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, 2002
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
August 5, 2002 were 12,597,375.
Total number of pages: 12
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.............................................. 7
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 ......................... 11
Item 3. Defaults Upon Senior Securities.................................... 11
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
STATEMENT OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER UNDER 18
U.S.C. 1350 ............................................................... 11
Signatures ................................................................ 12
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, 2002 June 30, 2001
Net sales $ 13,277 $ 15,081
------ ------
Cost and expenses:
Cost of sales 8,849 9,191
Research and development 2,318 3,270
Selling, general and administrative 1,835 1,816
------ ------
Total costs and expenses 13,002 14,277
------ ------
Income from operations 275 804
Interest income 244 527
Other income 7 376
------ ------
Income before provision for income taxes 526 1,707
Provision for income taxes 179 580
------ ------
Net income $ 347 $ 1,127
====== ======
Net income per share:
Basic $ 0.03 $ 0.09
Diluted $ 0.03 $ 0.09
Shares used in per share computation:
Basic 12,575 12,410
Diluted 12,935 12,613
See accompanying Notes to Unaudited Condensed Consolidated Financial
Statements.
SUPERTEX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
June 30, 2002 March 31, 2002
ASSETS
Current assets:
Cash and cash equivalents $ 54,884 $ 52,492
Trade accounts receivable, net of allowance
of $1,182 and $1,465 8,725 9,436
Inventories 15,464 16,494
Prepaid expenses and other current assets 488 902
Deferred income taxes 3,293 3,293
------ ------
Total current assets 82,854 82,617
Property, plant and equipment, net 16,044 16,327
Long term investments 1,451 1,451
Deferred income taxes 2,985 2,985
------ ------
TOTAL ASSETS $ 103,334 $ 103,380
======= =======
LIABILITIES
Current liabilities:
Trade accounts payable $ 4,395 $ 5,769
Accrued salaries, wages and employee benefits 5,935 6,565
Other accrued liabilities 519 655
Deferred revenue 1,723 1,729
Income taxes payable 1,793 566
------ ------
Total current liabilities 14,365 15,284
------ ------
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
12,597 and 12,544 shares at June 30, 2002
and March 31, 2002, respectively 27,980 27,454
Retained earnings 60,989 60,642
------- -------
Total shareholders' equity 88,969 88,096
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 103,334 $ 103,380
======= =======
See accompanying Notes to Unaudited Condensed Consolidated Financial
Statements.
SUPERTEX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Three months Ended
June 30, 2002 June 30, 2001
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 347 $ 1,127
------------ -----------
Non-cash adjustments to net income:
Depreciation and amortization 1,290 899
Provision for doubtful accounts and
sales returns 827 133
Provision for excess and obsolete inventories 4 168
Gain on sale of long-term investments -- (127)
Changes in operating assets and liabilities:
Accounts receivable (116) (667)
Inventories 1,026 22
Prepaid expenses and other assets 414 327
Trade accounts payable and accrued expenses (2,140) (1,827)
Income taxes payable 1,227 577
Deferred revenue (6) 641
------- -------
Total adjustments 2,526 146
------- -------
Net cash provided by operating activities 2,873 1,273
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (1,007) (185)
Sales (purchases) of long-term investments -- 627
Net cash provided by (used in) ------- -------
investing activities (1,007) 442
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Stock options exercised 526 549
Repurchase of stock -- (316)
------- -------
Net cash provided by financing activities 526 233
------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,392 1,948
CASH AND CASH EQUIVALENTS:
Beginning of period 52,492 44,282
-------- --------
End of period $ 54,884 $ 46,230
======== ========
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 June 30, 2002 and 2001 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, 2002, which were included in the Annual Report on Form 10-K (File
Number 000-12718).
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.
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.
