<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT of 1934
For Quarter Ended January 31, 1995 Commission File Number 0-10761
LTX CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MASSACHUSETTS 04-2594045
- ----------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
LTX Park at University Avenue, Westwood, Massachusetts 02090
----------------------------------------------------------------------
(address of principal executive offices and zip code)
Registrant's telephone number, including area code (617) 461-1000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
------------- -------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at March 3, 1995
- -------------------------- -------------------------------------
<S> <C>
Common Stock, par value 26,464,855
$0.05 per share
</TABLE>
<PAGE> 2
LTX CORPORATION
INDEX
<TABLE>
<CAPTION>
Page Number
<S> <C>
Part I. FINANCIAL INFORMATION
Consolidated Balance Sheet 1
January 31, 1995 and July 31, 1994
Consolidated Statement of Operations
Three months and six months ended
January 31, 1995 and January 31, 1994 2
Consolidated Statement of Cash Flows
Six months ended January 31, 1995
and January 31, 1994 3
Notes to Consolidated Financial Statements 4
Management's Discussion and Analysis of
Financial Condition and Results of Operations 5 - 8
Part II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 9
SIGNATURES 10
</TABLE>
<PAGE> 3
LTX CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
January 31, July 31,
1995 1994
----------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $21,441 $17,226
Accounts receivable, less allowances of $700 and $700 30,142 33,323
Inventories 45,246 42,672
Other current assets 4,782 3,848
-------- --------
Total current assets 101,611 97,069
Property and equipment, net 28,395 28,946
Other assets 4,627 4,621
-------- --------
$134,633 $130,636
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of
long-term liabilities $7,359 $7,307
Accounts payable 18,709 15,545
Accrued expenses and restructuring charges 18,420 21,497
Unearned service revenues and customer advances 4,540 3,867
-------- --------
Total current liabilities 49,028 48,216
Long-term liabilities, less current portion 21,372 21,632
Convertible subordinated debentures 20,326 20,195
Stockholders' equity:
Common stock, $0.05 par value 1,324 1,311
Additional paid-in capital 118,055 117,457
Accumulated deficit (75,472) (78,175)
-------- --------
Total stockholders' equity 43,907 40,593
-------- --------
$134,633 $130,636
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
- 1 -
<PAGE> 4
LTX CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
January 31, January 31,
------------------------ ----------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales:
Product $43,864 $32,911 $84,692 $75,377
Service 6,153 5,208 12,115 9,906
---------- ---------- ---------- ----------
Total net sales 50,017 38,119 96,807 85,283
---------- ---------- ---------- ----------
Cost of sales:
Product 28,883 23,982 56,292 53,257
Service 3,665 3,182 7,185 6,126
Provision for excess inventories -- 3,500 -- 3,500
---------- ---------- ---------- ----------
Total cost of sales 32,548 30,664 63,477 62,883
---------- ---------- ---------- ----------
Gross profit 17,469 7,455 33,330 22,400
Engineering and product
development expenses 4,715 5,092 9,437 10,133
Selling, general and
administrative expenses 9,619 11,512 18,721 22,170
Restructuring charges -- 14,376 -- 14,376
---------- ---------- ---------- ----------
Income (loss) from operations 3,135 (23,525) 5,172 (24,279)
Interest expense, net 1,123 900 2,374 1,751
---------- ---------- ---------- ----------
Income (loss) before income
taxes and minority interest 2,012 (24,425) 2,798 (26,030)
Provision for income taxes 95 -- 95 --
---------- ---------- ---------- ----------
Income (loss) before minority interest 1,917 (24,425) 2,703 (26,030)
Minority interest in net loss of subsidiary -- 420 -- 420
---------- ---------- ---------- ----------
Net income (loss) $1,917 $(24,005) $2,703 $(25,610)
========== ========== ========== ==========
Primary and fully diluted net income (loss) per share $0.07 $(0.96) $0.10 $(1.03)
Weighted average shares:
Primary 28,240 25,060 28,100 24,933
Fully diluted 28,517 25,060 28,428 24,933
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
