-----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, JuAk64AsUmpcyoOs5IPJplJ1iEPPy03I1x63/PKPuirKNXaagCzXedJ6nSFgEIaM J4BtGzhlFmn5irwBmurewQ== 0000730000-98-000002.txt : 19980608 0000730000-98-000002.hdr.sgml : 19980608 ACCESSION NUMBER: 0000730000-98-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980605 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUPERTEX INC CENTRAL INDEX KEY: 0000730000 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 942328535 STATE OF INCORPORATION: CA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-12718 FILM NUMBER: 98643027 BUSINESS ADDRESS: STREET 1: 1225 BORDEAUX DR CITY: SUNNYVALE STATE: CA ZIP: 94088-3607 BUSINESS PHONE: 4087440100 MAIL ADDRESS: STREET 1: 1235 BORDEAUX DR CITY: SUNNYVALE STATE: CA ZIP: 94089 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (MARK ONE) (x) Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (Fee Required) For the Fiscal Year Ended March 31, 1998 or ( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 (No Fee Required) Commission File No. 0-12718 SUPERTEX, INC. (Exact name of Registrant as specified in its Charter) California 94-2328535 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 1235 Bordeaux Drive Sunnyvale, California 94089 (Address of principal executive offices) Registrant's Telephone Number, Including Area Code: (408)744-0100 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock 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( ) The aggregate market value of the voting stock held by non-affiliates of the registrant as of May 15, 1998, was $97,830,795 based on the closing transaction reported for such date. For purposes of this disclosure, shares of common stock held by persons who hold more than 5% of the outstanding shares of common stock and shares held by officers and directors of the Registrant, have been excluded in that such persons may be deemed to be "affiliates" as that term is defined under the rules and regulations promulgated under the Securities Exchange Act of 1934. This determination of affiliate status is not necessarily a conclusive determination for other purposes. The number of shares outstanding of the Registrant's common stock as of May 15, 1998, was 12,100,314. Documents Incorporated by Reference: Part III incorporates information by reference from the Company's definitive proxy statement for the Annual Meeting of Shareholders to be held on August 7, 1998 (the "Proxy Statement"). Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ( ) Exhibit Index is on Page 27 Total number of pages is 30 (BLANK PAGE) SUPERTEX, INC. ANNUAL REPORT - FORM 10-K Table of Contents Page No. - ----------------- ------- PART I Item 1. Business................................................... 4 Item 2. Properties................................................. 8 Item 3. Legal Proceedings.......................................... 8 Item 4. Submission of Matters to a Vote of Security Holders........ 9 PART II Item 5. Market for Registrant's Common Equity and Related Shareholder Matters ....................................... 9 Item 6. Selected Consolidated Financial Data....................... 9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 10 Item 8. Financial Statements and Supplementary Data............... 13 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....................... 13 PART III Item 10. Directors and Executive Officers of the Registrant....... 13 Item 11. Executive Compensation................................... 13 Item 12. Security Ownership of Certain Beneficial Owners and Management............................................... 13 Item 13. Certain Relationships and Related Transactions........... 13 PART IV Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K................................................. 14 Signatures.......................................................... 15 PART I Item 1. Business Supertex, Inc. ("Supertex" or the "Company") is a technology-based producer of high voltage analog and mixed signal semiconductor components. It designs, develops, manufactures, and markets integrated circuits utilizing state-of-the-art high voltage DMOS, HVCMOS and HVBiCMOS analog and mixed signal technologies. With respect to its DMOS transistor products, the Company has maintained an established position in key products for telecommunication and automatic test equipment industries. Supertex has been an industry leader in high voltage integrated circuits (HVCMOS AND HVBiCMOS), which take advantage of the best features of CMOS, bipolar, and DMOS technologies and integrate them into the same chip. They are used by flat panel display, printer, medical ultrasound imaging, telephone, telecommunications and instrumentation industries. The Company markets its products through direct sales personnel, independent sales representatives and distributors in the United States and abroad, primarily to electronic equipment manufacturers. The Company was incorporated in California in October 1975 and conducted an initial public offering of its Common Stock in December 1983. Its executive offices are located at 1235 Bordeaux Drive, Sunnyvale, California 94089, and its principal manufacturing facilities are located at 1225/1231 Bordeaux Drive, Sunnyvale, California 94089. Supertex also maintains three direct field offices located in: (1) New York; (2) Illinois; and (3) United Kingdom. The telephone number of its headquarters is (408) 744-0100. The Company's mailing address is 1235 Bordeaux Drive, P.O.Box 3607, Sunnyvale, California 94088-3607. Products Supertex offers semiconductor products that interface between the low voltage computer logic signal world and the high voltage requirements of the real analog world. Most of its products are facilitated by the use of mixed signal technologies. It supplies standard and custom interface products primarily for the following three market groups: (1) The Telecommunications Group consists of interface products used in telephone handsets, solid state relays, modems, fax, ISDN, networking, PABX, PCMCIA cards, as well as diagnostic, curbside, set-top and central office equipment. In addition they are used in military radio frequency and microwave communication applications. (2) The Imaging Group consists of interface products for Flat Panel Displays and Non-impact Printers and Plotters. The flat panel display product family is sold to customers using Electro-Luminescent (EL), Plasma, Vacuum Fluorescent, Plasma- addressed LCD, Ferro-electric LCD, and Field Emission Display (FED) technologies. There is also a family of products for driving EL panels to backlight displays of handheld instruments, such as cellular phones, PDA's, pagers, HPC's, and meters. The printer product family is used in ink-jet and electrostatic types of printers and plotters which are mostly high end, with full color high resolution and high speed. (3) The Medical Electronics Group consists of products primarily for ultrasound diagnostic imaging equipment as well as selected portable instrumentation applications. Because Supertex has been a leading provider of products to these specific markets, it has been able to work very closely with key customers to define new products by determining future market needs. Such close collaboration has produced a wide range of leading edge new products for Supertex and allowed its customers to quickly develop new and more advanced products for their markets. In the DMOS transistor product line, Supertex focuses on certain niches such as very low threshold and low leakage devices which are most suitable for telecommunication, automatic test equipment, and hand held applications where these features justify a premium. They also serve as predecessors to a fully integrated solution - the high voltage integrated circuits. Research and Development Supertex expended approximately $5,582,000, $5,306,000, and $5,647,000 on research and development activities during fiscal years 1998, 1997, and 1996, respectively. Research and development activities continue at the rate of over thirty new product projects per year. Supertex believes that its position as a leading supplier in its targeted markets can only be maintained through continuous investments in research and development. Supertex focuses its efforts on designing new products with existing process technologies while also developing new process technologies to be used for future new products. The effective monitoring and control of the Company's research and development programs have actually resulted in better performance and greater technological achievements at lower costs. Manufacturing Manufacturing operations include wafer fabrication, limited assembly and packaging, product testing, and quality control. The Company's wafer fabrication facilities are continually being upgraded to