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UNITED STATES
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 June 27, 1998,
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: 0-27482
XETEL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 74-2310781
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
2105 GRACY FARMS LANE
AUSTIN, TEXAS 78758
(Address of principal executive offices, including zip code)
(512) 435-1000
(Registrant's telephone number, including area code)
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 other 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 of the issuer's common stock, $0.0001 par value, as
of August 6, 1998: 9,085,797.
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XETEL CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. INTERIM FINANCIAL STATEMENTS
Balance Sheet as of June 27, 1998 and March 28, 1998................................................................3
Statement of Operations for the three months ended June 27, 1998 and June 28, 1997..................................4
Statement of Cash Flows for the three months ended June 27, 1998 and June 28, 1997..................................5
Notes to Interim Financial Statements...............................................................................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...............................8
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K..................................................................................12
Signatures..................................................................................................................13
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PART I. FINANCIAL INFORMATION
ITEM 1. INTERIM FINANCIAL STATEMENTS
XETEL CORPORATION
BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
June 27, March 28,
1998 1998
-------- ---------
(unaudited)
Current assets:
Cash and cash equivalents $ 7,205 $ 7,239
Trade accounts receivable, net of
allowance for doubtful accounts
of $240 and $240, respectively 24,666 22,887
Inventories 21,773
18,061
Prepaid expenses and other 919
927
-------- --------
Total current assets 54,563 49,114
Property and equipment, net 8,858 8,955
Goodwill 683
737
-------- --------
Total assets $ 64,104 $ 58,806
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 20,177 $ 19,396
Notes payable and current portion
of long term debt 8,500 5,800
Accrued expenses and other liabilities 4,000 2,965
-------- --------
Total current liabilities 32,677 28,161
Deferred income taxes 234 234
Long term debt 2,542 2,667
Commitments (Note 7)
Stockholders' equity:
Common stock, $0.0001 par value,
25,000,000 shares authorized,
9,085,795 and 8,998,896 shares
issued and 9,043,299 and 8,936,400
shares outstanding, respectively 21,465 21,142
Retained earnings 7,309 6,625
Deferred compensation (123) (23)
-------- --------
Total stockholders' equity 28,651 27,744
-------- --------
Total liabilities and
stockholders' equity $ 64,104 $ 58,806
======== ========
The accompanying notes are an integral part of these financial statements.
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XETEL CORPORATION
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA AMOUNTS)
(UNAUDITED)
Three Months Ended
----------------------
June 27, June 28,
1998 1997
-------- --------
Net sales $ 44,308 $ 24,467
Cost of sales 41,238 22,171
-------- --------
Gross profit 3,070 2,296
Selling, general and administrative
expenses 1,787 1,624
-------- --------
Income from operations 1,283 672
Other (expense) income, net (179) 61
-------- --------
Income before income taxes 1,104 733
Provision for income taxes 420 278
-------- --------
Net income $ 684 $ 455
======== ========
Basic earnings per share $ 0.08 $ 0.05
======== ========
Basic weighted average shares 9,008 8,811
outstanding ======= ========
Diluted earnings per share $ 0.07 $ 0.05
======== ========
Diluted weighted average shares 9,695 9,638
outstanding ======= ========
The accompanying notes are an integral part of these financial statements.
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XETEL CORPORATION
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Three Months Ended
--------------------
June 27, June 28,
1998 1997
-------- --------
Cash flows from operating activities:
Net income $ 684 $ 455
Adjustments to reconcile net income to net
cash (used for) provided by operating
activities:
Depreciation and amortization 714 647
(Gain) loss on disposal of equipment (8) 1
Change in operating assets and liabilities:
(Increase) decrease in--
Trade accounts receivable (1,779) (401)
(1,667)
Inventories (3,712)
Prepaid expenses and other 8 729
Increase in--
Trade accounts payable 781 443
52
Accrued expenses and other liabilities 1,035
------- -------
Cash (used for) provided by operating activities (2,277) 259
------- -------
Cash flows from investing activities:
Proceeds from sale of equipment 8 399
Purchases of property and equipment (545) (3,102)
------- -------
Cash used for investing activities (537) (2,703)
------- -------
Cash flows from financing activities:
Net borrowings under debt agreements 2,575 1,677
Cash proceeds from stock issued under
employee stock purchase plan 154 --
Proceeds from stock options exercised 51 29
------- -------
Cash provided by financing activities 2,780 1,706
------- -------
(Decrease) increase in cash and cash equivalents (34) (738)
Cash and cash equivalents, beginning of period 7,239 7,032
------- -------
Cash and cash equivalents, end of period $ 7,205 $ 6,294
======= =======
The accompanying notes are an integral part of these financial statements.
