SUPX Supertex, Inc. (MM)

 

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SUPERTEX, INC.

QUARTERLY REPORT - FORM 10Q

 

 

 

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PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

SUPERTEX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(in thousands, except per share amounts)

 

 

 

 

 

The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

 

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S UPERTEX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited, in thousands)

 

 

The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements .

 

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SUPERTEX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands)

 

 

 

 

The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

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SUPERTEX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

 

 

 

The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

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Note 1 – Organization and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Supertex, Inc. (“Supertex,” the “Company,” “we,” and “us”) and its subsidiary have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America.  This financial information reflects all adjustments, which are, in the opinion of the Company’s management, of normal recurring nature and necessary to state fairly the balance sheet as of September 29, 2012; the statements of income for the three and six months ended September 29, 2012 and October 1, 2011; the statements of comprehensive income for the three and six months ended September 29, 2012 and October 1, 2011; and the statements of cash flows for the six months ended September 29, 2012 and October 1, 2011.  The March 31, 2012 balance sheet was derived from the audited financial statements included in the fiscal 2012 Annual Report on Form 10-K, but does not include all disclosures required by GAAP in the United States of America.  All significant intercompany transactions and balances have been eliminated. 

The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  Certain information and footnote disclosures normally included in these financial statements have been condensed or omitted pursuant to such rules and regulations, although the Company believes the disclosures which are made are adequate to make the information presented not misleading.  These financial statements should be read in conjunction with the audited consolidated financial statements of Supertex, Inc. for the fiscal year ended March 31, 2012, which were included in the fiscal 2012 Annual Report on Form 10-K.

The preparation of financial statements in conformity with GAAP in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates, and such differences may be material to the financial statements. The results of operations for the three and six months ended September 29, 2012 are not necessarily indicative of the results to be expected for any future periods.

The Company reports on a fiscal year basis and it operates and reports based on quarterly periods ending on the Saturday nearest to the end of the applicable calendar quarter, except in a 53-week fiscal year, in which case the additional week falls into the fourth quarter of the fiscal year.  Fiscal 2013 will be a 52-week year.  The three months ended September 29, 2012 and October 1, 2011, both consist of thirteen weeks.    

Revision to Previously Issued Financial Statements

The condensed consolidated statement of cash flows for the period ended October 1, 2011 has been revised as previously reported in Footnote 1 of the quarterly report on Form 10-Q for the period ended December 31, 2011.

Recent Accounting Pronouncements

In June 2011, Financial Accounting Standard Board (“FASB”) issued new authoritative guidance regarding Presentation of Comprehensive Income.  This amendment attempts to improve comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income.  In order to facilitate convergence with International Financial Reporting Standards (“IFRS”), FASB has decided to eliminate the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity.  Also, this amendment requires that all non-owner changes in stockholders’ equity be presented in a single continuous statement of comprehensive income or in two separate

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but consecutive statements.  This amendment is effective for annual periods beginning after December 15, 2011 and interim periods within these years (the fiscal quarter end ed   June 30 , 2012 for the Company) and is applied retrospectively.  On October 21, 2011, the FASB proposed a deferral of the requirement to present reclassifications of other comprehensive income on the face of the income statement. Companies would still be required to adopt all other requirements contained in the guidance. The adoption of these amended standards affected the presentation of other comprehensive income, as the Company has elected to present two separate but consecutive statements, but did not have an effect on its financial position or results of operations .

Note 2 – Fair Value

The Company measures its cash equivalents, short-term investments and long-term investments at fair value.  F air value is defined as the price that would be received from selling an asset and paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would t r ansact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance .

A three-tiered fair value hierarchy has been established as the basis for considering the above assumptions and determining the inputs used in the valuation methodologies in measuring fair values.  The three levels of inputs are defined as follows:

Level 1 – Unadjusted quoted market prices for identical assets or liabilities in active markets that the Company has the ability to access.

Level 2 – Observable inputs such as q uoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in inactive markets.

Level 3 – Valuations based on models where significant inputs are not observable. The unobservable inputs reflect the Company ’ s own assumptions about the factors that market participants would use.

