<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended January 31, 1997
----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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 No.)
LTX Park at University Avenue, Westwood, Massachusetts 02090
------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (617) 461-1000
--------------
- -------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report
Indicate by check X whether the registrant: (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at February 28, 1997
- --------------------------------------- --------------------------------
Common Stock, par value $0.05 per share 35,372,958
<PAGE> 2
LTX CORPORATION
INDEX
Page Number
Part I. FINANCIAL INFORMATION
Consolidated Balance Sheet 1
January 31, 1997 and July 31, 1996
Consolidated Statement of Operations
Three months and six months ended
January 31, 1997 and January 31, 1996 2
Consolidated Statement of Cash Flows
Six months ended January 31, 1997
and January 31, 1996 3
Notes to Consolidated Financial Statements 4 - 5
Management's Discussion and Analysis of
Financial Condition and Results of Operations 6 - 10
Part II. OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders 11
Item 6 - Exhibits and Reports on Form 8-K 11
SIGNATURES 12
<PAGE> 3
LTX CORPORATION
<TABLE>
CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands, except share data)
<CAPTION>
January 31, July 31,
1997 1996
----------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 58,958 $ 66,069
Short-term investments - 9,941
Accounts receivable, less allowances of $1,000 and $900 35,527 46,201
Inventories 55,226 66,496
Other current assets 4,304 5,239
-------- --------
Total current assets 154,015 193,946
Property and equipment, net 39,420 37,880
Other assets 3,435 3,493
-------- --------
$196,870 $235,319
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of
long-term liabilities $ 11,063 $ 12,395
Accounts payable 14,047 28,451
Accrued expenses and restructuring charges 9,472 9,052
Unearned service revenues and customer advances 5,301 6,429
-------- --------
Total current liabilities 39,883 56,327
Long-term liabilities, less current portion 15,622 16,645
Convertible subordinated debentures 7,308 7,308
Stockholders' equity:
Common stock, $0.05 par value 1,814 1,800
Additional paid-in capital 192,236 191,455
Accumulated deficit (55,632) (37,211)
Less - Treasury stock at cost
(947,500 and 200,000 shares) (4,361) (1,005)
-------- --------
Total stockholders' equity 134,057 155,039
-------- --------
$196,870 $235,319
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
- 1 -
<PAGE> 4
LTX CORPORATION
<TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<CAPTION>
Three Months Six Months
Ended Ended
January 31, January 31,
----------------------- -------------------------
1997 1996 1997 1996
------- ------- -------- --------
<S> <C> <C> <C> <C>
Net sales $46,783 $65,054 $ 91,449 $127,212
Cost of sales 32,249 39,007 63,596 77,735
Inventory provision for product line restructuring - - 9,250 -
------- ------- -------- --------
Gross profit 14,534 26,047 18,603 49,477
Engineering and product development
expenses 5,330 5,649 11,439 10,991
Selling, general and administrative expenses 8,861 11,510 18,996 22,488
Product line restructuring costs - - 6,750 -
------- ------- -------- --------
Income (loss) from operations 343 8,888 (18,582) 15,998
Interest (income) expense, net (38) (237) (161) 113
------- ------- -------- --------
Income (loss) before income taxes 381 9,125 (18,421) 15,885
Provision for income taxes - 380 - 594
------- ------- -------- --------
Net income (loss) $ 381 $ 8,745 $(18,421) $ 15,291
======= ======= ======== ========
Fully diluted net income (loss)
per share $ 0.01 $ 0.23 $ (0.52) $ 0.42
Weighted average shares 36,746 37,626 35,173 36,106
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
- 2 -
<PAGE> 5
LTX CORPORATION
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In thousands)
<CAPTION>
Six Months
Ended
January 31,
--------------------------
1997 1996
-------- --------
<S> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income (loss) $(18,421) $ 15,291
Add (deduct) non-cash items:
Depreciation and amortization 5,275 5,239
Exchange (gain) loss (157) (503)
(Increase) decrease in:
Accounts receivable 9,978 (11,678)
Inventories 11,270 (8,606)
Other current assets 896 (1,041)
Other assets 58 (26)
Increase (decrease) in:
Accounts payable (14,314) 994
Accrued expenses and restructuring charges 540 (2,526)
Unearned service revenues and customer advances (1,128) 2,471
-------- --------
Net cash used in operating activities (6,003) (385)
-------- --------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of held-to-maturity securities - (9,889)
Sale of held-to-maturity securities 9,941 -
Expenditures for property and equipment, net (6,815) (9,474)
