SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(MARK
ONE)
|
(x) |
Quarterly
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 |
For
the quarterly period ended January 1, 2005
or
|
(
) |
Transition
Report Pursuant to Section 13 or 15(d) of the Securities and Exchange Act
of 1934 (No Fee Required) |
Commission
File No. 0-12718
SUPERTEX,
INC.
(Exact
name of Registrant as specified in its Charter)
| California |
94-2328535 |
| (State or other jurisdiction of
incorporation or organization) |
(IRS Employer Identification
#) |
1235
Bordeaux Drive
Sunnyvale,
California 94089
(Address
of principal executive offices)
Registrant's
Telephone Number, Including Area Code: (408)
222-8888
Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes
X
No
Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Act).
Yes
X No
Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.
Class |
Outstanding
at February 4, 2005 |
|
Common
Stock, no par value |
13,057,812 |
Total
number of pages: 25
SUPERTEX,
INC.
QUARTERLY
REPORT - FORM 10Q
|
Table
of Contents |
|
Page
No. |
| |
PART
I - FINANCIAL INFORMATION |
|
|
Item
1. |
Financial
Statements |
|
| |
Unaudited
Condensed Consolidated Statements of Income |
3 |
| |
Unaudited
Condensed Consolidated Balance Sheets |
4 |
| |
Unaudited
Condensed Consolidated Statements of Cash Flows |
5 |
| |
Notes
to Unaudited Condensed Consolidated Financial Statements |
6 |
|
Item
2. |
Management's
Discussion and Analysis of Financial Condition and Results of
Operations |
13 |
|
Item
3. |
Quantitative
and Qualitative Disclosures About Market Risk and Interest Rate
Risk |
22 |
|
Item
4. |
Controls
and Procedures |
23 |
| |
|
|
| |
PART
II - OTHER INFORMATION |
|
|
Item
1. |
Legal
Proceedings |
24 |
|
Item
2. |
Unregistered
Sales of Equity Securities and Use of Proceeds |
24 |
|
Item
3. |
Defaults
Upon Senior Securities |
24 |
|
Item
4. |
Submission
of Matters to a Vote of Security Holders |
24 |
|
Item
5. |
Other
Information |
24 |
|
Item
6. |
Exhibits
|
24 |
| |
|
|
|
Signatures |
|
25 |
PART
I - FINANCIAL INFORMATION
Item
1. Financial Statements
SUPERTEX,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in
thousands, except per share amounts)
|
|
|
Three
Months Ended |
Nine
Months Ended
|
|
|
|
|
January
1, 2005 |
|
|
December
27, 2003 |
|
|
January
1, 2005 |
|
|
December
27, 2003 |
|
Net
sales |
|
$ |
14,925 |
|
$ |
13,010 |
|
$ |
44,715 |
|
$ |
37,805 |
|
Costs
and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales |
|
|
7,043 |
|
|
7,703 |
|
|
21,543 |
|
|
22,515 |
|
Research
and development |
|
|
2,086 |
|
|
2,418 |
|
|
7,242 |
|
|
6,925 |
|
Selling,
general and administrative |
|
|
3,049 |
|
|
2,550 |
|
|
8,400 |
|
|
7,144 |
|
Total
costs and expenses |
|
|
12,178 |
|
|
12,671 |
|
|
37,185 |
|
|
36,584 |
|
Income
from operations |
|
|
2,747 |
|
|
339 |
|
|
7,530 |
|
|
1,221 |
|
Interest
income |
|
|
441
|
|
|
307 |
|
|
1,102 |
|
|
840 |
|
Other
income, net |
|
|
251 |
|
|
292 |
|
|
362 |
|
|
647 |
|
Income
before provision for income taxes |
|
|
3,439 |
|
|
938 |
|
|
8,994 |
|
|
2,708 |
|
Provision
for income taxes |
|
|
1,189 |
|
|
291 |
|
|
2,968 |
|
|
839 |
|
Net
income |
|
$ |
2,250 |
|
$ |
647 |
|
$ |
6,026 |
|
$ |
1,869 |
|
Net
income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.17 |
|
$ |
0.05 |
|
$ |
0.47 |
|
$ |
0.15 |
|
Diluted |
|
$ |
0.17 |
|
$ |
0.05 |
|
$ |
0.46 |
|
$ |
0.14 |
|
Shares
used in per share computation: |
|
|
|
|
|
|
|
|
|
Basic |
|
|
13,023 |
|
|
12,775 |
|
|
12,957 |
|
|
12,728 |
|
Diluted |
|
|
13,419 |
|
|
13,086 |
|
|
13,204 |
|
|
13,013 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying Notes
to Unaudited Condensed Consolidated Financial
Statements. |
SUPERTEX,
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(unaudited,
in thousands)
|
|
|
January
1, 2005 |
|
|
April
3, 2004 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
|
|
Cash
and cash equivalents |
|
$ |
81,662 |
|
$ |
71,117 |
|
|
Short-term
investments |
|
|
5,797 |
|
|
5,007 |
|
|
Trade
accounts receivable, net of allowances of $628 and $386 |
|
|
8,755 |
|
|
7,667 |
|
|
Inventories |
|
|
11,891 |
|
|
12,606 |
|
|
Prepaid
expenses and other current assets |
|
|
790 |
|
|
642 |
|
|
Deferred
income taxes |
|
|
4,989 |
|
|
4,989 |
|
|
Total
current assets |
|
|
113,884 |
|
|
102,028 |
|
|
Property,
plant and equipment, net |
|
|
8,268 |
|
|
9,731 |
|
|
Other
assets |
|
|
96 |
|
|
94 |
|
|
Deferred
income taxes |
|
|
944 |
|
|
944 |
|
|
TOTAL
ASSETS |
|
$ |
123,192 |
|
$ |
112,797 |
|
| |
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Trade
accounts payable |
|
$ |
3,055 |
|
$ |
2,354 |
|
|
Accrued
salaries and employee benefits |
|
|
8,550 |
|
|
7,449 |
|
|
Other
accrued liabilities |
|
|
548 |
|
|
481 |
|
|
Deferred
revenue |
|
|
3,015 |
|
|
3,254 |
|
|
Income
taxes payable |
|
|
2,097 |
|
|
1,485 |
|
|
Total
current liabilities |
|
|
17,265 |
|
|
15,023 |
|
|
Commitments
and Contingencies (See Note 7) |
|
|
|
|
|
|
|
|
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
13,051 and 12,889 shares |
|
|
34,489 |
|
|
32,134 |
|
|
Retained
earnings |
|
|
71,438 |
|
|
65,640 |
|
|
Total
shareholders' equity |
|
|
105,927 |
|
|
97,774 |
|
|
TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
$ |
123,192 |
|
$ |
112,797 |
|
| |
|
|
|
|
See
accompanying Notes
to Unaudited Condensed Consolidated Financial
Statements. |
|
|
|
SUPERTEX,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited,
in thousands)
|
|
Nine
Months Ended, |
CASH
FLOWS FROM OPERATING ACTIVITIES |
|
|
January
1, 2005 |
|
|
December
27, 2003 |
|
|
Net
income |
|
$ |
6,026 |
|
$ |
1,869 |
|
|
Non-cash
adjustments to net income: |
|
|
|
|
|
|
|
|
Depreciation
|
|
|
2,453 |
|
|
3,316 |
|
|
Provision
for doubtful accounts and sales returns |
|
|
955 |
|
|
1,118 |
|
|
Provision
for excess and obsolete inventories |
|
|
1,317 |
|
|
538 |
|
|
Changes
in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Short-term
investments, categorized as trading |
|
|
(790 |
) |
|
(850 |
) |
|
Trade
accounts receivable |
|
|
(2,043 |
) |
|
636 |
|
|
Inventories |
|
|
(602 |
) |
|
517 |
|
|
Prepaid
expenses and other assets |
|
|
(150 |
) |
|
(315 |
) |
|
Trade
accounts payable and accrued expenses |
|
|
1,869 |
|
|
(670 |
) |
|
Deferred
revenue |
|
|
(239 |
) |
|
1,233 |
|
|
Income
taxes payable |
|
|
612 |
|
|
68 |
|
|
Total
adjustments |
|
|
3,382 |
|
|
5,591 |
|
|
Net
cash provided by operating activities |
|
|
9,408 |
|
|
7,460 |
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
Purchases
of property, plant and equipment |
|
|
(1,031 |
) |
|
(1,335 |
) |
|
Proceeds
from disposal of property and equipment |
|
|
41 |
|
|
15 |
|
|
Purchases
of short-term investments, categorized as available for
sale |
|
|
-- |
|
|
(5,025 |
) |
|
Sales
of short-term investments, categorized as available for
sale |
|
|
-- |
|
|
5,025 |
|
|
Net
cash used in investing activities |
|
|
(990 |
) |
|
(1,320 |
) |
|
CASH
FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Proceeds
from exercise of stock options and employee stock purchase
plan |
|
|
2,402 |
|
|
1,620 |
|
|
Repurchase
of common stock |
|
|
(275 |
) |
|
-- |
|
|
Net
cash provided by financing activities |
|
|
2,127 |
|
|
1,620 |
|
|
NET
INCREASE IN CASH AND CASH EQUIVALENTS |
|
|
10,545 |
|
|
7,760 |
|
|
CASH
AND CASH EQUIVALENTS: |
|
|
|
|
|
|
|
|
Beginning
of period |
|
|
71,117 |
|
|
60,931 |
|
|
End
of period |
|
$ |
81,662 |
|
$ |
68,691 |
|
|
Supplemental
cash flow disclosures: |
|
|
|
|
|
|
|
|
Income
taxes paid, net of refunds |
|
$ |
2,356 |
|
$ |
(771 |
) |
| |
|
|
|
|
See
accompanying Notes
to Unaudited Condensed Consolidated Financial
Statements. |
|
|
|
SUPERTEX,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note
1 - Organization and Basis of Presentation
The
accompanying unaudited condensed consolidated financial statements of Supertex,
Inc. and its subsidiary, have been prepared in accordance with accounting
principles generally accepted in the United States of America. This financial
information reflects all adjustments, which are, in the opinion of the Company's
management, of normal recurring nature and necessary to present fairly the
statements of financial position as of January 1, 2005 and April 3, 2004,
results of operations for the three and nine-month periods ended January 1, 2005
and December 27, 2003, and cash flows for the nine months ended January 1, 2005
and December 27, 2003. The April 3, 2004 balance sheet was derived from the
audited financial statements included in the 2004 annual report on Form 10-K.
