======================================================== SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 --------------------------------------------- FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2002 ------------------------------------------------- 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 ---------------------------------------------------- VICOR CORPORATION (Exact name of registrant as specified in its charter) Delaware 04-2742817 (State of Incorporation) (IRS Employer Identification Number) 25 Frontage Road, Andover, Massachusetts 01810 (Address of registrant's principal executive office) (978) 470-2900 (Registrant's telephone number) ----------------------------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock as of June 30, 2002. Common Stock, $.01 par value ----------------30,485,009 Class B Common Stock, $.01 par value -------11,930,848 ========================================================
VICOR CORPORATION INDEX TO FORM 10-Q Page ---- Part I - Financial Information: Item 1 - Financial Statements (Unaudited) Condensed Consolidated Balance Sheets at 1 June 30, 2002 and December 31, 2001 Condensed Consolidated Statements of Operations 2 for the three and six months ended June 30, 2002 and 2001 Condensed Consolidated Statements of Cash Flows 3 for the six months ended June 30, 2002 and 2001 Notes to Condensed Consolidated Financial 4-6 Statements Item 2 - Management's Discussion and Analysis of 7-11 Financial Condition and Results of Operations Item 3 - Quantitative and Qualitative Disclosures About Market Risk 12 Part II - Other Information: Item 1 - Legal Proceedings 13 Item 2 - Changes in Securities 14 Item 3 - Defaults Upon Senior Securities 14 Item 4 - Submission of Matters to a Vote of 14 Security Holders Item 5 - Other Information 15 Item 6 - Exhibits and Reports on Form 8-K 15 Signature(s) 16
FORM 10-Q PART 1 ITEM 1 Item 1 - Financial Statements PAGE 1 - ----------------------------- VICOR CORPORATION Condensed Consolidated Balance Sheets (In thousands) (Unaudited) Assets June 30, 2002 December 31, 2001 - ------------------------------------------------------- ------------- ----------------- Current assets: Cash and cash equivalents $ 68,957 $ 57,481 Short-term investments 25,770 28,808 Accounts receivable, net 26,069 23,224 Note receivable - 7,500 Inventories, net 33,443 40,748 Deferred tax assets 8,850 8,850 Other current assets 2,644 1,889 --------- --------- Total current assets 165,733 168,500 Property, plant and equipment, net 105,432 110,846 Notes receivable from related parties 2,206 2,167 Other assets 7,265 8,109 --------- --------- $ 280,636 $ 289,622 ========= ========= Liabilities and Stockholders' Equity - ------------------------------------------------------- Current liabilities: Accounts payable $ 4,986 $ 3,087 Accrued compensation and benefits 3,618 3,492 Accrued liabilities 7,121 8,762 --------- --------- Total current liabilities 15,725 15,341 Deferred income taxes 9,496 9,444 Stockholders' equity: Preferred Stock -- -- Class B Common Stock 119 119 Common Stock 370 369 Additional paid-in capital 145,647 145,359 Retained earnings 209,557 219,340 Accumulated other comprehensive income 112 40 Treasury stock, at cost (100,390) (100,390) --------- --------- Total stockholders' equity 255,415 264,837 --------- --------- $ 280,636 $ 289,622 ========= ========= Note: The balance sheet at December 31, 2001 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See accompanying notes.
FORM 10-Q PART I ITEM 1 PAGE 2 VICOR CORPORATION Condensed Consolidated Statements of Operations (In thousands except per share data) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2002 2001 2002 2001 ---- ---- ---- ---- Net revenues: Product $ 36,610 $ 49,339 $ 70,690 $102,995 License 221 921 761 2,284 -------- -------- -------- -------- 36,831 50,260 71,451 105,279 Costs and expenses: Cost of revenue 28,148 36,045 54,606 73,249 Selling, general and administrative 11,134 11,342 21,387 21,656 Research and development 5,128 5,332 10,235 10,785 -------- -------- -------- -------- 44,410 52,719 86,228 105,690 -------- -------- -------- -------- Loss from operations (7,579) (2,459) (14,777) (411) Other income (expense), net (63) 918 (630) 2,020 -------- -------- -------- -------- Income (loss) before income taxes (7,642) (1,541) (15,407) 1,609 Benefit (provision) for income taxes 2,790 588 5,624 (483) -------- -------- -------- -------- Net income (loss) $(4,852) $ (953) $ (9,783) $ 1,126 ======= ======== ========= ======== Net income (loss) per common share: Basic $(0.11) $ (0.02) $ (0.23) $ 0.03 Diluted $(0.11) $ (0.02) $ (0.23) $ 0.03 Shares used to compute net income (loss) per share: Basic 42,416 42,330 42,410 42,307 Diluted 42,416 42,330 42,410 42,767 See accompanying notes.