-------- --------
Net cash provided by (used in) investing activities 3,126 (19,363)
-------- --------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from sale of common stock - 55,797
Proceeds from stock purchase and option plans 795 1,164
Increase (decrease) in bank debt (1,386) 1,682
Payments of long-term debt (2,387) (279)
Proceeds from lease financing 2,435 -
Purchase of treasury stock (3,356) -
-------- --------
Net cash provided by (used in) financing activities (3,899) 58,364
-------- --------
Effect of exchange rate changes on cash (335) (553)
-------- --------
Net increase (decrease) in cash and equivalents (7,111) 38,063
Cash and equivalents at beginning of period 66,069 29,183
-------- --------
Cash and equivalents at end of period $ 58,958 $ 67,246
======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid during the period for:
Interest $ 1,368 $ 1,340
Income taxes 1,807 400
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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<PAGE> 6
LTX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The Company
-----------
LTX Corporation (the "Company") designs, manufactures, and markets automatic
test equipment for the semiconductor industry that is used to test mixed
signal, digital, linear and discrete semiconductor components. Headquartered
in Westwood, Massachusetts, the Company has development and manufacturing
facilities in Westwood, Massachusetts and San Jose, California and worldwide
sales and service facilities to support its customer base.
2. Summary of Significant Accounting Policies
------------------------------------------
Basis of Presentation
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. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosures of contingent assets and liabilities as of the
date of the financial statements and the reported amounts of income and
expenses during the reporting periods. 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.
Revenue Recognition
Revenues from product sales and related warranty costs are 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.
Net Income (Loss) Per Share
Fully diluted net income per share is based on the weighted average number of
shares of common stock and common stock equivalents outstanding. Common stock
equivalents include shares issuable under stock option plans and warrants to
purchase shares. None of the Company's Convertible Subordinated Debentures
are common stock equivalents. Fully diluted 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>
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
and include material, labor and manufacturing overhead. Inventories consisted
of the following at:
<CAPTION>
January 31, July 31,
1997 1996
----------- --------
(In thousands)
<S> <C> <C>
Raw materials $13,777 $17,752
Work-in-process 28,837 34,261
Finished goods 12,612 14,483
------- -------
$55,226 $66,496
======= =======
</TABLE>
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<PAGE> 7
LTX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
3. Recent Accounting Pronouncements
--------------------------------
The Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-lived Assets and for Long-lived
Assets to Be Disposed Of" (FAS 121) effective August 1, 1996. The
application of this new statement did not have a material effect on the
results of operations or financial condition of the Company.
In December 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (FAS 123) which is effective for the Company's
fiscal year ended July 31, 1997. FAS 123 requires employee stock-based
compensation to be either recorded or disclosed at its fair value. The
Company will continue to account for employee stock-based compensation
under Accounting Principles Board Opinion No. 25 and will not adopt the
new accounting standard for employee stock-based compensation under FAS
123, but will include the additional required disclosures in the fiscal
year ended July 31, 1997 consolidated financial statements.
<TABLE>
4. Interest Expense and Income
---------------------------
Interest expense and income were as follows:
<CAPTION>
Three Months Six Months
Ended Ended
January 31, January 31,
-------------------- ----------------------
1997 1996 1997 1996
----- ----- ------- -------
(In thousands)
<S> <C> <C> <C> <C>
Expense $ 675 $ 603 $ 1,370 $ 1,265
Income (713) (840) (1,531) (1,152)
----- ----- ------- -------
Interest (income) expense,
net $ (38) $(237) $ (161) $ 113
===== ===== ======= =======
</TABLE>
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<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
<TABLE>
The following table sets forth for the periods indicated the principal
items included in the Consolidated Statement of Operations as percentages of net
sales.
