UNITED STATES
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 April 30, 2008
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.)
|
|
|
825 University Avenue,
Norwood, Massachusetts
|
|
02062
|
(Address of principal executive offices)
|
|
(Zip Code)
|
(781) 461-1000
(Registrants telephone number, including area code)
[None]
(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 a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
|
|
|
|
|
|
|
Large accelerated filer
¨
|
|
Accelerated filer
x
|
|
Non-accelerated filer
¨
|
|
Smaller reporting company
¨
|
|
|
(Do not check if a smaller reporting company)
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes
¨
No
x
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.
|
|
|
Class
|
|
Outstanding at May 30, 2008
|
Common Stock, $0.05 par value per share
|
|
62,810,085
|
LTX CORPORATION
Index
LTX CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
April 30,
2008
|
|
|
July 31,
2007
|
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
46,370
|
|
|
$
|
63,302
|
|
Marketable securities
|
|
|
24,135
|
|
|
|
35,236
|
|
Accounts receivabletrade, net of allowances
|
|
|
21,326
|
|
|
|
22,479
|
|
Accounts receivableother
|
|
|
779
|
|
|
|
1,475
|
|
Inventories
|
|
|
23,373
|
|
|
|
27,102
|
|
Prepaid expenses and other current assets
|
|
|
3,045
|
|
|
|
3,783
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
119,028
|
|
|
|
153,377
|
|
Property and equipment, net
|
|
|
28,933
|
|
|
|
32,483
|
|
Goodwill
|
|
|
14,762
|
|
|
|
14,762
|
|
Other assets
|
|
|
489
|
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
163,212
|
|
|
$
|
201,122
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
4,800
|
|
|
$
|
29,322
|
|
Accounts payable
|
|
|
10,314
|
|
|
|
15,333
|
|
Deferred revenues and customer advances
|
|
|
1,816
|
|
|
|
1,838
|
|
Other accrued expenses
|
|
|
11,847
|
|
|
|
19,605
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
28,777
|
|
|
|
66,098
|
|
Long-term debt, less current portion
|
|
|
14,000
|
|
|
|
17,900
|
|
Other long-term liabilities
|
|
|
4,141
|
|
|
|
4,016
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
3,135
|
|
|
|
3,123
|
|
Additional paid-in capital
|
|
|
572,826
|
|
|
|
568,966
|
|
Accumulated other comprehensive loss
|
|
|
(296
|
)
|
|
|
(840
|
)
|
Accumulated deficit
|
|
|
(459,371
|
)
|
|
|
(458,141
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
116,294
|
|
|
|
113,108
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
163,212
|
|
|
$
|
201,122
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Consolidated Financial Statements
1
LTX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
April 30,
|
|
|
Nine Months
Ended
April 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Net product sales
|
|
$
|
32,089
|
|
|
$
|
25,843
|
|
|
$
|
78,837
|
|
|
$
|
94,894
|
|
Net service sales
|
|
|
7,231
|
|
|
|
7,171
|
|
|
|
21,139
|
|
|
|
22,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
39,320
|
|
|
|
33,014
|
|
|
|
99,976
|
|
|
|
117,525
|
|
Cost of sales
|
|
|
18,903
|
|
|
|
18,000
|
|
|
|
50,276
|
|
|
|
61,333
|
|
Inventory related provision
|
|
|
|
|
|
|
4,175
|
|
|
|
|
|
|
|
4,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
20,417
|
|
|
|
10,839
|
|
|
|
49,700
|
|
|
|
52,017
|
|
Engineering and product development expenses
|
|
|
11,794
|
|
|
|
12,203
|
|
|
|
34,776
|
|
|
|
38,058
|
|
Selling, general and administrative expenses
|
|
|
6,611
|
|
|
|
6,778
|
|
|
|
20,044
|
|
|
|
20,276
|
|
Reorganization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(377
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
2,012
|
|
|
|
(8,142
|
)
|
|
|
(5,120
|
)
|
|
|
(5,940
|
)
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(229
|
)
|
|
|
(862
|
)
|
|
|
(961
|
)
|
|
|
(4,095
|
)
|
Investment income
|
|
|
423
|
|
|
|
1,013
|
|
|
|
1,706
|
|
|
|
3,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before provision (benefit) for taxes
|
|
|
2,206
|
|
|
$
|
(7,991
|
)
|
|
|
(4,375
|
)
|
|
$
|
(6,480
|
)
|
Provision (benefit) for income taxes
|
|
|
34
|
|
|
|
|
|
|
|
(3,145
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
2,172
|
|
|
$
|
(7,991
|
)
|
|
$
|
(1,230
|
)
|
|
$
|
(6,480
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.03
|
|
|
$
|
(0.13
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.10
|
)
|
Diluted
|
|
$
|
0.03
|
|
|
$
|
(0.13
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.10
|
)
|
Weighted-average common shares used in computing net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
62,678
|
|
|
|
62,147
|
|
|
|
62,552
|
|
|
|
62,065
|
|
Diluted
|
|
|
62,773
|
|
|
|
62,147
|
|
|
|
62,552
|
|
|
|
62,065
|
|
|
|
|
|
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
2,172
|
|
|
$
|
(7,991
|
)
|
|
$
|
(1,230
|
)
|
|
$
|
(6,480
|
)
|
Unrealized gain (loss) on marketable securities
|
|
|
(124
|
)
|
|
|
318
|
|
|
|
555
|
|
|
|
1,003
|
|
Pension liability loss
|
|
|
(2
|
)
|
|
|
(7
|
)
|
|
|
(11
|
)
|
|
|
(27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
$
|
2,046
|
|
|
$
|
(7,680
|
)
|
|
$
|
(686
|
)
|
|
$
|
(5,504
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Consolidated Financial Statements
2
LTX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
April 30,
|
|
|
|
2008
|
|
|
2007
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,230
|
)
|
|
$
|
(6,480
|
)
|
Add (deduct) non-cash items:
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
3,551
|
|
|
|
3,135
|
|
Depreciation and amortization
|
|
|
9,235
|
|
|
|
10,614
|
|
Non-cash reorganization gain
|
|
|
|
|
|
|
(377
|
)
|
Charge for inventory related provision
|
|
|
|
|
|
|
4,175
|
|
Benefit for income taxes
|
|
|
(3,251
|
)
|
|
|
|
|
Other
|
|
|
54
|
|
|
|
253
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
2,037
|
|
|
|
20,842
|
|
Inventories
|
|
|
3,754
|
|
|
|
(3,045
|
)
|
Prepaid expenses
|
|
|
909
|
|
|
|
807
|
|
Other assets
|
|
|
(3
|
)
|
|
|
2,223
|
|
Accounts payable
|
|
|
(5,057
|
)
|
|
|
(5,386
|
)
|
Accrued expenses
|
|
|
(4,284
|
)
|
|
|
(12,183
|
)
|
Deferred revenues and customer advances
|
|
|
(144
|
)
|
|
|
(1,208
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
5,571
|
|
|
|
13,370
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from sale of marketable securities
|
|
|
11,639
|
|
|
|
44,892
|
|
Purchases of property and equipment
|
|
|
(5,732
|
)
|
|
|
(7,781
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities
|
|
|
5,907
|
|
|
|
37,111
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
23
|
|
|
|
687
|
|
Vesting of RSUs
|
|
|
(124
|
)
|
|
|
|
|
Proceeds from issuance of common stock under employees stock purchase plan
|
|
|
297
|
|
|
|
270
|
|
Payments of long term debt
|
|
|
(28,422
|
)
|
|
|
(120,469
|
)
|
Proceeds from term loan
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(28,226
|
)
|
|
|
(99,512
|
)
|
Effect of exchange rate changes on cash
|
|
|
(184
|
)
|
|
|
299
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(16,932
|
)
|
|
|
(48,732
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
63,302
|
|
|
|
106,445
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
46,370
|
|
|
$
|
57,713
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Consolidated Financial Statements
3
LTX CORPORATION
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 semiconductor devices at different stages of 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 systems support and maintenance services for its test systems. The Company is headquartered, and has development and manufacturing facilities, in Norwood, Massachusetts, a development facility in Milpitas, California,
and sales and service facilities around the world 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, 2007. 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 nine months ended April 30, 2008 are not
necessarily indicative of future trends or our results of operations for the entire year.
Revenue Recognition
The Company recognizes revenue based on guidance provided in SEC Staff Accounting Bulletin No. 104, (SAB 104), Revenue
Recognition and EITF No. 00-21 Revenue Arrangements with Multiple Deliverables. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the
sellers price is fixed or determinable and collectibility is reasonably assured.
Revenue related to equipment sales is recognized
when: (a) the Company has a written sales agreement; (b) delivery has occurred; (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 customer acceptance provision or payment tied to acceptance or an undelivered element significant to the functionality of the system. Generally, payment terms are time based after
product shipment. Certain sales include payment terms tied to customer acceptance. If a portion of the payment is linked to product acceptance, which is 20% or less, the revenue is deferred on only the percentage holdback until payment is received
or written evidence of acceptance is delivered to the Company. If the portion of the holdback is greater than 20%, the full value of the equipment is deferred until payment is received or written evidence of acceptance is delivered to the Company.
When sales to a customer involve multiple elements, revenue is recognized on the delivered element provided that (1) the undelivered element is a proven technology, (2) there is a history of acceptance on the product with the customer,
(3) the undelivered element is not essential to the customers application, (4) the delivered item(s) has value to the customer on a stand-alone basis, (5) objective and reliable evidence of the fair value of the undelivered
item(s) exists, (6) if the arrangement included a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the Company, and
(7) if objective and reliable evidence of fair value exists for all units of accounting in the arrangement, the arrangement consideration is allocated based on the relative fair values of each unit of accounting. If the fair value of a
delivered item is unknown, but the fair value of undelivered items are known, the residual method is used for allocating arrangement consideration which requires discounts in the sales value of the entire arrangement to be recognized in connection
with the sale of the delivered items only. Revenue related to spare parts is recognized on shipment. Revenue related to maintenance and service contracts is recognized as services are rendered.
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 (SFAS) No. 86, Accounting for the Costs of Computer
Software To Be Sold, Leased or Otherwise Marketed, relating to certain software development costs, were insignificant in the periods presented.
4
Shipping and Handling Costs
Shipping and handling costs are included in cost of sales in the consolidated statements of operations. These costs, when included in the sales price charged for products, are recognized in net sales. Shipping and
handling costs were not material for the three and nine months ended April 30, 2008 and 2007.
Income Taxes
In July, 2006 the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48,
Accounting for Uncertainty in Income
Taxes
(FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements in accordance with Statement of Financial Accounting Standards No. 109,
Accounting
for Income Taxes
(SFAS No. 108). FIN 48 prescribes a recognition threshold and measurement methodology for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48
also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures and transitions. The Company adopted FIN 48 on August 1, 2007. The adoption of FIN 48 did not impact the consolidated
financial results of operations or cash flow.