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XETEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 BUSINESS
XeTel provides advanced design and prototype services, manufactures
sophisticated surface mount assemblies and supplies turnkey solutions to
original equipment manufacturers primarily in the telecommunications, networking
and computer industries. XeTel incorporates its design and prototype services
and assembly capabilities together with materials management, advanced testing,
systems integration services and order fulfillment to provide turnkey solutions
for its customers.
NOTE 2 BASIS OF PRESENTATION
The accompanying financial statements have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). Certain
information and footnote disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to those rules or regulations.
In the opinion of management, the financial statements reflect all adjustments,
consisting only of normal recurring adjustments necessary for a fair
presentation of the financial position, operating results, and cash flows for
those periods presented. The results of operations for the period ended June 27,
1998 are not necessarily indicative of the results of operations for the fiscal
year ending March 27, 1999. These financial statements should be read in
conjunction with the financial statements, and notes thereto, for the fiscal
year ended March 28, 1998 as presented in the Company's 10-K filed with the SEC.
NOTE 3 INVENTORIES
Inventories consist of the following (in thousands):
June 27, March 28,
1998 1998
-------- --------
Raw materials $16,746 $13,944
Work in progress 4,393 3,731
Finished goods 634 386
------- -------
$21,773 $18,061
======= =======
As of June 27, 1998 and March 28, 1998, the Company had allowances for obsolete
raw materials (principally printed circuit board assembly components) of
$490,000 and $490,000, respectively. Cost of sales for the three months ended
June 27, 1998 and June 28, 1997 include provisions to the allowance for obsolete
materials of $ 130,000 and $0, respectively.
NOTE 4 PROPERTY AND EQUIPMENT, NET
Property and equipment, net consist of the following (in thousands):
June 27, March 28,
1998 1998
-------- ---------
Machinery and equipment $ 13,390 $ 13,204
Furniture and fixtures 912 838
Leasehold improvements 3,772 3,506
-------- --------
18,074 17,548
Less: Accumulated depreciation
and amortization (9,216) (8,593)
-------- --------
$ 8,858 $ 8,955
======== ========
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NOTE 5 NOTES PAYABLE AND LONG-TERM DEBT
The Company has (i) a revolving line of credit for $17.0 million from a
commercial bank, (ii) a term loan facility for $3.3 million, and (iii) an
equipment financing facility from a financial services company. There was $8.0
million and $5.3 outstanding under the commercial bank line of credit and $3.0
million and $3.3 million outstanding under the term note at June 27, 1998 and
March 28, 1998, respectively. The term loan facility bears interest at 9.2%, is
secured by certain assets, and matures on August 31, 2000.
The $17.0 million line of credit bears interest at LIBOR plus 1.25% or 1.75%,
depending on certain financial ratios, and/or prime (such rate determined based
upon the amounts and period of loans), matures on August 31, 1999 and is secured
by certain assets of the Company. The facility requires payment of a commitment
fee equal to one-eighth of 1% (1/8%) on the unused balance, and borrowings are
limited based upon certain collateral availability requirements The equipment
financing facility provides for the leasing of equipment over a five-year period
commencing on the date of acceptance of such equipment. All equipment leased to
date under this facility has qualified for operating lease treatment.
The financing facilities contain certain restrictions which include maintenance
of a minimum level of tangible net worth and other operating and financial
ratios. At June 27, 1998, the Company was in compliance with all debt covenants.
Interest paid totaled $201,000 and $23,000 for the three months ended June 27,
1998 and June 28, 1997, respectively.