All significant intercompany transactions and balances have been eliminated.
The
condensed consolidated financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission (SEC). Certain information and footnote
disclosures normally included in these financial statements have been condensed
or omitted pursuant to such rules and regulations, although the Company believes
the disclosures which are made are adequate to make the information presented
not misleading. These financial statements should be read in conjunction with
the audited condensed consolidated financial statements of Supertex, Inc. for
the fiscal year ended April 3, 2004, which were included in the annual report on
Form 10-K.
Interim
results are not necessarily indicative of results for the full fiscal year. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements as well as the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates, and such differences may be material to the financial statements. The
results of operations for the three and nine-month periods ended January 1, 2005
are not necessarily indicative of the results to be expected for any future
periods.
The
Company reports on a fiscal year basis and it operates and reports based on
quarterly periods ending on the Saturday closes to the end of the applicable
calendar quarter, except in a 53-week fiscal year, in which case the additional
week falls into the fourth quarter of the fiscal year. Fiscal 2005 will be a
52-week year. The three-month periods ended January 1, 2005 ("third quarter of
2005"), October 2, 2004 ("second quarter of 2005"), December 27, 2003 ("third
quarter of 2004"), and September 27, 2003 ("second quarter of 2004") all consist
of thirteen weeks.
Note
2 - Balance Sheet Details
The
Company's inventory consists of high technology integrated circuits that are
specialized in nature, subject to rapid technological obsolescence and are sold
in a highly competitive industry. Inventory balances at the end of each period
are adjusted to approximate the lower of cost or market.
Inventories
consisted of (in
thousands):
|
|
|
January
1, 2005 |
|
|
April
3, 2004 |
|
|
Raw
materials |
|
$ |
1,434 |
|
$ |
1,266 |
|
|
Work-in-process |
|
|
6,378 |
|
|
6,795 |
|
|
Finished
goods |
|
|
4,079 |
|
|
4,545 |
|
|
Inventories |
|
$ |
11,891 |
|
$ |
12,606 |
|
The
Company wrote down inventory valued at $533,000 for the three months ended
January 1, 2005 and $1,317,000 for the nine months ended January 1, 2005. For
the comparable periods in fiscal 2004, the Company wrote down inventory valued
at $159,000 and $538,000, respectively. The Company realized gross margin
benefits of $234,000 or 2% for the three months ended January 1, 2005 and
$738,000 or 2% for the nine months ended January 1, 2005, resulting from sale of
previously written down inventory. These benefits were $91,000 and $212,000 for
the three and nine-month periods ended December 27, 2003.
SUPERTEX,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued
(unaudited)
The
Company defers the recognition of revenue on shipments to distributors and the
related costs of sales until the distributors have sold the products to their
end-user customers because of the uncertainty associated with possible returns
and pricing concessions. Sales through the distributors are made primarily under
arrangements allowing limited rights of return, limited price protection and the
right of stock rotation on merchandise unsold by distributors. Deferred revenue
also includes a customer advance under a licensing agreement as well as upfront
payments received from customers.
Deferred
revenue
consisted of (in
thousands):
|
|
|
January
1, 2005 |
|
|
April
3, 2004 |
|
|
Shipments
to distributors |
|
$ |
2,656 |
|
$ |
2,678 |
|
|
Technology
license |
|
|
300 |
|
|
412 |
|
|
Others |
|
|
59 |
|
|
164 |
|
|
Deferred
revenue |
|
$ |
3,015 |
|
$ |
3,254 |
|
Note
3 - Comprehensive Income
Comprehensive
income, which includes all changes in equity during a period from non-owner
sources, did not differ from net income for any of the periods
presented.
Note
4 - Net Income per Share
Basic
earnings per share ("EPS") is computed as net income divided by the weighted
average number of common shares outstanding for the period. Diluted EPS reflects
the potential dilution that could occur from common shares issuable through
stock options only, as the Company does not have any warrants or other
convertible securities outstanding. A reconciliation of the numerator and
denominator of basic and diluted earnings per share is provided as follows (in
thousands, except per share amounts):
|
|
Three
Months Ended, |
Nine
Months Ended, |
|
|
|
January
1, 2005 |
|
|
December
27, 2003 |
|
|
January
1, 2005 |
|
|
December
27, 2003 |
|
|
BASIC: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income |
|
$ |
2,250 |
|
$ |
647 |
|
$ |
6,026 |
|
$ |
1,869 |
|
|
Weighted
average shares outstanding for the period |
|
|
13,023 |
|
|
12,775 |
|
|
12,957 |
|
|
12,728 |
|
|
Net
income per share |
|
$ |
0.17 |
|
$ |
0.05 |
|
$ |
0.47 |
|
$ |
0.15 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income |
|
$ |
2,250 |
|
$ |
647 |
|
$ |
6,026 |
|
$ |
1,869 |
|
|
Weighted
average shares outstanding for the period |
|
|
13,023 |
|
|
12,775 |
|
|
12,957 |
|
|
12,728 |
|
|
Dilutive
effect of stock options |
|
|
396 |
|
|
311 |
|
|
247 |
|
|
285
|
|
|
Total
|
|
|
13,419 |
|
|
13,086 |
|
|
13,204 |
|
|
13,013 |
|
|
Net
income per share |
|
$ |
0.17 |
|
$ |
0.05 |
|
$ |
0.46 |
|
$ |
0.14 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
to purchase 135,450 shares of the Company's common stock at an average price of
$39.40 per share, and 391,067 shares at an average price of $28.73 per share at
January 01, 2005 and December 27, 2003, respectively, were outstanding but were
not included in the computation of diluted earnings per share because their
effect would have been anti-dilutive. For the nine months ended January 1, 2005
and December 27, 2003, respectively, options to purchase the Company's common
stock of 298,956 shares at an average price of $28.75 per share, and 413,003
shares at an average price of $28.59 per share were not included in the
computation of diluted earnings per share because their effect would have been
anti-dilutive.
SUPERTEX,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued
(unaudited)
Note
5 - Income Taxes
Income
taxes for interim reporting purposes are computed using estimates of the
effective annual income tax rate for the entire fiscal year. During the third
quarter of fiscal 2005, the Company revised the estimated effective income tax
rate for fiscal year 2005 to 33% from the 32% rate used in the second quarter of
fiscal 2005. The change in the rate was primarily due to federal and state tax
credits and foreign tax differentials. As a result of the change, the effective
income tax rate for the third quarter of fiscal 2005 was 35%.
In
December 2004, the Financial Accounting Standards Board ("FASB") issued FASB
Staff Position No. FAS 109-2, "Accounting and Disclosure Guidance for the
Foreign Earnings Repatriation Provision within the American Jobs Creation Act of
2004", ("SP FAS 109-2"). The American Jobs Creation Act introduces a
special one-time dividends received deduction on the repatriation of certain
foreign earnings to a U.S. taxpayer ("repatriation provision"), provided certain
criteria are met. SP FAS 109-2 provides accounting and disclosure guidance
for the repatriation
provision. Although SP FAS 109-2 is effective immediately, the Treasury
Department or Congress has not provided additional clarifying language on key
elements of the repatriation provision. The Company is in the process of
assessing the impact of this provision in its Financial Statements.