- 2 -
<PAGE> 5
LTX CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six Months
Ended
January 31,
----------------------
1995 1994
--------- ----------
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $2,703 $(25,610)
Add (deduct) non-cash items:
Depreciation and amortization 4,678 4,462
Minority interest in subsidiary net loss -- (420)
Original issue discount amortization 131 125
(Increase) decrease in:
Accounts receivable 3,181 (5,562)
Inventories (2,574) (5,581)
Other current assets (934) (164)
Other assets (6) (219)
Increase (decrease) in:
Accounts payable 3,164 4,213
Accrued expenses and restructuring charges (3,077) 15,497
Unearned service revenues and customer advances 673 (529)
--------- ----------
Net cash provided by (used in) operating activities 7,939 (13,788)
--------- ----------
CASH USED IN INVESTING ACTIVITIES:
Expenditures for property and equipment, net (4,127) (7,619)
--------- ----------
Net cash used in investing activities (4,127) (7,619)
--------- ----------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from sale of common stock -- 4,000
Proceeds from stock purchase and option plans 611 856
Increase in bank debt 8 5,417
Proceeds from sale and leaseback of equipment -- 2,841
Payments of long-term debt (216) (88)
--------- ----------
Net cash provided by financing activities 403 13,026
--------- ----------
Net increase (decrease) in cash and equivalents 4,215 (8,381)
Cash and equivalents at beginning of period 17,226 21,725
--------- ----------
Cash and equivalents at end of period $21,441 $13,344
========= ==========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid during the period for:
Interest $2,575 $1,988
Income taxes 45 0
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
- 3 -
<PAGE> 6
LTX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying financial statements have been prepared by the Company,
without audit, and reflect all adjustments which, in the opinion of
management, are necessary for a fair statement of the results of the interim
periods presented. Certain information and footnote disclosures normally
included in the annual financial statements which are prepared in accordance
with generally accepted accounting principles have been condensed or omitted.
Accordingly, although the Company believes that the disclosures are adequate
to make the information presented not misleading, the financial statements
should be read in conjunction with the footnotes contained in the Company's
Annual Report on Form 10-K.
2. Revenues from product sales are recognized at the time units are shipped.
Service revenues are recognized over the applicable contractual periods or as
services are performed. Revenues from engineering contracts are recognized
over the contract period on a percentage of completion basis.
3. Inventories are stated at the lower of cost (first-in, first-out) or market
and include material, labor and manufacturing overhead. Inventories
consisted of the following at:
<TABLE>
<CAPTION>
January 31, July 31,
1995 1994
----------- ----------
(In thousands)
<S> <C> <C>
Raw materials $10,621 $12,075
Work-in-process 22,588 18,810
Finished goods 12,037 11,787
------- -------
$45,246 $42,672
======= =======
</TABLE>
4. Interest expense and income were as follows:
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
January 31, January 31,
-------------------- --------------------
1995 1994 1995 1994
-------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Expense $1,232 $1,033 $2,575 $1,988
Income (109) (133) (201) (237)
-------- -------- -------- --------
Interest expense, net $1,123 $900 $2,374 $1,751
======== ======== ======== ========
</TABLE>
5. Primary and fully diluted net loss per share is based on the weighted average
number of shares of common stock outstanding. Primary and fully diluted net
income per share is based on the weighted average shares of common stock and
common stock equivalents outstanding.
Common stock equivalents includes shares issuable under stock option plans
and warrents to purchase shares. None of the Company's Convertible
Subordinated Debentures are common stock equivalents.
- 4 -
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the principal
items included in the Consolidated Statement of Operations as percentages of
total revenues.
