UNITED
STATES
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 April 2, 2005 |
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) (I.R.S.
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
o
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. o
Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Act).
Yes
x No
o
As of
October 2, 2004, the last business day of the registrant’s most recently
completed second fiscal quarter, there were 12,972,875 shares of the
registrant’s common stock outstanding, and the aggregate market value of such
shares held by non-affiliates of the registrant was $196,198,857 based on the
closing price reported on the NASDAQ National Market on October 1, 2004. 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 13, 2005, was 13,063,528.
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 19, 2005 (the "Proxy
Statement").
Exhibit
Index is on Page 58
Total
number of pages is 62
(BLANK
PAGE)
SUPERTEX,
INC.
ANNUAL
REPORT - FORM 10K
Table
of Contents
| |
PART I |
Page
No. |
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Item
1. |
Business……………………………………………………………………………………….............................................................................................................. |
1 |
|
Item
2. |
Properties……………………………………………………………………………………................................................................................................................ |
8 |
|
Item
3. |
Legal
Proceedings……………………………………………………………………………............................................................................................................. |
9 |
|
Item
4. |
Submission
of Matters to a Vote of Security
Holders………………………………………......................................................................................................... |
9 |
| |
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PART
II |
|
| |
|
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|
Item
5. |
Market for Registrant's Common Equity Related Shareholder Matters
and Issuer Repurchases of Equity
Securities…………………………………... |
10 |
|
Item
6. |
Selected
Financial
Data………………………………………………………………………............................................................................................................ |
12 |
|
Item
7. |
Management's
Discussion and Analysis of Financial Condition and Results of
Operations….............................................................................................. |
13 |
|
Item
7A. |
Quantitative
and Qualitative Disclosures about Market
Risk…………………………………..................................................................................................... |
28 |
|
Item
8. |
Financial
Statements and Supplementary
Data………………………………………………....................................................................................................... |
29 |
|
Item
9. |
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure…............................................................................................. |
29 |
|
Item
9A |
Controls
and
Procedures………………………………………………………………………......................................................................................................... |
29 |
|
Item
9B |
Other
Information........………………………………………………………………………............................................................................................................. |
30 |
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PART III |
|
| |
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|
Item
10. |
Directors
and Executive Officers of the
Registrant……………………………………………..................................................................................................... |
31 |
|
Item
11. |
Executive
Compensation………………………………………………………...…………….......................................................................................................... |
31 |
|
Item
12. |
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder
Matters………………………………............................... |
31 |
|
Item
13. |
Certain
Relationships and Related
Transactions……………………………………………….................................................................................................... |
31 |
|
Item
14. |
Principal
Accountant Fees and
Services………………………………………………………...................................................................................................... |
32 |
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PART IV |
|
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|
Item
15. |
Exhibits………………………………………………………………………………………............................................................................................................... |
32 |
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Signatures…………………………………………………………………………………………………............................................................................................................... |
34 |
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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 2006, (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 2006, (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 belief that our revenue from
the imaging market will recover during fiscal 2006 due to recent design wins and
that overall we will experience sales growth due to recent product
introductions, (8) 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, (9) our plan to continue R&D spending as a
percentage of sales at its current level, (10) our forward thrusts and
strategies set forth under Part I, Business-Products on page 2, (11) our belief
that our continued growth depends in part on our ability to attract and retain
highly skilled employees, (12) that available funds and cash generated from
operations will be sufficient to meet our cash and working capital requirements
through the end of fiscal 2006, (13) that we expect to spend approximately
$2,386,000 for capital acquisitions in fiscal year 2006, (14) that the fair
value of our investment portfolio would not be significantly impacted by changes
in interest rates, (15) our belief that the Company has substantial production
capacity in place to handle any projected increase in business in fiscal 2006,
(16) our belief that our sales to the Medical Electronics market will continue
to hold at the same levels as fiscal 2005, (17) our belief that our sales to the
Telecom market will be increased by sales of our HotSwap products, but will be
offset by declines in sales of some our legacy products, (18) we expect SG&A
expenses to increase in absolute dollars as the Company expands its sales and
marketing presence worldwide, and SG&A expenses may fluctuate as a
percentage of net sales, and (19) we expect that expenses for compliance
activities of the Sarbanes-Oxley Act will decrease in 2006. 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 2006, (5) that we need to spend
more on capital acquisitions than anticipated, or that we overestimate or
underestimate our need for capital acquisition, (6) that changes in short-term
interest rates are significant enough to affect our investment portfolio, and
(7) that our newly introduced products will not be widely adopted so that they
do not generate substantial revenue. 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 the 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 two
design centers, one in our Sunnyvale headquarters and one in Hong Kong within
our production test facility. We maintain nine direct field sales offices
located in: (1) Tallman, New York; (2) Irving, Texas; (3) Oley, Pennsylvania;
(4) The United Kingdom; (5) Germany, (6) Shanghai, China; (7) Shenzhen, China,
(8) Taiwan as well as (9) our 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 94089. Our website address is www.supertex.com.
Products
Over the
years, Supertex has designed, developed, and manufactured 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
primarily for use in medical electronics, imaging, LED lighting, and
telecommunications markets. Our products are basically interface products,
interfacing between low voltage logic circuits and high voltage “real world”
media. We supply both standard and custom products. We also provide custom
processing services for the manufacture of integrated circuits, using
customer-owned designs and mask toolings. Under this “custom processing service”
arrangement, a tangible product is sold, and the Company bears the risk of loss
until title is passed after production is completed, which is the same for our
proprietary standard and custom integrated circuits. The Company does not rent
its equipment to any customer. During fiscal 2005, sales of custom processed
products represented approximately 24% of our total revenues, with the balance
of our revenues coming from proprietary standard and custom product sales.
During fiscal 2004 and fiscal 2003, sales of custom processed products was 25%
of our total revenues. After the successful transfer of our high voltage
processes from our old fab to our new fab, an effort that spanned over two years
(2000 to 2002), we saw excellent potentials to expand and compete in our markets
for standard products. We formulated the forward thrusts and strategies in
fiscal 2001 shown in the table below, and started developing a large number of
new standard products. The result was the introduction of an average of fourteen
new products per year in the three and one half years starting in January 1,
2002, versus an average of five new products per year in 2000 and
2001.
Typically
in the semiconductor industry, it takes a gestation period of up to three years
for a new product from introduction by the supplier through design-in by the
customer to volume production by the customer and supplier. As a result, we
expect sales growth in the coming years from these recently introduced products.
In the meantime, we also entered new markets, such as offline driver ICs for
light emitting diodes (LEDs) for lighting, hotswap and sequencer ICs,
Power-over-Ethernet (POE) ICs and Voice over Internet Protocol (VoIP) ICs.
|
Markets,
Products and Strategies |
|
Markets |
Products |
Strategies |
|
Medical |
Ultrasound |
3rd
Gen. MUX., HV Pulsers, Beam Former,
FET
Drivers |
Custom
and proprietary, leadership |
|
Imaging |
Flat
panel displays |
HV
Drivers for new Display Technologies:
FED
& EL |
Partnering,
proprietary and custom |
|
Backlighting |
EL
& LED Drivers |
Custom
and proprietary |
|
Printers |
HV
Drivers for Non-impact |
Custom
and proprietary |
|
Telecom |
Telecom |
HV
Ring Generators, Optical MEMS Drivers,
HV
Switches |
Custom
and proprietary, Leadership |
|
Datacom:
Hotswap & POE |
Power
Mgmt/Supervisory, Power Sequencers |
Second
source and proprietary |
|
Others |
LED
Lightings |
Drivers
for Traffic Lights, Gen. Lightings, Signages, Automotive |
Small,
reliable, cost-effective solutions |
Three
major product groups, medical electronics, imaging, and
telecommunications/broadband, currently generate most of the product revenues
while the fourth group, other, which includes the LED driver ICs for lighting,
should see material product revenue in fiscal 2006:
The
Medical
Electronics Group consists
of a family of high voltage analog switches and multiplexers, high voltage
pulser ICs, MOSFET drivers, primarily for ultrasound diagnostic imaging
equipment as well as selected portable instrument applications. In addition, we
offer custom processing service for pacemaker and defibrillator
ICs.
The
Imaging
Group consists
of three product lines: (1) Interface products for driving flat panel displays.
This product family is sold to flat panel manufacturers using electroluminescent
(EL), plasma, carbon nano-tube field emission, vacuum fluorescent, Cholesteric
LCD, electrophoretic and light emitting diodes (LED) technologies; (2) Driver
ICs for driving non-impact printers and plotters, primarily using inkjet
technologies. 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; and (3) A family of
products for driving EL panels to back-light LCD displays in hand-held
instruments, such as cell phone’s monochrome screen and keypads, PDAs, pagers,
HPCs, MP3, and meters as well as a family of high voltage driver ICs for driving
LEDs to backlight large LCD panels. In addition, we offer custom processing
service for charge-coupled devices (CCD) and CMOS imaging devices.
The
Telecommunications
(Telecom)/Broadband Group consists
of two product lines: (1) Telecom line which includes 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; and (2) Datacom line which includes: hotswap and sequencer
controller, power management, ring generators, protection & isolated
switches, Power over Ethernet (POE) ICs, Voice-over-Internet Protocol (VoIP)
ICs, and optical micro-electro-mechanical system (MEMS) driver ICs. In addition,
we offer custom processing services for certain optical MEMS
products.
Others. This
group includes high voltage driver ICs to drive LEDs for general lighting to
replace the incandescent and fluorescent lights as a result of new LEDs that are
getting very energy efficient, automatic test equipment for bare pc board
testing, and products for industrial applications. In addition, we offer custom
processing services for charge-coupled devices (CCD) and CMOS imaging devices.
The LED driver IC family is expected to be spun off into a fourth group in
fiscal 2006 when we expect its sales to become material.
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. While we work
with certain customers to design a product, generally, such products have
broader applications so that they are useful to multiple customers.
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 one business segment. Information regarding Supertex’s Segment
Reporting can be found in Notes 1 and 13 of the “Notes to Consolidated Financial
Statements.”
Research
and Development
Supertex
incurred research and development expenses of $9,780,000, $9,570,000, and
$9,338,000, on research and development activities during fiscal years 2005,
2004, and 2003, respectively. Research and development activities in fiscal 2006
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 proto-type
assembly and packaging in Sunnyvale, California; and product testing and quality
control in Sunnyvale, California and Hong Kong. Of our long-lived assets, 9% and
6% were located in our Hong Kong facility at the end of fiscal 2005 and 2004,
respectively, 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 Hong Kong and Sunnyvale facilities for
final product testing and quality control before shipment to customers. Although
our offshore assemblies have not experienced any serious work stoppages,
political instability or other epidemics in these countries may adversely affect
our assembly and test 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 maintain 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 2005, the carrying value of all our property, plant and
equipment located in Hong Kong amounted to $758,000.
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.
Availability
of raw silicon wafers was not a problem throughout fiscal 2005. As a
result, we were able to negotiate price reductions. The availability of assembly
packaging services and raw materials used in the manufacturing of our products
continues to be plentiful and subject to competitive pricing pressure,
especially as our unit volume has gone up. These materials and
services are currently obtained from multiple sources.
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 current 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, Hong Kong, Shanghai and Shenzhen, China and Taiwan. With Asia
being the growth region in comparison to North America and Europe, we
established a sales/distribution center in Hong Kong in fiscal 2002 in our
effort to penetrate the Asian market, in particular, the Chinese market.
International
sales are made primarily through independent distributors to customers in Europe
and Asia, and represented 44%, 43%, and 39% of net sales in fiscal years 2005,
2004, and 2003, respectively. Prior year percentages were adjusted to reflect a
change in our aggregation of geographic sales information in 2004. Sales are
now attributed to geographic area based on destination locations. International
sales to Asia are largely to customers in Japan. International 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 12% of our net sales for
fiscal 2005, 10% for fiscal 2004 and 11% for fiscal 2003, respectively. 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 16% of gross
accounts receivable as of April 2, 2005. While we have maintained a good
relationship with Microtek, Inc. for over eighteen years, deterioration 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 and 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. We maintain an inventory balance based
on current sales level and forecast of future demand. An amount for tactical
inventory is kept in our die bank warehouse to reduce lead-time in fulfilling
orders.
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. Sales to the Medical Electronics
market posted a record high in the second quarter of fiscal 2005, largely the
effect of increased demand of our customers’ products in their December quarter.
The budget process and consequential buying practices of hospitals resulted to
increased demand for components by equipment manufacturers in the quarter before
the purchase.
Backlog
Our
backlog at April 2, 2005 was approximately $10,114,000 compared with $
10,767,000 and $10,457,000 at April 3, 2004 and March 29, 2003, respectively. We
expect that all of the current backlog will be shipped in fiscal 2006. 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
In
general, competition 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, customer relationship and the ability to adapt to rapid
technological change in the development of new and improved products. We believe
we are 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
twelve United States patents, which will expire between 2008 to 2019, and we
have additional patents pending. We were granted two new patents in fiscal 2005.
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.
If infringement would be alleged, there could 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 April
2, 2005, we had 349 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
experience 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 |
67 |
1976 |
|
Richard
E. Siegel |
Executive
Vice President |
59 |
1982 |
|
Benedict
C. K. Choy |
Senior
Vice President, Technology Development |
59 |
1976 |
|
William
P. Ingram |
Vice
President, Wafer Fab Operations |
57 |
1999 |
|
Franklin
Gonzalez |
Vice
President, Process Technology |
54 |
1999 |
|
Michael
Lee |
Vice
President, I.C. Design |
50 |
1999 |
|
Dilip
Kapur |
Vice
President, Standard Products |
56 |
2000 |
|
William
Petersen |
Vice
President, Worldwide Sales |
52 |
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. 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.
William
P. Ingram joined
Supertex in April 1995 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 Semiconductor 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 University of California, 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.
Available
Information
We file
electronically with the SEC our 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://www.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)
222-4887.
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 are located. In January 2004, we amended the lease term of this
facility by extending the term to seven years to expire in April 2011. We have
one remaining option to extend the term for an additional five years, which, if
exercised, would extend the lease to April 2016.
We
renewed our lease for a portion of a building located at 10 Sam Chuk Street,
Sanpokong, Kowloon, Hong Kong in December 2003. The new lease covers 23,600
square feet and 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. The lease
expires in two years on December 1, 2006.
