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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from__________________________________________________
Commission File Number 0-18277
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VICOR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 04-2742817
(State of Incorporation) (IRS Employer Identification Number)
25 Frontage Road, Andover, Massachusetts 01810
(Address of registrant's principal executive office)
(978) 470-2900
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of June 30, 2000.
Common Stock, $.01 par value ............ 30,187,279
Class B Common Stock, $.01 par value .... 11,993,348
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VICOR CORPORATION
INDEX TO FORM 10-Q
Page
----
Part I - Financial Information:
Item 1 - Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet at 1
June 30, 2000 and December 31, 1999
Condensed Consolidated Statement of Income 2
for the quarters ended June 30, 2000 and 1999 and
for the six months ended June 30, 2000 and 1999
Condensed Consolidated Statement of Cash Flows 3
for the six months ended June 30, 2000 and 1999
Notes to Condensed Consolidated Financial 4-5
Statements
Item 2 - Management's Discussion and Analysis of 6-8
Financial Condition and Results of Operations
Item 3 - Quantative and Qualitative Disclosures About Market Risk 9
Part II - Other Information:
Item 1 - Legal Proceedings 10
Item 2 - Changes in Securities 10
Item 3 - Defaults Upon Senior Securities 10
Item 4 - Submission of Matters to a Vote of 10
Security Holders
Item 5 - Other Information 10
Item 6 - Exhibits and Reports on Form 8-K 10
Signature(s) 11
FORM 10-Q
PART 1
ITEM 1
PAGE 1
VICOR CORPORATION
Condensed Consolidated Balance Sheet
(In thousands)
(Unaudited)
Assets June 30, 2000 December 31, 1999
------------- -----------------
Current assets:
Cash and cash equivalents $ 71,295 $ 69,109
Accounts receivable, net 39,865 32,465
Inventories, net 38,768 33,360
Other current assets 6,566 6,940
--------- ---------
Total current assets 156,494 141,874
Property, plant and equipment, net 109,157 109,079
Notes receivable 8,674 8,698
Other assets 8,112 9,254
--------- ---------
$ 282,437 $ 268,905
--------- ---------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 10,941 $ 10,317
Accrued compensation and benefits 4,450 3,553
Accrued liabilities 8,201 4,987
--------- ---------
Total current liabilities 23,592 18,857
Deferred income taxes 5,515 5,515
Stockholders' equity:
Preferred Stock -- --
Class B Common Stock 120 121
Common Stock 360 356
Additional paid-in capital 130,341 124,451
Retained earnings 201,310 185,979
Accumulated other comprehensive income 637 889
Treasury stock, at cost (79,438) (67,263)
--------- ---------
Total stockholders' equity 253,330 244,533
--------- ---------
$ 282,437 $ 268,905
========= =========
Note: The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes.
FORM 10-Q
PART I
ITEM 1
PAGE 2
VICOR CORPORATION
Condensed Consolidated Statement of Income
(In thousands except per share data)
(Unaudited)
Three Months Ended Six Months Ended
---------------------- ----------------------
June 30, June 30,
2000 1999 2000 1999
-------- -------- -------- --------
Net revenues:
Product $ 59,985 $ 42,446 $115,171 $ 76,842
License 2,793 2,362 5,393 9,930
-------- -------- -------- --------
62,778 44,808 120,564 86,772
Costs and expenses:
Cost of revenue 35,622 26,007 68,641 49,283
Selling, general and administrative 10,607 8,554 20,880 17,443
Research and development 5,348 4,869 10,619 10,020
-------- -------- -------- --------
51,577 39,430 100,140 76,746
-------- -------- -------- --------
Income from operations 11,201 5,378 20,424 10,026
Other income 791 752 1,955 1,494
-------- -------- -------- --------
Income before income taxes 11,992 6,130 22,379 11,520
Provision for income taxes 3,777 1,962 7,048 3,687
-------- -------- -------- --------
Net income $ 8,215 $ 4,168 $ 15,331 $ 7,833
======== ======== ======== ========
Net income per common share:
Basic $ 0.19 $ 0.10 $ 0.36 $ 0.19
Diluted $ 0.19 $ 0.10 $ 0.35 $ 0.19
Shares used to compute net income per share:
Basic 42,155 41,328 42,319 41,429
Diluted 43,125 42,155 43,233 42,040
See accompanying notes.
