-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AY0R9S5f8+f6ZtQQAngUDrd+WbFTuPdZ4U6Cnge3CKgrhPObj+J9/oNnXTA+o8h2 sfrH1AkfE/qxC4bo3HfoBQ== 0000891618-97-004384.txt : 19971107 0000891618-97-004384.hdr.sgml : 19971107 ACCESSION NUMBER: 0000891618-97-004384 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970928 FILED AS OF DATE: 19971106 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: XICOR INC CENTRAL INDEX KEY: 0000319191 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 942526781 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-09653 FILM NUMBER: 97709178 BUSINESS ADDRESS: STREET 1: 1511 BUCKEYE DR CITY: MILPITAS STATE: CA ZIP: 95035 BUSINESS PHONE: 4084328888 MAIL ADDRESS: STREET 1: 1511 BUCKEYE DRIVE CITY: MILPITAS STATE: CA ZIP: 95035 10-Q 1 FORM 10-Q FOR PERIOD ENDED SEPTEMBER 28, 1997 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 28, 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 SEPTEMBER 28, 1997 19,073,502 2 XICOR, INC. FORM 10-Q QUARTER ENDED SEPTEMBER 28, 1997 INDEX
PAGE ---- PART I: FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Consolidated Balance Sheets at September 28, 1997 1 and December 31, 1996 Consolidated Statements of Operations for the three 2 and nine months ended September 28, 1997 and September 29, 1996 Consolidated Statements of Cash Flows for the nine 3 months ended September 28, 1997 and September 29, 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
-i- 3 PART I: FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS XICOR, INC. CONSOLIDATED BALANCE SHEETS ASSETS
September 28, December 31, 1997 1996 ------------- ------------- (Unaudited) Current assets: Cash and cash equivalents $ 19,886,000 $ 20,414,000 Short-term investments 14,611,000 21,159,000 Accounts receivable 10,951,000 11,611,000 Inventories 28,205,000 19,354,000 Prepaid expenses and other current assets 1,902,000 1,384,000 ------------- ------------- Total current assets 75,555,000 73,922,000 Property, plant and equipment, at cost less accumulated depreciation 44,406,000 33,992,000 Other assets 246,000 300,000 ------------- ------------- $ 120,207,000 $ 108,214,000 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 11,108,000 $ 9,979,000 Accrued expenses 7,583,000 7,216,000 Deferred income on shipments to distributors 13,772,000 13,725,000 Current portion of long-term obligations 6,049,000 5,868,000 ------------- ------------- Total current liabilities 38,512,000 36,788,000 ------------- ------------- Long-term obligations 18,123,000 13,469,000 ------------- ------------- Shareholders' equity: Preferred stock; 5,000,000 shares authorized - - Common stock; 75,000,000 shares authorized; 19,073,502 and 18,873,252 shares outstanding 124,141,000 123,522,000 Accumulated deficit (60,569,000) (65,565,000) ------------- ------------- 63,572,000 57,957,000 ------------- ------------- $ 120,207,000 $ 108,214,000 ============= =============
See accompanying notes to consolidated financial information -1- 4 XICOR, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three months ended Nine months ended ------------------------------- ----------------------------- September 28, September 29, September 28, September 29, 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Net sales $ 29,566,000 $ 33,054,000 $ 91,049,000 $ 93,002,000 Cost of sales 18,935,000 19,474,000 56,480,000 56,192,000 ------------ ------------ ------------ ------------ Gross profit 10,631,000 13,580,000 34,569,000 36,810,000 ------------ ------------ ------------ ------------ Operating expenses: Research and development 4,425,000 3,971,000 13,636,000 11,157,000 Selling, general and administrative 5,252,000 5,478,000 15,811,000 15,381,000 ------------ ------------ ------------ ------------ 9,677,000 9,449,000 29,447,000 26,538,000 ------------ ------------ ------------ ------------ Income from operations 954,000 4,131,000 5,122,000 10,272,000 Interest expense (475,000) (416,000) (1,342,000) (998,000) Interest income 488,000 517,000 1,478,000 1,472,000 ------------ ------------ ------------ ------------ Income before income taxes 967,000 4,232,000 5,258,000 10,746,000 Provision for income taxes 48,000 170,000 262,000 430,000 ------------ ------------ ------------ ------------ Net income $ 919,000 $ 4,062,000 $ 4,996,000 $ 10,316,000 ============ ============ ============ ============ Net income per common share $ 0.05 $ 0.20 $ 0.25 $ 0.52 ============ ============ ============ ============ Average common shares and equivalents 19,731,000 19,861,000 19,644,000 19,762,000 ============ ============ ============ ============
See accompanying notes to consolidated financial information -2- 5 XICOR, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended ------------------------------- September 28, 1997 September 29, 1996 ------------ ------------ Cash flows from operating activities: Net income $ 4,996,000 $ 10,316,000 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 8,175,000 5,809,000 Changes in assets and liabilities: Accounts receivable 660,000 42,000 Inventories (8,851,000) (4,286,000) Prepaid expenses and other current assets (518,000) (668,000) Other assets 54,000 30,000 Accounts payable and accrued expenses 1,496,000 3,766,000 Deferred income on shipments to distributors 47,000 303,000 ------------ ------------ Net cash provided by operating activities 6,059,000 15,312,000 ------------ ------------ Cash flows from investing activities: Investments in plant and equipment, net (9,042,000) (6,560,000) Purchases of short-term investments (20,925,000) (33,704,000) Maturities of short-term investments 