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 10 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
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, results of operations or cash flows.
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
April 2, 2005.
PART
II
Item
5. Market for Registrant's Common Equity and Related Shareholder Matters and
Issuer Repurchases of Equity Securities
Market
Information
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 Year Ended
|
|
April
2, 2005 |
April
3, 2004 |
|
|
High |
Low |
High |
Low |
|
First
Quarter |
16.99 |
13.96 |
18.32 |
13.57 |
|
Second
Quarter |
20.15 |
14.00 |
19.95 |
16.34 |
|
Third
Quarter |
24.04 |
19.78 |
20.41 |
16.71 |
|
Fourth
Quarter |
21.31 |
17.76 |
22.60 |
15.19 |
On May
27, 2005, the last reported sale price was $17.47 per share. There were
approximately 2,426 shareholders of record of common stock on May 27, 2005. We
have not paid cash dividends on our common stock in fiscal years 2005 and 2004,
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:
We
maintain the following three shareholder-approved equity compensation plans, as
further described in Note 8 to our consolidated Financial
Statements.
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 shareholders 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 of common stock during any six-month accumulation
period. A total
of 48,456, 50,086, and 46,408 shares of the Company’s common stock were issued
under the ESPP for fiscal years 2005, 2004, and 2003, respectively. There are
309,811 shares available for future issuance under the ESPP at the end of fiscal
year 2005.
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 of a 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 2005, there were 797,650 shares which are issuable upon
exercise of outstanding options under the 1991 Plan at a weighted average
exercise price of $17.96. 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 2005, there were 641,530 shares which are issuable upon
exercise of outstanding options under the 2001 Plan at a weighted average
exercise price of $17.11 and there are 1,321,909 shares remaining available for
issuance.
We have
no equity compensation plans that were not previously approved by our
shareholders.
The table
below shows information as of April 2, 2005, with respect to equity compensation
plans under which equity securities of the Company are authorized for issuance.
The Company’s equity compensation plans, consisting of the 1991 and 2001 Stock
Option Plans and Employee Stock Purchase Plan, are approved by security
holders.
|
Plan
Category |
Number
of Securities to be Issued upon Exercise of Outstanding Options,
Warrants,
and Rights
(a) |
Weighted-Average
Exercise Price of Outstanding Options, Warrants
and Rights
(b) |
Number
of Securities Remaining Available for Future Issuance under Equity
Compensation Plans (Excluding Securities
Reflected in Column (a))
(c) |
|
Equity
compensation plans approved by security holders |
1,439,180 |
$17.58 |
1,631,720
(1) |
|
Equity
compensation plans not approved by security holders |
0 |
N/A |
0 |
| (1) |
Includes
309,811 shares reserved as of April 2, 2005 for future purchases by
employees through payroll deductions under the Company’s Employee Stock
Purchase Plan described above. |
Purchases
of Equity Securities by the Issuer and Affiliated
Purchasers
The
following is a summary of share repurchase activity by the issuer and
“affiliated purchasers”, as defined in Rule 10b-18(a)(3) during the fourth
quarter ended April 2, 2005:
|
Period |
Total
Number of Shares Purchased
(1) |
Average
Price Paid
Per Share |
Total
Number of Shares Purchased as Part of Publicly Announced
Plans
or Programs (2) |
Maximum
Number of Shares that May Yet be Purchased Under the Plans
or Programs |
|
|
|
|
|
|
|
01/02/05
- 01/29/05 |
-- |
-- |
-- |
859,500 |
|
01/30/05
- 02/26/05 |
7,500 |
$18.48 |
-- |
852,000 |
02/27/05
- 04/02/05 |
-- |
-- |
-- |
852,000 |
|
Total |
7,500 |
$18.48 |
-- |
|
| (1) |
Our
current share repurchase program, under which we repurchased these 7,500
shares, has been in place since 1999. We are not certain but do not
believe we publicly announced this program, although our financial
statements have reflected purchases from time to time under this program
as have prior annual reports on Form 10-K. These 7,500 shares were
purchased in open market transactions. |
| (2) |
We
adopted a share repurchase program in 1992 authorizing the repurchase of
1,000,000 shares. Our board of directors terminated this program in 1999
after 938,000 shares had been repurchased and adopted a new share
repurchase program at the same time, authorizing the repurchase of 900,000
shares plus the 62,000 shares authorized for repurchase under the 1992
program whose repurchase had not been affected. As described in footnote
(1), we are not certain but do not believe that we publicly announced our
1999 repurchase plan. The 1999 repurchase program has no expiration date,
other than, unless extended, when an aggregate of 962,000 shares have been
repurchased. Neither this program nor any other repurchase program or plan
has expired during our fourth quarter ended April 2, 2005, nor has the
Company decided to terminate any repurchase plan or program prior to its
expiration. There are no existing repurchase plans or programs under which
the Company does not intend to make further
repurchases. |
Item
6. Selected 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. The
Company uses a 52-53 week fiscal year ending the Saturday nearest March 31.
Fiscal year 2004 consisted of 53 weeks, whereas, fiscal years 2005, 2003, 2002
and 2001 each consisted of 52 weeks.
| |
April
2, |
April
3, |
March
29, |
March
30, |
Mar
31, |
|
2005 |
2004 |
2003 |
2002 |
2001 |
|
Balance
Sheet Data:
(in
thousands) |
|
|
|
|
|
|
Working
capital |
$
96,896 |
$
87,005 |
$
78,051 |
$
67,333 |
$
61,662 |
|
Total
assets |
126,377 |
112,797 |
108,671 |
103,380 |
98,695 |
|
Shareholders’
equity |
107,095 |
97,774 |
92,525 |
88,096 |
82,359 |
|
Cash
and cash equivalents and short-term
investments |
88,417 |
76,124 |
64,876 |
52,492 |
44,282 |
|
Total
current assets |
116,178 |
102,028 |
94,197 |
82,617 |
77,998 |
|
Total
current liabilities |
19,282 |
15,023 |
16,146 |
15,284 |
16,336 |
Fiscal Year Ended
| |
April
2, |
April
3, |
March
29, |
March
30, |
Mar
31, |
|
2005 |
2004 |
2003 |
2002 |
2001 |
|
Statement
of Income Data:
(in
thousands, except per share amounts) |
|
|
|
|
|
|
Net
Sales |
$
56,558 |
$
51,394 |
$
54,915 |
$
56,195 |
$
81,455 |
|
Costs
and Expenses |
|
|
|
|
|
|
Costs
of sales |
27,545 |
30,938 |
34,103 |
33,700 |
48,790 |
|
Research
and development |
9,780 |
9,570 |
9,338 |
11,279 |
10,917 |
|
Selling,
general and administrative |
11,583 |
9,760 |
8,722 |
7,939 |
10,806 |
|
Income
from operations |
7,650 |
1,126 |
2,752 |
3,277 |
10,942 |
|
Other
income |
|
|
|
|
|
|
Interest
income |
1,603 |
1,164 |
916 |
1,538 |
2,466 |
|
Other
income (expense), net |
306 |
840 |
530 |
1,037 |
(1,153) |
|
Income
before provision for income taxes |
9,559 |
3,130 |
4,198 |
5,852 |
12,255 |
|
Provision
for income taxes |
3,100 |
970 |
1,343 |
1,990 |
4,167 |
|
Net
income |
$
6,459 |
$
2,160 |
$
2,855 |
$
3,862 |
$
8,088 |
|
Net
income per share: |
|
|
|
|
|
|
Basic |
$
0.50 |
$
0.17 |
$
0.23 |
$
0.31 |
$
0.65 |
|
Diluted |
$
0.49 |
$
0.17 |
$
0.22 |
$
0.30 |
$
0.62 |
|
Shares
used in per share computation: |
|
|
|
|
|
|
Basic |
12,985 |
12,758 |
12,598 |
12,443 |
12,351 |
|
Diluted |
13,239 |
13,051 |
12,757 |
12,748 |
12,990 |
Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations
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 custom processing 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 risks described below, which are specific to 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
work with our customers to develop products, which they will design into
their systems. Even if we do achieve a design win, the customer’s system
may never go into production or the production may be smaller than we had
anticipated. Although we attempt to develop products which will be useful
for multiple customers, we may misjudge the market and develop a product
which maybe useful for very few customers. |
| · |
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 22% 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 Severe Acute Respiratory Syndrome (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 disasters. Our principal
executive offices, our fab facility, 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 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 Inc., for approximately 12% of our
fiscal 2005 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. Were
Microtek to cease being our distributor, we would need to attempt to
retain an alternate distributor and/or establish direct relations with the
Japanese end customers, either or both of which could result in decreased
and delayed sales. |
| · |
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. |
| · |
Our
success depends upon our ability to protect our intellectual property,
including patents, trade secrets, and know-how, and to continue our
technological innovation. We cannot assure that the steps we have taken to
protect our intellectual property will be adequate to prevent
misappropriation or that others will not develop competitive technologies
or products. The failure to obtain necessary licenses or other rights
could cause us to lose market share and harm our
business. |
| · |
The
Sarbanes-Oxley Act of 2002 required us to change or supplement some of our
corporate governance and securities disclosure and compliance practices.
The SEC and Nasdaq have revised, and continue to revise, their regulations
and listing standards. These developments have increased, and may continue
to increase, our legal compliance and financial reporting costs. These
developments also may make it more difficult and more expensive for us to
obtain director and officer liability insurance, and we may be required to
accept reduced coverage or incur substantially higher costs to obtain
coverage. This, in turn, could make it more difficult for us to attract
and retain qualified members of our board of directors, or qualified
executive officers. |
Failure
to comply with present or future laws, rules and regulations of any kind that
govern our business could result in suspension of all or a portion of
production, cessation of all or a portion of operations, or the imposition of
significant administrative, civil, or criminal penalties, any of which could
harm our business.
| · |
Changes
in stock option accounting rules scheduled to go into effect at the start
of our fiscal 2007 will impact our reported operating results prepared in
accordance with generally accepted accounting principles, and may impact
our stock price and our competitiveness in the employee marketplace.
|
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
Year Ended |
|
|
April
2, 2005 |
April
3, 2004 |
March
29, 2003 |
|
Net
sales |
100% |
100% |
100%
|
|
Cost
of sales |
48.7 |
60.2 |
62.1 |
|
Research
and development |
17.3 |
18.6 |
17.0 |
|
Selling,
general and administrative |
20.5 |
19.0 |
15.9 |
|
Income
from operations |
13.5 |
2.2 |
5.0 |
|
Other
income |
|
|
|
|
Interest
income |
2.8 |
2.3 |
1.7 |
|
Other income (expense), net |
0.5 |
1.6 |
1.0 |
|
Income
before provision for income taxes |
16.9 |
6.1 |
7.7 |
|
Provision
for income taxes |
5.5 |
1.9 |
2.5 |
|
Net
income |
11.4% |
4.2% |
5.2% |
Critical
Accounting Policies and Estimates
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. Note 1 to the Consolidated Financial Statements describes the
significant accounting policies and methods used in the preparation of the
Consolidated Financial Statements. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses. Significant estimates in these
financial statements include provision for sales returns and allowances,
allowance for doubtful accounts, estimates for useful lives associated with long
lived assets, asset impairments, net realizable value of inventories, certain
accrued liabilities and provision for income taxes and tax valuation allowance.
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.
We
consider the accounting policies described below to be our critical accounting
policies. Our 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. These
critical accounting policies reflect our significant judgments, assumptions, and
estimates used in the preparation of the Consolidated Financial Statements. Our
management has discussed the development and selection of these critical
accounting policies and estimates with the audit committee of our board of
directors and the audit committee has reviewed our disclosures relating to them
in this report.
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 distributors provide us an inventory balance report at the end of each
period, which allows us to determine products sold to their
end-customer.
A small
amount of our deferred revenue is from upfront billings from customers under
non-recurring engineering (NRE) contracts as well as a customer advance under a
licensing agreement. We
recognize revenue from our Non-recurring Engineering (NRE) contracts upon
completion of contract milestones, which corresponds to when we provide the
services and/or products. Revenue is deferred for any amounts received prior to
completion of engineering contract milestones, such as amounts received upon
signing of contract. Some of our NRE contracts include formal customer
acceptance provisions. In this case, at the end of each period, we determine
whether customer acceptance has been obtained for the specific milestone. If
customer acceptance has not been obtained, we defer the recognition of such
revenue until customer acceptance is obtained.
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 and
Allowance Authorization 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 occur.
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. Standard
manufacturing cost includes materials, labor, and overhead costs including
depreciation, and includes factors for estimated production yield and throughput
time. We determine the market value of our inventories based on the average
selling price of our products in the last month prior to the balance sheet date.
Inventory balances are adjusted to approximate the lower of our standard
manufacturing cost or market value. Any adjustment to write down inventory to
market value is charged to the cost of sales in the period that the adjustment
is made.
We
evaluate
our ending inventories for excess quantities and obsolescence at each balance
sheet date. This evaluation includes analyses of sales levels by product and
projections of future demand during the next fifteen months. Inventories on hand
in excess of forecasted demand and inventories that we consider obsolete are
reserved for. Additions to the provision are charged to the cost of sales.
Subsequent changes in facts and circumstances do not result in the reduction of
the allowance until these inventories are subsequently sold, after which the
related allowance is matched to the movement of the related product inventory,
resulting in lower costs and higher gross margins for those products.
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 will be reflected in cost of sales in
the period the revision is made.
Accounting
for Investments and Consolidation
From time
to time we may make investments in privately held companies, which requires us
to determine the carrying value of such investments. We currently own
stock in a privately held company whose carrying value is zero as
of April 2, 2005 and April 3, 2004. Investments in privately held
companies that are not publicly traded usually have no established market value.
We have a policy in place to review the fair value of these investments on a
regular basis to evaluate the carrying value of our investments
in privately held companies. This policy includes, but is not limited
to, reviewing cash position, financing needs, earnings/revenue outlook,
operational performance, management/ownership changes, and competition of each
company. 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 estimate change.
Accounting
for Income Taxes
Income
taxes are accounted for under the asset and liability method. The Company makes
certain estimates and judgments in determining income tax expense for financial
statement purposes. These estimates and judgments occur in the calculation of
certain deferred tax assets and liabilities, which arise from timing differences
in the recognition of revenue and expense for tax and financial statement
purposes. Such deferred income tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax base, operating losses and tax credit carryforwards. Changes in
tax rates affect the deferred income tax assets and liabilities and are
recognized in the period in which the tax rates are enacted.
