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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
(x) Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (Fee Required)
For the Fiscal Year Ended March 31, 1998
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934 (No Fee Required)
Commission File No. 0-12718
SUPERTEX, INC.
(Exact name of Registrant as specified in its Charter)
California 94-2328535
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1235 Bordeaux Drive
Sunnyvale, California 94089
(Address of principal executive offices)
Registrant's Telephone Number, Including Area Code: (408)744-0100
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes (X) No( )
The aggregate market value of the voting stock held by
non-affiliates of the registrant as of May 15, 1998, was
$97,830,795 based on the closing transaction reported for such
date. For purposes of this disclosure, shares of common stock
held by persons who hold more than 5% of the outstanding shares
of common stock and shares held by officers and directors of the
Registrant, have been excluded in that such persons may be
deemed to be "affiliates" as that term is defined under the
rules and regulations promulgated under the Securities Exchange
Act of 1934. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
The number of shares outstanding of the Registrant's common
stock as of May 15, 1998, was 12,100,314.
Documents Incorporated by Reference: Part III incorporates
information by reference from the Company's definitive proxy
statement for the Annual Meeting of Shareholders to be held on
August 7, 1998 (the "Proxy Statement").
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 registrants 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. ( )
Exhibit Index is on Page 27
Total number of pages is 30
(BLANK PAGE)
SUPERTEX, INC.
ANNUAL REPORT - FORM 10-K
Table of Contents Page No.
- ----------------- -------
PART I
Item 1. Business................................................... 4
Item 2. Properties................................................. 8
Item 3. Legal Proceedings.......................................... 8
Item 4. Submission of Matters to a Vote of Security Holders........ 9
PART II
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters ....................................... 9
Item 6. Selected Consolidated Financial Data....................... 9
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 10
Item 8. Financial Statements and Supplementary Data............... 13
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure....................... 13
PART III
Item 10. Directors and Executive Officers of the Registrant....... 13
Item 11. Executive Compensation................................... 13
Item 12. Security Ownership of Certain Beneficial Owners and
Management............................................... 13
Item 13. Certain Relationships and Related Transactions........... 13
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on
Form 8-K................................................. 14
Signatures.......................................................... 15
PART I
Item 1. Business
Supertex, Inc. ("Supertex" or the "Company") is a
technology-based producer of high voltage analog and mixed
signal semiconductor components. It designs, develops,
manufactures, and markets integrated circuits utilizing
state-of-the-art high voltage DMOS, HVCMOS and HVBiCMOS analog
and mixed signal technologies. With respect to its DMOS
transistor products, the Company has maintained an established
position in key products for telecommunication and automatic
test equipment industries. Supertex has been an industry leader
in high voltage integrated circuits (HVCMOS AND HVBiCMOS), which
take advantage of the best features of CMOS, bipolar, and DMOS
technologies and integrate them into the same chip. They are
used by flat panel display, printer, medical ultrasound imaging,
telephone, telecommunications and instrumentation industries.
The Company markets its products through direct sales personnel,
independent sales representatives and distributors in the United
States and abroad, primarily to electronic equipment
manufacturers.
The Company was incorporated in California in October 1975 and
conducted an initial public offering of its Common Stock in
December 1983. Its executive offices are located at 1235
Bordeaux Drive, Sunnyvale, California 94089, and its principal
manufacturing facilities are located at 1225/1231 Bordeaux
Drive, Sunnyvale, California 94089. Supertex also maintains
three direct field offices located in: (1) New York; (2)
Illinois; and (3) United Kingdom. The telephone number of its
headquarters is (408) 744-0100. The Company's mailing address
is 1235 Bordeaux Drive, P.O.Box 3607, Sunnyvale, California
94088-3607.
Products
Supertex offers semiconductor products that interface between
the low voltage computer logic signal world and the high voltage
requirements of the real analog world. Most of its products are
facilitated by the use of mixed signal technologies. It
supplies standard and custom interface products primarily for
the following three market groups:
(1) The Telecommunications Group consists of interface products used
in telephone handsets, solid state relays, modems, fax, ISDN,
networking, PABX, PCMCIA cards, as well as diagnostic, curbside,
set-top and central office equipment. In addition they are used
in military radio frequency and microwave communication
applications.
(2) The Imaging Group consists of interface products for Flat Panel
Displays and Non-impact Printers and Plotters. The flat panel
display product family is sold to customers using
Electro-Luminescent (EL), Plasma, Vacuum Fluorescent, Plasma-
addressed LCD, Ferro-electric LCD, and Field Emission Display
(FED) technologies. There is also a family of products for
driving EL panels to backlight displays of handheld instruments,
such as cellular phones, PDA's, pagers, HPC's, and meters. The
printer product family is used in ink-jet and electrostatic
types of printers and plotters which are mostly high end, with
full color high resolution and high speed.
(3) The Medical Electronics Group consists of products primarily for
ultrasound diagnostic imaging equipment as well as selected
portable instrumentation applications.
Because Supertex has been a leading provider of products to
these specific markets, it has been able to work very closely
with key customers to define new products by determining future
market needs. Such close collaboration has produced a wide
range of leading edge new products for Supertex and allowed its
customers to quickly develop new and more advanced products for
their markets.
In the DMOS transistor product line, Supertex focuses on certain
niches such as very low threshold and low leakage devices which
are most suitable for telecommunication, automatic test
equipment, and hand held
applications where these features justify a premium. They also
serve as predecessors to a fully integrated solution - the high
voltage integrated circuits.
Research and Development
Supertex expended approximately $5,582,000, $5,306,000, and
$5,647,000 on research and development activities during fiscal
years 1998, 1997, and 1996, respectively. Research and
development activities continue at the rate of over thirty new
product projects per year.
Supertex believes that its position as a leading supplier in its
targeted markets can only be maintained through continuous
investments in research and development. Supertex focuses its
efforts on designing new products with existing process
technologies while also developing new process technologies to
be used for future new products. The effective monitoring and
control of the Company's research and development programs have
actually resulted in better performance and greater technological
achievements at lower costs.
Manufacturing
Manufacturing operations include wafer fabrication, limited
assembly and packaging, product testing, and quality control.
The Company's wafer fabrication facilities are continually being
upgraded to keep pace with technological developments, to
enhance environmental controls, and to improve technical
capabilities. To support growth, the Company anticipates
significant capital expenditures for equipment additions,
facilities upgrades, and expansion of its manufacturing
capability in the near future. In addition, through a licensing
agreement, Texas Instruments has allocated a certain amount of
its wafer capacity to Supertex to supplement the Company's
production needs.
