SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 April 30, 2004
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 000-10761
LTX CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
| Massachusetts | 04-2594045 | |
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) | |
| LTX Park at University Avenue, Westwood, Massachusetts |
02090 | |
| (Address of Principal Executive Offices) | (Zip Code) | |
Registrant’s Telephone Number, Including Area Code (781) 461-1000
Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report.
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 whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2 of the Exchange Act). 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 May 31, 2004 | |
| Common Stock, par value $0.05 per share | 61,003,272 |
Index
CONSOLIDATED BALANCE SHEETS
(In thousands)
| April 30, 2004 |
July 31, 2003 |
|||||||
| (Unaudited) | ||||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 78,514 | $ | 73,167 | ||||
| Marketable Securities |
150,518 | 63,416 | ||||||
| Accounts receivable, net of allowances |
35,365 | 12,033 | ||||||
| Accounts receivable – other |
9,391 | 5,192 | ||||||
| Inventories |
74,078 | 66,852 | ||||||
| Prepaid expense |
9,892 | 10,989 | ||||||
| Total current assets |
357,758 | 231,649 | ||||||
| Property and equipment, net |
72,031 | 73,443 | ||||||
| Goodwill and other intangible assets |
14,838 | 14,764 | ||||||
| Other assets |
4,525 | 5,040 | ||||||
| Total assets |
$ | 449,152 | $ | 324,896 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Notes payable |
$ | — | $ | 19,459 | ||||
| Current portion of long-term debt |
522 | 1,262 | ||||||
| Accounts payable |
34,061 | 13,380 | ||||||
| Deferred revenues and customer advances |
2,743 | 4,738 | ||||||
| Deferred gain on leased equipment |
7,625 | 10,350 | ||||||
| Other accrued expenses |
30,289 | 26,555 | ||||||
| Total current liabilities |
75,240 | 75,744 | ||||||
| Long-term debt, less current portion |
150,000 | 150,064 | ||||||
| Stockholders’ equity: |
||||||||
| Common stock |
3,169 | 2,721 | ||||||
| Additional paid-in capital |
565,047 | 433,489 | ||||||
| Unrealized gain on marketable securities |
509 | 751 | ||||||
| Accumulated deficit |
(333,033 | ) | (326,093 | ) | ||||
| Less treasury stock, at cost |
(11,780 | ) | (11,780 | ) | ||||
| Total stockholders’ equity |
223,912 | 99,088 | ||||||
| Total liabilities and stockholders’ equity |
$ | 449,152 | $ | 324,896 | ||||
See accompanying Notes to Consolidated Financial Statements
1
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
(In thousands, except per share data)
| Three Months Ended April 30, |
Nine Months Ended April 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Net product sales |
$ | 60,465 | $ | 21,743 | $ | 146,864 | $ | 61,710 | ||||||||
| Net service sales |
9,868 | 7,034 | 28,503 | 24,085 | ||||||||||||
| Net sales |
70,333 | 28,777 | 175,367 | 85,795 | ||||||||||||
| Cost of sales |
41,105 | 23,481 | 108,955 | 70,547 | ||||||||||||
| Gross profit |
29,228 | 5,296 | 66,412 | 15,248 | ||||||||||||
| Engineering and product development expenses |
17,143 | 15,393 | 50,209 | 50,413 | ||||||||||||
| Selling, general and administrative expenses |
6,999 | 7,186 | 20,222 | 21,081 | ||||||||||||
| Reorganization costs |
— | — | — | 5,593 | ||||||||||||
| Income (Loss) from operations |
5,086 | (17,283 | ) | (4,019 | ) | (61,839 | ) | |||||||||
| Other income (expense): |
||||||||||||||||
| Interest expense |
(1,581 | ) | (1,654 | ) | (5,009 | ) | (4,968 | ) | ||||||||
| Investment income |
801 | 961 | 2,093 | 3,270 | ||||||||||||
| Net income (loss) |
$ | 4,306 | $ | (17,976 | ) | $ | (6,935 | ) | $ | (63,537 | ) | |||||
| Net income (loss) per share: |
||||||||||||||||
| Basic |
$ | 0.07 | $ | (0.36 | ) | $ | (0.13 | ) | $ | (1.29 | ) | |||||
| Diluted |
$ | 0.07 | $ | (0.36 | ) | $ | (0.13 | ) | $ | (1.29 | ) | |||||
| Weighted-average common shares used in computing net income (loss) per share: |
||||||||||||||||
| Basic |
58,826 | 49,429 | 54,199 | 49,294 | ||||||||||||
| Diluted |
61,622 | 49,429 | 54,199 | 49,294 | ||||||||||||
| Comprehensive income (loss): |
||||||||||||||||
| Net income (loss) |
$ | 4,306 | $ | (17,976 | ) | $ | (6,935 | ) | $ | (63,537 | ) | |||||
| Unrealized gain (loss) on marketable securities |
(70 | ) | 39 | (242 | ) | 311 | ||||||||||
| Comprehensive income (loss) |
$ | 4,236 | $ | (17,937 | ) | $ | (7,177 | ) | $ | (63,226 | ) | |||||
See accompanying Notes to Consolidated Financial Statements
2
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| Nine Months Ended April 30, |
||||||||
| 2004 |
2003 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net income (loss) |
$ | (6,935 | ) | $ | (63,537 | ) | ||
| Add (deduct) non-cash items: |