The
Company must determine the probability that it will be able to utilize its
deferred tax assets. If the Company determines that recovery is unlikely, then a
valuation allowance against its deferred tax asset must be recorded by
increasing its income tax expense. As of April 2, 2005, the Company believes
that its deferred tax assets recorded on its balance sheet will be utilized.
However, should there be a change in its ability to utilize or recover its
deferred tax assets, an additional income tax expense would be incurred in the
period in which it was determined that the recovery is not
probable.
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 37 of this Annual Report on Form 10-K
which contain accounting policies and other disclosures required by generally
accepted accounting principles.
Recent
Developments
Beginning
the fourth quarter of fiscal 2001, the global semiconductor industry conditions
experienced a severe downturn that continued through the second half of fiscal
2004. During this time, conditions in all the markets we serve, particularly the
telecom market, were weak. Demand for our products decreased, and sales were
adversely impacted resulting in a sequential decline in fiscal years 2002, 2003
and 2004. Despite these declining sales, we have remained profitable and
generated positive cash flows through rigorous cost control measures.
We
experienced a modest recovery in sales in the first half of fiscal 2005, but we
saw sales declines in the third and fourth fiscal quarters. We are hopeful that
with expected improvements in the economy over the coming fiscal year, the
business of our customers will increase leading to increased sales for us as
well. We believe that we will be able to substantially meet our production needs
from our wafer fabrication and testing facilities in the coming fiscal year.
Quote activities and design wins have been strong in all the markets we serve.
We have seen a higher sequential backlog and a book-to-bill ratio of greater
than one, which are encouraging indicators for sales growth in the new fiscal
year. Book-to-bill ratio is defined as sales orders received over orders shipped
during the fiscal quarter. We believe that current orders will be shipped in
fiscal 2006. However, our 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 these reasons, purchase orders received are not necessarily
reliable indicators of future sales.
Results
of Operations
Fiscal
2005 vs. Fiscal 2004
Net
Sales
Net sales
for the fiscal year 2005 were $56,558,000, a 10% increase compared to
$51,394,000 for the prior fiscal year. 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, which 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 customers in the Medical Electronics, Imaging,
Telecom and Other markets as well as year-over-year and sequential percentage
changes are as follows (in
thousands):
|
|
Fiscal
Years Ended |
|
Year-Over-Year
Change |
|
|
Markets |
|
April
2, 2005 |
|
April
3, 2004 |
|
Medical
Electronics |
|
|
$
21,813 |
|
|
39 |
% |
|
$
18,024 |
|
|
35 |
% |
|
21 |
% |
Imaging |
|
|
16,069 |
|
|
28 |
% |
|
17,540 |
|
|
34 |
% |
|
-8 |
% |
Telecom |
|
|
12,802 |
|
|
23 |
% |
|
11,541 |
|
|
23 |
% |
|
11 |
% |
|
Others |
|
|
5,874 |
|
|
10 |
% |
|
4,289 |
|
|
8 |
% |
|
37 |
% |
|
Net Sales |
|
|
$
56,558 |
|
|
100 |
% |
|
$
51,394 |
|
|
100 |
% |
|
10 |
% |
Overall
demand for our products in fiscal 2005 was higher compared to fiscal 2004 in all
four markets except for sales to the Imaging market. This increase in overall
net sales is primarily due to higher units sales across these markets as
semiconductor market conditions improved and the initial production ramp of our
more recently introduced products. The Company did not have material sales price
erosion on its products.
Our sales
to the Medical Electronics market in fiscal 2005 increased 21% compared to the
prior fiscal year. The sales increase is primarily attributed to an increase in
ultrasound units shipped worldwide and to a lesser degree, from shipments of new
products in the high voltage pulser area. The Company believes that sales
to this market will continue to hold at this increased level as shipments of
high-voltage pulsers for the new portable and transportable systems and
shipments of chip sets increase. New
ultrasound therapeutic applications should also add to the sales of our products
in the coming fiscal year.
Sales to
the Imaging market in fiscal 2005 showed a decrease of 8% over the prior year
primarily due to
the reduced demand for the EL backlighting products for monochrome displays in
cellular phones. In the third fiscal quarter, there was the start of a
production ramp of our EL backlighting products for backlighting keypads, but
the ramp-up was abruptly stopped in the fourth fiscal quarter, due to the
unexpected push-out by a major customer. The
Company forecasts that new uses of the EL backlighting products in backlighting
keypads for cell phones, and for audio/video remote controls and other handheld
devices, requiring multi-segment EL backlighting, should more than offset the
decline in use of EL backlighting products for monochrome cell phone displays.
Current backlog indicates a recovery of the demand for the EL backlighting ICs
for keypads in the first fiscal quarter of 2006 and we expect the demand to grow
throughout the fiscal 2006. Sales of flat panel display products and non-impact
printers and plotters in our Imaging Group remained steady in fiscal 2005 and
are expected to increase in fiscal 2006.
Sales to
the Telecom market in fiscal 2005 increased 11% compared to prior fiscal
year. The increase in sales was the result of improving market conditions,
and increased demand for DC-to-DC converters, long haul ring generators,
protection devices and high voltage amplifier arrays for the optical-to-optical
telecom market. The Company projects increased sales of the HotSwap
products as production at a major telecom equipment manufacturer customer ramps
up. This increase is expected to offset decline in sales of our some of our
legacy products.
Sales to
Other markets in fiscal 2005 increased 37% compared to prior fiscal year.
The increase was primarily due to increased custom processing shipments to a
single customer whose end product is for the automotive market.
The
Company’s principal markets are in the United States, Europe, and Asia. Sales by
geography as well as year-over-year change, were as follows:
|
|
Fiscal
Years Ended |
|
Year-Over-Year
Change |
|
(Dollars
in thousands) |
|
April
2, 2005 |
April
3, 2004 |
United
States |
|
|
$
31,796 |
|
|
56 |
% |
|
$
29,072 |
|
|
57 |
% |
|
9 |
% |
Europe |
|
|
5,133
|
|
|
9 |
% |
|
5,773
|
|
|
11 |
% |
|
-11 |
% |
Japan |
|
|
6,673
|
|
|
12 |
% |
|
5,474
|
|
|
11 |
% |
|
22 |
% |
Asia
(excl. Japan) |
|
|
11,211 |
|
|
20 |
% |
|
9,481 |
|
|
18 |
% |
|
18 |
% |
|
Others |
|
|
1,745
|
|
|
3 |
% |
|
1,594
|
|
|
3 |
% |
|
9 |
% |
|
Total Net Sales |
|
|
$
56,558 |
|
|
100 |
% |
|
$
51,394 |
|
|
100 |
% |
|
10 |
% |
Net sales
to international customers in fiscal 2005 were $24,762,000, or 44% of the
Company’s net sales as compared to $22,322,000 or 43% of net sales for the prior
fiscal year. Except
for Europe, all geographical locations listed above posted higher sales as
market conditions improved. The decline in sales to our European market was
primarily caused by a slowdown at one major EL segment lighting customer. Sales
to our domestic customers increased during the same period primarily from higher
demand for our standard products. Additional
discussion regarding our sales based on geographic area can be found in Note 13
of the “Notes to Consolidated Financial Statements.”
Gross
Margin
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 fiscal year 2005 was $29,013,000 compared to $20,456,000 in fiscal
year 2004 whereas our sales only increased by $5,164,000. Thus, most of our
increase in gross profit dollars was due to increased efficiency in the
operations and decreased depreciation expenses.
|
|
Fiscal
Years Ended |
|
(Dollars
in thousands) |
April
2, 2005 |
April
3, 2004 |
|
Gross
Margin Percentage |
51% |
40% |
|
Included
in Gross Margin Percentage Above
Gross
Margin Benefit from Sale of Previously Written Down
Inventory |
$
990 |
$
820 |
|
Percentage
of Net Sales |
2% |
2% |
Our gross
margin is 51% for fiscal 2005 compared to 40% in the prior fiscal year. The
improvement in gross margin was primarily attributed to lower depreciation
charges, lower package assembly costs, and lower expense for process supplies
and line maintenance.
Declining
capital spending in the last two years after the completion of major upgrades to
the wafer fabrication facility and test operations resulted to a lower
depreciation in fiscal 2005 compared to prior year. Last time build of a custom
product at a sole-source packaging vendor in the prior fiscal year caused an
abnormal increase in package assembly cost during that period. The absence of an
abnormal assembly cost this fiscal year provided a favorable effect to the gross
margin. Continued cost measures resulted to lower expenses in process supplies
and line maintenance.
Research
and Development
|
|
Fiscal
Years Ended |
Year-To-Year
Change |
(Dollars
in thousands) |
April
2, 2005 |
April
3, 2004 |
|
R
& D Expenses |
$
9,780 |
$
9,570 |
2% |
|
Percentage
of Net Sales |
17% |
19%
|
|
Research
and development (R&D) expenses include payroll and benefits, processing
costs, and depreciation. We also expense prototype wafers and mask sets related
to new products as R&D expenses until new products are released to
production. R&D expenses were 17% and 19% of net sales in fiscal 2005 and
2004, respectively. Dollar expenditures for R&D were $9,780,000 and
$9,570,000 for fiscal 2005 and 2004, respectively. The net increase of $210,000
in R&D expense for the current year was primarily due to increased
manufacturing activity of prototype products. Design win activities remained
strong.
The
Company expects to keep R&D spending in fiscal year 2006 at 17% of net
sales.
Selling,
General and Administrative
(SG&A)
|
|
Fiscal
Years Ended |
Year-To-Year
Change |
(Dollars
in thousands) |
April
2, 2005 |
April
3, 2004 |
|
SG&A
Expenses |
$
11,583 |
$
9,760 |
19% |
|
Percentage
of Net Sales |
20% |
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 compliance services related to
Sarbanes-Oxley Act of 2002. SG&A expenses were 20% and 19% of net sales in
fiscal 2005 and 2004, respectively. In
absolute dollars, SG&A expenses were $11,583,000 in fiscal 2005 compared to
$9,760,000 for fiscal 2004.
The
$1,823,000 increase in SG&A expenses is primarily attributed to a $646,000
increase in payroll-related expenses due to increased headcount, an increase in
provision for bad debt expenses of $110,000, an increase in engineering supplies
and services expenses of $91,000, an increase is sales related travel expenses
of $77,000, all of which resulted from an increase in sales; and a $941,000
increase in expenses for professional services primarily from expenses related
to compliance activities resulting from the Sarbanes-Oxley Act of 2002, and in
particular, Section 404 of the Act, which requires documentation and testing of
our internal control over financial reporting. We expect that expenses for
compliance activities of the Sarbanes-Oxley Act will decrease in fiscal
2006.
SG&A
expenses are expected to increase in absolute dollars as the Company expands
sales and marketing presence worldwide. SG&A expenses may fluctuate as a
percentage of net sales.
Interest
Income and Other Income, Net
| |
Fiscal
Years Ended |
Year-To-Year
Change |
(Dollars
in thousands) |
April
2, 2005 |
April
3, 2004 |
|
Interest
Income and Other Income, Net |
$
1,909 |
$
2,004 |
-5% |
|
Percentage
of Net Sales |
3% |
4%
|
|
Interest
income and other income, net for fiscal year 2005 was $1,909,000 compared to
$2,004,000 in fiscal 2004.
Interest
Income Interest
income, which consists primarily of interest income from our cash, cash
equivalents and short-term investments, was $1,603,000 in fiscal 2005 compared
to $1,164,000 in fiscal 2004. The
increase in interest income was due primarily to increases in cash, cash
equivalents and short-term investments and slightly higher interest rates
starting in the second quarter of fiscal 2005.
Other
Income, Net Other
income, net for fiscal 2005 was $306,000 compared to $840,000 in fiscal 2004.
The decrease in other income, net is primarily from the $240,000 increase in
fair market value of investments held by the Company’s Supplemental Employee
Retirement Plan (“SERP”) compared to $738,000 in the prior year.
Provision
for Income Taxes The
provision for incomes taxes represents Federal, state and foreign taxes. The
provision for income taxes for fiscal 2005 was $3,100,000 at the estimated
effective tax rate of 32% compared to $970,000 and 31% for fiscal 2004. The
increase in tax rate in fiscal 2005 is attributed to higher profit. The
difference between the Federal statutory rate of 35% and our effective tax rate
used for fiscal 2005 of 32% is primarily due to favorable foreign tax rate
differential, R&D credits and Federal tax-exempt investments.
Fiscal
2004 vs. Fiscal 2003
Net
Sales Net
sales for fiscal year 2004 was $51,394,000, a decrease of $3,521,000 or 6% from
the previous fiscal year net sales of $54,915,000. As a percentage of total net
sales, sales to customers in the medical electronics, imaging, telecom and other
market were as follows:
(Dollars
in thousands) |
|
Fiscal
Years Ended |
|
Year-Over-Year
Change |
|
|
Markets |
|
April
3, 2004 |
March
29, 2003 |
|
Medical
Electronics |
|
|
$
18,024 |
|
|
35 |
% |
|
$
19,541 |
|
|
36 |
% |
|
-8 |
% |
|
Imaging |
|
|
17,540 |
|
|
34 |
% |
|
20,012 |
|
|
36 |
% |
|
-12 |
% |
|
Telecom |
|
|
11,541 |
|
|
23 |
% |
|
10,596 |
|
|
19 |
% |
|
9 |
% |
|
Others |
|
|
4,289 |
|
|
8 |
% |
|
4,766 |
|
|
9 |
% |
|
-10 |
% |
|
Net
Sales |
|
|
$
51,394 |
|
|
100 |
% |
|
$ 54,915 |
|
|
100 |
% |
|
-6 |
% |
Overall
demand for our products in fiscal 2004 was lower compared to fiscal 2003.
However, sales in our telecom market showed a modest improvement over the prior
year primarily as a result of the economic upturn in the semiconductor industry
in the second half of fiscal 2004. Sales to our telecom market increased 9%
compared to the prior fiscal year, primarily from our legacy ISDN products and
to a lesser extent from our optical-to-optical switcher arrays. Sales to the
medical electronics market dropped 8% compared to prior fiscal year due to a
delay in production of certain newer high-end platforms utilizing our chip scale
package products. The 12% decrease in sales to our imaging market reflected
softness in the consumer usage of EL backlights.