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction,
and various state and foreign jurisdictions. Foreign and United States jurisdictions are subject to income tax examinations by tax authorities for all years dating back approximately two to six years from April 30, 2008.
There were no adjustments to the Companys accumulated deficit as a result of the implementation of FIN 48. At August 1, 2007, the Company had
unrecognized tax benefits of approximately $4.3 million, which were included in other accrued liabilities. All of the Companys deferred tax assets have a full valuation allowance recorded against them as their realization does not meet the
more likely than not criteria under SFAS No. 109 based on the Companys current financial status.
Subsequent to
adopting FIN 48, the Company reduced its liability for uncertain tax positions by $3.3 million, as the statute of limitation on a previously identified position expired during the first quarter of fiscal year 2008. This event was reported as a
discrete item in the quarter ended October 31, 2007, and the $3.3 million non-cash benefit was recorded in provision for income taxes of the Companys consolidated statements of operations in the quarter ended October 31, 2007. No
other provision for income taxes was recorded in the first quarter. The Company also does not anticipate that any of the remaining uncertain tax positions will be significantly increased or decreased over the next 12 month period.
In addition, the Company recently conducted a study of the net operating loss (NOL) carry forwards and research and development (R&D) credit carry
forwards to determine whether such amounts are limited under Internal Revenue Code (IRC) Sec. 382. As of July 31, 2007, the Company has undergone no changes in ownership as described in IRC Sec. 382 in any of the NOL or R&D
credit carry forward years. The Company will continue to monitor its ownership to determine if future IRC Sec. 382 limitation events occur.
The Company recognizes interest and penalties related to uncertain tax positions in provision for income taxes. As of August 1, 2007, the Company had accrued $786,000 of interest and penalties related to uncertain tax positions. Of
this amount, $486,000 of accrued interest and penalties was de-recognized in the first quarter, as the statute of limitation on the underlying uncertain tax position expired.
Accounting for Stock-Based Compensation
The Company has five stock option plans: the 2004 Stock Plan
(2004 Plan), the 2001 Stock Plan (2001 Plan), the 1999 Stock Plan (1999 Plan), the 1995 LTX (Europe) Ltd. Approved Stock Option Plan (U.K. Plan) and, in addition, the Company assumed the StepTech, Inc.
Stock Option Plan (the STI 2000 Plan) as part of its acquisition of StepTech. The Company can only grant options from the 2004 Plan. Under the terms of the 2004 Plan, any unused shares of Common Stock as a result of termination,
surrender, cancellation or forfeiture of options from the 2001 Plan and the 1999 Plan will be available for grant of equity awards under the 2004 Plan. The 2004 Plan provides for the granting of options to employees to purchase shares of common
stock at not less than 100% of the fair market value at the date of grant. The 2004 Plan also provides for the granting of options to an employee, director or consultant of the Company or its subsidiaries to purchase shares of common stock at prices
to be determined by the Board of Directors and also allows both restricted stock awards and stock awards. Options under this plan are exercisable over vesting periods, which typically have been three to four years from the date of grant. The general
term of the Companys stock options is ten years. The Companys policy of issuing shares is to either buy shares in the open market or issue new shares. The Companys general practice has been to issue new shares. In fiscal 2005, the
Company granted 533,750 options tied to certain performance milestones. As of April 30, 2008, 100% of these options have vested as they have met the performance milestones. During the quarter ended January 31, 2006, the Company granted
983,600 restricted stock units (RSUs). Of the 983,600 RSUs, vesting for 742,600 is tied to
5
certain profit break-even milestones for executives. The first milestone was achieved May 16, 2006, resulting in 185,650 shares vesting on May 16,
2006. The remaining executive RSUs vest annually over three years on May 16 of each year which started on May 16, 2007. The remaining 241,000 RSUs are service vested for key employees over a four year period, including 60,250 shares that
vested on May 16, 2006, when the Company achieved a profit break-even milestone. The remaining shares vest annually over three years on May 16 of each year which started on May 16, 2007. During the quarter ended October 31, 2006,
the Company granted 973,000 RSUs. Of the 973,000 RSUs, vesting for 721,000 is tied to certain profit milestones for executives. As of April 30, 2008, none of the performance milestones have been met. The remaining 252,000 RSUs are service
vested for key employees and are earned over a four year period. For the quarter ended January 31, 2007, 62,300 RSUs were granted to directors to vest over three years, and 5,000 RSUs were granted to employees to vest over four years. For the
quarter ended April 30, 2007, 15,000 RSUs were granted to employees to vest over four years. During the quarter ended October 31, 2007, the Company granted 925,000 RSUs that will vest over a four year period beginning on September 19,
2008. Of the 925,000 RSUs granted during the quarter ended October 31, 2007, 645,000 were granted to executives. For the quarter ended January 31, 2008, 84,000 RSUs were granted to directors to vest over three years, and 5,000 RSUs were
granted to employees to vest over four years. For the quarter ended April 30, 2008, 19,500 RSUs were granted to employees to vest over four years.
Effective August 1, 2005, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (SFAS No. 123R). Under SFAS No. 123R,
the Company is required to recognize, as expense, the estimated fair value of all share-based payments to employees. In accordance with this standard, the Company has elected to recognize the compensation cost of all service based awards on a
straight-line basis over the vesting period of the award. Performance based awards are recognized ratably for each vesting tranche. For the three months ended April 30, 2008 and 2007, the Company recorded expense of approximately $1.1 million
and $0.9 million, respectively, in connection with its share-based payment awards. As of April 30, 2008, there is approximately $5.9 million of unrecognized compensation expense related to share-based payments to employees that will be
recognized over the next 16 quarters.
The following table presents stock-based compensation expense included in the Companys
unaudited consolidated statements of operations (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
April 30,
|
|
Nine Months Ended
April 30,
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
Cost of sales
|
|
$
|
27
|
|
$
|
25
|
|
$
|
90
|
|
$
|
82
|
Engineering and product development expenses
|
|
|
337
|
|
|
242
|
|
|
1,053
|
|
|
836
|
Selling, general and administrative expenses
|
|
|
737
|
|
|
587
|
|
|
2,408
|
|
|
2,217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense
|
|
$
|
1,101
|
|
$
|
854
|
|
$
|
3,551
|
|
$
|
3,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a summary of activities for the Companys Stock Option Plans for the three
months ended April 30, 2008:
Stock Option Activity
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
|
Weighted
Average
Exercise
Price
|
Options outstanding, beginning of period
|
|
8,073,856
|
|
|
$
|
10.15
|
Granted
|
|
|
|
|
|
|
Exercised
|
|
(4,500
|
)
|
|
|
2.81
|
Forfeited
|
|
(19,037
|
)
|
|
|
6.65
|
|
|
|
|
|
|
|
Options outstanding, end of period
|
|
8,050,319
|
|
|
|
10.17
|
|
|
|
|
|
|
|
Options exercisable
|
|
7,799,203
|
|
|
|
10.33
|
|
|
|
|
|
|
|
Share-based awards available for future grant
|
|
2,359,832
|
|
|
|
N/A
|
|
|
|
|
|
|
|
Share-based awards available for future grant include both restricted stock awards and stock
option awards.
6
RSU Activity
|
|
|
|
|
|
|
|
|
Three Months Ended
April 30, 2008
|
|
|
Number of
Shares
|
|
|
Weighted
Average
Grant-Date
Fair Value
|
RSUs outstanding, beginning of period
|
|
2,329,168
|
|
|
$
|
4.36
|
Granted
|
|
19,500
|
|
|
|
3.14
|
Vested
|
|
(4,950
|
)
|
|
|
2.73
|
Forfeited
|
|
(12,000
|
)
|
|
|
4.20
|
|
|
|
|
|
|
|
RSUs outstanding, end of period
|
|
2,331,718
|
|
|
$
|
4.34
|
|
|
|
|
|
|
|
Product Warranty Costs
The Companys products are sold with warranty provisions that require the Company to remedy deficiencies in quality or performance of its products over a specified period of time at no cost to its customers. The
Companys policy is to establish warranty reserves at levels that represent its estimate of the costs that will be incurred to fulfill those warranty requirements at the time that revenue is recognized.
The following table shows the change in the product warranty liability, as required by FASB Interpretation No. (FIN) 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, for the nine months ended April 30, 2008 and 2007:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
April 30,
|
|
Product Warranty Activity
|
|
2008
|
|
|
2007
|
|
|
|
(in thousands)
|
|
Balance at beginning of period
|
|
$
|
1,819
|
|
|
$
|
3,543
|
|
Warranty expenditures for current period
|
|
|
(1,592
|
)
|
|
|
(2,580
|
)
|
Changes in liability related to pre-existing warranties
|
|
|
(136
|
)
|
|
|
(599
|
)
|
Provision for warranty costs in the period
|
|
|
1,289
|
|
|
|
1,840
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
1,380
|
|
|
$
|
2,204
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income (Loss)
Comprehensive income (loss) is comprised of two components, net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) consists of unrealized gains and losses on the Companys
marketable securities and the effects of the Companys pension liability gain or loss.
Net Income (Loss) per Share
Basic net income (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted net income (loss) per share reflects the maximum dilution that would have resulted from the assumed exercise and share repurchase related to dilutive stock options and is computed by dividing net income
(loss) by the weighted average number of common shares and the dilutive effect of all securities outstanding.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
April 30,
|
|
|
Nine Months Ended
April 30,
|
|
|
|
2008
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(in thousands, except per share data)
|
|
Net income (loss)
|
|
$
|
2,172
|
|
$
|
(7,991
|
)
|
|
$
|
(1,230
|
)
|
|
$
|
(6,480
|
)
|
Basic Earnings Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic common shares
|
|
|
62,678
|
|
|
62,147
|
|
|
|
62,552
|
|
|
|
62,065
|
|
Basic EPS
|
|
$
|
0.03
|
|
$
|
(0.13
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.10
|
)
|
Diluted Earnings Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic common shares
|
|
|
62,678
|
|
|
62,147
|
|
|
|
62,552
|
|
|
|
62,065
|
|
Plus: impact of stock options and RSUs
|
|
|
95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted common shares
|
|
|
62,773
|
|
|
62,147
|
|
|
|
62,552
|
|
|
|
62,065
|
|
Diluted EPS
|
|
$
|
0.03
|
|
$
|
(0.13
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.10
|
)
|
7
For the three and nine months ended April 30, 2008 and for the three and nine months ended
April 30, 2007, options to purchase shares of common stock of 7,856,070, 7,808,370, 6,214,436 and 6,231,836, respectively, were not included in the calculation of diluted net income (loss) per share because their inclusion would have been
anti-dilutive. These options could be dilutive in the future. The calculation of diluted net income (loss) per share for the three and nine months ended April 2008 and for the three and nine months ended April 2007 excludes 653,000 RSUs, in
accordance with the contingently issuable shares guidance of SFAS No. 128, Earnings Per Share.
