-----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, VD0P3p+sed6qFApyMF36hxQhlDuNhKF+mOjpACr4i8QngVGLdpv64zWsn19lxsZK 3iUpt5r5r2XYyk/68ZrDzQ== 0000730000-03-000002.txt : 20030211 0000730000-03-000002.hdr.sgml : 20030211 20030211171044 ACCESSION NUMBER: 0000730000-03-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030211 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: 03550803 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 supx10qf.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 December 31, 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 February 7, 2003 was 12,658,267 Total number of pages: 15 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 Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3. Quantitative and Qualitative Disclosures About Market Risk and Interest Rate Risk 12 Item 4. Controls and Procedures 12 PART II- OTHER INFORMATION Item 1. Legal Proceedings 13 Item 2. Changes in Securities and Use of Proceeds 13 Item 3. Defaults Upon Senior Securities 13 Item 4. Submission of Matters to a Vote of Securities Holders 13 Item 5. Other Information 13 Item 6. Exhibits and Reports on Form 8-K 13 Statement of Chief Executive Officer and Chief Financial Officer under 18 U.S.C. 1350 14 Signatures 14 Certifications 15 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, Nine-months Ended, December 31, December 31, 2002 2001 2002 2001 Net sales $13,888 $14,062 $40,385 $43,386 ------- ------- ------- ------- Cost and expenses: Cost of sales 8,658 7,955 25,609 25,651 Research and development 2,164 2,581 6,972 8,558 Selling, general and administrative 2,366 1,803 6,407 5,523 ------- ------- ------- ------- Total costs and expenses 13,188 12,339 38,988 39,732 ------- ------- ------- ------- Income from operations 700 1,723 1,397 3,654 Interest income 154 335 648 1,303 Other income (expense), net 124 (46) 538 478 ------- ------- ------- ------- Income before provision for income taxes 978 2,012 2,583 5,435 Provision for income taxes 281 684 827 1,848 ------- ------- ------- ------- Net income $697 $1,328 $1,756 $3,587 ======= ======= ======= ======= Net income per share: Basic $0.06 $0.11 $0.14 $0.29 ======= ======= ======= ======= Diluted $0.05 $0.10 $0.14 $0.28 ======= ======= ======= ======= Shares used in per share computation: Basic 12,608 12,445 12,591 12,424 ======= ======= ======= ======= Diluted 12,680 12,796 12,752 12,678 ======= ======= ======= ======= See accompanying Notes to Unaudited Condensed Consolidated Financial Statements. SUPERTEX, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited, in thousands) December 31, March 31, 2002 2002 ASSETS Current assets: Cash and cash equivalents $ 57,305 $ 52,492 Short term investments 3,866 0 Trade accounts receivable, net 8,788 9,436 Inventories 14,779 16,494 Prepaid expenses and other current assets 665 902 Deferred income taxes 3,293 3,293 --------- --------- Total current assets 88,696 82,617 Property, plant and equipment, net 13,335 16,327 Other Assets 101 1,451 Deferred income taxes 2,985 2,985 --------- --------- TOTAL ASSETS $ 105,117 $ 103,380 ========= ========= LIABILITIES Current liabilities: Trade accounts payable $ 3,120 $ 5,769 Accrued salaries, wages and employee benefits 6,021 6,565 Other accrued liabilities 661 655 Deferred revenue 1,881 1,729 Income taxes payable 2,450 566 -------- -------- Total current liabilities 14,133 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 12,658 and 12,544 shares at December 31, 2002 and March 31, 2002, respectively 28,586 27,454 Retained earnings 62,398 60,642 -------- -------- Total shareholders' equity 90,984 88,096 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 105,117 $ 103,380 ======== ======== See accompanying Notes to Unaudited Condensed Consolidated Financial Statements. SUPERTEX, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands) Nine months Ended CASH FLOWS FROM OPERATING ACTIVITIES December 31, December 31, 2002 2001 Net income $ 1,756 $ 3,587 ---------- ---------- Non-cash adjustments to net income: Depreciation and amortization 4,128 2,927 Provision for doubtful accounts (147) (416) Provision for excess and obsolete inventories 896 901 Gain on sale of long-term investments (1,092) (127) Gain (loss) on disposal of assets (10) 12 Loss on impairment of long-term investment 750 -- Changes in operating assets and liabilities: Accounts receivable 795 2,769 Inventories 819 (1,524) Prepaid expenses and other assets 237 315 Trade accounts payable and accrued expenses (3,187) (2,384) Income taxes payable 1,884 1,105 Deferred revenue 152 566 ---------- ---------- Total adjustments 5,225 4,144 ---------- ---------- Net cash provided by operating activities 6,981 7,731 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant and equipment (1,136) (4,838) Proceeds from disposal of property and equipment 10 149 Purchases of short-term investments (3,866) -- Sales of long-term investments 1,692 627 ---------- ---------- Net cash used in investing activities (3,300) (4,062) CASH FLOWS FROM FINANCING ACTIVITIES Stock options exercised 1,132 1,014 Repurchase of stock -- (315) ---------- ---------- Net cash provided by financing activities 1,132 699 ---------- ---------- NET INCREASE IN CASH AND CASH EQUIVALENTS 4,813 4,368 CASH AND CASH EQUIVALENTS: Beginning of period 52,492 44,282 ---------- ---------- End of period $ 57,305 $ 48,650 ========== ========== 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 three and nine month periods ended December 31, 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): December 31, 2002 March 31, 2002 Raw materials........................... $ 1,164 $ 1,218 Work-in-process......................... 