NOTE 6 LEASE COMMITMENTS
XeTel leases its operating facilities and certain office equipment under
noncancellable operating leases. Rental expense under all operating leases was
approximately $1,001,000 and $566,000 during the three months ended June 27,
1998 and June 28, 1997, respectively. Future noncancellable minimum rental
payments under all operating leases with initial terms of greater than one year
are $3,875,000 in 1999, $3,782,000 in 2000, $3,467,000 in 2001, $2,513,000 in
2002, $1,684,000 in 2003 and an aggregate of $7,343,000 thereafter.
NOTE 7 RELATED PARTY TRANSACTIONS
The Company has transactions with certain divisions of Rohm Corporation, a
wholly-owned subsidiary of Rohm U.S.A., Inc. ("Rohm") a subsidiary of Rohm Co.,
Ltd., Japan, during the normal course of business. Rohm owned approximately 48%
and 49% of the Company's outstanding common stock as of June 27, 1998 and June
28, 1997, respectively. Purchases from such divisions were $41,000, and $70,000
for the three months ended June 27, 1998 and June 28, 1997, respectively.
Accounts payable to such divisions were $33,000 and $14,000 as of June 27, 1998
and March 28, 1998, respectively. Accounts receivable from such divisions were
not significant.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The discussion in this document contains trend analysis and other forward
looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Actual results could differ materially from those projected in the
forward-looking statements throughout this document as a result of the risk
factors set forth below and other risks described in the Company's other filed
SEC documents such as those associated with the Company's initial public
offering and Form 10-K filing.
OVERVIEW
XeTel was founded in 1984. In 1986, Rohm , a diversified electronics company,
acquired a controlling interest in the Company. Since its inception, the Company
has manufactured surface mount assemblies and performed other manufacturing
services for OEMs in the electronics industry. In a number of cases, such
services were rendered during periods in which customers were experiencing
fluctuations in demand for their products. During such periods, the Company's
net sales and operating results were and are subject to significant fluctuations
that often were and are tied to the market demand for its customers' products,
competitive factors and the customers' need to utilize independent manufacturers
to maintain sufficient product supply to meet such demand.
Annual and/or quarterly gross margins and operating results are also affected by
the level of capacity utilization of manufacturing facilities, indirect labor
and selling, general and administrative expenses. Accordingly, gross margins and
operating income margins have generally improved during periods of high volume
and high capacity utilization. XeTel generally has idle capacity and reduced
operating margins during periods of lower-volume.
In an effort to achieve greater stability and higher gross margins, the Company
made the strategic decision in 1993 to reduce its dependence on the computer
industry and expand its service offerings in order to establish long-term
relationships with targeted customers in diversified markets. With the addition
of new management personnel in 1993, including a new President in September
1993, the Company focused certain of its resources to establish capabilities in
product design and prototype, improve materials management processes,
restructure the Company's management organization, establish dedicated customer
teams, and to expand and diversify its customer base. The Company has reduced
its role as a source of additional capacity for OEMs during periods of
fluctuating product demand and has positioned itself to provide a more
comprehensive set of services within the electronics manufacturing services
industry.
The development and growth of the Company's business has generally followed the
trend by OEMs in the electronics industry to outsource certain of their
manufacturing requirements. Recognizing the benefits offered by using
independent manufacturers, OEMs in the electronics industry have increasingly
relied on independent manufacturers not only as a source of additional
manufacturing capacity during periods of fluctuating demand, but as the primary
source for their manufacturing and assembly needs. In addition, the Company has
developed competencies in additional areas where it can add value to its
customers' requirements, such as design, prototype, systems integration and
order fulfillment and has sought to use such competencies to forge long-term
relationships as a single source provider of turnkey solutions for its
customers. During fiscal 1997, XeTel acquired two full-service manufacturing
services centers in Dallas, Texas and San Ramon, California to further establish
and expand its long-term relationships with OEM's of advanced electronic
products.
RISK FACTORS
The following summary of risk factors relevant to an investment in shares of the
Company's common stock is derived, in part, from the section captioned "Risk
Factors" in the prospectus of the Company dated February 13, 1996 (the
"Prospectus"), as filed with the Securities and Exchange Commission (the
"Commission") pursuant to the initial registration of shares of common stock of
the Company under the Securities Act of 1933, as amended (the "Securities Act").