FORM 10-Q PART I ITEM 1 PAGE 3 VICOR CORPORATION Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) Six Months Ended -------------------------------------------------------------- June 30, 2002 June 30, 2001 ------------- ------------- Operating activities: Net income (loss) $(9,783) $ 1,126 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 10,642 9,729 Loss on disposal of equipment 1,145 4 Other than temporary decline in investment 1,078 - Unrealized gain on foreign currency (73) - Loss on sale of investment 17 - Tax benefit relating to stock option exercises 71 548 Change in current assets and liabilities, net 4,299 7,102 -------- -------- Net cash provided by operating activities 7,396 18,509 Investing activities: Sales and maturities of short-term investments 31,864 - Purchases of short-term investments (28,946) - Additions to property, plant and equipment (6,173) (12,834) Proceeds from sale of equipment - 2 Decrease (increase) in notes receivable 7,461 (144) Increase in other assets (286) (424) -------- -------- Net cash provided by (used in) investing activities 3,920 (13,400) Financing activities: Proceeds from sale of Common Stock 218 1,163 -------- -------- Net cash provided by financing activities 218 1,163 Effect of foreign exchange rates on cash (58) 113 -------- -------- Net increase in cash and cash equivalents 11,476 6,385 Cash and cash equivalents at beginning of period 57,481 62,916 -------- -------- Cash and cash equivalents at end of period $ 68,957 $ 69,301 ======== ======== See accompanying notes.
FORM 10-Q PART I ITEM 1 PAGE 4 VICOR CORPORATION Notes to Condensed Consolidated Financial Statements June 30, 2002 (Unaudited) 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three- and six-month periods ended June 30, 2002 are not necessarily indicative of the results that may be expected for the year ended December 31, 2002. For further information, refer to the consolidated financial statements and notes thereto included in the Company's audited financial statements for the year ended December 31, 2001, contained in the Company's annual report filed on Form 10-K (File No. 0-18277) with the Securities and Exchange Commission. 2. NET INCOME (LOSS) PER SHARE The following table sets forth the computation of basic and diluted income (loss) per share for the three and six months ended June 30 (in thousands, except per share amounts): Three Months Ended Six Months Ended June 30, June 30, 2002 2001 2002 2001 ---- ---- ---- ---- Numerator: Net income (loss) $(4,852) $ (953) $ (9,783) $1,126 ======= ====== ======== ====== Denominator: Denominator for basic income (loss) per share-weighted average shares 42,416 42,330 42,410 42,307 Effect of dilutive securities: Employee stock options - - - 460 ------- ------ -------- ------ Denominator for diluted income (loss) per share - adjusted weighted-average shares and assumed conversions 42,416 42,330 42,410 42,767 ======= ====== ======== ====== Basic income (loss) per share $ (0.11) $(0.02) $ (0.23) $ 0.03 ======= ====== ======== ====== Diluted income (loss) per share $ (0.11) $(0.02) $ (0.23) $ 0.03 ======= ====== ======== ======
FORM 10-Q PART I ITEM 2 PAGE 5 VICOR CORPORATION Notes to Condensed Consolidated Financial Statements June 30, 2002 (Continued) 3. INVENTORIES Inventories are valued at the lower of cost (determined using the first-in, first-out method) or market. Inventories were as follows as of June 30, 2002 and December 31, 2001 (in thousands): June 30, 2002 December 31, 2001 ------------- ----------------- Raw materials.................. $25,715 $31,979 Work-in-process................ 3,040 3,758 Finished goods................. 4,688 5,011 ------- ------- $33,443 $40,748 ======= ======= 4. COMPREHENSIVE INCOME Total comprehensive income (loss) was ($4,125,000) and ($9,711,000) for the three and six months ended June 30, 2002, respectively, and ($706,000) and $955,000 for the three and six months ended June 30, 2001, respectively. Other comprehensive income (loss) consisted principally of adjustments for foreign currency translation gains in the amounts of $110,000 and $103,000 and unrealized gains (losses) on available for sale securities in the amount of $617,000 and ($31,000) for the three and six months ended June 30, 2002, respectively. 5. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 142 (FAS 142) "Goodwill and Other Intangible Assets." Under FAS 142, goodwill and indefinite lived intangible assets will no longer be amortized but will be tested for impairment at least annually at the reporting unit level. The Company adopted FAS 142 in the first quarter of 2002, which resulted in the elimination of goodwill amortization beginning in fiscal 2002. In the quarter ended June 30, 2002 as provided for in FAS 142, the Company performed the first of the required tests under FAS 142 with respect to its goodwill of approximately $2,000,000 related to the operations of one of its subsidiaries, Vicor Japan Company, Ltd. ("VJCL"), and has determined that there is no impairment to the carrying value of this goodwill. The Company has no other goodwill or acquired intangible assets on the balance sheet at June 30, 2002.
