SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
(x) Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee Required) For the Fiscal Year Ended March 31, 2003
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
and Exchange Act of 1934 For the transition period from _______ to ________
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
No.)
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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act).
Yes x No
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of September 27, 2003, was $92,560,833 based on the closing price
reported for such date. Shares of common stock held by officers, directors
and other persons who may be deemed "affiliates" of the Registrant have been
excluded from this computation. This determination of affiliate status is
not necessarily a conclusive determination for other purposes. The total
number of shares outstanding of the Registrant's common stock as of June 20,
2003, was 12,705,704.
Documents Incorporated by Reference: Part III incorporates by reference
portions of the Company's definitive proxy statement for the Annual Meeting
of Shareholders to be held on August 15, 2003 (the "Proxy Statement").
Exhibit Index is on Page 44
Total number of pages is 47
SUPERTEX, INC.
ANNUAL REPORT - FORM 10K
Table of Contents
Page No.
PART I
Item 1. Business................................................... 1
Item 2. Properties................................................. 7
Item 3. Legal Proceedings.......................................... 8
Item 4. Submission of Matters to a Vote of Security Holders........ 8
PART II
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters........................................ 8
Item 6. Selected Consolidated Financial Data....................... 9
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 10
Item 7A. Quantitative and Qualitative Disclosure about Market Risk.. 20
Item 8. Financial Statements and Supplementary Data................ 20
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................... 20
PART III
Item 10. Directors and Executive Officers of the Registrant......... 21
Item 11. Executive Compensation..................................... 21
Item 12. Security Ownership of Certain Beneficial Owners
and Management............................................. 21
Item 13. Certain Relationships and Related Transactions............. 21
Item 14. Controls and Procedures.................................... 21
PART IV
Item 15. Exhibits, Financial Statement Schedule and Reports on
Form 8-K................................................... 22
Signatures................................................................. 24
PART I
Item 1. Business
This Annual Report on Form 10-K 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 the kinds of forward-looking
statements in this report include statements regarding the following:
(1) we expect to undertake research and development of more than thirty new
product projects during fiscal 2004, (2) our expectation that our wafer
fabrication facility (fab) will fulfill our wafer manufacturing capacity
needs, (3) our belief that our current backlog will be shipped in fiscal
2004, (4) our belief that our patents may have value and may be useful for
cross-licensing, (5) our belief that our position as a leading
supplier in our targeted markets can only be maintained through continuous
investments in R&D, (6) our anticipation that we will not pay dividends in
the near term, (7) our hope that the economy will recover in the coming
quarters and that as a result the business of our customers will increase
leading to increased revenue for us as well, (8) our belief that our
continued growth depends in part on our ability to attract and retain highly
skilled employees, (9), that available funds and cash generated from
operations will be sufficient to meet our cash and working capital
requirements through the end of fiscal 2004, (10) that we expect to spend
approximately $2,821,000 for capital acquisitions in fiscal year 2004, and
(11) that the fair value of our investment portfolio would not be
significantly impacted by changes in interest rates. These statements are
only predictions, are not guarantees, 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 those described in Item 7
"Factors Which May Affect Operating Results" and elsewhere in this report, as
well as the risks (1) that our patents may not have material value and that
there may not be a market to cross-license them,(2) that there may be
alternative ways for us to maintain our competitive position than through
investments in R&D, that these alternatives may cost us less money or be more
effective than investments in R&D, that our investments in R&D may not
result in new products, and that even if our investments in R&D result in new
products, these products may not enable us to maintain our competitive
position, (3) that we will not obtain continued growth despite hiring highly
skilled employees,(4) that we will not generate enough cash from
operations to meet our cash and working capital requirements through the end
of fiscal 2004, (5) that we need to spend more on capital acquisitions than
anticipated, or that we overestimate or underestimate our need for capital
acquisition, and (6) that changes in short-term interest rates are
significant enough to effect our investment portfolio. 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.
Supertex, Inc. ("Supertex" the "Company" "We" and "us") is a technology-based
producer of high voltage analog and mixed signal semiconductor components.
We design, develop, manufacture, and market integrated circuits (ICs),
utilizing state-of-the-art high voltage DMOS, HVCMOS and HVBiCMOS analog and
mixed signal technologies. With respect to our DMOS transistor products, the
Company has maintained an established position in key products for
telecommunication and automatic test equipment industries. Supertex has been
an industry leader in high voltage integrated circuits (HVCMOS and HVBiCMOS),
which take advantage of the best features of CMOS, bipolar, and DMOS
technologies and integrate them into the same chip. They are used by the
flat panel display, printer, medical ultrasound imaging, telecommunications,
industrial and consumer industries.
We market our products through direct sales personnel, independent sales
representatives and distributors in the United States of America and abroad,
primarily to electronic original equipment manufacturers.
The Company was incorporated in California in October 1975 and conducted an
initial public offering of its Common Stock in December 1983. Our executive
offices are located at 1235 Bordeaux Drive, Sunnyvale, California 94089, and
our principal manufacturing facilities are located in San Jose, California
and in Hong Kong. We have three design centers, one in our Sunnyvale
headquarters, one in San Jose, California within our six-inch sub-micron
wafer fabrication facility (fab), and one in Hong Kong within our production
test facility. We maintain six direct field sales offices located in: (1)
Tallman, New York; (2) Irving, Texas; (3) Oley, Pennsylvania; (4) The United
Kingdom; (5) Germany; and (6) Taiwan as well as our new International Sales
and Distribution Center in Hong Kong established in fiscal 2002. The
telephone number of our headquarters is (408) 222-8888. Our mailing address
is 1235 Bordeaux Drive, Sunnyvale, California 94088-3607. Our website
address is www.supertex.com.
Products
Over the years Supertex has designed and developed a variety of 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
telecommunications, imaging and medical electronics markets. Within the
same three markets as elaborated in the following, we also provide custom
wafer foundry services for the manufacture of integrated circuits using
customer-owned designs and mask toolings. During fiscal 2003, foundry
services represented approximately 25% of our revenues, with the balance of
our revenues coming from product sales, whereas during fiscal 2002 and 2001
foundry services represented approximately 28% and 25% of our revenues,
respectively.
The Telecommunications (Telecom)/Broadband Group consists of interface
products used in telephone handsets, solid state relays, modems, fax, ISDN,
networking, PABX, and PCMCIA cards, as well as diagnostic, curbside, set-top
and central office equipment. The IC products include: hotswap controller,
supervisory, power management, ringer, protection & isolated switch, Optical
micro-electro-mechanical system (MEMS) driver ICs. In addition, we offer
foundry service for certain optical MEMS products.
The Imaging Group consists of interface products for flat panel displays and
non-impact printers and plotters. The flat panel display product family is
sold to customers using electroluminescent (EL), plasma, vacuum fluorescent,
Cholesteric LCD, electrophoretic and light remitting diodes (LED)
technologies. There is also a family of products for driving EL panels to
back-light LCD displays in hand-held instruments, such as cellular phones,
PDAs, pagers, HPCs, and meters as well as LEDs for general lighting to
replace the incandescent and fluorescent lights because the new LEDs are
very efficient. The printer product family is used in ink-jet and
electrostatic types of printers and plotters, which are mostly high end
products, with full color capability, high resolution and high-speed outputs.
In addition, we offer foundry service for charge-coupled devices (CCD) and
CMOS imaging devices.
The Medical Electronics Group consists of products primarily for ultrasound
diagnostic imaging equipment as well as selected portable instrument
applications. In addition, we offer foundry service for pacemaker and
defibrillator integrated circuits.
Net sales generated from each of these three groups are discussed under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Net Sales."
As a leading provider of products to these specific niche markets, Supertex
has been able to work very closely with key customers to define new products
and identify future market needs. Such close collaboration has facilitated
our development of a wide range of leading edge new products and has allowed
our customers to quickly develop new and more advanced products for their
markets.
In the DMOS transistor product line, Supertex focuses on certain niches such
as very low threshold and low leakage devices, which are most suitable for
telecommunication, automatic test equipment, and hand-held applications
where these features justify a premium. The DMOS transistor products also
serve as building blocks and predecessors to a fully integrated solution
such as high voltage integrated circuits.
Supertex operates in only one segment. Information regarding Supertex's
Segment Reporting can be found in Notes 1 and 7 of the "Notes to Consolidated
Financial Statements."
Research and Development
Supertex incurred research and development expenses of $9,338,000,
$11,279,000, and $10,917,000 on research and development activities during
fiscal years 2003, 2002, and 2001 respectively. Research and development
activities in fiscal 2004 are expected to continue at the rate of over
thirty new product projects per year.
We believe that our position as a leading supplier in our targeted markets
can only be maintained through continuous investments in research and
development. We focus our efforts on designing new products with existing
process technologies while also developing new process technologies to be
used for future products. We continuously strive to effectively monitor
and control our research and development programs in order to obtain better
performance and greater technological achievements at lower costs.
Manufacturing
Manufacturing operations include wafer fabrication in San Jose, California;
limited assembly and packaging in Sunnyvale, California; product testing and
quality control in Sunnyvale, California and Hong Kong. Of our long lived
assets, 6% were located in our Hong Kong facility at the end of fiscal 2002
and 2003, with the balance located in the U.S.
We subcontract most of our standard component packaging and limited testing
to independent assemblers, principally in Thailand and Malaysia. After
assembly, packaged units are shipped back to our facilities for final product
testing and quality control before shipment to customers. Although our
off-shore assemblies have not experienced any serious work stoppages,
political instability and the severe acute respiratory syndrome (SARS)
epidemic in these countries may adversely affect our assembly operations.
Although we have qualified assemblers in different countries to reduce risk,
any prolonged work stoppage or other inability to assemble products would
have a material adverse impact on our operating results. Furthermore,
economic risks, such as changes in tariff or freight rates or interruptions
in air transportation, could adversely affect our operating results. We
also maintained a specialized assembly area at our manufacturing facilities
to package engineering prototypes, to ensure high priority deliveries, and to
assemble high reliability circuits required in military and other high
reliability applications. We moved our production test operation to Hong
Kong in fiscal 2002, but still maintain a small prototype product testing
and product engineering operation in Sunnyvale, California. As of the end
of the fiscal 2003, the value of all our equipment and facility (long-live
assets), located in Hong Kong amounted to $688,000.
We believe that we are well-positioned to fulfill our wafer manufacturing
capacity needs for the near future because our fab is running at below fifty
percent (50%) utilization.
The availability of blank silicon wafers has improved considerably in the
past year. Assembly packages and other raw materials we use in the
manufacturing of our products are obtainable from several suppliers. Some
of these materials were in short supply in prior years, but recently the
supply of these materials appears to be plentiful and subject to competitive
pricing pressure. However, any future shortage of supply would have a
material adverse effect on our operating results. As is typical in the
semiconductor industry, we must allow for lead times in ordering certain
materials and services and often commit to volume purchases to obtain
favorable pricing concessions and resource allocations.
Environmental Laws
Government regulations impose various environmental controls on the waste
treatment and discharge of certain chemicals and gases after their use in
semiconductor processing. We believe that our activities substantially
comply with present environmental regulations. However, increasing attention
has been focused on the environmental impact of semiconductor manufacturing
operations. While we have not experienced any material adverse effects on
our business or financial results from our compliance with environmental
regulations and installation of pollution control equipment, there can be no
assurance that changes in such regulations will not necessitate our
acquisition of costly equipment or other requirements in the future. We work
closely with pollution experts from federal, state, and local agencies,
especially from the cities of Sunnyvale and San Jose, California, to help us
comply with present requirements.
Sales
We market our standard and custom products in the United States and abroad
through our direct sales and marketing personnel in our headquarters, as well
as through independent sales representatives and distributors supported by
our field sales managers out of our sales offices in New York, Texas,
Pennsylvania, the United Kingdom, Germany, and Taiwan. In addition we have
established an international sale/distribution center in Hong Kong in fiscal
2002.
Export sales are made primarily through independent distributors to customers
in Europe and Asia, and represented 33%, 31%, and 38% of net sales in fiscal
years 2003, 2002, and 2001 respectively. Exports to Asia are largely to
customers in Japan. Export sales are denominated only in U.S. dollars.
Although export sales are subject to certain governmental commodity controls
and restrictions for national security purposes, we have not had any material
adverse effects on our business or financial results because of these
limitations.
Microtek Inc., our primary distributor in Japan, accounted for 11% of our
net sales for fiscal years 2003 and 2002, respectively, and 12%, of our net
sales in fiscal 2001. We do not have a long-term distributorship agreement
with Microtek. Normal terms and conditions of sale apply, which include a
60-day notice of cancellation and charges for work-in-process for
cancellations less than 60 days from shipment. Outstanding accounts
receivable from Microtek accounted for 17% of gross accounts receivable as of
March 31, 2003. While we have maintained a good relationship with Microtek,
Inc. for over sixteen years, a breakdown in that relationship could materially
and adversely affect our business and financial results.
Inventories are stated at the lower of cost (determined on a first-in,
first-out basis) or market value. Our inventories include high technology
parts and components that are specialized in nature or subject to rapid
technological obsolescence. While we endeavor to minimize the required
inventory on hand and consider technological obsolescence when estimating
amounts required, such estimates may be inaccurate and are subject to change.
Revenue from direct product sales to end-user customers is recognized upon
transfer of title and risk of loss, which is generally upon shipment of the
product provided persuasive evidence of an arrangement exists, the price is
fixed or determinable, no significant obligations remain and collection is
probable. For sales to original equipment manufacturers (OEMs), we use either
a binding purchase order or signed agreement as evidence of an arrangement.
