5 million for the nine months ended April 30, 1994. Strong
semiconductor industry conditions during fiscal 1995 have resulted in an
increase in demand for the Company's linear and mixed signal systems. Sales of
these products were about 43% higher during the nine months ended April
30, 1995 as compared to the nine months ended April 30, 1994. Shipments of
linear and mixed signal systems increased across all geographic regions,
particularly to European customers. Sales to various world-wide facilities of
two European customers accounted for approximately 24% of total sales for the
nine months ended April 30, 1995. Service revenues also increased $2.4 million
in the nine months ended April 30, 1995 over the nine months ended April 30,
1994. Although sales of digital systems were substantially lower in the first
quarter of fiscal 1995 as compared to the first quarter of fiscal 1994,
shipments increased 38% during the second and third quarters of fiscal 1995,
combined, as compared to the second and third quarters of fiscal 1994.
The gross profit margin was 34.6% of net sales in the nine months
ended April 30, 1995 as compared to 27.0% of net sales in the nine months ended
April 30, 1994. The improvement in the gross profit margin was largely a
result of proportionately lower fixed manufacturing costs on the higher
shipment levels and the increase in linear and mixed signal shipments at
higher margins. In the nine months ended April 30, 1994, a provision for
excess inventories reduced the gross profit margin by 2.8% of net sales.
Engineering and product development expenses decreased $0.4 million
and selling, general and administrative expenses were $4.3 million lower in the
nine months ended April 30, 1995 as compared to the nine months ended April 30,
1994. The reduction in operating expenses was a result of the Company's
restructuring and cost reduction measures initiated in March 1994. The Company
took a $14.4 million charge in the second quarter of fiscal 1994 as a result of
this restructuring program.
Interest expense was $0.7 million higher in the nine months ended
April 30, 1995 as compared to the nine months ended April 30, 1994. The
increase in interest expense is a result of the $20.0 million term loan the
Company received in July 1994. This increase was partially offset by the
reduction in interest on lower average bank borrowings in the nine months ended
April 30, 1995 as compared to the nine months ended April 30, 1994.
The tax provision of $0.2 million in the nine months ended April 30,
1995 relates to certain state and foreign tax provisions. The Company is in a
net operating loss carryforward position in most tax jurisdictions. There was
no tax provision in the nine months ended April 30, 1994 due to the loss for
the period.
- 7 -
<PAGE> 10
The Company's Japanese subsidiary's results of operations were
approximately break-even in the nine months ended April 30, 1995 and the
minority partner's share of the subsidiary's results was insignificant. In the
nine months ended April 30, 1994, the Company's Japanese subsidiary operated at
a loss and the minority partner's share of the subsidiary's loss was $0.7
million.
In the nine months ended April 30, 1995, the Company had net income of
$5.6 million as compared to a net loss of $29.9 million in the nine months
ended April 30, 1994. The loss for the nine months ended April 30, 1994
included a restructuring charge of $14.4 million and a provision for excess
inventories of $3.5 million.
LIQUIDITY AND CAPITAL RESOURCES:
- --------------------------------
Cash and equivalents were $27.6 million at April 30, 1995 as compared
to $17.2 million at July 31, 1994. The increase in cash and equivalents of
$10.4 million in the first nine months of fiscal 1995 was a result of $16.5
million of net cash provided by operating activities, $7.0 million of net cash
used for property and equipment expenditures, $0.3 million of net cash provided
by financing activities, and the favorable effect of exchange rate changes on
cash of $0.6 million.
Accounts receivable declined $3.8 million from July 31, 1994 to April
30, 1995, although sales were $10.7 million higher in the three months ended
April 30, 1995 as compared to the three months ended July 31, 1994. The
improvement in accounts receivable is primarily due to more even shipments
during the first nine months of fiscal 1995, which has resulted in a higher
level of collections on shipments made during the period. In the first nine
months of fiscal 1995, inventories increased $3.2 million to meet the higher
sales levels and to allow for more even shipments during the period. The
increase in accounts payable of $2.9 million in the first nine months of fiscal
1995 relates to the higher level of inventory purchases during the period.
During the third quarter of fiscal 1995, the Company received approximately
$4.0 million in advance payments for systems to be delivered after April 30,
1995. At April 30, 1995, the Company had a restructuring reserve of $8.8
million remaining to cover the estimated future cash flows relating primarily
to excess leased facilities. Cash outflows in the first nine months of fiscal
1995 were $2.9 million for excess leased facilities and $0.6 million for
severance payments.
Additions to property and equipment of $7.0 million in the first nine
months of fiscal 1995 were about equal to depreciation charges of $7.1 million.
Equipment additions during the period were primarily used in product
development and customer support activities.
At April 30, 1995 and July 31, 1994, the Company's Japanese subsidiary
had $7.7 million and $6.9 million in bank borrowings outstanding, respectively.
The Company had no borrowings outstanding under its domestic bank line at April
30, 1995 or July 31, 1994.
In the nine months ended April 30, 1994, the Company used $17.2
million of net cash for operating activities as a result of the loss for the
period, before restructuring charges and provision for excess inventories, and
the increase in working capital requirements.
- 8 -
<PAGE> 11
The Company had $11.1 million of additions to property and equipment in the
nine months ended April 30, 1994, of which $3.5 million was financed through
leasing arrangements. The Company received $4.0 million from the sale of its
common stock to several private investors in January 1994. The Company also
increased its bank borrowings by $4.7 million in the nine months ended April
30, 1994 to help meet its cash requirements.
Management believes that the Company has sufficient cash resources to
meet its remaining fiscal 1995 cash requirements. These resources include
existing cash balances, borrowing availability under domestic and Japanese bank
lines and future cash flows from operations.
- 9 -
<PAGE> 12
PART II -- OTHER INFORMATION
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 April 30, 1995.
- 10 -
<PAGE> 13
<TABLE>
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.
<S> <C>
LTX Corporation
Date: June 13, 1995 By: /s/ Roger W. Blethen
----------------------- ---------------------------------
Roger W. Blethen
President
Date: By:
----------------------- ---------------------------------
Martin S. Francis
President
Date: June 13, 1995 By: /s/ John J. Arcari
----------------------- ---------------------------------
John J. Arcari
Treasurer
Chief Financial Officer
(Principal Financial Officer)
Date: June 13, 1995 By: /s/ Glenn W. Meloni
----------------------- ---------------------------------
Glenn W. Meloni
Controller
(Principal Accounting Officer)
</TABLE>
- 11 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF LTX CORPORATION FOR THE NINE
MONTHS ENDED APRIL 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> AUG-01-1994
<PERIOD-END> APR-30-1995
<EXCHANGE-RATE> 1
<CASH> 27,627
<SECURITIES> 0
<RECEIVABLES> 30,833
<ALLOWANCES> 700
<INVENTORY> 45,845
<CURRENT-ASSETS> 108,548
<PP&E> 86,387
<DEPRECIATION> 57,563
<TOTAL-ASSETS> 141,727
<CURRENT-LIABILITIES> 52,864
<BONDS> 41,866
<COMMON> 1,328
0
0
<OTHER-SE> 45,669
<TOTAL-LIABILITY-AND-EQUITY> 141,727
<SALES> 132,010
<TOTAL-REVENUES> 150,378
<CGS> 87,743
<TOTAL-COSTS> 98,357
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,743
<INCOME-PRETAX> 5,813
<INCOME-TAX> 199
<INCOME-CONTINUING> 5,614
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,614
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
