NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. THE COMPANY

Xcerra Corporation (“Xcerra” or the “Company”), formerly known as LTX-Credence Corporation, is a global provider of test and handling capital equipment, interface products, test fixtures, and services to the semiconductor, industrial, and electronics manufacturing industries. The Company designs, manufacturers, markets and services systems and products that address the broad, divergent requirements of the mobility, industrial, medical, automotive and consumer end markets, offering a comprehensive portfolio of solutions and technologies, and a global network of strategically deployed applications and support resources. Xcerra operates in the semiconductor and electronics manufacturing test markets and is the parent company to the atg-Luther & Maelzer, Everett Charles Technologies, LTX-Credence and Multitest businesses. The Company has a broad spectrum of semiconductor and printed circuit board (“PCB”) test expertise which enables it to drive innovative new products and services and deliver to customers fully integrated semiconductor test solutions.

Semiconductor designers and manufacturers worldwide use the Company’s test and handling equipment and interface products to test their devices during the manufacturing process. The Company’s interface products include the design, manufacture and marketing of load boards, contactors, and pins used in various types of test equipment, as well as in a wide variety of commercial and consumer applications. After testing, these semiconductor devices are incorporated into a wide range of products, including personal and tablet computers, mobile internet equipment such as wireless access points and interfaces, broadband access products such as cable modems and set top boxes, personal communication and entertainment products such as mobile phones and personal digital music players, consumer products such as televisions, videogame systems and digital cameras, automobile electronics and power management devices used in portable and automotive electronics. The Company also designs, manufactures and markets PCB test systems used in the testing of pre-assembly PCBs. These testers are used to verify the quality of the PCB prior to the installation of components. The types of PCBs that are tested using the Company’s systems include a diverse set of electronic products including network servers, personal computers, tablet computers and mobile phones. The Company’s test fixture products include the design, manufacture, and marketing of in-circuit and functional-circuit test fixtures for testing assembled PCBs. The Company also sells hardware and software support and maintenance services for its products.

Unless otherwise noted, the historical financial results in this quarterly report on Form 10-Q do not give effect to the completion of the Company’s purchase of assets (the “Dover Acquisition”) from Dover Printing & Identification, Inc. (“Dover”) and its specified affiliates used exclusively or primarily in connection with Dover’s Everett Charles Technologies (including atg L&M) and Multitest businesses on December 1, 2013 (collectively, the “Acquired Businesses”). See Note 3 for additional information related to the Dover Acquisition.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). These footnotes condense or omit information and disclosures which substantially duplicate information provided in the Company’s latest audited financial statements. These unaudited consolidated financial statements should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2013. In the opinion of management, these unaudited consolidated financial statements reflect all adjustments, including normal recurring accruals, necessary for a fair presentation of the results for the interim periods presented. The operating results for the three and nine months ended April 30, 2014 are not necessarily indicative of future trends or the Company’s results of operations for the entire fiscal year ending July 31, 2014.

These unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation.

Revenue Recognition

The Company recognizes revenue based on guidance provided in Topic 605, Revenue Recognition , to the Financial Accounting Standards Board Codification (“FASB ASC”) and Accounting Standards Update 2009-13, Multiple-Deliverable Revenue Arrangements (“ASU 2009-13”) . The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller’s price is fixed or determinable and collectability is reasonably assured.

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Revenue related to product sales is recognized when: (a) the Company has a written sales agreement; (b) delivery has occurred or service has been rendered; (c) the price is fixed or determinable; (d) collectability is reasonably assured; (e) the product delivered is a 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. When sales to a customer involve multiple elements, revenue is recognized of 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 customer’s application, (4) the delivered item(s) has value to the customer on a stand-alone basis, and (5) if the arrangement includes 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. The arrangement consideration, or the amount of revenue to be recognized on each separate unit of accounting, is allocated at the inception of the arrangement to all deliverables on the basis of their relative selling price.

Revenue related to spare parts is recognized on shipment.

Revenue related to maintenance and service contracts is recognized ratably over the duration of the contracts. Net service sales as presented in the Company’s Consolidated Statement of Operations and Comprehensive Income (Loss) includes revenue associated with LTX-Credence maintenance and service contracts only.

The Company establishes inventory reserves when conditions exist that indicate inventory may be in excess of anticipated demand or is obsolete based upon assumptions about future demand for the Company’s products or market conditions. The Company regularly evaluates the ability to realize the value of inventory based on a combination of factors including forecasted sales or usage, estimated product end of life dates, estimated current and future market value, and new product introductions.

Purchasing and usage alternatives are also explored to mitigate inventory exposure. When recorded, reserves are intended to reduce the carrying value of inventory to its net realizable value. As of April 30, 2014 and July 31, 2013, inventory was stated net of inventory reserves of $43.9 million and $41.8 million, respectively. If actual demand for products deteriorates or market conditions are less favorable than projected, additional inventory reserves may be required. Such reserves are not reversed until the related inventory is sold or otherwise disposed of.

