SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 22, 2012
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SUPERTEX, INC. |
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(Exact name of registrant as specified in its charter) |
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California |
0-12718 |
94-2328535 |
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(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
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1235 Bordeaux Drive, Sunnyvale, California |
94089 |
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(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code 408-222-8888
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(Former name or former address, if changed since last report.) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
TABLE OF CONTENTS
Item 2.02. Results of Operations and Financial Condition.
Item 5.02. Departure of Director or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Item 7.01. Regulation FD Disclosure.
Item 9.01. Financial Statements and Exhibits.
Signatures
Item 2.02. Results of Operations and Financial Condition.
On October 22, 2012, Supertex, Inc. (the “Company” or “Registrant”) announced via press release the Company’s financial results for its fiscal 2013 second quarter ended September 29, 2012. A copy of the Company’s press release is attached hereto as Exhibit 99.1.
The information contained in item 2.02 of this Current Report on Form 8-K shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such filing.
Item 5.02. Departure of Director or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
(e) The Company has entered into Change of Control Agreements with its named executive officers designed to provide an incentive for such officers to continue in the employ of the Company should there be a change of control. Under these agreements, if the officer is terminated without cause or resigns for good reason within one year after a change of control of the Company (or during a period of up to four months preceding such change of control after a term sheet or letter of intent has been approved by the Company’s board of directors), then the officer receives the following benefits:
| · | salary continuation for one year or until the officer finds another position, whichever is sooner; |
| · | earned but unpaid profit sharing which the officer would have received at the next profit sharing payment date had there been no change of control and the officer had continued to be employed by the Company until such payment date; |
| · | full vesting of options and ability to exercise until the earlier of the original expiration date of the options and one year after termination; |
| · | COBRA premium reimbursement for one year or until the officer is covered by the plan of another employer, whichever is sooner. |
However, if the officer has not been employed for at least twelve months prior to the change of control, then these benefits are pro-rated by the number of months worked divided by twelve. In order to receive any benefits, the officer must execute a full release of claims within sixty days of employment termination.
While the Company may from time to time engage in discussions regarding a potential change of control, the Company is currently not engaged in any such discussions. The Company disclaims any obligation to publicly release updates or revisions to this statement which speaks only as of this date.
Item 7.01. Regulation FD Disclosure.
On October 22, 2012, the Company held a conference call to discuss its financial results for its fiscal 2013 second quarter ended September 29, 2012. A copy of the transcript of this conference call is attached hereto as Exhibit 99.2.
The information contained in item 7.01 of this Current Report on Form 8-K shall not be deemed "filed" for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit 99.1, Registrant’s press release dated October 22, 2012, is furnished pursuant to Item 2.02 of Form 8-K.
Exhibit 99.2, Transcript of Registrant’s October 22, 2012, earnings conference call is furnished pursuant to Item 7.01 of Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Supertex, Inc. |
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(Registrant) |
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Date: October 23, 2012 |
By |
/s/ Phillip A. Kagel |
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Name |
Phillip A. Kagel |
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Title |
Vice President, Finance and Chief Financial Officer |
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Exhibit Index
Exhibit Description
99.1Registrant's press release dated October 22, 2012, is furnished pursuant to Item 2.02 of Form 8-K.
99.2 Transcript of Registrant’s October 22, 2012, conference call is furnished pursuant to Item 7.01 of Form 8-K.
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Supertex, Inc |
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News Release |
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FOR IMMEDIATE RELEASE |
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Corporate Headquarters: |
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Dr. Henry C. Pao |
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President & CEO |
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408/222-8888 |
Supertex Reports Second Fiscal Quarter Results
Sunnyvale, CA (October 22, 2012) - Supertex, Inc. (NASDAQ GS: SUPX) today reported financial results for the second fiscal quarter ended September 29, 2012. Net sales for the second fiscal quarter were $15,919,000, a 1% decrease compared to the prior quarter of $16,059,000 and a 6% decrease compared to $16,960,000 in the same quarter last year. On a GAAP basis, net income in the second fiscal quarter was $690,000 or $0.06 per diluted share, as compared with $597,000 or $0.05 per diluted share in the prior fiscal quarter, and $1,711,000 or $0.14 per diluted share in the same quarter of the prior fiscal year.
