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, 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 (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
The total number of shares outstanding of the Registrant's common stock as
of January 28, 2002 were 12,464,059
Total number of pages: 11
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...............................8
Item 3. Quantitative and Qualitative Disclosures
About Market Risk and Interest Rate Risk.........................10
PART II- OTHER INFORMATION
Item 1. Legal Proceedings................................................10
Item 2. Changes in Securities and Use of Proceeds........................10
Item 3. Defaults Upon Senior Securities..................................10
Item 4. Submission of Matters to a Vote of Security Holders..............11
Item 5. Other Information................................................11
Item 6. Exhibits and Reports on Form 8-K.................................11
Signatures...............................................................11
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,
2001 2000 2001 2000
Net sales $ 14,062 $ 20,209 $ 43,386 $ 65,025
Cost and expenses: -------- -------- -------- --------
Cost of sales 7,955 11,800 25,651 38,208
Research and development 2,581 3,054 8,558 7,996
Selling, general and administrative 1,803 2,568 5,523 7,768
-------- -------- -------- --------
Total costs and expenses 12,339 17,422 39,732 53,972
-------- -------- -------- --------
Income from operations 1,723 2,787 3,654 11,053
Interest income 335 672 1,303 1,786
Other income (expense), net (46) (160) 478 464
-------- -------- -------- --------
Income before provision for
income taxes 2,012 3,299 5,435 13,303
Provision for income taxes 684 1,122 1,848 4,523
-------- -------- -------- --------
Net income $ 1,328 $ 2,177 $ 3,587 $ 8,780
Net income per share:
Basic $ 0.11 $ 0.18 $ 0.29 $ 0.71
Diluted $ 0.10 $ 0.17 $ 0.28 $ 0.67
Shares used in per share computation:
Basic 12,445 12,386 12,424 12,335
Diluted 12,796 13,041 12,678 13,091
See accompanying Notes to Unaudited Condensed Consolidated Financial
Statements.
SUPERTEX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
December 31, March 31,
2001 2001
ASSETS
Current assets:
Cash and cash equivalents $ 48,650 $ 44,282
Trade accounts receivable, net of
allowance of $1,710 and $2,412 11,183 13,536
Inventories 15,011 14,388
Prepaid expenses and other current assets 1,061 1,404
Deferred income taxes 4,388 4,388
--------- ---------
Total current assets 80,293 77,998
Property, plant and equipment, net 17,111 15,200
Intangible and other assets, net 1,866 2,499
Deferred income taxes 2,998 2,998
--------- ---------
TOTAL ASSETS $ 102,268 $ 98,695
LIABILITIES
Current liabilities:
Trade accounts payable $ 5,499 $ 6,659
Accrued salaries, wages and employee benefits 6,000 7,173
Other accrued liabilities 594 645
Deferred revenue 1,828 1,262
Income taxes payable 1,702 597
--------- ---------
Total current liabilities 15,623 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 12,460 and 12,394 shares 26,278 25,318
Retained earnings 60,367 57,041
--------- ---------
Total shareholders' equity 86,645 82,359
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 102,268 $ 98,695
See accompanying Notes to Unaudited Condensed Consolidated Financial
Statements.
SUPERTEX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Nine months Ended
CASH FLOWS FROM OPERATING ACTIVITIES December 31, December 31,
2001 2000
Net income $ 3,587 $ 8,780
Non-cash adjustments to net income:
Depreciation and amortization 2,927 3,868
Provision for doubtful accounts and sales returns 1,005 1,683
Provision for excess and obsolete inventories 901 277
Loss (gain) on disposal of assets 12 (776)
Gain on sale of long-term investments (127) --
Changes in operating assets and liabilities:
Accounts receivable 1,348 (3,661)
Inventories (1,524) 865
Prepaid expenses and other assets 315 (1,317)
Trade accounts payable and accrued expenses (2,384) 519
Income taxes payable 1,105 1,157
Deferred revenue 566 289
-------- --------
Total adjustments 4,144 2,902
-------- --------
Net cash provided by operating activities 7,731 11,682
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (4,838) (4,888)
Proceeds from disposal of assets 149 961
Purchases of short-term investments -- (39,276)
Proceeds from maturities of investments -- 28,228
Sales (purchases) of long-term investments 627 (1,750)
-------- --------
Net cash used in investing activities (4,062) (16,725)
CASH FLOWS FROM FINANCING ACTIVITIES
Stock options exercised 1,014 1,123
Repurchase of stock (315) --
-------- --------
Net cash provided by financing activities 699 1,123
NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS 4,368 (3,920)
CASH AND CASH EQUIVALENTS:
Beginning of period 44,282 22,584
-------- --------
End of period $ 48,650 $ 18,664
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 quarters ended December 31, 2001 and 2000 include all
adjustments (consisting of normal recurring adjustments) necessary for fair
presentation of the consolidated financial condition, results of operations,
and cash flows 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.
