-----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, LnXgR4MJY9vkRLuVQG99IoyAgnsgNecF3VCkcdWWUlUH4i6W3loSfbokdL0Q02zF g+j67F5Ay/vGwCVXIyoWhQ== 0000730000-02-000010.txt : 20020813 0000730000-02-000010.hdr.sgml : 20020813 20020813150402 ACCESSION NUMBER: 0000730000-02-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020813 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12718 FILM NUMBER: 02729389 BUSINESS ADDRESS: STREET 1: 1235 BORDEAUX DR CITY: SUNNYVALE STATE: CA ZIP: 94089 BUSINESS PHONE: 4087440100 MAIL ADDRESS: STREET 1: 1235 BORDEAUX DR CITY: SUNNYVALE STATE: CA ZIP: 94089 10-Q 1 supx10q.txt 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 30, 2002 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 #) 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 total number of shares outstanding of the Registrant's common stock as of August 5, 2002 were 12,597,375. Total number of pages: 12 SUPERTEX, INC. QUARTERLY REPORT - FORM 10Q Table of Contents Page No. PART I - FINANCIAL INFORMATION Item 1. Financial Statements Unaudited Condensed Consolidated Statements of Income............ 3 Unaudited Condensed Consolidated Balance Sheets.................. 4 Unaudited Condensed Consolidated Statements of Cash Flows........ 5 Notes to Unaudited Condensed Consolidated Financial Statements... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............................................. 7 Item 3. Quantitative and Qualitative Disclosures About Market Risk and Interest Rate Risk................................................. 10 PART II- OTHER INFORMATION Item 1. Legal Proceedings 10 Item 2. Changes in Securities and Use of Proceeds ......................... 11 Item 3. Defaults Upon Senior Securities.................................... 11 Item 4. Submission of Matters to a Vote of Security Holders................ 11 Item 5. Other Information.................................................. 11 Item 6. Exhibits and Reports on Form 8-K................................... 11 STATEMENT OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER UNDER 18 U.S.C. 1350 ............................................................... 11 Signatures ................................................................ 12 PART I - FINANCIAL INFORMATION Item 1. Financial Statements SUPERTEX, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) (in thousands, except per share amounts) Three-months Ended, June 30, 2002 June 30, 2001 Net sales $ 13,277 $ 15,081 ------ ------ Cost and expenses: Cost of sales 8,849 9,191 Research and development 2,318 3,270 Selling, general and administrative 1,835 1,816 ------ ------ Total costs and expenses 13,002 14,277 ------ ------ Income from operations 275 804 Interest income 244 527 Other income 7 376 ------ ------ Income before provision for income taxes 526 1,707 Provision for income taxes 179 580 ------ ------ Net income $ 347 $ 1,127 ====== ====== Net income per share: Basic $ 0.03 $ 0.09 Diluted $ 0.03 $ 0.09 Shares used in per share computation: Basic 12,575 12,410 Diluted 12,935 12,613 See accompanying Notes to Unaudited Condensed Consolidated Financial Statements. SUPERTEX, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited, in thousands) June 30, 2002 March 31, 2002 ASSETS Current assets: Cash and cash equivalents $ 54,884 $ 52,492 Trade accounts receivable, net of allowance of $1,182 and $1,465 8,725 9,436 Inventories 15,464 16,494 Prepaid expenses and other current assets 488 902 Deferred income taxes 3,293 3,293 ------ ------ Total current assets 82,854 82,617 Property, plant and equipment, net 16,044 16,327 Long term investments 1,451 1,451 Deferred income taxes 2,985 2,985 ------ ------ TOTAL ASSETS $ 103,334 $ 103,380 ======= ======= LIABILITIES Current liabilities: Trade accounts payable $ 4,395 $ 5,769 Accrued salaries, wages and employee benefits 5,935 6,565 Other accrued liabilities 519 655 Deferred revenue 1,723 1,729 Income taxes payable 1,793 566 ------ ------ Total current liabilities 14,365 15,284 ------ ------ 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 12,597 and 12,544 shares at June 30, 2002 and March 31, 2002, respectively 27,980 27,454 Retained earnings 60,989 60,642 ------- ------- Total shareholders' equity 88,969 88,096 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 103,334 $ 103,380 ======= ======= See accompanying Notes to Unaudited Condensed Consolidated Financial Statements. SUPERTEX, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands) Three months Ended June 30, 2002 June 30, 2001 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 347 $ 1,127 ------------ ----------- Non-cash adjustments to net income: Depreciation and amortization 1,290 899 Provision for doubtful accounts and sales returns 827 133 Provision for excess and obsolete inventories 4 168 Gain on sale of long-term investments -- (127) Changes in operating assets and liabilities: Accounts receivable (116) (667) Inventories 1,026 22 Prepaid expenses and other assets 414 327 Trade accounts payable and accrued expenses (2,140) (1,827) Income taxes payable 1,227 577 Deferred revenue (6) 641 ------- ------- Total adjustments 2,526 146 ------- ------- Net cash provided by operating activities 2,873 1,273 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant and equipment (1,007) (185) Sales (purchases) of long-term investments -- 627 Net cash provided by (used