SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
(x) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1999
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 July 15, 1999, 12,092,568 shares of the Registrant's
common stock were issued and outstanding.
Total number of pages: 12
<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 .................. 8
PART II - OTHER INFORMATION
Item 6. Exhibits, Financial Statement Schedule
and Reports on Form 8-K .............................. 11
<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,
June 30,
----------
1999 1998
---- ----
<S> <C> <C>
Net sales $ 16,297 $ 13,001
-------- --------
Cost and expenses:
Cost of sales 10,741 6,907
Research and development 2,835 1,501
Selling, general and administrative 1,492 1,692
-------- --------
Total costs and expenses 15,068 10,100
-------- --------
Income from operations 1,229 2,901
Interest income 415 470
Other income (expense), net (48) (29)
-------- --------
Income before provision for income taxes 1,596 3,342
Provision for income taxes 527 1,135
-------- --------
Net income $ 1,069 $ 2,207
======== ========
Net income per share:
Basic $ 0.09 $ 0.18
======== ========
Diluted $ 0.09 $ 0.18
======== ========
Shares used in per share computation
Basic 12,082 12,098
======== ========
Diluted 12,212 12,322
======== ========
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
SUPERTEX, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
<CAPTION>
Jun. 30, 1999 Mar. 31, 1999
------------- -------------
(in thousands)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 20,436 $ 28,190
Short term investments 10,050 1,366
Trade accounts receivable,
net of allowances of $1,012 and $1,020 12,440 10,860
Other accounts receivable 714 657
Inventories 12,731 11,330
Deferred income taxes 1,862 1,862
Prepaid expenses 286 453
-------- --------
Total current assets 58,519 54,718
Property and equipment, net 15,119 15,946
Long-term receivables 41 --
Intangibles assets, net 1,815 2,072
Deferred Income Taxes 1,853 1,853
-------- --------
TOTAL ASSETS $ 77,347 $ 74,589
======== ========
</TABLE>
<TABLE>
LIABILITIES
<CAPTION>
Current liabilities:
<S> <C> <C>
Trade accounts payable $ 7,986 $ 6,835
Accrued salaries, wages and employee benefits 3,882 3,162
Income taxes payable 519 --
Other accrued liabilities 416 714
Deferred revenue on shipments to distributors 1,065 1,198
-------- --------
Total current liabilities 13,868 11,909
-------- --------
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
12,077 and 12,099 shares in 1998 20,949 20,895
Accumulated other comprehensive income 358 356
Retained earnings 42,172 41,429
-------- --------
Total shareholders' equity 63,479 62,680
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 77,347 $ 74,589
======== ========
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
SUPERTEX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
<CAPTION>
Three Months Ended
-----------------
June 30, 1999 June 30, 1999
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 1,069 $ 2,207
-------- --------
Non-cash adjustments to net income:
Depreciation and amortization 1,461 772
Provision for doubtful accounts
and sales returns 350 254
Provision for excess and obsolete inventories 297 (161)
Changes in operating assets and liabilities:
Trade and other receivables (2,028) 855
Inventories (1,698) (167)
Prepaid expenses 167 13
Trade accounts payable and accrued expenses 1,573 (671)
Income taxes payable 519 1,054
Deferred revenue on shipments to distributors (133) (165)
-------- --------
Total adjustments 508 1,784
-------- --------
Net cash provided by operating activities 1,577 3,991
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (377) (732)
Purchases of short term investments (8,682) (11,400)
Proceeds from maturities of
short term investments -- 6,000
Other -- 58
-------- --------
Net cash used in investing activities (9,059) (6,074)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Stock options exercised 132 25
Repurchase of stock (404) --
------- -------
Net cash used in financing activities (272) 25
------- -------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (7,754) (2,058)
CASH AND CASH EQUIVALENTS:
Beginning of period 28,190 24,556
-------- --------
End of period $ 20,436 $ 22,498
======== ========
<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 three months ended June 30, 1999 and 1998 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, 1999, 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
- ------
<TABLE>
<CAPTION>
Inventories consisted of (in thousands):
Dec. 31, 1998 March 31, 1998
------------- --------------
(unaudited)
<S> <C> <C>
Finished goods .............................. $ 3,650 $ 3,534
Work-in-process ............................. 7,813 7,099
Raw materials ............................... 1,268 697
------- -------
$12,371 $11,330
======= =======
</TABLE>
Note 3
- ------
Net Income per Share: Basic earnings per share ("EPS") is computed as net
income divided by the weighted average number of common shares outstanding for
the period. Diluted EPS reflects the potential dilution that could occur from
common shares issuable through stock options, warrants, and other convertible
securities. The following is a reconciliation of the numerator (net income)
and the denominator (number of shares) used in the basic and diluted EPS
calculations.