9,258 11,849 Finished goods.......................... 4,357 3,427 --------- -------- $ 14,779 $ 16,494 ========= ======== During the quarter ended December 31, 2002, the Company recorded a charge to cost of goods sold of approximately $937,000 to write-down work-in-process inventory due to quantities on hand being in excess of projected demand. The write-down in inventory is centered primarily in the Company's Telecom data communication products. Note 3 - Comprehensive Income Comprehensive income equals net income for all periods presented. Note 4 - 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 Nine-months Ended December 31, December 31, 2002 2001 2002 2001 BASIC: Net income $ 697 $ 1,328 $ 1,756 $ 3,587 ======= ======= ======= ======= Weighted average shares outstanding for the period 12,608 12,445 12,591 12,424 ======= ======= ======= ======= Net income per share $ 0.06 $ 0.11 $ 0.14 $ 0.29 ======= ======= ======= ======= DILUTED: Net income $ 697 $ 1,328 $ 1,756 $ 3,587 ======= ======= ======= ======= Weighted average shares outstanding for the period 12,608 12,445 12,591 12,424 Dilutive effect of stock options 72 351 161 254 ------- ------- ------- ------- Total 12,680 12,796 12,752 12,678 ======= ======= ======= ======= Net income per share $ 0.05 $ 0.10 $ 0.14 $ 0.28 ======= ======= ======= ======= Options to purchase the Company's common stock of 841,369 shares at an average price of $21.70 per share, and 437,430 shares at an average price of $30.01 per share for the third quarter of fiscal 2003 and third quarter of fiscal 2002, respectively, were outstanding but were not included in the computation of diluted earnings per share because their effect would have been antidilutive. For the nine months period ended December 31, 2002 and 2001, respectively, options to purchase the Company's common stock of 650,292 shares at an average price of $24.74 per share, and 590,737 shares at an average price of $26.34 per share, were outstanding but were not included in the computation of diluted earnings per share because their effect would have been antidilutive. Note 5 - Investments During the quarter ended September 30, 2002, the Company sold a long-term investment resulting in a $1,092,000 gain before taxes. This gain was partially offset by a $750,000 impairment charge before taxes to fully reserve for another long-term investment in a start-up company that is experiencing liquidity concerns. These amounts are included within other income (expense), net in the Condensed Consolidated Statements of Income. Note 6 - Recent Accounting Pronouncements 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 is effective for exit or disposal activities that are initiated after December 31, 2002 and early application is encouraged. The Company's adoption of SFAS 146 on January 1, 2003 had no impact on the Company's financial position or results of operations. In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34." FIN 45 clarifies the requirements of FASB Statement No. 5, "Accounting for Contingencies," relating to the guarantor's accounting for, and disclosure of the issuance of certain types of guarantees. The disclosure provisions of the Interpretation are effective for financial statements of interim or annual reports that end after December 15, 2002. However, the provisions for initial recognition and measurement are effective on a prospective basis for guarantees that are issued or modified after December 31, 2002, irrespective of the guarantor's year-end. The Company's adoption of FIN 45 did not have a material impact on the Company's financial position or results of operations. In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation, Transition and Disclosure." SFAS No.148 amends SFAS No. 123 and requires prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS No. 148 is effective for fiscal years ending after December 15, 2002 and is effective for interim periods beginning after December 15, 2002. The Company's adoption of SFAS No. 148 on January 1, 2003 did not have a material effect on the Company's financial position or results of operations. 