<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
__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
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________________
Commission File Number: 0-13244
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ZYCAD CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 41-1404495
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
47100 Bayside Parkway, Fremont, California 94538
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(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: 510-623-4400
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Indicate by check mark whether 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 _____
On March 31, 1996 there were 19,856,004 shares of the Registrant's common stock
outstanding.
1
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PART 1 - FINANCIAL INFORMATION
Item 1: Financial Statements
ZYCAD CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,080 $ 3,722
Short-term investments 220 224
Accounts receivable, net 9,131 12,123
Inventories 1,518 1,788
Other current assets 1,166 765
-------- --------
Total current assets 16,115 18,622
Property and equipment, net 5,358 5,598
Purchased technology 1,068 1,129
Other assets 3,670 3,631
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Total assets $ 26,211 $ 28,980
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings under line of credit $ 1,900 $ --
Current portion of debt obligations 1,235 1,028
Accounts payable 3,767 3,968
Accrued expenses 3,844 3,619
Asset write-downs and staff reductions 311 336
Deferred revenues 2,908 2,930
-------- --------
Total current liabilities 13,965 11,881
Other long-term liabilities 170 213
Non-current portion of debt obligations 1,338 1,207
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Total liabilities 15,473 13,301
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Stockholders' equity:
Common stock, par value $.10 1,985 1,975
Additional paid-in capital 47,966 47,837
Accumulated translation adjustments (82) (19)
Accumulated deficit (39,131) (34,114)
-------- --------
Total stockholders' equity 10,738 15,679
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Total liabilities and stockholders' equity $ 26,211 $ 28,980
-------- --------
-------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
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ZYCAD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR PER-SHARE DATA)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1996 1995
-------- --------
<S> <C> <C>
Revenues:
Product $ 3,084 $ 7,333
Service 3,894 5,231
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Total revenues 6,978 12,564
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Cost of revenues:
Product 1,235 1,808
Service 2,294 2,598
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Total cost of revenues 3,529 4,406
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Gross profit 3,449 8,158
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Operating expenses:
Sales and marketing 3,298 3,781
Research and development 4,330 2,721
General and administrative 820 719
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Total operating expenses 8,448 7,221
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Operating income (4,999) 937
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Other income (expense):
Interest income 40 58
Interest expense (100) (191)
Other 42 (124)
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Other income expense, net (18) (257)
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Net income (loss) $(5,017) $ 680
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------- -------
Net income (loss) per share $ (.25) $ .04
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Average common and common
equivalent shares outstanding 19,802 19,348
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------- -------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1996 1995
-------- --------
<S> <C> <C>
Operating activities:
Net Income $(5,017) $ 680
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Adjustments to reconcile income to net
cash provided (used) by operating activities:
Depreciation and amortization 1,041 1,286
Changes in assets and liabilities:
Accounts receivable 2,770 2,422
Inventories 271 68
Other assets, net (465) (392)
Accounts payable and accrued expenses 1 (93)
Deferred revenue (36) 93
Asset write-downs and staff reductions -- (805)
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Total adjustments 3,582 2,579
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Net cash provided (used) by operating activities (1,435) 3,259
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Investing activities:
Capital expenditures (511) (238)
Collections from capital leases 118 253
Capitalized software (300) (200)
Repayment of note receivable 76 --
Short-term investment, proceeds, net (48) --
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Net cash used by investing activities (665) (185)
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Financing activities:
Proceeds from issuance of common stock 139 47
Increase (decrease) of equipment financing debt 338 (228)
Increase (reduction) on bank debt 1,900 (2,000)
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Net cash provided by (used in) financing activities 2,377 (2,181)
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Effect of exchange rate changes on cash
and cash equivalents 81 149
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Net increase in cash and cash equivalents 358 1,042
Cash and cash equivalents, beginning of period 3,722 2,861
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Cash and cash equivalents, end of period $ 4,080 $ 3,903
------- -------
------- -------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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ZYCAD CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Financial Statements:
The unaudited condensed consolidated financial statements of Zycad
Corporation for the three months ended March 31, 1996 and 1995 reflect, in
the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to fairly state the results of operations
for the interim period. The results of operations for any interim period
are not necessarily indicative of results for the full year. The unaudited
condensed consolidated interim financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
contained in the Company's December 31, 1995 Annual Report on Form 10-K.
2. Net Income Per Share:
Per-share data is computed by using the weighted average number of shares
of common stock and dilutive common stock equivalents outstanding, as
applicable during each period.