Note
6 - Stock-based Compensation
The
Company accounts for stock-based employee compensation using the intrinsic value
method under the Financial Standards Board ("FASB") Accounting Principles Board
Opinion No. 25, Accounting
for Stock Issued to Employees, ("APB
25"), and related interpretations, and complies with the disclosure provisions
of Statements of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation, and Financial Accounting Standards No. 148, Accounting
for Stock-Based Compensation - Transition and Disclosure, ("SFAS 123") and
("SFAS 148"), respectively. SFAS 123 requires the disclosure of pro forma net
income and earnings per share. Under SFAS 123, the fair value of stock-based
awards to employees is calculated through the use of option pricing models, even
though such models were developed to estimate the fair value of freely tradable,
fully transferable options without vesting restrictions, which significantly
differ from the Company's stock option awards. These models also require
subjective assumptions, including future stock price volatility and expected
time to exercise, which greatly affect the calculated values.
The fair
value of each option grant, as defined by SFAS No. 123, is estimated on the date
of grant using the Black-Scholes option-pricing model. The Black-Scholes model
was developed to estimate the fair value of freely tradable, fully transferable
options without vesting restrictions. However, options granted under the current
stock option plan are not freely tradable, or fully transferable, and have
vesting restrictions. The Black-Scholes model also requires highly subjective
assumptions, including future stock price volatility and expected time until
exercise, which greatly affect their fair value.
In
December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment" (SFAS 123R),
which requires companies to measure and recognize compensation expense for all
stock-based compensation to employees at fair value. SFAS 123R will be effective
for all interim fiscal periods beginning after June 15, 2005, thus will be
effective for the Company beginning the second quarter of fiscal 2006.
Retroactive application of the provisions of SFAS 123R to the beginning of the
fiscal year that includes the effective date is permitted, but not required. The
Company is currently evaluating the impact of the SFAS 123R on its financial
statements.
SUPERTEX,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued
(unaudited)
Had the
Company recorded compensation costs for stock options issued to employees under
the Company's current and former stock option plans and stock sale under
Employee Stock Purchase Plan (ESPP) based on the fair value at the grant date
for the awards consistent with the provisions of SFAS No. 123, the net income
and net income per share for the three and nine-month periods ended January 1,
2005 and December 27, 2003 would have been reduced to the pro forma amounts
indicated as follows:
| |
|
|
|
Three
Months Ended |
|
Nine
Months Ended |
|
|
(in
thousands except per share amounts) |
|
January
1, 2005 |
|
December
27, 2003 |
|
January
1, 2005 |
|
December
27, 2003 |
|
|
Net
income as reported |
$ |
2,250 |
|
$ |
647 |
|
$ |
6,026 |
|
$ |
1,869 |
|
|
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 |
|
|
(552)
|
|
|
(398)
|
|
|
(1,615)
|
|
|
(1,594)
|
|
|
Pro
forma net income (loss) |
|
|
|
|
$ |
1,698 |
|
$ |
249 |
|
$ |
4,411 |
|
$ |
275 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings (loss) per share |
|
|
As
reported |
|
$ |
0.17 |
|
$ |
0.05 |
|
$ |
0.47 |
|
$ |
0.15 |
|
|
|
|
|
|
|
$ |
0.13 |
|
$ |
0.02 |
|
$ |
0.34 |
|
$ |
0.02 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings (loss) per share |
|
|
As
reported |
|
$ |
0.17 |
|
$ |
0.05 |
|
$ |
0.46 |
|
$ |
0.14 |
|
|
|
|
|
Pro
forma |
|
$ |
0.13 |
|
$ |
0.02 |
|
$ |
0.34 |
|
$ |
0.02 |
|
Note
7 - Commitments and Contingencies
FASB
Interpretation No. 45, or FIN 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, requires
that upon issuance of a guarantee, the guarantor must recognize a liability for
the fair value of the obligation it assumes under that guarantee. In addition,
FIN 45 requires disclosures about the guarantees that an entity has issued,
including a roll forward of the entity's product warranty
liabilities.
SUPERTEX,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued
(unaudited)
Indemnification
As is
customary in the Company's industry, the Company has agreed to defend certain
customers, distributors, suppliers, and subcontractors against certain claims,
which third parties may assert that its products allegedly infringe certain of
their intellectual property rights, including patents, trademarks, trade
secrets, or copyrights. The Company has agreed to pay certain amounts of any
resulting damage awards and typically has 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 the Company's potential
liability for indemnification relating to intellectual property infringement
claims. The Company cannot estimate the amount of potential future payments, if
any, that it might be required to make as a result of these agreements. To date,
the Company has not paid any damage award or been required to defend any claim
related to its indemnification obligations, and accordingly, it has not accrued
any amount for indemnification obligations. However, there can be no assurances
that the Company will not have any financial exposure under those
indemnification obligations in the future.
Legal
Proceedings
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.
Product
Warranty
The
Company's policy is to replace defective products at its own expense for a
period of 90-days from date of shipment. This period may be extended in certain
cases. This liability is limited to replacement of the product and freight and
delivery costs or refund or credit of the purchase price. On certain occasions,
the Company may pay for rework. The Company usually provides a replaced/reworked
product at resale value rather than a refund or credit to meet the warranty
obligations. This policy is necessary to protect the Company's distributors, to
improve customer satisfaction, and for competitive reasons. Additionally, it is
the custom in Japan and Europe to provide this benefit.
The
Company records a reduction to revenue for estimated product returns, including
warranty related returns, in the same period as the related revenues are
recorded. These estimates are based on historical experience, analysis of
outstanding Return Material Authorization (RMA) and Allowance Authorization (AA)
data and any other form of notification received of pending returns.
The
reductions to revenue for estimated product returns for the three and nine
months ended January 1, 2005 and December 27, 2003 are as follows (in
thousands):
|
Description |
|
|
Balance
at Beginning of Period |
|
|
Additions(1) |
|
|
Deductions(2) |
|
|
Balance
at End of Period |
|
|
Three
months ended January 1, 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for sales returns |
|
$ |
199 |
|
$ |
323 |
|
$ |
175 |
|
$ |
347 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
months ended December 27, 2003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for sales returns |
|
$ |
299 |
|
$ |
371 |
|
$ |
437 |
|
$ |
233 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine
months ended January 1, 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for sales returns |
|
$ |
185 |
|
$ |
874 |
|
$ |
712 |
|
$ |
347 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine
months ended December 27, 2003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for sales returns |
|
$ |
365 |
|
$ |
1,136 |
|
$ |
1,268 |
|
$ |
233 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
______________
(1)
Allowances for sales returns are charged as a reduction to revenue.
(2)
Represents amounts written off against the allowance for sales
returns.
While the
Company's sales returns have historically been within the expectations and the
allowance established, it cannot guarantee that it will continue to experience
the same return rates that it has had in the past. Any significant increase in
product failure rates and the resulting sales returns could have a material
adverse impact on the operating results for the period or periods in which such
returns materialize.
SUPERTEX,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued
(unaudited)
Contractual
Obligations
The
following table summarizes the Company's significant contractual cash
obligations at January 1, 2005, and the effect such obligations are expected to
have on liquidity and cash flow in future periods (in thousands):
| |
|
Payment
Due by Year |
|
|
Contractual
Obligations |
|
|
Total |
|
|
Less
than 1 Year |
|
|
2-3
Years |
|
|
4-5
Years |
|
|
After
5 Years |
|
|
Operating
lease obligations (1) |
|
$ |
5,987 |
|
$ |
1,021 |
|
$ |
1,901 |
|
$ |
1,792 |
|
$ |
1,273 |
|
|
Purchase
obligations (2) |
|
|
854 |
|
|
854 |
|
|
-- |
|
|
-- |
|
|
-- |
|
|
Total
contractual cash obligations |
|
$ |
6,841 |
|
$ |
1,875 |
|
$ |
1,901 |
|
$ |
1,792 |
|
$ |
1,273 |
|
(1)
The Company leases facilities under non-cancelable lease agreements expiring at
various times through April 2011. Rental expense net of sublease income for the
quarter ending January 1, 2005, amounted to $247,000.
(2)
To obtain favorable pricing and resource commitment, the Company commits to
volume purchases from suppliers of manufacturing materials and
services.
Note
8 - Common Stock Repurchase
There
were no shares repurchased during the three months ended January 1, 2005. Share
repurchase activities for the nine months ended January 1, 2005 were as
follows:
| |
|
Nine
Months Ended January 1, 2005 |
|
|
Number
of shares repurchased |
|
|
18,900 |
|
|
Cost
of shares repurchased |
|
$ |
275,000 |
|
|
Average
price per share |
|
$ |
14.55 |
|
Since the
inception of the repurchase program in 1992 through January 1, 2005, the Company
has repurchased a total of 1,040,500 shares of the common stock for an aggregate
cost of $6,109,000. Upon their repurchase, shares are restored to the status of
authorized but unissued shares. At January 1, 2005, 859,500 shares remained
authorized for repurchases under the program.