Supertex subcontracts most of its standard component packaging
and limited testing to independent assemblers, principally in
Thailand, Taiwan, Malaysia, and the Philippines. A specialized
assembly area is also maintained at the Company's manufacturing
facilities to package engineering prototypes, to ensure high
priority deliveries, and to assemble high reliability circuits
required in military and high reliability applications. After
assembly, packaged units are shipped back to the Company's
facility or to testing subcontractors for final product testing.
Quality control is performed at the Company's headquarters
before shipment to customers. Although the Company's off-shore
assembly and test subcontractors have not experienced any
serious work stoppage, the political situation in these
countries could be volatile. Any prolonged work stoppage or
other inability of the Company to assemble products would have a
material adverse impact on the Company's operating results
although the Company has qualified assemblers in different
countries to reduce risk. Furthermore, economic risks, such as
changes in tariff or freight rates or interruptions in air
transportation, could adversely affect the Company's operating
results.
The availability of blank silicon wafers has improved
considerably in the past year from shortage to glut. Assembly
packages and other raw materials used by the Company in the
manufacturing of its products are obtainable from several
suppliers. Some of such materials were in short supply in prior
years, but recently the supply of these materials appears to be
plentiful and subject to competitive pricing pressure. However,
any future shortage of supply would have a material adverse
effect on the operating results of the Company. As is typical
in the semiconductor industry, the Company must allow for lead
times in ordering certain materials and services and often
commits to volume purchases to obtain favorable pricing
concessions and resource allocations.
Environmental Laws
Government regulations impose various environmental controls on
the waste treatment and discharge of certain chemicals and gases
after their use in semiconductor processing. The Company
believes that its activities comply with present environmental
regulations. However, increasing attention has been focused on
the environmental impact of semiconductor manufacturing
operations. While the Company has not experienced any material
adverse effects on its business or financial results from its
compliance with
environmental regulations and installation of pollution control
equipment, there can be no assurance that changes in such
regulations will not necessitate the acquisition of costly
equipment or other requirements in the future. The Company
works closely with pollution experts from federal, state, and
local agencies, especially from the City of Sunnyvale, California,
to ascertain that the Company is in compliance with present
requirements.
Sales
Supertex markets its standard and custom products in the United
States and abroad through the Company's direct sales and
marketing personnel in its headquarters, as well as through
independent sales representatives and distributors supported by
the Company's field sales managers out of the Company's sales
offices in Illinois, New York, and the United Kingdom.
Export sales are made primarily through independent distributors
to customers in Western Europe and the Far East, and represented
53%, 51%, and 44% of net sales in fiscal years 1998, 1997, and
1996, respectively. Exports to the Far East are largely to
customers in Japan. Export sales are denominated only in U.S.
dollars. Although export sales are subject to certain
governmental commodity controls and restrictions for national
security purposes, the Company has not had any material adverse
effects on its business or financial results because of these
limitations.
In fiscal 1998, one customer who is the Company's master
distributor in Japan, Microtek, Inc., accounted for
approximately 19% of net sales. In fiscal 1997, Microtek
counted for 18% of net sales. In fiscal 1996, two customers, CP
Clare Corporation and Microtek, Inc., accounted for 15% and 12%
of net sales respectively. There is no long-term production
agreement with these or any customers. Normal terms and
conditions of sale apply, which include a 60-day notice of
cancellation and charges for work in process for cancellations
of less than 60 days from shipment. The Company maintains a
good relationship with Microtek, Inc.
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 or 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.
Direct sales to end-user customers are recognized upon shipment
of products. Sales to distributors are made primarily under
arrangements allowing limited price protection and the right of
stock rotation on merchandise unsold by the distributors.
Because of this uncertainty associated with pricing concessions
and possible returns, the Company defers recognition of such
sales and the related costs of sales until the merchandise is
sold by distributors to their end-user customers.
Backlog
The Company's backlog at March 31, 1998, was approximately
$15,339,000 compared with $15,168,000 and $17,942,000 at March
31, 1997 and 1996, respectively. Due to general industry
slowdown and high inventory, customers are demanding much
shorter lead times, resulting in a smaller backlog. In
addition, some of the larger customers are now on programs where
orders are booked and released weekly even though their blanket
commitments are large. The Company only includes firm release
of any order into its backlog. The Company expects that all of
this backlog will be shipped in fiscal 1999. 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, the Company believes that
backlog is not meaningful in predicting the Company's actual net
revenue for any future period.
Competition
Because of the Company's product niche orientation, market
statistics are not generally available for many of its products.
Competition in general among manufacturers of semiconductor
components and discrete transistors is intense. Many of the
Company's domestic and foreign competitors have greater
facilities, financial, technical, and personnel resources, and
more diverse product lines. Such factors as product prices,
product performance, diversity of product lines, delivery
capabilities, and the ability to adapt to rapid technological
change and develop new and improved products are the principal
methods of competition in the industry. The Company believes it
is a leader in important segments of its product families where
it has a technological and/or cost advantage and that it is
generally competitive with respect to these factors.
Patents and Licenses
The Company holds numerous United States patents expiring from
1998 to 2009 and has applications for additional patents
pending. Although the Company believes that its patents may
have value, there can be no assurance that the Company's
patents, or any additional patents that may be obtained in the
future, will provide meaningful protection from competition. The
Company believes that its success depends primarily on the
experience, creative skills, technical expertise, and marketing
ability of its 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
patent or other proprietary rights of third parties but it
cannot be certain that they do not do so. If infringement is
alleged, there can be no assurance that the necessary licenses
could be obtained, or if obtained, would be on terms or
conditions that would not have a material adverse effect on the
Company.
Employees
At March 31, 1998, the Company had 312 full time employees.
Many of the Company's employees are highly skilled, and the
Company's continued growth and success will depend in part on
its ability to attract and retain such employees, who are
generally in great demand. At times, the Company as well as
other semiconductor manufacturers experience difficulty in
hiring and retaining sufficient numbers of skilled personnel.
The Company believes that the compensation, benefits, and
incentives offered to its employees are competitive with those
generally offered throughout the semiconductor industry. There
are no collective bargaining agreements between the Company and
its 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 60 1976
Richard E. Siegel Executive Vice President 52 1982
Benedict C. K. Choy Senior Vice President,
Technology Development and 52 1976
IC Products, and Secretary
Dennis E. Kramer Vice President, Materials 56 1996
William Numann Vice President, DMOS Products 41 1997
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
except as stated below.
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 University of Illinois at
Champaign-Urbana. Dr. Pao is the son of Mr. Yunni Pao and the
brother of Frank Pao, also Directors of the Company.
