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 30, 2001
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
incorporation or organization) (IRS Employer Identification #)
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
The total number of shares outstanding of the Registrant's common stock as of
August 1, 2001 were 12,413,950.
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 and Reports on Form 8-K..................................10
Signatures................................................................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,
June 30,
2001 2000
---- ----
Net sales $ 15,081 $ 22,303
Cost and expenses:
Cost of sales 9,191 13,389
Research and development 3,270 2,430
Selling, general and administrative 1,816 2,280
-------- --------
Total costs and expenses 14,277 18,099
-------- --------
Income from operations 804 4,204
Interest income 527 519
Other income (expense), net 376 (28)
-------- --------
Income before provision for income taxes 1,707 4,695
Provision for income taxes 580 1,596
-------- --------
Net income $ 1,127 $ 3,099
Net income per share:
Basic $ 0.09 $ 0.25
Diluted $ 0.09 $ 0.24
Shares used in per share computation:
Basic 12,410 12,276
Diluted 12,613 13,064
See accompanying Notes to Unaudited Condensed Consolidated Financial
Statements.
SUPERTEX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
June 30, 2001 March 31, 2001
ASSETS ------------- --------------
Current assets:
Cash and cash equivalents $ 46,230 $ 44,282
Trade accounts receivable, net of allowance
of $1,859 and $2,412 14,070 13,536
Inventories 14,198 14,388
Prepaid expenses and other current assets 1,077 1,404
Deferred income taxes 4,388 4,388
--------- ---------
Total current assets 79,963 77,998
Property, plant and equipment, net 14,509 15,200
Intangible and other assets, net 1,976 2,499
Deferred income taxes 2,998 2,998
--------- ---------
TOTAL ASSETS $ 99,446 $ 98,695
LIABILITIES
Current liabilities:
Trade accounts payable $ 5,289 $ 6,659
Accrued salaries, wages and employee benefits 6,705 7,173
Other accrued liabilities 656 645
Deferred revenue 1,903 1,262
Income taxes payable 1,174 597
--------- ---------
Total current liabilities 15,727 16,336
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
12,414 and 12,394 shares 25,814 25,318
Retained earnings 57,905 57,041
--------- ---------
Total shareholders' equity 83,719 82,359
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 99,446 $ 98,695
See accompanying Notes to Unaudited Condensed Consolidated Financial
Statements.
SUPERTEX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Three months Ended
CASH FLOWS FROM OPERATING ACTIVITIES June 30, 2001 June 30, 2000
------------- -------------
Net income $ 1,127 $ 3,099
Non-cash adjustments to net income:
Depreciation and amortization 899 1,221
Provision for doubtful accounts and
sales returns 133 524
Provision for excess and obsolete inventories 168 188
Gain on sale of long-term investments (127) --
Changes in operating assets and liabilities:
Accounts receivable (667) (4,044)
Inventories 22 (14)
Prepaid expenses and other assets 327 (47)
Trade accounts payable and accrued expenses (1,827) 333
Income taxes payable 577 1,596
Deferred revenue 641 539
--------- ---------
Total adjustments 146 296
--------- ---------
Net cash provided by operating activities 1,273 3,395
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (185) (2,271)
Purchases of short-term investments -- (25,404)
Proceeds from maturities of short-term investments -- 11,593
Sales (purchases) of long-term investments 627 (1,000)
--------- ---------
Net cash provided by (used in) investing
activities 442 (17,082)
CASH FLOWS FROM FINANCING ACTIVITIES
Stock options exercised 549 435
Repurchase of stock (316) --
--------- ---------
Net cash provided by financing activities 233 435
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 1,948 (13,252)
CASH AND CASH EQUIVALENTS:
Beginning of period 44,282 22,584
--------- ---------
End of period $ 46,230 $ 9,332
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 quarter ended June 30, 2001 and 2000 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 accounting principles generally accepted in the
United States of America.