Cash and Cash Equivalents and
Marketable Securities
The Company considers all highly liquid investments that are readily convertible to cash and that have original
maturity dates of three months or less to be cash equivalents. Cash and cash equivalents consist primarily of repurchase agreements and commercial paper. Marketable securities consist primarily of debt securities that are classified as
available-for-sale, in accordance with the SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. Securities available for sale include corporate and governmental obligations with various contractual
maturity dates some of which are greater than one year. The Company considers the securities to be liquid and convertible to cash within 30 days. The Company has the ability and intent, if necessary, to liquidate any security that the Company holds
to fund operations over the next twelve months and as such has classified these securities as short-term. Governmental obligations include U.S. Government, State, Municipal and Federal Agency securities. The Companys investment policy
prohibits investments in certain securities with some elements of risk, such as Auction Rate Securities. The Company does not have any investments in Auction Rate Securities as of April 30, 2008.
The realized profits, losses and interest are included in investment income in the Companys Consolidated Statements of Operations. Unrealized gains
and losses are reflected as a separate component of comprehensive income (loss) and are included in Stockholders Equity. The Company analyzes its securities portfolio for impairment on a quarterly basis or upon occurrence of a significant
change in circumstances. There were no impairment losses recorded for the three and nine months ended April 30, 2008 and April 30, 2007.
At April 30, 2008 and July 31, 2007, there was no cash restricted from withdrawal.
Inventories
Inventories are stated at the lower of cost or market, determined on the first-in, first-out method, and include materials, labor and manufacturing
overhead. Inventories consisted of the following at:
|
|
|
|
|
|
|
|
|
April 30,
2008
|
|
July 31,
2007
|
|
|
(in thousands)
|
Purchased components and parts
|
|
$
|
13,590
|
|
$
|
20,317
|
Units-in-progress
|
|
|
2,370
|
|
|
529
|
Finished units
|
|
|
7,413
|
|
|
6,256
|
|
|
|
|
|
|
|
|
|
$
|
23,373
|
|
$
|
27,102
|
|
|
|
|
|
|
|
The Companys policy is to establish inventory reserves when conditions exist that indicate
its inventory may be in excess of anticipated demand or is obsolete based upon its assumptions about future demand for its products or market conditions. The Company regularly evaluates the ability to realize the value of its inventory based on a
combination of factors including the following: forecasted sales or usage, estimated product end of life dates, estimated current and future market value and new product introductions. Purchasing and alternative usage options are also explored to
mitigate inventory exposure. When recorded, the Companys reserves are intended to reduce the carrying value of its inventory to its net realizable value. As of April 30, 2008 and July 31, 2007, the Companys inventory is stated
net of inventory reserves of $36.2 million and $41.4 million, respectively. If actual demand for the Companys products deteriorates or market conditions are less favorable than those that the Company projects, additional inventory reserves may
be required. Such reserves are not reversed until the related inventory is sold or otherwise disposed of. The Company had no sales of previously reserved inventory during the three months ended April 30, 2008. The Company recognized sales of
previously written off inventory of $1.4 million for the three months ended April 30, 2007 and none in the three months ended April 30, 2008. The Company recognized sales of previously written off inventory of $1.2 million and $4.4 million
for the nine months ended April 30, 2008 and 2007, respectively. The $1.2 million recorded for the nine months ended April 30, 2008 represents the gross cash received from the customer. The net incremental gross margin and net income
effect for these transactions did not have a significant impact on operating margins.
8
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 that are sufficient to amortize the
cost of the assets over their estimated useful lives. Machinery, equipment and internally manufactured systems include spare parts used for service and LTX test systems used internally for testing components, engineering and applications
development. Repairs and maintenance costs that do not extend the lives of property and equipment are expensed as incurred. Property and equipment are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30,
2008
|
|
|
July 31,
2007
|
|
|
Depreciable Life
In Years
|
|
|
(in thousands)
|
|
|
|
Machinery, equipment and internally manufactured systems
|
|
$
|
99,680
|
|
|
$
|
98,827
|
|
|
3-7
|
Office furniture and equipment
|
|
|
3,122
|
|
|
|
3,035
|
|
|
3-7
|
Leasehold improvements
|
|
|
10,168
|
|
|
|
8,659
|
|
|
10 or term of lease
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
112,970
|
|
|
|
110,521
|
|
|
|
Less accumulated depreciation and amortization
|
|
|
(84,037
|
)
|
|
|
(78,038
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
28,933
|
|
|
$
|
32,483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of Long-Lived Assets Other Than Goodwill
On an on-going basis, management reviews the value and period of amortization or depreciation of long-lived assets. In accordance with SFAS No.144,
Accounting for Impairment or Disposal of Long-Lived Assets, the Company reviews whether impairment losses exist on long-lived assets when indicators of impairment are present. During this review, the Company reevaluates the significant
assumptions used in determining the original cost of long-lived assets. Although the assumptions may vary, they generally include revenue growth, operating results, cash flows and other indicators of value. Management then determines whether there
has been a permanent impairment of the value of long-lived assets based upon events or circumstances that have occurred since acquisition. The extent of the impairment amount recognized is based upon a determination of the impaired assets fair
value. There were no significant impairment losses for the nine months ended April 30, 2008 and April 30, 2007.
Goodwill and Other
Intangibles
The Company follows the provisions of SFAS No. 142, Goodwill and Other Intangible Assets, which requires
that goodwill and intangible assets with indefinite useful lives not be amortized. Intangible assets with a definitive useful life are amortized over their estimated useful life. Assets recorded in these categories are tested for impairment at least
annually or when a change in circumstances may result in future impairment. Intangible assets are recorded at historical cost. Intangible assets acquired in an acquisition, including purchased research and development, are recorded under the
purchase method of accounting. Assets acquired in an acquisition are recorded at their estimated fair values at the date of acquisition. Management uses a discounted cash flow analysis to test goodwill, at least annually or when indicators of
impairment exist, which requires that certain assumptions and estimates be made regarding industry economic factors and future profitability of the acquired business to assess the need for an impairment charge. If the carrying value of the
Companys goodwill is in excess of the present value of the expected future cash flows, the carrying value of goodwill is written down to fair value in the period identified.
Goodwill totaling $14.8 million at April 30, 2008 and July 31, 2007, represents the excess of acquisition costs over the estimated fair value
of the net assets acquired from StepTech, Inc. (StepTech) on June 10, 2003. Since the Company operates as a single reporting unit under SFAS No. 142, goodwill is evaluated for impairment annually based on the
Companys enterprise value, or more frequently if indicators of impairment develop.
3. SEGMENT REPORTING
The Company operates predominantly in one industry segment: the design, manufacture and marketing of automatic test equipment for the semiconductor
industry that is used to test system-on-a-chip, digital, analog and mixed signal integrated circuits.
9
The Companys net sales by geographic area for the three and nine months ended April 30, 2008
and 2007, along with the long-lived assets at April 30, 2008 and July 31, 2007, are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
April 30,
|
|
Nine Months Ended
April 30,
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
(in thousands)
|
Net Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
12,733
|
|
$
|
6,418
|
|
$
|
42,706
|
|
$
|
37,028
|
Taiwan
|
|
|
1,759
|
|
|
857
|
|
|
4,377
|
|
|
4,225
|
Japan
|
|
|
1,224
|
|
|
1,007
|
|
|
3,266
|
|
|
4,313
|
Singapore
|
|
|
9,996
|
|
|
1,610
|
|
|
18,717
|
|
|
13,014
|
Philippines
|
|
|
1,853
|
|
|
15,833
|
|
|
6,911
|
|
|
33,639
|
All other countries
|
|
|
11,755
|
|
|
7,289
|
|
|
23,999
|
|
|
25,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Net Sales
|
|
$
|
39,320
|
|
$
|
33,014
|
|
$
|
99,976
|
|
$
|
117,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer prices on products sold to foreign subsidiaries are intended to produce profit margins
that correspond to the subsidiarys sales and support efforts.
Long-lived assets consist of property and equipment and goodwill.
|
|
|
|
|
|
|
|
|
April 30,
2008
|
|
July 31,
2007
|
|
|
(in thousands)
|
Long-lived Assets:
|
|
|
|
|
|
|
United States
|
|
$
|
40,242
|
|
$
|
43,881
|
Taiwan
|
|
|
58
|
|
|
65
|
Japan
|
|
|
180
|
|
|
232
|
Singapore
|
|
|
1,745
|
|
|
1,845
|
All other countries
|
|
|
1,470
|
|
|
1,222
|
|
|
|
|
|
|
|
Total Long-lived Assets
|
|
$
|
43,695
|
|
$
|
47,245
|
|
|
|
|
|
|
|
4. REORGANIZATION CHARGES
There were no significant reorganization charges recorded for the nine months ended April 30, 2008 and for the prior twelve months ended July 31, 2007.
The Company initiated and completed several reorganization actions during the fiscal year ended July 31, 2006.
The following table sets forth the Companys reorganization accrual activity for fiscal 2007 and the nine months ended April 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
Costs
|
|
|
Equipment
leases
|
|
|
Facility
leases
|
|
|
Total
|
|
|
|
(in millions)
|
|
Balance July 31, 2006
|
|
$
|
2.1
|
|
|
$
|
4.1
|
|
|
$
|
1.8
|
|
|
$
|
8.0
|
|
Additions (reductions) to expense
|
|
|
(0.4
|
)
|
|
|
|
|
|
|
|
|
|
|
(0.4
|
)
|
Elimination of deferred gain
|
|
|
|
|
|
|
(1.6
|
)
|
|
|
|
|
|
|
(1.6
|
)
|
Non-cash utilization
|
|
|
(0.4
|
)
|
|
|
|
|
|
|
0.2
|
|
|
|
(0.2
|
)
|
Cash paid
|
|
|
(0.7
|
)
|
|
|
(1.7
|
)
|
|
|
(1.0
|
)
|
|
|
(3.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance July 31, 2007
|
|
|
0.6
|
|
|
|
0.8
|
|
|
|
1.0
|
|
|
|
2.4
|
|
Additions to expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash utilization
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
(0.1
|
)
|
Cash paid
|
|
|
(0.1
|
)
|
|
|
(0.8
|
)
|
|
|
(0.4
|
)
|
|
|
(1.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance April 30, 2008
|
|
$
|
0.4
|
|
|
$
|
|
|
|
$
|
0.6
|
|
|
$
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
5. COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the Company agrees from time to time to indemnify certain customers against certain third party claims for property damage, bodily injury, personal injury or intellectual property
infringement arising from the operation or use of the Companys products. Also, from time to time in agreements with suppliers, licensors and other business partners, we agree to indemnify these partners against certain liabilities arising out
of the sale or use of the Companys products. The maximum potential amount of future payments the Company could be required to make under these indemnification obligations is theoretically unlimited; however, the Company has general and
umbrella insurance policies that enable the Company to recover a portion of any amounts paid and many of its agreements contain a limit on the maximum amount, as well as limits on the types of damages recoverable. Based on the Companys
experience with such indemnification claims, it believes the estimated fair value of these obligations is minimal. Accordingly, the Company has no liabilities recorded for these agreements as of April 30, 2008 or July 31, 2007.