For the six months ended September 29, 2012, net sales were $31,978,000 compared to $35,018,000 for the same period of the prior fiscal year, and on a GAAP basis, net income was $1,287,000, or $0.11 per diluted share, as compared with $3,380,000, or $0.27 per diluted share, in the same period of the prior fiscal year.
Non-GAAP earnings per diluted share for the second quarter of fiscal 2013 were $0.12 excluding pre-tax employee stock-based compensation of $769,000, compared with $0.11 in the prior quarter, excluding pre-tax employee stock-based compensation of $745,000, and $0.20 in the same quarter of the prior fiscal year, excluding pretax employee stock-based compensation of $829,000.
“Although our overall sales were slightly less than 1% lower than last quarter, we are pleased with the increase in our growth businesses, medical and LED lighting and backlighting,” stated Dr. Henry C. Pao, President and CEO. “Medical sales increased 23% sequentially and LED lighting and backlighting increased 67% sequentially. The pick-up in medical sales was due in part to normal seasonality. LED driver sales grew significantly in backlighting as our customer’s high-end monitor production ramped up, and LED general lighting driver sales increased slightly. The slight overall sequential sales decrease primarily stemmed from corresponding sequential reductions in our legacy printer head drivers and custom processing services which had spiked in the first fiscal quarter and which we believe were due to normal business cycle fluctuations. We are forecasting our overall sales to be sequentially flat in our third fiscal quarter of 2013, as increases in LED lighting and backlighting sales are expected to be offset by seasonality decreases in medical ultrasound sales. With ten weeks remaining in the quarter we have 62% of projected sales shipped or backlog committed. We expect to launch some significant new products in medical ultrasound and LED lighting in the next few months which should provide impetus for top-line growth in fiscal 2014.”
Dr. Pao commented further, “Gross margin for the second quarter of fiscal 2013 was 46%, slightly below last quarter of 47% primarily due to product mix. Operating expense was about the same as last quarter. Other income was higher due to an increase in the fair value of our non-qualified deferred compensation plan assets compared to a small decrease last quarter. This benefit was offset in operating expense. Our fiscal second quarter tax rate of 28% was the same as last quarter. On cash flow, we generated $5.1 million which included a tax refund of $2.2 million. During the fiscal second quarter we deployed $6.9 million to repurchase 396,000 of our shares. Through September 29, 2012, since the current stock repurchase program of 2,500,000 shares was
announced in January 2011, we have bought back 1,576,000 shares of Supertex stock for a total of $30.4 million.”
Forward-Looking Statements:
The industry in which we compete is characterized by extreme rapid changes in technology and frequent new product introductions. We believe that our long-term growth will depend largely on our ability to continue to enhance existing products and to introduce new products and features that meet the continually changing requirements of our customers. All statements contained in this press release that are not historical facts are forward-looking statements. They are not guarantees of future performance or events. They are based upon current expectations, estimates, beliefs, and assumptions about the future, which may prove incorrect, and upon our goals and objectives, which may change. Often such statements can be identified by the use of the words such as "will," "intends," "expects," "plans," "believes," "anticipates" and "estimates." Examples of forward-looking statements include our anticipation that in the third fiscal quarter sales will be flat sequentially, our belief that sequential reductions in revenue from our legacy printer head drivers and custom processing services were due to normal business cycle fluctuations, our expectation of launching several significant new products in the next few months, and our expectation that such newly launched products will provide impetus for top-line growth in fiscal 2014.
These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. They are not guarantees of future performance or events but rather involve a number of risks and uncertainties including, but not limited to, whether our customers experience the demand we anticipate for their products based in part upon their input and our order backlog, whether our distributors have the sell-through we anticipate and whether we receive the additional orders we anticipate, whether the designed performance of our devices satisfies our customers' requirements so that they continue to design our devices into their products, whether our devices perform to their design specification, whether competitors introduce devices at lower prices than our devices causing price erosion, whether we are successful in the engineering of new products, whether we encounter production issues in device manufacturing or moving new products from engineering into production, whether customers have requirements for deliveries of newly launched products during fiscal 2014, and whether our fab equipment continues to operate at expected capacities without need of replacement, as well as other risk factors detailed in our Form 8-K, 10-K, and 10-Q filings with the Securities and Exchange Commission. Due to these and other risks, our future actual results could differ materially from those discussed above. We undertake no obligation to publicly release updates or revisions to these statements that speak only as of this date.