The Company maximize s the use of observable inputs and minimize s the use of unobservable inputs. If a financial instrument uses an input that is significant to the fair value calculation, the instrument will be categorized based upon the lowest level of input that is significant to the fair value calculation.  The Company ’ s financial assets and liabilities measured at fair value on a recurring basis include cash equivalents and investment securities ,   both short-term and long-term.

The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to their short maturities.

The Company’s money market investments, certificates of deposit purchased directly from the bank, and Non-Qualified Deferred Compensation (NQDCP) assets and liabilities are valued using Level 1 inputs. Fixed income available-for-sale portfolio, mainly consisting of municipal bonds, US government agency bonds, corporate bonds , commercial paper and certificates of deposits bought in the secondary market, are valued using Level 2 inputs.

The Company’s long-term investments consist entirely of auction rate securities (“ARS”) which are collateralized by student loans.   Of its two ARS holdi ngs, the credit rating of one with a par value of $12,800,000 

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was reduced to AA+ by S&P in February 2012 and to A with a negative outlook by Fitch in June 2012. The other ARS investment with a par value of $2,500,000 still holds an AAA and Aaa credit rating, which have not been reduced as of or subsequent to September 29, 2012.  Due to the lack of availability of observable market quotes for the Company’s investment portfolio of these ARS, the fair value was estimated based on a discounted cash flow model using Level 3 inputs. The assumptions used in the discounted cash flow model include estimates for interest rates, timing and amounts of cash flows, liquidity of the underlying security, expected holding periods, and contractual terms of the security. In light of the current market condition for ARS, the Company developed different scenarios for the significant inputs used in the discounted cash flow model, including but not limited to a liquidity discount of 125 and 150 basis points per year for the current ARS market, and the timing of recovery of the ARS market from three to five years.  The Company concluded that the fair value of those of its ARS which were classified as level 3 assets was $13,700,000 as of September 29, 2012 net of a temporary impairment of $1,600,000 to par value.  

The Company also considered the quality, amount of collateral, and US government guarantee for the ARS and looked to other marketplace transactions and information received from third party brokers in order to assess whether the fair value based on the discounted cash flow model is reasonable. The valuation of the Company ’ s investment portfolio is subject to uncertainties that are difficult to predict. Factors that may affect the Company ’ s valuation include changes to credit ratings of the securities as well as the underlying assets supporting those securities, rates of default of the underlying assets, underlying collateral values, discount rates, counterparty risk and ongoing strength , and quality of market credit and liquidity. Significant inputs to the investment valuation s are unobservable in the active markets and therefore the Company’s ARS are classified as Level 3 in the hierarchy.  

The following table s summarize assets and liabilities measured at fair value on a recurring basis as of   September 29, 2012 and March 31, 2012 ,   excluding accrued interest (in thousands) :

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There were no significant transfers between Level 1 , Level 2 and Level 3 during the three and six months ended September 29, 2012 or October 1, 2011. The following table includes the activity for Auction Rate Securities that are classified as Level 3 of the valuation hierarchy ( in thousands ):

 

 

 

The Company recognizes transfers into and out of levels within the fair value hierarchy based on the transaction or the change in circumstances at the end of the fiscal month.

 

During the six months ended September 29, 2012 , the Company received $ 12,750,000   relating to ARS with a carrying value at the time of $11,772,000 , redeemed at par value. See Note 3 for further discussion of the Company ’ s ARS.

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Note 3 – Cash and C ash Equivalents and I nvestments

The Company ’ s cash equivalents consist primarily of investments in money market funds as follows (in thousand s ) :

 

The Company ’ s portfolio of short-term and long-term   investments is as follows (in thousands) :

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The Company ’ s   short-term and long-term investments by contractual maturit y are as follows (in thousands) :

 

 

Short-term investments classified as trading securities consisted entirely of investments in mutual funds held by the Company’s Non-Qualified Deferred Compensation Plan (“NQDCP”). Unrealized gains (losses) on trading securities are recorded in the Condensed Consolidated Statement of Income. Unrealized gain s on trading securities w ere   $291,000   and $194,000 for the three and six months ended September 29, 2012   compared to losses of  $ 822 ,000 and $723,000 , respectively,   for the same period s of the prior fiscal year.