||||||||
| Depreciation and amortization |
14,338 | 12,511 | ||||||
| Translation (gain) loss |
(207 | ) | 233 | |||||
| (Increase) decrease in: |
||||||||
| Accounts receivable |
(31,063 | ) | 3,670 | |||||
| Inventories |
(816 | ) | (26,636 | ) | ||||
| Prepaid expenses |
1,172 | 20,416 | ||||||
| Other assets |
1,089 | 1,100 | ||||||
| Increase (decrease) in: |
||||||||
| Accounts payable |
16,706 | (8,875 | ) | |||||
| Accrued expenses |
3,941 | (3,533 | ) | |||||
| Deferred revenues and customer advances |
(4,146 | ) | (3,210 | ) | ||||
| Net cash used in operating activities |
(5,921 | ) | (67,861 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Purchases of marketable securities |
(173,749 | ) | (62,079 | ) | ||||
| Proceeds from sale of marketable securities |
86,647 | 59,263 | ||||||
| Purchases of property and equipment |
(12,562 | ) | (15,659 | ) | ||||
| Net cash used in investing activities |
(99,664 | ) | (18,475 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Exercise of stock options |
3,201 | 231 | ||||||
| Employees’ stock purchase plan |
1,060 | 675 | ||||||
| Proceeds from equity offering, net |
126,598 | — | ||||||
| (Payments) advances of short-term notes payable, net |
(19,459 | ) | 4,998 | |||||
| Proceeds from lease financing |
— | 9,185 | ||||||
| Purchase of treasury stock |
— | (19 | ) | |||||
| Payments of long-term debt |
(823 | ) | (1,520 | ) | ||||
| Net cash provided by financing activities |
110,577 | 13,550 | ||||||
| Effect of exchange rate changes on cash |
355 | (204 | ) | |||||
| Net increase (decrease) in cash and cash equivalents |
5,347 | (72,990 | ) | |||||
| Cash and cash equivalents at beginning of period |
73,167 | 144,467 | ||||||
| Cash and cash equivalents at end of period |
$ | 78,514 | $ | 71,477 | ||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
||||||||
| Cash paid during the period for interest |
$ | 3,663 | $ | 6,562 | ||||
See accompanying Notes to Consolidated Financial Statements
3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. THE COMPANY
LTX Corporation (“LTX” or the “Company”) designs, manufactures, and markets automatic semiconductor test equipment. Semiconductor designers and manufacturers worldwide use semiconductor test equipment to test devices at different stages during the manufacturing process. These devices are incorporated in a wide range of products, including mobile internet equipment such as wireless access points and interfaces, broadband access products such as cable modems and DSL modems, personal communication products such as cell phones and personal digital assistants, consumer products such as televisions, videogame systems, digital cameras and automobile electronics, and for power management in portable and automotive electronics. The Company also sells hardware and software support and maintenance services for its test systems. The Company is headquartered, and has development and manufacturing facilities, in Westwood, Massachusetts, a development facility in 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 unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, accordingly, these footnotes condense or omit information and disclosures which substantially duplicate information provided in our latest audited financial statements. These financial statements should be read in conjunction with the financial statements and notes included in our Annual Report on Form 10-K for the year ended July 31, 2003. In the opinion of our management, these financial statements reflect all adjustments, including normal recurring accruals, necessary for a fair presentation of the results for the interim periods presented. The operating results for the three and nine months ended April 30, 2004 are not necessarily indicative of future trends or our results of operations for the entire year.
Revenue Recognition
The Company derives revenues from three sources – equipment sales, spare parts and service contracts. The Company recognizes revenue based on guidance provided in SEC Staff Accounting Bulletin No. 101 (SAB 101), “Revenue Recognition in Financial Statements” and SAB 104 “Revenue Recognition”. In December 2003, the SEC issued SAB 104, “Revenue Recognition”, which codifies, revises and rescinds certain sections of SAB 101. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller’s price is fixed or determinable and collectibility is reasonably assured.
Revenue related to equipment sales is recognized when: (a) we have a written sales agreement; (b) delivery has occurred or services rendered; (c) the price is fixed or determinable; (d) collectibility is reasonably assured; (e) the product delivered is standard product with historically demonstrated acceptance; and (f) there is no unique cust