UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2020
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
(Exact name of registrant as specified in its charter)
(State of Incorporation) |
(I.R.S. Employer Identification No.) |
(Address of Principal Executive Office)
(978 ) 470-2900
(Registrant’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
$0.01 per share |
The |
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 Yes
days.
☒
No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation Yes
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒
No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2
of the Exchange Act.☒ |
Smaller reporting company |
|||||
Accelerated filer |
☐ |
Emerging growth company |
||||
Non-accelerated filer |
☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
Yes 12b-2
of the Exchange Act). ☐
No The number of shares outstanding of each of the issuer’s classes of Common Stock as of was:
April 20, 2020
Common Stock, $.01 par value |
||||
Class B Common Stock, $.01 par value |
VICOR CORPORATION
INDEX
Page |
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1 |
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2 |
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3 |
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4 |
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5 |
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6 |
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18 |
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27 |
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27 |
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29 |
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29 |
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29 |
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30 |
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EX-31.1 SECTION 302 CERTIFICATION OF CEO |
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EX-31.2 SECTION 302 CERTIFICATION OF CFO |
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EX-32.1 SECTION 906 CERTIFICATION OF CEO |
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EX-32.2 SECTION 906 CERTIFICATION OF CFO |
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VICOR CORPORATION
Part I – Financial Information
Item 1 – Financial Statements
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
March 31, 2020 |
December 31, 2019 |
|||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | $ | ||||||
Accounts receivable, less allowance of $ |
||||||||
Inventories, net |
||||||||
Other current assets |
||||||||
Total current assets |
||||||||
Long-term deferred tax assets, net |
||||||||
Long-term investments, net |
||||||||
Property, plant and equipment, net |
||||||||
Other assets |
||||||||
Total assets |
$ | $ | ||||||
Liabilities and Equity |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | $ | ||||||
Accrued compensation and benefits |
||||||||
Accrued expenses |
||||||||
Short-term lease liabilities |
||||||||
Sales allowances |
||||||||
Income taxes payable |
||||||||
Short-term deferred revenue and customer prepayments |
||||||||
Total current liabilities |
||||||||
Long-term deferred revenue |
||||||||
Contingent consideration obligations |
||||||||
Long-term income taxes payable |
||||||||
Long-term lease liabilities |
||||||||
Total liabilities |
||||||||
Commitments and contingencies (Note 1 0 ) |
||||||||
Equity: |
||||||||
Vicor Corporation stockholders’ equity: |
||||||||
Class B Common Stock |
||||||||
Common Stock |
||||||||
Additional paid-in capital |
||||||||
Retained earnings |
||||||||
Accumulated other comprehensive loss |
( |
) | ( |
) | ||||
Treasury stock, at cost |
( |
) | ( |
) | ||||
Total Vicor Corporation stockholders’ equity |
||||||||
Noncontrolling interest |
||||||||
Total equity |
||||||||
Total liabilities and equity |
$ | $ | ||||||
See accompanying notes.
-1-
VICOR CORPORATION
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2020 |
2019 |
|||||||
| Net revenues |
$ | |
$ | |
||||
| Cost of revenues |
|
|
||||||
| Gross margin |
|
|
||||||
| Operating expenses: |
||||||||
| Selling, general and administrative |
|
|
||||||
| Research and development |
|
|
||||||
| Total operating expenses |
|
|
||||||
| (Loss) income from operations |
( |
) | |
|||||
| Other income (expense), net: |
||||||||
| Total unrealized gains on available-for-sale securities, net |
|
|
||||||
| Less: portion of gains recognized in other comprehensive income |
( |
) | ( |
) | ||||
| Net credit gains recognized in earnings |
|
|
||||||
| Other income (expense), net |
|
|
||||||
| Total other income (expense), net |
|
|
||||||
| (Loss) income before income taxes |
( |
) | |
|||||
| Less: (Benefit) provision for income taxes |
( |
) | |
|||||
| Consolidated net (loss) income |
( |
) | |
|||||
| Less: Net income attributable to noncontrolling interest |
|
|
||||||
| Net (loss) income attributable to Vicor Corporation |
$ | ( |
) | $ | |
|||
| Net (loss) income per common share attributable to Vicor Corporation: |
||||||||
| Basic |
$ | ( |
) | $ | |
|||
| Diluted |
$ | ( |
) | $ | |
|||
| Shares used to compute net (loss) income per common share attributable to Vicor Corporation: |
||||||||
| Basic |
|
|
||||||
| Diluted |
|
|
||||||
See accompanying notes.
-2-
VICOR CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(In thousands)
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2020 |
2019 |
|||||||
| Consolidated net (loss) income |
$ |
( |
) | $ | |
|||
| Foreign currency translation gains (losses), net of tax (1) |
|
( |
) | |||||
| Unrealized gains on available-for-sale securities, net of tax (1) |
|
|
||||||
| Other comprehensive income (loss) |
|
( |
) | |||||
| Consolidated comprehensive (loss) income |
( |
) | |
|||||
| Less: Comprehensive income attributable to noncontrolling interest |
|
|
||||||
| Comprehensive (loss) income attributable to Vicor Corporation |
$ | ( |
) | $ | |
|||
| (1) | The deferred tax assets associated with cumulative foreign currency translation gains and cumulative unrealized gains on available-for-sale securities are completely offset by a tax valuation allowance as of March 31, 2020 and 2019. Therefore, there is |
See accompanying notes.
-3-
VICOR CORPORATION
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2020 |
2019 |
|||||||
| Operating activities: |
||||||||
| Consolidated net (loss) income |
$ | ( |
) | $ | |
|||
| Adjustments to reconcile consolidated net (loss) income to net cash used by operating activities: |
||||||||
| Depreciation and amortization |
|
|
||||||
| Stock-based compensation expense, net |
|
|
||||||
| Provision (benefit) for doubtful accounts |
|
( |
) | |||||
| Increase in long-term income taxes payable |
|
|
||||||
| Decrease in long-term deferred revenue |
( |
) | ( |
) | ||||
| Gain on disposal of equipment |
— |
( |
) | |||||
| Deferred income taxes |
( |
) | ( |
) | ||||
| Credit gain on available-for-sale securities |
( |
) | ( |
) | ||||
| Change in current assets and liabilities, net |
( |
) | ( |
) | ||||
| Net cash used by operating activities |
( |
) | ( |
) | ||||
| Investing activities: |
||||||||
| Additions to property, plant and equipment |
( |
) | ( |
) | ||||
| Proceeds from sale of equipment |
— |
|
||||||
| Decrease in other assets |
|
( |
) | |||||
| Net cash used for investing activities |
( |
) | ( |
) | ||||
| Financing activities: |
||||||||
| Proceeds from issuance of Common Stock |
|
|
||||||
| Payment of contingent consideration obligations |
( |
) | ( |
) | ||||
| Net cash provided by financing activities |
|
|
||||||
| Effect of foreign exchange rates on cash |
|
( |
) | |||||
| Net decrease in cash and cash equivalents |
( |
) | ( |
) | ||||
| Cash and cash equivalents at beginning of period |
|
|
||||||
| Cash and cash equivalents at end of period |
$ | |
$ | |
||||
See accompanying notes.