<TABLE>
<CAPTION>
Percentage
Percentage of Net Sales Increase/(Decrease)
-------------------------------------- ---------------------------
Three Months Six Months
Ended Ended Three Months Six Months
January 31, January 31, 1995 1995
--------------- ----------------- Over Over
1995 1994 1995 1994 1994 1994
------- ------- ------- ------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Net sales:
Product 87.7 % 86.3 % 87.5 % 88.4 % 33.3 % 12.4 %
Service 12.3 13.7 12.5 11.6 18.1 22.3
----- ----- ----- ----- ---- ----
Total sales 100.0 100.0 100.0 100.0 31.2 13.5
Cost of sales:
Product 57.8 62.9 58.2 62.5 20.4 5.7
Service 7.3 8.3 7.4 7.2 15.2 17.3
Provision for excess inventories -- 9.2 -- 4.0 N/M N/M
----- ----- ----- ----- ---- ----
Total cost of sales 65.1 80.4 65.6 73.7 6.1 0.9
----- ----- ----- ----- ---- ----
Gross profit 34.9 19.6 34.4 26.3 134.3 48.8
Engineering and product
development expenses 9.4 13.4 9.8 11.9 (7.4) (6.9)
Selling, general and
administrative expenses 19.2 30.2 19.3 26.0 (16.4) (15.6)
Restructuring charges -- 37.7 -- 16.9 N/M N/M
----- ----- ----- ----- ---- ----
Income (loss) from operations 6.3 (61.7) 5.3 (28.5) N/M N/M
Interest expense, net 2.3 2.4 2.4 2.0 24.8 35.6
----- ----- ----- ----- ---- ----
Income (loss) before income
taxes and minority interest 4.0 (64.1) 2.9 (30.5) N/M N/M
Provision for income taxes 0.2 -- 0.1 -- N/M N/M
----- ----- ----- ----- ---- ----
Income (loss) before minority
interest 3.8 (64.1) 2.8 (30.5) N/M N/M
Minority interest in net loss
of subsidiary -- 1.1 -- 0.5 N/M N/M
----- ----- ----- ----- ---- ----
Net income (loss) 3.8 % (63.0)% 2.8 % (30.0)% N/M N/M
===== ===== ===== ===== ==== ====
</TABLE>
- 5 -
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
Three Months Ended January 31, 1995 Compared to the
Three Months Ended January 31, 1994
Net sales were $50.0 million in the second quarter of fiscal 1995 as
compared to $38.1 million in the second quarter of fiscal 1994. Sales of linear
and mixed signal systems increased approximately 20% year-to-year reflecting the
strong demand the Company has experienced for these products. Sales of these
systems to various worldwide facilities of two European customers accounted for
approximately 30% of total revenues in the second quarter of fiscal 1995. Sales
of digital systems in the second quarter of fiscal 1995 were also substantially
higher than the low sales level of the second quarter of fiscal 1994. Service
revenues of $6.2 million in the second quarter of fiscal 1995 were $0.9 million
higher than the second quarter of fiscal 1994.
The gross profit margin was 34.9% of net sales in the second quarter of
fiscal 1995 as compared to 28.7%, before a provision for excess inventories, in
the second quarter of fiscal 1994. The increase in mixed signal and digital
shipments over the second quarter of fiscal 1994 resulted in proportionately
lower fixed manufacturing costs on the higher level of shipments. In addition,
sales of digital systems in the second quarter of fiscal 1995 were at higher
average selling prices as compared to the second quarter of fiscal 1994. Higher
margins on sales of mixed signal systems also contributed to the improvement in
the gross profit margin. In the second quarter of fiscal 1994, the Company took
a $3.5 million provision for excess inventories which further reduced the gross
profit margin.
Engineering and product development and selling, general and
administrative expenses in the second quarter of fiscal 1995, combined, were
$2.3 million less than the second quarter of fiscal 1994. The reduction in
operating expenses is a result of the Company's restructuring and cost reduction
measures initiated in March 1994, which included a plan to eliminate excess
leased facilities and a workforce reduction. The restructuring program and cost
reduction measures have primarily reduced selling, general and administrative
expenses. In the second quarter of fiscal 1994, the Company took a $14.4 million
charge as a result of this restructuring program.
Interest expense was $0.2 million higher in the second quarter of fiscal
1995 as compared to the second quarter of fiscal 1994. The increase in interest
expense is a result of the $20.0 million term loan the Company received from
Ando Electric Co., Ltd. in July 1994. This increase was partially offset by a
reduction in interest on lower average bank borrowings in the second quarter of
fiscal 1995 as compared to the second quarter of fiscal 1994.
