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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 September 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)
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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 September 30, 2000.
Common Stock, $.01 par value ............ 30,305,047
Class B Common Stock, $.01 par value .... 11,993,348
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<PAGE>
VICOR CORPORATION
INDEX TO FORM 10-Q
Page
----
Part I - Financial Information:
Item 1 - Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet at 1
September 30, 2000 and December 31, 1999
Condensed Consolidated Statement of Income 2
for the quarters ended September 30, 2000 and 1999 and
for the nine months ended September 30, 2000 and 1999
Condensed Consolidated Statement of Cash Flows 3
for the nine months ended September 30, 2000 and 1999
Notes to Condensed Consolidated Financial 4-5
Statements
Item 2 - Management's Discussion and Analysis of 6-9
Financial Condition and Results of Operations
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 10
Part II - Other Information:
Item 1 - Legal Proceedings 11
Item 2 - Changes in Securities 11
Item 3 - Defaults Upon Senior Securities 11
Item 4 - Submission of Matters to a Vote of 11
Security Holders
Item 5 - Other Information 11
Item 6 - Exhibits and Reports on Form 8-K 11
Signature(s) 12
<PAGE>
FORM 10-Q
PART 1
ITEM 1
PAGE 1
VICOR CORPORATION
Condensed Consolidated Balance Sheet
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Assets September 30, 2000 December 31, 1999
--------------------------------------- ------------------ -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 76,037 $ 69,109
Accounts receivable, net 44,241 32,465
Inventories, net 42,051 33,360
Other current assets 7,068 6,940
--------- ---------
Total current assets 169,397 141,874
Property, plant and equipment, net 107,864 109,079
Notes receivable 8,712 8,698
Other assets 7,634 9,254
--------- ---------
$ 293,607 $ 268,905
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 10,752 $ 10,317
Accrued compensation and benefits 5,247 3,553
Accrued liabilities 9,662 4,987
--------- ---------
Total current liabilities 25,661 18,857
Deferred income taxes 5,515 5,515
Stockholders' equity:
Preferred Stock -- --
Class B Common Stock 120 121
Common Stock 365 356
Additional paid-in capital 136,977 124,451
Retained earnings 211,349 185,979
Accumulated other comprehensive income 529 889
Treasury stock, at cost (86,909) (67,263)
--------- ---------
Total stockholders' equity 262,431 244,533
--------- ---------
$ 293,607 $ 268,905
========= =========
</TABLE>
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.
<PAGE>
FORM 10-Q
PART I
ITEM 1
PAGE 2
VICOR CORPORATION
Condensed Consolidated Statement of Income
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------- ---------------------
September 30, September 30,
2000 1999 2000 1999
------- -------- -------- --------
<S> <C> <C> <C> <C>
Net revenues:
Product $65,422 $ 45,660 $180,593 $122,502
License 2,429 3,713 7,822 13,643
------- -------- -------- --------
67,851 49,373 188,415 136,145
Costs and expenses:
Cost of revenue 37,821 28,002 106,462 77,285
Selling, general and administrative 11,155 9,052 32,035 26,495
Research and development 4,962 4,933 15,581 14,953
------- -------- -------- --------
53,938 41,987 154,078 118,733
------- -------- -------- --------
Income from operations 13,913 7,386 34,337 17,412
Other income 743 788 2,698 2,282
------- -------- -------- --------
Income before income taxes 14,656 8,174 37,035 19,694
Provision for income taxes 4,617 2,616 11,665 6,303
------- -------- -------- --------
Net income $10,039 $ 5,558 $ 25,370 $ 13,391
======= ======== ======== ========
Net income per common share:
Basic $ 0.24 $ 0.13 $ 0.60 $ 0.32
Diluted $ 0.23 $ 0.13 $ 0.59 $ 0.32
Shares used to compute net income per share:
Basic 42,216 41,318 42,284 41,392
Diluted 43,435 42,372 43,300 42,151
</TABLE>
See accompanying notes.
<PAGE>
FORM 10-Q
PART I
ITEM 1
PAGE 3
VICOR CORPORATION
Condensed Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
--------------------------------------
September 30, 2000 September 30, 1999
------------------ ------------------
<S> <C> <C>
Operating activities:
Net income $ 25,370 $ 13,391
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 13,518 11,266
Loss on disposal of equipment 166 101
Tax benefit relating to stock option plans 4,985 330
Change in current assets and
liabilities, net (13,649) (9,796)
-------- --------
Net cash provided by operating activities 30,390 15,292
Investing activities:
Additions to property, plant and equipment (11,932) (10,572)
Proceeds from sale of equipment 2 17
Increase in notes receivable (14) (24)
Decrease (increase) in other assets 693 (1,183)
-------- --------
Net cash used in investing activities (11,251) (11,762)
Financing activities:
Proceeds from issuance of Common Stock 7,549 1,242
Acquisitions of treasury stock (19,646) (8,564)
-------- --------
Net cash used in financing activities (12,097) (7,322)
Effect of foreign exchange rates on cash (114) 142
-------- --------
Net increase (decrease) in cash and cash equivalents 6,928 (3,650)
Cash and cash equivalents at beginning of period 69,109 58,897
-------- --------
Cash and cash equivalents at end of period $ 76,037 $ 55,247
======== ========
</TABLE>
See accompanying notes.