-4-
VICOR CORPORATION
Condensed Consolidated Statements of Equity
(In thousands)
(Unaudited)
| Three months ended March 31, 2020 |
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, 2019 |
$ | |
$ | |
$ | |
$ | |
$ | ( |
) | $ | ( |
) | $ | |
$ | |
$ | |
||||||||||||||||
| Sales of Common Stock |
|
|
|
|
||||||||||||||||||||||||||||||||
| Stock-based compensation expense |
|
|
|
|||||||||||||||||||||||||||||||||
| Issuances of stock through employee stock purchase plan |
|
|
|
|
||||||||||||||||||||||||||||||||
| Components of comprehensive income, net of tax: |
||||||||||||||||||||||||||||||||||||
| Net income |
( |
) | ( |
) | |
( |
) | |||||||||||||||||||||||||||||
| Other comprehensive income |
|
|
|
|
||||||||||||||||||||||||||||||||
| Total comprehensive income |
( |
) | |
( |
) | |||||||||||||||||||||||||||||||
| Balance on March 31, 2020 |
$ | |
$ | |
$ | |
$ | |
$ | ( |
) | $ | ( |
) | $ | |
$ | |
$ | |
||||||||||||||||
| Three months ended March 31, 2019 |
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, 2018 |
$ | |
$ | |
$ | |
$ | |
$ | ( |
) | $ | ( |
) | $ | |
$ | |
$ | |
||||||||||||||||
| Sales of Common Stock |
|
|
|
|||||||||||||||||||||||||||||||||
| Stock-based compensation expense |
|
|
|
|||||||||||||||||||||||||||||||||
| Issuances of stock through employee stock purchase plan |
|
|
|
|
||||||||||||||||||||||||||||||||
| Components of comprehensive income, net of tax: |
||||||||||||||||||||||||||||||||||||
| Net income |
|
|
|
|
||||||||||||||||||||||||||||||||
| Other comprehensive loss |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| Total comprehensive income |
|
|
|
|||||||||||||||||||||||||||||||||
| Balance on March 31, 2019 |
$ | |
$ | |
$ | |
$ | |
$ | ( |
) | $ | ( |
) | $ | |
$ | |
$ | |
||||||||||||||||
See accompanying notes.
-5-
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
March 31, 2020
(unaudited)
1.
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements of Vicor Corporation and its consolidated subsidiaries (collectively, the “Company”) 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, these interim financial statements 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 normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended March
31,
2020 are not necessarily indicative of the results that may be expected for any other interim period or the year ending December
31,
2020. The balance sheet at December
31,
2019 presented herein 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. For further information, refer to the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form
10-K
for the year ended December
31,
2019 filed by the Company with the Securities and Exchange Commission on February
28,
2020 (“
2019 Form
10-K”).
2.
Inventories
Inventories are valued at the lower of cost (determined using the
first-in,
first-out
method) or net realizable value. Fixed production overhead is allocated to the inventory cost per unit based on the normal capacity of the production facilities. Abnormal production costs, including fixed cost variances from normal production capacity, if any, are charged to cost of revenues in the period incurred. All shipping, handling and customs (e.g., tariff) costs incurred in connection with the sale of products are included in cost of revenues. Inventory that is estimated to be excess, obsolete or unmarketable is written down to net realizable value. The Company’s estimation process for assessing net realizable value is based upon forecasted future usage which is derived based on backlog, historical consumption and expected market conditions. If the Company’s estimated demand and/or market expectation were to change or if product sales were to decline, the Company’s estimation process may cause larger inventory reserves to be recorded, resulting in larger charges to cost of revenues.
Inventories were as follows (in thousands):
| March 31, 2020 |
December 31, 2019 |
|||||||
| Raw materials |
$ | |
$ | |
||||
| Work-in-process |
|
|
||||||
| Finished goods |
|
|
||||||
| Net balance |
$ | |
$ | |
||||
3.
Long-Term Investments
As of March 31, 2020 and December 31, 2019, the Company held one auction rate security with a par value of $3,000,000
-6-
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
March 31, 2020
(unaudited)
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 March 31, 2020.
The following is a summary of the
available-for-sale
security (in thousands):| Gross |
Gross |
Estimated |
||||||||||||||
| Unrealized |
Unrealized |
Fair |
||||||||||||||
| March 31, 2020 |
Cost |
Gains |
Losses |
Value |
||||||||||||
| Failed Auction Security |
$ | |
$ | — |
$ | |
$ | |
||||||||
| Gross |
Gross |
Estimated |
||||||||||||||
| Unrealized |
Unrealized |
Fair |
||||||||||||||
| December 31, 2019 |
Cost |
Gains |
Losses |
Value |
||||||||||||
| Failed Auction Security |
$ | |
$ | — |
$ | |
$ | |
||||||||
As of March 31, 2020, the Failed Auction Security had been in an unrealized loss position for greater than 12 months .
The amortized cost and estimated fair value of the Failed Auction Security on March 31, 2020, by contractual maturity,
are shown below (in thousands):
| Estimated |
||||||||
| Cost |
Fair Value |
|||||||
| Due in twenty to forty years |
$ | |
$ | |
||||
Based on the fair value measurements described in Note 4, the fair value of the Failed Auction Security on March 31, 2020, with a par value of $3,000,000, was estimated by the Company to be approximately $2,557,000 . The gross unrealized loss of $443,000 on the Failed Auction Security consists of two types of estimated loss: an aggregate credit loss of $36,000 and an aggregate temporary impairment of $407,000 . 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.
-7-
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
March 31, 2020
(unaudited)
The following table represents a rollforward of the activity related to the credit loss recognized in earnings on the Failed Auction Security for the three months ended March 31 (in thousands):
| 2020 |
2019 |
|||||||
| Balance at the beginning of the period |
$ | |
$ | |
||||
| Reductions in the amount related to credit gain for which other-than-temporary impairment was not previously recognized |
( |
) | ( |
) | ||||
| Balance at the end of the period |
$ | |
$ | |
||||
At this time, the Company has no intent to sell the impaired Failed Auction Security and does not believe it is more likely than not the Company will be required to sell this security. If current market conditions deteriorate further, the Company may be required to record additional unrealized losses. If the credit rating of the security deteriorates, the Company may be required to adjust the carrying value of the investment through impairment charges recorded in the Condensed Consolidated Statements of Operations, and any such impairment adjustments may be material.
Based on the Company’s ability to access cash and cash equivalents and its expected operating cash flows, management does not anticipate the current lack of liquidity associated with the Failed Auction Security held will affect the Company’s ability to execute its current operating plan.
4.
Fair Value Measurements
The Company accounts for certain financial assets at fair value, defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions market participants would use in pricing an asset or liability. A three-level hierarchy is used to show the extent and level of judgment used to estimate fair value measurements.
Assets and liabilities measured at fair value on a recurring basis included the following as of March 31, 2020 (in thousands):
| Using |
||||||||||||||||
| Quoted Prices Markets (Level |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
Total Fair Value as of March 31, 2020 |
|||||||||||||
| Cash equivalents: |
||||||||||||||||
| Money market funds |
$ | |
$ | — |
$ | — |
$ | |
||||||||
| Long-term investments: |
||||||||||||||||
| Failed Auction Security |
— |
— |
|
|
||||||||||||
| Liabilities: |
||||||||||||||||
| Contingent consideration obligations |
— |
— |
( |
) | ( |
) | ||||||||||
-8-
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
March 31, 2020
(unaudited)
Assets and liabilities measured at fair value on a recurring basis included the following as of December 31, 2019 (in thousands):
| 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 |
$ | |
$ | — |
$ | — |
$ | |
||||||||
| Long-term investments: |
||||||||||||||||
| Failed Auction Security |
— |
— |
|
|
||||||||||||
| Liabilities: |
||||||||||||||||
| Contingent consideration obligations |
— |
— |
( |
) | ( |
) | ||||||||||
As of March 31, 2020, there was insufficient observable auction rate security market information available to determine the fair value of the Failed Auction Security using Level 1 or Level 2 inputs. As such, the Company’s investment in the Failed Auction Security was deemed to require valuation using Level 3 inputs. Management, after consulting with advisors, valued the Failed Auction Security using analyses and pricing models similar to those used by market participants (i.e., buyers, sellers, and the broker-dealers responsible for execution of the Dutch auction pricing mechanism by which each issue’s interest rate was set). Management utilized a probability weighted discounted cash flow (“DCF”) model to determine the estimated fair value of this security as of March 31, 2020. The major assumptions used in preparing the DCF model were similar to those described in Note 5
—
Fair Value Measurements in the Notes to the Consolidated Financial Statements contained in the Company’s 2019 Form 10-K.
Quantitative information about Level 3 fair value measurements as of March 31, 2020 is as follows (dollars in thousands):
| Fair Value |
Valuation Tech nique |
Unobservable Input |
Weighted Average |
|||||||||
| Failed Auction Security |
$ | |
|
|
|
% | ||||||
| |
|
% | ||||||||||
| |
|
% | ||||||||||
| |
|
% | ||||||||||
| |
|
% | ||||||||||
-9-
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
March 31, 2020
(unaudited)
The change in the estimated fair value calculated for the investment valued on a recurring basis utilizing Level 3 inputs (i.e., the Failed Auction Security) for the three months ended March 31, 2020 was as follows (in thousands):
Balance at the beginning of the period |
$ | |||
Credit gain on available-for-sale security included in Other income (expense), net |
||||
Gain included in Other comprehensive income |
||||
Balance at the end of the period |
$ | |||
The Company has classified its contingent consideration obligations as Level 3 because the fair value for these liabilities was determined using unobservable inputs. The liabilities were based on estimated sales of legacy products over the period of royalty payments at the royalty rate, discounted using the Company’s estimated cost of capital.
