☑ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) |
OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) |
OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 04-2742817 | |
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25 Frontage Road, Andover, Massachusetts | 01810 | |
(Address of principal executive offices) | (Zip code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, par value $0.01 per share | VICR | The NASDAQ Stock Market LLC | ||
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to thisForm 10-K. ☑
Large Accelerated Filer ☑ | Accelerated Filer ☐ | Non-accelerated Filer ☐ | Smaller Reporting Company ☐ | |||
Emerging growth company ☐ |
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Common Stock |
28,844,478 | |
Class B Common Stock | 11,758,218 |
Thisits subsidiaries, unless otherwise specified.
ITEM 1. | BUSINESS |
conversion efficiency (i.e., the ratio of output power in watts to the power consumedrepresented by the device)symbol “W”, with wattage being the product of voltage, expressed as “volts,” and high power density (i.e., the amount of power in watts dividedrepresented by the volumesymbol “V,” and current, expressed as
In the market segments we serve, we position the Company as a vendor of power components that can be utilized individually, given their market-leading performance, or combined, given their level of integration, to create highly-differentiated power management solutions. We articulate this positioning through our “Power Component Design Methodology”, which is our approach to providing our customers the modular products, design tools, and support to enable the rapid design of comprehensive power conversion and management systems.
Our website, www.vicorpower.com, sets forth detailed information describing our Power Component Design Methodology, all of our products, the applications for which they may be used, and our suite of design tools. The information contained on our website is not a part of, nor incorporated by reference into, this Annual Report onForm 10-K and shall not be deemed “filed” under the Exchange Act.
We are headquartered in Andover, Massachusetts, where our manufacturing facility is located. We conduct business primarily through the activities of our Brick Business Unit (“BBU”), established in 2005, and our two operating subsidiaries, Picor Corporation, established in 2001, and VI Chip Corporation, established in 2007. Picor Corporation relocated its headquarters from North Smithfield, Rhode Island, to Lincoln, Rhode Island in January 2017. Picor Corporation also has personnel based in Andover, Massachusetts. VI Chip Corporation is headquartered in Andover, Massachusetts, where its manufacturing facilities areco-located with those of the BBU.
Our Vicor Custom PowerTMlocations are geographically distributed across the United States and all are incorporated in Delaware. In March 2016, we acquired 100% ownership of certain operating assets and cash of our consolidated subsidiary, Converpower Corporation, in which we held a 49% ownership interest. In December 2015, we completed the statutory merger of one Vicor Custom Power subsidiary, Mission Power Solutions, Inc., with and into another subsidiary, Northwest Power, Inc., after which we closed the Mission Power Solutions location. Also in December 2015, we sold our 49% ownership interest in Aegis Power Systems, Inc. to Aegis Power Systems, thereby ending our formal relationship with the subsidiary. The consolidated financial statements presented herein reflect these transactions.
Internationally, we conduct business through subsidiaries incorporated in or branch offices established in individual countries. Vicor Japan Company, Ltd. (“VJCL”), our majority-owned Japanese subsidiary, which is engaged in sales and customer support activities exclusively for the Japanese market, is headquartered in Tokyo, Japan. Vicor B.V., a wholly-owned subsidiary incorporated in the Netherlands, serves as our European distribution center. We have established individual subsidiaries or branch offices to conduct the activities of Technical Support Centers (“TSCs”) located outside of the United States.
VLT, Inc., incorporated in California, is our wholly-owned licensing subsidiary. VICR Securities Corporation, incorporated in Massachusetts, is a subsidiary established to hold certain investment securities.
Our subsidiaries and their legal domicile are set forth in Exhibit 21.1 to this Annual Report on Form10-K. The activities of all of the above named entities are consolidated in the financial statements presented herein.
We were incorporated in Delaware in 1981. Shares of our Common Stock were listed on the NASDAQ National Market System in April 1990 under the ticker symbol VICR, and we completed an initial public offering of our shares in May 1991.
Market Background and Our Strategy
“I”). In electrically-powered devices utilizing alternating current (“AC”) voltage from a primary AC source (for example, a wall outlet), a power system converts AC voltage into the stable direct current (“DC”) voltage necessary to power subsystems and/or individual applications and devices (known as “loads”). In many electronic devices, this DC voltage may be further converted to one or more higher or lower voltages and currents required by a range of loads. In equipment utilizing DC voltage from a primary DC source (for example, a battery) or a secondary source (such as an
Our strategy, competitive positioning, and product offerings, all based on highly differentiated product performance, have anticipateddivided by the evolution of system power architectures. As system designs advanced along with the demandsvolume of the loads powered, the inherent limitations of historically accepted system power architectures have caused designerssystem). Higher efficiency and density contribute to seek out improved solutions.
In 1984, we introduced a significant enhancement of the standardizedDC-DC converter: the fully-encapsulated “brick” module. Our innovative, patented technology utilized our implementation of zero current soft switching topology to deliver unprecedentedly high switching frequencies and, in turn, unprecedented power density. Superior conversion efficiency, overall performance improvements, and full encapsulation (which provided shielding from environmental influences) contributed to significant enhancement ofsuperior thermal performance, characteristics, an important competitive advantage. Such thermal performance enhancement has been critical to the differentiation of our power converters, as thevoltagepower conversion and distribution is heat, which must be dissipated in order to assure the performance of the converterpower system solution itself and the overall system to which it is delivering power.
Power system performance also is based on the electrical characteristics of the power system (and their effect on and compatibility with the customer’s application). Important electrical characteristics include transient responsiveness (i.e., the reaction of a power system to a sudden change in voltage or current levels) and noise profile (i.e., the level of electromagnetic interference created by power conversion). We believe the superior performance of our power systems is the most important element of our differentiation strategy.
With the advent of enterprise computing in the 1990s, the limitations of DPA became apparent, as the number of different loads on a system board increased beyond the level for which DPA and bricks were well-suited. The Intermediate Bus Architecture (“IBA”), a multi-stage extension of DPA, addressed the space
constraints, performance requirements, and cost challenges of highly complex system boards by further separating the functions of DC conversion carried out by the brick, which in IBA is replaced by an isolated bus converter delivering a stepped-down (i.e., reduced), unregulated voltage to anon-isolatedpoint-of-load regulator. For computing and, later, networking applications, IBA was more scalable and cost-efficient, as numerous brickDC-DC converters on a system board were replaced by one brickDC-DC converter, providing one system-wide distributed voltage, accompanied by numerous, lower-cost bus converters providing an intermediate bus voltage, typically from 5 to 14 volts, topoint-of-load regulators.
Two significant industry changes coincided with the broad adoption of IBA in the late 1990s and the early 2000s. The first change was the significant decline of the telecommunications infrastructure segment that representedsolutions.
Unwilling to pursue rapidly commoditized market opportunities, notably in IBA, and unwilling to relocate our manufacturing to lower-cost countries, we shifted our strategy and operations in the 2000s to emphasizestandard Brick Products emphasizing “mass customization”,customization,” using highly automated, efficient, domestic manufacturing to serve customers with product design and performance requirements, across a wide range of worldwide market segments, thatwhich could not be met by high-volume oriented competitors. We focusedfocus on applications, largelydistributed power implementations, of DPA, for which our brickDC-DC converters werebrick-format products are well-suited, in market segments such as aerospace and defense electronics, industrial automation, andindustrial equipment, instrumentation and test equipment, and transportation (e.g., rail). This strategy has been the basis upon which the BBU has competed since this strategic and operational shift. TheOur customers served range from independent manufacturers of highly specialized electronic devices to larger original equipment manufacturers (“OEMs”) and their contract manufacturers.
During the 2000s, we embarked on a long-term strategy based on our belief that our competitors’ products and existing system power architectures, notably IBA, would not meet evolving market requirements, notably system conversion efficiency. Over the last decade, we have invested significantly in the development
We offer brick modules asDC-DC converters, as well as complementary components providing AC line rectification, input filtering, power factor correction, and transient protection. All of our brick modules are encapsulated with a dielectric, thermally-conductive material, thereby providing electrical insulation, thermal conductivity, and environmental protection of the electronic circuitry. These products are well-established as important, reliable elements of conventional power systems architectures.
The BBU currently offers seven families of high power density,component-level DC-DC converters, representing what we believe to be the broadest selection ofDC-DC converter modules in the industry: theVI-200TM,VI-J00TM,MI-200TM,MI-J00TM, and the FasTrakTM module line, our highest volume products, made up of the Maxi, Mini, and Micro product families. All of ourDC-DC converters are based on our proprietary approach to resonant soft switching, enabling high efficiencies and power
densities. Wide ranges of input voltage (from nine to 425 volts), output voltages (from two to 54 volts), and output power (up to 600 watts) are offered, allowing end users to select components appropriate to their individual applications. The products differ in temperature grades, maximum power ratings, performance characteristics, pin configuration, and, in certain cases, characteristics specific to the targeted market. BrickDC-DC converters are offered in sizes, depending on family, ranging from 116.9 x 61.0 x 12.7 mm (full brick), to 57.9 x 61.0 x 12.7 mm (half brick), to 57.9 x 36.8 x 12.7 mm (quarter brick).
Products from our broad line of complementary components are used to condition and/or filter the input and output voltages of the brickDC-DC converter. Generally, these components address customer requirements at the AC current source, upstream from ourDC-DC converters, providing rectification of the AC current, input filtering, inrush limiting, and transient protection. An example of such a complementary product is our HAMTM (Harmonic Attenuator Module), a front end providing power factor correction. The HAM utilizes a proprietary zero current switching boost converter, allowing it to provide output power of up to 675 watts and DC output voltage of 365 volts.
We also offer numerous accessories (for example, base plates and heat sinks) to meet customer requirements.
These products are generally targeted at applications requiring high performance and reliability in the following market segments: aerospace and aviation; defense electronics; industrial automation, instrumentation, and test equipment; medical diagnostics; telecommunications infrastructure; and vehicles and transportation infrastructure.
We offer an extensive line of open-frame (i.e., not encapsulated) intermediate bus converters (“IBCs”) for implementation of multi-stage power conversion. These devices utilize the same Sine Amplitude Converter switching topology utilized in our VTM and BCM modules in the VI Chip and ChiP formats. These low profile, isolated, fixed-ratio IBCs conform to industry standard quarter-brick and eighth-brick sizes, but offer increased capabilities and exceptional performance.
These devices typically are used in telecommunications and networking equipment applications. Because our IBCs represent pin compatible upgrades for existing designs, a customer, for example, can replace a competitor’s quarter-brick unit with our eighth-brick converter, using half the available space, while meaningfully improving system performance.
We offer a family of isolatedDC-DC converters delivering up to 60 watts in a very small (22 x 16.5 x 6.7 mm) surface-mount package. Because these small devices are packaged in the VI Chip over-molded package, they are able to withstand harsh environments in applications for which space is limited and light weight is advantageous (e.g., aerospace, aviation, and defense electronics). These high density converter modules are offered in three input voltages: 48 volt nominal for communication applications; 28 volt nominal for rugged high temperature or military applications; and 24 volt nominal for industrial applications.
Cool-Power converters utilize our proprietary zero voltage soft switching topology (“ZVS”) to achieve high-switching frequencies enablingbest-in-class power density, while reducing input and output filtering requirements.
Utilizing our modular brick components to drive system function, we offer numerous higher valued-added standard products we configure to a customer’s specific needs, often with multiple voltage outputs. These near-custom products exploit the benefits and flexibility of our modular approach to offer higher performance, higher power densities, lower costs, and faster delivery than many competitive offerings. TheseAC-DC andDC-DC configurable products are designed, developed, and manufactured by the BBU.
Our highest volume configurable product, the FlatPACTM, is representative of our approach to integrating our power components to create high-performance solutions. FlatPACs, available in thousands of configurations in three package variants based on the number of DC output voltages, are complete, conductively-cooledAC-DC conversion solutions comprised of ourVI-200DC-DC converter modules and our complementary components, described above, providing rectification and filtering of the AC input voltage.
Our configurable products typically are used in a range of CPA and distributed power architecture implementations in defense electronics, industrial and transportation applications, as well as medical instrumentation.
Certain customers rely on us to design, develop, and manufacture custom power systems to meet performance and/or form factor requirements that cannot be met withoff-the-shelf system solutions. Theselow-volume, highvalue-add products frequently are designed to function reliably in the harsh environments
Advancedthe sale of Brick Products,
The following product groups include those that reflect our vision representing the sum of the direction of the market segments we serve with our Power Component Design Methodology. Many of these products are targeted toward FPA implementations, but our more recently introduced products are suitable for other distributed architectures.
In 2013, our VI Chip Corporation subsidiary introduced the ChiP platform, designed to be a scalable, leveragable module format with lower manufacturing costs. We believe the ChiP platform establishesbest-in-class standards for a new generation of scalable power modules, while expanding our capability range and, in turn, our addressable market opportunity. Combining advanced proprietary magnetic structures, power semiconductors, and microcontrollers in a high density interconnect substrate, the ChiP delivers superior thermal management characteristics, allowing customers to achieve low cost power system solutions with previously unattainable system efficiency, size, and weight. ChiP modules also have lower manufacturing costs than our original VI Chips, thereby allowing us to offer highly differentiated products, not only with superior total cost of ownership over time, but at attractive initial price points. Our goal is to offer ChiP modules and solutions on a cents per watt basis near or equivalent to the prices of competitive product offerings, thereby presenting customers with a compelling value proposition.
ChiPs are produced in the same functional families as our earlier VI Chip FPA modules (i.e., PRM, BCM, and VTM), but today we offer five package sizes ranging from 6 by 23 mm to 61 by 23 mm. We currently offer over 100 specific ChiP module variants, reflecting the multiple configurations, based on dimensions, lead formats, and performance specifications, enabled by the flexible module format. During 2016, we continued to introduce ChiP modules, adding 32 new products and 128 additional variants within the product families. Based on our current design and development activities, we anticipate, in 2017, further expansion of the range of package sizes, board or chassis mounting alternatives, lead formats, and performance characteristics of our ChiP product offerings. We plan to target a number of these new product families and variants at segments and applications that, if successfully penetrated, should expand the size of our addressable markets.
ChiP modules are targeted at sophisticated applications, regardless of the power distribution architecture, for which their high level of performance and form factor differentiation is appropriate. Across distributed power system architectures, ChiPs are targeted at: aerospace and aviation (e.g., for
use in unmanned aerial vehicles, due to their conversion efficiency, reliability, small form factor, and light weight); computing (e.g., for source topoint-of-load solutions in servers deployed in datacenters, due to their conversion efficiency and flexibility of use, which contribute to lower total cost of ownership); defense electronics (e.g., for use in airborne, seaborne, or field radar, due to their high power capabilities, conversion efficiency, ruggedness, and reliability); industrial automation, instrumentation, and test equipment (e.g., for use in semiconductor testing, due to their power density and tight current regulation); telecommunications and networking infrastructure (e.g., for use in pole-mounted small-cell base stations in urban environments, due to their form factor, reliability, and cost/performance profile); and vehicles (e.g., in hybrid electric vehicles, due to their form factor, light weight, differentiated performance, and cost/performance profile). As stated, we also are pursuing applications with OEMs and their contract manufacturers in market segments for which the advantages of ChiPs are most compelling.
The VIA platform is a rugged, double-sided, copper-alloy package for ChiP modules, integrating complementary components, circuitry, and superior thermal management through conductive cooling. In 2016, we completed installation of our first dedicated manufacturing line exclusively for the VIA packaging concept.
We consider the VIA platform to be important to our transitionalgo-to-market strategy, as it has been designed to enable the use of ChiP modules across the widest range of power system architectures, power levels, and applications. It is aneasy-to-use power management solution, providing customers an advanced,turn-key solution for their demanding power needs, cost-effectively accelerating design cycles andtime-to-market, while providing superior power density. The VIA platform is particularly differentiated by the flexibility it provides designers, as it offers substantial thermal advantages and its form factor allows a broad range of installation options. In numerous applications, the package simplifies thermal design considerations and, in some instances, eliminates the need for a fan for convection cooling, improving overall system reliability and further minimizing the power system footprint. Offered in board and chassis mount configurations, all VIA packages have a vertical dimension of 9.3 mm and a width of 35.5 mm, and, depending on the packaged ChiP module and its functionality, range in length from 72.0 to 141.4 mm.
The VIA platform facilitates our latest ACfront-end solution, based on the ChiP PFM® (Power Factor Module). The VIA PFM represents a significant improvement over our legacyfront-end solutions, thereby enhancing our positioning as a supplier of highly-differentiated power management solutions from the AC source to the point(s) of load. The VIA PFM achieves a market-leading power density of 127 W/in³, supplying an isolated DC output of either 24 or 48 volts, at up to 400 watts, from a universal AC input. It operates with active power factor correction at 93% peak conversion efficiency, which is an unprecedented level for anAC-DC converter of this size and power density. Combining the VIA PFM with our small AIMTM (“AC Input Module”), which provides AC rectification, filtering, transient protection, and inrush limiting capabilities, creates a high-performanceAC-DCfront-end solution with an unmatched size profile. This solution is especially well-suited for emerging applications with size constraints, including small-cell base stations and commercial LED lighting.
The VIA platform also facilitates the VIA DCM, which is an important product for executing our strategic transition. We currently offer seven variants of the VIA DCM. The product family integrates filtering, output voltage regulation, circuitry protection, and a control interface, giving the VIA DCM the function of a conventional brickDC-DC converter, while offering higher conversion efficiency, superior power density, and the design flexibility described above. As such, we are positioning the VIA DCM as a successor to our legacy brickDC-DC converters, notably in advanced, challenging applications. However, the VIA DCM also is positioned as an innovative, high-performance element of our Power Component Design Methodology, as it has been designed to be integrated with our other products to facilitate design of comprehensive power system solutions.
Our Cool-Power brand ofnon-isolated,point-of-load regulators currently consists of an expanding portfolio of buck (i.e., the device steps down voltage) and buck-boost (i.e., the device lowers or increases voltage) regulators.
We believe Cool-Power buck regulators provide best in class conversion efficiency (up to 98%), allowing customers to deploy more efficient designs, regardless of power system architecture, based on the compatibility of thesepoint-of-load regulators with higher, more efficient input voltages. Operating from nominal input voltages of 12, 24, or 48 volts, these regulators are optimized for applications requiring high conversion efficiency and power density, such as computer and graphic processors.
The high conversion efficiency of our Cool-Power regulators is enabled by our proprietary ZVS topology, which minimizes switching losses, while maximizing dynamic response to line and load transients. Along with ZVS control circuitry, the advanced design of Cool-Power regulators incorporates proprietary power semiconductors, all within a high-density, surface-mount package.
Cool-Power regulators are competitively well-positioned to address market trends toward higher required conversion efficiencies and higher currents at thepoint-of-load. The addition of buck-boost variants expands our capabilities to include loads powered by batteries, which are subject to varying voltage delivery over their discharge cycle. We believe these products will be an important contributor to our long-term success, as they represent a meaningful element of our Power Component Design Methodology, enabling comprehensive, highly integrated solutions for FPA and other distributed architectural implementations, fulfilling our strategic commitment to offering integrated solutions all the way from the source to thepoint-of-load. Our success to date with these products has frequently been when they have been part of an integrated FPA solution, delivering a tightly regulated voltage to a downstream VTM serving as a current multiplier, which in turn delivers low voltage, high amperage, regulated current to thepoint-of-load, typically a microprocessor. Our 48 volt topoint-of-load solutions for datacenter servers is representative of such an integrated FPA solution.
Our Picor subsidiary offers a limited range of specialized components for circuit protection, all of which are characterized by small size,ease-of-use, and differentiated performance. The highest volume products are QuietPower® filters for input filtering of electro-magnetic interference and output noise (i.e., ripple attenuation).
We consider these products to be a valuable complement to our Power Component Design Methodology, despite their relatively small sales volumes, as they enable customers, assisted by our application engineers, to source from Vicor their complete solution to power conversion and management.
We continue to offer the first generation of VI Chip PRM, BCM, and VTM modules, in full (32.5 by 22.0 by 6.73 mm) and half (22.0 by 16.5 by 6.73 mm) sizes, targeting FPA implementations. These products remain compelling solutions for certain applications, notably in defense electronics, medical instrumentation, and test and measurement applications.
With the expansion of ChiP product families, we anticipate ourthird-party sales of the first generationproducts sold under the Brick Products line, which were sold under the former the Brick Business Unit operating segment, inclusive of VI Chips will be limited to shipments to existing customers during the life cyclessuch sales of our Vicor Custom Power and VJCL subsidiaries, was approximately 71.4%, 64.1%, and 66.6% of the applications into which these products have been designed. We expectCompany’s consolidated revenue for the life cycles of many of these applications may continue for several years.
Patents and Intellectual Property
An important element of our strategy is to protect our competitive leadership with domestic and foreign patents and patent applications that cover our products and much of their enabling technologies. We believe our
competitive leadership is further protected by proprietary trade secrets associated with our use of certain components and materials of our own design, as well as our significant experience with manufacturing, packaging, and testing these complex devices.
We believe our patents afford advantages by building fundamental and multilayered barriers to competitive encroachment upon key features and performance benefits of our principal product families. Our patents cover the fundamental switching topologies used to achieve the performance attributes of our converter product lines; converter array architectures; product packaging design; product construction; high frequency magnetic structures; as well as automated equipment and methods for circuit and product assembly.