Note
9 -
Short-term Investments
The
Company's short-term investments of $5,797,000 at January 1, 2005 and $5,007,000
at April 3, 2004 consisted entirely of investments held by the Company's
Supplemental Employee Retirement Plan, which are categorized as trading
securities.
Note
10 - Segment Information
The
Company operates in one business segment comprising of the design, development,
manufacturing and marketing of high voltage analog and mixed signal integrated
circuits. The Company's principal markets are in the United States, Europe, and
Asia. The Company's Chief Operating Officer, the President, Principal Executive
and Financial Officer, reviews financial information presented on a consolidated
basis for purposes of making operating decisions and assessing financial
performance. Below is
a summary of sales by major geographic area:
SUPERTEX,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued
(unaudited)
| |
|
Three
Months Ended |
|
Nine
Months Ended |
|
|
(in
thousands) |
|
January
1, 2005 |
|
December
27, 2003 |
|
January
1, 2005 |
|
December
27, 2003 |
|
|
United
States |
|
$ |
8,264 |
|
$ |
7,439 |
|
$ |
25,581 |
|
$ |
20,878 |
|
|
Europe |
|
|
1,154 |
|
|
1,554 |
|
|
3,957 |
|
|
4,175 |
|
|
Japan |
|
|
1,412 |
|
|
1,359 |
|
|
5,179 |
|
|
4,205 |
|
|
Asia
(excluding Japan) |
|
|
3,667 |
|
|
2,450 |
|
|
8,640 |
|
|
7,331 |
|
|
Other |
|
|
428 |
|
|
208 |
|
|
1,358 |
|
|
1,216 |
|
|
Total
revenue |
|
$ |
14,925 |
|
$ |
13,010 |
|
$ |
44,715 |
|
$ |
37,805 |
|
The
Company does not segregate information related to operating income generated by
export sales. The Company's assets are primarily located in the United States of
America.
Net
property, plant and equipment by country was as follows:
|
Country |
|
|
January
1, 2005 |
|
|
December
27, 2003 |
|
|
United
States |
|
$ |
7,614 |
|
$ |
9,161 |
|
|
Hong
Kong |
|
|
654 |
|
|
570 |
|
| |
|
$ |
8,268 |
|
$ |
9,731 |
|
Note
11 - Significant Customers
Microtek
Inc., the Company's primary distributor in Japan, accounted for 9% and 12% of
net sales for the three and nine-month periods ended January 1, 2005. For the
comparable periods in fiscal 2004, sales to Microtek, Inc. accounted for 10% and
11% of net sales, respectively. No other customer accounted for more than 10% of
net sales for the three and nine-month periods of fiscal 2005.
Note
12 - Recent Accounting Pronouncements
In March
2004, the Financial Accounting Standards Board (FASB) approved the consensus
reached on the Emerging Issues Task Force (EITF) Issue No. 03-1, "The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments. " EITF
03-1 provides guidance for identifying impaired investments and new disclosure
requirements for investments that are deemed to be temporarily impaired. On
September 30, 2004, the FASB issued a final staff position (FSP) EITF Issue
03-1-1 that delays the effective date for the measurement and recognition
guidance included in paragraphs 10 through 20 of EITF 03-1. Quantitative and
qualitative disclosures required by EITF 03-1 remain effective for the Company's
fiscal year ending April 2, 2005. The Company does not believe the impact of
adoption of this EITF consensus will be significant to the overall results of
operations or financial position.
In
November 2004, the FASB issued SFAS No. 151, "Inventory
Costs, an amendment of ARB No.43, Chapter 4" (SFAS
151). This statement amends the guidance in ARB No. 43, Chapter 4, "Inventory
Pricing" to
clarify the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material (spoilage). SFAS 151 requires that those
items be recognized as current-period charges. In addition, this Statement
requires that allocation of fixed production overheads to costs of conversion be
based upon the normal capacity of the production facilities. The provisions of
SFAS 151 are effective for inventory cost incurred in fiscal years beginning
after June 15, 2005. As such, the Company is required to adopt these provisions
at the beginning of fiscal 2007. The Company is currently evaluating the impact
of SFAS 151 on its consolidated financial statements.
In
December 2004, the FASB issued SFAS No. 153, "Exchanges
of Non-monetary Assets, an amendment of APB Opinion No. 29" (SFAS
153). SFAS 153 replaces the exception from fair value measurement in APB Opinion
No. 29 for non-monetary exchanges of similar productive assets with a general
exception from fair value measurement for exchanges of non-monetary assets that
do not have commercial substance. A non-monetary exchange has commercial
substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange. SFAS 153 is to be applied
prospectively, and is effective for non-monetary asset exchanges occurring in
fiscal periods after the date of issuance of SFAS 153. As such, the Company is
required to adopt these provisions on the fourth quarter of its current fiscal
year.
Item
2 - Management's Discussion and Analysis of Financial Condition and Results of
Operations.
You
should read the following discussion and analysis in conjunction with the
Condensed Consolidated Financial Statements and related Notes thereto contained
elsewhere in this Report. The information contained in this quarterly report on
Form 10-Q is not a complete description of the Company's business or the risks
associated with an investment in the common stock. You are urged to carefully
review and consider the various disclosures made by us in this Report and in
other reports filed with the SEC, including the annual report on Form 10-K for
the year-ended April 3, 2004.
Cautionary
Statement Regarding Forward Looking Statements
This
Form 10-Q includes forward-looking statements. These forward-looking statements
are not historical facts, and are based on current expectations, estimates, and
projections about the Company's industry, its beliefs, its assumptions, and its
goals and objectives. Words such as "anticipates", "expects", "intends",
"plans", "believes", "seeks", "forecasts", and "estimates", and variations of
these words and similar expressions, are intended to identify forward-looking
statements. Examples of such forward-looking statements in this Form 10-Q are
the Company's expectations as to future revenues in the Medical Electronics,
Imaging, and Telecom markets and as to certain products within these markets;
the expectation that sales of lower margin foundry products will continue to
decline but may be offset by forecasted revenue growth in new products; the
expectation for depreciation expense to continue at its current reduced level
for the rest of fiscal 2005; plans to continue the same dollar amount of R&D
investment and to increase SG&A expense in absolute dollars as the Company
increases worldwide sales and marketing presence and incurs the additional cost
of Sarbanes-Oxley compliance; the belief that the impact of rising interest
rates on the fair value of the fixed rates securities is minimal; the plan to
spend approximately $576,000 for capital acquisitions in the fourth quarter of
fiscal 2005; the belief that the Company have substantial production capacity in
place to handle any projected increase in business for this fiscal year; and the
anticipation that the available funds and expected cash generated from
operations will be sufficient to meet the liquidity and capital requirements
through the next twelve months. These statements are only predictions, not a
guaranty of future performance, and are subject to risks, uncertainties, and
other factors, some of which are beyond the Company's control and are difficult
to predict, and could cause actual results to differ materially from those
expressed or forecasted in the forward-looking statements. These risks and
uncertainties include that there are no material adverse changes in the demand
for our customer's products in which the Company's products are used;
competition to supply semiconductor devices in the markets in which the Company
competes does not increase and cause price erosion; demand materializes and
increases for recently released customer products incorporating the Company's
products; that there are no unexpected manufacturing issues as production ramps
up; the demand for the Company's products or results of its product development
change is such that it would be unwise not to decrease research and development;
and that some of the Company's equipment will not be unexpectedly damaged or
obsoleted, thereby requiring replacement as well as those described in "Risk
Factors" under Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operation" in the Company's annual report of Form 10-K
for the fiscal year ended April 3, 2004. The information included in this Form
10-Q is provided as of the filing date with the SEC and future events or
circumstances could differ significantly from the forward-looking statements
included herein. Accordingly, the readers are cautioned not to place undue
reliance on such statements. Except as required by law, the Company undertakes
no obligation to update any forward-looking statement, whether as a result of
new information, future events, or otherwise.
Critical
Accounting Policies
The
Company's critical accounting policies are those that both (1) are most
important to the portrayal of the financial condition and results of operations
and (2) require management's most difficult, subjective, or complex judgments,
often requiring estimates about matters that are inherently uncertain. The
critical accounting policies are described in Item 7, "Management's Discussion
and Analysis of Financial Condition and Results of Operations," of the annual
report on Form 10-K for the year ended April 3, 2004.
Critical
accounting policies affecting the Company, the critical estimates made when
applying them, and the judgments and uncertainties affecting their application
have not changed materially since April 3, 2004.