The change in the estimated fair value calculated for the liabilities valued on a recurring basis utilizing Level 3 inputs (i.e., the Contingent consideration obligations) for the three months ended March 31, 2020 was as follows (in thousands):
Balance at the beginning of the period |
$ |
|||
Payments |
( |
) | ||
Balance at the end of the period |
$ | |||
There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the three months ended March 31, 2020.
-10-
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
March 31, 2020
(unaudited)
5
. Revenues
Revenue from the sale of Advanced Products represents the sum of third-party sales of the products sold under the Advanced Products line, which were sold under the former Picor and VI Chip operating segments during periods prior to the second quarter of 2019. Revenue from the sale of Brick Products represents the sum of third-party sales of the products sold under the Brick Products line, which were also sold under the former Brick Business Unit operating segment, inclusive of such sales of our Vicor Custom Power and Vicor Japan Company, Ltd. subsidiaries.
The following tables present the Company’s net revenues disaggregated by geography based on the locati
o
n of the customer, by product line (in thousands): Three Months Ended March 31, 2020 |
||||||||||||
Brick Products |
Advanced Products |
Total |
||||||||||
United States |
$ | $ | $ | |||||||||
Europe |
||||||||||||
Asia Pacific |
||||||||||||
All other |
||||||||||||
| $ | $ | $ | ||||||||||
Three Months Ended March 31, 2019 |
||||||||||||
Brick Products |
Advanced Products |
Total |
||||||||||
United States |
$ | $ | $ | |||||||||
Europe |
||||||||||||
Asia Pacific |
||||||||||||
All other |
||||||||||||
| $ | $ | $ | ||||||||||
-11-
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
March 31, 2020
(unaudited)
| Three Months Ended March 31, 2020 |
||||||||||||
| Brick Products |
Advanced Products |
Total |
||||||||||
| Direct customers, contract manufacturers and non-stocking distributors |
$ | |
$ | |
$ | |
||||||
| Stocking distributors, net of sales allowances |
|
|
|
|||||||||
| Non-recurring engineering |
|
|
|
|||||||||
| Other |
— |
|
|
|||||||||
| $ | |
$ | |
$ | |
|||||||
| Three Months Ended March 31, 2019 |
||||||||||||
| Brick Products |
Advanced Products |
Total |
||||||||||
| Direct customers, contract manufacturers and non-stocking distributors |
$ | |
$ | |
$ | |
||||||
| Stocking distributors, net of sales allowances |
|
|
|
|||||||||
| Non-recurring engineering |
|
|
|
|||||||||
| Royalties |
|
|
|
|||||||||
| Other |
— |
|
|
|||||||||
| $ | |
$ | |
$ | |
|||||||
The following table presents the changes in certain contract assets and (liabilities) (in thousands):
| March 31, 2020 |
December 31, 2019 |
Change |
||||||||||
| Accounts receivable |
$ | |
$ | |
$ | |
||||||
| Short-term deferred revenue and customer prepayments |
( |
) | ( |
) | ( |
) | ||||||
| Long-term deferred revenue |
( |
) | ( |
) | |
|||||||
| Deferred expenses |
|
|
|
|||||||||
| Sales allowances |
( |
) | ( |
) | ( |
) | ||||||
The increase in accounts receivable was primarily due to an increase in net revenues of approximately $5,634,000 in March 2020 compared to December 2019.
-12-
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
March 31, 2020
(unaudited)
Deferred expenses are included in Other current assets in the accompanying Condensed Consolidated Balance Sheets.
The Company records deferred revenue, which represents a contract liability, when cash payments are received or due in advance of performance under a contract with a customer. The Company recognized revenue of approximately $36,000 for the three months ended March 31, 2020, and $0 for the three months ended March 31, 2019, respectively, that was included in deferred revenue at the beginning of each respective period.
6
. Stock-Based Compensation
The Company uses the Black-Scholes option pricing model to calculate the fair value of stock option awards, whether they possess time-based vesting provisions or performance-based vesting provisions, and awards granted under the Vicor Corporation 2017 Employee Stock Purchase Plan (“ESPP”), as of their grant date. Stock-based compensation expense was as follows (in thousands):
| Three Months Ended |
||||||||
| March 31, |
||||||||
| 2020 |
2019 |
|||||||
| Cost of revenues |
$ | |
$ | |
||||
| Selling, general and administrative |
|
|
||||||
| Research and development |
|
|
||||||
| Total stock-based compensation |
$ | |
$ | |
||||
Compensation expense by type of award was as follows (in thousands):
| Three Months Ended |
||||||||
| March 31, |
||||||||
| 2020 |
2019 |
|||||||
| Stock options |
$ | |
$ | |
||||
| ESPP |
|
|
||||||
| Total stock-based compensation |
$ | |
$ | |
||||
7
. Rental Income
Income, net under the Company’s operating lease agreement for its leased facility with a third party in California was
approximately $198,000
8
. Income Taxes
The tax (benefit) provision is based on the estimated annual effective tax rate for the year, which includes estimated federal, state and foreign income taxes on the Company’s projected
pre-tax
income.-13-
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
March 31, 2020
(unaudited)
The (benefit) provision for income taxes and the effective income tax rates were as follows (dollars in thousands):
Three Months Ended March 31, |
||||||||
2020 |
2019 |
|||||||
(Benefit) provision for income taxes |
$ | ( |
) | $ | ||||
Effective income tax rate |
( |
)% | % | |||||
The effective tax rates were lower than the statutory tax rates for the three months ended March 31, 2020 and 2019 due primarily to the utilization of tax credits in 2020 and the combination of utilizing net operating loss carryforwards and tax credits in 2019.
The (benefit) provision for income taxes in the three months
ended March 31, 2020 and 2019 also included estimated foreign income taxes and estimated state taxes in jurisdictions in which the Company does not have net operating loss carryforwards.
As of March 31, 2020, the Company has a valuation allowance of approximately $30,363,000
against all domestic deferred tax assets, for which realization cannot be considered more likely than not at this time. Management assesses the need for the valuation allowance on a quarterly basis. In assessing the need for a valuation allowance, the Company considers all positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and past financial performance. While positive operating results in 2018 and 2019 caused the Company to be in a cumulative income position as of March 31, 2020, its overall profitability has been declining since the third quarter of 2018 and the Company recorded an operating loss in the first quarter of 2020, primarily due to overall reduced bookings for both Advanced and Brick products, reflecting U.S.-China trade/tariff dynamics and elements of macro uncertainty. In addition, the uncertain impact of the
COVID-19
pandemic on the Company’s supply chain, and certain process issues with the production of Advanced Products are contributing to near-term uncertainty. As a result, management has concluded a full valuation allowance against all net domestic deferred tax assets is still warranted as of March 31, 2020. The valuation allowance against these deferred tax assets may require adjustment in the future based on changes in the mix of temporary differences, changes in tax laws, and operating performance. If the positive quarterly earnings resume and then continue, and the Company’s concerns about industry uncertainty and world events, the impact of the COVID-19
pandemic on the Company’s supply chain, and process issues with the production of Advanced Products are resolved, and order volumes are alleviated to the point that the Company believes future profits can be more reliably forecasted, the Company may release all or a portion of the valuation allowance in the near-term. Certain state tax credits, though, will likely continue to require a valuation allowance. If and when the Company determines the valuation allowance should be released (i.e., reduced), the adjustment would result in a tax benefit reported in that period’s Consolidated Statements of Operations, the effect of which would be an increase in reported net income. -14-
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
March 31, 2020
(unaudited)
9
. Net
(
Income per ShareLoss
) The following table sets forth the computation of basic and diluted net (loss) income per share (in thousands, except per share amounts):
Three Months Ended March 31, |
||||||||
2020 |
2019 |
|||||||
Numerator: |
||||||||
Net (loss) income attributable to Vicor Corporation |
$ | ( |
) | $ | ||||
Denominator: |
||||||||
Denominator for basic net (loss) income per share-weighted average shares (1) |
||||||||
Effect of dilutive securities: |
||||||||
Employee stock options (2) |
— |
|||||||
Denominator for diluted net (loss) income per share – adjusted weighted-average shares and assumed conversions |
||||||||
Basic net (loss) income per share |
$ | ( |
) | $ | ||||
Diluted net (loss) income per share |
$ | ( |
) | $ | ||||
| (1) | Denominator represents weighted average number of shares of Common Stock and Class B Common Stock outstanding. |
| (2) | Options to purchase |
1
0
. Commitments and Contingencies
At March 31, 2020, the Company had approximately $4,041,000
of capital expenditure commitments, principally for manufacturing equipment.