Goodwill and Other Intangibles

The Company performs its annual goodwill impairment test as required under the provisions of Topic 350-10, Intangibles—Goodwill and Other to the FASB ASC on July 31 of each fiscal year unless interim indicators of impairment exist. Goodwill is considered to be impaired when the net book value of a reporting unit exceeds its estimated fair value. The Company’s goodwill represents the excess of acquisition costs over estimated fair value of net assets acquired from StepTech, Inc on June 10, 2003, and from the Company’s merger with Credence Systems Corporation (“Credence”) on August 29, 2008. There was no goodwill associated with the acquisition of the ECT and Multitest businesses on December 1, 2013. As a result of the recent Dover Acquisition, the Company is still evaluating the impact on the structure of the reporting units of the combined company. During the three months ended April 30, 2014, the Company did not identify any triggering events that would result in an interim test of goodwill.

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Amortizable intangible assets which relate to the acquisition of the ECT and Multitest businesses and the Credence merger, consist of the following, and are included in intangibles asset, net on the Company’s Consolidated Balance Sheets:

Intangible assets, other than trademarks owned by the Company, are amortized based upon the pattern of estimated economic use over their estimated useful lives. The weighted average estimated remaining useful life over which these intangible assets will be amortized is 2.5 years.

The Company expects amortization for these intangible assets to be:

Also included in intangible assets, net on the Company’s Consolidated Balance Sheets at April 30, 2014 is $5.0 million of trademarks which were acquired in the Dover Acquisition. These assets have indefinite lives and are therefore not subject to amortization by the Company.

Impairment of Long-Lived Assets Other Than Goodwill and Indefinite Lived Intangibles

On an ongoing basis, management reviews the value of and period of amortization or depreciation of the Company’s long-lived assets. In accordance with Topic 360, Property, Plant and Equipment , to the FASB ASC, the Company reviews whether impairment losses exist on its long-lived assets other than goodwill when indicators of impairment are present. During this review, the Company assesses future cash flows and re-evaluates the significant assumptions used in determining the original cost of long-lived assets other than goodwill. Although the assumptions may vary, they generally include revenue growth, operating results, cash flows and other

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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 impairment amount recognized is based upon a determination of the impaired asset’s fair value compared to its carrying value. As of April 30, 2014 and July 31, 2013 there were no indicators that required the Company to conduct a recoverability test as of those dates.

Foreign Currency Remeasurement

The financial statements of the Company’s foreign subsidiaries are remeasured in accordance with Topic 830, Foreign Currency Matters, to the FASB ASC. The Company’s functional currency is the U.S. dollar. Accordingly, the Company’s foreign subsidiaries remeasure monetary assets and liabilities at month-end exchange rates while long-term non-monetary items are remeasured at historical rates. Income and expense accounts are remeasured at the average rates in effect during the month. Net gains or losses resulting from foreign currency remeasurement and transaction gains or losses are included in the consolidated results of operations as a component of other expense, net, and were not significant for the three and nine months ended April 30, 2014 and 2013. The functional currency of each of the Acquired Businesses was historically the local currency and net gains or losses resulting from foreign currency remeasurement and translation gains or losses are recorded in stockholders’ equity as accumulated other comprehensive income (loss). The Company recorded $0.8 million of net foreign currency translation gain for the period December 1, 2013 to April 30, 2014. The Company is in the process of reevaluating its functional currency.

Product Warranty Costs

Certain of the Company’s products are sold with warranty provisions that require it to remedy deficiencies in quality or performance of products over a specified period of time at no cost to its customers. The Company generally offers a warranty for most of its products, the standard terms and conditions of which are based on the product sold and the customer. For all products sold, subject to warranty, the Company accrues a liability for the estimated cost of standard warranty at the time of product shipment. Factors that impact the expected product warranty liability include the number of installed products, historical and anticipated product failure rates, material usage and service labor costs. The Company periodically assesses the adequacy of its recorded product warranty liability and adjusts it as necessary.

The following table shows the change in the Company’s product warranty liability, as required by Topic 460, Guarantees , to the FASB ASC for the nine months ended April 30, 2014 and 2013:

Engineering and Product Development Expenses

The Company expenses all engineering, research and development expenses as incurred.

Shipping and Handling Costs

Shipping and handling costs are included in cost of sales in the Company’s Consolidated Statement of Operations and Comprehensive Income (Loss ). Shipping and handling costs were insignificant for the three and nine months ended April 30, 2014 and 2013.

Income Taxes

Provision for income taxes relates principally to operating results of foreign entities in jurisdictions primarily in Asia and Europe and the release of reserves due to statute of limitation expirations.

