UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
(x) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended December 31, 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 (IRS Employer Identification #)
of 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 1, 2000, 12,224,684 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................. 8
PART II- OTHER INFORMATION
Item 6. Exhibits, Financial Statement Schedule and Reports
on Form 8-K ........................................ 10
<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,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 17,709 $ 12,017 $ 50,743 $ 37,668
Cost and expenses:
Cost of sales 11,065 6,565 32,531 19,980
Research and development 1,583 1,483 6,143 4,462
Selling, general and
administrative 1,939 1,522 5,044 4,999
------ ----- ------ ------
Total costs and expenses 14,587 9,570 43,718 29,441
------ ----- ------ ------
Income from operations 3,122 2,447 7,025 8,227
Interest income 467 625 1,242 1,579
Other income (expense), net 59 (26) (65) (69)
Income before provision
for income taxes 3,648 3,046 8,202 9,737
Provision for income taxes 1,204 842 2,707 3,116
Net income $ 2,444 $ 2,204 $ 5,495 $ 6,621
Net income per share:
Basic $ 0.20 $ 0.18 $ 0.45 $ 0.55
Diluted $ 0.20 $ 0.18 $ 0.44 $ 0.54
Shares used in per share computation:
Basic 12,121 12,055 12,104 12,073
Diluted 12,496 12,233 12,394 12,271
<FN>
See accompanying Notes to Unaudited Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
SUPERTEX, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousand)
<CAPTION>
Dec. 31, 1999 Mar. 31, 1999
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 11,140 $ 28,190
Short-term investments 21,908 1,366
Trade accounts receivable,
net of allowances of $1,146 and $1,020 13,258 10,860
Other receivables 916 657
Inventories 14,034 11,330
Deferred income taxes 1,862 1,862
Prepaid expenses 541 453
------- -------
Total current assets 63,659 54,718
Property, plant and equipment, net 15,751 15,946
Intangibles assets, net 1,333 2,072
Deferred income taxes 1,853 1,853
------- -------
TOTAL ASSETS $ 82,596 $ 74,589
======= =======
LIABILITIES
Current liabilities:
Trade accounts payable $ 8,565 $ 6,835
Accrued salaries, wages and employee
benefits 3,612 3,162
Income taxes payable 757 --
Other accrued liabilities 366 714
Deferred income on shipments to distributors 1,103 1,198
------- -------
Total current liabilities 14,403 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 12,132 and 12,099 shares 21,460 20,895
Accumulated other comprehensive income 619 356
Retained earnings 46,114 41,429
------- -------
Total shareholders' equity 68,193 62,680
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 82,596 $ 74,589
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
SUPERTEX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Nine Months Ended
Dec. 31, 1999 Dec. 31, 1998
<CAPTION>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,495 $ 6,621
Non-cash adjustments to net income:
Depreciation and amortization 4,320 2,608
Provision for doubtful accounts
and sales returns 1,932 1,652
Provision for excess and obsolete
inventories 866 (33)
Changes in operating assets and liabilities:
Accounts and other receivables (4,589) (1,163)
Inventories (3,570) 367
Prepaid expenses (88) 12
Trade accounts payable and
accrued expenses 1,832 (346)
Income taxes payable 757 (290)
Deferred revenue on shipments
to distributors (95) (439)
-------- --------
Total adjustments 1,365 2,368
-------- --------
Net cash provided by operating activities 6,860 8,989
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (3,386) (1,373)
Purchases of short term investments (43,536) (41,096)
Proceeds from maturities of short term investments 23,255 27,344
-------- --------
Net cash used in investing activities (23,667) (15,125)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Stock options exercised 723 136
Repurchase of stock (966) (563)
-------- --------
Net cash used in financing activities (243) (427)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (17,050) (6,563)
CASH AND CASH EQUIVALENTS:
Beginning of period 28,190 24,556
-------- --------
End of period $ 11,140 $ 17,993
======== ========
<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 and nine months ended December 31, 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>
Inventories consisted of (in thousands):
<CAPTION>
December 31, 1999 March 31, 1999
<S> <C> <C>
Finished goods......................... $ 3,466 $ 3,534
Work-in-process........................ 9,807 7,099
Raw materials.......................... 761 697
-------- --------
$ 14,034 $ 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. A reconciliation of the numerator and denominator of basic and
diluted earnings per share is provided as follows (in thousands, except per
share amounts).