The Company ’s available-for-sale portfolio as of September 29, 2012 was comprised of municipal bonds, corporate bonds, government agency bonds, commercial paper, certificates of deposits and ARS . Unrealized gains (losses) on available-for-sale securities are recorded in other comprehensive income as increases (declines) in fair values and are considered to be temporary.

During the three and six months ended September 29, 2012 , the Company disposed of short-term available-for-sale securities totaling $18,83 7 ,000 and $44,60 2 ,000 at par, compared to $40,944,000 and $108,291,000 for the same period s of the prior fiscal year.  The realized gains and losses of these tran sactions were immaterial.

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The Company’s ARS have contractual maturities between 25 and 29 years. They are in the form of auction rate bonds whose interest rates had historically been reset every thirty-five days through an auction process. At the end of each reset period, investors could sell or continue to hold the securities at par. These ARS held by the Company are backed by pools of student loans and are primarily guaranteed by the U.S. Department of Education, although the credit rating of one ARS with a par value of $12,800,000 was reduced to AA+ by S&P in February 2012 and to A with a negative outlook by Fitch in June 2012. 

ARS with a par value of $15,300,000 , whose carrying value was $13,700,000 ,   were classified as non-current assets and were presented as long-term investments on the Company’s balance sheet as of September 29, 2012 .

The Company has concluded that the decline in fair value of the ARS investments as of September 29, 2012 is considered to be temporary in part due to the following:

 

If uncertainties in the credit and capital markets continue or these markets deteriorate further, the Company may incur additional temporary impairment to its ARS holdings . The Company will continue to monitor its ARS holdings and may be required to record an impairment charge through the income statement if the decline in fair value is determined to be other-than-temporary or the credit quality of its ARS holdings declines further .

 

Note 4 – Inventories

The Company ’ s inventories consist of high technology semiconductor devices and integrated circuits that are specialized in nature, subject to rapid technological obsolescence, and sold in a highly competitive industry.  Inventory balances at the end of each period are sta ted at the lower of cost (determined on a first-in, first-out basis) or net realizable value.

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Inventories consist of (in thousands) :

 

The Company wrote down excess and obsolete inventory totaling $ 598,000   and $ 754,000   for the three and six months ended September 29, 2012 compared to $ 517,000 and  $ 1,475,000 , respectively,   for the same periods of the prior fiscal year. The Company sold previously written-down inventory of $ 419,000 and $ 764,000   for the three and six months ended   September 29, 2012 , respectively .  For the same periods of the prior fiscal year, such sales were $ 249,000 and $544,000 , respectively .

 

Note 5   – Accumulated Other Comprehensive Loss    

As of September 29, 2012 , the total unrealized loss on available-for-sale investments amounted to $1,224,000 , which was recorded in accumulated other comprehensive loss, net of tax of $433, 000 ,   or $791,000 . As of Octobe r 1, 2011 , the total unrealized loss on available-for-sale investments amounted to $2, 381 ,000, which was recorded in accumulated other comprehensive loss, net of tax of $ 836 ,000 ,   or $1,545,000 .

 

Note 6 - Stock-Based Compensation

The stock-based compensation expense for the three and six months ended September 29, 2012   was $769,000   and $1,514,000, compared to $829,000 and $1,422,000, respectively, for the same periods of the prior fiscal year.

T he Company granted options to employees with an estimated grant date fair value of $238,000   f or both the three and six months ended September 29, 2012 . For the three and six months ended Oct o ber 1, 2011 , the Company granted options with an estimated grant date fair value of $1, 645,000 and $2,576,000, respectively . As of September 29, 2012 , the unrecorded stock-based compensation related to stock options was $ 4,360,000 (net of estimated forfeitures) and will be recognized over an estimated weighted average amortization period of approximately 1.8 years.

The Company’s shareholders approved the adoption of the 2001 Stock O ption Plan (the “2001 Plan”) and the reservation of 2,000,000 shares of common stock for issuance under 2001 Plan at the August 17, 2001 annual meeting of shareholders. Options granted under the 2001 Plan were granted at the fair market value of the Com pany’s common stock on the date of grant and generally expired s even years from the date of grant or thirty days after termination of service, whichever occurs first.  The options generally were exercisable beginning one year from date of grant and generally vest ratably over a five-year period. On August 24, 2006, the Company’s board of directors approved a change in grant policy of the 2001 Plan to only grant non-statutory stock options to better align the Company’s compensa tion plan to employee incentives and to Company objectives. On August 17, 2007, the Company’s board of directors approved that all future stock option grants would have a ten-year term, which is within the guidelines of the Company’s 2001 Plan, subject to earlier expiration thirty days after termination of service. As of August 14, 2009, no further options may be granted under the 2001 Pla n.