The
Company’s principal markets are in the United States, Europe, and Asia. Sales by
geography as well as year-over-year change, were as follows:
| |
|
Fiscal
Years Ended |
|
Year-Over-Year
Change |
|
(Dollars
in thousands) |
|
April
3, 2004 |
|
March
29, 2003 |
|
|
United
States |
|
|
$
29,072 |
|
|
57 |
% |
|
$
33,741 |
|
|
61 |
% |
|
-14 |
% |
|
Europe |
|
|
5,773
|
|
|
11 |
% |
|
5,819 |
|
|
11 |
% |
|
-1 |
% |
|
Japan |
|
|
5,474
|
|
|
11 |
% |
|
6,137 |
|
|
11 |
% |
|
-11 |
% |
|
Asia
(excluding Japan) |
|
|
9,481 |
|
|
18 |
% |
|
8,055 |
|
|
15 |
% |
|
18 |
% |
|
Others |
|
|
1,594
|
|
|
3 |
% |
|
1,163 |
|
|
2 |
% |
|
37 |
% |
|
Total
revenue |
|
|
$
51,394 |
|
|
100 |
% |
|
$
54,915 |
|
|
100 |
% |
|
-6 |
% |
In fiscal
2004, we derived approximately 43% of our net sales from customers outside the
United States, primarily in Asia and Europe, compared to 39% in fiscal 2003.
Dollar sales to international customers also increased approximately 5% from
$21,174,000 to $22,322,000 for the fiscal year ended March 29, 2003 and April 3,
2004 respectively. These percentages have been adjusted to reflect a change in
our aggregation of geographic sales information. Sales are now attributed to
geographic area based on destination location. The increase in the percentage of
international sales is attributed to increase in shipments to destination
locations in Asia excluding Japan while sales in the United States declined. We
believe that part of this shift reflects changes in our customers’ manufacturing
trends with more customers increasing their production operations in Asia.
Additional discussion regarding our sales based on geographic area can be found
in Note 13 of the “Notes to Consolidated Financial Statements.”
Gross
Margin
| |
Fiscal
Years Ended |
|
(Dollars
in thousands) |
April
3, 2004 |
March
29, 2003 |
|
Gross
Margin Percentage |
40% |
38% |
|
Included
in Gross Margin Percentage Above
Gross Margin Benefit from Sale of
Previously Written Down Inventory |
$
820 |
$
79 |
|
Percentage
of Net Sales |
2% |
<1% |
Gross
profit represents net sales less cost of sales. Our cost of sales includes the
cost of wafer fabrication, 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 fiscal year 2004 was $20,456,000 compared to
$20,812,000 in fiscal 2003. Gross profit in fiscal 2004 includes a benefit of
$820,000, which represents the release of provision for inventory previously
written down and sold during the year compared to $79,000 in fiscal
2003.
Our gross
profit as a percentage of net sales fluctuates, depending on product mix,
manufacturing yields, utilization of manufacturing capacity, and average selling
prices, among other factors. Our gross margin was 40% for fiscal 2004 compared
to 38% in the prior fiscal year. The gross margin improvement was primarily due
to rigorous cost reduction measures and lower depreciation expenses. In fiscal
2004, we successfully qualified our in-house ion implantation process that
resulted in reductions in our outside service costs and favorably impacted our
gross profit. Depreciation expense in fiscal 2004 was lower than fiscal 2003 due
to declining capital spending in the last few years, thereby reducing the
depreciable cost. We have completed the upgrades to our fab and test operations,
which we started in fiscal 2002.
Research
and Development
| |
|
Fiscal
Years Ended |
|
Year-To-Year
Change |
|
(Dollars
in thousands) |
|
|
April
3, 2004 |
|
|
March
29, 2003 |
|
R
& D Expenses |
|
|
$9,570 |
|
|
$9,338 |
|
|
2 |
% |
Percentage
of Net Sales |
|
|
19 |
% |
|
17 |
% |
|
|
|
Research
and development (R&D) expenses include payroll and benefits, processing
costs, and depreciation. We also expense prototype wafers and mask sets related
to new products as R&D expenses until new products are released to
production. R&D expenses were 19% and 17% of net sales in fiscal 2004 and
2003, respectively. Dollar expenditures for research and development were
$9,570,000 and $9,338,000 for fiscal 2004 and 2003, respectively. The net
increase of $232,000 in R&D expense was primarily due to an increase in
costs related to new process and new product development offset by a reduction
in payroll, software licensing costs and lower depreciation expenses.
Selling,
General and Administrative
(SG&A)
|
|
Fiscal
Years Ended |
|
|
|
(Dollars
in thousands) |
|
|
April
3, 2004 |
|
|
March
29, 2003 |
|
SG&A
Expenses |
|
|
$9,760 |
|
$ |
$8,722 |
|
|
12 |
% |
Percentage
of Net Sales |
|
|
19 |
% |
|
16 |
% |
|
|
|
SG&A
expenses consist primarily of employee related expenses, commissions to sales
representatives, occupancy expenses including expenses associated with our
regional sales offices, cost of advertising and publications, and outside
services such as legal, auditing and tax services. SG&A expenses were 19%
and 16% of net sales in fiscal 2004 and 2003, respectively. In
absolute dollars, SG&A expenses were $9,760,000 in fiscal 2004 compared to
$8,722,000 for fiscal 2003. This
$1,038,000 or 12% increase in SG&A was attributed to an increase in payroll
and benefits expenses of $611,000, an increase in legal expenses of $291,000, an
increase in occupancy cost of $122,000, an increase in bad debt expenses of
$74,000, an increase in travel and entertainment expenses of $67,000, offset by
a reduction in advertising and publication charges of $126,000. The increase in
payroll and benefits expenses was attributed to the increase in compensation
expense resulting primarily from the increase in valuation of plan assets for
the Company’s Supplemental Employee Retirement Plan of $426,000 as well as an
increase in headcount in our sales and marketing group. We have expanded our
sales efforts in the Far East, which also caused an increase in travel and
entertainment expenses during fiscal 2004. The increase in legal expenses
year-over-year is due to a benefit from a reversal of a provision for legal
expenses in fiscal 2003 following the favorable resolution of a claim initiated
by a customer. This reversal resulted in a benefit of $224,000 realized in
fiscal year 2003. The increase in occupancy costs is attributed to an increase
in facilities maintenance costs. Bad debt expenses in the prior year were
favorably impacted by the collection of previously reserved accounts receivable
of $298,000. The reduction in advertising expenses in fiscal 2004 was due to
cost control measures.
Interest
Income and Other Income, Net
| |
|
Fiscal
Years Ended |
|
Year-To-Year
Change |
|
(Dollars
in thousands) |
|
April
3, 2004 |
|
March
29, 2003 |
|
Interest
Income and Other Income, Net |
|
$
2,004 |
|
$
1,446 |
|
39% |
|
Percentage
of Net Sales |
|
|
4 |
% |
|
3 |
% |
|
|
|
Interest
income and other income, net for fiscal year 2004 was $2,004,000 compared to
$1,446,000 in fiscal 2003.
Interest
Income Interest
income, which consists primarily of interest income from our cash, cash
equivalents and short-term investments, was $1,164,000 in fiscal 2004 compared
to $916,000 in fiscal 2003. The
moderate increase in interest income in fiscal 2004 is due to larger average
cash, cash equivalent and short-term investment balance in the current periods
compared to the same periods of the prior fiscal year.
Other
Income, Net Other
income, net of $840,000 for fiscal 2004 consisted primarily of an increase in
fair market value of investments held by the Company’s Supplemental Employee
Retirement Plan of $738,000, and licensing income of $150,000. For the
comparable period in fiscal 2003, other income, net, of $530,000 consisted of a
gain on sale of a long-term investment of $1,092,000, and an increase in the
fair market value of investments held in the Company’s Supplemental Employee
Retirement Plan of $79,000, licensing income of $150,000, offset by a loss from
disposal of equipment of $60,000 and an impairment charge of $750,000 due to the
uncertainty surrounding the recoverability of another long-term investment.
Provision
for Income Taxes The
provision for income taxes for fiscal 2004 is 31% of income before provision for
income taxes compared to 32% in fiscal 2003. The Company reduced its effective
tax rate due to a higher proportion of its earnings attributed to its
foreign-based subsidiary, which is in a lower tax jurisdiction.
Financial
Condition
Overview
Cash,
cash equivalents and short-term investment balance as of April 2, 2005 was
$88,417,000, compared with $76,124,000 on April 3, 2004, and $64,876,000 on
March 29, 2003. Working capital was $96,896,000, an increase of $9,891,000 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 from operations.
Liquidity
and Capital Resources
The
Company’s cash and cash equivalents decreased $19,083,000 during fiscal 2005 to
$38,634,000 from $57,717,000 at April 3, 2004. The decrease in cash and cash
equivalents during fiscal 2005 is due to cash used in investment activities of
$32,252,000, offset by cash flows from operating activities of $10,811,000 and
cash provided from financing activities of $2,358,000.
Our
operating activities generated cash of $10,811,000, $9,617,000, and $6,999,000
for fiscal 2005, 2004, and 2003, respectively. The positive cash flows from
operating activities were primarily attributable to net income, adjusted for
non-cash items. Net operating cash flows for fiscal 2005 was favorably impacted
by non-cash charges for depreciation of $3,293,000, non-cash charges for
provisions relating to inventory of $1,777,000, non-cash charges for provisions
for doubtful accounts and sales returns totaling $1,335,000 and tax benefit
associated with employee stock option exercises of $504,000. Working
capital sources of cash included an increase in accounts payable and accrued
expenses of $2,350,000 primarily from timing of payments and increased accruals
for employee benefits payable, an increase in income taxes payable of $1,553,000
due to higher income, and an increase in deferred revenue of $356,000. Working
capital uses of cash included an increase in deferred tax assets of $2,500,000
based on our estimate of tax effect attributable to timing differences and carry
forwards, an increase in inventories of $1,795,000 due to the unexpected
push-out of our EL backlighting products in the fourth fiscal quarter by one of
our largest customers, an increase in accounts receivable of $1,566,000 due
primarily to higher sales, and an increase in prepaid expenses and other assets
of $277,000.
Net cash
used in investing activities in fiscal 2005 was $32,252,000, primarily from
purchase of short-term investments categorized as available for sale of
$30,650,000 and for equipment purchases of $1,602,000. In fiscal 2004, net cash
used in fiscal 2004 was $15,390,000, primarily from purchase of short-term
investments categorized as available for sale of $18,425,000, equipment purchase
of $2,010,000, offset by proceeds from sales of short-term investment
categorized as available for sale of $5,025,000, and proceeds from sale of
property and equipment of $20,000.
Net cash
provided by financing activities in fiscal 2005 was $2,358,000, which consisted
primarily of proceeds from employee exercises of stock options under the current
and former option plans of $2,149,000 and proceeds from employee purchases of
stocks under the ESPP of $623,000, offset by $414,000 from common stock
repurchases. During fiscal 2005, the Company bought back 26,400 shares of the
Company’s common stock in open market or privately negotiated transactions for
the total amount of $414,000. The repurchase prices ranged from $14.15 to $18.48
with a weighted average price of $15.68. Such repurchases were made under the
repurchase program, which was approved by the Board of Directors. In
fiscal
2004, net cash provided by financing activities was $2,559,000, which consisted
of proceeds from employee exercises of stock options under the stock option
plans of $1,945,000 and employee purchases of stock under the ESPP of $614,000.
The
Company expects to spend approximately $2,386,000 for capital acquisitions in
fiscal 2006. The Company believes that it has substantial production capacity in
place to handle any projected increase in business in fiscal 2006. Most of the
Company’s $7,992,000 of property, plant and equipment, net are located in the
United States. 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
We do not
have any off-balance sheet arrangements that have, or are reasonably likely to
have, a current or future effect upon our financial condition, revenues,
expenses, results of operations, liquidity, capital expenditures or capital
resources that are material to our investors. Noted below under “Contractual
Obligations” are various commitments we have associated with our business such
as lease commitments, open purchase obligations and other items, that are not
recorded on our balance sheet, since we have not yet received the related goods
or services as of April 2, 2005.
Contractual
Obligations
The
following table summarizes our significant contractual cash obligations at April
2, 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) |
|
$ |
5,723 |
|
$ |
1,010 |
|
$ |
1,861 |
|
$ |
1,811 |
|
$ |
1,041 |
|
|
Purchase
obligations (2) |
|
|
4,728 |
|
|
4,728 |
|
|
-- |
|
|
-- |
|
|
-- |
|
|
Total
Contractual Cash Obligations |
|
$ |
10,451 |
|
$ |
5,738 |
|
$ |
1,861 |
|
$ |
1,811 |
|
$ |
1,041 |
|
(1)
We lease facilities under non-cancelable lease agreements expiring at various
times through April 2011. Rental expense net of sublease for fiscal 2005
amounted to $892,000.
(2)
To obtain favorable pricing and resource commitment, we commit to volume
purchase to suppliers of our manufacturing materials.
Common
Stock Repurchases
There
were no shares repurchased in fiscal 2004. Share repurchase activities for
fiscal 2005 were as follows:
|
Number
of shares repurchased |
26,400 |
|
Cost
of shares repurchased |
$
414,000 |
|
Average
price per share |
$
15.68 |
Since the
inception of the repurchase program in 1992 through April 2, 2005, the Company
has repurchased a total of 1,048,000 shares of the common stock for an aggregate
cost of $6,247,000. Upon their repurchase, shares are restored to the status of
authorized but unissued shares. At April 2, 2005, 852,000 shares remained
authorized for repurchases under the program.
Recent
Accounting Pronouncements
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 fiscal periods beginning after June
15, 2005. The Company does not expect the adoption of SFAS 153 to have a
material impact on the overall results of operations or financial
position.