In the United States, as ofyears ended December 31, 2016, we have been issued 102 total patents, which expire between2019, 2018, and 2017, and 2035. We also have a number of patent applications pending in the United States and certain countries of Europe and Asia. We have vigorously protected our rights under these patents and will continue to do so. Although we believe patents are an effective way of protecting our technology, there can be no assurances our patents will prove to be enforceable in any given jurisdiction.
In addition to generating revenue from product sales, we seek to license our intellectual property. In granting licenses, we generally retain the right to use our patented technologies and manufacture and sell our products in all licensed geographic areas and fields of use. Licenses are granted and administered through our wholly-owned subsidiary, VLT, Inc., which is the assignee for our patents that may be subject to licensing. Revenues from licensing arrangements have not exceeded 10% of our consolidated revenues in any of the last three fiscal years.
respectively.
For the year ended December 31, 2016, one customer, NuPower Electronic, Ltd., accounted for approximately 16.4.% of net revenues, and our five largest customers represented approximately 26.5% of net revenues. For the year ended December 31, 2015, one customer, NuPower Electronic, Ltd., accounted for approximately 16.2% of net revenues, and our five largest customers represented approximately 33.4% of net revenues. For the year ended December 31, 2014, one customer (NuPower Electronic, Ltd.) accounted for approximately 14.7% of net revenues, and our five largest customers represented approximately 32.6% of net revenues.
International revenues, as a percentage of total revenues, were approximately 59.4%, 59.6%, and 60.5% in 2016, 2015, and 2014, respectively. Net revenues from customers in China, our largest international market, accounted for approximately 32.1% of total net revenues in 2016, approximately 34.2% in 2015, and approximately 32.3% in 2014, respectively. International sales have increased from historical levels primarily due to higher volumes of shipments to foreign contract manufacturers, many of which are located in China, utilized by domestic and international OEMs. As we have substantially expanded our sales and customer support activities and resources internationally, particularly in Asia, we expect international sales to continue to increase as a percentage of total revenue.
within the following 12 months, subject to normal customerour scheduling and cancellation policies.
Sales and Marketing
for certain custom products, VJCL.
Vicor
In 2016, we reorganized
any revenue associated with shipments from Vicor to Vicor B.V. for subsequent delivery to customers. The early-stage, low volume customers previously served by this initiative now are referred by us to either our website or a distributor for order placement.
We generally sell our products on the basissignificant expansion of our standard termssales and conditions,application engineering infrastructure over historical levels, notably across Asia. We incurred approximately $43,387,000, $42,533,000, and we most commonly warrant our products for a period$40,438,000 in marketing and sales expenses in 2019, 2018, and 2017, respectively, representing approximately 16.5%, 14.6%, and 17.7% of two years. Effective January 1,revenues in 2019, 2018, and 2017, we extended the warranty period to three years for a range of H Grade, M Grade and MI FamilyDC-DC converters, input filters, output filters, and front ends sold after that date. In a limited number of circumstances, we have entered into supply contracts with certain high-volume customers calling for extended warranty terms. With our distribution partners, we also enter into contracts providing for our product warranties to transfer to the end customer upon final sale of our product(s) by the stocking distributor.
respectively.
We continue to make investments in automated manufacturing equipment, particularly for our ChiP modules and VIA packaging platforms. Based on current estimates of ChiP and VIA manufacturing volumes and our capacity requirements, we do not expect to incur capital expenditures during 2017 significantly higher than we incurred during recent years.
Components and materials used in our products are purchased from a variety of domestic and international vendors. Most of the components are available from multiple sources, whether directly from suppliers or indirectly through distributors. In instances of single source items, we maintain levels of inventories we consider to be appropriate to enable meeting the delivery requirements of customers. Incoming components, assemblies, and other parts are subjected to several levels of inspection procedures, and we maintain robust data on our raw material inventories in order to support our quality assurance procedures.
See Note 17 —Segment Information to Similarly, many of the Consolidated Financial Statementsproprietary semiconductors we use, for which we have either a manufacturing license or ownership of the designs, are sourced from third party foundries.
Employees
own design and proprietary manufacturing, packaging, and testing processes. We incurred approximately $46,588,000, $44,286,000, and $44,924,000 in research and development expenses in 2019, 2018, and 2017, respectively, representing approximately 17.7%, 15.2%, and 19.7% of revenues in 2019, 2018, and 2017, respectively.
on our ability to attract and retain qualified personnel. Although there is strong demand for qualified personnel, we have not to date experienced meaningful difficulty in attracting and retaining sufficient engineering and technical personnel to meet our needs (see Part I, Item 1A — “Risk Factors”).
ITEM 1A. | RISK FACTORS |
We do not actively communicate with investment analysts and, as a consequence, we are not aware of earnings estimates or supporting investment research coverage of Vicor and our Common Stock. While we seek to be transparent in our financial reporting, public statements, and related disclosures, the absence of research coverage may limit investor interest in our Common Stock. Because our operating results have fluctuated on a quarterly and annual basis, investors may have difficulty in assessing our current and future performance.
As of December 31, 2019, we have no plans to declare or pay a cash dividend.
Common Stock issued and outstanding. As such, Dr. Vinciarelli, controlling in aggregate 82.7%81.6% of our outstanding voting securities, has effective control of our governance.
product development expenses, as well as significant sales and marketing expenses, before we generate the related revenues for these products. Furthermore, we may never generate the anticipated revenues from a product after incurring such expenses if our customer cancels or changes its product plans.
Further stagnation of spending by the U.S. Department of Defense or a pronounced shift in the nature of such spending may negatively influence our operating results.
Customers in the defense electronics segment historically have contributed a meaningful portion of our revenue, primarily in the BBU, which sells military-grade brick modules and, through our Vicor Custom Power businesses, customer-specific systems incorporating our brick modules, primarily for C4I (Command,Control,Communications,Computing, and Intelligence) applications. However, shifts in Department of Defense spending priorities and ongoing budget constraints have contributed to a decline in such revenue as a percentage of our consolidated revenue. Additional risks to our defense electronics volume has been associated with the organizational structure, capacity, and ownership of our Vicor Custom Power businesses. In March 2016, we acquired 100% ownership of certain operating assets and cash of our consolidated subsidiary, Converpower Corporation, in which we held a 49% ownership interest, transferring operations to Granite Power Technologies, Inc., a wholly-owned subsidiary we established to assume the operations of a previously unincorporated Vicor Custom Power location (i.e., a division). Converpower ceased operations in December 2015. In December 2015, we completed the statutory merger of one Vicor Custom Power subsidiary, Mission Power Solutions, Inc. with and into another subsidiary, Northwest Power, Inc., after which we closed the Mission Power Solutions location. Also in December 2015, we sold our 49% ownership interest in Aegis Power Systems, Inc. to Aegis Power Systems, thereby ending our formal relationship with the subsidiary. We undertook these transactions in order to consolidate our custom organization, reduce manufacturing capacity, and reduce our cost structure. If the performance of the remaining three Vicor Custom Power subsidiaries does not improve as expected, we may choose to further consolidate our locations or otherwise rationalize our associated cost structure, which may impact our ability to compete cost effectively in this market segment.
profitability.
ability to forecast and procure inventories of rawcomponents and materials and components to match production schedules and customer delivery requirements. Many of our products require raw materials supplied by a limited number of vendors and, in some instances, a single vendor. During certain periods, key components or materials required to build our products may become unavailable in the timeframe required for us to meet our customers’ needs. Our inability to secure sufficient raw materials and components to buildmanufacture products for our customers has reduced, in the past, negatively impacted our salesrevenue and operating resultsprofitability and could do so again.
In addition, visibility into our Chinese supply chain has been recently clouded by the uncertain impact of the coronavirus on the personnel and operations of our Chinese vendors. We are in frequent contact with our critical vendors in China, and are monitoring the situation closely.
substantial resources to establish and protect our patents and proprietary rights, and we rely on patent and intellectual property law to protect such rights. This protection, however, may not prevent competitors from independently developing products similar or superior to our products. We may be unable to protect or enforce current patents, may rely on unpatented technology that competitors could restrict or replicate, or may be unable to acquire patents in the future, all of which may have a material adverse effect on our competitive position. In addition, the intellectual property laws of foreign countries may not protect our rights to the same extent as those of the United States. We have been and may need to continue to defend or challenge patents. We have incurred and expect to incur significant financial costs in the defense of our patented technologies and have devoted and expect to devote significant resources to these efforts which, if unsuccessful, may have a material adverse effect on our operating results and financial position.
from us for all of our standard products. Effective January 1, 2017, we extended the warranty period to three years for a range of H Grade, M Grade and MI Family converters, input filters, output filters, and front endsstocking distributor.
Our ability to successfully implement our business strategy may be limited if we do not retain our key personnel and attract and retain skilled and experienced personnel.
Our success depends on our ability to retain the services of our executive officers. The loss of one or more members of senior management could materially adversely affect our business and financial results. In particular, we are dependent on the services of Dr. Vinciarelli, our founder, Chairman of the Board, Chief Executive Officer, and President. The loss of the services of Dr. Vinciarelli could have a material adverse effect on our development of new products and on our results of operations. In addition, we depend on highly skilled engineers and other personnel with technical skills that are in high demand and are difficult to replace. Our continued operations and growth depend on our ability to attract and retain skilled and experienced personnel in a very competitive employment market. If we are unable to attract and retain these employees, our ability to successfully implement our business strategy may be harmed.
All modular
interruption, and cyber-risk insurance to an extent,address potential liabilities from such circumstances, such insurance may be insufficient to compensate us for the potentially significant amountscosts or liabilities incurred. Any such events, if prolonged, could have a material and adverse effect on our operating results and financial condition.
Our network segmented NIST 800-171 environment was not impacted by the December 2019 ransomware incident, but there can be no assurance that it will not be impacted by similar incidents in the future, which could have a material and adverse effect on our operating results and financial condition for the reasons described above.
New regulations
their products. We began to implement processes within our supply chain to comply with these rules beginning in 2012 and filed our initial Form SD in May 2014. There have been and will continue to be costs associated with complying with these disclosure requirements, including due diligence to determine the sources of conflict minerals used in our products and other potential changes to products, processes, or sources of supply as a consequence of such verification activities. The implementation of these rules could adversely affect the sourcing, supply, and pricing of materials used in our products. As there may be only a limited number of suppliers offering “conflict free” conflict minerals, we cannot be sure thatcertain we will be able to obtain necessary conflict minerals from such suppliers in sufficient quantities or at competitive prices. Also, we may face reputational challenges if we determine that certain of our products contain minerals not determined to be conflict free or if we are unable to sufficiently verify the origins for all conflict minerals used in our products through the procedures we may implement.
ITEM 1B. | UNRESOLVED STAFF COMMENTS |
ITEM 2. | PROPERTIES |
In December 2014,
ITEM 3. | LEGAL PROCEEDINGS |
On
We have initiated administrative review On May 23, 2016, after extensive discovery, the Texas Action was stayed by the court pending completion of certain inter partes reexamination (“IPRx”) proceedings at the United States Patent and Trademark Office (“USPTO”) (including any appeals from such proceedings to the Federal Circuit (as defined below)) concerning the SynQor patents, which are described below. That stay remains in force.
basis for any liability by us.
ITEM 4. | MINE SAFETY DISCLOSURES |
ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
The following table sets forth the quarterly high and low sales prices for the Common Stock as reported by The NASDAQ Stock Market for the periods indicated:
2016 | High | Low | ||||||
First Quarter | $ | 10.60 | $ | 7.19 | ||||
Second Quarter | 11.06 | 8.94 | ||||||
Third Quarter | 12.16 | 9.74 | ||||||
Fourth Quarter | 16.05 | 11.50 | ||||||
2015 | High | Low | ||||||
First Quarter | $ | 15.79 | $ | 10.77 | ||||
Second Quarter | 17.21 | 11.73 | ||||||
Third Quarter | 11.89 | 8.93 | ||||||
Fourth Quarter | 10.66 | 8.96 |
Dividend Policy
We do not have a policy mandating the declaration of cash dividends at any particular time or on a regular basis. We did not pay cash dividends on our Common Stock for the years ended December 31, 2016 or 2015.
Dividends are declared periodically, only at the discretion of our Board of Directors, and any such declaration depends on actual cash from operations, our financial condition and capital requirements, the recommendation of our management, and any other factors the Board of Directors may consider relevant at the time.
From time to time, excess cash held at the subsidiary level is transferred to the Company via cash dividends declared by the subsidiary. Because we have owned less than 100% of the common stock of certain subsidiaries, such subsidiary dividends can result in payments to outside shareholders of those subsidiaries. During the years ended December 31, 2016 and 2015, one of our subsidiaries paid a total of $750,000 and $250,000 in cash dividends, respectively, all of which was paid to us. Dividends paid to outside shareholders of our subsidiaries are accounted for as a reduction in noncontrolling interest.
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Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||||||
October 1 — 31, 2019 | — | $ | — | — | $ | 8,541,000 | ||||||||||
November 1 — 30, 2019 | — | $ | — | — | $ | 8,541,000 | ||||||||||
December 1 — 31, 2019 | — | $ | — | — | $ | 8,541,000 | ||||||||||
Total | — | $ | ||||||||||||||
— | — | $ | 8,541,000 | |||||||||||||
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2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |||||||||||||||||
Vicor Corporation | $100.00 | $ | 68.09 | $ | 168.59 | $ | 152.01 | $ | 114.57 | $ | 189.70 | |||||||||||
S&P 500 Index | $100.00 | $ | 116.00 | $ | 153.57 | $ | 174.60 | $ | 177.01 | $ | 198.18 | |||||||||||
S&P SmallCap 600 Index | $100.00 | $ | 116.33 | $ | 164.38 | $ | 173.84 | $ | 170.41 | $ | 215.67 |
2014 | 2015 | 2016 | 2017 | 2018 | 2019 | ||||||||||||||||||||
Vicor Corporation | $100.00 | $ | 75.37 | $ | 124.79 | $ | 172.73 | $ | 312.31 | $ | 386.12 | ||||||||||||||
S&P 500 Index | $100.00 | $ | 101.38 | $ | 113.51 | $ | 138.29 | $ | 132.23 | $ | 173.86 | ||||||||||||||
S&P SmallCap 600 Index | $100.00 | $ | 98.03 | $ | 124.06 | $ | 140.48 | $ | 128.56 | $ | 157.85 |
ITEM 6. | SELECTED FINANCIAL DATA |
Year Ended December 31, | ||||||||||||||||||||
Statement of Operations Data | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Net revenues | $ | 200,280 | $ | 220,194 | $ | 225,731 | $ | 199,160 | $ | 218,507 | ||||||||||
Loss from operations | (6,314 | ) | (267 | ) | (14,763 | ) | (20,467 | ) | (2,785 | ) | ||||||||||
Consolidated net income (loss) | (6,261 | ) | 5,159 | (14,070 | ) | (23,504 | ) | (3,798 | ) | |||||||||||
Net income (loss) attributable to noncontrolling interest | (14 | ) | 232 | (183 | ) | 136 | 279 | |||||||||||||
Net income (loss) attributable to Vicor Corporation | (6,247 | ) | 4,927 | (13,887 | ) | (23,640 | ) | (4,077 | ) | |||||||||||
Net income (loss) per share — basic and diluted attributable to Vicor Corporation | (0.16 | ) | 0.13 | (0.36 | ) | (0.60 | ) | (0.10 | ) | |||||||||||
Weighted average shares — basic | 38,842 | 38,754 | 38,569 | 39,195 | 41,811 | |||||||||||||||
Weighted average shares — diluted | 38,842 | 39,146 | 38,569 | 39,195 | 41,811 | |||||||||||||||
As of December 31, | ||||||||||||||||||||
Balance Sheet Data | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||
(In thousands) | ||||||||||||||||||||
Working capital | $ | 89,545 | $ | 94,905 | $ | 90,321 | $ | 97,869 | $ | 128,498 | ||||||||||
Total assets | 154,067 | 157,545 | 155,542 | 165,640 | 202,581 | |||||||||||||||
Total liabilities | 23,050 | 21,460 | 24,990 | 23,303 | 20,608 | |||||||||||||||
Total equity | 131,017 | 136,085 | 130,552 | 142,337 | 181,973 |
Year Ended December 31, | ||||||||||||||||||||
Statement of Operations Data | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Net revenues | $ | 262,977 | $ | 291,220 | $ | 227,830 | $ | 200,280 | $ | 220,194 | ||||||||||
Net income (loss) from operations | 13,821 | 32,059 | (1,360 | ) | (6,314 | ) | (267 | ) | ||||||||||||
Consolidated net income (loss) | 14,109 | 31,846 | 258 | (6,261 | ) | 5,159 | ||||||||||||||
Net income (loss) attributable to noncontrolling interest | 11 | 121 | 91 | (14 | ) | 232 | ||||||||||||||
Net income (loss) attributable to Vicor Corporation | 14,098 | 31,725 | 167 | (6,247 | ) | 4,927 | ||||||||||||||
Net income (loss) per share — basic attributable to Vicor Corporation | 0.35 | 0.80 | 0.00 | (0.16 | ) | 0.13 | ||||||||||||||
Net income (loss) per share — diluted attributable to Vicor Corporation | 0.34 | 0.78 | 0.00 | (0.16 | ) | 0.13 | ||||||||||||||
Weighted average shares — basic | 40,330 | 39,872 | 39,228 | 38,842 | 38,754 | |||||||||||||||
Weighted average shares — diluted | 41,677 | 40,729 | 39,933 | 38,842 | 39,146 |
As of December 31, | ||||||||||||||||||||
Balance Sheet Data | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
(In thousands) | ||||||||||||||||||||
Working capital | $ | 149,136 | $ | 129,062 | $ | 90,796 | $ | 89,545 | $ | 94,905 | ||||||||||
Total assets | 240,727 | 221,068 | 165,724 | 154,067 | 157,545 | |||||||||||||||
Total liabilities | 34,857 | 36,978 | 29,305 | 23,050 | 21,460 | |||||||||||||||
Total equity | 205,870 | 184,090 | 136,419 | 131,017 | 136,085 |
ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
We have organizedDC power conversion products, we consider our business segments accordingcore competencies to our key product lines. Reflecting our historybe associated with 48V DC distribution, which offers numerous inherent cost and direction,performance advantages over lower distribution voltages, although we broadly categorize ouroffer products as either “legacy” or “advanced”addressing other DC voltage standards (e.g., generally based380V for power distribution in data centers, 110V for rail applications, 28V for military and avionics applications, and 24V for industrial automation).
The BBU segment designs, develops, manufacturessold under the Advanced Products line, which were sold under the former Picor and markets our legacy linesVI Chip operating segments during periods prior to the second quarter ofDC-DC converters and configurable products, as well as complementary components providing AC line rectification, input filtering, power factor correction, and transient protection. The BBU segment also includes 2019. Revenue from the BBU business conducted through VJCL and our Vicor Custom Power subsidiaries. The BBU has customers concentrated in aerospace and aviation, defense electronics, industrial automation and equipment, medical diagnostics, rail transportation, and test and measurement instrumentation.
As previously disclosed, on March 30, 2016, we acquired 100% ownershipsale of certain operating assets and cashBrick Products represents the sum of Converpower Corporation (“Converpower”). We also entered into a license with Converpower allowing us to continue manufacturing certain products and supporting existing customers. With the closingthird-party sales of the Converpower transaction, we completedproducts sold under the consolidationBrick Products line, which were sold under the former Brick Business Unit operating segment, inclusive of such sales of our Vicor Custom Power operations into three wholly-ownedand Vicor Japan Company, Ltd. (“VJCL”) subsidiaries.
When reporting such revenue on a consolidated basis, intra-segment revenues are eliminated.
The Picor segment consiststransportation (notably in rail and heavy equipment applications). With our strategic emphasis on larger, high-volume customers, we expect to experience over time a greater concentration of our subsidiary, Picor Corporation, which designs, develops,sales among relatively fewer customers.
Our consolidated results for 2016, particularly our decreased revenue and profitability, continueBrick Products to be impacted by the general weakness of demand for our legacy productsChinese customers due to global macroeconomic uncertainty. Customer interest in our expanding portfoliothe costs of advanced products continues to increase, but we are encountering longer sales cycles than originally anticipated, attributable, in part, to the same macroeconomic trendsimport tariffs and industry-specific conditions influencing bookings and sales of our legacy product lines. In addition, for the latter half of 2015 and throughout 2016, demand for our 48 volt topoint-of-load solutions for datacenter servers was influenced by customer supply chain matters, notably scheduling delaysuncertainties associated with the releaseChina — U.S. trade dispute, and continued weakness in industrial market segments served with Brick Products in Japan and certain European countries. We experienced increased bookings and revenue for 2019 in recently targeted market segments (e.g., Advanced Products applications in automotive and commercial lighting applications), but such increases were not of next generation computer processors. However, sincesufficient volume to meaningfully offset declines in larger, established market segments and geographies.
higher prototyping and related engineering material costs.