keep pace with technological developments, to enhance environmental controls, and to improve technical capabilities. To support growth, the Company anticipates significant capital expenditures for equipment additions, facilities upgrades, and expansion of its manufacturing capability in the near future. In addition, through a licensing agreement, Texas Instruments has allocated a certain amount of its wafer capacity to Supertex to supplement the Company's production needs. Supertex subcontracts most of its standard component packaging and limited testing to independent assemblers, principally in Thailand, Taiwan, Malaysia, and the Philippines. A specialized assembly area is also maintained at the Company's manufacturing facilities to package engineering prototypes, to ensure high priority deliveries, and to assemble high reliability circuits required in military and high reliability applications. After assembly, packaged units are shipped back to the Company's facility or to testing subcontractors for final product testing. Quality control is performed at the Company's headquarters before shipment to customers. Although the Company's off-shore assembly and test subcontractors have not experienced any serious work stoppage, the political situation in these countries could be volatile. Any prolonged work stoppage or other inability of the Company to assemble products would have a material adverse impact on the Company's operating results although the Company has qualified assemblers in different countries to reduce risk. Furthermore, economic risks, such as changes in tariff or freight rates or interruptions in air transportation, could adversely affect the Company's operating results. The availability of blank silicon wafers has improved considerably in the past year from shortage to glut. Assembly packages and other raw materials used by the Company in the manufacturing of its products are obtainable from several suppliers. Some of such materials were in short supply in prior years, but recently the supply of these materials appears to be plentiful and subject to competitive pricing pressure. However, any future shortage of supply would have a material adverse effect on the operating results of the Company. As is typical in the semiconductor industry, the Company must allow for lead times in ordering certain materials and services and often commits to volume purchases to obtain favorable pricing concessions and resource allocations. Environmental Laws Government regulations impose various environmental controls on the waste treatment and discharge of certain chemicals and gases after their use in semiconductor processing. The Company believes that its activities comply with present environmental regulations. However, increasing attention has been focused on the environmental impact of semiconductor manufacturing operations. While the Company has not experienced any material adverse effects on its business or financial results from its compliance with environmental regulations and installation of pollution control equipment, there can be no assurance that changes in such regulations will not necessitate the acquisition of costly equipment or other requirements in the future. The Company works closely with pollution experts from federal, state, and local agencies, especially from the City of Sunnyvale, California, to ascertain that the Company is in compliance with present requirements. Sales Supertex markets its standard and custom products in the United States and abroad through the Company's direct sales and marketing personnel in its headquarters, as well as through independent sales representatives and distributors supported by the Company's field sales managers out of the Company's sales offices in Illinois, New York, and the United Kingdom. Export sales are made primarily through independent distributors to customers in Western Europe and the Far East, and represented 53%, 51%, and 44% of net sales in fiscal years 1998, 1997, and 1996, respectively. Exports to the Far East are largely to customers in Japan. Export sales are denominated only in U.S. dollars. Although export sales are subject to certain governmental commodity controls and restrictions for national security purposes, the Company has not had any material adverse effects on its business or financial results because of these limitations. In fiscal 1998, one customer who is the Company's master distributor in Japan, Microtek, Inc., accounted for approximately 19% of net sales. In fiscal 1997, Microtek counted for 18% of net sales. In fiscal 1996, two customers, CP Clare Corporation and Microtek, Inc., accounted for 15% and 12% of net sales respectively. There is no long-term production agreement with these or any customers. Normal terms and conditions of sale apply, which include a 60-day notice of cancellation and charges for work in process for cancellations of less than 60 days from shipment. The Company maintains a good relationship with Microtek, Inc. Inventories are stated at the lower of cost (determined on a first-in, first-out basis) or market value. The Company's inventories include high technology parts and components that are specialized in nature or subject to rapid technological obsolescence. While the Company has programs to minimize the required inventories on hand and considers technological obsolescence when estimating amounts required to reduce recorded amounts to market values, it is reasonably possible that such estimates could change in the near term. Direct sales to end-user customers are recognized upon shipment of products. Sales to distributors are made primarily under arrangements allowing limited price protection and the right of stock rotation on merchandise unsold by the distributors. Because of this uncertainty associated with pricing concessions and possible returns, the Company defers recognition of such sales and the related costs of sales until the merchandise is sold by distributors to their end-user customers. Backlog The Company's backlog at March 31, 1998, was approximately $15,339,000 compared with $15,168,000 and $17,942,000 at March 31, 1997 and 1996, respectively. Due to general industry slowdown and high inventory, customers are demanding much shorter lead times, resulting in a smaller backlog. In addition, some of the larger customers are now on programs where orders are booked and released weekly even though their blanket commitments are large. The Company only includes firm release of any order into its backlog. The Company expects that all of this backlog will be shipped in fiscal 1999. Customers may cancel or reschedule orders without significant penalty, and the price of products may be adjusted between the time the purchase order is booked into backlog and the time the product is shipped to the customer. For those reasons, the Company believes that backlog is not meaningful in predicting the Company's actual net revenue for any future period. Competition Because of the Company's product niche orientation, market statistics are not generally available for many of its products. Competition in general among manufacturers of semiconductor components and discrete transistors is intense. Many of the Company's domestic and foreign competitors have greater facilities, financial, technical, and personnel resources, and more diverse product lines. Such factors as product prices, product performance, diversity of product lines, delivery capabilities, and the ability to adapt to rapid technological change and develop new and improved products are the principal methods of competition in the industry. The Company believes it is a leader in important segments of its product families where it has a technological and/or cost advantage and that it is generally competitive with respect to these factors. Patents and Licenses The Company holds numerous United States patents expiring from 1998 to 2009 and has applications for additional patents pending. Although the Company believes that its patents may have value, there can be no assurance that the Company's patents, or any additional patents that may be obtained in the future, will provide meaningful protection from competition. The Company believes that its success depends primarily on the experience, creative skills, technical expertise, and marketing ability of its personnel rather than on the ownership of patents. Patents may, however, be useful for cross-license purposes and have served the Company well in the past. Supertex is not aware that any of its products infringe on patent or other proprietary rights of third parties but it cannot be certain that they do not do so. If infringement is alleged, there can be no assurance that the necessary licenses could be obtained, or if obtained, would be on terms or conditions that would not have a material adverse