<PAGE>
FORM 10-Q
PART I
ITEM 1
PAGE 4
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
September 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 nine-month periods
ended September 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 nine months ended September 30 (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
September 30, September 30,
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Numerator:
Net Income $10,039 $ 5,558 $25,370 $13,391
======= ======= ======= =======
Denominator:
Denominator for basic income
per share-weighted average shares 42,216 41,318 42,284 41,392
Effect of dilutive securities:
Employee stock options 1,219 1,054 1,016 759
------- ------- ------- -------
Denominator for diluted income per share-
adjusted weighted-average shares and
assumed conversions 43,435 42,372 43,300 42,151
------- ------- ------- -------
Basic income per share $ 0.24 $ 0.13 $ 0.60 $ 0.32
======= ======= ======= =======
Diluted income per share $ 0.23 $ 0.13 $ 0.59 $ 0.32
======= ======= ======= =======
</TABLE>
<PAGE>
FORM 10-Q
PART I
ITEM 2
PAGE 5
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
September 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
September 30, 2000 and December 31, 1999 (in thousands):
September 30, 2000 December 31, 1999
------------------ -----------------
Raw materials ..................... $28,038 $22,924
Work-in-process ................... 7,497 4,957
Finished goods .................... 6,516 5,479
------- -------
$42,051 $33,360
======= =======
4. Comprehensive Income
Total comprehensive income was $9,931,000 and $25,010,000 for the three
and nine months ended September 30, 2000 and $6,336,000 and $13,659,000
for the three and nine months ended September 30, 1999. Other
comprehensive income consisted of adjustments for foreign currency
translation gains in the amounts of $108,000 and $360,000 for the three
and nine months ended September 30, 2000.
<PAGE>
FORM 10-Q
PART I
ITEM 2
PAGE 6
VICOR CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
September 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 September 30, 2000 compared to three months ended September
30, 1999
Net revenues for the third quarter of 2000 were $67,851,000, an increase of
$18,478,000 (37.4%) as compared to $49,373,000 for the same period a year ago.
The growth in net revenues resulted primarily from a net increase of unit
shipments of standard and custom products of approximately $19,762,000 due to
increases in demand for first and second generation products.
Gross margin increased $8,659,000 (40.5%) to $30,030,000 from $21,371,000, and
increased as a percentage of net revenues from 43.3% to 44.3%. The primary
component of the increase in gross margin dollars and percentage was due to an
increase in net revenues.
Selling, general and administrative expenses were $11,155,000 for the period, an
increase of $2,103,000 (23.2%) over the same period in 1999. As a percentage of
net revenues, selling, general and administrative expenses decreased to 16.4%
from 18.3%. The principal components of the $2,103,000 increase were $662,000
(21.1%) of increased compensation expense, $566,000 (44.5%) of increased sales
commission expense, $319,000 (233.3%) of increased legal expense and $285,000 of
payroll tax expense associated with the exercise of stock options.
<PAGE>
FORM 10-Q
PART I
ITEM 2
PAGE 7
VICOR CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
September 30, 2000
(continued)
Research and development expenses increased $29,000 (0.6%) to $4,962,000 and
decreased as a percentage of net revenues to 7.3% from 10.0%. The principal
components of the $29,000 increase were $238,000 (9.3%) of increased
compensation expense and $61,000 (25.4%) of increased research and development
costs associated with the operations of the Vicor Integrated Architects (VIA),
offset by $335,000 (40.0%) of decreased project materials costs.
Other income decreased $45,000 (5.7%) from the same period a year ago to
$743,000. Other income is primarily comprised of interest income derived from
invested cash and cash equivalents, as well as a note receivable associated with
the Company's real estate transaction. Other income decreased due to the
write-down of $390,000 for certain equipment no longer in use, offset by an
increase in interest income due to an increase in cash and cash equivalent
balances and an increase in average interest rates.
Income before income taxes was $14,656,000, an increase of $6,482,000 (79.3%)
compared to the same period in 1999. As a percentage of net revenues, income
before income taxes increased to 21.6% from 16.6% primarily due to the gross
margin increase generated by the increased net revenues, combined with a
decrease in operating expenses as a percentage of net revenues.
