##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2006
 OR
 o
    
    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 000-51828
 EAGLE TEST SYSTEMS, INC.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    36-2917389(State of incorporation)
    
    (I.R.S. Employer Identification No.)2200 Millbrook Drive, Buffalo Grove, Illinois
    
    60089(Address of principal executive offices)
    
    (Zip Code)
 (847) 367-8282
 þ o
  o o þ
 o þ




---



##### 



Table of Contents
 EAGLE TEST SYSTEMS, INC.  (The Company)  INDEX
 PagePart I. Financial InformationItem 1. Financial StatementsCondensed Consolidated Balance Sheets as of June 30, 2006 (unaudited) and September 30, 2005
    
    
    3Condensed Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss)
(unaudited) for the three and nine months ended June 30, 2006 and 2005
    
    
    4Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended June
30, 2006 and 2005
    
    
    5Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    20Item 4. Controls and Procedures
    
    
    20Part II. Other InformationItem 1. Legal Proceedings
    
    
    21Item 1A. Risk Factors
    
    
    21Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    21Item 3. Defaults Upon Senior Securities
    
    
    22Item 4. Submission of Matters to a Vote of Security Holders
    
    
    22Item 5. Other Information
    
    
    22Item 6. Exhibits
    
    
    22Signatures
    
    
    23Exhibit Index
    
    
    24Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification Pursuant to 18 U.S.C. Section 1350302 Certification of Chief Executive Officer302 Certification of Chief Financial Officer906 Certification of CEO and CFO
  2




---



##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 EAGLE TEST SYSTEMS, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands, except share and per share data)
 June 30,
    
    
    September 30,2006
    
    
    2005(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    37,914
    
    
    $
    9,976Marketable securities
    
    
    25,700
    
    
    
    12,700Accounts receivable, net of allowances of $1,393 and $1,240
    
    
    19,897
    
    
    
    9,202Inventories
    
    
    22,601
    
    
    
    17,707Deferred income taxes
    
    
    5,969
    
    
    
    3,426Prepaid expenses and other current assets
    
    
    1,876
    
    
    
    548Total current assets
    
    
    113,957
    
    
    
    53,559Property, plant and equipment, net
    
    
    11,723
    
    
    
    12,135Other assets
    
    
    692
    
    
    
    477Total assets
    
    $
    126,372
    
    
    $
    66,171LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Current liabilities:Accounts payable
    
    $
    7,901
    
    
    $
    1,523Current portion of long-term debt
    
    
    258
    
    
    
    249Deferred revenue
    
    
    8,606
    
    
    
    3,419Accrued compensation and related liabilities
    
    
    4,414
    
    
    
    3,103Accrued income taxes
    
    
    4,004
    
    
    
    767Other accrued expenses
    
    
    2,872
    
    
    
    2,881Total current liabilities
    
    
    28,055
    
    
    
    11,942Long-term liabilities:Long-term debt, less current portion
    
    
    448
    
    
    
    29,484Redeemable warrants
    
    
    
    
    
    
    2,667Deferred income taxes
    
    
    1,110
    
    
    
    1,272Other long-term liabilities
    
    
    429
    
    
    
    393Total long-term liabilities
    
    
    1,987
    
    
    
    33,816Series A convertible preferred stock, par value $0.01 per share, no
shares authorized, issued, or outstanding as of June 30, 2006, 3,437
shares authorized and 3,436 shares issued as of September 30, 2005
    
    
    
    
    
    
    65,000Stockholders equity (deficit):Preferred stock, par value $0.01 per share 10,000,000 shares
authorized, no shares issued or outstanding as of June 30, 2006 and
no shares authorized, issued or outstanding as of September 30, 2005
    
    
    
    
    
    
    Common stock, par value $0.01 per share, 90,000,000 and 15,495,325
shares authorized as of June 30, 2006 and September 30, 2005,
respectively; 20,655,283 and 5,396,248 shares outstanding as of June
30, 2006 and September 30, 2005, respectively
    
    
    207
    
    
    
    54Additional paid in capital
    
    
    138,899
    
    
    
    156Accumulated deficit
    
    
    (42,776
    )
    
    
    (44,665
    )Deferred stock compensation expense
    
    
    
    
    
    
    (132
    )Total stockholders equity (deficit)
    
    
    96,330
    
    
    
    (44,587
    )Total liabilities and stockholders equity (deficit)
    