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The Company ’ s shareholders approved the adoption of the 2009 Equity Incentive Plan (the “2009 Plan”) at the August 14, 2009 annual meeting for shareholders. Under the 2009 Plan, the total number of shares of Company common stock reserved for issuance consists of 1,000,000 shares plus (1) the 159,509 shares which remained authorized for issuance under the 2001 Plan but which were not subject to outstanding stock awards as of August 14, 2009, and (2) those of the 1,440,400 shares , subject to stock awards outstanding under the 2001 Plan as of August 14, 2009, that terminate prior to exercise and would otherwise be returned to the share reserves under the 2001 Plan, with the total shares in addition to the 1,000,000 shares thus being up to a maximum of 1,599,909 shares. The 2009 Plan allows the Company to continue its prior option practices under the 2001 Plan to grant non-statutory options to key employees with an exercise price equal to the fair market value of the Company ’ s stock on the date of grant. The Company ’ s options typically have a term of ten years and vest in 20% installments   on each of the f irst  f ive   anniversaries of the date of grant . The 2009 Plan also provides the Company with the flexibility in designing equity incentives, including restricted stock awards, stock appreciation rights, restricted stock unit awards, performance stock awards, and performance cash awards.

The following table summarizes the activities under the 2001 and 2009 Plans for the six months ended September 29, 2012:

 

The weighted average fair value of options, as determined under the authoritative guidance for stock compensation, granted to employees and directors under the 2009 Plan during the three and six months ended   September 29, 2012 were $7.04 per share for both periods, compared to $8.08 per share for both the three and six months ended October 1, 2011. The total intrinsic value of options exercised (which is the amount by which the stock price exceeded the exercise price of the option on the date of the exercise) during the three and six months ended September 29, 2012 was zero and $26,000 , respectively .  During the three and six months ended September 29, 2012, the amount of cash received from employees as a result of employee stock option exercises was zero and $249,000 ,   r espectively .

 

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The options outstanding and exercisable as of September 29, 2012, under the 2001 and 2009 Plans are in the following exercise price ranges:             

 

 

Options outstanding and options exercisable under the option plans had a total intrinsic value of $43,000 and $4,000 , respectively, as of September 29, 2012.

2000 Employee Stock Purchase Plan (“ESPP”).   Under the ESPP, e ligible employees may elect to withhold up to 20% of their cash compensation to purchase shares of the Company’s common stock at a price equal to 95% of the market value of the stock at the time of purchase, which is at the end of the six-month offering period.  An eligible employee may purchase no more than 500 shares during any six-month offering period. For the six months ended September 29, 2012, the amount of cash received from employees as a result of ESPP purchases was  $ 63 ,000 compared to $89,000 for the same period of the prior fiscal year.

 

Note 7 – Income Taxes

The provision for income taxes for the three months ended September 29, 2012 was $269,000 on income before tax of $9 59 ,000 at the effective tax rate of 28% compared to $306,000 on inc ome before tax of $2, 017 ,000 at the effective tax rate of 15 % in the second quarter of the prior fiscal year.

The provisio n for income taxes for the six months ended September 29, 2012   was $498,000 on income before tax of $1,7 85 ,000 at the effective tax rate of 28% compared to $1,006,000 on income before tax of $ 4,386 ,000 at the effective tax rate of 23 %   for the same period of the prior fiscal year.  

The year-over-year quarterly and six months increase s in the estimated tax rate were both primarily due to changes in relative expected income to be generated in fiscal 2013 between Supertex's US and Hong Kong entities which have different tax rates and to a lesser exten t research and development credits as they have not been extended by the US Government , partially offset by increased domestic manufacturing deduction .