The Company is the defendant in a patent infringement lawsuit originally filed on January 28, 2011 by SynQor, Inc. (“SynQor”) in the U.S. District Court for the Eastern District of Texas (the “Texas Action”). The complaint, as 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 8,023,290 (“the ‘190 patent”, “the ‘021 patent”, “the ‘702 patent”, and “the ‘290 patent”, respectively). SynQor’s compl
a
int sought an injunction against further infringement and an award of unspecified compensatory and enhanced damages, interest, costs and attorney fees. The Company has denied that its products infringe any of the SynQor patents, and has asserted that the SynQor patents are invalid and/or unenforceable. The Company has also asserted counterclaims seeking damages from SynQor for deceptive trade practices and tortious interference with prospective economic advantage arising from SynQor’s attempted enforcement of its patents against the Company. -15-
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
March 31, 2020
(unaudited)
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.
In 2011, in response to the filing of the Texas Action, the Company’s IPRx proceedings at the USPTO challenged the validity of all claims that were asserted against the Company by SynQor. The current status of these proceedings is as follows. Regarding the ‘190 patent IPRx, the United States Court of Appeals for the Federal Circuit (the “Federal Circuit”) issued a decision on March 13, 2015, determining that certain claims were invalid and remanding the matter to the Patent Trial and Appeal Board (“PTAB”) of the USPTO for further proceedings. On February 20, 2019, the PTAB issued a decision finding that all of the remaining challenged claims were unpatentable. SynQor has appealed that decision to the Federal Circuit, and the appeal remains pending. On August 30, 2017, the Federal Circuit issued rulings with regard to the IPRx proceedings for the ’021, ‘702 and ‘290 patents. With respect to the ‘021 patent, the Federal Circuit affirmed the PTAB’s determination that all of the challenged claims of the ‘021 patent were invalid. The Federal Circuit remanded the case to the PTAB for further consideration of the patentability of certain claims that had been added by amendment during the reexamination. On February 20, 2019, the PTAB issued a decision affirming the examiner’s rejections of all challenged claims. SynQor has filed an appeal of that decision in the Federal Circuit, and that appeal remains pending. With respect to the ‘702 patent, the Federal Circuit affirmed the PTAB’s determination that all of the challenged claims of the ‘702 patent were patentable. With respect to the ‘290 patent, the Federal Circuit vacated the PTAB’s decision upholding the patentability of the ‘290 patent claims, and remanded the case to the PTAB for further consideration. On February 20, 2019, the PTAB issued a decision reversing its prior affirmance of the examiner’s
non-adoption
of rejections with respect to the ‘290 patent, and entering rejections of all of the claims of the ‘290 patent. On May 20, 2019, as permitted by USPTO rules, SynQor requested the USPTO to reopen prosecution of this proceeding to address the new rejections made by the PTAB. While prosecution was reopened, the examiner has yet to issue a further substantive ruling.On October 31, 2017, the Company filed a request with the USPTO for ex parte reexamination (“EPRx”) of the asserted claims of the ‘702 patent, based on different prior art references than had been at issue in the previous IPRx of the ‘702 patent. On September 12, 2018, a patent examiner found that all of the asserted claims were invalid. SynQor has appealed that ruling to the PTAB, where the appeal remains pending. On August 6, 2018, the Company filed a request with the USPTO for EPRx of the asserted claims of the ‘190 patent, based on different prior art references than had been at issue in the previous IPRx of the ‘190 patent. On August 9, 2019, the USPTO issued a final rejection of all of the asserted claims of the ‘190 patent. SynQor has appealed that ruling to the PTAB, where the appeal remains pending.
On January 23, 2018, the
20-year
terms of the ‘190 patent, the ‘021 patent, the ‘702 patent and the ‘290 patent expired. As a consequence of these expirations, the Company cannot be liable under any of the SynQor patents for allegedly infringing activities occurring after the patents’ respective expiration dates. In addition, any amended claims that may issue as a result of any of the still-pending reexamination proceedings will have no effective term and cannot be the basis for any liability by the Company.The Company continues to believe none of its products, including its unregulated bus converters, infringe any valid claim of the asserted SynQor patents, either alone or when used in an intermediate bus architecture implementation. The Company believes SynQor’s claims lack merit and, therefore, it continues to vigorously defend itself against SynQor’s patent infringement allegations. The Company does not believe a loss is probable for this matter. If a loss were to be incurred, however, the Company cannot estimate the amount of possible loss or range of possible loss at this time.
In addition to the SynQor matter, the Company is involved in certain other litigation and claims incidental to the conduct of its business. While the outcome of lawsuits and claims against the Company cannot be predicted with certainty, management does not expect any current litigation or claims will have a material adverse impact on the Company’s financial position or results of operations.
-16-
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
March 31, 2020
(unaudited)
1
1
. Impact of Recently Issued Accounting Standards
In December 2019,
the Financial Accounting Standards Board (“FASB”) issued guidance designed to simplify the accounting for income taxes by eliminating certain exceptions to the general principles in
Topic 740, Income Taxes, and also improve consistent application of and simplify U.S. GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This new guidance will be effective for the Company for its fiscal year beginning after December 15, 2020, with early adoption permitted. The Company has not yet determined the impact this new guidance will have on its consolidated financial statements and disclosures.
In August 2018, the FASB issued guidance which modifies the disclosure requirements on fair value measurements under Topic 820, Fair Value Measurements, including the consideration of costs and benefits. The new guidance is effective for all entities for annual and interim periods in fiscal years beginning after December 15, 2019, with early adoption permitted. It is required to be applied on a retrospective approach with certain elements being adopted prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. The Company adopted the new guidance as of January 1, 2020. The adoption did not have a material impact on the Company’s consolidated financial statements and disclosures.
In June 2016, the FASB issued new guidance which will require measurement and recognition of expected credit losses on certain types of financial instruments. It also modifies the impairment model for
available-for-sale
debt securities and provides for a simplified accounting model for purchased financial assets 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 adopted the new guidance as of January 1, 2020. The adoption did not have a material impact on the Company’s consolidated financial statements and disclosures.Other new pronouncements issued but not effective until after March 31, 2020 are not expected to have a material impact on the Company’s consolidated financial statements.
-17-
VICOR CORPORATION
Management’s Discussion and Analysis of
Financial Condition and Results of Operation
March 31, 2020
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations
The Company’s consolidated operating results are affected by a wide variety of factors that could materially and adversely affect revenues and profitability, including the risk factors described in the Company’s Annual Report on Form
10-K
for the year ended December 31, 2019 and the risk factor described in this Quarterly Report on Form 10-Q.