The tax provision of $0.1 million in the second quarter of fiscal 1995
relates to certain state and foreign tax provisions. The Company is in a net
operating loss carryforward position in most tax jurisdictions. In the second
quarter of fiscal 1994, the Company had no tax provision due to the loss for the
period.
The Company's Japanese subsidiary operated at a small profit in the
second quarter of fiscal 1995 and the minority partner's share of the
subsidiary's operating results was insignificant. In the second quarter of
fiscal 1994, the minority partner's share of the subsidiary's loss for the
period was $0.4 million.
-6-
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company had net income of $1.9 million in the second quarter of
fiscal 1995 as compared to a net loss of $24.0 million in the second quarter of
fiscal 1994. The net loss for the second quarter of fiscal 1994 included a
restructuring charge of $14.4 million and a provision for excess inventories of
$3.5 million. The improvement in the operating results of the Company in the
second quarter of fiscal 1995 reflected the increase in revenues and gross
profit margin in combination with the lower level of operating expenses.
Six Months Ended January 31, 1995 Compared to the
Six Months Ended January 31, 1994
Net sales were $96.8 million for the six months ended January 31,1995 as
compared to $85.3 million for the six months ended January 31, 1994. The
increase in sales was primarily a result of the substantially higher level of
mixed signal system shipments, particularly to European customers. However, this
improvement in sales of the Company's mixed signal products was partially offset
by lower digital system shipments in the six months ended January 31, 1995.
Service revenues increased $2.2 million in the six months ended January 31, 1995
as compared to the six months ended January 31, 1994.
The gross profit margin was 34.4% of net sales in the six months ended
January 31, 1995 as compared to 30.4% of net sales, before a provision for
excess inventories, in the six months ended January 31, 1994. The improvement in
the gross profit margin was primarily a result of the increase in mixed signal
shipments at higher margins. In addition, sales of digital systems in the six
months ended January 31, 1995 were at comparatively higher selling prices. In
the second quarter of fiscal 1994, the Company took a $3.5 million provision for
excess inventories.
Engineering and product development expenses decreased $0.7 million and
selling, general and administrative expenses were $3.4 million lower in the six
months ended January 31, 1995 as compared to the six months ended January 31,
1994. The reduction in operating expenses was a result of the Company's
restructuring and cost reduction measures initiated in March 1994. The Company
took a $14.4 million charge in the second quarter of fiscal 1994 as a result of
this restructuring program.
Interest expense was $0.6 million higher in the six months ended January
31, 1995 as compared to the six months ended January 31, 1994. The increase in
interest expense is a result of the $20.0 million term loan the Company received
from Ando Electric Co., Ltd. in July 1994. This increase was partially offset by
a reduction in interest on lower average bank borrowings in the six months ended
January 31, 1995 as compared to the six months ended January 31, 1994.
The tax provision of $0.1 million in the six months ended January 31,
1995 relates to certain state and foreign tax provisions. The Company is in a
net operating loss carryforward position in most tax jurisdictions. There was no
tax provision in the six months ended January 31, 1994 due to the loss for the
period.
The Company's Japanese subsidiary's result of operations were
approximately break-even in the six months ended January 31, 1995 and the
minority partner's share of the subsidiary's results was insignificant. In the
six months ended January 31, 1994, the Company's Japanese subsidiary operated at
a loss and the minority partner's share of the subsidiary's loss was $0.4
million.
-7-
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In the six months ended January 31, 1995, the Company had net income of
$2.7 million as compared to a net loss of $25.6 million in the six months ended
January 31, 1994. The loss for the six months ended January 31, 1995 included a
restructuring charge of $14.4 million and a provision for excess inventories of
$3.5 million.
Liquidity and Capital Resources:
Cash and equivalents were $21.4 million at January 31, 1995 as compared
to $17.2 million at July 31, 1994. The increase in cash and equivalents of $4.2
million in the first six months of fiscal 1995 was a result of $7.9 million of
net cash provided by operating activities, $4.1 million of net cash used for
property and equipment expenditures and $0.4 million of net cash provided by
financing activities.
