<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED JULY 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
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 Number)
LTX PARK AT UNIVERSITY AVENUE, WESTWOOD, MASSACHUSETTS 02090
(Address of principal executive offices) (Zip Code)
(617) 461-1000
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
None
------------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $0.05 Per Share
7 1/4% Convertible Subordinated Debentures Due 2011
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
The aggregate market value of the common stock held by non-affiliates of
the registrant on September 13, 1995 was $400,417,500.
Number of shares outstanding of each of the issuer's classes of common
stock as of September 13, 1995:
Common Stock, Par Value $0.05 Per Share, 29,336,759 shares.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE REGISTRANT'S PROXY STATEMENT IN CONNECTION WITH ITS 1995
ANNUAL MEETING OF STOCKHOLDERS ARE INCORPORATED BY REFERENCE INTO PART III.
PORTIONS OF THE REGISTRANT'S ANNUAL REPORT TO STOCKHOLDERS FOR THE FISCAL
YEAR ENDING JULY 31, 1995 ARE INCORPORATED BY REFERENCE INTO PART II.
================================================================================
<PAGE> 2
<TABLE>
LTX CORPORATION
INDEX
<CAPTION>
PAGE
----
<S> <C>
PART I
Item 1. Business.................................................................. 1
Overview................................................................. 1
Industry Background...................................................... 1
Company Strategy......................................................... 2
Products and Markets..................................................... 3
Linear/Mixed Signal Products............................................. 5
Digital Products......................................................... 6
Discrete Products........................................................ 7
Service.................................................................. 7
Sales and Distribution................................................... 8
Customers................................................................ 8
Geographic Sales......................................................... 8
Engineering and Product Development...................................... 9
Manufacturing and Supply................................................. 9
Competition.............................................................. 9
Backlog.................................................................. 9
Proprietary Rights....................................................... 10
Executive Officers of the Company........................................ 10
Environmental Affairs.................................................... 11
Item 2. Properties................................................................ 11
Item 3. Legal Proceedings......................................................... 11
Item 4. Submission of Matters to a Vote of Security Holders....................... 11
PART II
Item 5. Market Value for the Registrant's Common Stock and Related
Security Holder Matters.................................................. 12
Item 6. Selected Consolidated Financial Data...................................... 13
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................ 14
Quarterly Results of Operations (unaudited).............................. 18
Item 8. Financial Statements and Supplementary Data............................... 20
Report of Independent Public Accountants................................. 20
Consolidated Statement of Operations..................................... 21
Consolidated Balance Sheet............................................... 22
Consolidated Statement of Stockholders' Equity........................... 23
Consolidated Statement of Cash Flows..................................... 24
Notes to Consolidated Financial Statements............................... 25
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................................. 33
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART III
Item 10. Directors and Executive Officers of the Registrant........................ 33
Item 11. Executive Compensation.................................................... 33
Item 12. Security Ownership of Certain Beneficial Owners and Management............ 33
Item 13. Certain Relationships and Related Transactions............................ 33
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K........... 33
Financial Statements..................................................... 33
Schedules................................................................ 33
Listing of Exhibits...................................................... 33
Reports on Form 8-K...................................................... 35
Exhibits................................................................. 35
Signatures......................................................................... 36
<FN>
LTX(R), HiPer(R) and enVision(TM) are all trademarks of LTX Corporation.
</TABLE>
ii
<PAGE> 4
PART I
ITEM 1. BUSINESS
OVERVIEW
LTX designs, manufactures and markets automatic test equipment for the
semiconductor industry that is used to test digital, linear and mixed signal (a
combination of digital and linear) integrated circuits ("ICs") and discrete
semiconductor components. The Company currently offers three lines of test
systems: digital test systems, which test digital ICs, including microprocessors
and microcontrollers; linear/mixed signal test systems, which test a wide range
of linear and mixed signal ICs; and discrete component test systems, which test
small signal and high power semiconductor components. The Company also sells
service and applications support for its test systems. The semiconductors tested
by the Company's systems are widely used in the computer, communications,
automotive and consumer electronics industries. The Company markets its products
worldwide to both manufacturers and users of digital, linear and mixed signal
ICs and discrete semiconductor components.
INDUSTRY BACKGROUND
All semiconductor manufacturers use semiconductor test equipment ("STE") in
the design and manufacture of ICs. During design, STE is used for design
verification, characterization, qualification and failure analysis of ICs.
During manufacture, STE is used during wafer probing to select usable ICs and
after packaging to classify ICs by performance characteristics and to assure
conformance with quality standards. Typically, all ICs are tested two or more
times during the manufacturing process. In addition, certain large electronic
equipment manufacturers employ STE for incoming inspection and for further
classification of ICs.
Demand for STE is driven by overall business expansion in the semiconductor
industry and advances in semiconductor technology. When demand for
semiconductors increases, semiconductor manufacturers will often purchase STE to
meet their growing capacity requirements. Advances in semiconductor technology
have allowed for increasingly complex semiconductor devices with improved
performance, lower cost and greater reliability than earlier generations of
devices. As a result, the use of semiconductors has proliferated across many
industries, particularly in applications for the computer, communications,
automotive and consumer electronics industries. In turn, semiconductor
manufacturers are demanding STE that is faster, more versatile, more accurate,
more productive and easier to program and maintain.
According to industry sources, worldwide sales of STE totaled approximately
$2.3 billion in 1994. Sales of STE for testing of digital, linear and mixed
signal ICs and discrete components, which are the markets in which the Company
participates, accounted for approximately $1.5 billion of this total. STE for
testing of memory ICs accounted for the balance. Worldwide semiconductor
shipments increased by approximately 29% and 32% in 1993 and 1994, respectively,
and by approximately 45% in the first six months of 1995 over the comparable
1994 period. Worldwide shipments of STE increased by approximately 37% in 1994.
Prices of STE systems generally increase as their capabilities increase.
The acquisition of STE represents a significant investment on the part of the
Company's customers, who typically consider both the capital and long term
operating costs of the test system in the acquisition process. Factors that can
vary from one test system to another, and thereby affect the total cost of
testing, include:
Speed. A test system that offers faster test times or that is able to test
more than one device at a time is able to test a greater number of devices over
its product life, thus increasing the system's efficiency and reducing the
customer's cost of testing.
Accuracy. Superior accuracy improves the yield of the semiconductor
production process because it reduces the number of good devices that are
improperly rejected and permits the selection of a higher number of premium
devices.
Efficiency. Greater efficiency in test program preparation, loading and
debugging leads to faster time to market for newly-designed semiconductors.
1
<PAGE> 5
Software. Test system operating software which is easier to use and more
powerful reduces the amount of engineering resources needed to develop test
programs and operate test systems.
Reliability. A test system that operates with minimal downtime allows the
customer's production and engineering work to proceed without frequent
intervention and provides more cost-effective operation.
System Architecture. Test system architecture that is modular extends the
product life of a test system because the system can be adapted to meet the
customer's new requirements while largely retaining compatibility with existing
test programs.
Customer Support. Customer specific applications programs, worldwide
service and customer training contribute to the efficient use of STE and
minimize the customer's cost of testing.
COMPANY STRATEGY
LTX's objective is to be the leading supplier of STE in the markets in
which it participates. The key elements of the Company's strategy are as
follows:
Focus on Leading-Edge Devices
The Company's test systems are designed to meet the design and production
test requirements of leading-edge digital, linear and mixed signal ICs and
discrete components. Testing of these devices requires high performance test
systems. The Company believes that only STE manufacturers with sophisticated
technological ability are able to compete effectively in this sector of the STE
market. Moreover, the Company believes that by focusing on testing advanced
devices, it is able to gain valuable insight into future market opportunities.
Develop Adaptable Test Systems
The Company designs its test systems so that they may be adapted and
improved to meet its customers' future needs. This philosophy is reflected in
the modular architecture of many of the Company's products, which permits both
capacity additions and upgrading of performance as the Company develops new
modular options and associated software. When possible, the Company also seeks
to enable its customers to bridge different generations of the Company's
products. For example, the Company's enVision software has been designed to
operate on its new Delta Series products, as well as on its Master Series
products.
Provide Application Specific Solutions
The Company is committed to providing complete test solutions to its
customers by having a substantial group of engineers strategically located at
customer support centers throughout the world. By actively participating in the
application of its test systems, the Company is able to learn more about
requirements for new devices and to improve the design of future test systems.
LTX also believes that its participation in the application of its test systems
enables its customers to get devices to market more rapidly and builds stronger
ties with these customers.
Leverage Worldwide Presence
The semiconductor business is a worldwide industry, with well-established
manufacturers in the United States, Europe and the Far East. The Company has
nine offices in the United States, and in Europe maintains sales and support
offices in the United Kingdom, France, Italy and Germany. In recent years, an
increasing portion of semiconductor test and assembly operations has been
conducted in the Pacific Rim by manufacturers based in the United States and
Europe, as well as by local manufacturers. LTX has established sales and support
offices in Korea, Taiwan and Singapore to focus on the specific needs of the
markets within the Pacific Rim. In addition, through a majority-owned
subsidiary, the Company provides sales and support services at three locations
in Japan. The Company believes that this network of sales and support centers
improves its ability to sell and support its products to the world's major
semiconductor manufacturers.
2
<PAGE> 6
Execute Strategic Alliances in Japan
The Japanese semiconductor industry represents the second largest market in
the world for STE. In Japan, the Company encounters significant competition from
local STE manufacturers. In fiscal 1990, the Company strengthened its resources
and presence in Japan by forming a joint venture with Sumitomo Metal Industries,
Ltd. ("SMI") through which the Company currently sells and services its products
in Japan. In addition, in fiscal 1993, the Company entered into a development,
manufacturing and marketing agreement with Ando, a Japanese STE manufacturer and
majority owned subsidiary of NEC, relating to the Delta 50, a new digital test
system that the Company introduced in fiscal 1994. The Company believes that its
alliance with Ando will better enable it to penetrate the Japanese digital
production STE market. Moreover, since the Delta 50 is compatible with other
Delta Series machines, the Company believes that sales of Delta 50 test systems
to key Japanese semiconductor manufacturers will increase the Company's
opportunities to sell other Delta Series test systems to these same
manufacturers. In fiscal 1995, the Company entered into a development,
manufacturing and marketing agreement with Asia Electronics, Inc. ("Asia"), a
Japanese STE manufacturer which is 50% owned by Toshiba Corporation ("Toshiba"),
relating to a new discrete component test system for testing integrated power
modules that the Company plans to introduce in 1996. The Company believes that
its alliance with Asia will increase LTX's penetration of the market for
discrete component test systems in Japan.
Emphasize Quality and Reliability
The Company's People Driven Quality (PDQ) Program is designed to
continually improve all of its processes and increase the satisfaction of its
customers. The Company believes that this program will lead to: more efficient
and timely performance in engineering projects; improvement in manufacturing
costs through the reduction of defective products and manufacturing cycle time;
better on-time delivery performance; and greater reliability of its test
systems.
PRODUCTS AND MARKETS
Product Overview
The Company offers products in three broad product categories:
- Systems that are used to test linear and mixed signal devices, which
include the Synchro Series and Ninety;
- Systems that are used to test digital devices, which include the Delta
Series and Master Series, and enVision test development software; and
- Discrete component test systems, marketed as the iPTest product line.
Since its inception, the Company has shipped over $1.8 billion of products,
including approximately $1.2 billion of linear/mixed signal test systems and
approximately $600 million of digital test systems. In fiscal 1995, sales of
linear/mixed signal test systems, digital test systems and discrete component
test systems represented approximately 57%, 28% and 3%, respectively, of total
net sales of the Company with service revenues representing 12%.
The Company's test systems are used by semiconductor manufacturers for
design verification, characterization, qualification and failure analysis of
ICs. In addition, certain large electronic equipment manufacturers use the
Company's test systems for incoming inspection and for further classification of
ICs. All of the Company's test systems are comprised of multiple
computer-controlled instruments which send signals to a device under test and
measure the responses of that device to classify the device by performance
characteristics and to ensure conformance with quality standards. The Company's
test system instrumentation is controlled by operating system software which is
developed by the Company. The Company also develops and sells test programs for
specific devices and offers software packages for use by semiconductor
manufacturers for test simulation in engineering design and test program
generation, data collection and statistical analysis in manufacturing.
3
<PAGE> 7
Linear and Mixed Signal ICs
Linear ICs are used in almost every electronic application. Physical
occurrences, such as sound, images, temperature, pressure, speed, acceleration,
position and rotation, consist of continuously varying information. Linear ICs
are used to amplify, filter and shape this information. Mixed signal ICs convert
the signals from linear ICs into digital signals that can be processed by a
computer. Mixed signal devices also convert processed digital information into a
linear form to control physical phenomena or to improve sound and images.
Linear and mixed signal ICs are widely used in automobiles, appliances,
personal computers, telephones, personal communication products and home
entertainment products such as video cassette recorders, cameras, compact disc
players and video games. The complexity and density of these ICs have increased
rapidly over the past several years, as the demand for portable,
battery-operated products has required IC manufacturers to integrate more
functions on each chip and reduce size and power consumption. These
technological advances have resulted in increased demand for higher performance
linear/mixed signal test systems.
<TABLE>
Listed in the following table are certain customers for the Company's
linear/mixed signal test systems by market segment.
<CAPTION>
--------------------------------------------------------------------------------------------
DEVICE APPLICATIONS CUSTOMERS
--------------------------------------------------------------------------------------------
<S> <C>
Automotive General Motors, Motorola,
National Semiconductor
--------------------------------------------------------------------------------------------
Consumer Motorola, National Semiconductor, Siemens,
Sony, SGS Thomson
--------------------------------------------------------------------------------------------
Datacommunications Austria Mikro Systeme ("AMS"),
Newbridge Networks, Rockwell
--------------------------------------------------------------------------------------------
Disk drives National Semiconductor, Philips, Silicon
Systems, SGS Thomson
--------------------------------------------------------------------------------------------
Industrial Cardiac Pacemakers, Maxim,
National Semiconductor, Sony
--------------------------------------------------------------------------------------------
Telecommunications AMS, AT&T, Philips, SGS Thomson
--------------------------------------------------------------------------------------------
Wireless communications AMS, AT&T, Motorola, National Semiconductor
--------------------------------------------------------------------------------------------
</TABLE>
Digital ICs
Digital ICs include microprocessors, microcontrollers, programmable DSPs
(digital signal processing), microperipherals and logic/ASIC (application
specific IC) devices. These ICs are used for computing, controlling and
calculating functions, and are at the heart of most electronic products. The
most well known of these devices is the microprocessor, which is the enabler of
personal computer technology. Microcontrollers, however, are much more broadly
used in automobiles, appliances, home entertainment products and many other
electronic products which utilize electronic control functions. According to
industry statistics, fewer than 200 million microprocessors were manufactured
worldwide during 1994, while more than 2.5 billion microcontrollers were
manufactured that year. The unit growth alone from 1993 to 1994 in
microcontrollers shipped was approximately double the total production for
microprocessors in 1994. Microprocessors can cost hundreds or even thousands of
dollars, while microcontrollers typically cost tens of dollars. However, testing
of microcontrollers can be as complex as microprocessors and requires high
performance test systems.
