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 September 30, 2003 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 incorporation or organization) Identification #) 			 1235 Bordeaux Drive 	 		 Sunnyvale, California 94089 	 	 (Address of principal executive offices) 	Registrant's Telephone Number, Including Area Code: (408) 222-8888 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 Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). 			 Yes X No The total number of shares outstanding of the Registrant's common stock as of November 7, 2003 were 12,785,324. 			Total number of pages: 17 				SUPERTEX, INC. 			QUARTERLY REPORT - FORM 10Q Table of Contents						 Page No. PART I - FINANCIAL INFORMATION Item 1. Financial Statements 	 Unaudited Condensed Consolidated Statements of Income	 3 	 Unaudited Condensed Consolidated Balance Sheets		 4 	 Unaudited Condensed Consolidated Statements of Cash Flows	 5 	 Notes to Unaudited Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition 	 and Results of Operations		 9 Item 3. Quantitative and Qualitative Disclosures About Market Risk and Interest Rate Risk		 13 Item 4. Controls and Procedures		 13 PART II- OTHER INFORMATION Item 1. Legal Proceedings						 14 Item 2. Changes in Securities and Use of Proceeds		 	 14 Item 3. Defaults Upon Senior Securities		 		 14 Item 4. Submission of Matters to a Vote of Security Holders		 14 Item 5. Other Information						 14 Item 6. Exhibits and Reports on Form 8-K				 15 Signatures								 15 Item 1. Financial Statements 				SUPERTEX, INC. 		 CONDENSED CONSOLIDATED STATEMENTS OF INCOME 				 (unaudited) 		 (in thousands, except per share amounts) 				 Three-months Ended, Six-months Ended, 				 September 30, September 30, 				 ------------- ------------- 					 2003 2002 2003 2002 					 ---- ---- ---- ---- Net sales				$12,315 $13,220 $24,794 $26,497 					------- ------- ------- ------- Costs and expenses: Cost of sales			 7,523	 8,102 14,812 16,951 Research and development 2,276 2,489 4,506 4,807 Selling, general and administrative 2,203 2,206 4,593 4,041 					 ------ ------ ------ ------ 	Total costs and expenses 12,002 12,797 23,911 25,799 					 ------ ------ ------ ------ Income from operations 313 423 883 698 Interest income 268 250 532 494 Other income, net 66 407 356 414 					 ------ ------ ------ ------ Income before provision for income taxes 647 1,080 1,771 1,606 Provision for income taxes		 200		367	 548	 546 					 ------ ------ ------ ------ Net income				 $ 447	 $ 713 $1,223 $1,060 					 ====== ====== ====== ====== Net income per share: Basic 				 $0.04 $0.06 $0.10	 $0.08 					 ===== ===== ===== ===== Diluted				 $0.03	 $0.06 $0.09	 $0.08 					 ===== ===== ===== ===== Shares used in per share computation: Basic				 12,723	 12,589 12,705	 12,582 					 ====== ====== ====== ====== Diluted 				 13,047	 12,640 12,977	 12,788 					 ====== ====== ====== ====== See accompanying Notes to Unaudited Condensed Consolidated Financial Statements. 			 	 SUPERTEX, INC. 		 CONDENSED CONSOLIDATED BALANCE SHEETS 		 (unaudited, in thousands) 					 September 30, 2003 March 31, 2003 ASSETS					 ------------------ -------------- Current assets: Cash and cash equivalents $ 59,414	 $ 60,931 Short-term investments			 9,518		 3,945 Trade accounts receivable, net of allowance of $550 and $615			 9,176		 10,134 Inventories					 14,325		 14,582 Prepaid expenses and other current assets 655	 575 Deferred income taxes 4,030 4,030 						 ------ ------ 	Total current assets 97,118 94,197 Property, plant and equipment, net		 11,042 12,104 Other assets 97		 97 Deferred income taxes 			 2,273		 2,273 						 -------		------- TOTAL ASSETS 				 $ 110,530	 $ 108,671 						 ======= ======= LIABILITIES Current liabilities: Trade accounts payable			 $ 2,315		$ 3,572 Accrued salaries and employee benefits 6,560		 6,784 Other accrued liabilities		 478		 485 Deferred revenue			 3,017 2,001 Income taxes payable			 3,373		 3,304 						 ------		 ------ Total current liabilities		 15,743		 16,146 						 ------ ------ 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 12,744 and 12,658 shares at September 30, 2003 and March 31, 2003, respectively 30,084 29,045 Retained earnings 64,703 63,480 						 ------- ------- 	Total shareholders' equity 94,787 92,525 						 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $110,530 $108,671 						 ======= ======= See accompanying Notes to Unaudited Condensed Consolidated Financial Statements. 				SUPERTEX, INC. 		CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 			 (unaudited, in thousands) 						 Six-months Ended, CASH FLOWS FROM OPERATING ACTIVITIES September 30, September 30, 						 2003	 2002 Net income					 $ 1,223 $ 1,060 						 ------- ------- Non-cash adjustments to net income: Depreciation 				 2,177 2,696 Provision for doubtful accounts and sales returns					 829	 1,199 Provision for excess and obsolete inventories 379 	 (253) Gain on sale of long-term investments 	 -- 	 (1,092) Gain on disposal of assets			 --		 (9) Impairment of long term investment		 -- 	 750 Changes in operating assets and liabilities: Short-term investments, categorized as trading (548)		 -- Trade accounts receivable			129	 (258) Inventories				 (122)		978 Prepaid expenses and other current assets	(80)		238 Trade accounts payable and accrued expenses (1,488)	 (2,352) Deferred revenue				 1,016		 56 Income taxes payable				 69	 1,590 						 ----- ----- 	 Total adjustments			 2,361	 3,543 						 ----- ----- 	 Net cash provided by operating 	 activities			 3,584	 4,603 						 ----- ----- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant and equipment	 (1,130)	 (1,336) Proceeds from disposal of property and equipment 15		 9 Sales of long-term investments 		 -- 1,692 Purchases of short-term investments, categorized as available for sale (5,025) 	 	 -- 						 ------- ------ Net cash provided by (used in) investing activities 			 (6,140)		365 						 ------- ------ CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from exercise of stock options and employee stock purchase plan		 1,039		684 	 					 ------- ------ 	 Net cash provided by financing 		 activities			 1,039		684 		 				 ------- ------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,517)	 5,652 CASH AND CASH EQUIVALENTS: Beginning of period			 60,931	 52,492 						 ------- ------- 	 End of period 			 $59,414	 $58,144 						 =======	 ======= Supplemental cash flow disclosures: Income taxes (paid), net of refunds	 $ (480)	 $ 1,045 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 September 30, 2003 and 2002 include all adjustments (consisting of normal recurring adjustments) necessary for fair presentation of the consolidated financial position, results of operations, and cash flows for those periods in accordance with accounting principles generally accepted in the United States of America. The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes the disclosures which are made are adequate to make the information presented not misleading. In particular, the year-end condensed consolidated balance sheet data were 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 condensed consolidated financial statements of Supertex, Inc. for the fiscal year ended March 31, 2003, which were included in the Annual Report on Form 10-K. 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. The financial statements have been prepared on a consolidated basis. The condensed consolidated financial statements include the accounts of Supertex, Inc. and its subsidiary. All significant intercompany balances have been eliminated on consolidation. For purposes of presentation, the Company labels its annual accounting period end as March 31 and its interim quarterly periods as ending on the last day of the corresponding month. The Company, in fact, operates and reports based on quarterly periods ending on the Saturday closest to month end. The 13-week second quarter of fiscal 2003 ended on September 28, 2002, and the 13-week second quarter of fiscal 2004 ended on September 27, 2003. Note 2 - Inventories Inventories consisted of (in thousands): 					September 30, 2003	March 31, 2003 Raw materials...........................	 $ 1,517	 $ 1,348 Work-in-process.........................	 8,052	 9,341 Finished goods..........................	 4,756	 3,893 						 ------- ------- 						 $14,325	 $14,582 						 ======= ======= Note 3 - Comprehensive Income SFAS No.130 establishes standards for disclosure and financial statement display for reporting total comprehensive income and its individual components. Comprehensive income, as defined, includes all changes in equity during a period from non-owner sources. The Company's comprehensive income did not differ from net income for all periods presented. Note 4 - 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, Six-months Ended, 					 September 30,	September 30, 					 2003 2002	2003 2002 BASIC: Net income				 $ 447 $ 713	$1,223	 $1,060 					 ====== ====== ====== ====== Weighted average shares outstanding for the period			 12,723 12,589	12,705	 12,582 					 ====== ======	====== ====== Net income per share			 $ 0.04 $0.06	$ 0.10 $ 0.08 					 ====== ====== ====== ====== DILUTED: Net income				 $ 447 $ 713	$1,223	 $1,060 					 ====== ===== ====== ====== Weighted average shares outstanding for the period			 12,723 12,589	12,705	 12,582 Dilutive effect of stock options	 324 51 272	 206 					 ------ ------ ------ ------ Total					 13,047 12,640	12,977	 12,788 					 ====== ====== ====== ====== Net income per share			 $ 0.03 $ 0.06	$ 0.09	 $ 0.08 					 ====== ====== ====== ====== Options to purchase 379,339 shares of the Company's common stock at an average price of $29.76 per share, and 1,045,358 shares at an average price of $20.48 per share at September 30, 2003 and September 30, 2002, respectively, were outstanding but were not included in the computation of diluted earnings per share because their effect would have been anti-dilutive. For the six-month period ended September 30, 2003 and 2002, respectively, options to purchase the Company's common stock of 408,795 shares at an average price of $28.92 per share, and 663,650 shares at an average price of $24.83 per share, were not included in the computation of diluted earnings per share because their effect would have been anti-dilutive. Note 5 - Stock-based Compensation The Company accounts for stock-based employee compensation arrangements using the intrinsic value method as described in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25") and Financial Accounting Standards Board Interpretation No. 44 "Accounting for Certain Transaction Involving Stock Compensation" ("FIN 44"). Accordingly, compensation cost for stock options is measured as the excess, if any, of the fair value of the Company's stock at the date of grant over the stock option exercise price. The Company accounts for stock issued to non-employees in accordance with the provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123") and Emerging Issues Task Force Consensus No. 96-18, "Accounting for Equity Instruments that are offered to other than employees for acquiring or in conjunction with selling goods or services" ("EITF 96-18"). Under SFAS No. 123 and EITF 96-18, stock option awards issued to non-employees are accounted for at their fair value and re-measured at each period end until a commitment date is reached, which is generally the vesting date. Had the Company recorded compensation costs for stock options issued to employees under the Company's stock option plans and Employee Stock Purchase Plan (ESPP) based on the fair value at the grant date for the awards consistent with the provisions of SFAS No. 123, the net income and net income per share for the quarter ended September 30, 2003 and 2002 would have been reduced to the pro forma amounts indicated as follows: 					Three-months Ended Six-months Ended 					 September 30,	September 30, 					 ------------- ------------- (in thousands except per share amounts) 2003 2002 2003 2002 					 ---- ---- ---- ---- Net income	 As reported		 $447	 $713	 $1,223 $1,060 Add: Stock-based employee compensation expense included in reported net income, net of tax --	 --		 --	 -- Deduct: Stock-based employee compensation expense determined under fair value based method, net of tax	 (505)	 (622) (1,186)	(1,616) 				 ------ ------ ------- ------- 	 Pro forma net 	 income (loss) $(58)	 $91 $37 $(556) 				 ====== ====== ======= ======= Basic earnings As reported $ 0.04	 $ 0.06 $ 0.10	 $ 0.08 (loss) per share 		 Pro forma	 $ 0.00	 $ 0.01 $ 0.00	 $(0.04) Diluted earnings As reported	 $ 0.03 $ 0.06 $ 0.09 $ 0.08 (loss) per share 		 Pro forma $ 0.00 $ 0.01 $ 0.00 $(0.04) To compute the estimated fair value of each option grant under the Option Plans and employee purchase rights under the ESPP, the Black-Scholes option pricing model was used with the following weighted average assumptions: 	 Employee Stock Option Plans Employee Stock Option Plans 	 Three-months Ended September 30 Six-months Ended September 30 		 2003 2002	 2003	 2002 Risk-free interest rate 1.05% 1.56% 1.05% 0.91% Expected term of option from vest date (years) 1.50 1.52 1.50 1.52 Expected volatility 0.98 1.03 0.98 1.24 Expected dividends -- -- -- -- 	 Employee Stock Purchase Plan 	 Employee Stock Purchase Plan 	 Three-months Ended September 30 Six-months Ended September 30 		 2003 2002		 2003		2002 Risk-free interest rate 1.23% 1.35%		 1.23%		1.35% Expected term of option from vest date (years)	 .50	.50		 .50		 .50 Expected volatility	 .43	.68		 .43		 .68 Expected dividends	 --	 --		 --		 -- Note 6 - Investments As of September 30, 2003, the Company's short-term investments consisted of investments held by the Company's Supplemental Employee Retirement Plan of $4,493,000, which are categorized as trading securities, and a time certificate of