Conference Call Details
The Company will host a conference call at 2:30 p.m. PDT (5:30 p.m. EDT) on October 22, 2012, following the earnings release. President and CEO, Dr. Henry C. Pao, and CFO, Phil Kagel, will present an overview of the second fiscal quarter financial results, discuss current business conditions, and then respond to questions.
The call will be available live for any interested party by dialing 866-952-1907 (domestic) or 785-424-1826 (toll, international) 5 minutes before the scheduled start time. A recorded replay will be available shortly after the call as a downloadable .mp3 file at http://www.supertex.com/company_ir.html until 11:59 p.m. EDT, November 21, 2012.
About Supertex
Supertex, Inc. is a publicly held mixed signal semiconductor manufacturer, focused in high voltage products for use in the medical ultrasound imaging, LCD TV and computer monitor backlighting, LED general lighting,
telecommunications, printer, flat panel display, industrial and consumer product industries. Supertex product, corporate and financial information is readily available at our website: http://www.supertex.com.
For further information, contact Investor Relations at Supertex, Inc., 1235 Bordeaux Drive, Sunnyvale, California 94089, 408-222-8888 or visit our website at http://www.supertex.com.
Use of Non-GAAP Financial Information
To supplement our financial results presented in accordance with GAAP, we use the following non-GAAP financial measures: non-GAAP net income and diluted non-GAAP net income per share. We present such non-GAAP financial measures in reporting our financial results to provide investors with an additional tool to evaluate our operating results. Because these non-GAAP measures are not calculated in accordance with GAAP, they may not necessarily be comparable to similarly titled measures employed by other companies. These non-GAAP financial measures should not be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.
Our management uses each of the above non-GAAP financial measures internally to understand, manage and evaluate our business. Our management believes it is useful for us and for investors to review, as applicable, both GAAP information, which includes employee stock-based compensation expense, and the non-GAAP measures, which exclude this information, in order to assess the performance of our core continuing businesses and for planning and forecasting in future periods. Each of these non-GAAP measures is intended to provide investors with an understanding of our operational results and trends that more readily enables them to analyze our base financial and operating performance and facilitate period-to-period comparisons and analysis of operation trends. Our management believes each of these non-GAAP financial measures is useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision-making.
Our GAAP cost of sales and operating expenses include employee stock-based compensation. Our non-GAAP financial measures reflect adjustments to exclude this employee stock-based compensation. We believe cost of sales excluding share-based compensation, R&D expense excluding share-based compensation, and SG&A expense excluding share-based compensation are useful information for investors because comparative differences in the corresponding GAAP measures for different periods may reflect factors such as a different stock price when equity awards were made and different equity award practices rather than changes in the operation of the business. Stock options are the form of equity compensation we presently utilize and they are a key incentive we offer our employees. We believe they have contributed to the sales earned during the period and will contribute to our future sales generation. Employee stock-based compensation expenses will recur in future periods.