4
<PAGE> 8
<TABLE>
The following table sets forth types of devices tested by certain customers of the Company's
digital test systems.
<CAPTION>
--------------------------------------------------------------------------------------------
DEVICE APPLICATIONS CUSTOMERS
--------------------------------------------------------------------------------------------
<S> <C>
ASICs National Semiconductor, Silicon Systems,
Symbios Logic, Western Digital
--------------------------------------------------------------------------------------------
Logic ASAT, Gould/AMI, Harris, Lucky Goldstar,
Silicon Systems
--------------------------------------------------------------------------------------------
Microcontrollers Microchip Technology, National Semiconductor
--------------------------------------------------------------------------------------------
Microprocessors Motorola, NEC, Symbios Logic
--------------------------------------------------------------------------------------------
PC chip sets ACER, ASE Test, Samsung,
Taiwan Semiconductor (TSMC)
--------------------------------------------------------------------------------------------
</TABLE>
LINEAR/MIXED SIGNAL PRODUCTS
LTX offers two product lines for testing linear/mixed signal ICs, the
Synchro Series and Ninety, introduced in 1990 and 1986, respectively.
Synchro Series
The Synchro is the latest generation of the Company's linear/mixed signal
test systems. Synchro test systems are designed for high throughput testing of
linear devices and for testing mixed signal devices that require high digital
pattern rates and high digital pin counts along with analog signal generation
and measurement requirements. The Synchro features DSP(digital signal
processor) - per-pin architecture which allows for concurrent control of both
linear and digital resources at each pin of the IC under test. This design
permits the generation of test signals and measurements on many device pins at
the same time, producing faster test times on high pin count ICs. The Synchro
systems are modular in design which enables customers to add new options to
their systems in the future. This allows customers to increase the capability of
their Synchro system to meet their new test requirements. Since its
introduction, the Company has significantly upgraded the performance and
capabilities of the Synchro through the introduction of new hardware and
software.
The Synchro Series includes the Synchro II, Synchro Plus and Synchro
ProductionPAC test systems:
Synchro II. The configuration of the Synchro II test system is flexible.
This permits LTX customers to choose from a wide array of options to meet the
test requirements of a broad range of linear/mixed signal devices.
Synchro Plus. The Synchro Plus test system is configured with SuperSpeed
Data Pins which can test mixed signal devices at data rates of up to 400 MHz.
The Synchro Plus system addresses the test requirements of new, high speed
devices used in applications such as disk drives for personal computers and
advanced ATM(Asynchronous Transfer Mode) interface boards used to support the
development of the information superhighway.
Synchro ProductionPAC. The Synchro ProductionPAC test systems are lower
cost, smaller footprint, specifically focused configurations that address the
production requirements of high volume, low cost mixed signal devices. The RFPAC
system is configured to test devices used in the rapidly expanding wireless
communications market. The PowerPAC addresses "smart" power devices that are
being increasingly used in automobiles and consumer electronics. The TelePAC
addresses commodity ICs used in telecommunications. The ConverterPAC is focused
on devices used in multimedia applications.
All Synchro Series test systems are fully compatible in hardware, software
and specification. Current prices range from approximately $400,000 for a
Synchro ProductionPAC system to approximately $2,000,000 for a high pin count
Synchro Plus system.
5
<PAGE> 9
Ninety
The Ninety system is an improved version of the LTX77, the Company's first
linear/mixed signal test system introduced in 1977. Although the Synchro has
largely superseded the Ninety, the Company continues to manufacture the Ninety,
primarily for customers who are already using the Ninety or LTX77 systems and
desire to expand capacity. Many of the Ninety or LTX77 systems the Company has
previously sold are currently still in use. In the past, the Company has
upgraded the performance and capabilities of the Ninety system through the
introduction of new hardware and software. As with the Synchro, a wide array of
options are available. The current prices for a Ninety system range from
approximately $200,000 to approximately $700,000, depending on the system
configuration.
Software Tools
The Company offers software for test program generation and debugging in
manufacturing, called Device Tool, with its Synchro test systems. The Company
also offers data collection and statistical analysis software, called
dataVision. This software is test system independent and provides customers with
solutions for integrated yield management in manufacturing and engineering
device characterization. Device Tool typically sells for approximately $25,000
and dataVision typically sells for approximately $100,000.
DIGITAL PRODUCTS
LTX offers two product lines for testing digital ICs, the Delta Series and
Master Series, which are marketed under the Trillium name. The Delta Series and
Master Series product lines are based on a resource-per-pin architecture which
allows for a complete set of the test system's key features (timing generators,
waveform formatting and pattern memory) for each pin channel of the test system.
The Company believes that this architecture provides for faster, simpler
characterization and engineering debugging of new ICs, better system timing
accuracy, and simplified interfacing with computer-aided design systems. The
Company's enVision test development software is sold with both the Delta Series
and Master Series product lines.
Delta Series
The Company's new line of digital test systems, the Delta Series, includes
the Delta 50, Delta/ST and the Delta 100. Introduced in 1994, the Delta 50 was
designed to meet the production test requirements of newer high volume, lower
cost devices such as microcontrollers. The Delta 50 has a compact design and is
capable of testing 512 pins at data rates of up to 50 MHz or 256 pins at data
rates of up to 100 MHz. The Delta/ST, introduced in 1995, incorporates Synchro
mixed signal technology with Delta Series digital technology to address the test
requirements of a new generation of devices with high performance analog signal
interfaces to complex digital functions. These new devices are enabling the
development of powerful, yet low cost consumer electronic products in areas such
as multimedia and portable communications. The Delta 100, also introduced in
1994, was designed to test high performance microprocessors and the ICs that
make up the chip sets that are used with them. The Delta 100 can test up to 512
pins at data rates of up to 100 MHz with timing accuracy of 150 pico seconds.
The Delta 50, Delta/ST, and Delta 100 operate with the Company's enVision
software providing customers with compatibility among these systems. The current
prices for the Delta Series test systems range from approximately $500,000 for a
low pin count Delta 50 to approximately $4,000,000 for a high pin count Delta
100.
In fiscal 1993, the Company entered into a development, manufacturing and
marketing agreement with Ando, a Japanese STE manufacturer and majority owned
subsidiary of NEC, relating to the Delta 50. The Company has developed the Delta
50 in conjunction with Ando and has granted Ando exclusive rights to manufacture
the Delta 50 in Japan. The Company has retained exclusive rights to manufacture
the Delta 50 outside of Japan. Ando has the exclusive right to sell the Delta 50
in Japan and the Company has exclusive marketing rights for the rest of the
world, with certain exceptions in each case. In connection with this agreement,
the Company has received a payment of $6.5 million from Ando and will receive
royalty payments on sales of the Delta 50 by Ando. In July 1994, the Company
amended its development agreement with Ando to allow for further development
enhancements to the Delta 50.
6
<PAGE> 10
Master Series
The Master Series product line includes the Deltamaster and Micromaster
test systems, which are enhanced versions of the Company's original digital test
system. The Deltamaster, introduced in 1990, is a high-performance system with
the capability of testing up to 256 pins at data rates of up to 80 MHz. The
Micromaster, introduced in 1987, is a lower-priced system that can test up to
256 pins at data rates of up to 40 MHz. The Micromaster is device interface and
software compatible with the Deltamaster. Although the Delta Series product line
is expected to eventually replace the Master Series, the Company will continue
to sell the Master Series test systems, primarily to customers who are already
using these systems and desire to expand capacity. The current prices for the
Master Series range from approximately $400,000 for a low pin count Micromaster
to approximately $2,000,000 for a high pin count Deltamaster.
enVision
In fiscal 1993, the Company completed the development of its new
object-oriented enVision programming software for use on all its digital test
systems. In earlier generation software languages, programming commands made
direct reference to the hardware of the test system, which required the user to
have a detailed knowledge of the system's hardware. In contrast, this detailed
knowledge is not required when using enVision, thereby allowing the programmer
to focus attention on refining the test program for the specific IC under test.
Thus, the Company has designed enVision to be more device oriented than tester
oriented. enVision permits a user to test multiple devices at the same time,
significantly improving the throughput of the Company's digital test systems.
enVision is an integral feature of the Delta Series product line and can be
purchased by customers of the Master Series product line. The current price for
enVision is approximately $15,000 per workstation.
DISCRETE PRODUCTS
The Company's iPTest systems are used to test discrete semiconductor
components, such as diodes, small signal transistors and power transistors, as
well as arrays of these components. These discrete components are used in every
area of electronics. For example, diodes are used in consumer, industrial and
automotive applications; small signal transistors are used in consumer
electronics, such as hearing aids and portable radios; and power transistors are
used in audio amplifiers, radios and televisions. iPTest systems are also
capable of accurately measuring the characteristics of transient voltage
suppression components, which are widely used to protect personal computers and
telecommunications products from harmful voltage spikes or surges.
The Company expects that arrays of discrete components, such as
multi-device modules, will replace transistors in electric motor control and
will permit a wider use of semiconductors in extremely high power applications,
such as air conditioners, domestic appliances, electric locomotives and
automobiles. These arrays of discrete components are mostly constructed from
high power transistors of IGBT (insulated gate bipolar transistor) technology.
In 1995, the Company introduced new options to its iPTest systems for high
volume production testing of these discrete power components. The Company
believes that these newer components may become the most significant market for
discrete component test systems. In 1995, the Company entered into a
development, manufacturing and marketing agreement with Asia, a Japanese STE
manufacturer which is 50% owned by Toshiba, relating to a new discrete component
test system.
Prices of iPTest systems currently range from approximately $100,000 to
approximately $700,000, depending on the system configuration and testing
specifications.
SERVICE
The Company considers service to be an important aspect of its business.
The Company's worldwide service organization is capable of performing
installations and all necessary maintenance of test systems sold by the Company,
including routine servicing of components manufactured by third parties. The
Company includes a one-year parts and three-month labor warranty on test systems
or options designed and manufactured by the Company, and a three-month labor
warranty on components that have been purchased
7
<PAGE> 11
from other manufacturers and incorporated into the Company's test systems. The
Company also provides training on the maintenance and operation of test systems
sold to its customers.
The Company offers a wide range of service contracts which gives its
customers flexibility to select the maintenance program best suited to their
needs. Customers may purchase service contracts which extend maintenance beyond
the initial warranty provided by the Company with the sale of its test systems.
Many customers enter into annual or multiple-year service contracts over the
life of the equipment. The pricing of contracts is based upon the level of
service provided to the customer and the time period of the service contract. As
the installed base of LTX test systems has grown, service revenues have been
increasing on an annual basis. The Company believes that service revenues should
be less affected by the cyclicality of the semiconductor industry than sales of
test equipment. The Company maintains 22 service centers around the world.
SALES AND DISTRIBUTION
The Company sells its products primarily through its worldwide sales
organization. In Japan, the Company sells, services and supports its products
through its joint venture with SMI, except that Ando has the right to
manufacture and sell the Delta 50 to certain customers in Japan and to sell the
Delta 100 to these customers. The Company will share with its SMI joint venture
specified portions of the royalties to be paid by Ando on any sales by it of the
Delta 50 and of the revenues received on the Delta 100. In the future, Asia will
be selling the Company's iPTest systems to certain customers in Japan. The
Company uses a small number of independent sales representatives in certain
other regions of the world.
CUSTOMERS
The Company's customers include many of the world's leading semiconductor
manufacturers. The Company's major customers in fiscal 1995 included:
<TABLE>
<S> <C>
ASAT Motorola
AT&T National Semiconductor
Austria Mikro Systeme Philips
Hitachi SGS Thomson
Intel Sony
</TABLE>
Sales to these major customers accounted for approximately 60% of net sales
in fiscal 1995. Sales to Philips accounted for approximately 17% of net sales in
fiscal 1995. No single customer accounted for 10% or more of net sales in fiscal
1994. Sales to Intel accounted for approximately 16% of net sales in fiscal
1993.
GEOGRAPHIC SALES
The following table sets forth the Company's net sales by geographic area
as a percentage of total net sales for each of the Company's last three fiscal
years:
<TABLE>
<CAPTION>
% OF TOTAL NET SALES
----------------------------
FISCAL FISCAL FISCAL
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
North America...................................................... 52.7% 38.8% 33.7%
Europe............................................................. 12.0 14.5 15.8
Japan.............................................................. 5.5 12.5 10.2
Rest of world (principally Pacific Rim)............................ 29.8 34.2 40.3
----- ----- -----
Total.................................................... 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
Sales to customers outside the United States are subject to risks,
including the imposition of governmental controls, the need to comply with a
wide variety of foreign and United States export laws, political and economic
instability, trade restrictions, changes in tariffs and taxes, longer payment
cycles typically associated with international sales, and the greater difficulty
of administering business overseas as well as general economic conditions. For
information about the Company's foreign operations and export sales see Note 10
of Notes to the Company's Consolidated Financial Statements.
8
<PAGE> 12
ENGINEERING AND PRODUCT DEVELOPMENT
The STE market is characterized by rapid technological change and new
product introductions, as well as advancing industry standards. The Company's
ability to remain competitive in the digital, linear and mixed signal IC and
discrete component markets will depend upon its ability to successfully enhance
existing test systems and develop new generations of test systems and to
introduce these new products on a timely and cost-effective basis. Accordingly,
the Company devotes a significant portion of its personnel and financial
resources to engineering and product development programs and seeks to maintain
close relationships with its customers in order to be responsive to their
product needs. The Company's expenditures for engineering and product
development were $19.7 million, $19.6 million and $19.8 million during fiscal
1993, 1994 and 1995, respectively.
The Company's engineering strategy is to develop its test systems in an
evolutionary manner so that they may be progressively upgraded. This approach
preserves its customers' substantial investments in test programs, and, in
general, maintains market acceptance for the Company's test systems. In order to
implement this strategy, the Company works closely with its customers to define
new product features and to identify emerging applications for its products.
MANUFACTURING AND SUPPLY
LTX's principal manufacturing operations consist of component parts
assembly, final assembly and testing at its manufacturing facilities in
Westwood, Massachusetts and San Jose, California. Over the past year, the
Company has significantly increased its outsourcing of certain subassemblies to
contract manufacturers. The Company uses standard components and prefabricated
parts manufactured to the Company's specifications. Most of the components for
the Company's products are available from a number of different suppliers;
however, certain components are purchased from a single supplier. Although LTX
believes that all single-source components currently are available in adequate
amounts, there can be no assurance that shortages will not develop in the
future. Any disruption or termination of supply of certain single-source
components could have an adverse effect on the Company's business and results of
operations.