This discussion does not purport to be complete and is subject to, and qualified
by, the discussion of risk factors set forth in the Prospectus. A copy of the
Prospectus may be inspected without charge at the Commission's principal offices
in Washington, D.C. and copies of all or any part thereof may be obtained from
such office upon payment of prescribed fees. The Commission also maintains a
World Wide Website which provides online access to reports, proxy and
information statements and other information regarding registrants that they
file electronically with the Commission (including the Company) at the address
http:// www.sec.gov.
Fluctuations in Operating Results. XeTel's operating results are affected by a
number of factors, including timing of orders from and shipments to major
customers, availability of materials and components, the volume of orders
relative to the Company's capacity, timing of expenditures in anticipation of
future sales, the gain or loss of significant customers, variations in the mix
between consignment and component purchase arrangements with customers,
variations in the demand for products in the industries served by the Company
and general economic conditions. Operating results can also be significantly
influenced by the development and introduction of new products or technologies
by the Company's customers, or such customer's competitors, which may materially
and adversely affect the demand for the Company's services. The Company's
customers generally require short delivery cycles, and a substantial portion of
the Company's backlog is typically scheduled for delivery within 120 days. In
the absence of substantial backlog, quarterly sales and operating results depend
on
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the volume and timing of bookings received during the quarter which can be
difficult to forecast. Backlog fluctuations affect the Company's ability to plan
production and inventory levels, which could lead to fluctuations in operating
results. Variations in the size and delivery schedules of purchase orders
received by the Company, changes in customers' delivery requirements, or the
rescheduling or cancellation of orders and commitments, may result in
substantial fluctuations in backlog from period to period. Accordingly, the
Company believes that backlog may not be a meaningful indicator of future
operating results.
A significant portion of the Company's expenses is relatively fixed in nature
and planned expenditures are based in part on anticipated orders. The inability
to adjust expenditures quickly enough to compensate for a decline in net sales
may magnify the adverse impact of such decline in the Company's results of
operations. Due to the factors noted above and elsewhere in this Form 10-Q and
other filings with the Securities and Exchange Commission, the Company's future
earnings and stock price may be subject to significant volatility, particularly
on a quarterly basis. Past financial performance should not be considered a
reliable indicator of future performance and investors should not use historical
trends to anticipate results or trends in future periods. Any shortfall in
revenue and earnings from the levels anticipated by securities analysts could
have an immediate and significant effect on the trading price of the Company's
common stock in any given period. Also, the Company participates in a highly
dynamic industry which often results in volatility of the Company's common stock
price.
Concentration of Customers. The Company's customer base is highly concentrated.
The Company's three largest customers accounted for approximately 54.8%, 9.6%
and 3.4%, respectively, of net sales for the three months ended June 27, 1998.
The Company anticipates that a significant portion of its sales will continue to
be concentrated in a relatively small number of customers for the foreseeable
future. In addition, the Company's objective is to develop new and expand
existing relationships with leading and emerging OEM's in the electronics
industry. Such emerging growth and technology companies tend to have limited
operating histories, and also may have changes in management and limited
capitalization. As a result, the Company may experience difficulties in
maintaining long-term relationships with these customers and in receiving
payment for services rendered to them. To the extent that any significant
customers of the Company terminate their relationship with the Company, or the
Company is unable, for any reason, to receive payment for its services, the
Company's business, financial condition and results of operations likely would
be materially and adversely affected.
Unavailability of Components and Materials. Components and material used by
XeTel in producing surface mount assemblies and turnkey solutions are purchased
by XeTel from approved suppliers of its customers. Any failure on the part of
suppliers to deliver required components to the Company or any failure of such
components to meet performance requirements could impair the Company's ability
to meet scheduled shipment dates and could delay sales of systems by the
Company's customers and thereby adversely affect the Company's business,
financial condition and results of operations. The Company has in the past
experienced shortages of certain types of electronic components, and may
experience shortages of certain electronic components that are in short supply
generally within the electronics industry. Component shortages or price
fluctuations, to the extent not absorbed by customers under its agreements with
the Company, could have a material adverse effect on the Company's business,
financial condition and results of operations. Certain components used in a
number of the Company's customer programs are obtained from a single source.
