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, 2000
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
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 12, 2001, 12,405,539 shares of the Registrant's common
stock were issued and outstanding.
Total number of pages: 10
SUPERTEX, INC.
QUARTERLY REPORT - FORM 10Q
Table of Contents Page No.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income 3
Condensed Consolidated Balance Sheets 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II- OTHER INFORMATION
Item 6. Exhibits, Financial Statement Schedule and Reports
on Form 8-K 10
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SUPERTEX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share amounts)
Three-months Ended, Nine-Months Ended,
December 31, December 31,
2000 1999 2000 1999
Net sales $ 20,209 $ 17,709 $ 65,025 $ 50,743
Cost and expenses:
Cost of Sales 11,800 11,065 38,208 32,531
Research and development 3,054 1,583 7,996 6,143
Selling, general and
administrative 2,568 1,939 7,768 5,044
------ ------ ------ ------
Total costs and expenses 17,422 14,587 53,972 43,718
------ ------ ------ ------
Income from operations 2,787 3,122 11,053 7,025
Interest income 672 467 1,786 1,242
Other income (expense), net (160) 59 464 (65)
------ ------ ------ ------
Income before provision for
income taxes 3,299 3,648 13,303 8,202
Provision for income taxes 1,122 1,204 4,523 2,707
------ ------ ------ ------
Net income $ 2,177 $ 2,444 $ 8,780 $ 5,495
====== ====== ====== ======
Net income per share:
Basic $ 0.18 $ 0.20 $ 0.71 $ 0.45
Diluted $ 0.17 $ 0.20 $ 0.67 $ 0.44
Shares used in per share computation:
Basic 12,386 12,121 12,335 12,104
Diluted 13,041 12,496 13,091 12,394
See accompanying Notes to Unaudited Condensed Consolidated Financial
Statements.
SUPERTEX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
December 31, 2000 March 31, 2000
ASSETS
Current assets:
Cash and cash equivalents $ 18,664 $ 22,584
Short-term investments 22,640 11,592
Trade accounts receivable, net
of allowance of $1,660 and $1,366 16,406 14,428
Other receivables 814 315
Inventories 13,941 15,083
Deferred income taxes 2,862 2,862
Prepaid expenses 1,249 440
------ ------
Total current assets 76,576 67,304
Property, plant and equipment, net 16,450 14,890
Long term investments 3,152 1,402
Intangible and other assets, net 443 1,157
Deferred income taxes 1,870 1,870
------ ------
TOTAL ASSETS $ 98,491 $ 86,623
====== ======
LIABILITIES
Current liabilities:
Trade accounts payable $ 7,087 $ 8,395
Accrued salaries, wages and
employee benefits 6,021 4,495
Income taxes payable 1,510 353
Other accrued liabilities 577 276
Deferred license revenue 400 --
Deferred revenue on shipments to
distributors 724 835
------ ------
Total current liabilities 16,319 14,354
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 12,405 and 12,251 shares 24,290 23,167
Retained earnings 57,882 49,102
------ ------
Total Shareholders' equity 82,171 72,269
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 98,491 $ 86,623
====== ======
See accompanying Notes to Unaudited Condensed Consolidated Financial
Statements.
SUPERTEX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Nine months Ended
December 31, 2000 December 31, 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 8,780 $ 5,495
Non-cash adjustments to net income:
Depreciation and amortization 3,868 4,320
Provision for doubtful accounts and
sales returns 1,683 1,932
Provision for excess and obsolete
inventories 277 866
Gain on disposal of assets (776) --
Changes in operating assets and liabilities:
Accounts receivable (3,661) (4,589)
Inventories 865 (3,570)
Prepaid expenses and other assets (1,317) (88)
Trade accounts payable and accrued expenses 519 1,832
Income taxes payable 1,157 757
Deferred license revenue 400 --
Deferred revenue on shipments to
distributors (111) (95)
------ ------
Total adjustments 2,902 1,365
------ ------
Net cash provided by operating activities 11,682 6,860
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (4,888) (3,386)
Proceeds from disposal of assets 961 --
Purchases of short term investments (39,276) (43,536)
Proceeds from maturities of short term
investments 28,228 23,255
Purchases of long term investments (1,750) --
------ ------
Net cash used in investing activities (16,725) (23,667)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES
Stock options exercised 1,123 723
Repurchase of stock -- (966)
Net cash provided by (used in) financing ------ ------
activities 1,123 (243)
------ ------
NET DECREASE IN CASH AND CASH EQUIVALENTS (3,920) (17,050)
CASH AND CASH EQUIVALENTS:
Beginning of period 22,584 28,190
End of period $ 18,664 $ 11,140
See accompanying Notes to Unaudited Condensed Consolidated Financial
Statements.