As a result of these and other factors, the Company may experience material fluctuations in future operating results on a quarterly or annual basis, which could materially and adversely affect its business, consolidated financial condition, and operating results, and the share price of its listed common stock. This document and other documents filed by the Company with the Securities and Exchange Commission (“SEC”) include forward-looking statements regarding future events and the Company’s future results that are subject to the safe harbor afforded under the Private Securities Litigation Reform Act of 1995 and other safe harbors afforded under the Securities Act of 1933 and the Securities Exchange Act of 1934. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Forward-looking statements are based on our current beliefs, expectations, estimates, forecasts, and projections for the future performance of the Company. Forward-looking statements are identified by the use of the words denoting uncertain, future events, such as “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “future,” “if,” “intend,” “may,” “plan,” “potential,” “project,” “prospective,” “seek,” “should,” “target,” “will,” or “would,” as well as similar words and phrases, including the negatives of these terms, or other variations thereof. Forward-looking statements also include statements regarding: our expectations that the Company has adequate resources to respond to financial and operational risks associated with the novel coronavirus “COVID-19,” and our ability to effectively conduct business during the pandemic; ongoing development of power conversion architectures, switching topologies, materials, packaging, and products; the ongoing transition of our business strategically, organizationally, and operationally from serving a large number of relatively low volume customers across diversified markets and geographies to serving a small number of relatively large volume customers; our intent to enter new market segments; the levels of customer orders overall and, in particular, from large customers and the delivery lead times associated therewith; the financial and operational impact of customer changes to shipping schedules; the derivation of a portion of our sales in each quarter from orders booked in the same quarter; our intent to expand the percentage of revenue associated with licensing our intellectual property to third parties; our plans to invest in expanded manufacturing capacity and the timing, location, and funding thereof; our belief cash generated from operations and the total of our cash and cash equivalents will be sufficient to fund operations and capital investments for the foreseeable future; our outlook regarding tariffs and the impact thereof on our business; our belief that we have limited exposure to currency risks; our intentions regarding the declaration and payment of cash dividends; our intentions regarding protecting our rights under our patents; and our expectation that no current litigation or claims will have a material adverse impact on our financial position or results of operations. These forward-looking statements are based upon our current expectations and estimates associated with prospective events and circumstances that may or may not be within our control and as to which there can be no assurance. Actual results could differ materially from those implied by forward-looking statements as a result of various factors, including but not limited to those described in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2019 under Part I, Item 1 — “Business,” under Part I, Item 1A — “Risk Factors,” under Part I, Item 3 — “Legal Proceedings,” and under Part II, Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” and those described in this Quarterly Report on Form 10-Q,
particularly under Part I, Item 2 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 1A – “Risk Factors.” The discussion of our business contained herein, including the identification and assessment of factors that may influence actual results, may not be exhaustive. Therefore, the information presented should be read together with other documents we file with the SEC from time to time, including our Annual Reports on Form 10-K,
our Quarterly Reports on Form 10-Q
and our Current Reports on Form 8-K,
which may supplement, modify, supersede, or update the factors discussed in this Quarterly Report on Form 10-Q.
We do not undertake any obligation to update any forward-looking statements as a result of future events or developments, except as required by law.Overview
We design, develop, manufacture, and market modular power components and power systems for converting electrical power for use in electrically-powered devices. Our competitive position is supported by innovations in product design and achievements in product performance, largely enabled by our focus on the research and development of advanced technologies and processes, often implemented in proprietary semiconductor circuitry, materials, and packaging. Many of our products incorporate patented or proprietary implementations of high-frequency switching topologies enabling power system solutions that are more efficient and much smaller than conventional alternatives. Our strategy emphasizes demonstrable product differentiation and a value proposition based on competitively superior solution performance, advantageous design flexibility, and a compelling total cost of ownership. While we
-18-
VICOR CORPORATION
Management’s Discussion and Analysis of
Financial Condition and Results of Operation
March 31, 2020
offer a wide range of alternating current (“AC”) and direct current (“DC”) power conversion products, we consider our core competencies to be associated with 48V DC distribution, which offers numerous inherent cost and performance advantages over lower distribution voltages. However, we also offer products addressing other DC voltage standards (e.g., 380V for power distribution in data centers, 110V for rail applications, 28V for military and avionics applications, and 24V for industrial automation).
Based on design, performance, and form factor considerations, as well as the range of evolving applications for which our products are appropriate, we categorize our product portfolios as either “Advanced Products” or “Brick Products.” The Advanced Products category consists of our more recently introduced products, which are largely used to implement our proprietary Factorized Power Architecture
™
(“FPA”), an innovative power distribution architecture enabling flexible, rapid power system design using individual components optimized to perform a specific conversion function. The Brick Products category largely consists of our broad and well-established families of integrated power converters, incorporating multiple conversion stages, used in conventional power systems architectures. Given the growth profiles of the markets we serve with our Advanced Products line and our Brick Products line, our strategy involves a transition in organizational focus, emphasizing investment in our Advanced Products line and targeting high growth market segments with a
low-mix,
high-volume operational model, while maintaining a profitable business in the mature market segments we serve with our Brick Products line with a high-mix,
low-volume
operational model.The applications in which our Advanced Products and Brick Products are used are typically in the higher-performance, higher-power segments of the market segments we serve. With our Advanced Products, we generally serve large Original Equipment Manufacturers (“OEMs”), Original Design Manufacturers (“ODMs”), and their contract manufacturers, with sales currently concentrated in the data center and hyperscaler segments of enterprise computing, in which our products are used for voltage distribution on server motherboards, in server racks, and across datacenter infrastructure. We also target applications in aerospace and aviation, defense electronics, industrial automation, instrumentation, test equipment, solid state lighting, telecommunications and networking infrastructure, and vehicles (notably in the autonomous driving, electric vehicle, and hybrid vehicle niches of the vehicle segment). With our Brick Products, we generally serve a fragmented base of large and small customers, concentrated in aerospace and defense electronics, industrial automation, industrial equipment, instrumentation and test equipment, and transportation (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 sales among relatively fewer customers.
Summary of First Quarter 2020 Financial Performance
Total revenue for the first quarter of 2020 sequentially increased 0.4%, compared to total revenue for the fourth quarter of 2019, as shipments of Advanced Products sequentially increased 9.8%, while shipments of Brick Products sequentially declined 2.8%. An increase in domestic shipments of both Advanced Products and Brick Products was offset by a decline in shipments to China and Hong Kong, resulting from the influence of tariffs and other trade-related matters on prior period bookings. Shipments to other Asian countries also declined, largely due to gaps in scheduling for certain Advanced Product backlog delivery schedules. European shipments for the first quarter of 2020 also declined, as compared to shipments during the fourth quarter of 2019, reflecting prior period bookings patterns and the ongoing weakness of regional business conditions. Revenue fell short of forecast, as certain supply chain constraints caused manufacturing delays, which, in turn, caused a reduction in shipments, and production inefficiencies, which, in turn, caused an increase in costs. We experienced a small number of customer requests to postpone shipments due to the
COVID-19
pandemic, but the impact of such postponed shipments on revenue for the first quarter of 2020 was immaterial.Our gross margin as a percentage of revenue declined sequentially, to 43.1% for the first quarter of 2020 from 47.1% for the fourth quarter of 2019, primarily due to the aforementioned influence of supply chain constraints experienced during the first quarter of 2020. Gross margin as a percentage of revenue for the first quarter of 2020 also was influenced by an unfavorable change in product mix shipped (i.e., a sequentially higher percentage of lower margin products were produced and shipped during the quarter), lower volume-related absorption of manufacturing overhead expenses, a sequential quarterly increase in tariff charges.
-19-
VICOR CORPORATION
Management’s Discussion and Analysis of
Financial Condition and Results of Operation
March 31, 2020
We recorded an operating loss of $(2,373,000), as operating expenses increased 2.9% compared to the fourth quarter of 2019, primarily due to a 9.7% sequential quarterly rise in research and development expenses, an increase largely associated with increased prototype development costs for the first quarter of 2020.
Net loss attributable to Vicor Corporation (i.e., after net income or loss attributable to a noncontrolling interest) for the first quarter of 2020 was $(1,735,000), representing a loss per share of $(0.04) for the first quarter of 2020, in contrast to net income of $1,312,000 or $0.03 per diluted share for the fourth quarter of 2019.