COMPETITION
The STE industry is highly competitive, with many other domestic and
foreign companies participating in the markets for each of the Company's
products. The Company's major competitors in the market for digital test systems
are Schlumberger Limited, Teradyne, Inc. and Credence Systems Corporation,
except in Japan where the Company's major competitor is Advantest Corporation
(an affiliate of Fujitsu Limited). The Company's principal competitor for
linear/mixed signal test systems is Teradyne, Inc., except in Japan where the
Company's major competitor is Yokogawa Electric Works. The Company's principal
competitor for discrete component test systems is Tesec, Ltd. Most of the
Company's major competitors are also suppliers of other types of automatic test
equipment and have significantly greater financial and other resources than the
Company.
The Company principally competes on the basis of performance, cost of test,
reliability, customer service, applications support, price and ability to
deliver its products on a timely basis. Although the Company believes that it
competes favorably with respect to each of these factors, new product
introductions by the Company's competitors could cause a decline in sales or
loss of market acceptance of the Company's existing products. In addition,
increased competitive pressure could lead to intensified price-based
competition, resulting in lower prices and adversely affecting the Company's
business and results of operations.
BACKLOG
At July 31, 1995, the Company's backlog of unfilled orders for all products
and services was approximately $98.4 million, compared with approximately $71.8
million at July 31, 1994. The Company expects to deliver approximately 92% of
its July 31, 1995 backlog in fiscal 1996. While backlog is calculated on the
basis of firm orders, no assurance can be given that customers will purchase the
equipment subject to such
9
<PAGE> 13
orders. As a result, the Company's backlog at a particular date is not
necessarily indicative of actual sales for any succeeding period.
PROPRIETARY RIGHTS
The development of the Company's products is largely based on proprietary
information. The Company relies upon a combination of contract provisions,
copyright, trademark and trade secret laws to protect its proprietary rights in
products. It also has a policy of seeking patents on technology considered of
particular strategic importance. Although the Company believes that the
copyrights, trademarks and patents it owns are of value, the Company believes
that they will not determine the Company's success, which depends principally
upon its engineering, manufacturing, marketing and service skills. However, the
Company intends to protect its rights when, in its view, these rights are
infringed upon.
The Company licenses some software programs from third party developers and
incorporates them in the Company's products. Generally, such agreements grant to
the Company non-exclusive licenses with respect to the subject program and
terminate only upon a material breach by the Company. The Company believes that
such licenses are generally available on commercial terms from a number of
licensors.
The use of patents to protect hardware and software has increased in the
STE industry. The Company has at times been notified of claims that it may be
infringing patents issued to others. Although there are no pending actions
against the Company regarding any patents, no assurance can be given that
infringement claims by third parties will not have a material adverse effect on
the Company's business and results of operations. As to any claims asserted
against the Company, the Company may seek or be required to obtain a license
under the third party's intellectual property rights. There can be no assurance,
however, that a license will be available under reasonable terms or at all. In
addition, the Company could decide to resort to litigation to challenge such
claims or a third party could resort to litigation to enforce such claims. Such
litigation could be expensive and time consuming and could materially adversely
affect the Company's business and results of operations.
<TABLE>
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as follows:
<CAPTION>
EXECUTIVE OFFICER AGE POSITION
----------------- --- --------
<S> <C> <C>
Roger W. Blethen................................... 44 President and Director
Martin S. Francis.................................. 49 President and Director
John J. Arcari..................................... 49 Chief Financial Officer and Treasurer
Kenneth E. Daub.................................... 59 Senior Vice President
</TABLE>
Executive officers are chosen by and serve at the discretion of the Board
of Directors of the Company.
Roger W. Blethen was elected a President of the Company in February 1994.
Mr. Blethen has been a Director since 1980 and had been a Senior Vice President
of the Company from 1985 until February 1994. Mr. Blethen was a founder of LTX
and has served in a number of senior management positions with the Company since
its formation in 1976.
Martin S. Francis was elected a President of the Company in February 1994.
Mr. Francis has been a Director since 1991 and had been a Senior Vice President
of the Company from 1991 until 1994. Prior to 1991, Mr. Francis had held senior
management positions in the Company's European and Japanese operations from the
time that he joined LTX in 1982.
John J. Arcari has been Chief Financial Officer and Treasurer of the
Company since 1987. He had been Controller of LTX since joining the Company in
1981. Prior to joining LTX, Mr. Arcari spent ten years with the public
accounting firm of Price Waterhouse as a certified public accountant.
Kenneth E. Daub was appointed a Senior Vice President of the Company in
1991 and is responsible for North American and Pacific Rim sales. From the time
he joined the Company in 1987 until 1991, Mr. Daub
10
<PAGE> 14
served as Vice President responsible for North American Sales. Prior to joining
the Company in 1987, Mr. Daub held various senior positions with Schlumberger
Limited.
At July 31, 1995, the Company had a total of 944 employees, including 238
in engineering and product development, 185 in service and customer support, 323
in manufacturing and 198 in sales, marketing and administration. Many of the
Company's employees are highly skilled, and the Company believes its future
success will depend in large part on its ability to attract and retain such
employees. None of the Company's employees are represented by a labor union, and
the Company has experienced no work stoppages. The Company believes that its
employee relations are excellent.
ENVIRONMENTAL AFFAIRS
The Company's manufacturing facilities are subject to numerous laws and
regulations designed to protect the environment. The Company does not anticipate
that compliance with these laws and regulations will have a material effect on
its capital expenditures, earnings or competitive position.
ITEM 2. PROPERTIES
All of the Company's facilities are leased. The Company maintains its
headquarters in Westwood, Massachusetts, where corporate administration, sales
and customer support and manufacturing and engineering for its linear/mixed
signal products are located. In May 1995, the Company subleased a 208,000 square
foot facility at this location for a ten year term. The Company's lease of this
facility expires in 2010. The Company is currently consolidating its operations
into an adjacent 167,000 square foot facility. The lease of that facility
expires in 2007. Manufacturing and engineering for the Company's digital
products are located in a 70,000 square foot facility in San Jose, California.
The lease of this facility expires in 1999. The Company also leases seven sales
and customer support offices at various locations in the United States totaling
approximately 40,000 square feet.
The Company's European headquarters is located in Woking, United Kingdom.
The Company also maintains sales and support offices in facilities at four other
locations in Europe. The manufacturing and engineering facilities for the
Company's iPTest systems are located in Guildford, United Kingdom. The Company
also maintains sales and support offices in six locations in the Far East.
Office space leased in Europe and the Far East totals approximately 100,000
square feet.
The headquarters of LTX Co., Ltd., the Company's joint venture with SMI, is
located in Kawasaki, Japan. The joint venture also leases additional offices in
four other locations in Japan. Office space leased in Japan totals approximately
15,000 square feet.
The Company believes that its existing facilities are adequate to meet its
current and foreseeable future requirements.
ITEM 3. LEGAL PROCEEDINGS
The Company has no material pending legal proceedings other than routine
litigation relating to its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of stockholders during the fourth
quarter of fiscal 1995.
11
<PAGE> 15
PART II
<TABLE>
ITEM 5. MARKET VALUE FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "LTXX." The following table sets forth for the periods indicated the
actual high and low sales prices per share of Common Stock, as reported on the
Nasdaq National Market:
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fiscal Year Ended July 31, 1994:
First Quarter........................................................ $ 8 1/4 $4 3/4
Second Quarter....................................................... 5 5/8 3 1/8
Third Quarter........................................................ 4 1/2 2
Fourth Quarter....................................................... 3 3/4 2
Fiscal Year Ended July 31, 1995:
First Quarter........................................................ $ 4 3/4 $3
Second Quarter....................................................... 5 11/16 3 1/2
Third Quarter........................................................ 6 7/16 4 7/8
Fourth Quarter....................................................... 11 5/8 6
</TABLE>
The Company has never declared or paid cash dividends on the shares of
Common Stock and does not anticipate paying any cash dividends on the shares of
Common Stock in the foreseeable future. The Company currently intends to retain
future earnings to fund the development and growth of its business. Moreover,
the Company's credit agreement with a bank contains certain covenants which
prohibit the payment of cash dividends by the Company.
As of September 13, 1995, there were 1,208 stockholders of record.
12
<PAGE> 16
<TABLE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data of the
Company for and as of the end of each of the fiscal years in the five-year
period ended July 31, 1995. The selected consolidated financial data for and as
of the end of each of the five fiscal years in the period ended July 31, 1995
are derived from the consolidated financial statements of the Company, which
have been audited by Arthur Andersen LLP, independent public accountants. These
selected consolidated financial data should be read in conjunction with the
Company's Consolidated Financial Statements and the Notes thereto appearing
elsewhere in this report.
<CAPTION>
FISCAL YEAR ENDED JULY 31
----------------------------------------------------
1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales:
Product................................... $187,887 $134,353 $154,392 $145,688 $185,180
Service................................... 12,474 14,753 18,540 22,638 25,139
-------- -------- -------- -------- --------
Total net sales................... 200,361 149,106 172,932 168,326 210,319
Cost of sales:
Product................................... 113,124 96,024 102,005 104,189 122,509
Service................................... 8,265 10,050 11,521 12,750 14,239
Provision for excess inventories.......... -- -- -- 3,500 --
-------- -------- -------- -------- --------
Total cost of sales............... 121,389 106,074 113,526 120,439 136,748
-------- -------- -------- -------- --------
Gross profit................................ 78,972 43,032 59,406 47,887 73,571
Engineering and product development
expenses.................................. 21,859 21,943 19,744 19,604 19,778
Selling, general and administrative
expenses.................................. 45,948 41,529 42,548 42,308 38,953
Restructuring charges....................... -- 2,800 -- 14,376 --
-------- -------- -------- -------- --------
Income (loss) from operations............... 11,165 (23,240) (2,886) (28,401) 14,840
Interest expense, net....................... 5,550 3,520 3,979 3,874 3,774
-------- -------- -------- -------- --------
Income (loss) before income taxes and
minority interest......................... 5,615 (26,760) (6,865) (32,275) 11,066
Provision for income taxes.................. 1,095 -- -- -- 372
-------- -------- -------- -------- --------
Income (loss) before minority interest...... 4,520 (26,760) (6,865) (32,275) 10,694
Minority interest in net loss of
subsidiary................................ 1,608 2,500 2,556 971 --
-------- -------- -------- -------- --------
Net income (loss)........................... $ 6,128 $(24,260) $ (4,309) $(31,304) $ 10,694
======== ======== ======== ======== ========
Fully diluted net income (loss) per share... $ 0.36 $ (1.22) $ (0.20) $ (1.23) $ 0.36
Weighted average shares..................... 21,963 19,888 21,089 25,485 29,787
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital............................. $ 73,578 $ 49,019 $ 55,624 $ 48,853 $ 62,182
Total assets................................ 144,829 118,284 138,257 130,636 145,917
Short-term debt............................. 4,044 9,430 10,047 7,307 8,816
Long-term debt.............................. 25,956 26,056 21,003 41,399 28,267
Stockholders' equity........................ 76,793 53,084 66,476 40,593 65,407
</TABLE>
13
<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
LTX designs, manufactures and markets automatic test equipment for the
semiconductor industry. The Company sells and supports its products worldwide to
both manufacturers and users of semiconductor components. LTX has been selling
equipment to test linear/mixed signal ICs since 1977 and digital ICs since 1985.
The Company's business is largely dependent upon the capital expenditures of
semiconductor manufacturers. The semiconductor industry is highly cyclical and
has historically experienced recurring periods of oversupply, which often have
had a severely detrimental effect on such industry's demand for test equipment.
As a result of these and other factors, the Company incurred losses in fiscal
years 1992, 1993 and 1994.
The Company has recently taken certain steps to attempt to mitigate the
effect on its business of the cyclical nature of the semiconductor industry. In
February 1994, the Company initiated a major restructuring program, including a
reorganization of senior management. This restructuring program lowered the
Company's break-even level of sales and aligned management responsibilities and
objectives along the Company's product lines. The Company consolidated
operations in Massachusetts and California, implemented a workforce reduction of
approximately 100 employees and eliminated several levels of management. Largely
as a result of these actions, quarterly operating expense levels were reduced
$2.1 million in the second half of fiscal 1994. In addition, product reliability
and product cost reduction programs were initiated to improve the Company's
gross margins.
In fiscal 1995, the Company began delivering its Delta Series digital test
systems and its Synchro ProductionPAC mixed signal test system. The Delta 50 and
Delta/ST systems were developed to meet the test requirements of newer high
volume, lower cost devices such as microcontrollers. The Synchro Production PAC
systems are lower cost, focused configurations aimed at the production
requirements of a variety of new mixed signal devices. In July 1994, the Company
strengthened its relationship with Ando Electric Company Ltd. ("Ando"), a
Japanese STE manufacturer and majority-owned subsidiary of Nippon Electric
Corporation, Ltd. (NEC). The Company received $20.0 million from Ando under a
term loan agreement that extends through July 2001. In fiscal 1993, the Company
entered into a development, manufacturing and marketing agreement with Ando
relating to the Delta 50.
Since the second quarter of fiscal 1994, the Company's operating results
have improved significantly. The Company returned to profitability in the first
quarter of fiscal 1995 and had net income of $10.7 million in fiscal 1995. The
Company has substantially increased its backlog position, while increasing
quarterly sales from $38.1 million in the second quarter of fiscal 1994 to $59.9
million in the fourth quarter of fiscal 1995. With the higher level of backlog,
the Company has been able to manufacture and deliver its test systems more
evenly within a quarter. Largely as a result of this, the Company generated
$19.5 million in net cash flow from operations in fiscal 1995.
14
<PAGE> 18
<TABLE>
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the items included in the
Consolidated Statement of Operations as percentages of total net sales.