SUPERTEX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1 - Basis of Presentation
In the opinion of management, the unaudited condensed consolidated financial
statements for the three and nine months ended December 31 , 2000 and 1999
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, 2000, 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. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the
date of the financial statements as well as the reported amounts of revenue
and expenses during the reporting period. Actual results could differ from
those estimates, and such differences may be material to the financial
statements.
Note 2 - Inventories
Inventories consisted of (in thousands):
December 31, 2000 March 31, 2000
Raw materials.................... $ 1,720 $ 1,088
Work-in-process.................. 8,632 11,652
Finished goods................... 3,589 2,343
--------- ---------
$ 13,941 $ 15,083
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).
Three-months Ended, Nine-months Ended,
December 31, December 31,
2000 1999 2000 1999
BASIC:
Net income $ 2,177 $ 2,444 $ 8,780 $ 5,495
Weighted average shares
outstanding for the period 12,386 12,121 12,335 12,104
------ ------ ------ ------
Net income per share $ 0.18 $ 0.20 $ 0.71 $ 0.45
DILUTED:
Net income $ 2,177 $ 2,444 $ 8,780 $ 5,495
Weighted average shares
outstanding for the period 12,386 12,121 12,335 12,104
Dilutive effect of stock
options 655 375 756 290
------ ------ ------ ------
Total 13,041 12,496 13,091 12,394
------ ------ ------ ------
Net income per share $ 0.17 $ 0.20 $ 0.67 $ 0.44
Note 4 - Long Term Investments
On June 21, 2000, the Company purchased 1,059,322 shares of Series A
Preferred Stock of LightConnect Inc., an optical MEMS start up, for
$1,000,000. The Company owns 12% of LightConnect's outstanding Series A
Preferred Stock shares. On September 2000, the Company purchased 600,000
shares of Series A Preferred Stock of OEpic Inc., for $750,000. OEpic
Inc., is a start up company whose business is in design, manufacture and
sale of ultra-high-speed integrated photonic components for the next
generation telecommunication applications. The company owns 14% of OEpic's
outstanding Series A Preferred Stock shares. The Company recorded its
investment in both LightConnect and OEpic as long-term investments using
the cost method of accounting.
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,
2000. 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.
In March 2000, The Financial Accounting Standards Board ("FASB") issued
FIN No. 44 "Accounting for Certain Transactions Involving Stock Compensation
an interpretation of APB Opinion No. 25". This interpretation has
provisions that are effective on staggered dates, some of which began after
December 15, 1998 and others that become effective after June 30, 2000. The
adoption of this interpretation did not have a material impact on the
company's financial position or results of operations.
In December, 1999, SAB 101 was issued which summarizes the SEC's views in
applying generally accepted accounting principles to revenue recognition in
financial statements. In June, 2000 SAB 101B was issued to delay the
implementation of SAB 101 until the fourth quarter of fiscal year 2001. The
Company is currently evaluating the impact SAB 101 will have on its
financial position and results of operations.