FORM 10-Q
PART I
ITEM 1
PAGE 3
VICOR CORPORATION
Condensed Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
-----------------------------
June 30, 2000 June 30, 1999
------------- -------------
Operating activities:
Net income $ 15,331 $ 7,833
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 9,068 7,594
Loss on disposal of equipment 166 75
Change in current assets and
liabilities, net (7,838) (12,320)
-------- --------
Net cash provided by operating activities 16,727 3,182
Investing activities:
Additions to property, plant and equipment (8,721) (7,346)
Proceeds from sale of equipment 2 17
Decrease (increase) in notes receivable 24 (78)
Decrease (increase) in other assets 537 (814)
-------- --------
Net cash used in investing activities (8,158) (8,221)
Financing activities:
Tax benefit relating to stock option plans 1,991 211
Proceeds from issuance of Common Stock 3,902 696
Acquisitions of treasury stock (12,175) (5,475)
-------- --------
Net cash used in financing activities (6,282) (4,568)
Effect of foreign exchange rates on cash (101) (297)
-------- --------
Net increase (decrease) in cash and cash equivalents 2,186 (9,904)
Cash and cash equivalents at beginning of period 69,109 58,897
-------- --------
Cash and cash equivalents at end of period $ 71,295 $ 48,993
-------- --------
See accompanying notes.
FORM 10-Q
PART I
ITEM 1
PAGE 4
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2000
(Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of only normal
recurring adjustments) considered necessary for a fair presentation have
been included. Operating results for the three- and six-month periods
ended June 30, 2000 are not necessarily indicative of the results that may
be expected for the year ended December 31, 2000. For further information,
refer to the consolidated financial statements and notes thereto included
in the Company's audited financial statements for the year ended December
31, 1999, contained in the Company's annual report filed on Form 10-K
(File No. 0-18277) with the Securities and Exchange Commission.
2. Net Income per Share
The following table sets forth the computation of basic and diluted income
per share for the three and six months ended June 30 (in thousands, except
per share amounts):
Three Months Ended Six Months Ended
------------------- -------------------
June 30, June 30,
2000 1999 2000 1999
------ ------ ------ ------
Numerator:
Net Income $ 8,215 $ 4,168 $15,331 $ 7,833
======= ======= ======= =======
Denominator:
Denominator for basic income
per share-weighted average shares 42,155 41,328 42,319 41,429
Effect of dilutive securities:
Employee stock options 970 827 914 611
------ ------ ------ ------
Denominator for diluted income per share-
adjusted weighted-average shares and
assumed conversions 43,125 42,155 43,233 42,040
======= ======= ======= =======
Basic income per share $ 0.19 $ 0.10 $ 0.36 $ 0.19
======= ======= ======= =======
Diluted income per share $ 0.19 $ 0.10 $ 0.35 $ 0.19
======= ======= ======= =======
FORM 10-Q
PART I
ITEM 1
PAGE 5
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2000
(Continued)
3. Inventories
Inventories are valued at the lower of cost (determined using the
first-in, first-out method) or market. Inventories were as follows as of
June 30, 2000 and December 31, 1999 (in thousands):
June 30, 2000 December 31, 1999
------------- -----------------
Raw materials ................ $25,600 $22,924
Work-in-process .............. 7,047 4,957
Finished goods ............... 6,121 5,479
------- -------
$38,768 $33,360
======= =======
4. Comprehensive Income
Total comprehensive income was $7,990,000 and $15,079,000 for the three
and six months ended June 30, 2000, respectively, and $3,892,000 and
$7,323,000 for the three and six months ended June 30, 1999, respectively.
Other comprehensive income consisted of adjustments for foreign currency
translation losses in the amounts of $225,000 and $252,000 for the three
and six months ended June 30, 2000, respectively.
FORM 10-Q
PART I
ITEM 2
PAGE 6
VICOR CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
June 30, 2000
Except for historical information contained herein, some matters discussed in
this report constitute forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. The words "believes," "expects,"
"anticipates," "intend," "estimate," "plan," "assumes," and other similar
expressions identify forward-looking statements. Actual results could differ
materially from those projected in the forward-looking statements as a result of
the risk factors set forth in this report and in the Company's Annual Report on
Form 10-K for the year ended December 31, 1999. Reference is made in particular
to the discussions set forth below in this Report under "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and set forth in
the Annual Report on Form 10-K under Item 1 -- "Business -- Second-Generation
Automated Manufacturing Line," "--Competition," "--Patents," "--Licensing," and
"--Risk Factors," and under Item 7 -- "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The risk factors contained in
the Annual Report on Form 10-K may not be exhaustive. Therefore, the information
contained in that Form 10-K should be read together with other reports and
documents that the Company files with the Securities and Exchange Commission
from time to time, including Forms 10-Q, 8-K and 10-K, which may supplement,
modify, supersede or update those risk factors.
Results of Operations
Three months ended June 30, 2000 compared to three months ended June 30, 1999
Net revenues for the second quarter of 2000 were $62,778,000, an increase of
$17,970,000 (40.1%) as compared to $44,808,000 for the same period a year ago.