    $
    126,372
    
    
    $
    66,171
  3




---



##### Table of Contents



EAGLE TEST SYSTEMS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
 (In thousands, except share and per share data)
 Three Months
    
    
    Nine MonthsEnded June 30,
    
    
    Ended June 30,(unaudited)
    
    
    (unaudited)2006
    
    
    2005
    
    
    2006
    
    
    2005Net revenue
    
    $
    36,779
    
    
    $
    6,163
    
    
    $
    87,791
    
    
    $
    34,954Cost of goods sold
    
    
    12,256
    
    
    
    3,293
    
    
    
    28,605
    
    
    
    16,000Gross profit
    
    
    24,523
    
    
    
    2,870
    
    
    
    59,186
    
    
    
    18,954Operating expensesSelling, general and administrative
    
    
    8,014
    
    
    
    4,971
    
    
    
    21,259
    
    
    
    14,630Research and development
    
    
    2,088
    
    
    
    1,701
    
    
    
    6,555
    
    
    
    5,800Operating income (loss)
    
    
    14,421
    
    
    
    (3,802
    )
    
    
    31,372
    
    
    
    (1,476
    )Interest expense
    
    
    71
    
    
    
    982
    
    
    
    3,481
    
    
    
    2,928Other (income) and expenseIncome from marketable securities
    
    
    (615
    )
    
    
    (88
    )
    
    
    (1,097
    )
    
    
    (381
    )Investment impairments
    
    
    
    
    
    
    
    
    
    
    24
    
    
    
    Increase (decrease) in value of warrants
    
    
    
    
    
    
    57
    
    
    
    5,466
    
    
    
    (384
    )Other (income) expense, net
    
    
    33
    
    
    
    3
    
    
    
    21
    
    
    
    (288
    )Income (loss) before taxes
    
    
    14,932
    
    
    
    (4,756
    )
    
    
    23,477
    
    
    
    (3,351
    )Provision (benefit) for income taxes
    
    
    5,260
    
    
    
    (3,826
    )
    
    
    10,158
    
    
    
    (3,427
    )Net income (loss)
    
    $
    9,672
    
    
    $
    (930
    )
    
    $
    13,319
    
    
    $
    76Net income (loss) per share, basic
    
    $
    0.47
    
    
    $
    (0.17
    )
    
    $
    0.16
    
    
    $
    0.01Net income (loss) per share, diluted
    
    $
    0.46
    
    
    $
    (0.17
    )
    
    $
    0.09
    
    
    $
    (0.11
    )Weighted average shares outstanding, basic
    
    
    20,651,934
    
    
    
    5,396,248
    
    
    
    11,782,483
    
    
    
    5,396,248Weighted average shares outstanding, diluted
    
    
    20,937,003
    
    
    
    5,396,248
    
    
    
    16,973,554
    
    
    
    14,512,892Comprehensive income (loss):Net income (loss)
    
    $
    9,672
    
    
    $
    (930
    )
    
    $
    13,319
    
    
    $
    76Unrealized gain on marketable securities, net
of taxes
    
    
    
    
    
    
    57
    
    
    
    
    
    
    
    109Comprehensive income (loss)
    
    $
    9,672
    
    
    $
    (873
    )
    
    $
    13,319
    
    
    $
    185Income (loss) available to common stockholders:Net income (loss)
    
    $
    9,672
    
    
    $
    (930
    )
    
    $
    13,319
    
    
    $
    76Retained earnings adjustment for redemption of
redeemable preferred stock
    
    
    
    
    
    
    
    
    
    
    (11,430
    )
    
    
    Net income allocated to preferred stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (47
    )Income (loss) available to common stockholders
    
    $
    9,672
    
    
    $
    (930
    )
    
    $
    1,889
    
    
    $
    29
  4




---



##### Table of Contents



EAGLE TEST SYSTEMS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 Nine Months EndedJune 30,2006
    
    
    2005(unaudited)Cash flows from operating activities:Net income
    
    $
    13,319
    
    
    $
    76Adjustments to reconcile net income to net cash provided by (used
in) operating activities:Depreciation and amortization
    
    
    2,253
    
    
    
    1,443Investment impairments
    
    
    24
    
    
    
    Realized (gain) loss on sale of marketable securities
    
    
    
    
    
    
    (72
    )Gain on sale of property and equipment
    
    
    
    
    
    
    (246
    )Accretion of discount and redemption premium on long-term debt
    
    
    1,752
    
    
    