FORM 10-Q PART I ITEM 2 PAGE 6 VICOR CORPORATION Notes to Condensed Consolidated Financial Statements June 30, 2002 (Continued) 5. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS (CONTINUED) The following table sets forth a reconciliation of reported net income (loss) to adjusted net income (loss) (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2002 2001 2002 2001 ---- ---- ---- ---- Reported net income (loss) $(4,852) $ (953) $ (9,783) $ 1,126 Add back: goodwill amortization - 75 - 149 ------- ------ -------- ------- Adjusted net income (loss) $(4,852) $ (878) $ (9,783) $ 1,275 ======= ====== ======== ======= In June 2001, the FASB issued Statement of Financial Accounting Standards No. 143 (FAS 143) "Accounting for Asset Retirement Obligations," which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. It also applies to legal obligations associated with retirement of long-lived assets that result from the acquisition, construction, development and/or the normal operation of a long-lived asset except for certain obligations of lessees. The Company is required to adopt FAS 143 in the first quarter of 2003 and does not expect it will have a material effect on the Company's financial position or results of operations. In October 2001, the FASB issued Statement of Financial Accounting Standards No. 144 (FAS 144) "Accounting for the Impairment or Disposal of Long-Lived Assets." FAS 144 supersedes FAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and provides a single accounting model for long-lived assets to be disposed of. The Company adopted FAS 144 in the first quarter of 2002. The adoption of FAS 144 did not have a significant impact on the Company's financial statements.
FORM 10-Q PART I ITEM 2 PAGE 7 VICOR CORPORATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS JUNE 30, 2002 Except for historical information contained herein, some matters discussed in this report constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words "believes," "expects," "anticipates," "intend," "estimate," "plan," "assumes," and other similar expressions identify forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements as a result of the risk factors set forth in this report and in the Company's Annual Report on Form 10-K for the year ended December 31, 2001. Reference is made in particular to the discussions set forth below in this Report under "Management's Discussion and Analysis of Financial Condition and Results of Operations," and set forth in the Annual Report on Form 10-K under Part I, Item 1 -- "Business -- Second-Generation Automated Manufacturing Line," "--Competition," "--Patents," "--Licensing," and "--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." The risk factors contained in the Annual Report on Form 10-K may not be exhaustive. Therefore, the information contained in that Form 10-K should be read together with other reports and documents that the Company files with the Securities and Exchange Commission from time to time, including Forms 10-Q, 8-K and 10-K, which may supplement, modify, supersede or update those risk factors. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 2002 COMPARED TO THREE MONTHS ENDED JUNE 30, 2001 Net revenues for the second quarter of 2002 were $36,831,000, a decrease of $13,429,000 (26.7%) as compared to $50,260,000 for the same period a year ago. The decrease in net revenues resulted primarily from a decrease in unit shipments of standard and custom products of approximately $12,729,000 and a decrease in license revenue of $700,000. Management believes that the decrease in unit shipments and net revenues is primarily due to infrastructure over-capacity in the major electronic markets, particularly in the communications markets. As a result, demand for the Company's products suffered in 2001 and the first six months of 2002. While the Company has experienced an increase in orders in the first half of 2002 as compared with the second half of 2001, they are still significantly less than that of 2000 and the first half of 2001. There can be no assurance that these increases will continue. The book-to-bill ratio was 1.01 for the second quarter of 2002 compared to 0.75 for the same period a year ago. Gross margin for the second quarter of 2002 decreased $5,532,000 (38.9%) to $8,683,000 from $14,215,000, and decreased as a percentage of net revenues from 28.3% to 23.6%. The primary components of the decreases in gross margin dollars and percentage were the decrease in net revenues and changes in the revenue mix, principally due to the decrease in license revenue, partially offset by additional provisions for inventory reserves for potential excess raw materials taken in the second quarter of 2001. The Company continues to refine the design, processes, equipment and parts associated with second-generation products. Until the Company achieves higher production volumes for both its first- and second-generation products and attains higher yield levels and component cost reductions on second-generation products, gross margins will continue to be adversely affected.