effect on the Company. Employees At March 31, 1998, the Company had 312 full time employees. Many of the Company's employees are highly skilled, and the Company's continued growth and success will depend in part on its ability to attract and retain such employees, who are generally in great demand. At times, the Company as well as other semiconductor manufacturers experience difficulty in hiring and retaining sufficient numbers of skilled personnel. The Company believes that the compensation, benefits, and incentives offered to its employees are competitive with those generally offered throughout the semiconductor industry. There are no collective bargaining agreements between the Company and its employees, and there has been no work stoppage due to labor difficulties. The Company considers its employee relations to be good. Executive Officers of the Company Name Position with the Company Age Officer Since - ---- ------------------------- --- ------------- Henry C. Pao President, Principal Executive and Financial Officer 60 1976 Richard E. Siegel Executive Vice President 52 1982 Benedict C. K. Choy Senior Vice President, Technology Development and 52 1976 IC Products, and Secretary Dennis E. Kramer Vice President, Materials 56 1996 William Numann Vice President, DMOS Products 41 1997 Officers appointed by the Board of Directors serve at the discretion of the Board. There is no family relationship between any directors or executive officers of the Company except as stated below. Henry C. Pao is a founder of Supertex and has served as President, Principal Financial and Executive Officer, and as a Director since the Company's formation in fiscal 1976. Previously, he worked at Fairchild Semiconductor, Raytheon, Sperry Rand and IBM. He has B.S., M.S., and Ph.D. degrees in Electrical Engineering from University of Illinois at Champaign-Urbana. Dr. Pao is the son of Mr. Yunni Pao and the brother of Frank Pao, also Directors of the Company. Richard E. Siegel joined the Company in 1981 as National Sales Manager, was appointed Vice President of Sales and Marketing in April 1982, Senior Vice President in February 1988, and has served as Executive Vice President since November 1988. He has been a Director since 1988. Previously, he worked at Signetics Corporation, Fairchild Semiconductor, Ford Instrument and Grumman Aircraft Corporation. He has a B.S. degree in Mechanical Engineering from City College of New York, augmented with Electrical Engineering courses from Brooklyn Polytechnic Institute, New York. Benedict C. K. Choy, a founder of the Company, joined Supertex in fiscal 1976 as Vice President, Device Technology and Process Development, and has served as Senior Vice President since February 1988. He has been a Director since 1986. Previously, he worked at Fairchild Semiconductor, National Semiconductor, and Raytheon. He has a B.S. degree in Electrical Engineering from University of California, Berkeley. Dennis E. Kramer joined Supertex in September 1981 as Wafer Fab II Production Manager. Over his tenure, he has managed many facets of wafer fabrication process as well as all the back-end manufacturing operations. He was promoted to Vice President of Materials in 1996. Previously, he worked at Siemens and Signetics Corporation. He has a B.S. degree in Chemistry from University of California, Los Angeles and an MBA from Santa Clara University. William Numann came on board in June 1997, as Vice-President of DMOS Products. Aside from his product line responsibilities, he is working with the Company's senior management team in developing a new strategic plan for the Company. Previously, he worked at Siliconix and Supertex, Inc. He has a B.S. degree in Electrical Engineering and an MBA, both from Rensseleaer Polytechnic Institute, New York. Item 2. Properties The Company leases facilities covering approximately 38,000 square feet at 1225/1231 Bordeaux Drive, Sunnyvale, California. Operations at these facilities include wafer fabrication, process engineering, assembly, and quality control functions. These facilities are leased from a corporation owned by a director of the Company. (See Note 6 of "Notes to Consolidated Financial Statements.") The Company owns its corporate headquarters, a facility of approximately 42,000 square feet at 1235 Bordeaux Drive, Sunnyvale, California, which houses the executive offices, sales and marketing, product engineering, test, production control, corporate financial and administrative staff. The Company believes that its existing facilities and equipment are well maintained and are in good operating condition. Item 3. Legal Proceedings None. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders during the quarter ended March 31, 1998. PART II Item 5. Market for Registrant's Common Equity and Related Shareholder Matters On May 15, 1998, the last reported sale price was $12.563 per share. There were approximately 2,320 shareholders of record of common stock on May 15, 1998. The Company has not paid cash dividends on its common stock in fiscal years 1998 and 1997, and its Board of Directors presently intends to continue this policy in order to retain earnings for the development of the Company's business. Accordingly, it is anticipated that no cash dividends will be paid to holders of common stock in the foreseeable future. The following table sets forth the range of high and low closing sale prices reported on The Nasdaq Stock Market under the symbol SUPX for the periods indicated.
Fiscal Years Ended March 31, ---------------------------- 1998 1997 ---- ---- High Low High Low ------ ------- ------ ------- First Quarter $ 15 1/8 $ 9 3/4 $ 20 1/8 $ 12 1/2 Second Quarter 17 11 19 3/4 14 Third Quarter 17 7/8 10 1/2 25 3/8 13 3/4 Fourth Quarter 11 3/4 9 7/8 16 1/4 11
Item 6. Selected Consolidated Financial Data The selected financial information and other data presented below should be read in conjunction with the "Consolidated Financial Statements," "Notes to Consolidated Financial Statements," and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Form 10-K.
Fiscal Years Ended March 31, ---------------------------- 1998 1997 1996 1995 1994 ------ ------ ------ ------ ------ (in thousands) Balance Sheet Data: Working capital ...... $ 44,868 $ 36,734 $ 32,197 $ 27,723 $ 23,240 Total assets ......... $ 66,629 $ 56,408 $ 45,428 $ 37,310 $ 31,202 Shareholders'equity .. $ 57,217 $ 48,487 $ 38,663 $ 31,164 $ 25,776
Fiscal Years Ended March 31, ---------------------------- 1998 1997 1996 1995 1994 ------- ------- ------- ------- ------- (in thousands, except per share amounts) Statement of Operations Data: Net sales............... $ 52,706 $ 48,935 $ 42,802 $ 31,806 $ 26,108 Costs and expenses: Costs of sales....... 28,709 26,073 22,097 16,133 13,652 Research and development.......... 5,582 5,306 5,647 4,427 4,360 Selling, general and administrative... 6,724 6,226 5,700 5,324 4,576 ------ ------ ----- ----- ----- Income from operations.. 11,691 11,330 9,358 5,922 3,520 Other income: Interest income...... 1,666 1,430 1,099 867 509 Other income, net ... 2 63 255 129 83 ------ ----- ----- ----- ----- Income before provision for income taxes.... 13,359 12,823 10,712 6,918 4,112 Provision for income taxes............ 4,542 4,103 3,321 1,853 1,110 ------ ------- ------ ------ ------ Net income.......... $ 8,817 $ 8,720 $ 7,391 $ 5,065 $ 3,002 ====== ====== ====== ====== ====== Net income per share: Basic................ $ 0.73 $ 0.73 $ 0.62 $ 0.43 $ 0.25 ====== ====== ====== ====== ======= Diluted.............. $ 0.71 $ 0.70 $ 0.60 $ 0.42 $ 0.25 ====== ====== ====== ====== ======= Shares used in per share computation: Basic................ 12,074 12,026 11,902 11,772 11,808 ====== ====== ====== ====== ====== Diluted.............. 12,380 12,509 12,296 12,003 11,842 ====== ====== ====== ====== ======
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Certain Factors This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21 E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in the forward-looking statements as a result of the risk factors set forth below and elsewhere in this report. The industry in which the Company competes is characterized by extreme rapid changes in technology and frequent new product introductions. The Company believes that its long-term growth will depend largely on its ability to continue to enhance existing products and to introduce new products and features that meet the continually changing requirements of customers. While the Company has invested heavily in new products and processes, there can be no assurance that it can continue to introduce new products and features on a timely basis or that certain of its products and processes will not be rendered noncompetitive or obsolete by its competitors. The following discussion should be read in conjunction with the "Consolidated Financial Statements," "Notes to Consolidated Financial Statements" and "Selected Consolidated Financial Data" included elsewhere in this Form 10-K. The following table sets forth items from the Statements of Income as a percentage of net sales for the periods indicated:
Fiscal Years Ended March 31, ---------------------------- 1998 1997 1996 ---- ---- ---- Net sales ................. 100.0 % 100.0 % 100.0 % Costs of sales .......... 54.5 53.3 51.6 Research and development.. 10.6 10.8 13.2 Selling, general and administrative ....... 12.8 12.7 13.3 Income from operations ..... 22.1 23.2 21.9 Other income Interest income ........... 3.2 2.9 2.6 Other income,net .......... 0.0 0.1 0.6 Income before provision for income taxes........... 25.3 26.2 25.1 Provision for income taxes...... 8.6 8.4 7.8 Net income .............. 16.7 % 17.8 % 17.3 %
Results of Operations NET SALES. The Company had net sales of $52,706,000 in fiscal 1998, an increase of $3,771,000 or 7.7% from the previous fiscal year. Fiscal 1997 net sales improved from fiscal 1996 by $6,133,000 or 14.3%. The Company's sales growth has been generated principally by new product introductions in the Company's targeted markets of medical ultrasound imaging, telecommunications, and flat panel displays. In fiscal 1998, approximately 53% of the Company's net sales were derived from customers outside the United States, primarily in Western Europe and the Far East (51% in fiscal 1997 and 44% in fiscal 1996). All of the Company's sales to international customers were denominated in U.S. currencies. There was no currency exchange exposure; however toward the end of the fiscal 1998 when the US dollar strengthened beyond expectation, many international customers requested and received some modest price concessions. GROSS MARGIN. The Company's gross margin as a percentage of net sales was 45.5%, 46.7%, and 48.4% in fiscal 1998, 1997, and 1996, respectively. In fiscal 1998, production ramp up of many newer products, which have yet to benefit from production learning curve efficiencies, contributed to the lower gross margins. As the Company gains production experience in these newer products, gross margins are expected to improve. RESEARCH AND DEVELOPMENT. Research and development expenses were 10.6%, 10.8%, and 13.2% of net sales in fiscal 1998, 1997, and 1996, respectively. The percentage decreases from year to year were due to sales volume increases and tighter cost controls, offset by increases in the number of projects in the last three years. The Company expects that the number of research and development projects is expected to increase during fiscal 1999. SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative expenses were 12.8%, 12.7%, and 13.3% of net sales in fiscal 1998, 1997, and 1996, respectively. The percentage decrease for each year was due to sales volume increases, offset by actual dollar expense increases due to increases in payroll and its related benefits, sales commissions, and incentive compensation for certain sales personnel. INTEREST INCOME. Interest income, which consists primarily of interest income from the Company's cash, cash equivalents and short-term investments, was $1,666,000 as compared with $1,430,000 in fiscal 1997 and $1,099,000 in fiscal 1996 due to the higher amount of funds available for investment. PROVISION FOR INCOME TAXES. Income taxes for fiscal 1998, 1997, and 1996 were at 34.0%, 32.0%, and 31.0%, respectively, of income before provision for income taxes. The effective income tax rate is expected to remain at 34.0% in fiscal 1999. Financial Condition OVERVIEW. Total assets grew to $66,629,000 at the end of fiscal 1998, up from $56,408,000 at the end of fiscal 1997. The increase is due to favorable operating results for the year. LIQUIDITY AND CAPITAL RESOURCES. The Company's primary source of funds for fiscal 1998, 1997, and 1996 has been the net cash generated from operating activities of $11,264,000, $8,524,000, and $7,737,000, respectively. Net cash provided by operating activities in fiscal 1998 of $11,264,000 consisted principally of net income of $8,817,000 plus depreciation and amortization of $2,669,000, provision for doubtful accounts and sales returns $1,566,000 and an increase in accounts payable and accrued expenses and deferred revenue of $203,000 and $373,000, respectively, partially offset by increases in accounts receivable and inventories of $2,180,000 and $1,065,000, respectively. Net cash used in investing activities in fiscal 1998 was $5,737,000 which consisted of an increase in short term investments of $2,460,000 and purchases of property and equipment of $3,277,000, which included the costs of upgrading the Company's fabrication facility during the fiscal year. Net cash used in financing activities in fiscal 1998 was $137,000, which consisted of repurchases of the Company's common stock partially offset by proceeds from exercises of stock options. As of March 31, 1998, the Company's working capital was $44,868,000, which included approximately $31,512,000 in cash, cash equivalents and short-term investments. The Company anticipates that the available funds and cash expected to be generated from operations will be sufficient to meet cash and working capital requirements through the end of fiscal 1999. The Company expects to spend approximately $4,700,000 for capital acquisitions during fiscal year 1999. YEAR 2000 COMPLIANCE RISKS. The Company is aware of the issues associated with the programming code in existing computer systems and software products as the millennium (Year 2000) approaches. The "Year 2000" problem is pervasive and complex, as virtually every computer operation will be affected in the same way by the rollover of the two digit year value to 00. The issue is whether computer systems will properly recognize date-sensitive information when the year changes to 2000. Systems that do not properly recognize such information could generate erroneous data or cause a system to fail. As a result, many companies' software, computer systems and other equipment may need to be upgraded or replaced in order to comply with such "Year 2000" requirements. The Company is utilizing both internal and external resources to identify, correct or reprogram, and test the systems for Year 2000 compliance. It is anticipated that all reprogramming efforts will be completed by December 31, 1999, including and allowing adequate time for testing. This process includes getting confirmations from the Company's primary vendors that plans are being developed or are already in place to address processing of transactions in the Year 2000. However, there can be no assurance that the systems of other companies on which the Company's systems rely will also be converted in a timely manner or that any such failure to convert by another company would not have an adverse effect on the Company's systems. Additionally, the Company's net sales could be adversely affected if the Company's customers or potential customers reallocate spending from the Company's products to their efforts to resolve the Year 2000 issue. Finally, the Company utilizes third-party equipment and software that may not be Year 2000 compliant. Although preliminary estimates indicate that the Year 2000 issue will not have a material impact on the Company, there can be no assurance that the Year 2000 issue, due to the above factors or other unforeseen consequences, will not have a material adverse effect on the Company's business, financial condition and operating results. Item 8. Financial Statements and Supplementary Data The Financial Statements and Financial Statement Schedule are listed in Item 14 of this report. Supplementary Quarterly Financial Data:
Quarters Ended -------------- Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, 1998 1997 1997 1997 1997 1996 1996 1996 ------- ------- ------- ------- ------- ------- ------- ------- (Unaudited) (in thousands, except per share amounts) Statement of Operations Data: Net sales..... $12,923 $13,857 $13,613 $12,313 $12,705 $10,849 $12,920 $12,461 Costs of sales.. 7,065 7,496 7,468 6,680 6,983 6,196 6,584 6,310 Income from operations...... 2,795 3,156 3,117 2,623 2,648 1,826 3,610 3,246 Income before provision for income taxes... 3,289 3,588 3,488 2,994 3,039 2,195 3,975 3,614 Net income ....$ 2,171 $ 2,368 $ 2,302 $1,976 $ 2,067 $ 1,492 $ 2,703 $ 2,458 Net income per share: Basic .......$ 0.18 $ 0.20 $ 0.19 $ 0.16 $ 0.17 $ 0.12 $ 0.23 $ 0.23 Diluted .....$ 0.17 $ 0.19 $ 0.19 $ 0.16 $ 0.17 $ 0.12 $ 0.22 $ 0.22