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. An Example of such forward-looking statements in this 10-Q is our anticipation that our available funds and expected cash generated from operations will be sufficient to meet our 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 we would have an unexpectedly large demand for cash as well as those risks and uncertainties 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, 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 tooling. Results of Operations Net Sales Net sales for the quarter ended December 31, 2002 were $13,888,000, a 1% decrease compared to $14,062,000 for the same quarter of prior fiscal year. Net sales for the nine months ended December 31, 2002 were $40,385,000, a 7% decrease compared to $43,386,000 for the same period of the prior fiscal year. Net sales for the quarter ended December 31, 2002 continued to be adversely affected by the global economic slowdown and the slowdown in the semiconductor industry. However, net sales for the quarter ended December 31, 2002 increased 5% sequentially when compared with net sales for the quarter ended September 30, 2002 of $13,220,000. Medical electronics product sales increased by $267,000 or 6%, telecommunications product sales increased by $162,000 or 7% and imaging product sales increased by $107,000 or 2% for the quarter ended December 31, 2002 as compared to the quarter ended September 30, 2002. As a percentage of total net sales for the quarter ended December 31, 2002, sales to customers in the medical electronics, imaging, and telecommunications product sales represented 37%, 37%, and 18% of total net sales respectively, compared to 44%, 27% and 21% of total net sales for the same quarter of the prior fiscal year. Sales of other miscellaneous products for the quarters ended December 31, 2002 and 2001 were 8% of total sales. Sales to international customers for the quarter ended December 31, 2002 were $3,788,000, or 27% of the Company's net sales as compared to $4,681,000, or 33% of total net sales for the same period of prior fiscal year. The decrease in international sales for the quarter ended December 31, 2002 compared to the same period of the prior fiscal year is the result of decreased shipments to our customers in Japan and Korea. For the nine-months ended December 31, 2002 sales to international customers were $12,190,000, or 30% of total net sales as compared to $12,743,000, or 29% of total net sales for the same period of prior fiscal year. Gross Profit Gross profit represents net sales less cost of sales. Cost of sales includes the cost of purchasing raw silicon wafers, cost associated with assembly, packaging, test, quality assurance and product yields, the cost of personnel, facilities, and equipment associated with manufacturing support and charges for excess inventory. During the quarter ended December 31, 2002, the Company recorded a charge to cost of goods sold of approximately $937,000 to write-down work-in-process inventory due to quantities on hand being in excess of projected demand. The write-down in inventory is centered primarily in our Telecom data communication products. Our customer orders have increasingly become orders placed with short lead-time instead of longer-term orders, which has made it more difficult to project future demand. As a percent of sales, the Company's gross margin were 38% and 37% for the three-months and nine-months ended December 31, 2002 respectively, compared with 43% and 41%, respectively, for the same periods of the prior fiscal year. Gross profit has been adversely affected by less favorable product mix, the charge for the write-down of inventory, and continued low plant capacity utilization, which has been partially offset by continued cost controls. Research and Development (R&D) R&D expenses decreased 16% to $2,164,000 for the quarter ended December 31, 2002 as compared to $2,581,000 for the same quarter of the prior fiscal year. The dollar decrease in R&D expenses for the quarter ended December 31, 2002 is primarily due to cost control measures adopted by the Company through reduction in software and overhead expenses. Additional savings were realized through lower prototype processing costs as several new products were transferred to production status. As a percent of net sales, our R&D expenses were 16% of net sales for the quarter ended December 31, 2002 as compared with 18% for the same quarter of the prior fiscal year. For the nine months ended December 31, 2002, R&D expenses decreased 19% to $6,972,000 from $8,558,000 for the same period of the prior fiscal year. The decrease is attributed primarily to the reduction in prototype processing cost as many new products were transferred to production status, reduction in software expenses and reduction in mask tooling expenses. Selling, General and Administrative (SG&A) SG&A expenses increased by 31% to $2,366,000 or 17% of net sales for the quarter ended December 31, 2002 as compared to $1,803,000 or 13% of net sales of the same quarter of the prior fiscal year. This