<PAGE>
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, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-3698
SILICONIX INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 94-1527868
(State or other jurisdiction (I.R.S. Employer
of incorporation Identification No.)
or organization)
2201 Laurelwood Road, Santa Clara, California 95054
(Address of principal executive offices)
Registrant's telephone number including area code (408) 988-8000
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 ___
Indicate the number of shares outstanding of each of the registrant's
classes of common stock:
Common stock, $0.01 par value -- 9,959,680 outstanding shares as of
August 14, 1996.
Page 1 of 10
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SILICONIX INCORPORATED
TABLE OF CONTENTS TO FORM 10-Q
Part I. Financial Information Page No.
Item 1 Financial Statements
Consolidated statements of operations for the
three months and six months ended
June 30, 1996 and July 2, 1995 3
Consolidated balance sheets as
of June 30, 1996 and December 31, 1995 4
Consolidated statements of cash flows
for the six months ended June 30, 1996 and July 2, 1995 5
Notes to consolidated financial statements 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-8
Part II. Other Information
Item 4 Submission of Matters to a Vote of Security Holders 9
Signature 10
Page 2 of 10
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SILICONIX INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands Three Months Ended Six Months Ended
except per share amounts) ------------------ -------------------
June 30, July 2, June 30, July 2,
1996 1995 1996 1995
------- ------- -------- --------
Net sales $64,079 $61,125 $134,140 $112,474
Cost of sales 37,979 38,216 79,358 70,289
------- ------- -------- --------
Gross profit 26,100 22,909 54,782 42,185
Research and development 4,951 4,937 11,121 9,240
Selling, marketing and administration 13,559 12,045 27,983 23,533
------- ------- -------- --------
Operating income 7,590 5,927 15,678 9,412
Interest expense 592 621 1,182 1,267
Other (income) expense, net (30) (126) (192) (318)
------- ------- -------- --------
Income before taxes 7,028 5,432 14,688 8,463
Income taxes 774 890 1,615 1,387
------- ------- -------- --------
Net income $ 6,254 $ 4,542 $ 13,073 $ 7,076
======= ======= ======== ========
Net income per share $0.63 $0.46 $1.31 $0.71
======= ======= ======== ========
Shares used to compute earnings
per share 9,960 9,960 9,960 9,960
======= ======= ======== ========
See accompanying notes to consolidated financial statements.
Page 3 of 10
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SILICONIX INCORPORATED
CONSOLIDATED BALANCE SHEETS
June 30, Dec. 31,
1996 1995
-------- --------
(000s omitted)
ASSETS
Current assets:
Cash and equivalents $2,464 $10,513
Short term investment with affiliate 7,920 17,195
Accounts receivable, less allowances 35,095 41,201
Accounts receivable from affiliates 16,268 11,093
Inventories 31,941 26,740
Other current assets 12,503 9,033
Deferred income taxes 2,524 2,024
-------- --------
Total current assets 108,715 117,799
-------- --------
Property, plant and equipment, at cost:
Land 1,174 279
Buildings and improvements 41,917 40,474
Machinery and equipment 180,209 160,421
-------- --------
223,300 201,174
Accumulated depreciation (121,668) (117,324)
-------- --------
Net property, plant and equipment 101,632 83,850
Other assets 10,375 6,313
-------- --------
Total assets $220,722 $207,962
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of debt obligations $ 586 $ 586
Accounts payable 23,640 24,347
Accounts payable to affiliates 17,972 12,465
Accrued payroll and related compensation 12,452 11,613
Accrued liabilities 21,655 28,023
-------- --------
Total current liabilities 76,305 77,034
Long-term related party debt 34,570 34,570
Long-term debt, less current portion 6,308 6,082
-------- --------
Total liabilities 117,183 117,686
-------- --------
Shareholders' equity:
Common stock 100 100
Additional paid-in-capital 59,423 59,423
Retained earnings 44,622 31,558
Accumulated translation adjustments (606) (805)
-------- --------
Total shareholders' equity 103,539 90,276
-------- --------
Total liabilities and shareholders' equity $220,722 $207,962
======== ========
See accompanying notes to consolidated financial statements.