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Item 10. Directors and Executive Officers of the Registrant Information regarding directors is set forth under "Election of Directors - Nominees" on Page 2 of the Proxy Statement, which information is incorporated herein by reference. Information regarding executive officers is included in Part I hereof under caption "Executive Officers of the Company," and is hereby incorporated herein by reference. Item 11. Executive Compensation Information regarding the Company's remuneration of its officers and directors is set forth under "Compensation of Directors" on Page 5 and "Compensation of Executive Officers" on Page 7 of the Proxy Statement, which information is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management Information regarding the security ownership of certain beneficial owners and management is set forth under "Security Ownership of Certain Beneficial Owners and Management" on Pages 5 through 7 of the Proxy Statement, which information is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions Information regarding certain relationships and related transactions is set forth under "Certain Transactions: Lease with Company Director" on Page 5 of the Proxy Statement, which information is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K (a) The following documents are filed as part of this report: Page No. ------- 1. Report of Coopers & Lybrand L.L.P., Independent Accountants.............................................. 16 2. Consolidated Financial Statements: Consolidated Balance Sheets at March 31, 1998 and 1997... 17 For the three years ended March 31, 1998, 1997, and 1996: Consolidated Statements of Income.................. 18 Consolidated Statements of Shareholders'Equity...... 18 Consolidated Statements of Cash Flows............... 19 Notes to Consolidated Financial Statements.............. 20 3. Financial Statement Schedule. The following Financial Statement Schedule of Supertex, Inc., is filed as part of this report should be read in conjunction with the Consolidated Financial Statements of Supertex. Schedule for fiscal years ended March 31, 1998, 1997, and 1996: II Valuation and Qualifying Accounts.................... 26 All other schedules have been omitted since the required information is not present or it is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements, including notes thereto. 4. Exhibits. The exhibits listed in the accompanying EXHIBIT INDEX are filed as part of this annual report. (b) Reports on Form 8-K The Company did not file any reports on Form 8-K during the quarter ended March 31, 1998. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SUPERTEX, INC. Dated: June 1, 1998 /s/ Henry C. Pao ------------------------ Henry C. Pao, President, Principal Financial and Accounting Officer Pursuant to the requirements of the Securities Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Henry C. Pao, his attorney-in-fact, with the power of substitution, for him in any and all capacities, to sign any amendments to this report on Form 10-K, 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 said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. Signature Title Date /s/ Henry C. Pao President, Principal June 1, 1998 - ---------------- Executive and Financial (Henry C. Pao) Officer and Director /s/ Richard E. Siegel Executive Vice President June 1, 1998 - --------------------- and Director (Richard E. Siegel) /s/ Benedict C. K. Choy Senior Vice President June 1, 1998 - ----------------------- and Director (Benedict C. K. Choy) /s/ Yunni Pao Director June 1, 1998 - ------------- (Yunni Pao) /s/ Frank C. Pao Director June 1, 1998 - ---------------- (Frank C. Pao) REPORT OF INDEPENDENT ACCOUNTANTS --------------------------------- The Board of Directors and Shareholders of Supertex, Inc.: We have audited the consolidated financial statements and the financial statement schedule of Supertex, Inc. and subsidiary listed in Item 14(a) of this Form 10-K. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Supertex, Inc. and subsidiary as of March 31, 1998 and 1997, and the consolidated results of their operations and their cash flows for each of the three years in the period ended March 31, 1998 in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. /S/COOPERS & LYBRAND L.L.P. San Jose, California April 24, 1998 SUPERTEX, INC. CONSOLIDATED BALANCE SHEETS (in thousands) March 31, -------------- 1998 1997 ---- ---- ASSETS Current Assets: Cash and cash equivalents............................ $ 24,556 $ 19,166 Short term investments............................... 6,956 4,497 Trade accounts receivable, net of allowances of $700 in 1998 and $525 in 1997... 9,784 9,337 Other accounts receivable............................ 322 154 Inventories.......................................... 10,263 9,249 Deferred income taxes................................ 2,181 1,834 Prepaid expenses..................................... 218 418 ------- ------- Total current assets.............................. 54,280 44,655 Property, plant and equipment, net..................... 12,349 11,753 ------- ------- TOTAL ASSETS............................................ $ 66,629 $ 56,408 ======== ========
LIABILITIES Current liabilities: Trade accounts payable............................... $ 3,436 $ 3,813 Accrued salaries, wages and employee benefits........ 3,086 2,499 Income taxes payable................................. 1,080 166 Other accrued liabilities............................ 359 366 Deferred revenue on shipments to distributors........ 1,451 1,077 ------- ------- Total current liabilities......................... 9,412 7,921 ------- ------- Commitments (Note 6) SHAREHOLDERS' EQUITY Preferred stock, no par value -- 10,000 shares authorized, none outstanding. -- -- Common stock, no par value -- 30,000 shares authorized; issued and outstanding 12,097 shares in 1998 and 12,047 shares in 1997...................................... 20,713 20,302 Retained earnings.................................... 36,504 28,185 ------- ------- Total shareholders' equity........................ 57,217 48,487 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.............. $ 66,629 $ 56,408 ======== ======== See accompanying Notes to Consolidated Financial Statements.
SUPERTEX, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts)
Year Ended March 31, -------------------- 1998 1997 1996 ---- ---- ---- Net Sales ........................ $ 52,706 $ 48,935 $ 42,802 ------- -------- ------- Costs and expenses: Costs of sales...................... 28,709 26,073 22,097 Research and development............ 5,582 5,306 5,647 Selling, general and administrative. 6,724 6,226 5,700 ------- -------- ------- Total costs and expenses......... 41,015 37,605 33,444 ------- -------- ------- Income from operations................. 11,691 11,330 9,358 Other income: Interest Income .................... 1,666 1,430 1,099 Other income,net.................... 2 63 255 ------- -------- ------- Income before provision for income taxes.................. 13,359 12,823 10,712 Provision for income taxes............. 4,542 4,103 3,321 ------- -------- ------- Net income.......................... $ 8,817 $ 8,720 $ 7,391 ======== ======== ======== Net income per share: Basic............................... $ 0.73 $ 0.73 $ 0.62 ======== ======== ======== Diluted............................. $ 0.71 $ 0.70 $ 0.60 ======== ======== ======== Shares used in per share computation: Basic............................... 12,074 12,026 11,902 ======== ======== ======== Diluted............................. 12,380 12,509 12,296 ======== ======== ======== See accompanying Notes to Consolidated Financial Statements.
SUPERTEX, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in thousands) Common Stock ------------ Retained Shareholders' Shares Amount Earnings Equity ------ ------ -------- ------------- Balance, March 31, 1995 ................... 11,893 $ 18,173 $ 12,991 $ 31,164 Stock options exercised ................ 99 329 -- 329 Stock repurchased ............... (56) (85) (428) (513) Tax benefit from exercise of stock options.. -- 292 -- 292 Net income .......................... -- -- 7,391 7,391 ------- ------- ------- ------- Balance, March 31,1996 ................... 11,936 18,709 19,954 38,663 Stock options exercised .................. 156 760 -- 760 Stock repurchased .................... (45) (72) (489) (561) Tax benefit from exercise of stock options.. -- 902 -- 902 Unrealized holding gains and losses ...... -- 3 -- 3 Net income ............................ -- -- 8,720 8,720 ------- ------- ------- ------- Balance, March 31,1997 ..................... 12,047 20,302 28,185 48,487 Stock options exercised ................ 97 439 -- 439 Stock repurchased ................... (47) (80) (498) (578) Tax benefit from exercise of stock options.. -- 52 -- 52 Net income ........................ -- -- 8,817 8,817 ------ ------ ------ ------ Balance, March 31, 1998 ................... 12,097 $ 20,713 $ 36,504 $ 57,217 ====== ====== ====== ====== See accompanying Notes to Consolidated Financial Statements.