In the second quarter of fiscal 1995, net cash provided by operating
activities was $10.0 million. The Company used $2.1 million in net cash for
operating activities in the first quarter of fiscal 1995. The significant
improvement in cash flow from operations in the second quarter of fiscal 1995
was primarily a result of the Company's ability to deliver systems more evenly
during the quarter. As a result, the Company was able to increase the level of
accounts receivable collections on shipments made during the period. Accounts
receivable declined $9.4 million in the second quarter of fiscal 1995, although
sales in the period increased $3.2 million over the first quarter of fiscal
1995. In the first six months of fiscal 1995, inventories increased $2.6 million
to meet the higher sales levels and to allow for more even shipments during the
period. The increase in accounts payable of $3.2 million in the first six months
of fiscal 1995 relates to the higher level of inventory purchases during the
period. At January 31, 1995, the Company had a restructuring reserve of $9.9
million remaining to cover the estimated future cash flows relating primarily to
excess leased facilities. Cash outflows in the first six months of fiscal 1995
were $1.4 million for excess leased facilities and $0.4 million for severance
payments.
Additions to property and equipment of $4.1 million in the first six
months of fiscal 1995 were less than deprecation charges of $4.7 million.
Equipment additions during the period were primarily used in product development
and customer support activities.
At January 31, 1995 and July 31, 1994, the Company's Japanese subsidiary
had $6.9 million in bank borrowings outstanding. The Company had no borrowings
outstanding under its domestic bank line at January 31, 1995 or July 31, 1994.
In the six months ended January 31, 1994, the Company used $13.8 million
of net cash for operating activities as a result of the loss for the period,
before restructuring charges and provision for excess inventories, and the
increase in working capital requirements. The Company had $7.6 million of
additions to property and equipment in the six months ended January 31, 1994, of
which $2.8 million was financed through leasing arrangements. The Company
received $4.0 million from the sale of its common stock to several private
investors in January 1994. The Company also increased its bank borrowings by
$5.4 million in the six months ended January 31, 1994 to help meet its cash
requirements.
Management believes that the Company has sufficient cash resources to
meet its remaining fiscal 1995 cash requirements. These resources include
existing cash balances, borrowing availability under domestic and Japanese bank
lines and future cash flows from operations.
-8-
<PAGE> 11
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits 27 - Financial Data Schedules
(b) There were no reports on Form 8-K filed during the three
months ended January 31, 1995.
- 9 -
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LTX Corporation
Date: March 14, 1995 By: /s/ Roger W. Blethen
-------------- ---------------------------------
Roger W. Blethen
President
Date: By:
--------------- ---------------------------------
Martin S. Francis
President
Date: March 14, 1995 By: /s/ John J. Arcari
--------------- ---------------------------------
John J. Arcari
Treasurer
Chief Financial Officer
(Principal Financial Officer)
Date: March 14, 1995 By: /s/ Glenn W. Meloni
-------------- ---------------------------------
Glenn W. Meloni
Controller
(Principal Accounting Officer)
- 10 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> AUG-01-1994
<PERIOD-END> JAN-31-1995
<EXCHANGE-RATE> 1
<CASH> 21,441
<SECURITIES> 0
<RECEIVABLES> 30,842
<ALLOWANCES> 700
<INVENTORY> 45,246
<CURRENT-ASSETS> 101,611
<PP&E> 83,569
<DEPRECIATION> 55,174
<TOTAL-ASSETS> 134,633
<CURRENT-LIABILITIES> 49,028
<BONDS> 41,698
<COMMON> 1,324
0
0
<OTHER-SE> 42,583
<TOTAL-LIABILITY-AND-EQUITY> 134,633
<SALES> 84,692
<TOTAL-REVENUES> 96,807
<CGS> 56,192
<TOTAL-COSTS> 63,477
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,575
<INCOME-PRETAX> 2,798
<INCOME-TAX> 95
<INCOME-CONTINUING> 2,703
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,703
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
</TABLE>
