UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
(x) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 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
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 October 13, 1999, 12,138,468 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 4. Submission of Matters to a Vote of Security Holders........... 11
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, Six-months Ended,
September 30, September 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $16,737 $12,650 $33,034 $25,651
------- ------- ------- -------
Cost and expenses:
Cost of sales 10,725 6,508 21,466 13,415
Research and development 1,724 1,478 4,560 2,979
Selling, general and administrative 1,609 1,785 3,101 3,477
------- ------- ------- -------
Total costs and expenses 14,058 9,771 29,127 19,871
------- ------- ------- -------
Income from operations 2,679 2,879 3,907 5,780
Interest income 360 483 775 953
Other income (expense), net (76) (13) (124) (42)
------- ------- ------- -------
Income before provision 2,963 3,349 4,558 6,691
for income taxes
Provision for income taxes 978 1,139 1,504 2,274
------- ------- ------- -------
Net income $ 1,985 $ 2,210 $ 3,054 $ 4,417
======= ======= ======= =======
Net income per share:
Basic $ 0.16 $ 0.18 $ 0.25 $ 0.37
======= ======= ======= =======
Diluted $ 0.16 $ 0.18 $ 0.25 $ 0.36
======= ======= ======= =======
Shares used in per share computation:
Basic 12,109 12,066 12,096 12,082
======= ======= ======= =======
Diluted 12,474 12,258 12,343 12,290
======= ======= ======= =======
<FN>
See accompanying Notes to Unaudited Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
SUPERTEX, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
<CAPTION>
Sep. 30, 1999 Mar. 31, 1999
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 10,018 $ 28,190
Short term investments 21,463 1,366
Trade accounts receivable,
net of allowances of $1,051 and $1,020 13,150 10,860
Other accounts receivable 702 657
Inventories 13,161 11,330
Deferred income taxes 1,862 1,862
Prepaid expenses 604 453
-------- --------
Total current assets 60,960 54,718
Property, plant and equipment, net 14,451 15,946
Intangibles assets, net 1,574 2,072
Deferred Income Taxes 1,853 1,853
-------- --------
TOTAL ASSETS $ 78,838 $ 74,589
======== ========
</TABLE>
<TABLE>
LIABILITIES
<CAPTION>
Current liabilities:
<S> <C> <C>
Trade accounts payable $ 6,563 $ 6,835
Accrued salaries, wages and employee benefits 3,765 3,162
Income taxes payable 1,190 --
Other accrued liabilities 327 714
Deferred revenue on shipments to distributors 1,044 1,198
-------- --------
Total current liabilities 12,889 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:
12,136 shares and 12,099 shares 21,337 20,895
Accumulated other comprehensive income 455 356
Retained earnings 44,157 41,429
-------- --------
Total shareholders' equity 65,949 62,680
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 78,838 $ 74,589
======== ========
<FN>
See accompanying Notes to Unaudited Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
SUPERTEX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
<CAPTION>
Six Months Ended,
-----------------
Sep 30, 1999 Sep 30, 1998
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 3,054 $ 4,417
-------- --------
Non-cash adjustments to net income:
Depreciation and amortization 2,931 1,668
Provision for doubtful accounts and sales returns 1,242 895
Provision for excess and obsolete inventories 526 (161)
Changes in operating assets and liabilities:
Accounts and other receivables (3,578) 773
Inventories (2,357) 57
Prepaid expenses (151) 14
Trade accounts payable and accrued expenses (56) (934)
Income taxes payable 1,191 271
Deferred revenue on shipments to distributors (154) (306)
-------- --------
Total adjustments (406) 2,277
-------- --------
Net cash provided by operating activities 2,648 6,694
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (938) (1,011)
Purchases of short term investments (28,743) (21,409)
Proceeds from maturities of short term investments 8,745 7,478
-------- --------
Net cash flow used in investing activities (20,936) (14,942)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Stock options exercised 523 82
Stock repurchased (407) (563)
-------- --------
Net cash provided by (used in) financing activities 116 (481)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (18,172) (8,729)
CASH AND CASH EQUIVALENTS:
Beginning of period 28,190 24,556
-------- --------
End of period $ 10,018 $ 15,827
======== ========
<FN>
See accompanying Notes to Unaudited Consolidated Financial Statements.
