-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QvPXJfv5PEDPNLgPGMf/Tc6euk3bdKrvqmeBOBPJPnKNAomZPcswLTq+hW5/sJSd HD+2mnRLYTLUkx75K+mn6A== 0000922423-02-000533.txt : 20020514 0000922423-02-000533.hdr.sgml : 20020514 ACCESSION NUMBER: 0000922423-02-000533 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020330 FILED AS OF DATE: 20020514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SILICONIX INC CENTRAL INDEX KEY: 0000090283 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 941527868 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-03698 FILM NUMBER: 02646322 BUSINESS ADDRESS: STREET 1: 2201 LAURELWOOD RD CITY: SANTA CLARA STATE: CA ZIP: 95056 BUSINESS PHONE: 4089888000 MAIL ADDRESS: STREET 1: 2201 LAURELWOOD RD CITY: SANTA CLARA STATE: CA ZIP: 95056 10-Q 1 kl05029_form10q.txt FORM 10-Q QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------- FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) - OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 30, 2002 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) -- OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number 0-3698 SILICONIX INCORPORATED (Exact name of registrant as specified in its charter) Delaware 94-1527868 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 2201 Laurelwood Road, Santa Clara, California 95054 (Address of principal executive offices) Registrant's telephone number including area code (408) 988-8000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _ - Indicate the number of shares outstanding of each of the registrant's classes of common stock: Common stock, $0.01 par value -- 29,879,040 outstanding shares as of May 13, 2002. 1 SILICONIX INCORPORATED TABLE OF CONTENTS TO FORM 10-Q Part I. Financial Information Page No. Item 1 Financial Statements Consolidated statements of operations for the three months ended March 30, 2002 and March 31, 2001 3 Consolidated balance sheets as of March 30, 2002 and December 31, 2001 4 Consolidated statements of cash flows for the three months ended March 30, 2002 and March 31, 2001 5 Notes to consolidated financial statements 6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Part II. Other Information Signatures 12 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements. SILICONIX INCORPORATED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share amounts) Three Months Ended March 30, March 31, 2002 2001 ---------- --------- Net sales $ 83,602 $ 88,137 Cost of sales 59,194 59,812 -------- -------- Gross profit 24,408 28,325 Operating expenses: Research and development 4,762 4,335 Selling, marketing, and administration 9,625 11,347 Goodwill amortization -- 115 -------- -------- Operating income 10,021 12,528 Interest income 855 2,179 Other (expense) - net (22) (1,171) -------- -------- Income before taxes and minority interest 10,854 13,536 Income taxes (2,590) (3,243) Minority interest in income of (60) (60) consolidated subsidiary -------- -------- Net income $ 8,204 $ 10,233 ======== ======== Net income per share (basic and diluted) $ 0.27 $ 0.34 ======== ======== Shares used to compute net income per share 29,879 29,879 ======== ======== See accompanying Notes to Consolidated Financial Statements. 3 SILICONIX INCORPORATED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) March 30, December 31, 2002 2001 ---------- ------------ Assets Current assets: Cash and cash equivalents $ 174,802 $ 167,236 Accounts receivable, less allowances 38,781 33,644 Accounts receivable from affiliates 28,473 12,457 Inventories 59,400 61,302 Other current assets 19,263 17,801 Deferred income taxes 5,058 5,058 --------- --------- Total current assets 325,777 297,498 --------- --------- Property, plant, and equipment, at cost: Land 1,715 1,715 Buildings and improvements 55,339 53,946 Machinery and equipment 350,699 352,196 --------- --------- Less accumulated depreciation 407,753 407,857 Net property, plant, and equipment 246,724 237,378 --------- --------- 161,029 170,479 Goodwill 7,445 7,445 Other assets 331 376 --------- --------- Total assets $ 494,582 $ 475,798 ========= ========= Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 20,051 $ 17,800 Accounts payable to affiliates 42,493 36,692 Accrued payroll and related compensation 7,286 6,409 Other accrued liabilities 19,784 18,274 --------- --------- Total current liabilities 89,614 79,175 --------- --------- Long-term debt, less current portion 2,083 2,001 Deferred income taxes 15,010 15,010 Other non-current liabilities 36,976 36,976 Minority interest 3,726 3,666 --------- --------- Total liabilities 147,409 136,828 --------- --------- Commitments and contingencies Stockholders' equity: Common stock 299 299 Additional paid-in-capital 59,370 59,370 Retained earnings 288,306 280,102 Accumulated other comprehensive loss (802) (801) --------- --------- Total stockholders' equity 347,173 338,970 --------- --------- Total liabilities and stockholders' equity $ 494,582 $ 475,798 ========= ========= See accompanying Notes to Consolidated Financial Statements. 4