The effective tax rate for the third quarter of 2000 was 31.5%, compared to
32.0% for the same period in 1999.
Net income per share (diluted) was $.23 for the third quarter of 2000, compared
to $.13 for the third quarter of 1999, an increase of $.10.
Nine months ended September 30, 2000 compared to nine months ended September 30,
1999
Net revenues for the first nine months of 2000 were $188,415,000, an increase of
$52,270,000 (38.4%) as compared to $136,145,000 for the same period a year ago.
The growth in net revenues resulted primarily from a net increase of unit
shipments of standard and custom products of approximately $58,091,000 offset by
a decrease in license revenue of $5,821,000. The decrease in license revenues
was primarily due to non-recurring payments from licensees for past use of
Vicor's intellectual property in 1999.
Gross margin increased $23,093,000 (39.2%) to $81,953,000 from $58,860,000 and
increased as a percentage of net revenues from 43.2% to 43.5%. The primary
components of the increase in gross margin dollars and percentage was the
increase in net revenues, partially offset by changes in the revenue mix.
<PAGE>
FORM 10-Q
PART I
ITEM 2
PAGE 8
VICOR CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
September 30, 2000
(continued)
Selling, general and administrative expenses were $32,035,000 for the period, an
increase of $5,540,000 (20.9%) over the same period in 1999. As a percentage of
net revenues, selling, general and administrative expenses decreased to 17.0%
from 19.5%. The principal components of the $5,540,000 increase were $1,594,000
(47.6%) increase in sales commission costs, $1,311,000 (13.8%) increase in
compensation expense, $664,000 (39.1%) in increased advertising costs and
$619,000 of payroll tax expense associated with the exercise of stock options.
Research and development expenses increased $628,000 (4.2%) to $15,581,000 and
decreased as a percentage of net revenues to 8.3% from 11.0%. The principal
component of the $628,000 increase was $1,208,000 (16.2%) of increased
compensation expense, offset by a $723,000 (26.1%) decrease in project material
costs.
Other income increased $416,000 (18.2%) from the same period a year ago, to
$2,698,000. 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. Other income increased primarily due
to an increase in interest income due to an increase in cash and cash equivalent
balances and an increase in average interest rates, partially offset by
write-downs of $550,000 for certain equipment no longer in use.
Income before income taxes was $37,035,000, an increase of $17,341,000 (88.1%)
compared to the same period in 1999. As a percentage of net revenues, income
before income taxes increased from 14.5% to 19.7% primarily due to the gross
margin increase generated by the increased net revenues.
The effective tax rate for the nine months ended September 30, 2000 was 31.5%,
compared to 32.0% for the same period in 1999.
Net income per share (diluted) was $.59 for the nine months ended September 30,
2000, compared to $.32 for the same period in 1999, an increase of $.27.
<PAGE>
FORM 10-Q
PART I
ITEM 2
PAGE 9
VICOR CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
September 30, 2000
(continued)
Liquidity and Capital Resources
At September 30, 2000 the Company had $76,037,000 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 $20,719,000, from $123,017,000
at December 31, 1999 to $143,736,000 at September 30, 2000. The primary factors
affecting the working capital increase were an increase in cash of $6,928,000
and accounts receivable and inventories of $20,467,000 offset by an increase in
current liabilities of $6,804,000. The primary sources of cash were $30,390,000
from operating activities and $7,549,000 from the issuance of Common Stock upon
the exercise of stock options. The primary uses of cash for the nine months of
2000 were for the acquisition of treasury stock of $19,646,000 and additions to
property and equipment of $11,932,000.
The Company plans to make continuing investments in manufacturing equipment,
much of which is built internally, particularly for the Company's second
generation products. 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 $13,500,000 remains available as of September 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 nine month period ended September 30, 2000, the Company spent $19,646,000
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 September 30, 2000, the Company had approximately
$1,700,000 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.
<PAGE>
FORM 10-Q
PART I
ITEM 3
PAGE 10
VICOR CORPORATION
September 30, 2000
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. Substantially all of the
Company's international sales are priced in U.S. dollars. As a result, 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.
<PAGE>
FORM 10-Q
PART II
ITEM 1-6
PAGE 11
VICOR CORPORATION
Part II - Other Information
September 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
Not applicable.
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.
<PAGE>
FORM 10-Q
PART II
PAGE 12
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: November 9, 2000 By: /s/ Patrizio Vinciarelli
------------------------------------
Patrizio Vinciarelli
President and Chairman
of the Board
Date: November 9, 2000 By: /s/ Mark A. Glazer
------------------------------------
Mark A. Glazer
Chief Financial Officer