</TABLE>
<PAGE>
SUPERTEX, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1
- ------
In the opinion of management, the unaudited financial statements for the
three and six months ended September 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 (specifically, the footnotes)
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 consist of (in thousands):
September 30, 1999 March 31, 1999
------------------ --------------
<S> <C> <C>
Finished goods.............................. $ 1,016 $ 3,534
Work-in-process............................. 9,196 7,099
Raw materials............................... 2,949 697
------- -------
$13,161 $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>
Three-months Ended Six-months Ended
------------------ ----------------
September 30, September 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
BASIC:
Net income $ 1,985 $ 2,210 $ 3,054 $ 4,417
======= ======= ======= =======
Weighted average shares
outstanding for the period 12,109 12,066 12,096 12,082
======= ======= ======= =======
Net income per share $ 0.16 $ 0.18 $ 0.25 0.37
======= ======= ======= =======
DILUTED:
Net income $ 1,985 $ 2,210 $ 3,054 $ 4,417
======= ======= ======= =======
Weighted average shares
outstanding for the period 12,109 12,066 12,096 12,082
Dilutive effect of stock
options 365 192 247 208
------- ------- ------- -------
Total 12,474 12,258 12,343 12,290
======= ======= ======= =======
Net income per share $ 0.16 $ 0.18 $ 0.25 $ 0.36
======= ======= ======= =======
</TABLE>
<PAGE>
Note 4
- ------
Comprehensive Income: The Company has adopted the provisions of Statement of
Financial Accounting Standards No. 130, ("SFAS No.130"), "Reporting
Comprehensive Income". SFAS No. 130 establishes rules for the reporting and
display of comprehensive income and its components; however, the adoption of
this Statement had no impact on the Company's net income or stockholders'
equity.
<TABLE>
<CAPTION>
The following are the components of comprehensive income (in thousands):
Three-months Ended Six-months Ended
September 30, September 30,
------------------ ----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $1,985 $2,210 $3,054 $4,417
Unrealized gain on short term 97 45 99 103
investment ------ ------ ------ ------
Comprehensive income $2,082 $2,255 $3,153 $4,520
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
The components of accumulated other comprehensive income are as follows
(in thousands):
September 30, 1999 March 31, 1999
------------------ --------------
<S> <C> <C>
Unrealized gain on short term
investment $455 $356
</TABLE>
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 operations 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, 1999. 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 our two wafer fabs and other risks related to the
product transfers from the old to the new fab, 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 September 30, 1999 were $16,737,000,
a 32% increase compared to $12,650,000 of the same quarter last year. For the
six months ended September 30, 1999, net sales were $33,034,000 compared to
$25,651,000 for the same period of the prior year, a 29% increase. The
increases in sales for the quarter and year-to-date period are primarily due
to the addition of the foundry business through the acquisition of the
submicron fab on February 1, 1999 and the sales increases in our
telecommunication sector.
Approximately 33% of the Company's net sales for this quarter and 34% for the
six months were derived from customers outside the United States. All of the
company's sales to international customers were denominated in U.S.
currencies, therefore, there was no currency exchange exposure. However, if
the US dollar continues to be strong against other currencies, international
customers may request and receive modest price concessions, as they did in the
past.
Gross Profit: As a percent of sales, the Company's gross margin for the
three and six month periods ended September 30, 1999 was 36% and 35%
respectively, compared with 49% and 48% for the same periods of the last
fiscal year. The gross profit was adversely affected by the extra overhead
absorption of the two fabs, the old four-inch fab and the six-inch fab
acquired in February, 1999, including the accelerated depreciation of
the physical assets of the new six-inch fab.
Research and Development: Research and development expenses increased 17% to
$1,724,000 for the quarter ended September 30, 1999 as compared with
$1,478,000 for the same quarter of last year. The increase in research and
development expenditures in the second quarter is primarily due to the
development of new mask sets for the transfer of products to the new fab. For
the six months ended September 30, 1999, research and development increased
53% to $4,560,000 compared to $2,979,000 for the same period of last year.
This increase is primarily due to the development of new mask sets and
to a non-recurring payment of $1,350,000 to Orbit Semiconductor, Inc. under
a process development agreement for assisting Supertex in accelerating the
process transfer to the new fab.
<PAGE>
Selling, General and Administrative: Expenses for selling, general and
administrative were lower at $1,609,000 or 10% of net sales for the quarter
ended September 30, 1999 as compared with $1,785,000, or 14% of net sales
in the same quarter of last fiscal year. For six months ended
September 30, 1999, selling, general and administrative expenses were at 9%
of net sales compared to 14% for the same period last year. The decrease in
this category was due to a decrease in commissions as a result of lower
commissionable sales and a decrease in bad debt expenses.