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As of April 30, 2014 and July 31, 2013, the Company’s total liability for unrecognized income tax benefits was $6.6 million and $6.8 million, respectively (of which $3.0 million and $3.2 million, if recognized, would impact the Company’s income tax rate). The Company recognizes interest and penalties related to uncertain tax positions as a component of provision for income taxes. As of April 30, 2014 and July 31, 2013, the Company had accrued approximately $0.9 million for potential payment of accrued interest and penalties.

The Company conducts business globally and, as a result, the Company and its subsidiaries or branches file income tax returns in the U.S. federal jurisdiction and various U.S. state and foreign jurisdictions. In the normal course of business the Company is subject to examination by taxing authorities throughout the world, including such major jurisdictions as the United States, Singapore, Malaysia, China, France and Germany. With few exceptions, the Company is no longer subject to U.S. federal, state and local or non-U.S. income tax examinations for the years prior to 1998.

As a result of completion of the Company’s merger with Credence Systems Corporation (“Credence”) on August 29, 2008, a greater than 50% cumulative ownership change in both entities triggered a significant limitation in net operating loss carryforward utilization. The Company’s ability to use operating and acquired U.S. net operating loss and credit carryforwards is subject to annual limitation as defined in sections 382 and 383 of the Internal Revenue Code. The Company currently estimates that the annual limitation on its use of net operating losses generated through August 29, 2008 will be approximately $10.1 million which, based on currently enacted federal carryforward periods, limits the amount of net operating losses able to be used to approximately $202.0 million. The Company currently has a full valuation allowance against the U.S. net operating loss and credit carryforwards, and will continue to assess the realizability of these carryforwards in subsequent periods.

Accounting for Stock-Based Compensation

The Company has equity awards outstanding under various stock-based compensation plans, including the Company’s 2010 Stock Plan, as amended on November 26, 2010 (“2010 Plan”), the Company’s 2004 Stock Plan, the Company’s 2001 Stock Plan, the Company’s 1999 Stock Plan, and the Company’s 1993 Stock Plan. In addition, the Company assumed and has made awards that remain outstanding under the StepTech, Inc. Stock Option Plan as part of its acquisition of StepTech, Inc. (“StepTech”) in 2003 and the Credence 2005 Stock Incentive Plan in connection with the Credence merger. The Company can only grant new awards under the 2010 Plan.

The Company recognizes stock-based compensation expense for its equity awards in accordance with the provisions of Topic 718, Compensation—Stock Compensation to the FASB ASC (“Topic 718”). Under Topic 718, the Company is required to recognize as expense the estimated fair value as of the grant date of all share-based payments to employees. In accordance with this standard, the Company has elected to recognize the compensation cost of each service-based award on a straight-line basis over the vesting period of such award. The Company recorded stock-based compensation expense of approximately $1.3 million and $3.7 million for the three and nine months ended April 30, 2014, in connection with its share-based payments.

On February 27, 2014, the Company’s Board of Directors and Compensation Committee granted 300,000 restricted stock unit awards to certain employees, all of which are service-based. Of these awards, 96,000 vest 25% in each of the next four years. The remaining 204,000 awards vest 50% on December 1, 2014 and 50% on December 1, 2015. The Company will recognize the stock-based compensation expense related to these awards over their vesting periods.

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Net loss per share

Basic net loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding for the period. Because the Company was in a net loss position for all periods presented, diluted loss per share equals basic loss per share. The Company’s net loss and diluted loss per share for the three and nine months ended April 30, 2014 and 2013 is as follows:

For the three and nine months ended April 30, 2014 and 2013, options to purchase approximately 0.5 million shares and 1.0 million shares, respectively, of common stock were not included in the calculation of diluted net loss per share because their inclusion would have been anti-dilutive. These options could be dilutive in the future. The calculation of diluted net loss per share also excludes 2.2 million and 2.0 million restricted stock units, respectively, for the periods ended April 30, 2014 and 2013 in accordance with the contingently issuable shares guidance of Topic 260, Earnings Per Share , to the FASB ASC.

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 operating cash. Marketable securities consist primarily of debt securities that are classified as available-for-sale and held-to-maturity, in accordance with Topic 320, Investments—Debt and Equity Securities , to the FASB ASC. The Company also holds certain investments in commercial paper or certificates of deposit that it considers to be held-to-maturity, based on their maturity dates. Securities available-for-sale includes corporate, asset-backed, mortgage-backed, 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 to liquidate any security that the Company holds to fund operations over the next twelve months if necessary and as such has classified these securities as short-term. Governmental obligations include U.S. Government, State, Municipal and Federal Agency securities. The Company has an overnight sweep investment arrangement with its bank for certain accounts to allow the Company to enter into diversified overnight investments via a money market mutual fund which generally provides a higher investment yield than a regular operating account.