deposit of $5,025,000, which is categorized as available for sale. At March 31, 2003, the Company's short-term investments consisted entirely of investments held by the Company's Supplemental Employee Retirement Plan. Note 7 - Recent Accounting Pronouncements In November 2002, the Emerging Issues Task Force reached a consensus on Issue No. 00-21, Revenue Arrangements with Multiple Deliverables, ("EITF 00-21"). EITF 00-21 provides guidance on how to account for arrangements that involve the delivery or performance of multiple products, service and/or rights to use assets. The provisions of EITF 00-21 apply to revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The Company's adoption of EITF 00-21 did not have a material impact on its financial position or results of operations. In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity"("SFAS 150"). SFAS 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The Company's adoption of SFAS 150 did not have an impact on its 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 Form 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. Examples of such forward-looking statements in this Form 10-Q are our expectation that future sales of our backlighting chips to the cell phone industry will remain at a lower run rate; our anticipation for the price erosion in the medical segment to stabilize by the second half of fiscal 2004; our expectation for growth in revenue in the second half of fiscal 2004, particularly in the fourth quarter; our belief that we will start to see some production capacity utilization improvement as demand of our products increases; our plans to continue in the future our current level of R&D investment on new product development as a percent of net sales; our plan to not add capacity in the future and to spend approximately $1,691,000 for capital acquisitions in the remaining two quarters of fiscal 2004; and our anticipation that our available funds and expected cash generated from operations will be sufficient to meet cash and working capital requirements through at least the next twelve months. These statements are only predictions not a guaranty of future performance, and are 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 that there are no material changes in the demand for our customer's cell phone or medical products in which our chips are used; competition to supply products in the markets in which we compete does not increase and cause price erosion; demand materializes and increases for recently released customer products incorporating our products; we do not have unexpected manufacturing expenses as we ramp up production; the demand for our products or results of our product development change such that it would be unwise not to decrease research and development and that some of our equipment will not be unexpectedly damaged or obsoleted, thereby requiring replacement as well as 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, 2003. 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. Critical Accounting Policies We described our critical accounting policies in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of our Annual Report on Form 10-K for the year ended March 31, 2003. Our critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations, and require our management's significant judgments and estimates and such consistent application fairly depicts our financial condition and results of operations for all periods presented. Critical accounting policies affecting us and the critical estimates we made when applying them have not changed materially since March 31, 2003. Overview Supertex designs, develops, manufactures, and markets high voltage semiconductor devices, including 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 (telecom), imaging, medical electronics, and industrial 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 September 30, 2003 were $12,315,000, a 7% decrease compared to $13,220,000 for the same quarter of fiscal 2003, and a 1% decrease from $12,479,000 of the prior quarter. Net sales for the six months ended September 30, 2003 were $24,794,000, a 6% decrease compared to $26,497,000 for the same period of fiscal 2003. As a percentage of total net sales for the quarter ended September 30, 2003, sales to customers in the medical electronics, imaging, and telecom markets represented 39%, 37%, and 19% of total net sales, respectively, compared to 36%, 39% and 18% for the same quarter of fiscal 2003. Sales to customers in other markets accounted for 5% and 7% of the total net sales for the quarter ended September 30, 2003 