Sales through our distributors are evidenced by a distributor agreement
governing the relationship together with binding purchase orders on a
transaction-by-transaction basis. Provisions for estimated warranty
repairs, returns and other allowances are recorded at the time revenue is
recognized. Sales to distributors are made primarily under arrangements
allowing limited price protection and the right of stock rotation on
merchandise unsold by the distributors. Because of the uncertainty
associated with pricing concessions and possible returns, the Company defers
recognition of such sales and the related costs of sales until distributors
sell the merchandise to their end-user customers.
Seasonality
While there may be some seasonality in some of our markets, typically weaker
in the first half of any calendar year, a seasonal influence on our sales has
not been identified as a consistent material trend although the
telecommunications market has been exceptionally weak since the first
calendar quarter of 2002.
Backlog
Our backlog at March 31, 2003 was approximately $10,457,000 compared with
$12,275,000 and $23,956,000 at March 31, 2002, and 2001 respectively. We
expect that all of the current backlog will be shipped in fiscal 2004.
Customers may cancel or reschedule orders without significant penalty, and
the price of products may be adjusted between the time the purchase order is
booked into backlog and the time the product is shipped to the customer. For
those reasons, we believe that backlog is not meaningful in predicting our
actual net revenue for any future period.
Competition
Competition in general among manufacturers of semiconductor components and
discrete transistors is intense. Many of our domestic and foreign
competitors have larger facilities, more financial, technical, and human
resources, and more diverse product lines. Competition in the industry is
based primarily upon factors such as product prices, product performance,
diversity of product lines, delivery capabilities, and the ability to adapt
to rapid technological change in the development of new and improved
products. We believe we are generally competitive with respect to these
factors; however, because of our market niches, market statistics are not
generally available for many of our products. We also believe we are a
leader in certain markets for our product families where we have a
technological and/or cost advantage. We capitalize on our leadership
positions by working very closely with customers to help them with next
generation products, thus maintaining our leadership positions. Such close
collaboration has produced a wide range of leading edge new products for us
and for our customers and is one of our competitive advantages.
Patents and Licenses
We hold numerous United States patents, which will expire between 2002 to
2018, and we have applications for additional patents pending. Although we
believe that our patents may have value, there can be no assurance that our
patents or any additional patents that may be obtained in the future will
provide meaningful protection from competition. We believe that our success
depends primarily on the experience, creative skills, technical expertise,
and marketing ability of our personnel rather than on the ownership of
patents. Patents may, however, be useful for cross-license purposes and
have served the Company well in the past.
Supertex is not aware that any of its products infringe on any valid patent
or other proprietary rights of third parties but it cannot be certain that
they do not do so. If infringement is alleged, there can be no assurance
that the necessary licenses could be obtained, or if obtained, would be on
terms or conditions that would not have a material adverse effect on the
Company.
Employees
At March 31, 2003, we had 334 full time employees primarily located in
Northern California and Kowloon, Hong Kong. Many of our employees are
highly skilled, and we believe our continued growth and success will depend
in part on our ability to attract and retain such employees. At times, like
other semiconductor manufacturers, we experienced difficulty in hiring and
retaining sufficient numbers of skilled personnel, especially experienced
analog integrated circuit designers.
We believe that the compensation, benefits, and incentives offered to our
employees are competitive with those generally offered throughout the
semiconductor industry. There are no collective bargaining agreements
between us and our employees, and there has been no work stoppage due to
labor difficulties. The Company considers its employee relations to be good.
Executive Officers of the Company
Name Position with the Company Age Officer Since
- ---- ------------------------- --- -------------
Henry C. Pao President, Principal Executive
and Financial Officer 65 1976
Richard E. Siegel Executive Vice President 57 1982
Benedict C. K. Choy Senior Vice President,
Technology Development, 57 1976
and Secretary
Dennis E. Kramer Vice President, Materials 61 1996
William P. Ingram Vice President, Wafer Fab Operations 55 1999
Franklin Gonzalez Vice President, Process Technology 52 1999
Michael Lee Vice President, I.C. Design 48 1999
Dilip Kapur Vice President, Standard Products 54 2000
William Petersen Vice President, Worldwide Sales 50 2001
David Schie Vice President, Telecom
and Broadband Products 31 2001
Officers appointed by the Board of Directors serve at the discretion of the
Board. There is no family relationship between any directors or executive
officers of the Company.
Henry C. Pao is a founder of Supertex and has served as President, Principal
Financial and Executive Officer, and as a Director since the Company's
formation in fiscal 1976. Previously, he worked at Fairchild Semiconductor,
Raytheon, Sperry Rand and IBM. He has B.S., M.S., and Ph.D. degrees in
Electrical Engineering from the University of Illinois at Champaign-Urbana.
Richard E. Siegel joined the Company in 1981 as National Sales Manager, was
appointed Vice President of Sales and Marketing in April 1982, Senior Vice
President in February 1988, and has served as Executive Vice President since
November 1988. He has been a Director since 1988. Previously, he worked at
Signetics Corporation, Fairchild Semiconductor, Ford Instrument and Grumman
Aircraft Corporation. Mr. Siegel is also a member of the Board of Directors
for All American Semiconductor (NASD: SEMI). All American Semiconductor,
headquartered in Florida, is a national distributor of electronic components
manufactured by others and is a major distributor for Supertex. Mr. Siegel
has a B.S. degree in Mechanical Engineering from City College of New York,
augmented with Electrical Engineering courses from Brooklyn Polytechnic
Institute, New York.
Benedict C. K. Choy, a founder of the Company, joined Supertex in fiscal 1976
as Vice President, Device Technology and Process Development, and has served
as Senior Vice President since February 1988. He has been a Director since
1986. Previously, he worked at Fairchild Semiconductor, National
Semiconductor, and Raytheon. He has a B.S. degree in Electrical Engineering
from the University of California, Berkeley.
Dennis E. Kramer joined Supertex in September 1981 as Wafer Fab II Production
Manager. Over his tenure, he has managed many facets of the wafer fabrication
process as well as all the back-end manufacturing operations. He was
promoted to Vice President of Materials in 1996. Previously, he worked at
Siemens and Signetics Corporation. He has a B.S. degree in Chemistry from
University of California, Los Angeles and an MBA from Santa Clara University.
William P. Ingram joined Supertex five years ago as its Director of Wafer Fab
Operations. Prior to joining Supertex, he was Vice President of Technology
Development at Crosspoint Solutions, before which he held management positions
at Fairchild and National Semiconductor. He began his career at National
after receiving his B.S. degree in Electrical Engineering with honors from
the North Carolina State University.
Franklin Gonzalez joined Supertex in November 1990 as a Process Development
Manager. In 1994, he was promoted to Director of Process Technology. Prior
to joining Supertex, he held various R&D management positions spanning over
seventeen years with such companies as ECI Semiconductor, Telmos and Harris
Semiconductor where he began his career. He has a Ph.D. in Electrical
Engineering from the University of Florida and a Masters in Electrical
Engineering from Stanford University.
Michael Lee re-joined Supertex in October 1993 as Director of I.C. Design.
Before that, he had a combined total of fifteen years of industry experience
in I.C. Design. He began his career at Supertex after receiving his Masters
in Electrical Engineering from UC Berkeley in 1978.
Dilip Kapur joined Supertex in March 1984 and has managed Marketing,
Applications, Marketing Communications and Product Engineering Departments.
He was promoted to Director of Marketing in 1990, and promoted to Vice
President Standard Products in December 2000. He has previously held
Application Engineering and Marketing positions at Computer Power Inc. and
Advani Oerlikon Ltd. He has a B.S. degree in Electrical Engineering from
MACT, Bhopal and a Diploma in International Trade from Indian Institute of
Foreign Trade, New Delhi.
William Petersen first joined Supertex in 1984 as Sales Manager for the
Central Region of the United States. From 1990 through 1994, he was the
Company's National Sales Manager, overseeing sales operations throughout the
United States. Mr. Petersen re-joined Supertex in September 1999 as Director
of Sales. He was promoted to Vice President of Worldwide Sales in April 2001.
Prior to working at Supertex, he worked at Siemens as Central Area Manager
from 1980-1984. Mr. Petersen attended the University of Iowa.
David C. Schie joined Supertex in 2000 and was promoted to Vice President
Telecom & Broadband Products in August 2001. He was a founder of various
companies including the ESG group of companies and Linear Dimensions
Semiconductor. Mr. Schie holds various patents or patents pending in areas
including PWM, supervisory & biasing ICs and power management ICs. He was
trained at the University of Toronto in Analog IC Design.
Available Information
We make available free of charge and through our internet website our annual
report on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, and amendments to those reports filed or furnished pursuant to
Section 13(a) or 159(d) of the Securities Exchange Act of 1934 as soon as
reasonably practicable after we electronically file such material with, or
furnish it to, the Securities and Exchange Commission.
Item 2. Properties
We lease a building at 71 Vista Montana, San Jose, California covering
approximately 61,700 square feet where our six-inch submicron wafer
fabrication and process engineering, and Telecom Design functions are
located. The current lease at this facility will expire in April 2004 with
two five-year options which if exercised would extend the lease to April
2014. Supertex is subleasing a portion of this building to an unrelated
third party.
We leased a portion of a building at 10 Sam Chuk Street, Sanpokong, Kowloon,
Hong Kong in July 2001. This facility houses our back-end processing
operations including: wafer sort, final test, quality control and assembly
logistics as well as our Hong Kong Design Center and our International Sales
and Distribution Center. In March 2003 we surrendered 4,250 of the 27,850
square feet that was contracted in the original lease agreement.
We also lease a portion of a building, covering approximately 5,600 square
feet, at 1225 Bordeaux Drive, Sunnyvale, California, expiring on April 2007.
This building is leased from a corporation owned by a former director of the
Company and is being sub-leased, essentially at cost, to Reaction Technology,
our epitaxial deposition service provider. (See Note 6 of "Notes to
Consolidated Financial Statements" and Item 13.)
We own our corporate headquarters, a facility of approximately 42,000 square
feet at 1235 Bordeaux Drive, Sunnyvale, California, which houses the
executive offices, sales and marketing, product engineering, R&D, prototype
and hi-rel assembly, quality control, production control, corporate
financial and administrative staff.
We believe that our existing facilities and equipment are well maintained and
are in good operating condition.
Item 3. Legal Proceedings
Supertex is not currently a party to any material legal proceedings. However,
it may be involved from time to time in various legal actions arising in the
ordinary course of business.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the quarter
ended March 31, 2003.
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters
The following table sets forth the range of high and low closing sale prices
reported on The Nasdaq Stock Market under the symbol SUPX for the periods
indicated.
Fiscal Years Ended March 31,
----------------------------
2003 2002
---- ----
High Low High Low
---- --- ---- ---
First Quarter $ 22.00 $ 13.80 $ 18.28 $ 11.20
Second Quarter 17.62 9.64 17.82 12.02
Third Quarter 15.10 9.25 19.75 15.25
Fourth Quarter 15.36 13.00 23.75 18.00
On May 19, 2003, the last reported sale price was $15.63 per share. There
were approximately 2,289 shareholders of record of common stock on May 28,
2003. We have not paid cash dividends on our common stock in fiscal years
2003 and 2002, and the Board of Directors presently intends to continue this
policy in order to retain earnings for the development of the Company's
business. Accordingly, it is anticipated that no cash dividends will be
paid to holders of common stock in the foreseeable future.
Securities authorized for issuance under equity compensation plans:
Employee Stock Purchase Plan - The shareholders of the Company approved
the adoption of the 2000 Employee Stock Purchase Plan (the "ESPP") and the
reservation of shares of common stock for issuance under this Plan at the
August 18, 2000 annual shareholder meeting. The maximum aggregate number of
common stock available for purchase under the ESPP is 500,000 shares plus an
annual increase on the first day of the Company's fiscal year of the lesser
of 100,000 shares or three percent (3%) of the outstanding shares on that
date or a lesser amount determined by the Board of Directors. Eligible
employees may elect to withhold up to 20% of their cash compensation to
purchase shares of the Company's common stock at a price equal to 85% of the
market value of the stock at the beginning or ending of a six month offering
period, whichever is lower. An eligible employee may purchase no more than
500 shares during any calendar year. A total of 46,408 shares and 45,239
shares of the Company's common stock were issued under the ESPP for fiscal
years 2003 and 2002 respectively. There were no shares issued under the ESPP
for the year ended March 31, 2001. There are 408,353 shares available for
future issuance under the ESPP at the end of fiscal year 2003.
Stock Option Plans - The 1991 Stock Option Plan (the "1991 Plan")
provides for granting incentive stock options to employees, and non-statutory
stock options to employees and consultants. Terms for exercising options are
determined by the Board of Directors, and options expire at the earlier of
the term provided in the Notice of Grant or upon termination of employment
or consulting relationship. The 1991 Plan expired in June 2001, thus there
were no options available for grant under the 1991 Plan.
At the end of fiscal year 2003, there were 1,309,380 shares which are
issuable upon exercise of outstanding options under the 1991 Plan at a
weighted average exercise price of $17.21. Options granted under the 1991
Plan were granted at the fair market value of the Company's common stock on
the date of grant and generally expire 7 years from the date of grant or at
termination of service, whichever occurs first. The options generally are
exercisable beginning one year from date of grant and generally vest over a
five-year period.
Our shareholders approved the adoption of the 2001 Stock Option Plan
(the "2001 Plan") and the reservation of 2,000,000 shares of common stock for
issuance under the 2001 Plan at the August 17, 2001 annual meeting of
shareholders. Terms for exercising options and vesting schedules are similar
to the 1991 Plan. At the end of fiscal year 2003, there were 234,700 shares
which are issuable upon exercise of outstanding options under the 2001 Plan
at a weighted average exercise price of $15.69 and there are 1,765,300 shares
remaining available for issuance.
We have no equity compensation plans that were not previously approved
by our shareholders.
Item 6. Selected Consolidated Financial Data
The selected financial information and other data presented below should be
read in conjunction with the "Consolidated Financial Statements," "Notes to
Consolidated Financial Statements," and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
Form 10-K.