<CAPTION>
PERCENTAGE OF NET SALES
-------------------------
YEAR ENDED JULY 31
-------------------------
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
Net sales:
Product........................................................... 89.3% 86.6% 88.0%
Service........................................................... 10.7 13.4 12.0
----- ----- -----
Total net sales............................................. 100.0 100.0 100.0
Cost of sales:
Product........................................................... 59.0 61.9 58.2
Service........................................................... 6.6 7.6 6.8
Provisions for excess inventories................................. -- 2.1 --
----- ----- -----
Total cost of sales......................................... 65.6 71.6 65.0
----- ----- -----
Gross profit........................................................ 34.4 28.4 35.0
Engineering and product development expenses........................ 11.5 11.6 9.4
Selling, general and administrative expenses........................ 24.6 25.1 18.5
Restructuring charges............................................... -- 8.6 --
----- ----- -----
Income (loss) from operations....................................... (1.7) (16.9) 7.1
Interest expense, net............................................... 2.3 2.3 1.8
----- ----- -----
Income (loss) before income taxes and minority interest............. (4.0) (19.2) 5.3
Provision for income taxes.......................................... -- -- 0.2
----- ----- -----
Income (loss) before minority interest.............................. (4.0) (19.2) 5.1
Minority interest in net loss of subsidiary......................... 1.5 0.6 --
----- ----- -----
Net income (loss)................................................... (2.5)% (18.6)% 5.1%
===== ===== =====
</TABLE>
Fiscal 1995 Compared to Fiscal 1994
Strong semiconductor industry conditions during fiscal 1995 resulted in a
significant increase in demand for the Company's test systems. Orders for the
Company's products and services were $236.9 million in fiscal 1995 as compared
to $197.9 million in fiscal 1994, an increase of approximately 20%. In the
fourth quarter of fiscal 1995, the Company achieved a record order level of
$83.7 million. Orders for the Company's linear and mixed signal test systems
remained at a high level in fiscal 1995, increasing 11% over fiscal 1994, while
orders for the Company's digital products increased 41% year-to-year. As a
result, the Company's backlog of unfilled orders for products and services was
$98.4 million at July 31, 1995 as compared to $71.8 million at July 31, 1994.
Net sales were $210.3 million in fiscal 1995 as compared to $168.3 million
in fiscal 1994, an increase of approximately 25%. Sales of the Company's linear
and mixed signal test systems were about 40% higher in fiscal 1995 as compared
to fiscal 1994. Sales of the Company's digital test systems in fiscal 1995 were
slightly higher than fiscal 1994. In the fourth quarter of fiscal 1995, sales of
the Company's digital test systems were almost 50% higher than the fourth
quarter of fiscal 1994. Service revenues were $25.1 million in fiscal 1995 as
compared to $22.7 million in fiscal 1994.
The gross profit margin was 35.0% of net sales in fiscal 1995 as compared
to 28.4% in fiscal 1994. The improvement in the gross profit margin was largely
a result of proportionately lower fixed manufacturing costs on the higher level
of shipments and higher average selling prices. In fiscal 1994, the gross profit
margin was reduced by 2.1% as a result of a $3.5 million provision for excess
inventories.
Engineering and product development expenses were $19.8 million, or 9.4% of
net sales, in fiscal 1995, as compared to $19.6 million, or 11.6% of net sales,
in fiscal 1994. Engineering and product development expenses have remained
approximately equal year-to-year reflecting the Company's continuing development
efforts, particularly for its Delta Series and Synchro product lines.
15
<PAGE> 19
Selling, general and administrative expenses were $39.0 million, or 18.5%
of net sales, in fiscal 1995, as compared to $42.3 million, or 25.1% of net
sales, in fiscal 1994. The decrease in selling, general and administrative
expenses of $3.3 million was largely a result of the Company's cost reduction
and restructuring measures initiated in fiscal 1994, which included a workforce
reduction and consolidation of facilities.
Net interest expense was $3.8 million in fiscal 1995 as compared to $3.9
million in fiscal 1994. In July 1995, the Company's 13 1/2% Convertible
Subordinated Debentures Due 2011 were converted into 2,241,000 shares of Common
Stock, reducing interest expense in the fourth quarter of fiscal 1995. In
addition, lower average bank borrowings reduced interest expense in fiscal 1995
as compared to fiscal 1994. This reduction in interest expense was largely
offset by an increase in interest due to a long-term loan the Company received
in July 1994.
The tax provision of $0.4 million in fiscal 1995 reflected 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 fiscal 1994
due to the net operating loss for the year.
The Company's Japanese subsidiary's results of operations were break-even
in fiscal 1995. In fiscal 1994, the minority partner's share of the Company's
Japanese subsidiary's net loss was $1.0 million.
The Company had net income of $10.7 million, or $0.36 per share, in fiscal
1995, as compared to a net loss of $31.3 million, or $1.23 per share, in fiscal
1994. The net loss in fiscal 1994 included a restructuring charge of $14.4
million and a provision for excess inventories of $3.5 million. The Company's
operating results improved sequentially during fiscal 1995, beginning with net
income of $0.8 million in the first quarter and ending with net income of $5.1
million in the fourth quarter. The quarterly improvement in the Company's
results reflected the increasing level of sales, higher gross profit margin and
reduction of operating expenses as a percentage of net sales.
Fiscal 1994 Compared to Fiscal 1993
Net sales were $168.3 million in fiscal 1994 as compared to $172.9 million
in fiscal 1993, a decrease of approximately 3%. Sales of the Company's linear
and mixed signal products increased by over 30% in fiscal 1994 as compared to
fiscal 1993, and service revenues increased by over 20% year-to-year. However,
this improvement was offset by a reduction of over 30% in sales of the Company's
digital product line in fiscal 1994 as compared to fiscal 1993. The decline in
shipments of the Company's digital product line was due to lower demand from
customers, particularly in North America, for testing microprocessors and other
personal computer-related devices.
The gross profit margin was 28.4% of net sales in fiscal 1994 as compared
to 34.4% in fiscal 1993. In the second quarter of fiscal 1994, the Company
recorded a $3.5 million provision for excess inventories primarily as a result
of lower than anticipated shipment levels in the first half of fiscal 1994. This
provision lowered the gross profit margin by 2.1% of net sales in fiscal 1994.
In fiscal 1993, the gross profit margin was increased by 2.6% as a result of a
$6.5 million payment made by Ando under the terms of a development contract that
was included in product sales. There was no similar contract revenue in fiscal
1994. The gross profit margin in fiscal 1994 was also adversely affected by
proportionately higher fixed manufacturing costs on lower digital product sales
and by lower average selling prices for the Company's digital products.
Engineering and product development expenses were $19.6 million, or 11.6%
of net sales, in fiscal 1994 as compared to $19.7 million, or 11.5% of net
sales, in fiscal 1993. Engineering expenses in both fiscal 1994 and fiscal 1993
included significant development costs for the Company's new generation of
digital products, the Delta Series, as well as enhancements to the mixed signal
product line.
In March 1994, the Company announced a major restructuring program. The
restructuring consisted of a consolidation of facilities, primarily involving
the Company's leased facilities in Westwood, Massachusetts, and a workforce
reduction of approximately 100 employees. As a result of those decisions, the
Company took a $14.4 million restructuring charge to its second quarter results
of operations. The restructuring charge largely related to the Company's plan to
eliminate excess leased facilities and included amounts for severance payments
and outplacement benefits for terminated employees. Largely as a result of the
restructuring,
16
<PAGE> 20
engineering and product development expenses and selling, general and
administrative expenses, combined, were $2.1 million lower in the fourth quarter
of fiscal 1994 as compared to the second quarter of fiscal 1994.
Selling, general and administrative expenses were $42.3 million, or 25.1%
of net sales, in fiscal 1994 as compared to $42.5 million, or 24.6% of net
sales, in fiscal 1993. The decrease of $0.2 million was due to a translation
loss of $1.5 million in fiscal 1993, which was partially offset by personnel
additions and higher costs for sales activities in the first half of fiscal
1994.
Net interest expense was $3.9 million in fiscal 1994 as compared to $4.0
million in fiscal 1993. A decrease in interest expense in fiscal 1994 as a
result of the conversion of the Company's 10 1/2% Convertible Subordinated
Debentures Due 2010 into Common Stock in July 1993 was largely offset by an
increase in interest expense on higher average bank borrowings in fiscal 1994.
The Company's Japanese subsidiary had a net loss in fiscal 1994 and fiscal
1993. The minority interest in net loss of subsidiary represents the minority
partner's share of the Company's Japanese subsidiary's loss in both years. The
net loss in fiscal 1994 was reduced substantially from the prior fiscal year
primarily as a result of an increase in sales and gross margin in fiscal 1994
over fiscal 1993.
There was no tax provision in fiscal 1994 or fiscal 1993 due to the net
loss in both years.
The Company had a net loss of $31.3 million in fiscal 1994 as compared to a
net loss of $4.3 million in fiscal 1993. The Company reported a net loss of $1.6
million in the first quarter of fiscal 1994 and a net loss of $24.0 million in
the second quarter of fiscal 1994, including the restructuring charge of $14.4
million and a provision for excess inventories of $3.5 million. The Company
reduced its net loss to $4.3 million in the third quarter of fiscal 1994 and to
$1.4 million in the fourth quarter of fiscal 1994 as a result of a combination
of lower operating expenses from the restructuring effort initiated in March
1994 and an increase in the Company's shipment level and gross profit margin.
17
<PAGE> 21
<TABLE>
QUARTERLY RESULTS OF OPERATIONS
The following tables set forth certain unaudited quarterly financial
information for each of the Company's last eight fiscal quarters, including such
amounts expressed as a percentage of total net sales. The Company believes that
this information includes all necessary adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of such quarterly
information when read in conjunction with the consolidated financial statements
included or incorporated elsewhere herein. The operating results for any quarter
are not necessarily indicative of results of any future period. Generally,
orders are lower in the first quarter of the Company's fiscal year than in other
quarters of that fiscal year as a result of buying patterns in the semiconductor
industry, although the Company's net sales in a particular fiscal quarter are a
function of both orders and backlog.
<CAPTION>
FISCAL 1994 FISCAL 1995
------------------------------------------------ ------------------------------------------------
OCTOBER 31, JANUARY 31, APRIL 30, JULY 31, OCTOBER 31, JANUARY 31, APRIL 30, JULY 31,
1993 1994 1994 1994 1994 1995 1995 1995
----------- ----------- --------- -------- ----------- ----------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales:
Products................. $42,466 $ 32,911 $34,164 $36,147 $40,828 $43,864 $47,318 $53,170
Service.................. 4,698 5,208 6,052 6,680 5,962 6,153 6,253 6,771
------- -------- ------- ------- ------- ------- ------- -------
Total net sales..... 47,164 38,119 40,216 42,827 46,790 50,017 53,571 59,941
Cost of sales:
Products................. 29,275 23,982 25,485 25,447 27,409 28,883 31,451 34,766
Service.................. 2,944 3,182 3,237 3,387 3,520 3,665 3,429 3,625
Provision for excess
inventories............ -- 3,500 -- -- -- -- -- --
------- -------- ------- ------- ------- ------- ------- -------
Total cost of
sales............. 32,219 30,664 28,722 28,834 30,929 32,548 34,880 38,391
------- -------- ------- ------- ------- ------- ------- -------
Gross profit............... 14,945 7,455 11,494 13,993 15,861 17,469 18,691 21,550
Engineering and product
development expenses..... 5,041 5,092 4,794 4,677 4,722 4,715 5,077 5,264
Selling, general and
administrative
expenses................. 10,658 11,512 10,353 9,785 9,102 9,619 9,544 10,688
Restructuring charges...... -- 14,376 -- -- -- -- -- --
------- -------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations............... (754) (23,525) (3,653) (469) 2,037 3,135 4,070 5,598
Interest expense, net...... 851 900 994 1,129 1,251 1,123 1,055 345
------- -------- ------- ------- ------- ------- ------- -------
Income (loss) before income
taxes and minority
interest................. (1,605) (24,425) (4,647) (1,598) 786 2,012 3,015 5,253
Provision for income
taxes.................... -- -- -- -- -- 95 104 173
------- -------- ------- ------- ------- ------- ------- -------
Income (loss) before
minority interest........ (1,605) (24,425) (4,647) (1,598) 786 1,917 2,911 5,080
Minority interest in net
loss of subsidiary....... -- 420 316 235 -- -- -- --
------- -------- ------- ------- ------- ------- ------- -------
Net income (loss).......... $(1,605) $(24,005) $(4,331) $(1,363) $ 786 $ 1,917 $ 2,911 $ 5,080
======= ======== ======= ======= ======= ======= ======= =======
Fully diluted net income
(loss) per share......... $ (0.06) $ (0.96) $ (0.17) $ (0.05) $ 0.03 $ 0.07 $ 0.10 $ 0.16
Net sales:
Products................. 90.0% 86.3% 85.0% 84.4% 87.3% 87.7% 88.3% 88.7%
Service.................. 10.0 13.7 15.0 15.6 12.7 12.3 11.7 11.3
------- -------- ------- ------- ------- ------- ------- -------
Total net sales..... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Cost of sales:
Products................. 62.1 62.9 63.4 59.4 58.6 57.8 58.7 58.0
Service.................. 6.2 8.3 8.0 7.9 7.5 7.3 6.4 6.0
Provision for excess
inventories............ -- 9.2 -- -- -- -- -- --
------- -------- ------- ------- ------- ------- ------- -------
Total cost of
sales............. 68.3 80.4 71.4 67.3 66.1 65.1 65.1 64.0
------- -------- ------- ------- ------- ------- ------- -------
Gross profit............... 31.7 19.6 28.6 32.7 33.9 34.9 34.9 36.0
Engineering and products
development expenses..... 10.7 13.4 11.9 10.9 10.1 9.4 9.5 8.8
Selling, general and
administrative
expenses................. 22.6 30.2 25.8 22.9 19.4 19.2 17.8 17.9
Restructuring charges...... -- 37.7 -- -- -- -- -- --
------- -------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations............... (1.6) (61.7) (9.1) (1.1) 4.4 6.3 7.6 9.3
Interest expense, net...... 1.8 2.4 2.5 2.6 2.7 2.3 2.0 0.5
------- -------- ------- ------- ------- ------- ------- -------
Income (loss) before income
taxes and minority
interest................. (3.4) (64.1) (11.6) (3.7) 1.7 4.0 5.6 8.8
Provision for income
taxes.................... -- -- -- -- -- 0.2 0.2 0.3
------- -------- ------- ------- ------- ------- ------- -------
Income (loss) before
minority interest........ (3.4) (64.1) (11.6) (3.7) 1.7 3.8 5.4 8.5
Minority interest in net
loss of subsidiary....... -- 1.1 0.8 0.5 -- -- -- --
------- -------- ------- ------- ------- ------- ------- -------
Net income (loss).......... (3.4)% (63.0)% (10.8)% (3.2)% 1.7% 3.8% 5.4% 8.5%
======= ======== ======= ======= ======= ======= ======= =======
</TABLE>
18
<PAGE> 22
LIQUIDITY AND CAPITAL RESOURCES
Cash and equivalents were $29.2 million at July 31, 1995 as compared to
$17.2 million at July 31, 1994. The increase in cash and equivalents of $12.0
million was a result of $19.5 million of net cash provided by operating
activities, $10.2 million of net cash used for property and equipment
expenditures, $2.3 million of net cash provided by financing activities and $0.4
million of net cash provided by the effect of exchange rate changes.
The positive net cash flow from operating activities was primarily a result
of the net income for the fiscal year, before non-cash depreciation charges.
Although sales in the fourth quarter of fiscal 1995 were approximately 40%
higher than the fourth quarter of the prior year, accounts receivable were $0.5
million lower year-to-year. The decrease in accounts receivable reflected the
Company's ability to ship more evenly within a fiscal quarter and achieve a
higher level of collections on those shipments within the fiscal quarter.