SUPERTEX, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Year Ended March 31, -------------------- 1998 1997 1996 ------ ------ ------ CASH FLOWS FROM OPERATING ACTIVITIES Net income............................... $ 8,817 $ 8,720 $ 7,391 ------- ------- ------- Non-cash adjustments to net income: Depreciation and amortization......... 2,669 2,163 1,571 Provision for doubtful accounts and sales returns...................... 1,573 2,054 857 Provision for excess and obsolete inventories............................ 277 256 99 Loss on disposal of assets............. 11 2 24 Deferred income taxes.................. (347) (593) 214 Changes in operating assets and liabilities: Accounts receivable...................... (2,188) (3,641) (2,609) Inventories.............................. (1,291) (2,251) (716) Prepaid expenses.......................... 200 (244) (5) Trade accounts payable and accrued expenses. 203 1,284 756 Income taxes payable........................ 966 430 (84) Deferred revenue on shipments to distributors. 374 344 239 ------- ------- ------- Total adjustments............................ 2,447 (196) 346 ------- ------- ------- Net cash provided by operating activities.... 11,264 8,524 7,737 ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment............ (3,276) (7,452) (4,620) Purchases of short term investments............(27,613) (33,275) (39,350) Proceeds from maturities of short term investments........................ 25,152 35,059 48,088 ------- ------- ------- Net cash provided by (used in) investing activities........................... (5,737) (5,668) 4,118 ------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Stock options exercised.............. 375 763 329 Stock repurchased..................... (512) (561) (513) ------- ------- ------- Net cash provided by (used in) financing activities.......................... (137) 202 (184) ------- ------- ------- NET INCREASE IN CASH AND CASH EQUIVALENTS.... 5,390 3,058 11,671 CASH AND CASH EQUIVALENTS: Beginning of year......................... 19,166 16,108 4,437 ------- ------- ------- End of year............................... $ 24,556 $ 19,166 $ 16,108 ------- ------- ------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Tax benefit from exercise of stock options 52 902 292 Stock tendered for exercise of stock options 64 -- -- See accompanying Notes to Consolidated Financial Statements.
SUPERTEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES Nature of Business. The Company designs, manufactures and markets custom and standard semiconductor products. Use of Estimates in Preparation of the Financial Statements. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain Risks and Uncertainties. The Company's business is concentrated in the high voltage semiconductor components industry, which is rapidly changing, highly competitive and subject to competitive pricing pressures. The Company's operating results may experience substantial period-to-period fluctuations due to these factors, including the cyclical nature of the semiconductor industry, the changes in customer requirements, the timely introduction of new products, the Company's ability to implement new capabilities or technologies, its ability to manufacture efficiently, its reliance on subcontractors and vendors, and the general economic conditions. Principles of Consolidation. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany accounts and transactions have been eliminated. Net Sales. The Company has no revenue-producing operations outside the United States. In fiscal 1998, one customer who is a master distributor accounted for approximately 19% of net sales. In fiscal 1997, the same distributor accounted for approximately 18% of net sales. In fiscal 1996, two customers accounted for 15% (the same distributor discussed in the preceding sentence) and 12% of net sales. Export sales, which are made primarily to Western Europe and the Far East, accounted for approximately 53%, 51%, and 44% of net sales in fiscal 1998, 1997 and 1996, respectively. Fiscal Period. The Company uses a 52-53 week fiscal year ending the Saturday nearest March 31. The Company's fiscal years in the accompanying financial statements have been shown ending on March 31. Fiscal years 1998, 1997, and 1996 all comprise 52 weeks. Cash and Cash Equivalents. The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. The carrying amounts reported in the balance sheets of cash, cash equivalents and short term investments approximate estimated fair value because of the short maturity of the financial instruments. Short Term Investments. Short term investments, which are classified as held to maturity, consist principally of commercial papers that mature within one year and are stated at cost, which approximates fair market value. Unrealized holding gains and losses are reflected at a net amount in a separate component of the Statement of Shareholders' Equity until realized. For the purpose of computing realized gains and losses, cost is identified on a specific identification basis. Inventories. Inventories are stated at the lower of cost (determined on a first-in, first-out basis) or market value. The Company's inventories include high technology parts and components that are specialized in nature or subject to rapid technological obsolescence. While the Company has programs to minimize the required inventories on hand and considers technological obsolescence when estimating amounts required to reduce recorded amounts to market values, it is reasonably possible that such estimates could change in the near term. SUPERTEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Property, Plant, and Equipment. Property and equipment are stated at cost and generally depreciated using accelerated methods over estimated useful lives of five years. Building and building improvements are recorded at cost and are depreciated on a straight-line basis over the useful life of the building. Leasehold improvements are recorded at cost and are amortized on a straight-line basis over the lesser of the related lease term or the estimated useful life of the assets. The Company reviews for impairment its long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset might not be recoverable. In certain situations, an impairment loss would be recognized. Revenue Recognition. Net sales are stated net of allowance. Revenue from direct sales to end-user customers are recognized upon shipment of product. Sales to distributors are made primarily under arrangements allowing limited price protection and the right of stock rotation on merchandise unsold by the distributors. Because of the uncertainty associated with pricing concessions and possible returns, the Company defers recognition of such sales and the related costs of sales until the merchandise is sold by distributors to their end-user customers. Net Income per Share. Effective December 31, 1997, the Company adopted Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share (EPS)," which specifies the computation, presentation, and disclosure requirements for earnings per share. The Company restated all prior-period earnings per share data presented after the effective date. Accordingly, the adoption of SFAS 128 did not have material impact to the Company's condition or results of operation. Basic EPS is computed as net income divided by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options, warrants, and other convertible securities. The following is a reconciliation of the numerator (net income) and the denominator (number of shares) used in the basic and diluted EPS calculations.