March 31,
--------
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
(in thousands)
Balance Sheet Data:
Working capital............................ $ 78,051 $ 67,333 $ 61,662 $ 52,950 $ 41,650
Total assets............................... 108,671 103,380 98,695 86,623 74,589
Shareholders' equity....................... 92,525 88,096 82,359 72,269 62,680
Cash and cash equivalents and
short-term investments............ 64,876 52,492 44,282 34,176 28,397
Total current assets....................... 94,197 82,617 77,998 67,304 53,559
Total current liabilities.................. 16,146 15,284 16,336 14,354 11,909
Fiscal Years Ended March 31,
- ---------------------------- 2003 2002 2001 2000 1999
---- ---- ---- ---- ----
(in thousands, except per share amounts)
Statement of Income Data:
Net sales.......................................... $54,915 $56,195 $81,455 $70,838 $50,721
Costs and expenses:
Costs of sales............................. 34,103 33,700 48,790 44,976 28,867
Research and development................... 9,338 11,279 10,917 8,468 7,195
Selling, general and administrative 8,722 7,939 10,806 6,980 6,860
Write-off of acquired in process
Technology................................. -- -- -- -- 2,506
----- ----- ----- ------ -----
Income from operations............................. 2,752 3,277 10,942 10,414 5,293
Other income:
Interest income............................ 916 1,538 2,466 1,978 1,981
Other income (expense), net 530 1,037 (1,153) 257 (130)
----- ----- ----- ------ -----
Income before provision for income taxes........... 4,198 5,852 12,255 12,649 7,144
Provision for income taxes......................... 1,343 1,990 4,167 4,174 1,810
------ ------ ------ ------ ------
Net income................................. $ 2,855 $ 3,862 $ 8,088 $ 8,475 $ 5,334
====== ====== ====== ====== ======
Net income per share:
Basic...................................... $ 0.23 $ 0.31 $ 0.65 $ 0.70 $ 0.44
====== ====== ====== ====== ======
Diluted.................................... $ 0.22 $ 0.30 $ 0.62 $ 0.68 $ 0.44
====== ====== ====== ====== ======
Shares used in per share computation:
Basic...................................... 12,598 12,443 12,351 12,126 12,077
====== ====== ====== ====== ======
Diluted.................................... 12,757 12,748 12,990 12,519 12,225
====== ====== ====== ====== ======
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Cautionary Statement Regarding Forward Looking Statements
This discussion 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 the kinds of forward-looking statements in this
report include statements regarding the following: (1) we expect to
undertake research and development of more than thirty new product projects
during fiscal 2004, (2) our expectation that our wafer fabrication facility
(fab) will fulfill our wafer manufacturing capacity needs, (3) our belief
that our current backlog will be shipped in fiscal 2004, (4) our belief that
our patents may have value and may be useful for cross-licensing, (5) our
belief that our position as a leading supplier in our targeted markets can
only be maintained through continuous investments in R&D, (6) our
anticipation that we will not pay dividends in the near term, (7) our hope
that the economy will recover in the coming quarters and that as a result the
business of our customers will increase leading to increased revenue for us
as well, (8) our belief that our continued growth depends in part on our
ability to attract and retain highly skilled employees, (9), that available
funds and cash generated from operations will be sufficient to meet our cash
and working capital requirements through the end of fiscal 2004, (10) that
we expect to spend approximately $2,821,000 for capital acquisitions in
fiscal year 2004, and (11) that the fair value of our investment portfolio
would not be significantly impacted by changes in interest rates. These
statements are only predictions, are not guarantees, 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 those
described in Item 7 "Factors Which May Affect Operating Results" and elsewhere
in this report, as well as the risks (1) that our patents may not have
material value and that there may not be a market to cross-license them,
(2) that there may be alternative ways for us to maintain our competitive
position than through investments in R&D, that these alternatives may cost us
less money or be more effective than investments in R&D, that our investments
in R&D may not result in new products, and that even if our investments in
R&D result in new products, these products may not enable us to maintain our
competitive position, (3) that we will not obtain continued growth despite
hiring highly skilled employees,(4) that we will not generate enough
cash from operations to meet our cash and working capital requirements
through the end of fiscal 2004, (5) that we need to spend more on capital
acquisitions than anticipated, or that we overestimate or underestimate our
need for capital acquisition, and(6) that changes in short-term interest
rates are significant enough to effect our investment portfolio. 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 the 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.
Factors Which May Affect Operating Results
Semiconductor companies as a group are subject to many similar risks. These
include the risks that (1) the demand for semiconductors decreases as the
industry has historically been very cyclical, (2) there are shortages of raw
materials and/or fab capacity, or (3) there are changes in underlying circuit
or process technology or fab technology. Other factors that could affect our
future results include whether we can generate new bookings from both new and
current products; general economic conditions, both in the United States and
foreign markets, and economic conditions specific to the semiconductor
industry; risks associated with customer concentration; our ability to
introduce new products, to enhance existing products, and to meet the
continually changing requirements of our customers; our ability to maintain
and enhance relationships with our assembly and test subcontractors and
independent distributors and sales representatives; and whether we can
manufacture efficiently and control costs. In addition, we are subject to
the below-described risks, which are specific to us and our business:
* We have focused our product offerings primarily on niche markets which
leverage our capabilities and in which we believe we have dominance. We
attempt to choose markets which are sizable enough to be worth pursuing but
which are not large enough to attract fierce competition. These markets
could grow enough to attract increased competition or else competitors could
enter due to happenstance or downturns elsewhere. In addition, these niches
might be more susceptible to shrinkage than more diverse markets, due to
their concentration on a few product offerings.
* We are dependent upon one fab which we own and operate. We would be
susceptible were this fab to be unable to meet our needs, for example, were
this fab to become obsolete due to process technology changes, or to be
damaged, for example by fire or earthquake. We could encounter difficulties
in operating our fab, such as contaminants in the air or defects in equipment,
which could affect yields and production.
* We have several competitors which are substantially larger and could bring
to bear substantially more resources in our niche markets. We have been able
to maintain profitable margins in part because of our dominance of most of
our niche markets. Increased competition could cause our margins to decrease.
* Henry Pao, a director of and the President and CEO of the Company, along
with Mr. Pao's father and brother, collectively own greater than 25% of our
outstanding stock. They have no agreement among themselves to act together
with respect to the Company or their stockholdings. However, were they to
act in concert, they would be our largest beneficial shareholder and would
have an ability to elect one or more directors, to direct management, and to
delay or prevent a change in control.
* We sell a substantial amount of our products internationally. We also
package and test most of our products abroad. Problems with foreign
economies, political turmoil, wars, changes in the exchange rate, or
epidemics, such as SARS could adversely affect our foreign sales or foreign
product assembly.
* Our operations may be interrupted and our business would be harmed in the
event of an earthquake, terrorist act, and other disaster. Our principal
executive offices, our fab facilities, and major suppliers are located in
areas that have been subject to severe earthquakes. In the event of an
earthquake, we and/or our major suppliers may be temporarily unable to
continue operations and may suffer significant property damage. Any such
interruption in our ability or that of our major suppliers to continue
operations at our facilities could delay the development and shipment of our
products. Like other U.S. companies, our business and operating results are
subject to uncertainties arising out of the recent terrorist attacks on the
United States, including the potential worsening or extension of the current
global economic slowdown, the economic consequences of current and potential
military actions or additional terrorist activities and associated political
instability, and the impact of heightened security concerns on domestic and
international travel and commerce. Such uncertainties could also lead to
delays or cancellations of customer orders, a general decrease in corporate
spending or our inability to effectively market and sell our products. Any of
these results could substantially harm our business and results of operations,
causing a decrease in our revenues.
* We depended upon one customer, Microtek, for approximately 11% of our
fiscal year 2003 sales. Microtek is our primary distributor in Japan with
at least twenty end-user customers. Most of our customers can typically
cancel or reschedule orders without penalty so decreased demand for our
products could translate into rapid decreases in sales volume.
* We are very dependent upon continued innovation of our engineers. The
competition for engineers with relevant experience is extremely intense in
the Silicon Valley, where most of our engineers are located. We must
compete in terms of salary, benefits, and working conditions with many
start-ups which can offer more equity. We established an I.C. Design Center
in Hong Kong in fiscal 2001 where competition for qualified engineer is not
as intense as that in Silicon Valley. However, a majority of our product
innovation activities remains in our Sunnyvale and San Jose offices.
* We operate a fab in San Jose, California at which we use various chemicals
and solvents which are regulated by various environmental agencies. We
cooperate and work with these agencies to comply with these regulations.
Should we nonetheless inadvertently contaminate the soil or ground water, or
should the previous operator of the fab have done so, we may be responsible
for significant costs to remediate the situation.
* We are dependent upon the continued service of several of our key management
and technical personnel. The loss of the services of one or more of our
engineers, executive officers and other key personnel or our inability to
recruit replacements for, or to attract, retain and motivate these individuals
would be harmful to our business. We do not have long-term employment
contracts with our employees.
The following discussion should be read in conjunction with the "Consolidated
Financial Statements," "Notes to Consolidated Financial Statements" and
"Selected Consolidated Financial Data" included elsewhere in this Form 10-K.
The following table sets forth items from the Consolidated Statements of
Income as a percentage of net sales for the periods indicated:
Fiscal Years Ended March 31,
---------------------------
2003 2002 2001
---- ---- ----
Net sales.................................... 100.0% 100.0 % 100.0 %
Costs of sales............................... 62.1 60.0 59.9
Research and development..................... 17.0 20.1 13.4
Selling, general and administrative.......... 15.9 14.1 13.3
Income from operations....................... 5.0 5.8 13.4
Other income
Interest income...................... 1.7 2.7 3.0
Other income (expense), net.......... 1.0 1.8 (1.4)
Income before provision for income taxes..... 7.7 10.4 15.0
Provision for income taxes .................. 2.5 3.5 5.1
Net income................................... 5.2% 6.9% 9.9%
Critical Accounting Policies
Our discussion and analysis of financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United
States of America. The preparation of these financial statements requires us
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses. On an on-going basis, we evaluate our
estimates, including those related to our revenues, product returns, bad
debts, inventories, investments, asset impairments, and income taxes. We base
our estimates on historical experience and on various other assumptions that
are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions.
We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our
consolidated financial statements:
Revenue Recognition
We recognize revenue from direct product sales to end-user customers upon
transfer of title and risk of loss, which is upon shipment of the product
provided persuasive evidence of an arrangement exists, the price is fixed or
determinable, no significant obligations remain and collection of the
resulting receivable is reasonably assured. For sales to original equipment
manufacturers (OEMs), we use either a binding purchase order or signed
agreement as evidence of an arrangement. Sales through our distributors are
evidenced by a distributor agreement governing the relationship together
with binding purchase orders on a transaction-by-transaction basis. Sales
to our distributors are made primarily under arrangements allowing limited
rights of return, limited price protection and the right of stock rotation
on merchandise unsold by the distributors. Because of the uncertainty
associated with pricing concessions and possible returns, we defer the
recognition of such sales and the related costs of sales until our
distributors have sold the merchandise to their end-user customers. Our
deferred revenue also includes customer advances under licensing agreements.
We recognize deferred license revenue ratably over the term of the contract.
Sales Returns and Other Allowances
We record a provision for estimated sales returns and allowances on product
sales in the same period as the related revenues are recorded. We base these
estimates on historical experience, analysis of outstanding Return Material
Authorization (RMA) and Allowance Authorization (AA) data and any other form
of notification we receive of pending returns. We continuously monitor and
track product returns and in circumstances where we are aware of specific
customer return or allowance which is over and above normal historical sales
returns, we record a specific allowance against the amounts due to reduce our
net receivable for such customer. While our sales returns have historically
been within our expectations and the provisions established, we cannot
guarantee that we will continue to experience the same return rates that we
have in the past. Any significant increase in product failure rates and the
resulting credit returns could have a material adverse impact on our
operating results for the period or periods in which such returns materialize.
Allowance for Doubtful Accounts
We evaluate the collectibility of our accounts receivable based on two
methods. The amounts calculated from each of these methods are combined to
determine the total amount reserved. First, a minimum allowance is established
for all customers based on a percentage applied to outstanding accounts
receivable. This percentage is based on our historical collection and write-off
experience. Second, we evaluate specific accounts where we have information
that a specific customer may have an inability to meet its financial
obligations (bankruptcy, etc.) to us. In these cases, significant management
judgments and estimates must be made, based on the best available facts and
circumstances. We record a specific allowance for that customer against
amounts due to reduce the net recognized receivable to the amount we
reasonably believe will be collected. These specific reserves are
re-evaluated and adjusted as additional information is received that impacts
the amount reserved. If the financial condition of our customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required.
Inventory Valuation
Our inventories are stated at the lower of cost (determined on a first-in,
first-out basis) or market value and include high technology parts and
components that are specialized in nature and subject to rapid technological
obsolescence. At each balance sheet date, we evaluate our ending inventories
for excess quantities and obsolescence. This evaluation includes analyses of
sales levels by product and projections of future demand over nine months.
Inventories on hand in excess of forecasted demand are not valued. In
addition, we write off inventories that are considered obsolete. Remaining
inventory balances are adjusted to approximate the lower of our standard
manufacturing cost or market value. While the Company has programs to
minimize the required inventories on hand and considers technological
obsolescence when estimating amounts required to reduce recorded amounts to
market values, it is reasonably possible that such estimates could change in
the near term. If future demand or market conditions are less favorable than
our projections, additional inventory write-downs may be required and would
be reflected in cost of sales in the period the revision is made.