<CAPTION>
Percentage of Net Sales Percentage
----------------------------------------------- Increase/(Decrease)
Three Months Six Months ------------------------
Ended Ended Three Months Six Months
January 31, January 31, 1997 1997
-------------------- -------------------- Over Over
1997 1996 1997 1996 1996 1996
------ ------ ------ ------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0% (28.1)% (28.1)%
Cost of sales 68.9 60.0 69.6 61.1 (17.3) (18.2)
Inventory provision for product line
restructuring - - 10.1 - N/A N/M
----- ----- ----- -----
Gross profit 31.1 40.0 20.3 38.9 (44.2) (62.4)
Engineering and product
development expenses 11.4 8.7 12.5 8.6 (5.6) 4.1
Selling, general and
administrative expenses 18.9 17.6 20.7 17.7 (23.0) (15.5)
Product line restructuring costs - - 7.4 - N/A N/M
----- ----- ----- -----
Income (loss) from operations 0.8 13.7 (20.3) 12.6 (96.1) N/M
Interest (income) expense, net - (0.3) (0.2) - (84.0) N/M
----- ----- ----- -----
Income (loss) before income
taxes 0.8 14.0 (20.1) 12.6 (95.8) N/M
Provision for income taxes - 0.6 - 0.5 N/M N/M
----- ----- ----- -----
Net income (loss) 0.8% 13.4% (20.1)% 12.1% (95.6)% N/M
===== ===== ===== =====
<FN>
N/A - Not Applicable
N/M - Not Meaningful
</TABLE>
- 6 -
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the three months ended January 31, 1997, were $46.8 million as
compared to $65.1 million in the same quarter of the prior year. For the six
months ended January 31, 1997, net sales were $91.4 million as compared to
$127.2 million for the same period of the prior year. The year-to-year reduction
in sales reflects the continuing weak semiconductor equipment industry
conditions. The Company's mixed signal test equipment and digital test equipment
sales have both been adversely affected by the decline in demand by
semiconductor manufacturers for new equipment. Although sales were 28% lower in
the current fiscal year, for both comparative periods, the Company's order rate
improved sequentially in the three months ended January 31, 1997. The sequential
improvement in orders allowed the Company to increase its shipments in the three
months ended January 31, 1997, over the three months ended October 31, 1996.
Gross profit was 31.1% of net sales for the three months ended
January 31, 1997, as compared to 40.0% for the three months ended January 31,
1996. For the six months ended January 31, 1997, gross profit, excluding the
inventory provision for product line restructuring, was 30.4% as compared to
38.9% for the six months ended January 31, 1996. In the current fiscal year,
the gross profit has been adversely affected as a result of the proportionately
higher costs associated with maintaining the Company's applications assistance
and warranty support organizations and fixed manufacturing costs relative to
the lower sales levels.
For the six months ended January 31, 1997, the gross profit was reduced by a
$9.3 million inventory provision, associated with non-strategic Digital
products. In addition, the Company took a charge of $6.7 million in the three
months ended October 31, 1996, relating to the cancellation of non-strategic
Digital development projects, future costs associated with the Company's
redirection of its Digital product strategy and severance costs associated with
a workforce reduction.
Engineering and product development expenses were $5.3 million, or 11.4% of
net sales, in the three months ended January 31, 1997, as compared to $5.6
million, or 8.7% of net sales, in the three months ended January 31, 1996. For
the six months ended January 31, 1997, engineering and product development
expenses were $11.4 million, or 12.5% of net sales, as compared to $11.0
million, or 8.6% of net sales, in the six months ended January 31, 1996. For
the comparative six month periods, the Company has continued to maintain its
investment in product development programs, largely related to its Synchro and
Delta/STE test systems.
Selling, general and administrative expenses were $8.9 million, or 18.9% of
net sales, in the three months ended January 31, 1997, as compared to $11.5
million, or 17.6% of net sales, in the three months ended January 31, 1996. For
the six months ended January 31, 1997, selling, general and administrative
expenses were $19.0 million, or 20.7% of net sales, as compared to $22.5
million, or 17.7% of net sales, in the six months ended January 31, 1996. The
significant reduction in selling, general and administrative expenses is a
result of the combination of lower variable selling costs, reduced discretionary
spending, a holiday vacation shutdown, as well as reduced variable compensation
in the current fiscal year.