In
December 2004, FASB issued Statement No. 123 (revised 2004), or SFAS 123R,
“Share-Based Payment.” This statement replaces SFAS 123, “Accounting for
Stock-Based Compensation” and supersedes Accounting Principles Board’s Opinion
No. 25 (ABP 25), “Accounting for Stock Issued to Employees”. SFAS 123R will
require the Company to measure the cost its employee stock-based compensation
awards granted after the effective date based on the grant date fair value of
those awards and to record that cost as compensation expense over the period
during which the employee is required to perform services in exchange for the
award (generally over the vesting period of the award). In addition, it will be
required to record compensation expense (as previous awards continue to vest)
for the unvested portion of previously granted awards that remain outstanding at
the date of adoption. In April 2005, the U.S. Securities and Exchange Commission
(the “SEC”) announced a deferral of the effective date of SFAS 123R to the
registrant’s fiscal year beginning on or after June 15, 2005. The Company is
therefore required to implement the standard beginning in its fiscal year 2007.
In addition, the SEC issued Staff Accounting Bulletin No. 107, or (SAB 107) in
March 2005. SAB 107 includes interpretive guidance for the initial
implementation of SFAS 123R. The Company is currently evaluating the impact of
the SFAS 123R on its financial statements.
Item
7A. Quantitative and Qualitative Disclosures About Market
Risk
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. Investments and cash and cash equivalents generated
interest income of $1,603,000 in fiscal year 2005. A significant change in
interest rates would impact the amount of interest income generated from our
excess cash and investments. It would also adversely impact the fair value of
the Company's investments, however, we believe the impact would be minimal since
the investment maturities of these securities are short. As of April 2, 2005 the
Company had no long-term debt outstanding.
The table
below presents the fair value of our interest bearing investment portfolio at
April 2, 2005 and April 3, 2004:
|
|
|
|
|
|
|
|
Weighted
Average Interest Rate |
(Dollars
in thousands) |
|
|
April
2, 2005 |
|
|
April
3, 2004 |
|
|
April
2, 2005 |
|
|
April
3, 2004 |
|
Available-for-sale
securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax-exempt
securities |
|
$ |
44,050 |
|
$ |
13,400 |
|
|
2.1 |
% |
|
1.5 |
% |
Foreign
Currency Exchange Risks
The
Company does not hedge any potential risk from any foreign currency exposure.
With the Company’s operations in Hong Kong, it faces exposure to an adverse
change in the exchange rate of the Hong Kong dollar. The Company believes that
its exposure is relatively small thus, it does not employ hedging techniques
designed to mitigate this foreign currency exposure. Likewise, the Company could
experience unanticipated currency gains or losses. As the level of activity at
this operation changes over time, actual currency gains or losses could have an
adverse impact to the consolidated financial statements.
Item
8. Financial Statements and Supplementary Data
With the
exception of the quarter ending March 27, 2004, which consisted of 14 weeks,
each of the quarters presented in the following page consisted of 13
weeks.
|
|
Quarters
Ended |
|
|
|
Apr
2, |
|
|
Jan
1, |
|
|
Oct
2, |
|
|
Jul
3, |
|
|
Mar
27, |
|
|
Dec
27, |
|
|
Sep
27, |
|
|
Jun
28, |
|
| |
|
|
2005 |
|
|
2005 |
|
|
2004 |
|
|
2004 |
|
|
2004 |
|
|
2003 |
|
|
2003 |
|
|
2003 |
|
(in thousands, except
per share amounts)
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement
of Income Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales |
|
$ |
11,843 |
|
$ |
14,925 |
|
$ |
15,548 |
|
$ |
14,242 |
|
$ |
13,590 |
|
$ |
13,010 |
|
$ |
12,315 |
|
$ |
12,479 |
|
|
Costs
of sales |
|
|
6,002 |
|
|
7,043 |
|
|
7,431 |
|
|
7,069 |
|
|
8,423 |
|
|
7,703 |
|
|
7,523 |
|
|
7,289 |
|
|
Gross
profit |
|
|
5,841 |
|
|
7,882 |
|
|
8,117 |
|
|
7,173 |
|
|
5,167 |
|
|
5,307 |
|
|
4,792 |
|
|
5,190 |
|
|
Income
(loss) from operations |
|
|
120 |
|
|
2,747 |
|
|
2,482 |
|
|
2,301 |
|
|
(96 |
) |
|
339 |
|
|
313 |
|
|
570 |
|
|
Income
before provision for |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income
taxes |
|
|
565 |
|
|
3,439 |
|
|
2,859 |
|
|
2,696 |
|
|
421 |
|
|
938 |
|
|
647 |
|
|
1,124 |
|
|
Net
income |
|
$ |
433 |
|
$ |
2,250 |
|
$ |
1,916 |
|
$ |
1,860 |
|
$ |
290 |
|
$ |
647 |
|
$ |
447 |
|
$ |
776 |
|
|
Net
income per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.03 |
|
$ |
0.17 |
|
$ |
0.15 |
|
$ |
0.14 |
|
$ |
0.02 |
|
$ |
0.05 |
|
$ |
0.04 |
|
$ |
0.06 |
|
|
Diluted |
|
$ |
0.03 |
|
$ |
0.17 |
|
$ |
0.15 |
|
$ |
0.14 |
|
$ |
0.02 |
|
$ |
0.05 |
|
$ |
0.03 |
|
$ |
0.06 |
|
Item
9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
None.
Item
9A.
Controls and Procedures
(a) Evaluation
of 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 or submitted
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 Chief 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 April 2, 2005,
and has determined that they are reasonably effective, taking into account the
totality of the circumstances, including the limitations described above.
(b) Management’s
Annual Report on Internal Control Over Financial Reporting:
Our
management is responsible for establishing and maintaining adequate internal
control over our financial reporting. Management assessed the effectiveness of
our internal control over financial reporting as of April 2, 2005. In making
this assessment, management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission in Internal
Control-Integrated Framework. Based on
the assessment using those criteria, management concluded that, as of April 2,
2005, our internal control over financial reporting is effective.
Our
independent registered public accounting firm, PricewaterhouseCoopers LLP,
audited the consolidated financial statements included in this Annual Report on
Form 10-K, and have also audited management’s assessment of the
effectiveness of our internal control over financial reporting as well as the
effectiveness of our internal control over financial reporting as of April 2,
2005. The Report appears under Item 15(a)(1).
(c)
Changes
in Internal Control over Financial Reporting.
There
were no significant changes in the Company’s internal control over financial
reporting that occurred during the fourth quarter of fiscal 2005 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, our management conducted a thorough review of all of our internal control
processes and procedures leading up to its assessment of the effectiveness of
the Company’s internal control over financial reporting as of April 2, 2005.
This review highlighted a number of processes where we had the opportunity to
improve internal controls. Accordingly, during the fourth quarter, our
management further strengthened access controls to sensitive financial systems,
subsystems,
and data, improved documentation of testing financial application changes,
further segregated duties in critical functional areas, and strengthened control
procedures and practices over financial reporting processes.
Our
internal control over financial reporting is designed to provide reasonable
assurance regarding the reliability of our financial reporting and preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles. Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements.
Item
9B.
Other Information.
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 2005
Annual Meeting of Stockholders to be held on August 19, 2005 (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 2005
Proxy Statement. The required information regarding executive officers is
included in Part I hereof under caption "Executive Officers of the
Company."
The
Company has adopted a Code of Business Conduct and Ethics that applies to all of
our employees, agents, contractors, and Board of Directors, including our
principal executive officer and financial officer and controller. A copy of the
Code of Business Conduct and Ethics is accessible, free of charge, at our
Internet website (www.supertex.com).
Printed copy is also available on request. Requests should be directed in
writing to Supertex, Inc., 1235 Bordeaux Drive, Sunnyvale, CA 94089, Attention:
Investors Relations. Information on our website is not part of this
report.
Disclosure
of whether or not we have a financial expert serving on the audit committee of
our Board of Directors, and if so who that individual is, is contained in the
2005 Proxy Statement under the caption “Audit Committee Financial Expert” and is
incorporated herein by reference.
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 2005 Proxy Statement and is incorporated by reference.
Item
12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
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 2005 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 $125,000, $125,000, and $130,000 in fiscal years 2005, 2004, and 2003,
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 2005,
2004, and 2003, were $2,183,000, $2,510,000, and $3,120,000, respectively. The
accounts receivable due from All American Semiconductor at April 2, 2005, and
April 3, 2004 were $530,000 and $481,000, 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. Principal Accountant Fees and Services
Information
required by this Item regarding accounting fees and services is set forth under
the caption “Ratification of Appointment of Independent Registered Public
Accounting Firm” in the 2005 Proxy Statement and is incorporated herein by
reference.
PART
IV
Item
15. Exhibits
|
(a) |
The
following documents are filed as part of this form: |
|
| |
|
Page
No. |
|
1. |
Report
of Independent Registered Public Accounting
Firm…………………………………......................................................................................... |
35 |
| |
|
|
|
2. |
Consolidated
Financial Statements: |
|
| |
Consolidated
Balance Sheets at April 2, 2005 and April 3,
2004………………………......................................................................................... |
37 |
| |
For
the three years ended April 2, 2005, April 3, 2004 and March 29,
2003: |
|
| |
Consolidated
Statements of
Income………………………………………………......................................................................................... |
38 |
| |
Consolidated
Statements of Shareholders'
Equity…………………………………..................................................................................... |
39 |
| |
Consolidated
Statements of Cash
Flows…………………………………………......................................................................................... |
40 |
| |
Notes
to Consolidated Financial
Statements………………………………………………….................................................................................. |
41 |
3. 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 Registered Public Accounting
Firm |
| |
|
|
24.1 |
Power
of Attorney (See signature page). |
| |
|
|
31.1 |
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to
Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002. |
| |
|
|
32.1 |
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. |
| |
|
(1) Incorporated by
reference to exhibit of 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) Exhibits
23.1, 24.1, 31.1, and 32.2 are filed herewith.
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 16, 2005 |
/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 Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
|
Signature |
|
Title |
Date |
| |
|
|
|
|
/s/
Henry C. Pao |
|
President,
Principal Executive and |
June
16, 2005 |
|
(Henry
C. Pao) |
|
Financial
Officer and Director |
|
| |
|
|
|
|
/s/
Richard E. Siegel |
|
Executive
Vice President and Director |
June
16, 2005 |
|
(Richard
E. Siegel) |
|
|
|
| |
|
|
|
|
/s/
W. Mark Loveless |
|
Director |
June
16, 2005 |
|
(W.
Mark Loveless) |
|
|
|
| |
|
|
|
|
/s/
Elliott Schlam |
|
Director |
June
16, 2005 |
|
(Elliott
Schlam) |
|
|
|
| |
|
|
|
|
/s/
Milton Feng |
|
Director |
June
16, 2005 |
|
(Milton
Feng) |
|
|
|
| |
|
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Shareholders and Board of Directors of Supertex, Inc.:
We have
completed an integrated audit of Supertex, Inc.’s (the Company) 2005
consolidated financial statements and of its internal control over financial
reporting as of April 2, 2005 and audits of its 2004 and 2003 consolidated
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Our opinions, based on our audits,
are presented below.
Consolidated
financial statements
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 April 2, 2005 and April 3,
2004, and the results of their operations and their cash flows for each of the
three years in the period ended April 2, 2005 in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit of financial statements 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.
Internal
control over financial reporting
Also, in
our opinion, management’s assessment, included in Management’s Annual Report on
Internal Control Over Financial Reporting appearing under Item 9A, that the
Company maintained effective internal control over financial reporting as of
April 2, 2005 based on the criteria established in
Internal Control — Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
is fairly stated, in all material respects, based on those criteria.
Furthermore, in our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of April 2, 2005, based
on criteria established in
Internal Control — Integrated Framework issued
by the COSO. The Company’s management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our responsibility
is to express opinions on management’s assessment and on the effectiveness of
the Company’s internal control over financial reporting based on our audit. We
conducted our audit of internal control over financial reporting in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects. An audit of internal control
over financial reporting includes obtaining an understanding of internal control
over financial reporting, evaluating management’s assessment, testing and
evaluating the design and operating effectiveness of internal control, and
performing such other procedures as we consider necessary in the circumstances.
We believe that our audit provides a reasonable basis for our
opinions.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (ii)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial
statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
/s/
PricewaterhouseCoopers LLP
San Jose,
California
June 15,
2005
SUPERTEX,
INC.
CONSOLIDATED
BALANCE SHEETS
(in
thousands)
| |
|
April
2, 2005 |
|
April
3, 2004 |
|
ASSETS |
|
|
|
|
|
|
|
Current
Assets: |
|
|
|
|
|
|
|
|
Cash
and cash equivalents |
|
$ |
38,634 |
|
$ |
57,717 |
|
|
Short-term
investments |
|
|
49,783 |
|
|
18,407 |
|
|
Trade
accounts receivable |
|
|
7,898 |
|
|
7,667 |
|
|
Inventories |
|
|
12,624 |
|
|
12,606 |
|
|
Prepaid
expenses and other current assets |
|
|
917 |
|
|
642 |
|
|
Deferred
income taxes |
|
|
6,322 |
|
|
4,989 |
|
|
Total
current asset |
|
|
116,178 |
|
|
102,028 |
|
|
Property,
plant and equipment, net |
|
|
7,992 |
|
|
9,731 |
|
|
Other
assets |
|
|
96 |
|
|
94 |
|
|
Deferred
income taxes |
|
|
2,111 |
|
|
944 |
|
|
TOTAL
ASSETS |
|
$ |
126,377 |
|
$ |
112,797 |
|
| |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
Current
Liabilities: |
|
|
|
|
|
|
|
|
Trade
accounts payable |
|
$ |
3,280 |
|
$ |
2,354 |
|
|
Accrued
salaries and employee benefits |
|
|
8,720 |
|
|
7,449 |
|
|
Other
accrued liabilities |
|
|
634 |
|
|
481 |
|
|
Deferred
revenue |
|
|
3,610 |
|
|
3,254 |
|
|
Income
taxes payable |
|
|
3,038 |
|
|
1,485 |
|
|
Total
current liabilities |
|
|
19,282 |
|
|
15,023 |
|
| |
|
|
|
|
|
|
|
|
Commitments
and contingencies (Note 10) |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
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 13,086 shares and 12,889 shares |
|
|
33,543 |
|
|
32,134 |
|
|
Retained
earnings |
|
|
71,752 |
|
|
65,640 |
|
|
Total
shareholders' equity |
|
|
107,095 |
|
|
97,774 |
|
|
TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
$ |
126,377 |
|
$ |
112,797 |
|
See
accompanying Notes
to Consolidated Financial Statements.