Accounting for Investments and Consolidation
Although the carrying value of our investments in privately held companies is
nil at March 31, 2003, we may make investments in privately held
companies in the future. Investments in privately held companies that are not
publicly traded have no established market. We have a policy in place to
review the fair value of these investments on a regular basis to evaluate
the carrying value of the investments in these companies. This policy
includes, but is not limited to, reviewing each of the companies' cash
position, financing needs, earnings/revenue outlook, operational performance,
management/ownership changes, and competition. The evaluation process is
based on information that we request from these privately held companies.
This information is not subject to the same disclosure regulations as U.S.
public companies, and as such, the basis for these evaluations is subject to
the timing and the accuracy of the data received from these companies. If we
believe that the carrying value of an investment is in excess of its fair
value, it is our policy to record a reserve and the related write down is
recorded as an investment loss on our consolidated statements of income.
We record an investment impairment charge when we believe an investment has
experienced a decline in value that is other-than temporary. When a decline
in value is deemed to be other-than-temporary, we recognize an impairment
loss in the current period to the extent of the decline below the carrying
value of the investment. Estimating the fair value of non-marketable equity
investments in early-stage technology companies is inherently subjective and
may contribute to significant volatility in our reported results of
operations. In addition, adverse operating results of underlying long-term
investments could result in additional other-than-temporary losses in future
periods.
Impairment of Long-Lived Assets
We routinely consider whether indicators of impairment of long-lived assets
are present. If such indicators are present, we determine whether the sum of
the estimated undiscounted cash flows attributable to the assets in question
is less than their carrying value. If less, we recognize an impairment loss
based on the excess of the carrying amount of the assets over their
respective fair values. Fair value is determined by discounted future cash
flows, appraisals or other methods. If the assets determined to be impaired
are to be held and used, we recognize an impairment charge to the extent the
present value of anticipated net cash flows attributable to the asset are
less than the asset's carrying value. The fair value of the asset then
becomes the asset's new carrying value, which we depreciate or amortize over
the remaining estimated useful life of the asset where appropriate. We may
incur impairment losses in future periods if factors influencing our
estimates change.
Accounting for Income Taxes
As part of the process of preparing our consolidated financial statements we
are required to estimate our income taxes in each of the jurisdictions in
which we operate. This process involves us estimating our actual current tax
exposure together with assessing temporary differences resulting from
differing treatment of items, such as deferred revenue, for tax and accounting
purposes. These differences result in deferred tax assets and liabilities,
which are included within our consolidated balance sheets. We evaluate the
realizability of the deferred tax assets annually. We have determined that
no valuation allowance is required because, although realization is not
assured, the Company has sufficient taxable income in carryback years to
absorb items deductible in the future for federal tax purposes and anticipates
that its estimated future taxable income will allow the deferred tax asset for
state tax purposes to be fully realized in future years. The amount of the
deferred tax asset that is realizable could be reduced in the near term if
actual results differ significantly from estimates of future taxable income.
The above listing is not intended to be a comprehensive list of all of our
accounting policies. In many cases, the accounting treatment of a particular
transaction is specifically dictated by generally accepted accounting
principles, with no need for management's judgment in their application.
There are also areas in which management's judgment in selecting any
available alternative would not produce a materially different result. See
our audited consolidated financial statements and notes thereto which begin
on page 28 of this Annual Report on Form 10-K which contain accounting
policies and other disclosures required by generally accepted accounting
principles.
Recent Developments
During fiscal 2003, we continued to experience a decreased demand for our
products, particularly when compared with the significantly higher levels of
demand we experienced during fiscal 2001 and 2000. Our sales continued to be
affected by the general slowdown in the economy and in particular the lack of
recovery and continued business deceleration at our telecommunications
equipment customers. We are hopeful that as the expected improvements in
the economy continue over the coming quarters, the business of our customers
would increase leading to increased revenue for us as well, although we do
not expect to achieve the same level of demand experienced in fiscal 2001
and 2000.
During the year, we generated positive cash flow. We have been successful
in controlling costs and have remained profitable even though sales have
dropped significantly and our fab has been running at below 50% capacity.
Results of Operations
Fiscal 2003 vs. Fiscal 2002
Net Sales We had net sales of $54,915,000 in fiscal 2003, a decrease of 2%
from the previous fiscal year net sales of $56,195,000. Overall
semiconductor industry conditions were very weak during fiscal year 2003, as
were conditions in all of the markets that we serve, except the imaging
market in which we increased our market share. In fiscal 2003, sales of our
telecommunications products continued to be adversely affected by the
telecommunications industry's lackluster infrastructure spending which
reduced demand for our customers' products. This was offset in part by
increased revenues for our products in the imaging market.
As percentage of total sales for the year ended March 31, 2003, sales to the
medical market accounted for 36% of total sales in fiscal 2003 compared to
39% in the previous year. The telecommunications market represented 19% and
22% of total sales for the fiscal year 2003 and 2002, respectively. Sales to
the imaging market accounted for 36% of total sales for fiscal 2003 compared
to 29% in fiscal 2002. The sales increase was primarily due to the sales
increase in the backlighting inverter ICs for cellular phone applications.
Sales to all other markets represented 9% in fiscal 2003 and 10% in fiscal
2002. Compared to fiscal year 2002 on a dollar basis, sales of our medical
electronics products decreased 11% to $19,541,000 from $21,835,000, sales of
our telecommunications products decreased 14% to $10,596,000 from $12,378,000,
and sales of our imaging products increased 24% to $20,012,000 from
$16,134,000.
In fiscal 2003, we derived approximately 33% of our net sales from customers
outside the United States, primarily in Asia and Europe, compared to 31% in
fiscal 2002. Dollar sales to international customers also increased
approximately 7% from $17,186,000 to $18,403,000. Additional discussion
regarding our revenues based on geographic area can be found in Note 7 of the
"Notes to Consolidated Financial Statements."
Gross Margin Our gross margin as a percentage of net sales for fiscal 2003
was approximately 38% compared to 40% for fiscal year 2002. The 2% drop in
margin was the result of a slightly less favorable product sales mix, the
charge for the write-down of inventory, and continued low plant capacity
utilization, partially offset by continued cost control.
..
Research and Development Research and development (R&D) expenses, which
include payroll and benefits, processing costs and process transfer costs,
were 17% and 20% of net sales in fiscal 2003 and 2002, respectively. Dollar
expenditures for research and development were $9,338,000 and $11,279,000 for
fiscal 2003 and 2002, respectively. The net decrease of $1,941,000 in R&D
expense for the current year was primarily attributed to a reduction in
prototype processing costs of $1,300,000 as several new products were
transferred to production status, reduction in software expenses of $411,000,
reduction in mask tooling expenses of $230,000 and reduction in rent expenses
of $310,000, offset by an increase in payroll and benefit expenses of
$410,000 due to additional headcount.
Selling, General and Administrative Selling, general and administrative
expenses (SG&A), which include commissions, payroll and benefits, were 16%
and 14% of net sales in fiscal 2003 and 2002, respectively. In fiscal 2003,
the selling, general and administrative expenses were $8,722,000 compared to
$7,939,000 for fiscal 2002. The net increase of $783,000 was attributed to
an increase of $459,000 in payroll and benefits due to additional headcount,
an increase in advertising spending of $189,000, and an increase in
commissions of $122,000 due to increased commissionable sales. In addition,
SG&A expenses for the fiscal year 2003 were partially offset by benefits
from the collection of previously reserved accounts receivable of $298,000
as compared with SG&A expenses for fiscal 2002 which were partially offset
by benefits from the collection of previously reserved accounts receivable
of approximately $721,000. SG&A expenses were favorably impacted by the
reversal of a provision for legal expenses in fiscal 2003 of $224,000
following the favorable settlement of a claim initiated by a customer in
fiscal 2002 related to a product returned.
Interest Income Interest income, which consists primarily of interest income
from our cash, cash equivalents and short-term investments, was $916,000 in
fiscal 2003 compared to $1,538,000 in fiscal 2002. The decline in interest
income in fiscal 2003 was mostly due to lower yields on cash deposit accounts
as compared to the prior year.
Other Income and Expense, Net Other income and expense, net of $530,000 for
fiscal 2003 consists primarily of a gain on the sale of a long-term investment
of $1,092,000, gain from investment in short term securities of $79,000,
licensing income of $150,000, offset by a loss from disposal of equipment of
$60,000, sublease expenses net of sublease income of $36,000, and an
impairment charge of $750,000 due to the uncertainty surrounding the
recoverability of an investment. In fiscal 2002, other income and expense,
net of $1,037,000 consisted primarily of a gain on sale of long-term
investments of $453,000, licensing income realized of $150,000, fees charged
to customers for returning products of $160,000, and sublease income net of
sublease expenses of $205,000.
Provision for Income Taxes Income taxes for fiscal 2003 was at 32% of income
before provision for income taxes compared to 34% in fiscal 2002. The
reduction of the effective tax rate was primarily due to a change in
geographic mix of income.
Fiscal 2002 vs. Fiscal 2001
Net Sales We had net sales of $56,195,000 in fiscal 2002, a decrease of 31%
from the previous fiscal year. Overall semiconductor industry conditions
were very weak during fiscal year 2002, as were all the markets we serve. In
fiscal 2002, our telecommunications products were adversely affected by the
decline in the telecommunications industry's infrastructure spending.
As percentage of total sales for the year ended March 31, 2002, sales to the
medical market accounted for 39% of total sales in fiscal 2002 compared to
35% in the fiscal 2001. The telecommunications market represented 22% and
27% of total sales for the fiscal year 2002 and 2001, respectively. Sales to
the imaging market accounted for 29% of total sales for fiscal 2002 compared
to 26% in fiscal 2001. Sales to all other markets represented 10% in fiscal
2002 and 12% in fiscal 2001. Compared to fiscal 2001 on a dollar basis,
sales of our medical electronics products decreased 24% to $21,835,000 from
$28,620,000, sales of our telecommunications products decreased 43% to
$12,378,000 from $21,851,000, and sales of our imaging products decreased 25%
to $16,134,000 from $21,537,000.
In fiscal 2002, we derived approximately 31% of its net sales from customers
outside the United States, primarily in Asia and Europe, compared to 38% in
fiscal 2001. Dollar sales to international customers also decreased
approximately 44% from $30,634,000 to $17,186,000.
Gross Margin Compared with the prior fiscal year, our gross margin as a
percentage of net sales remained approximately the same at 40% for fiscal
year 2002 despite a 31% drop in sales. We were able to retain the gross
margin level by lowering manufacturing expenditures through rigorous cost
reduction measures.
Research and Development Research and development (R&D) expenses, which
include payroll and benefits, processing costs and process transfer costs,
were 20% and 13% of net sales in fiscal 2002 and 2001, respectively. Dollar
expenditures for research and development were $11,279,000 and $10,917,000
for fiscal 2002 and 2001, respectively. The increase in R&D expense for this
year was attributed to the increase in payroll and benefit expenses due to
additional headcount of $639,000 and the increase in mask tooling expenses
for the new products of $240,000. During the year, we continued to increase
our staff and equip our Hong Kong Design Center and the Telecom Design Group
in San Jose, California.
Selling, General and Administrative Selling, general and administrative
expenses, which include commissions, payroll and benefits, were 14% and 13%
of net sales in fiscal 2002 and 2001, respectively. In fiscal 2002, the
selling, general and administrative expenses were $7,939,000 compared to
$10,806,000 for fiscal 2001. Dollar reduction in selling, general and
administrative expenses was primarily due to a decrease in bad debt expense
of $1,810,000, staff reduction and cutback in benefits of $486,000, and
decreased commission on sales of $654,000.
Interest Income Interest income, which consists primarily of interest
income from our cash, cash equivalents and short-term investments, was
$1,538, 000 in fiscal 2002 compared to $2,466,000 in fiscal 2001. The
decline in interest income in fiscal 2002 was mostly due to lower yields on
cash deposit accounts as compared to the prior year.
Other Income and Expense Other income of $1,037,000 for fiscal 2002 consists
primarily of a gain on sale of long-term investments of $453,000, fees
charged to customers for returning products of $160,000, licensing income
realized of $150,000, sublease income net of sublease expenses of $205,000.
In fiscal 2001, other expense of $1,153,000 consist primarily of an
impairment charge of $1,000,000 due to the uncertainty surrounding the
recoverability of an investment in a start up company.
Provision for Income Taxes Income taxes for fiscal 2002 and 2001 were at 34%
of income before provision for income taxes.
Financial Condition
Overview
Total assets grew to $108,671,000 at the end of fiscal 2003, up from
$103,380,000 at the end of fiscal 2002. The increase was due primarily to
profit generated from operations during the year as well as from profit from
interest and other income and cash proceeds from exercise of options under
our stock option and purchase plans.
As of March 31, 2003, the Company's working capital was $78,051,000, which
was a $10,718,000 increase over March 31, 2002. The increase in working
capital was mostly the result of an increase in cash and cash equivalents and
a decrease in accounts payable offset in part by a reduction in net book
value of property, plant and equipment, reduction in net inventory and an
increase in income taxes payable.
Liquidity and Capital Resources
On March 31, 2003, the Company had $64,876,000 in cash, cash equivalents, and
short-term investments, compared with $52,492,000 on March 31, 2002, and
$44,282,000 on March 31, 2001. Cash and cash equivalents increased $8,439,000
during fiscal 2003 from $52,492,000 at March 31, 2002 to $60,931,000 at
March 31, 2003. The increase in cash and cash equivalents during fiscal
2003 is due to cash flows from operating activities of $6,999,000, cash
flows from investing activities of $317,000 and cash flows from financing
activities of $1,123,000. Our primary source of funds for fiscal 2003, 2002
and 2001 has been the net cash generated from operating activities of
$6,999,000, $10,525,000 and $15,008,000, respectively.