SILICONIX INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended (In thousands) March 30, March 31, 2002 2001 --------- ----------- Cash flows from operating activities: Net income $ 8,204 $ 10,233 Adjustments to reconcile net income to net cash provided in operating activities: Depreciation and amortization 10,387 10,315 Deferred income taxes -- 1,880 Other non-cash expenses 82 107 Changes in assets and liabilities, net of acquisitions: Accounts receivable (5,137) 23,080 Accounts receivable from affiliates (16,016) 17,748 Inventories 1,902 (4,202) Other assets (1,489) (1,494) Accounts payable 2,251 (18,890) Accounts payable to affiliates 5,801 (18,788) Accrued liabilities 2,447 (19,280) --------- --------- Net cash provided by operating activities 8,432 709 --------- --------- Cash flows from investing activities: Purchase of property, plant, and equipment (891) (8,641) Proceeds from sale of property, plant, and equipment 26 5 --------- --------- Net cash used by investing activities (865) (8,636) --------- --------- Effect of exchange rate changes on cash and cash equivalents (1) 14 --------- --------- Net increase (decrease) in cash and cash equivalents 7,566 (7,913) Cash and cash equivalents: Beginning of period 167,236 134,265 --------- --------- End of period $ 174,802 $ 126,352 ========= =========
See accompanying Notes to Consolidated Financial Statements. 5 SILICONIX INCORPORATED Notes to Consolidated Financial Statements (Unaudited) Note 1. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of the management of the Company, the consolidated financial statements appearing herein contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results for, and as of the end of, the periods indicated therein. These statements should be read in conjunction with the Company's December 31, 2001 consolidated financial statements and notes thereto. The results of operations for the first three months of 2002 are not necessarily indicative of the results to be expected for the full year. Note 2. Inventories The components of inventory are as follows: March 30, December (In thousands) 2002 31, 2001 -------- -------- Finished goods $ 18,165 $ 20,985 Work-in-process 33,616 32,963 Raw materials 7,619 7,354 --------- --------- $ 59,400 $ 61,302 ========= ========= Note 3. Contingencies As of March 30, 2002, the Company remained a party to two environmental proceedings. The first involves property that the Company vacated in 1972. In July 1989, the California Regional Water Quality Control Board ("RWQCB") issued Cleanup and Abatement Order No. 89-115 both to the Company and the current owner of the property. The Order alleged that the Company contaminated both the soil and the groundwater on the property by the improper disposal of certain chemical solvents. The RWQCB considered both parties to be liable for the contamination and sought to have them decontaminate the site to acceptable levels. The Company subsequently reached a settlement of this matter with the current owner of the property. The settlement provided that the current owner will indemnify the Company and its employees, officers, and directors against any liability that may arise out of any governmental agency actions brought for environmental cleanup of the subject site, including liability arising out of RWQCB Order No. 89-115, to which the Company remains nominally subject. The second proceeding involves the Company's Santa Clara, California facility, which the Company has owned and occupied since 1969. In February 1989, the RWQCB issued Cleanup and Abatement Order No. 89-27 to the Company. The Order was based on the discovery of contamination of both the soil and the groundwater on the property by certain chemical solvents. The Order called for the Company to specify and implement interim remedial actions and to evaluate final remedial alternatives. The RWQCB issued a subsequent order requiring the Company to complete the decontamination. The Company has substantially complied with the RWQCB's orders. In management's opinion, based on discussions with legal counsel and other considerations, the ultimate resolution of the above-mentioned matters is not expected to have a material adverse effect on the Company's consolidated financial condition or results of operations. 6 In February and March 2001, several purported class action complaints were filed in the Court of Chancery in and for New Castle County, Delaware and the Superior Court of the State of California against Vishay, the Company, and the Company's directors in connection with Vishay's announced proposal to purchase all issued and outstanding shares of the Company not already owned by Vishay. The class actions, filed on behalf of all non-Vishay Siliconix shareholders, allege, among other things, that Vishay's proposed offer was unfair and a breach of fiduciary duty. One of the Delaware class actions also contains derivative claims against Vishay on behalf of the Company alleging self-dealing and waste because Vishay purportedly usurped the Company's inventory and patents, appropriated the Company's separate corporate identity, and obtained a below-market loan from the Company. In May 2001, the Delaware Court of Chancery consolidated the several class action complaints described above. On or about May 31, 2001, lead plaintiff Fitzgerald served an amended complaint, an application for a preliminary injunction against proceeding with or taking steps to give effect to Vishay's proposed tender offer or the contemplated short-form merger, and a motion to expedite proceedings and additional discovery requests. In addition to his prior allegations, plaintiff claimed, among other things, that in connection with the proposed offer and short-form merger, defendants allegedly violated (i) their duty to deal fairly from a timing and