Fiscal Year Ended March 31, -------------------------- 1998 1997 1996 ---- ---- ---- BASIC: Weighted average shares outstanding for the period 12,074 12,026 11,902 Net income $ 8,817 $ 8,720 $ 7,391 ------- ------- ------- Net income per share $ 0.73 $ 0.73 $ 0.62 ------- ------- ------- DILUTED: Weighted average shares outstanding for the period 12,074 12,026 11,902 Common stock equivalents 306 483 394 ------- ------- ------- Total common and common equivalent shares 12,380 12,509 12,296 ------- ------- ------- Net income $ 8,817 $ 8,720 $ 7,391 ------- ------- ------- Net income per share $ 0.71 $ 0.70 $ 0.60 ------- ------- -------
Options to purchase the Company's common stock of 200,600 shares at $13.875 - $19.875, 32,700 shares at $17.50 - $19.875, and 97,500 shares at $10.00 - $12.375 in fiscal 1998, 1997, and 1996 respectively, were outstanding but were not included in the computation of diluted earnings per share because the option exercise prices were greater than the average market price of the common stock. SUPERTEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Concentration of Credit Risk. The Company sells its semiconductor products in North America, Europe and the Pacific Rim to numerous customers. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. Allowances for potential credit losses are maintained and such losses historically have not been material. Substantially all of the Company's cash, cash equivalents and short term investments are held at four major financial institutions domiciled in the United States. Income Taxes. The Company utilizes the liability method to account for income taxes where deferred tax assets or liabilities are determined based on the temporary differences between the bases used for financial versus tax reporting of assets and liabilities, using tax laws and rates in effect for the year in which the differences are expected to affect taxable income. The realizability of deferred tax assets is based on expectations about future taxable income. 2. INVENTORIES (in thousands): March 31, ---------------- 1998 1997 ---- ---- Finished goods..................... $ 2,919 $ 1,656 Work-in-process.................... 6,200 5,993 Raw materials...................... 1,144 1,600 ------- ------- $ 10,263 $ 9,249 ====== ===== 3. PROPERTY AND EQUIPMENT (in thousands): March 31, ----------------- 1998 1997 ---- ---- Machinery and equipment.......... $ 21,597 $ 20,985 Leasehold improvements .............. 2,175 1,626 Building ............................. 1,968 1,959 Furniture and fixtures ................ 70 78 ------- ------- 25,810 24,648 Less accumulated depreciation & amortization ...................... (14,286) (13,720) ------- ------- 11,524 10,928 Land ........................... 825 825 ------- ------- $ 12,349 $ 11,753 ====== ====== 4. INCOME TAXES The components of the provision for income taxes for fiscal years ended March 31, 1998, 1997 and 1996 are as follows (in thousands): March 31, ------------------------ 1998 1997 1996 ---- ---- ---- Federal - current ............. $ 4,223 $ 4,128 $ 2,693 Federal - deferred ............. (333) (540) 202 ------- ------- ------- 3,890 3,588 2,895 State - current ....................... 666 568 414 State- deferred ...................... (14) (53) 12 ------- ------- ------- 652 515 426 ------- ------- ------- $ 4,542 $ 4,103 $ 3,321 ===== ===== ===== SUPERTEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Substantially all of the Company's revenue is taxable in the United States. The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before provision for income taxes as follows: 1998 1997 1996 ---- ---- ---- Statutory provision.......................... 35% 35% 34% State tax, net of federal benefits.................................. 4% 4% 5% Tax Credits ............................. (3%) (3%) (2%) Benefit of foreign sales corporation............................. (3%) (3%) (2%) Other....................................... 1% (1%) (4%) ----- ----- ----- 34% 32% 31% ===== ===== ===== Income taxes of $4,226,000, $4,265,000, and $3,155,000 were paid during fiscal 1998, 1997, and 1996, respectively. The components of the deferred tax assets are as follows (in thousands): March 31, --------- 1998 1997 ==== ==== Deferred tax assets: Accrued benefits........................ $ 362 $ 363 Inventory allowances.................... 342 225 Accrued liabilities..................... 312 156 State deferred taxes (net of federal benefits).............. 182 220 Deferred revenue on shipments to distributors....................... 568 377 Allowances for doubtful accounts and sales returns.............. (80) 184 Other............................ 495 309 ----- ----- Total deferred tax assets............ $ 2,181 $ 1,834 ====== ====== Management has determined that no valuation allowance is required because, although realization is not assured, the Company has sufficient taxable income in carryback years to absorb items deductible in the future for federal tax purposes and anticipates that its estimated future taxable income will allow the deferred tax asset for state tax purposes to be fully realized in future years. The amount of the deferred tax asset that is realizable could be reduced in the near term if actual results differ significantly from estimates of future taxable income. 5. EMPLOYEE BENEFIT PLANS Profit Sharing Plan -- The Company has a discretionary profit sharing plan for the benefit of eligible employees. Related expenses were $1,299,000, $1,259,000, and $1,040,000 in fiscal 1998, 1997, and 1996, respectively. Savings and Retirement Plan -- The Supertex Savings and Retirement Plan allows for employee savings intended to qualify under the provisions of Section 401 of the Internal Revenue Code. Employees having at least three months of permanent service may make pretax contributions of 1% to 20% of qualified compensation, with the Company matching certain percentages of employee contributions, all of which are 100% vested. In fiscal years 1998, 1997, and 1996, the Company's matching contributions were $180,000, $160,000, and $221,000, respectively. SUPERTEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Stock Option Plan -- The 1991 Stock Option Plan (the Option Plan) provides for granting incentive stock options to employees, and non-statutory stock options to employees and consultants. Terms for exercising options are determined by the Board of Directors, and options expire at the earlier of the term provided in the Notice of Grant or upon termination of employment or consulting relationship. A total of 1,925,715 shares of the Company's common stock were reserved for issuance under the 1991 Plan. As of March 31, 1998, 269,280 options were exercisable at a weighted average exercise price of $6.16. As of March 31, 1997, 183,790 options were exercisable at a weighted average exercise price of $ 5.00. As of March 31, 1996, 123,530 options were exercisable at a weighted average exercise price of $3.97. Options granted under the Plan are granted at the fair market value of the Company's common stock on the date of grant and generally expire 7 years from the date of grant or at termination of service, whichever occurs first. The options generally are exercisable beginning one year from date of grant and generally vest over a five year period. Activity under the Option Plan is as follows (in thousands, except share and per share data):
Weighted Available Options Outstanding Average For ---------------------------------------- Exercise Grant Shares Price Per Share Amount Price --------- ------ --------------- ------ -------- Balance, March 31, 1995 74,875 667,260 $ 1 15/16 - $ 7 3/8 $ 2,601 $3.90 Granted (376,600) 376,600 7 1/4 - 12 5/8 3,495 $9.28 Exercised (98,510) 1 15/16 - 7 3/8 (329) $3.34 Canceled 83,000 (83,400) 2 3/8 - 11 3/8 (493) $5.91 Authorized 1,000,000 --------- ------- ----- Balance, March 31, 1996 781,275 861,950 2 3/4 - 12 5/8 5,274 $6.12 Granted (364,300) 364,300 12 - 9 7/8 4,859 $13.34 Exercised (156,360) 2 3/4 - 11 3/4 (763) $4.88 Canceled 63,000 (63,000) 2 3/4 - 17 1/2 (684) $10.86 ------- --------- ----- Balance, March 31, 1997 479,975 1,006,890 2 3/4 - 19 7/8 8,686 $8.63 Granted (378,300) 378,300 10 5/8 - 15 1/4 4,526 $11.96 Exercised (96,770) 2 3/4 - 16 1/2 (439) $4.54 Canceled 276,860 (276,860) 3 - 19 7/8 (3,604) $13.02 ------- --------- ------- Balance, March 31, 1998 378,535 1,011,560 $ 2 3/4 - $ 16 3/4 $ 9,169 $9.06 ======= ========= =======