27,473,000 30,766,000 ------------ ------------ Net cash used for investing activities (2,494,000) (9,498,000) ------------ ------------ Cash flows from financing activities: Repayments of long-term obligations (4,712,000) (3,695,000) Proceeds from sale of common stock to employees 619,000 826,000 ------------ ------------ Net cash used for financing activities (4,093,000) (2,869,000) ------------ ------------ Increase (decrease) in cash and cash equivalents (528,000) 2,945,000 Cash and cash equivalents at beginning of year 20,414,000 17,259,000 ------------ ------------ Cash and cash equivalents at end of quarter $ 19,886,000 $ 20,204,000 ============ ============ Supplemental information: Cash paid for: Interest expense $ 1,342,000 $ 998,000 Income taxes 269,000 501,000 Equipment acquired pursuant to long-term obligations 9,547,000 14,097,000
See accompanying notes to consolidated financial information -3- 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, 1996 filed with the Securities and Exchange Commission.
NOTE 2 - BALANCE SHEET DETAIL: September 28, December 31, 1997 1996 ------------- ------------- Inventories: Raw materials and supplies $ 4,740,000 $ 4,952,000 Work in process 16,943,000 8,568,000 Finished goods 6,522,000 5,834,000 ------------- ------------- $ 28,205,000 $ 19,354,000 ============= ============= Property, plant and equipment: Leased building and building improvements $ 1,602,000 $ 1,602,000 Leasehold improvements 17,410,000 16,947,000 Equipment 113,223,000 101,140,000 Furniture and fixtures 1,769,000 1,722,000 Construction in progress 6,318,000 2,815,000 ------------- ------------- 140,322,000 124,226,000 Less accumulated depreciation (95,916,000) (90,234,000) ------------- ------------- $ 44,406,000 $ 33,992,000 ============= ============= Accrued expenses: Accrued wages and employee benefits $ 3,383,000 $ 3,421,000 Other accrued expenses 4,200,000 3,795,000 ------------- ------------- $ 7,583,000 $ 7,216,000 ============= =============
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 Nine months ended ------------------------ ------------------------ September 28, September 29, September 28, September 29, 1997 1996 1997 1996 -------- -------- -------- -------- Basic income per share $ 0.05 $ 0.22 $ 0.26 $ 0.55 Diluted income per share $ 0.05 $ 0.20 $ 0.25 $ 0.52
-4- 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 three and nine months ended September 28, 1997 are not necessarily indicative of results to be expected in future periods. RESULTS OF OPERATIONS Sales for the third quarter of 1997 were $29.6 million compared to $33.1 million for the third quarter of 1996 and $32.0 million for the second quarter of 1997. Sales for the nine months ended September 28, 1997 were $91 million compared to $93 million for the comparable 1996 period. Sales declined in the third quarter of 1997 as bookings during the summer were lower than expected and orders booked for shipment within the same quarter continue to represent about half of total orders. Gross profit as a percentage of sales was 36% for the third quarter of 1997, down from 41% for the third quarter of 1996 and 38% for the second quarter of 1997. The decline in the gross profit percentage was primarily due to lower average selling prices as a result of competitive price pressures and Xicor's increased manufacturing cost level associated with increased production capacity and upgrading of the wafer fabrication operations, partially offset by increased manufacturing volumes and efficiencies. Maintaining or improving the gross profit percentage is contingent upon increasing sales, improving product mix, maintaining stable prices and successfully executing Xicor's plans to further improve manufacturing efficiencies. Research and development expenses were 15% of sales for the third quarter and nine months ended September 28, 1997 compared to 12% for the comparable 1996 periods. Research and development spending for the first nine months of 1997 increased 22% over the comparable 1996 period primarily due to an increase in the number of new products under development and increases in advanced manufacturing process technology development efforts. Research and development activities are requiring an increasing degree of complexity of design and manufacturing process, and Xicor expects to invest a similar amount in research and development during the fourth quarter of 1997. Due to the decreased sales level, selling, general and administrative expenses increased to 18% of sales in the third quarter of 1997 from 17% of sales for the third quarter of 1996 and the nine month period of both 1997 and 1996. As a result of ongoing cost control measures, third quarter 1997 costs were slightly below third quarter 1996 costs. Interest expense increased in the third quarter and nine months ended September 28, 1997 compared to the comparable prior year periods due to the financing of $15.9 million of capital equipment acquisitions during 1996 and $9.5 million during the nine months ended September 28, 1997. Interest expense for the fourth quarter of 1997 is expected to increase in absolute dollars over the third quarter level due to continuing increases in financed capital equipment acquisitions. -5- 8 Interest income decreased in the third quarter of 1997 compared to the prior year's quarter due to a decrease in the average balance invested caused primarily by funds used to purchase equipment and finance inventory growth. Interest income is expected to decrease during the fourth quarter of 1997 principally due to the utilization of