Our profitability is closely aligned with production unit volumes. We manufacture ourhave invested significantly in
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pursuing opportunities to replace certain Brick Products used in existing customers’ applications with Advanced Products, when appropriate, and, similarly, to replace competitors’ products in existing applications, we believe such opportunities may not cumulatively contribute to a substantial expansion of our share of the mature markets we serve. |
Financial Highlights:
Year Ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
Net revenues | 100.0 | % | 100.0 | % | 100.0 | % | ||||||
Gross margin | 45.5 | % | 45.2 | % | 43.0 | % | ||||||
Selling, general and administrative expenses | 27.8 | % | 26.5 | % | 30.2 | % | ||||||
Research and development expenses | 20.9 | % | 18.8 | % | 18.4 | % | ||||||
Loss before income taxes | (3.0 | )% | (0.1 | )% | (6.4 | )% |
Year Ended December 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Net revenues | 100.0 | % | 100.0 | % | 100.0 | % | ||||||
Gross margin | 46.8 | % | 47.7 | % | 44.6 | % | ||||||
Selling, general and administrative expenses | 23.8 | % | 21.4 | % | 25.5 | % | ||||||
Research and development expenses | 17.7 | % | 15.2 | % | 19.7 | % | ||||||
Income (loss) before income taxes | 5.7 | % | 11.3 | % | (0.0 | )% |
We base our estimates, assumptions, and judgments on historical experience, knowledge of current conditions, and on various other factors we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We also have other policies we consider key accounting policies, such as our policy for revenue recognition, including the deferral of revenue on sales to distributors until the products are sold(See Note 2 to the end user.Consolidated Financial Statements —
Income Taxes
We make certain estimates, assumptions, and judgments in determining income tax expense for financial statement reporting purposes. These estimates, assumptions, and judgments occur in the calculation of tax credits, benefits, and deductions, and in the calculation of certain assets and liabilities that arise from differences in the timing and
Deferred Tax Assets
We follow atwo-step process to determine the amount of tax benefit to recognize in our financial statements for tax positions taken on tax returns. The first step is to evaluate the tax position to determine the likelihood it would be sustained upon examination by a tax authority. If the tax position is deemed“more-likely-than-not” to be sustained, the second step is to assess the tax position to determine the amount of tax benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater
than 50 percent likelihood of being realized upon ultimate settlement. If the tax position does not meet the“more-likely-than-not” threshold then it is not recognized in the financial statements. We accrue interest and penalties, if any, related to unrecognized tax benefits as a component of income tax expense. If the estimates, assumptions, and judgments made by us change, the unrecognized tax benefits may have to be adjusted, and such adjustments may be material.
Contingencies
From time to time, we receive notices of product failure claims, notices of infringement of patent or other intellectual property rights of others, or notices associated with other claims. In January 2011, we were named in a lawsuit for patent infringement (See Part I, Item 3 — “Legal Proceedings”) that is ongoing. We assess each notice and associated matter to determine if a contingent liability should be recorded. In making this assessment, we may consult, depending on the nature of the matter, with external legal counsel and technical experts. Based on the information we obtain, combined with our judgment regarding all the facts and circumstances of each matter, we determine whether it is probable a contingent loss may be incurred and whether the amount of such loss can be reasonably estimated. Should a loss be probable and reasonably estimable, we record such a loss (i.e., we establish a loss contingency). In determining the amount of the loss to be recorded, we consider advice received from experts in the specific matter, current status of legal proceedings (if any), prior case history, comparable precedent litigation, and other factors. Should the estimates, assumptions, and judgments made by us change, we may need to record additional losses (i.e., add to our loss contingency) that may be material.
Revenue Recognition
statements.
Net2018
The components of revenue2018.
Increase (decrease) | ||||||||||||||||
2016 | 2015 | $ | % | |||||||||||||
BBU | $ | 151,429 | $ | 173,108 | $ | (21,679 | ) | (12.5 | )% | |||||||
VI Chip | 38,369 | 35,198 | 3,171 | 9.0 | % | |||||||||||
Picor | 10,482 | 11,888 | (1,406 | ) | (11.8 | )% | ||||||||||
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Total | $ | 200,280 | $ | 220,194 | $ | (19,914 | ) | (9.0 | )% | |||||||
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Increase (decrease) | ||||||||||||||||
2019 | 2018 | $ | % | |||||||||||||
Brick Products | $ | 187,896 | $ | 186,704 | $ | 1,192 | 0.6 | % | ||||||||
Advanced Products | 75,081 | 104,516 | (29,435 | ) | (28.2 | )% | ||||||||||
Total | $ | 262,977 | $ | 291,220 | $ | (28,243 | ) | (9.7 | )% | |||||||
Income (loss) from operations by segment for the years ended December 31 were as follows (dollars in thousands):
Increase (decrease) | ||||||||||||||||
2016 | 2015 | $ | % | |||||||||||||
BBU | $ | 11,750 | $ | 21,743 | $ | (9,993 | ) | (46.0 | )% | |||||||
VI Chip | (16,494 | ) | (21,040 | ) | 4,546 | 21.6 | % | |||||||||
Picor | (637 | ) | (290 | ) | (347 | ) | (119.7 | )% | ||||||||
Corporate | (933 | ) | (680 | ) | (253 | ) | (37.2 | )% | ||||||||
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Total | $ | (6,314 | ) | $ | (267 | ) | $ | (6,047 | ) | (2,264.8 | )% | |||||
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The decrease in BBU operating profit in 2016 compared to 2015 was primarily due to a decrease in revenues and related decrease in gross margin, partially offset by decreases in operating expenses. The primary decreases in operating expenses were compensation expenses, commissions expense, and legal fees. Compensation and other operating expenses have decreased in part due to the Westcor consolidation and the consolidation of our Vicor Custom Power operations discussed above. The decrease in commissions expense is primarily attributable to the decrease in net revenues, subject to commissions. Legal fees, which are charged to the BBU segment, are associated with the ongoing patent infringement litigation. The decrease in VI Chip operating loss in 2016 compared to 2015 was due to the increase in revenues and the related increase in gross margin, along with the reversalhigher tariff charges of approximately $768,000$5,089,000 and lower production volume on absorption of stock-based compensation expense related to certain VI Chip performance-based stock options in the third quartermanufacturing overhead costs, partially offset by an improved mix of 2016. The VI Chip segment continues to incur significant operating losses as revenue volume and related gross margins are not sufficient to cover fixed manufacturing costs and operating expenses, particularly research and development expenses. The cash needs for each segment are primarily for working capital and capital expenditures. Positive cash flow from BBU historically has funded, and is expected to continue to fund, VI Chip and Picor operations, as well as the capital expenditures for all segments for the foreseeable future.
higher-margin products shipped.
Increase (decrease) | ||||||||
Compensation | $ | (1,077 | ) | (3.1 | )%(1) | |||
Commissions expense | (748 | ) | (17.4 | )%(2) | ||||
Legal fees | (734 | ) | (31.9 | )%(3) | ||||
Depreciation and amortization | (148 | ) | (5.2 | )%(4) | ||||
Supplies expense | (138 | ) | (25.3 | )%(5) | ||||
Project expenses | (132 | ) | (73.5 | )%(6) | ||||
Computer expenses | (52 | ) | (5.2 | )% | ||||
Employment recruiting | (40 | ) | (15.3 | )% | ||||
Travel expenses | 300 | 11.3 | %(7) | |||||
Outside services | 362 | 22.1 | %(8) | |||||
Other, net | (231 | ) | (3.0 | )% | ||||
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$ | (2,638 | ) | (4.5 | )% | ||||
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Increase (decrease) | ||||||||
Depreciation and amortization | $ | 384 | 15.8 | %(1) | ||||
Outside services | 285 | 15.0 | %(2) | |||||
Advertising expenses | 217 | 7.1 | %(3) | |||||
Facilities allocations | 156 | 10.4 | %(4) | |||||
Commissions | 104 | 3.0 | % | |||||
Bad debt expense | (209 | ) | (321.7 | )%(5) | ||||
Legal fees | (223 | ) | (12.2 | )%(6) | ||||
Compensation | (362 | ) | (0.9 | )%(7) | ||||
Other, net | (19 | ) | (0.2 | )% | ||||
$ | 333 | 0.5 | % | |||||
(1) | Increase attributable to an increase in additions of furniture and fixtures and building improvements. |
(2) | Increase in use of outside service providers in Andover. |
(3) | Increase primarily attributed to increases in sales support expenses, direct mailings, and advertising in trade publications. |
(4) | Increase primarily attributable to an increase in utilities and building maintenance expenses. |
(5) | Decrease attributable to favorable historical collections experience over the period analyzed. |
(6) | Decrease attributable to a decrease in corporate legal matters. |
(7) | Decrease primarily attributable to |
non-employee. |
revenues, an increase in prototype development costs, and a net increase in headcount.
Increase (decrease) | ||||||||
Project andpre-production materials | $ | 1,214 | 26.5 | %(1) | ||||
Compensation | 502 | 1.8 | %(2) | |||||
Computer expenses | 91 | 22.7 | % | |||||
Outside services | (86 | ) | (9.7 | )% | ||||
Facilities expenses | (221 | ) | (10.2 | )%(3) | ||||
Depreciation and amortization | (357 | ) | (14.8 | )%(4) | ||||
Deferred costs | (774 | ) | (474.7 | )%(5) | ||||
Other, net | 7 | 0.3 | % | |||||
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$ | 376 | 0.9 | % | |||||
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Increase (decrease) | ||||||||
Compensation | $ | 1,580 | 5.0 | %(1) | ||||
Project and pre-production materials | 1,548 | 28.4 | %(2) | |||||
Depreciation and amortization | (141 | ) | (7.3 | )% | ||||
Deferred costs | (761 | ) | (77.5 | )%(3) | ||||
Other, net | 76 | 1.2 | % | |||||
$ | 2,302 | 5.2 | % | |||||
(1) |
Increase primarily attributable to annual compensation adjustments in May |
Decrease primarily attributable to an increase in deferred costs capitalized for certain non-recurring engineering projects for which the related revenues have been deferred. |
2016 | 2015 | Increase (decrease) | ||||||||||
Rental income | $ | 462 | $ | — | $ | 462 | ||||||
Foreign currency losses, net | (268 | ) | (161 | ) | (107 | ) | ||||||
Interest income | 68 | 47 | 21 | |||||||||
Credit gains on available for sale securities | 13 | 12 | 1 | |||||||||
(Loss) gain on disposal of equipment | (4 | ) | 60 | (64 | ) | |||||||
Other | 13 | 67 | (54 | ) | ||||||||
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$ | 284 | $ | 25 | $ | 259 | |||||||
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During the second quarter of 2016, we began recognizing rental income under a new leasing agreement with a third party for the former Westcor facility.
2019 | 2018 | Increase (decrease) | ||||||||||
Rental income | $ | 792 | $ | 792 | $ | — | ||||||
Interest income | 300 | 257 | 43 | |||||||||
Foreign currency losses, net | (108 | ) | (260 | ) | 152 | |||||||
Gain on disposal of equipment | 38 | 57 | (19 | ) | ||||||||
Credit gains on available-for-sale securities | 4 | 7 | (3 | ) | ||||||||
Other | 40 | 21 | 19 | |||||||||
$ | 1,066 | $ | 874 | $ | 192 | |||||||
�� |
2018.
2016 | 2015 | |||||||
Provision (benefit) for income taxes | $ | 231 | $ | (401 | ) | |||
Effective income tax rate | 3.8 | % | (165.7 | )% |
For the years ended December 31, 2016
2019 | 2018 | |||||||
Provision for income taxes | $ | 778 | $ | 1,087 | ||||
Effective income tax rate | 5.2 | % | 3.3 | % |
domestic net deferred tax assets and the majority of foreign net deferred tax assets. The effective tax rate was lower in 2016 than 2015 as the loss before income taxes and before the gain from sale of equity method investments was significantly higher in 2016 than in 2015.
In September 2015, Intersil acquired GWS. At that time, our gross investment innon-voting convertible preferred stock of GWS totaled $4,999,719, giving us an approximately 27% ownership interest in GWS. We received cash consideration of $4,999,719 for our investment from Intersil, representing full preference value of our shares ofnon-voting convertible preferred stock of GWS. Since the investment in GWS had previously been written down to zero, the full amount of the consideration was recorded as a gain from sale of equity method investment in the third quarter of 2015. (See Note 816 to the Consolidated Financial Statements for additional information.)
Net loss per share attributable to Vicor Corporation was $(0.16) for the year ended December 31, 2016, compared to net income per diluted share of $0.13 for the year ended December 31, 2015.
Year ended December 31, 2015 compared to Year ended December 31, 2014
Net revenues for 2015 were $220,194,000, a decrease of $5,537,000 or 2.5%, as compared to $225,731,000 for 2014.
The components of revenue for the years ended December 31 were as follows (dollars in thousands):
Increase (decrease) | ||||||||||||||||
2015 | 2014 | $ | % | |||||||||||||
BBU | $ | 173,108 | $ | 184,224 | $ | (11,116 | ) | (6.0 | )% | |||||||
VI Chip | 35,198 | 32,929 | 2,269 | 6.9 | % | |||||||||||
Picor | 11,888 | 8,578 | 3,310 | 38.6 | % | |||||||||||
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Total | $ | 220,194 | $ | 225,731 | $ | (5,537 | ) | (2.5 | )% | |||||||
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The overall year to year decrease in BBU net revenues was primarily due to a 8.2% decrease in bookings in 2015 compared to 2014. The decrease in BBU revenues was primarily attributable to decreases in BBU revenues of approximately $4,481,000, Vicor Custom Power revenues of approximately $3,507,000, and VJCL revenues of approximately $3,100,000. While bookings declined across all three segments on a year over year basis, VI Chip and Picor revenues increased due to strong bookings in the latter half of 2014, particularly from the two segments’ major datacenter customer.
Gross margin for 2015 increased $2,398,000, or 2.5%, to $99,518,000 from $97,120,000 in 2014. Gross margin as a percentage of net revenues increased to 45.2% in 2015 from 43.0% in 2014. The increases in gross margin and gross margin percentage were primarily due to the increase in VI Chip and Picor net revenues, particularly due to a larger proportion of higher margin Picor products. In addition, the gross margin for BBU products remained relatively flat, despite their decrease in net revenues, due to average selling price improvements across several BBU programs, along with realizing the full benefitdisclosure regarding our current assessment of the Westcor consolidation into Andover manufacturing.
Income (loss) from operations by segment for the years ended December 31 were as follows (dollars in thousands):
Increase | ||||||||||||||||
2015 | 2014 | $ | % | |||||||||||||
BBU | $ | 21,743 | $ | 15,499 | $ | 6,244 | 40.3 | % | ||||||||
VI Chip | (21,040 | ) | (29,015 | ) | 7,975 | 27.5 | % | |||||||||
Picor | (290 | ) | (407 | ) | 117 | 28.7 | % | |||||||||
Corporate | (680 | ) | (840 | ) | 160 | 19.0 | % | |||||||||
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|
|
|
| |||||||||||
Total | $ | (267 | ) | $ | (14,763 | ) | $ | 14,496 | 98.2 | % | ||||||
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|
|
|
|
|
The increase in BBU operating profit in 2015 compared to 2014 was due to decreases in operating expenses, partially offset by decreases in revenues and the related gross margin. The primary decreases in operating expenses were legal fees and compensation expenses. Legal fees, which are charged to the BBU segment, are associated with the ongoing patent infringement litigation. The decrease in legal fees continued the trend begun in the fourth quarter of 2014 associated with continued delays in the expected trial date related to the SynQor litigation. Compensation and other operating expenses have decreased in part due to the Westcor consolidation discussed above.
Selling, general, and administrative expenses were $58,313,000 for 2015, a decrease of $9,884,000, or (14.5)%, as compared to $68,197,000 for 2014. As a percentage of net revenues, selling, general, and administrative expenses decreased to 26.5% in 2015 from 30.2% in 2014.
The components of the $9,884,000 decrease in selling, general, and administrative expenses were as follows (dollars in thousands):
Increase (decrease) | ||||||||
Legal fees | $ | (8,621 | ) | (78.9 | )%(1) | |||
Compensation | (1,064 | ) | (3.0 | )%(2) | ||||
Commissions expense | (310 | ) | (6.7 | )%(3) | ||||
Travel expenses | (280 | ) | (9.5 | )%(4) | ||||
Advertising expenses | (234 | ) | (9.6 | )%(5) | ||||
Business taxes and fees | 83 | 16.0 | % | |||||
Outside services | 130 | 8.1 | % | |||||
Audit, tax, and accounting fees | 145 | 8.1 | % | |||||
Facilities expenses | 145 | 10.0 | % | |||||
Other, net | 122 | 2.0 | % | |||||
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| |||||||
$ | (9,884 | ) | (14.5 | )% | ||||
|
|
Research and development expenses decreased $7,000, or 0.0%, to $41,472,000 in 2015 from $41,479,000 in 2014. As a percentage of net revenues, research and development increased to 18.8% in 2015 from 18.4% in 2014, primarily due to the decrease in net revenues.
The significant changes in the components of “Other income, net” for the years ended December 31 were as follows (in thousands):
2015 | 2014 | Increase (decrease) | ||||||||||
Foreign currency losses, net | $ | (161 | ) | $ | (196 | ) | $ | 35 | ||||
Gain on disposal of equipment | 60 | 22 | 38 | |||||||||
Interest income | 47 | 80 | (33 | ) | ||||||||
Credit gains on available for sale securities | 12 | 311 | (299 | ) | ||||||||
Other | 67 | 51 | 16 | |||||||||
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| |||||||
$ | 25 | $ | 268 | $ | (243 | ) | ||||||
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We assess the value of our investment portfolio of auction rate securities each quarter, and record any credit gains or losses calculated as a component of “Other income (expense), net”. Our exposure to market risk fluctuations in foreign currency exchange rates relate primarily to the operations of VJCL, for which the functional currency is the Japanese Yen. The functional currency of all other subsidiaries in Europe and Asia is the U.S. Dollar. While our Vicor B.V. operation also potentially exposes us to exchange rate risk, as that subsidiary’s sales are denominated in Euros and Pounds Sterling, any periodic gains or losses associated with exchange rate fluctuations are small, given the small U.S. Dollar value of shipments we make to Vicor B.V. The decrease in interest income for the period was due to lower average balances on our long-term investments, as well as a general decrease in interest rates earned on these investments.
Loss before income taxes was $(242,000) in 2015, as compared to $(14,495,000) in 2014.
The benefit for income taxes and the effective income tax rate for the years ended December 31 were as follows (dollars in thousands):
2015 | 2014 | |||||||
Benefit for income taxes | $ | (401 | ) | $ | (425 | ) | ||
Effective income tax rate | (165.7 | )% | (2.9 | )% |
For the years ended December 31, 2015 and 2014, no tax benefit could be recognized for the majority of our losses due to a full valuation allowance against all domestic deferred tax assets. In 2015, we recognized a tax benefit of approximately $555,000 as a discrete item in the fourth quarter of 2015 for the release of certain tax reserves, due to entering into voluntary disclosure agreements with several states. In addition, in connection with the sale of our 49% interest in a noncontrolling interest subsidiary, Aegis Power Systems, Inc., the related deferred tax liability for unremitted earnings of $274,000 was reversed and recorded as a deferred tax benefit in the fourth quarter of 2015 (see Note 9 to the Consolidated Financial Statements). In 2014, we recognized a tax benefit of approximately $552,000 as a discrete item in the third quarter of 2014 for the release of certain income tax reserves, due to the completion of an Internal Revenue Service examination of its 2010 and 2011 federal corporate income tax returns during the quarter. The tax benefits in both years were partially offset by estimated federal and state taxes for one noncontrolling interest subsidiary as well as estimated state and foreign taxes in jurisdictions in which we do not have net operating loss carryforwards. We continue to maintain a full valuation allowance against all domestic net deferred tax assets, and in 2015, established a valuation allowance against the majority of foreign net deferred tax assets. The effective tax rate was higher in 2015 than 2014 as the loss before income taxes and before the gain from sale of equity method investments was significantly lower in 2015 than in 2014.
In September 2015, Intersil acquired GWS. At that time, our gross investment innon-voting convertible preferred stock of GWS totaled $4,999,719, representing an approximately 27% ownership preference in GWS. We received cash consideration from Intersil of $4,999,719, representing full preference valuepossible release (i.e., reduction) of the shares of
non-voting convertible preferred stock of GWS we owned. Since the investment in GWS had previously been reduced to zero, the full amount of the consideration was recorded as a gain from sale of equity method investmentallowance in the third quarter of 2015. See Note 8 to the Consolidated Financial Statements for additional information.
Net income (loss) of noncontrolling interest increased by $415,000 for 2015 to $232,000, as compared to $(183,000) for 2014. This increase was due to the increase in net income during 2015 recorded by entities in which others held an equity interest (i.e., three Vicor Custom Power subsidiaries and VJCL).
future.
LIQUIDITY AND CAPITAL RESOURCES
Capital Resources
2018.
Increase (decrease) | ||||
Cash and cash equivalents | $ | (6,810 | ) | |
Accounts receivable | (766 | ) | ||
Inventories | 3,694 | |||
Other current assets | 148 | |||
Accounts payable | (118 | ) | ||
Accrued compensation and benefits | (616 | ) | ||
Accrued expenses | 389 | |||
Accrued severance charges | 195 | |||
Income taxes payable | (61 | ) | ||
Deferred revenue | (1,415 | ) | ||
|
| |||
$ | (5,360 | ) | ||
|
|
Increase (decrease) | ||||
Cash and cash equivalents | $ | 14,111 | ||
Accounts receivable | (5,558 | ) | ||
Inventories | 1,817 | |||
Other current assets | 3,636 | |||
Accounts payable | 7,144 | |||
Accrued compensation and benefits | 247 | |||
Accrued expenses | (59 | ) | ||
Sales allowances | (193 | ) | ||
Accrued severance and other charges | 234 | |||
Short-term lease liabilities | (1,520 | ) | ||
Income taxes payable | 653 | |||
Short-term deferred revenue and customer prepayments | (438 | ) | ||
$ | 20,074 | |||
$12,485,000.