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SUPERTEX, INC. |
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CONSOLIDATED BALANCE SHEET INFORMATION |
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(unaudited) |
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September 29, 2012 |
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March 31, 2012 |
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(in thousands) |
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ASSETS |
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Cash and cash equivalents |
$ 16,149
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$ 19,860
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Short term investments |
129,806 |
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111,137 |
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Trade accounts receivable, net |
8,275 |
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8,021 |
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Inventories |
11,940 |
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14,438 |
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Deferred tax assets |
7,424 |
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7,529 |
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Prepaid income taxes |
3,079 |
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3,032 |
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Prepaid expenses and other current assets |
5,311 |
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6,786 |
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Total current assets |
181,984 |
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170,803 |
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Long term investments |
13,700 |
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25,900 |
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Property, plant and equipment, net |
4,398 |
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4,941 |
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Other assets |
549 |
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621 |
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Deferred tax assets, noncurrent |
5,309 |
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5,375 |
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TOTAL ASSETS |
$ 205,940
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$ 207,640
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LIABILITIES |
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Trade accounts payable |
$ 2,593
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$ 1,994
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Accrued salaries and employee benefits |
12,799 |
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12,434 |
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Other accrued liabilities |
781 |
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615 |
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Deferred revenue |
2,773 |
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2,560 |
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Income taxes payable |
137 |
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23 |
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Total current liabilities |
19,083 |
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17,626 |
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Income taxes payable, noncurrent |
4,192 |
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4,161 |
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Deferred tax liabilities, noncurrent |
127 |
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- |
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Other accrued liabilities, noncurrent |
568 |
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561 |
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Total liabilities |
23,970 |
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22,348 |
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SHAREHOLDERS' EQUITY |
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Common stock |
67,549 |
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68,031 |
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Accumulated other comprehensive loss |
(791) |
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(1,345) |
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Retained earnings |
115,212 |
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118,606 |
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Total shareholders' equity |
181,970 |
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185,292 |
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
$ 205,940
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$ 207,640
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SUPERTEX, INC. |
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CONSOLIDATED INCOME STATEMENT INFORMATION |
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(unaudited) |
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Three Months Ended |
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Six Months Ended |
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(in thousands, except per share amounts) |
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September 29, 2012 |
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June 30, 2012 |
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October 1, 2011 |
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September 29, 2012 |
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October 1, 2011 |
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Net sales |
$ 15,919
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$ 16,059
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$ 16,960
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$ 31,978
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$ 35,018
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Cost of sales(1) |
8,571 |
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8,565 |
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8,432 |
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17,136 |
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17,424 |
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Gross profit |
7,348 |
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7,494 |
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8,528 |
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14,842 |
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17,594 |
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Research and development(1) |
3,556 |
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3,486 |
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3,220 |
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7,042 |
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7,034 |
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Selling, general and administrative(1) |
3,449 |
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3,384 |
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2,706 |
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6,833 |
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5,957 |
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Income from operations |
343 |
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624 |
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2,602 |
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967 |
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4,603 |
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Interest and other income (expense), net |
616 |
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202 |
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(585) |
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818 |
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(217) |
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Income before income taxes |
959 |
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826 |
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2,017 |
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1,785 |
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4,386 |
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Provision for income taxes |
269 |
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229 |
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306 |
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498 |
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1,006 |
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Net income |
$ 690
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$ 597
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$ 1,711
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$ 1,287
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$ 3,380
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Net income per share: |
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Basic |
$ 0.06
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$ 0.05
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$ 0.14
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$ 0.11
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$ 0.27
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Diluted |
$ 0.06
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$ 0.05
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$ 0.14
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$ 0.11
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$ 0.27
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Shares used in per share computation: |
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Basic |
11,779 |
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11,999 |
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12,498 |
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11,889 |
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12,627 |
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Diluted |
11,782 |
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12,001 |
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12,510 |
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11,892 |
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12,644 |
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(1) Includes amortization of employee stock-based |
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Cost of sales |
$ 130
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$ 134
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$ 154
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$ 264
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$ 273
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Research and development |
$ 335
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$ 349