Subject to certain limitations, LTX indemnifies its current and former officers and directors for certain events or occurrences. Although the maximum
potential amount of future payments LTX could be required to make under these agreements is theoretically unlimited, as there are no known or pending claims, the Company has not accrued a liability for these agreements as of April 30, 2008 or
July 31, 2007.
The Company has operating lease commitments for certain facilities and equipment and capital lease commitments for
certain equipment. Minimum lease payments under noncancelable leases at April 30, 2008, are as follows:
Lease Commitments:
|
|
|
|
Year ending July 31,
|
|
(in thousands)
|
May 2008 - July 2008
|
|
$
|
603
|
2009 - 2010
|
|
|
4,193
|
2011 - 2012
|
|
|
2,858
|
Thereafter
|
|
|
3,743
|
|
|
|
|
Total minimum lease payments
|
|
$
|
11,397
|
|
|
|
|
Other accrued expenses consisted of the following as of April 30, 2008 and July 31,
2007:
Other Accrued Expenses:
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
April 30,
2008
|
|
July 31,
2007
|
Accrued compensation
|
|
$
|
4,252
|
|
$
|
4,823
|
Accrued income and local taxes
|
|
|
2,206
|
|
|
5,596
|
Product warranty
|
|
|
1,380
|
|
|
1,819
|
Accrued restructuring
|
|
|
957
|
|
|
2,223
|
Accrued interest
|
|
|
63
|
|
|
2,280
|
Other accrued expenses
|
|
|
2,989
|
|
|
2,864
|
|
|
|
|
|
|
|
Total other accrued expenses
|
|
$
|
11,847
|
|
$
|
19,605
|
|
|
|
|
|
|
|
6. LONG TERM DEBT
Long-term debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
April 30,
2008
|
|
|
July 31,
2007
|
|
Convertible subordinated notes
|
|
$
|
|
|
|
$
|
27,220
|
|
Bank term loan
|
|
|
18,800
|
|
|
|
20,000
|
|
Other
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
18,800
|
|
|
|
47,222
|
|
Less: current portion
|
|
|
(4,800
|
)
|
|
|
(29,322
|
)
|
|
|
|
|
|
|
|
|
|
Long-term debt, less current portion
|
|
$
|
14,000
|
|
|
$
|
17,900
|
|
|
|
|
|
|
|
|
|
|
11
On August 8, 2001, the Company received net proceeds of $145.2 million from a private placement of
$150 million, 4.25% Convertible Subordinated Notes (the Notes) due 2006. The private placement was effected through a Rule 144A offering to qualified institutional buyers. Interest on the Notes was payable on February 15 and
August 15 of each year, commencing February 15, 2002. The Notes were convertible into shares of the Companys common stock at any time prior to the close of business on August 15, 2006, unless previously redeemed, at a conversion
price of $29.04 per share, subject to certain adjustments. Prior to August 19, 2004, the Company could have redeemed any of the Notes at a certain redemption price, plus accrued interest, if the closing price of the common stock exceeded 150%
of the conversion price for at least 20 trading days in any consecutive 30-day trading period and certain other conditions are satisfied. On or after August 19, 2004, the Company could have redeemed any of the Notes at designated redemption
prices, plus accrued interest. The Notes were unsecured and subordinated in right of payment in full to all existing and future senior indebtedness of the Company. Expenses associated with the offering of approximately $4.8 million were being
amortized using the straight-line method, which approximates the effective interest method, over the term of the Notes. The stated interest rate was 4.25% and the effective rate was 4.39% due to the amortization of capitalized costs associated with
the offering. During the fourth fiscal quarter of 2005, the Company repurchased $61.7 million of the outstanding principal balance. On November 14, 2005, the Company refinanced this debt by exchanging $27.2 million in aggregate principal amount
of existing notes plus all accrued and unpaid interest on the outstanding notes for an equal principal amount of new notes due August 2007 with an interest rate of 4.25%. The principal balance of these notes of $27.2 million was paid in full on
August 15, 2007.
On June 3, 2005, the Company closed a $60.0 million term loan with a commercial lender (the 2005 Loan
Agreement). The loan had a five year term. Interest was at the lenders variable prime rate and was payable monthly. The Company entered into a new Loan and Security Agreement (the 2006 Loan Agreement), dated as of
December 7, 2006, with a commercial lender to modify the existing $60.0 million term loan. Under the terms of the 2006 Loan Agreement, LTX borrowed $20.0 million under a term loan at an interest rate of prime minus 1.25% with interest-only
payable during the first 12 months. The loan is secured by all assets of the Company located in the United States. Principal of this term loan is repayable over four years as follows:
|
|
|
months 13 to 24: $300,000.00 per month (first payment made on January 1, 2008)
|
|
|
|
months 25 to 36: $600,000.00 per month
|
|
|
|
months 37 to 48: $766,666.67 per month
|
The financing arrangement under the 2006 Loan Agreement also provides LTX with a $30.0 million revolving credit facility. No amount was outstanding under the revolving credit facility as of July 31, 2007 and April 30, 2008.
In connection with the 2006 Loan Agreement, LTX has terminated the 2005 Loan Agreement and has repaid all outstanding amounts under the
2005 Loan Agreement. The net effect of this transaction reduced existing cash on hand by approximately $36.0 million in the quarter ended January 31, 2007.
The Company had a second credit facility with another lender for a revolving credit line of $5.0 million. This facility was secured by cash and marketable securities. The line expired on October 31, 2007 and was
not renewed.
7. RECENTLY ISSUED ACCOUNTING STANDARDS
In March 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 161, Disclosures about Derivative Instruments and Hedging Activities-an amendment
of FASB Statement No. 133. SFAS No. 161 expands the current disclosure requirements of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, such that entities must now provide enhanced
disclosures on a quarterly basis regarding how and why the entity uses derivatives; how derivatives and related hedged items are accounted for under SFAS No. 133 and how derivatives and related hedged items affect the entitys financial
position, performance and cash flow. SFAS No. 161 is effective prospectively for periods beginning on or after November 15, 2008. The adoption of this standard will not have any impact on the Companys financial condition or results
of operations.
In December 2007, the FASB issued Statement No. 141(R), Business Combinations (Statement 141 (R)), a
replacement of FASB Statement No. 141. Statement 141(R) is effective for fiscal years beginning on or after December 15, 2008 and applies to all business combinations. Statement 141(R) provides that, upon initially obtaining control, an
acquirer shall recognize 100 percent of the fair values of acquired assets, including goodwill, and assumed liabilities, with only limited exceptions, even if the acquirer has not acquired 100 percent of its target. As a consequence, the current
step acquisition model will be eliminated. Additionally, Statement 141(R) changes current practice, in part, as follows: (1) contingent consideration arrangements will be fair valued at the acquisition date and included on that basis in the
purchase price consideration; (2) transaction costs will be expensed as incurred, rather than capitalized as part of the purchase price; (3) pre-acquisition contingencies, such as legal issues, will generally have to be accounted for in
purchase accounting at fair value; and (4) in order to accrue for a restructuring plan in purchase accounting, the requirements in FASB Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities, would have to be
met at the acquisition
12
date. While there is no expected impact to our consolidated financial statements on the accounting for acquisitions completed prior to July 31, 2009,
the adoption of Statement 141(R) on August 1, 2009 could materially change the accounting for business combinations consummated subsequent to that date.
In September 2006, the FASB issued Statement 157, Fair Value Measurement (Statement 157). Statement 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting
principles and establishes a hierarchy that categorizes and prioritizes the sources to be used to estimate fair value. Statement 157 also expands financial statement disclosures about fair value measurements. On February 6, 2008, the FASB
issued FASB Staff Position (FSP) 157-b which delays the effective date of Statement 157 for one year for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on
a recurring basis (at least annually). Statement 157 and FSP 157-b are effective for financial statements issued for fiscal years beginning after November 15, 2007. The impact of adopting Statement 157 effective August 1, 2008 is not
expected to be material to our consolidated financial statements.
13
Item 2.
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
Industry Conditions and Outlook
We
sell capital equipment and services to companies that design, manufacture, assemble or test semiconductor devices. The semiconductor industry is highly cyclical, causing in turn a cyclical impact on our financial results. As a capital equipment
provider, revenue is driven by the capital expenditure budgets and spending patterns of our customers, who often delay or accelerate purchases in reaction to variations in their business. The level of capital expenditures by these semiconductor
companies depends on the current and anticipated market demand for semiconductor devices and the products that incorporate them. Therefore, demand for our semiconductor test equipment is dependent on growth in the semiconductor industry. In
particular, three primary characteristics of the semiconductor industry drive the demand for semiconductor test equipment:
|
|
|
increases in unit production of semiconductor devices;
|
|
|
|
increases in the complexity of semiconductor devices used in electronic products; and
|
|
|
|
the emergence of next generation device technologies, such as system in package (SIP).
|
The semiconductor industry is highly concentrated, and a small number of semiconductor device manufacturers and outsourced test providers account for a
substantial portion of the purchases of semiconductor test equipment generally, including our test equipment. Sales to Texas Instruments accounted for 38% of our net sales in fiscal 2007 and 56% of our net sales in fiscal 2006. Sales to our ten
largest customers accounted for 80% in the nine months ended April 30, 2008 and in the nine months ended April 30, 2007. Our customers may cancel orders with few or no penalties. If a major customer reduces orders for any reason, our
revenues, operating results, and financial condition will be affected.
14
The following graph shows the cyclicality in semiconductor test equipment orders and shipments from
fiscal 1997 through the fiscal year ended July 31, 2007 (using the three month moving average), as calculated by SEMI, an industry trade organization:
Consistent with our business strategy, we continue to invest significant amounts in engineering and product
development to develop and enhance our Fusion platform during industry slowdowns. For fiscal 2007, engineering and product development expense was $50.0 million, or 33.9% of net sales, as compared to $53.8 million, or 24.9% of net sales, in fiscal
2006. Engineering and product development expense decreased sequentially on a quarterly basis during fiscal 2006 and 2007 and has remained at a targeted level of approximately $11.5 million to $12.5 million per quarter for the last six quarters.
Engineering and product development expense for the first nine months of fiscal 2008 was $34.8 million as compared to $38.1 million for the first nine months of fiscal 2007. We believe that our competitive advantage in the semiconductor test
industry is primarily driven by the ability of our Fusion platform to meet or exceed the technical specifications required for the testing of advanced semiconductor devices in a cost-efficient manner. Current investment in engineering and product
development is focused on enhancements to and additions to our product offerings with new options and instruments designed for specific market segments. We believe this will continue to differentiate the Fusion platform from the product offerings of
our competitors.