Overview
Supertex
designs, develops, manufactures, and markets high voltage semiconductor devices,
including analog and mixed signal integrated circuits utilizing state-of-the-art
high voltage DMOS, HVCMOS and HVBiCMOS analog and mixed signal technologies. The
Company supplies standard and custom high voltage interface products primarily
for use in the telecommunications (telecom), imaging, medical electronics, and
industrial markets. The Company also supplies custom integrated circuits for
customers using customer-owned designs and mask toolings with the Company's
process technologies.
Results
of Operations
Net
Sales
Net sales
for the three months ended January 1, 2005 were $14,925,000, a 15% increase
compared to $13,010,000 for the same period of prior fiscal year but a decrease
of 4% from $15,548,000 for the prior quarter. Net sales for the nine months
ended January 1, 2005 were $44,715,000, an 18% increase compared to $37,805,000
for the same period of fiscal 2004. The Company operates in one business segment
comprising the design, development, manufacturing and marketing of high voltage
analog and mixed signal integrated circuits and
transistors.
The
Company has a broad base of customers, who in some cases manufacture end
products spanning multiple markets. As such, the assignment of revenue to the
aforementioned markets requires the use of estimates, judgment, and
extrapolation. Actual results may differ from those reported.
A
breakdown of our total sales to show sales to customers in the Medical
Electronics, Imaging, Telecom and Other markets for the three and nine-month
periods ended January 1, 2005, as well as year-over-year and sequential
percentage changes are as follows:
| |
|
Three
Months Ended |
|
Nine
Months Ended |
|
| Markets |
|
January
1, 2005 |
|
December
27, 2003 |
|
October
2, 2004 |
|
Year-Over-Year
Change |
|
Sequential
Change |
|
January
1, 2005 |
|
December
27, 2003 |
|
Year-Over-Year
Change |
|
|
Medical
Electronics |
|
|
35
|
%
|
|
34
|
%
|
|
38
|
%
|
|
18
|
%
|
|
-14
|
%
|
|
38
|
%
|
|
35
|
%
|
|
27
|
%
|
|
Imaging |
|
|
36
|
%
|
|
35
|
%
|
|
28
|
%
|
|
17
|
%
|
|
22
|
%
|
|
29
|
%
|
|
37
|
%
|
|
-7
|
%
|
|
Telecom |
|
|
20
|
%
|
|
23
|
%
|
|
22
|
%
|
|
-1
|
%
|
|
-10
|
%
|
|
22
|
%
|
|
21
|
%
|
|
24
|
%
|
|
Other |
|
|
9
|
%
|
|
8
|
%
|
|
12
|
%
|
|
34
|
%
|
|
-23
|
%
|
|
11
|
%
|
|
7
|
%
|
|
80
|
%
|
|
Total
Sales |
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
15
|
%
|
|
-4
|
%
|
|
100
|
%
|
|
100
|
%
|
|
18
|
%
|
For the
three months ended January 1, 2005, our overall net sales increased compared to
the same period a year ago as total sales in the Company's markets other than
Telecom were higher while total sales in the Telecom market were approximately
the same. This increase in overall net sales is primarily due to higher
units sales across these markets as overall semiconductor market conditions
improved. The Company did not have material sales price erosion that
negatively impacted sales for the current quarter. Compared to the three months
ended October 2, 2004, sequential sales decreased in all markets except in
Imaging. The decline in sales is attributed to the seasonal adjustment of sales
in the medical electronics market in the third fiscal quarter
and the reduced demand for its foundry products due to inventory build up at
certain foundry customers, which offset the sales increase in new products
during the quarter. The Company expects that sales of the lower margin foundry
products will continue to decline but may be offset by forecasted revenue growth
in new products as demand for our second-generation EL drivers, LED drivers,
medical ultrasound pulsers and HotSwap ICs ramps up. During the quarter, the
Company had several successful design-wins in its LED driver ICs, particularly
in the LCD TV backlighting applications, the demand for which the Company's
management believes, is going to ramp up in the
next fiscal year.
The
Company's current growth strategy emphasizes the successful transition of its
new products. Its success or failure depends, in large part, upon the Company's
ability to continuously and successfully introduce and market the new products
and technologies that meet its customer's requirements.
Sales to
the Medical Electronics market for the three months ended January 1, 2005
increased 18% compared to same period in prior fiscal year, but decreased 14%
sequentially. For the nine months ended January 1, 2005, sales increased
27% compared to the same period in the prior fiscal year. The increase in the
three and nine-month periods is due primarily to worldwide increase in
ultrasound units shipped and to a lesser degree, from shipments of new products
in the pulser area. The Company believes that sales to this market for the
remainder of the fiscal year will continue to hold at this increased level as
shipments of high-voltage pulsers for the new portable and transportable systems
coming to market begin, which in the past had been primarily the domain of large
diagnostic systems. New
therapeutic applications for ultrasound should also add to the sales of our
component devices in the coming fiscal quarters. The sequential decrease in
sales is primarily caused by the expected correction following seasonally strong
shipments in the second fiscal quarter. Customers in this market have
indicated to us that due to the budget process and the resulting buying practice
of many hospitals, which typically purchase their capital equipment in the
December quarter, our customers increase their demand for components from
suppliers like Supertex in the quarter prior to the last calendar
quarter.
Sales to
the Imaging market increased 17% for the three months ended January 1, 2005
compared to the same period a year ago, and increased 22% sequentially.
For the nine months ended January 1, 2005, sales to the Imaging market decreased
7% compared to the same period of last fiscal year. The increase in sales to
this market in the three months and sequentially, is primarily attributed to
large shipments of (EL) backlighting products to cell phone customers starting
in September 2004 for backlighting keypads. Sales for
the nine-month period were unfavorably affected by the reduced demand for the EL
backlighting products for monochrome displays in cellular phones. The
Company forecasts that new uses of the EL backlighting products in backlighting
keypads both in cellular phones and in audio/video remote controllers and other
handheld devices requiring multi-segment EL backlighting will more than offset
the decline in orders for EL backlighting products for the monochrome displays
for cell phones. Sales to the flat panel display and printer business remained
steady and are expected to increase sequentially as well.
Sales to
the Telecom market decreased 1% during the three months ended January 1, 2005
compared to the same period a year ago and decreased 10%
sequentially from the
prior period.
For the nine months ended January 1, 2005, sales to the Telecom market
increased 24% compared to the same period of prior fiscal year. The
increase in sales for the nine-month period was the result of improving market
conditions, and increased demand for DC to DC converters, long haul ringers,
protection devices and high voltage amplifier arrays for the optical-to-optical
market. The decrease in sales in the quarter when compared to the
comparable period in the prior fiscal year, and sequentially, is primarily
attributed to the decline in demand for our legacy products. However, the
Company projects that the expected decline in sales of the legacy products in
the future will be more than offset by increased sales of the HotSwap products
and optical MEMS drivers, as production at a major telecom equipment
manufacturer customer ramps-up in the next fiscal year.
Sales to
Other markets increased 34% during the three months ended January 1, 2005
compared to the same period a year ago, but decreased 23% sequentially.
The increase for the three and nine-months periods is primarily due to increased
custom processing shipments to a single customer whose end product is for the
automotive market. The sequential decrease in sales is primarily attributed to
decreased sales in foundry products as foundry customers experience inventory
build up.
The
Company's principal markets are in the United States, Europe, and Asia. Sales by
geography as well as year-over-year and sequential percentage change, were as
follows:
| |
|
Three
Months Ended |
|
Nine
Months Ended |
|
|
|
|
|
January
1, 2005 |
|
|
December
27, 2003 |
|
|
October
2, 2004 |
|
|
Year-Over-Year
Change |
|
|
Sequential
Change |
|
|
January
1, 2005 |
|
|
December
27, 2003 |
|
|
Year-Over-Year
Change |
|
|
United
States |
|
$ |
8,264 |
|
$ |
7,439 |
|
$ |
9,102 |
|
|
11 |
% |
|
-9 |
% |
$ |
25,581 |
|
$ |
20,878 |
|
|
23 |
% |
|
Europe |
|
|
1,154 |
|
|
1,554 |
|
|
1,245 |
|
|
-26 |
% |
|
-7 |
% |
|
3,957 |
|
|
4,175 |
|
|
-5 |
% |
|
Japan |
|
|
1,412 |
|
|
1,359 |
|
|
2,126 |
|
|
4 |
% |
|
-34 |
% |
|
5,179 |
|
|
4,205 |
|
|
23 |
% |
|
Asia
(excluding Japan) |
|
|
3,667 |
|
|
2,450 |
|
|
2,529 |
|
|
50 |
% |
|
45 |
% |
|
8,640 |
|
|
7,331 |
|
|
18 |
% |
|
Other |
|
|
428 |
|
|
208 |
|
|
546 |
|
|
106 |
% |
|
-22 |
% |
|
1,358 |
|
|
1,216 |
|
|
12 |
% |
|
Total
revenue |
|
$ |
14,925 |
|
$ |
13,010 |
|
$ |
15,548 |
|
|
15 |
% |
|
-4 |
% |
$ |
44,715 |
|
$ |
37,805 |
|
|
18 |
% |
Net sales
to international customers for the three months ended January 1, 2005 were
$6,661,000, or 45% of the Company's net sales as compared to $5,571,000 or 43%
of net sales for the same period of the prior fiscal year and $6,446,000 or 41%
in the three months ended October 2, 2004. In
absolute dollars, sales to
international customers for the three months ended January 1, 2005 increased 20%
year-over-year and 3% sequentially. The increase in sales to Asia is
attributed to shipments of EL backlighting and HotSwap products to customers
whose contract manufacturing vendors are located in China. Sales to Japan
declined 34% sequentially due to the seasonal decline at a certain medical
ultrasound customer. Sales to domestic customers for the same period decreased
9% sequentially due to the decline in sales in the foundry products, but
increased 11% year-over-year. During the quarter, one of our foundry customers
experienced a build-up in inventories and accordingly purchased fewer
products.