The income tax provision for interim periods reflects the Company’s computed estimated annual effective tax rate and differs from the taxes computed at the federal and state statutory rates primarily due to the effects of foreign rate differentials, non-deductible stock-based compensation expense, tax-exempt interest income, R&D tax credits, tax contingencies, and the domestic production activities deduction.

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During the six months ended September 29, 2012 ,   the liability for uncertain income tax positions excluding accrued interest and penalties increased from $3,661,000 to $3,729,000 . Of the total $3,729,000 of unrecognized tax benefits, $2,861,000 represents the amount that, if recognized, would favorably affect the Company’s effective income tax rate in a future period. The Company cannot conclude on the range of cash payments that will be made within the next twelve months associated with its uncertain tax positions.

The Company records interest and penalties related to unrecognized tax benefits in income tax expense. As of   September 29, 2012 , the Company had approximately $ 505 ,000 accrued for estimated interest and $ 155 ,000 for estimated penalties related to uncertain t ax positions. For the six months ended September 29, 2012 , the Company recorded estimated interest of $1 1 ,000 and estimated penalties of $ 3 ,000.  

T he balance of unrecognized income tax benefits, including accrued interest and accrued penalties on September 29, 2012, was approximately $ 1,719 ,000   related to tax positions for which it is reasonably possible that the statute of limitations will expire in various jurisdictions within the next twelve months.

The Company ’ s major tax jurisdictions a re the United States federal, State of California and Hong Kong , and the Company’s income tax returns are no longer subject to examination by these taxing authorities for fiscal years before   2002.    

Note 8 - Net Income per Share  

Basic earnings per share (“EPS”) is computed as net income divided by the weighted average number of common shares outstanding for the period.  Diluted EPS reflects the potential dilution that could occur from common shares that may be issued through stock options and ESPP only, since the Company does not have warrants or any other convertible securities outstanding. 

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A reconciliation of the numerator and denominator of basic and diluted earnings per share is provided as follows ( in thousands, except per share amounts ):

 

 

Options to purchase 1,650,407 shares of the Company’s common stock at an average price of $26.48 per share, and 1,653,266 shares at an average price of $26.53   for the three and six months ended September 29, 2012, respectively, were outstanding but were not included in the computation of diluted earnings per share because their effect would have been anti-dilutive.  

For the three and six months ended October 1, 2011, options to purchase 1,510,270 shares of the Company’s common stock at an average price of $27.42 per share, and 1,445,847 shares at an average price of $27.75 per share, respectively, were outstanding but were not included in the computation of diluted earni ngs per share because their effect would have been anti-dilutive.

 

Note 9 – Commitments and Contingencies

Indemnification

As is customary in the Company’s industry, the Company has agreed to defend certain customers, distributors, suppliers, and subcontractors against certain claims which third parties may assert that its products allegedly infringe on certain of their intellectual property rights, including patents, trademarks, trade secrets, or copyrights.  The Company has agreed to pay certain amounts of any resulting damage awards and typically has the option to replace any infringing product with non-infringing product.  The terms of these indemnification obligations are generally perpetual from the effective date of the agreement.  In certain cases, there are limits on and exceptions to the Company’s potential liability for indemnification relating to intellectual property infringement claims.  The Company cannot estimate the amount of potential future payments, if any, that it might be required to make as a result of these agreements.  To date, the Company has not paid any damage awards nor has it been required to defend any claims related to its indemnification obligations, and accordingly,

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it has not accrued any amounts for indemnification obligations.  However, there can be no assurance that the Company will not have any financial exposure under those indemnification obligations in the future.

Legal Proceedings

From time to time the Company is subject to possible claims or assessments from third parties arising in the normal course of business.  Management has reviewed such possible claims and assessments with the Company’s outside legal counsel and believes that it is unlikely that they will result in any material adverse effect on the Company’s financial condition, results of operations, or cash flows.  The Company is not currently involved in any legal proceeding .  

Product Return and Warranty Reserves

The Company ’ s standard policy is to accept the return of defective parts for credit from non-distributor customers for a period of 90 days from date of shipment. This period may be extended in certain cases. The Company records estimated product returns as a reduction to revenue in the same period as the related revenues are recorded. These estimates are based on historical experience, analysis of outstanding return ed material authorizations and allowance authorization data.