Inventories increased $4.4 million during fiscal 1995 to meet the higher sales
levels and to allow for more even shipments during the year. The increase in
accounts payable of $6.0 million during fiscal 1995 relates to the higher level
of inventory purchases during the period. At July 31, 1995, the Company had
received $3.3 million in advance payments from customers for systems to be
delivered in fiscal 1996. At July 31, 1995, the Company had a restructuring
reserve of $6.1 million remaining to cover the estimated future cash flows
relating primarily to excess leased facilities. Cash outflows during fiscal 1995
were $4.8 million for excess leased facilities and $0.8 million for severance
payments. At July 31, 1995, the Company had working capital of $62.2 million and
a ratio of current assets to current liabilities of 2.2 to 1.0.
Additions to property and equipment were $10.2 million during fiscal 1995
and were slightly higher than depreciation charges of $9.7 million. Equipment
additions during fiscal 1995 were primarily for use in product development and
customer support activities. The Company anticipates that expenditures for
property and equipment in fiscal 1996 will be approximately $14.0 million.
The Company's Japanese subsidiary had bank borrowings of $8.5 million at
July 31, 1995 as compared to $6.9 million at July 31, 1994. The Company had no
borrowings outstanding under its domestic bank line at July 31, 1995 or July 31,
1994.
In July 1995, the Company's 13 1/2% Convertible Subordinated Debentures Due
2011 were converted into 2,241,000 shares of Common Stock. The outstanding
principal amount of $15.7 million of Debentures was converted at the conversion
price of $7.00 per share. As a result, long-term debt was reduced by $13.1
million for the book value of the Debentures and stockholders' equity was
increased by $12.1 million.
Management believes that the Company has sufficient cash resources to meet
at least its fiscal 1996 needs. These resources include existing cash balances,
borrowing availability under domestic and Japanese bank lines and future cash
flows from operations, together with the proceeds from a proposed public
offering of Common Stock by the Company.
19
<PAGE> 23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of LTX Corporation:
We have audited the accompanying consolidated balance sheet of LTX
Corporation and subsidiaries as of July 31, 1994 and 1995, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended July 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of LTX Corporation and
subsidiaries as of July 31, 1994 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended July 31,
1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
September 8, 1995
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report, included in this Form 10-K, into LTX Corporation's previously
filed registration statements on Form S-8 (File No. 2-77475, File No. 2-90698,
File No. 33-7018, File No. 33-14179, File No. 33-32140, File No. 33-32141, File
No. 33-33614, File No. 33-38675, File No. 33-51683, File No. 33-51685, File No.
33-57457 and File No. 33-57459) and on Form S-3 (File No. 33-62125).
ARTHUR ANDERSEN LLP
Boston, Massachusetts
September 19, 1995
20
<PAGE> 24
<TABLE>
LTX CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
YEAR ENDED JULY 31
-------------------------------------
1993 1994 1995
-------- -------- -----------
<S> <C> <C> <C>
Net sales:
Product.......................................... $154,392 $145,688 $ 185,180
Service.......................................... 18,540 22,638 25,139
-------- -------- ---------
Total net sales............................. 172,932 168,326 210,319
Cost of sales:
Product.......................................... 102,005 104,189 122,509
Service.......................................... 11,521 12,750 14,239
Provision for excess inventories................. -- 3,500 --
-------- -------- ---------
Total cost of sales......................... 113,526 120,439 136,748
-------- -------- ---------
Gross profit................................ 59,406 47,887 73,571
Engineering and product development expenses.......... 19,744 19,604 19,778
Selling, general and administrative expenses.......... 41,080 42,308 38,953
Restructuring charges................................. -- 14,376 --
Translation losses.................................... 1,468 -- --
-------- -------- ---------
Income (loss) from operations............... (2,886) (28,401) 14,840
Other income (expense):
Interest expense................................. (4,277) (4,286) (4,254)
Interest income.................................. 298 412 480
-------- -------- ---------
Income (loss) before income taxes and
minority interest......................... (6,865) (32,275) 11,066
Provision for income taxes............................ -- -- 372
-------- -------- ---------
Income (loss) before minority interest...... (6,865) (32,275) 10,694
Minority interest in net loss of subsidiary........... 2,556 971 --
-------- -------- ---------
Net income (loss)........................... $ (4,309) $(31,304) $ 10,694
======== ======== =========
Net income (loss) per share:
Primary.......................................... $ (0.20) $ (1.23) $ 0.37
Fully diluted.................................... $ (0.20) $ (1.23) $ 0.36
Weighted average shares:
Primary.......................................... 21,089 25,485 28,805
Fully diluted.................................... 21,089 25,485 29,787
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
21
<PAGE> 25
<TABLE>
LTX CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<CAPTION>
JULY 31
------------------------
1994 1995
-------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents............................................. $ 17,226 $ 29,183
Accounts receivable, less allowances of $700 and $700............ 33,323 32,785
Inventories...................................................... 42,672 47,101
Other current assets............................................. 3,848 4,929
-------- --------
Total current assets................................... 97,069 113,998
-------- --------
Property and equipment, net...................................... 28,946 28,407
Other assets..................................................... 4,621 3,512
-------- --------
$130,636 $145,917
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable.................................................... $ 6,870 $ 8,457
Current portion of long-term liabilities......................... 437 359
Accounts payable................................................. 15,545 21,744
Accrued compensation............................................. 2,512 3,155
Unearned service revenues and customer advances.................. 3,867 7,157
Restructuring charges............................................ 11,710 6,087
Other accrued expenses........................................... 7,275 4,857
-------- --------
Total current liabilities.............................. 48,216 51,816
-------- --------
Long-term liabilities, less current portion........................... 21,204 20,959
Convertible subordinated debentures................................... 20,195 7,308
Deferred compensation................................................. 428 427
Stockholders' equity:
Common stock, $0.05 par value:
100,000,000 shares authorized; 26,223,942 shares and
29,268,826 shares issued and outstanding...................... 1,311 1,463
Additional paid-in capital....................................... 117,457 131,425
Accumulated deficit.............................................. (78,175) (67,481)
-------- --------
Total stockholders' equity............................. 40,593 65,407
-------- --------
$130,636 $145,917
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
22
<PAGE> 26
<TABLE>
LTX CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
-------------------- PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
--------- ------ -------- -------- -------
<S> <C> <C> <C> <C> <C>
BALANCE, JULY 31, 1992............... 20,094,773 $ 1,005 $ 94,641 $(42,562) $53,084
Sale of common stock................. 2,458,000 123 9,709 9,832
Exercise of stock options............ 408,695 20 845 865
Issuance of shares under employees'
stock purchase plan................ 254,902 13 616 629
Conversion of 10 1/2% Convertible
Subordinated Debenture Due 2010.... 1,500,000 75 6,300 6,375
Net loss............................. (4,309) (4,309)
---------- ------- -------- -------- -------
BALANCE, JULY 31, 1993............... 24,716,370 1,236 112,111 (46,871) 66,476
Sale of common stock................. 971,515 48 3,959 4,007
Exercise of stock options............ 255,285 13 538 551
Issuance of shares under employees'
stock purchase plan................ 280,772 14 849 863
Net loss............................. (31,304) (31,304)
---------- ------- -------- -------- -------
BALANCE, JULY 31, 1994............... 26,223,942 1,311 117,457 (78,175) 40,593
Conversion of 13 1/2% Convertible
Subordinated Debentures Due 2011... 2,240,581 112 11,943 12,055
Exercise of stock options............ 504,595 25 965 990
Issuance of shares under employees'
stock purchase plan................ 299,708 15 1,060 1,075
Net income........................... 10,694 10,694
---------- ------- -------- -------- -------
BALANCE, JULY 31, 1995............... 29,268,826 $ 1,463 $131,425 $(67,481) $65,407
========== ======= ======== ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
23
<PAGE> 27
<TABLE>
LTX CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<CAPTION>
YEAR ENDED JULY 31
--------------------------------
1993 1994 1995
------- -------- --------
<S> <C> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income (loss)............................................ $(4,309) $(31,304) $10,694
Add (deduct) non-cash items:
Minority interest in subsidiary......................... (2,556) (971) --
Depreciation and amortization........................... 9,159 9,158 9,701
Original issue discount amortization.................... 262 252 263
Translation loss........................................ 1,468 320 178
(Increase) decrease in:
Accounts receivable..................................... (4,563) 1,739 990
Inventories............................................. (5,027) 2,508 (4,429)
Other current assets.................................... 538 268 (980)
Other assets............................................ (361) 413 382
Increase (decrease) in:
Accounts payable........................................ 14,441 (11,450) 6,033
Accrued expenses, compensation and restructuring
charges.............................................. 123 12,717 (6,626)
Unearned service revenues and customer advances......... (2,797) (804) 3,290
------- -------- --------
Net cash provided by (used in) operating activities....... 6,378 (17,154) 19,496
------- -------- --------
CASH USED IN INVESTING ACTIVITIES:
Expenditures for property and equipment................... (7,797) (12,687) (10,222)
------- -------- --------
Net cash used in investing activities..................... (7,797) (12,687) (10,222)
------- -------- --------
CASH PROVIDED BY FINANCING ACTIVITIES:
Proceeds from stock plans:
Employees' stock purchase plan............................ 629 863 1,075
Exercise of stock options................................. 865 551 990
Sale of common stock......................................... 9,832 4,007 --
Increase (decrease) in notes payable......................... (518) (3,385) 1,187
Proceeds from sale and leaseback of equipment................ 1,142 3,483 --
Payments of long-term debt................................... (769) (221) (627)
Costs of debenture conversion................................ -- -- (367)
Proceeds from long-term debt................................. -- 20,000 --
------- -------- --------
Net cash provided by financing activities.................... 11,181 25,298 2,258
------- -------- --------
Effect of exchange rate changes on cash........................ 249 44 425
Net increase (decrease) in cash and equivalents................ 10,011 (4,499) 11,957
Cash and equivalents at beginning of year...................... 11,714 21,725 17,226
------- -------- --------
Cash and equivalents at end of year............................ $21,725 $ 17,226 $ 29,183
======= ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest.................................................. $ 4,390 $ 4,237 $ 4,872
Income taxes.............................................. -- -- 364
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Conversion of convertible subordinated debentures to common
stock (See Note 6)........................................ $ 6,375 -- $12,415
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
24
<PAGE> 28
LTX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned domestic subsidiaries and wholly-owned and majority-owned
foreign subsidiaries. All significant intercompany transactions and balances
have been eliminated in consolidation.
Minority interest in net loss of subsidiary represents the minority
shareholder's proportionate share of the results of operations of the Company's
majority-owned Japanese subsidiary (see Note 12).
Foreign Currency Translation
The financial statements of the Company's foreign subsidiaries are
translated in accordance with Statement of Financial Accounting Standards No.
52. The Company's functional currency is the U.S. dollar. Accordingly, the
Company's foreign subsidiaries translate monetary assets and liabilities at
year-end exchange rates while nonmonetary items are translated at historical
rates. Income and expense accounts are translated at the average rates in effect
during the year, except for sales, cost of sales and depreciation which are
primarily translated at historical rates. Net realized and unrealized gains and
losses resulting from foreign currency remeasurement and transaction gains and
losses, which have not been significant in the past three fiscal years, are
included in the results of operations.
Cash Equivalents
Cash equivalents consist of short-term investments with maturity dates of
one month or less and which are readily convertible into cash. The Consolidated
Statement of Cash Flows for fiscal year 1993 and fiscal year 1994 has been
reclassified to conform with the current year's presentation.
Inventories
Inventories are stated at the lower of cost or market, cost being
determined on the first-in, first-out method, and include materials, labor and
manufacturing overhead.
Property and Equipment
Property and equipment is recorded at cost. The Company provides for
depreciation and amortization on the straight-line method. Charges are made to
operating expenses in amounts which are sufficient to amortize the cost of the
assets over their estimated useful lives.
Revenue Recognition
Revenue from product sales is recognized at the time of shipment. 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.
Warranty Costs
Warranty costs incurred by the Company during the three years ended July
31, 1995 were not significant. Future warranty costs are not expected to be
significant, and therefore, the Company has not provided any warranty reserves.
Engineering and Product Development Costs
The Company expenses all engineering, research and development costs as
incurred. Expenses subject to capitalization in accordance with the Statement of
Financial Accounting Standards No. 86, relating to certain software development
costs, were insignificant.
25
<PAGE> 29
LTX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes
The Company adopted Statement of Financial Accounting Standards No. 109 in
fiscal 1994. The change in accounting principles was not material to the results
of operations for the year ended July 31, 1993.
Deferred income taxes are recorded for temporary differences between the
financial reporting and tax basis of assets and liabilities. Research and
development tax credits are recognized for financial reporting purposes to the
extent they can be used to reduce the tax provision. The Company has not
provided for federal income taxes on the cumulative undistributed earnings of
its foreign subsidiaries in the past since it reinvested those earnings. At July
31, 1995, the Company's foreign subsidiaries had accumulated deficits.
Net Income (Loss) per Share
Primary and fully diluted earnings per share are based on the weighted
average number of shares of common stock and common stock equivalents (shares
issuable under stock option plans and warrants) outstanding. None of the
Company's Convertible Subordinated Debentures are common stock equivalents. Net
loss per share is based on the weighted average number of shares of common stock
outstanding only, as the inclusion of common stock equivalents would be
anti-dilutive.
<TABLE>
2. INVENTORIES
Inventories consist of the following:
<CAPTION>
JULY 31
-------------------------
1994 1995
---------- ----------
<S> <C> <C>
Raw materials................................. $12,075,000 $12,388,000
Work-in-process............................... 18,810,000 24,680,000
Finished goods................................ 11,787,000 10,033,000
----------- -----------
$42,672,000 $47,101,000
=========== ===========
</TABLE>
<TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
<CAPTION>
JULY 31 DEPRECIABLE
------------------------- LIFE IN
1994 1995 YEARS
------------ ------------ ------------
<S> <C> <C> <C>
Machinery and equipment................... $ 68,365,000 $ 73,147,000 5
Office furniture and equipment............ 3,917,000 3,881,000 3-7
Leasehold improvements.................... 7,297,000 4,499,000 10 or term
of lease
------------ ------------
79,579,000 81,527,000
Less: accumulated depreciation and
amortization............................ (50,633,000) (53,120,000)
------------ ------------
$ 28,946,000 $ 28,407,000
============ ============
</TABLE>
4. NOTES PAYABLE
The Company's Japanese subsidiary had borrowings outstanding of $8,457,000
at July 31, 1995 under demand bank lines of credit. Borrowings of $7,662,000, at
the local prime rate plus 1/4%, are guaranteed by the Company's minority
partner in Japan, and borrowings of $795,000, at the local prime rate plus
1 1/8%, under a $2,273,000 demand bank line, are guaranteed by the Company. At
July 31, 1994, the Company's Japanese subsidiary had borrowings outstanding of
$6,870,000 under demand bank lines of credit.