Payments Due by Period | ||||||||||||||||||||
Contractual Obligations | Total | Less than 1 Year | Years 2 & 3 | Years 4 & 5 | More Than 5 Years | |||||||||||||||
Operating lease obligations | $ | 4,771 | $ | 1,572 | $ | 1,569 | $ | 699 | $ | 931 | ||||||||||
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Payments Due by Period | ||||||||||||||||||||
Contractual Obligations | Total | Less than 1 Year | Years 2 & 3 | Years 4 & 5 | More Than 5 Years | |||||||||||||||
Operating lease obligations (1) | $ | 4,711 | $ | 1,657 | $ | 1,690 | $ | 1,193 | $ | 171 | ||||||||||
(1) | For further information, refer to Note 13 of the notes to Consolidated Financial Statements, Leases 10-K. |
2019.
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
In our opinion,
We also have audited, in accordance withcritical audit matters below, providing separate opinions on the standardscritical audit matters or on the accounts or disclosures to which they relate.
the Company’s income tax process, including controls over the assessment of the realizability of deferred tax assets and the application of relevant tax regulations. To assess the Company’s ability to forecast, we compared the Company’s previous forecasts to actual results. We also
March 7, 2017
CONSOLIDATED BALANCE SHEETS
2018
2016 | 2015 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 56,170 | $ | 62,980 | ||||
Accounts receivable, less allowance of $153 in 2016 and $171 in 2015 | 25,216 | 25,982 | ||||||
Inventories, net | 27,136 | 23,442 | ||||||
Other current assets | 3,250 | 3,102 | ||||||
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|
|
| |||||
Total current assets | 111,772 | 115,506 | ||||||
Long-term deferred tax assets | 38 | 15 | ||||||
Long-term investments, net | 2,508 | 2,866 | ||||||
Property, plant and equipment, net | 37,574 | 37,450 | ||||||
Other assets | 2,175 | 1,708 | ||||||
|
|
|
| |||||
Total assets | $ | 154,067 | $ | 157,545 | ||||
|
|
|
| |||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 7,588 | $ | 7,470 | ||||
Accrued compensation and benefits | 8,965 | 8,349 | ||||||
Accrued expenses | 2,179 | 2,568 | ||||||
Accrued severance charges | — | 195 | ||||||
Income taxes payable | 92 | 31 | ||||||
Deferred revenue | 3,403 | 1,988 | ||||||
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|
|
| |||||
Total current liabilities | 22,227 | 20,601 | ||||||
Long-term deferred revenue | 374 | 468 | ||||||
Contingent consideration obligations | 253 | 144 | ||||||
Long-term income taxes payable | 196 | 192 | ||||||
Deferred income taxes | — | 55 | ||||||
|
|
|
| |||||
Total liabilities | 23,050 | 21,460 | ||||||
Commitments and contingencies (Note 16) | ||||||||
Equity: | ||||||||
Vicor Corporation stockholders’ equity: | ||||||||
Preferred Stock, $.01 par value, 1,000,000 shares authorized; no shares issued | ||||||||
Class B Common Stock: 10 votes per share, $.01 par value, 14,000,000 shares authorized, 11,758,218 shares issued and outstanding in 2016 and 2015 | 118 | 118 | ||||||
Common Stock: 1 vote per share, $.01 par value, 62,000,000 shares authorized 38,922,489 shares issued and 27,251,003 shares outstanding (38,705,564 shares issued and 27,034,078 shares outstanding in 2015) | 397 | 395 | ||||||
Additionalpaid-in capital | 176,344 | 174,337 | ||||||
Retained earnings | 93,438 | 99,685 | ||||||
Accumulated other comprehensive loss | (561 | ) | (577 | ) | ||||
Treasury stock at cost: 11,671,486 shares in 2016 and 2015 | (138,927 | ) | (138,927 | ) | ||||
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|
|
| |||||
Total Vicor Corporation stockholders’ equity | 130,809 | 135,031 | ||||||
Noncontrolling interest | 208 | 1,054 | ||||||
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|
|
| |||||
Total equity | 131,017 | 136,085 | ||||||
|
|
|
| |||||
Total liabilities and equity | $ | 154,067 | $ | 157,545 | ||||
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|
|
2019 | 2018 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 84,668 | $ | 70,557 | ||||
Accounts receivable, less allowance of $59 in 2019 and $224 in 2018 | 38,115 | 43,673 | ||||||
Inventories, net | 49,187 | 47,370 | ||||||
Other current assets | 7,096 | 3,460 | ||||||
Total current assets | 179,066 | 165,060 | ||||||
Long-term deferred tax assets | 205 | 265 | ||||||
Long-term investment, net | 2,510 | 2,526 | ||||||
Property, plant and equipment, net | 56,952 | 50,432 | ||||||
Other assets | 1,994 | 2,785 | ||||||
Total assets | $ | 240,727 | $ | 221,068 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 9,005 | $ | 16,149 | ||||
Accrued compensation and benefits | 10,410 | 10,657 | ||||||
Accrued expenses | 2,690 | 2,631 | ||||||
Sales allowances | 741 | 548 | ||||||
Short-term lease liabilities | 1,520 | — | ||||||
Accrued severance and other charges | — | 234 | ||||||
Income taxes payable | 57 | 710 | ||||||
Short-term deferred revenue and customer prepayments | 5,507 | 5,069 | ||||||
Total current liabilities | 29,930 | 35,998 | ||||||
Long-term deferred revenue | 1,054 | 232 | ||||||
Contingent consideration obligations | 451 | 408 | ||||||
Long-term income taxes payable | 567 | 238 | ||||||
Long-term lease liabilities | 2,855 | 102 | ||||||
Total liabilities | 34,857 | 36,978 | ||||||
Commitments and contingencies (Note 17) | ||||||||
Equity: | ||||||||
Vicor Corporation stockholders’ equity: | ||||||||
Class B Common Stock: 10 votes per share, $.01 par value, 14,000,000 shares authorized, 11,758,218 shares issued and outstanding in 2019 and 2018 | 118 | 118 | ||||||
Common Stock: 1 vote per share, $.01 par value, 62,000,000 shares authorized 40,403,058 shares issued and 28,768,252 shares outstanding in 2019; 40,066,710 shares issued and 28,430,971 shares outstanding in 2018 | 405 | 402 | ||||||
Additional paid-in capital | 201,251 | 193,457 | ||||||
Retained earnings | 143,098 | 129,000 | ||||||
Accumulated other comprehensive loss | (383 | ) | (394 | ) | ||||
Treasury stock at cost: 11,634,806 shares in 2019 and 11,635,739 shares in 2018 | (138,927 | ) | (138,927 | ) | ||||
Total Vicor Corporation stockholders’ equity | 205,562 | 183,656 | ||||||
Noncontrolling interest | 308 | 434 | ||||||
Total equity | 205,870 | 184,090 | ||||||
Total liabilities and equity | $ | 240,727 | $ | 221,068 | ||||
CONSOLIDATED STATEMENTS OF
2017
2016 | 2015 | 2014 | ||||||||||
Net revenues | $ | 200,280 | $ | 220,194 | $ | 225,731 | ||||||
Cost of revenues | 109,071 | 120,676 | 128,611 | |||||||||
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| |||||||
Gross margin | 91,209 | 99,518 | 97,120 | |||||||||
Operating expenses: | ||||||||||||
Selling, general and administrative | 55,675 | 58,313 | 68,197 | |||||||||
Research and development | 41,848 | 41,472 | 41,479 | |||||||||
Severance and other charges | — | — | 2,207 | |||||||||
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| |||||||
Total operating expenses | 97,523 | 99,785 | 111,883 | |||||||||
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| |||||||
Loss from operations | (6,314 | ) | (267 | ) | (14,763 | ) | ||||||
Other income (expense), net: | ||||||||||||
Total unrealized (losses) gains onavailable-for-sale securities, net | (18 | ) | (49 | ) | 750 | |||||||
Portion of gains (losses) recognized in other comprehensive income (loss) | 31 | 61 | (439 | ) | ||||||||
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| |||||||
Net credit gains recognized in earnings | 13 | 12 | 311 | |||||||||
Other income (expense), net | 271 | 13 | (43 | ) | ||||||||
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| |||||||
Total other income (expense), net | 284 | 25 | 268 | |||||||||
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| |||||||
Loss before income taxes | (6,030 | ) | (242 | ) | (14,495 | ) | ||||||
Less: Provision (benefit) for income taxes | 231 | (401 | ) | (425 | ) | |||||||
Gain from sale of equity method investment, net of tax | — | 5,000 | — | |||||||||
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| |||||||
Consolidated net income (loss) | (6,261 | ) | 5,159 | (14,070 | ) | |||||||
Less: Net income (loss) attributable to noncontrolling interest | (14 | ) | 232 | (183 | ) | |||||||
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| |||||||
Net income (loss) attributable to Vicor Corporation | $ | (6,247 | ) | $ | 4,927 | $ | (13,887 | ) | ||||
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Net income (loss) per common share attributable to Vicor Corporation: | ||||||||||||
Basic | $ | (0.16 | ) | $ | 0.13 | $ | (0.36 | ) | ||||
Diluted | $ | (0.16 | ) | $ | 0.13 | $ | (0.36 | ) | ||||
Shares used to compute net income (loss) per common share attributable to Vicor Corporation: | ||||||||||||
Basic | 38,842 | 38,754 | 38,569 | |||||||||
Diluted | 38,842 | 39,146 | 38,569 |
2019 | 2018 | 2017 | ||||||||||
Net revenues | $ | 262,977 | $ | 291,220 | $ | 227,830 | ||||||
Cost of revenues | 140,011 | 152,249 | 126,174 | |||||||||
Gross margin | 122,966 | 138,971 | 101,656 | |||||||||
Operating expenses: | ||||||||||||
Selling, general and administrative | 62,557 | 62,224 | 58,092 | |||||||||
Research and development | 46,588 | 44,286 | 44,924 | |||||||||
Severance and other charges | — | 402 | — | |||||||||
Total operating expenses | 109,145 | 106,912 | 103,016 | |||||||||
Income (loss) from operations | 13,821 | 32,059 | (1,360 | ) | ||||||||
Other income (expense), net: | ||||||||||||
Total unrealized (losses) gains on available-for-sale securities, net | (16 | ) | 1 | 17 | ||||||||
Portion of losses (gains) recognized in other comprehensive income (loss) | 20 | 6 | (6 | ) | ||||||||
Net credit gains recognized in earnings | 4 | 7 | 11 | |||||||||
Other income (expense), net | 1,062 | 867 | 1,251 | |||||||||
Total other income (expense), net | 1,066 | 874 | 1,262 | |||||||||
Income (loss) before income taxes | 14,887 | 32,933 | (98 | ) | ||||||||
Less: Provision (benefit) for income taxes | 778 | 1,087 | (356 | ) | ||||||||
Consolidated net income | 14,109 | 31,846 | 258 | |||||||||
Less: Net income attributable to noncontrolling interest | 11 | 121 | 91 | |||||||||
Net income attributable to Vicor Corporation | $ | 14,098 | $ | 31,725 | $ | 167 | ||||||
Net income per common share attributable to Vicor Corporation: | ||||||||||||
Basic | $ | 0.35 | $ | 0.80 | $ | 0.00 | ||||||
Diluted | $ | 0.34 | $ | 0.78 | $ | 0.00 | ||||||
Shares used to compute net income per common share attributable to Vicor Corporation: | ||||||||||||
Basic | 40,330 | 39,872 | 39,228 | |||||||||
Diluted | 41,677 | 40,729 | 39,933 |
CONSOLIDATED STATEMENTS OF
2017
2016 | 2015 | 2014 | ||||||||||
Consolidated net income (loss) | $ | (6,261 | ) | $ | 5,159 | $ | (14,070 | ) | ||||
Foreign currency translation gains (losses), net of tax benefit (1) | 52 | (52 | ) | (410 | ) | |||||||
Unrealized (losses) gains onavailable-for-sale securities, net of tax (1) | (31 | ) | (59 | ) | 429 | |||||||
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Other comprehensive income (loss) | 21 | (111 | ) | 19 | ||||||||
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| |||||||
Consolidated comprehensive income (loss) | (6,240 | ) | 5,048 | (14,051 | ) | |||||||
Less: Comprehensive income (loss) attributable to noncontrolling interest | (9 | ) | 227 | (219 | ) | |||||||
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| |||||||
Comprehensive income (loss) attributable to Vicor Corporation | $ | (6,231 | ) | $ | 4,821 | $ | (13,832 | ) | ||||
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2019 | 2018 | 2017 | ||||||||||
Consolidated net income | $ | 14,109 | $ | 31,846 | $ | 258 | ||||||
Foreign currency translation gains, net of tax benefit (1) | 33 | 98 | 83 | |||||||||
Unrealized (losses) gains on available-for-sale securities, net of tax (1) | (20 | ) | (6 | ) | 6 | |||||||
Other comprehensive income | 13 | 92 | 89 | |||||||||
Consolidated comprehensive income | 14,122 | 31,938 | 347 | |||||||||
Less: Comprehensive income attributable to noncontrolling interest | 13 | 129 | 97 | |||||||||
Comprehensive income attributable to Vicor Corporation | $ | 14,109 | $ | 31,809 | $ | 250 | ||||||
(1) | The deferred tax assets associated with cumulative foreign currency translation gains |
CONSOLIDATED STATEMENTS OF CASH FLOWS
2017
2016 | 2015 | 2014 | ||||||||||
Operating activities: | ||||||||||||
Consolidated net income (loss) | $ | (6,261 | ) | $ | 5,159 | $ | (14,070 | ) | ||||
Adjustments to reconcile consolidated net income (loss) to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 8,438 | 9,142 | 9,805 | |||||||||
Gain from sale of equity method investment | — | (5,000 | ) | — | ||||||||
Increase in other assets | (505 | ) | — | — | ||||||||
Gain from disposition of consolidated subsidiary | — | (28 | ) | — | ||||||||
Stock-based compensation expense | 506 | 1,782 | 1,634 | |||||||||
Increase (decrease) in long-term income taxes payable | 4 | (675 | ) | (472 | ) | |||||||
Deferred income taxes | (78 | ) | (183 | ) | 18 | |||||||
Decrease in long-term deferred revenue | (94 | ) | (139 | ) | (139 | ) | ||||||
Loss (gain) on disposal of equipment | 4 | (60 | ) | (22 | ) | |||||||
(Benefit) provision for doubtful accounts | (22 | ) | (18 | ) | 66 | |||||||
Credit gain on available for sale securities | (13 | ) | (12 | ) | (311 | ) | ||||||
Change in current assets and liabilities, net | (1,435 | ) | 1,499 | 5,682 | ||||||||
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| |||||||
Net cash provided by operating activities | 544 | 11,467 | 2,191 | |||||||||
Investing activities: | ||||||||||||
Additions to property, plant and equipment | (8,428 | ) | (9,090 | ) | (7,128 | ) | ||||||
Sales and maturities of investments | — | 360 | 3,460 | |||||||||
Purchases of investments | — | — | (340 | ) | ||||||||
Proceeds from sale of equity method investment | — | 5,000 | — | |||||||||
Deconsolidation of subsidiary | — | (392 | ) | — | ||||||||
Proceeds from sale of equipment | 2 | 60 | 22 | |||||||||
Increase in other assets | (93 | ) | (204 | ) | (43 | ) | ||||||
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| |||||||
Net cash used for investing activities | (8,519 | ) | (4,266 | ) | (4,029 | ) | ||||||
Financing activities: | ||||||||||||
Proceeds from issuance of Common Stock | 1,584 | 820 | 788 | |||||||||
Acquisition of noncontrolling interest | (372 | ) | (216 | ) | — | |||||||
Payment of contingent consideration obligations | (99 | ) | — | — | ||||||||
Noncontrolling interest dividends paid | — | — | (162 | ) | ||||||||
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| |||||||
Net cash provided by financing activities | 1,113 | 604 | 626 | |||||||||
Effect of foreign exchange rates on cash | 52 | (12 | ) | 60 | ||||||||
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| |||||||
Net (decrease) increase in cash and cash equivalents | (6,810 | ) | 7,793 | (1,152 | ) | |||||||
Cash and cash equivalents at beginning of period | 62,980 | 55,187 | 56,339 | |||||||||
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Cash and cash equivalents at end of period | $ | 56,170 | $ | 62,980 | $ | 55,187 | ||||||
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| |||||||
Change in assets and liabilities, excluding effects of disposition of consolidated subsidiary: | ||||||||||||
Accounts receivable | $ | 780 | $ | 2,201 | $ | (1,151 | ) | |||||
Inventories, net | (3,677 | ) | 1,880 | 3,202 | ||||||||
Other current assets | (158 | ) | (111 | ) | 1,029 | |||||||
Accounts payable and accrued liabilities | 339 | (1,301 | ) | 300 | ||||||||
Accrued severance charges | (195 | ) | (1,709 | ) | 1,855 | |||||||
Income taxes payable | 61 | (10 | ) | 26 | ||||||||
Deferred revenue | 1,415 | 549 | 421 | |||||||||
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| |||||||
$ | (1,435 | ) | $ | 1,499 | $ | 5,682 | ||||||
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Supplemental disclosures: | ||||||||||||
Cash paid during the year for income taxes, net of refunds | $ | 230 | $ | 675 | $ | (1,529 | ) |
2019 | 2018 | 2017 | ||||||||||
Operating activities: | ||||||||||||
Consolidated net income | $ | 14,109 | $ | 31,846 | $ | 258 | ||||||
Adjustments to reconcile consolidated net income to net cash provided by (used for) operating activities: | ||||||||||||
Depreciation and amortization | 10,334 | 9,254 | 8,893 | |||||||||
Stock-based compensation expense | 3,036 | 3,396 | 1,735 | |||||||||
Increase (decrease) in long-term income taxes payable | 329 | 43 | (1 | ) | ||||||||
Deferred income taxes | 60 | (55 | ) | (172 | ) | |||||||
Increase (decrease) in long-term deferred revenue | 822 | (71 | ) | (71 | ) | |||||||
Increase in other long-term liabilities | — | 9 | 93 | |||||||||
Gain on disposal of equipment | (38 | ) | (57 | ) | (14 | ) | ||||||
(Benefit) provision for doubtful accounts | (144 | ) | 65 | 6 | ||||||||
Credit gain on available-for-sale securities | (4 | ) | (7 | ) | (11 | ) | ||||||
Increase in refundable income taxes | — | — | (736 | ) | ||||||||
Increase in contingent consideration obligations | 280 | — | 650 | |||||||||
Change in current assets and liabilities, net | (6,576 | ) | (8,252 | ) | (13,094 | ) | ||||||
Net cash provided by (used for) operating activities | 22,208 | 36,171 | (2,464 | ) | ||||||||
Investing activities: | ||||||||||||
Additions to property, plant and equipment | (12,485 | ) | (18,211 | ) | (12,545 | ) | ||||||
Proceeds from sale of equipment | 38 | 57 | 14 | |||||||||
(Decrease) increase in other assets | (35 | ) | (85 | ) | 5 | |||||||
Net cash used for investing activities | (12,482 | ) | (18,239 | ) | (12,526 | ) | ||||||
Financing activities: | ||||||||||||
Proceeds from issuance of Common Stock | 4,742 | 8,656 | 3,300 | |||||||||
Payment of contingent consideration obligations | (237 | ) | (270 | ) | (225 | ) | ||||||
Noncontrolling interest dividend paid | (139 | ) | — | — | ||||||||
Net cash provided by financing activities | 4,366 | 8,386 | 3,075 | |||||||||
Effect of foreign exchange rates on cash | 19 | 9 | (25 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents | 14,111 | 26,327 | (11,940 | ) | ||||||||
Cash and cash equivalents at beginning of year | 70,557 | 44,230 | 56,170 | |||||||||
Cash and cash equivalents at end of year | $ | 84,668 | $ | 70,557 | $ | 44,230 | ||||||
Change in current assets and liabilities, excluding effects of deconsolidation of subsidiary: | ||||||||||||
Accounts receivable | $ | 5,714 | $ | (8,834 | ) | $ | (9,210 | ) | ||||
Inventories, net | (1,812 | ) | (10,827 | ) | (9,309 | ) | ||||||
Other current assets | (2,895 | ) | 176 | (357 | ) | |||||||
Accounts payable and accrued liabilities | (7,339 | ) | 7,450 | 3,186 | ||||||||
Accrued severance and other charges | (234 | ) | 234 | — | ||||||||
Short-term lease payable | 12 | — | — | |||||||||
Income taxes payable | (653 | ) | 410 | 208 | ||||||||
Deferred revenue | 631 | 3,139 | 2,388 | |||||||||
Change in current assets and liabilities, net | $ | (6,576 | ) | $ | (8,252 | ) | $ | (13,094 | ) | |||
Supplemental disclosures: | ||||||||||||
Cash paid during the year for income taxes, net of refunds | $ | 2,194 | $ | 743 | $ | 373 |
2017
Class B Common Stock | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Total Vicor Corporation Stockholders’ Equity | Noncontrolling Interest | Total Equity | ||||||||||||||||||||||||||||
Balance on December 31, 2013 | $ | 118 | $ | 392 | $ | 169,474 | $ | 108,645 | $ | (526 | ) | $ | (138,927 | ) | $ | 139,176 | $ | 3,161 | $ | 142,337 | ||||||||||||||||
Sales of Common Stock | 1 | 787 | 788 | 788 | ||||||||||||||||||||||||||||||||
Noncontrolling interest dividends paid | (162 | ) | (162 | ) | ||||||||||||||||||||||||||||||||
Stock-based compensation expense | 1,634 | 1,634 | 1,634 | |||||||||||||||||||||||||||||||||
Other | 6 | 6 | 6 | |||||||||||||||||||||||||||||||||
Components of comprehensive income, net of tax | ||||||||||||||||||||||||||||||||||||
Net loss | (13,887 | ) | (13,887 | ) | (183 | ) | (14,070 | ) | ||||||||||||||||||||||||||||
Other comprehensive income (loss) | 55 | 55 | (36 | ) | 19 | |||||||||||||||||||||||||||||||
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Total comprehensive loss | (13,832 | ) | (219 | ) | (14,051 | ) | ||||||||||||||||||||||||||||||
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Balance on December 31, 2014 | 118 | 393 | 171,901 | 94,758 | (471 | ) | (138,927 | ) | 127,772 | 2,780 | 130,552 | |||||||||||||||||||||||||
Sales of Common Stock | 2 | 818 | 820 | 820 | ||||||||||||||||||||||||||||||||
Acquisition of noncontrolling interest | (144 | ) | (144 | ) | (216 | ) | (360 | ) | ||||||||||||||||||||||||||||
Disposition of consolidated subsidiary | (5 | ) | (5 | ) | (1,737 | ) | (1,742 | ) | ||||||||||||||||||||||||||||
Stock-based compensation expense | 1,782 | 1,782 | 1,782 | |||||||||||||||||||||||||||||||||
Net settlement stock option exercises | (22 | ) | (22 | ) | (22 | ) | ||||||||||||||||||||||||||||||
Other | 7 | 7 | 7 | |||||||||||||||||||||||||||||||||
Components of comprehensive income, net of tax | ||||||||||||||||||||||||||||||||||||
Net income | 4,927 | 4,927 | 232 | 5,159 | ||||||||||||||||||||||||||||||||
Other comprehensive loss | (106 | ) | (106 | ) | (5 | ) | (111 | ) | ||||||||||||||||||||||||||||