in) ------- ------- investing activities (1,007) 442 ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Stock options exercised 526 549 Repurchase of stock -- (316) ------- ------- Net cash provided by financing activities 526 233 ------- ------- NET INCREASE IN CASH AND CASH EQUIVALENTS 2,392 1,948 CASH AND CASH EQUIVALENTS: Beginning of period 52,492 44,282 -------- -------- End of period $ 54,884 $ 46,230 ======== ======== See accompanying Notes to Unaudited Condensed Consolidated Financial Statements. SUPERTEX, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 1 - Basis of Presentation In the opinion of management, the unaudited condensed consolidated financial statements for the quarters ended June 30, 2002 and 2001 include all adjustments (consisting of normal recurring adjustments) necessary for fair presentation of the consolidated financial condition, results of operations, and cash flows for those periods in accordance with accounting principles generally accepted in the United States of America. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. These financial statements should be read in conjunction with the audited consolidated financial statements of Supertex, Inc. for the fiscal year ended March 31, 2002, which were included in the Annual Report on Form 10-K (File Number 000-12718). Interim results are not necessarily indicative of results for the full fiscal year. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates, and such differences may be material to the financial statements. The financial statements have been prepared on a consolidated basis. The condensed consolidated financial statements include the accounts of Supertex, Inc. and its subsidiary. All significant intercompany balances have been eliminated on consolidation. Note 2 - Inventories Inventories consisted of (in thousands): June 30, 2002 March 31, 2002 Raw materials................................... $ 1,130 $ 1,218 Work-in-process................................. 11,100 11,849 Finished goods.................................. 3,234 3,427 --------- --------- $ 15,464 $ 16,494 ========= ========= Note 3 - Net Income per Share Basic earnings per share ("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. A reconciliation of the numerator and denominator of basic and diluted earnings per share is provided as follows (in thousands, except per share amounts). Three-months Ended June 30, 2002 2001 BASIC: Net income $ 347 $ 1,127 ======= ======== Weighted average shares outstanding for the period 12,575 12,410 ======= ======== Net income per share $ 0.03 $ 0.09 DILUTED: Net income $ 347 $ 1,127 ======= ======= Weighted average shares outstanding for the period 12,575 12,410 Dilutive effect of stock options 360 203 ======= ======= Total 12,935 12,613 ======= ======= Net income per share $ 0.03 $ 0.09 As of June 30, 2002, Options to purchase the Company's common stock of 435,899 shares at an average price of $29.64 per share were outstanding but were not included in the computation of diluted earnings per share because their effect would have been antidilutive. Note 4 - Recent Accounting Pronouncements In June 2001, the FASB issued FASB Statement No. 143 (FAS 143), "Accounting for Asset Retirement Obligations". FAS 143 requires that the fair value of a liability for an asset retirement obligation be realized in the period which it is incurred if a reasonable estimate of fair value can be made. Companies are required to adopt FAS 143 for fiscal years beginning after June 15, 2002, but early adoption is encouraged. The Company has not yet determined the impact this standard will have on its financial position and results of operations, although it does not anticipate that the adoption of this standard will have a material impact on the Company's financial position or results of operations. In June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or Disposal Activities" ("SFAS 146"). SFAS 146 addresses significant issues regarding the recognition, measurement, and reporting of costs that are associated with exit and disposal activities, including restructuring activities that are currently accounted for under EITF No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The scope of SFAS 146 also includes costs related to terminating a contract that is not a capital lease and termination benefits that employees who are involuntarily terminated receive under the terms of a one-time benefit arrangement that is not an ongoing benefit arrangement or an individual deferred-compensation contract. SFAS 146 will be effective for exit or disposal activities that are initiated after December 31, 2002 and early application is encouraged. We will adopt SFAS 146 during the year ending March 31, 2003. The provisions of EITF No. 94-3 shall continue to apply for an exit activity initiated under an exit plan that met the criteria of EITF No. 94-3 prior to the adoption of SFAS 146. The effect on adoption of SFAS 146 will change on a prospective basis the timing of when restructuring charges are recorded from a commitment date approach to when the liability is incurred. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations. Cautionary Statement Regarding Forward Looking Statements This 10-Q includes forward-looking statements. These forward-looking statements are not historical facts, and are based on current expectations, estimates, and projections about our industry, our beliefs, our assumptions, and our goals and objectives. Words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", and "estimates ", and variations of these words and similar expressions, are intended to identify forward-looking statements. Examples of such forward-looking statements in this 10-Q are our plans to continue in the future our current level of R&D investment on new product development as a percent of net sale and our anticipation that our available funds and expected cash generated from operations will be sufficient to meet cash and working capital requirements through at least the next twelve months. These statements are only predictions not a guaranty of future performance, and are subject to risks, uncertainties, and other factors, some of which are beyond our control and are difficult to predict, and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. These risks and uncertainties include that the demand for our products or results of our product development change such that it would be unwise not to decrease research and development as well as those described in "Risk Factors" under Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operation" in our Annual Report of Form 10-K for the fiscal year ended March 31, 2002. Except as required by law, we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise. Critical Accounting Policies We described our critical accounting policies in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of our Annual Report on Form 10-K for the year ended March 31, 2002. Our critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations, and require our management's significant judgments and estimates and such consistent application fairly depicts our financial condition and results of operations for all periods presented. Critical accounting policies affecting us and the critical estimates we made when applying them have not changed materially since March 31, 2002. Overview Supertex designs, develops, manufactures, and markets high voltage semiconductor devices, including analog and mixed signal integrated circuits utilizing state-of-the-art high voltage DMOS, HVCMOS and HVBiCMOS analog and mixed signal technologies. We supply standard and custom high voltage interface products primarily for use in the telecommunications (telecom), imaging, medical electronics, and industrial markets. We also provide wafer foundry services for the manufacture of integrated circuits for customers using customer-owned designs and mask toolings. Results of Operations Net Sales Net sales for the quarter ended June 30, 2002 were $13,277,000, a 12% decrease compared to $15,181,000 for the same quarter last year, and a increase of 4% from $12,809,000 of the prior quarter. Our sales for the first quarter were adversely affected by the continued global economic slowdown and the reduced demand for our products in two of our three major markets: telecom and medical. Demand for our telecom products were adversely affected by the reduced spending of our telecom customers while our medical market suffered some average sales price (ASP) erosion primarily due to consolidations within the medical electronics industry we sell into. As a percentage of total sales for the quarter ended June 30, 2002, sales to customers in the medical electronics, imaging, and telecommunications markets represented 33%, 33%, and 22% of total sales, respectively, compared to 37%, 29% and 22% of total sales for the quarter ended June 30, 2001. Sales to customers in other markets accounted for 12% of the total sales for both the quarter ended June 30, 2002 and 2001. Sales to international customers for the quarter ended June 30, 2002 were $4,032,000, or 30% of the Company's net sales as compared to $4,148,000, or 28% of the net sales of the same period of last year. In comparing the current quarter with the same period last year, dollar sales to international customers declined only approximately 3% while the total sales declined 12%. Gross Profit As a percent of sales, the Company's gross margin was 33% for the three-month period ended June 30, 2002, compared with 39% of the same period of the prior year. Gross margin was adversely affected by a planned inventory reduction of approximately $1.0 million, which caused a further decline in production capacity utilization. This planned inventory reduction was a result of our improved throughput time. Research and Development (R&D) R&D expense decreased 29% to $2,318,000 for the quarter ended June 30, 2002 as compared to $3,270,000 for the same quarter of the prior year. The dollar decrease in R&D expense for the quarter ended June 30, 2002 is partly due to many new products being transferred to production status during the quarter and therefore reducing the fab expenses associated with R&D. As a percent of sales, our R& D expense declined from 22% in the first quarter of last year to 17% in the first quarter of this year. However, our R&D expense in the first quarter of last year was abnormally high for us-in both the remainder of last year and during all of fiscal 2001, our quarterly R&D expense averaged approximately $2.7 million per quarter and as a percentage of sales was 20% and 13%, respectively. Despite lower sales, we maintained our R&D investments during the first quarter of this year at 17% of net sales. We plan to continue this level of R&D