Gross unrealized gains and losses on investments held by the Company for the three and nine months ended April 30, 2014 and 2013 were not significant. Unrealized gains and losses on investments held by the Company are reflected as a separate component of comprehensive income (loss) and are included in Stockholders’ Equity. Realized gains, losses and interest on investments held by the Company are included in interest income in the Consolidated Statements of Operations and Comprehensive Income (Loss). The Company analyzes its investments for impairment on a quarterly basis or upon occurrence of indicators of possible impairment. There were no other temporary impairment losses in the three and nine months ended April 30, 2014 or 2013.

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Property and Equipment

Property and equipment acquired 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. Equipment spares used for service and internally manufactured systems used for testing components and engineering projects are recorded at cost and depreciated over three to seven years. Repair and maintenance costs that do not extend the lives of property and equipment are expensed as incurred. The Company’s property and equipment as of April 30, 2014 and July 31, 2013 are summarized as follows:

3. BUSINESS COMBINATION

Acquisition of Everett Charles Technologies LLC and Multitest

On September 6, 2013, in connection with the Dover Acquisition, the Company entered into a Master Sale and Purchase Agreement (the “Purchase Agreement”) with Dover and, solely for the limited purposes set forth in the Purchase Agreement, Dover Corporation (“Dover Parent”). Pursuant to the Purchase Agreement, the Company agreed to purchase from Dover or its specified affiliates (collectively, the “Sellers”) all assets of the Sellers used exclusively or primarily in connection with the research and development, design, manufacture, assembly, production, marketing, distribution, sale and repair of probes, assembled board and bare board test equipment, and fixturing products and the provision of services related thereto (the “ECT Business,” and such assets and intellectual property, the “ECT Assets”) and all assets of the Sellers used exclusively or primarily in connection with the research and development, design, manufacture, assembly, production, marketing, distribution, sale and repair of semiconductor test handlers, semiconductor test contactors and sockets and semiconductor test load boards, and the provision of services related thereto (the “MT Business,” and such assets and intellectual property, the “MT Assets”). The Company also agreed to assume certain specified liabilities of the Sellers related primarily or exclusively to the Acquired Businesses or the Acquired Assets (as defined below). Under the Purchase Agreement, the Company also agreed to acquire all of the issued and outstanding capital stock and other equity interests of specified indirect subsidiaries of Dover Parent and its affiliates engaged in the Acquired Businesses, including Everett Charles Technologies LLC (such capital stock and other equity interests, the “Acquired Shares”). The ECT Assets, the MT Assets and the Acquired Shares are collectively referred to as the “Acquired Assets.”

On December 1, 2013, the Company completed the Dover Acquisition pursuant to the Purchase Agreement. Pursuant to the Purchase Agreement, in connection with the closing of the Dover Acquisition (the “Closing”), the Company paid the Sellers an aggregate purchase price of $93.5 million, of which $73.5 million was paid in cash through a combination of existing cash-on-hand and bank debt and $20.0 million was paid by the issuance of promissory notes by the Company to certain Sellers in the original aggregate principal amount of $20.0 million. Pursuant to the Purchase Agreement, the cash purchase price was increased by $11.5 million, an amount equal to specified cash balances held by the Acquired Businesses as of the Closing and decreased by an amount equal to any acquired indebtedness and the amount of certain transaction costs and employee related liabilities of the Acquired Businesses as of the Closing. The cash purchase price was also increased by $3.2 million for a working capital adjustment as specified in the Purchase Agreement.

Subject to certain conditions, the original principal amount of the promissory notes are subject to reduction upon written certification from the Company to Dover prior to January 1, 2015 of certain specified events related to the Company’s relocation from or refurbishment of certain properties of the Acquired Businesses, or the prepayment of the promissory notes in full prior to such date. In January 2014, the Company executed leases for two new facilities, and in February 2014, the Company provided Dover with written certification of a planned relocation from certain properties of the Acquired Businesses. Consequently, the original principal amount of the promissory note issued to Dover was reduced by $2.0 million. The promissory notes accrue interest on the unpaid balance for each day that they remain outstanding after December 1, 2014 at a per annum rate equal to the London Interbank Offered Rate plus 10%, and may be prepaid by the Company at any time without penalty prior to May 1, 2019.

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After giving effect to the post-Closing purchase price adjustments described above, and including the principal amount reduction of the promissory note to Dover, the aggregate purchase price paid to the Sellers as of the date of this report is $106.0 million.

The Company, Dover, and certain of their affiliates, also entered into a transition services agreement, an intellectual property termination agreement and a license agreement which govern certain ongoing relationships between the Company and Dover and their respective affiliates following the Closing.

In accordance with Topic 805, Business Combinations, to the FASB ASC and based on the terms of the Dover Acquisition, the Company is the accounting acquirer.

During the three and nine months ended April 30, 2014, the Company generated revenues of $105.4 million and $206.5 million, respectively. Of this amount, approximately $60.3 million and $100.2 million in revenues included in net product sales in the Company’s Consolidated Statement of Operations and Comprehensive Income (Loss) for the three and nine months ended April 30, 2014, respectively, is attributable to atg L&M, ECT and Multitest businesses. The Acquired Businesses also generated $1.2 million and $4.0 million of net income for the three and nine months ended April 30, 2014, which is included in the Company’s Consolidated Statement of Operations and Comprehensive Income (Loss) for the three and nine months ended April 30, 2014, respectively.