SUPERTEX,
INC.
CONSOLIDATED
STATEMENTS OF INCOME
(in
thousands, except per share amounts)
| |
|
|
|
|
|
|
April
2, 2005 |
|
|
April
3, 2004 |
|
|
March
29, 2003 |
|
|
Net
sales |
|
$ |
56,558 |
|
$ |
51,394 |
|
$ |
54,915 |
|
|
Cost
and expenses: |
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales |
|
|
27,545 |
|
|
30,938 |
|
|
34,103 |
|
|
Research
and development |
|
|
9,780 |
|
|
9,570 |
|
|
9,338 |
|
|
Selling,
general and administrative |
|
|
11,583 |
|
|
9,760 |
|
|
8,722 |
|
|
Total
costs and expenses |
|
|
48,908 |
|
|
50,268 |
|
|
52,163 |
|
|
Income
from operations |
|
|
7,650 |
|
|
1,126 |
|
|
2,752 |
|
|
Other
income: |
|
|
|
|
|
|
|
|
|
|
|
Interest
income |
|
|
1,603 |
|
|
1,164 |
|
|
916 |
|
|
Other
income, net |
|
|
306 |
|
|
840 |
|
|
530 |
|
|
Income
before provision for income taxes |
|
|
9,559 |
|
|
3,130 |
|
|
4,198 |
|
|
Provision
for income taxes |
|
|
3,100 |
|
|
970 |
|
|
1,343 |
|
|
Net
income |
|
$ |
6,459 |
|
$ |
2,160 |
|
$ |
2,855 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Net
income per share |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.50 |
|
$ |
0.17 |
|
$ |
0.23 |
|
|
Diluted |
|
$ |
0.49 |
|
$ |
0.17 |
|
$ |
0.22 |
|
|
Shares
used in per share computation |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
12,985 |
|
|
12,758 |
|
|
12,598 |
|
|
Diluted |
|
|
13,239 |
|
|
13,051 |
|
|
12,757 |
|
See
accompanying Notes
to Consolidated Financial Statements.
SUPERTEX,
INC.
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS' EQUITY
(in
thousands)
| |
Number
of Common Shares |
Stock
Amount |
Retained
Earnings |
Shareholders’
Equity |
| |
|
|
|
|
|
Balance,
March 30, 2002 |
12,544 |
$
27,454 |
$
60,642 |
$
88,096 |
|
Stock
options exercised |
88 |
829 |
-- |
829 |
|
Shares
received in lieu of cash for exercise of options |
(18) |
(252) |
-- |
(252) |
|
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 29, 2003 |
12,658 |
29,045 |
63,480 |
92,525 |
|
Stock
options exercised |
221 |
2,678 |
-- |
2,678 |
|
Shares
received in lieu of cash for exercise of options |
(40) |
(733) |
-- |
(733) |
|
Issuance
of shares under ESPP |
50 |
614 |
-- |
614 |
|
Tax
benefit from stock options |
-- |
530 |
-- |
530 |
|
Net
income |
-- |
-- |
2,160 |
-- |
|
Total
comprehensive income |
-- |
-- |
-- |
2,160 |
|
Balance,
April 3, 2004 |
12,889 |
32,134 |
65,640 |
97,774 |
|
Stock
options exercised |
183 |
2,330 |
-- |
2,330 |
|
Shares
received in lieu of cash for exercise of options |
(8) |
(181) |
-- |
(181) |
|
Issuance
of shares under ESPP |
48 |
623 |
-- |
623 |
|
Stock
repurchased |
(26) |
(67) |
(347) |
(414) |
|
Tax
benefit from stock options |
-- |
504 |
-- |
504 |
|
Net
income |
-- |
-- |
6,459 |
-- |
|
Total
comprehensive income |
-- |
-- |
-- |
6,459 |
|
Balance,
April 2, 2005 |
13,086 |
$
35,343 |
$
71,752 |
$
107,095 |
See
accompanying Notes
to Consolidated Financial Statements.
SUPERTEX,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in
thousands)
|
|
|
Fiscal Year
Ended |
|
CASH
FLOWS FROM OPERATING ACTIVITIES |
|
|
April
2, 2005 |
|
|
April
3, 2004 |
|
|
March
29, 2003 |
|
|
Net
income |
|
$ |
6,459 |
|
$ |
2,160 |
|
$ |
2,855 |
|
|
Non-cash
adjustments to net income: |
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization |
|
|
3,293 |
|
|
4,363 |
|
|
5,542 |
|
|
Provision
for doubtful accounts and sales returns |
|
|
1,335 |
|
|
1,599 |
|
|
1,989 |
|
|
Provision
for excess and obsolete inventories |
|
|
1,777 |
|
|
1,044 |
|
|
1,493 |
|
|
Gain
on sale of long-term investments |
|
|
-- |
|
|
-- |
|
|
(1,092 |
) |
|
Loss
on disposal of assets |
|
|
48 |
|
|
-- |
|
|
60 |
|
|
Impairment
of long-term investment |
|
|
-- |
|
|
-- |
|
|
750 |
|
|
Deferred
income taxes |
|
|
(2,500 |
) |
|
370 |
|
|
(25 |
) |
|
Tax
benefit from exercise of stock options |
|
|
504 |
|
|
530 |
|
|
451 |
|
|
Changes
in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Short-term
investments, categorized as trading |
|
|
(726 |
) |
|
(1,062 |
) |
|
(3,945 |
) |
|
Trade
accounts receivable |
|
|
(1,566 |
) |
|
868 |
|
|
(2,687 |
) |
|
Inventories |
|
|
(1,795 |
) |
|
932 |
|
|
419 |
|
|
Prepaid
expenses and other assets |
|
|
(277 |
) |
|
(64 |
) |
|
327 |
|
|
Trade
accounts payable and accrued expenses |
|
|
2,350 |
|
|
(557 |
) |
|
(2,148 |
) |
|
Deferred
revenue |
|
|
356 |
|
|
1,253 |
|
|
272 |
|
|
Income
taxes payable |
|
|
1,553 |
|
|
(1,819 |
) |
|
2,738 |
|
|
Total
adjustments to net income |
|
|
4,352 |
|
|
7,457 |
|
|
4,144 |
|
|
Net
cash provided by operating activities |
|
|
10,811 |
|
|
9,617 |
|
|
6,999 |
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
Purchases
of property, plant and equipment |
|
|
(1,602 |
) |
|
(2,010 |
) |
|
(1,389 |
) |
|
Proceeds
from disposal of property and equipment |
|
|
-- |
|
|
20 |
|
|
10 |
|
|
Sales
of short-term investments, categorized as available for
sale |
|
|
396,258 |
|
|
10,400 |
|
|
-- |
|
|
Sales
of long-term investments, categorized as available for
sale |
|
|
-- |
|
|
-- |
|
|
1,696 |
|
|
Purchases
of short-term investments, categorized as available for
sale |
|
|
(426,908 |
) |
|
(23,800 |
) |
|
-- |
|
|
Net
cash (used in) provided by investing activities |
|
|
(32,252 |
) |
|
(15,390 |
) |
|
317 |
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from exercise of stock options and employee stock purchase
plan |
|
|
2,772 |
|
|
2,559 |
|
|
1,152 |
|
|
Stock
Repurchased |
|
|
(414 |
) |
|
-- |
|
|
(29 |
) |
|
Net
cash provided by financing activities |
|
|
2,358 |
|
|
2,559 |
|
|
1,123 |
|
|
NET
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS |
|
|
(19,083 |
) |
|
(3,214 |
) |
|
8,439 |
|
|
CASH
AND CASH EQUIVALENTS: |
|
|
|
|
|
|
|
|
|
|
|
Beginning
of period |
|
|
57,717 |
|
|
60,931 |
|
|
52,492 |
|
|
End
of period |
|
$ |
38,634 |
|
$ |
57,717 |
|
$ |
60,931 |
|
|
Supplemental
cash flow disclosures: |
|
|
|
|
|
|
|
|
|
|
|
Income
taxes paid, net of refunds |
|
$ |
3,543 |
|
$ |
1,889 |
|
$ |
9 |
|
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. The Company supplies standard and custom
interface products primarily for the use in the medical electronics, imaging,
LED lighting, and telecommunications markets. We also provide custom processing
services for the manufacture of integrated circuits, using customer-owned
designs and mask toolings. Under this “custom processing service” arrangement, a
tangible product is sold, and the Company bears the risk of loss until title is
passed after production is completed, which is the same for our proprietary
standard and custom integrated circuits. The Company does not rent its equipment
to any customer.
Principles
of Consolidation
The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiary. All significant inter-company balances and transactions
have been eliminated.
Fiscal
Period
The
Company uses a 52-53 week fiscal year ending the Saturday nearest March 31.
Fiscal year 2005 comprises 52 weeks, fiscal year 2004 comprises 53 weeks, and
fiscal year 2003 comprises 52 weeks.
Use
of Estimates
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 sales and expenses during the reporting period.
Significant estimates in these financial statements include provision for sales
returns and allowances, allowance for doubtful accounts, estimates for useful
lives associated with long lived assets, asset impairments, net realizable value
of inventories, certain accrued liabilities and provision for income taxes and
tax valuation allowance. 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 general economic
conditions.
Cash
and Cash Equivalents
Investments
with an original or remaining maturity of 90 days or less, as of the date of
purchase, are considered cash equivalents, and consist of highly liquid money
market instruments, demand notes and income tax exempt municipal bonds. The
Company maintains cash balances at a variety of financial institutions and have
not experienced any material losses relating to such balances. The Company
invests its excess cash in fixed income
SUPERTEX,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
money
market products and auction rate securities with maturities of no longer than
twelve months. The Company began investing in auction rate securities in fiscal
2004.
As of
April 3, 2004, the Company revised its classification of auction rate securities
having a stated or contractual maturity date for the underlying security in
excess of 90 days in its Consolidated Balance Sheet to Short-term investments
from Cash and cash equivalents. The impact of this revision was to increase
Short-term
investments
as of April 3, 2004 by $13,400,000 and reduce Cash and cash equivalents by an
equivalent amount. For the year ended April 3, 2004, the Company reflected the
purchases and sales of such securities in investing cash flows in its
Consolidated Statement of Cash Flows, which increased Net cash used in investing
activities by $13,400,000. Previously, the Company had classified these types of
securities as cash equivalents.
Short-term
Investments
At April
2, 2005, short-term investments categorized as available for sale consisted
entirely of investments in tax-exempt fixed income securities and are presented
within short-term investments on the consolidated balance sheets. Short-term
investments categorized as trading consisted entirely of investments held by the
Company’s Supplemental Employee Retirement Plan (SERP) and are presented as
short-term investments on the consolidated balance sheets. The Company’s SERP
also had investments in equity securities that were not publicly traded during
fiscal year 2003.
Management
determines the appropriate classification of its investments in debt securities
at the time of purchase and reevaluates such determinations at each balance
sheet date. The Company accounts for its investments in auction rate securities
in accordance with the provisions of Statement of Financial Accounting Standards
(SFAS) No. 115, “Accounting for Certain Investments in Debt and Securities.”
Regardless of the frequency of the interest rate reset date, which results in a
highly liquid market similar to cash equivalents, when the underlying security
of an auction rate security has a stated or contractual maturity date in excess
of 90 days at the day of purchase, the security is classified as an
available-for-sale marketable debt security.
Realized
and unrealized gains or losses are determined on the specific identification
method and are reflected in other income, net. At April 2, 2005, the realized
gain associated with trading securities held at the balance sheet date was
$240,000 and is included within other income, net. This amount was offset by
compensation expense recognized in the same amount, which is included in
operating expenses. Unrealized gains and losses associated with available for
sales securities was nil at April 2, 2005.
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 of $750,000 was taken in the second quarter of
fiscal 2003 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 was nil
at April 2, 2005 and April 3, 2004.
Accounts
Receivable
An
allowance for doubtful accounts is calculated based on a percentage applied to
outstanding accounts receivable, specific doubtful account identification, and
management judgment. The Company writes off accounts receivable against the
allowance when it determines a balance is uncollectible and no longer actively
pursues collection of the receivable.
SUPERTEX,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Concentration
of credit risk and foreign operations
Financial
instruments, which potentially subject the Company to concentrations of credit
risk consist principally of cash and cash equivalents and accounts receivable.
The Company’s accounts receivable are derived from sales and earned from
customers located in the U.S. and certain foreign countries and regions,
including Europe, Asia and Japan. For the years ended April 2, 2005, April 3,
2004 and March 29, 2003, sales to foreign customers based on destination
locations were all denominated in U.S. dollars and accounted for 44%, 43%, and
39%, of net sales, respectively. The Company performs ongoing credit evaluations
of its customers’ financial condition and requires no collateral from its
customers.
Foreign
Currency Risk
With the
Company’s operations in Hong Kong, it may face exposure to an adverse change in
the exchange rate of the Hong Kong dollar that is currently pegged to the U.S.
dollar. The Company believes that its exposure is relatively small thus, it does
not employ hedging techniques designed to mitigate this foreign currency
exposure. Likewise, the Company could experience unanticipated currency gains or
losses. As the level of activity at this operation changes over time, actual
currency gains or losses could have an adverse impact to the consolidated
financial statements.
A small
amount of the Company’s assets are denominated in Hong Kong dollars including
two bank accounts, one for its Hong Kong subsidiary’s daily cash requirements
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 in US dollars and domiciled in the United States with the exception
of one investment account that is domiciled in Ireland.
Substantially
all of the Company’s foreign sales are denominated in United States dollars.
Currency exchange fluctuations in countries where the Company does business
could harm the 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 are included in other income, net. Such gains and losses have not
been material for any period presented.
Significant
Customers
Microtek
Inc., the Company’s primary distributor in Japan, accounted for 12% of net sales
in fiscal 2005, and 10% and 11% of fiscal 2004, and fiscal 2003 respectively.
Outstanding accounts receivable from Microtek accounted for 16% and 7% of gross
accounts receivable as of April 2, 2005 and April 3, 2004, respectively. No
other customer accounted for more than 10% of net sales in fiscal 2005, 2004 and
2003; or more than 10% of accounts receivable at April 2, 2005 and April 3,
2004.
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.
SUPERTEX,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Property,
Plant and Equipment
Property,
plant 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.