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Total comprehensive income | 4,821 | 227 | 5,048 | |||||||||||||||||||||||||||||||||
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Balance on December 31, 2015 | 118 | 395 | 174,337 | 99,685 | (577 | ) | (138,927 | ) | 135,031 | 1,054 | 136,085 | |||||||||||||||||||||||||
Sales of Common Stock | 2 | 1,587 | 1,589 | 1,589 | ||||||||||||||||||||||||||||||||
Acquisition of noncontrolling interest | (81 | ) | (81 | ) | (837 | ) | (918 | ) | ||||||||||||||||||||||||||||
Stock-based compensation expense | 506 | 506 | 506 | |||||||||||||||||||||||||||||||||
Net settlement stock option exercises | (5 | ) | (5 | ) | (5 | ) | ||||||||||||||||||||||||||||||
Components of comprehensive income, net of tax | ||||||||||||||||||||||||||||||||||||
Net income | (6,247 | ) | (6,247 | ) | (14 | ) | (6,261 | ) | ||||||||||||||||||||||||||||
Other comprehensive income | 16 | 16 | 5 | 21 | ||||||||||||||||||||||||||||||||
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Total comprehensive income | (6,231 | ) | (9 | ) | (6,240 | ) | ||||||||||||||||||||||||||||||
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Balance on December 31, 2016 | $ | 118 | $ | 397 | $ | 176,344 | $ | 93,438 | $ | (561 | ) | $ | (138,927 | ) | $ | 130,809 | $ | 208 | $ | 131,017 | ||||||||||||||||
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Class B Common Stock | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Total Vicor Corporation Stockholders’ Equity | Noncontrolling Interest | Total Equity | ||||||||||||||||||||||||||||
Balance on December 31, 2016 | $ | 118 | $ | 397 | $ | 176,344 | $ | 93,438 | $ | (561 | ) | $ | (138,927 | ) | $ | 130,809 | $ | 208 | $ | 131,017 | ||||||||||||||||
Sales of Common Stock | 4 | 3,296 | 3,300 | 3,300 | ||||||||||||||||||||||||||||||||
Stock-based compensation expense | 1,735 | 1,735 | 1,735 | |||||||||||||||||||||||||||||||||
Other | 20 | 20 | 20 | |||||||||||||||||||||||||||||||||
Components of comprehensive income, net of tax | ||||||||||||||||||||||||||||||||||||
Net income | 167 | 167 | 91 | 258 | ||||||||||||||||||||||||||||||||
Other comprehensive income | 83 | 83 | 6 | 89 | ||||||||||||||||||||||||||||||||
Total comprehensive income | 250 | 97 | 347 | |||||||||||||||||||||||||||||||||
Balance on December 31, 2017 | 118 | 401 | 181,395 | 93,605 | (478 | ) | (138,927 | ) | 136,114 | 305 | 136,419 | |||||||||||||||||||||||||
Sales of Common Stock | 6 | 6,776 | 6,782 | 6,782 | ||||||||||||||||||||||||||||||||
Stock-based compensation expense | 3,396 | 3,396 | 3,396 | |||||||||||||||||||||||||||||||||
Issuances of stock through employee stock purchase plan | 1 | 1,873 | 1,874 | 1,874 | ||||||||||||||||||||||||||||||||
Cumulative effect of adoption of new accounting principle (Topic 606) | 3,670 | 3,670 | 3,670 | |||||||||||||||||||||||||||||||||
Other | (6 | ) | 17 | 11 | 11 | |||||||||||||||||||||||||||||||
Components of comprehensive income, net of tax | ||||||||||||||||||||||||||||||||||||
Net income | 31,725 | 31,725 | 121 | 31,846 | ||||||||||||||||||||||||||||||||
Other comprehensive income | 84 | 84 | 8 | 92 | ||||||||||||||||||||||||||||||||
Total comprehensive income | 31,809 | 129 | 31,938 | |||||||||||||||||||||||||||||||||
Balance on December 31, 2018 | 118 | 402 | 193,457 | 129,000 | (394 | ) | (138,927 | ) | 183,656 | 434 | 184,090 | |||||||||||||||||||||||||
Sales of Common Stock | 2 | 2,435 | 2,437 | 2,437 | ||||||||||||||||||||||||||||||||
Stock-based compensation expense | 3,036 | 3,036 | 3,036 | |||||||||||||||||||||||||||||||||
Issuances of stock through employee stock purchase plan | 1 | 2,304 | 2,305 | 2,305 | ||||||||||||||||||||||||||||||||
Noncontrolling interest dividend paid | — | (139 | ) | (139 | ) | |||||||||||||||||||||||||||||||
Other | 19 | 19 | 19 | |||||||||||||||||||||||||||||||||
Components of comprehensive income, net of tax | ||||||||||||||||||||||||||||||||||||
Net income | 14,098 | 14,098 | 11 | 14,109 | ||||||||||||||||||||||||||||||||
Other comprehensive income | 11 | 11 | 2 | 13 | ||||||||||||||||||||||||||||||||
Total comprehensive income | 14,109 | 13 | 14,122 | |||||||||||||||||||||||||||||||||
Balance on December 31, 2019 | $ | 118 | $ | 405 | $ | 201,251 | $ | 143,098 | $ | (383 | ) | $ | (138,927 | ) | $ | 205,562 | $ | 308 | $ | 205,870 | ||||||||||||||||
Revenue
Product revenue is recognized in the period when persuasive evidenceincome statement. For lessors, the guidance modifies the classification criteria and accounting for sales-type and direct financing leases.
Theadditional required disclosures under the new standard. Through December 31, 2017, the Company defersdeferred revenue and the related cost of sales on shipments to stocking distributors until the distributors resellresold the products to their customers. Upon adoption, the Company is no longer permitted to defer revenue until sale by the stocking distributor to the end customer, but rather, is required to estimate the effects of returns and allowances provided to stocking distributors and record revenue at the time of sale to the stocking distributor. In addition, the Company modified the accounting for a contractual arrangement due to a reassessment of the number of performance obligations in the arrangement, and adjusted for the timing of certain royalty revenue. The cumulative effect of adopting this guidance, recorded as an increase to the balance of retained earnings as of January 1, 2018, was approximately $3,670,000. The comparative information for the year ended December 31, 2017, including disclosures, has not been restated and continues to be reported under the accounting standards in effect for that period.
a) | Consolidated Balance Sheet Items |
As of December 31, 2018 | ||||||||||||
As reported | Adjustments | Balances without adoption of Topic 606 | ||||||||||
Accounts receivable, net | $ | 43,673 | $ | (72 | ) | $ | 43,601 | |||||
Inventories, net | 47,370 | (110 | ) | 47,260 | ||||||||
Total assets | 221,068 | (182 | ) | 220,886 | ||||||||
Income taxes payable | 710 | (59 | ) | 651 | ||||||||
Deferred revenue | 5,069 | 5,768 | 10,837 | |||||||||
Sales allowances | 548 | (483 | ) | 65 | ||||||||
Total liabilities | 36,978 | 5,226 | 42,204 | |||||||||
Retained earnings | 129,000 | (5,408 | ) | 123,592 | ||||||||
Total equity | 184,090 | (5,408 | ) | 178,682 | ||||||||
Total liabilities and equity | 221,068 | (182 | ) | 220,886 |
b) | Consolidated Statement of Operations Items |
Year Ended December 31, 2018 | ||||||||||||
As reported | Adjustments | Balances without adoption of Topic 606 | ||||||||||
Net revenues | $ | 291,220 | $(3,946) | $ | 287,274 | |||||||
Cost of revenues | 152,249 | (2,149 | ) | 150,100 | ||||||||
Gross margin | 138,971 | (1,797 | ) | 137,174 | ||||||||
Income before income taxes | 32,933 | (1,797 | ) | 31,136 | ||||||||
Provision for income taxes | 1,087 | (59 | ) | 1,028 | ||||||||
Consolidated net income | 31,846 | (1,738 | ) | 30,108 | ||||||||
Net income attributable to Vicor Corporation | 31,725 | (1,738 | ) | 29,987 |
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Company’s shipments to that stocking distributor during the prior quarter. In addition, stocking distributors arewere allowed to return unsold products if the Company terminatesterminated the relationship with the stocking distributor. Title to the inventory transferred to the stocking distributor at the time of shipment or delivery to the stocking distributor, as well as paymentdistributor. Payments from the stocking distributor, aredistributors were due in accordance with the Company’s standard payment terms. These payment terms arewere not contingent upon the stocking distributors’ sale of the products to theirreducesreduced inventory for the cost of goods shipped, the margin (i.e., revenues less cost of revenues) iswas recorded as deferred revenue, and an account receivable iswas recorded. As of December 31, 2016, the Company had gross deferred revenue of approximately $3,337,000 and gross deferred cost of revenues of approximately $1,445,000 under agreements with stocking distributors ($2,042,000 and $882,000, respectively, as of December 31, 2015).
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
investment
Level 1 | Inputs used to measure fair value are unadjusted quoted prices available in active markets for the identical assets or liabilities as of the reporting date. | |
| ||
Level 2 | Inputs used to measure fair value, other than quoted prices included in Level 1, are either directly or indirectly observable as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in inactive markets. Level 2 also includes assets and liabilities valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable data from actively quoted markets for substantially the full term of the financial instrument. | |
| ||
Level 3 | Inputs used to measure fair value are unobservable inputs supported by little or no market activity and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions. |
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Allowance for doubtful accounts
The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments, based on assessments of customers’ credit-risk profiles and payment histories. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The Company does not require collateral from its customers, although there have been circumstances when the Company has required cash in advance (i.e., a partial down-payment) to facilitate orders in excess of a customer’s established credit limit. To date, such amounts have not been material.
The Company provides reserves for inventories
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
electronics, networking equipment, solid state lighting, testtelecommunications and measurement instrumentation,networking infrastructure, and transportation (electricvehicles (notably in the autonomous driving, electric vehicle, and hybrid vehicles and autonomous vehicles)vehicle niches of the vehicle segment). While, overall, the Company has a broad customer base and sells into a variety of industries, VI Chip and Picor have derived a substantial portion of theirthe Company’s revenue from its Advanced Products line has been derived from a limited number of customers. This concentration of revenue is a reflection of the relatively early stage of adoption of the technologies, architectures and products offered by these subsidiaries,in the Advanced Products line, and theirthe Company’s strategy of targeting of market leading innovators as initial customers.customers for its Advanced Products. Concentrations of credit risk with respect to trade accounts receivable are limited due to the number of entities comprising the Company’s customer base. base
During 2016, 2015, and 2014, one customer accounted for approximately 16.4%, 16.2%, and 14.7% of net revenues, respectively. International sales, based on customer location, as a percentage of total net revenues, were approximately 59.4% in 2016, 59.6% in 2015, and 60.5% in 2014. Net revenues from customers in China, our largest international market, accounted for approximately 32.1% of total net revenues in 2016, approximately 34.2% in 2015, and approximately 32.3% in 2014, respectively.
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2016 | 2015 | 2014 | ||||||||||
Numerator: | ||||||||||||
Net income (loss) attributable to Vicor Corporation | $ | (6,247 | ) | $ | 4,927 | $ | (13,887 | ) | ||||
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Denominator: | ||||||||||||
Denominator for basic net income (loss) per share-weighted average shares (1) | 38,842 | 38,754 | 38,569 | |||||||||
Effect of dilutive securities: | ||||||||||||
Employee stock options (2) | — | 392 | — | |||||||||
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Denominator for diluted net income (loss) per share-adjusted weighted-average shares and assumed conversions (3) | 38,842 | 39,146 | 38,569 | |||||||||
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Basic net income (loss) per share | $ | (0.16 | ) | $ | 0.13 | $ | (0.36 | ) | ||||
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Diluted net income (loss) per share | $ | (0.16 | ) | $ | 0.13 | $ | (0.36 | ) | ||||
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2019 | 2018 | 2017 | ||||||||||
Numerator: | ||||||||||||
Net income attributable to Vicor Corporation | $ | 14,098 | $ | 31,725 | $ | 167 | ||||||
Denominator: | ||||||||||||
Denominator for basic net income per share-weighted average shares (1) | 40,330 | 39,872 | 39,228 | |||||||||
Effect of dilutive securities: | ||||||||||||
Employee stock options (2) | 1,347 | 857 | 705 | |||||||||
Denominator for diluted net income per share-adjusted weighted-average shares and assumed conversions (3) | 41,677 | 40,729 | 39,933 | |||||||||
Basic net income per share | $ | 0.35 | $ | 0.80 | $ | 0.00 | ||||||
Diluted net income per share | $ | 0.34 | $ | 0.78 | $ | 0.00 | ||||||
(1) | Denominator represents weighted average number of Common Shares and Class B Common Shares outstanding. |
(2) | Options to purchase |
(3) | Denominator represents weighted average number of Common Shares and Class B Common Shares outstanding for the year, adjusted to include the dilutive effect, if any, of outstanding options. |
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
with credit deterioration since their origination. The new guidance is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. It is required to be applied on a modified-retrospective approach with certain elements being adopted prospectively. The Company has not yet determined the impact this new guidance will have on its consolidated financial statements
In March 2016, the FASB issued new guidance for employee share-based payment accounting, which makes several modifications to existing guidance related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. This new guidance also clarifies the statement of cash flows presentation for certain components of share-based awards. In terms of the accounting for forfeitures, the new guidance allows an option for them to either be estimated, as currently required, or recognized when they occur. The Company will continue to estimate forfeitures. The standard is effective for interim and annual reporting periods beginning after December 15, 2016, with early adoption permitted. The Company does not anticipateexpect the adoption of the new guidance will have a material impact on its consolidated financial statements and related disclosures.
In February 2016, the FASB issued new guidance for lease accounting, which will require lessees to recognize leases on the balance sheet and disclose key information about leasing arrangements. The new guidance establishes aright-of-use model (“ROU”) that will require a lessee to recognize a ROU asset and a lease liability on the balance sheet for all leases with a term longer than twelve months. Leases will be classified as finance or operating, with classification affecting the pattern and classification
retained earnings as of January 1, 2018. The Company is continuing to evaluate the future impact and method of adoption the new guidance will have on its consolidated financial statements and related disclosures.
Vicor currently grants options for the purchase of common stock (i.e., “stock options”) under the following equity compensation plans that are stockholder-approved:
Amended and Restated 2000 Stock Option and Incentive Plan (the “2000 Plan”) — Under the 2000 Plan, the Board of Directors or the Compensation Committee of the Board of Directors may grant stock incentive awards based on the Company’s Common Stock, including stock options, stock appreciation rights, restricted stock, performance shares, unrestricted stock, deferred stock, and dividend equivalent rights. Awards may be granted to employees and other key persons, includingnon-employee directors. Incentive stock options may be granted to employees at a price at least equal to the fair market value per share of the Common Stock on the date of grant, andnon-qualified options may be granted tonon-employee directors at a price at least equal to 85% of the fair market value of the Common Stock on the date of grant. A total of 4,000,000 shares of Common Stock have been reserved for issuance under the 2000 Plan. The period of time during which an option may be exercised and the vesting periods are determined by the Compensation Committee. The term of each option may not exceed 10 years from the date of grant.
Picor Corporation (“Picor”), a privately held, majority-owned subsidiary of Vicor, currently grants stock options under the following equity compensation plan that has been approved by its Board of Directors:
2001 Stock Option and Incentive Plan, as amended (the “2001 Picor Plan”) — Under the 2001 Picor Plan, the Board of Directors of Picor may grant equity-based awards associated with Picor Common Stock, including stock options, restricted stock, or unrestricted stock. Awards may be granted to employees and other key persons, includingnon-employee directors and full or part-time officers. No incentive stock options have been granted since November 11, 2011, and no such options were outstanding
VI Chip Corporation (“VI Chip”), a privately held, majority-owned subsidiary of Vicor, currently grants stock options under the following equity compensation plan that has been approved by its Board of Directors:
2007 Stock Option and Incentive Plan,were as amended (the “2007 VI Chip Plan”) — Under the 2007 VI Chip Plan, the Board of Directors of VI Chip may grant equity-based awards associated with VI Chip Common Stock, including stock options, restricted stock, or unrestricted stock. Awards may be granted to employees and other key persons, includingnon-employee directors and full or part-time officers. No incentive stock options have been granted since November 11, 2011, and no such options were outstanding as of December 31, 2016.Non-qualifying stock options may be granted to employees at a price at least equal to the fair market value per share of the VI Chip Common Stock, based on judgments made by VI Chip’s Board of Directors on the date of grant. A total of 12,000,000 shares of VI Chip Common Stock have
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
been reserved for issuance under the 2007 VI Chip Plan. The period of time during which an option may be exercised and the vesting periods are determined by the VI Chip Board of Directors. The term of each option may not exceed 10 years from the date of grant.
All time-based (i.e.,non-performance-based) options for the purchase of Vicor common stock are granted at an exercise price equal to or greater than the market price for Vicor common stock at the date of the grant. All time-based (i.e.,non-performance-based) options for the purchase of VI Chip or Picor common stock are granted at an exercise price equal to or greater than the estimated fair market value of the respective share price, based on a value calculated using a discounted cash flow model at the date of grant consistent with the requirements of Section 409A of the Internal Revenue Code.
On December 31, 2010, the Company granted 2,984,250non-qualified stock options under the 2007 VI Chip Plan with performance-based vesting provisions tied to achievement of certain margin targets by VI Chip Corporation. follows (in thousands):
2019 | 2018 | |||||||
Raw materials | $ | 35,901 | $ | 37,696 | ||||
Work-in-process | 5,184 | 4,740 | ||||||
Finished goods | 8,102 | 4,934 | ||||||
$ | 49,187 | $ | 47,370 | |||||
During the fourth quarter of 2014, the Company, in effect, cancelled certain stock options previously awarded to three corporate officers in 2013 and awarded to those officers new stock options representing an equivalent value, as calculated using the Black-Scholes option-pricing model. Subsequent to the 2013 awards, the Company determined those grants exceeded the limit on the number of stock options that may be granted to an individual in a year, according to the terms of the 2000 Plan. In connection with this action, recorded for financial reporting purposes as a modification of existing options, a total of 129,028 stock options awarded in 2013 were cancelled and a total of 150,355 new stock options were awarded. The cancellation of the 2013 stock options and the award of new stock options did not have a material impact on the Company’s results of operations.
Stock-based compensation expense for the years ended December 31 was as follows (in thousands):
2016 | 2015 | 2014 | ||||||||||
Cost of revenues | $ | 95 | $ | 230 | $ | 183 | ||||||
Selling, general and administrative | 412 | 1,246 | 1,176 | |||||||||
Research and development | (1 | ) | 306 | 275 | ||||||||
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Total stock-based compensation | $ | 506 | $ | 1,782 | $ | 1,634 | ||||||
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The decrease in stock-based compensation expense in 2016 compared to 2015 was primarily due to the reversal of previously recorded stock-based compensation for VI Chip performance-based options, described above.
