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, 1998
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934 (No Fee Required)
Commission File No. 0-12718
SUPERTEX, INC.
(Exact name of Registrant as specified in its Charter)
California 94-2328535
(State or other jurisdiction of (IRS Employer Identification #)
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 ( )
As of February 2, 1999, 12,079,539 shares of the Registrant's
common stock were issued and outstanding.
Total number of pages: 10
<PAGE>
SUPERTEX, INC.
QUARTERLY REPORT - FORM 10Q
Table of Contents Page No.
- ----------------- --------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income .................... 3
Consolidated Balance Sheets .......................... 4
Consolidated Statements of Cash Flows ................ 5
Notes to Consolidated Financial Statements ........... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .................. 7
PART II - OTHER INFORMATION
Item 6. Exhibits, Financial Statement Schedule
and Reports on Form 8-K .............................. 9
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
SUPERTEX, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share amounts)
<CAPTION>
Three-months Ended, Nine-months Ended,
December 31, December 31,
------------ ------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 12,017 $ 13,857 $ 37,668 $ 39,782
-------- -------- -------- --------
Cost and expenses:
Cost of sales 6,565 7,496 19,980 21,644
Research and development 1,483 1,464 4,462 4,265
Selling, general and administrative 1,522 1,741 4,999 4,978
-------- -------- -------- --------
Total costs and expenses 9,570 10,701 29,441 30,887
-------- -------- -------- --------
Income from operations 2,447 3,156 8,227 8,895
Interest income 625 454 1,578 1,171
Other income (expense), net (26) (22) (69) 5
-------- -------- -------- --------
Income before provision for income taxes 3,046 3,588 9,737 10,071
Provision for income taxes 842 1,220 3,116 3,424
-------- -------- -------- --------
Net income $ 2,204 $ 2,368 $ 6,621 $ 6,647
======== ======== ======== ========
Net income per share:
Basic $ 0.18 $ 0.20 $ 0.55 $ 0.55
======== ======== ======== ========
Diluted $ 0.18 $ 0.19 $ 0.54 $ 0.54
======== ======== ======== ========
Shares used in per share computation
Basic 12,055 12,089 12,073 12,068
======== ======== ======== ========
Diluted 12,233 12,427 12,271 12,407
======== ======== ======== ========
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
SUPERTEX, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
<CAPTION>
Dec. 31, 1998 Mar. 31, 1998
------------- -------------
(in thousands)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 17,993 $ 24,556
Short term investments 20,886 6,956
Trade accounts receivable,
net of allowances of $847 and $700 9,213 9,784
Other receivables 404 322
Inventories 9,929 10,263
Deferred income taxes 2,181 2,181
Prepaid expenses 206 218
-------- --------
Total current assets 60,812 54,280
Property and equipment, net 11,113 12,349
-------- --------
TOTAL ASSETS $ 71,925 $ 66,629
======== ========
</TABLE>
<TABLE>
LIABILITIES
<CAPTION>
Current liabilities:
<S> <C> <C>
Trade accounts payable and accrued liabilities $ 6,535 $ 6,881
Income taxes payable 790 1,080
Deferred revenue on shipments to distributors 1,012 1,451
-------- --------
Total current liabilities 8,337 9,412
-------- --------
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
12,064 and 12,097 shares 20,923 20,713
Retained earnings 42,665 36,504
-------- --------
Total shareholders' equity 63,588 57,217
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 71,925 $ 66,629
======== ========
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
SUPERTEX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
<CAPTION>
Nine Months Ended
-----------------
Dec. 31, 1998 Dec. 31, 1997
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 6,621 $ 6,647
-------- --------
Non-cash adjustments to net income:
Depreciation and amortization 2,609 1,804
Provision for doubtful accounts
and sales returns 1,652 916
Provision for excess and obsolete inventories (33) (75)
Changes in operating assets and liabilities:
Accounts and other receivables (1,163) (1,266)
Inventories 367 (249)
Prepaid expenses 12 83
Trade accounts payable and accrued expenses (346) (253)
Income taxes payable (290) 940
Deferred revenue on shipments to distributors (439) 300
-------- --------
Total adjustments 2,369 2,200
-------- --------
Net cash provided by operating activities 8,990 8,847
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (1,373) (2,658)
Purchases of short term investments (41,096) (21,287)
Proceeds from maturities of
short term investments 27,344 18,153
-------- --------
Net cash used in investing activities (15,303) (5,792)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Stock options exercised 136 333
Repurchase of stock (563) (419)
------- -------
Net cash used in financing activities (249) (86)
------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS (6,562) 2,969
CASH AND CASH EQUIVALENTS:
Beginning of period 24,556 19,166
-------- --------
End of period $ 17,993 $ 22,135
======== ========
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
SUPERTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
- ------
In the opinion of management, the unaudited financial statements
for the nine months ended December 31, 1998 and 1997, include all
adjustments (consisting of normal recurring adjustments)
necessary for fair presentation of financial condition and
results of operations for those periods in accordance with
generally accepted accounting principles.