increase was primarily due to stepped-up sales and marketing efforts which included increase in payroll and benefits of $110,000 resulting from additional headcount, an increase in salesman bonus of $108,000, an increase in conference related expenses of $43,000, and an increase in travel expenses of $44,000. In addition, the SG&A expenses of the prior fiscal year quarter were partially offset by benefits from the collection of previously reserved accounts receivable of $232,000. For the nine months ended December 31, 2002, SG&A expenses were $6,407,000 or 16% of net sales as compared to $5,523,000 or 13% for the same period of the prior fiscal year, an $884,000 increase. This increase was attributed mainly to an increase of $296,000 in payroll and benefits due to additional headcount, an increase in advertising spending of $175,000, an increase in sales commissions expenses of $163,000, and an increase in travel expenses of $100,000. In addition, SG&A expenses for the nine months ended December 31, 2001 were partially offset by benefits from the collection of previously reserved accounts receivable of $416,000 as compared with SG&A expenses for the nine months ended December 31, 2002, which were partially offset by benefits from the collection of previously reserved accounts receivable of approximately $147,000. Income from Operations Income from operations was $700,000, or 5% of net sales for the quarter ended December 31, 2002 compared to $1,723,000, or 12% of net sales for the same quarter of the prior fiscal year. The decrease in operating income is primarily attributable to the charge for the write-down of inventory, further decline in production capacity utilization and an increase in Sales and Marketing expenses. For the nine months ended December 31, 2002, income from operations was $1,397,000 or 3% of net sales, compared to $3,654,000 or 8% of net sales for the same period of the prior fiscal year. The decrease in operating income is attributable primarily to the charge for the write-down of inventory, lower sales, continued decline in production capacity utilization, unfavorable product mix, some price erosion and the continued economic slowdown. Interest Income and Other Income, Net Interest income and other income, net for the three and nine-months ended December 31, 2002 were $278,000 and $1,186,000, respectively, when aggregated together. For the corresponding periods of the prior fiscal year they were $289,000 and $1,781,000 respectively. Interest income for the three and nine- months ended December 31, 2002 was $154,000 and $648,000 respectively, compared to $335,000 and $1,303,000 respectively for the same periods of the prior fiscal year. The decrease in interest income is primarily attributable to lower yields in the money market accounts where we maintain the bulk of our cash deposits. Other income, net for the quarter ended December 31, 2002 was $124,000 compared with other expense, net of $46,000 for the same quarter of the prior fiscal year, a $170,000 increase. The increase in other income, net was attributable primarily to a gain representing an increase in the fair value of mutual fund investments held by the Company's Supplemental Employee Retirement Plan of $81,000, and a $59,000 gain from the settlement of a dispute. Other income, net for the nine-months ended December 31, 2002 was $538,000, compared with $478,000 for the same period of the prior fiscal year, a $60,000 increase. The increase was primarily attributed to a gain from sale of long-term investments of $1,092,000 during the nine months ended December 31, 2002 as compared with gains from the sale of long-term investments of $127,000 for the same period of the prior year, a $750,000 impairment charge taken during the nine months ended December 31, 2002 to fully reserve for a long-term investment in a start-up company that is experiencing liquidity concerns, a gain during the nine months ended December 31, 2002 representing an increase in the fair value of mutual fund investments held by the Company's Supplemental Employee Retirement Plan of $81,000, a $59,000 gain during the nine months ended December 31, 2002 from the settlement of a dispute, the absence of restocking fees collected from customers for returning products in the nine months ended December 31, 2002 as compared to $160,000 of such fees for the same period of prior fiscal year, and a net increase in sub-lease expenses of $126,000. Provision for Income Taxes The Company's effective tax rate for the quarter ended December 31, 2002 was 29% compared to 34% for the same quarter of the prior fiscal year. For the nine-months ended December 31, 2002, the effective tax rate was 32% compared to 34% for the same period of the prior fiscal year. The reduction of the effective tax rate was primarily due to a change in the geographic mix of income. Liquidity and Capital Resources On December 31, 2002, the Company had $61,171,000 in cash, cash equivalents, and