    211Increase (decrease) in value of warrants
    
    
    5,466
    
    
    
    (384
    )Non cash compensation related to stock options
    
    
    285
    
    
    
    35Deferred income taxes
    
    
    (2,705
    )
    
    
    3,495Changes in operating assets and liabilities:Accounts receivable
    
    
    (10,695
    )
    
    
    15,480Inventories
    
    
    (4,894
    )
    
    
    3,762Prepaid expenses and other current assets
    
    
    (1,328
    )
    
    
    (387
    )Other assets
    
    
    (239
    )
    
    
    (46
    )Accounts payable
    
    
    6,378
    
    
    
    (5,175
    )Deferred revenue
    
    
    5,187
    
    
    
    (9,423
    )Accrued compensation and related liabilities
    
    
    1,311
    
    
    
    (4,369
    )Accrued income taxes
    
    
    3,237
    
    
    
    (6,694
    )Other accrued expenses
    
    
    (9
    )
    
    
    (1,833
    )Other liabilities
    
    
    35
    
    
    
    2Net cash provided by (used in) operating activities
    
    
    19,377
    
    
    
    (4,125
    )Cash flows from investing activities:Purchases of marketable securities
    
    
    (13,000
    )
    
    
    (26
    )Sale of property and equipment
    
    
    
    
    
    
    659Capital expenditures
    
    
    (1,840
    )
    
    
    (5,654
    )Net cash used in investing activities
    
    
    (14,840
    )
    
    
    (5,021
    )Cash flows from financing activities:Payments of long-term debt
    
    
    (30,595
    )
    
    
    Payments of capital lease obligations
    
    
    (184
    )
    
    
    (82
    )Redemption of redeemable preferred stock
    
    
    (32,500
    )
    
    
    Proceeds from issuance of common stock, net of issuance costs
    
    
    86,680
    
    
    
    Net cash provided by (used in) financing activities
    
    
    23,401
    
    
    
    (82
    )Net increase (decrease) in cash and cash equivalents
    
    
    27,938
    
    
    
    (9,228
    )Cash and cash equivalents at beginning of period
    
    
    9,976
    
    
    
    17,303Cash and cash equivalents at end of period
    
    $
    37,914
    
    
    $
    8,075
  5




---



##### Table of Contents



EAGLE TEST SYSTEMS, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except share and per share data)
 (Unaudited)
 1. The Company
  2. Summary of Significant Accounting Policies
 Basis of Presentation
   Preparation of Financial Statements and Use of Estimates
  Unaudited Interim Results
  6




---



##### Table of Contents



EAGLE TEST SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(In thousands, except share and per share data)
(Unaudited)
 Stock Options
  Accounting for Stock Issued to Employees .
 3. Inventories
  June 30,
    
    
    September 30,2006
    
    
    2005Raw materials
    
    $
    6,790
    
    
    $
    7,683Work-in-process
    
    
    7,698
    
    
    
    1,865Finished goods
    
    
    5,965
    
    
    
    7,434Inventory at customers under purchase orders
    
    
    2,148
    
    
    
    725$
    22,601
    
    
    $
    17,707
  7




---



##### Table of Contents



EAGLE TEST SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(In thousands, except share and per share data)
(Unaudited)
 4. Initial Public Offering
  Recapitalization
   Common Stock
    Preferred Stock
 Series A Convertible Preferred Stock/Redeemable Preferred Stock
  8




---



##### Table of Contents



EAGLE TEST SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(In thousands, except share and per share data)
(Unaudited)
 4. Initial Public Offering (continued)
 Long-term Debt
 Senior Subordinated Convertible Notes/ Senior Subordinated Notes
  Warrants
  5. Long-Term Debt
  June 30,
    
    
    September 30,2006
    
    
    2005Senior Subordinated Convertible Notes, net of discount of $1,157 at September 30, 2005
    
    $
    
    
    
    $
    28,843Capital lease obligations
    
    
    706
    
    
    
    890$
    706
    
    
    $
    29,733Less current portion of capital lease obligations
    
    
    (258
    )
    
    
    (249
    )$
    448
    
    
    $
    29,484
  6. Net Income Per Share
   9




---



##### Table of Contents



EAGLE TEST SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(In thousands, except share and per share data)
(Unaudited)
  Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net income (loss)
    
    $
    9,672
    
    
    $
    (930
    )
    
    $
    13,319
    
    
    $
    76Basic EPS:Adjustments to income:Retained earnings
adjustment for
conversion of
redeemable preferred
stock
    