In addition, over the past several years, we have increasingly transitioned the manufacture of certain components and
subassemblies to contract manufacturers, thereby reducing fixed manufacturing costs associated with direct labor and overhead. In fiscal 2002, we completed the transition of our final assembly, system integration and testing operations for Fusion HF
to Jabil Circuit. In fiscal 2004, we completed the transition of our Fusion HFi, CX and DX manufacturing to Jabil Circuit. In fiscal 2005, we added Fusion EX, in fiscal 2006, we added Fusion MX and in fiscal 2007, we added Fusion LX to Fusion
testers manufactured by Jabil Circuit. We have announced plans to transition manufacturing of all X-Series products from the Jabil facility in Massachusetts to Jabils Penang, Malaysia facility. This strategy will further reduce our
manufacturing costs. We believe that transforming product manufacturing costs from fixed into variable costs will in the future allow us to improve our performance during cyclical downturns while preserving our historic gross margins during cyclical
upturns.
15
During fiscal years 2005 and 2006, we took several additional cost reduction measures to further mitigate
the adverse effect of cyclical downturns on our profitability. Our total worldwide headcount was reduced from 635 employees and 55 temporary workers at the end of fiscal 2004 to 450 employees and 14 temporary workers as of April 30, 2008. In
addition, we continue to maintain other cost reduction measures, such as the strict oversight and reduction in discretionary travel and other variable overhead expenses. We believe that these reductions in operating costs have reduced our costs
while preserving our ability to fund critical product research and development efforts and continue to provide our customers with the levels of responsiveness and service they require.
We are also exposed to the risks associated with the volatility of the U.S. and global economies. The lack of visibility regarding whether or when there
will be sustained growth periods for the sale of electronic goods and information technology equipment, and uncertainty regarding the amount of sales, underscores the need for caution in predicting growth in the semiconductor test equipment industry
in general and in our revenues and profits specifically. Slow or negative growth in the domestic economy may continue to materially and adversely affect our business, financial condition and results of operations for the foreseeable future. Our
results of operations would be further adversely affected if we were to experience lower than anticipated order levels, cancellations of orders in backlog, extended customer delivery requirements or pricing pressure as a result of a slowdown. At
lower levels of revenue, there is a higher likelihood that these types of changes in our customers requirements would adversely affect our results of operations because in any particular quarter a limited number of transactions accounts for an
even greater portion of sales for the quarter.
Critical Accounting Policies and the Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base these estimates and assumptions on historical experience, and evaluate them on an
on-going basis to ensure they remain reasonable under current conditions. Actual results could differ from those estimates. We discuss the development and selection of the critical accounting policies with the audit committee of our board of
directors on a quarterly basis, and the audit committee has reviewed our critical accounting policies as described in Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations in our Annual
Report on Form 10-K for the fiscal year ended July 31, 2007. For the three and nine months ended April 30, 2008, there have been no changes to these critical accounting policies.
In July, 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48,
Accounting for Uncertainty in
Income Taxes
(FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements in accordance with Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes
. The interpretation prescribes a recognition threshold and measurement methodology for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The
interpretation also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures and transitions. We adopted FIN 48 on August 1, 2007. The adoption of FIN 48 did not impact
our results of operations, financial condition or cash flow.
Results of Operations
The following table sets forth for the periods indicated the principal items included in the Consolidated Statements of Operations as percentages of net
sales.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of Net Sales
|
|
|
|
Three Months
Ended
April 30,
|
|
|
Nine Months
Ended
April 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Net sales
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
Cost of sales
|
|
48.1
|
|
|
67.1
|
|
|
50.3
|
|
|
55.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
51.9
|
|
|
32.9
|
|
|
49.7
|
|
|
44.3
|
|
Engineering and product development expenses
|
|
30.0
|
|
|
37.0
|
|
|
34.8
|
|
|
32.3
|
|
Selling, general and administrative expenses
|
|
16.8
|
|
|
20.5
|
|
|
20.0
|
|
|
17.3
|
|
Reorganization
|
|
|
|
|
|
|
|
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
5.1
|
|
|
(24.6
|
)
|
|
(5.1
|
)
|
|
(5.0
|
)
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
(0.6
|
)
|
|
(2.6
|
)
|
|
(1.0
|
)
|
|
(3.5
|
)
|
Investment income
|
|
1.1
|
|
|
3.0
|
|
|
1.7
|
|
|
3.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before taxes
|
|
5.6
|
|
|
(24.2
|
)
|
|
(4.4
|
)
|
|
(5.5
|
)
|
Provision (benefit) for income taxes
|
|
0.1
|
|
|
|
|
|
(3.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
5.5
|
%
|
|
(24.2
|
)%
|
|
(1.2
|
)%
|
|
(5.5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
The discussion below contains certain forward-looking statements relating to, among other things,
estimates of economic and industry conditions, sales trends, expense levels and capital expenditures. Actual results may vary from those contained in such forward-looking statements. See Business Risks below.
Three and Nine Months Ended April 30, 2008 Compared to the Three and Nine Months Ended April 30, 2007.
Net sales.
Net sales consist of both semiconductor test equipment and related hardware and product support, and maintenance services, net of
returns and allowances. Net sales for the three months ended April 30, 2008 increased 19.1% to $39.3 million as compared to $33.0 million in the same quarter of the prior year. The increase in net sales for the three months ended April 30,
2008 as compared to April 30, 2007, is principally due to increased sales of XSeries products to new customers. Net sales for the nine months ended April 30, 2008 decreased 14.9% to $100.0 million as compared to $117.5 million for
the same nine month period of the prior year. The decrease in net sales in the nine months ended April 30, 2008 as compared to the same period in the prior year is due to an overall industry-wide slowdown which began during the fourth quarter
of fiscal year 2006 and has continued into the first, second and third quarters of fiscal year 2008. During the second half of calendar year 2006, which is the first half of our fiscal 2007, semiconductor device manufacturers reduced their capital
equipment spending levels in line with these adverse conditions resulting in a decreased demand for new purchases of automated semiconductor test equipment.
Service revenue, included in net sales, accounted for $7.2 million, or 18.4% of net sales, and $7.2 million, or 21.7% of net sales, for the three months ended April 30, 2008 and 2007, respectively, and $21.1
million or 21.1% of net sales, and $22.6 million or 19.3% of net sales for the nine months ended April 30, 2008 and 2007, respectively. The decrease in service revenue for the nine month period is primarily a result of the increased adoption of
our newer X-Series products which carry a higher degree of reliability and lower service cost than our legacy products.
Geographically,
sales to customers outside of the United States were 67.6% and 80.6% of net sales for the three months ended April 30, 2008 and 2007, respectively, and 57.3% and 68.5% of net sales for the nine months ended April 30, 2008 and 2007,
respectively. The decrease in sales to customers outside the United States was a result of the overall industry wide slowdown impacting the majority of our customer base. A significant portion of our products is shipped to semiconductor device
manufacturers whose test and assembly operations are performed in Asia and to Asian subcontractors. Both of these areas were negatively impacted by the overall industry-wide economic conditions
Gross profit margin.
The gross profit margin was $20.4 million from $39.3 million of net sales or 51.9% of net sales in the three months
ended April 30, 2008, as compared to $10.8 million from $33.0 million of net sales or 32.9% of net sales in the same quarter of the prior year. Gross profit margin as a percentage of net sales for the three months ended April 30, 2008
compared to the same period ended April 30, 2007 increased primarily as a result of higher sales volume, more favorable X-Series product mix and a $4.2 million Fusion HFi-related inventory provision recorded in the quarter ended April 30,
2007. The inventory provision accounted for 12.6% points of the decrease in gross profit margin percentage in the prior quarter ended April 30, 2007. For the nine months ended April 30, 2008, the gross profit margin was $49.7 million from
$100.0 million of net sales or 49.7% of net sales as compared to $52.0 million from $117.5 million of net sales or 44.3% of net sales for the nine months ended April 30, 2007. The 5.4% point increase in gross profit margin percentage of net
sales on lower net sales for the nine month periods was a result of more favorable X-Series product mix and 3.5% points related to the $4.2 million inventory related provision recorded in the three months ended April 30, 2007.
Inventory related provision
. There were no inventory related provisions recorded for the three and nine months ended April 30, 2008.
For the quarter ended April 30, 2007, we recorded a $4.2 million inventory related provision related to the Fusion HFi product line. The provision was required as a result of two major factors that materialized during the quarter. First, our
assessment of a decrease in our Fusion HFi customers demand for HFi due to the softness in the markets they serve and second, the projected impact from our customers who have increased adoption of our X-Series platform by transferring test
capacity from HFi to a lower cost-to-test X-Series alternative.
Engineering and product development expenses.
Engineering
and product development expenses were $11.8 million, or 30.0% of net sales, in the three months ended April 30, 2008, as compared to $12.2 million, or 37.0% of net sales, in the same quarter of the prior year. For the nine months ended
April 30, 2008, engineering and product development expenses were $34.8 million, or 34.8% of net sales, compared to $38.1 million, or 32.3% of net sales for the nine months ended April 30, 2007. The decrease in engineering and product
development expenses for the three and nine months ended April 30, 2008 as compared to the three and nine months ended April 30, 2007 is principally a result of completion during fiscal 2006 and fiscal 2007 of next generation Fusion
product development projects for the Fusion X-Series product line. Additionally, we have been able to leverage and re-use X-Series engineering development initiatives across a broader range of applications than in the past with our Fusion HF and HFi
products. This trend has resulted in more efficient use of engineering resources and lower costs.
17
Selling, general and administrative expenses.
Selling, general and administrative expenses
were $6.6 million, or 16.8% of net sales, in the three months ended April 30, 2008, as compared to $6.8 million, or 20.5% of net sales, in the same quarter of the prior year. For the nine months ended April 30, 2008, selling, general and
administrative expenses were $20.0 million, or 20.0% of net sales as compared to $20.3 million, or 17.3% of net sales for the nine months ended April 30, 2007. Selling, general and administrative expenses are primarily made up of employee
compensation and benefits, travel, information technology, sales commissions and legal and audit fees. Each of these expense categories continue to run on plan and have not fluctuated in any significant manner over the past nine months.
Reorganization.
There were no reorganization costs recorded in the nine months ended April 30, 2008. For the nine months ended
April 30, 2007, we re-evaluated the requirements of our reorganization accrual for severance and recognized a gain of $0.4 million in the nine months ended April 30, 2007.
Interest expense.
Interest expense was $0.2 million for the three months ended April 30, 2008 as compared to $0.9 million for the
three months ended April 30, 2007. For the nine months ended April 30, 2008, interest expense was $1.0 million compared to $4.1 million for the same period in 2007. Interest expense for the three and nine months ended April 30, 2008
relates to our bank term loan which bears interest at the prime rate minus 1.25%. The decrease in interest expense for all comparative periods presented is primarily a result of the decrease in our convertible subordinated notes balance which was
paid in full on August 15, 2007.
Investment income.