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The fair value for options awarded for the years shown below was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:
Non Performance- based Stock Options | ||||||||||||
Vicor: | 2016 | 2015 | 2014 | |||||||||
Risk-free interest rate | 1.5 | % | 2.0 | % | 2.2 | % | ||||||
Expected dividend yield | — | — | — | |||||||||
Expected volatility | 45 | % | 51 | % | 52 | % | ||||||
Expected lives (years) | 7.2 | 7.2 | 6.6 | |||||||||
VI Chip: | 2016 | 2015 | 2014 | |||||||||
Risk-free interest rate | 1.7 | % | 2.1 | % | 2.3 | % | ||||||
Expected dividend yield | — | — | — | |||||||||
Expected volatility | 34 | % | 37 | % | 41 | % | ||||||
Expected lives (years) | 6.5 | 6.5 | 6.5 | |||||||||
Picor: | 2016 | 2015 | 2014 | |||||||||
Risk-free interest rate | 1.5 | % | 1.9 | % | 2.2 | % | ||||||
Expected dividend yield | — | — | — | |||||||||
Expected volatility | 42 | % | 41 | % | 42 | % | ||||||
Expected lives (years) | 6.5 | 6.5 | 6.5 |
Risk-free interest rate:
Vicor — The Company uses the yield onzero-coupon U.S. Treasury “Strip” securities for a period that is commensurate with the expected term assumption for each vesting period.
Picor and VI Chip — Picor and VI Chip use the yield to maturity of a seven-year U.S. Treasury bond, as it most closely aligns to the expected exercise period.
Expected dividend yield:
Vicor — The Company determines the expected dividend yield by annualizing the most recent prior cash dividends declared by the Company’s Board of Directors, if any, and dividing that result by the closing stock price on the date of that dividend declaration. Dividends are not paid on options.
Picor and VI Chip — Picor and VI Chip have not and do not expect to declare and pay dividends in the foreseeable future. Therefore, the expected dividend yield is not applicable.
Expected volatility:
Vicor — Vicor uses historical volatility to estimate the grant-date fair value of the options, using the expected term for the period over which to calculate the volatility (see below). The Company does not expect its future volatility to differ from its historical volatility. The computation of the Company’s volatility is based on a simple average calculation of monthly volatilities over the expected term.
Picor — As Picor is a nonpublic entity, historical volatility information is not available. An industry sector index of six publicly traded fabless semiconductor firms was developed for calculating historical volatility for Picor. Historical prices for each of the companies in the index based on the market price of the shares on each day of trading over the expected term were used to determine the historical volatility.
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
VI Chip — As VI Chip is a nonpublic entity, historical volatility information is not available. An industry sector index of 11 publicly traded fabless semiconductor firms was developed for calculating historical volatility for VI Chip. Historical prices for each of the companies in the index based on the market price of the shares on each day of trading over the expected term were used to determine the historical volatility.
Expected term:
Vicor — The Company uses historical employee exercise and option expiration data to estimate the expected term assumption for the Black-Scholes grant-date valuation. The Company believes this historical data is currently the best estimate of the expected term of options, and all groups of the Company’s employees exhibit similar exercise behavior.
Picor and VI Chip — Due to the lack of historical information, the “simplified” method as prescribed by the Securities and Exchange Commission is used to determine the expected term.
Forfeiture rate:
The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term “forfeitures” is distinct from “cancellations” or “expirations” and represents only the unvested portion of the surrendered option. The forfeiture analysis isre-evaluated annually and the forfeiture rate is adjusted as necessary. Ultimately, the actual expense recognized over the vesting period will only be for those shares that vest.
Vicor — The Company currently expects, for Vicor options, based on an analysis of historical forfeitures, approximately 86% of its options will actually vest. An annual forfeiture rate of 5.00% has been applied to all unvested options as of December 31, 2016. For 2015 and 2014, the Company expected 88% and 78%, respectively, of its options would actually vest and applied an annual forfeiture rate of 4.25% and 8.00%, respectively.
Picor — The Company currently expects, for Picor options, based on an analysis of historical forfeitures, approximately 92% of its options will actually vest. An annual forfeiture rate of 2.50% has been applied to all unvested options as of December 31, 2016. For 2015 and 2014, the Company expected 93% and 92%, respectively, of its options would actually vest and applied an annual forfeiture rate of 2.50% and 2.75%, respectively.
VI Chip — The Company currently expects, for VI Chip options, based on an analysis of historical forfeitures, approximately 76% of its options will actually vest. An annual forfeiture rate of 9.00% has been applied to all unvested options as of December 31, 2016. For 2015 and 2014, the Company expected 78% and 77%, respectively, of its options would actually vest and applied an annual forfeiture rate of 8.50% and 7.75%, respectively.
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Vicor Stock Options
A summary of the activity under Vicor’s stock option plans as of December 31, 2016 and changes during the year then ended, is presented below (in thousands except for share and weighted-average data):
Options Outstanding | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life in Years | Aggregate Intrinsic Value | |||||||||||||
Outstanding on December 31, 2015 | 1,848,067 | $ | 8.57 | |||||||||||||
Granted | 83,817 | $ | 10.32 | |||||||||||||
Forfeited and expired | (18,737 | ) | $ | 9.21 | ||||||||||||
Exercised | (216,925 | ) | $ | 7.25 | ||||||||||||
|
| |||||||||||||||
Outstanding on December 31, 2016 | 1,696,222 | $ | 8.82 | 6.83 | $ | 10,661 | ||||||||||
|
| |||||||||||||||
Exercisable on December 31, 2016 | 730,388 | $ | 7.74 | 6.51 | $ | 5,375 | ||||||||||
|
| |||||||||||||||
Vested or expected to vest as of December 31, 2016 (1) | 1,646,808 | $ | 8.76 | 6.82 | $ | 10,437 | ||||||||||
|
|
As of December 31, 2015 and 2014 the Company had options exercisable for 565,861 and 306,173 shares respectively, for which the weighted average exercise prices were $7.24 and $6.90, respectively.
During the years ended December 31, 2016, 2015, and 2014 under all plans, the total intrinsic value of Vicor options exercised (i.e., the difference between the market price at exercise and the price paid by the employee to exercise the options) was $1,392,000, $928,000, and $751,000, respectively. The total amount of cash received by the Company from options exercised in 2016, 2015, and 2014, was $1,572,000, $805,000, and $788,000, respectively. The total grant-date fair value of stock options that vested during the years ended December 31, 2016, 2015, and 2014 was approximately $365,000, $1,194,000, and $1,096,000, respectively.
As of December 31, 2016, there was $870,000 of total unrecognized compensation cost related to unvestednon-performance based awards for Vicor. That cost is expected to be recognized over a weighted-average period of 1.5 years for those awards. The expense will be recognized as follows: $490,000 in 2017, $245,000 in 2018, $103,000 in 2019, $28,000 in 2020, and $4,000 in 2021.
The weighted-average fair value of Vicor options granted was $4.94, $6.76, and $5.50, in 2016, 2015, and 2014, respectively.
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Picor Stock Options
A summary of the activity under the 2001 Picor Plan as of December 31, 2016 and changes during the year then ended, is presented below (in thousands except for share and weighted-average data):
Options Outstanding | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life in Years | Aggregate Intrinsic Value | |||||||||||||
Outstanding on December 31, 2015 | 9,725,067 | $ | 0.62 | |||||||||||||
Granted | 603,000 | $ | 0.88 | |||||||||||||
Forfeited and expired | (113,560 | ) | $ | 0.65 | ||||||||||||
Exercised | (683,520 | ) | $ | 0.88 | ||||||||||||
|
| |||||||||||||||
Outstanding on December 31, 2016 | 9,530,987 | $ | 0.62 | 4.56 | $ | 1,262 | ||||||||||
|
| |||||||||||||||
Exercisable on December 31, 2016 | 7,915,219 | $ | 0.62 | 4.09 | $ | 1,030 | ||||||||||
|
| |||||||||||||||
Vested or expected to vest as of December 31, 2016 (1) | 9,470,822 | $ | 0.62 | 4.54 | $ | 1,256 | ||||||||||
|
|
As of December 31, 2015 and 2014, Picor had options exercisable for 8,053,490 and 6,643,377 shares, respectively, for which the weighted average exercise prices were $0.64 and $0.67, respectively.
During the years ended December 31, 2016 and 2015, the total intrinsic value of Picor options exercised was $24,000 and $72,000, respectively. The total amount of cash received by Picor from options exercised in 2016 and 2015 was $17,000 and $14,000, respectively. There were no Picor options exercised in 2014. The total grant-date fair value of stock options that vested during the years ended December 31, 2016, 2015, and 2014 was approximately $155,000, $39,000, and $0, respectively.
As of December 31, 2016, there was $285,000 of total unrecognized compensation cost related to unvested share-based awards for Picor. That cost is expected to be recognized over a weighted-average period of 2.8 years for all Picor awards. The expense will be recognized as follows: $116,000 in 2017, $78,000 in 2018, $45,000 in 2019, $29,000 in 2020, and $17,000 in 2021.
The weighted-average fair value of Picor options granted was $0.26 in 2016, $0.48 in 2015, and $0.19 in 2014.
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
VI Chip Stock Options
A summary of the activity under the 2007 VI Chip Plan as of December 31, 2016 and changes during the year then ended, is presented below (in thousands except for share and weighted-average data):
Options Outstanding | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life in Years | Aggregate Intrinsic Value | |||||||||||||
Outstanding on December 31, 2015 | 10,097,500 | $ | 1.00 | |||||||||||||
Granted | 5,000 | $ | 1.00 | |||||||||||||
Forfeited and expired | (168,750 | ) | $ | 1.00 | ||||||||||||
Exercised | — | $ | — | |||||||||||||
|
| |||||||||||||||
Outstanding on December 31, 2016 (1) | 9,933,750 | $ | 1.00 | 1.88 | $ | — | ||||||||||
|
| |||||||||||||||
Exercisable on December 31, 2016 | 7,074,650 | $ | 1.00 | 0.88 | $ | — | ||||||||||
|
| |||||||||||||||
Vested or expected to vest as of December 31, 2016 (2) | 9,747,034 | $ | 1.00 | 1.83 | $ | — | ||||||||||
|
|
As of December 31, 2015 and 2014, VI Chip had options exercisable for 7,042,600 and 7,377,950 shares, respectively, for which the weighted average exercise price was $1.00.
There were no VI Chip options exercised in 2016 and 2014. The total intrinsic value of VI Chip options exercised in 2015 was zero. The total amount of cash received by VI Chip from options exercised in 2015 was $1,000.
As of December 31, 2016, there was $51,000 of total unrecognized compensation cost related to unvested share-based awards for VI Chip. That cost is expected to be recognized over a weighted-average period of 2.1 years for all VI Chip awards. The expense will be recognized as follows: $39,000 in 2017, and $12,000 in 2018.
The weighted-average fair value of VI Chip options granted was $0.01, $0.01, and $0.02 in 2016, 2015, and 2014, respectively.
401(k) Plan
The Company sponsors a savings plan available to all domestic employees, which qualifies under Section 401(k) of the Internal Revenue Code. Employees may contribute to the plan in amounts representing from 1% to 80% of theirpre-tax salary, subject to statutory limitations. The Company matches employee contributions to the plan at a rate of 50%, up to the first 3% of an employee’s compensation. The Company’s matching contributions currently vest at a rate of 20% per year, based upon years of service. The Company’s contributions to the plan were approximately $882,000, $854,000, and $877,000 in 2016, 2015, and 2014, respectively.
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Stock Bonus Plan
Under the Company’s 1985 Stock Bonus Plan, as amended, shares of Common Stock may be awarded to employees from time to time as determined by the Board of Directors. On December 31, 2016, 109,964 shares were available for further award. All shares awarded to employees under this plan have vested. No further awards are contemplated under this plan at the present time.
4. LONG-TERM INVESTMENTS
As of December 31, 2016 and 2015, the Company held one auction rate security that had experienced failed auctionswith a par value of $3,000,000, at par value, which was purchased through and is held in custody by a broker-dealer affiliate of Bank of America, N.A., that has experienced failed auctions (the “Failed Auction Security”). since February 2008. The Failed Auction Security held by the Company is Aaa/AA+ rated by the major credit rating agencies, is collateralized by student loans, and is guaranteed by the U.S. Department of Education under the Federal Family Education Loan Program. Management is not aware of any reason to believe the issuer of the Failed Auction Security is presently at risk of default. The interest rate for the security is reset at regular intervals ranging from seven to 28 days. The auction rate security held by the Company traded at par prior to February 2008 and is callable at par at the option of the issuer. Through December 31, 2016,2019, the Company has continued to receive interest payments on the Failed Auction Security in accordance with the terms of its indenture. Management believes the Company ultimately should be able to liquidate the Failed Auction Security without significant loss primarily due to the overall quality of the issue held and the collateral securing the substantial majority of the underlying obligation. However, current conditions in the auction rate securities market have led management to conclude the recovery period for the Failed Auction Security exceeds 12 months. As a result, the Company continued to classify the Failed Auction Security as long-term as of December 31, 2016.
2019.
December 31, 2016 | Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||
Failed Auction Security | $ | 3,000 | $ | — | $ | 492 | $ | 2,508 | ||||||||
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| |||||||||
December 31, 2015 | Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||
Failed Auction Security | $ | 3,000 | $ | — | $ | 474 | $ | 2,526 | ||||||||
Brokered certificates of deposit | 340 | — | — | 340 | ||||||||||||
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|
|
|
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| |||||||||
$ | 3,340 | $ | — | $ | 474 | $ | 2,866 | |||||||||
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|
|
December 31, 2019 | Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||
Failed Auction Security | $ | 3,000 | $ | — | $ | 490 | $ | 2,510 | ||||||||
December 31, 2018 | ||||||||||||||||
Failed Auction Security | $ | 3,000 | $ | — | $ | 474 | $ | 2,526 | ||||||||
Cost | Estimated Fair Value | |||||||
Due in twenty to forty years | $ | 3,000 | $ | 2,508 | ||||
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|
|
Cost | Estimated Fair Value | |||||||
Due in twenty to forty years | $ | 3,000 | $ | 2,510 | ||||
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
estimated loss: an aggregate credit loss of $59,000$37,000 and an aggregate temporary impairment of $433,000.$453,000. In determining the amount of credit loss, the Company compared the present value of cash flows expected to be collected to the amortized cost basis of the security, considering credit default risk probabilities and changes in credit ratings as significant inputs, among other factors (see Note 5).
2016 | 2015 | 2014 | ||||||||||
Balance at the beginning of the period | $ | 72 | $ | 84 | $ | 395 | ||||||
Reductions in the amount related to credit gain for which other-than-temporary impairment was not previously recognized | (13 | ) | (12 | ) | (39 | ) | ||||||
Reductions for securities sold during the period | — | — | (272 | ) | ||||||||
|
|
|
|
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| |||||||
Balance at the end of the period | $ | 59 | $ | 72 | $ | 84 | ||||||
|
|
|
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|
|
2019 | 2018 | 2017 | ||||||||||
Balance at the beginning of the period | $ | 41 | $ | 48 | $ | 59 | ||||||
Reductions in the amount related to credit gain for which other-than-temporary impairment was not previously recognized | (4 | ) | (7 | ) | (11 | ) | ||||||
Balance at the end of the period | $ | 37 | $ | 41 | $ | 48 | ||||||
Using | ||||||||||||||||
Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Fair Value as of December 31, 2016 | |||||||||||||
Cash equivalents: | ||||||||||||||||
Money market funds | $ | 10,114 | $ | — | $ | — | $ | 10,114 | ||||||||
Long-term investments: | ||||||||||||||||
Failed Auction Security | — | — | 2,508 | 2,508 | ||||||||||||
Liabilities: | ||||||||||||||||
Contingent consideration obligations | — | — | (253 | ) | (253 | ) |
Using | ||||||||||||||||
Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Fair Value as of December 31, 2019 | |||||||||||||
Cash equivalents: | ||||||||||||||||
Money market funds | $ | 9,630 | $ | — | $ | — | $ | 9,630 | ||||||||
Long-term investments: | ||||||||||||||||
Failed Auction Security | — | — | 2,510 | 2,510 | ||||||||||||
Liabilities: | ||||||||||||||||
Contingent consideration obligations | — | — | (451 | ) | (451 | ) |
Using | ||||||||||||||||
Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Fair Value as of December 31, 2015 | |||||||||||||
Cash equivalents: | ||||||||||||||||
Money market funds | $ | 10,412 | $ | — | $ | — | $ | 10,412 | ||||||||
Long-term investments: | ||||||||||||||||
Failed Auction Security | — | — | 2,526 | 2,526 | ||||||||||||
Brokered certificates of deposit | — | 340 | — | 340 | ||||||||||||
Liabilities: | ||||||||||||||||
Contingent consideration obligation | — | — | (144 | ) | (144 | ) |
The Company has classified its contingent consideration obligations as Level 3 because the fair value for this liability was determined using unobservable inputs. The liability was based on estimated sales of legacy products over the period of royalty payments at the royalty rate (see Note 9), discounted using the Company’s estimated cost of capital.
The Company has classified its brokered certificates of deposit as Level 2 because the fair value for these investments was determined utilizing observable inputs fromnon-active markets. The fair values fluctuate with changes in market interest rates obtained from information available in publicly quoted markets. Management tested the reported fair values by comparing them to net present value calculations utilizing a discount rate based on U.S. Treasury bill and bond yields for similar maturities.
Using | ||||||||||||||||
Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Fair Value as of December 31, 2018 | |||||||||||||
Cash equivalents: | ||||||||||||||||
Money market funds | $ | 9,433 | $ | — | $ | — | $ | 9,433 | ||||||||
Long-term investments: | ||||||||||||||||
Failed Auction Security | — | — | 2,526 | 2,526 | ||||||||||||
Liabilities: | ||||||||||||||||
Contingent consideration obligations | — | — | (408 | ) | (408 | ) |
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
estimated the implied yield (i.e., the discount to par value) necessary to complete a sale of the Failed Auction Security. Management has calculated an increase or decrease in the liquidity risk premium of 5.0% referenced above of 1.0% (i.e., 100 basis points) as used in the model, would decrease or increase, respectively, the fair value of the Failed Auction Security by approximately $100,000.
For purposes of the valuation process for the Failed Auction Security, “management” consists of senior members of the Company’s finance department.
The
Fair Value | Valuation Technique | Unobservable Input | Weighted Average | |||||||||||
Failed Auction Security | $ | 2,508 | | Discounted cash flow | | Cumulative probability of earning the maximum rate until maturity | 0.04 | % | ||||||
Cumulative probability of principal return prior to maturity | 93.72 | % | ||||||||||||
Cumulative probability of default | 6.24 | % | ||||||||||||
Liquidity risk premium | 5.00 | % | ||||||||||||
Recovery rate in default | 40.00 | % |
Fair Value | Valuation | Unobservable Input | Weighted Average | |||||||||||
Failed Auction Security | $ | 2,510 | Discounted cash flow | Cumulative probability of earning the maximum rate until maturity | 0.11 | % | ||||||||
Cumulative probability of principal return prior to maturity | 93.66 | % | ||||||||||||
Cumulative probability of default | 6.24 | % | ||||||||||||
Liquidity risk premium | 5.00 | % | ||||||||||||
Recovery rate in default | 40.00 | % |
Balance at the beginning of the period | $ | 2,526 | ||
Credit gain on available-for- sale security included in Other income (expense), net | 13 | |||
Loss included in Other comprehensive income (loss) | (31 | ) | ||
|
| |||
Balance at the end of the period | $ | 2,508 | ||
|
|
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Balance at the beginning of the period | $ | 2,526 | ||
Credit gain on available-for-sale security included in Other income (expense), net | 4 | |||
Gain included in Other comprehensive income (loss) | (20 | ) | ||
Balance at the end of the period | $ | 2,510 | ||
Balance at the beginning of the period | $ | 144 | ||
Obligation incurred upon acquisition of noncontrolling interest (see Note 9) | 208 | |||
Payments | (99 | ) | ||
|
| |||
Balance at the end of the period | $ | 253 | ||
|
|
Balance at the beginning of the period | $ | 408 | ||
Increase in estimated contingent consideration obligations (see Note 9) | 280 | |||
Payments | (237 | ) | ||
Balance at the end of the period | $ | 451 | ||
6. INVENTORIES
Inventories as2019.
2016 | 2015 | |||||||
Land | $ | 2,089 | $ | 2,089 | ||||
Buildings and improvements | 43,950 | 44,647 | ||||||
Machinery and equipment | 237,434 | 231,305 | ||||||
Furniture and fixtures | 5,656 | 5,652 | ||||||
Constructionin-progress and deposits | 2,471 | 3,839 | ||||||
|
|
|
| |||||
291,600 | 287,532 | |||||||
Accumulated depreciation and amortization | (254,026 | ) | (250,082 | ) | ||||
|
|
|
| |||||
Net balance | $ | 37,574 | $ | 37,450 | ||||
|
|
|
|
2019 | 2018 | |||||||
Land | $ | 3,600 | $ | 2,089 | ||||
Buildings and improvements | 45,791 | 45,170 | ||||||
Machinery and equipment | 220,405 | 208,135 | ||||||
Furniture and fixtures | 8,231 | 7,239 | ||||||
Construction in-progress and deposits | 4,362 | 9,251 | ||||||
282,389 | 271,884 | |||||||
Accumulated depreciation and amortization | (229,698 | ) | (221,452 | ) | ||||
Right of use asset — net | 4,261 | — | ||||||
Net balance | $ | 56,952 | $ | 50,432 | ||||
8. OTHER INVESTMENTS
In September 2015, Intersil Corporation (“Intersil”) acquired, through a statutory merger, Great Wall Semiconductor Corporation (“GWS”), in which the Company heldnon-voting convertible preferred stock. GWS
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
and its subsidiary designed and sold semiconductors, conducted research and development activities, and developed and licensed patents. A director of the Company was the founder, Chairman of the Board, President and Chief Executive Officer (“CEO”), as well as the majority voting shareholder, of GWS. The Company accounted for its investment in GWS under the equity method. The Company determined, while GWS was a variable interest entity, the Company was not the primary beneficiary. The key factors in the Company’s assessment were that the CEO of GWS had: (i) the power to direct the activities of GWS that most significantly impact its economic performance, and (ii) an obligation to absorb losses or the right to receive benefits from GWS, respectively, that could potentially be significant to GWS.