<TABLE>
<CAPTION>
For Three-months Ended,
-----------------------
June 30,
--------
1999 1998
---- ----
<S> <C> <C>
BASIC:
Weighted average shares
outstanding for the period 12,082 12,098
Net income $ 1,069 $ 2,207
-------- --------
Net income per share $ 0.09 $ 0.18
======== ========
DILUTED:
Weighted average shares
outstanding for the period 12,082 12,098
Common stock equivalents 130 224
------ ------
Total common and common
equivalent shares 12,212 12,322
------ ------
Net income $ 1,069 $ 2,207
------- -------
Net income per share $ 0.09 $ 0.18
======= =======
</TABLE>
<PAGE>
SUPERTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4
- ------
Comprehensive Income: The Company has adopted the provisions of Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." The
statement requires the disclosure of comprehensive income and its components
in a full set of general purpose financial statements or on the statement of
operations. Comprehensive income is defined as net income plus revenues,
expenses, gains and losses that are excluded from net income in accordance
with generally accepted accounting principles. There are no material
differences between comprehensive income and the net income.
Note 5
- ------
Recent Accounting Pronouncements: In June 1998, the FASB issued Statement of
Financial Accounting Standards No. 133, ("SFAS No. 133"), "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes new
standards of accounting and reporting for derivative instruments and hedging
activities. SFAS No. 133 requires that all derivatives be recognized at fair
value in the statement of financial position and that the corresponding gains
or losses be reported either in the statement of operation or as a component
of comprehensive income, depending on the type of hedging relationship that
exists. SFAS No. 133 is effective for fiscal years beginning after June 15,
2000. Earlier application is allowed as of the beginning of any quarter
beginning after issuance. The Company does not anticipate that the adoption
of SFAS 133 will have a material impact on its financial position or results
of operations.
<PAGE>
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, risks associated with customer concentration,
the successful integration of the newly acquired wafer fabrication facility
and other risks associated with this acquisition, the Company's timely
introduction of new products, its ability to enhance existing products, its
ability to implement new capacities or technologies, 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.
Concentration of Credit Risk: The Company sells its semiconductor products in
North America, Europe and the Pacific Rim to numerous customers. The Company
performs ongoing credit evaluations of its customers and generally does not
require collateral. Allowances for potential credit losses are maintained and
such losses historically have not been material. Substantially all of the
Company's cash, cash equivalents and short term investments are held at four
major financial institutions domiciled in the United States.
Results of Operations
Net Sales: Net sales for the quarter ended June 30, 1999 were $16,297,000,
a 25% increase from $13,001,000 of the same quarter last year. This sales
increase was primarily due to our recently acquired foundry business through
the fab acquisition.
In this quarter, approximately 35% 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. There was no
currency exchange exposure, however as the U.S. dollar continues to be
strong against other currencies, many international customers requested
and received modest price concessions.
Gross Profit: The Company's gross profit for the quarter was $5,556,000,
compared with $6,094,000 in the same quarter last year. As a percent of
net sales, gross margin for the quarter was 34%, a 13% decrease from when
compared with the same quarter last fiscal year. The gross profit was
adversely affected by the extra overhead absorption of the two fabs,
including the double declining depreciation of the physical assets of the
new fab.