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. He has a B.S. degree in
Mechanical Engineering from City College of New York, augmented
with Electrical Engineering courses from Brooklyn Polytechnic
Institute, New York.
Benedict C. K. Choy, a founder of the Company, joined Supertex
in fiscal 1976 as Vice President, Device Technology and Process
Development, and has served as Senior Vice President since
February 1988. He has been a Director since 1986. Previously,
he worked at Fairchild Semiconductor, National Semiconductor,
and Raytheon. He has a B.S. degree in Electrical Engineering
from University of California, Berkeley.
Dennis E. Kramer joined Supertex in September 1981 as Wafer Fab
II Production Manager. Over his tenure, he has managed many
facets of wafer fabrication process as well as all the back-end
manufacturing operations. He was promoted to Vice President of
Materials in 1996. Previously, he worked at Siemens and
Signetics Corporation. He has a B.S. degree in Chemistry from
University of California, Los Angeles and an MBA from Santa
Clara University.
William Numann came on board in June 1997, as Vice-President of
DMOS Products. Aside from his product line responsibilities, he
is working with the Company's senior management team in
developing a new strategic plan for the Company. Previously, he
worked at Siliconix and Supertex, Inc. He has a B.S. degree in
Electrical Engineering and an MBA, both from Rensseleaer
Polytechnic Institute, New York.
Item 2. Properties
The Company leases facilities covering approximately 38,000
square feet at 1225/1231 Bordeaux Drive, Sunnyvale, California.
Operations at these facilities include wafer fabrication,
process engineering, assembly, and quality control functions.
These facilities are leased from a corporation owned by a
director of the Company. (See Note 6 of "Notes to Consolidated
Financial Statements.")
The Company owns its 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, test, production control,
corporate financial and administrative staff.
The Company believes that its existing facilities and equipment
are well maintained and are in good operating condition.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during
the quarter ended March 31, 1998.
PART II
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters
On May 15, 1998, the last reported sale price was $12.563 per
share. There were approximately 2,320 shareholders of record of
common stock on May 15, 1998. The Company has not paid cash
dividends on its common stock in fiscal years 1998 and 1997, and
its 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.
The following table sets forth the range of high and low closing
sale prices reported on The Nasdaq Stock Market under the symbol
SUPX for the periods indicated.
Fiscal Years Ended March 31,
----------------------------
1998 1997
---- ----
High Low High Low
------ ------- ------ -------
First Quarter $ 15 1/8 $ 9 3/4 $ 20 1/8 $ 12 1/2
Second Quarter 17 11 19 3/4 14
Third Quarter 17 7/8 10 1/2 25 3/8 13 3/4
Fourth Quarter 11 3/4 9 7/8 16 1/4 11
Item 6. Selected Consolidated Financial Data
The selected financial information and other data presented
below should be read in conjunction with the "Consolidated
Financial Statements," "Notes to Consolidated Financial
Statements," and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included
elsewhere in this Form 10-K.
Fiscal Years Ended March 31,
----------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
(in thousands)
Balance Sheet Data:
Working capital ...... $ 44,868 $ 36,734 $ 32,197 $ 27,723 $ 23,240
Total assets ......... $ 66,629 $ 56,408 $ 45,428 $ 37,310 $ 31,202
Shareholders'equity .. $ 57,217 $ 48,487 $ 38,663 $ 31,164 $ 25,776
Fiscal Years Ended March 31,
----------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
(in thousands, except per share amounts)
Statement of Operations Data:
Net sales............... $ 52,706 $ 48,935 $ 42,802 $ 31,806 $ 26,108
Costs and expenses:
Costs of sales....... 28,709 26,073 22,097 16,133 13,652
Research and
development.......... 5,582 5,306 5,647 4,427 4,360
Selling, general
and administrative... 6,724 6,226 5,700 5,324 4,576
------ ------ ----- ----- -----
Income from operations.. 11,691 11,330 9,358 5,922 3,520
Other income:
Interest income...... 1,666 1,430 1,099 867 509
Other income, net ... 2 63 255 129 83
------ ----- ----- ----- -----
Income before provision
for income taxes.... 13,359 12,823 10,712 6,918 4,112
Provision for
income taxes............ 4,542 4,103 3,321 1,853 1,110
------ ------- ------ ------ ------
Net income.......... $ 8,817 $ 8,720 $ 7,391 $ 5,065 $ 3,002
====== ====== ====== ====== ======
Net income per share:
Basic................ $ 0.73 $ 0.73 $ 0.62 $ 0.43 $ 0.25
====== ====== ====== ====== =======
Diluted.............. $ 0.71 $ 0.70 $ 0.60 $ 0.42 $ 0.25
====== ====== ====== ====== =======
Shares used in per share computation:
Basic................ 12,074 12,026 11,902 11,772 11,808
====== ====== ====== ====== ======
Diluted.............. 12,380 12,509 12,296 12,003 11,842
====== ====== ====== ====== ======
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Certain Factors
This report contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21 E of the Securities Exchange Act of 1934. Actual results
could differ materially from those projected in the
forward-looking statements as a result of the risk factors set
forth below and elsewhere in this report. The industry in which
the Company competes is characterized by extreme rapid changes
in technology and frequent new product introductions. The
Company believes that its long-term growth will depend largely
on its ability to continue to enhance existing products and to
introduce new products and features that meet the continually
changing requirements of customers. While the Company has
invested heavily in new products and processes, there can be no
assurance that it can continue to introduce new products and
features on a timely basis or that certain of its products and
processes will not be rendered noncompetitive or obsolete by its
competitors.
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 Statements of
Income as a percentage of net sales for the periods indicated:
Fiscal Years Ended March 31,
----------------------------
1998 1997 1996
---- ---- ----
Net sales ................. 100.0 % 100.0 % 100.0 %
Costs of sales .......... 54.5 53.3 51.6
Research and development.. 10.6 10.8 13.2
Selling, general
and administrative ....... 12.8 12.7 13.3
Income from operations ..... 22.1 23.2 21.9
Other income
Interest income ........... 3.2 2.9 2.6
Other income,net .......... 0.0 0.1 0.6
Income before provision
for income taxes........... 25.3 26.2 25.1
Provision for income taxes...... 8.6 8.4 7.8
Net income .............. 16.7 % 17.8 % 17.3 %
Results of Operations
NET SALES. The Company had net sales of $52,706,000 in fiscal
1998, an increase of $3,771,000 or 7.7% from the previous fiscal
year. Fiscal 1997 net sales improved from fiscal 1996 by
$6,133,000 or 14.3%. The Company's sales growth has been
generated principally by new product introductions in the
Company's targeted markets of medical ultrasound imaging,
telecommunications, and flat panel displays.