FORM 10-Q PART I ITEM 2 PAGE 8 VICOR CORPORATION Management's Discussion and Analysis of Financial Condition and Results of Operations June 30, 2002 (continued) Selling, general and administrative expenses were $11,134,000 for the period, a decrease of $208,000 (1.8%) over the same period in 2001. As a percentage of net revenues, selling, general and administrative expenses increased to 30.2% from 22.6% primarily due to the reduction in net revenues. The principal components of the $208,000 decrease were $363,000 (27.5%) of decreased sales commission costs due to decreased product sales, $124,000 (15.2%) of decreased costs associated with the operations of VJCL, principally due to reduced compensation and transportation expenses, and $112,000 (12.2%) of decreased advertising expenses. The principal components offsetting the above decreases were an increase of $252,000 (17.7%) in legal expenses related to the Company's patent infringement actions (see Part II, Item 1 - "Legal Proceedings") and a $179,000 (4.6%) increase in compensation expense. The increase in compensation expense was primarily due to the completion in the first quarter of 2002 of the internally developed software project of the Company's new Enterprise Resource Planning System. In accordance with Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," certain costs associated with this project were capitalized and capitalization ceased upon completion. Research and development expenses decreased $204,000 (3.8%) to $5,128,000, but increased as a percentage of net revenues to 13.9% from 10.6% due to the reduction in net revenues. The principal components of the $204,000 decrease were $276,000 (46.9%) of decreased project materials costs, $110,000 (80.1%) of decreased personnel expenses, principally for employment recruiting, advertisement and relocation expenses, and a decrease of $97,000 (3.0%) of compensation expense. This was offset by $277,000 (342.0%) of increased development costs associated with the automation and test engineering groups. Approximately $524,000 of the net decrease in compensation expense was due to certain manufacturing engineering groups being transferred to operations in the third quarter of 2001 where they are included in cost of sales. This decrease was partially offset by increases in other engineering groups, in particular at the Company's Picor subsidiary, which increased by $326,000. The Company has a long-term commitment to investing in new product design and development in order to maintain and improve its competitive position. Under the Company's previously announced cost reduction plan, the Company continues to require a reduced work schedule for direct factory employees, as required by production demands, and mandatory use of certain accrued personal time by all other employees. The need for this plan is reviewed by senior management on a periodic basis. Other income (expense), net decreased $981,000 (106.9%) from the same period a year ago to ($63,000). Other income is primarily comprised of interest income derived from invested cash and cash equivalents and short-term investments, as well as a note receivable associated with the Company's real estate transaction (which was repaid in May 2002) and foreign currency transaction gains or losses. Other income (expense), net decreased due to a loss of $1,078,000 resulting from a decline in the value of the Company's investment in Scipher, plc judged to be other than temporary and a decrease in interest income of approximately $346,000 due to a decrease in average interest rates. These decreases were partially offset by an increase in foreign currency transaction gains of $418,000. The loss before income taxes was $7,642,000, an increase of $6,101,000 (395.9%) compared to the loss before taxes of $1,541,000 for the same period in 2001.