- 7 -
<PAGE> 10
There was no tax provision in the three months or six months ended January 31,
1997 as a result of the cumulative loss for the period.
The higher level of shipments, combined with the reduction in operating
expenses, produced a net profit of $0.4 million, or $0.01 per share, in the
three months ended January 31, 1997. In the preceding three months ended October
31, 1996, the Company had a loss from operations, excluding inventory and
restructuring provisions, of $2.8 million, or $0.08 per share. The total net
loss, including inventory and restructuring provisions, was $18.8 million, or
$0.53 per share.
Management believes that the on-going weak semiconductor equipment industry
conditions will continue for the near term. These conditions will continue
to adversely affect the Company's results of operations. In the near term,
lower than anticipated order levels or lengthy customer delivery requirements
would have an adverse affect on the Company's results of operations.
LIQUIDITY AND CAPITAL RESOURCES
Cash and equivalents were $59.0 million at January 31, 1997, as compared to
$76.0 million for cash and short-term investments, combined, at July 31, 1996.
The reduction in cash and short-term investments of $17.0 million for the six
months ended January 31, 1997, was a result of $6.0 million of net cash used in
operating activities, $6.8 million of cash used for property and equipment
additions, $3.9 million of net cash used in financing activities and $0.3
million for the effect of exchange rate changes on cash.
The $6.0 million of net cash used in operating activities was largely a result
of the reduction in accounts payable during the period of $14.3 million and the
loss for the period before inventory and restructuring charges of $2.4 million,
partially offset by a reduction in accounts receivable of $10.0 million. The
lower level of accounts receivable at January 31, 1997, as compared to July 31,
1996, reflects the sales level of $46.8 million in the three months ended
January 31, 1997, as compared to $67.3 million in the three months ended July
31, 1996. Inventories of $55.2 million at January 31, 1997, were $11.3 million
lower than July 31, 1996. The reduction in inventories during the six month
period includes the inventory provision of $9.3 million for product line
restructuring. Cash outlays relating to the first quarter provision for
restructuring charges in the six months ended January 31, 1997, were $1.0
million.
Property and equipment additions were $6.8 million in the six months ended
January 31, 1997, and exceeded depreciation charges of $5.1 million. Additions
during the six month period included expenditures for a new management
information system, which is funded through lease financing, as well as well as
systems and spares required for product development and customer support.
The Company's Japanese subsidiary reduced its bank borrowings to $6.1 million
at January 31, 1997, as compared to $8.3 million at July 31, 1996. A long term
note payable was reduced by the Company's initial $2.0 million semi-annual
principal payment made in January. During the six months ended January 31, 1997,
the Company repurchased an additional 747,500 shares of the Company's common
stock at a cost of $3.4 million.
Management believes that the Company has sufficient cash resources to meet its
remaining fiscal 1997 cash requirements. These resources include cash balances
of $59.0 million together with future cash flows from operations.
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<PAGE> 11
FORWARD-LOOKING STATEMENTS
The Company in this report makes, and may from time to time elsewhere make,
disclosures which contain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such disclosures in this
report include, without limitation, the Company's belief, under "Liquidity and
Capital Resources", as to the adequacy of its cash resources. Such
forward-looking statements involve risks and uncertainties including, but not
limited to, the following important factors that could cause actual results to
differ materially from those in the forward-looking statement:
Fluctuations in Sales and Operating Results
- -------------------------------------------
Given the relatively large selling prices of the Company's test systems, sales
of a limited number of test systems account for a substantial portion of sales
in any particular fiscal quarter and a small number of transactions could
therefore have a significant impact on sales and gross margins for that fiscal
quarter. The Company's sales and operating results have fluctuated and could in
the future fluctuate significantly from period to period, including from one
quarterly period to another, due to a combination of factors, including the
cyclical demand of the semiconductor industry, order cancellations or
reschedulings by customers, the large selling prices of the Company's test
systems (which typically result in a long selling process), competitive pricing
pressures and the mix between and configuration of digital and linear/mixed
signal and discrete component test systems sold in a particular period. The
impact of these and other factors on the Company's sales and operating results
in any future period cannot be forecast with accuracy. In addition, the need for
continued investment in research and development, for capital equipment
requirements and for extensive worldwide customer support capability results in
significant fixed costs which would be difficult to reduce in the event that the
Company does not meet its sales objectives.