In fiscal 1998, approximately 53% of the Company's net sales
were derived from customers outside the United States, primarily
in Western Europe and the Far East (51% in fiscal 1997 and 44%
in fiscal 1996). All of the Company's sales to international
customers were denominated in U.S. currencies. There was no
currency exchange exposure; however toward the end of the fiscal
1998 when the US dollar strengthened beyond expectation, many
international customers requested and received some modest price
concessions.
GROSS MARGIN. The Company's gross margin as a percentage of net
sales was 45.5%, 46.7%, and 48.4% in fiscal 1998, 1997, and
1996, respectively. In fiscal 1998, production ramp up of many
newer products, which have yet to benefit from production
learning curve efficiencies, contributed to the lower gross
margins. As the Company gains production experience in these
newer products, gross margins are expected to improve.
RESEARCH AND DEVELOPMENT. Research and development expenses were
10.6%, 10.8%, and 13.2% of net sales in fiscal 1998, 1997, and
1996, respectively. The percentage decreases from year to year
were due to sales volume increases and tighter cost controls,
offset by increases in the number of projects in the last three
years. The Company expects that the number of research and
development projects is expected to increase during fiscal 1999.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses were 12.8%, 12.7%, and 13.3% of net
sales in fiscal 1998, 1997, and 1996, respectively. The
percentage decrease for each year was due to sales volume
increases, offset by actual dollar expense increases due to
increases in payroll and its related benefits, sales
commissions, and incentive compensation for certain sales
personnel.
INTEREST INCOME. Interest income, which consists primarily of
interest income from the Company's cash, cash equivalents and
short-term investments, was $1,666,000 as compared with
$1,430,000 in fiscal 1997 and $1,099,000 in fiscal 1996 due to
the higher amount of funds available for investment.
PROVISION FOR INCOME TAXES. Income taxes for fiscal 1998, 1997,
and 1996 were at 34.0%, 32.0%, and 31.0%, respectively, of
income before provision for income taxes. The effective income
tax rate is expected to remain at 34.0% in fiscal 1999.
Financial Condition
OVERVIEW. Total assets grew to $66,629,000 at the end of fiscal
1998, up from $56,408,000 at the end of fiscal 1997. The
increase is due to favorable operating results for the year.
LIQUIDITY AND CAPITAL RESOURCES. The Company's primary source of
funds for fiscal 1998, 1997, and 1996 has been the net cash
generated from operating activities of $11,264,000, $8,524,000,
and $7,737,000, respectively. Net cash provided by operating
activities in fiscal 1998 of $11,264,000 consisted principally
of net income of $8,817,000 plus depreciation and amortization
of $2,669,000, provision for doubtful accounts and sales returns
$1,566,000 and an increase in accounts payable and accrued
expenses and deferred revenue of $203,000 and $373,000,
respectively, partially offset by increases in accounts
receivable and inventories of $2,180,000 and $1,065,000,
respectively.
Net cash used in investing activities in fiscal 1998 was
$5,737,000 which consisted of an increase in short term
investments of $2,460,000 and purchases of property and
equipment of $3,277,000, which included the costs of upgrading
the Company's fabrication facility during the fiscal year.
Net cash used in financing activities in fiscal 1998 was
$137,000, which consisted of repurchases of the Company's common
stock partially offset by proceeds from exercises of stock
options.
As of March 31, 1998, the Company's working capital was
$44,868,000, which included approximately $31,512,000 in cash,
cash equivalents and short-term investments.
The Company anticipates that the available funds and cash
expected to be generated from operations will be sufficient to
meet cash and working capital requirements through the end of
fiscal 1999. The Company expects to spend approximately
$4,700,000 for capital acquisitions during fiscal year 1999.
YEAR 2000 COMPLIANCE RISKS. The Company is aware of the issues
associated with the programming code in existing computer
systems and software products as the millennium (Year 2000)
approaches. The "Year 2000" problem is pervasive and complex,
as virtually every computer operation will be affected in the
same way by the rollover of the two digit year value to 00. The
issue is whether computer systems will properly recognize
date-sensitive information when the year changes to 2000.
Systems that do not properly recognize such information could
generate erroneous data or cause a system to fail. As a result,
many companies' software, computer systems and other equipment
may need to be upgraded or replaced in order to comply with such
"Year 2000" requirements. The Company is utilizing both
internal and external resources to identify, correct or
reprogram, and test the systems for Year 2000 compliance. It is
anticipated that all reprogramming efforts will be completed by
December 31, 1999, including and allowing adequate time for
testing. This process includes getting confirmations from the
Company's primary vendors that plans are being developed or are
already in place to address processing of transactions in the
Year 2000. However, there can be no assurance that the systems
of other companies on which the Company's systems rely will also
be converted in a timely manner or that any such failure to
convert by another company would not have an adverse effect on
the Company's systems. Additionally, the Company's net sales
could be adversely affected if the Company's customers or
potential customers reallocate spending from the Company's
products to their efforts to resolve the Year 2000 issue.
Finally, the Company utilizes third-party equipment and software
that may not be Year 2000 compliant. Although preliminary
estimates indicate that the Year 2000 issue will not have a
material impact on the Company, there can be no assurance that
the Year 2000 issue, due to the above factors or other
unforeseen consequences, will not have a material adverse effect
on the Company's business, financial condition and operating
results.
Item 8. Financial Statements and Supplementary Data
The Financial Statements and Financial Statement Schedule are
listed in Item 14 of this report.
Supplementary Quarterly Financial Data:
Quarters Ended
--------------
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
1998 1997 1997 1997 1997 1996 1996 1996
------- ------- ------- ------- ------- ------- ------- -------
(Unaudited) (in thousands, except per share amounts)
Statement of
Operations Data:
Net sales..... $12,923 $13,857 $13,613 $12,313 $12,705 $10,849 $12,920 $12,461
Costs of sales.. 7,065 7,496 7,468 6,680 6,983 6,196 6,584 6,310
Income from
operations...... 2,795 3,156 3,117 2,623 2,648 1,826 3,610 3,246
Income before
provision for
income taxes... 3,289 3,588 3,488 2,994 3,039 2,195 3,975 3,614
Net income ....$ 2,171 $ 2,368 $ 2,302 $1,976 $ 2,067 $ 1,492 $ 2,703 $ 2,458
Net income per share:
Basic .......$ 0.18 $ 0.20 $ 0.19 $ 0.16 $ 0.17 $ 0.12 $ 0.23 $ 0.23
Diluted .....$ 0.17 $ 0.19 $ 0.19 $ 0.16 $ 0.17 $ 0.12 $ 0.22 $ 0.22
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information regarding directors is set forth under "Election of
Directors - Nominees" on Page 2 of the Proxy Statement, which
information is incorporated herein by reference. Information
regarding executive officers is included in Part I hereof under
caption "Executive Officers of the Company," and is hereby
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" on
Page 5 and "Compensation of Executive Officers" on Page 7 of the
Proxy Statement, which information is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information regarding the security ownership of certain
beneficial owners and management is set forth under "Security
Ownership of Certain Beneficial Owners and Management" on Pages
5 through 7 of the Proxy Statement, which information is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Information regarding certain relationships and related
transactions is set forth under "Certain Transactions: Lease
with Company Director" on Page 5 of the Proxy Statement, which
information is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports
on Form 8-K
(a) The following documents are filed as part of this report: Page No.
