<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 September 29, 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
November 14, 1996.
Page 1 of 9
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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 nine months ended
September 29, 1996 and October 1, 1995 3
Consolidated balance sheets as
of September 29, 1996 and December 31, 1995 4
Consolidated statements of cash flows
for the nine months ended September 29, 1996 and
October 1, 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
Signature 9
Page 2 of 9
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SILICONIX INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
(Amounts in thousands Three Months Ended Nine Months Ended
except per share amounts)
September 29, October 1, September 29, October 1,
1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $62,033 $66,015 $196,173 $178,489
Cost of sales 37,771 39,682 116,736 109,971
-------------------------------------------------
Gross profit 24,262 26,333 79,437 68,518
Research and development 5,095 4,650 16,131 13,890
Selling, marketing and administration 11,847 13,219 40,308 36,752
-------------------------------------------------
Operating income 7,320 8,464 22,998 17,876
Interest expense 592 682 1,774 1,949
Other (income) expense - net (158) (51) (350) (369)
-------------------------------------------------
Income before taxes 6,886 7,833 21,574 16,296
Income taxes 998 529 2,613 1,916
-------------------------------------------------
Net income $5,888 $7,304 $18,961 $14,380
-------------------------------------------------
-------------------------------------------------
Net income per share $0.59 $0.73 $1.90 $1.44
-------------------------------------------------
-------------------------------------------------
Shares used to compute earnings per share 9,960 9,960 9,960 9,960
-------------------------------------------------
-------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
Page 3 of 9
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SILICONIX INCORPORATED
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
September 29, December 31,
1996 1995
- --------------------------------------------------------------------------------
(000s omitted)
Assets
- --------------------------------------------------------------------------------
Current assets:
Cash and equivalents $6,199 $10,513
Short term investment with affiliate 4,427 17,195
Accounts receivable, less allowances 32,968 41,201
Accounts receivable from affiliates 12,777 11,093
Inventories 31,937 26,740
Other current assets 10,151 9,033
Deferred income taxes 6,924 2,024
------------------------
Total current assets 105,383 117,799
------------------------
Property, plant and equipment, at cost:
Land 1,174 279
Buildings and improvements 42,384 40,474
Machinery and equipment 182,418 160,421
------------------------
225,976 201,174
Accumulated depreciation (121,925) (117,324)
------------------------
Net property, plant and equipment 104,051 83,850
Other assets 11,334 6,313
------------------------
Total assets $220,768 $207,962
------------------------
------------------------
Liabilities and Shareholders' Equity
- --------------------------------------------------------------------------------
Current liabilities:
Current portion of debt obligations $586 $586
Accounts payable 15,943 24,347
Accounts payable to affiliates 11,020 12,465
Accrued payroll and related compensation 15,042 11,613
Accrued liabilities 24,782 28,023
------------------------
Total current liabilities 67,373 77,034
Long-term related party debt 34,570 34,570
Long-term debt, less current portion 6,436 6,082
Deferred income taxes 3,000 -
------------------------
Total liabilities 111,379 117,686
------------------------
Shareholders' equity:
Common stock 100 100
Additional paid-in-capital 59,423 59,423
Retained earnings 50,519 31,558
Accumulated translation adjustments (653) (805)
------------------------
Total shareholders' equity 109,389 90,276
------------------------
Total liabilities and shareholders' equity $220,768 $207,962
------------------------
------------------------
See accompanying notes to consolidated financial statements.
Page 4 of 9
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SILICONIX INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
9 Months Ended
September 29, October 1,
1996 1995
- --------------------------------------------------------------------------------
(000s omitted)
Cash flows from operating activities:
Net income $18,961 $14,380
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 12,865 9,740
Deferred income taxes (1,900) (1,000)
Other non-cash expenses 354 361
Changes in:
Accounts receivable 8,245 (2,644)
Accounts receivable from affiliates (1,684) (2,692)
Inventories (5,180) 5,324
Other current assets (2,983) (2,615)
Accounts payable (8,399) (459)
Accounts payable to affiliates (1,445) 2,181
Accrued liabilities 183 8,533
--------------------------
Net cash provided by operating activities 19,017 31,109
--------------------------
Cash flows from investing activities:
Purchase of property, plant and equipment (31,829) (15,390)
Investment in joint venture (2,053) (1,200)
Short term investment with affiliate 12,768 (16,692)
Purchase of other assets (2,340) (1,630)
--------------------------
Net cash used in investing activities (23,454) (34,912)
--------------------------
Cash flows from financing activities:
Proceeds from sale of restricted common stock - 230
Repurchase of subordinated debt - (110)
--------------------------
Net cash provided by financing activities - 120
--------------------------
Effect of exchange rate changes on
cash and equivalents 123 499
--------------------------
Net decrease in cash
and equivalents (4,314) (3,184)
Cash and equivalents:
Beginning of period 10,513 10,743
--------------------------
End of period $6,199 $7,559
--------------------------
--------------------------
See accompanying notes to consolidated financial statements.