Revenue
Recognition
The
Company recognizes 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), the Company uses
either a binding purchase order or signed agreement as evidence of an
arrangement. Sales through distributors are evidenced by a distributor agreement
governing the relationship together with binding purchase orders on a
transaction-by-transaction basis. Sales to 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, the
Company defers the recognition of such sales and the related costs of sales
until distributors have sold the merchandise to their end-user customers. The
distributors provide an inventory balance report at the end of each period,
which allows the Company to determine products sold to their
end-customer.
A small
amount of deferred revenue is from upfront billings from customers under
non-recurring engineering (NRE) contracts as well as a customer advance under a
licensing agreement. The
Company recognizes revenue from Non-recurring Engineering (NRE) contracts upon
completion of contract milestones, which corresponds to when the Company
provides the services and/or products. Revenue is deferred for any amounts
received prior to completion of engineering contract milestones, such as amounts
received upon signing of contract. Some of the NRE contracts include formal
customer acceptance provisions. In this case, at the end of each period, the
Company determines whether customer acceptance has been obtained for the
specific milestone. If customer acceptance has not been obtained, the Company
defers the recognition of such revenue until customer acceptance is
obtained.
SUPERTEX,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Research
and Development Expense
All
research and development expenses that have no alternative future use are
expensed as incurred. Research and development expenses consist primarily of
payroll and benefits of those employees engaged in research, design and
development activities; costs related to design tools, license expenses related
to intellectual property, supplies and services; depreciation and other
occupancy costs. The Company also expenses prototype wafers and mask sets
related to new products until such new products are released to
production.
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.
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 value) |
Fiscal
Years Ended |
|
April
2, 2005 |
April
3, 2004 |
March
29, 2003 |
|
BASIC: |
|
|
|
|
Weighted
average shares outstanding |
12,985 |
12,758 |
12,598 |
|
Net
income |
$
6,459 |
$ 2,160 |
$
2,855 |
|
Net
income per share |
$ 0.50 |
$
0.17 |
$0.23 |
| |
|
|
|
|
DILUTED: |
|
|
|
|
Weighted
average shares outstanding |
12,985 |
12,758 |
12,598 |
|
Effect
of dilutive securities: stock options |
254 |
293 |
159 |
|
Total |
13,239 |
13,051 |
12,757 |
|
Net
income |
$
6,459 |
$
2,160 |
$ 2,855 |
|
Net
income per share |
$
0.49 |
$ 0.17 |
$ 0.22 |
Options
to purchase the Company’s common stock of 299,620 shares at an average price of
$29.00, 371,088 shares at an average price of $29.35 per share, and 643,056
shares at an average price of $24.68 per share in fiscal 2005, 2004, and 2003,
respectively, were outstanding but were not included in the computation of
diluted earnings per share because their effect would have been
anti-dilutive.
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.
SUPERTEX,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Had the Company recorded compensation costs for stock
options issued to employees under the Company’s stock
option 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 April 2, 2005, April 3,
2004, and March 29, 2003 would have been reduced to the pro forma amounts
indicated on the table in the following page:
Fiscal Years Ended
| (in
thousands except per share amount) |
April
2, 2005 |
April
3, 2004 |
March
29, 2003 |
| |
|
|
|
|
|
Net
income |
As
reported |
$ 6,459 |
$ 2,160 |
$ 2,855 |
|
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 |
(1,272) |
(1,063) |
(1,851) |
| |
|
|
|
|
| |
Pro
forma |
$ 5,187 |
$ 1,097 |
$ 1,004 |
| |
|
|
|
|
|
Basic
earnings per share |
As
reported |
$ 0.50 |
$ 0.17 |
$
0.23 |
| |
|
|
|
|
| |
Pro
forma |
$0.40 |
$ 0.09 |
$ 0.08 |
|
Diluted
earnings per share |
As
reported |
$ 0.49 |
$ 0.17 |
$
0.22 |
| |
|
|
|
|
| |
Pro
forma |
$ 0.40 |
$
0.08 |
$ 0.08 |
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 options pricing
model was used with the following weighted average assumptions:
Employee Stock Option Plans ESPP
| |
|
|
2005 |
|
|
2004 |
|
|
2003 |
|
|
2005 |
|
|
2004 |
|
|
2003 |
|
Risk-free
interest rate
|
|
|
2.80
|
%
|
|
2.27
|
%
|
|
2.52
|
%
|
|
1.67
|
%
|
|
1.02
|
%
|
|
1.28
|
%
|
Expected
term of options from vest date (years)
|
|
|
1.52
|
|
|
1.37
|
|
|
1.30
|
|
|
0.50
|
|
|
0.50
|
|
|
0.50
|
|
Expected
volatility
|
|
|
51.61
|
%
|
|
53.65
|
%
|
|
72.18
|
%
|
|
51.03
|
%
|
|
41.71
|
%
|
|
59.92
|
%
|
Expected
dividends
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
--
|
|
Weighted-average
fair value
|
|
|
$
17.94
|
|
|
$
17.53
|
|
|
$
13.44
|
|
|
$
15.13
|
|
|
$
14.44
|
|
|
$
14.58
|
|
SUPERTEX,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Income
Taxes
Income
taxes are reported under Statement of Financial Accounting Standard (“SFAS”) No.
109, “Accounting
for Income Taxes,” (“SFAS
109”) and, accordingly, deferred taxes are recognized using the asset and
liability method, whereby deferred tax assets and liabilities are recognized for
the future tax consequence attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax base, and operating loss and tax credit carry-forwards. 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.
Advertising
Costs
The
Company expenses advertising and promotional costs as they are incurred.
Fair
Value of Financial Instrument
Carrying
amounts of certain of the Company's financial instruments including cash, cash
equivalents, short-term investments, accounts receivable, accounts payable and
accrued liabilities approximate fair value due to their short maturities.
Comprehensive
Income
Comprehensive
income includes all changes in equity during a period from non-owner sources.
The Company’s comprehensive income did not differ from net income for any period
presented.
Recent
Accounting Pronouncements
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 fiscal periods beginning after June
15, 2005. The Company does not expect the adoption of SFAS 153 to have a
material impact on the overall results of operations or financial
position.
SUPERTEX,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
In
December 2004, FASB issued Statement No. 123 (revised 2004), or SFAS 123R,
“Share-Based Payment.” This statement replaces SFAS 123, “Accounting for
Stock-Based Compensation” and supersedes Accounting Principles Board’s Opinion
No. 25, “Accounting for Stock Issued to Employees”. SFAS 123R will require the
Company to measure the cost its employee stock-based compensation awards granted
after the effective date based on the grant date fair value of those awards and
to record that cost as compensation expense over the period during which the
employee is required to perform services in exchange for the award (generally
over the vesting period of the award). In addition, it will be required to
record compensation expense (as previous awards continue to vest) for the
unvested portion of previously granted awards that remain outstanding at the
date of adoption. In April 2005, the U.S. Securities and Exchange Commission
(the “SEC”) announced a deferral of the effective date of SFAS 123R to the
registrant’s fiscal year beginning on or after June 15, 2005. The Company is
therefore required to implement the standard beginning in its fiscal year 2007.
In addition, the SEC issued Staff Accounting Bulletin No. 107, or (SAB 107) in
March 2005. SAB 107 includes interpretive guidance for the initial
implementation of SFAS 123R. The Company is currently evaluating the impact of
the SFAS 123R on its financial statements.
2.
SHORT-TERM INVESTMENTS (in
thousands):
| |
April
2, 2005 |
April
3, 2004 |
|
Available-for-sale
securities (tax-free municipal bonds) |
$
44,050 |
$
13,400 |
|
Trading
securities (other debt securities) |
5,733 |
5,007 |
| |
$
49,783 |
$
18,407 |
The
Company’s portfolio of short-term investments by contractual maturities is as
follows:
| |
April
2, 2005 |
April
3, 2004 |
|
Available-for-sale
securities: |
|
|
|
Due
after ten years |
$
44,050 |
$
13,400 |
| |
|
|
|
Trading
securities: |
|
|
Due
in one year or less |
5,733 |
5,007 |
| |
$
49,783 |
$
18,407 |
Short-term
investment in available-for-sale securities for fiscal years 2005 and 2004,
consisted entirely of tax-exempt auctioned rate securities. Short-term
investments in trading securities for fiscal years 2005 and 2004 consisted
entirely of investments held by the Company’s Supplemental Employee Retirement
Plan.
3.
ACCOUNTS RECEIVABLE, NET (in
thousands)
| |
April
2, 2005 |
April
3, 2004 |
|
Accounts
receivable |
$
8,602 |
$
8,053 |
|
Less:
Allowance for doubtful accounts and sales returns |
(704) |
(386) |
| |
$
7,898 |
$
7,667 |
SUPERTEX,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Allowance
for doubtful accounts and sales returns are:
| |
2005 |
2004 |
2003 |
|
Balance
at beginning of fiscal year |
$
386 |
$
615 |
$
1,465 |
|
Charged
to costs & expenses |
1,335 |
1,599 |
1,989 |
|
Write-off
of accounts |
(1,017) |
(1,828) |
(2,839) |
|
Balance
at end of fiscal year |
$
704 |
$
386 |
$
615 |
4.
INVENTORIES (in
thousands):
| |
April
2, 2005 |
April
3, 2004 |
|
Raw
materials |
$
1,220 |
$
1,266 |
|
Work-in-process |
7,371 |
6,795 |
|
Finished
goods |
4,033 |
4,545 |
| |
$12,624 |
$
12,606 |
The
Company wrote down inventory valued at $1,777,000 and $1,044,000 for fiscal year
2005 and 2004, respectively. The Company realized gross margin benefits from the
sale of previously written down inventory of $990,000 and $820,000 for fiscal
2005 and 2004, respectively.
5.
DEFERRED REVENUE
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.
Inventories held by distributors for which revenue has been deferred are
included in inventories reported at the period ends.
Deferred
revenue consisted of (in
thousands):
| |
April
2, 2005 |
April
3, 2004 |
|
Shipments
to distributors |
$
3,306 |
$
2,678 |
|
Technology
license |
262 |
412 |
|
Others |
42 |
164 |
|
Deferred
revenue |
$
3,610 |
$
3,254 |
SUPERTEX,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
6. PROPERTY,
PLANT AND EQUIPMENT (in
thousands):
|
|
|
April
2, 2005 |
|
|
April
3, 2004 |
|
Land |
|
$ |
825 |
|
$ |
825 |
|
Machinery
and equipment |
|
|
33,691 |
|
|
32,282 |
|
Leasehold
improvements |
|
|
2,252 |
|
|
2,243 |
|
Building |
|
|
2,468 |
|
|
2,461 |
|
|
Furniture
and fixtures |
|
|
330 |
|
|
297 |
|
|
|
|
39,566 |
|
|
38,108 |
|
|
Less
accumulated depreciation |
|
|
(31,574 |
) |
|
(28,377 |
) |
|
|
|
$ |
7,992 |
|
$ |
9,731 |
|
7. INCOME
TAXES
The
components of the provision for income are as follows (in
thousands):
| |
|
Fiscal
Years Ended |
|
|
|
|
April
2, 2005 |
|
|
April
3, 2004 |
|
|
March
29, 2003 |
|
| |
|
|
|
|
|
|
|
|
|
|
U.S.
Federal current |
|
$ |
4,487 |
|
$ |
886 |
|
$ |
802 |
|
|
U.S.
Federal deferred |
|
|
(2,381 |
) |
|
(727 |
) |
|
(188 |
) |
| |
|
|
2,106 |
|
|
159 |
|
|
614 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Non-US
current |
|
|
878 |
|
|
450 |
|
|
491 |
|
| |
|
|
|
|
|
|
|
|
|
|
State
current |
|
|
167 |
|
|
4 |
|
|
25 |
|
|
State
deferred |
|
|
(51 |
) |
|
357 |
|
|
213 |
|
| |
|
|
116 |
|
|
361 |
|
|
238 |
|
| |
|
$ |
3,100 |
|
$ |
970 |
|
$ |
1,343 |
|
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 |
|
|
|
April
2, 2005 |
|
|
April
3, 2004 |
|
|
March
29, 2003 |
|
|
Tax
provision at US statutory rates |
|
|
35 |
% |
|
35 |
% |
|
35 |
% |
|
State
tax provision, net of Federal benefits |
|
|
3 |
|
|
5 |
|
|
5 |
|
|
Tax
credits |
|
|
(6 |
) |
|
(12 |
) |
|
(8 |
) |
|
Foreign
earnings tax differential |
|
|
2 |
|
|
(7 |
) |
|
(7 |
) |
|
Tax
exempt investment income |
|
|
(2 |
) |
|
0 |
|
|
0 |
|
|
Other |
|
|
0
|
|
|
10 |
|
|
7 |
|
| |
|
|
32 |
% |
|
31 |
% |
|
32 |
% |
SUPERTEX,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Significant
components of deferred tax assets are as follows (in
thousands):
| |
Fiscal
Years Ended |
|
Deferred
tax assets: |
April
2, 2005 |
April
3, 2004 |
March
29, 2003 |
|
Accrued
employee benefits |
$
733 |
$
554 |
$
576 |
|
Inventory
reserves |
1,604 |
1,131 |
890 |
|
Accrued
liabilities |
2,287 |
1,905 |
1,527 |
|
Deferred
revenue on shipments to distributors |
1,421 |
1,253 |
793 |
|
Allowances
for doubtful accounts and sales returns |
277 |
146 |
244 |
|
Depreciation
and amortization |
1,234 |
28 |
1,031 |
|
Tax
credits |
877 |
916 |
1,242 |
|
Total
deferred tax assets |
$
8,433 |
$
5,933 |
$
6,303 |
Management
has determined that no valuation allowance is required because, although
realization is not assured, the Company anticipates that its estimated future
taxable income will allow the deferred tax asset 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 |
|
April
2, 2005 |
April
3, 2004 |
March
29, 2003 |
|
United
States |
$
7,489 |
$
1,472 |
$
2,243 |
|
Foreign |
2,070 |
1,658 |
1,955 |
| |
$
9,559 |
$
3,130 |
$
4,198 |
Undistributed
earnings of the Company’s wholly owned Hong Kong subsidiary of $5,205,000 at
April 2, 2005, are considered to be indefinitely reinvested and, accordingly, no
provision for Federal and state income taxes have been provided thereon. Upon
distribution of those earnings in the form of dividends or otherwise, the
Company will be subject to United States income taxes and Hong Kong withholding
taxes payable.