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$ 330
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$ 684
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$ 576
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Selling, general and administrative |
$ 304
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$ 262
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$ 345
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$ 566
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$ 573
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SUPERTEX, INC. |
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SUPPLEMENTAL RECONCILIATIONS OF GAAP TO NON-GAAP RESULTS |
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(unaudited) |
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Three Months Ended |
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Six Months Ended |
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(in thousands, except per share amounts) |
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September 29, 2012 |
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June 30, 2012 |
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October 1, 2011 |
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September 29, 2012 |
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October 1, 2011 |
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GAAP net income |
$ 690 |
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$ 597
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$ 1,711
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$ 1,287
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$ 3,380
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Adjustment for stock-based compensation included in: |
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Cost of sales |
130 |
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134 |
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154 |
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264 |
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273 |
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Research and development |
335 |
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349 |
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330 |
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684 |
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576 |
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Selling, general and administrative |
304 |
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262 |
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345 |
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566 |
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573 |
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Subtotal |
769 |
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745 |
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829 |
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1,514 |
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1,422 |
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Tax effect of stock-based compensation |
(18) |
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(18) |
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(29) |
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(36) |
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(48) |
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Non-GAAP net income excluding |
$ 1,441 |
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$ 1,324
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$ 2,511
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$ 2,765
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$ 4,754
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Non-GAAP net income per share: |
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Basic |
$ 0.12 |
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$ 0.11
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$ 0.20
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$ 0.23
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$ 0.38
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Diluted |
$ 0.12 |
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$ 0.11
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$ 0.20
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$ 0.23
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$ 0.38
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Shares used in per share computation: |
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Basic |
11,779 |
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11,999 |
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12,498 |
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11,889 |
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12,627 |
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Diluted |
11,782 |
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12,001 |
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12,510 |
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11,892 |
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12,644 |
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SUPERTEX, INC. |
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SUPPLEMENTAL RECONCILIATIONS OF GAAP TO NON-GAAP INCOME PER SHARE |
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(unaudited) |
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Three Months Ended |
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Six Months Ended |
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(in thousands, except per share amounts) |
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September 29, 2012 |
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June 30, 2012 |
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October 1, 2011 |
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September 29, 2012 |
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October 1, 2011 |
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Shares used in per share computation: |
11,782 |
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12,001 |
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12,510 |
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11,892 |
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12,644 |
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DILUTED: |
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GAAP net income per share |
$ 0.06
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$ 0.05
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$ 0.14
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$ 0.11
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$ 0.27
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Adjustments to reconcile net income to |
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Employee stock-based compensation effects included in: |
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Cost of sales |
0.01 |
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0.01 |
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0.01 |
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0.02 |
|
0.02 |
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Research and development |
0.03 |
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0.03 |
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0.02 |
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0.06 |
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0.05 |
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Selling, general and administrative |
0.02 |
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0.02 |
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0.03 |
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0.04 |
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0.04 |
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Provision for income taxes |
(0.00) |
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(0.00) |
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(0.00) |
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(0.00) |
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(0.00) |
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Non-GAAP net income per share |
$ 0.12
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$ 0.11
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$ 0.20
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$ 0.23
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$ 0.38
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SUPERTEX SECOND FISCAL QUARTER 2013 EARNINGS RELEASE CONFERENCE CALL
Moderator: Good afternoon. Welcome to the Supertex fiscal 2013 second quarter earnings Conference Call. I will now turn the Call over to Phil Kagel, CFO of Supertex, for opening comments and introductions.
Phil: Thank you and good afternoon everyone. On the call with me today, I have Dr. Henry C. Pao, President & CEO.
First, let me remind you that all statements made during this conference call, including in response to your questions, which are not historical facts, are forward-looking statements. They are not guarantees of future performance or events. They are based upon current expectations, estimates, beliefs, and assumptions about the future, which may prove incorrect. Furthermore, our goals and objectives, which may change, are also factored into the forward- looking statements. Often such statements can be identified by the use of words such as "will," "intends," "expects," "plans," "believes," "anticipates," and "estimates."
Examples of forward-looking statements include our guidance and projections as to our sales, both overall and for particular customers, markets, segments, and products; for release, performance and customer adoption of new products; and our guidance for financial measures such as gross margin, and tax rate.
Additional information about risks and other factors relating to such statements may be found in our earnings news release of today, as well as other risk factors detailed in our Form 8-K, 10-K, 10-Q and other filings with the Securities and Exchange Commission.
Due to these risks and other factors, our future actual results could differ materially from those contained in the forward looking statements made during this Conference Call. Forward-looking statements speak only as of today and we undertake no obligation to publicly release updates or revisions to these statements.
I would also note that our customers have requested that we do not identify them except to the extent required by SEC disclosure rules. Therefore, we will only be giving a general description of any customer to whom our sales exceeded 10% of total company sales in this reporting period.
And now I will turn the Call over to Henry Pao.
Henry:
Thank you, Phil. Good afternoon.