For the
nine months ended January 1, 2005, international sales were $19,134,000 or 43%
of net sales as compared to $16,927,000 or 45% of net sales of the same period
of the prior fiscal year. In absolute dollars, sales to international customers
for the nine-month period ended January 1, 2005 increased 13% due to stronger
sales in all geographical locations listed except Europe, the decline of which
was due to the slowdown at a European EL segment lighting customer. Sales to
domestic customers increased during the same period primarily from higher demand
for our standard products.
The
Company's assets are primarily located in the United States.
Gross
Profit
Gross
profit or gross margin represents net sales less cost of sales. Cost of sales
includes the cost of purchasing raw silicon wafers, cost associated with
assembly, packaging, test, quality assurance and product yields, the cost of
personnel, facilities, and equipment associated with manufacturing support and
charges for excess inventory. Gross profit for the quarter ended January 1, 2005
was $7,882,000, compared to $5,307,000 for the same period of fiscal 2004, and
$8,117,000 of the prior quarter. For the nine months ended January 1, 2005,
gross profit was $23,172,000 compared to $15,290,000 for the same period of last
fiscal year.
| |
|
|
Three months
ended |
|
Nine
months ended |
|
|
(Dollars
in thousands) |
|
|
January
1, 2005 |
|
|
December
27, 2003 |
|
|
October
2, 2004 |
|
|
January
1, 2005 |
|
|
December
27, 2003 |
|
|
Gross
Margin Percentage |
|
|
53 |
% |
|
41 |
% |
|
52 |
% |
|
52 |
% |
|
40 |
% |
|
Included
in Gross Margin Percentage Above |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Margin Benefit from Sale of Previously Written Down
Inventory |
|
$ |
234 |
|
$ |
91 |
|
$ |
219 |
|
$ |
738 |
|
$ |
212 |
|
|
Percentage
of Net Sales |
|
|
2 |
% |
|
1 |
% |
|
1 |
% |
|
2 |
% |
|
1 |
% |
The
improvement in gross margin for the three and nine-month periods ended January
1, 2005 over the comparable periods in the prior fiscal year was primarily
attributed to lower package assembly costs, lower depreciation charges, and
lower expense for process supplies.
Last time
build of a custom product at a sole-source packaging vendor in the third quarter
of the prior fiscal year caused an abnormal increase in package assembly cost
during that period. The absence of an abnormal assembly cost this quarter and
for the first three quarters of this fiscal year, resulted in a 3% favorable
effect to the gross margin for the three and nine-month periods ended January 1,
2005. Depreciation expenses were lower due to declining capital spending in the
last two years as the planned major upgrades to the wafer fabrication facility
and test operations are now complete. This decline contributed another 3%
improvement in the gross margin in both the three and nine-month periods ended
January 1, 2005. Depreciation expense is expected to continue to be lower for
the rest of the current fiscal year unless unplanned capital equipment purchases
are made. Additionally, reduction in the raw material cost and lower expenses
for process supplies, contributed an additional 2% improvement in the gross
margin for the current quarter. Meanwhile, lower expenses for process supplies,
rent and line maintenance, contributed an additional 3% improvement in the gross
margin for the nine-month period ended January 1, 2005.
Research
and Development (R&D) Expenses
| |
|
Three
Months Ended |
|
Nine
Months Ended |
|
|
(Dollars
in thousands) |
|
January
1, 2005 |
|
December
27, 2003 |
|
October
2, 2004 |
|
Year-Over-Year
Change |
|
Sequential
Change |
|
January
1, 2005 |
|
December
27, 2003 |
|
Year-Over-Year
Change |
|
|
R&D
Expenses |
|
|
2,086 |
|
|
2,418 |
|
|
2,686 |
|
|
-14 |
% |
|
-22 |
% |
|
7,242 |
|
|
6,925 |
|
|
5 |
% |
|
Percentage
of Net Sales |
|
|
14 |
% |
|
19 |
% |
|
17 |
% |
|
|
|
|
|
|
|
16 |
% |
|
18 |
% |
|
|
|
Research
and development (R&D) expenses, which include payroll and benefits, as well
as expensed material and facility costs associated with the development of new
processes and new products, decreased 14% to $2,086,000 for the three months
ended January 1, 2005 as compared to $2,418,000 for the same period of the prior
fiscal year, and decreased 22% sequentially from $2,686,000. For the nine months
ended January 1, 2005, R&D expenses increased 5% to $7,242,000 from
$6,925,000 of the same period of last fiscal year.
The
decrease in R&D expenses in the three months year-over-year is primarily
from lower process development cost of new products under development, as many
of these new products previously under development moved to production status
during the quarter. However, for the nine months year-over-year, the process
development cost of new products was higher and is the primary reason for the
increase in R&D expenses during the comparable nine-month
period.
As a
percentage of Net Sales, R&D expenses dropped to 14% and 16% for the three
and nine-month periods ended January 1, 2005 respectively, compared to 19% and
18% of net sales for the respective comparable periods in fiscal 2004. The
Company plans to continue the level of R&D investments at about the same
dollar amount although the timing of such expenditures will likely fluctuate
from quarter to quarter.
Selling,
General and Administrative (SG&A)
Expenses
| |
|
Three
Months Ended |
|
|
Nine
Months Ended |
|
(Dollars
in thousands) |
|
|
January
1, 2005 |
|
|
December
27, 2003 |
|
|
October
2, 2004 |
|
|
Year-Over-Year
Change |
|
|
Sequential
Change |
|
|
January
1, 2005 |
|
|
December
27, 2003 |
|
|
Year-
Over-Year
Change |
|
|
SG&A
Expenses |
|
|
3,049 |
|
|
2,550 |
|
|
2,949 |
|
|
19 |
% |
|
3 |
% |
|
8,400 |
|
|
7,144 |
|
|
18 |
% |
|
Percentage
of Net Sales |
|
|
20 |
% |
|
20 |
% |
|
19 |
% |
|
|
|
|
|
|
|
19 |
% |
|
19 |
% |
|
|
|
SG&A
expenses consist primarily of employee-related expenses, commissions to sales
representatives, occupancy expenses including expenses associated with the
Company's regional sales offices, cost of advertising and publications, and
outside services such as legal, auditing, tax, and Sarbanes-Oxley compliance
services. SG&A expenses for the three months ended January 1, 2005 and for
the comparable period of fiscal 2004 remained at 20% of net sales or $3,049,000
and $2,550,000, respectively. For the nine months ended January 1, 2005, and for
the comparable period in fiscal 2004, SG&A expenses remained at 19% of net
sales, or $8,400,000 and $7,144,000, respectively.
The
$499,000 year-over-year increase in SG&A expenses for the three months ended
January 1, 2005 is primarily attributed to a $378,000 increase in
payroll-related expenses due to increased headcount, an increase in commissions
and salesmen's bonus of $82,000, and a $169,000 increase in expenses for
professional services, the majority of which is the cost of compliance with the
requirements of the Sarbanes-Oxley Act of 2002; offset by a decrease in
occupancy cost of $56,000 and a decrease in other costs of $57,000.
The
$1,256,000 year-over-year increase in SG&A expenses for the nine months
ended January 1, 2005 is primarily attributed to a $726,000 increase in
payroll-related expenses due to increased headcount, an increase in commissions
and salesmen's bonus of $144,000, an increase is sales related travel expenses
of $71,000, and an increase in provision for bad debt expenses of $99,000, all
of which resulted from an increase in sales; and a $217,000 increase in expenses
for professional services, the majority of which is related to the cost of
compliance with the requirements of the Sarbanes-Oxley Act of 2002.