Cyclicality of Semiconductor Industry
- -------------------------------------
The Company's business is largely dependent upon the capital expenditures of
semiconductor manufacturers. The semiconductor industry is highly cyclical and
has historically experienced, and is currently experiencing, recurring periods
of oversupply, which often have had a severely detrimental effect on such
industry's demand for test equipment and could cause cancellations,
reschedulings or reductions of customer orders. No assurance can be given that
the Company's business and results of operations will not be materially
adversely affected if the current weak market conditions continue for a
prolonged period or if weak market conditions or changes in any particular
market segments of the semiconductor industry occur in the future, especially if
all of the market segments in which the Company participates experience
downturns at the same time.
Importance of New Product Introductions
- ---------------------------------------
The semiconductor test equipment ("STE") market is subject to rapid
technological change and new product introductions, as well as advancing
industry standards. The development of increasingly complex semiconductors and
the utilization of semiconductors in a broader spectrum of products has driven
the need for more advanced test systems to test such devices at an acceptable
cost. The Company's ability to remain competitive in the digital, linear and
mixed signal integrated circuit ("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. The Company also has to manufacture its
products in volume at a competitive price and on a timely basis to enable
customers to integrate them into their operations as they begin to produce their
next generation of semiconductors. The Company's failure to have a competitive
test system available when required by a semiconductor manufacturer would make
it substantially more difficult for the Company to sell test systems to that
manufacturer for a number of years.
- 9 -
<PAGE> 12
The Company has in the past experienced delays in introducing certain of its
products and enhancements, and there can be no assurance that it will not
encounter technical or other difficulties that could in the future delay the
introduction of new products or enhancements. If new products have reliability
or functionality problems, then reduced, canceled or rescheduled orders, higher
manufacturing costs, delays in collecting accounts receivable and additional
warranty expense may result, which could reduce gross margins on new product
sales and otherwise materially affect the Company's business and results of
operations. The Company's newly introduced Delta/STE is subject to the risks
associated with new product introductions, including the risk that reliability
or functionality problems could increase expenses and reduce gross margins on
new product sales. Furthermore, announcements by the Company or its competitors
of new products could cause customers to defer or forego purchases of the
Company's existing products, which would also adversely affect the Company's
business and results of operations. There can be no assurance that the Company
will be successful in the introduction and volume manufacture of its new
products, that such introduction will coincide with the development by
semiconductor manufacturers of their next generation semiconductors or that such
products will satisfy customer needs or achieve market acceptance. The failure
to do so could materially adversely affect the Company's business and results of
operations.
Acquisitions
- ------------
The Company from time to time may acquire technologies, product lines or
businesses that are complementary to those of the Company. There can be no
assurance that the Company will be able to successfully negotiate financing or
integrate such acquired technologies, product lines or businesses. Furthermore,
the integration of an acquired company or business may cause a diversion of
management time and resources. There can be no assurance that a given
acquisition, if consummated, would not materially adversely affect the Company.
Proprietary Rights
- ------------------
The Company's future success depends in part upon its proprietary technology.
Although the Company attempts to protect its proprietary technology through a
combination of contract provisions, trade secrets, copyrights and patents, it
believes that its future success depends more upon its engineering,
manufacturing, marketing and service skills. There can be no assurance that the
steps taken by the Company to protect its proprietary rights will be adequate to
prevent misappropriation of its technology or the independent development by
others of similar technology. 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.
- 10 -
<PAGE> 13
PART II -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company held its Annual Meeting of Stockholders on
December 10, 1996.
(b) Stockholders elected Messrs. Graham C. C. Miller and Robert E.
Moore as Class I Directors to serve additional terms of three
years. Messrs. Roger W. Blethen and Roger J. Maggs continued
to serve as Class II Directors, with their terms of office
expiring at the 1997 Annual Meeting of Stockholders. Messrs.