The Company had no borrowings outstanding under a $5,000,000 domestic bank
line at July 31, 1995 and July 31, 1994. This line of credit matures in December
1995 and bears interest at the bank's prime rate plus
26
<PAGE> 30
LTX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1%. Borrowing availability under the line is on a formula basis and borrowings
are secured by accounts receivable and inventories. The line of credit has
financial covenants which largely relate to results of operations and a minimum
level of liquidity.
<TABLE>
5. LONG-TERM LIABILITIES
Long-term liabilities consist of the following:
<CAPTION>
JULY 31
------------------------------
1994 1995
---------- ----------
<S> <C> <C>
Subordinated note payable
with interest at 8%.................. $20,000,000 $20,000,000
Lease purchase obligations at various
interest rates, net of deferred
interest............................. 1,641,000 1,318,000
----------- -----------
21,641,000 21,318,000
Less -- current portion................ (437,000) (359,000)
----------- -----------
$21,204,000 $20,959,000
=========== ===========
</TABLE>
In July 1994, the Company received $20,000,000 from Ando Electric Co., Ltd.
of Japan ("Ando") under a long-term loan agreement which extends through July
2001. The loan bears interest at 8%, which is payable semi-annually and has
semi-annual principal payments of $2,000,000 beginning in January 1997. The loan
is secured by the Company's inventories and capital equipment and is
subordinated in right of payment to senior indebtedness of the Company. In
connection with this loan agreement, the Company issued to Ando a warrant to
purchase up to 2,000,000 shares of common stock during the term of the loan
agreement (See Note 8). The Company also expanded its existing license and
development agreement with Ando to allow for further joint development of the
Company's Delta 50 technology. Proceeds from the loan were used to repay
domestic bank borrowings and to finance working capital requirements.
<TABLE>
6. CONVERTIBLE SUBORDINATED DEBENTURES
Convertible subordinated debentures consist of:
<CAPTION>
JULY 31
----------------------------
1994 1995
---------- ---------
<S> <C> <C>
13 1/2% Debentures Due 2011................. $12,887,000 $ --
7 1/4% Debentures Due 2011................. 7,308,000 7,308,000
----------- ----------
$20,195,000 $7,308,000
=========== ==========
</TABLE>
In July 1995, the Company's 13 1/2% Convertible Subordinated Debentures Due
2011 were converted into 2,240,581 shares of common stock. The outstanding
principal amount of $15,693,000 of Debentures was converted at the conversion
price of $7.00 per share. On the conversion date, the Debentures had a book
value of $13,149,000, which included the remaining unamortized original issue
discount of $2,544,000.
On April 25, 1986, the Company issued and sold at par $35,000,000 of 7 1/4%
Convertible Subordinated Debentures Due 2011. A total of $7,308,000 of the
original issue of $35,000,000 of 7 1/4% Convertible Subordinated Debentures
remain outstanding on July 31, 1995. The debentures are subordinated in right of
payment to senior indebtedness and are convertible by the holders into common
stock at $18 per share at any time prior to redemption or maturity. The
debentures are redeemable at the Company's option at any time, in whole or in
part, at 100% of the principal amount. Annual sinking fund payments of $366,000
are required beginning April 15, 1996. Interest is payable semi-annually on
April 15 and October 15.
On July 30, 1993 Sumitomo Metal Industries, Ltd. of Japan converted its
$6,375,000 10 1/2% Convertible Subordinated Debenture Due 2010 into 1,500,000
shares of common stock of the Company. The Company had issued the debenture to
Sumitomo Metal Industries, Ltd. in May 1990 (see Note 12).
27
<PAGE> 31
LTX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES
At July 31, 1995 the Company had, for tax purposes, $2,330,000 of federal
tax credits available for carryforward, which expire in fiscal years 2000
through 2004. In addition, the Company had, for tax purposes, a federal net
operating loss carryforward available of $30,500,000 which expires in fiscal
years 2007 through 2010.
The tax provision of $372,000 in fiscal 1995 consisted of $50,000 in
currently payable state income taxes and $322,000 in currently payable foreign
income taxes.
<TABLE>
Reconciliations of the U.S. federal statutory rate to the Company's
effective tax rate are as follows:
<CAPTION>
YEAR ENDED JULY 31
-------------------------
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
U.S. federal statutory rate.................................. (34.0)% (35.0)% 35.0%
State income taxes, net of federal income tax effect......... -- -- 0.3
Foreign income taxes......................................... -- -- (2.0)
Realization of deferred tax assets........................... -- -- (29.9)
Losses without current tax benefit........................... 34.0 35.0 --
----- ----- -----
Effective tax rate........................................... 0.0% 0.0% 3.4%
===== ===== =====
</TABLE>
<TABLE>
The temporary differences and carryforwards which created the deferred tax
assets and liabilities as of July 31, 1994 and July 31, 1995 are as follows:
<CAPTION>
JULY 31
-----------------------------
1994 1995
------------ ------------
<S> <C> <C>
Deferred tax assets:
Net operating losses.................................... $ 10,476,000 $ 10,675,000
Tax credits............................................. 2,330,000 2,330,000
Inventory valuation reserves............................ 4,426,000 3,643,000
Restructuring charges................................... 4,099,000 1,977,000
Spares amortization..................................... 2,435,000 2,989,000
Unearned service revenues............................... 949,000 151,000
Other................................................... 710,000 687,000
------------ ------------
Total deferred tax assets............................. 25,425,000 22,452,000
Valuation allowance..................................... (24,073,000) (21,784,000)
------------ ------------
Net deferred tax assets............................... $ 1,352,000 $ 668,000
============ ============
Deferred tax liabilities:
Depreciation............................................ $ (177,000) $ (418,000)
Basis difference -- debenture exchange.................. (807,000) --
Other................................................... (368,000) (250,000)
------------ ------------
Total deferred tax liabilities........................ $ (1,352,000) $ (668,000)
============ ============
Net deferred taxes recorded........................... $ -- $ --
============ ============
</TABLE>
Deferred tax assets and liabilities as of July 31, 1994 have been
reclassified to reflect the tax returns as actually filed. The valuation
allowance relates to uncertainty surrounding the realization of the deferred tax
assets, principally the tax loss carryforwards.
28
<PAGE> 32
LTX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. STOCKHOLDERS' EQUITY
Authorized Shares
At the Company's Annual Meeting of Stockholders in December 1993, the
stockholders approved an increase in the Company's authorized common stock from
50,000,000 shares to 100,000,000 shares.
Stock Option Plans
The Company has two stock option plans: the 1990 Stock Option Plan ("1990
Plan") and the 1995 LTX (Europe) Ltd. Approved Stock Option Plan ("U.K. Plan").
The 1990 Plan and the U.K. Plan provide for the granting of options to
employees to purchase shares of common stock at not less than 100% of the fair
market value on the date of grant. The 1990 Plan also provides for the granting
of options to key employees, directors and advisors of the Company to purchase
shares of common stock at prices to be determined by the Board of Directors.
Compensation expense relating to shares granted under this plan at less than
fair market value has been charged to operations over the applicable vesting
period. Options under both plans are exercisable over vesting periods which are
typically three-years beginning one year from the date of grant. In December
1994, the stockholders of the Company approved an increase to the number of
shares of common stock that may be granted under the 1990 Plan, through October
2000, from 1,500,000 shares to 2,700,000 shares. At July 31, 1995, options to
purchase 1,374,143 shares had been granted, and 1,325,857 shares were subject to
future grant under the 1990 Plan. At July 31, 1995, 100,000 shares were subject
to future grant under the U.K. Plan.
The following table summarizes stock option activity for the three years
ended July 31, 1995:
<TABLE>
<CAPTION>
RANGE OF
SHARES OPTION PRICES
-------- -------------
<S> <C> <C>
Outstanding at July 31, 1992................................... 2,096,028 $0.05 - $6.88
Granted................................................... 569,000 0.05 - 1.88
Exercised................................................. (408,695) 0.50 - 3.75
Terminated................................................ (143,895) 1.88 - 3.75
--------
Outstanding at July 31, 1993................................... 2,112,438 0.05 - 6.88
Granted................................................... 398,000 0.05 - 3.94
Exercised................................................. (255,285) 0.05 - 3.75
Terminated................................................ (71,814) 1.75 - 3.75
--------
Outstanding at July 31, 1994................................... 2,183,339 0.05 - 6.88
--------
Granted................................................... 391,000 1.00 - 5.56
Exercised................................................. (504,595) 0.05 - 3.75
Terminated................................................ (35,675) 1.88 - 4.13
--------
Outstanding at July 31, 1995................................... 2,034,069 0.05 - 6.88
========
</TABLE>
Of the total options outstanding at July 31, 1995, 1,135,014 shares were
exercisable.
Warrants
In July 1994, in connection with a term loan agreement, the Company issued
to Ando Electric Co., Ltd. a warrant to purchase up to 2,000,000 shares of
common stock, at the fair market value of $2.31 per share, during the term of
the loan agreement (see Note 5). At July 31, 1995, the total warrant was
outstanding.
Employees' Stock Purchase Plan
In December 1993, the stockholders of the Company approved the adoption of
the 1993 Employees' Stock Purchase Plan, which replaced the 1983 Employees'
Stock Purchase Plan which expired in December 1993. Under this plan, eligible
employees may contribute up to 15% of their annual compensation for the purchase
of common stock of the Company up to $25,000 of fair market value of the stock
per calendar year. The plan limits the number of shares which can be issued for
any semi-annual plan period to 150,000 shares
29
<PAGE> 33
LTX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and, over the term of the plan, the Company may issue up to 600,000 shares.
Under the plan, 299,708 shares were issued in fiscal 1995 and 19,520 shares were
available for future issuance under this plan at July 31, 1995.
Rights Agreement
The Board of Directors of the Company adopted a Rights Agreement, dated as
of May 11, 1989, between the Company and The First National Bank of Boston, as
rights agent, and in connection therewith, distributed one common share purchase
right for each outstanding share of common stock. The rights will become
exercisable only if a person or group acquires 20% or more of the Company's
common stock or announces a tender offer that would result in ownership of 30%
or more of the common stock. Initially, each right will entitle a stockholder to
buy one share of common stock of the Company at a purchase price of $30.00 per
share, subject to significant adjustment depending upon the occurrence
thereafter of certain events. Before any person or group has acquired 20% or
more of the common stock of the Company, the rights are redeemable by the Board
of Directors at $0.01 per right. The rights will expire on May 11, 1999, unless
redeemed by the Company prior to that date.
9. RETIREMENT PLAN
The Company's retirement plan provides for an annual discretionary
contribution by the Company from current or accumulated profits of an amount not
to exceed 5% of the eligible compensation of the participants in the plan.
Amounts are allocated to the accounts of the participants based on their
compensation and years of service and are subject to certain vesting provisions.
No contributions were made in the past three fiscal years. Eligible employees
may also make voluntary contributions to the plan through a salary reduction
contract up to the statutory limit or 15% of their annual compensation.
Beginning in October 1995, the Company will begin matching, up to certain
prescribed limits, employees' voluntary contributions to the plan.
10. GEOGRAPHIC AREA INFORMATION
The Company's operations by geographic segment for the three years ended
July 31, 1995 are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31
------------------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Sales to unaffiliated customers
North America................................. $ 91,248,000 $ 65,240,000 $ 70,797,000
Europe........................................ 20,744,000 24,423,000 33,268,000
Japan......................................... 9,447,000 21,106,000 21,352,000
Rest of world (principally Pacific Rim)....... 51,493,000 57,557,000 84,902,000
------------ ------------ ------------
Total sales to unaffiliated customers.... $172,932,000 $168,326,000 $210,319,000
============ ============ ============
Transfers between geographic areas
United States................................. $ 51,003,000 $ 67,225,000 $ 81,666,000
Europe........................................ 5,857,000 7,751,000 10,966,000
Japan......................................... 142,000 364,000 519,000
------------ ------------ ------------
Total transfers between geographic
areas.................................. $ 57,002,000 $ 75,340,000 $ 93,151,000
============ ============ ============
Income (loss) from operations
United States................................. $ 2,288,000 $(25,991,000) $ 9,228,000
Europe........................................ (212,000) (613,000) 2,853,000
Japan......................................... (5,717,000) (1,892,000) 569,000
Eliminations.................................. 755,000 95,000 2,190,000
------------ ------------ ------------
Total income (loss) from operations...... $ (2,886,000) $(28,401,000) $ 14,840,000
============ ============ ============
</TABLE>
30
<PAGE> 34
<TABLE>
LTX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<CAPTION>
YEAR ENDED JULY 31
-----------------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Identifiable assets
United States................................. $135,962,000 $124,029,000 $136,563,000
Europe........................................ 9,382,000 20,730,000 17,866,000
Japan......................................... 12,428,000 13,180,000 13,296,000
Eliminations.................................. (19,515,000) (27,303,000) (21,808,000)
------------ ------------ ------------
Total identifiable assets................ $138,257,000 $130,636,000 $145,917,000
============ ============ ============
</TABLE>
Transfer prices on products sold to foreign subsidiaries are intended to
produce profit margins that correspond to the subsidiary's sale and support
efforts.
<TABLE>
11. COMMITMENTS
The Company has operating lease commitments for certain facilities and
equipment and capital lease commitments for certain equipment. Minimum lease
payments under non-cancelable leases at July 31, 1995 are as follows:
<CAPTION>
TOTAL TOTAL
REAL OPERATING CAPITAL
ESTATE EQUIPMENT LEASES LEASES
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Year ended July 31,
1996................................ $ 5,212,000 $2,031,000 $ 7,243,000 $ 435,000
1997................................ 4,096,000 841,000 4,937,000 235,000
1998................................ 3,750,000 347,000 4,097,000 235,000
1999................................ 3,301,000 42,000 3,343,000 235,000
2000................................ 3,538,000 25,000 3,563,000 235,000
2001 and thereafter................. 22,107,000 -- 22,107,000 157,000
----------- ---------- ----------- ----------
Total minimum lease payments............. $42,004,000 $3,286,000 $45,290,000 $1,532,000
=========== ========== ===========
Less: amount representing interest....... (214,000)
----------
Present value of total capital leases.... $1,318,000
==========
</TABLE>
Total rental expense for fiscal 1993, 1994 and 1995 was $10,822,000,
$9,849,000 and $9,611,000, respectively.
As a result of the Company's restructuring in fiscal 1994, certain excess
leased facilities have been sub-leased. At July 31, 1995, the Company had
accrued $1,159,000, which is included in restructuring charges on the
accompanying balance sheet, relating to the lease commitments on these
facilities.