During the three and nine months ended April 30, 2014, the Company incurred $1.4 million and $3.6 million, respectively, of restructuring charges associated with workforce reductions and facility consolidation. The Company anticipates incurring additional restructuring charges of approximately $0.6 million through October 31, 2014. In accordance with the provisions of FASB ASC 805, these costs are expensed as incurred and are not allocated to the purchase price. Upon completion of the fair value assessment after the Dover Acquisition, the Company anticipates that the final purchase price allocation may differ from the preliminary assessment outlined below. Any changes to the initial estimates of the fair value of the assets and liabilities will be recorded as adjustments to those assets and liabilities and residual amounts will be allocated to the gain on bargain purchase. The fair value estimates for the assets acquired and liabilities assumed were based upon preliminary calculations and valuations, and the Company’s estimates and assumptions regarding the Dover Acquisition are subject to change as the Company obtains additional information during the measurement period (up to one year from the respective acquisition dates). The primary areas of preliminary estimates that were not yet finalized related to certain asset and liabilities acquired.

In accordance with the provisions of ASC 805, during the three months ended April 30, 2014, the Company retroactively recorded a change in estimate of Acquired Assets of $1.4 million related to the period ended January 31, 2014. Of this amount, approximately $0.6 million related to the working capital adjustment and therefore resulted in an increase to the purchase price. The remaining $0.8m was a change in estimate of assumed liabilities and had no impact to on the consideration paid the seller. The net impact of these adjustments resulted in a $1.4 million decrease to the bargain purchase gain.

The following is a summary of the estimated purchase price for the Acquired Assets:

The following table summarizes the preliminary amounts recognized for the Acquired Assets and liabilities assumed as of the date of Closing. The allocation of purchase price is still preliminary as the Company is in the process of finalizing its valuation analysis. Any post-Closing true-up adjustments will have a corresponding purchase price adjustment.

The estimated purchase price has been allocated based on the fair value of net assets acquired as follows:

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The overall fair value of the net assets acquired by the Company exceeded the amount paid, which resulted in the recognition of a bargain purchase gain by the Company during the three months ended January 31, 2014. This bargain purchase gain was recorded as a component of other (expense) income, net on the Company’s Consolidated Statement of Operations and Comprehensive Income (Loss). The Company believes it was able to acquire ECT and Multitest for less than the fair value of their net assets since ECT and Multitest had been held as discontinued operations by Dover Parent for more than one year.

Valuation of Intangible Assets and Goodwill

The overall fair value of the Multitest and ECT businesses of Dover has been allocated to tangible assets acquired, assumed liabilities, and identifiable intangible assets, based upon a detailed valuation that uses information and assumptions provided by management, as further described below.

Identifiable Intangible Assets

As part of the preliminary purchase price allocation, identifiable intangible assets of the Acquired Businesses include developed technology, customer relationships and trademarks.

The consolidated financial statements include estimated identifiable intangible assets with a fair value aggregating $9.1 million, which will be amortized based on the pattern and period over which the economic benefits of the intangible assets are realized. The current estimated weighted average period is 10.9 years. The Company engaged independent valuation advisors to assist the Company in estimating the identifiable intangible asset value. The estimated identifiable intangible asset value is primarily based on information and assumptions developed by the Company’s management, certain publicly available information, and discussions with management of the Acquired Businesses. These estimates will be adjusted based upon the completion of the Company’s final valuation. The final valuation is expected to be completed within 12 months after the Closing of the Dover Acquisition.

The Company primarily used the income approach to value the developed technology and other acquired identifiable intangible assets of the Acquired Businesses. This approach calculates fair value by estimating future cash flows attributable to each intangible asset and discounting the future cash flows to present value using a risk adjusted discount rate.

In estimating the useful life of the acquired intangible assets of the Acquired Businesses, the Company considered paragraph 11 of FASB ASC 350, which lists the pertinent factors to be considered when estimating the useful life of an intangible asset. These factors include a review of the expected use by the combined company of the assets acquired, the expected useful life of another asset (or group of assets) related to the acquired assets, legal, regulatory or other contractual provisions that may limit the useful life of an acquired asset or may enable the extension of the useful life of an acquired asset without substantial cost, the effects of obsolescence, demand, competition and other economic factors, and the level of maintenance expenditures required to obtain the expected future cash flows from the asset. The Company is amortizing these intangible assets over their estimated useful lives using a method that is based on estimated future cash flows as the Company believes this amortization methodology approximates the pattern in which the economic benefits of the intangible assets will be derived.