investments as a percent of net sales on new product development. Selling, General and Administrative (SG&A) SG&A was $1,835,000 or 14% of net sales for the quarter ended June 30, 2002 as compared with $1,816,000 or 12% of net sales in the same quarter of the prior year. In absolute dollars, SG&A expense for the quarter decreased by $19,000, or 1% when compared to the same period of the prior year. Increased spending in advertising of $123,000 and sales commissions of $152,000 during the first quarter were offset by the decline in payroll and benefits of $104,000 resulting from reduced work week and reduced spending on outside services of $166,000. Income from Operations Income from operations was $275,000, or 2% of net sales for the quarter ended June 30, 2002 compared to $804,000, or 5% of net sales for the quarter ended June 30, 2001. The decrease in operating income is primarily attributable to lower sales and the further decline in production capacity utilization. Interest and Other Income Interest income for the quarter ended June 30, 2002 was $244,000 compared to $527,000 for the same quarter of prior year. The decrease in interest income is primarily attributable to lower yields on the money market accounts where we maintain the bulk of our cash deposits. Other Income for the three-month period ended June 30, 2002, was $7,000 compared with $376,000 for the same period of last fiscal year. Other income for the first quarter of last fiscal year included realized gains from sale of long-term investments of $127,000 and a restocking fee charged for customer returns of approximately $160,000. Provision for Income Taxes The Company's effective tax rate for the three -month period ended June 30, 2002 remained unchanged at 34%. Liquidity and Capital Resources On June 30, 2002, the Company had $54,884,000 in cash and cash equivalents, compared with $52,492,000 on March 31, 2002. This increase is due primarily to a positive cash flow from operating activities of $2,873,000 consisting principally of net income of $347,000 and non-cash charges for depreciation and amortization of $1,290,000. Factors affecting cash flow from operating activities include (a) a decrease in inventories of $1,026,000 due to a planned inventory reduction resulting from better throughput time; (b) a decrease in accounts payable and other accrued items of $2,140,000 due to a decrease in purchasing activities; and (c) an increase of $1,227,000 in income tax payable. Net cash used in investing activities during the three-month period was $1,007,000, primarily for the purchase equipment to upgrade our wafer fabrication facility. Net cash provided by financing activities for the three-month period was $526,000 generated by proceeds from the issuance of common stock through the exercise of employee stock options. We described our total potential commitments in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of our Annual Report on Form 10-K for the year ended March 31, 2002. Our total potential commitments have not changed materially since March 31, 2002. The Company anticipates that available funds and expected cash to be generated from operations will be sufficient to meet cash and working capital requirements through at least the next twelve months. Item 3. - Quantitative and Qualitative Disclosures About Market Risk and Interest Rate Risk. Interest Rate Sensitivity The Company may be exposed to financial market risks due primarily to changes in interest rates. The Company does not use derivatives to alter the interest characteristics of its investment securities. The Company has no holdings of derivative or commodity instruments. The fair value of the Company's investment portfolio or related income would not be significantly impacted by changes in interest rates since the investment maturities are short and the interest rates are primarily fixed. As of June 30, 2002, the Company maintained its funds primarily in money market funds and it plans to continue to invest a significant portion of its existing cash in interest bearing money market funds and other short-term debt securities with maturities of less than a year. PART II - OTHER INFORMATION Item 1. - Legal Proceedings None Item 2. - Changes in Securities and Use of Proceeds None Item 3. - Defaults Upon Senior Securities None Item 4. - Submission of Matters to a Vote of Security Holders None Item 5. - Other Information None Item 6. - Exhibits and Reports on Form 8-K (a) Exhibits: None (b) Reports on Form 8-K No report on Form 8-K was filed during the quarter for which this Form 10-Q is filed. STATEMENT OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER UNDER 18 U.S.C. 1350 I, Henry C. Pao, the chief executive officer and chief financial officer of Supertex, Inc., a California corporation (the "Company"), certify pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, (i) the Quarterly Report of the Company on Form 10-Q for the period ending June 30, 2002 (the "Report"), fully complies with the requirements of Section 13(a) or 15(d), whichever is applicable, of the Securities Exchange Act of 1934, and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Henry C. Pao SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SUPERTEX, INC. (Registrant) Date: August 12, 2002 By: /S/ Henry C. Pao, Ph.D. President (Principal Executive and Financial Officer) -----END PRIVACY-ENHANCED MESSAGE-----