process perspective with the minority shareholders of Siliconix, (ii) their duties of loyalty and candor, and (iii) Vishay's obligations to pay a fair price to the Siliconix minority shareholders. Following expedited discovery and briefing, on June 19, 2001, the Delaware Court of Chancery issued its order denying Fitzgerald's motion for a preliminary injunction. The Court found that Fitzgerald had not succeeded in demonstrating that he had a reasonable probability of success on the merits of his claims. The Company and Vishay filed motions to dismiss the verified amended complaint on June 6, 2001. Vishay filed a motion for summary judgment on June 25, 2001. The motions to dismiss and for summary judgment are pending. On July 3, 2001, the California Superior Court entered an order staying the California state-court actions that had been filed against the Company and Vishay in connection with Vishay's earlier proposal. On April 25, 2001, the Company initiated a lawsuit against General Semiconductor, Inc. In its complaint, the Company asserted claims that General Semiconductor is infringing United States Letters Patent Nos. 5,072,266 and 5,298,442 relating to certain power MOSFET products. General Semiconductor has denied the material allegations in the Company's complaint and has asserted various affirmative defenses. General Semiconductor also has asserted counterclaims for patent misuse and unfair competition against the Company, seeking a declaratory judgment of non-infringement, invalidity and/or unenforceability and seeking injunctive relief, damages, attorneys' fees and costs. The Company has not yet responded to those Counterclaims. On November 2, 2001, General Semiconductor was acquired by Vishay, which owns 80.4% of the Company. The Company is engaged in discussions with various parties regarding patent licensing and cross patent licensing issues. In the opinion of management, the outcome of these discussions will not have a material adverse effect on the Company's consolidated financial condition or overall trends in the results of operations. 7 Note 4. Comprehensive Income The following are the components of comprehensive income: (In thousands) Three Months Ended March 30, March 31, 2002 2001 --------- ---------- Net income $ 8,204 $ 10,233 Other comprehensive income (loss): Foreign currency translation adjustment (1) 14 -------- --------- Total other comprehensive income (loss) (1) 14 Comprehensive income $ 8,203 $ 10,247 ======== ========= Note 5. Segment Reporting The Company is engaged primarily in the design, marketing, and manufacturing of power and analog semiconductor products. The Company is organized into three operating segments, which due to their inter-dependencies, similar long-term economic characteristics, and shared production processes and distribution channels have been aggregated into one reportable segment. Note 6. Earnings Per Share Basic earnings per common share are computed by using weighted average common shares outstanding during the period. Diluted earnings per common share incorporates the incremental shares issuable upon the assumed exercise of stock options when diluted. Due to the Company's simple capital structure, basic and diluted earnings per share are the same. Note 7. Accounting Pronouncements Effective January 1, 2002, amortization of goodwill is no longer permitted in accordance with Statement of Financial Accounting Standards No. 142 "Goodwill and Other Intangible Assets". The non-amortization of goodwill in the first quarter 2001 would have resulted in an increase in operating income of $115,000. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations Net sales for the first quarter of 2002 were $83.6 million compared to $88.1 million for the first quarter of 2001. The decline from the first quarter of 2001 resulted mainly from price erosion caused by excess industry capacity during a major market downturn. However it was a sequential increase of 9% from the $76.7 million in the fourth quarter of 2001. The Company sees a distinct improvement in the business climate that may lead to improved results during 2002. The Book-to-bill ratio and bookings in absolute dollars improved for the fourth consecutive quarter. Cancellations also declined for the fourth consecutive quarter. The improvement in the Company's business has resulted from increasing demands from the notebook computer, game console, digital camera, and other consumer markets. The Company's backlog is increasing steadily and at the end of the first quarter, was 34% higher than at the beginning. The Company is taking measures to increase its capacity to meet the customers' anticipated increased requirements in 2002. The Company is also seeing signs that the desktop computer market may rebound in the second half of the year. In addition, with the increased demand in the Company's strategic markets, the Company is observing a moderation in the rate of decrease of its average selling price. Gross profit as a percentage of net sales in the first quarter of 2002 was 29% compared to 32% for the first quarter of 2001. The decrease from the quarter ended March 31, 2001 resulted primarily from pricing pressures caused by excess industry capacity. The Company's ongoing cost reduction programs helped significantly to offset the decline. Research and development expenses were $4.8 million for the first quarter of 2002 compared to $4.3 million for the first