The reductions to revenue for estimated product returns for the three months ended September 29, 2012 and October 1, 2011 are as follows (in thousands):  

 

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⁽¹⁾ Represents amounts charged to the allowance for sales returns.  

While the Company ’ s sales returns are historically within the allowance established, it cannot guarantee that it will continue to experience the same return rates that it has had in the past.  Any significant increase in product failure rates and the resulting sales returns could have a material adverse effect on the operating results for the period or periods in which such returns materialize.

For sales through distributors, the Company ’ s policy is to replace under warranty defective products at its own expense for a period of 90 days from date of shipment. This period may be extended in certain cases. This liability is limited to replacement of the product along with freight and delivery costs. In certain cases, the Company may pay for rework.

The Company reserves for estimated warranty costs in the same period as the related revenues are recorded. The estimate is based on historical expenses and is recorded as cost of sales. The warranty reserve was $ 54 ,000 as of   September 29, 2012 . Such amount was $4 5 ,000 as of March 31, 2012 .

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Operating Lease Obligations

The Company’s future minimum lease payments under non-cancelable operating leases as of September 29, 2012 are as follows ( in thousands ):

 

 

 

The Company leases facilities under non-cancelable lease agreements expiring at various times through April 2016.  Rental expense for the three and six months ended September 29, 2012 amounted to $278,000 and $561,000   compared to $258,000 and $546, 000   for the same period s of last fiscal year.

 

Note 10 – Common Stock Repurchase

Stock repurchase activities for the three and six months ended September 29, 2012 and October 1, 2011 are as follows:

 

I n January 2011, the Board of Directors designated $60,000,000 of its cash, cash equivalents and investments for a major stock repurchase during the period from January 2011 through March 2013, and accordingly , increased the Company ’ s share repurchase program from approximately 556,000 shares to 2,500,000 shares. The amended repurchase program has no expiration date except when an aggregate of 2,500,000 shares have been repurchased, either in the open market or through private transactions. Under this program, cumulatively the Company had repurchased approximately 1,576,000 shares for $30,402,000 as of September 29, 2012.

Since the inception of the Company’s initial share rep urchase program in 1992 through September 29, 2012 , the Company has repurchased a total of approximately 3,920 ,000 shares of the common stock for an aggregate cost of $66,953 ,000 under its share repurchase programs . Upon their repurchase, shares are restored to the status of authorized but unissued shares. As of September 29, 2012 , there were approximately 924 ,000 shares authorized for future repurchase under the Company ’ s current repurchase program.

 

Subsequent to September 29, 2012 , the Company has repurchased an additional 13 ,000 shares for $ 225 ,000 as of November 6 , 2012.

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Note 11 – Segment Information

The Company operates in one reportable segment comprising the design, development, manufacturing and marketing of high voltage semiconductor devices including analog and mixed signal integrated circuits.  The Company’s chief operating decision maker, who is currently the Company’s chief executive officer, reviews financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial performance. 

The Company’s principal markets are in Asia, the United States, and Europe.  Below is a summary of sales by major geographic area for the three and six months ended September 29, 2012 and October 1, 2011   (in thousands):

 

 

Net property, plant and equipment by country as of September 29, 2012 and March 31, 2012 are as follows (in thousands):

 

Note 12 – Significant Customers 

The Company sells its products to OEMs through its direct sales and marketing personnel, and through its independent sales representatives and distributors. Revenue from sales to distributors and the related cost of sales are recognized only upon resale to end-user customers, which is on a sell-through basis.

A major medical equipment company and two distributors each accounted for approximately 1 2 % of net sales f or the three months ended   September 29, 2012. For the six months ended September 29, 2012, this medical equipment company and one of these two distributors each accounted for approximately 12% of net sales while the other distributor accounted for less than 10% of net sales .   Nearly all of the sales to th e medical equipment

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company were through distributors and contract manufacturers. None of the sales attributed to the two significant company distributors were also included in the sales attributed to the medical equipment company. This medical equipment company also accounted for approximately 13% and 11% of net sales for the three and six months ended October 1, 2011 , respectively .  

There w ere no other customer s that the Company believes accounted for more than 10% of the Company ’ s net sales for the three and six months ended   September 29, 2012 and October 1, 2011 .