-------
1. Report of Coopers & Lybrand L.L.P., Independent
Accountants.............................................. 16
2. Consolidated Financial Statements:
Consolidated Balance Sheets at March 31, 1998 and 1997... 17
For the three years ended March 31, 1998, 1997, and 1996:
Consolidated Statements of Income.................. 18
Consolidated Statements of Shareholders'Equity...... 18
Consolidated Statements of Cash Flows............... 19
Notes to Consolidated Financial Statements.............. 20
3. Financial Statement Schedule. The following Financial
Statement Schedule of Supertex, Inc., is filed as part of
this report should be read in conjunction with the Consolidated
Financial Statements of Supertex.
Schedule for fiscal years ended March 31, 1998, 1997, and 1996:
II Valuation and Qualifying Accounts.................... 26
All other schedules have been omitted since the required
information is not present or it is not present in amounts
sufficient to require submission of the schedule, or because the
information required is included in the consolidated financial
statements, including notes thereto.
4. Exhibits. The exhibits listed in the accompanying
EXHIBIT INDEX are filed as part of this annual report.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
quarter ended March 31, 1998.
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 1, 1998 /s/ Henry C. Pao
------------------------
Henry C. Pao, President,
Principal Financial
and Accounting Officer
Pursuant to the requirements of the Securities Act of 1934, this
report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
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.
Signature Title Date
/s/ Henry C. Pao President, Principal June 1, 1998
- ---------------- Executive and Financial
(Henry C. Pao) Officer and Director
/s/ Richard E. Siegel Executive Vice President June 1, 1998
- --------------------- and Director
(Richard E. Siegel)
/s/ Benedict C. K. Choy Senior Vice President June 1, 1998
- ----------------------- and Director
(Benedict C. K. Choy)
/s/ Yunni Pao Director June 1, 1998
- -------------
(Yunni Pao)
/s/ Frank C. Pao Director June 1, 1998
- ----------------
(Frank C. Pao)
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
The Board of Directors and Shareholders of Supertex, Inc.:
We have audited the consolidated financial statements and the
financial statement schedule of Supertex, Inc. and subsidiary
listed in Item 14(a) of this Form 10-K. These financial
statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. 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 includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Supertex, Inc. and subsidiary as of March
31, 1998 and 1997, and the consolidated results of their
operations and their cash flows for each of the three years in
the period ended March 31, 1998 in conformity with generally
accepted accounting principles. In addition, in our opinion,
the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken
as a whole, presents fairly, in all material respects, the
information required to be included therein.
/S/COOPERS & LYBRAND L.L.P.
San Jose, California
April 24, 1998
SUPERTEX, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31,
--------------
1998 1997
---- ----
ASSETS
Current Assets:
Cash and cash equivalents............................ $ 24,556 $ 19,166
Short term investments............................... 6,956 4,497
Trade accounts receivable,
net of allowances of $700 in 1998 and $525 in 1997... 9,784 9,337
Other accounts receivable............................ 322 154
Inventories.......................................... 10,263 9,249
Deferred income taxes................................ 2,181 1,834
Prepaid expenses..................................... 218 418
------- -------
Total current assets.............................. 54,280 44,655
Property, plant and equipment, net..................... 12,349 11,753
------- -------
TOTAL ASSETS............................................ $ 66,629 $ 56,408
======== ========
LIABILITIES
Current liabilities:
Trade accounts payable............................... $ 3,436 $ 3,813
Accrued salaries, wages and employee benefits........ 3,086 2,499
Income taxes payable................................. 1,080 166
Other accrued liabilities............................ 359 366
Deferred revenue on shipments to distributors........ 1,451 1,077
------- -------
Total current liabilities......................... 9,412 7,921
------- -------
Commitments (Note 6)
SHAREHOLDERS' EQUITY
Preferred stock, no par value -- 10,000 shares authorized,
none outstanding. -- --
Common stock, no par value -- 30,000 shares authorized;
issued and outstanding 12,097 shares in 1998 and 12,047
shares in 1997...................................... 20,713 20,302
Retained earnings.................................... 36,504 28,185
------- -------
Total shareholders' equity........................ 57,217 48,487
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.............. $ 66,629 $ 56,408
======== ========
See accompanying Notes to Consolidated Financial Statements.
SUPERTEX, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
Year Ended March 31,
--------------------
1998 1997 1996
---- ---- ----
Net Sales ........................ $ 52,706 $ 48,935 $ 42,802
------- -------- -------
Costs and expenses:
Costs of sales...................... 28,709 26,073 22,097
Research and development............ 5,582 5,306 5,647
Selling, general and administrative. 6,724 6,226 5,700
------- -------- -------
Total costs and expenses......... 41,015 37,605 33,444
------- -------- -------
Income from operations................. 11,691 11,330 9,358
Other income:
Interest Income .................... 1,666 1,430 1,099
Other income,net.................... 2 63 255
------- -------- -------
Income before provision
for income taxes.................. 13,359 12,823 10,712
Provision for income taxes............. 4,542 4,103 3,321
------- -------- -------
Net income.......................... $ 8,817 $ 8,720 $ 7,391
======== ======== ========
Net income per share:
Basic............................... $ 0.73 $ 0.73 $ 0.62
======== ======== ========
Diluted............................. $ 0.71 $ 0.70 $ 0.60
======== ======== ========
Shares used in per share computation:
Basic............................... 12,074 12,026 11,902
======== ======== ========
Diluted............................. 12,380 12,509 12,296
======== ======== ========
See accompanying Notes to Consolidated Financial Statements.