quarter of 2001, a 9% increase. The Company continues its commitment to the development of new products and technologies. During the first quarter of 2002, the Company introduced 35 new products and won 230 new designs. The Company believes it is critical to continue to make investments in research and development to ensure the availability of innovative technology that meets the current and future requirements of the Company's customers. Selling, marketing, and administration expenses were $9.6 million for the first quarter of 2002 compared to $11.3 million for the first quarter of 2001. The Company's selling, marketing, and administration expenses as a percentage of net sales were 12% and 13% for the first quarter of 2002 and 2001, respectively. The decrease in selling, marketing, and administration expenses reflected the Company's ongoing success in controlling costs. Interest income for the first quarter of 2002 was $0.9 million compared to $2.2 million for the first quarter of 2001. The decrease in interest income for the first quarter of 2002 was due to lower interest rates as compared to the first quarter 2001. All excess cash not immediately needed to fund the Company's operations is invested in money market funds. Other expense was $22,000 for the first quarter of 2002 compared to $1.2 million for the first quarter of 2001. The decrease in expenses was mainly due to decrease in foreign exchange losses on the Company's assets denominated in European and Japanese currencies. Income tax expense for the quarter of 2002 decreased by $0.7 million compared to the first quarter of 2001. The decrease in income tax expense was due to the decrease in earnings before tax. Liquidity and Capital Resources At March 30, 2002, the Company had $174.8 million in cash and cash equivalents, compared to $167.2 million in cash and cash equivalents at December 31, 2001. The increase of $7.6 million was due to a decrease in capital expenditures and inventories, as well as a sequential increase in profit in the first quarter of 2002 as compared to the fourth quarter 2001. 9 Net cash provided by operating activities was $8.4 million in the first quarter of 2002 compared to $0.7 million in the same period of 2001. The increase in net cash provided by operating activities for the first quarter of 2002 was mainly due to a decrease in inventories and an increase in accounts payable. Net affiliate payables as of March 30, 2002 decreased by $10.2 million from December 31, 2001, mainly due to the timing of cash payments made to unconsolidated affiliates. Accounts payable as of March 31, 2002 increased by $2.3 million from December 31, 2001, mainly due to the increase in business volume. Accrued liabilities and contingencies as of March 30, 2002 increased by $2.4 million from December 31, 2001, mainly due to the increase in accrued income taxes and management incentive programs. Inventories decreased by $1.9 million in the first quarter of 2002 from December 31, 2001. Raw materials as of March 30, 2002 increased by $0.3 million from December 31, 2001 as the Company began to increase its purchases of silicon, piece parts and foundry wafers as a result of the anticipated increase in demand. Work-in-process as of March 30, 2002 increased by $0.7 million from December 31, 2001 as result of increase in raw materials and production. Finished goods inventory as of March 31, 2002 decreased by $2.8 million from December 31, 2001, mainly due to the Company's inventory reduction efforts and higher sales. Net cash used by investing activities was $0.9 million in the first quarter of 2002 compared to $8.6 million in the same period of 2001. The Company spent $0.9 million in capital expenditures in the first quarter of 2002, primarily related to building improvements. For the next twelve months, management expects that cash flows from operations will be sufficient to meet the Company's normal operating requirements and to fund its research and development and capital expenditure plans. SAFE HARBOR STATEMENT Statements contained herein that relate to the Company's future performance, including statements with respect to anticipated improvements in the Company's business and business climate, future product innovation and implementation of cost savings strategies, are forward-looking statements within safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on current expectations only, and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. Among the factors that could cause actual results to materially differ include: general business and economic conditions, particularly in the markets that we serve, cancellation of orders in our backlog, difficulties in new product development and other factors affecting the Company's operations, markets, products, services and prices that are set forth in its December 31, 2001 Report on Form 10-K filed with the Securities and Exchange Commission. You are urged to refer to the Company's Form 10-K for a detailed discussion of these factors. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 10 PART II - OTHER INFORMATION SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SILICONIX INCORPORATED Date: May 13, 2002 By: /s/ King Owyang ---------------------------- King Owyang President and Chief Executive Officer By: /s/ William M.Clancy ---------------------------- William M. Clancy Principal Accounting Officer 11 -----END PRIVACY-ENHANCED MESSAGE-----