<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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 0-9653
XICOR, INC.
(Exact name of registrant as specified in its charter)
California 94-2526781
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1511 Buckeye Drive, Milpitas, California 95035
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 432-8888
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
------- -------
NUMBER OF SHARES OUTSTANDING AT MARCH 31, 1996
18,547,152
Page 1 of 11 Pages
<PAGE> 2
XICOR, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 1996
PART I
FINANCIAL INFORMATION
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<PAGE> 3
XICOR, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---- ----
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 18,294,000 $ 17,259,000
Short-term investments 18,158,000 18,136,000
Accounts receivable 15,762,000 13,430,000
Inventories 12,907,000 11,977,000
Prepaid expenses and other
current assets 1,528,000 902,000
------------ -----------
Total current assets 66,649,000 61,704,000
Property, plant and equipment, at
cost less accumulated depreciation 24,964,000 17,369,000
Other assets 414,000 366,000
------------ ------------
$ 92,027,000 $ 79,439,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,335,000 $ 6,128,000
Accrued expenses 6,631,000 8,174,000
Deferred income on shipments
to distributors 16,231,000 13,394,000
Current portion of long-term
obligations 5,039,000 3,483,000
------------ ------------
Total current liabilities 35,236,000 31,179,000
------------ ------------
Long-term obligations 10,809,000 5,229,000
------------ ------------
Shareholders' equity:
Preferred stock; 5,000,000
shares authorized -- --
Common stock; 75,000,000 shares
authorized; 18,547,152 and
18,524,202 shares outstanding 122,503,000 122,431,000
Accumulated deficit (76,521,000) (79,400,000)
------------ ------------
45,982,000 43,031,000
------------ ------------
$ 92,027,000 $ 79,439,000
============ ============
</TABLE>
See accompanying notes to consolidated financial information
-3-
<PAGE> 4
XICOR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Thirteen weeks Twelve weeks
ended ended
March 31, 1996 March 26, 1995
-------------- --------------
<S> <C> <C>
Net sales $28,642,000 $23,535,000
Cost of sales 17,771,000 14,562,000
----------- -----------
Gross profit 10,871,000 8,973,000
----------- -----------
Operating expenses:
Research and development 3,460,000 3,458,000
Selling, general and administrative 4,651,000 4,342,000
----------- -----------
8,111,000 7,800,000
----------- -----------
Income from operations 2,760,000 1,173,000
Interest expense (234,000) (153,000)
Interest income 473,000 279,000
----------- -----------
Income before income taxes 2,999,000 1,299,000
Provision for income taxes 120,000 66,000
----------- -----------
Net income $ 2,879,000 $ 1,233,000
=========== ===========
Net income per common share $ .15 $ .07
=========== ===========
Average common shares and equivalents 19,429,000 18,362,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial information
-4-
<PAGE> 5
XICOR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Thirteen weeks Twelve weeks
ended ended
March 31, 1996 March 26, 1995
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,879,000 $ 1,233,000
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 1,761,000 1,958,000
Changes in assets and liabilities:
Accounts receivable (2,332,000) (2,238,000)
Inventories (930,000) 2,096,000
Prepaid expenses and other
current assets (626,000) (153,000)
Other assets (48,000) --
Accounts payable and accrued expenses (336,000) (321,000)
Deferred income on shipments
to distributors 2,837,000 459,000
------------ ------------
Net cash provided by operating activities 3,205,000 3,034,000
------------ ------------
Cash flows from investing activities:
Investments in plant and equipment, net (1,209,000) (340,000)
Purchases of short-term investments (11,377,000) (3,006,000)
Maturities of short-term investments 11,355,000 2,000,000
------------ ------------
Net cash used for investing activities (1,231,000) (1,346,000)
------------ ------------
Cash flows from financing activities:
Repayments of long-term obligations (1,011,000) (656,000)
Proceeds from sale of common stock
to employees 72,000 7,000
------------ ------------
Net cash used for financing activities (939,000) (649,000)
------------ ------------
Increase in cash and cash equivalents 1,035,000 1,039,000
Cash and cash equivalents at beginning
of year 17,259,000 14,754,000
------------ ------------
Cash and cash equivalents at end of quarter $ 18,294,000 $ 15,793,000
============ ============
Supplemental information:
Cash paid during the period for:
Interest expense $ 234,000 $ 165,000
Income taxes 68,000 --
Equipment acquired pursuant to long-term
obligations 8,147,000 110,000
</TABLE>
See accompanying notes to consolidated financial information
-5-
<PAGE> 6
XICOR, INC.
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
Note 1 - The Company:
In the opinion of management, all adjustments necessary for a fair
statement of the results of the interim periods presented (consisting only of
normal recurring adjustments) have been included. These financial statements,
notes and analyses should be read in conjunction with Xicor's Annual Report on
Form 10-K for the year ended December 31, 1995 filed with the Securities and
Exchange Commission.