Net operating cash flows in fiscal 2003 were impacted by the following:
* Net income of $2,855,000
* Non-cash charges for depreciation of $5,542,000
* Non-cash loss of $750,000 from an impairment of a long-term investment
* An investment of $3,945,000 previously invested in long-term investments
and cash equivalents transferred into short-term investments classified as
trading securities
* A gain on the sale of a long-term investment of $1,092,000
* An increase in net trade accounts receivable of $698,000 including a
non-cash reduction of $1,989,000 for the provision for doubtful accounts and
sales returns and a net increase in gross accounts receivable of
$2,687,000.
* A decrease in net inventory of $1,912,000 consisting of a non-cash charge
for the provision for excess and obsolescence of $1,493,000 and a decrease
due to normal operating activities of $419,000
* A decrease in trade accounts payable and accrued expenses of $2,148,000
comprised primarily of a decrease in trade accounts payable of $2,197,000
which resulted from a decrease in operating expenses and equipment purchases
* An increase in income taxes payable of $2,738,000, which is net of a tax
benefit from stock option exercises of $451,000 that is recognized in
shareholders' equity
Net cash provided by investing activities in fiscal 2003 was $317,000, which
consisted of $1,696,000 proceeds from the sale of long-term investment offset
by purchases of equipment of $1,389,000 primarily for upgrading our wafer
fabrication facility.
Net cash provided by financing activities in fiscal 2003 was $1,123,000, which
consisted of proceeds from exercises of stock options and ESPP of $1,152,000
partially offset by repurchases of our common stock in the amount of $29,000.
The Company anticipates that the available funds and cash expected to be
generated from operations will be sufficient to meet cash and working capital
requirements through the end of fiscal 2004. The Company expects to spend
approximately $2,821,000 for capital acquisitions during fiscal 2004, which
is much less than prior 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 March 31, 2003 are as follows (in thousands):
Fiscal Years Ending March 31 Operating Lease Sublease Income
---------------------------- --------------- ---------------
2004 $ 1,230 $ 644
2005 1,104 370
2006 1,047 336
2007 1,051 336
2008 761 155
Thereafter -- --
----- -----
$ 5,193 $ 1,841
====== =====
We have agreed to defend certain customers, distributors, suppliers, and
subcontractors against certain claims which third parties may assert that our
products allegedly infringe certain of their intellectual property rights,
including patents, trademarks, trade secrets, or copyrights. We have also
agreed to pay certain amounts of any resulting damage awards and we have the
option to replace any infringing product with non-infringing product. The
terms of these indemnification obligations are generally perpetual from the
effective date of the agreement. In certain cases, there are limits on and
exceptions to our potential liability for indemnification relating to
intellectual property infringement claims. We cannot estimate the amount of
potential future payments, if any, that we might be required to make as a
result of these agreements. To date, we have not paid any damage award or
been required to defend any claim related to our indemnification obligations,
and accordingly, we have not accrued any amounts for our indemnification
obligations. However, there can be no assurances that we will not have any
financial exposure under those indemnification obligations.
Certain Relationships and Related Transactions
The Company leased a portion of a building, consisting of approximately 5,600
sq. ft at 1225 Bordeaux Drive, Sunnyvale, California under an operating lease
from Fortuna Realty Co, a corporation owned by a former Supertex Director,
Yunni Pao. The lease will expire on April 1, 2007, which coincides with our
Sublease Agreement with Reaction Technology, our epitaxial deposition service
provider at essentially the same cost. Previously we leased the entire
building, consisting of approximately 20,000 sq.ft. The total rental
expenses paid to Fortuna Realty Co. were $135,000, $457,000, and $408,000 in
fiscal years 2003, 2002 and 2001, respectively. We believe that the lease
with Fortuna Realty Co. was and is at prevailing market rates.
Mr. Richard Siegel, the Executive Vice President of the Company, is a member
of the Board of Directors for All American Semiconductor. All American
Semiconductor is a national distributor of electronic components manufactured
by others and is a major distributor for Supertex. Sales to this distributor
for fiscal years 2003, 2002, and 2001 were $3,120,267, $ 2,109,000, and
$3,969,000, respectively. Supertex has no long-term distributorship
agreement with All American Semiconductor, instead operating on the basis of
purchase orders and sales order acknowledgements.
Recent Accounting Pronouncements
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 is effective for exit or disposal activities that are
initiated after December 31, 2002 and early application is encouraged. The
Company's adoption of SFAS 146 had no impact on the Company's financial
position or results of operations, although SFAS 146 may impact the timing of
recognition of costs associated with future restructuring, exit, or disposal
activities.
In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others, an interpretation of FASB
Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34."
FIN 45 clarifies the requirements of FASB Statement No. 5, "Accounting for
Contingencies," relating to the guarantor's accounting for, and disclosure of
the issuance of certain types of guarantees. The disclosure provisions of
the Interpretation are effective for financial statements of interim or
annual reports that end after December 15, 2002. However, the provisions for
initial recognition and measurement are effective on a prospective basis for
guarantees that are issued or modified after December 31, 2002, irrespective
of the guarantor's year-end. The Company's adoption of FIN 45 did not have a
material impact on the Company's financial position or results of operations.
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 will apply to revenue arrangements
entered into in fiscal periods beginning after June 15, 2003. The Company
does not believe that adoption of EITF 00-21 will have a material impact on
its financial position or results of operations.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation, Transition and Disclosure." SFAS No. 148 amends SFAS No. 123
and requires prominent disclosures in both annual and interim financial
statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. SFAS
No. 148 is effective for fiscal years ending after December 15, 2002 and is
effective for interim periods beginning after December 15, 2002. The Company
has included the disclosures required by SFAS 148 in Note 1 of the Notes to
Consolidated Financial Statements. The Company does not intend to adopt the
accounting provisions of SFAS 123 for employee compensation.
In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation
of Variable Interest Entities, an Interpretation of ARB No. 51," ("FIN 46").
FIN 46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the entity do
not have the characteristics of a controlling financial interest or do not
have sufficient equity at risk for the entity to finance its activities
without additional subordinated financial support from other parties. FIN 46
is effective immediately for all new variable interest entities created or
acquired after January 31, 2003. For variable interest entities created or
acquired prior to February 1, 2003, the provision of FIN 46 must be applied
for the first interim or annual period beginning after June 15, 2003. The
Company does not believe the adoption of FIN 46 will 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 does not believe the adoption of SFAS 150
will have a material impact on its financial position or results of
operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company is 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, and its holdings are for purposes other
than trading purposes. 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.
Item 8. Financial Statements and Supplementary Data
The Financial Statements and Financial Statement Schedule are listed in Item
15 of this report.
Supplementary Quarterly Financial Data:
Quarters Ended
--------------
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
2003 2002 2002 2002 2002 2001 2001 2001
---- ---- ---- ---- ---- ---- ---- ----
(Unaudited) (in thousands, except per share amounts)
Statement of Income Data:
Net sales.....................$14,530 $13,888 $13,220 $13,277 $12,809 $14,062 $14,243 $15,081
Costs of sales................ 8,494 8,658 8,102 8,849 8,049 7,955 8,505 9,191
Gross Profit.................. 6,036 5,230 5,118 4,428 4,760 6,107 5,738 5,890
Income (loss) from operations. 1,354 700 423 275 (377) 1,723 1,127 804
Income before provision for
income taxes........... 1,614 978 1,080 526 417 2,012 1,716 1,707
Net income....................$ 1,098 $ 697 $ 713 $ 347 $ 275 $ 1,328 $1,133 $1,127
Net income per share
Basic......................$ 0.09 $ 0.06 $ 0.06 $ 0.03 $ 0.02 $ 0.11 $ 0.09 $ 0.09
Diluted....................$ 0.09 $ 0.05 $ 0.06 $ 0.03 $ 0.02 $ 0.10 $ 0.09 $ 0.09
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Certain information required by Part III is incorporated by reference from
the Company's definitive Proxy Statement to be filed with the Securities and
Exchange Commission in connection with the solicitation of proxies for the
Company's 2003 Annual Meeting of Stockholders to be held on August 15, 2003
(the "Proxy Statement").
Item 10. Directors and Executive Officers of the Registrant
Information regarding our directors is set forth under "Election of Directors"
in the Proxy Statement and is incorporated by reference. The information
required by Item 405 of Regulation S-K with respect to disclosure of any
known late filings or failure by an insider to file a report required by
Section 16(a) of the Exchange Act is incorporated herein by reference from
the information contained in the section entitled "Compliance with Section
16(a) of the Exchange Act" in the Proxy Statement. The required information
regarding executive officers is included in Part I hereof under caption
"Executive Officers of the Company."
Item 11. Executive Compensation
Information regarding the Company's remuneration of its officers and directors
is set forth under "Compensation of Directors" and "Compensation of Executive
Officers" in the Proxy Statement and is incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information regarding the security ownership of certain beneficial owners and
management is set forth under "Security Ownership of Certain Beneficial
Owners and Management" in the Proxy Statement and is incorporated by
reference.
Item 13. Certain Relationships and Related Transactions
The Company leased a portion of a building, consisting of approximately 5,600
sq. ft at 1225 Bordeaux Drive, Sunnyvale, California under an operating lease
from Fortuna Realty Co, a corporation owned by a former Supertex Director,
Yunni Pao. The lease will expire on April 1, 2007, which coincides with our
sublease agreement with Reaction Technology, our epitaxial deposition service
provider at essentially the same cost. Previously we leased the entire
building, consisting of approximately 20,000 sq.ft. The total rental
expenses paid to Fortuna Realty Co. were $135,000, $457,000, and $408,000 in
fiscal years 2003, 2002 and 2001, respectively. We believe that the lease
with Fortuna Realty Co. was and is at prevailing market rates.
Mr. Richard Siegel, the Executive Vice President of the Company, is a member
of the Board of Directors for All American Semiconductor. All American
Semiconductor is a national distributor of electronic components manufactured
by others and is a major distributor for Supertex. Sales to this distributor
for fiscal years 2003, 2002, and 2001 were $3,120,267, $ 2,109,000, and
$3,969,000, respectively. Supertex has no long-term distributorship
agreement with All American Semiconductor, instead operating on the basis of
purchase orders and sales order acknowledgement.
Item 14. Controls and Procedures.
(a) Evaluation of disclosure controls and procedures
The term "disclosure controls and procedures" refers to the controls and
other procedures of a company that are designed to ensure that information
required to be disclosed by a company in the reports that it files under the
Securities Exchange Act of 1934 ("Exchange Act") is recorded, processed,
summarized and reported within required time periods.
The Company's principal executive and financial officer has evaluated the
Company's disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14(c) and 15d-14(c)) within the 90 days prior to the date of this
Form 10-K ("Evaluation Date") and has determined that, as of the Evaluation
Date, such controls and procedures are reasonable taking into account the
totality of the circumstances.
(b) Changes in internal controls
There were no significant changes in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to
the Evaluation Date.
PART IV
Item 15. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
(a) The following documents are filed as part of this report:
Page No.
1. Report of Independent Accountants.................................. 26
2. Consolidated Financial Statements:
Consolidated Balance Sheets at March 31, 2003 and 2002..... 27
For the three years ended March 31, 2003, 2002, and 2001:
Consolidated Statements of Income.................. 28
Consolidated Statements of Shareholders' Equity.... 29
Consolidated Statements of Cash Flows.............. 30
Notes to Consolidated Financial Statements................. 31
3. Financial Statement Schedule. The following Financial Statement
Schedule of Supertex, Inc., is filed as part of this report and should
be read in conjunction with the Consolidated Financial Statements of
Supertex.
Schedule for fiscal years ended March 31, 2003, 2002, and 2001:
Schedule II Valuation and Qualifying Accounts.............. 43
All other schedules have been omitted since the required information is not
present or it is not present in amounts sufficient to require submission of
the schedule, or because the information required is included in the
consolidated financial statements, including notes thereto.
4. Exhibits.
Exhibit Exhibit Description
2.1 (1) Agreement for purchases and sale of assets by and between Supertex,
Inc. and Orbit Semiconductor dated January 16, 1999.
3.1 (2) Restated Articles of Incorporation of Registrant filed May 21, 1980.
3.2 (2) Certificate of Amendment of Articles of Incorporation filed
April 16, 1981.
3.3 (2) Certificate of Amendment of Articles of Incorporation filed
September 30, 1983.
3.4 (5) Bylaws of Registrant, as amended.
10 Deferred Compensation Plan (Supplemental Employee Retirement Plan)
which became effective January 1, 1996.
10.2 Lease Assignment agreement for 71 Vista Montana, San Jose,
California, dated February 1, 1999 among Orbit Semiconductor, as
assignor, Sobrato Development Companies #871, as landlord, and
Supertex, Inc., as assignee.
10.6 (4) 1991 Stock Option Plan which became effective, with form of stock
option agreement.
10.6a (5) 1991 Stock Option Plan, as amended as of August 4, 1995, with form
of stock option agreement.
10.6b (6) 1991 Stock Option Plan, as amended as of August 6, 1999, with form
of stock option agreement.
10.6c (7) 2000 Employee Stock Purchase Plan.
10.6d (8) 2001 Stock Option Plan, which became effective, with form of
stock option agreement.
10.7 (2) Profit Sharing Plan.
10.21 (3) Certificate of Amendment of Articles of Incorporation filed
October 14, 1988.
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
24.1 Power of Attorney (See signature page).
99.1 Certification of Chief Executive and Financial Officer
(1) Incorporated by reference to the exhibit of the same number filed
with current report on form 8-K dated January 19, 1999.
(2) Incorporated by reference to exhibit of same number of Registrant's
Registration Statement on Form S-1 (File No. 2-86898), which became
effective December 6, 1983.
(3) Incorporated by reference to exhibit filed with Quarterly Report on
Form 10-Q for period ended October 1, 1988.
(4) Incorporated by reference to exhibit filed with Annual Report on Form
10-K for year ended March 31, 1991.