    
    
    
    
    
    
    
    
    
    (11,430
    )*
    
    
    Net income allocated to
convertible preferred
shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (47
    )Income (loss) available to
common stockholders
    
    
    9,672
    
    
    
    (930
    )
    
    
    1,889
    
    
    
    29Weighted-average common shares
outstanding
    
    
    20,651,934
    
    
    
    5,396,248
    
    
    
    11,782,483
    
    
    
    5,396,248Basic net income (loss) per common
share
    
    $
    0.47
    
    
    $
    (0.17
    )
    
    $
    0.16
    
    
    $
    0.01Diluted EPS:Adjustments to income:Dividend on redeemable
preferred stock  as
converted
    
    $
    
    
    
    $
    
    **
    
    $
    (406
    )
    
    $
    (1,234
    )Warrant value adjustment
    
    
    
    
    
    
    
    **
    
    
    
    **
    
    
    (384
    )Income (loss) available to
common stockholders
    
    $
    9,672
    
    
    $
    (930
    )
    
    $
    1,483
    
    
    $
    (1,542
    )Weighted-average common shares
outstanding
    
    
    20,651,934
    
    
    
    5,396,248
    
    
    
    11,782,483
    
    
    
    5,396,248Plus impact of convertible
preferred stock and warrants and
stock options, as applicable
    
    
    285,069
    
    
    
    
    **
    
    
    5,191,071
    
    
    
    9,116,644Diluted common shares
    
    
    20,937,003
    
    
    
    5,396,248
    
    
    
    16,973,554
    
    
    
    14,512,892Diluted net income (loss) per common share
    
    $
    0.46
    
    
    $
    (0.17
    )
    
    $
    0.09
    
    
    $
    (0.11
    )
 
 *
    
    The difference between the fair market value of the Redeemable Preferred Stock at date of issue of $21,070 and the
redemption price of $32,500 was charged to retained earnings in March 2006, when the redemption occurred. This
adjustment is used to reduce net income to arrive at income available to common stockholders for purposes of calculating
earnings per common share in accordance with EITF Topic D-42-The Effect on the Calculation of Earnings per Share for
the Redemption or Induced Conversion of Preferred Stock.**
    
    This element of the diluted EPS computation is not applicable since the impact on the computation would be anti-dilutive. 10




---



##### Table of Contents



EAGLE TEST SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(In thousands, except share and per share data)
(Unaudited)
 7. Income Taxes
  Accounting for Uncertainty in Income Taxesan
interpretation of FASB Statement No. 109,
 8. Stock Option Plans
   WeightedOutstanding
    
    
    AverageOptions
    
    
    Exercise PriceOutstanding at September 30, 2005
    
    
    703,111
    
    
    $
    8.29Granted
    
    
    350,000
    
    
    
    10.84Exercised
    
    
    (13,750
    )
    
    
    6.73Forfeited
    
    
    (274,861
    )
    
    
    8.89Outstanding at June 30, 2006
    
    
    764,500
    
    
    $
    9.27
  WeightedAverageGrant-DateNon-vested Options
    
    Options
    
    Fair ValueNon-vested at September 30, 2005
    
    
    
    
    
    $
    Granted
    
    
    350,000
    
    
    
    5.21Vested
    
    
    (47,639
    )
    
    
    3.69Forfeited
    
    
    
    
    
    
    Non-vested at June 30, 2006
    
    
    302,361
    
    
    $
    5.44
 11




---



##### Table of Contents



EAGLE TEST SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(In thousands, except share and per share data)
(Unaudited)
 8. Stock Option Plan (continued)
   Options Outstanding
    
    Options VestedWeighted-
    
    Weighted-
    
    
    
    
    
    Weighted-Average
    
    Average
    
    
    
    
    
    AverageExercise
    
    Number
    
    Remaining
    
    Exercise
    
    Number
    
    ExercisePrice
    
    Outstanding
    
    Life
    
    Price
    
    Exercisable
    
    Price$6.00-$7.00
    
    
    319,500
    
    
    
    8.41
    
    
    $
    6.32
    
    
    
    122,833
    
    
    $
    6.25$8.00-$10.00
    
    
    383,611
    
    
    
    8.83
    
    
    $
    9.92
    
    
    
    132,257
    
    
    $
    10.00703,111
    
    
    
    
    
    
    
    
    
    
    
    255,090
  Options Outstanding
    
    Options VestedWeighted-
    
    Weighted-
    
    
    