12. JOINT VENTURE AGREEMENT
In May 1990, the Company completed a joint venture agreement with Sumitomo
Metal Industries, Ltd. ("SMI") of Japan to manufacture, sell and support the
Company's semiconductor test equipment products in Japan. Under this agreement,
the Company owns 50.5% of the shares of its Japanese subsidiary and 49.5% are
owned by SMI.
At July 31, 1995, other assets include a minority interest receivable from
SMI of $2,320,000 which arose as a result of cumulative losses of the Company's
Japanese subsidiary allocable to SMI, exceeding SMI's investment in the
Company's subsidiary. The Company believes this asset is fully realizable from
SMI due to SMI's guarantee of a portion of the Company's Japanese subsidiary's
bank lines of credit.
31
<PAGE> 35
<TABLE>
LTX CORPORATION
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<CAPTION>
1995
----------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER(1)
------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales................................. $46,790 $50,017 $53,571 $59,941
Gross profit.............................. 15,861 17,469 18,691 21,550
Net income................................ 786 1,917 2,911 5,080
Net income per share:
Primary.............................. 0.03 0.07 0.10 0.17
Fully diluted........................ 0.03 0.07 0.10 0.16
</TABLE>
<TABLE>
<CAPTION>
1994
----------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER(2) QUARTER QUARTER
------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales................................. $47,164 $ 38,119 $40,216 $42,827
Gross profit.............................. 14,945 7,455 11,494 13,993
Net loss.................................. (1,605) (24,005) (4,331) (1,363)
Primary and fully diluted net loss per
share................................... (0.06) (0.96) (0.17) (0.05)
<FN>
---------------
(1) Fully diluted earnings per share in the fourth quarter of fiscal year 1995
is based on the weighted average number of common stock and common stock
equivalents outstanding and the shares issued upon conversion of the 13 1/2%
Convertible Subordinated Debentures Due 2011.
(2) The Company took a restructuring charge of $14,376,000 to its second quarter
results of operations. The restructuring charge largely related to the
Company's plan to eliminate excess leased facilities and included amounts
for severance payments and benefits to employees terminated in a workforce
reduction. The Company also took a provision for excess inventories of
$3,500,000 in the second quarter.
</TABLE>
32
<PAGE> 36
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEMS 10-13. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
EXECUTIVE COMPENSATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required under these Items is included in Item 1. of Part I of
this report and in the Proxy Statement for the Annual Meeting of Stockholders to
be held on December 13, 1995, under the headings "Certain Stockholders,"
"Election of Directors," and "Compensation of Executives," which information is
incorporated herein by reference. Such Proxy Statement shall be filed with the
Securities and Exchange Commission not later than 120 days after the end of the
Company's fiscal year, July 31, 1995.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) 1. FINANCIAL STATEMENTS
The following consolidated financial statements of LTX Corporation are
included in response to Item 8:
Report of Independent Public Accountants
Consolidated Balance Sheet -- July 31, 1994 and 1995
Consolidated Statement of Operations for the years ended
July 31, 1993, 1994 and 1995
Consolidated Statement of Stockholders' Equity for the years
ended July 31, 1993, 1994 and 1995
Consolidated Statement of Cash Flows for the years
ended July 31, 1993, 1994 and 1995
Notes to the Consolidated Financial Statements
(B) 2. SCHEDULES
Separate financial statements of LTX Corporation (parent only) have been
omitted since they are not required.
All other schedules have been omitted since they are not required, not
applicable or the information is included in the financial statements or notes
thereto.
(A) 3. EXHIBITS
Certain of the exhibits listed hereunder have previously been filed with
the Commission as exhibits to the Company's Registration Statement No. 2-75470
on Form S-1 filed December 23, 1981, as amended (the 1981 Registration
Statement); to the Company's Registration Statement No. 2-94218 on Form S-1
filed November 8, 1984, as amended (the 1984 Registration Statement); to the
Company's Registration Statement No. 33-35401 on Form S-4 filed June 26, 1990,
as amended (the 1990 Registration Statement No. 1); to the Company's
Registration Statement No. 33-39610 on Form S-3 filed June 10, 1991, as amended
(the 1991 Registration Statement No. 1); to the Company's Amendment No. 1 to
Registration Statement No. 33-62125 on Form S-3 filed September 11, 1995 (the
1995 Registration Statement No. 1); to the Company's Form 8A/A filed September
30, 1993 amending the Company's Registration Statement on Form 8-A filed
November 24, 1982 (the 1993 8A/A); to the Company's Current Report on Form 8-K,
filed May 11, 1989; or the Company's Annual Reports on Form 10-K for one of the
years ended July 31, 1994, 1993, 1992, 1991,
33
<PAGE> 37
1990, 1989, 1988, 1987, 1986, 1985, 1984 and 1983 and are hereby incorporated by
reference. The location of each document so incorporated by reference is noted
parenthetically.
<TABLE>
(A) EXHIBITS
<S> <C>
(3)(A) -- Articles of Organization, as amended. (Exhibit 3.1 to the 1995
Registration Statement No. 1)
(3)(B) -- By-laws, as amended. (Exhibit 3.3 to the 1995 Registration Statement
No. 1)
(4)(A) -- Indenture dated April 15, 1986 between the Company and The First
National Bank of Boston. (Exhibit 4(A) to the 1990 Registration
Statement No. 1)
(4)(A)(ii) -- Indenture dated June 15, 1990 between the Company and The First
National Bank of Boston. (Exhibit 4(A)(ii) to the 1990 Annual Report
on Form 10-K)
(4)(C) -- Rights Agreement. (Exhibit 1 of the Registrant's Current Report on
Form 8-K, filed May 11, 1989), as amended by Amendment No. 1 to
Rights Agreement dated as of September 17, 1993 (Exhibit 4(C) to the
1993 Annual Report on Form 10-K)
(10)(B)+ -- 1990 Stock Option Plan. (Exhibit 10(B) hereto)
(10)(D)+ -- 1993 Employees' Stock Purchase Plan. (Exhibit 10(D) to the 1994
Annual Report on Form 10-K)
(10)(E)+ -- 1983 Non-Qualified Stock Option Plan. (Exhibit 10(E) to the 1983
Annual Report on Form 10-K)
(10)(F) -- LTX Corporation Growth and Investment Program, as restated. (Exhibit
10(F) to the 1993 Annual Report on Form 10-K)
(10)(I) -- Lease dated as of March 8, 1984 relating to land and building at
McCandless Park, San Jose, California. (Exhibit 10(I) to the 1984
Registration Statement)
(10)(J) -- Lease dated as of July 16, 1984 relating to Company's administration
facility on Rosemont Avenue, Westwood, Massachusetts. (Exhibit 10(J)
to the 1984 Registration Statement)
(10)(K) -- Lease dated as of February 27, 1985 relating to land and building at
McCandless Park, San Jose, California. (Exhibit 10(K) to the 1985
Annual Report on Form 10-K)
(10)(M) -- Lease dated as of November 26, 1980 relating to Company's
manufacturing facility at 5 Rosemont Avenue, Westwood,
Massachusetts, and Amendment dated as of April 29, 1982, and Third
Amendment and Restatement of Lease dated April 29, 1982. (Exhibit
10(M) to the 1993 Annual Report on Form 10-K)
(10)(N) -- Joint Venture Agreement dated May 14, 1990 among Sumitomo Metal
Industries, Ltd., LTX Corporation and LTX Co., Ltd. (Exhibit 10(N)
to the 1990 Registration Statement No. 1)
(10)(O) -- License Agreement dated May 14, 1990 between LTX Corporation and LTX
Co., Ltd. (Exhibit 10(O) to the 1990 Registration Statement No. 1)
(10)(P) -- Distribution and Supply Agreement between LTX Corporation and LTX
Co., Ltd. (Exhibit 10(P) to the 1990 Registration Statement No. 1)
(10)(Q) -- Securities Purchase Agreement for sale of LTX Common Stock, $0.05
par value, and 10 1/2% Convertible Subordinated Debentures Due 2010
to Sumitomo Metal Industries, Ltd. (Exhibit 10(Q) to the 1990
Registration Statement No. 1)
(10)(R)* -- License and Development Agreement dated as of January 28, 1993
between LTX Corporation and Ando Electric Co., Ltd. (Exhibit 10(R)
to the 1993 Annual Report on Form 10-K)
(10)(S)* -- Distribution and Supply Agreement dated as of January 28, 1993
between LTX Corporation and Ando Electric Co., Ltd. (Exhibit 10(S)
to the 1993 Annual Report on Form 10-K)
</TABLE>
34
<PAGE> 38
<TABLE>
<S> <C>
(10)(T)* -- Letter Agreement dated as of January 29, 1993 between LTX
Corporation and Ando Electric Co., Ltd. (Exhibit 10(T) to the 1993
Annual Report on Form 10-K)
(10)(U) -- Credit Agreement dated as of October 6, 1994 between LTX Corporation
and Silicon Valley Bank (Exhibit 10(U) to the 1994 Annual Report on
Form 10-K)
(10)(V) -- Loan Agreement dated as of July 20, 1994 between LTX Corporation and
Ando Electric Co., Ltd. (Exhibit 10(V) to the 1994 Annual Report on
Form 10-K)
(10)(W)* -- Amendment No. 1 to License and Development Agreement dated as of
July 20, 1994 between LTX Corporation and Ando Electric Co., Ltd.
(Exhibit 10(W) to the 1994 Annual Report on Form 10-K)
(22) -- Subsidiaries of Registrant
(27) -- Financial Data Schedules (Exhibit 27 hereto)
<FN>
---------------
+ This exhibit is a compensatory plan or arrangement in which executive officers
or directors of the Company participate.
* Confidential treatment requested as to certain portions thereof. The
confidential portion has been omitted and filed separately with the
Commission.
</TABLE>
Pursuant to Item 601 of Regulation S-K, certain instruments with respect to
long-term debt not exceeding 10% of the total assets of the Company and its
subsidiaries on a consolidated basis are not filed herewith. The Company hereby
agrees to furnish to the Commission a copy of each such instrument upon request.
ITEM 14(B). REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the fourth quarter
of fiscal 1995.
<TABLE>
ITEM 14(C). EXHIBITS
Exhibit 22 -- Subsidiaries of Registrant
<CAPTION>
JURISDICTION
COMPANY OF ORGANIZATION OWNERSHIP
------- ---------------- ---------
<S> <C> <C>
LTX Co., Ltd. Japan 50.5%
LTX (Europe) Limited United Kingdom 100%
LTX International, Inc., a Domestic
International Sales Corporation (DISC) Delaware 100%
LTX (Deutschland) GmbH West Germany 100%
LTX France S.A. France 100%
LTX Test Systems Corporation Delaware 100%
LTX (Italia) S.r.l. Italy 100%
LTX Benelux B.V. The Netherlands 100%
LTX International B.V. The Netherlands 100%
LTX (Foreign Sales Corporation) B.V. The Netherlands 100%
LTX Asia International, Inc. Delaware 100%
LTX Israel Limited Israel 100%
LTX (Malaysia) SDN.BHD. Malaysia 100%
iPTest (Holdings) Limited United Kingdom 100%
</TABLE>
The subsidiaries listed are all included in the consolidated financial
statements of the Company.
35
<PAGE> 39
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
/S/ ROGER W. BLETHEN
/S/ MARTIN S. FRANCIS
By .................................
ROGER W. BLETHEN
DIRECTOR AND PRESIDENT
MARTIN S. FRANCIS
DIRECTOR AND PRESIDENT
September 19, 1995
<TABLE>
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/S/ GRAHAM C. C. MILLER Chairman of the Board September 19, 1995
..........................................
(GRAHAM C. C. MILLER)
/S/ ROGER W. BLETHEN President and Director September 19, 1995
.......................................... (Principal Executive
(ROGER W. BLETHEN) Officer)
/S/ MARTIN S. FRANCIS President and Director September 19, 1995
.......................................... (Principal Executive
(MARTIN S. FRANCIS) Officer)
/S/ JOHN J. ARCARI Chief Financial Officer and September 19, 1995
.......................................... Treasurer (Principal
(JOHN J. ARCARI) Financial Officer)
/S/ GLENN W. MELONI Controller (Principal September 19, 1995
.......................................... Accounting
(GLENN W. MELONI) Officer)
/S/ JACQUES BOUYER Director September 19, 1995
..........................................
(JACQUES BOUYER)
/S/ FRED J. BUTLER Director September 19, 1995
..........................................
(FRED J. BUTLER)
/S/ ROGER J. MAGGS Director September 19, 1995
..........................................
(ROGER J. MAGGS)
/S/ ROBERT E. MOORE Director September 19, 1995
..........................................
(ROBERT E. MOORE)
/S/ SAMUEL RUBINOVITZ Director September 19, 1995
..........................................
(SAMUEL RUBINOVITZ)
</TABLE>
36
<PAGE> 1
EXHIBIT 10(B)
LTX CORPORATION
1990 STOCK OPTION PLAN
1. DEFINITIONS. As used in this 1990 Stock Option Plan, the
following terms shall have the following meanings:
1.1 BOARD means the Company's Board of Directors.
1.2 CODE means the Federal Internal Revenue Code of 1986,
as amended.
1.3 COMPANY means LTX Corporation.
1.4 FAIR MARKET VALUE means the value of a share of Stock
of the Company on any date as determined by the Board.
1.5 GRANT DATE means the date on which an Option is
granted, as specified in Section 7.
1.5A INCENTIVE OPTION means an Option intended to be an
incentive stock option with the meaning of Section 422
of the Code.
1.5B NONSTATUTORY OPTION means any option that is not an
Incentive Option.
1.6 MARKET VALUE means, as of a particular date, the
average closing bid and asked prices of the Stock in
the Over the Counter Market, as reported by the
National Association of Securities Dealers, Inc., or if
the Stock is listed on an exchange, the closing price
of the Stock.
1.7 OFFICER means any person who has been identified by the
Board as an "officer" for purposes of Section 16 of the
Securities Exchange Act of 1934, as amended.
1.8 OPTION means an option to purchase shares of the stock
granted under the Plan.
1.9 OPTION AGREEMENT means an agreement between the Company
and an Optionee, setting forth the terms and conditions
of an Option.
1.10 OPTION PRICE means the price paid by an Optionee for an
Option under this Plan.
1.11 OPTION SHARE means any share of Stock of the Company
transferred to an Optionee upon exercise of an Option
pursuant to this Plan.
<PAGE> 2
1.12 OPTIONEE means a person eligible to receive an Option,
as provided in Section 6, to whom an Option shall have
been granted under the Plan.
1.13 PLAN means this 1990 Stock Option Plan of the Company,
as amended.
1.14 STOCK means common stock, par value $ 0.05 per share,
of the Company.
1.15 VESTING YEAR for any portion of any Option means the
calendar year in which that portion of the Option first
becomes exercisable.