SUPERTEX, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
Common Stock
------------ Retained Shareholders'
Shares Amount Earnings Equity
------ ------ -------- -------------
Balance, March 31, 1995 ................... 11,893 $ 18,173 $ 12,991 $ 31,164
Stock options exercised ................ 99 329 -- 329
Stock repurchased ............... (56) (85) (428) (513)
Tax benefit from exercise of stock options.. -- 292 -- 292
Net income .......................... -- -- 7,391 7,391
------- ------- ------- -------
Balance, March 31,1996 ................... 11,936 18,709 19,954 38,663
Stock options exercised .................. 156 760 -- 760
Stock repurchased .................... (45) (72) (489) (561)
Tax benefit from exercise of stock options.. -- 902 -- 902
Unrealized holding gains and losses ...... -- 3 -- 3
Net income ............................ -- -- 8,720 8,720
------- ------- ------- -------
Balance, March 31,1997 ..................... 12,047 20,302 28,185 48,487
Stock options exercised ................ 97 439 -- 439
Stock repurchased ................... (47) (80) (498) (578)
Tax benefit from exercise of stock options.. -- 52 -- 52
Net income ........................ -- -- 8,817 8,817
------ ------ ------ ------
Balance, March 31, 1998 ................... 12,097 $ 20,713 $ 36,504 $ 57,217
====== ====== ====== ======
See accompanying Notes to Consolidated Financial Statements.
SUPERTEX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended March 31,
--------------------
1998 1997 1996
------ ------ ------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................... $ 8,817 $ 8,720 $ 7,391
------- ------- -------
Non-cash adjustments to net income:
Depreciation and amortization......... 2,669 2,163 1,571
Provision for doubtful accounts
and sales returns...................... 1,573 2,054 857
Provision for excess and obsolete
inventories............................ 277 256 99
Loss on disposal of assets............. 11 2 24
Deferred income taxes.................. (347) (593) 214
Changes in operating assets and liabilities:
Accounts receivable...................... (2,188) (3,641) (2,609)
Inventories.............................. (1,291) (2,251) (716)
Prepaid expenses.......................... 200 (244) (5)
Trade accounts payable and accrued expenses. 203 1,284 756
Income taxes payable........................ 966 430 (84)
Deferred revenue on shipments to distributors. 374 344 239
------- ------- -------
Total adjustments............................ 2,447 (196) 346
------- ------- -------
Net cash provided by operating activities.... 11,264 8,524 7,737
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment............ (3,276) (7,452) (4,620)
Purchases of short term investments............(27,613) (33,275) (39,350)
Proceeds from maturities of
short term investments........................ 25,152 35,059 48,088
------- ------- -------
Net cash provided by (used in) investing
activities........................... (5,737) (5,668) 4,118
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Stock options exercised.............. 375 763 329
Stock repurchased..................... (512) (561) (513)
------- ------- -------
Net cash provided by (used in) financing
activities.......................... (137) 202 (184)
------- ------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS.... 5,390 3,058 11,671
CASH AND CASH EQUIVALENTS:
Beginning of year......................... 19,166 16,108 4,437
------- ------- -------
End of year............................... $ 24,556 $ 19,166 $ 16,108
------- ------- -------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Tax benefit from exercise of stock options 52 902 292
Stock tendered for exercise of stock options 64 -- --
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. The Company designs, manufactures and
markets custom and standard semiconductor products.
Use of Estimates in Preparation of the Financial Statements. The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Certain Risks and Uncertainties. The Company's business is
concentrated in the high voltage semiconductor components
industry, which is rapidly changing, highly competitive and
subject to competitive pricing pressures. The Company's
operating results may experience substantial period-to-period
fluctuations due to these factors, including the cyclical nature
of the semiconductor industry, the changes in customer
requirements, the timely introduction of new products, the
Company's ability to implement new capabilities or technologies,
its ability to manufacture efficiently, its reliance on
subcontractors and vendors, and the general economic conditions.
Principles of Consolidation. The consolidated financial
statements include the accounts of the Company and its
wholly-owned subsidiary. All significant intercompany accounts
and transactions have been eliminated.
Net Sales. The Company has no revenue-producing operations
outside the United States. In fiscal 1998, one customer who is
a master distributor accounted for approximately 19% of net
sales. In fiscal 1997, the same distributor accounted for
approximately 18% of net sales. In fiscal 1996, two customers
accounted for 15% (the same distributor discussed in the
preceding sentence) and 12% of net sales. Export sales, which
are made primarily to Western Europe and the Far East, accounted
for approximately 53%, 51%, and 44% of net sales in fiscal 1998,
1997 and 1996, respectively.
Fiscal Period. The Company uses a 52-53 week fiscal year ending
the Saturday nearest March 31. The Company's fiscal years in
the accompanying financial statements have been shown ending on
March 31. Fiscal years 1998, 1997, and 1996 all comprise 52
weeks.
Cash and Cash Equivalents. The Company considers all highly
liquid debt instruments purchased with an original maturity of
three months or less to be cash equivalents. The carrying
amounts reported in the balance sheets of cash, cash equivalents
and short term investments approximate estimated fair value
because of the short maturity of the financial instruments.
Short Term Investments. Short term investments, which are
classified as held to maturity, consist principally of
commercial papers that mature within one year and are stated at
cost, which approximates fair market value. Unrealized holding
gains and losses are reflected at a net amount in a separate
component of the Statement of Shareholders' Equity until
realized. For the purpose of computing realized gains and
losses, cost is identified on a specific identification basis.
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 or 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 and equipment are stated
at cost and generally depreciated using accelerated methods over
estimated useful lives of five years. Building and building
improvements are recorded at cost and are depreciated on a
straight-line basis over the useful life of the building.
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. The Company reviews
for impairment its long-lived assets whenever events or changes
in circumstances indicate that the carrying amount of an asset
might not be recoverable. In certain situations, an impairment
loss would be recognized.
Revenue Recognition. Net sales are stated net of allowance.
Revenue from direct sales to end-user customers are recognized
upon shipment of product. Sales to distributors are made
primarily under arrangements allowing limited price protection
and the right of stock rotation on merchandise unsold by the
distributors. Because of the uncertainty associated with
pricing concessions and possible returns, the Company defers
recognition of such sales and the related costs of sales until
the merchandise is sold by distributors to their end-user
customers.
Net Income per Share. Effective December 31, 1997, the Company
adopted Statement of Financial Accounting Standards No. 128
(SFAS 128), "Earnings Per Share (EPS)," which specifies the
computation, presentation, and disclosure requirements for
earnings per share. The Company restated all prior-period
earnings per share data presented after the effective date.
Accordingly, the adoption of SFAS 128 did not have material
impact to the Company's condition or results of operation.
Basic EPS is computed as net income divided by the weighted
average number of common shares outstanding for the period.
Diluted EPS reflects the potential dilution that could occur
from common shares issuable through stock options, warrants, and
other convertible securities. The following is a reconciliation
of the numerator (net income) and the denominator (number of
shares) used in the basic and diluted EPS calculations.