During the three months ended December 31, 2001, gross profit was favorably
affected by a credit of approximately $648,000 to cost of sales for the
reduction of an accrual related to miscellaneous vendor commitments, however,
it was adversely affected by one-time charges of approximately $472,000
associated with the move of our production test operations from California
to Hong Kong.
Note 2 - Inventories
Inventories consisted of (in thousands):
December 31, 2001 March 31, 2001
Raw materials.......................... $ 1,485 $ 1,662
Work-in-process........................ 10,687 9,281
Finished goods......................... 2,839 3,445
--------- ---------
$ 15,011 $ 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 Nine-months Ended
December 31, December 31,
2001 2000 2001 2000
BASIC:
Net income $ 1,328 $ 2,177 $ 3,587 $ 8,780
Weighted average shares outstanding
for the period 12,445 12,386 12,424 12,335
------- ------- ------- -------
Net income per share $ 0.11 $ 0.18 $ 0.29 $ 0.71
DILUTED:
Net income $ 1,328 $ 2,177 $ 3,587 $ 8,780
Weighted average shares outstanding
for the period 12,445 12,386 12,424 12,335
Dilutive effect of stock options 351 655 254 756
------- ------- ------- -------
Total 12,796 13,041 12,678 13,091
------- ------- ------- -------
Net income per share $ 0.10 $ 0.17 $ 0.28 $ 0.67
Note 4 - Recent Accounting Pronouncements
In July 2001, 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
expects to adopt FAS 142 effective April 1, 2002. The Company has determined
that the adoption of FAS 142 will not have a material impact on its results
of operations and financial position.
In June 2001, the FASB issued FASB Statement No. 143 (FAS 143), "Accounting
for Asset Retirement Obligations". FAS 143 requires that the fair value of
a liability for an asset retirement obligation be realized in the period
which it is incurred if a reasonable estimate of fair value can be made.
Companies are required to adopt FAS 143 for fiscal years beginning after
June 15, 2002, but early adoption is encouraged. The Company has not yet
determined the impact this standard will have on its financial position and
results of operations, although it does not anticipate that the adoption of
this standard will have a material impact on the Company's financial position
or results of operations.
In August 2001, the FASB issued FASB Statement No. 144 (FAS 144). "Accounting
for the Impairment or Disposal of Long-lived Assets". FAS 144 supercedes FASB
Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, and the accounting and reporting
provisions of APB Opinion No. 30, Reporting the Results of Operations --
Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions,
for the disposal of a segment of a business (as previously defined in that
Opinion). This Statement also amends ARB No. 51, Consolidated Financial
Statements, to eliminate the exception to consolidation for a subsidiary for
which control is likely to be temporary. Companies are required to adopt FAS
144 for fiscal years beginning after December 15, 2001, and interim periods
within those fiscal years, but early adoption is encouraged. The Company has
not yet determined the impact this standard will have on its financial
position and results of operations, although it does not anticipate that the
adoption of this standard will have a material impact on the Company's
financial position or results of operations.
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 high voltage 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, 2001 were
$14,062,000, a 30% decrease compared to $20,209,000 for the same quarter
last year. Net sales for the nine months ended December 31, 2001 were
$43,386,000, a 33% decrease compared to $65,025,000 for the same period of
the prior fiscal year. Sales for the third quarter were adversely affected
by the decline in the telecommunications infrastructure spending and general
economic slowdown with weakness in all the markets we serve. Many of our
customers reduced their demand for our products as they face lower customer
orders and higher inventory.
As a percentage of total sales for the quarter ended December 31, 2001, sales
to customers in the medical electronics, imaging, and telecommunications
markets represented 44%, 27%, and 21% of total sales, respectively, compared
to 37%, 24% and 28% of total sales for the quarter ended December 31, 2000.
Sales to customers in other markets for the quarter ended December 31, 2001
was 9% of total sales, compared to 11% of the same period of last year.
Approximately 34% of the Company's net sales for the quarter ended December
31, 2001 and 30% for the nine-month period ended December 31, 2001 were
derived from international customers as compared to 38% and 40% of the same
periods of 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
telecommunications infrastructure customers in Europe.
Gross Profit As a percent of sales, the Company's gross margin were 43% and
41% for the three-month and nine-month periods ended December 31, 2001,
respectively, compared with 42% and 41% for the respective periods in the
prior fiscal year. Rigorous cost reduction measures allowed the Company to
quickly lower manufacturing expenditures to adjust to a much lower sales
level thereby improving the gross profit percentage to sales. Several cost
reduction measures were implemented, including the move of our production
test operations from Sunnyvale, CA to Hong Kong, which is near completion.
Gross profit was adversely affected by one-time charges associated with this
move of approximately $472,000, consisting of approximately $65,000 for
severance pay, $55,000 for equipment and product freight costs, and $352,000
for closure and startup costs which were expensed as incurred during the
quarter ended December 31, 2001. This was offset by a credit of
approximately $648,000 resulting from the reduction of an accrual related
to miscellaneous vendor commitments.