In accordance with the provisions of FASB ASC 350, the Company has identified trademarks, having a fair value of $5 million, acquired in the Dover Acquisition as having indefinite useful lives; therefore these assets are not subject to amortization. The Company will test these assets for impairment at least annually, or, if a triggering event occurs, more frequently.

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The pro forma net loss for the nine months ended April 30, 2014 includes $3.6 million of charges related to the Acquisition for restructuring costs and approximately $0.6 million of acquisition costs, which were incurred after December 1, 2013. The unaudited pro forma results are not necessarily indicative of the results that the Company would have attained had the Acquisition occurred at the beginning of the periods presented.

4. SEGMENT REPORTING AND GEOGRAPHIC INFORMATION

Segment Reporting

The Company currently operates as a single segment. As a result of the Dover Acquisition on December 1, 2013, the Company is currently assessing its reporting segments in accordance with the provisions of Topic 280, Segment Reporting to the FASB ASC.

Long-lived assets consist of property and equipment:

Transfer prices on products sold to foreign subsidiaries are intended to produce profit margins that correspond to the subsidiary’s sales and support efforts.

5. RESTRUCTURING

In accordance with the provisions of Topic 420, Exit or Disposal Cost Obligation , to the FASB ASC, the Company recognizes certain costs associated with headcount reductions, office vacancies and other costs to move or relocate operations or employees as restructuring costs in the period in which such actions are initiated and approved by management or the obligations are incurred, as applicable.

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On January 30, 2014, the Company announced a strategic restructuring plan in connection with ongoing efforts to reduce costs and maximize efficiencies in connection with the Dover Acquisition. The Company recorded restructuring expense of $3.2 million during the nine months ended April 30, 2014 related to headcount reductions in connection with the implementation of the restructuring plan. The Company expects to incur an additional $0.6 million of restructuring expense associated with employees with deferred end dates, as well as facility consolidations, during the remainder of calendar year 2014.

On April 30, 2014, the Company ceased use of its Beaverton, Oregon facility. All operations that had occurred at that location have been transferred to other locations in North America. During the three months ended April 30, 2014, the Company recorded $0.4 million as restructuring expense related to remaining lease payments on the Beaverton, Oregon facility.

The following table sets forth the Company’s restructuring accrual activity for the nine months ended April 30, 2014 and April 30, 2013:

The balance assumed in the Dover Acquisition relates to liabilities that were assumed by the Company from actions that existed prior to the Closing.

6. COMMITMENTS AND CONTINGENCIES

From time to time, the Company is subject to certain legal proceedings and other contingencies, the outcomes of which are subject to significant uncertainty. The Company accrues for estimated losses if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. The Company uses judgment and evaluates, with the assistance of legal counsel, whether a loss contingency arising from litigation should be disclosed or recorded. The outcome of legal proceedings and other contingencies is inherently uncertain and often difficult to estimate. Accordingly, if the outcome of legal proceedings and other contingencies is different than is anticipated by the Company, the Company would record the difference between any previously recorded amount and the full amount at which the matter was resolved, in earnings in the period resolved, which could negatively impact the Company’s results of operations and financial position for the period.

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The Company is a defendant in a litigation matter incidental to the business that is related to customer expectations of test system performance for product that was shipped in 2006 by Credence. The Company does not believe the plaintiff’s claims have merit and is vigorously defending its position. An estimate of any potential loss cannot be made; the Company does not believe a loss is probable, and accordingly the Company has not accrued any amounts related to this matter.

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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 Company’s products. Also, from time to time in agreements with suppliers, licensors, and other business partners, the Company agrees to indemnify these partners against certain liabilities arising out of the sale or use of the Company’s products. The maximum potential amount of future payments the Company could be required to make under these indemnification obligations in the aggregate is theoretically unlimited; however, the Company has general and umbrella insurance policies that enable it 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 Company’s 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, 2014 or July 31, 2013.

Subject to certain limitations, the Company indemnifies its current and former officers and directors in certain circumstances in connection with their services as directors and officers of the Company. Although the maximum potential amount of future payments the Company could be required to make under these agreements is theoretically unlimited, as there were no known or pending claims, the Company has not accrued a liability for these agreements as of April 30, 2014 or July 31, 2013.

The Company had approximately $30.3 million and $14.8 million of non-cancelable inventory commitments as of April 30, 2014 and July 31, 2013, respectively. The Company expects to consume the inventory through normal operating activity.

As a result of restructuring actions taken by the Company during the nine months ended April 30, 2014, the Company has approximately $1.1 million in accrued severance at April 30, 2014 related to headcount reductions. The Company expects to pay these obligations through the fourth quarter of fiscal 2015.