The growth in net revenues resulted primarily from a net increase in unit
shipments of standard and custom products of approximately $17,539,000.
Gross margin increased $8,355,000 (44.4%) to $27,156,000 from $18,801,000, and
increased as a percentage of net revenues from 42.0% to 43.3%. The primary
component of the increase in gross margin dollars and percentage was the
increase in net revenues.
Selling, general and administrative expenses were $10,607,000 for the period, an
increase of $2,053,000 (24.0%) over the same period in 1999. As a percentage of
net revenues, selling, general and administrative expenses decreased to 16.9%
from 19.1%. The principal components of the $2,053,000 increase were $442,000
(38.5%) of increased sales commission expense, $426,000 (80.4%) of increased
advertising costs, $418,000 (393.1%) of increased legal expenses and $227,000
(7.0%) of increased compensation expense.
Research and development expenses increased $479,000 (9.8%) to $5,348,000 and
decreased as a percentage of net revenues to 8.5% from 10.9%. The principal
component of the $479,000 increase was $544,000 (22.8%) of increased
compensation expense.
FORM 10-Q
PART I
ITEM 2
PAGE 7
VICOR CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
June 30, 2000
(continued)
Other income increased $39,000 (5.2%) from the same period a year ago, to
$791,000. Other income is primarily comprised of interest income derived from
invested cash and cash equivalents, as well as from a note receivable associated
with the Company's real estate transaction. Interest income increased primarily
due to an increase in cash and cash equivalent balances and an increase in
average interest rates.
Income before income taxes was $11,992,000, an increase of $5,862,000 (95.6%)
compared to the same period in 1999. As a percentage of net revenues, income
before income taxes increased from 13.7% to 19.1% primarily due to the gross
margin increase generated by the increased net revenues coupled with a decrease
in operating expenses as a percentage of net revenues.
The effective tax rate for the second quarter of 2000 was 31.5%, compared to
32.0% for the same period in 1999.
Net income per share (diluted) was $.19 for the second quarter of 2000, compared
to $.10 for the second quarter of 1999, an increase of $.09.
Six months ended June 30, 2000 compared to six months ended June 30, 1999
Net revenues for the first six months of 2000 were $120,564,000, an increase of
$33,792,000 (38.9%) as compared to $86,772,000 for the same period a year ago.
The growth in net revenues resulted primarily from an increase in unit shipments
of standard and custom products of $38,329,000 offset by a decrease in license
revenue of $4,537,000. The decrease in license revenue was primarily due to a
non-recurring payment from a licensee for past use of Vicor's intellectual
property in the first quarter of 1999.
Gross margin increased $14,434,000 (38.5%) to $51,923,000 from $37,489,000, and
decreased as a percentage of net revenues from 43.2% to 43.1%. The primary
component of the increase in gross margin dollars was the increase in net
revenues. The primary component of the decrease in gross margin percentage was
due to changes in revenue mix, partially offset by the increase in net revenues.
Selling, general and administrative expenses were $20,880,000 for the period, an
increase of $3,437,000 (19.7%) over the same period in 1999. As a percentage of
net revenues, selling, general and administrative expenses decreased to 17.3%
from 20.1%. The principal components of the $3,437,000 increase were $1,029,000
(49.4%) of increased sales commission expense, $681,000 (71.5%) of increased
advertising expenses, $542,000 (8.6%) of increased compensation expense,
$363,000 (31.0%) of increased depreciation and amortization expense, and
$334,000 of payroll tax expense associated with the exercise of stock options.
Research and development expenses increased $599,000 (6.0%) to $10,619,000 and
decreased as a percentage of net revenues to 8.8% from 11.5%. The principal
components of the $599,000 increase were $1,417,000 (32.1%) of increased
compensation expense offset by a decrease of $684,000 (31.7%) in project
material costs and $126,000 (23.1%) of decreased facilities costs.
FORM 10-Q
PART I
ITEM 2
PAGE 8
VICOR CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
June 30, 2000
(continued)
Other income increased $461,000 (30.9%) from the same period a year ago, to
$1,955,000. Other income is primarily comprised of interest income derived from
invested cash and cash equivalents, as well as from a note receivable associated
with the Company's real estate transaction. Interest income increased primarily
due to an increase in cash and cash equivalent balances and an increase in
average interest rates.
Income before income taxes was $22,379,000, an increase of $10,859,000 (94.3%)
compared to the same period in 1999. As a percentage of net revenues, income
before income taxes increased from 13.3% to 18.6% primarily due to the gross
margin increase generated by the increased net revenues.
The effective tax rate for the six months ended June 30, 2000 was 31.5%,
compared to 32.0% for the same period in 1999.