2. PURPOSE. This 1990 Incentive Stock Option Plan is intended
to advance the interests of the Company and its stockholders by
improving the Company's ability to attract and retain qualified
individuals who are in a position to contribute to the management
and growth of the Company and its subsidiaries and to provide
additional incentive for such individuals to contribute to the
Company's future success. The Plan is intended to be an
incentive stock option plan within the meaning of Section 422 of
the Code, but not all Options granted hereunder are required to
be Incentive Options.
3. TERM OF THE PLAN. Options under the Plan may be granted on
or after October 24, 1990, but not later than October 23, 2000.
4. STOCK SUBJECT TO THE PLAN. At no time shall the number of
shares of the Stock then outstanding which are attributable to
the exercise of Options granted under the Plan, plus the number
of shares then issuable upon exercise of outstanding Options
granted under the Plan exceed 2,700,000 shares, SUBJECT, HOWEVER,
to the provisions of Section 15 of the Plan. Shares to be issued
upon the exercise of Options granted under the Plan may be either
authorized but unissued shares or shares held by the Company in
its treasury. If any Option expires or terminates for any reason
without having been exercised in full, the shares not purchased
thereunder shall again be available for Options thereafter to be
granted. Each Director who is not an employee of the Company or
a subsidiary thereof shall receive a nonstatutory option to
purchase 20,000 shares of Common Stock on the date on which he or
she is first elected to the Board of Directors of the Company and
an additional option to purchase 6,000 shares of Common Stock on
the date of each annual meeting at which he or she is re-elected
or after which he continues to serve as a Director. Each
Director who is not an employee of the Company or a subsidiary
thereof shall also receive an option to purchase 2,000 shares of
Common Stock in each year served as a chairman of a Committee of
the Board of Directors and an option to purchase 1,000 shares of
Common Stock in each year served as a member of a Committee of
the Board of Directors, such options to be issued on the date the
Committees are established annually by the Board of Directors.
Each option granted to a Director under this Section 4 shall have
an exercise price of $1.00 per share and shall be exercisable,
cumulatively, to the extent of one-third of the stock covered
thereby on each of the
2
<PAGE> 3
first three anniversary dates of the grant of the Option. In the
event any Director standing for re-election is not re-elected to
the Board of Directors at any meeting, all of such Director's
unexercisable Options granted prior to the date of that meeting
will become exercisable immediately.
5. ADMINISTRATION. The Plan shall be administered by the Board
of Directors of the Company or by a committee composed of members
of the Board (the Board of Directors or any such committee being
hereinafter referred to as the "Committee"). With respect to
directors and Officers eligible to receive an Option under this
Plan, the Plan shall be administered by a special committee (the
"Special Committee") of the Board of Directors of the Company who
are "disinterested persons" as defined in Rule 16b-3(c) (2) (i)
under Section 16 of the Securities Exchange Act of 1934 and who
are also not an employee of one or more of the Company and its
subsidiaries. Only the Special Committee may grant Options to
directors and Officers eligible to receive Options under this
Plan. Subject to the provisions of the Plan, the Committee or
the Special Committee, as the case may be, shall have complete
authority, in its discretion, to make the following
determinations with respect to each Option to be granted by the
Company: (a) the employee, director or consultant to receive the
Option; (b) the time of granting the Option; (c) the number of
shares subject thereto; (d) the Option Price; and (e) the Option
period. In making such determinations, the Committee may take
into account the nature of the services rendered by the
respective employees, directors and consultants their present and
potential contributions to the success of the Company and its
subsidiaries, and such other factors as the Committee in its
discretion shall deem relevant. Subject to the provisions of the
Plan, the Committee shall also have complete authority to
interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to it, to determine the terms and provisions
of the respective Option Agreements (which need not be
identical), and to make all other determinations necessary or
advisable for the administration of the Plan. The Committee's
determinations on the matters referred to in this Section 5 shall
be conclusive.
6. ELIGIBILITY. An Option may be granted only to an employee,
director, or consultant of one or more of the Company and its
subsidiaries. A Director of one or more of the Company and its
subsidiaries who is not also an employee of one or more of the
Company and its subsidiaries shall not be eligible to receive an
Incentive Option. Any person who, within the meaning of Section
422A(b) (6) of the Code, is deemed to own stock possessing more
than 10% of the total combined voting power of all classes of
stock of the Company (or of its parent or subsidiary
corporations) shall not be eligible to receive an Option.
7. TIME OF GRANTING OPTIONS. The granting of an Option shall
take place at the time specified by the Committee. Only if
expressly so provided by the Committee, shall the Grant Date be
the date on which an Option Agreement shall have been duly
executed and delivered by the Company and the Optionee.
3
<PAGE> 4
8. OPTION PRICE. The Option Price under each Incentive Option
shall be not less than 100% of the Fair Market Value of Stock on
the Grant Date; the Option Price under each Nonstatutory Option
shall not be so limited.
9. OPTION PERIOD. No Incentive Option may be exercised later
than the tenth anniversary of the Grant Date. The period during
which a Nonstatutory Option may be exercised shall not be so
limited. An Option may become exercisable in such installments,
cumulative or non-cumulative, as the Committee may determine. In
the case of an Option not otherwise immediately exercisable in
full, the Committee may accelerate the exercisability of such
Option in whole or in part at any time, provided the acceleration
of the exercisability of any Incentive Option would not cause the
Option to fail to comply with the provisions of Section 422 of
the Code.
10. LIMIT ON INCENTIVE OPTION CHARACTERIZATION. No Incentive
Option shall be considered an Incentive Option to the extent
pursuant to its terms it would permit the Optionee to purchase
for the first time in any Vesting Year more than the number of
shares of Stock calculated by dividing the current limit by the
Fair Market Value on the Grant Date. The current limit for any
Optionee for any Vesting Year shall be $100,000 minus the
aggregate Fair Market Value at the date of grant of the number of
shares of Stock available for purchase for the first time in such
Vesting Year under each other Incentive Option granted to the
Optionee under the Plan and each other incentive stock option
granted to the Optionee under any other incentive stock option
plan of the Company (and its parent and subsidiary corporations).
11. EXERCISE OF OPTION. An Option may be exercised in
accordance with its terms by written notice of intent to exercise
the Option, specifying the number of shares with respect to which
the Option is then being exercised. The notice shall be
accompanied by payment in the form of cash or shares of the
Stock with a Market Value on the date of exercise equal to the
Option Price of the shares to be purchased. Within 20 days
thereafter, the Company shall deliver or cause to be delivered to
the Optionee evidence of ownership of the number of shares then
being purchased. Such shares shall be fully paid and
nonassessable. If any law or applicable regulation of the
Securities and Exchange Commission or other public regulatory
authority shall require the Company or the Optionee to register
or qualify under the Securities Act of 1933, as amended, any
similar federal statute then in force or any state law regulating
the sale of securities, any Option Shares with respect to which
notice of intent to exercise shall have been delivered to the
Company or to take any other action in connection with such
shares, the delivery of the certificate or certificates for such
shares shall be postponed until completion of the necessary
action, which the Company shall take in good faith and without
delay. All such action shall be taken by the Company at its own
expense.
12. TERMINATION OF EMPLOYMENT. In the event that the Optionee's
employment or association with the Company is terminated, whether
voluntarily or by reason of dismissal, disability or retirement,
the
4
<PAGE> 5
Option, to the extent exercisable at the date of termination,
may be exercised by the Optionee within three months after he or
she ceases to be an employee, director or consultant; PROVIDED,
HOWEVER, that if termination results from the death of the
Optionee, the Option, to the extent exercisable at the date of
death, may be exercised by the person to whom the option is
transferred by will or the applicable laws of descent and
distribution, at any time within six months after the date of
death, unless terminated earlier by its terms. Military or sick
leave shall not be deemed a termination of employment provided
that it does not exceed the longer of 90 days or the period
during which the absent employee's reemployment rights are
guaranteed by statute or by contract.
13. TRANSFERABILITY OF OPTIONS. Options shall not be
transferable, otherwise than by will or the laws of descent and
distribution, and may be exercised during the life of the
Optionee only by the Optionee.
14. TRANSFERABILITY OF OPTION SHARES. The Optionee agrees that
he or she will not transfer any of the Option Shares at any time
purchased upon the exercise of any portion of the Option unless
(i) such shares are registered under the provisions of the
Securities Act of 1933, as amended, or (ii) at the request
of the Company, the transferee represents, in form satisfactory
to counsel for the Company, that he or she will not transfer,
sell or otherwise dispose of the Optioned Shares at any time
purchased by him or her in a manner which would violate the
Securities Act of 1933, as amended (the "Act"), and the
regulations of the Securities and Exchange Commission thereunder.
The Optionee agrees that the Company may, at its discretion, make
a notation on any certificates issued upon exercise of any
portion of the Option to the effect that such certificate may not
be transferred except after receipt by the Company of an opinion
of counsel satisfactory to it to the effect that such transfer
will not violate the Act and the regulations thereunder, and may
issue "stop transfer" instructions to its transfer agent, if any,
and make a "stop transfer" notation on its books as appropriate.
15. ADJUSTMENT OF NUMBER OF OPTION SHARES. Each Option
Agreement shall provide that in the event of any stock dividend
payable in the Stock or any split-up or contraction in the number
of shares of the Stock occurring after the date of the Agreement
and prior to the exercise in full of the Option or the repurchase
by the Company pursuant to Section 14, the number of shares
subject to such Agreement shall be proportionately adjusted and
the price to be paid for each share subject to the Option shall
be proportionately adjusted. Each such agreement shall also
provide that in case of any reclassification or change of
outstanding shares of the Stock or in case of any consolidation
or merger of the Company with or into another company or in case
of any sales or conveyance to another company or entity of the
property of the Company as a whole or substantially as a whole,
shares of Stock or other securities shall be delivered equivalent
in kind and value to those shares an Optionee would have been
received if the Option had been exercised in full or the repurchase
consummated immediately prior to such reclassification, change,
consolidation,
<PAGE> 6
merger, sale or conveyance and no disposition had subsequently
been made. Each Agreement shall further provide that upon dissolution
or liquidation of the Company, the Option shall terminate, but the
Optionee (if at the time in the employ of the Company or any of
its subsidiaries) shall have the right, immediately prior to such
dissolution or liquidation, to exercise the Option to the extent
not theretofore exercised. No fraction of a share shall be
purchasable or deliverable upon exercise, but in the event any
adjustment hereunder of the number of shares covered by the
Option shall cause such number to include a fraction of a share,
such fraction shall be adjusted to the nearest smaller whole
number of shares. In the event of changes in the outstanding
Stock by reason of any stock dividend, split-up, contraction,
reclassification, or change of outstanding shares of the Stock of
the nature contemplated by this Section 15, the number of shares
of the Stock available for the purpose of the Plan as stated in
Section 4 shall be correspondingly adjusted.
16. RESERVATION OF STOCK. The Company shall at all times during
the term of the Option reserve and keep available such number of
shares of the Stock as will be sufficient to satisfy the
requirements of this Plan and shall pay all fees and expenses
necessarily incurred by the Company in connection therewith.
17. LIMITATION OF RIGHTS IN THE OPTION SHARES. The Optionee
shall not be deemed for any purpose to be a stockholder of the
Company with respect to any of the Option Shares except to the
extent that the Option shall have been exercised with respect
thereto and, in addition, a certificate shall have been issued
therefore and delivered to the Optionee. Any Stock issued
pursuant to the Option shall be subject to all restrictions upon
the transfer thereof which may be now or hereafter imposed by the
Articles of Organization or the By-laws of the Company.
18. TERMINATION AND AMENDMENT OF THE PLAN. The Board may at any
time terminate the Plan or make such modifications of the Plan as
it shall deem advisable; PROVIDED that no modification shall be
effective to increase the number of shares of Stock subject
to the Plan or change the number or classification of employees
eligible to receive Options until such modification is approved
by the holders of a majority of the voting capital stock of the
Company. No termination or amendment of the Plan may, without
the consent of the Optionee to whom any Option shall theretofore
have been granted, adversely affect the rights of such Optionee
under such Option. In no event may the Board amend the Plan more
than once every six months other than to comply with changes in
the Code, the Employee Retirement Income Security Act of 1974 or
the rules thereunder.
19. NOTICES. Any communication or notice required or permitted
to be given under the Plan shall be in writing, and mailed by
registered or certified mail or delivered in hand, if to the
Company, to its Treasurer at LTX Park at University Avenue,
Westwood, Massachusetts 02090 and, if to the Optionee, to the
address as the Optionee shall last have furnished to the
communicating party.
6
<PAGE> 7
20. Withholding; Notice of Disposition of Stock Prior to
----------------------------------------------------
Expiration of Specified Holding Period.
--------------------------------------
(a) Whenever shares are to be issued in satisfaction
of an Option granted hereunder, the Company shall
have the right to require the Optionee to remit to
the Company an amount sufficient to satisfy
federal, state, local or other withholding tax
requirements if and to the extent required by law
(whether so required to secure for the Company an
otherwise available tax deduction or otherwise)
prior to the delivery of any certificate or
certificates for such shares.
(b) The Company may require as a condition to the
issuance of shares covered by an Incentive Option
that the party exercising such Option give a
written representation to the Company which is
satisfactory in form and substance to its counsel
and upon which the Company may reasonably rely,
that he or she will report to the Company any
disposition of such shares prior to the expiration
of the holding periods specified by Section
422(a)(1) of the Code. If and to the extent that
the realization of income in such a disposition
imposes upon the Company federal, state, local or
other withholding tax requirements, or any other
available tax deduction, the Company shall have
the right to require that the recipient remit to
the Company an amount sufficient to satisfy those
requirements; and the Company may require as a
condition to the issuance of shares covered by an
Incentive Option that the party exercising such
option give a satisfactory written representation
promising to make such a remittance.
7
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> AUG-1-1994
<PERIOD-END> JUL-31-1995
<EXCHANGE-RATE> 1
<CASH> 29,183
<SECURITIES> 0
<RECEIVABLES> 33,485
<ALLOWANCES> (700)
<INVENTORY> 47,101
<CURRENT-ASSETS> 113,998
<PP&E> 81,527
<DEPRECIATION> (53,120)
<TOTAL-ASSETS> 145,917
<CURRENT-LIABILITIES> 51,816
<BONDS> 28,267
<COMMON> 1,463
0
0
<OTHER-SE> 63,944
<TOTAL-LIABILITY-AND-EQUITY> 145,917
<SALES> 185,180
<TOTAL-REVENUES> 210,319
<CGS> 122,509
<TOTAL-COSTS> 136,748
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,254
<INCOME-PRETAX> 11,066
<INCOME-TAX> 372
<INCOME-CONTINUING> 10,694
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,694
<EPS-PRIMARY> 0.37
<EPS-DILUTED> 0.36
</TABLE>
