<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 30, 1997
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 30, 1997
18,902,502
<PAGE> 2
XICOR, INC.
FORM 10-Q
QUARTER ENDED MARCH 30, 1997
INDEX
PAGE
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets at March 30, 1997 1
and December 31, 1996
Consolidated Statements of Operations for the three 2
months ended March 30, 1997 and March 31, 1996
Consolidated Statements of Cash Flows for the three 3
months ended March 30, 1997 and March 31, 1996
Notes to Consolidated Financial Information 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 5
CONDITION AND RESULTS OF OPERATIONS
PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 9
SIGNATURES 9
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<PAGE> 3
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
XICOR, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 30, December 31,
1997 1996
------------- -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 20,888,000 $ 20,414,000
Short-term investments 17,973,000 21,159,000
Accounts receivable 13,108,000 11,611,000
Inventories 22,201,000 19,354,000
Prepaid expenses and other current assets 1,154,000 1,384,000
------------- -------------
Total current assets 75,324,000 73,922,000
Property, plant and equipment,
at cost less accumulated depreciation 38,214,000 33,992,000
Other assets 269,000 300,000
------------- -------------
$ 113,807,000 $ 108,214,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,834,000 $ 9,979,000
Accrued expenses 7,083,000 7,216,000
Deferred income on shipments to distributors 14,670,000 13,725,000
Current portion of long-term obligations 6,009,000 5,868,000
------------- -------------
Total current liabilities 38,596,000 36,788,000
------------- -------------
Long-term obligations 15,157,000 13,469,000
------------- -------------
Shareholders' equity:
Preferred stock; 5,000,000 shares authorized -- --
Common stock; 75,000,000 shares authorized;
18,902,502 and 18,873,252 shares
outstanding 123,609,000 123,522,000
Accumulated deficit (63,555,000) (65,565,000)
------------- -------------
60,054,000 57,957,000
------------- -------------
$ 113,807,000 $ 108,214,000
============= =============
</TABLE>
See accompanying notes to consolidated financial information
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<PAGE> 4
XICOR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 30, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Net sales $ 29,513,000 $ 28,642,000
Cost of sales 17,718,000 17,771,000
------------ ------------
Gross profit 11,795,000 10,871,000
------------ ------------
Operating expenses:
Research and development 4,613,000 3,460,000
Selling, general and administrative 5,158,000 4,651,000
------------ ------------
9,771,000 8,111,000
------------ ------------
Income from operations 2,024,000 2,760,000
Interest expense (410,000) (234,000)
Interest income 502,000 473,000
------------ ------------
Income before income taxes 2,116,000 2,999,000
Provision for income taxes 106,000 120,000
------------ ------------
Net income $ 2,010,000 $ 2,879,000
============ ============
Net income per common share $ .10 $ .15
============ ============
Average common shares and equivalents 19,683,000 19,429,000
============ ============
</TABLE>
See accompanying notes to consolidated financial information
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<PAGE> 5
XICOR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 30, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,010,000 $ 2,879,000
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 2,669,000 1,761,000
Changes in assets and liabilities:
Accounts receivable (1,497,000) (2,332,000)
Inventories (2,847,000) (930,000)
Prepaid expenses and other current assets 230,000 (626,000)
Other assets 31,000 (48,000)
Accounts payable and accrued expenses 722,000 (336,000)
Deferred income on shipments to distributors 945,000 2,837,000
------------ ------------
Net cash provided by operating activities 2,263,000 3,205,000
------------ ------------
Cash flows from investing activities:
Investments in plant and equipment, net (3,643,000) (1,209,000)
Purchases of short-term investments (6,097,000) (11,377,000)
Maturities of short-term investments 9,283,000 11,355,000
------------ ------------
Net cash used for investing activities (457,000) (1,231,000)
------------ ------------
Cash flows from financing activities:
Repayments of long-term obligations (1,419,000) (1,011,000)
Proceeds from sale of common stock to employees 87,000 72,000
------------ ------------
Net cash used for financing activities (1,332,000) (939,000)
------------ ------------
Increase in cash and cash equivalents 474,000 1,035,000
Cash and cash equivalents at beginning of year 20,414,000 17,259,000
------------ ------------
Cash and cash equivalents at end of quarter $ 20,888,000 $ 18,294,000
============ ============
Supplemental information:
Cash paid for:
Interest expense $ 410,000 $ 234,000
Income taxes 59,000 68,000
Equipment acquired pursuant to long-term obligations 3,248,000 8,147,000
</TABLE>
See accompanying notes to consolidated financial information
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<PAGE> 6
XICOR
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, 1996 filed with the Securities and
Exchange Commission.