Although our overall sales were slightly less than 1% lower than last quarter, we are pleased with the increase in our growth businesses, medical and LED lighting. Medical sales increased 23% sequentially and LED lighting and backlighting increased 67% sequentially. The pick-up in medical sales was due in part to normal seasonality. LED driver sales grew significantly in backlighting as our customer’s high-end monitor production ramped up, and LED general lighting driver sales increased slightly. The slight overall sequential sales decrease primarily stemmed from corresponding sequential reductions in our legacy printer head drivers and custom processing services which had spiked in the first fiscal quarter and which we believe were due to normal business cycle fluctuations. We are forecasting our overall sales to be sequentially flat in our third fiscal quarter of 2013, as increases in LED lighting and backlighting sales are expected to be offset by seasonality decreases in medical ultrasound sales. With ten weeks remaining in the quarter we have 62% of projected sales shipped or backlog confirmed. We expect to launch some significant new products in medical ultrasound and LED lighting in the next few months which should provide impetus for our top-line growth in fiscal 2014.
Gross margin for the second quarter of fiscal 2013 was 46%, slightly below last quarter of 47% primarily due to product mix. Operating expense was about the same as last quarter. Other income was higher due to an increase in the fair value of our non-qualified deferred compensation plan assets compared to a small decrease last quarter. This benefit was offset in operating expense. Our fiscal second quarter tax rate of 28% was the same as last quarter. On cash flow, we generated $5.1 million which included a tax refund of $2.2 million. During the fiscal second quarter we deployed $6.9 million to repurchase 396,000 of our shares. Through September 29, 2012, since the current stock repurchase program of 2,500,000 shares was announced in January 2011, we have bought back 1,576,000 shares of Supertex stock for a total of $30.4 million.
On the marketing side, so far this calendar year we have launched 19 new products: 7 LED, 6 Medical ultrasound, 2 Printer/Display, and 4 for the Other/industrial market. Our analog switches are best in class with our 24 and 32 channel analog switches being designed into several new ultrasound systems. Our transmit/receive switches are also incorporated into many design wins. We have just launched a low noise amplifier designed specifically for portable systems with ultra low power dissipation. We have several new medical ultrasound products in qualification: high voltage pulsers, analog switches, another beamformer, and another transmit/receive switch. Additionally, we have many other new products at various stages of development including high performance, low cost, LED drivers for general lighting, for backlighting and for automotive lighting.
In LED backlighting we have a design win on a new TV model for production early next year. Our customer has given us a forecast with shipments of our chip beginning in December.
We were also given forecasts of higher volume for the December quarter for our LED backlighting chips for high end computer monitors.
Our OLED program is progressing, as we are working with several customers in this space.
Now, I will turn the call over to Phil who will elaborate on the financial results.
Phil: Thank you, Henry.
Fiscal 2013 second quarter sales of $15.9 million dollars decreased 1 percent sequentially and 6 percent compared to the second fiscal quarter of last year.
The percentage breakdown of our total sales by end market in the second fiscal quarter was as follows: Medical 42%, LED lighting 14%, Printers/EL 20%, Telecom 10%, and Industrial/other 14%. Three companies accounted for more than 10% of total sales; a major medical instrumentation customer and two distributors at 12% of sales each.
GAAP diluted earnings per share were 6 cents, compared to 5 cents in the prior quarter and 14 cents in the same quarter last year.
Non-GAAP diluted earnings per share for the second fiscal quarter, excluding pre-tax employee stock-based compensation, were 12 cents, or an increase of 1 cent versus the prior quarter and a decrease of 8 cents compared to the same quarter last year.
For the balance of this discussion, I will be referring to GAAP numbers only.
Gross margin for the second fiscal quarter was 46 percent, or approximately 1 percent lower than the prior quarter primarily due to unfavorable product mix and also increased inventory reserves These factors were partially offset by lower unit costs of product sold in the quarter versus last quarter, as these products were built in periods of higher wafer fab utilization. For the first and second quarters of fiscal 2013 our wafer fab utilization was 56% and 58% respectively, compared to 25% and 34% in the preceding two quarters. We expect that gross margin will improve to the range of 49-51% in our third fiscal quarter due to further reductions in unit costs from the higher wafer fab utilization.
R&D spending of $3.6 million dollars in the second fiscal quarter increased approximately $100 thousand dollars compared to the prior quarter primarily due to
higher benefits expense resulting from our non-qualified deferred compensation plan assets increasing compared to a decrease in the prior quarter, all of which is offset in other income & expense.
Selling, general and administrative expenses of $3.4 million dollars in the second fiscal quarter were also approximately $100 thousand dollars higher than the prior quarter, primarily due to same reason as in the increase in R&D expense.