SG&A
expenses are expected to increase in absolute dollars as the Company expands
sales and marketing presence worldwide and as it continues to comply with
recently enacted and proposed changes in the laws and regulations affecting
public companies, including its cost to comply with Section 404 provision of the
Sarbanes-Oxley Act of 2002. SG&A expenses may fluctuate as a percentage of
net sales.
Interest
Income and Other Income, Net
| |
Three
Months Ended |
|
|
Nine
Months Ended |
|
|
(Dollars
in thousands) |
January
1, 2005 |
December
27, 2003 |
October
2, 2004 |
Year-Over-Year
Change |
Sequential
Change |
January
1, 2005 |
December
27, 2003 |
Year-Over-Year
Change |
|
Interest
Income and Other Income, Net |
692 |
599 |
377 |
16% |
84% |
1,464 |
1,487 |
-2% |
|
Percentage
of Net Sales |
5% |
5% |
2% |
|
|
3% |
4% |
|
Interest
income and other income, net were $692,000 for the three months ended January 1,
2005 and $1,464,000 for the nine months ended January 1, 2005, compared to
$599,000 and $1,487,000 for the same periods of last fiscal
year.
Interest
income was $441,000 and $307,000 for the three months ended January 1, 2005 and
December 27, 2003, respectively. For the nine months ended January 1, 2005,
interest income was $1,102,000, compared to $840,000 of the same period of the
last fiscal year. The moderate increases in interest income for the three and
nine-month periods are due to larger average cash and cash equivalents balances
and more favorable interest rates in the current periods compared to the same
periods of the prior fiscal year.
Other
income, net, was $251,000 for the three months ended January 1, 2005, and
consisted primarily of an increase in fair market value of investments held by
the Company's Supplemental Employee Retirement Plan of $295,000, offset by
foreign currency exchange losses of $23,000. For the comparable period in fiscal
2004, other income, net, was $292,000 and consisted primarily of an increase in
fair market value of investments held by the Company's Supplemental Employee
Retirement Plan of $202,000 and foreign currency exchange gains of $49,000.
Other
income, net, for the nine months ended January 1, 2005, was $362,000 and
consisted primarily of increase in fair market value of investments held by the
Company's Supplemental Employee Retirement Plan of $324,000, and foreign
currency gain of $49,000. For the comparable nine months ended December 27,
2003, other income, net of $647,000 and is primarily attributed to increase in
fair market value of investments held by the Company's Supplemental Employee
Retirement Plan of $543,000.
Provision
for Income Taxes
Provision
for income taxes represents federal, state and foreign taxes. The provision for
income taxes for the three months ended January 1, 2005 was $1,189,000 at the
effective tax rate of 35%, compared to $291,000 and 31% for the same period in
the prior fiscal year. The provision for income taxes for the nine months ended
January 1, 2005 was $2,968,000 at the effective tax rate of 33%, compared to
$839,000 and 31% for the same period in the prior fiscal year.
During
the third quarter of fiscal 2005, the Company revised the estimated effective
income tax rate for fiscal year 2005 to 33% from the 32% rate used in the second
quarter of fiscal 2005. The change in the rate was primarily due to federal and
state tax credits and foreign tax differentials. As a result of the change, the
effective income tax rate for the third quarter of fiscal 2005 was 35%.
Financial
Condition
Overview
The
Company ended the third quarter of fiscal 2005 with $87,459,000 in cash, cash
equivalents, and short-term investments. This represents an increase of
$11,335,000 when compared with the amount of $76,124,000 on April 3, 2004. As of
January 1, 2005, the working capital was $96,619,000, an increase of $9,614,000
from $87,005,000 as of April 3, 2004. Working capital is defined as current
assets less current liabilities. The increase in working capital was mostly the
result of cash generated by operations.
Liquidity
and Capital Resources
The
Company's cash and cash equivalents increased $10,545,000 during the nine months
ended January 1, 2005 to $81,662,000 from $71,117,000 at April 3, 2004. The
increase in cash and cash equivalents during the nine-month period is due to
cash flows from operating activities of $9,408,000 and cash flows from financing
activities of $2,127,000, offset by cash used in investing activities of
$990,000.
The
Company's operating activities generated cash of $9,408,000 for the nine months
ended January 1, 2005, compared to $7,460,000, for the same period in the prior
fiscal year. The positive cash flows from operating activities were primarily
attributable to net income, adjusted for non-cash items. Net operating cash
flows for the first three quarters of fiscal 2005 were favorably impacted by
non-cash charges for depreciation of $2,453,000, non-cash charges for provisions
relating to inventory of $1,317,000, and non-cash charges for provisions for
doubtful accounts and sales returns totaling $955,000. Working
capital sources of cash included an increase in accounts payable and accrued
expenses of $1,869,000 primarily from timing of payments and increased accruals
for employee benefits payable and an increase in income taxes payable of
$612,000 due to higher income. Working capital uses of cash included an increase
in accounts receivable of $2,043,000 due primarily to higher sales, an increase
of inventories of $602,000, and a decrease in deferred revenue of
$239,000.
Net cash
used in investing activities in the nine months ended January 1, 2005 was
$990,000, primarily for equipment purchases of $1,031,000 partially offset by
proceeds from disposal of equipment of $41,000.
Net cash
provided by financing activities during the nine months ended January 1, 2005,
was $2,127,000, which consisted primarily of proceeds from employee exercises of
stock options under the current and former option plans of $1,779,000 and
proceeds from employee purchases of stocks under the ESPP of $623,000, offset by
$275,000 from common stock repurchases. During the nine-month period, the
Company bought back 18,900 shares of the Company's common stock in open market
or privately negotiated transactions for the total amount of $275,000; however,
no repurchases were made during the third quarter of fiscal 2005. The repurchase
prices ranged from $14.15 to $15.00 with a weighted average price of $14.55.
Such repurchases were made under the repurchase program, which was approved by
the Board of Directors. In the
comparable period in
fiscal 2004, net cash provided by financing activities was $1,620,000, which
consisted of proceeds from employee exercises of stock options under the stock
option plans of $1,006,000 and employee purchases of stock under the ESPP of
$614,000.
The
Company expects to spend approximately $576,000 for capital acquisitions in the
fourth quarter of fiscal 2005. Planned capital expenditure for fiscal 2005 is
less than prior fiscal years because most of the upgrades to the fab and the
test operations have been completed. The Company believes that it has
substantial production capacity in place to handle any projected increase in
business for this fiscal year. The Company also believes that existing cash,
cash equivalents and short-term investments, together with cash flow from
operations, will be sufficient to meet liquidity and capital requirements
through the next twelve months.
Off-Balance
Sheet Arrangements
The
Company does not have and never had any off-balance sheet arrangements that
have, or are reasonably likely to have, a current or future effect upon the
financial condition, revenues, expenses, results of operations, liquidity,
capital expenditures or capital resources that are material to investors.
Contractual
Obligations
The
following table summarizes the Company's significant contractual cash
obligations at January 1, 2005, and the effect such obligations are expected to
have on liquidity and cash flow in future periods (in thousands):
| |
|
Payment
Due by Year |
|
|
Contractual
Obligations |
|
|
Total |
|
|
Less
than 1 Year |
|
|
2-3
Years |
|
|
4-5
Years |
|
|
After
5 Years |
|
|
Operating
lease obligations (1) |
|
$ |
5,987 |
|
$ |
1,021 |
|
$ |
1,901 |
|
$ |
1,792 |
|
$ |
1,273 |
|
|
Purchase
obligations (2) |
|
|
854 |
|
|
854 |
|
|
-- |
|
|
-- |
|
|
-- |
|
|
Total
contractual cash obligations |
|
$ |
6,841 |
|
$ |
1,875 |
|
$ |
1,901 |
|
$ |
1,792 |
|
$ |
1,273 |
|
(1)
The Company leases facilities under non-cancelable lease agreements expiring at
various times through April 2011. Rental expense net of sublease income for the
quarter ending January 1, 2005, amounted to $247,000.
(2)
To obtain favorable pricing and resource commitment, the Company commits to
volume purchases from suppliers of manufacturing materials and
services.
Recent
Accounting Pronouncements
In March
2004, the Financial Accounting Standards Board (FASB) approved the consensus
reached on the Emerging Issues Task Force (EITF) Issue No. 03-1, "The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments." EITF 03-1
provides guidance for identifying impaired investments and new disclosure
requirements for investments that are deemed to be temporarily impaired. On
December 30, 2004, the FASB issued a final staff position (FSP) EITF Issue
03-1-1 that delays the effective date for the measurement and recognition
guidance included in paragraphs 10 through 20 of EITF 03-1. Quantitative and
qualitative disclosures required by EITF 03-1 remain effective for the Company's
fiscal year ending April 2, 2005. The Company does not believe the impact of
adoption of this EITF consensus will be significant to the overall results of
operations or financial position.