PART I - FINANCIAL INFORMATION
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Cautionary Statement Regarding Forward Looking Statements This 10-Q includes
forward-looking statements. These forward-looking statements are not
historical facts, and are based on current expectations, estimates, and
projections about our industry, our beliefs, our assumptions, and our goals
and objectives. Words such as "anticipates", "expects", "intends", "plans",
"believes", "seeks", and "estimates ", and variations of these words and
similar expressions, are intended to identify forward-looking statements.
An example of such a statement in this 10-Q is that the Company anticipates
available funds and expected cash generated from operations to be sufficient
to meet cash and working capital requirements through at least the next
twelve months. This statement is only a prediction, is not a guaranty of
future performance, and is subject to risks, uncertainties, and other
factors, some of which are beyond our control and are difficult to predict,
and could cause actual results to differ materially from those expressed or
forecasted in the forward-looking statements. These risks and uncertainties
include those described in "Risk Factors" under Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operation" in
our Annual Report of Form 10-K for the fiscal year ended March 31, 2000.
Except as required by law, we undertake no obligation to update any
forward-looking statement, whether as a result of new information, future
events, or otherwise.
Overview
Supertex designs, develops, manufactures, and markets high voltage analog
and mixed signal integrated circuits utilizing state-of-the-art high voltage
DMOS, HVCMOS and HVBiCMOS analog and mixed signal technologies. We supply
standard and custom interface products primarily for use in the
telecommunications, imaging, and medical electronics markets. We also
provide wafer foundry services for the manufacture of integrated circuits
for customers using customer-owned designs and mask toolings.
Results of Operations
Net Sales Net sales for the quarter ended December 31, 2000 were $20,209,000,
a 14% increase compared to $17,709,000 for the same quarter last year. Net
sales for the nine months ended December 31, 2000 were $65,025,000, a 28%
increase compared to $50,743,000 for the same period of the prior fiscal
year. The increase in sales for the quarter and year-to-date period are
primarily due to increased unit sales volume of both core and foundry
products.
As percentage of total sales for the quarter ended December 31, 2000 and
1999, sales to customers in the medical electronics and telecommunications
markets represented 37% and 28% of total sales, respectively. Sales to
customers in the imaging market was 24% in 2000 compared with 23% in 1999.
Sales to all other markets represented 11% in 2000 and 12% in 1999,
respectively.
As percentage of total sales for the nine months ended December 31, 2000,
sales to customers in the medical electronics market represented 36% of our
business as compared with 35% for the same period in 1999. Sales to
customers in the telecommunications market was 27% in 2000 compared with 29%
in 1999. Sales to customers in the imaging market was 25% in 2000 compared
with 23% in 1999. Sales to all other markets represented 12% in 2000
compared with 13% in 1999. On a dollar basis, sales of our medical
electronics products increased 31% to $23,314,000 for the nine months ended
December 31, 2000, sales of our telecommunication products increased 19% to
$17,570,000, and sales of our imaging products increased 39% to $16,472,000.
Approximately 38% of the Company's net sales for this quarter and 40% for
the nine-month period ended December 31, 2000, were derived from
international customers as compared to 39% and 36% for the respective
periods in the prior year. Although dollar sales to international customers
increased from quarter to quarter, the percentage of international sales to
total sales is slightly lower primarily due to lower demand in Japan. For
the nine-month period, the increase in percentage of international sales is
primarily due to the increased sales volume in both Europe and Asia
Gross Profit As a percent of sales, the Company's gross margin for the
three-month and nine-month periods ended December 31, 2000 were 42% and 41%
respectively, compared with 38% and 36% for the same periods of the last
fiscal year. The improvement in gross margin is primarily due to higher
production volume in our new six-inch fab operation, allowing us to benefit
from economies of scale.
Research and Development Research and development (R&D) expense increased
93% to $3,054,000 for the quarter ended December 31, 2000 as compared to
$1,583,000 for the same quarter of the prior year. For the nine months ended
December 31, 2000, R&D expense increased 30% to $7,996,000 from $6,143,000
for the same period last year, with most of the increase occurring during
this past quarter. The increase in R&D expense for the three-month and
nine-month periods this year as compared to last year was due to an
increases in payroll expense resulting from additional headcount, and in
new product development efforts, as well as the transfer of our products
from four-inch to six-inch fab. Our customers have continued to worked with
us in our development efforts in the new integrated circuits (ICs) to drive
the optical micro-electro-mechanical systems (MEMS) and in the network power
interface circuits to drive photonic and gigabit Ethernet modules and voice
over Internet Protocol (VoIP) telephone systems.