The year-end condensed balance sheet data was derived from audited financial
statements, but does not include all disclosures required by accounting
principles generally accepted in the United States of America. These
financial statements should be read in conjunction with the audited
consolidated financial statements of Supertex, Inc. for the fiscal year ended
March 31, 2001, 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 accounting
principles generally accepted in the United States of America 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):
June 30, 2001 March 31, 2001
------------- --------------
Raw materials..................... $ 1,619 $ 1,662
Work-in-process................... 9,052 9,281
Finished goods.................... 3,527 3,445
--------- ---------
$ 14,198 $ 14,388
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,
June 30,
2001 2000
---- ----
BASIC:
Net income $ 1,127 $ 3,099
Weighted average shares outstanding
for the period 12,410 12,276
-------- --------
Net income per share $ 0.09 $ 0.25
DILUTED:
Net income $ 1,127 $ 3,099
Weighted average shares outstanding
for the period 12,410 12,276
Dilutive effect of stock options 203 788
-------- --------
Total 12,613 13,064
-------- --------
Net income per share $ 0.09 $ 0.24
Note 4 - Recent Accounting Pronouncements
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 adopted SFAS
No. 133 effective April 1, 2001. The adoption of SFAS 133 did not have a
material impact on the Company's financial position or results of operations.
In July 2001, the Financial Accounting Standards Board (FASB) issued FASB
Statements Nos. 141 and 142 (FAS 141 and FAS 142), "Business Combinations"
and "Goodwill and Other Intangible Assets." FAS 141 replaces APB 16 and
eliminates pooling-of-interests accounting prospectively. It also provides
guidance on purchase accounting related to the recognition of intangible
assets and accounting for negative goodwill. FAS 142 changes the accounting
for goodwill from an amortization method to an impairment-only approach.
Under FAS 142, goodwill will be tested annually and whenever events or
circumstances occur indicating that goodwill might be impaired. FAS 141 and
FAS 142 are effective for all business combinations completed after June 30,
2001. Upon adoption of FAS 142, amortization of goodwill recorded for
business combinations consummated prior to July 1, 2001 will cease, and
intangible assets acquired prior to July 1, 2001 that do not meet the
criteria for recognition under FAS 141 will be reclassified to goodwill.
Companies are required to adopt FAS 142 for fiscal years beginning after
December 15, 2001, but early adoption is permitted. The Company will adopt
FAS 142 on April 1, 2002, the beginning of fiscal 2002. In connection with
the adoption of FAS 142, the Company will be required to perform a
transitional goodwill impairment assessment. The Company has not yet
determined the impact these standards will have on its results of operations
and financial position.
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, 2001.
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 June 30, 2001 were $15,081,000, a
32% decrease compared to $22,303,000 for the same quarter last year. Sales
for the first quarter was adversely affected by the decline in the
telecommunications infrastructure spending and general economic slowdown with
weakness in all the markets we serve. Our customers reduced their demands
for our component products as they face slower customer orders and rising
inventory levels.
As percentage of total sales for the quarter ended June 30, 2001, sales to
customers in the medical electronics, imaging, and telecommunications markets
represented 37%, 28%, and 22% of total sales, respectively, compared to 35%,
29% and 23% of total sales for the quarter ended June 30, 2000. Sales to
customers in other markets remained unchanged at 13% of total sales.
Approximately 28% of the Company's net sales for this quarter were derived
from international customers as compared to 39% of the same quarter last
year. The decrease in international sales resulted from decreased shipments
to our customers in Asia and Europe primarily due to the sharp decline of
orders from contract manufacturers in Asia and the lack of telecommunications
infrastructure spending.
Gross Profit As a percent of sales, the Company's gross profit for the
quarter ended June 30, 2001 was 39%, compared with 40% for the same period of
the last fiscal year. Rigorous cost reduction measures allowed the Company
to quickly lower manufacturing expenditures to adjust to a much lower sales
level thereby retaining the gross profit percentage to sales.
Research and Development Research and development (R&D) expense increased
35% to $3,270,000 for the quarter ended June 30, 2001 as compared to
$2,430,000 for the same quarter of the prior fiscal year. The increase in
R&D expense in absolute dollars is primarily due to the Company's continued
development efforts in new integrated circuits (ICs) to drive the optical
micro-electro-mechanical systems (MEMS) and in network power interface
circuits to drive photonic and gigabit Ethernet modules and voice over
Internet Protocol (VoIP) telephone systems. The increase in R&D expenses
in the quarter ended June 30, 2001 included labor costs for additional
headcount, rent, purchases of mask toolings, and data processing costs to
support new product development activities in our design centers.
Selling, General and Administrative Selling, general and administrative
expenses (SG&A) were $1,816,000 or 12% of net sales for the quarter ended
June 30, 2001 as compared with $2,280,000 or 10% of net sales in the same
quarter of the prior year. In absolute dollars, SGA expenditures for the
three-month period decreased by 20% when compared to the same period in
fiscal 2001 due to reduced sales commissions, and lower provision for bad
debts. As a percentage of sales, SG&A expenses increased due to the lower
sales level.