    
    
    Weighted-Average
    
    Average
    
    
    
    
    
    AverageExercise
    
    Number
    
    Remaining
    
    Exercise
    
    Number
    
    ExercisePrice
    
    Outstanding
    
    Life
    
    Price
    
    Exercisable
    
    Price$6.00-$7.00
    
    
    309,500
    
    
    
    8.08
    
    
    $
    6.56
    
    
    
    151,531
    
    
    $
    6.45$8.00-$10.00
    
    
    240,000
    
    
    
    8.33
    
    
    $
    9.46
    
    
    
    100,208
    
    
    $
    9.88$11.00-$13.00
    
    
    190,000
    
    
    
    9.64
    
    
    $
    12.58
    
    
    
    24,722
    
    
    $
    11.40$14.00-$16.00
    
    
    25,000
    
    
    
    9.83
    
    
    $
    15.80
    
    
    
    
    
    
    $
    764,500
    
    
    
    
    
    
    
    
    
    
    
    276,461
  9. Commitments and Contingencies
 Contingencies
   12




---



##### Table of Contents



EAGLE TEST SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(In thousands, except share and per share data)
(Unaudited)
 9. Commitments and Contingencies (continued)
 Product Warranty
   Product Warranty Activity
 Nine Months EndedJune 30,2006
    
    2005Balance at beginning of period
    
    $
    563
    
    
    $
    1,271Warranty expenditures
    
    
    (727
    )
    
    
    (1,142
    )Provisions for warranty
    
    
    987
    
    
    
    441Balance at end of period
    
    $
    823
    
    
    $
    570
 13




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Forward Looking Statements And Projections
 This Quarterly Report on Form 10-Q contains forward looking statements. Forward looking
statements relate to future events or our future financial performance. We generally identify
forward looking statements by terminology such as may, will, should, expects, plans,
anticipates, could, intends, target, projects, contemplates, believes, estimates,
predicts, potential or continue or the negative of these terms or other similar words. These
statements are only predictions. We have based these forward looking statements largely on our
current expectations and projections about future events and financial trends that we believe may
affect our business, results of operations and financial condition. The outcome of the events
described in these forward looking statements is subject to risks, uncertainties and other factors
described in Managements Discussion and Analysis of Financial Condition and Results of
Operations, and elsewhere in this Quarterly Report on Form 10-Q , and in the Risk Factors
contained in the Quarterly Report on Form 10-Q for the period ended March 31, 2006. Accordingly,
you should not rely upon forward looking statements as predictions of future events. We cannot
assure you that the events and circumstances reflected in the forward looking statements will be
achieved or occur, and actual results could differ materially from those projected in the forward
looking statements. The forward looking statements made in this Quarterly Report on Form 10-Q
relate only to events as of the date on which the statements are made. We undertake no obligation
to update any forward looking statement to reflect events or circumstances after the date on which
the statement is made or to reflect the occurrence of unanticipated events.
 Overview
        14




---



##### Table of Contents



Critical Accounting Policies and Estimates
   Revenue Recognition.
 
    
    we have a written sales agreement;
    
    delivery has occurred or services have been rendered;
    
    the price is fixed or determinable; and
    
    collectibility is reasonably assured.
    Inventory Reserves.
  Warranty Reserves.
 15




---



##### Table of Contents



Allowance for Sales Returns and Uncollectibles.
 Stock-Based Compensation.
  Income Taxes Accounting for Uncertainty in Income
Taxesan interpretation of FASB Statement No. 109,
 Results of Operations
  Three Months
    
    Nine MonthsEnded
    
    EndedJune 30,
    
    June 30,2006
    
    2005
    
    2006
    
    2005Net revenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of goods sold
    
    
    33.3
    
    
    
    53.4
    
    
    
    32.6
    
    
    
    45.8Gross profit
    
    
    66.7
    
    
    
    46.6
    
    
    
    67.4
    
    
    
    54.2Operating expensesSelling, general and administrative
    
    
    21.8
    
    
    
    80.7
    
    
    
    24.2
    
    
    
    41.8Research and development
    
    
    5.7
    
    
    
    27.6
    
    
    
    7.5
    
    
    
    16.6Operating income (loss)
    
    
    39.2
    
    
    
    (61.7
    )
    
    
    35.7
    
    
    
    (4.2
    )Interest expense
    
    
    0.2
    
    
    
    16.0
    
    
    
