<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 September 29, 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 SEPTEMBER 29, 1996
18,804,752
Page 1 of 10 Pages
<PAGE> 2
XICOR, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 29, 1996
PART I
FINANCIAL INFORMATION
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<PAGE> 3
XICOR, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 29, December 31,
1996 1995
------------- ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 20,204,000 $ 17,259,000
Short-term investments 21,074,000 18,136,000
Accounts receivable 13,388,000 13,430,000
Inventories 16,263,000 11,977,000
Prepaid expenses and other current assets 1,570,000 902,000
------------- -------------
Total current assets 72,499,000 61,704,000
Property, plant and equipment, at cost less
accumulated depreciation 32,217,000 17,369,000
Other assets 336,000 366,000
------------- -------------
$ 105,052,000 $ 79,439,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,460,000 $ 6,128,000
Accrued expenses 7,608,000 8,174,000
Deferred income on shipments to distributors 13,697,000 13,394,000
Current portion of long-term obligations 5,818,000 3,483,000
------------- -------------
Total current liabilities 37,583,000 31,179,000
------------- -------------
Long-term obligations 13,296,000 5,229,000
------------- -------------
Shareholders' equity:
Preferred stock; 5,000,000 shares authorized -- --
Common stock; 75,000,000 shares authorized;
18,804,752 and 18,524,202 shares outstanding 123,257,000 122,431,000
Accumulated deficit (69,084,000) (79,400,000)
------------- -------------
54,173,000 43,031,000
------------- -------------
$ 105,052,000 $ 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 Thirty-nine weeks Thirty-six weeks
ended ended ended ended
September 29, September 10, September 29, September 10,
1996 1995 1996 1995
-------------- ------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Net sales $ 33,054,000 $ 27,931,000 $ 93,002,000 $ 77,149,000
Cost of sales 19,474,000 16,569,000 56,192,000 46,827,000
------------ ------------ ------------ ------------
Gross profit 13,580,000 11,362,000 36,810,000 30,322,000
------------ ------------ ------------ ------------
Operating expenses:
Research and development 3,971,000 3,981,000 11,157,000 10,898,000
Selling, general and
administrative 5,478,000 4,718,000 15,381,000 13,652,000
------------ ------------ ------------ ------------
9,449,000 8,699,000 26,538,000 24,550,000
------------ ------------ ------------ ------------
Income from operations 4,131,000 2,663,000 10,272,000 5,772,000
Interest expense (416,000) (126,000) (998,000) (417,000)
Interest income 517,000 377,000 1,472,000 991,000
------------ ------------ ------------ ------------
Income before income taxes 4,232,000 2,914,000 10,746,000 6,346,000
Provision for income taxes 170,000 148,000 430,000 321,000
------------ ------------ ------------ ------------
Net income $ 4,062,000 $ 2,766,000 $ 10,316,000 $ 6,025,000
============ ============ ============ ============
Net income per
common share $ .20 $ .14 $ .52 $ .32
============ ============ ============ ============
Average common shares
and equivalents 19,861,000 19,225,000 19,762,000 18,826,000
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial information
-4-
<PAGE> 5
XICOR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Thirty-nine weeks Thirty-six weeks
ended ended
September 29, 1996 September 10, 1995
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 10,316,000 $ 6,025,000
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 5,809,000 5,346,000
Changes in assets and liabilities:
Accounts receivable 42,000 (5,493,000)
Inventories (4,286,000) 3,161,000
Prepaid expenses and other current assets (668,000) (325,000)
Other assets 30,000 --
Accounts payable and accrued expenses 3,766,000 2,260,000
Deferred income on shipments to distributors 303,000 2,460,000
------------ ------------
Net cash provided by operating activities 15,312,000 13,434,000
------------ ------------
Cash flows from investing activities:
Investments in plant and equipment, net (6,560,000) (2,203,000)
Purchases of short-term investments (33,704,000) (14,061,000)
Maturities of short-term investments 30,766,000 9,000,000
------------ ------------
Net cash used for investing activities (9,498,000) (7,264,000)
------------ ------------
Cash flows from financing activities:
Repayments of long-term obligations (3,695,000) (2,086,000)
Proceeds from sale of common stock to employees 826,000 796,000
------------ ------------
Net cash used for financing activities (2,869,000) (1,290,000)
------------ ------------
Increase in cash and cash equivalents 2,945,000 4,880,000
Cash and cash equivalents at beginning of year 17,259,000 14,754,000
------------ ------------
Cash and cash equivalents at end of quarter $ 20,204,000 $ 19,634,000
============ ============
Supplemental information:
Cash paid for:
Interest expense $ 998,000 $ 451,000
Income taxes 501,000 5,000
Equipment acquired pursuant to long-term obligations 14,097,000 1,023,000
</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:
Through 1995, Xicor's quarterly accounting periods 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 were changed to four even 13-week quarters.