Selling, General and Administrative Selling, general and administrative
expense was $2,568,000 or 13% of net sales for the quarter ended December
31, 2000 as compared with $1,939,000 or 11% of net sales in the same quarter
of the prior year. For the nine months ended December 31, 2000, selling,
general and administrative expense was $7,768,000 or 12% of net sales
compared to $5,044,000 or 10% for the same period last year. The dollar
increases in selling, general and administrative expense for the three-month
period were primarily due to salary adjustments of $227,000, consulting fees
of $127,000, and commissions of $100,000. The dollar increases for the
nine-month period were due to salary adjustments of $877,000, bad debt
expense of $518,000 and sales commissions of $600,000, consulting fees of
$175,000, depreciation of $155,000 and data processing expenses for software
implementation of $154,000.
Interest and Other Income Interest and other income, net for the three and
nine month periods ended December 31, 2000 was $512,000 and $2,250,000,
respectively. For the three and nine month periods ended December 31, 1999,
interest and other income, net was $526,000 and $1,177,000, respectively.
The increase for the nine-month period was due to a $776,000 gain from
disposal of assets including retired equipment from the four-inch
fabrication plant and a $544,000 increase in interest income attributed to
larger average cash and investment balances.
Provision for Income Taxes The Company's effective tax rate for the three
and nine months ending December 31, 2000 was 34% compared to 33% for the
same periods of the last fiscal year.
Overview of Change in Financial Condition Total assets increased to
$98,491,000 as of December 31, 2000, up from $86,623,000 at the end of last
fiscal year ended March 31, 2000. The increase is due primarily to
favorable operating results during the first nine months of the fiscal year.
Liquidity and Capital Resources On December 31, 2000, the Company had
$41,304,000 in cash, cash equivalents, and short-term investments, compared
with $34,176,000 on March 31, 2000. This increase is due primarily to
positive cash flow from operating activities of $11,682,000 consisting
principally of net income of $8,780,000.
Positive factors contributing to cash flow from operating activities are as
follows:
* There was decrease in inventory of $865,000 primarily caused by the
increase in net sales.
* There was an increase in income taxes payable of $1,157,000 due to a
higher amount of income subject to tax and a higher tax rate.
* There was an increase in trade accounts payable and accrued expenses
of $520,000 resulting from normal operating activities.
* There was an increase in deferred revenue from a licensing agreement
of $400,000.
Meanwhile, negative factors affecting operating cash flow were as follows:
* There was increase in accounts receivable of $3,661,000 primarily
caused by the increase in net sales.
* There was an increase in prepaid expenses and other assets of
$1,317,000 relating primarily to a prepaid software maintenance contract
of $705,000; an increase in non-trade receivables from sale of surplus
four-inch equipment of $381,000; and increased accrued interest income of
$110,000.
Net cash used in investing activities during the nine-month period was
$16,725,000 of which $11,048,000 was used for short-term investments,
$4,888,000 was used to purchase property and equipment offset by proceeds
from disposal of surplus equipment of $961,000, and $1,750,000 was used to
purchase long-term investments in LightConnect, Inc. and OEpic Inc.
Net cash provided by financing activities during the nine-month period was
$1,123,000 all of which was generated from stock option exercises.
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 at least the next twelve months.
PART II - OTHER INFORMATION
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits
(b) Reports on Form 8-K
No report on Form 8-K was filed during the quarter for which this Form 10-Q
is filed.
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 14, 2001
By: /s/Henry C. Pao
-------------------
Henry C. Pao, Ph.D.
President
(Principal Executive and Financial Officer)