Investment income was $0.4 million for the three months ended
April 30, 2008, as compared to $1.0 million for the three months ended April 30, 2007. For the nine months ended April 30, 2008, investment income was $1.7 million, compared to $3.6 million for the same period in 2007. The decrease
was due to lower cash balances resulting from the cash utilized to pay off our convertible subordinated notes on August 15, 2007.
Income tax.
We recorded $0.1 million income tax expense relating to taxable income in foreign locations for the nine months ended April 30, 2008. We have recorded no US income tax benefit in loss periods due to the
uncertainty related to utilization of net operating loss carry forwards. As a result of a review undertaken at April 30, 2008 and 2007 and our cumulative loss position at those dates, management concluded that it was appropriate to maintain a
full valuation allowance for our net operating loss carry forwards and our other net deferred tax assets.
We recorded a one time tax
benefit of $3.3 million for the three months ended October 31, 2007 related to the de-recognition of a liability related to an uncertain tax position. The uncertain tax position related to potential dual taxation of a gain recorded in fiscal
2002 as part of the settlement with a former supplier. The statute of limitations expired on the potential tax exposure on September 14, 2007, triggering the reversal of the reserve and recognition of a non-cash benefit recorded in the quarter
ended October 31, 2007.
Net income (loss).
Net income was $2.2 million, or $0.03 per diluted share, in the three months
ended April 30, 2008, as compared to a net loss of $8.0 million, or $0.13 per diluted share, in the same quarter of 2007. The $10.2 million increase in net income was principally due to higher net sales and gross profit related to a more
favorable product mix with the higher margin X-Series products contributing a larger percentage of net sales, and the $4.2 million inventory related provision recorded in the three months ended April 30, 2007 which did not recur in the three
months ended April 30, 2008.
For the nine months ended April 30, 2008, net loss was $1.2 million as compared to a net loss of
$6.5 million for the nine months ended April 30, 2007. The $5.3 million decrease in net loss was due primarily to an increase in gross profit margin related to the $4.2 million inventory provision recorded in the three months ended
April 30, 2007, which did not recur in the three months ended April 30, 2008, reduced engineering and product development expenses of approximately $3.3 million, a favorable impact of $3.3 million related to the tax benefit booked in the
first quarter and $1.3 million lower net interest cost due to the reduction in debt. Notwithstanding these positive developments was a decrease in net sales of $17.5 million over this same nine month period, which reduced gross profit margin by
approximately $6.5 million, excluding the $4.2 million inventory provision.
Liquidity and Capital Resources.
As of April 30, 2008, we had $70.5 million in cash and cash equivalents and marketable securities and net working capital of $90.3 million, as
compared to $98.5 million of cash and cash equivalents and marketable securities and $87.3 million of net working capital at July 31, 2007. The decrease in the cash and cash equivalents and marketable securities was due primarily to the $28.4
million principal and interest payment related to the 4.25% Convertible Subordinated Notes due in August 2007. Our investment policy prohibits investments in certain securities with some elements of risk, such as Auction Rate Securities. We do not
have any investments in Auction Rate Securities as of April 30, 2008.
Accounts receivable from trade customers, net of allowances,
was $21.3 million at April 30, 2008, as compared to $22.5 million at July 31, 2007. The principal reason for the $1.2 million decrease in accounts receivable is a result of the timing of shipments within the quarter when comparing the
quarter ended April 30, 2008 to the quarter ended July 31, 2007.
18
Accounts receivable from other sources, principally amounts due from vendors, decreased from the
July 31, 2007 balance of $1.5 million to $0.8 million at April 30, 2008. The decrease is a result of shifting the purchasing of certain components by LTX to direct purchases by our outsource providers.
Net inventories decreased by $3.7 million to $23.4 million at April 30, 2008 as compared to $27.1 million at July 31, 2007 as we continue to
utilize slower moving but active inventory in our manufacturing process.
Prepaid expenses and other current assets decreased by $0.8
million to $3.0 million at April 30, 2008 as compared to $3.8 million at July 31, 2007. The major reason for the decrease was due to $0.7 million use of the cash surrender value of life insurance policies used to fund our deferred
compensation plan which was terminated and liquidated in the quarter ended January 31, 2008.
Capital expenditures totaled $5.7
million for the nine months ended April 30, 2008, as compared to $7.8 million for the nine months ended April 30, 2007. Expenditures for the nine months ended April 30, 2008 included $1.4 million of leasehold improvements related to
relocating to a new development facility in Milpitas, California and $4.3 million of equipment-related capital expenditures to support the X-Series product line.
On June 3, 2005, we closed a $60.0 million term loan with a commercial lender (the 2005 Loan Agreement). The loan had a five year term. Interest was at the lenders variable prime rate and was
payable monthly. We entered into a new Loan and Security Agreement (the 2006 Loan Agreement), dated as of December 7, 2006, with a commercial lender to modify the existing $60.0 million term loan. Under the terms of the 2006 Loan
Agreement, LTX borrowed $20.0 million under a term loan at an interest rate of prime minus 1.25% with interest-only payable during the first 12 months. The loan is secured by all assets of LTX located in the United States. Principal of this term
loan is repayable over four years as follows:
|
|
|
months 13 to 24: $300,000.00 per month (first payment made on January 1, 2008)
|
|
|
|
months 25 to 36: $600,000.00 per month
|
|
|
|
months 37 to 48: $766,666.67 per month
|
The financing arrangement under the 2006 Loan Agreement also provides LTX with a $30.0 million revolving credit facility. No amount was outstanding under the revolving credit facility as of April 30, 2008 and July 31, 2007.
In connection with the 2006 Loan Agreement, LTX has terminated the 2005 Loan Agreement and has repaid all outstanding amounts under the
2005 Loan Agreement. The net effect of this transaction reduced existing cash on hand by approximately $36.0 million in the quarter ended January 31, 2007.
We had a second credit facility with another lender for a revolving credit line of $5.0 million. This facility was secured by cash and marketable securities. This line of credit was used to secure obligations of
operating leases and existing stand-by letters of credit. The facility expired and was not renewed on October 31, 2007.
We had a
non-qualified deferred compensation plan for senior management and other highly compensated employees. We had two plans that have been discontinued with respect to new deferrals: (i) the LTX Corporation Deferred Compensation Plan that was
adopted effective December 1, 2001, (referred to herein as the Frozen Plan) and (ii) a newer plan that complies with the requirements of Code Section 409A and related Treasury guidance and that governs all amounts deferred
on or after January 1, 2005 (referred to herein as the New Plan). The Frozen Plans and New Plans accumulated balances were distributed in a lump sum payment of approximately $2.3 million and $0.8 million in January 2007
and January 2008, respectively, with the proceeds from the cash surrender value of the insurance policy used to fund this plan. The proceeds and related liability associated with these plans were reported as prepaid expenses and other current
assets, and other accrued expenses, respectively. The plan is closed as of April 30, 2008 with no assets or liabilities remaining.
We
have a defined benefit pension plan for our operation in the United Kingdom. The plan was constituted in October 1981 to provide defined benefit pension and lump sum benefits, payable on retirement, for employees of LTX (Europe) Limited,
(UK). The plan has 71 participants of which 2 remain as active employee members and 69 are non-active former employees but for whom benefits are preserved. The plan has been closed to all new members since December 31, 2000.
Annually, we obtain an actuarial valuation of the pension plan. The plan was under-funded as of April 30, 2008 by $3.7 million. We have recorded this liability as other long-term liabilities of $3.4 million and other accrued expenses of $0.3
million on the consolidated balance sheet as of April 30, 2008. Cash payments are projected to be approximately $0.3 million in fiscal 2008 and actual cash payments were $0.4 million in fiscal 2007.
We operate in a highly cyclical industry and we may experience, with relatively short notice, significant fluctuations in demand for our products. This
could result in a material effect on our liquidity position. To mitigate the risk, we have completed a substantial
19
and lengthy process of converting our manufacturing process to an outsource model. In addition, we continue to maintain other cost reduction measures, such
as the strict oversight of discretionary travel and other variable overhead expenses. We believe that these reductions in operating costs have reduced our costs while preserving our ability to fund critical product research and development efforts
and continue to provide our customers with the levels of responsiveness and service they require. As such, we believe we can react to a downturn or a significant upturn much faster than in the past. We believe that our balances of cash and cash
equivalents and marketable securities, cash flows expected to be generated by future operating activities, our access to capital markets for competitively priced instruments and funds available under our credit facilities will be sufficient to meet
our cash requirements over the next twelve to twenty-four months, which includes the payment of the outstanding principal installments of the 2006 Loan Agreement discussed above.
Commitments and Contingencies
Our major outstanding contractual obligations are related to our bank term loan, facilities, leases, inventory purchase commitments and other operating leases. Since the quarter ended October 31, 2007, there have been no material
changes in these contractual obligations. Please refer to the Liquidity and Capital Resources section of our Form 10-Q filed with the SEC for the period ended October 31, 2007.
In addition to the contractual obligations mentioned above, our other accrued expense balance includes $1.2 million for uncertain tax positions,
including penalties and interest, as of April 30, 2008.
BUSINESS RISKS
This report includes or incorporates forward-looking statements that involve substantial risks and uncertainties and fall within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify these forward-looking statements by our use of the words believes, anticipates, plans,
expects, may, will, would, intends, estimates, and similar expressions, whether in the negative or affirmative. We cannot guarantee that we actually will achieve these plans,
intentions or expectations. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements,
particularly under the heading Business Risks, that we believe could cause our actual results to differ materially from the forward-looking statements that we make. We do not assume any obligation to update any forward-looking statement
we make.
Our sole market is the highly cyclical semiconductor industry, which causes a cyclical impact on our financial results.
We sell capital equipment to companies that design, manufacture, assemble, and test semiconductor devices. The semiconductor
industry is highly cyclical, causing in turn a cyclical impact on our financial results. An overall industry-wide slowdown began during the fourth quarter of fiscal year 2006 and has continued into the first, second and third quarters of fiscal
2008. Any failure to expand in cycle upturns to meet customer demand and delivery requirements or contract in cycle downturns at a pace consistent with cycles in the industry could have an adverse effect on our business.
Any significant downturn in the markets for our customers semiconductor devices or in general economic conditions would likely result in a
reduction in demand for our products and would hurt our business. From the fourth quarter of fiscal 2006 through the end of fiscal 2007 and into our first six months of 2008, our revenue and operating results were negatively impacted by a downturn
in the semiconductor industry. Downturns in the semiconductor test equipment industry have been characterized by diminished product demand, excess production capacity, accelerated erosion of selling prices and excessive inventory levels. We believe
the markets for newer generations of devices, including system in package (SIP), will also experience similar characteristics. Our market is also characterized by rapid technological change and changes in customer demand. In the past, we
have experienced delays in commitments, delays in collecting accounts receivable and significant declines in demand for our products during these downturns, and we cannot be certain that we will be able to maintain or exceed our current level of
sales.