At the time of the merger transaction, the Company’s gross investment totaled $4,999,719. However, during the fourth quarter of 2008, the Company determined a decline in value judged to be other-than-temporary had occurred and, as such, the investment’s recorded value on the Consolidated Balance Sheet, as of December 31, 2008, was reduced to zero. Management’s decision to reduce the remaining investment balance to zero at that time was based on GWS’ continued operating losses, the impact of the global economic crisis on the current and short-term outlook for its operations, a negative working capital position as of December 31, 2008, and a valuation based on discounted cash flows.
Under the terms of the merger agreement between GWS and Intersil, and in accordance with the terms of the shareholder agreement under which the Company made its investments, all preferred stock was redeemed at full preference value (i.e., purchased for cash equal to the original investment amount). This redemption was effected through the exchange of a share of preferred stock for (a) the right to receive the preference value in cash upon surrender of the preferred shares and (b) thenon-transferable right to receive certain cash payments as additional consideration, after a period of 16 months, associated with (i) the release by Intersil of some or all of the $2,625,000 portion of total consideration held in escrow by Intersil for potential funding of indemnification and related obligations made by GWS and its selling shareholders and (ii) additional consideration of up to $4,000,000, payable in the event Intersil achieved certain revenue goals related to GWS products. Immediately after the closing of the merger transaction, the Company received the full preference value, equal to its gross investment in GWS. Because the net investment on the Company’s Consolidated Balance Sheet had a value of zero, the full preference value was recorded as a gain from sale of equity method investment in the third quarter of 2015. Just prior to the merger, the Company also received, as a dividend from GWS, shares of an entity in which GWS held an investment. Such shares were deemed by the Company to have a value of zero on the date of receipt.
While the Company’s shares of preferred stock were never converted into shares ofnon-voting common stock, as provided for in the terms of the shareholder agreement under which the Company made its investment, the proportionate share of the contingent amounts described above was calculated assuming such a conversion, resulting in a pro forma proportionate share for the Company of any amounts paid of 27.0%. The Company will record its proportionate share of any additional consideration when it is determined to be realizable. As a former stockholder of GWS, the Company is subject to the indemnification provisions in the merger agreement, as noted above. In certain cases, the Company’s indemnification obligation can extend to the full amount of the merger consideration received by the Company, however, the Company believes the likelihood of any such indemnification obligation occurring is remote.
The Company and GWS were parties to an intellectual property cross-licensing agreement, a license agreement, and two supply agreements, under which the Company purchased certain components from GWS. Intersil, through the merger transaction, has assumed all of GWS’ rights and obligations under these agreements. Company purchases from GWS totaled approximately $1,662,000 for the nine months ended September 30, 2015, the approximate time of the sale, and $2,146,000 in 2014.
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. NONCONTROLLING INTEREST TRANSACTIONS
On March 30, 2016, the Company acquired 100% ownership of certain operating assets and cash of its consolidated subsidiary, Converpower Corporation (“Converpower”), in which it held a 49% ownership interest. The operating assets and cash were acquired in exchange for the Company’s common shares representing that 49% interest and the aggregate dollar amount of royalty payments to be made by the Company to Converpower. The transaction was executed through a newly-formed, wholly-owned subsidiary, Granite Power Technologies, Inc. (“GPT”), the business operations of which had formerly existed as a division of Vicor Corporation. The shares of Converpower common stock held by the Company were contributed to GPT prior to the transaction. At the same time that it entered into the Asset Purchase Agreement associated with this transaction, the Company and Converpower entered into a license agreement providing the Company the right to continue manufacturing certain Converpower products in exchange for payment of royalties, quarterly through June 30, 2021, equal to a percentage of the revenue generated by the manufacture and sale of these products by GPT. The estimated present value of total future royalties, included in “Contingent consideration obligations” in the accompanying Consolidated Balance Sheet as of December 31, 2016, is $167,000 (initially $208,000, as of March 31, 2016). Although the Company exchanged its shares representing its 49% equity interest in Converpower, it acquired 100% control of the business operations. Accordingly, this transaction was accounted for as an acquisition of a noncontrolling interest (i.e., an equity transaction). As such, the noncontrolling interest balance in equity associated with Converpower was reduced to zero, and the additionalpaid-in capital account was reduced by $208,000, the estimated present value of total future royalties as of March 31, 2016. As a result of the transactions associated with the consolidation of the Converpower operation into GPT, the Company’s aggregate balance of cash, short-term interest receivable, and long-term investments on its Consolidated Balance Sheet as of March 31, 2016, declined by approximately $718,000. No amounts were recorded in the Consolidated Statement of Operations related to these transactions.
On December 28, 2015, the Company sold its 49% ownership interest in Aegis Power Systems, Inc. (“APS”) to the 51% noncontrolling interest holder for approximately $1,698,000. The amount of the proceeds approximated the Company’s share of the net equity of APS, resulting in a gain of approximately $28,000, which was recorded in Other income (expense), net in the accompanying Consolidated Statements of Operations. As a result of the transaction, cash of approximately $2,090,000 and other net assets of approximately $1,317,000 of APS were fully deconsolidated from the Company’s consolidated balance sheet as of December 31, 2015. After the sale, APS operates independently from the Company, and may purchase the Company’s products going forward, on an arms-length basis.
Also on December 28, 2015, the Company acquired the noncontrolling interest holder’s 18% ownership interest in Mission Power Solutions, Inc. (“MPS”) for approximately $216,000, which equaled the noncontrolling interest holder’s share of the net equity of MPS. This transaction was achieved through a statutory merger of MPS with and into an existing Vicor Custom Power wholly-owned subsidiary, Northwest Power, Inc. (“NPI”). In addition to the payment noted above, the selling principal will be eligible to receive quarterly royalty payments through June 30, 2021 equal to a percentage of the revenue generated by the sale of certain MPS legacy products to be manufactured by NPI going forward. The estimated obligation for total future royalties, recorded as Contingent consideration obligation in the accompanying Consolidated Balance Sheets, was approximately $144,000 as of December 31, 2015. Royalty payments of approximately $58,000 were made during 2016. The acquisition of the noncontrolling interest holder’s 18% ownership interest was accounted for as an equity transaction, and therefore, the noncontrolling interest balance in equity for this subsidiary was reduced to zero. The excess of the acquisition amount, which is inclusive of the cash paid and the value of the contingent consideration obligation, over the noncontrolling interest balance in equity, was recorded as a charge to additionalpaid-in capital.
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The respective noncontrolling interest holders of APS, Converpower, and MPS served as key employees of each company prior to the transactions described above.
10.
2016 | 2015 | |||||||
Patent costs | $ | 2,427 | $ | 2,525 | ||||
Accumulated amortization | (1,598 | ) | (1,583 | ) | ||||
|
|
|
| |||||
$ | 829 | $ | 942 | |||||
|
|
|
|
2019 | 2018 | |||||||
Patent costs | $ | 1,992 | $ | 1,979 | ||||
Accumulated amortization | (1,483 | ) | (1,380 | ) | ||||
$ | 509 | $ | 599 | |||||
11. SEVERANCE AND OTHER CHARGES
In July 2014, the Company’s management authorized the consolidation
12.
2016 | 2015 | 2014 | ||||||||||
Balance at the beginning of the period | $ | 585 | $ | 204 | $ | 283 | ||||||
Accruals for warranties for products sold in the period | 358 | 715 | 281 | |||||||||
Fulfillment of warranty obligations | (527 | ) | (334 | ) | (350 | ) | ||||||
Revisions of estimated obligations | (202 | ) | — | (10 | ) | |||||||
|
|
|
|
|
| |||||||
Balance at the end of the period | $ | 214 | $ | 585 | $ | 204 | ||||||
|
|
|
|
|
|
13.
2019 | 2018 | 2017 | ||||||||||
Balance at the beginning of the period | $ | 268 | $ | 290 | $ | 214 | ||||||
Accruals for warranties for products sold in the period | 250 | 173 | 346 | |||||||||
Fulfillment of warranty obligations | (140 | ) | (117 | ) | (194 | ) | ||||||
Revisions of estimated obligations | (6 | ) | (78 | ) | (76 | ) | ||||||
Balance at the end of the period | $ | 372 | $ | 268 | $ | 290 | ||||||
During the years ended December 31, 2016 and 2015, one subsidiary paid a total of $750,000 and $250,000, in cash dividends, respectively, all of which were paid to the Company.
During the year ended December 31, 2018, one subsidiary paid a total of $632,000 in cash dividends, all of which was paid to the Company.
Stock and under the ESPP.
Twelve Months Ended December 31, 2019 | ||||||||||||
Brick Products | Advanced Products | Total | ||||||||||
United States | $ | 98,822 | $ | 22,806 | $ | 121,628 | ||||||
Europe | 22,172 | 5,090 | 27,262 | |||||||||
Asia Pacific | 62,720 | 46,107 | 108,827 | |||||||||
All other | 4,182 | 1,078 | 5,260 | |||||||||
$ | 187,896 | $ | 75,081 | $ | 262,977 | |||||||
Twelve Months Ended December 31, 2018 | ||||||||||||
Brick Products | Advanced Products | Total | ||||||||||
United States | $ | 77,995 | $ | 32,784 | $ | 110,779 | ||||||
Europe | 23,484 | 4,205 | 27,689 | |||||||||
Asia Pacific | 80,097 | 66,981 | 147,078 | |||||||||
All other | 5,128 | 546 | 5,674 | |||||||||
$ | 186,704 | $ | 104,516 | $ | 291,220 | |||||||
Twelve Months Ended December 31, 2019 | ||||||||||||
Brick Products | Advanced Products | Total | ||||||||||
Direct customers, contract manufacturers and non-stocking distributors | $ | 159,135 | $ | 63,567 | $ | 222,702 | ||||||
Stocking distributors, net of sales allowances | 27,797 | 9,802 | 37,599 | |||||||||
Non-recurring engineering | 843 | 1,614 | 2,457 | |||||||||
Royalties | 121 | 24 | 145 | |||||||||
Other | — | 74 | 74 | |||||||||
$ | 187,896 | $ | 75,081 | $ | 262,977 | |||||||
Twelve Months Ended December 31, 2018 | ||||||||||||
Brick Products | Advanced Products | Total | ||||||||||
Direct customers, contract manufacturers and non-stocking distributors | $ | 163,206 | $ | 91,579 | $ | 254,785 | ||||||
Stocking distributors, net of sales allowances | 22,362 | 9,370 | 31,732 | |||||||||
Non-recurring engineering | 1,066 | 3,356 | 4,422 | |||||||||
Royalties | 70 | 140 | 210 | |||||||||
Othe r | — | 71 | 71 | |||||||||
$ | 186,704 | $ | 104,516 | $ | 291,220 | |||||||
December 31, 2019 | December 31, 2018 | Change | ||||||||||
Accounts receivable | $ | 38,115 | $ | 43,673 | $ | (5,558 | ) | |||||
Short-term deferred revenue and customer prepayment s | (5,507 | ) | (5,069 | ) | (438 | ) | ||||||
Long-term deferred revenue | (1,054 | ) | (232 | ) | (822 | ) | ||||||
Deferred expenses | 1,897 | 501 | 1,396 | |||||||||
Sales allowances | (741 | ) | (548 | ) | (193 | ) |
2019 | 2018 | 2017 | ||||||||||
United States | $ | 121,628 | $ | 110,779 | $ | 83,871 | ||||||
Europe | 27,262 | 27,689 | 24,078 | |||||||||
Asia Pacific | 108,827 | 147,078 | 114,365 | |||||||||
All other | 5,260 | 5,674 | 5,516 | |||||||||
$ | 262,977 | $ | 291,220 | $ | 227,830 | |||||||
2019 | 2018 | 2017 | ||||||||||
Cost of revenues | $ | 342 | $ | 237 | $ | 187 | ||||||
Selling, general and administrative | 1,979 | 2,517 | 1,125 | |||||||||
Research and development | 715 | 642 | 423 | |||||||||
Total stock-based compensation | $ | 3,036 | $ | 3,396 | $ | 1,735 | ||||||
2019 | 2018 | 2017 | ||||||||||
Stock options | $ | 2,072 | $ | 2,649 | $ | 1,546 | ||||||
ESPP | 964 | 747 | 189 | |||||||||
Total stock-based compensation | $ | 3,036 | $ | 3,396 | $ | 1,735 | ||||||
2019 | 2018 | 2017 | ||||||||||
Risk-free interest rate | 1.8 | % | 2.9 | % | 2.1 | % | ||||||
Expected dividend yield | — | — | — | |||||||||
Expected volatility | 42 | % | 44 | % | 43 | % | ||||||
Expected lives (years) | 6.3 | 6.4 | 7.1 |
Options Outstanding | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life in Years | Aggregate Intrinsic Value | |||||||||||||
Outstanding on December 31, 2018 | 1,382,981 | $ | 13.41 | |||||||||||||
Granted | 115,753 | $ | 31.76 | |||||||||||||
Options transferred from VI Chip Merge r | 1,476,371 | $ | 6.79 | |||||||||||||
Forfeited and expired | (36,228 | ) | $ | 21.37 | ||||||||||||
Exercised | (250,981 | ) | $ | 9.71 | ||||||||||||
Outstanding on December 31, 2019 | 2,687,896 | $ | 10.81 | 4.65 | $ | 96,665 | ||||||||||
Exercisable on December 31, 2019 | 1,475,947 | $ | 8.74 | 4.10 | $ | 56,079 | ||||||||||
Vested or expected to vest as of December 31, 2019(1) | 2,601,076 | $ | 10.65 | 4.62 | $ | 93,938 | ||||||||||
(1) | In addition to the vested options, the Company expects a portion of the unvested options to vest at some point in the future. The number of options expected to vest is calculated by applying an estimated forfeiture rate to the unvested options. |
Options Outstanding | Weighted- Average Exercise Price | |||||||
Outstanding on December 31, 2018 (1) | 10,414,000 | $ | 0.96 | |||||
Granted | — | |||||||
Forfeited and expired | — | |||||||
Exercised | — | |||||||
Options transferred in merger with Vicor | (10,414,000 | ) | $ | 0.96 | ||||
Outstanding on June 28, 2019 | — | |||||||
(1) | Of the total VI Chip options outstanding on December 31, 2018, 5,500,000 options had been granted to Dr. Vinciarelli, the Company’s Chief Executive Officer. |
2020 | $ | 1,657 | ||
2021 | 995 | |||
2022 | 695 | |||
2023 | 606 | |||
2024 | 587 | |||
Thereafter | 171 | |||
Total lease payments | $ | 4,711 | ||
Less: Imputed interest | 336 | |||
Present value of lease liabilities | $ | 4,375 | ||
Year | ||||
2019 | $ | 1,962 | ||
2020 | 1,502 | |||
2021 | 688 | |||
2022 | 447 | |||
2023 and thereafter | 830 | |||
$5,429 | ||||
2020 | $ | 874 | ||
2021 | 901 | |||
2022 | 928 | |||
2023 | 955 | |||
2024 | 402 | |||
Total lease payments to be received | $ | 4,060 | ||
2016 | 2015 | 2014 | ||||||||||
Rental income | $ | 462 | $ | — | $ | — | ||||||
Foreign currency losses, net | (268 | ) | (161 | ) | (196 | ) | ||||||
Interest income | 68 | 47 | 80 | |||||||||
Credit gains on available for sale securities | 13 | 12 | 311 | |||||||||
(Loss) gain on disposal of equipment | (4 | ) | 60 | 22 | ||||||||
Other | 13 | 67 | 51 | |||||||||
|
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|
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| |||||||
$ | 284 | $ | 25 | $ | 268 | |||||||
|
|
|
|
|
|
During the second quarter of 2016, the Company began recognizing rental income under a new leasing agreement with a third party for the former Westcor facility.
15.
2019 | 2018 | 2017 | ||||||||||
Rental income | $ | 792 | $ | 792 | $ | 792 | ||||||
Interest income | 300 | 257 | 124 | |||||||||
Foreign currency losses, net | (108 | ) | (260 | ) | 323 | |||||||
Gain on disposal of equipment | 38 | 57 | 14 | |||||||||
Credit gains on available-for-sale securities | 4 | 7 | 11 | |||||||||
Other | 40 | 21 | (2 | ) | ||||||||
$ | 1,066 | $ | 874 | $ | 1,262 | |||||||
2016 | 2015 | 2014 | ||||||||||
Statutory federal tax rate | (34.0 | )% | (34.0 | )% | (34.0 | )% | ||||||
State income taxes, net of federal income tax benefit | 1.9 | 46.4 | 0.8 | |||||||||
(Decrease) increase in valuation allowance | 46.5 | (138.4 | ) | 46.9 | ||||||||
Tax credits | (13.6 | ) | 29.9 | (12.4 | ) | |||||||
Capital gain on sale to noncontrolling interest | 3.9 | 237.8 | — | |||||||||
Permanent items | 0.9 | 21.2 | 0.4 | |||||||||
Decrease in unremitted Vicor Custom Power earnings | (0.9 | ) | (108.7 | ) | — | |||||||
Foreign rate differential and deferred items | (0.8 | ) | (18.2 | ) | (0.3 | ) | ||||||
Book income attributable to noncontrolling interest | 0.1 | 47.0 | (0.6 | ) | ||||||||
Decrease in tax reserves | — | (248.6 | ) | (3.7 | ) | |||||||
Other | (0.2 | ) | (0.1 | ) | — | |||||||
|
|
|
|
|
| |||||||
3.8 | % | (165.7 | )% | (2.9 | )% | |||||||
|
|
|
|
|
|
2019 | 2018 | 2017 | ||||||||||
Statutory federal tax rate | 21.0 | % | 21.0 | % | (34.0 | )% | ||||||
State income taxes, net of federal income tax benefit | (8.1 | ) | 3.6 | 97.2 | ||||||||
Increase (decrease) in valuation allowance | 2.2 | (9.1 | ) | (936.1 | ) | |||||||
Permanent items | (3.9 | ) | (5.9 | ) | (861.2 | ) | ||||||
Tax credits | (15.6 | ) | (5.5 | ) | (1,222.3 | ) | ||||||
Provision vs. tax return differences | 9.0 | (1.7 | ) | — | ||||||||
Foreign rate differential and deferred items | 0.6 | 0.7 | (91.8 | ) | ||||||||
Change in tax reserves | — | 0.1 | (5.1 | ) | ||||||||
Rate change due to tax reform | — | — | 3,441.1 | |||||||||
Refundable income taxes—AMT credit | — | — | (751.0 | ) | ||||||||
Other | — | 0.1 | (0.1 | ) | ||||||||
5.2 | % | 3.3 | % | (363.3 | )% | |||||||
In 2016, in connection with the Company’s acquisition of 100% ownership of certain operating assets and cash of Converpower, the related deferred tax liability for unremitted earnings of $55,000 was reversed and recorded as a discrete benefit in the first quarter of 2016 (see Note 9).
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In 2015, the Company entered into voluntary disclosure agreements with several states. As a result, the Company recognized a tax benefit of approximately $555,000 as a discrete item in the fourth quarter of 2015 for the release of tax reserves. In addition, in connection with the Company’s sale of its 49% interest in APS, recognized as a capital gain, the related deferred tax liability for unremitted earnings of $274,000 was reversed and recorded as a deferred tax benefit in the fourth quarter of 2015 (see Note 9).
During the third quarter of 2014, the Company recognized a tax benefit of approximately $552,000 as a discrete item for the release of certain income tax reserves, due to the completioninability to project net future taxable income, as described below. The benefit for income taxes in 2017 was primarily due to the Company’s
Tax Act.
2016 | 2015 | 2014 | ||||||||||
Domestic | $ | (6,034 | ) | $ | 1,373 | $ | (14,223 | ) | ||||
Foreign | 4 | (1,615 | ) | (272 | ) | |||||||
|
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| |||||||
$ | (6,030 | ) | $ | (242 | ) | $ | (14,495 | ) | ||||
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|
2019 | 2018 | 2017 | ||||||||||
Domestic | $ | 13,493 | $ | 31,455 | $ | (1,591 | ) | |||||
Foreign | 1,394 | 1,478 | 1,493 | |||||||||
$ | 14,887 | $ | 32,933 | $ | (98 | ) | ||||||
2016 | 2015 | 2014 | ||||||||||
Current: | ||||||||||||
Federal | $ | — | $ | 144 | $ | (690 | ) | |||||
State | 172 | (473 | ) | 147 | ||||||||
Foreign | 137 | 111 | 124 | |||||||||
|
|
|
|
|
| |||||||
309 | (218 | ) | (419 | ) | ||||||||
Deferred: | ||||||||||||
Federal | (55 | ) | (274 | ) | (6 | ) | ||||||
Foreign | (23 | ) | 91 | — | ||||||||
|
|
|
|
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| |||||||
(78 | ) | (183 | ) | (6 | ) | |||||||
|
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| |||||||
$ | 231 | $ | (401 | ) | $ | (425 | ) | |||||
|
|
|
|
|
|
2019 | 2018 | 2017 | ||||||||||
Current: | ||||||||||||
Federal | $ | — | $ | — | $ | (736 | ) | |||||
State | 268 | 231 | 156 | |||||||||
Foreign | 450 | 911 | 396 | |||||||||
718 | 1,142 | (184 | ) | |||||||||
Deferred: | ||||||||||||
Foreign | 60 | (55 | ) | (172 | ) | |||||||
60 | (55 | ) | (172 | ) | ||||||||
$ | 778 | $ | 1,087 | $ | (356 | ) | ||||||
The Company intends to continue to reinvest certain of its foreign earnings indefinitely. Accordingly, no U.S. income taxes have been provided for approximately $909,000 of unremitted earnings of international subsidiaries.Tax Act. As of December 31, 2016,2019 and 2018, unremitted foreign earnings, which were not significant, were permanently
in the form of dividends or otherwise, the Company could be subject to immaterial withholding taxes payable to the various foreign countries.
