<PAGE>
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 June 29, 1997
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
1, 1997.
Page 1 of 12
<PAGE>
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 29, 1997 3
and June 30, 1996
Consolidated balance sheets as
of June 29, 1997 and December 31, 1996 4
Consolidated statements of cash flows for the
six months ended June 29, 1997 and June 30, 1996 5
Notes to consolidated financial statements 6-7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
Part II. Other Information
Item 4 Submission of Matters to a Vote of Security Holders 11
Item 6 Exhibits and Reports on Form 8-K 11
Signature 12
Page 2 of 12
<PAGE>
PART 1
SILICONIX INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 29, June 30, June 29, June 30,
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1997 1996 1997 1996
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $80,024 $64,079 $150,236 $134,140
Cost of sales 49,815 37,979 92,931 79,358
---------------------------------------
Gross profit 30,209 26,100 57,305 54,782
Research and development 4,394 4,951 8,523 11,121
Selling, marketing, and administration 14,889 13,559 28,798 27,983
---------------------------------------
Operating income 10,926 7,590 19,984 15,678
Interest expense 571 592 1,160 1,182
Other (income) expense - net 187 (30) (19) (192)
---------------------------------------
Income before taxes 10,168 7,028 18,843 14,688
Income taxes 2,135 774 3,870 1,615
---------------------------------------
Net income after taxes $8,033 $6,254 $14,973 $13,073
---------------------------------------
---------------------------------------
Net income per share $0.81 $0.63 $1.50 $1.31
---------------------------------------
---------------------------------------
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 12
<PAGE>
SILICONIX INCORPORATED
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
June 29, December 31,
(IN THOUSANDS) 1997 1996
- ----------------------------------------------------------------------
Assets
- ----------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and equivalents $3,614 $12,201
Short term investment with affiliate 10,116 12,136
Accounts receivable, less allowances 45,044 37,044
Accounts receivable from affiliates 16,383 14,802
Inventories 30,554 30,162
Other current assets 12,681 8,044
Deferred income taxes 6,314 5,314
--------- --------
Total current assets 124,706 119,703
--------- --------
Property, plant and equipment, at cost:
Land 1,174 1,183
Buildings and improvements 43,429 42,672
Machinery and equipment 203,983 187,791
--------- --------
248,586 231,646
Accumulated depreciation (133,098) (124,524)
--------- --------
Net property, plant and equipment 115,488 107,122
--------- --------
Other assets 13,944 11,844
--------- --------
Total assets $254,138 $238,669
--------- --------
--------- --------
Liabilities and Shareholders' Equity
- -----------------------------------------------------------------------
Current liabilities:
Current portion of debt obligations $1,039 $1,041
Accounts payable 28,510 26,286
Accounts payable to affiliates 6,297 11,115
Accrued payroll and related compensation 13,478 13,614
Accrued liabilities 30,861 29,418
--------- --------
Total current liabilities 80,185 81,474
Long-term related party debt 34,570 34,570
Long-term debt, less current portion 4,742 4,859
Deferred income taxes 3,148 1,148
--------- --------
Total liabilities 122,645 122,051
--------- --------
Shareholders' equity:
Common stock 100 100
Additional paid-in-capital 59,452 59,440
Retained earnings 72,508 57,535
Accumulated translation adjustments (567) (457)
--------- --------
Total shareholders' equity 131,493 116,618
--------- --------
Total liabilities and shareholders'
equity $254,138 $238,669
--------- --------
--------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4 of 12
<PAGE>
SILICONIX INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Six Months Ended Six Months Ended
June 29, June 30,
(IN THOUSANDS) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $14,973 $13,073
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 10,599 7,986
Deferred income taxes 1,000 (500)
Undistributed earnings from joint
venture (1,336) (1,163)
Other non-cash (income) expenses (119) 226
Changes in:
Accounts receivable (7,683) 6,117
Accounts receivable from affiliates (1,581) (5,175)
Inventories (390) (5,169)
Other current assets (3,842) (2,926)
Accounts payable 2,221 (701)
Accounts payable to affiliates (4,818) 5,507
Accrued liabilities 1,258 (5,536)
-----------------------------
Net cash provided by operating activities 10,282 11,739
-----------------------------
Cash flows from investing activities:
Purchase of property, plant and equipment (18,018) (25,112)
Investment in joint venture - (2,053)
Short term investment with affiliate 2,020 9,275
Purchase of other assets (2,506) (2,046)
-----------------------------
Net cash used in investing activities (18,504) (19,936)
-----------------------------
Effect of exchange rate changes on
cash and equivalents (365) 148
-----------------------------
Net decrease in cash and equivalents (8,587) (8,049)
Cash and equivalents:
Beginning of period 12,201 10,513
-----------------------------
End of period $3,614 $2,464
-----------------------------
-----------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
Page 5 of 12
<PAGE>
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, 1996 consolidated financial
statements and notes thereto. The results of operations for the first six
months of 1997 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 29, December 31,
1997 1996
------- ------------
(000s omitted)
Finished goods $ 2,760 $ 6,105
Work-in-process 24,071 18,838
Raw materials 3,723 5,219
------- -------
$30,554 $30,162
------- -------
------- -------
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
Control Board (RWQCB) 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
RWQCB issued a cleanup and abatement order based on the discovery of
contamination of both the soil and the groundwater on the property by certain
chemical solvents. The Company is currently engaged in certain remedial action
and has accrued $750,000 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 condition
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
Company's consolidated financial condition or overall trends in the results of
operations.