In
November 2004, the FASB issued SFAS No. 151, "Inventory
Costs, an
amendment of ARB No.43, Chapter 4" (SFAS
151). This statement amends the guidance in ARB No. 43, Chapter 4, "Inventory
Pricing" to
clarify the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material (spoilage). SFAS 151 requires that those
items be recognized as current-period charges. In addition, this Statement
requires that allocation of fixed production overheads to costs of conversion be
based upon the normal capacity of the production facilities. The provisions of
SFAS 151 are effective for inventory cost incurred in fiscal years beginning
after June 15, 2005. As such, the Company is required to adopt these provisions
at the beginning of fiscal 2007. The Company is currently evaluating the impact
of SFAS 151 on its consolidated financial statements.
In
December 2004, the FASB issued SFAS No. 153, "Exchanges
of Non-monetary Assets, an amendment of APB Opinion No. 29" (SFAS
153). SFAS 153 replaces the exception from fair value measurement in APB Opinion
No. 29 for non-monetary exchanges of similar productive assets with a general
exception from fair value measurement for exchanges of non-monetary assets that
do not have commercial substance. A non-monetary exchange has commercial
substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange. SFAS 153 is to be applied
prospectively, and is effective for non-monetary asset exchanges occurring in
fiscal periods after the date of issuance of SFAS 153. As such, the Company is
required to adopt these provisions on the fourth quarter of its current fiscal
year.
In
December 2004, the FASB also issued SFAS No. 123R, "Share-Based
Payment" (SFAS
123R), which requires companies to measure and recognize compensation expense
for all stock-based compensation to employees at fair value. SFAS 123R will be
effective for all interim fiscal periods beginning after June 15, 2005, thus
will be effective for the Company beginning the second quarter of fiscal 2006.
Retroactive application of the provisions of SFAS 123R to the beginning of the
fiscal year that includes the effective date is permitted, but not required. The
Company is currently evaluating the impact of the SFAS 123R on its financial
statements. The Company does not believe the impact of adoption of this EITF
consensus will be significant to the overall results of operations or financial
position.
In
December 2004, the FASB also issued FASB Staff Position No. FAS 109-2,
"Accounting
and Disclosure Guidance for the Foreign Earnings Repatriation Provision within
the American Jobs Creation Act of 2004", ("SP
FAS 109-2"). The American Jobs Creation Act introduces a special one-time
dividends received deduction on the repatriation of certain foreign earnings to
a U.S. taxpayer ("repatriation provision"), provided certain criteria are met.
SP FAS 109-2 provides accounting and disclosure guidance for the repatriation
provision. Although SP FAS 109-2 is effective immediately, the Treasury
Department or Congress has not provided additional clarifying language on key
elements of the repatriation provision.
Available
Information
The
Company files electronically with the SEC its annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments, if
any, to those reports pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934. The SEC maintains an Internet site at http://sec.gov that
contains reports, proxy and information statements and other information
regarding the Company. The Company makes available free of charge and through
its Internet website at www.supertex.com copies
of these reports as soon as reasonably practicable after filing or furnishing
the information to the SEC. Copies of such documents may be requested by
contacting the Company's Investor Relations department at (408)
222-4816.
Item
3. - Quantitative and Qualitative Disclosures About Market Risk and Interest
Rate 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 Company's portfolio is primarily comprised of fixed
rate securities. The fair value of these fixed rate securities may be
affected by a rise in interest rates; however, the Company believes that the
impact would be minimal since the maturities of these securities are short,
typically no more than 35 days.
To date,
our international customer agreements have been denominated solely in U.S.
dollars, and accordingly, we have not been exposed to foreign currency exchange
rate fluctuations related to customer agreements, and do not currently engage in
foreign currency hedging transactions. However, the functional currency of our
operations in Hong Kong is the U.S. dollar and as the local expenditures are
denominated in the local currency of Hong Kong, we are subject to foreign
currency exchange rate fluctuations associated with remeasurement to U.S.
dollars. We do not enter into forward exchange contracts as a hedge against
foreign currency exchange risk on transactions denominated in foreign currencies
or for speculative or trading purposes. A hypothetical change of 10% in the
foreign currency exchange rates would not have a material impact on our
consolidated financial position or results of operations.
Item
4. - Controls and Procedures.
(a)
Disclosure Controls and Procedures.
Disclosure
Controls and Procedures. The
Company's disclosure controls and procedures are designed to ensure that
information required to be disclosed in the Company's reports filed under the
Securities Exchange Act of 1934 is recorded, processed, summarized, and reported
within the time periods specified in the SEC's rules and forms, including,
without limitation, that such information is accumulated and communicated to
Company management, including the Company's principal executive and financial
officer, as appropriate to allow timely decisions regarding required
disclosures.
Limitations
on the Effectiveness of Disclosure Controls. In
designing and evaluating the Company's disclosure controls and procedures,
management recognized that disclosure controls and procedures, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the disclosure controls and procedures are met.
Additionally, in designing disclosure controls and procedures, Company
management necessarily was required to apply its judgment in evaluating the
cost-benefit relationship of possible disclosure controls and procedures. The
design of any disclosure controls and procedures also is based in part upon
certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions.
Evaluation
of Disclosure Controls and Procedures. The
Company's principal executive and financial officer has evaluated the
effectiveness of the design and operation of the Company's disclosure controls
and procedures as defined in Exchange Act Rules 13a-14(c) as of January 1, 2005,
and has determined that they are reasonably effective, taking into account the
totality of the circumstances, including the limitations described
above.
(b)
Changes in internal controls over financial reporting
There
were no significant changes in the Company's internal control over financial
reporting that occurred during the period covered by this Form 10-Q that have
materially affected, or are reasonably likely to materially affect such
control.
However,
as required by Section 404 of the Sarbanes-Oxley Act of 2002, the Company's
management is conducting a thorough review of all of its internal control
processes and procedures. This review has highlighted a number of processes
where we have the opportunity to improve internal controls. The Company's
management intends to further strengthen access controls to sensitive financial
systems, subsystems, and data, improve documentation of testing financial
application changes, further segregate duties in critical functional areas, and
strengthen control procedures and practices over financial reporting processes.
The Company has made substantial progress in these areas in the third fiscal
quarter and intends to make further enhancements in the fourth
quarter.
Pursuant
to Section 404 of the Sarbanes-Oxley Act of 2002 (Section 404), beginning with
our annual report on Form 10-K for fiscal 2005, we will be required to furnish a
report by our management on our internal control over financial reporting as of
April 2, 2005, our fiscal 2005 year end. Such report will contain, among other
matters, an assessment of the effectiveness of our internal control over
financial reporting as of April 2, 2005, including a statement as to whether or
not our internal control over financial reporting is effective. This assessment
must include disclosure of any material weaknesses in our internal control over
financial reporting identified by management. Such report must also contain a
statement that our auditors have issued an attestation report on management's
assessment of such internal controls.
The
Committee of Sponsoring Organizations of the Treadway Commission (COSO) provides
a framework for us to assess and improve our internal control systems. Auditing
Standard No.2 provides the professional standards and related performance
guidance for auditors to attest to, and report on, management's assessment of
the effectiveness of internal control over financial reporting under Section
404. Management's assessment of internal controls over financial reporting
requires management to make subjective judgments and, particularly because
Section 404 and Auditing Standard No. 2 are newly effective, some of the
judgments will be in areas that may be open to interpretation and therefore the
report may be uniquely difficult to prepare and our auditors may not agree with
our assessments.
While we
are enhancing our internal control as described above to comply with Section
404, which is both costly and challenging, no assurance can be provided as to
management's, or the Company's independent registered public accounting firm's
conclusions on April 2, 2005 with respect to the effectiveness of the Company's
internal control over financial reporting. If we are unable to assert that our
internal control over financial reporting is effective as of the end of fiscal
2005 (or if our auditors are unable to attest that our management's report is
fairly stated or they are unable to express an opinion on the effectiveness of
our internal controls), we could lose investor confidence in the accuracy and
completeness of our financial reports, which would have an adverse effect on our
stock price.
PART
II - OTHER INFORMATION
Item
1. - Legal Proceedings
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.
Item
2.
- - Unregistered
Sales of Equity Securities and Use of Proceeds
None
Item
3. - Defaults Upon Senior Securities
None
Item
4. - Submission of Matters to a Vote of Security
Holders
None
Item
5. - Other Information
None
Item
6. - Exhibits
Exhibit
31 - Certification of Chief Executive Officer and Chief Financial Officer
pursuant to Securities and Exchange Act Rules 13a-14(a) and 15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit
32 - Certification of Chief Executive Officer and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
| |
SUPERTEX,
INC. |
| |
(Registrant) |
| Date: February 9, 2005 |
By: /s/ Henry C. Pao |
| |
Henry C. Pao, Ph.D. |
| |
President |
| |
(Principal
Executive and Financial Officer) |