    4.0
    
    
    
    8.4Increase (decrease) in value of warrants
    
    
    
    
    
    
    0.9
    
    
    
    6.2
    
    
    
    (1.1
    )Other (income)
    
    
    (1.6
    )
    
    
    (1.4
    )
    
    
    (1.2
    )
    
    
    (1.9
    )Income (loss) before taxes
    
    
    40.6
    
    
    
    (77.2
    )
    
    
    26.7
    
    
    
    (9.6
    )Provision (benefit) for income taxes
    
    
    14.3
    
    
    
    (62.1
    )
    
    
    11.5
    
    
    
    (9.8
    )Net income (loss)
    
    
    26.3
    %
    
    
    (15.1
    )%
    
    
    15.2
    %
    
    
    0.2
    %
  Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005United States
    
    $
    14,642
    
    
    
    39.8
    %
    
    $
    3,948
    
    
    
    64.1
    %
    
    $
    27,219
    
    
    
    31.0
    %
    
    $
    20,288
    
    
    
    58.0
    %Malaysia
    
    
    13,490
    
    
    
    36.7
    
    
    
    1,032
    
    
    
    16.7
    
    
    
    34,736
    
    
    
    39.6
    
    
    
    3,674
    
    
    
    10.5Other
    
    
    8,647
    
    
    
    23.5
    
    
    
    1,183
    
    
    
    19.2
    
    
    
    25,836
    
    
    
    29.4
    
    
    
    10,992
    
    
    
    31.5Total
    
    $
    36,779
    
    
    
    100.0
    %
    
    $
    6,163
    
    
    
    100.0
    %
    
    $
    87,791
    
    
    
    100
    %
    
    $
    34,954
    
    
    
    100
    %
 16




---



##### Table of Contents



Three Months
    
    Nine MonthsEnded
    
    EndedJune 30,
    
    June 30,2006
    
    2005
    
    2006
    
    2005AMI Semiconductor, Inc.
    
    
    *
    %
    
    
    11.7
    %
    
    
    *
    %
    
    
    *
    %Intersil Corporation
    
    
    10.4
    
    
    
    *
    
    
    
    *
    
    
    
    *National Semiconductor Corporation
    
    
    *
    
    
    
    11.9
    
    
    
    10.2
    
    
    
    12.4Texas Instruments Incorporated
    
    
    55.0
    
    
    
    29.6
    
    
    
    51.4
    
    
    
    35.5
 
 *
    
    Less than 10%. Comparison of Three and Nine Months Ended June 30, 2006 and 2005
 Net Revenue.
  Gross Profit.
  Selling, General and Administrative.
  Research and Development.
 17




---



##### Table of Contents



Interest Expense.
  Increase (Decrease) in Value of Warrants.
  Other (Income) and Expense.
  Provision (benefit) for Income Taxes.
  Liquidity and Capital Resources
   18




---



##### Table of Contents



19




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
   
 Item 4. Controls and Procedures
   20




---



##### Table of Contents



Part II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 (a)
    
    Not applicable.(b)
    
    On March 8, 2006, our registration statement on Form S-1 (Registration No. 333-130521)
was declared effective for our initial public offering, pursuant to which we offered and
sold 6,130,000 shares of common stock and received net proceeds of approximately $88.7
million. We used these proceeds to repurchase all of our senior subordinated notes and to
redeem all outstanding shares of our redeemable preferred stock, and to pay offering
related expenses. As of March 31, 2006, we retained approximately $23.6 million of these
net proceeds, none of which were used during the three month period ended June 30, 2006.
We intend to use the remaining $23.6 million of the net proceeds from our initial public
offering for general corporate purposes, including working capital and possible
acquisitions and investments. We currently have no agreements or commitments with respect
to any acquisitions or investments and we do not currently have any acquisitions or
investments planned. Pending specific application of our net proceeds, we plan to invest
our net proceeds in government securities and other short-term, investment-grade,
marketable securities.(c)
    
    Not applicable
 21




---



##### Table of Contents



Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
  22




---



##### Table of Contents



SIGNATURES
  EAGLE TEST SYSTEMS, INC.Date: August 11, 2006
    By:
    /s/ Leonard A. FoxmanLeonard A. FoxmanChief Executive Officer and President 23




---



##### Table of Contents



EXHIBIT INDEX
  Exhibit No.
    
    Description31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer.31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer.32.1
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, by Chief Executive Officer and Chief Financial Officer.
 24