Page 4 of 10
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SILICONIX INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30, July 2,
1996 1995
------- -------
(000s omitted)
Cash flows from operating activities:
Net income $13,073 $7,076
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 7,986 6,255
Deferred income taxes (500) -
Other non-cash expenses 226 378
Changes in:
Accounts receivable 6,117 (5,267)
Accounts receivable from affiliates (5,175) (2,418)
Inventories (5,169) 4,036
Other current assets (4,089) (1,446)
Accounts payable (701) (2,265)
Accounts payable to affiliates 5,507 2,102
Accrued liabilities (5,536) 3,552
------- -------
Net cash provided by operating activities 11,739 12,003
------- -------
Cash flows from investing activities:
Purchase of property, plant and equipment (25,112) (10,318)
Investment in joint venture (2,053) -
Short term investment with affiliate 9,275 -
Purchase of other assets (2,046) (1,375)
------- -------
Net cash used in investing activities (19,936) (11,693)
------- -------
Cash flows from financing activities:
Proceeds from sale of restricted common stock - 63
Repayment of long-term debt - (28)
------- -------
Net cash provided by (used in) financing activities - 35
------- -------
Effect of exchange rate changes on
cash and equivalents 148 12
------- -------
Net increase / (decrease) in cash
and equivalents (8,049) 357
Cash and equivalents:
Beginning of period 10,513 10,743
------- -------
End of period $2,464 $11,100
======= =======
See accompanying notes to consolidated financial statements.
Page 5 of 10
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SILICONIX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
In the opinion of the management of the Company, the consolidated
financial statements appearing herein contain all adjustments (consisting
only of normal recurring accruals) necessary for a fair presentation of the
results for, and as of the end of, the periods indicated therein. These
statements should be read in conjunction with the Company's December 31, 1995
consolidated financial statements and notes thereto. The results of
operations for the first six months of 1996 are not necessarily indicative of
the results to be expected for the full year.
NOTE 2. INVENTORIES
The components of inventory consist of the following:
June 30, December 31,
1996 1995
------- -------
(000s omitted)
Finished goods $10,368 $ 5,931
Work-in-process 17,161 17,449
Raw materials 4,412 3,360
------- -------
$31,941 $26,740
======= =======
NOTE 3. CONTINGENCIES
The Company is party to two environmental proceedings. The first
involves property that the Company vacated in 1972. The California Regional
Water Quality Board issued a cleanup and abatement order to both the Company
and the current owner of the property. The Company subsequently reached a
settlement of this matter with the current owner in which the current owner
indemnifies the Company against any liability that may arise out of any
governmental agency actions brought for environmental cleanup of the site,
including liability arising out of the current cleanup and abatement order.
The second proceeding involves the Company's current facility in Santa Clara.
The Company is currently engaged in certain remedial action and has accrued
$400,000 for the estimated future costs related to this matter.
In management's opinion, based on discussion with legal counsel and
other considerations, the ultimate resolution of the above-mentioned matters
will not have a material adverse effect on the Company's consolidated
financial position or results of operations.
The Company is engaged in discussions with various parties regarding
patent licensing and cross patent licensing issues. In the opinion of
management, the outcome of these discussions will not have a material adverse
effect on the financial position or overall trends in the results of
operations of the Company.
Page 6 of 10
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Siliconix designs, markets, and manufactures power and analog
semiconductor products. The Company focuses on technologies and products for
the computer, data storage, communications, and automotive markets.
Revenues increased 5% in the second quarter of 1996 to $64.1 million, up
$3.0 million over the second quarter of 1995. Increased demand for power
MOSFET products accounted for much of this growth. Sales of power MOSFETs
grew by 10%, fueled by products used in the telecommunication and computing
markets, increasing to 63% of total revenues in the second quarter of 1996,
compared with 60% in the second quarter of 1995. Sales in Japan were up 89%
from the second quarter of 1995. This accounted for 20% of total revenues in
the second quarter of 1996, compared with 11% of total revenues in the second
quarter of 1995. For the first six months of 1996, revenues were up 3%, 49%,
and 10% in North America, Asia Pacific and Europe respectively, compared to
the first six months of 1995.
Gross profit for the second quarter of 1996 remained consistent at 41%
of revenues against the first quarter of 1996. Gross profit as a percentage
of revenues for the second quarter of 1996 increased 4% compared to the
second quarter of 1995. This increase reflects economies of scale in
manufacturing operations and improved yields. Gross profit for the first six
months of 1996 increased 30% compared to the first six months of 1995
principally due to higher revenues and improved margins. The Company is
beginning to experience much more pricing pressure in 1996 compared to the
previous year. Management expects to see pressure on margins continue for
the remainder of the year.
Research and development for the first six months of 1996 remained
consistent at 8% of revenues against the first six months of 1995. The
Company remains committed to the development of future products and continues
to invest in power MOSFET and power IC technology and product development.
Selling, marketing, and administrative expenses, as a percentage of
revenues, for the first six months of 1996 remained consistent at 21%
compared to the first six months of 1995. During this difficult market
environment, the Company remains committed to maintaining our cost reduction
programs.
Interest expense remained flat at $1.2 million in the first six months
of 1996 compared with the first six months of 1995, as short-term market
interest rates have not fluctuated significantly over the past year.
Other income, comprised mainly of interest income, decreased slightly to
$.2 million for the first six months of 1996 compared with $.3 million for
the first six months of 1995, due mainly to lower interest income as cash
balances have decreased during the first half of 1996.