(5) Incorporated by reference to exhibit included in Registrant's
Registration Statement on Form S-8 (File No. 33-43691) which became
effective September 1, 1995.
(6) Incorporated by reference to exhibit included in Registrant's
Registration Statement on Form S-8 (File No. 33-43691) which became
effective September 29, 1999.
(7) Incorporated by reference to exhibit included in Registrant's
Registration Statement on Form S-8 (File No. 333-47606) which became
effective October 6, 2000.
(8) Incorporated by reference to Appendix B of the Registrants amended
Proxy Statement filed on August 7, 2001 (File No. 000-12718).
Corresponding Registration Statement on Form S-8 (File No. 333-69594)
became effective on September 18, 2001.
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
SUPERTEX, INC.
Dated: June 23, 2003 /s/ Henry C. Pao
Henry C. Pao, President, Principal
Financial and Accounting Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Henry C. Pao, his attorney-in-fact, with the
power of substitution, for him in any and all capacities, to sign any
amendments to this report on Form 10-K, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1934, this report has
been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
Signature Title Date
/s/Henry Pao President, Principal Executive and June 23, 2003
(Henry C. Pao) Financial Officer and Director
/s/ Richard Siegel Executive Vice President and Director June 23, 2003
(Richard E. Siegel)
/s/ Benedict C.K. Choy Senior Vice President and Director June 23, 2003
(Benedict C. K. Choy)
/s/ Mark Loveless Director June 23, 2003
(W. Mark Loveless)
/s/ Elliott Schlam Director June 23, 2003
(Elliott Schlam)
/s/ Milton Feng Director June 23, 2003
(Milton Feng)
CERTIFICATION
I, Henry C. Pao, certify that:
1) I have reviewed this annual report on Form 10-K of Supertex, Inc., a
California corporation ("registrant");
2) Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3) Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of and for the periods, presented in this annual report;
4) I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and I have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiary,
is made known to me by others within those entities, particularly during the
period in which this annual report is being prepared; b) evaluated the
effectiveness of the registrant's disclosure controls and procedures as of a
date within 90 days prior to the filing date of this annual report (the
"Evaluation Date"); and c) presented in this annual report my conclusions about
the effectiveness of the disclosure controls and procedures based on my
evaluation as of the Evaluation Date;
5) I have disclosed, based on my most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and b) any fraud,
whether or not material, that involves management or other employees who have a
significant role in the registrant's internal controls; and
6) I have indicated in this annual report whether or not there were significant
changes in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of my most recent evaluation,
including any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: June 23, 2003 /s/ Henry C. Pao
Henry C. Pao, Ph.D.
Chief Executive Officer and Chief
Financial Officer
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of Supertex, Inc.
In our opinion, the consolidated financial statements listed in the index
appearing under Item 15(a)(2) present fairly, in all material respects, the
financial position of Supertex, Inc. and its subsidiary at March 31, 2003 and
March 31, 2002, and the results of their operations and their cash flows for
each of the three years in the period ended March 31, 2003, in conformity with
accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedule listed in the index
appearing under Item 15(a)(3) presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and financial
statement schedule are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
San Jose, California
April 25, 2003
SUPERTEX, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31,
--------
2003 2002
---- ----
ASSETS
Current Assets:
Cash and cash equivalents................................ $ 60,931 $ 52,492
Short-term investments................................... 3,945 --
Trade accounts receivable,
net of allowances of $ 615 in 2003 and $1,465 in 2002.... 10,134 9,436
Inventories.............................................. 14,582 16,494
Prepaid expenses and other current assets................ 575 902
Deferred income taxes.................................... 4,030 3,293
------ ------
Total current assets................................. 94,197 82,617
Property, plant and equipment, net........................... 12,104 16,327
Other assets................................................. 97 1,451
Deferred income taxes........................................ 2,273 2,985
------ ------
TOTAL ASSETS................................................. $108,671 $103,380
======== ========
LIABILITIES
Current Liabilities:
Trade accounts payable................................... $ 3,572 $ 5,769
Accrued salaries and employee benefits................... 6,784 6,565
Other accrued liabilities................................ 485 655
Deferred revenue......................................... 2,001 1,729
Income taxes payable..................................... 3,304 566
------ ------
Total current liabilities............................ 16,146 15,284
------ ------
Commitments and contingencies (Note 6)
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 12,658 shares and 12,544
shares at March 31, 2003 and 2002, respectively......... 29,045 27,454
Retained earnings.......................................... 63,480 60,642
------ ------
Total shareholders' equity.............................. 92,525 88,096
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY....................$108,671 $103,380
======= =======
See accompanying Notes to Consolidated Financial Statements.
SUPERTEX, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
Fiscal Years Ended March 31,
----------------------------
2003 2002 2001
---- ---- ----
Net sales.................................... $ 54,915 $ 56,195 $ 81,455
Costs and expenses:
Costs of sales............................ 34,103 33,700 48,790
Research and development.................. 9,338 11,279 10,917
Selling, general and administrative....... 8,722 7,939 10,806
------ ------ ------
Total costs and expenses.......... 52,163 52,918 70,513
------ ------ ------
Income from operations....................... 2,752 3,277 10,942
Other income:
Interest income.......................... 916 1,538 2,466
Other income (expense), net.............. 530 1,037 (1,153)
----- ----- ------
Income before provision for income taxes. 4,198 5,852 12,255
Provision for income taxes................... 1,343 1,990 4,167
----- ----- -----
Net income................................... $ 2,855 $ 3,862 $ 8,088
====== ====== ======
Net income per share:
Basic.................................... $ 0.23 $ 0.31 $ 0.65
====== ======= ======
Diluted.................................. $ 0.22 $ 0.30 $ 0.62
====== ======= ======
Shares used in per share computation:
Basic.................................... 12,598 12,443 12,351
====== ====== ======
Diluted.................................. 12,757 12,748 12,990
====== ====== ======
See accompanying Notes to Consolidated Financial Statements.
SUPERTEX, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
Accumulated
Other
Common Stock Comprehensive Retained Shareholders'
Shares Amount Income Earnings Equity
------ ------ ------ -------- -------
Balance, March 31, 2000...................... 12,251 $ 23,167 -- $ 49,102 $ 72,269
Stock options exercised................... 162 1,151 -- -- 1,151
Stock repurchased......................... (19) (26) -- (149) (175)
Tax benefit from stock options............ -- 1,026 -- -- 1,026
Net income................................ -- -- -- 8,088 --
Total comprehensive income................ -- -- -- -- 8,088
------ ------ ------ ------ ------
Balance, March 31, 2001...................... 12,394 25,318 -- 57,041 82,359
Stock options exercised................... 129 1,315 -- -- 1,315
Issuance of shares under ESPP............. 45 652 -- -- 652
Stock repurchased......................... (25) (55) -- (261) (316)
Tax benefit from stock options............ -- 224 -- -- 224
Net income................................ -- -- -- 3,862 --
Total comprehensive income................ -- -- -- -- 3,862
------ ------ ------ ------ ------
Balance, March 31, 2002...................... 12,544 27,454 -- 60,642 88,096
Stock options exercised................... 70 577 -- -- 577
Issuance of shares under ESPP............. 46 575 -- -- 575
Stock repurchased......................... (2) (12) -- (17) (29)
Tax benefit from stock options............ -- 451 -- -- 451
Net income................................ -- -- -- 2,855 --
Total comprehensive income................ -- -- -- -- 2,855
------ ------ ------ ------ ------
Balance, March 31, 2003...................... $12,658 $29,045 $ -- $63,480 $92,525
====== ====== ====== ====== ======
See accompanying Notes to Consolidated Financial Statements.
SUPERTEX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Fiscal Years Ended March 31,
----------------------------
2003 2002 2001
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.......................................... $2,855 $3,862 $8,088
Non-cash adjustments to net income:
Depreciation and amortization..................... 5,542 4,411 5,146
Impairment of long-term investment................ 750 -- 1,000
Provision for doubtful accounts and sales returns. 1,989 1,732 3,195
Provision for excess and obsolete inventories..... 1,493 (933) 1,636
Loss (gain) on disposal of assets................. 60 (45) (508)
Gain on sale of long-term investments............. (1,092) (453) --
Deferred income taxes............................. (25) 1,108 (2,654)
Changes in operating assets and liabilities:
Short term investments......................... (3,945) -- --
Trade Accounts receivable...................... (2,687) 2,368 (2,303)
Inventories.................................... 419 (1,173) (941)
Prepaid expenses and other current assets...... 327 476 (659)
Trade accounts payable and accrued expenses.... (2,148) (1,488) 1,311
Income taxes payable........................... 3,189 193 1,270
Deferred revenue............................... 272 467 427
------- ------- -------
Total adjustments................................. 4,144 6,663 6,920
------- ------- -------
Net cash provided by operating activities........... 6,999 10,525 15,008
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment................. (1,389) (5,515) (5,093)
Proceeds from disposal of property and equipment.... 10 295 965
Proceeds from sale of long-term investment.......... 1,696 1,254 --
Purchases of short term investments................. -- -- (39,276)
Purchases of long term investments.................. -- -- (1,750)
Proceeds from maturities of short term investments.. -- -- 50,868
------- ------- --------
Net cash provided (used in) by investing activities. 317 (3,966) 5,714
------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options and ESPP.... 1,152 1,967 1,151
Stock repurchased................................... (29) (316) (175)
----- ----- -----
Net cash provided by financing activities........... 1,123 1,651 976
----- ----- -----
NET INCREASE IN CASH AND CASH EQUIVALENTS........... 8,439 8,210 21,698
CASH AND CASH EQUIVALENTS:
Beginning of year................................. 52,492 44,282 22,584
------- ------- -------
End of year.......................................$60,931 $52,492 $44,282
======= ======= =======
Supplemental cash flow disclosures:
Income taxes paid................................. $ 9 $ 833 $ 5,543
See accompanying Notes to Consolidated Financial Statements.
SUPERTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Supertex designs, develops, manufactures, and markets high voltage analog and
mixed signal integrated circuits utilizing high voltage DMOS, HVCMOS and
HVBiCMOS analog and mixed signal technologies. We supply standard and custom
interface products primarily for the 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.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary. All significant intercompany accounts and
transactions have been eliminated.
Fiscal Period
The Company uses a 52-53 week fiscal year ending the Saturday nearest March
31. The Company's fiscal years in the accompanying consolidated financial
statements have been shown ending on March 31. Fiscal year 2003 comprises 52
weeks, fiscal year 2002 comprises 52 weeks, and fiscal year 2001 comprises 52
weeks.
Use of Estimates in Preparation of the Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Certain Risks and Uncertainties
The Company's business is concentrated in the high voltage semiconductor
component industry, which is rapidly changing, highly competitive and subject
to competitive pricing pressures. The Company's operating results may
experience substantial period-to-period fluctuations due to these factors,
including the cyclical nature of the semiconductor industry, the changes in
customer requirements, the timely introduction of new products, the Company's
ability to implement new capabilities or technologies, its ability to
manufacture efficiently, its reliance on subcontractors and vendors, and the
general economic conditions.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with an original
maturity of three months or less to be cash equivalents.
Financial Instruments
Short-term investments consist entirely of investments held by the Company's
Supplemental Employee Retirement Plan. These investments are comprised of
liquid mutual funds that are listed on established exchanges and have readily
determinable fair values. Short-term investments are classified as trading
securities and are measured at fair value with unrealized holding gains and
losses included in the earnings for the period. For the purpose of computing
unrealized gains and losses, cost is identified on a specific identification
basis.
Investments in equity securities that are not traded on public markets are
accounted for under the cost method of accounting. The Company periodically
evaluates the carrying value of such equity investments and when a
decline in the value is other than temporary, the securities are reduced to
their fair value. An impairment charge was taken in the second quarter of
fiscal 2003 for $750,000 due to the uncertainty surrounding the recoverability
of an investment in a start-up company. The carrying value of the Company's
investments in equity securities that are not traded on public markets is nil
at March 31, 2003.
The Company's Supplemental Employee Retirement Plan had investments in equity
securities that were not publicly traded during fiscal years 2003 and 2002.
During fiscal year 2003, investments in such securities were liquidated and all
of the assets of the Plan were invested in highly liquid trading securities and
are classified as short-term investments on the consolidated balance sheet at
March 31, 2003.
Concentration of credit risk and foreign operations
Financial instruments which potentially subject the Company to concentrations
of credit risk consists principally of cash and cash equivalents and accounts
receivable. The Company's accounts receivable are derived from revenue and
earned from customers located in the U.S. and certain foreign countries and
regions, including Europe and Japan. Sales to foreign customers for the years
ended March 31, 2003, 2002, and 2001 all of which were denominated in U.S.
dollars, accounted for 33%, 31%, and 38%, of net sales, respectively. The
Company performs ongoing credit evaluations of its customers' financial
condition and requires no collateral from its customers.
The Company sells its semiconductor products in North America, Europe and the
Pacific Rim to numerous customers. Allowances for potential credit losses are
maintained and such losses historically have not been material.
Foreign Currency Risk
With our operations in Hong Kong, we face exposure to an adverse change in the
exchange rate of the Hong Kong dollar. Because this exposure is relatively
small, we do not employ hedging techniques designed to mitigate this foreign
currency exposure. Likewise, we could experience unanticipated currency gains
or losses. As the level of activity at this operation changes over time, this
could have an adverse impact to the Company's financial position.
A small amount of our assets are denominated in Hong Kong dollars including two
bank accounts, one for our Hong Kong subsidiary's daily cash requirement while
the second account is held for that subsidiary's employees' contributions to
the Employee Stock Purchase Plan. All other cash and investment accounts are
denominated and domiciled in the United States with an exception of one
investment account that is domiciled in the United Kingdom.
Substantially all of our foreign sales are denominated in United States
dollars. Currency exchange fluctuations in countries where we do business
could harm our business by resulting in pricing that is not competitive with
prices denominated in local currencies.