Variability of Customer Requirements; Absence of Long-Term Purchase Orders. The
level and timing of purchase orders placed by the Company's customers are
affected by a number of factors, including variation in demand for the
customer's products, customer attempts to manage inventory and changes in the
customer's manufacturing strategies. Many of such factors are outside of the
control of the Company. The Company typically does not obtain long-term purchase
orders or commitments, but instead works with its customers to develop
nonbinding forecasts of the future volume of orders. Based on such nonbinding
forecasts, the Company makes commitments regarding the level of business that it
will seek and accept, the timing of production schedules and the levels and
utilization of personnel and other resources. Generally, customers may cancel,
reduce or delay purchase orders and commitments without penalty, except for
payment for services rendered, materials purchased or procured and, in certain
circumstances, charges associated with such cancellation, reduction or delay.
Significant or numerous cancellations, reductions or delays in orders by
customers, or inability by customers to pay for services provided by the Company
or to pay for components and materials purchased by the Company on such
customer's behalf, could have a material adverse effect on the Company's
business, financial condition and results of operations.
Management of Growth and Expansion. The Company's design, prototype, assembly
and turnkey solutions business and multi-site locations have grown rapidly in
recent years. This growth has increased the Company's fixed costs and required
it to hire additional personnel. Furthermore, the Company plans to establish
additional regional manufacturing services centers which will increase the
Company's fixed costs and will require additional personnel. A continuing period
of rapid growth, including geographic expansions, could place a significant
strain on the Company's management, operations and other resources. The
Company's ability to manage its growth will require it to manage its existing
resources more efficiently, to continue to invest in its operations, including
its financial and management information systems and internal process controls,
and to retain, motivate and manage its employees. If the Company's management is
unable to manage growth effectively, the quality of the Company's services and
its ability to retain key personnel could be materially and adversely affected,
which would have a material adverse effect on the Company's business, financial
condition and results of operations.
Year 2000 Compliance. In fiscal 1998, the Company began a year 2000 data
assessment project to address all necessary code changes, testing and
implementation for all of its systems. Many of the Company's business and
operating systems are currently year 2000 compliant, and therefore, the Company
is undertaking additional efforts to identify and modify those systems which may
not be year 2000
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compliant. Anticipated spending for the year 2000 date conversion project will
be expensed as incurred or new software will be capitalized and amortized over
the software's useful life and is not expected to have a significant impact on
the Company's results of operations. Project completion is planned during fiscal
1999. The costs of the project and the date on which the Company believes it
will complete the year 2000 modifications are based on management's best
estimates, which are derived utilizing numerous assumptions of future events,
including the continuous availability of certain resources and other factors.
However, there can be no guarantee that these estimates will be achieved and
actual results could differ materially from those anticipated. Specific factors
that might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes, and similar uncertainties. In addition,
there can be no assurance that the systems of other companies on which the
Company's systems rely will be converted on a timely basis or that such failure
by another company to convert would not have an adverse effect on the Company's
systems.
RESULTS OF OPERATIONS
Net sales for the three months ended June 27, 1998 increased 81.1% to $44.3
million from $24.5 million for the same prior year period. The higher sales
levels primarily represents increased shipments to the Company's major customers
in the computer segment of the electronics market.
Gross profit for the three months ended June 27, 1998 increased 33.7% to $3.1
million from $2.3 million in the comparable prior year period. Gross profit is
defined as net sales less cost of sales. Cost of sales consists of direct labor,
direct material and manufacturing overhead (which includes manufacturing and
process engineering expenses). The increase in gross profit primarily resulted
from higher sales levels which provided increased coverage of fixed expenses.
Gross margin (gross profit as a percentage of net sales) decreased to 6.9% for
the first quarter of fiscal 1999 from 9.4% for the comparable prior year period.
The decrease in gross margin mainly reflects anticipated changes in product mix
towards higher material content customer programs.
Selling, general and administrative ("SG&A") expenses consist primarily of
salaries and related expenses, marketing and promotional expenses, and sales
commissions paid to direct sales personnel and independent sales representative
organizations. SG&A expenses for the three months ended June 27, 1998 increased
10.0% to $1.8 million compared to $1.6 million in the corresponding period last
year. The increase in SG&A expenses mainly reflects expenses related to employee
additions. SG&A expenses represented 4.0% of net sales for the three months
ended June 27, 1998 compared to 6.6% for the three months ended June 28, 1997.