The
American Jobs Creation Act of 2004 (the Jobs Act), enacted on October 22, 2004,
provides for a temporary 85% dividends received deduction on certain foreign
earnings repatriated during a one-year period. The deduction would result in
approximately 5.25% Federal tax rate on the repatriated earnings. To qualify for
the deduction, the earnings must be reinvested in the United States pursuant to
a domestic reinvestment plan established by the Company’s chief executive
officer and approved by the Company’s board of directors. Certain other criteria
in the Jobs Act must be satisfied as well.
The
Company does not anticipate it will apply the above provision to qualify for
earnings repatriations in fiscal 2006; however, as additional clarifying
language on key elements of the repatriation provision becomes available, the
Company will continue to analyze and assess whether such repatriation would be
practical.
At April
2, 2005, the Company had tax credit carry-forwards of approximately $1,350,000
for state tax purposes, which will carry forward indefinitely if not utilized.
Tax benefits of $504,000 in 2005, $530,000 in 2004, and $451,000 in 2003
associated with the exercise of stock options were recognized in shareholders’
equity.
SUPERTEX,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
8. EMPLOYEE
BENEFIT PLANS
Profit
Sharing Plan -- The
Company has a discretionary profit sharing plan for the benefit of eligible
employees. Related expenses were $977,000, $235,000, and $423,000, in fiscal
2005, 2004, and 2003, 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 (IRC).
Employees having at least three months of service may make pretax contributions
of up to the IRC maximum allowable amount of the employees’ qualified
compensation. The Company matches certain percentages of employee contributions,
all of which are 100% vested. In fiscal years 2005, 2004, and 2003, the
Company's matching contributions were $183,000, $191,000, and $210,000,
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 April 2, 2005 of $5,733,000 are included in
short-term investments in the Company's consolidated balance sheet at April 2,
2005 and classified as trading securities. Such assets shall at all times be
subject to claims of the general creditors of the Company.
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 Executive 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 six-month offering period. For
fiscal year 2005 there were 48,456 shares of the Company’s common stock that
were issued under the ESPP compared to 50,086 shares and 46,408 shares of common
stock issued in fiscal 2004 and 2003 respectively. There are 309,811 shares
available for future issuance under the ESPP at the end of fiscal year
2005.
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 ratably over a five-year period.
SUPERTEX,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
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
Grant |
Shares |
|
Price
Per Share |
Average
Exercise
Price |
|
Balance,
March 30, 2002 |
-- |
1,484,660 |
|
$
7.50 - 46.34 |
$
17.19 |
|
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 29, 2003 |
-- |
1,309,380 |
|
10.31
- 46.34 |
17.21 |
|
Exercised |
-- |
(217,650) |
|
10.31
- 19.56 |
12.05 |
|
Canceled |
129,500 |
(129,500) |
|
11.00
- 46.34 |
26.67 |
|
Expired |
(129,500) |
-- |
|
|
|
|
Balance,
April 3, 2004 |
-- |
962,230 |
|
10.31
- 46.34 |
17.10 |
|
Exercised |
-- |
(150,020) |
|
10.31
- 19.56 |
12.13 |
|
Canceled |
14,560 |
(14,560) |
|
12.53
- 46.34 |
21.30 |
|
Expired |
(14,560) |
-- |
|
|
|
|
Balance,
April 2, 2005 |
-- |
797,650 |
|
$
10.31 - 46.34 |
$
17.96 |
Activity
under the 2001 Option Plan is as follows:
| |
|
|
|
|
|
|
|
Available |
|
Options
Outstanding |
|
| |
For
Grant |
Shares |
|
Price Per
Share |
Weighted
Average Exercise
Price |
|
Balance,
March 30, 2002 |
1,872,700 |
127,300 |
|
$7.50
- 46.34 |
$17.65 |
|
Granted |
(132,200) |
132,200 |
|
11.30
- 17.67 |
13.44 |
|
Canceled |
24,800 |
(24,800) |
|
13.16
- 17.14 |
13.72 |
|
Balance,
March 29, 2003 |
1,765,300 |
234,700 |
|
11.30
- 21.31 |
15.69 |
|
Granted |
(324,800) |
324,800 |
|
17.11
- 18.52 |
17.53 |
|
Exercised |
-- |
(3,451) |
|
11.30
- 17.14 |
15.61 |
|
Canceled |
38,449 |
(38,449) |
|
15.83
- 21.31 |
18.07 |
|
Balance,
April 3, 2004 |
1,478,949 |
517,600 |
|
11.30
- 21.31 |
16.67 |
|
Granted |
(205,600) |
205,600 |
|
15.67
- 21.75 |
17.94 |
|
Exercised |
-- |
(33,110) |
|
11.30
- 18.52 |
15.42 |
|
Canceled |
48,560 |
(48,560) |
|
11.30
- 21.75 |
17.06 |
|
Balance,
April 2, 2005 |
1,321,909 |
641,530 |
|
$11.30
- $21.75 |
$17.11 |
SUPERTEX,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The
options outstanding and currently exercisable by exercise price under the
combined 1991 and 2001 Option Plans at April 2, 2005 are as follows:
| |
|
Options
Outstanding |
|
Options
Exercisable |
|
Range
of Exercise Prices |
|
Number
Outstanding |
|
Weighted-Average
Remaining Contractual Life
(Years) |
|
Weighted-Average
Exercise Price |
|
Number
Outstanding |
|
Weighted-Average
Exercise Price |
|
$10.31
- $12.53 |
|
369,900 |
|
2.83 |
|
$11.37 |
|
194,000 |
|
$11.26 |
|
13.16
- 17.11 |
|
461,000 |
|
3.46 |
|
15.22 |
|
271,140 |
|
14.41 |
|
17.14
- 19.56 |
|
402,330 |
|
4.89 |
|
17.95 |
|
134,210 |
|
18.58 |
|
21.31
- 46.34 |
|
205,950 |
|
3.39 |
|
33.29 |
|
129,060 |
|
36.58 |
|
$
10.31 - $46.34 |
|
1,439,180 |
|
3.69 |
|
$17.58 |
|
728,410 |
|
$18.27 |
The
weighted average fair value of options granted during fiscal 2005, 2004, and
2003 was $9.25 per share, $8.91 per share, and $10.37 per share, respectively.
All options were granted at market price of the Company's common stock on the
date of grant.
9.
RELATED PARTY TRANSACTIONS
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 of the Company. Sales to this distributor for fiscal years
2005, 2004, and 2003 were $2,183,000, $2,510,000, and $3,120,000, respectively.
The accounts receivable due from All American Semiconductor at April 2, 2005 and
April 3, 2004 were $530,000 and $481,000, respectively. The Company has no
long-term distributorship agreement with All American Semiconductor, instead
operating on the basis of purchase orders and sales order
acknowledgement.
10. 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. On January 28, 2004, the Board of Directors of the Company approved
the amendment of the lease extending the lease term to seven years, expiring on
April 30, 2011 at a specified new rent schedule. Rent started at $62,000 per
month with a provision for an annual increase of $3,000. The Company is
responsible for maintenance costs, including real property taxes, utilities,
insurance and other costs. The Company has one five-year option remaining which
if exercised would
extend the lease to April 2016. A portion of the facility is subleased to an
unrelated company.
The
Company also leases a facility to house its operations in Hong Kong under an
operating lease for the equivalent of approximately $9,000 per month exclusive
of building maintenance fees, rates, taxes and other duties imposed by the
government of Hong Kong upon the leased property. The lease agreement was
renewed in December 1, 2003 and has a term of three years.
The
Company leases a portion of a building 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. Previously we leased the entire building.
Under the lease, monthly rent is $10,442 per month and Supertex 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
SUPERTEX,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
total
rental expenses paid to Fortuna Realty Co. were $125,000, $125,000, and $130,000
in fiscal years 2005, 2004 and 2003, respectively. We believe that the lease
with Fortuna Realty Co. was and is at prevailing market rates.
The
Company has other operating leases for its field sales offices in New York,
Texas and Taiwan expiring at various dates through fiscal year 2006.
Future
minimum lease payments and sublease income under all non-cancelable operating
leases at April 2, 2005 are as follows (in
thousands):
|
Fiscal
Years Ending March 31 |
Operating
Lease |
Sublease
Income |
|
2006 |
$ 1,010 |
$
347 |
|
2007 |
1,011 |
352 |
|
2008 |
850 |
155 |
|
2009 |
887 |
-- |
|
2010 |
924 |
-- |
|
Thereafter |
1,041 |
-- |
|
|
$
5,723 |
$
854 |
Facilities
rental expenses, net of facilities sublease, were approximately $892,000,
$856,000, and $817,000 (net of facilities sublease income of $135,000, $411,000,
and $480,000) in fiscal years 2005, 2004, and 2003, respectively.
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
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, results of operations or cash flows.
SUPERTEX,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
11.
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 and Allowance Authorization data and
any other form of notification received of pending returns.
The
reductions to revenue for estimated product returns for the fiscal years 2005
and 2004 are as follows (in
thousands):
|
Description |
Balance
at Beginning of Period |
Additions(1) |
Deductions(2) |
Balance
at End of Period |
|
Twelve
months ended April 2, 2005 |
|
|
|
|
|
Allowance
for sales returns |
$
186 |
$
1,278 |
$
1,001 |
$
463 |
| |
|
|
|
|
|
Twelve
months ended April 3, 2004 |
|
|
|
|
|
Allowance
for sales returns |
$
365 |
$
1,652 |
$
1,831 |
$
186 |
| |
|
|
|
|
| |
(1) |
Allowances
for sales returns are charged as a reduction to revenue and are recorded
on the balance sheet as a reduction to accounts receivable.
|
(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.
12.
COMMON STOCK REPURCHASES
Share
repurchase activities were as follows:
| |
Fiscal Years Ended |
| |
April
2, 2005 |
April
3, 2004 |
March
29, 2003 |
|
Number
of shares repurchased |
26,400 |
-- |
1,600 |
|
Cost
of shares repurchased |
$
414,000 |
-- |
$
20,800 |
|
Average
price per share |
$
15.68 |
-- |
$13.00 |
Since the
inception of the repurchase program in 1992 through January 1, 2005, the Company
has repurchased a total of 1,048,000 shares of the common stock for an aggregate
cost of $6,247,000. Upon their repurchase, shares are restored to the status of
authorized but unissued shares. At April 2, 2005, 852,000 shares remained
authorized for repurchases under the program.
SUPERTEX,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
13.
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 of America,
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 net sales by major geographic area for the years ended April 2,
2005, April 3, 2004, and March 29, 2003:
| |
Fiscal
Years Ended |
|
(in
thousands) |
April
2, 2005 |
April
3, 2004 |
March
29, 2003 |
|
Net
Sales |
|
|
|
|
United
States |
$
31,796 |
$
29,072 |
$
33,741 |
|
Europe |
5,133 |
5,773 |
5,819 |
|
Japan |
6,673 |
5,474 |
6,137 |
|
Asia
(excluding Japan) |
11,211 |
9,481 |
8,055 |
|
Other |
1,745 |
1,594 |
1,163 |
|
Total
Net Sales |
$
56,558 |
$
51,394 |
$
54,915 |
The
aggregation of geographic sales information was changed in fiscal year 2004.
Sales are now attributed to geographic location based on destination location.
Property,
plant and equipment, net by country was as follows (in
thousands):
| |
April
2, 2005 |
April
3, 2004 |
|
United
States |
$
7,234 |
$
9,161 |
|
Hong
Kong |
758 |
570 |
|
Property,
plant and equipment, net |
$
7,992 |
$
9,731 |
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 Registered Public Accounting
Firm. |
|
24.1 |
Power
of Attorney. Contained on Signature Page. |
|
31 |
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to
Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of
2002. |
|
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. |
|
(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. |
EXHIBIT
23.1
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby
consent to the incorporation by reference in the Registration Statements on Form
S-8 (Nos. 333-69594, 333-47606 and 033-43691) of Supertex, Inc. of our report
dated June 15, 2005 relating to the financial statements, management’s
assessment of the effectiveness of internal control over financial reporting and
the effectiveness of internal control over financial reporting, which appears in
this Form 10-K.
/s/
PricewaterhouseCoopers LLP
San Jose,
California
June 15,
2005
EXHIBIT
31.1
Certifications
Under Rule 13a-14(a)/l5d-14(a)
I,
Henry C.
Pao, certify
that:
1. I have
reviewed this annual report on Form 10-K of Supertex, Inc., a California
corporation;
| 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-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-a5(f) for the registrant and I
have: |
| (a) |
designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under my supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared; |
| (b) |
designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles; |
| (c) |
evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report my conclusion about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by
this annual report based on such evaluation;
and |
| (d) |
disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s fourth fiscal
quarter that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and |
|
5. |
I
have disclosed, based on my most recent evaluation of internal control
over financial reporting, 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 and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize, and report financial information; and
|
| (b) |
any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over
financial reporting. |
Date:
June 16, 2005 /s/
Henry C. Pao
Henry C. Pao,
Ph.D.
Chief Executive
Officer and Chief Financial Officer
(Principal Executive
and Financial Officer)
Exhibit
32.1
Statement
of Chief Executive Officer and Chief Financial Officer under 18 U.S.C.
§ 1350
I, Henry
C. Pao, the chief executive officer and chief financial officer of Supertex,
Inc., a California corporation (the “Company”), certify pursuant to Section 1350
of Chapter 63 of Title 18 of the United States Code, that to my
knowledge:
|
(i) |
the
Annual Report of the Company on Form 10-K for the period ending April
2, 2005 (the “Report”), fully complies with the requirements of Section
13(a) or 15(d),
whichever
is applicable, of the Securities Exchange Act of 1934,
and
|
(ii) the
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.
Date:
June 16, 2005 /s/ Henry
C. Pao
Henry C.
Pao, Ph.D.
Chief
Executive Officer and Chief Financial Officer
| 1 |
The
material contained in this Exhibit 32.1 is not deemed “filed” with the SEC
and is not to be incorporated by reference into any filing of the Company
under the Securities Act of 1933 or the Securities Exchange Act of 1934,
whether made before or after the date hereof and irrespective of any
general incorporation language contained in such filing.
|