Note 2 - Adoption of New Quarterly Accounting Calendar:
Since inception, Xicor's quarterly accounting periods have consisted of
three 12-week quarters and one 16-week fourth quarter. To make comparative
analysis easier for Xicor shareholders and other potential investors, beginning
in 1996 Xicor's quarterly accounting periods are being changed to four even
13-week quarters. Xicor's fiscal year, which ends on the Sunday nearest December
31, will not change. In 1996, Xicor's quarters end on March 31, June 30,
September 29 and December 29.
Note 3 - Balance sheet detail:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---- ----
<S> <C> <C>
Inventories:
Raw materials and supplies $ 5,339,000 $ 3,996,000
Work in process 3,210,000 3,497,000
Finished goods 4,358,000 4,484,000
------------ ------------
$ 12,907,000 $ 11,977,000
============ ============
Property, plant and equipment:
Leased building and building improvements $ 1,602,000 $ 1,602,000
Leasehold improvements 16,699,000 16,679,000
Equipment 80,213,000 76,981,000
Furniture and fixtures 1,697,000 1,699,000
Construction in progress 10,991,000 5,245,000
------------ ------------
111,202,000 102,206,000
Less accumulated depreciation (86,238,000) (84,837,000)
------------ ------------
$ 24,964,000 $ 17,369,000
============ ============
Accrued expenses:
Accrued wages and employee benefits $ 2,598,000 $ 4,089,000
Other accrued expenses 4,033,000 4,085,000
------------ ------------
$ 6,631,000 $ 8,174,000
============ ============
</TABLE>
Accounts receivable:
Accounts receivable at March 31, 1996 and December 31, 1995 are net of an
allowance for doubtful accounts of $500,000.
-6-
<PAGE> 7
XICOR, INC.
Quarterly Period Ended March 31, 1996
Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion should be read in conjunction with the
accompanying Quarterly Financial Information and Notes thereto and Xicor's
Annual Report on Form 10-K for the year ended December 31, 1995 and is qualified
in its entirety by the foregoing. The results of operations for the thirteen
weeks ended March 31, 1996 are not necessarily indicative of results to be
expected in future periods.
RESULTS OF OPERATIONS
Sales for the 13-week first quarter of 1996 were $28.6 million compared to
$23.5 million for the 12-week first quarter of 1995. Sales for the first quarter
of 1996 were slightly below the 1995 fourth quarter run rate due to equipment
capacity limitations and related manufacturing inefficiencies that arose during
the fourth quarter. Starting in the fourth quarter of 1995 and continuing
through the first half of 1996, additional wafer production and test equipment
has been and is being installed to increase capacity and productivity. Increased
wafer output, which we started seeing at the end of the first quarter is
expected to lead to sales growth in the second quarter of 1996.
Gross profit as a percentage of sales was 38% for both the first quarter of
1996 and the first quarter of 1995. Maintaining or increasing the gross profit
percentage for the balance of 1996 is contingent upon increased sales, product
mix and prices and successful execution of Xicor's plans to increase
manufacturing capacity and further improve manufacturing efficiencies.
Research and development expenses were 12% of sales for the first quarter
of 1996 compared to 15% for the first quarter of 1995. The decrease in research
and development costs as a percentage of sales is primarily due to the transfer
to production of certain new products which had previously been under
development. Research and development activities are requiring an increasing
degree of complexity of design and manufacturing process and consequently a
larger amount of funds is expected to be invested in research and development in
1996 than was invested in 1995.
The level of selling, general and administrative expenses remained
relatively constant in absolute dollars, but decreased as a percentage of sales
in the first quarter of 1996 compared to the first quarter of 1995 due to
ongoing cost control measures and the increased sales levels.
-7-
<PAGE> 8
Interest expense increased in the first quarter of 1996 compared to the
1995 first quarter level due to the financing of $4.7 million of capital
equipment acquisitions during the latter part of 1995 and $8.1 million in the
first quarter of 1996. Interest expense for the remaining 1996 quarters is
expected to increase over the first quarter level due to the financing of the
1996 first quarter additions and the planned financing of additional capital
equipment acquisitions during the balance of 1996.
Interest income increased in the first quarter of 1996 compared to the
first quarter of 1995 due to an increase in the average balance invested caused
primarily by funds generated from operations in 1995 and the first quarter of
1996.
The provision for income taxes for the first quarter of both 1995 and 1996
consisted primarily of federal and state minimum taxes, which result from
limitations on the use of net operating loss carryforwards, and foreign taxes.