The year-end condensed balance sheet data was derived from
audited financial statements, but does not include all
disclosures required by generally accepted accounting
principles. These financial statements should be read in
conjunction with the audited financial statements of Supertex,
Inc. for the fiscal year ended March 31, 1998, which were
included in the Annual Report on Form 10-K (File Number 0-12718).
Interim results are not necessarily indicative of results for
the full fiscal year.
Note 2
- ------
Inventories consisted of (in thousands):
Dec. 31, 1998 March 31, 1998
------------- --------------
(unaudited)
Finished goods .............................. $ 2,930 $ 2,919
Work-in-process ............................. 6,488 6,200
Raw materials ............................... 511 1,144
------- -------
$ 9,929 $10,263
======= =======
Note 3
- ------
Net Income per Share: Basic EPS is computed as net income divided by the
weighted average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could occur from common shares
issuable through stock options, warrants, and other convertible securities.
The following is a reconciliation of the numerator (net income) and the
denominator (number of shares) used in the basic and diluted EPS calculations.
For Three-months Ended, For Nine-months Ended,
December 31, December 31,
1998 1997 1998 1997
---- ---- ---- ----
BASIC:
Weighted average shares
outstanding for the period 12,055 12,089 12,073 12,068
Net income $ 2,204 $ 2,368 $ 6,621 $ 6,647
-------- -------- -------- --------
Net income per share $ 0.18 $ 0.20 $ 0.55 $ 0.55
======== ======== ======== ========
DILUTED:
Weighted average shares
outstanding for the period 12,055 12,089 12,073 12,068
Common stock equivalents 178 338 198 341
------ ------ ------ ------
Total common and common
equivalent shares 12,233 12,427 12,271 12,409
------ ------ ------ ------
Net income $ 2,204 $ 2,368 $ 6,621 $ 6,647
------- ------- ------ ------
Net income per share $ 0.18 $ 0.19 $ 0.54 $ 0.54
======= ======= ======= =======
<PAGE>
Note 4
- ------
On February 1, 1999, Supertex, Inc. completed the acquisition of all the
assets of the six inch sub-micron wafer fabrication (fab) facility located in
San Jose, CA from Orbit Semiconductor, Inc. a wholly owned subsidiary of Dii
Group. Per the Asset Purchase Agreement dated January 16, 1999, the purchase
price, including the assumption of operating lease liabilities, is
approximately $11.2 million. In connection with the acquisition, the Company
is assuming certain contract obligations and work-in-process inventory.
Orbit will assist Supertex to accelerate its process transfer to the six-inch
fab. The associated cost with this transfer will be expensed over the present
quarter and next fiscal quarter.
PART I - FINANCIAL INFORMATION
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
Certain Factors: This report contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21 E of the
Securities Exchange Act of 1934. Actual future results could differ
materially from those discussed here and elsewhere in this report. Factors
that could affect future results include general economic conditions, both
in the United States and foreign markets, economic conditions specific to
the semiconductor industry, the Company's ability to introduce new products,
its ability to enhance existing products, its ability to meet the continually
changing requirements of its customers, its ability to manufacture efficiently,
its ability to control costs, and its ability to maintain and enhance
relationships with its assembly and test subcontractors and independent
distributors and sales representatives.