Xicor's fiscal year, which ends on the Sunday nearest December 31, did 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>
September 29, December 31,
1996 1995
------------- -------------
<S> <C> <C>
Inventories:
Raw materials and supplies $ 4,778,000 $ 3,996,000
Work in process 6,182,000 3,497,000
Finished goods 5,303,000 4,484,000
------------- -------------
$ 16,263,000 $ 11,977,000
============= =============
Property, plant and equipment:
Leased building and building improvements $ 1,602,000 $ 1,602,000
Leasehold improvements 16,911,000 16,679,000
Equipment 91,905,000 76,981,000
Furniture and fixtures 1,698,000 1,699,000
Construction in progress 8,295,000 5,245,000
------------- -------------
120,411,000 102,206,000
Less accumulated depreciation (88,194,000) (84,837,000)
------------- -------------
$ 32,217,000 $ 17,369,000
============= =============
Accrued expenses:
Accrued wages and employee benefits $ 2,939,000 $ 4,089,000
Other accrued expenses 4,669,000 4,085,000
------------- -------------
$ 7,608,000 $ 8,174,000
============= =============
</TABLE>
Accounts receivable:
Accounts receivable at September 29, 1996 and December 31, 1995 are
presented net of an allowance for doubtful accounts of $500,000.
-6-
<PAGE> 7
XICOR, INC.
Quarterly Period Ended September 29, 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 and
thirty-nine weeks ended September 29, 1996 are not necessarily indicative of
results to be expected in future periods.
RESULTS OF OPERATIONS
All comparative comments that follow consider the difference in the
number of weeks for the respective periods.
Sales for the 13-week third quarter of 1996 were $33.1 million compared
to $27.9 million for the 12-week third quarter of 1995. Sales for the 39-week
period ended September 29, 1996 were $93.0 million compared to $77.1 million for
the 36-week period of 1995. Production and test equipment brought on-line in the
fourth quarter of 1995 and in 1996 increased capacity and contributed to
sequential sales increases in the second and third quarters of 1996 and the
increased sales level for each of the first three quarters of 1996 over the
comparable 1995 quarters. The Company is proceeding to bring on-line additional
equipment during the balance of the year to support further sales growth.
Gross profit as a percentage of sales was 41% and 40% for the third
quarter and year-to-date period ended September 29, 1996, respectively,
compared to 41% and 39% for the corresponding periods of 1995. Maintaining or
increasing the gross profit percentage for the balance of 1996 and thereafter is
contingent upon increased sales, product mix and prices and successful execution
by Xicor of its plans to further increase manufacturing capacity and improve
manufacturing efficiencies.
Research and development expenses were 12% of sales for the third
quarter and year-to-date period ended September 29, 1996 compared to 14% for the
corresponding 1995 periods. The decrease in research and development costs as a
percentage of sales in 1996 was primarily due to the transfer to production of
certain new products which had previously been under development and the effect
of higher sales. Research and development activities are requiring an increasing
degree of complexity of design and manufacturing process technology and
consequently a larger amount of funds is expected to be invested in research and
development in 1997 than in 1995 or 1996.
Selling, general and administrative expenses as a percentage of sales
remained relatively constant in the third quarter and year-to-date period ended
September 29, 1996 compared to the
-7-
<PAGE> 8
corresponding periods of 1995. The increase in absolute dollars was primarily
due to the increased sales levels.
Interest expense increased in each of the three quarters of 1996
compared to the corresponding 1995 quarters due to the financing of $4.7 million
of capital equipment acquisitions during the latter part of 1995 and $14.1
million in the first three quarters of 1996. Interest expense for the fourth
quarter of 1996 is expected to increase over the third quarter level due to the
planned financing of additional capital equipment acquisitions during the fourth
quarter of 1996.
Interest income increased in each of the three quarters of 1996
compared to the corresponding 1995 quarters due to an increase in the average
balance invested caused primarily by funds generated from operations in 1995 and
the first three quarters of 1996.
The provision for income taxes for each of the three quarters of 1996
and 1995 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 increased
capacity, improved manufacturing efficiencies and sales growth. 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, 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 capabilities.
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 September 29, 1996, Xicor had $41.3 million in cash, cash
equivalents and short-term investments compared to $35.4 million at December 31,
1995. During the first three quarters of 1996, Xicor generated $15.3 million of
cash from operating activities which was partially offset by equipment purchases
of $6.6 million and long-term debt repayments of $3.7 million. Xicor used
long-term financing to acquire additional capital assets of $14.1 million during
the thirty-nine weeks ended September 29, 1996.
Capital expenditures for the balance of 1996 are planned at
approximately $8 million, $5.4 million of which had been committed as of
September 29, 1996. As of September 29, 1996, Xicor had entered into additional
equipment purchase commitments for delivery in 1997 aggregating approximately
$5.6 million. The acquisitions consist principally of production and
-9-
<PAGE> 10
test equipment to support sales growth. Xicor is investigating equipment
financing for the majority of these acquisitions.
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 September 29, 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.
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 September 29, 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: November 1, 1996
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-29-1996
<CASH> 20,204,000
<SECURITIES> 21,074,000
<RECEIVABLES> 13,888,000
<ALLOWANCES> 500,000
<INVENTORY> 16,263,000
<CURRENT-ASSETS> 72,499,000
<PP&E> 120,411,000
<DEPRECIATION> 88,194,000
<TOTAL-ASSETS> 105,052,000
<CURRENT-LIABILITIES> 37,583,000
<BONDS> 0
0
0
<COMMON> 123,257,000
<OTHER-SE> (69,084,000)
<TOTAL-LIABILITY-AND-EQUITY> 105,052,000
<SALES> 93,002,000
<TOTAL-REVENUES> 93,002,000
<CGS> 56,192,000
<TOTAL-COSTS> 56,192,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 998,000
<INCOME-PRETAX> 10,746,000
<INCOME-TAX> 430,000
<INCOME-CONTINUING> 10,316,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,316,000
<EPS-PRIMARY> 0.52
<EPS-DILUTED> 0
</TABLE>