The decrease in SG&A expenses as a percentage of sales reflects the effects of
cost controls and higher sales levels.
Other (expense) income, net for the three months ended June 27, 1998 reflected
expense of $179,000 compared to income of $61,000 in the corresponding period in
fiscal 1998. The change in other (expense) income is mainly due to interest
expense incurred on borrowings under the term note and revolving line of credit.
The provision for income taxes of $420,000 and $278,000 reflects an effective
tax rate of 38.0% for the three months ended June 27, 1998 which was relatively
flat with the 37.9% effective tax rate for the three month period ended June 28,
1997.
LIQUIDITY AND CAPITAL RESOURCES
Working capital was $21.9 million and $21.0 million as of June 27, 1998 and
March 28, 1998, respectively. In addition to the Company's working capital as of
June 27, 1998, which includes cash and cash equivalents of $7.2 million, the
Company has $16.1 million available from unused credit facilities.
Net cash used for operating activities was $2.3 million during the first quarter
due to working capital needs associated with higher sales levels. Net cash
provided by operating activities was $259,000 during the three month period
ended June 28, 1997.
Capital expenditures during the three months ended June 27, 1998 and June 28,
1997 were $545,000 and $3.1 million, respectively. The decrease in capital
expenditures was primarily due to capital investments made in the prior year
associated with the Company's new manufacturing and administrative facilities in
Austin, Texas.
The bank facility bears interest at LIBOR plus 1.25% or 1.75% and/or prime (such
rate determined based upon the amounts and period of loans), matures August 1999
and is secured by certain assets of the Company. The bank facility requires the
payment of a monthly commitment fee equal to one-eighth of 1% (1/8%) on the
unused balance, and borrowings are limited based upon certain collateral
availability requirements. The term loan facility bears interest at 9.2% with a
maturity of August 31, 2000. The equipment financing facility provides for the
leasing of equipment over a five-year period commencing on the date of
acceptance of such equipment.
The financing facilities contain certain restrictions which, among other things,
require maintenance of a minimum level of tangible net worth and other operating
and financial ratios.
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The Company believes its working capital, together with cash flows from
operations and financing facilities, will be sufficient to meet operating and
capital requirements through its 1999 fiscal year end.
BACKLOG
The Company's backlog as of June 27, 1998 was approximately $114.8 million
compared to approximately $112.3 million at March 28, 1998. Backlog consists of
purchase orders received by the Company and commitments under scheduled
releases, both of which generally specify delivery dates within twelve months.
Variations in the size and delivery schedules of purchase orders received by the
Company, as well as changes in customers' delivery requirements or the
rescheduling or cancellation of orders and commitments, has resulted in the past
and may result in substantial fluctuation in backlog from period to period.
Accordingly, the Company believes that backlog may not be a meaningful indicator
of future operating results. See "Variability of Customer Requirements" and
"Fluctuations in Operating Results."
EMPLOYEES
As of June 27, 1998, the Company had 675 full-time employees supplemented from
time to time by part-time employees. The employees are not represented by a
union, and the Company believes its employee relations to be satisfactory.
The Company's success depends to an extent upon the continued services of
several key employees. The loss of certain key personnel could have a material
adverse effect on the Company. The Company's business also depends upon its
ability to continue to attract and retain senior managers and skilled employees.
Failure to do so could adversely affect the Company's operations.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Description
Number
3.2(1) Second Restated Certificate of Incorporation.
3.3(1) Restated Bylaws of the Registrant, as amended.
3.4(1) Registration Rights, dated June 18, 1986 among the Registrant Rohm Corporation, Julian C. Hart, David W. Gault
and Emory C. Garth.
4.1(1) Reference is made to Exhibits 3.1, 3.2 and 3.3.
4.2(1) Specimen Common Stock certificate.
10.2(1) Form of Indemnification Agreement between the Registrant and each of its directors and certain executive officers.