Income tax expense decreased in the second quarter of 1996 to $.8
million, down $.1 million over the second quarter of 1995. However, tax
expense for the first six months of 1996 as compared to the first six months
of 1995 increased as a result of the reduction in net operating loss
carryforwards available in 1996 and the increase in earnings before taxes.
Page 7 of 10
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During its quarterly assessment of deferred income taxes, management
reduced the valuation allowance on deferred income tax assets to realize an
additional $300,000 net deferred income tax asset. This decision to recognize
additional net deferred income tax assets was based on management's belief
that, it is more likely than not, the Company will realize benefit from a
portion of its deferred income taxes. The primary positive factors assessed
by management in reaching its conclusion about the Company's ability to
realize the additional deferred income tax assets include positive earnings
and continued increases in gross profits for the past three years.
The expectations for the future are that, even with the extremely
volatile environment in which the Company competes, operating income of the
Company will more than likely be sufficient to realize a portion of the
deferred income tax asset; however, due to certain factors beyond
management's control there can be no assurance that sufficient taxable income
will be generated in each of the Company's taxing jurisdictions to realize
recorded tax benefits. In addition, there is no assurance that the Company
will generate any earnings or any specific level of continuing earnings in
future years.
The primary negative factors assessed by management in reaching its
conclusion about the Company's ability to realize the net deferred income tax
asset are discussed in the section titled "Certain Factors" in the
Management's Discussion and Analysis of Financial Condition and Results of
Operations section of the Company's 1995 annual report on Form 10-K, which is
incorporated herein by reference.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operations were $11.7 million for the six-month period
ended June 30, 1996 as compared to $12.0 million in the comparable period of
1995. Cash and equivalents decreased by $8.0 million and the short term
investment with affiliate decreased by $9.3 million from December 31, 1995
due to large expenditures in the first half of 1996. These included capital
expenditures, royalties and commissions as well as yearly management and
employment bonuses and annual 401(k) company match and profit sharing
contributions. Management expects 1996 cash flows from operations to be
sufficient to fund planned investments in capital expenditures and research
and development.
Accounts receivable decreased $6.1 million or 15 % from December 31,
1995. This decrease is largely attributable to lower revenues in the second
quarter of 1996, $64.1 million compared with $71.8 million for the fourth
quarter of 1995.
Inventories increased $5.2 million or 19% from December 31, 1995 due
mainly to additional manufacturing capacity added to achieve 1996 planned
revenue. Inventory levels at December 31, 1995 were low due to certain
capacity constraints during fiscal 1995 and high sales volume in the fourth
quarter of 1995.
Capital expenditures were $25.2 million in the first six months of 1996,
compared to $10.3 million in the first six months of 1995. These related
mostly to additions for plant capacity expansion. 1996 capital expenditures
are expected to exceed the 1995 annual level of $28.2 million.
Page 8 of 10
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PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The registrant's Annual Meeting of Shareholders was held on May 30,
1996.
(b) Not applicable.
(c) There were two matters voted on at the Meeting. A brief description
of each of these matters, and the results of the votes thereon, are as
follows:
1. Election of Directors
Nominee For Abstain
------- --- -------
Hanspeter Eberhardt 9,597,878 4,440
Richard Kulle 9,598,238 4,080
Frank Maier 9,598,156 4,162
Gustav Muehlschlegel 9,597,926 4,392
Robert Wehrli 9,597,407 4,911
Peter Westrick 9,598,215 4,103
2. Ratification of the appointment of KPMG Peat Marwick LLP as the
registrant's auditors for the fiscal year ending December 31, 1996.
Broker
For Against Abstain Nonvotes
---------- ---------- ---------- ----------
9,596,746 3,476 2,096 -0-
(d) Not applicable.
Page 9 of 10
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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 thereunto duly authorized.
SILICONIX INCORPORATED
Date: August 14, 1996 By: /s/Juergen F. Biehn
------------------------
Juergen F. Biehn
Vice President and
Chief Financial Officer
Page 10 of 10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,464
<SECURITIES> 0
<RECEIVABLES> 43,086
<ALLOWANCES> (7,991)
<INVENTORY> 31,941
<CURRENT-ASSETS> 108,715
<PP&E> 223,300
<DEPRECIATION> (121,668)
<TOTAL-ASSETS> 220,722
<CURRENT-LIABILITIES> 76,305
<BONDS> 0
0
0
<COMMON> 100
<OTHER-SE> 103,439
<TOTAL-LIABILITY-AND-EQUITY> 220,722
<SALES> 134,140
<TOTAL-REVENUES> 134,140
<CGS> 79,358
<TOTAL-COSTS> 39,104
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,182
<INCOME-PRETAX> 14,688
<INCOME-TAX> 1,615
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,073
<EPS-PRIMARY> 1.31
<EPS-DILUTED> 1.31
</TABLE>