Foreign Currency Translation
The functional currency of the Company's Hong Kong subsidiary is the U.S.
dollar. As such, gains and losses resulting from translation from local
currency to the U.S. dollar is included in determining income or loss for the
period.
Segment Reporting
The Company adopted SFAS No. 131, "Disclosure about segments of an Enterprise
and Related Information." SFAS No. 131 supersedes SFAS No. 14, "Financial
Reporting for Segments of a Business Enterprise," and replaces the "industry
segment" approach with the "management" approach. The management approach
designates the internal organization that is used by management for making
operating decisions and assessing performance as the source of a company's
reportable segments. SFAS No. 131 also requires disclosures about products
and services, geographic areas, and major customers. The Company operates in
one segment: the Semiconductor Manufacturing Segment.
Significant Customers
Microtek Inc., our primary distributor in Japan, accounted for 11% of net sales
in fiscal 2003 and 2002 respectively, and 12% in fiscal year 2001. Outstanding
accounts receivable from Microtek accounted for 17% and 10% of gross accounts
receivable as of March 31, 2003 and 2002, respectively. No other customer
accounted for more than 10% of net sales in fiscal 2003 or more than 10% of
accounts receivable at March 31, 2003.
Inventories
Inventories are stated at the lower of cost (determined on a first-in,
first-out basis) or market value. The Company's inventories include high
technology parts and components that are specialized in nature and subject to
rapid technological obsolescence. While the Company has programs to minimize
the required inventories on hand and considers technological obsolescence when
estimating amounts required to reduce recorded amounts to market values, it is
reasonably possible that such estimates could change in the near term.
Property, Plant and Equipment
Property and equipment are stated at cost and generally depreciated using
accelerated methods over estimated useful lives of five years or less.
Building and building improvements are recorded at cost and are depreciated on
a straight-line basis over the useful life of the building of 39 years.
Leasehold improvements are recorded at cost and are amortized on a
straight-line basis over the lesser of the related lease term or the estimated
useful life of the assets.
Impairment of Long-lived assets
Long-lived assets and certain identifiable intangible assets to be held and
used are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of such assets may not be recoverable.
Determination of recoverability is based on an estimate of undiscounted future
cash flows resulting from the use of the asset and its eventual disposition.
Measurement of an impairment loss for long-lived assets and certain
identifiable intangible assets that management expects to hold and use are
based on the fair value of the asset. Long-lived assets and certain
identifiable intangible assets to be disposed of are reported at the lower of
carrying amount or fair value less costs to sell.
The Company reviews for impairment of its Long-lived assets whenever events or
changes in circumstances indicate that the carrying amount of an asset might
not be recoverable. In certain situations, an impairment loss would be
recognized.
Revenue Recognition
Revenue from direct product sales to end-user customers is generally recognized
upon transfer of title and risk of loss, which is generally upon shipment of
the product provided persuasive evidence of an arrangement exists, the price is
fixed or determinable, no significant obligations remain and collection of the
resulting receivable is reasonably assured. Provisions for estimated returns
and other allowances are recorded at the time revenue is recognized. Sales to
distributors are made primarily under arrangements allowing limited price
protection and the right of stock rotation on merchandise unsold by the
distributors. Because of the uncertainty associated with pricing concessions
and possible returns, the Company defers recognition of such sales and the
related costs of sales until the merchandise is sold by distributors to their
end-user customers.
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.
The following is a reconciliation of the numerator (net income) and the
denominator (number of shares) used in the basic and diluted EPS calculations.
(in thousands except per share amounts)
Fiscal Years Ended
March 31,
2003 2002 2001
---- ---- ----
BASIC:
Weighted average shares outstanding................. 12,598 12,443 12,351
Net income..........................................$ 2,855 $ 3,862 $ 8,088
Net income per share................................$ 0.23 $ 0.31 $ 0.65
DILUTED:
Weighted average shares outstanding................. 12,598 12,443 12,351
Effect of dilutive securities: stock option........ 159 305 639
------ ------ ------
Total......................................... 12,757 12,748 12,990
Net income..........................................$ 2,855 $ 3,862 $ 8,088
Net income per share................................$ 0.22 $ 0.30 $ 0.62
Options to purchase the Company's common stock of 643,056 shares at an average
price of $24.68 per share, 444,450 shares at an average price of $29.79 per
share, and 83,513 shares at an average price of $46.34 per share in fiscal
2003, 2002, and 2001, respectively, were outstanding but were not included in
the computation of diluted earnings per share because their effect would have
been anti-dilutive.
Accounting for 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, 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 options plans and Employee Stock Purchase
Plan based on the fair value at the grant date for the awards consistent with
the provisions of SFAS 123, the net income and net income per share for the
years ended March 31, 2003, 2002, and 2001 would have been reduced to the pro
forma amounts indicated as follows:
Fiscal Years Ended March 31,
(in thousands except per share amount) 2003 2002 2001
---- ---- ----
Net income As reported $2,855 $3,862 $8,088
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 (3,186) (4,801) (3,884)
------ ------ -------
Pro forma $(331) $(939) $4,204
====== ====== =======
Basic earnings
per share As reported $0.23 $0.31 $0.65
Pro forma $(0.03) $(0.07) $0.34
Diluted
earnings
per share As reported $0.22 $0.30 $0.62
Pro forma $(0.03) $(0.07) $0.33
To compute the estimated fair value of each option grant under the Option
Plans and employee's purchase rights under the ESPP, the Black-Scholes option
pricing model was used with the following weighted average assumptions:
Employee Stock Options Plans ESPP
---------------------------- ----
2003 2002 2001 2003 2002 2001
---- ---- ---- ---- ---- ----
Risk-free interest rate 1.73% 3.52% 5.78% 1.29% 3.02% 6.35%
Expected term of option
from vest date (years) 1.49 1.24 1.13 0.50 0.50 0.50
Expected volatility 98.0% 129.0% 104.0% 55.8% 58.4% 98.9%
Expected dividends -- -- -- -- -- --
Income Taxes
The Company utilizes the liability method to account for income taxes where
deferred tax assets or liabilities are determined based on the temporary
differences between the bases used for financial versus tax reporting of assets
and liabilities, using tax laws and rates in effect for the year in which the
differences are expected to affect taxable income. A valuation allowance is
provided for deferred tax assets when management cannot conclude, based on the
available evidence, that it is more likely than not that all or a portion of
the deferred tax assets will be realized through future operations. The
provision for income taxes represents taxes that are or would have been payable
for the current period, plus the net change in deferred tax amounts.
Advertising Costs
The Company expenses advertising and promotional costs as they are incurred.
Advertising costs for the last three fiscal years were insignificant.
Fair Value of Financial Instrument
Carrying amounts of certain of the Company's financial instruments including
cash, cash equivalents, accounts receivable, and accounts payable approximate
fair value due to their short maturities. We measure a Financial Instrument's
"other than temporary" impairment, if any, using its fair value.
Comprehensive Income
The Company adopted SFAS No. 130, "Reporting 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.
Recent Accounting Pronouncements
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
is effective for exit or disposal activities that are initiated after December
31, 2002 and early application is encouraged. The Company's adoption of SFAS
146 had no impact on the Company's financial position or results of operations,
although SFAS 146 may impact the timing of recognition of costs associated with
future restructuring, exit, or disposal activities.
In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others, an interpretation of FASB
Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34."
FIN 45 clarifies the requirements of FASB Statement No. 5, "Accounting for
Contingencies," relating to the guarantor's accounting for, and disclosure of
the issuance of certain types of guarantees. The disclosure provisions of the
Interpretation are effective for financial statements of interim or annual
reports that end after December 15, 2002. However, the provisions for initial
recognition and measurement are effective on a prospective basis for
guarantees that are issued or modified after December 31, 2002, irrespective of
the guarantor's year-end. The Company's adoption of FIN 45 did not have a
material impact on the Company's financial position or results of operations.
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 will apply to revenue arrangements
entered into in fiscal periods beginning after June 15, 2003. The Company
believes that adoption of EITF 00-21 will have no material impact on its
financial position or results of operations.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation, Transition and Disclosure." SFAS No. 148 amends SFAS No. 123 and
requires prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. SFAS No. 148 is effective for
fiscal years ending after December 15, 2002 and is effective for interim
periods beginning after December 15, 2002. The Company has included the
disclosures required by SFAS 148 in Note 1 to the consolidated financial
statements. The Company does not intend to adopt the accounting provisions of
SFAS 123 for employee compensation.
In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities, an Interpretation of ARB No. 51," ("FIN 46"), FIN
46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the entity do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN 46 is
effective immediately for all new variable interest entities created or
acquired after January 31, 2003. For variable interest entities created or
acquired prior to February 1, 2003, the provision of FIN 46 must be applied for
the first interim or annual period beginning after June 15, 2003. The Company
does not believe the adoption of FIN 46 will have a material impact on its
financial position or results of operations.
2. INVENTORIES (in thousands):
March 31,
2003 2002
---- ----
Raw materials............................... $ 1,348 $ 1,218
Work-in-process............................. 9,341 11,849
Finished goods.............................. 3,893 3,427
------ ------
$ 14,582 $ 16,494
During fiscal year 2003, the Company recorded a charge to cost of goods sold of
approximately $1,493,000 to write-down work-in-progress inventory due to
quantities on hand being in excess of projected demand.
3. PROPERTY, PLANT AND EQUIPMENT (in thousands):
March 31,
2003 2002
---- ----
Land............................................ $ 825 $ 825
Machinery and equipment......................... 30,882 30,955
Leasehold improvement........................... 2,231 2,023
Building........................................ 2,234 2,048
Furniture and fixture........................... 291 257
------ ------
36,463 36,108
Less accumulated depreciation and amortization (24,359) (19,781)
------ ------
$12,104 $16,327
4. INCOME TAXES
The components of the provision for income taxes for fiscal years ended March
31, 2003, 2002, and 2001 are as follows (in thousands):
Fiscal Years Ended March 31,
----------------------------
2003 2002 2001
---- ---- ----
U.S. Federal current............................. $ 802 $ 881 $ 6,058
U.S. Federal deferred............................ (188) 1,377 (2,464)
----- ----- ------
614 2,258 3,594
Non-US current................................... 491 -- --
Non-US deferred.................................. -- -- --
----- ----- ------
491 -- --
State current................................... 25 1 763
State deferret................................... 213 (269) (190)
--- --- ---
238 (268) 573
--- --- ---
$1,343 $ 1,990 $4,167
====== ======= ======
The provision for income taxes differs from the amount computed by applying the
statutory federal income tax rate to income before provision for income taxes
as follows:
Fiscal Years Ended March 31,
----------------------------
2003 2002 2001
---- ---- ----
Statutory provision.................... 35% 35% 35%
State tax, net of federal benefits..... 5 5 3
Tax credits............................ (8) (9) (4)
Foreign earnings tax differential...... (7) -- (4)
Other.................................. 7 3 4
--- --- ---
32% 34% 34%
=== === ===
Significant components of deferred tax assets, for which no valuation allowance
was required, and the deferred tax liabilities included on the consolidated
balance sheet are as follows (in thousands):
March 31,
---------
2003 2002
---- ----
Deferred tax assets:
Accrued employee benefits........................... $ 576 $ 579
Inventory reserves.................................. 890 386
Accrued liabilities................................. 1,527 1,548
State deferred taxes (net of federal benefits)...... -- --
Deferred revenue on shipments to distributors....... 793 685
Allowances for doubtful accounts and sales returns.. 244 580
Depreciation and amortization....................... 1,031 2,120
Tax credits......................................... 1,242 380
------ ------
Total deferred tax assets........................ $6,303 $6,278
====== ======
Management has determined that no valuation allowance is required because,
although realization is not assured, the Company has sufficient taxable income
in carryback years to absorb items deductible in the future for federal tax
purposes and anticipates that its estimated future taxable income will allow
the deferred tax asset for state tax purposes to be fully realized in future
years. The amount of the deferred tax asset that is realizable could be
reduced in the near term if actual results differ significantly from estimates
of future taxable income.
The domestic and foreign components of income before income taxes are
(in thousands):
Fiscal Years Ended March 31,
----------------------------
2003 2002 2001
---- ---- ----
United States $2,243 $5,265 $12,255
Foreign 1,955 587 --
------ ----- ------
$4,198 $5,852 $12,255
====== ====== ======
We have not provided for U.S. federal and foreign withholding taxes on $2,542
of non-U.S. subsidiary undistributed earnings as of March 31, 2003 because we
intend to reinvest such earnings indefinitely. Where excess cash has
accumulated in our non-U.S. subsidiary and its advantageous for tax or foreign
exchange reasons, subsidiary earnings are remitted.
At March 31, 2003, we had tax credit carryforwards of approximately $546,000
for federal and $1,063,000 of state which will expire in varying amounts
beginning in 2007 through 2023 if not utilized.
Tax benefits of $451,000 in 2003, $224,000 in 2002 and $1,026,000 in 2001
associated with the exercise of stock options were recognized in shareholders'
equity.
5. EMPLOYEE BENEFIT PLANS
Profit Sharing Plan -- The Company has a discretionary profit sharing plan for
the benefit of eligible employees. Related expenses were $423,000, $364,000,
and $1,229,000, in fiscal 2003, 2002, and 2001, respectively.
Savings and Retirement Plan -- The Supertex Savings and Retirement Plan allows
for employee savings intended to qualify under the provisions of Section 401 of
the Internal Revenue Code. Employees having at least three months of permanent
service may make pretax contributions of 1% to 20% of qualified compensation,
with the Company matching certain percentages of employee contributions, all of
which are 100% vested. In fiscal years 2003, 2002, and 2001, the Company's
matching contributions were $210,000, $245,000, and $234,000, respectively.