Additionally, as a capital equipment provider, our revenue is driven by the capital expenditure budgets and spending patterns of
our customers who often delay or accelerate purchases in reaction to variations in their businesses. Because a high portion of our costs are fixed, we are limited in our ability to reduce expenses and inventory purchases quickly in response to
decreases in orders and revenues. In a contraction, we may not be able to reduce our significant fixed costs, such as continued investment in research and development and capital equipment requirements and materials purchases from our suppliers.
The market for semiconductor test equipment is highly concentrated, and we have limited opportunities to sell our products.
The semiconductor industry is highly concentrated, and a small number of semiconductor device manufacturers and outsourced test providers
account for a substantial portion of the purchases of semiconductor test equipment generally, including our test
20
equipment. Sales to Texas Instruments accounted for 38% of our net sales in fiscal 2007 and 56% of our net sales in fiscal 2006. Sales to our ten largest
customers accounted for 80% in the nine months ended April 30, 2008 and the nine months ended April 30, 2007. Our customers may cancel orders with few or no penalties. If a major customer reduces orders for any reason, our revenues,
operating results, and financial condition will be affected.
Our ability to increase our sales will depend in part upon our ability to
obtain orders from new customers. Semiconductor device manufacturers select a particular vendors test system for testing the manufacturers new generations of devices and make substantial investments to develop related test program
software and interfaces. Once a manufacturer has selected one test system vendor for a generation of devices, that manufacturer is more likely to purchase test systems from that vendor for that generation of devices, and, possibly, subsequent
generations of devices as well. Therefore, the opportunities to obtain orders from new customers may be limited.
Our sales and
operating results have fluctuated significantly from period to period, including from one quarter to another, and they may continue to do so.
Our quarterly and annual operating results are affected by a wide variety of factors that could adversely affect sales or profitability or lead to significant variability in our operating results or our stock price.
This may be caused by a combination of factors, including the following:
|
|
|
sales of a limited number of test systems account for a substantial portion of our net sales in any particular fiscal quarter, and a small number of transactions
could therefore have a significant impact;
|
|
|
|
order cancellations by customers;
|
|
|
|
lower gross margins in any particular period due to changes in:
|
|
|
|
the configurations of test systems sold,
|
|
|
|
the customers to whom we sell these systems, or
|
|
|
|
a long sales cycle, due to the high selling price of our test systems, the significant investment made by our customers, and the time required to incorporate our
systems into our customers design or manufacturing process; and
|
|
|
|
changes in the timing of product orders due to:
|
|
|
|
unexpected delays in the introduction of products by our customers,
|
|
|
|
shorter than expected lifecycles of our customers semiconductor devices,
|
|
|
|
uncertain market acceptance of products developed by our customers, or
|
|
|
|
our own research and development.
|
We cannot predict the impact of these and other factors on our sales and operating results in any future period. Results of operations in any period, therefore, should not be considered indicative of the results to be expected for any
future period. Because of this difficulty in predicting future performance, our operating results may fall below expectations of securities analysts or investors in some future quarter or quarters. Our failure to meet these expectations would likely
adversely affect the market price of our common stock.
A substantial amount of the shipments of our test systems for a particular quarter
occur late in the quarter. Our shipment pattern exposes us to significant risks in the event of problems during the complex process of final integration, test and acceptance prior to shipment. If we were to experience problems of this type late in
our quarter, shipments could be delayed and our operating results could fall below expectations.
We depend on Jabil Circuit to
produce and test our family of Fusion products, and any failures or other problems at or with Jabil could cause us to lose customers and revenues.
We have selected Jabil Circuit, Inc. to manufacture our Fusion test systems. If for any reason Jabil cannot provide us with these products and services in a timely fashion, or at all, whether due to labor shortage,
slow down or stoppage, deteriorating financial or business conditions or any other reason, we would not be able to sell or ship our Fusion family of products to our customers. All of the products Jabil tests and assembles for us are assembled in one
facility in Massachusetts. If this facility were to become unable to meet our production requirements, transitioning assembly to an alternative Jabil facility could result in production delays of several weeks
21
or more. In fiscal 2007 we announced plans to transition manufacturing of all X-Series products from Jabils facility in Massachusetts to Jabils
Penang, Malaysia facility. If the transition to Jabils Malaysia facility is not successfully completed, or if Jabil Malaysia is unable to meet our production requirements, there would be production delays and we would not be able to ship
products to our customers. We have no written supply agreement with Jabil. We also may be unable to engage alternative production and testing services on a timely basis or upon terms favorable to us, if at all.
If we are required for any reason to seek a new manufacturer of our test systems, an alternate manufacturer may not be available and, in any event,
transitioning to a new manufacturer would require a significant lead time of six months or more and would involve substantial expense and disruption of our business. Our test systems are highly sophisticated and complex capital equipment, with many
custom components, and require specific technical know-how and expertise. These factors could make it more difficult for us to find a new manufacturer of our test systems if our relationship with Jabil is terminated for any reason, which would cause
us to lose revenues and customers.
Our dependence on subcontractors and sole source suppliers may prevent us from delivering an
acceptable product on a timely basis.
We rely on subcontractors to manufacture Fusion and many of the components and subassemblies
for our products, and we rely on sole source suppliers for certain components. We may be required to qualify new or additional subcontractors and suppliers due to capacity constraints, competitive or quality concerns or other risks that may arise,
including a result of a change in control of, or deterioration in the financial condition of, a supplier or subcontractor. The process of qualifying subcontractors and suppliers is a lengthy process. Our reliance on subcontractors gives us less
control over the manufacturing process and exposes us to significant risks, especially inadequate capacity, late delivery, substandard quality, and high costs. In addition, the manufacture of certain of these components and subassemblies is an
extremely complex process. If a supplier became unable to provide parts in the volumes needed or at an acceptable price, we would have to identify and qualify acceptable replacements from alternative sources of supply, or manufacture such components
internally. The failure to qualify acceptable replacements quickly would delay the manufacturing & delivery of our products, which could cause us to lose revenues and customers.
We are dependent on a semiconductor device manufacturer, Maxtek Components as a sole source supplier of components manufactured in accordance with our
proprietary design and specifications. We have no written supply agreement with this sole source supplier and purchase our custom components through individual purchase orders.
Future acquisitions may be difficult to integrate, disrupt our business, dilute stockholder value or divert management attention.
We have in the past, and may in the future, seek to acquire or invest in additional complementary businesses, products,
technologies or engineers. For example, in June 2003, we completed our acquisition of StepTech, Inc. We may have to issue debt or equity securities to pay for future acquisitions, which could be dilutive to then current stockholders. We have also
incurred and may continue to incur certain liabilities or other expenses in connection with acquisitions, which could continue to materially adversely affect our business, financial condition and results of operations.
Mergers and acquisitions of high-technology companies are inherently risky, and no assurance can be given that future acquisitions will be successful and
will not materially adversely affect our business, operating results or financial condition. Our past and future acquisitions may involve many risks, including:
|
|
|
difficulties in managing our growth following acquisitions;
|
|
|
|
difficulties in the integration of the acquired personnel, operations, technologies, products and systems of the acquired companies;
|
|
|
|
uncertainties concerning the intellectual property rights we purport to acquire;
|
|
|
|
unanticipated costs or liabilities associated with the acquisitions;
|
|
|
|
diversion of managements attention from other business concerns;
|
|
|
|
adverse effects on our existing business relationships with our or our acquired companies customers;
|
|
|
|
potential difficulties in completing projects associated with purchased in process research and development; and
|
|
|
|
inability to retain employees of acquired companies.
|
Any of the events described in the foregoing paragraphs could have an adverse effect on our business, financial condition and results of operations and could cause the price of our common stock to decline.
22
We may not be able to deliver custom hardware options and system applications to satisfy specific
customer needs in a timely manner.
We must develop and deliver customized hardware and system applications to meet our
customers specific test requirements. Our test equipment may fail to meet our customers technical or cost requirements and may be replaced by competitive equipment or an alternative technology solution. Our inability to provide a test
system that meets requested performance criteria when required by a device manufacturer would severely damage our reputation with that customer. This loss of reputation may make it substantially more difficult for us to sell test systems to that
manufacturer for a number of years. We have, in the past, experienced delays in introducing some of our products and enhancements.
Our dependence on international sales and non-U.S. suppliers involves significant risk.
International sales have
constituted a significant portion of our revenues in recent years, and we expect that this composition will continue. International sales accounted for 57% of our revenues for the nine months ended April 30, 2008 and 69% of our revenues for the
nine months ended April 30, 2007. In addition, we rely on non-U.S. suppliers for several components of the equipment we sell. As a result, a major part of our revenues and the ability to manufacture our products are subject to the risks
associated with international commerce. A reduction in revenues or a disruption or increase in the cost of our manufacturing materials could hurt our operating results. These international relationships make us particularly sensitive to changes in
the countries from which we derive sales and obtain supplies. Our recently announced plans to transition our outsource manufacturing to Penang, Malaysia increases our exposure to these types of international risks. International sales and our
relationships with suppliers may be hurt by many factors, including:
|
|
|
changes in law or policy resulting in burdensome government controls, tariffs, restrictions, embargoes or export license requirements;
|
|
|
|
political and economic instability in our target international markets;
|
|
|
|
longer payment cycles common in foreign markets;
|
|
|
|
difficulties of staffing and managing our international operations;
|
|
|
|
less favorable foreign intellectual property laws making it harder to protect our technology from appropriation by competitors; and
|
|
|
|
difficulties collecting our accounts receivable because of the distance and different legal rules.
|
In the past, we have incurred expenses to meet new regulatory requirements in Europe, experienced periodic difficulties in obtaining timely payment from
non-U.S. customers, and been affected by economic conditions in several Asian countries. Our foreign sales are typically invoiced and collected in U.S. dollars. A strengthening in the dollar relative to the currencies of those countries where we do
business would increase the prices of our products as stated in those currencies and could hurt our sales in those countries. Significant fluctuations in the exchange rates between the U.S. dollar and foreign currencies could cause us to lower our
prices and thus reduce our profitability. These fluctuations could also cause prospective customers to push out or delay orders because of the increased relative cost of our products. In the past, there have been significant fluctuations in the
exchange rates between the dollar and the currencies of countries in which we do business. While we have not entered into significant foreign currency hedging arrangements, we may do so in the future. If we do enter into foreign currency hedging
arrangements, they may not be effective.
Our market is highly competitive, and we have limited resources to compete.
The test equipment industry is highly competitive in all areas of the world. Many other domestic and foreign companies participate
in the markets for each of our products, and the industry is highly competitive. Our competitors in the market for semiconductor test equipment include Advantest, Credence Systems, Eagle Test Systems, Teradyne and Verigy. Certain of these major
competitors have substantially greater financial resources and more extensive engineering, manufacturing, marketing, and customer support capabilities.
We expect our competitors to enhance their current products and to introduce new products with comparable or better price and performance. The introduction of competing products could hurt sales of our current and
future products. In addition, new competitors, including semiconductor manufacturers themselves, may offer new testing technologies, which may in turn reduce the value of our product lines. Increased competition could lead to intensified price-based
competition, which would hurt our business and results of operations. Unless we are able to invest significant financial resources in developing products and maintaining customer support centers worldwide, we may not be able to compete effectively.