Net income per share (diluted) was $.35 for the six months ended June 30, 2000,
compared to $.19 for the same period in 1999, an increase of $.16.
Liquidity and Capital Resources
At June 30, 2000 the Company had $71,295,000 in cash and cash equivalents. The
ratio of current assets to current liabilities was 6.6:1 compared to 7.5:1 at
December 31, 1999. Working capital increased $9,885,000, from $123,017,000 at
December 31, 1999 to $132,902,000 at June 30, 2000. The primary factors
affecting the working capital increase were an increase in cash, accounts
receivable and inventories of $14,994,000, offset by an increase in current
liabilities of $4,735,000. The primary uses of cash for the first six months of
2000 were for additions to property and equipment of $8,721,000 and the
acquisition of treasury stock of $12,175,000.
The Company plans to make continuing investments in manufacturing equipment,
much of which is built internally. The internal construction of manufacturing
machinery, in order to provide for additional manufacturing capacity, is a
practice which the Company expects to continue over the next several years.
In February 2000, the Board of Directors of the Company authorized the
repurchase of up to $30,000,000 of the Company's Common Stock, of which
approximately $21,000,000 remains available as of June 30, 2000. The plan
authorizes the Company to make such repurchases from time to time in the open
market or through privately negotiated transactions. The timing of this program
and the amount of the stock that may be repurchased is at the discretion of
management based on its view of economic and financial market conditions. During
the six month period ended June 30, 2000, the Company spent $12,175,000 for the
repurchase of its Common Stock under the current and a prior plan.
The Company believes that cash generated from operations and the total of its
cash and cash equivalents, together with other sources of liquidity, will be
sufficient to fund planned operations and capital equipment purchases for the
foreseeable future. At June 30, 2000, the Company had approximately $1,000,000
of capital expenditure commitments.
The Company does not consider the impact of inflation and changing prices on its
business activities or fluctuations in the exchange rates for foreign currency
transactions to have been significant during the last three fiscal years.
FORM 10-Q
PART I
ITEM 3
PAGE 9
ITEM 3 - Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to a variety of market risks, including changes in
interest rates affecting the return on its cash and cash equivalents and
fluctuations in foreign currency exchange rates. The Company's exposure to
market risk for a change in interest rates relates primarily to the Company's
cash and cash equivalents.
As the Company's cash and cash equivalents consist principally of money market
securities, which are short-term in nature, the Company's exposure to market
risk on interest rate fluctuations is not significant. The Company's exposure to
market risk for fluctuations in foreign currency exchange rates relates
primarily to the operations of Vicor Japan Company, Ltd. ("VJCL"). The Company
believes that this market risk is currently not material due to the relatively
small size of VJCL's operations.
FORM 10-Q
PART II
ITEM 1-6
PAGE 10
VICOR CORPORATION
Part II - Other Information
June 30, 2000
Item 1 - Legal Proceedings
The Company is involved in certain litigation incidental to the conduct of
its business. While the outcome of lawsuits against the Company cannot be
predicted with certainty, management does not expect any current
litigation to have a material adverse impact on the Company.
Item 2 - Changes in Securities
Not applicable.
Item 3 - Defaults Upon Senior Securities
Not applicable.
Item 4 - Submission of Matters to a Vote of Security-Holders
The 2000 Annual Meeting of Stockholders of the Company was held on June
29, 2000. All nominees of the Board of Directors of the Company were
re-elected for a one year term. Votes were cast in the election of the
directors as follows:
Nominee Votes For Votes Withheld
------- --------- --------------
Patrizio Vinciarelli 143,156,335 574,746
Estia J. Eichten 143,160,835 570,246
Barry Kelleher 143,069,679 661,402
Jay M. Prager 143,069,679 661,402
David T. Riddiford 143,451,573 279,508
M. Michael Ansour 143,449,673 281,408
There were 0 broker non-votes and 0 abstentions on this proposal.
A proposal to approve and ratify the Company's 2000 Stock Option and
Incentive Plan was approved by the Company's stockholders. Votes were cast
for the proposal as follows:
Votes For Votes Against Abstained
--------- ------------- ---------
134,413,541 3,318,527 138,739
There were 5,860,274 broker non-votes on this proposal.
Item 5 - Other Information
Not applicable.
Item 6 - Exhibits and Reports on Form 8-K
a. Exhibits - 27.1 Financial Data Schedule
b. Reports on Form 8-K - none.
FORM 10-Q
PART II
PAGE 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VICOR CORPORATION
Date: August 8, 2000 By: /s/ Patrizio Vinciarelli
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Patrizio Vinciarelli
President and Chairman
of the Board
Date: August 8, 2000 By: /s/ Mark A. Glazer
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Mark A. Glazer
Chief Financial Officer