funds for working capital purposes, leasehold improvements and equipment purchases. The provision for income taxes for the three and nine month periods of both 1997 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 $30.7 million at December 31, 1996 remain fully reserved because of the uncertainty regarding the ultimate realization of these assets. Net income for the third quarter of 1997 was lower than the prior year's quarter primarily due to the lower sales, the lower gross profit percentage and, to a lesser extent, the 11% increase in research and development expenses related to the development of new products and technology. Xicor's manufacturing cost level is higher in 1997 as a result of increasing the workforce in its wafer fabrication facility in 1996 and upgrading and adding manufacturing equipment in 1996 and 1997. Sales must grow substantially over the 1997 third quarter level to cover these costs and anticipated cost increases, including depreciation on additional equipment. There can be no assurance Xicor will achieve such increased sales. Orders booked and shipped in the same quarter constitute a large portion of Xicor's sales and thus limit Xicor's visibility of sales levels in future quarters. However, Xicor plans to further increase inventories during the fourth quarter, despite the risks associated with higher inventories. Xicor's management believes this business decision will allow Xicor to respond to orders requiring quick deliveries, which are needed to increase sales in the fourth quarter and thereafter. In addition, Xicor is actively marketing undifferentiated products which represent the bulk of the EEPROM 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. There can be no assurance that sales and production efficiencies will increase sufficiently to maintain or improve profitability in the fourth quarter of 1997 compared to the third quarter of 1997. Furthermore, if fourth quarter sales do not increase substantially from third quarter sales, Xicor will decrease production levels which will adversely impact operating results. "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 quick delivery business opportunities, cost effective utilization of Xicor's wafer fabrication facility and Xicor's plans to improve manufacturing efficiencies. In addition, during the nine months ended September 28, 1997 Xicor announced 36 new products, including products from two innovative product families. The success of these new products is dependent on a number of factors, including Xicor's ability to achieve design wins for these products and to manufacture the products efficiently and in sufficient quantities. -6- 9 Forward-looking statements are subject to certain risks and uncertainties that could cause the actual results to differ materially from those projected. Factors that could cause Xicor's actual results to differ materially include the following: general economic conditions and conditions specific to the semiconductor industry, fluctuations in customer demand, competition, 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, currency fluctuations, changes in laws, 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 in 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 and affordability 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 available in a timely manner. The sales level in any specific quarter is also in large part 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 the remainder of 1997 and beyond, although there can be no assurance that such research and development efforts or resulting new products or processes 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. -7- 10 LIQUIDITY AND CAPITAL RESOURCES At September 28, 1997, Xicor had $34.5 million in cash, cash equivalents and short-term investments compared to $41.6 million at December 31, 1996. During the first nine months of 1997, Xicor used funds to purchase $9 million of equipment and repay $4.7 million of long-term obligations, while generating $6.1 million of cash from operating activities. Xicor used long-term financing to acquire additional capital assets of $9.5 million during the first nine months of 1997. During the balance of 1997, Xicor expects to use additional cash to finance inventory growth, leasehold improvements and certain equipment purchases. Capital expenditures for the balance of 1997 are planned at approximately $6 million, $2 million of which had been committed as of September 28, 1997. The acquisitions consist principally of production equipment to increase manufacturing capacity and capabilities. Lease financing has been arranged for approximately $0.5 million of the equipment commitments. Xicor is investigating additional equipment financing for a portion of the planned fourth quarter capital expenditures. 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 September 28, 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. -8- 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 September 28, 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: November 4, 1997 -9- 12 INDEX TO EXHIBITS
Exhibit Number Description - ------ ----------- 27 Financial Data Schedule
EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-28-1997 DEC-30-1996 SEP-28-1997 19,886,000 14,611,000 11,451,000 500,000 28,205,000 75,555,000 140,322,000 95,916,000 120,207,000 38,512,000 0 0 0 124,141,000 (60,569,000) 120,207,000 91,049,000 91,049,000 56,480,000 56,480,000 13,636,000 0 1,342,000 5,258,000 262,000 4,996,000 0 0 0 4,996,000 0.25 0
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