Page 6 of 12
<PAGE>
SILICONIX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4. RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share." SFAS No. 128 requires the presentation of basic earnings per share
("EPS") and, for companies with complex capital structures, diluted EPS.
SFAS No. 128 is effective for annual and interim periods ending after
December 15, 1997. The Company expects that basic EPS will not differ
materially from net income per share as presented in the accompanying
consolidated financial statements.
In June 1997, the Financial Accounting Standards Board issued SFAS No.
130, "Reporting Comprehensive Income," and SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS No. 130 establishes
standards for reporting and presentation of comprehensive income and its
components and is effective for fiscal years beginning after December 15,
1997. SFAS No. 131, effective for fiscal years beginning after December 15,
1997, establishes standards for an enterprise to report information about
operating segments in annual financial statements and interim financial
reports. The Company is presently analyzing these statements and has not yet
determined the impact on the Company's financial statements.
Page 7 of 12
<PAGE>
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 second quarter of 1997 increased to $80.0 million,
compared with $64.1 million in the second quarter of 1996. For the first six
months of 1997, revenues were $150.2 million, compared with $134.1 million
for the first six months of 1996. Increased demand for both the power MOSFET
and power IC products accounted for much of the growth in the second quarter
and the first six months of 1997. Sales of power MOSFETs grew by 34%,
increasing to 67% of total revenues in the second quarter of 1997, compared
with 63% of total revenues in the second quarter of 1996. Sales of power ICs
grew by almost 40%, increasing to 11% of total revenues in the second quarter
of 1997, compared with 10% in the second quarter of 1996. Revenue growth for
both product lines was driven by products used in the telecommunication and
computer markets. Sales in Europe and North America were up 53% and 20%,
respectively, from the second quarter of 1996. Revenues in Asia Pacific,
excluding Japan, were up over 60%, with revenues in Japan down 32% from the
second quarter of 1996. The revenue decrease in Japan is due to the
combination of pricing pressures from increased competition and the
appreciation of the yen against the dollar during the quarter. Revenues in
Europe, North America, and Asia Pacific accounted for 30%, 36%, and 34%,
respectively, of total revenues in the second quarter of 1997, compared with
25%, 37%, and 38%, respectively, in the second quarter of 1996.
Gross profit decreased to 38% for the second quarter of 1997 from 41% in
the second quarter of 1996 and 39% in the first quarter of 1997. Gross
profit for the first six months of 1997 decreased to 38% from 41% for the
first six months of 1996. The decrease in gross profit is primarily due to
pricing pressures worldwide, but especially in Japan, as well as start-up
costs associated with the new fabrication facility in Itzehoe, Germany.
Research and development as a percentage of revenues decreased to 6% for
the second quarter of 1997 from 8% for the second quarter of 1996. The Company
remains committed to the development of future products and continues to invest
in power MOSFET and power IC technology as well as product development. Planned
research and development expenditures for 1997 are expected to be below that of
1996.
Selling, marketing, and administration expenses as a percentage of revenues
decreased to 19% for the second quarter of 1997 from 21% for the second quarter
of 1996. This decrease as a percentage of revenues is a result of continuing
economies of scale and the Company's commitment to maintaining its cost
reduction programs.
Interest expense for the first half of 1997 remained flat at $1.2 million
compared to the first half of 1996, as short-term market interest rates have not
fluctuated significantly over the past year.
Other income for the first half of 1997 decreased $0.2 million from the
first half of 1996. Other income/expense is mainly comprised of interest income
and accounts receivable discounts. The decrease in other income is primarily
due to additional accounts receivable discounts taken in Europe.
Income tax expense increased in the second quarter of 1997 to $2.1
million from $0.8 million for the second quarter of 1996. For the first six
months of 1997, income tax expense was $3.9 million as compared to $1.6
million for the first six months of 1996. This increase is due to the
increase in earnings before taxes during the first half of 1997 and the
depletion of net operating loss carryforwards at the end of 1996.
