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LTXCredence Corp. Reports Operating Results (10-Q)

June 09, 2010 | About:
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10qk

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LTXCredence Corp. (LTXC) filed Quarterly Report for the period ended 2010-04-30.

Ltxcredence Corp. has a market cap of $404.2 million; its shares were traded at around $2.76 with and P/S ratio of 3. LTXC is in the portfolios of Richard Perry of Perry Capital, Paul Tudor Jones of The Tudor Group, Jim Simons of Renaissance Technologies LLC, Chuck Royce of Royce& Associates.

Highlight of Business Operations:

Inventory-related provision. There were no inventory-related provisions recorded in the nine months ended April 30, 2010. We recorded an inventory-related provision of $19.3 million or 18.9% of net sales in the nine months ended April 30, 2009. The provision consisted of $0.8 million related to the implementation of product roadmap decisions related to the ASL 3KMS line and $4.8 million related to future requirements of last time buy components related to the implementation of the product roadmap decisions. In addition, $6.6 million of the inventory related provision was a result of a significant reduction in the demand for the Sapphire products which have been negatively impacted by the current business conditions. The balance of the inventory related provision of approximately $1.2 million was related to our Fusion CX product line which is being phased out in favor of our Fusion MXc product line.

Gross profit margin. The gross profit margin was $32.1 million or 57.3% of net sales in the three months ended April 30, 2010, as compared to $7.0 million or 28.3% of net sales in the same quarter of the prior year. For the nine months ended April 30, 2010, the gross profit margin was $78.3 million or 53.7% of net sales as compared to $15.1 million or 14.8% of net sales for the nine months ended April 30, 2009. The increase in the gross profit margin for the three months ended April 30, 2010 as compared to April 30, 2009 was driven by an increase in revenue. The increase in the gross profit margin for the nine months ended April 30, 2010 as compared to the nine months ended April 30, 2009 was primarily the result of increased net sales coupled with lower cost of sales resulting from our merger-related integration savings, as well as the inventory-related provision of $19.3 million recorded in the nine months ended April 30, 2009 that did not recur in the nine months ended April 30, 2010.

Restructuring. Restructuring expense was $0.8 million or 1.4% of net sales and $2.0 million or 1.4% of net sales for the three and nine months ended April 30, 2010, respectively, as compared to $3.3 million or 13.4% of net sales and $21.8 million or 21.4% of net sales for the same periods in the prior year. The restructuring expense of $0.8 million recorded in the three months ended April 30, 2010 is a result of additional vacated space in our Milpitas facility. The expense incurred in the first six months of fiscal 2010 related to a change in sublease assumptions based on market conditions and future estimated cash flows related to certain of the Companys office locations, which were restructured during the second quarter of fiscal 2009, and employee termination-related costs associated with the downsizing of our Hillsboro office facility and Europe. The restructuring expense incurred in the three and nine months ended April 30, 2009 included employee termination-related severance and outplacement costs and post-employment benefits associated with the merger resulting from three separate restructuring actions announced in September 2008, January 2009 and April 2009. The expense incurred in the nine months ending April 30, 2009 also included costs associated with closing certain facilities.

Gain on extinguishment of debt, net. At the time of the completion of the merger, Credence had outstanding $122.5 million aggregate principal amount of 3.5% Convertible Senior Subordinated Notes due 2010 (Notes). In the three months ended April 30, 2010, we repurchased $32.4 million of principal amount of the outstanding notes at a discount to their par. The discount to the par resulted in a net gain on extinguishment of debt of approximately $0.6 million in the three months ended April 30, 2010. The results for the nine months ended April 30, 2010 also include the impact of repurchases made in the first quarter of fiscal 2010 that resulted in a net gain on extinguishment of approximately $0.3 million. We also recognized approximately $1.5 million and $2.1 million in the three and nine months ended April 30, 2010, respectively, of previously deferred gains from debt modifications under ASC 470 (EITF 96-19) recorded in prior periods. In the three and nine months ended April 30, 2009, we repurchased approximately $6.9 million and $78.9 million, respectively, of principal amount of the Notes at a discount to their par value. The discount to the par value resulted in a net gain on extinguishment of debt of approximately $1.0 million and $3.2 million in the three and nine months ended April 30, 2009.

Provision (benefit) for Income taxes. We recorded an income tax provision (benefit) of less than ($0.1) million and $0.2 million, respectively, for the three and nine months ended April 30, 2010 as compared to $0.2 million and $0.8 million, respectively, for the three and nine months ended April 30, 2009. The provisions were primarily due to foreign tax on earnings generated in foreign jurisdictions. As of April 30, 2010 and July 31, 2009, the total liability for unrecognized income tax benefits was $13.9 million and $13.7 million, respectively, of which $4.7 million and $4.4 million, if recognized, would favorably affect our income tax rate.

Net income (loss). Net income was $6.8 million, or $0.05 per basic and diluted share, in the three months ended April 30, 2010, as compared to net loss of $27.8 million, or ($0.22) per basic and diluted share, in the same quarter of the prior year. For the nine months ended April 30, 2010, our net income was $4.4 million, or $0.03 per basic and diluted share, as compared to a net loss of $127.7 million or $(1.06) per basic and diluted share for the nine months ended April 30, 2009. The $34.6 million and $132.1 million decrease in net loss in the three and nine mont

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