Stock Compensation -- The Company has adopted the disclosure-only provisions of SFAS 123. Accordingly, no compensation cost has been recognized for the 1991 Stock Option Plan. Had compensation cost for the Option Plan been determined based on the fair value at the grant date for the awards consistent with the provisions of SFAS 123, the Company's net income and net income per share for the years ended March 31, 1997 and 1996 would have been reduced to the pro forma amounts indicated below (in thousands except per share data): 1998 1997 ---- ---- Net Income As reported $8,817 $8,720 Pro forma $7,894 $8,002 Earnings per share As reported $ 0.73 $ 0.70 Pro forma $ 0.65 $ 0.65 The weighted average fair value of options granted during fiscal 1998, 1997 and 1996 was $4.94 per share, $6.87 per share, and $4.46 per share, respectively. All options were granted at market price of the Company's common stock on the date of grant. The Company made option grants prior to fiscal 1996, the effective disclosure date of SFAS 123. Therefore, the proforma disclosures may not be representative of the effects on reported net income or earnings-per-share for future years. The fair value of each option grant for the Option Plan is estimated on the date of grant using the Black-Scholes multiple options pricing model with the following weighted average assumptions by year: 1998 1997 ----- ------ Risk-free interest rate 5.38% 5.53% Expected term of option from vest date 0.53 0.54 Expected volatility 50.30% 61.50% Expected dividend yield -- -- The options outstanding and currently exercisable by exercise price under the Option Plan at March 31, 1998 are as follows:
Options Outstanding Options Exercisable ------------------------------------------------ --------------------------------- Weighted-Average Range of Exercise Number Remaining Weighted-Average Number Weighted-Average Prices Outstanding Contractual Life Exercise Price Outstanding Exercise Price ----------------- ----------- ---------------- ---------------- ----------- ----------------- $ 2.750 - $ 6.750 253,760 2.70 $ 3.95 164,560 $ 3.83 $ 7.250 - $10.625 480,400 5.26 $ 9.70 78,900 $ 9.10 $11.000 - $15.250 263,400 5.95 $12.44 24,220 $11.75 $15.500 - $16.750 14,000 5.82 $16.50 1,600 $16.31 --------- ---- ------ ------- ------ $ 2.750 - $16.750 1,011,560 4.81 $ 9.06 269,280 $ 6.16
6. COMMITMENTS The Company leases its manufacturing facility under an operating lease that expires in 2001, from a corporation owned by one of the Company's directors. Under the lease, the Company is responsible for maintenance costs, including real property taxes, utilities and other costs. Future minimum lease payments at March 31, 1998 are as follows (in thousands): Fiscal Year ----------------------------- 1999 2000 2001 Total ---- ---- ---- ----- $ 374 $ 374 $ 343 $ 1,091 Rental expenses, net of sublease, were approximately $315,000, $321,000, and $473,000 (net of sublease income of $49,000, $105,000, and $86,000) in fiscal years 1998, 1997, and 1996, respectively. SCHEDULE II SUPERTEX, INC. VALUATION AND QUALIFYING ACCOUNTS (in thousands)
Balance at Charged to Balance at Beginning Costs and Write-Off End of Period Expenses of Accounts of Period --------- ---------- ----------- ---------- Year ended March 31, 1996 Allowance for sales returns...... $ 352 $ 867 $ 785 $ 434 Allowance for doubtful accounts.. 135 (10) -- 125 Inventory allowances............. 614 99 154 559 Year ended March 31, 1997 Allowance for sales returns....... $ 434 $ 2,020 $ 2,077 $ 377 Allowance for doubtful accounts... 125 34 11 148 Inventory allowances.............. 559 256 171 644 Year ended March 31, 1998 Allowance for sales returns...... $ 377 $ 1,333 $ 1,167 $ 543 Allowance for doubtful accounts.. 148 240 231 157 Inventory allowances............ 644 277 47 874
SUPERTEX, INC. EXHIBIT INDEX (The Registrant will furnish to any shareholders who so request a copy of this Annual Report on Form 10-K and any Exhibit listed below, provided that the Registrant may require payment of a reasonable fee not to exceed its expense in furnishing such information.) Exhibit Exhibit Description 3.1* Restated Articles of Incorporation of Registrant filed May 21, 1980. 3.2* Certificate of Amendment of Articles of Incorporation filed April 16, 1981. 3.3* Certificate of Amendment of Articles of Incorporation filed September 30, 1983. 3.4**** Bylaws of Registrant, as amended. 10.2* Lease for 1225 and 1231 Bordeaux Drive, Sunnyvale, California, dated January 25, 1991, between Fortuna Realty Company, as Lessor, and Registrant, as Lessee. 10.6* 1981 Stock Option Plan, as amended, with form of stock option agreement. 10.6a**** 1991 Stock Option Plan, as amended, with form of stock option agreement. 10.7* Profit Sharing Plan. 10.21** Certificate of Amendment of Articles of Incorporation filed October 14, 1988. 10.22*** Agreement with Texas Instruments Inc. dated May 31,1991.1 11.1 Statement Regarding Computation of Net Income per Share. 23.1 Consent of Coopers & Lybrand L.L.P., Independent Accountants. 24.1 Power of Attorney. 27.1 Financial Data Schedule. * Incorporated by reference to exhibit of same number of Registrant's Registration Statement on Form S-1 (File No. 2-86898), which became effective December 6, 1983. ** Incorporated by reference to exhibit filed with Quarterly Report on Form 10-Q for period ended October 1, 1988. *** Incorporated by reference to exhibit filed with Annual Report on Form 10-K for year ended March 31, 1991. **** Incorporated by reference to exhibit included in Registrant's Registration Statement on Form S-8 (File No. 33-43691) which became effective September 1, 1995. (1) Confidential treatment of portions of this exhibit was granted by order dated August 12, 1991. EX-23.1 2 CONSENT OF INDEPENDENT ACCOUNTANTS Exhibit 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statement of Supertex, Inc. on Form S-8 (File No. 33-43691) of our report dated April 24, 1998, on our audits of the consolidated financial statements and financial statement schedule of Supertex, Inc. as of March 31, 1998 and 1997, and for the years ended March 31, 1998, 1997, and 1996, which report is included in this Annual Report on Form 10-K. /S/COOPERS & LYBRAND L.L.P. San Jose, California June 1, 1998 EX-24.1 3 POWER OF ATTORNEY Exhibit 24.1 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Henry C. Pao, his attorney-in-fact, with the power of substitution, for him in any and all capacities, to sign any amendments to this report on Form 10-K, 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 said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. Signature Title Date /s/ Henry C. Pao President, Principal Executive and June 1, 1998 - ---------------- Financial Officer and Director (Henry C. Pao) /s/ Richard E. Siegel Executive Vice President and Director June 1, 1998 - --------------------- (Richard E. Siegel) /s/ Benedict C. K. Choy Senior Vice President and Director June 1, 1998 - ----------------------- (Benedict C. K. Choy) /s/ Yunni Pao Director June 1, 1998 - ------------- (Yunni Pao) /s/ Frank C. Pao Director June 1, 1998 - ---------------- (Frank C. Pao) EX-27.1 4 ARTICLE 5 FIN. DATA SCHEDULE FOR YEAR END 10-K
5 1,000 YEAR MAR-31-1998 MAR-31-1998 24,556 6,956 10,484 700 10,263 54,280 26,636 14,287 66,629 9,412 0 0 0 20,713 36,504 66,629 52,706 52,706 28,709 41,015 0 233 0 13,359 4,542 8,817 0 0 0 8,817 .73 .71
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