Page 5 of 9
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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 nine
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:
September 29, December 31,
1996 1995
------ ------
(000s omitted)
Finished goods $ 9,998 $ 5,931
Work-in-process 16,588 17,449
Raw materials 5,351 3,360
--------- ---------
$ 31,937 $ 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 9
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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 in the first nine months of 1996 increased 10% to $196.2 million,
compared with $178.5 million in the first nine months of 1995. Revenues
decreased 6% in the third quarter of 1996 to $62.0 million, down $4.0 million
from the third quarter of 1995. Revenues in the third quarter of 1996 were down
5% and 17% in North America and Asia Pacific, respectively, and flat in Europe
and Japan compared with the third quarter of 1995. Year-to-date results were
substantially improved, driven by revenue increases of 84% and 6% in Japan and
Europe, respectively, in the first nine months of 1996 compared with the first
nine months of 1995. Sales in Japan accounted for 19% of total revenues in the
first nine months of 1996, compared with 11% of total revenues in the first nine
months of 1995. Increased demand for power MOSFET products accounted for the
revenue growth. Sales of power MOSFETS grew by 16% fueled by products used in
the telecommunication and computing markets, increasing to 62% of total revenues
for the first nine months of 1996, compared with 59% for the first nine months
of 1995.
Gross profit for the third quarter of 1996 decreased to 39%, compared
with 41% in the second quarter of 1996. Gross profit as a percentage of
revenues for the third quarter of 1996 decreased 1% compared to the third
quarter of 1995. For the first nine months of 1996, gross profit increased
16% compared to the first nine months of 1995 primarily due to higher
revenues, economies of scale in manufacturing operations, and improved
yields. The Company continues to experience much more pricing pressure in
1996 compared to the previous year and expects to see pressures on margins
continue for the remainder of the year.
Research and development for the nine months of 1996 remained consistent at
8% of revenues compared to the first nine 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 nine months of 1996 remained consistent at 21% compared
to the first nine months of 1995. During this difficult market environment, the
Company remains committed to maintaining cost reduction programs.
Interest expense decreased slightly to $1.8 million for the first nine
months of 1996, compared with $1.9 million for the first nine months of 1995, as
short-term market interest rates have not fluctuated significantly over the past
year.
Other income, comprised mainly of interest income, remained flat at $.4
million for the first nine months of 1996 compared with the first nine months
of 1995.
Page 7 of 9
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Income tax expense increased in the third quarter of 1996 to $1.0 million,
up $.5 million over the third quarter of 1995. Income tax expense for the
first nine months of 1996 as compared to the first nine 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.
During its quarterly assessment of deferred income taxes, management
reduced the valuation allowance on deferred income tax assets to realize an
additional $1.4 million 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 $19.0 million for the nine-month period
ended September 29, 1996 as compared to $31.1 million in the comparable period
of 1995. Cash and equivalents decreased by $4.3 million and the short term
investment with affiliate decreased by $12.8 million from December 31, 1995 due
to large expenditures in the first nine months 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 $8.2 million or 20% from December 31, 1995.
This decrease is largely attributable to lower revenues in the third quarter of
1996, $62.0 million compared with $71.8 million for the fourth quarter of 1995.
Inventories increased $5.2 million or 19% from December 31, 1995 mainly due
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 $31.8 million in the first nine months of 1996,
compared to $15.4 million in the first nine months of 1995. These related
mostly to additions for plant capacity expansion. Capital expenditures for 1996
have exceeded the 1995 annual level of $28.2 million.
Page 8 of 9
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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: November 14, 1996 By: /s/Juergen F. Biehn
--------------------
Juergen F. Biehn
Senior Vice President and
Chief Financial Officer
Page 9 of 9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-29-1996
<CASH> 6,199
<SECURITIES> 0
<RECEIVABLES> 41,518
<ALLOWANCES> (8,550)
<INVENTORY> 31,937
<CURRENT-ASSETS> 105,383
<PP&E> 225,976
<DEPRECIATION> (121,925)
<TOTAL-ASSETS> 220,768
<CURRENT-LIABILITIES> 67,373
<BONDS> 0
0
0
<COMMON> 100
<OTHER-SE> 109,289
<TOTAL-LIABILITY-AND-EQUITY> 220,768
<SALES> 196,173
<TOTAL-REVENUES> 196,173
<CGS> 116,736
<TOTAL-COSTS> 56,439
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,774
<INCOME-PRETAX> 21,574
<INCOME-TAX> 2,613
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,961
<EPS-PRIMARY> 1.90
<EPS-DILUTED> 1.90
</TABLE>