Bookings for the first quarter of 2020 decreased 8.8%, compared to the fourth quarter of 2019, as orders for Brick Products declined 3.1% sequentially, primarily as a result of the impact of the
COVID-19
pandemic on business activity across Asia, while orders for Advanced Products decreased 16.1% sequentially. Advanced Products order volume for the first quarter of 2020 met expectations. The sequential 8.8% decline reflects the composition of the prior quarter’s bookings, which included a large, year-long program for high-end
commercial lighting. Absent that single large order, Advanced Product bookings rose 23.2% sequentially and were almost entirely associated with customers in Artificial Intelligence applications.Our quarterly consolidated operating results can be difficult to forecast and have been subject to significant fluctuations. We plan our production and inventory levels based on management’s estimates of customer demand, based on customer forecasts and based on other information sources. Customer forecasts, particularly those of OEM, ODM, and contract manufacturing customers to which we supply Advanced Products in high volumes, are subject to scheduling changes on short notice, contributing to operating inefficiencies and excess costs. In addition, external factors such as supply chain uncertainties, often associated with cyclicality of the electronics industry, regional macroeconomic and trade-related circumstances, and , most recently evidenced by the
force majeure
COVID-19
pandemic, have caused our operating results to vary meaningfully. Our quarterly gross margin as a percentage of revenue may vary, depending on production volumes, average selling prices, average unit costs, the mix of products sold that quarter, and the level of importation of raw materials. Our quarterly operating margin as a percentage of revenue also may vary with changes in revenue and product level profitability, but our operating costs are largely associated with compensation and related employee costs, which are not subject to sudden or significant changes.Impact of
COVID-19
Pandemic On January 30, 2020, the World Health Organization designated the
COVID-19
outbreak a “Public Health Emergency of International Concern” (i.e., a health emergency requiring coordinated action by the governments of effected countries). On January 31, 2020, the U.S. Department of Health and Human Services declared a public health emergency for the entire United States, thereby facilitating nationwide public health response. On March 11, 2020, COVID-19
was declared a pandemic by the World Health Organization, an indication of its global severity. Governments worldwide have responded with measures intended to contain the further spread of COVID-19,
including mandatory closures of businesses, schools, and organizations.On March 23, 2020, the Commonwealth of Massachusetts ordered
non-essential
businesses closed and prohibited gatherings of more than 10 people, extending the emergency declaration of March 10, 2020. Our headquarters offices and primary manufacturing facility are located in Massachusetts. However, the Company is designated as essential by the U.S. Department of Homeland Security, given our role in supporting industrial sectors considered “critical infrastructure.” As such, we have continued to operate at, or close to, full manufacturing capacity, although there can be no assurance we will be able to continue to operate at such levels of manufacturing capacity.Widespread uncertainty associated with the
COVID-19
pandemic has contributed to reduced business activity worldwide. As described above, our financial performance for the first quarter of 2020 was not materially influenced by the COVID-19
pandemic, although there can be no assurance our financial performance will not be materially negatively influenced in future quarters, given the continued uncertainty. Since early March 2020, we have taken actions intended to protect the health and safety of our employees, customers, business partners, and suppliers. Following guidance from the U.S. Centers for Disease Control and Prevention, the U.S. Occupational Health and Safety Administration, state and local health authorities, and existing crisis management policies, we developed and implemented comprehensive health and safety measures at all of our locations, including: establishing a central response team; distributing information and carrying out education initiatives; implementing social distancing requirements;-20-
VICOR CORPORATION
Management’s Discussion and Analysis of
Financial Condition and Results of Operation
March 31, 2020
distributing breathing masks, disposable gloves, and thermometers to employees who must be physically on premises to perform their work; implementing temperature checks at the entrances to our manufacturing facility; extensive and frequent disinfecting of our workspaces; modifying our meal services to minimize physical contact; requiring and enabling work-from-home for those employees who do not need to be physically on premises to perform their work effectively; and suspending travel. We expect to maintain these measures until we determine the
COVID-19
pandemic is adequately contained for purposes of our business, and we may take further actions we consider to be in the best interests of our employees, customers, business partners, and suppliers or in response to government mandate or requirement.While our facilities currently are operational, the further spread of
COVID-19
and the measures set forth above may negatively influence our operations, as well as those of our customers, business partners, and suppliers. As described above, we experienced certain supply chain constraints associated with COVID-19
during the first quarter of 2020, and such constraints contributed to lower revenue, higher costs, and reduced productivity, although we do not consider the cumulative impact of such constraints to have had a material influence on our financial performance. However, there can be no assurance that future circumstances associated with the COVID-19
pandemic will not have a material negative influence on our operations and, in turn, our financial performance.We have experienced absenteeism associated with employee self-quarantine due to exposure to
COVID-19,
although as of the date of this report we continue to operate with three shifts in our factory, and our engineering, sales, and administrative departments continue to function. However, the productivity of our factory may be reduced further if absenteeism increases or if an employee is diagnosed with COVID-19,
which likely would require further restrictive health and safety measures, including factory closure, to be implemented.We have not yet experienced significant disruption of our supply chain due to the
COVID-19
pandemic. During the period when China was under strict shelter-in-place
restrictions, we did experience delays in delivery of certain raw materials, but these delays did not materially influence our operational or financial performance for the first quarter of 2020. We are closely monitoring the performance and financial health of our business partners and suppliers, but an extended period of operational constraints brought about by COVID-19
could cause financial hardship within our supply chain, thereby potentially disrupting our access to raw materials. Additionally, restrictions or disruptions of transportation, such as reduced availability of cargo transport by ship or air could result in higher costs and inbound and outbound delays.Although there is uncertainty regarding the extent to which
COVID-19
will continue to influence our operational and financial results, in the future, the Company’s high level of liquidity, flexible operational model, existing raw material inventories, and increased use of second-sources for critical raw materials support management’s belief the Company will be able to effectively conduct business until the COVID-19
pandemic passes.We are monitoring the rapidly changing circumstances, and may take additional actions to address
COVID-19
risks as they evolve, particularly if federal and state governments so require. Because much of the potential negative influence of COVID-19
is associated with risks outside of our control, we cannot estimate the extent of such influence on our financial or operational performance, or when such influence might occur.Please refer to Item 1A, “Risk Factors” below for updates to our risk factors associated with the
COVID-19
pandemic.Please refer to the Company’s Annual Report on Form
10-K
for the year ended December 31, 2019 for a summary of the Company’s critical accounting policies and estimates.Three Months Ended March 31, 2020, Compared to Three Months Ended March 31, 2019
The following summarizes our financial performance for the first quarter of 2020, compared to the first quarter of 2019:
| • | Net revenues decreased 3.5% to $63,401,000 for the first quarter of 2020, from $65,725,000 for the first quarter of 2019, despite a 5.2% increase in bookings in the first three months of 2020 compared to the first three months of 2019.Advanced Products revenues decreased 6.4% and Brick Products revenues decreased 2.4% in each case compared to the first quarter of 2019. |
-21-
VICOR CORPORATION
Management’s Discussion and Analysis of
Financial Condition and Results of Operation
March 31, 2020
| • | Export sales, as a percentage of total revenues, represented approximately 47.1% in the first quarter of 2020 and 55.5% in the first quarter of 2019. |
| • | Gross margin decreased to $27,331,000 for the first quarter of 2020 from $31,086,000 for the first quarter of 2019, and gross margin, as a percentage of net revenues, decreased to 43.1% for the first quarter of 2020 from 47.3% for the first quarter of 2019. |
| • | Backlog, representing the total of orders for products received for which shipment is scheduled within the next 12 months, was approximately $110,832,000 at the end of the first quarter of 2020, as compared to $103,832,000 at the end of the first quarter of 2019 and $104,164,000 at the end of the fourth quarter of 2019. |
| • | Operating expenses for the first quarter of 2020 increased $3,111,000, or 11.7%, to $29,704,000 from $26,593,000 for the first quarter of 2019, due to an increase in research and development expense of $2,115,000 and an increase in selling, general, and administrative expenses of $996,000. |
| • | We reported a net loss for the first quarter of 2020 of $(1,735,000), or $(0.04) per share, compared to net income of $4,286,000, or $0.10 per diluted share, for the first quarter of 2019. |
| • | For the three months ended March 31, 2020, depreciation and amortization totaled $2,711,000, and capital additions totaled $2,999,000, compared to $2,445,000 and $3,322,000, respectively, for the three months ended March 31, 2019. |
| • | Inventories increased by approximately $4,165,000, or 8.5%, to $53,352,000 at March 31, 2020, compared to $49,187,000 at December 31, 2019. |
Consolidated net revenues for the first quarter of 2020 were $63,401,000, a decrease of $2,324,000, or 3.5%, as compared to $65,725,000 for the first quarter of 2019, and an increase of $276,000, or 0.4%, on a sequential basis from $63,125,000 for the fourth quarter of 2019. Net revenues, by product line, for the three months ended March 31, 2020 and 2019 were as follows (dollars in thousands):
| Decrease |
||||||||||||||||
| 2020 |
2019 |
$ |
% |
|||||||||||||
| Brick Products |
$ | 45,517 |
$ | 46,625 |
$ | (1,108 |
) | (2.4 |
)% | |||||||
| Advanced Products |
17,884 |
19,100 |
(1,216 |
) | (6.4 |
)% | ||||||||||
| Total |
$ | 63,401 |
$ | 65,725 |
$ | (2,324 |
) | (3.5 |
)% | |||||||
The decrease in consolidated net revenues for the three months ended March 31, 2020, from the three months ended March 31, 2019, reflected a lower level of backlog scheduled for shipment during the first quarter of 2020, primarily a consequence of the extended delivery schedules of prior period bookings from Advanced Product customers in the data center market.