The Company has operating lease commitments for certain facilities and equipment that expire at various dates through 2021. Minimum lease payment obligations under non-cancelable leases are as follows:

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The debt principal payments for the next five years and thereafter are as follows:

Credit Agreement

On November 27, 2013, in anticipation of the completion of the Dover Acquisition and to fund a portion of the purchase price therefore the Company entered into a credit agreement (the “Credit Agreement”) with Everett Charles Technologies LLC (together with the Company, the “Borrowers”), Silicon Valley Bank, as lender, administrative agent and issuing lender (“SVB”), and the several lenders from time to time party thereto (the “Lenders”). The Credit Agreement provides for a senior secured credit facility in the aggregate principal amount of up to $55 million (the “Facility”).

The Facility consists of a term loan facility for $50 million that was advanced to the Company on November 27, 2013 (the “Term Loan”) and a revolving credit facility (including a letter of credit facility) for up to $5 million (the “Revolving Loan” and, together with the Term Loan, the “Loans”) that is available from time to time for five years after November 27, 2013 (the “Closing Date”). Under the terms of the Credit Agreement, not more than one time during the period commencing on the Closing Date until the close of business on the date that is one day prior to the 42-month anniversary of the Closing Date, the Facility may be increased by an aggregate amount not to exceed $20 million through an additional facility on a pari passu basis with the Term Loan, subject to specified conditions and the agreement of one or more Lenders to participate therein. At April 30, 2014, approximately $1.1 million was outstanding in the form of standby letters of credit. The standby letters of credit have various expiration dates, of which the last to expire is November 2014.

All obligations under the Facility are secured by a first priority security interest in substantially all of the Borrowers’ existing and future assets, including a pledge of the stock or other equity interests of the Borrowers’ domestic subsidiaries and of any first tier foreign subsidiaries, provided that not more than 66% of the voting stock of any such foreign subsidiaries shall be required to be pledged.

The Credit Agreement requires that the Term Loan be repaid in quarterly installments, with 5% of the principal due the first year, 7.5% of principal due the second year, 10% of principal due the third year, 12.5% of principal due the fourth year, 15% of principal due the fifth year, and a final payment of $25 million due on the fifth anniversary of the Closing Date (the “Maturity Date”). All outstanding Loans under the Facility mature on the Maturity Date unless earlier payment is required under the terms of the Credit Agreement. The Term Loan is subject to optional and mandatory prepayment in whole and part as described in the Credit Agreement, subject to certain criteria. Loans outstanding under the Facilities may, at the Borrowers’ option, be prepaid at any time in whole or in part without premium or penalty, other than customary breakage costs, if any, subject to the terms and conditions of the Credit Agreement.

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Borrowings under the Facility bear interest, at a base rate plus a margin of up to 2.50% per annum, or at the London Interbank Offered Rate (“LIBOR”) plus a margin of up to 3.50% per annum, in either case based on the Company’s ratio of consolidated senior debt to consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) (the “Leverage Ratio”), or at a LIBOR rate plus a margin (such margin not to exceed a per annum rate of 3.50%) based on the Leverage Ratio. The selection of the interest rate formula is at the Company’s discretion. The interest rate otherwise payable under the Facility will be subject to increase by 2.0% per annum during the continuance of a payment default and may be subject to increase by 2.0% per annum during the continuance of any other event of default under the Credit Agreement. Certain customary fees and expenses are also payable in connection with the Facility. At April 30, 2014, the interest rate in effect on the Facility was 2.74%.

The obligations of the Company under the Facility may be accelerated upon the occurrence of an event of default under the Credit Agreement, which includes customary events of default, including payment defaults, the inaccuracy of representations or warranties, the failure to comply with covenants, ERISA defaults, judgment defaults, bankruptcy and insolvency defaults and cross defaults to material indebtedness.

Covenants

The Credit Agreement contains customary affirmative and negative covenants, subject in certain cases to baskets and exceptions, including negative covenants with respect to indebtedness, liens, fundamental changes, dispositions, restricted payments, investments, ERISA matters, matters relating to subordinated debt, affiliate transactions, sale and leaseback transactions, swap agreements, accounting changes, negative pledge clauses, clauses restricting subsidiary distributions, lines of business, amendments to certain documents and use of proceeds. The Credit Agreement also contains customary reporting and other affirmative covenants. The Credit Agreement contains a consolidated fixed charge coverage ratio, consolidated leverage ratio and liquidity requirements. The Credit Agreement required the Company to maintain a consolidated leverage ratio of less than 3.00 to 1.00 as of the end of four consecutive fiscal quarters ending January 31, 2014. At January 31, 2014, the Company’s consolidated leverage ratio exceeded this ratio threshold, resulting in an event of default under the Credit Agreement. On April 15, 2014, the Company executed a First Amendment to Credit Agreement and Waiver (the “Credit Agreement Amendment and Waiver”) pursuant to which the parties thereto agreed, among other things, to waive the occurrence of the event of default resulting from the Company’s failure to meet the above described financial covenant in the Credit Agreement provided, that the Company’s consolidated leverage ratio for the four fiscal quarters ending on January 31, 2014 did not exceed 3.66 to 1.00. Pursuant to the Credit Agreement Amendment and Waiver, the parties also agreed to modify the definition of “consolidated net income” to include, in the calculation of consolidated net income for periods following the closing of the Dover Acquisition, net income (or loss) attributable to the Acquired Businesses for specified periods prior to the closing of the Dover Acquisition.