Research and Development (R&D) R&D expense decreased 15% to $2,581,000 for
the quarter ended December 31, 2001 as compared to $3,054,000 for the same
quarter of the prior year. The dollar decrease in R&D expense for the
quarter ended December 31, 2001 is partly due to many new products being
transferred to production status during the quarter.
For the nine months ended December 31, 2001, research and development
increased 7% to $8,558,000 from $7,996,000 for the same period last year.
The increase in R&D expense is 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
included labor costs of $796,000 for additional headcount, offset by a
reduction in miscellaneous expenses.
Selling, General and Administrative (SG&A) SG&A was $1,803,000 or 13% of net
sales for the quarter ended December 31, 2001 as compared with $2,568,000 or
13% of net sales in the same quarter of the prior year. For the nine months
ended December 31, 2001, SG&A expense was $5,523,000 or 13% of net sales
compared to $7,768,000 or 12% for the same period of the prior year. In
absolute dollars, SG&A expense for the quarter decreased by $765,000, or 30%
when compared to the same period of the prior year primarily due to a
reduction of sales commissions of $189,000 attributed to lower sales and a
drop in bad debt expense of $360,000. For the nine-month period, the
reduction in SG&A expense of $2,245,000, or 29% when compared to the same
period of the prior year was mainly due to a reduction in sales commissions
of $529,000, a reduction in bad debt expense of $966,000, and a decrease in
labor costs and related benefits of $423,000 due to a headcount reduction.
Income from Operations Income from operations was $1,723,000, or 12% of net
sales for the quarter ended December 31, 2001 compared to $2,787,000, or 14%
of net sales for the quarter ended December 31, 2000. For the nine months
ended December 31, 2001, income from operations was $3,654,000 or 8% of net
sales, compared to $11,053,000 or 17% of net sales for the same period of the
prior year. The decrease in operating income is attributable to lower sales.
Interest and Other Income Interest and other income for the three and
nine-month periods ended December 31, 2001, were $289,000 and $1,781,000,
respectively. For the three and nine-month periods ended December 31, 2000,
interest and other income were $512,000 and $2,250,000, respectively. The
decrease in interest and other income compared with the same periods of prior
fiscal year is primarily attributable to lower yields on cash deposit
accounts combined with lower gains from sale of surplus equipment from the
consolidation of our wafer fabrication facilities.
Provision for Income Taxes The Company's effective tax rate for the three
and nine-month periods ended December 31, 2001 remained unchanged at 34%.
Liquidity and Capital Resources On December 31, 2001, the Company had
$48,650,000 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 $7,731,000 consisting principally of net income of
$3,587,000 and non-cash charges for depreciation and amortization of
$2,927,000. Factors affecting cash flow from operating activities include
(a) a decrease in accounts receivable of $1,348,000 with a corresponding
reduction in the provision for doubtful accounts and sales returns of
$1,005,000 largely due to lower sales; (b) a decrease in accounts payable
and other accrued items of $2,384,000 due to a decrease in purchasing
activities; (c) an increase in deferred revenue of $566,000, of which
$388,000 is derived from a technology licensing agreement; and (d) an
increase of 1,105,000 income tax payable.
Net cash used in investing activities during the nine-month period was
$4,062,000 of which $4,838,000 was used to purchase equipment for the wafer
fab and testing operations offset in part by $627,000 provided by the
proceeds from the sale of long-term investments in Galleon New Media Funds.
Net cash provided by financing activities for the nine-month period was
$699,000 generated by proceeds from the issuance of common stock through the
exercise of employee stock options of $362,000, and by proceeds from the
issuance of common stock through the Employee Stock Purchase Plan of
$652,000. This amount was offset by our repurchase of 25,000 shares of
common stock for $315,000 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.
Item 3. - Quantitative and Qualitative Disclosures About Market Risk and
Interest Rate Risk.
Interest Rate Sensitivity The Company may be exposed to financial market
risks due primarily to changes in interest rates. The Company does not use
derivatives to alter the interest characteristics of its investment
securities. The Company has no holdings of derivative or commodity
instruments. The fair value of the Company's investment portfolio or
related income would not be significantly impacted by changes in interest
rates since the investment maturities are short and the interest rates are
primarily fixed. As of December 31,2001, the Company maintained its funds
primarily in money market funds and it plans to continue to invest a
significant portion of its existing cash in interest bearing money market
funds and other short-term debt securities with maturities of less than a
year.
PART II - OTHER INFORMATION
Item 1. - Legal Proceedings
None
Item 2. - Changes in Securities and Use of Proceeds
None
Item 3. - Defaults Upon Senior Securities
None
Item 4. - Submission of Matters to a Vote of Security Holders
None
Item 5. - Other Information
None
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: February 14, 2002
By: /s/ Henry C. Pao
Henry C. Pao, Ph.D.
President
(Principal Executive and Financial Officer)