10.20(1) Manufacturing Services Agreement February 22, 1989 between Motorola, Inc., MOS Memory Products Division and the
Registrant, and letter from Motorola, Inc., Fast Static RAM Module Division related thereto.
10.21(1) Mobile Communication Standard Terms and Conditions dated August 5, 1994 for Westinghouse Electric.
10.22(2) Master Lease Agreement between the Registrant and General Electric Capital Corporation.
10.23(2) $3,000,000 Promissory Note between the Registrant and Rohm U.S.A.
10.24(3) $7,000,000 Promissory Note between the Registrant and Texas Commerce Bank National Association.
10.25(3) Lease Agreement between Braker Phase III, Ltd. as Landlord, and the Registrant, as Tenant.
10.26(4) Lease Agreement between Delta HP Limited, as Landlord, and the Registrant, as Tenant.
10.27(4) First Amendment to Credit Agreement between the Registrant and Texas Commerce Bank National Association.
10.28(4) Letter of Commitment between the Registrant and General Electric Capital Corporation.
10.29(4) Amended $3,000,000 Promissory Note between the Registrant and Rohm U.S.A.
10.30(5) Registrant's 1997 Stock Incentive Plan
10.31(5) Registrant's Employee Stock Purchase Plan
10.32(6) Lease Agreement between Braker Phase III, Ltd. as Landlord, and the Registrant, as Tenant.
10.33(7) Amended $10,000,000 Promissory Note between the Registrant and Chase Bank of Texas.
10.34(7) Second Amendment to Credit Agreement between the Registrant and Chase Bank of Texas.
10.35(7) Amended Letter of Commitment between the Registrant and General Electric Capital Corporation.
10.36 Amended $17,000,000 Promissory Note between the Registrant and Chase Bank of Texas.
10.37 Third Amendment to Credit Agreement between the Registrant and Chase Bank of Texas.
11.1 Computation of Earnings per Share.
24.1 Power of Attorney, pursuant to which amendments to this Form 10-Q may be filed, is included
on the signature page contained in this Form 10-Q.
27.1 Financial Data Schedule
(1) Incorporated by reference to the like-numbered exhibits previously filed
with Registrant's Registration Statement on Form S-1, No. 33-99632 filed with
the Securities and Exchange Commission on February 14, 1996.
(2) Incorporated by reference to the like-numbered exhibits previously filed
with the Registrant's 1996 Form 10-K.
(3) Incorporated by reference to the like-numbered exhibits previously filed
with the Registrant's September 1996 Form 10-Q.
(4) Incorporated by reference to the like-numbered exhibits previously filed
with the Registrant's 1997 Form 10-K.
(5) Incorporated by reference to the like-numbered exhibits previously filed
with the Registrant's 1997 Form 14-A.
(6) Incorporated by reference to the like-numbered exhibits previously filed
with the Registrant's December 1997 Form 10-Q.
(7) Incorporated by reference to the like-numbered exhibits previously filed
with the Registrant's 1998 Form 10-K.
(b) Reports on Form 8-K
During the fiscal quarter ended June 27, 1998 no current reports
on Form 8-K were filed.
13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby severally constitutes and appoints, Angelo A. DeCaro, Jr. and
Richard S. Chilinski, and each or any of them, his true and lawful
attorney-in-fact and agent, each with the power of substitution and
resubstitution, for him in any and all capacities, to sign any and all
amendments to this Form 10-Q and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each said attorney-in-fact
and agent, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
XETEL CORPORATION
(Registrant)
Date: August 11, 1998 By: /s/ Angelo A. DeCaro, Jr.
---------------------------------
Angelo A. DeCaro, Jr.
President and Chief Executive
Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: August 11, 1998 By: /s/ Angelo A. DeCaro, Jr.
---------------------------------
Angelo A. DeCaro, Jr.
President and Chief Executive
Officer and Director
Date: August 11, 1998 /s/ Richard S. Chilinski
---------------------------------
Richard S. Chilinski
Vice President,
Chief Financial Officer
and Assistant Secretary
(Principal Financial and
Accounting Officer)
14
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- ------- ------- -------------
10.36 Amended $17,000,000 Promissory Note
10.37 Third Amendment to Credit Agreement
11.1 Computation of Earnings per Share
27.1 Financial Data Schedule