and 2002, respectively. For the six-month period ended September 30, 2003, sales to customers in the medical electronics, imaging, telecom and other markets represented 36%, 36%, 19% and 9% of total net sales, respectively, compared to 35%, 36%, 20% and 9% of total net sales in the same period of fiscal 2003. Net sales for the three and six-month periods were adversely affected by the continued global economic slowdown. Overall conditions in the sectors we serve were weak in the second quarter of fiscal 2004. This is reflected in the reduced demand for our products in all of our major markets. Compared to the prior quarter, sales of our backlighting chips to the cell phone industry were flat and we expect future demand to be at this lower run rate. In our medical segment there was some price erosion and we expect this to stabilize in the second half of fiscal 2004. Recovery in our telecom segment still remains elusive. Based on customer projections, which we anticipate will be followed by confirmed orders, we expect revenue growth during the second half of fiscal 2004, particularly in the fourth quarter. Net sales to international customers for the quarter ended September 30, 2003 were $5,050,000, or 41% of the Company's net sales as compared to $4,301,000 or 33% of the net sales for the same period of prior fiscal year. The quarter increase in the percent of international sales is the result of increased shipments to our OEM manufacturers in Europe and Asia. Net sales to international customers for the six-month period ended September 30, 2003 were $9,248,000 or 37% of the Company's net sales as compared to $8,388,000 or 32% of the net sales for the same period of the prior fiscal year. The six-month increase in the percentage of international sales is attributable to increased shipments to Asia excluding Japan. Gross Profit Gross profit represents net sales less cost of sales. Cost of sales includes the cost of purchasing raw silicon wafers, cost associated with assembly, packaging, test, quality assurance and product yields, the cost of personnel, facilities, and equipment associated with manufacturing support and charges for excess inventory. Gross profit for the three and six-month periods ended September 30, 2003 are $4,792,000 and $9,982,000, respectively. This compares to $5,118,000 and $9,546,000, respectively for the same period of fiscal 2003. As a percent of sales, the Company's gross margin was 39% and 40% respectively for the three and six-month periods ended September 30, 2003, compared with 39% and 36% respectively for the same periods of fiscal 2003. Gross margin for the quarter ended June 30, 2003 was 42% compared to 39% for the quarter ended September 30, 2003. Gross margin for the quarter was adversely affected by the continued under utilization of our production capacity which was, in part, the result of a planned inventory reduction of $1,100,000. We believe we will start to see some production capacity utilization improvement as demand for our products increases. The increase in gross profit percentage for the six-month period ended September 30, 2003 as compared to the same period of fiscal 2003 was primarily due to rigorous cost reduction measures. Research and Development (R&D) Research and development (R&D) expenses, which include payroll and benefits, processing costs and process transfer costs, decreased 9% to $2,276,000 for the quarter ended September 30, 2003 as compared to $2,489,000 for the same quarter of the prior fiscal year, which represented 18% and 19% of our net sales in each period, respectively. R&D expenses for the six-month period ended September 30, 2003 were $4,506,000 compared to $4,807,000 for the same period in fiscal 2003, which represented 18% of net sales for both periods. The moderate decrease in absolute dollars in R&D expense for the quarter and six- month periods is primarily due to a reduction in software licensing costs and in depreciation expense. We plan to continue this level of R&D investments as a percent of net sales. Selling, General and Administrative (SG&A) Selling, general and administrative expenses, which include commissions, payroll and benefits, were $2,203,000, or 18% of net sales for the quarter ended September 30, 2003, essentially flat as compared to $2,206,000, or 17% of net sales for the same quarter of the prior fiscal year. For the six-months ended September 30, 2003, SG&A expenses increased $552,000 to $4,593,000, or 19% of net sales, compared to $4,041,000, or 15% of net sales for the same period of the prior fiscal year. This increase was attributed to an increase in