Supplemental Employee Retirement Plan -- The Supplemental Employee Retirement
Plan (the "SERP") is a non-qualified deferred compensation plan that covers a
select group of management or highly compensated employees of the Company. The
SERP was adopted by the Company, effective January 1, 1996. The Plan assets at
March 31, 2003 of $3,945,000 are included in short-term investments in the
Company's consolidated balance sheet at March 31, 2003 and classified as
trading securities. Such assets shall at all times be subject to claims of the
general creditors of the Company. Prior to March 31, 2003, certain Plan assets
were invested in limited partnership interests which were not traded in public
markets and as such were accounted for under the cost method of accounting.
Gain and losses for this type of investments were recorded when realized which
is upon liquidation of the securities.
SERP obligations are based on the fair value of the underlying assets owed to
participants as stipulated by the SERP and are included in accrued liabilities
in the consolidated financial statements. The Deferred Compensation Committee
is responsible for the general administration and interpretation of the SERP
and for carrying out its provisions.
Employee Stock Purchase Plan -- The shareholders of the Company approved the
adoption of the 2000 Employee Stock Purchase Plan (the "ESPP") and the
reservation of shares of common stock for issuance under this Plan at the
August 18, 2000 annual shareholder's meeting. The maximum aggregate number of
common stock available for purchase under the ESPP is 500,000 shares plus an
annual increase on the first day of the Company's fiscal year of the lesser of
100,000 shares or three percent (3%) of the outstanding shares on that date or
a lesser amount determined by the Board of Directors. Eligible employees may
elect to withhold up to 20% of their cash compensation to purchase shares of
the Company's common stock at a price equal to 85% of the market value of the
stock at the beginning or ending of a six month offering period, whichever is
lower. An eligible employee may purchase no more than 500 shares during any
calendar year. For fiscal year 2003 there were 46,408 shares of the Company's
common stock that were issued under the ESPP compared to 45,239 shares of
common stock issued in fiscal 2002. There were no shares issued under the ESPP
for the year ended March 31, 2001. There are 408,353 shares available for
future issuance under the ESPP at the end of fiscal year 2003.
Stock Option Plans -- The 1991 Stock Option Plan (the "1991 Plan") provides
for granting incentive stock options to employees, and non-statutory stock
options to employees and consultants. Terms for exercising options are
determined by the Board of Directors, and options expire at the earlier of the
term provided in the Notice of Grant or upon termination of employment or
consulting relationship. The 1991 Plan expired in June 2001, thus there were
no options available for grant under the 1991 Plan.
A total of 2,825,715 shares of the Company's common stock were reserved for
issuance under the 1991 Plan. Options granted under the 1991 Plan are granted
at the fair market value of the Company's common stock on the date of grant and
generally expire 7 years from the date of grant or at termination of service,
whichever occurs first. The options generally are exercisable beginning one
year from date of grant and generally vest over a five-year period.
The Company's shareholders approved the adoption of the 2001 Stock Option Plan
(the "2001 Plan") and the reservation of 2,000,000 shares of common stock for
issuance under 2001 Plan at the August 17, 2001 annual meeting of shareholders.
Terms for exercising options and vesting schedules are similar to the 1991
Plan.
Activity under the 1991 Option Plan is as follows:
Available Options Outstanding Weighted
For Average
Grant Shares Price Per Share Exercise Price
------- -------- -------------- --------------
Balance, March 31, 2000 720,435 1,259,820 $2.88 - 26.06 $ 11.62
Granted (549,560) 549,560 3.25 - 46.34 29.03
Exercised -- (161,580) 2.88 - 16.75 8.36
Canceled 130,720 (130,720) 3.25 - 46.34 14.92
------- --------
Balance, March 31, 2001 301,595 1,517,080 4.50 - 46.34 17.48
Granted (193,290) 193,290 12.53 - 12.53 12.53
Exercised -- (129,370) 4.50 - 19.56 10.16
Canceled 96,340 (96,340) 9.25 - 46.34 22.13
Expired (204,645) --
--------- ---------
Balance, March 31, 2002 -- 1,484,660 7.50 - 46.34 17.19
Granted -- --
Exercised -- (87,520) 7.25 - 19.56 9.47
Canceled 87,760 (87,760) 9.38 - 46.34 23.96
Expired (87,760) --
-------- --------
Balance, March 31, 2003 -- 1,309,380 $10.31- 46.34 $ 17.21
======== ========= =======
Activity under the 2001 Option Plan is as follows:
Available Options Outstanding Weighted
For Average
Grant Shares Price Per Share Exercise Price
------- ------ --------------- --------------
Balance, March 31, 2001 -- -- -- --
Reserved 2,000,000
Granted (127,300) 127,300 $15.83 - 21.31 $17.65
---------- -------
Balance, March 31, 2002 1,872,700 127,300 15.83 - 21.31 $17.65
Granted (132,200) 132,300 11.30 - 17.67 $13.44
Exercised -- -- -- --
Canceled 24,800 (24,800) 13.16 - 17.14 13.72
------ -------
Balance, March 31, 2003 1,765,300 234,700 $11.30 - 21.31 $15.69
========= ======= ======
The options outstanding and currently exercisable by exercise price under the
combined 1991 and 2001 Option Plans at March 31, 2003 are as follows:
Options Outstanding Options Exercisable
Weighted-Average
Range of Exercise Number Remaining Weighted Average Number Weighted-Average
Prices Outstanding Contractual Life Exercise Price Outstanding Exercise Price
- ---------------- ------- ---------------- ---------------- ----------- --------------
$ 10.31 - $11.30 437,900 3.68 $10.84 200,860 $10.75
12.00 - 13.50 440,370 3.43 12.80 228,330 12.72
13.69 - 19.56 407,060 4.68 16.84 169,206 16.86
21.31 - 46.34 258,750 4.49 34.68 99,920 35.32
$10.31 - $46.34 1,544,080 4.01 $16.98 698,316 $16.39
The weighted average fair value of options granted during fiscal 2003, 2002,
and 2001 was $13.44 per share, $14.56 per share, and $29.03 per share,
respectively. All options were granted at market price of the Company's common
stock on the date of grant.
6. COMMITMENTS AND CONTINGENCIES
Operating Leases
As part of the Company's acquisition of Orbit's six-inch wafer fabrication
operation in fiscal 1999, the Company assumed an operating lease for its
manufacturing facility. The lease expires on April 30, 2004 with two (2)
options to extend the term of the lease, each for a period of five years. Rent
during the entire term is $76,000 per month which is adjusted annually based on
Bureau of Labor Statistic's Consumer Price Index. The Company is responsible
for maintenance costs, including real property taxes, utilities, insurance and
other costs. A portion of the facility is subleased to an unrelated company.
The Company also leases a Sunnyvale facility under an operating lease for
$10,442 per month from a corporation owned by a former director of the Company,
expiring on April 1, 2007. Under the lease, the Company is responsible for its
pro-rata maintenance costs, including real property taxes, and other costs.
This facility is being subleased to one of the Company's providers of epitaxial
deposition services, expiring on April 1, 2007, essentially at cost.
The Company also leases a facility to house its operations in Hong Kong under
an operating lease for the equivalent of approximately $13,700 per month
exclusive of building maintenance fees, rates, taxes and other duties imposed
by the government of Hong Kong upon the leased property.
The Company has other operating leases for its field sales offices in New York,
Texas and Taiwan expiring at various dates through fiscal year 2008.
Future minimum lease payments and sublease income under all non-cancelable
operating leases at March 31, 2003 are as follows (in thousands):
Fiscal Years Ending March 31 Operating Lease Sublease Income
- ---------------------------- --------------- ---------------
2004 $ 1,230 $ 644
2005 1,104 370
2006 1,047 336
2007 1,051 336
2008 761 155
Thereafter -- --
------ -----
$ 5,193 $ 1,841
====== =====
Facilities rental expenses, net of facilities sublease, were approximately
$600,000, $999,000, and $659,000, (net of facilities sublease income of
$448,000, $405,000, and $593,000) in fiscal years 2003, 2002, and 2001,
respectively. Of the total rental expenses paid, $135,000, $457,000, and
$408,000 were paid to the Company's former director in fiscal 2003, 2002, and
2001 respectively.
We have agreed to defend certain customers, distributors, suppliers, and
subcontractors against certain claims which third parties may assert that our
products allegedly infringe certain of their intellectual property rights,
including patents, trademarks, trade secrets, or copyrights. We have also
agreed to pay certain amounts of any resulting damage awards and we have the
option to replace any infringing product with non-infringing product. The
terms of these indemnification obligations are generally perpetual from the
effective date of the agreement. In certain cases, there are limits on and
exceptions to our potential liability for indemnification relating to
intellectual property infringement claims. We cannot estimate the amount of
potential future payments, if any, that we might be required to make as a
result of these agreements. To date, we have not paid any damage award or been
required to defend any claim related to our indemnification obligations, and
accordingly, we have not accrued any amounts for our indemnification
obligations. However, there can be no assurances that we will not have any
financial exposure under those indemnification obligations.
In addition to the foregoing, from time to time the Company is subject to
possible claims or assessments from third parties arising in the normal course
of business. Management has reviewed such possible claims and assessments with
legal counsel and believes that it is unlikely that they will result in a
material adverse impact on the Company's financial position or results of
operations.
7. SEGMENT INFORMATION
The Company operates in one business segment. The Company's principal markets
are in the United States of America, Europe and Asia. On the following page is
a summary of the semiconductor manufacturing geographic information related to
revenues for the years ended March 31, 2003, 2002, and 2001:
Fiscal Years ended March 31,
----------------------------
(in thousands) 2003 2002 2001
---- ---- ----
Revenues
United States $ 36,512 $ 39,009 $ 50,822
Europe 6,015 5,270 12,762
Japan 6,045 5,961 9,438
Asia (excluding Japan) 5,141 4,895 6,597
Other 1,202 1,060 1,836
------ ------ ------
Total Revenue $ 54,915 $ 56,195 $ 81,455
====== ====== ======
International sales are entirely comprised of export sales. The Company's
assets are primarily located in the United States of America. The Company does
not segregate information related to operating income generated by its export
sales.
SCHEDULE II
SUPERTEX, INC.
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Balance at Charged to Balance at
Beginning Costs and Write-Off End
of Period Expenses of Accounts of Period
--------- -------- ----------- ---------
Year end March 31, 2001
Allowance for sales returns $ 845 $ 1,920 $ 1,859 $ 906
Allowance for doubtful accounts 521 1,275 290 1,506
Year end March 31, 2002
Allowance for sales returns $ 906 $ 2,267 $ 2,395 $ 778
Allowance for doubtful accounts 1,506 (535) 284 687
Year end March 31, 2003
Allowance for sales returns $ 778 $ 2,116 $ 2,529 $ 365
Allowance for doubtful accounts 687 (127) 310 250
SUPERTEX, INC.
EXHIBIT INDEX
(The Registrant will furnish to any shareholders who so request a copy of this
Annual Report on Form 10-K and any Exhibit listed below, provided that the
Registrant may require payment of a reasonable fee not to exceed its expense
in furnishing such information.)
Exhibit Exhibit Description
2.1 (1) Agreement for purchases and sale of assets by and between Supertex,
Inc. and Orbit Semiconductor dated January 16, 1999.
3.1 (2) Restated Articles of Incorporation of Registrant filed May 21, 1980.
3.2 (2) Certificate of Amendment of Articles of Incorporation filed
April 16, 1981.
3.3 (2) Certificate of Amendment of Articles of Incorporation filed
September 30, 1983.
3.4 (5) Bylaws of Registrant, as amended.
10 Deferred Compensation Plan (Supplemental Employee Retirement Plan)
which became effective January 1, 1996.
10.2 Lease Assignment agreement for 71 Vista Montana, San Jose, California,
dated February 1, 1999 among Orbit Semiconductor, as assignor, Sobrato
Development Companies #871, as landlord, and Supertex, Inc., as
assignee.
10.6 (4) 1991 Stock Option Plan which became effective, with form of
stock option agreement.
10.6a (5) 1991 Stock Option Plan, as amended as of August 4, 1995, with
form of stock option agreement.
10.6b (6) 1991 Stock Option Plan, as amended as of August 6, 1999, with
form of stock option agreement.
10.6c (7) 2000 Employee Stock Purchase Plan.
10.6d (8) 2001 Stock Option Plan, which became effective, with form of
stock option agreement.
10.7 (2) Profit Sharing Plan.
10.21 (3) Certificate of Amendment of Articles of Incorporation filed
October 14, 1988.
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
Attached
24.1 Power of Attorney. Contained on Signature Page
99.1 Certification of Chief Executive and Financial Officer.
(1) Incorporated by reference to the exhibit of the same number filed with
current report on form 8-K dated January 19, 1999.
(2) Incorporated by reference to exhibit of same number of Registrant's
Registration Statement on Form S-1
(File No. 2-86898), which became effective December 6, 1983.
(3) Incorporated by reference to exhibit filed with Quarterly Report on
Form 10-Q for period ended October 1, 1988.
(4) Incorporated by reference to exhibit filed with Annual Report on Form
10-K for year ended March 31, 1991.
(5) Incorporated by reference to exhibit included in Registrant's
Registration Statement on Form S-8 (File No. 33-43691) which became
effective September 1, 1995.
(6) Incorporated by reference to exhibit included in Registrant's
Registration Statement on Form S-8 (File No. 33-43691) which became
effective September 29, 1999.
(7) Incorporated by reference to exhibit included in Registrant's
Registration Statement on Form S-8 (File No. 333-47606) which became
effective October 6, 2000.
(8) Incorporated by reference to Appendix B of the Registrants amended
Proxy Statement filed on August 7, 2001 (File No. 000-12718).
Corresponding Registration Statement on Form S-8 (File No. 333-69594)
became effective on September 18,2001.