<TABLE>
For Three-months Ended, For Nine-months Ended,
December 31, December 31,
1999 1998 1999 1998
<CAPTION>
<S> <C> <C> <C> <C>
BASIC:
Net income $ 2,444 $ 2,204 $ 5,495 $ 6,621
-------- -------- -------- --------
Weighted average shares
outstanding for the period 12,121 12,055 12,104 12,073
======== ======== ======== ========
Net income per share $ 0.20 $ 0.18 $ 0.45 $ 0.55
======== ======== ======== ========
DILUTED:
Net income $ 2,444 $ 2,204 $ 5,495 $ 6,621
-------- -------- -------- --------
Weighted average shares
outstanding for the period 12,121 12,055 12,104 12,073
Dilutive effect of stock options 375 178 290 198
-------- -------- -------- --------
Total 12,496 12,233 12,394 12,271
-------- -------- -------- --------
Net income per share $ 0.20 $ 0.18 $ 0.44 $ 0.54
======== ======== ======== ========
</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. The following are
the components of comprehensive income (in thousands):
<TABLE>
Three-months Ended Nine-months Ended
December 31, December 31,
1999 1998 1999 1998
<CAPTION>
<S> <C> <C> <C> <C>
Net income $2,444 $2,204 $5,495 $6,621
Unrealized gain on short term investment 164 75 261 178
------ ------ ------ ------
Comprehensive income $2,608 $2,279 $5,756 $6,799
====== ====== ====== ======
</TABLE>
The components of accumulated other comprehensive income are as follows
(in thousand):
December 31, 1999 March 31, 1999
Unrealized gain on short term investment $619 $356
Note 5
Recent Accounting Pronouncements: In December 1999, the Securities and
Exchange Commission issued Staff Accounting Bulletin No. 101 (SAB 101),
'Revenue Recognition in Financial Statements.' SAB 101 provides guidance for
revenue recognition under certain circumstances. The Company is currently
evaluating the impact of SAB 101 on its financial statements and related
disclosures. The accounting and disclosures prescribed by SAB 101 will be
effective for the Company's fiscal year ended April 1, 2000.
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 No. 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 fabrication facilities, 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, 1999 were $17,709,000,
a 47% increase compared to $12,017,000 of the same quarter last year. For the
nine months ended December 31, 1999, net sales were $50,743,000 compared to
$37,668,000 for the same period of the prior year, a 35% increase. The
increases in sales for the three- and nine- months are primarily due to the
addition of the foundry business resulting from the acquisition of the
submicron wafer fabrication facility (fab) on February 1, 1999, as well as the
increases in the core products, led by the imaging and medical electronics
products.
Approximately 39% of the Company's net sales for third fiscal quarter and 36%
for the nine month period were derived from international customers as compared
to 55% for the comparable periods in the prior year. The drop in percentage
of international sales is primarily due to the addition of foundry service
sales, as a result of the submicron fab acquisition because all foundry service
customers are in the U.S.. All of the Company's international sales were
denominated in U.S.dollars.
Gross Profit: As a percent of sales, the Company's gross margin for the three-
and nine- month periods ended December 31, 1999 was 38% and 36% respectively,
compared with 45% and 47% for the same periods of the prior year. The gross
profit was adversely affected by the extra overhead of operating two fabs, the
old four-inch fab and the new six-inch fab acquired on February 1, 1999,
including the accelerated depreciation of the capitalized assets of the new
fab.
Research and Development: Research and development expenses increased 7% to
$1,583,000 for the quarter ended December 31, 1999 as compared to $1,483,000
for the same quarter of the prior year. The increase in research and
development expenditures is primarily due to the development of new mask sets
for the transfer of core products from the old fab to the new fab. For the
nine months ended December 31, 1999, research and development increased 38%
to $6,143,000 compared to $4,462,000 for the same period of the prior year.