payroll and benefits of $267,000, an increase in bad debt expense of $134,000, offset by a decrease in sales commissions expense of $103,000. In addition, SG&A expenses were favorably impacted in the six months ended September 30, 2002 by the reversal of a provision for an anticipated settlement of $224,000 following the favorable resolution of a claim initiated by a customer in fiscal 2002. The increase in payroll and benefits expenses was primarily from the increase in accrued compensation resulting from the increase in valuation of plan assets for the Company's Supplemental Employee Retirement Plan. The increase in bad debt expense was attributed to a credit taken in the first half of fiscal 2003 which resulted from a successful collection of a previously reserved receivable in that period. The decrease in sales commissions expense resulted from lower commissionable sales. Interest Income and Other Income, Net Interest income and other income, net for the three and six-month periods ended September 30, 2003 were $334,000 and $888,000 respectively, compared to $657,000 and $908,000 respectively for the same periods of the prior fiscal year. Interest income for the three and six-month periods ended September 30, 2003 was $268,000 and $532,000, respectively, compared to $250,000 and $494,000, respectively for the same periods of the prior fiscal year. The moderate increase in interest income is attributable to a larger average cash, cash equivalent and short-term investments balance in the current period compared to the same period of the prior fiscal year, which was partially offset by lower interest rates. Other income, net was $66,000 for the quarter ended September 30, 2003 consisting primarily of an increase in fair market value of investments held by the Company's Supplemental Employee Retirement Plan of $95,000 and licensing income of $38,000 offset by a foreign currency exchange loss of $42,000. For the comparable period in fiscal 2003, other income and expense, net of $407,000 consisted of gain on sale of a long-term investment of $1,092,000 and licensing income of $38,000 offset by an impairment charge of $750,000 due to the uncertainty surrounding the recoverability of another long-term investment. Other income and expense, net of $356,000 for the six-month period ended September 30, 2003 consisted primarily of an increase in fair market value of investments held by the Company's Supplemental Employee Retirement Plan of $343,000 and licensing income of $75,000 offset by a foreign currency exchange loss of $42,000. For the comparable period in fiscal 2003, other income and expense, net of $414,000 consisted of gain on sale of a long-term investment of $1,092,000 and licensing income of $75,000 offset by an impairment charge of $750,000 due to the uncertainty surrounding the recoverability of another long- term investment. Provision for Income Taxes The Company's effective tax rate for the three-month and six-month periods ended September 30, 2003 was 31%, compared to 34% for the same periods in the prior fiscal year. The reduction in the effective tax rate was primarily due to a favorable change in geographic mix of income. Liquidity and Capital Resources On September 30, 2003, the Company had $68,932,000 in cash, cash equivalents, and short-term investments, compared with $64,876,000 on March 31, 2003. The Company anticipates that available sources of funds including cash, cash equivalents, short-term investments, and expected that cash to be generated from operations will be sufficient to meet cash and working capital requirements through at least the next twelve months. The decrease in cash and cash equivalents of $1,517,000 from $60,931,000 at March 31, 2003 to $59,414,000 at September 30, 2003 is due to cash used in investing activities of $6,140,000, cash flows provided by operating activities of $3,584,000, and cash flows provided by financing activities of $1,039,000. Our primary source of funds for the quarter ended September 30, 2003 has been the net cash generated from operating activities of $3,584,000. Net operating cash flows were the result of the following items: * Net income of $1,223,000; * Non-cash charges for depreciation of $2,177,000; * A decrease in net trade accounts receivable of $958,000 including a non-cash reduction of $829,000 for the provisions for doubtful accounts and sales returns and a net decrease in gross accounts receivable of $129,000, primarily due to lower sales; * A decrease in trade accounts payable and accrued expenses of $1,488,000 comprised primarily of a decrease in trade accounts payable