3. Inventories consisted of (in 000's):
March 31, 1996 December 31, 1995
-------------- -----------------
Finished goods $ 884 $ 753
Raw materials 634 1,035
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$1,518 $1,788
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Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
5
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RESULTS OF OPERATIONS
The 1995 first quarter results included revenue and costs related to the
Company's DOORS requirements management solution sales as summarized
below. In January 1996 the Company formed a joint venture with the U.K.
based owner of the DOORS technology to market and distribute the
technology in North America. Accordingly, the results of the joint venture
will now be reported on an equity basis rather than on the operating basis
that had been the reporting method in 1995. For the first quarter ended
March 31, 1996 the Company's 40% equity share of the joint venture profits
were not material. ($ in millions):
Service Revenue $1.0
Cost of service revenue .4
-------
Gross profit .6
Sales and marketing expenses .3
-------
Operating income $ .3
-------
-------
REVENUES
Revenues in the first quarter 1996 were $7.0 million, a decrease of $5.6
million compared to the first quarter in 1995. Product revenues decreased
by $4.3 million principally due to significant dollar volume purchases
from 3 customers in the 1995 first quarter which were not duplicated in
1996. Additionally, the Company is transitioning from its current
generation PXP accelerator products for logic simulation to its next
generation, faster LightSpeed accelerator products, which will be
available for shipment in the September 1996 quarter. Consequently, some
customers are waiting for the LightSpeed products before purchasing
accelerators for their next engineering projects. Services revenues
decreased by $1.3 million compared to the first quarter of 1995 of which
$1.0 million related to the inclusion of reporting DOORS revenues in 1995.
GROSS PROFIT
Total first quarter 1996 gross profit was $3.4 million, a decrease of $4.7
million from first quarter 1995, primarily due to the product revenue
decline and due to no longer including the DOORS gross profit in 1996, as
explained above. Gross profit percentages also declined to 60% for product
and 41% for service in 1996, compared to 75% and 50%, respectively, in
1995. The change in the product gross profit percentage is due to product
mix and higher discounts due to the product being one year older. The
change in the service gross profit is due to the elimination of reporting
the gross profit related to the DOORS activities as explained above.
Services gross profit is comparable in both 1996 and 1995, excluding the
impact of DOORS in 1995.
OPERATING EXPENSES
SALES AND MARKETING
Sales and marketing expenses decreased by $0.5 million or 13% in the first
quarter of 1996 compared to the same period in 1995 primarily because the
sales and marketing expenses related to the DOORS activities are no longer
included in operating expenses, as explained above.
RESEARCH AND DEVELOPMENT
Research and development expenses increased $1.6 million in the first
quarter of 1996 compared to the first quarter of 1995 due to higher costs
associated with the introduction of both the new LightSpeed Simulation
Server product and the GateField family of high density field programmable
gate array (FPGA) products.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased by $0.1 million compared to
the same period in 1995.
OTHER INCOME/EXPENSES, NET
Interest expense for the first quarter 1996 decreased by $.1 million from
the same quarter in 1995 due to a reduction in the level of bank debt.
Fluctuations in foreign currencies favorably impacted results in 1996 and
adversely impacted results in 1995.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996 the Company's working capital was $2.1 million compared to
$6.7 million at December 31, 1995. The decline in working capital resulted
from the lower revenue activity that produced significant losses and an
increase in bank borrowings of $1.9 million.
6
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Management believes that the current level of working capital, together with
the funds expected to be generated from operations and the availability of
funds under the Company's $5.0 million bank line-of-credit will be adequate
to finance the Company's operating needs in the foreseeable future.
However, the Company is actively pursuing alternative options for raising
additional cash to ensure it can successfully introduce both its
LightSpeed Simulation Server Products and its GateField family of high
density FPGA products. See Note 5 of Notes to Consolidated Financial
Statements in the Company's 1995 Annual Report to Shareholders.
At March 31, 1996 the Company was in technical default of certain
financial covenants of its line of credit agreement with the bank. The
bank has agreed to waive the noncompliance subject to certain conditions
which the Company expects to achieve prior to May 31, 1996.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
None.
(b) Reports on Form 8-K:
None.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ZYCAD CORPORATION
/s/ Peter J. Cassidy
---------------------------------------
Peter J. Cassidy
Executive Vice President and
Chief Financial Officer
Authorized Officer of the Registrant
Dated: May 15, 1996
7
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Exhibit (11)
ZYCAD CORPORATION
COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1996 1995
-------- --------
<S> <C> <C>
Weighted average shares outstanding 19,802 19,064
Effect of dilutive stock options and
warrants based on treasury stock method --- 284
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Average common and common
equivalent shares 19,802 19,348
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------- -------
Net income (loss) $(5,017) $ 680
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Net income (loss) per share $ (.25) $ .04
------- -------
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</TABLE>
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000727621
<NAME> EZS$6COW
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 4,080
<SECURITIES> 220
<RECEIVABLES> 9,427
<ALLOWANCES> 296
<INVENTORY> 1,518
<CURRENT-ASSETS> 16,115
<PP&E> 22,367
<DEPRECIATION> 17,010
<TOTAL-ASSETS> 26,211
<CURRENT-LIABILITIES> 13,965
<BONDS> 1,338
0
0
<COMMON> 49,951
<OTHER-SE> (39,213)
<TOTAL-LIABILITY-AND-EQUITY> 26,211
<SALES> 3,084
<TOTAL-REVENUES> 6,978
<CGS> 1,235
<TOTAL-COSTS> 3,530
<OTHER-EXPENSES> 18
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 100
<INCOME-PRETAX> (4,999)
<INCOME-TAX> 18
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,017)
<EPS-PRIMARY> (.25)
<EPS-DILUTED> (.24)
</TABLE>