Note 2 - Balance sheet detail:
<TABLE>
<CAPTION>
March 30, December 31,
1997 1996
------------ --------------
<S> <C> <C>
Inventories:
Raw materials and supplies $ 4,918,000 $ 4,952,000
Work in process 10,727,000 8,568,000
Finished goods 6,556,000 5,834,000
------------- -------------
$ 22,201,000 $ 19,354,000
============= =============
Property, plant and equipment:
Leased building and building improvements $ 1,602,000 $ 1,602,000
Leasehold improvements 17,161,000 16,947,000
Equipment 101,757,000 101,140,000
Furniture and fixtures 1,737,000 1,722,000
Construction in progress 7,667,000 2,815,000
------------- -------------
129,924,000 124,226,000
Less accumulated depreciation (91,710,000) (90,234,000)
------------- -------------
$ 38,214,000 $ 33,992,000
============= =============
Accrued expenses:
Accrued wages and employee benefits $ 3,021,000 $ 3,421,000
Other accrued expenses 4,062,000 3,795,000
------------- -------------
$ 7,083,000 $ 7,216,000
============= =============
</TABLE>
Note 3 - Recent Accounting Pronouncement:
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share." This
statement will be effective for the Company's fiscal year ending December 31,
1997. Under the new standard, primary income per share is replaced by basic
income per share and fully diluted income per share is replaced by diluted
income per share. If the Company had adopted this Statement, income per share
would have been as follows:
Three months ended
March 30, 1997 March 31, 1996
-------------- --------------
Basic income per share $ .11 $ .16
Diluted income per share $ .10 $ .15
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<PAGE> 7
ITEM 2. 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, 1996 and is qualified
in its entirety by the foregoing. The results of operations for the quarter
ended March 30, 1997 are not necessarily indicative of results to be expected in
future periods.
RESULTS OF OPERATIONS
Sales for the first quarter of 1997 were $29.5 million, an increase over
first quarter 1996 sales of $28.6 million, but lower than fourth quarter 1996
sales of $30.5 million. First quarter 1997 sales were negatively impacted by
reduced orders in the latter part of the fourth quarter of 1996, particularly
from customers in the wireless communications market.
Gross profit as a percentage of sales was 40% for the first quarter of
1997, an improvement from 38% for the comparable prior year quarter and
essentially flat with the fourth quarter of 1996. The improvement over the
comparable 1996 period was due primarily to increased manufacturing volumes and
efficiencies that compensated for continuing price pressure and Xicor's
increased cost level.
Research and development expenses increased 33% to 16% of sales in the
first quarter of 1997 compared to 12% in the comparable 1996 quarter. This
increase was primarily due to an increase in the number of new products under
development and increases in manufacturing process technology development
efforts. Research and development activities require an increasing degree of
complexity of design and manufacturing process technology and consequently more
funds are expected to be invested in research and development in 1997 than were
invested in 1996.
Selling, general and administrative expenses increased from 16% of sales
for the first quarter of 1996 to 17% of sales during the first quarter of 1997
due to increased promotional spending and the costs of supporting an increased
level of operations.
Interest expense increased in the first quarter of 1997 compared to the
1996 first quarter level due to the financing of $15.9 million of capital
equipment acquisitions during 1996. Interest expense for the remaining 1997
quarters is expected to increase over the first quarter level due to the planned
financing of additional capital equipment acquisitions.
Interest income increased in the first quarter of 1997 compared to the
first quarter of 1996 due to an increase in the average balance invested caused
primarily by funds generated from operations in 1996. Interest income is
expected to decrease during the remaining 1997 quarters principally due to the
utilization of funds for working capital purposes, leasehold improvements and
equipment purchases.