Gross margin for the first quarter of 2020 decreased $3,755,000, or 12.1%, to $27,331,000, from $31,086,000 for the first quarter of 2019. Gross margin as a percentage of net revenues decreased to 43.1% for the first quarter of 2020 compared to 47.3% for the first quarter of 2019. The absolute and percentage decreases for the first quarter of 2020, relative to the first quarter of 2019, were primarily associated with the decrease in net revenues, and certain supply chain constraints associated with the COVID-19 pandemic, which caused both manufacturing delays, which in turn caused a reduction in shipments, and production inefficiencies, which, in turn, caused an increase in costs.
-22-
VICOR CORPORATION
Management’s Discussion and Analysis of
Financial Condition and Results of Operation
March 31, 2020
Selling, general, and administrative expenses were $16,369,000 for the first quarter of 2020, an increase of $996,000, or 6.5%, from $15,373,000 for the first quarter of 2019. Selling, general, and administrative expenses as a percentage of net revenues increased to 25.8% for the first quarter of 2020 from 23.4% for the first quarter of 2019, primarily due to the decrease in net revenues. The components of the $996,000 increase in selling, general and administrative expenses for the first quarter of 2020 from the first quarter of 2019 were as follows (dollars in thousands):
| Increase (decrease) |
||||||||
| Legal fees |
$ | 564 |
161.6 |
%(1) | ||||
| Compensation |
456 |
4.6 |
%(2) | |||||
| Bad debt expense |
131 |
148.9 |
% | |||||
| Depreciation and amortization |
118 |
18.4 |
% | |||||
| Outside services |
101 |
23.8 |
% | |||||
| Travel expense |
(145 |
) | (21.9 |
)%(3) | ||||
| Business taxes and bank fees |
(164 |
) | (58.6 |
)%(4) | ||||
| Other, net |
(65 |
) | (2.0 |
)% | ||||
| $ | 996 |
6.5 |
% | |||||
| (1) | Increase primarily attributable to an increase in outside legal services associated with the December 2019 ransomware incident. |
| (2) | Increase primarily attributable to annual compensation adjustments in May 2019 and an increase in headcount. |
| (3) | Decrease primarily attributable to decreased travel by our sales and marketing personnel, notably due to the COVID-19 pandemic. |
| (4) | Decrease primarily attributable to a decrease in certain business taxes. |
-23-
VICOR CORPORATION
Management’s Discussion and Analysis of
Financial Condition and Results of Operation
March 31, 2020
Research and development expenses were $13,335,000 for the first quarter of 2020, an increase of $2,115,000, or 18.9%, compared to $11,220,000 for the first quarter of 2019, primarily due to increased prototype development costs. As a percentage of net revenues, research and development expenses increased to 21.0% for the first quarter of 2020 from 17.1% for the first quarter of 2019, primarily due to the decrease in net revenues. The components of the $2,115,000 increase in research and development expenses were as follows (dollars in thousands):
| Increase (decrease) |
||||||||
| Project and pre-production materials |
$ | 970 |
61.6 |
%(1) | ||||
| Compensation |
575 |
6.9 |
%(2) | |||||
| Deferred costs |
364 |
74.9 |
%(3) | |||||
| Overhead absorption |
89 |
29.3 |
% | |||||
| Supplies expense |
87 |
40.8 |
% | |||||
| Other, net |
30 |
1.5 |
% | |||||
| $ | 2,115 |
18.9 |
% | |||||
| (1) | Increase primarily attributable to increased prototype development costs for Advanced Products. |
| (2) | Increase primarily attributable to annual compensation adjustments in May 2019 and an increase in headcount. |
| (3) | Increase primarily attributable to a decrease in deferred costs capitalized for certain non-recurring engineering projects for which the related revenues have been deferred. |
The significant components of “Other income (expense), net” for the three months ended March 31, and the changes between the periods were as follows (in thousands):
| 2020 |
2019 |
Increase (decrease) |
||||||||||
| Rental income |
$ | 198 |
$ | 198 |
$ | — |
||||||
| Interest income |
53 |
83 |
(30 |
) | ||||||||
| Gain on disposals of equipment |
— |
9 |
(9 |
) | ||||||||
| Foreign currency losses, net |
(121 |
) | (58 |
) | (63 |
) | ||||||
| Other, net |
18 |
7 |
11 |
|||||||||
| $ | 148 |
$ | 239 |
$ | (91 |
) | ||||||
Our exposure to market risk fluctuations in foreign currency exchange rates relates to the operations of Vicor Japan Company, Ltd. (“VJCL”), for which the functional currency is the Japanese Yen, and all other subsidiaries in Europe and Asia, for which the functional currency is the U.S. Dollar. These other subsidiaries in Europe and Asia experienced more unfavorable foreign currency exchange rate fluctuations in 2020 compared to 2019. Interest income increased due to an increase in interest rates.
(Loss) income before income taxes was $(2,225,000) for the first quarter of 2020, as compared to $4,732,000 for the first quarter of 2019.
-24-
VICOR CORPORATION
Management’s Discussion and Analysis of
Financial Condition and Results of Operation
March 31, 2020
The (benefit) provision for income taxes and the effective income tax rates for the three months ended March 31, 2020 and 2019 were as follows (dollars in thousands):
| 2020 |
2019 |
|||||||
| (Benefit) provision for income taxes |
$ | (494 |
) | $ | 426 |
|||
| Effective income tax rate |
(22.2 |
)% | 9.0 |
% | ||||
The effective tax rates were lower than the statutory tax rates for the three months ended March 31, 2020 and 2019 due primarily to the utilization of tax credits in 2020 and the combination of utilizing net operating loss carryforwards and tax credits in 2019. The (benefit) provision for income taxes in the three months ended March 31, 2020 and 2019 also included estimated foreign income taxes and estimated state taxes in jurisdictions in which the Company does not have net operating loss carryforwards.
See Note 8 to the Condensed Consolidated Financial Statements for disclosure regarding our current assessment of the valuation allowance against all domestic deferred tax assets, and the possible release (i.e., reduction) of the allowance in the future.
We reported a net loss for the first quarter of 2020 of $(1,735,000), or $(0.04) per share, compared to net income of $4,286,000, or $0.10 per diluted share, for the first quarter of 2019.
Liquidity and Capital Resources
As of March 31, 2020, we had $82,751,000 in cash and cash equivalents. The ratio of total current assets to total current liabilities was 5.3:1 as of March 31, 2020 and 6.0:1 as of December 31, 2019. Working capital, defined as total current assets less total current liabilities, increased $834,000 to $149,970,000 as of March 31, 2020 from $149,136,000 as of December 31, 2019.
The changes in working capital from December 31, 2019 to March 31, 2020 were as follows (in thousands):
| Increase (decrease) |
||||
| Cash and cash equivalents |
$ | (1,917 |
) | |
| Accounts receivable |
3,164 |
|||
| Inventories, net |
4,165 |
|||
| Other current assets |
712 |
|||
| Accounts payable |
(4,435 |
) | ||
| Accrued compensation and benefits |
329 |
|||
| Accrued expenses |
(71 |
) | ||
| Short-term lease liabilities |
150 |
|||
| Sales allowances |
(40 |
) | ||
| Income taxes payable |
23 |
|||
| Short-term deferred revenue |
(1,246 |
) | ||
| $ | 834 |
|||
The primary source of cash for the three months ended March 31, 2020 was proceeds from the issuance of Common Stock upon the exercise of options awarded under our stock option plans and the issuance of Common Stock under our 2017 Employee Stock Purchase Plan, of $2,061,000. The primary uses of cash for the three months ended March 31, 2020 were for funding the net loss of $(1,731,000), an increase in current assets and liabilities, net, exclusive of cash and cash equivalents, of $2,639,000, and the purchase of equipment of $2,999,000.