Research and Development: Research and development expenses increased 89%
to $2,835,000 for the quarter ended June 30, 1999 as compared with
$1,501,000 for the same quarter of last year. As a percent of sales,
research and development expenditures increase to 17% compared to 12% for
the same quarter last year. The increase was primarily due to a
non-recurring payment of $1,350,000 to Orbit Semiconductor, Inc. under a
process development agreement. This is the final payment to Orbit for
assisting Supertex in accelerating the process transfer to the recently
acquired six-inch fab from Supertex's existing four-inch fab which is scheduled
to close by the end of this fiscal year.
<PAGE>
Selling, General and Administrative: Expenses for selling, general and
administrative were lower at $1,492,000, or 9% of net sales for the quarter
ending June 30, 1999 as compared with $1,692,000, 13%, in the same quarter of
last fiscal year. The dollar decrease in this category was primarily due to
a decrease in bad debt expenses.
Interest and Other Income (Expense): Interest and other income (expense) for
this period were $367,000 compared with $441,000 last year. There were less
funds available for investment due to the cash used in the acquisition of the
new fab facility.
Provision for Income Taxes: The Company's effective tax rate for the three
months ended June 30, 1999 was at 33% compared to 34% of the same period last
year.
Overview: Total assets grew to $77,347,000 as of June 30, 1999 up from
$74,589,000 from quarter ending March 31, 1999. The increase is due to a
favorable operating results for the quarter.
Liquidity and Capital Resources: On June 30, 1999, the Company had $30,486,000
in cash, cash equivalents, and short term investments, compared with
$29,556,000 on March 31, 1999. This increase is mostly due to positive cash
flow from operating activities of $1,577,000 consisting principally of net
income of $1,069,000.
Net cash used in investing activities in the first quarter of 1999 was
$9,059,000 which consisted primarily of purchases of short term investments.
Net cash used in financing activities was $272,000 which consists primarily of
funds used for stock repurchase of $404,000 offset by proceeds from exercises
of stock options.
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 2000.
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 them
to fail. As a result, many companies' software, computer systems and other
equipment may need to be reprogrammed 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
<PAGE>
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 safety net has been built into our Y2K readiness program
to allow for any possible 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 ("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 the second fiscal quarter of
this year. Remaining business software programs and computer systems are
expected to be Y2K compliant through the Y2K readiness program including
those supplied by vendors. Any business software programs and computer
systems that are not Y2K compliant will be retired before the millennium.
It is important to note that Supertex, Inc. products are not date sensitive.
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 was
completed in June, 1999. Follow-up reviews are scheduled throughout 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 relating to these parties, 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 their
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
Y2K project is approximately $1,200,000 including the cost of
implementing MESA, estimated to be approximately $700,000, substantially
all of which would be capitalized. Other non-Y2K information technology
projects have not been materially delayed or impacted by the 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 initial contingency plan was
completed on 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, short to medium-term use of backup equipment and 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 issues, 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.
<PAGE>
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: July 28, 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> 3-MOS
<FISCAL-YEAR-END> MAR-25-2000
<PERIOD-END> JUN-30-1999
<CASH> 20,436
<SECURITIES> 10,050
<RECEIVABLES> 13,452
<ALLOWANCES> 1,012
<INVENTORY> 12,731
<CURRENT-ASSETS> 58,519
<PP&E> 34,599
<DEPRECIATION> 19,480
<TOTAL-ASSETS> 77,347
<CURRENT-LIABILITIES> 13,868
<BONDS> 0
0
0
<COMMON> 20,949
<OTHER-SE> 42,530
<TOTAL-LIABILITY-AND-EQUITY> 77,347
<SALES> 16,297
<TOTAL-REVENUES> 16,297
<CGS> 10,741
<TOTAL-COSTS> 15,068
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 104
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,596
<INCOME-TAX> 527
<INCOME-CONTINUING> 1,069
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,069
<EPS-BASIC> .09
<EPS-DILUTED> .09
</TABLE>