Total operating expense of $7.0 million dollars would have been $300 thousand dollars lower, adjusting out the benefits expense increase of $300 thousand dollars due to the change in our deferred compensation plan assets.
Interest and other income, net, in the second fiscal quarter was approximately $600 thousand dollars, or approximately $400 thousand dollars more than the prior quarter. This was primarily due to the higher offset of the non-qualified deferred compensation plan to income, as discussed earlier. Interest income was also higher than the previous quarter.
Our fiscal second quarter tax rate was 28 percent, or flat sequentially. For the third fiscal quarter we expect our tax provision to be down to 5% due to benefits from expirations of uncertain tax positions.
We generated approximately $5.1 million dollars of positive cash flow from operating activities in the second fiscal quarter. Net income, adjusted by non-cash items, was approximately $2.8 million dollars. Changes in operating assets and liabilities increased operating cash flow by approximately 2.3 million dollars due primarily to an income tax refund.
During the second fiscal quarter we repurchased 396,000 shares of our stock for $6.9 million dollars. Since we announced the stock repurchase program in January of 2011 through the end of our second fiscal quarter, we had bought back approximately one million five hundred seventy-six thousand shares for a total of $30.4 million dollars. So far in our third fiscal quarter, we have repurchased 12,000 shares for approximately two hundred seventeen thousand dollars.
Now we are open for Q & A.
Jiwon Lee from Sidoti & Co.
Jiwon: Good Afternoon Gentlemen.
Phil: Hi Jiwon.
Jiwon: Just want to circle on the revenue guidance for next quarter, if I hear Henry’s comment correctly, the medical will be down and LED will be up and the color of it is, if medical decline is not as bad as what I think it isn’t, then you are looking for fairly substantial ramp in the LED drivers both from the TV and the monitors, correct? I just want to get a little more color of how we should think of the ups and downs of next quarter.
Phil: Sure, as you know we normally have a seasonality dip in December quarter for medical, and it looks to be down around 10% - 12%, in that range, not a significant decrease and the offset to that mostly comes from LED as we mentioned. It’s really both the computer monitor and general lighting. It’s not a real steep ramp but a continued growth as we like to see.
Henry: On the TV side, the volume production will start in January, but we have to ship some in December in order to allow them to start production in January.
Jiwon: So that’s helpful. So Phil do you have additional comments.
Phil: Yes, so that is part of the LED increase. Just want to make that clear that it’s the LED backlighting increase.
Jiwon: On the margin guidance, I am not sure that I understand if you are guiding sequentially flat revenue, why your margin would improve so much. From utilization?
Phil: Yes, that’s a good question. Forty-six to forty-seven percent gross margin is not where we like to be. We are coming out of a period of very low wafer fab utilization. If you look at the last fiscal year, our sales were down but exacerbating this was that we reduced our inventory by about 7 million dollars in our fiscal 2012. So in the first quarter or two this year we were shipping product built a couple of quarters earlier, in terms of the wafers, under a very low utilization period. Now our utilization is coming up and so our product cost is lower. So even with our sales being flat we are shipping product that has lower unit cost and that’s really the reason.
Jiwon: So that’s helpful. Lastly for me I could see that your printer EL segment has a taken a fairly substantial sequential down turn. I recall the OLED printer, I wonder where we stand on that please.
Phil: Yes that’s really a good question. It’s embedded in the Printer/EL market space, and we were flat. We had OLED shipments of around $600 thousand in the 1st fiscal quarter and $600 thousand or so in the 2nd fiscal quarter. This is not really a production ramp. They are building prototype of units in anticipation of evaluation of those units to come in the January-February-March time frame. So we aren’t going to have many shipments until those units are evaluated.
Jiwon: For that product your revenue is fairly stable with hopefully after the evaluation period, revenue will go up.
Henry: If they go into volume production, then the volume will be significant.
Jiwon: Ok. That’s all for me.
Phil: Thank you Jiwon.
Phil: We thank you for being on the call today. We understand that since we moved up this call a day early, we would be up against several other earnings conference calls and we wouldn’t have as many as usual on the call with us. If there are other questions, we would be happy to take them later. Thank you and good bye.