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<PAGE> 8
The provision for income taxes for the first quarter of both 1996 and
1997 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 $30.7 million at December 31, 1996 remain fully
reserved because of the uncertainty regarding the ultimate realization of these
assets.
While sales were higher than in the same quarter a year ago, net income
was lower primarily due to a 33% increase in research and development expenses
and increased promotional spending and administrative costs to support an
increased level of operations. Xicor's manufacturing cost level also increased
during 1996 as a result of upgrading equipment and increasing the workforce in
its wafer fabrication facility. To cover these costs and further cost increases
in 1997 due to plans to install additional equipment, sales must grow
substantially. To achieve such growth, Xicor will more actively market
undifferentiated products, which represent the bulk of the E2PROM market.
However, competitive pressure on prices of undifferentiated products will
generate lower gross margins until production and sales reach a level sufficient
to spread costs effectively. Xicor estimates it will be at least the third
quarter before sales can be substantially increased and anticipates that sales
for the second quarter of 1997 will not be sufficient to maintain the fourth
quarter 1996 level of profitability.
Recent customer buying patterns, confirmed by reports from other
semiconductor suppliers and industry analysts, leads Xicor to believe that
semiconductor inventories at system manufacturers are at low levels. Many
customers worldwide have recently expressed an optimistic outlook for the second
half of 1997. In light of these indications, Xicor plans to further increase
inventories during the second quarter, despite the risks associated with higher
inventories, as Xicor's management believes that this business decision will
allow Xicor to effectively respond to orders requiring quick deliveries, which
are needed to increase sales in the second quarter and the balance of the year.
There can be no assurance that sales and production efficiencies will increase
sufficiently to maintain or improve profitability in 1997 compared to 1996.
"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 orders
and sales, quick delivery business opportunities, and cost effective utilization
of Xicor's wafer fabrication facility. 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
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<PAGE> 9
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.
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 1997 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.
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<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
At March 30, 1997, Xicor had $38.9 million in cash, cash equivalents and
short-term investments compared to $41.6 million at December 31, 1996. During
the first quarter of 1997, Xicor used funds to purchase $3.6 million of
equipment and repay $1.4 million of long-term obligations, while generating $2.3
million of cash from operating activites. Xicor used long-term financing to
acquire additional capital assets of $3.2 million during the quarter ended March
30, 1997.
During 1997 Xicor expects to use cash to finance inventory growth,
leasehold improvements and certain equipment purchases. Capital expenditures for
the balance of 1997 are planned at approximately $18 million, $7 million of
which had been committed as of March 30, 1997. The acquisitions consist
principally of production equipment to support planned sales growth. Xicor is
investigating equipment financing for a large portion of these acquisitions.
Xicor has a line of credit agreement with a financial institution that
expires March 31, 1998, 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 30, 1997, 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 equipment financing and
expected cash flow from operations will be adequate to support Xicor's
operations for the next twelve months.
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<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 30,
1997.
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 9, 1997
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<PAGE> 12
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> MAR-30-1997
<CASH> 20,888,000
<SECURITIES> 17,973,000
<RECEIVABLES> 13,608,000
<ALLOWANCES> 500,000
<INVENTORY> 22,201,000
<CURRENT-ASSETS> 75,324,000
<PP&E> 129,924,000
<DEPRECIATION> 91,710,000
<TOTAL-ASSETS> 113,807,000
<CURRENT-LIABILITIES> 38,596,000
<BONDS> 0
0
0
<COMMON> 123,609,000
<OTHER-SE> (63,555,000)
<TOTAL-LIABILITY-AND-EQUITY> 113,807,000
<SALES> 29,513,000
<TOTAL-REVENUES> 29,513,000
<CGS> 17,718,000
<TOTAL-COSTS> 17,718,000
<OTHER-EXPENSES> 4,613,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 410,000
<INCOME-PRETAX> 2,116,000
<INCOME-TAX> 106,000
<INCOME-CONTINUING> 2,010,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,010,000
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0
</TABLE>