Note 2 - Inventories
Inventories consisted of (in thousands):
June 30, 2002 March 31, 2002
Raw materials................................... $ 1,130 $ 1,218
Work-in-process................................. 11,100 11,849
Finished goods.................................. 3,234 3,427
--------- ---------
$ 15,464 $ 16,494
========= =========
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,
2002 2001
BASIC:
Net income $ 347 $ 1,127
======= ========
Weighted average shares outstanding for the period 12,575 12,410
======= ========
Net income per share $ 0.03 $ 0.09
DILUTED:
Net income $ 347 $ 1,127
======= =======
Weighted average shares outstanding for the period 12,575 12,410
Dilutive effect of stock options 360 203
======= =======
Total 12,935 12,613
======= =======
Net income per share $ 0.03 $ 0.09
As of June 30, 2002, Options to purchase the Company's common stock of 435,899
shares at an average price of $29.64 per share were outstanding but were not
included in the computation of diluted earnings per share because their effect
would have been antidilutive.
Note 4 - Recent Accounting Pronouncements
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 June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or Disposal
Activities" ("SFAS 146"). SFAS 146 addresses significant issues regarding the
recognition, measurement, and reporting of costs that are associated with
exit and disposal activities, including restructuring activities that are
currently accounted for under EITF No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." The scope of SFAS
146 also includes costs related to terminating a contract that is not a
capital lease and termination benefits that employees who are involuntarily
terminated receive under the terms of a one-time benefit arrangement that is
not an ongoing benefit arrangement or an individual deferred-compensation
contract. SFAS 146 will be effective for exit or disposal activities that are
initiated after December 31, 2002 and early application is encouraged. We
will adopt SFAS 146 during the year ending March 31, 2003. The provisions of
EITF No. 94-3 shall continue to apply for an exit activity initiated under an
exit plan that met the criteria of EITF No. 94-3 prior to the adoption of
SFAS 146. The effect on adoption of SFAS 146 will change on a prospective
basis the timing of when restructuring charges are recorded from a commitment
date approach to when the liability is incurred.
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. Examples of such forward-looking statements in this 10-Q are our
plans to continue in the future our current level of R&D investment on new
product development as a percent of net sale 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 the demand for our products or results of our product
development change such that it would be unwise not to decrease research and
development 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, 2002. 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, 2002.
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, 2002.
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 June 30, 2002 were $13,277,000, a 12%
decrease compared to $15,181,000 for the same quarter last year, and a
increase of 4% from $12,809,000 of the prior quarter. Our sales for the first
quarter were adversely affected by the continued global economic slowdown and
the reduced demand for our products in two of our three major markets:
telecom and medical. Demand for our telecom products were adversely affected
by the reduced spending of our telecom customers while our medical market
suffered some average sales price (ASP) erosion primarily due to
consolidations within the medical electronics industry we sell into.
As a percentage of total sales for the quarter ended June 30, 2002, sales to
customers in the medical electronics, imaging, and telecommunications markets
represented 33%, 33%, and 22% of total sales, respectively, compared to 37%,
29% and 22% of total sales for the quarter ended June 30, 2001. Sales to
customers in other markets accounted for 12% of the total sales for both the
quarter ended June 30, 2002 and 2001.
Sales to international customers for the quarter ended June 30, 2002 were
$4,032,000, or 30% of the Company's net sales as compared to $4,148,000, or
28% of the net sales of the same period of last year. In comparing the
current quarter with the same period last year, dollar sales to international
customers declined only approximately 3% while the total sales declined 12%.
Gross Profit
As a percent of sales, the Company's gross margin was 33% for the three-month
period ended June 30, 2002, compared with 39% of the same period of the prior
year. Gross margin was adversely affected by a planned inventory reduction
of approximately $1.0 million, which caused a further decline in production
capacity utilization. This planned inventory reduction was a result of our
improved throughput time.