short term investments, compared with $52,492,000 on March 31, 2002. The Company anticipates that available sources of funds including cash, cash equivalents, short term investments, 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. Cash and cash equivalents increased $4,813,000 to $57,305,000 at December 31, 2002 from $52,492,000 at December 31, 2002. The increase is due primarily to a positive cash flow from operating activities of $6,981,000 consisting principally of a net income of $1,756,000, non-cash charges for depreciation and amortization of $4,128,000, a gain on the sale of a long-term investment of $1,092,000 which was partially offset by an impairment charge of $750,000 on another long-term investment, an increase in the provision for excess and obsolete inventories of $896,000 and a decrease in the provision for doubtful accounts of $147,000. Other factors affecting cash flow from operating activities include (a) a decrease in accounts payable and other accrued items of $3,187,000 due to a decrease in purchasing activities; (b) an increase in income tax payable $1,884,000; (c) a decrease in inventory of $819,000; (d) a decrease in accounts receivable of $795,000; (e) a decrease in prepaid expense and other assets of $237,000, and; (f) an increase in deferred revenue of $152,000. Net cash used in investing activities during the nine-months ended December 31, 2002 was $3,300,000. Investing activities for the nine-months ended December 31, 2002 consisted of $1,692,000 from the sale of a long-term investment offset by purchases of short-term investments of $3,866,000, and purchases of equipment of $1,136,000 primarily for upgrading our wafer fabrication facility. Net cash provided by financing activities for the nine-months ended December 31, 2002 was $1,132,000 and was generated by proceeds from the issuance of common stock through the exercise of employee stock options and employee stock purchases. Future minimum lease payments and sublease income under all non-cancelable operating leases at December 31, 2002 are as follows (in thousands): Fiscal Year Ended March 31 Operating Lease Sublease Income - -------------------------- --------------- --------------- Q4 2003 $ 326 $ 147 2004 1,257 632 2005 1,124 370 2006 147 336 2007 152 336 --------------- --------------- $ 3,006 $ 1,821 Item 3. - Quantitative and Qualitative Disclosures About Market Risk and Interest Rate Risk. Interest Rate Sensitivity The Company is not likely exposed to financial market risks due primarily to changes in interest rates. It does not use derivatives to alter the interest characteristics of its investment securities. It has no holdings of derivative or commodity instruments. The fair value of its 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 December 31, 2002, it 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 investments with maturities of less than a year. Item 4. Controls and Procedures. (a) Evaluation of disclosure controls and procedures The term "disclosure controls and procedures" refers to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Securities Exchange Act of 1934 ("Exchange Act") is recorded, processed, summarized and reported within required time periods. The Company's principal executive and financial officer has evaluated the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c)) within the 90 days prior to the date of this Form 10-Q ("Evaluation Date") and has determined that, as of the Evaluation Date, such controls and procedures are reasonable taking into account the totality of the circumstances. (b) Changes in internal controls There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the Evaluation Date. 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 that: (i) the Quarterly Report of the Company on Form 10-Q for the period ending December 31, 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 _________________________________ Henry C. Pao, Ph.D. 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: February 11, 2003 By: /s/ Henry C. Pao _____________________________ Henry C. Pao, Ph.D. President (Principal Executive and Financial Officer) CERTIFICATIONS I, Henry C. Pao, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Supertex, Inc., a California corporation ("registrant"); 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for the periods, presented in this quarterly report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and I have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report my conclusions about the effectiveness of the disclosure controls and procedures based on my evaluation as of the Evaluation Date; 5. I have disclosed, based on my most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of my most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: February 11, 2003 /s/ Henry C. Pao ____________________________ Henry C. Pao, Ph.D. Chief Executive Officer and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----