of $1,257,000 which resulted from a decrease in operating expenses and equipment purchases; * An increase in deferred revenue of $1,016,000 due to an increase in inventory at distributors; * A decrease in net inventory of $257,000 consisting of an increase in inventory of $122,000 due to a shortfall of our anticipated turns business offset by a non-cash charge for the provision for excess and obsolescence of $379,000; * An increase in short-term investments categorized as trading securities of $548,000. These investments are held by the Company's Supplemental Employee Retirement Plan. The increase is due to net employee contributions of $205,000 and an increase in the fair market value of plan assets of $343,000 during the six-month period. Net cash used in investing activities in the six-month period ended September 30, 2003 was $6,140,000, which included purchases of short-term investments of $5,025,000 and equipment purchases of $1,130,000 offset by proceeds from disposal of property and equipment of $15,000. Net cash provided by financing activities in the six-month period ended September 30, 2003 was $1,039,000, which consisted of proceeds from stock options exercises of $712,000 and employee stock purchases of $327,000. The Company expects to spend approximately $1,691,000 for capital acquisitions in the remaining two quarters of fiscal 2004, which is less than prior fiscal years because most of the upgrades to our fab and our test operations have been completed, and we do not plan to add any capacity in the near future. The Company has commitments for non-cancelable operating leases. Future minimum lease payments and sublease income under all non-cancelable operating leases at September 30, 2003 are as follows (in thousands): Fiscal Years Ending March 31 Operating Lease Sublease Income 2004 (remaining six months) $ 615	 $ 350 2005				 1,104		 370 2006					1,047		 336 2007					1,051		 336 2008					 761		 155 Thereafter				 --		 -- 					----- ----- 			 $4,578		 $1,547 Item 3. - Quantitative and Qualitative Disclosures About Market Risk and Interest Rate Risk. Interest Rate Sensitivity The Company is not likely 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. It 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 September 30, 2003, 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. Item 4. - Controls and Procedures. 	(a) Evaluation of Disclosure Controls and Procedures 	The Company's principal executive and financial officer has 	evaluated the Company's disclosure controls and procedures (as defined 	in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the 	period covered by this Form 10-Q and have determined that they are 	reasonable taking into account the totality of the circumstances. 	(b) Changes in Internal Control over Financial Reporting 	There were no changes in the Company's internal control over 	financial reporting that occurred during the period covered by this 	Form 10-Q that have materially affected, or are reasonably likely to 	materially affect such control. 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 The Company's Annual Shareholders' Meeting was held on August 15, 2003 at 10:00 a.m., at which the following matters were acted upon: 						 Votes Withheld/	 Broker Matter Acted Upon	 Votes For Votes Against Abstentions Non-Votes - -----------------	 --------- ------------- ----------- -------- 1. Election of Directors Henry C. Pao 9,090,637 0 	 1,393,159	 0 Benedict Choy 9,206,437	 0		1,277,359	 0 Richard Siegel 	 9,090,637	 0		1,393,159	 0 W. Mark Loveless 10,259,121	 0		 224,675	 0 Elliott Schlam	 9,180,367	 0		1,303,429	 0 Milton Feng		 10,374,119	 0		 109,677	 0 2. Ratification of the appointment of PricewaterhouseCoopers LLP as the independent accountants of the Company for the fiscal year ending March 31, 2004. 10,430,905 47,634 5,257 0 Item 5. - Other Information 	None Item 	6. - Exhibits and Reports on Form 8-K 	(a) Exhibits: 	Exhibit 31, Rule 13(a)-14(a)/15(d)-14(a) Certification by Henry C. Pao 	Exhibit 32, Section 1350 Certification of Henry C. Pao 	(b) Reports on Form 8-K 	On July 14, 2003, the Company filed a Report on Form 8-K, dated July 14, 2003, furnishing under Item 12, a July 14, 2003 press release announcing the first fiscal quarter results. (Such press release is not incorporated by reference herein or deemed "filed" within the meaning of Section 18 of the Securities Act.) 				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: November 7, 2003 				By: /s/ Henry C. Pao 	 			-------------------------- 	 			Henry C. Pao, Ph.D. President 	 (Principal Executive and Financial Officer)