23
Development of our products requires significant lead-time, and we may fail to correctly anticipate
the technical needs of our customers.
Our customers make decisions regarding purchases of our test equipment while their devices
are still in development. Our test systems are used by our customers to develop, test and manufacture their new devices. We therefore must anticipate industry trends and develop products in advance of the commercialization of our customers
devices, requiring us to make significant capital investments to develop new test equipment for our customers well before their devices are introduced. If our customers fail to introduce their devices in a timely manner or the market does not accept
their devices, we may not recover our capital investment through sales in significant volume. In addition, even if we are able to successfully develop enhancements or new generations of our products, these enhancements or new generations of products
may not generate revenue in excess of the costs of development, and they may be quickly rendered obsolete by changing customer preferences or the introduction of products embodying new technologies or features by our competitors. Furthermore, if we
were to make announcements of product delays, or if our competitors were to make announcements of new test systems, these announcements could cause our customers to defer or forego purchases of our existing test systems, which would also hurt our
business.
Our success depends on attracting and retaining key personnel.
Our success will depend substantially upon the continued service of our executive officers and key personnel, none of whom are bound by an employment or
non-competition agreement. Our success will depend on our ability to attract and retain highly qualified managers and technical, engineering, marketing, sales and support personnel. Competition for such specialized personnel is intense, and it may
become more difficult for us to hire or retain them. Our volatile business cycles only aggravate this problem. Layoffs in any industry downturn could make it more difficult for us to hire or retain qualified personnel. Our business, financial
condition and results of operations could be materially adversely affected by the loss of any of our key employees, by the failure of any key employee to perform in his or her current positions, or by our inability to attract and retain skilled
employees.
We may not be able to protect our intellectual property rights.
Our success depends in part on our ability to obtain intellectual property rights and licenses and to preserve other intellectual property rights covering
our products and development and testing tools. To that end, we have obtained certain domestic patents and may continue to seek patents on our inventions when appropriate. We have also obtained certain trademark registrations. To date, we have not
sought patent protection in any countries other than the United States, which may impair our ability to protect our intellectual property in foreign jurisdictions. The process of seeking intellectual property protection can be time consuming and
expensive. We cannot ensure that:
|
|
|
patents will issue from currently pending or future applications;
|
|
|
|
our existing patents or any new patents will be sufficient in scope or strength to provide meaningful protection or any commercial advantage to us;
|
|
|
|
foreign intellectual property laws will protect our intellectual property rights; or
|
|
|
|
others will not independently develop similar products, duplicate our products or design around our technology.
|
If we do not successfully enforce our intellectual property rights, our competitive position could suffer, which could harm our operating results. We
also rely on trade secrets, proprietary know-how and confidentiality provisions in agreements with employees and consultants to protect our intellectual property. Other parties may not comply with the terms of their agreements with us, and we may
not be able to adequately enforce our rights against these people.
Third parties may claim we are infringing their intellectual
property, and we could suffer significant litigation costs, licensing expenses or be prevented from selling our products.
Intellectual property rights are uncertain and involve complex legal and factual questions. We may be unknowingly infringing on the intellectual property rights of others and may be liable for that infringement, which could result in
significant liability for us. If we do infringe the intellectual property rights of others, we could be forced to either seek a license to intellectual property rights of others or alter our products so that they no longer infringe the intellectual
property rights of others. A license could be very expensive to obtain or may not be available at all. Similarly, changing our products or processes to avoid infringing the rights of others may be costly or impractical.
We are responsible for any patent litigation costs. If we were to become involved in a dispute regarding intellectual property, whether ours or that of
another company, we may have to participate in legal proceedings. These types of proceedings may be costly and time consuming for us, even if we eventually prevail. If we do not prevail, we might be forced to pay significant damages, obtain
licenses, modify our products or processes, stop making products or stop using processes.
24
Our stock price is volatile.
In the twelve-month period ending on April 30, 2008, our stock price ranged from a low of $2.28 to a high of $6.29. The price of our common stock has
been and likely will continue to be subject to wide fluctuations in response to a number of events and factors, such as:
|
|
|
quarterly variations in operating results;
|
|
|
|
variances of our quarterly results of operations from securities analyst estimates;
|
|
|
|
changes in financial estimates and recommendations by securities analysts;
|
|
|
|
announcements of technological innovations, new products, or strategic alliances; and
|
|
|
|
news reports relating to trends in our markets.
|
In addition, the stock market in general, and the market prices for semiconductor-related companies in particular, have experienced significant price and volume fluctuations that often have been unrelated to the
operating performance of the companies affected by these fluctuations. These broad market fluctuations may adversely affect the market price of our common stock, regardless of our operating performance.
We have substantial indebtedness.
We have $18.8 million in principal outstanding under a commercial loan. We may incur substantial additional indebtedness in the future. The level of indebtedness, among other things, could
|
|
|
make it difficult for us to make payments on our debt and other obligations;
|
|
|
|
make it difficult for us to obtain any necessary future financing for working capital, capital expenditures, debt service requirements or other purposes;
|
|
|
|
require the dedication of a substantial portion of any cash flow from operations to service for indebtedness, thereby reducing the amount of cash flow available for
other purposes, including capital expenditures;
|
|
|
|
limit our flexibility in planning for, or reacting to changes in, our business and the industries in which we compete;
|
|
|
|
place us at a possible competitive disadvantage with respect to less leveraged competitors and competitors that have better access to capital resources; and
|
|
|
|
make us more vulnerable in the event of a further downturn in our business.
|
There can be no assurance that we will be able to meet our debt service obligations.
We may not be able to pay our debt and other obligations.
If our cash flow is inadequate to meet our obligations, we could face substantial liquidity problems. The $27.2 million principal amount of 4.25% Convertible Subordinated Notes due August 2007 was paid on
August 15, 2007, reducing our cash and cash equivalents. In addition, we have monthly principal and interest payments through May 2010 related to our $20.0 million term loan. If we are unable to generate sufficient cash flow or otherwise obtain
funds necessary to make required payment on the term loan, or certain of our other obligations, we would be in default under the terms thereof, which could permit the holders of those obligations to accelerate their maturity and also could cause
default under future indebtedness we may incur. Any such default could have material adverse effect on our business, prospects, financial position and operating results. In addition, we may not be able to repay amounts due in respect of our
obligations, if payment of those obligations were to be accelerated following the occurrence of any other event of default as defined in the instruments creating those obligations.
We may need additional financing, which could be difficult to obtain.
We expect that our existing cash and marketable securities, and borrowings from available bank financings, will be sufficient to meet our cash
requirements to fund operations and expected capital expenditures for the foreseeable future. In the event we need to raise additional funds, we cannot be certain that we will be able to obtain such additional financing on favorable terms, if at
all. Further, if we issue additional equity securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of common stock. Future financings
may place restrictions on how we operate our business. If we cannot raise funds on acceptable terms, if and when needed, we may not be able to develop or enhance our products and services, take advantage of future opportunities, grow our business or
respond to competitive pressures, which could seriously harm our business.
25
Compliance with current and future environmental regulations may be costly and disruptive to our
operations.
We may be subject to environmental and other regulations due to our production and marketing of products in certain
states and countries. We are in the process of planning for and evaluating the impact of a directive to reduce the amount of hazardous materials in certain electronic components such as printed circuit boards. The directive is known as Directive
2002/95/EC of the European Parliament and of the Council of January 27, 2003 on the restriction of the use of certain hazardous substances in electrical and electronic equipment. RoHS is short for restriction of hazardous
substances. The RoHS Directive banned the placing on the EU market of new electrical and electronic equipment containing more than agreed levels of lead, cadmium, mercury, hexavalent chromium, polybrominated biphenyl (PBB) and polybrominated
diphenyl ether (PBDE), except where exemptions apply, from July 1, 2006. As a Semiconductor Test Equipment producer of large-scale stationary industrial tools, LTX product is exempt from the European WEEE and RoHS directives under section 6,
Annex 1B of the WEEE Directive. The exemption lasts until June 1, 2010 and will likely be extended until 2014. Manufacturers are required to ensure that their products, including their constituent materials and components, do not contain more
than the minimum levels of the six restricted materials in order to be allowed to export goods into the Single Market (i.e. of the European Communitys 25 Member States). We are uncertain as to the impact of compliance on future costs and
supply of materials used to manufacture our equipment. Any interruption in supply due to the unavailability of lead free products could have a significant impact on the manufacturing and delivery of our products. If a supplier became unable to
provide parts in the volumes needed or at an acceptable price, we would have to identify and qualify acceptable replacements from alternative sources of supply or manufacture such components internally. The failure to qualify acceptable replacements
quickly would delay the manufacturing and delivery of our products, which could cause us to lose revenues and customers.
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
There has been no material change in our market risk exposure since the filing of the 2007 Annual Report on Form 10-K.
Item 4.
|
Controls and Procedures
|
Evaluation of
Disclosure Controls and Procedures.
Based on the evaluation by management, with the participation of the Chief Executive Officer and Chief Financial Officer, of our disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) as of the end of the period covered by this quarterly report on Form 10-Q, the Companys Chief Executive Officer and Chief Financial Officer have concluded that the Companys disclosure controls and procedures
(1) were designed to ensure that material information relating to the Company, including its consolidated subsidiaries, was made known to them by others within those entities, particularly during the period in which this report was being
prepared and (2) effective, in that they provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, including information regarding its consolidated
subsidiaries, is recorded, processed, summarized and reported within the time periods specified by the SEC.
Changes in Internal
Controls.
No change in the Companys internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the first nine months of fiscal 2008 ending April 30, 2008 that has
materially affected or is reasonably likely to materially affect the Companys internal control over financial reporting.
Limitations on the Effectiveness of Controls
The Companys management, including the Chief Executive Officer and
Chief Financial Officer, does not expect that the Companys disclosure controls and procedures or the Companys internal controls can prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative
to their costs. The inherent limitations in all control systems include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the
individual acts of some persons or by collusion of two or more people. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
PART IIOTHER INFORMATION
|
(i)
|
Exhibit 31.1 and 31.2 Rule 13a-14(a)/15d-14(a) Certifications
|
|
(ii)
|
Exhibit 32 Section 1350 Certifications
|
26
SIGNATURE
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: June 9, 2008
|
|
By:
|
|
/
S
/ M
ARK
J. G
ALLENBERGER
|
|
|
|
|
Mark J. Gallenberger
|
|
|
|
|
Chief Financial Officer and Treasurer
|
|
|
|
|
(Principal Financial Officer)
|
27
Ltx (NASDAQ:LTXX)
Historical Stock Chart
From Jul 2024 to Aug 2024
Ltx (NASDAQ:LTXX)
Historical Stock Chart
From Aug 2023 to Aug 2024