Results of Operations
Net Sales: Net sales for the quarter ended December 31, 1998 were $12,017,000,
a 13% decrease from $13,857,000 of the same quarter last year due to
continuing weakness in demand and price pressure. For the nine months ended
December 31, 1998, net sales declined by 5% to $37,668,000 from $39,782,000
when compared with the same period of the prior year.
In this quarter as well as the nine months period, approximately 55% of the
Company's net sales were derived from customers outside the United States.
All of the Company's sales to international customers were denominated in U.S.
currencies.
Gross Margin: As a percent of sales, the Company's gross margin for the
quarter and the nine months period ending December 31, 1998 was 45% and 47%
respectively, compared with 46% gross margin for the same quarter and nine
months period of last fiscal year.
Research and Development: As a percent of net sales, third quarter R&D
expenses increased to 12% of net sales for the quarter and nine months
ending December 31, 1998. This compares with R&D expenses of 11% of net
sales for the quarter and nine months period of last year. Dollar
expenditures increased slightly to $1,483,000 and $4,462,000 for the
quarter and nine months ended December 31, 1998 respectively, as compared
with $1,464,000 and $4,265,000 for the same periods of the last fiscal year.
Selling, General and Administrative: Expenses for selling, general and
administrative remained constant at 13% of net sales for the quarter and nine
months ending December 31, 1998 and 1997.
Interest Income: Interest income for this quarter was $625,000 compared with
$454,000 for the comparable quarter of last year. Nine months interest income
was $1,578,000, a 35% increase from $1,171,000 of the same period of last
fiscal year. Higher amount of funds available for investments contributed to
this increase.
<PAGE>
Provision for Income Taxes: The Company's effective tax rate for the three-
and nine- months ended December 31, 1998 decreased to 28% and 32%
respectively, compared with the effective tax rate of 34% of net sales for
the same quarter and nine month periods of last fiscal year.
Overview: Total assets grew to $71,925,000 as of December 31, 1998, up from
$66,629,000 from quarter ending March 31, 1998. The increase is due to
favorable operating results for the quarter.
Liquidity and Capital Resources: On December 31, 1998, the Company had
$38,879,000 in cash, cash equivalents, and short term investments, compared
with $31,512,000 on March 31, 1998. This increase is mostly due to positive
cash flow from operating activities of $8,988,000 consisting principally of
net income of $6,621,000.
Net cash used in investing activities as of the second quarter of fiscal year
1999 was $15,302,000 compared to $5,792,000 for the same period last year.
Net cash used in short-term investment activities totaled $41,096,000, and
$1,372,000 was used in the purchase of equipment.
Net cash used in financing activities was $249,000. Repurchase of stocks
accounted for $563,000, which was offset by proceeds from stock option
exercises of $136,000 and proceeds from other activities of $178,000.
The Company anticipates that available funds and cash expected to be
generated from operations will be sufficient to meet cash and working
capital requirements through the end of fiscal year 1999.
Year 2000 Issues.
Background: The Company is aware of the issues associated with the
programming code in existing computer systems and software products as the
millennium (year 2000) approaches. The "Year 2000" or "Y2K" problem is
pervasive and complex, as virtually every computer operation will be
affected in the same way by the rollover of the two digit year value to 00.
The issue is whether computer systems will properly recognize date-sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system
to fail. As a result, many companies' software, computer systems and other
equipment may need to be upgraded or replaced in order to comply with such
"Y2K" requirements.
Assessment: The Y2K problem could affect computers, software, and other
equipment used, operated, or maintained by the Company. Accordingly,
the Company has been reviewing its internal computer program and systems to
ensure that they will be Y2K compliant in a timely manner. It is utilizing
both internal and external resources to identify, correct or reprogram, and
test the systems for Y2K compliance. The Company's Y2K readiness
program is divided into five major sections, namely; Enterprise Resource
Planning (ERP) Systems, PC Systems and Applications, Shop Floor Control
System, the Facilities Systems, and Third Party Suppliers and Customers.