As of April 30, 2014, the Company was in compliance with all covenants under the Credit Agreement and Credit Agreement Amendment and Waiver, including the consolidated leverage ratio.

Seller Financing – Promissory Notes

As described in Note 3 above, pursuant to the Purchase Agreement, in connection with the closing of the Dover Acquisition, the Company issued promissory notes having an aggregate principal amount of $20.0 million to certain of the Sellers.

Subject to certain conditions, the original principal amount of the promissory notes are subject to reduction upon written certification from the Company to Dover prior to January 1, 2015 of certain specified events related to the Company’s relocation from or refurbishment of certain properties of the Acquired Businesses, or the prepayment of the promissory notes in full prior to such date. In January 2014, the Company executed leases for two new facilities, and in February 2014, the Company provided written certification to Dover of a planned relocation from certain properties of the Acquired Businesses. Accordingly, the Company was released from $2.0 million of the promissory note obligations. As of the date of this report, the aggregate principal amount of the promissory notes is $18.0 million.

The promissory notes accrue interest on the unpaid balance for each day that they remain outstanding after December 1, 2014 at a per annum rate equal to the LIBOR plus 10%, and may be prepaid by the Company at any time without penalty prior to May 1, 2019. The promissory notes are subject to repayments of $1.3 million on December 1 and June 1 of each year starting in June 2015, until the notes are paid in full.

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9. FAIR VALUE MEASUREMENTS

The Company determines its fair value measurements for assets and liabilities based upon the provisions of Topic 820, Fair Value Measurements and Disclosures to the FASB ASC.

The Company holds short-term money market investments and certain other financial instruments which are carried at fair value. The Company determines fair value based upon quoted prices, when available, or through the use of alternative approaches when market quotes are not readily accessible or available.

Valuation techniques for fair value are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s best estimate, considering all relevant information. These valuation techniques involve some level of management estimation and judgment. The valuation process to determine fair value also includes making appropriate adjustments to the valuation model outputs to consider risk factors.

The fair value hierarchy of the Company’s inputs used in the determination of fair value for assets and liabilities during the current period consists of three levels. Level 1 inputs are composed of unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. Level 2 inputs include quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 inputs incorporate the Company’s own best estimate of what market participants would use in pricing the asset or liability at the measurement date where consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. If inputs used to measure an asset or liability fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the asset or liability. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the asset or liability.

The following table presents financial assets and liabilities measured at fair value and their related valuation inputs as of April 30, 2014 and July 31, 2013:

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The carrying value of accounts receivable, prepaid expenses and accounts payable approximate fair value due to their short-term nature.

There were no assets or liabilities recorded at fair value on a non-recurring basis requiring valuation disclosures as of April 30, 2014 or July 31, 2013.

10. STOCKHOLDERS’ EQUITY

Stock Repurchases

On September 15, 2011, the Company announced that its Board of Directors had authorized a stock repurchase program for up to $25 million of shares of the Company’s common stock. Under this program, the Company is authorized to repurchase shares of its common stock from time to time in open market transactions. The Company will determine the timing and amount of the transactions based on its evaluation of market conditions and other factors. The repurchase program may be suspended or discontinued at any time and has no expiration date. During the three and nine months ended April 30, 2014, the Company did not repurchase any shares under this program. Cumulatively, as of April 30, 2014, the Company has repurchased 3,294,666 shares of common stock for a total purchase price of $18.7 million since the inception of the program.

11. RECENT ACCOUNTING PRONOUNCEMENTS

In July 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Loss, or a Tax Credit Carryforward Exists. Topic 740, Income Taxes, to the FASB ASC does not include explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. There is diversity in practice in the presentation of unrecognized tax benefits in those instances and the amendments in this update are intended to eliminate that diversity in practice. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Early adoption is permitted. The Company is currently evaluating the impact of adoption of this amended standard.

12. SUBSEQUENT EVENTS

On May 16, 2014, LTX-Credence Corporation held a Special Meeting of Stockholders to approve an amendment to its Articles of Organization, to change the name of the Company from “LTX-Credence Corporation” to “Xcerra Corporation.” The proposal was approved by the Company’s stockholders, with the results of the voting as follows: 44,273,002 shares of the Company’s common stock outstanding were represented at the meeting, with 43,411,016 voted in favor, 283,279 shares voted against and 578,707 shares abstaining. The amendment to the Company’s Articles of Organization was filed with the Secretary of the Commonwealth of Massachusetts on May 20, 2014 and the Company began operating under its new name and its Common Stock began trading on the Nasdaq Global Market under the ticker symbol “XCRA” on May 22, 2014.