Fiscal Year Ended March 31,
--------------------------
1998 1997 1996
---- ---- ----
BASIC:
Weighted average shares outstanding
for the period 12,074 12,026 11,902
Net income $ 8,817 $ 8,720 $ 7,391
------- ------- -------
Net income per share $ 0.73 $ 0.73 $ 0.62
------- ------- -------
DILUTED:
Weighted average shares outstanding
for the period 12,074 12,026 11,902
Common stock equivalents 306 483 394
------- ------- -------
Total common and common equivalent shares 12,380 12,509 12,296
------- ------- -------
Net income $ 8,817 $ 8,720 $ 7,391
------- ------- -------
Net income per share $ 0.71 $ 0.70 $ 0.60
------- ------- -------
Options to purchase the Company's common stock of 200,600 shares
at $13.875 - $19.875, 32,700 shares at $17.50 - $19.875, and
97,500 shares at $10.00 - $12.375 in fiscal 1998, 1997, and 1996
respectively, were outstanding but were not included in the
computation of diluted earnings per share because the option
exercise prices were greater than the average market price of
the common stock.
SUPERTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Concentration of Credit Risk. The Company sells its
semiconductor products in North America, Europe and the Pacific
Rim to numerous customers. The Company performs ongoing credit
evaluations of its customers and generally does not require
collateral. Allowances for potential credit losses are
maintained and such losses historically have not been material.
Substantially all of the Company's cash, cash equivalents and
short term investments are held at four major financial
institutions domiciled in the United States.
Income Taxes. The Company utilizes the liability method to
account for income taxes where deferred tax assets or
liabilities are determined based on the temporary differences
between the bases used for financial versus tax reporting of
assets and liabilities, using tax laws and rates in effect for
the year in which the differences are expected to affect taxable
income. The realizability of deferred tax assets is based on
expectations about future taxable income.
2. INVENTORIES (in thousands):
March 31,
----------------
1998 1997
---- ----
Finished goods..................... $ 2,919 $ 1,656
Work-in-process.................... 6,200 5,993
Raw materials...................... 1,144 1,600
------- -------
$ 10,263 $ 9,249
====== =====
3. PROPERTY AND EQUIPMENT (in thousands):
March 31,
-----------------
1998 1997
---- ----
Machinery and equipment.......... $ 21,597 $ 20,985
Leasehold improvements .............. 2,175 1,626
Building ............................. 1,968 1,959
Furniture and fixtures ................ 70 78
------- -------
25,810 24,648
Less accumulated depreciation &
amortization ...................... (14,286) (13,720)
------- -------
11,524 10,928
Land ........................... 825 825
------- -------
$ 12,349 $ 11,753
====== ======
4. INCOME TAXES
The components of the provision for income taxes for fiscal
years ended March 31, 1998, 1997 and 1996 are as follows (in
thousands):
March 31,
------------------------
1998 1997 1996
---- ---- ----
Federal - current ............. $ 4,223 $ 4,128 $ 2,693
Federal - deferred ............. (333) (540) 202
------- ------- -------
3,890 3,588 2,895
State - current ....................... 666 568 414
State- deferred ...................... (14) (53) 12
------- ------- -------
652 515 426
------- ------- -------
$ 4,542 $ 4,103 $ 3,321
===== ===== =====
SUPERTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Substantially all of the Company's revenue is taxable in the
United States. 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:
1998 1997 1996
---- ---- ----
Statutory provision.......................... 35% 35% 34%
State tax, net of federal
benefits.................................. 4% 4% 5%
Tax Credits ............................. (3%) (3%) (2%)
Benefit of foreign sales
corporation............................. (3%) (3%) (2%)
Other....................................... 1% (1%) (4%)
----- ----- -----
34% 32% 31%
===== ===== =====
Income taxes of $4,226,000, $4,265,000, and $3,155,000 were paid
during fiscal 1998, 1997, and 1996, respectively.
The components of the deferred tax assets are as follows (in
thousands):
March 31,
---------
1998 1997
==== ====
Deferred tax assets:
Accrued benefits........................ $ 362 $ 363
Inventory allowances.................... 342 225
Accrued liabilities..................... 312 156
State deferred taxes
(net of federal benefits).............. 182 220
Deferred revenue on shipments to
distributors....................... 568 377
Allowances for doubtful accounts
and sales returns.............. (80) 184
Other............................ 495 309
----- -----
Total deferred tax assets............ $ 2,181 $ 1,834
====== ======
Management has determined that no valuation allowance is
required because, although realization is not assured, the
Company has sufficient taxable income in carryback years to
absorb items deductible in the future for federal tax purposes
and anticipates that its estimated future taxable income will
allow the deferred tax asset for state tax purposes to be fully
realized in future years. The amount of the deferred tax asset
that is realizable could be reduced in the near term if actual
results differ significantly from estimates of future taxable
income.
5. EMPLOYEE BENEFIT PLANS
Profit Sharing Plan -- The Company has a discretionary profit
sharing plan for the benefit of eligible employees. Related
expenses were $1,299,000, $1,259,000, and $1,040,000 in fiscal
1998, 1997, and 1996, respectively.
Savings and Retirement Plan -- The Supertex Savings and
Retirement Plan allows for employee savings intended to qualify
under the provisions of Section 401 of the Internal Revenue
Code. Employees having at least three months of permanent
service may make pretax contributions of 1% to 20% of qualified
compensation, with the Company matching certain percentages of
employee contributions, all of which are 100% vested. In fiscal
years 1998, 1997, and 1996, the Company's matching contributions
were $180,000, $160,000, and $221,000, respectively.
SUPERTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Stock Option Plan -- The 1991 Stock Option Plan (the Option
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.
A total of 1,925,715 shares of the Company's common stock were
reserved for issuance under the 1991 Plan. As of March 31,
1998, 269,280 options were exercisable at a weighted average
exercise price of $6.16. As of March 31, 1997, 183,790 options
were exercisable at a weighted average exercise price of $ 5.00.
As of March 31, 1996, 123,530 options were exercisable at a
weighted average exercise price of $3.97. Options granted under
the Plan are granted at the fair market value of the Company's
common stock on the date of grant and generally expire 7 years
from the date of grant or at termination of service, whichever
occurs first. The options generally are exercisable beginning
one year from date of grant and generally vest over a five year
period.