Interest and Other Income, Net: Interest and other income, net for the
three and six month periods ended September 30, 1999 was $284,000 and $651,000,
respectively. For the three and six month periods ended September 30, 1998,
interest was $470,000 and $911,000, respectively. Other income for all
periods is primarily from interest income on short-term investments. Reduced
funds available for investment after the acquisition of the new fab caused
the reduction in interest income.
Provision for Income Taxes: The Company's effective tax rate for the three-
and six- months ending September 30, 1999 was at 33% compared to 34% for the
same periods of last fiscal year.
Overview: Total assets grew to $78,838,000 as of September 30, 1999, up from
$74,589,000 from quarter ending March 31, 1999. The increase is due to a
favorable operating results for the first half of the fiscal year.
Liquidity and Capital Resources: On September 30, 1999, the Company had
$31,481,000 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 $2,648,000 consisting principally of
net income of $3,054,000. Net cash used in investing activities as of the
second quarter of fiscal year 2000 was $20,936,000 compared to $14,942,000
for the same period last year. Net cash used in short-term investment
activities totaled $19,998,000 and $938,000 was used in the purchase of
equipment. Net cash used in financing activities was $116,000. Repurchase
of stocks accounted for $407,000, which was offset by proceeds from stock
option exercises of $523,000. 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 the fiscal
year 2000.
Year 2000 Issues.
Assessment: The Year 2000 ("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 programs 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. For the ERP
Systems, the inventory and priority assessment phases have been completed.
Testing and reprogramming phases are 90% completed and are expected to be
completed during the earlier part of the next fiscal quarter. For the PC
Systems and Applications, they have been assessed and tested, and are Y2K
compliant. As a part of the Y2K readiness program, the Company purchased and
implemented a Shop Floor Control System called MESA software from Camstar
Systems, Inc. This system replaced the existing work in process tracking
system. MESA systems implementation was completed during this quarter as
scheduled. We will continue to monitor and adjust, as required, all major
systems throughout the remainder of this year and into 2000. A safety period
was built into our Y2K readiness program to prepare for possible unplanned
and unscheduled occurrences that may need to be remedied prior to the 2000.
During this period, we anticipate minimal Y2K activities allowing for the
Company's management information services to work on any unforeseen issues
that may arise. 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 sensitive.
<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 its business operations. Steps are being
undertaken to 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,
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,
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
the new Shop Floor Control System, 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 objective is to complete its
initial contingency planning by October 31, 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 4. - Submission of Matters to a Vote of Security Holders
The Company's Annual Shareholders' Meeting was held on August 6, 1999 at
10:00 a.m., at which the following matters were acted upon:
Votes Votes Withheld/ Broker
Matter Acted Upon Votes For Against Abstentions Non-Votes
- ----------------- --------- ------- --------------- ---------
1. Election of Directors
Henry C. Pao 10,221,392 0 571,300 0
Yunni Pao 10,216,042 0 576,650 0
Benedict C.K. Choy 10,220,892 0 571,800 0
Frank C. Pao 10,216,142 0 576,550 0
Richard E. Siegel 10,215,892 0 576,800 0
2. Ratification of PricewaterhouseCoopers LLP as independent accountants
for the Company for fiscal year ending April 1, 2000.
10,781,654 3,750 7,288 0
3. Reservation of an additional 900,000 shares for issuance under
the Company's 1991 Stock Option Plan and the adoption of an annual
option grant limit.
6,751,117 1,328,803 26,313 2,686,459
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
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: October 22, 1999
By: /s/ Henry C. Pao
--------------------------
Henry C. Pao, Ph.D.
President
(Principal Executive and Financial Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-1-2000
<PERIOD-END> SEP-30-1999
<CASH> 10,018
<SECURITIES> 21,463
<RECEIVABLES> 14,201
<ALLOWANCES> 1,051
<INVENTORY> 13,161
<CURRENT-ASSETS> 60,960
<PP&E> 35,159
<DEPRECIATION> 20,708
<TOTAL-ASSETS> 78,838
<CURRENT-LIABILITIES> 12,889
<BONDS> 0
0
0
<COMMON> 21,337
<OTHER-SE> 44,612
<TOTAL-LIABILITY-AND-EQUITY> 78,838
<SALES> 33,034
<TOTAL-REVENUES> 33,034
<CGS> 21,466
<TOTAL-COSTS> 29,127
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,558
<INCOME-TAX> 1,504
<INCOME-CONTINUING> 3,054
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,054
<EPS-BASIC> 0.25
<EPS-DILUTED> 0.25
</TABLE>