The increase is primarily due to a non-recurring payment of $1,350,000 to
Orbit Semiconductor, Inc. under a process development agreement for assisting
Supertex to accelerate the process transfer to the new fab.
Selling, General and Administrative: Expenses for selling, general and
administrative were $1,939,000 or 11% of net sales for the quarter ended
December 31, 1999 as compared with $1,522,000 or 13% of net sales in the same
quarter of the prior year. For nine months ended December 31, 1999, selling,
general and administrative expenses were $5,044,000 or 10% of net sales
compared to $4,999,000 or 13% for the same period of the prior year. The
dollar increases in selling, general and administrative expenses for the three
months were primarily due to increase in sales commission and bad debt reserve
corresponding to higher net sales.
Interest and Other Income: Interest and other income, net for the three- and
nine- month periods ended
<PAGE>
December 31, 1999 was $526,000 and $1,177,000, respectively as compared to
$599,000 and $1,510,000 for the same periods of the prior year. The decreases
were primarily due to the use of cash for the purchase of the new fab.
Provision for Income Taxes: The Company's effective tax rate for the three-
and nine- months ended December 31, 1999 were both 33% compared to 28% and 32%
respectively for the same periods of the prior year.
Overview: Total assets grew to $82,596,000 as of December 31, 1999, up from
$74,589,000 from the end of last fiscal year ended March 31, 1999. The
increase is due to favorable operating results.
Liquidity and Capital Resources: On December 31, 1999, the Company had
$33,048,000 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 $6,860,000 consisting principally of
net income of $5,495,000. $3,386,000 was used over the nine months in the
purchase of equipment primarily to add test capacity. Net cash used in
financing activities was $243,000 (Repurchase of Company stocks accounted for
$966,000, which was offset by proceeds from stock option exercises of
$723,000). The Company anticipates that available funds and expected cash
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.
Background: For over two years the Company has been 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 could 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.
Progress Report: The Company is pleased to confirm that no incident has been
reported in relation to the Y2K compliance. All systems, as planned, have
been working and are still working even though contingency plans have been in
place at the change of the millennium as a precautionary measure in case any
problem would occur as a result of Y2K.
As part of the Company's post millennium program, all systems' operational
functions are closely monitored with strong emphasis placed on other critical
dates such as February 29, 2000. A smooth transition into March 2000 is
anticipated. The Company remains confident that it has and will continue to
service its customers without interruption. It must be stressed that Supertex,
Inc.'s products are not date sensitive.
As part of the year Y2K readiness program, the Company identified its primary
vendors, service providers and customers that are believed to be critical to
its business operations. Steps were taken to reasonably ascertain their Y2K
readiness through questionnaires, interviews and other available means. To
date there has not been any supplier related Y2K issues. The Company will
continue to monitor its suppliers to assure that there will be noY2K related
problem in their product delivery.
The Company's Y2K readiness program will continue to be an ongoing process to
ward off any potential material impact on the Company and its operations.
Supertex, Inc. started its Y2K readiness program over two years ago and has
expended the necessary amount of time and resources to assure its customers
that there would not be any adverse effect with its Y2K compliance.
<PAGE>
PART II - OTHER INFORMATION
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: February 12, 2000
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> 9-MOS
<FISCAL-YEAR-END> APR-1-2000
<PERIOD-END> DEC-31-1999
<CASH> 11,140
<SECURITIES> 21,908
<RECEIVABLES> 14,404
<ALLOWANCES> 1,146
<INVENTORY> 14,034
<CURRENT-ASSETS> 63,659
<PP&E> 37,606
<DEPRECIATION> 21,855
<TOTAL-ASSETS> 82,596
<CURRENT-LIABILITIES> 14,403
<BONDS> 0
0
0
<COMMON> 21,460
<OTHER-SE> 46,733
<TOTAL-LIABILITY-AND-EQUITY> 82,596
<SALES> 50,743
<TOTAL-REVENUES> 50,743
<CGS> 32,531
<TOTAL-COSTS> 43,718
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8,202
<INCOME-TAX> 2,707
<INCOME-CONTINUING> 5,495
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,495
<EPS-BASIC> 0.45
<EPS-DILUTED> 0.44
</TABLE>