Activity under the Option Plan is as follows (in thousands,
except share and per share data):
Weighted
Available Options Outstanding Average
For ---------------------------------------- Exercise
Grant Shares Price Per Share Amount Price
--------- ------ --------------- ------ --------
Balance, March 31, 1995 74,875 667,260 $ 1 15/16 - $ 7 3/8 $ 2,601 $3.90
Granted (376,600) 376,600 7 1/4 - 12 5/8 3,495 $9.28
Exercised (98,510) 1 15/16 - 7 3/8 (329) $3.34
Canceled 83,000 (83,400) 2 3/8 - 11 3/8 (493) $5.91
Authorized 1,000,000
--------- ------- -----
Balance, March 31, 1996 781,275 861,950 2 3/4 - 12 5/8 5,274 $6.12
Granted (364,300) 364,300 12 - 9 7/8 4,859 $13.34
Exercised (156,360) 2 3/4 - 11 3/4 (763) $4.88
Canceled 63,000 (63,000) 2 3/4 - 17 1/2 (684) $10.86
------- --------- -----
Balance, March 31, 1997 479,975 1,006,890 2 3/4 - 19 7/8 8,686 $8.63
Granted (378,300) 378,300 10 5/8 - 15 1/4 4,526 $11.96
Exercised (96,770) 2 3/4 - 16 1/2 (439) $4.54
Canceled 276,860 (276,860) 3 - 19 7/8 (3,604) $13.02
------- --------- -------
Balance, March 31, 1998 378,535 1,011,560 $ 2 3/4 - $ 16 3/4 $ 9,169 $9.06
======= ========= =======
Stock Compensation -- The Company has adopted the disclosure-only
provisions of SFAS 123. Accordingly, no compensation cost has been
recognized for the 1991 Stock Option Plan. Had compensation cost
for the Option Plan been determined based on the fair value at the
grant date for the awards consistent with the provisions of
SFAS 123, the Company's net income and net income per share for
the years ended March 31, 1997 and 1996 would have been reduced
to the pro forma amounts indicated below (in thousands except
per share data):
1998 1997
---- ----
Net Income As reported $8,817 $8,720
Pro forma $7,894 $8,002
Earnings per share As reported $ 0.73 $ 0.70
Pro forma $ 0.65 $ 0.65
The weighted average fair value of options granted during
fiscal 1998, 1997 and 1996 was $4.94 per share, $6.87 per share,
and $4.46 per share, respectively. All options were granted at
market price of the Company's common stock on the date of grant.
The Company made option grants prior to fiscal 1996, the
effective disclosure date of SFAS 123. Therefore, the proforma
disclosures may not be representative of the effects on reported
net income or earnings-per-share for future years.
The fair value of each option grant for the Option Plan is
estimated on the date of grant using the Black-Scholes multiple
options pricing model with the following weighted average
assumptions by year:
1998 1997
----- ------
Risk-free interest rate 5.38% 5.53%
Expected term of option from vest date 0.53 0.54
Expected volatility 50.30% 61.50%
Expected dividend yield -- --
The options outstanding and currently exercisable by exercise
price under the Option Plan at March 31, 1998 are as follows:
Options Outstanding Options Exercisable
------------------------------------------------ ---------------------------------
Weighted-Average
Range of Exercise Number Remaining Weighted-Average Number Weighted-Average
Prices Outstanding Contractual Life Exercise Price Outstanding Exercise Price
----------------- ----------- ---------------- ---------------- ----------- -----------------
$ 2.750 - $ 6.750 253,760 2.70 $ 3.95 164,560 $ 3.83
$ 7.250 - $10.625 480,400 5.26 $ 9.70 78,900 $ 9.10
$11.000 - $15.250 263,400 5.95 $12.44 24,220 $11.75
$15.500 - $16.750 14,000 5.82 $16.50 1,600 $16.31
--------- ---- ------ ------- ------
$ 2.750 - $16.750 1,011,560 4.81 $ 9.06 269,280 $ 6.16
6. COMMITMENTS
The Company leases its manufacturing facility under an operating
lease that expires in 2001, from a corporation owned by one of
the Company's directors. Under the lease, the Company is
responsible for maintenance costs, including real property
taxes, utilities and other costs. Future minimum lease payments
at March 31, 1998 are as follows (in thousands):
Fiscal Year
-----------------------------
1999 2000 2001 Total
---- ---- ---- -----
$ 374 $ 374 $ 343 $ 1,091
Rental expenses, net of sublease, were approximately $315,000,
$321,000, and $473,000 (net of sublease income of $49,000,
$105,000, and $86,000) in fiscal years 1998, 1997, and 1996,
respectively.
SCHEDULE II
SUPERTEX, INC.
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Balance at Charged to Balance at
Beginning Costs and Write-Off End
of Period Expenses of Accounts of Period
--------- ---------- ----------- ----------
Year ended March 31, 1996
Allowance for sales returns...... $ 352 $ 867 $ 785 $ 434
Allowance for doubtful accounts.. 135 (10) -- 125
Inventory allowances............. 614 99 154 559
Year ended March 31, 1997
Allowance for sales returns....... $ 434 $ 2,020 $ 2,077 $ 377
Allowance for doubtful accounts... 125 34 11 148
Inventory allowances.............. 559 256 171 644
Year ended March 31, 1998
Allowance for sales returns...... $ 377 $ 1,333 $ 1,167 $ 543
Allowance for doubtful accounts.. 148 240 231 157
Inventory allowances............ 644 277 47 874
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
3.1* Restated Articles of Incorporation of Registrant filed
May 21, 1980.
3.2* Certificate of Amendment of Articles of Incorporation filed
April 16, 1981.
3.3* Certificate of Amendment of Articles of Incorporation filed
September 30, 1983.
3.4**** Bylaws of Registrant, as amended.
10.2* Lease for 1225 and 1231 Bordeaux Drive, Sunnyvale,
California, dated January 25, 1991, between Fortuna Realty
Company, as Lessor, and Registrant, as Lessee.
10.6* 1981 Stock Option Plan, as amended, with form of stock
option agreement.
10.6a**** 1991 Stock Option Plan, as amended, with form of stock
option agreement.
10.7* Profit Sharing Plan.
10.21** Certificate of Amendment of Articles of Incorporation
filed October 14, 1988.
10.22*** Agreement with Texas Instruments Inc. dated May 31,1991.1
11.1 Statement Regarding Computation of Net Income per Share.
23.1 Consent of Coopers & Lybrand L.L.P., Independent Accountants.
24.1 Power of Attorney.
27.1 Financial Data Schedule.
* 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.
** Incorporated by reference to exhibit filed with Quarterly
Report on Form 10-Q for period ended October 1, 1988.
*** Incorporated by reference to exhibit filed with Annual
Report on Form 10-K for year ended March 31, 1991.
**** 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.
(1) Confidential treatment of portions of this exhibit was
granted by order dated August 12, 1991.