-25-
VICOR CORPORATION
Management’s Discussion and Analysis of
Financial Condition and Results of Operation
March 31, 2020
In November 2000, our Board of Directors authorized the repurchase of up to $30,000,000 of our Common Stock (the “November 2000 Plan”). The November 2000 Plan authorizes us to make such repurchases from time to time in the open market or through privately negotiated transactions. The timing and amounts of Common Stock repurchases are at the discretion of management based on its view of economic and financial market conditions. We did not repurchase shares of Common Stock under the November 2000 Plan during the three months ended March 31, 2020. As of March 31, 2020, we had approximately $8,541,000 remaining under the November 2000 Plan.
We had approximately $4,041,000 of capital expenditure commitments, principally for manufacturing equipment, as of March 31, 2020, which we intend to fund with existing cash. Our primary liquidity needs are for making continuing investments in manufacturing equipment and for funding the planned construction of approximately 90,000 square feet of additional manufacturing space adjoining our existing Andover manufacturing facility, including architectural and construction costs. We believe cash generated from operations and the total of our cash and cash equivalents will be sufficient to fund planned operational needs, capital equipment purchases, and the planned construction, for the foreseeable future.
-26-
Vicor Corporation
March 31, 2020
Item 3 — Quantitative and Qualitative Disclosures About Market Risk
We are exposed to a variety of market risks, including changes in interest rates affecting the return on our cash and cash equivalents and fluctuations in foreign currency exchange rates. As our cash and cash equivalents consist principally of cash accounts and money market securities, which are short-term in nature, we believe our exposure to market risk on interest rate fluctuations for these investments is not significant. As of March 31, 2020, our long-term investment portfolio, recorded on our Condensed Consolidated Balance Sheet as “Long-term investments, net”, consisted of a single auction rate security with a par value of $3,000,000, purchased through and 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. While the Failed Auction Security is Aaa/AA+ rated by major credit rating agencies, collateralized by student loans and guaranteed by the U.S. Department of Education under the Federal Family Education Loan Program, continued failure to sell at its periodic auction dates (i.e., reset dates) could negatively impact the carrying value of the investment, in turn leading to impairment charges in future periods. Periodic changes in the fair value of the Failed Auction Security attributable to credit loss (i.e., risk of the issuer’s default) are recorded through earnings as a component of “Other income (expense), net”, with the remainder of any periodic change in fair value not related to credit loss (i.e., temporary
“mark-to-market”
carrying value adjustments) recorded in “Accumulated other comprehensive (loss) income”, a component of Stockholders’ Equity. Should we conclude a decline in the fair value of the Failed Auction Security is other than temporary, such losses would be recorded through earnings as a component of “Other income (expense), net”. We do not believe there was an “other-than-temporary” decline in value in this security as of March 31, 2020.Our exposure to market risk for fluctuations in foreign currency exchange rates relates to the operations of VJCL, for which the functional currency is the Japanese Yen, and changes in the relative value of the Yen to the U.S. Dollar. The functional currency of all other subsidiaries in Europe and other subsidiaries in Asia is the U.S. Dollar. While we believe risk to fluctuations in foreign currency exchange rates for these subsidiaries is generally not significant, they can be subject to substantial currency changes, and therefore foreign exchange exposures.
Item 4 — Controls and Procedures
(a) Disclosure regarding controls and procedures.
As required by Rule
13a-15
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), management, with the participation of our Chief Executive Officer (“CEO”) (who is our principal executive officer) and Chief Financial Officer (“CFO”) (who is our principal financial officer), conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the last fiscal quarter (i.e., March 31, 2020). The term “disclosure controls and procedures,” as defined in Rules 13a-15(e)
and 15d-15(e)
under the Exchange Act, means controls and other procedures of a company that are designed to ensure information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure information required to be disclosed by a company in the reports it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2020, our CEO and CFO concluded, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Accordingly, management, including the CEO and CFO, recognizes our disclosure controls or our internal control over financial reporting may not prevent or detect all errors and all fraud. The design of a control system must reflect the fact there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the
-27-
Vicor Corporation
March 31, 2020
likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any control’s effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
(b) Changes in internal control over financial reporting.
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended March 31, 2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
-28-
Vicor Corporation
Part II – Other Information
March 31, 2020
Item 1 — Legal Proceedings
See Note 10. in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 – “Financial Statements.”
Commitments and Contingencies
Item 1A — Risk Factors
There have been no material changes in the risk factors described in Part I, Item 1A – “Risk Factors” of the Company’s Annual Report on Form
10-K
for the year ended December 31, 2019, except for the following supplemental risk factor:Our financial and operational performance has been and may continue to be negatively influenced by the consequences of the
COVID-19
pandemic. The
COVID-19
pandemic and the response of governments worldwide to contain its spread negatively influenced our financial and operational performance for the first quarter of 2020, and future developments may have a potentially more substantial negative influence on our financial and operational performance over an unknown period of time. We experienced certain supply chain constraints associated with COVID-19
during the first quarter of 2020, and such constraints contributed to lower revenue, manufacturing delays, reduced shipments, production inefficiencies, higher costs, and reduced productivity, although we do not consider the cumulative impact of such constraints to have had a material influence on our financial performance for the period. However, there can be no assurance that future circumstances associated with the COVID-19
pandemic will not have a material negative influence on our financial and operational performance.We have taken action to protect the health and safety of our workforce, the costs of which, to date, have not had a material effect on our financial performance. We expect to maintain the measures put in place until we determine the
COVID-19
pandemic is adequately contained for purposes of our business, and we may take further actions we consider to be in the best interests of our employees, customers, business partners, and suppliers or in response to government mandate or requirement. Such further actions may have a negative influence on our costs and productivity and, in turn, our financial and operational performance.Our customers, business partners, and suppliers may be adversely affected by the
COVID-19
pandemic, which also may contribute to a negative influence on our future financial and operational performance.Item 6 — Exhibits
| Exhibit Number |
Description | |||
| 31.1 |
||||
| 31.2 |
||||
| 32.1 |
||||
| 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 Exhibit 101) | |||
-29-
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: May 4, 2020 |
By: |
/s/ Patrizio Vinciarelli | ||||
| Patrizio Vinciarelli | ||||||
| Chairman of the Board, President and | ||||||
| Chief Executive Officer | ||||||
| (Principal Executive Officer) | ||||||
| Date: May 4, 2020 |
By: |
/s/ James A. Simms | ||||
| James A. Simms | ||||||
| Vice President, Chief Financial Officer | ||||||
| (Principal Financial Officer) | ||||||
-30-
Exhibit 31.1
CHIEF EXECUTIVE OFFICER CERTIFICATION
I, Patrizio Vinciarelli, certify:
| 1. | I have reviewed this quarterly report on Form 10-Q of Vicor Corporation; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Dated: May 4, 2020 | /s/ Patrizio Vinciarelli | |||||
| Patrizio Vinciarelli | ||||||
| Chief Executive Officer | ||||||
| (Principal Executive Officer) |
Exhibit 31.2
CHIEF FINANCIAL OFFICER CERTIFICATION
I, James A. Simms, certify:
| 1. | I have reviewed this quarterly report on Form 10-Q of Vicor Corporation; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Dated: May 4, 2020 | /s/ James A. Simms | |||||
| James A. Simms | ||||||
| Vice President, Chief Financial Officer | ||||||
| (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Vicor Corporation (the “Company”) on Form 10-Q for the period ended March 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Patrizio Vinciarelli, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Patrizio Vinciarelli |
| Patrizio Vinciarelli |
| President, Chairman of the Board and |
| Chief Executive Officer |
May 4, 2020
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Vicor Corporation (the “Company”) on Form 10-Q for the period ended March 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James A. Simms, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ James A. Simms |
| James A. Simms |
| Vice President, Chief Financial Officer |
May 4, 2020
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.