Income from Operations Income from operations was $804,000, or 5% of net
sales, for the quarter ended June 30, 2001 compared to $4,204,000, or 19% of
net sales for the quarter ended June 30, 2000. The decrease in operating
income as a percentage of sales was attributed to the increase in research
and development expenses at a time when sales declined and the fact that our
selling, general, and administrative expenses decreased at a slower rate than
the decline in sales.
Interest and Other Income Interest and other income, net for the quarter
ended June 30, 2001, was $903,000 as compared to $491,000 of the same period
of prior fiscal year. The increase was attributed to the gain from the
liquidation of a long-term investment of $127,000 and fees charged to
customers for returning products of $160,000. Compared to the same period
last year, the interest income from short-term investments remained constant
as the slight increase in the average cash balance was offset by a decline in
interest rates.
Provision for Income Taxes The Company's effective tax rate for the three
months ending June 30, 2001 remained unchanged at 34%.
Liquidity and Capital Resources On June 30, 2001, the Company had
$46,230,000 in cash and cash equivalents, compared with $44,282,000 on March
31, 2001. This increase is due primarily to a positive cash flow from
operating activities of $1,273,000 consisting principally of net income of
$1,127,000 and non-cash charges for depreciation and amortization of
$899,000.
Net cash provided by operating activities for the quarter ended June 30, 2001
was positively impacted by an increase in income tax payable of $577,000 and
an increase in deferred revenue of $641,000.
Net cash provided by operating activities for the quarter ended June 30, 2001
was adversely impacted by an increase in accounts receivable of $667,000 and
a decrease in accounts payable and other accrued items of $1,827,000.
The Company's investment activities during the quarter ended June 30, 2001
generated cash of $442,000 as compared to $17,082,000 of cash used for
investment activities during the comparable period in the prior year. Cash
generated by investment activities during the quarter ended June 30, 2001
resulted from the proceeds of the sale of long-term investments in Galleon
New Media Funds of $627,000, which was offset by purchases of equipment of
$185,000 primarily for wafer fab and testing operations.
The Company's financing activities during the quarter ended June 30, 2001
generated cash of $233,000 as compared to cash generated of $435,000 during
the comparable period in the prior year. Cash generated by financing
activities during the quarter ended June 30, 2001 was the result of $165,000
in proceeds from the issuance of common stock through the exercise of
employee stock options, and $384,000 in proceeds from the issuance of common
stock through the Employee Stock Purchase Plan. This amount was offset by
the use of cash for the repurchase of 25,000 shares of common stock for
$316,000 as authorized by the Company's Stock Repurchase Program.
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.
Recent Accounting Pronoucements In July 2001, the Financial Accounting
Standards Board (FASB) issued FASB Statements Nos. 141 and 142 (FAS 141 and
FAS 142), "Business Combinations" and "Goodwill and Other Intangible Assets."
FAS 141 replaces APB 16 and eliminates pooling-of-interests accounting
prospectively. It also provides guidance on purchase accounting related to
the recognition of intangible assets and accounting for negative goodwill.
FAS 142 changes the accounting for goodwill from an amortization method to an
impairment-only approach. Under FAS 142, goodwill will be tested annually
and whenever events or circumstances occur indicating that goodwill might be
impaired. FAS 141 and FAS 142 are effective for all business combinations
completed after June 30, 2001. Upon adoption of FAS 142, amortization of
goodwill recorded for business combinations consummated prior to July 1, 2001
will cease, and intangible assets acquired prior to July 1, 2001 that do not
meet the criteria for recognition under FAS 141 will be reclassified to
goodwill. Companies are required to adopt FAS 142 for fiscal years beginning
after December 15, 2001, but early adoption is permitted. The Company will
adopt FAS 142 on April 1, 2002, the beginning of fiscal 2002. In connection
with the adoption of FAS 142, the Company will be required to perform a
transitional goodwill impairment assessment. The Company has not yet
determined the impact these standards will have on its results of operations
and financial position.
PART II - OTHER INFORMATION
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits: None
(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: August 10, 2001
By:/s/ Henry C. Pao
----------------------
Henry C. Pao, Ph.D.
President
(Principal Executive and Financial Officer)
2