The inventory and priority assessment phases of each section of the program
have been completed. The testing phases of the program are being performed
by the Company. It is anticipated that all reprogramming efforts will be
completed by September 30, 1999. For other sections, a six month safety net
is built into our Y2K readiness program to allow for any unplanned or
unscheduled occurrence that may need to be remedied prior to the millennium.
As part of the Y2K readiness program, the Company has purchased and is
implementing a Shop Floor Control System called MESA software from Camstar
Systems, Inc. This will replace the existing work in process tracking
system. Implementation of MESA is on schedule and is expected to be
completed by mid-1999. Remaining business software programs and computer
systems are expected to be Y2K compliant through the Y2K readiness
program including those supplied by vendors or they will be retired. It is
important to note that Supertex, Inc. products are not date sentitive.
<PAGE>
Suppliers and Customers: As part of the Y2K readiness program, the
Company has identified primary vendors, service providers and customers that
are believed to be critical to business operations. Steps are being
undertaken to reasonably ascertain their stage of Y2K readiness through
questionnaires, interviews and other available means. The process of
evaluating these third party business partners began on July 1, 1998 and is
scheduled for completion by mid-1999, with follow up reviews scheduled
through the remainder of 1999. However, the Company has limited or no
control over the actions of these third parties. Thus, while the Company
does not anticipate any significant Y2K problems with these systems, there
can be no assurance that these third party entities will resolve any or all
Y2K problems before the occurrence of a material disruption to the Company
or any of its customers. Any failure of these third parties to resolve Y2K
problems in a timely manner could have a material adverse effect on the
Company's business, financial condition and results of operations.
Costs: It is currently estimated that the aggregate cost of the Company's
year 2000 project is approximately $1,200,000 including the cost of
implementing the new Shop Floor Control System, MESA, estimated to be
approximately $700,000, substantially all of which would be capitlized. Other
non-Y2K information technology projects have not been materially delayed or
impacted by tge Company's Y2K initiatives.
Contingency Plans: The Company is currently developing contingency plans
intended to mitigate possible disruption in business operations that may
result from the Y2K issue. The Company's objective is to complete its initial
contingency planning by June 30, 1999. Contingency plans may include
increasing inventory levels of raw materials, securing alternate sources of
supply and distribution, accelerated replacement of affected equipment or
software, increased work hours for Company personnel, additional staffing,
manual workarounds and other appropriate measures.
Risks: The Company's Y2K readiness program is an ongoing process and
the risk assessments and estimates of costs and completion dates for the
various components of the Y2K readiness program described above are forward
looking statements and are subject to change. Factors that may cause
changes include among others the continued availability and cost of
programming and testing resources, ability to identify and remediate all
Y2K problems, the timely implementation of Y2K ready systems, the timely
conversion by third parties of their equipment and proprietary
software, and unanticipated problems identified in the ongoing compliance
review. Although preliminary estimates indicate that the Y2K issue
will not have a material impact on the Company, there can be no assurance
that the Y2K issue, due to the above factors or other unforeseen
consequences, will not have a material adverse effect on the Company's
business, financial condition and operating results.
PART II - OTHER INFORMATION
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
None.
<PAGE>
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 12, 1999
By: /s/ Henry C. Pao
---------------------------
Dr. Henry C. Pao, President
(Principal Executive and
Financial Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> DEC-31-1998
<CASH> 17,993
<SECURITIES> 20,886
<RECEIVABLES> 10,254
<ALLOWANCES> 637
<INVENTORY> 9,928
<CURRENT-ASSETS> 60,812
<PP&E> 28,008
<DEPRECIATION> 16,895
<TOTAL-ASSETS> 71,925
<CURRENT-LIABILITIES> 8,337
<BONDS> 0
0
0
<COMMON> 20,923
<OTHER-SE> 42,665
<TOTAL-LIABILITY-AND-EQUITY> 71,925
<SALES> 37,668
<TOTAL-REVENUES> 37,668
<CGS> 19,980
<TOTAL-COSTS> 29,441
<OTHER-EXPENSES> 29
<LOSS-PROVISION> 141
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9,737
<INCOME-TAX> 3,116
<INCOME-CONTINUING> 6,621
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,621
<EPS-PRIMARY> .55
<EPS-DILUTED> .54
</TABLE>