Research and Development (R&D)
R&D expense decreased 29% to $2,318,000 for the quarter ended June 30, 2002
as compared to $3,270,000 for the same quarter of the prior year. The dollar
decrease in R&D expense for the quarter ended June 30, 2002 is partly due to
many new products being transferred to production status during the quarter
and therefore reducing the fab expenses associated with R&D. As a percent of
sales, our R& D expense declined from 22% in the first quarter of last year
to 17% in the first quarter of this year. However, our R&D expense in the
first quarter of last year was abnormally high for us-in both the remainder
of last year and during all of fiscal 2001, our quarterly R&D expense
averaged approximately $2.7 million per quarter and as a percentage of sales
was 20% and 13%, respectively. Despite lower sales, we maintained our R&D
investments during the first quarter of this year at 17% of net sales. We
plan to continue this level of R&D investments as a percent of net sales on
new product development.
Selling, General and Administrative (SG&A)
SG&A was $1,835,000 or 14% of net sales for the quarter ended June 30, 2002
as compared with $1,816,000 or 12% of net sales in the same quarter of the
prior year. In absolute dollars, SG&A expense for the quarter decreased by
$19,000, or 1% when compared to the same period of the prior year. Increased
spending in advertising of $123,000 and sales commissions of $152,000 during
the first quarter were offset by the decline in payroll and benefits of
$104,000 resulting from reduced work week and reduced spending on outside
services of $166,000.
Income from Operations
Income from operations was $275,000, or 2% of net sales for the quarter ended
June 30, 2002 compared to $804,000, or 5% of net sales for the quarter ended
June 30, 2001. The decrease in operating income is primarily attributable to
lower sales and the further decline in production capacity utilization.
Interest and Other Income
Interest income for the quarter ended June 30, 2002 was $244,000 compared to
$527,000 for the same quarter of prior year. The decrease in interest income
is primarily attributable to lower yields on the money market accounts where
we maintain the bulk of our cash deposits. Other Income for the three-month
period ended June 30, 2002, was $7,000 compared with $376,000 for the same
period of last fiscal year. Other income for the first quarter of last fiscal
year included realized gains from sale of long-term investments of $127,000
and a restocking fee charged for customer returns of approximately $160,000.
Provision for Income Taxes
The Company's effective tax rate for the three -month period ended June 30,
2002 remained unchanged at 34%.
Liquidity and Capital Resources
On June 30, 2002, the Company had $54,884,000 in cash and cash equivalents,
compared with $52,492,000 on March 31, 2002. This increase is due primarily
to a positive cash flow from operating activities of $2,873,000 consisting
principally of net income of $347,000 and non-cash charges for depreciation
and amortization of $1,290,000. Factors affecting cash flow from operating
activities include (a) a decrease in inventories of $1,026,000 due to a
planned inventory reduction resulting from better throughput time; (b) a
decrease in accounts payable and other accrued items of $2,140,000 due to a
decrease in purchasing activities; and (c) an increase of $1,227,000 in
income tax payable.
Net cash used in investing activities during the three-month period was
$1,007,000, primarily for the purchase equipment to upgrade our wafer
fabrication facility.
Net cash provided by financing activities for the three-month period was
$526,000 generated by proceeds from the issuance of common stock through the
exercise of employee stock options.
We described our total potential commitments 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, 2002. Our
total potential commitments have not changed materially since March 31, 2002.
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 June 30, 2002, 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.
STATEMENT OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER UNDER 18
U.S.C. 1350
I, Henry C. Pao, the chief executive officer and chief financial
officer of Supertex, Inc., a California corporation (the "Company"), certify
pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code,
(i) the Quarterly Report of the Company on Form 10-Q for the
period ending June 30, 2002 (the "Report"), fully complies with the
requirements of Section 13(a) or 15(d), whichever is applicable, of the
Securities Exchange Act of 1934, and
(ii) the information contained in the Report fairly presents, in
all material respects, the financial condition and results of operations of
the Company.
/s/
Henry C. Pao
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 12, 2002
By: /S/
Henry C. Pao, Ph.D.
President
(Principal Executive and Financial Officer)