2016 | 2015 | |||||||
Deferred tax assets: | ||||||||
Research and development tax credit carryforwards | $ | 13,967 | $ | 12,503 | ||||
Net operating loss carryforwards | 4,902 | 3,393 | ||||||
Stock-based compensation | 4,066 | 3,993 | ||||||
Inventory reserves | 3,143 | 2,979 | ||||||
Vacation accrual | 1,928 | 1,768 | ||||||
Investment tax credit carryforwards | 1,576 | 1,399 | ||||||
Alternative minimum tax credit carryforward | 340 | 340 | ||||||
Deferred revenue | 154 | 192 | ||||||
Unrealized loss on investments | 136 | 149 | ||||||
Warranty reserves | 73 | 202 | ||||||
Bad debt reserves | 52 | 58 | ||||||
Other | 331 | 735 | ||||||
|
|
|
| |||||
Total deferred tax assets | 30,668 | 27,711 | ||||||
Less: Valuation allowance for deferred tax assets | (29,274 | ) | (25,862 | ) | ||||
|
|
|
| |||||
Net deferred tax assets | 1,394 | 1,849 | ||||||
Deferred tax liabilities: | ||||||||
Prepaid expenses | (654 | ) | (713 | ) | ||||
Depreciation | (406 | ) | (787 | ) | ||||
Patent amortization | (296 | ) | (334 | ) | ||||
Unremitted Vicor Custom Power earnings | — | (55 | ) | |||||
|
|
|
| |||||
Total deferred tax liabilities | (1,356 | ) | (1,889 | ) | ||||
|
|
|
| |||||
Net deferred tax assets (liabilities) | $ | 38 | $ | (40 | ) | |||
|
|
|
|
2019 | 2018 | |||||||
Deferred tax assets: | ||||||||
Research and development tax credit carryforwards | $ | 27,607 | $ | 23,244 | ||||
Investment tax credit carryforwards | 2,102 | 1,976 | ||||||
Stock-based compensation | 1,587 | 3,133 | ||||||
Inventory reserves | 1,522 | 2,109 | ||||||
Vacation accrual | 1,280 | 1,218 | ||||||
Deferred revenue, net | 796 | 66 | ||||||
Lease liabilities | 679 | — | ||||||
UNICAP | 351 | 275 | ||||||
Net operating loss carryforwards | 328 | 1,091 | ||||||
International deferred tax assets | 205 | 265 | ||||||
Sales allowances | 172 | 128 | ||||||
Unrealized loss on investments | 132 | 132 | ||||||
Contingent consideration liabilities | 98 | 88 | ||||||
Warranty reserves | 66 | 35 | ||||||
Bad debt reserves | 14 | 52 | ||||||
Other | 225 | 233 | ||||||
Total deferred tax assets | 37,164 | 34,045 | ||||||
Less: Valuation allowance for deferred tax assets | (30,363 | ) | (30,031 | ) | ||||
Net deferred tax assets | 6,801 | 4,014 | ||||||
Deferred tax liabilities: | ||||||||
Depreciation | (5,296 | ) | (3,144 | ) | ||||
ROU assets | (653 | ) | — | |||||
Prepaid expenses | (552 | ) | (473 | ) | ||||
Patent amortization | (91 | ) | (107 | ) | ||||
Other | (4 | ) | (25 | ) | ||||
Total deferred tax liabilities | (6,596 | ) | (3,749 | ) | ||||
Net deferred tax assets (liabilities) | $ | 205 | $ | 265 | ||||
As a result of certain realization requirements under the stock-based compensation guidance, the table of deferred tax assetsstate and liabilities shown above does not include certain deferred tax assets as of December 31, 2016, that arose directly from tax deductions related to stock-based compensation greater than stock-based
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
compensation recognized for financial reporting. Equity will be increased, net of any valuation allowance, by $3,485,000 if and when such deferred tax assets are ultimately realized. Beginning in 2017, upon the adoption of new guidance for employee share-based accounting described in Note 2 — Significant Accounting Policies —Impact of recently issued accounting standards, this amount will be allocated and added to the deferred tax assets forfederal research and development tax credit carryforwards of approximately $14,451,000 and net operating loss carryforwards, but will be fully offset by the valuation allowance for deferred tax assets. The Company uses ASC 740 ordering when determining when excess tax benefits have been realized.
The research and development tax credit carryforwards$17,744,000, respectively, expire beginning in 20172020 for state purposes and in 20222025 for federal purposes. The Company has federal net operating loss carryforwards which expire beginning in 2033, as well as net operating loss carryforwards in certain states of approximately $4,913,000, which expire beginning in 20172022 through 2036.
2037.
2016 | 2015 | 2014 | ||||||||||
Balance on January 1 | $ | 830 | $ | 1,254 | $ | 2,072 | ||||||
Additions based on tax provisions related to the current year | 125 | 120 | 161 | |||||||||
Reductions for tax positions of prior years | — | — | (967 | ) | ||||||||
Settlements | — | (480 | ) | — | ||||||||
Lapse of statute | (9 | ) | (64 | ) | (12 | ) | ||||||
|
|
|
|
|
| |||||||
Balance on December 31 | $ | 946 | $ | 830 | $ | 1,254 | ||||||
|
|
|
|
|
|
2019 | 2018 | 2017 | ||||||||||
Balance on January 1 | $ | 1,462 | $ | 1,104 | $ | 946 | ||||||
Additions based on tax positions related to the current year | 571 | 245 | 138 | |||||||||
Additions for tax positions of prior years | 43 | 120 | 29 | |||||||||
Settlements | — | — | (1 | ) | ||||||||
Lapse of statute | (6 | ) | (7 | ) | (8 | ) | ||||||
Balance on December 31 | $ | 2,070 | $ | 1,462 | $ | 1,104 | ||||||
VICOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other than
16.
Year | ||||
2017 | $ | 1,572 | ||
2018 | 1,013 | |||
2019 | 556 | |||
2020 | 411 | |||
2021 and thereafter | 1,219 |
Rent expense was approximately $1,866,000, $1,902,000 and $1,824,000 in 2016, 2015 and 2014, respectively. The Company also pays tenant-related executory costs such as taxes, maintenance, and insurance.
Ona patent infringement lawsuit originally filed on January 28, 2011 by SynQor, Inc. (“SynQor”) filed a complaint for patent infringement against Ericsson, Inc. (“Ericsson”), Cisco Systems, Inc. (“Cisco”) and the Company in the U.S. District Court for the Eastern District of Texas (the “Texas Action”). Ericsson and Cisco subsequently settled with SynQor and are no longer parties to the Texas Action. With respect to the Company, SynQor’sThe complaint, in the Texas Action allegedas amended, alleges that the Company’s products, including but not limited to, unregulated bus converters used in intermediate bus architecture power supply systems, infringe SynQor’s U.S. patent numbers 7,072,190, 7,272,021, 7,564,702, and 7,564,7028,023,290 (“the ‘190 patent”, “the ‘021 patent” and, “the ‘702 patent”, and “the ‘290 patent”, respectively). SynQor’s complaintcompliant sought an injunction against further infringement and an award of unspecified compensatory and enhanced damages, interest, costs and attorney fees. On September 20, 2011, SynQor filed an amended complaint in the Texas Action that further alleged that the Company’s products, including, but not limited to, unregulated bus converters used in intermediate bus architecture power supply systems, infringe SynQor’s U.S. patent number 8,023,290 (“the ‘290 patent”). The Company responded to SynQor’s amended complaint in the Texas Action by denyinghas denied that its products infringe any of the SynQor patents, and assertinghas asserted that the SynQor patents are invalid. The Company has further alleged that the SynQor ‘290 patent is unenforceable due to inequitable conduct by SynQor invalid and/or its agents during the examination of the ‘290 patent at the United States Patent and Trademark Office (“USPTO”).unenforceable. The Company has also asserted counterclaims seeking damages againstfrom SynQor for deceptive trade practices and tortious interference with prospective economic advantage arising from SynQor’s attempted enforcement of its patents against the Company.
The Company has initiated administrative review
decision upholding the validity
basis for any liability by the Company.
17. SEGMENT INFORMATION
The Company has organized its business segments according to its key product lines. The BBU segment designs, develops, manufactures, and markets
The Company’s Chief Executive Officer (i.e.,Plan, and options outstanding thereunder, by the chief operating decision maker) evaluates performance and allocates resources based on segment revenues and segment operating income (loss). The operating income (loss) for each segment includes selling, general, and administrative and research and development expenses directly attributable to the segment. Certain ofCompany.
The following table provides significant segment
BBU | VI Chip | Picor | Corporate | Eliminations | Total | |||||||||||||||||||
(1) | ||||||||||||||||||||||||
2016: | ||||||||||||||||||||||||
Net revenues | $ | 151,428 | $ | 39,947 | $ | 16,684 | $ | — | $ | (7,779 | ) | $ | 200,280 | |||||||||||
Income (loss) from operations | 11,750 | (16,494 | ) | (637 | ) | (933 | ) | — | (6,314 | ) | ||||||||||||||
Total assets | 196,987 | 21,389 | 8,583 | 73,253 | (146,145 | ) | 154,067 | |||||||||||||||||
Depreciation and amortization | 4,258 | 2,235 | 545 | 1,400 | — | 8,438 | ||||||||||||||||||
2015: | ||||||||||||||||||||||||
Net revenues | $ | 173,064 | $ | 36,688 | $ | 17,304 | $ | — | $ | (6,862 | ) | $ | 220,194 | |||||||||||
Income (loss) from operations | 21,743 | (21,040 | ) | (290 | ) | (680 | ) | — | (267 | ) | ||||||||||||||
Total assets | 170,939 | 15,577 | 5,369 | 81,824 | (116,164 | ) | 157,545 | |||||||||||||||||
Depreciation and amortization | 4,538 | 2,740 | 442 | 1,422 | — | 9,142 | ||||||||||||||||||
2014: | ||||||||||||||||||||||||
Net revenues | $ | 184,224 | $ | 34,701 | $ | 15,570 | $ | — | $ | (8,764 | ) | $ | 225,731 | |||||||||||
Income (loss) from operations | 15,499 | (29,015 | ) | (407 | ) | (840 | ) | — | (14,763 | ) | ||||||||||||||
Total assets | 151,923 | 17,677 | 5,691 | 75,758 | (95,507 | ) | 155,542 | |||||||||||||||||
Depreciation and amortization | 4,711 | 3,265 | 410 | 1,419 | — | 9,805 |
18.2019 and 2018 as a result of the mergers.
First | Second | Third | Fourth | Total | ||||||||||||||||
2016: | ||||||||||||||||||||
Net revenues | $ | 46,027 | $ | 52,941 | $ | 53,227 | $ | 48,085 | $ | 200,280 | ||||||||||
Gross margin | 19,316 | 24,471 | 25,923 | 21,499 | 91,209 | |||||||||||||||
Consolidated net income (loss) | (5,376 | ) | (550 | ) | 2,351 | (2,686 | ) | (6,261 | ) | |||||||||||
Net income (loss) attributable to noncontrolling interest | (25 | ) | (6 | ) | 15 | 2 | (14 | ) | ||||||||||||
Net income (loss) attributable to Vicor Corporation | (5,351 | ) | (544 | ) | 2,336 | (2,688 | ) | (6,247 | ) | |||||||||||
Net income (loss) per share attributable to Vicor Corporation: | ||||||||||||||||||||
Basic and diluted | (0.14 | ) | (0.01 | ) | 0.06 | (0.07 | ) | (0.16 | ) |
First | Second | Third | Fourth | Total | ||||||||||||||||
2019: | ||||||||||||||||||||
Net revenues | $ | 65,725 | $ | 63,355 | $ | 70,772 | $ | 63,125 | $ | 262,977 | ||||||||||
Gross margin | 31,086 | 29,117 | 33,002 | 29,761 | 122,966 | |||||||||||||||
Consolidated net income | 4,306 | 2,556 | 5,932 | 1,315 | 14,109 | |||||||||||||||
Net income (loss) attributable to noncontrolling interest | 20 | (7 | ) | (5 | ) | 3 | 11 | |||||||||||||
Net income attributable to Vicor Corporation | 4,286 | 2,563 | 5,937 | 1,312 | 14,098 | |||||||||||||||
Net income per share attributable to Vicor Corporation: | ||||||||||||||||||||
Basic | 0.11 | 0.06 | 0.15 | 0.03 | 0.35 | |||||||||||||||
Diluted | 0.10 | 0.06 | 0.14 | 0.03 | 0.34 |
First | Second | Third | Fourth | Total | ||||||||||||||||
2015: | ||||||||||||||||||||
Net revenues | $ | 64,017 | $ | 56,119 | $ | 48,664 | $ | 51,394 | $ | 220,194 | ||||||||||
Gross margin | 28,891 | 26,510 | 21,286 | 22,831 | 99,518 | |||||||||||||||
Consolidated net income (loss) | 3,442 | 771 | 2,609 | (1,663 | ) | 5,159 | ||||||||||||||
Net income (loss) attributable to noncontrolling interest | 71 | (34 | ) | 106 | 89 | 232 | ||||||||||||||
Net income (loss) attributable to Vicor Corporation | 3,371 | 805 | 2,503 | (1,752 | ) | 4,927 | ||||||||||||||
Net income (loss) per share attributable to Vicor Corporation: | ||||||||||||||||||||
Basic and diluted | 0.09 | 0.02 | 0.06 | �� | (0.05 | ) | 0.13 |
First | Second | Third | Fourth | Total | ||||||||||||||||
2018: | ||||||||||||||||||||
Net revenues | $ | 65,269 | $ | 74,196 | $ | 78,035 | $ | 73,720 | $ | 291,220 | ||||||||||
Gross margin | 30,211 | 35,883 | 39,004 | 33,873 | 138,971 | |||||||||||||||
Consolidated net income | 3,982 | 7,909 | 13,048 | 6,907 | 31,846 | |||||||||||||||
Net income (loss) attributable to noncontrolling interest | 39 | 49 | 36 | (3 | ) | 121 | ||||||||||||||
Net income attributable to Vicor Corporation | 3,943 | 7,860 | 13,012 | 6,910 | 31,725 | |||||||||||||||
Net income per share attributable to Vicor Corporation: | ||||||||||||||||||||
Basic | 0.10 | 0.20 | 0.32 | 0.17 | 0.80 | |||||||||||||||
Diluted | 0.10 | 0.19 | 0.32 | 0.17 | 0.78 |
ITEM 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
ITEM 9A. | Controls and procedures |
2019.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
In our opinion, Vicor Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on criteria established inInternal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Vicor Corporation and subsidiaries as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive income (loss), cash flows, and equity for each of the years in the three-year period ended December 31, 2016, and our report dated March 7, 2017 expressed an unqualified opinion on those consolidated financial statements.
March 7, 2017
ITEM |
PART
ITEM 10. | Directors, executive officers and corporate governance |
ITEM 11. | Executive Compensation |
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ANDRELATED STOCKHOLDER MATTERS |
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR |
ITEM 14. | Principal accountant fees and services |
PART
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Exhibits | Description of Document | |||||
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3.5 | ||||||
4.1 | Specimen Common Stock Certificate (2) | |||||
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10.1* | ||||||
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| 10.8* | |||||
| 10.9* | |||||
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| 10.11* | |||||
10.12* | ||||||
21.1 | ||||||
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32.2 | ||||||
| 101.INS** | Inline XBRL Instance Document — the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | ||||
101.SCH** | Inline XBRL Taxonomy Extension Schema Document. | |||||
101.CAL** | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |||||
101.DEF** | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |||||
101.LAB** | Inline XBRL Taxonomy Extension Label Linkbase Document. | |||||
101.PRE** | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in |
* | Indicates a management contract or compensatory plan or arrangement required to be filled pursuant to Item 15(b) of Form 10-K. |
** | Filed with this Annual Report on Form 10-K for the year ended December 31, 2019 are the following documents formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Consolidated |
Balance Sheets for the years ended December 31, 2019 and 2018; (ii) the Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017; (iii) the Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018 and 2017; (iv) the Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017; (v) the Consolidated Statements of Equity for the years ended December 31, 2019, 2018 and 2017; and (vi) the Notes to Consolidated Financial Statements. |
(1) | Filed as an exhibit to the Company’s Annual Report onForm 10-K filed on March 29, 2001 and incorporated herein by reference. |
(2) | Filed as an exhibit to the Company’s Registration Statement on Form 10, as amended, under the Securities Exchange Act of 1934 (FileNo. 0-18277), and incorporated herein by reference. (P) |
(3) | Filed as an exhibit to the Company’s Registration Statement onForm S-8, as amended, under the Securities Act of 1933 333-61177), and incorporated herein by reference. |
(4) | Filed as 000-18277), and incorporated herein by reference. |
(5) | Filed as an exhibit to the Company’s 10-Q filed on 0-18277) and incorporated herein by reference. |
(6) | Filed as an exhibit to the Company’s 10-K filed on 0-18277) and incorporated herein by reference. |
(7) | Filed as an exhibit to the Company’s Annual Report onForm 10-K filed on March 0-18277) and incorporated herein by reference. |
(8) | Filed as an exhibit to the Company’s 10-Q filed on 0-18277) and incorporated herein by reference. |
(9) | Filed as an exhibit to the Company’s 8-K, dated June 6, 2007 (FileNo. 0-18277) and incorporated herein by reference. |
(10) | Filed as an exhibit to the Company’s Current Report 8-K, dated 0-18277) incorporated herein by reference. |
(11) | Filed as Appendix B to the Company’s Definitive Proxy Statement on Schedule 14A filed with the SEC on May 1, 2017 (File No. 000-18277), and incorporated herein by reference. |
Filed as 000-18277), and incorporated herein by reference. |
(13) | Filed as Appendix D to the Company’s Definitive Proxy Statement on Schedule 14A filed with the SEC on May 1, 2017 (File No. 000-18277), and incorporated herein by reference. |
(14) | Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 5, 2018 (File No. 000-18277), and |
Filed as Exhibit 10.1 to the Company’s Registration Statement on Form S-8, under the Securities Act of 1933 (No. 333-232864), and incorporated herein by reference. |
(16) | Filed herewith. |
ITEM
Description | Balance at Beginning of Period | Charge (Recovery) to Costs and Expenses | Other Charges, Deductions (1) | Balance at End of Period | ||||||||||||
Allowance for doubtful accounts: | ||||||||||||||||
Year ended: | ||||||||||||||||
December 31, 2016 | $ | 171,000 | $ | (22,000 | ) | $ | 4,000 | $ | 153,000 | |||||||
December 31, 2015 | 183,000 | 18,000 | (30,000 | ) | 171,000 | |||||||||||
December 31, 2014 | 198,000 | 66,000 | (81,000 | ) | 183,000 |
Description | Balance at Beginning of Period | Charge (Recovery) to Costs and Expenses | Other Charges, Deductions (1) | Balance at End of Period | ||||||||||||
Allowance for doubtful accounts: | ||||||||||||||||
Year ended: | ||||||||||||||||
December 31, 2019 | $ | 224,000 | $ | (144,000 | ) | $ | (21,000 | ) | $ | 59,000 | ||||||
December 31, 2018 | 159,000 | 65,000 | — | 224,000 | ||||||||||||
December 31, 2017 | 153,000 | 6,000 | — | 159,000 |
(1) | Reflects uncollectible accounts written off, net of recoveries. |
Vicor Corporation | ||
By: | /s/ James A. Simms | |
James A. Simms | ||
Vice President, Chief Financial Officer |
February 28, 2020
Signature | Title | Date | ||
/s/ Patrizio Vinciarelli Patrizio Vinciarelli | President, Chief Executive Officer and Chairman of the Board (Principal Executive Officer) | February 28, 2020 | ||
/s/ James A. Simms James A. Simms | Chief Financial Officer and Vice President (Principal Financial Officer and Principal Accounting Officer) | February 28, 2020 | ||
/s/ Estia J. Eichten Estia J. Eichten | Director | February 28, 2020 | ||
| ||||
/s/
Michael S. McNamara | Director | February 28, 2020 | ||
/s/ Samuel J. Anderson Samuel J. Anderson | Director | February 28, 2020 | ||
/s/ Claudio Tuozzolo Claudio Tuozzolo | Director | February 28, 2020 | ||
/s/ Jason L. Carlson Jason L. Carlson | Director | February 28, 2020 | ||
| ||||
/s/
Philip D. Davies | Director | February 28, 2020 |