Jacques Bouyer and Samuel Rubinovitz continued to serve as
Class III Directors, with their terms of office expiring at
the 1998 Annual Meeting of Stockholders.
(c) Matters voted upon and the results of the voting were as
follows:
1) Stockholders voted 31,142,182 shares FOR and 927,874
shares WITHHELD from the election of Graham C. C.
Miller as a Class I Director. Stockholders voted
31,562,139 shares FOR and 507,917 shares WITHHELD
from the election of Robert E. Moore as a Class I
Director.
2) Stockholders voted 26,914,873 shares FOR; 4,232,331
shares AGAINST; 255,598 shares ABSTAINED and 667,254
shares were BROKER NON-VOTES regarding the vote to amend
the 1990 Stock Option Plan to provide that the vesting of
nonstatutory options issued under the Plan is accelerated
upon a "change of control" as defined in the Plan.
3) Stockholders voted 29,751,693 shares FOR; 1,435,707
shares AGAINST; 215,402 shares ABSTAINED and 667,254
shares were BROKER NON-VOTES regarding the vote to amend
the 1990 Stock Option Plan to provide that options
granted in the future be exercisable for two years after
termination of employment in the event employment of the
optionee terminates as a result of death or disability.
Item 6. Exhibits and Reports on Form 8-K
(a) (i) Exhibit 10 - Material Contracts -- LTX Corporation 1990 Stock
Option Plan
(ii) Exhibit 27 - Financial Data Schedules
(b) There were no reports on Form 8-K filed during the three
months ended January 31, 1997.
- 11 -
<PAGE> 14
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 12, 1997 By: /s/ Roger W. Blethen
--------------------- -------------------------------------
Roger W. Blethen
Chief Executive Officer and President
Date: March 12, 1997 By: /s/ John J. Arcari
--------------------- -------------------------------------
John J. Arcari
Treasurer
Chief Financial Officer
(Principal Financial Officer)
Date: March 12, 1997 By: /s/ Glenn W. Meloni
--------------------- -------------------------------------
Glenn W. Meloni
Controller
(Principal Accounting Officer)
- 12 -
<PAGE> 1
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 commons 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 the outstanding Options granted under the Plan exceed 3,700,000 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
Nonstatutory 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 a Nonstatutory Option to
purchase 3,000 shares of Common Stock in each year served as a chairman of a
Committee of the Board of Directors and a Nonstatutory Option to purchase 1,500
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 a fair market value exercise price per
share and shall be exercisable, cumulatively, to the extent of twenty percent
of
2
<PAGE> 3
the stock covered thereby on the first anniversary date of the grant of the
Option, thirty-five percent of the stock covered thereby on the second
anniversary date of the grant of the Option and forty-five percent of the stock
covered thereby on the third anniversary date of the grant of the Option. In
addition, on the day of the 1996 Annual Meeting of Stockholders, each Director
who is not an employee of the Company who has served as an outside director for
at least one year will receive a one-time grant of a Nonstatutory Option to
purchase 10,000 shares of Common Stock at a fair market value exercise price,
which Option will be immediately exercisable. 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
determination 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 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 its
parent or subsidiary corporations) shall not be eligible to receive an Option.
In
3
<PAGE> 4
any given fiscal year, no Optionee may receive Options covering more than
300,000 shares of Stock (such number of shares to be adjusted in accordance
with Section 15).
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.
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 be exercisable
in such installments, cumulative or noncumulative, 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 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
4
<PAGE> 5
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 or 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 or retirement, the 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. In the event that the
Optionee's employment or association with the Company terminates as a result of
the death or disability of the Optionee, the Option may be fully exercised by
the Optionee or, in the event of the death of the Optionee by the person to
whom the option is transferred by will or the applicable laws of descent and
distribution, at any time within two years after the date of termination,
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. In the event that the Optionee's
employment or association with the Company terminates as a result of death or
disability of the Optionee, the exercisability of any Option not otherwise
immediately exercisable in full held by such Optionee shall be accelerated and
such Options shall be fully exercisable as of the date of termination.
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 be 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 potion 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
5
<PAGE> 6
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, 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 or 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
6
<PAGE> 7
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.
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.
1990 Stock Option Plan of LTX/Stock Plans Master
7
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