Net deferred tax assets of $34 million at December 31, 1995 remain fully
reserved because of the uncertainty regarding the ultimate realization of these
assets.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
This quarterly report contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, including statements regarding the expectation
of increased capacity, productivity, wafer output and manufacturing efficiencies
in 1996 and anticipated sales growth in 1996 and beyond. Except for historical
information, the matters discussed in this quarterly report are forward-looking
statements that are subject to certain risks and uncertainties that could cause
the actual results to differ materially from those projected. Factors that could
cause actual results to differ materially include the following: general
economic conditions and conditions specific to the semiconductor industry,
fluctuations in customer demand, competitive factors such as pricing pressures
on existing products and the timing and market acceptance of new product
introductions, Xicor's ability to have available an appropriate amount of
production capacity in a timely manner, improvements in manufacturing
efficiencies, the timely development of new products and processes, and the risk
factors listed from time to time in Xicor's SEC reports, including but not
limited to the "Factors Affecting Future Results" section below and Part I, Item
1. of the Form 10-K. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. Xicor
undertakes no obligation to publicly release or otherwise disclose the result of
any revision to these forward-looking statements which may be made as a result
of events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
-8-
<PAGE> 9
FACTORS AFFECTING FUTURE RESULTS
The semiconductor industry is highly competitive and characterized by
rapidly changing technology and steadily declining product prices. Xicor's
results of operations are affected by a wide variety of factors, including
general economic conditions and conditions specific to the semiconductor
industry, decreases in average selling price over the life of any particular
product, the timing of new product introductions (both by Xicor and
competitors), availability of new manufacturing technologies, the ability to
secure intellectual property rights in a rapidly evolving market and the ability
to have an appropriate amount of production capacity in a timely manner. The
sales level in any specific quarter is also a function of orders received during
that quarter, as customers continue to shorten lead times for purchase
commitments. Consistent with industry practice, customer orders are generally
subject to cancellation by the customer without penalty. Xicor may be at a
disadvantage in competing with major domestic and foreign concerns that have
significant financial resources, established and diverse product lines,
worldwide vertically integrated production facilities and extensive research and
development staffs.
The semiconductor industry is also characterized by substantial capital and
research and development investment for products and processes. The rapid rate
of technological change within the industry requires Xicor to continually
develop new and improved products and processes to maintain its competitive
position. Xicor expects to continue to invest in the research and development of
new products and manufacturing processes in 1996 and beyond, although there can
be no assurances that such research and development efforts or new products will
be successful.
Due to the foregoing and other factors, past results are a much less
reliable predictor of the future than is the case in many older, more stable and
less dynamic industries. In addition, the securities of many high technology
companies, including Xicor, have historically been subject to extensive price
and volume fluctuations that may adversely affect the market price of their
common stock.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, Xicor had $36.5 million in cash, cash equivalents and
short-term investments compared to $35.4 million at December 31, 1995. The
increase was caused principally by $3.2 million of cash generated from operating
activities, partially offset by equipment acquisitions of $1.2 million and
long-term debt repayments of $1.0 million.
Capital expenditures for the balance of 1996 are presently planned at
approximately $15 million consisting principally of production equipment to
support anticipated sales growth in 1996 and beyond. Xicor is presently
-9-
<PAGE> 10
investigating additional equipment financing for the majority of the
acquisitions. At March 31, 1996, Xicor had entered into commitments for
equipment purchases and leasehold improvements aggregating approximately $4
million.
Xicor has a line of credit agreement with a financial institution that
expires March 31, 1997, provides for borrowings of up to $7.5 million against
eligible accounts receivable and is secured by all of Xicor's assets. Interest
on borrowings is charged at the prime lending rate plus 2% and is payable
monthly. At March 31, 1996, the entire $7.5 million was available to Xicor based
on the eligible accounts receivable balances and the borrowing formulas. To
date, no amounts have been borrowed under this line of credit. Management
believes that currently available cash, expected cash flow from operations and
equipment financing will be adequate to support Xicor's operations for the next
twelve months.
-10-
<PAGE> 11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed with the Securities
and Exchange Commission during the quarter ended
March 31, 1996.
SIGNATURES
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.
XICOR, INC., a
California Corporation
By /s/ Raphael Klein
---------------------------
Raphael Klein
President
(Principal Executive Officer)
By /s/ Klaus G. Hendig
---------------------------
Klaus G. Hendig
Vice President, Finance
and Administration
(Principal Financial Officer)
Date: May 10, 1996
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 18,294,000
<SECURITIES> 18,158,000
<RECEIVABLES> 16,262,000
<ALLOWANCES> 500,000
<INVENTORY> 12,907,000
<CURRENT-ASSETS> 66,649,000
<PP&E> 111,202,000
<DEPRECIATION> 86,238,000
<TOTAL-ASSETS> 92,027,000
<CURRENT-LIABILITIES> 35,236,000
<BONDS> 0
0
0
<COMMON> 122,503,000
<OTHER-SE> (76,521,000)
<TOTAL-LIABILITY-AND-EQUITY> 92,027,000
<SALES> 28,642,000
<TOTAL-REVENUES> 28,642,000
<CGS> 17,771,000
<TOTAL-COSTS> 17,771,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 234,000
<INCOME-PRETAX> 2,999,000
<INCOME-TAX> 120,000
<INCOME-CONTINUING> 2,879,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,879,000
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0
</TABLE>