Page 8 of 12
<PAGE>
During its quarterly assessment of deferred income taxes, management
reduced the valuation allowance on deferred income tax assets. This decision to
reduce the 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 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 1996 annual report on Form 10-K, which is incorporated herein
by reference.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operations were $10.3 million for the six-month period
ended June 29, 1997 as compared to $11.7 million for the six-month period ended
June 30, 1996. Cash and equivalents decreased by $8.6 million and the short
term investment with affiliate decreased by $2.0 million from December 31, 1996
due to large expenditures in the first half of 1997. These included capital
expenditures, royalty payments, commissions, yearly management and employee
bonuses, the 401(k) company match, and profit sharing contributions. Management
expects 1997 cash flows from operations to be sufficient to fund investments in
capital expenditures and research and development.
Accounts receivable increased $8.0 million or 22% from December 31, 1996.
This increase is a result of record revenues earned in the second quarter of
1997. Revenues for the second quarter of 1997 totaled $80.0 million, compared
with $72.8 million for the fourth quarter of 1996. In addition, there is
continuing revenue growth in Europe and longer payment terms are typically
afforded to European customers.
Net affiliate receivables/payables increased $6.4 million from December 31,
1996 mainly due to timing differences of cash remitted to our unconsolidated
affiliates. In addition, there was an increase in selling and administrative
expenses incurred on behalf of our unconsolidated affiliates, which are
reimbursed at cost.
Other current assets increased $4.6 million or 58% from December 31, 1996.
The majority of this increase is due to purchases of equipment and supplies on
behalf of our subcontrators in Taiwan and Germany, which are reimbursed at cost.
Capital expenditures were $18.0 million in the first six months of 1997,
compared to $25.1 million in the first six months of 1996. These expenditures
were mainly related to additions for plant capacity expansion. Capital spending
in 1997, funded from cash provided by operating activities, is expected to
approximate the 1996 level.
Other assets increased $2.1 million or 18% from December 31, 1996 due to an
increase in the investment in Simconix, the Company's joint venture in The
People's Republic of China.
Page 9 of 12
<PAGE>
Current liabilities decreased $1.3 million or 2% from December 31, 1996.
This decrease is mainly due to the payment of certain liabilities which are paid
only once a year, including annual management and employee bonuses, the 401(k)
company match, and profit sharing contributions.
SAFE HARBOR STATEMENT
"Safe Harbor" Statement under the Private Securities Litigation Reform Act
of 1995: With the exception of historical information, the matters discussed in
this Form 10Q are forward-looking statements that involve risks and
uncertainties including, but not limited to, economic conditions, product demand
and industry capacity, competitive products and pricing, manufacturing
efficiencies, new product development, availability of raw materials and
critical manufacturing equipment, the regulatory and trade environment, and
other risks indicated in filings with the Securities and Exchange Commission.
Page 10 of 12
<PAGE>
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
June 6, 1997.
(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 9,692,547 47,515
Richard Kulle 9,692,829 47,233
Frank Maier 9,692,736 47,326
Michael Muehlbayer 9,692,532 47,530
Robert Wehrli 9,692,534 47,528
Peter Westrick 9,692,736 47,326
2. Ratification of the appointment of KPMG Peat Marwick LLP
as the registrant's auditors for the fiscal year ending
December 31, 1997.
Broker
For Against Abstain Nonvotes
--------- ------- ------- --------
9,728,176 1,524 10,362 219,618
(d) Not applicable.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the quarter
ended June 29, 1997.
Page 11 of 12
<PAGE>
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 13, 1997 By: /s/Juergen F. Biehn
-------------------
Juergen F. Biehn
Senior Vice President and
Chief Financial Officer
Page 12 of 12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-29-1997
<CASH> 3,614
<SECURITIES> 0
<RECEIVABLES> 50,555
<ALLOWANCES> (5,511)
<INVENTORY> 30,554
<CURRENT-ASSETS> 124,706
<PP&E> 248,586
<DEPRECIATION> (133,098)
<TOTAL-ASSETS> 254,138
<CURRENT-LIABILITIES> 80,185
<BONDS> 0
0
0
<COMMON> 100
<OTHER-SE> 131,393
<TOTAL-LIABILITY-AND-EQUITY> 254,138
<SALES> 150,236
<TOTAL-REVENUES> 150,236
<CGS> 92,931
<TOTAL-COSTS> 37,321
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,160
<INCOME-PRETAX> 18,843
<INCOME-TAX> 3,870
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,973
<EPS-PRIMARY> 1.50
<EPS-DILUTED> 1.50
</TABLE>