FORM 10-Q PART I ITEM 2 PAGE 9 VICOR CORPORATION Management's Discussion and Analysis of Financial Condition and Results of Operations June 30, 2002 (continued) The effective tax rate for the second quarter of 2002 was 36.5%, compared to 38.2% for the same period in 2001. Diluted loss per share was ($.11) for the second quarter of 2002, compared to ($.02) for the second quarter of 2001. SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO SIX MONTHS ENDED JUNE 30, 2001 Net revenues for the first six months of 2002 were $71,451,000, a decrease of $33,828,000 (32.1%) as compared to $105,279,000 for the same period a year ago. The decrease in net revenues resulted primarily from a decrease in unit shipments of standard and custom products of approximately $32,305,000 and a decrease in license revenue of $1,523,000. The decrease in licensing revenue was primarily due to recognition of the final amounts under the license agreement with Reltec Corporation during the first quarter of 2001. The book-to-bill ratio was 1.01 for the first six months of 2002 compared to 0.94 for the same period a year ago. Gross margin for the first half of 2002 decreased $15,185,000 (47.4%) to $16,845,000 from $32,030,000 and decreased as a percentage of net revenues from 30.4% to 23.6%. The primary components of the decreases in gross margin dollars and percentage were due to the decrease in net revenues and changes in the revenue mix, principally due to the decrease in license revenue, partially offset by additional provisions for inventory reserves for potential excess raw materials in the first half of 2001. Selling, general and administrative expenses were $21,387,000 for the period, a decrease of $269,000 (1.2%) over the same period in 2001. As a percentage of net revenues, selling, general and administrative expenses increased to 29.9% from 20.6% primarily due to the reduction in net revenues. The principal components of the $269,000 decrease were $744,000 (27.8%) of decreased sales commission costs due to decreased product sales, $403,000 (23.2%) of decreased advertising costs, $176,000 (16.3%) of decreased costs associated with the operations of the Vicor Integrated Architects ("VIAs") and $174,000 (11.5%) of decreased costs associated with the operations of VJCL, principally due to reduced compensation and transportation expenses. These were offset by a $1,349,000 (78.2%) increase in legal costs related to the Company's patent infringement actions (see Part II, Item 1 - "Legal Proceedings"). Research and development expenses decreased $550,000 (5.1%) to $10,235,000, but increased as a percentage of net revenues to 14.3% from 10.2% due to the reduction in net revenues. The principal components of the $550,000 decrease were $331,000 (5.2%) of decreased compensation expense, $320,000 (28.2%) of decreased project material costs and $250,000 (74.7%) of decreased personnel expenses, principally for employment recruiting, advertising and relocation expenses. These were offset by $478,000 (264.1%) of increased development costs associated with the automation and test engineering groups. Approximately $1,173,000 of the net decrease in compensation expense was due to certain manufacturing engineering groups being transferred to operations in the third quarter of 2001 where they are included in cost of sales. This decrease was partially offset by increases in other engineering groups, in particular at the Company's Picor subsidiary, which increased by $624,000.
FORM 10-Q PART I ITEM 2 PAGE 10 VICOR CORPORATION Management's Discussion and Analysis of Financial Condition and Results of Operations June 30, 2002 (continued) Other income (expense), net decreased $2,650,000 (131.2%) from the same period a year ago, to ($630,000). Other income is primarily comprised of interest income derived from invested cash and cash equivalents and short-term investments, as well as a note receivable associated with the Company's real estate transaction (which was repaid in May 2002) and foreign currency transaction gains or losses. The decrease in other income (expense), net was due to the write-down of obsolete equipment of $1,159,000, a loss of $1,078,000 resulting from a decline in the value of the Company's investment in Scipher, plc judged to be other than temporary and a decrease in interest income of approximately $957,000 due to a decrease in average interest rates. These decreases were partially offset by an increase in foreign currency transaction gains of $595,000. Income (loss) before income taxes was $(15,407,000), a decrease of $17,016,000 compared to the same period in 2001. The effective tax rate for the six months ended June 30, 2002 was 36.5%, compared to 30.0% for the same period in 2001. Diluted loss per share was $(0.23) for the six months ended June 30, 2002, compared to diluted income per share of $.03 for the same period in 2001. LIQUIDITY AND CAPITAL RESOURCES At June 30, 2002 the Company had $68,957,000 in cash and cash equivalents. The ratio of current assets to current liabilities was 10.5:1 at June 30, 2002 compared to 11.0:1 at December 31, 2001. Working capital decreased $3,151,000 from $153,159,000 at December 31, 2001 to $150,008,000 at June 30, 2002. The primary factors affecting the working capital decrease were a decrease in a note receivable of $7,500,000 and a decrease in inventories of $7,305,000, offset by an increase in cash of $11,476,000. The primary sources of cash were a net decrease in notes receivable of $7,461,000, $7,396,000 from operating activities and net sales of short-term investments of $2,918,000. The primary use of cash for the six months ended June 30, 2002 was for additions to property and equipment of $6,173,000. The Company's primary liquidity needs are for making continuing investments in manufacturing equipment, much of which is built internally, particularly for the Company's second-generation products. The internal construction of manufacturing machinery, in order to provide for additional manufacturing capacity, is a practice which the Company expects to continue over the next several years. The Company is in the process of completing an upgrade to second-generation products, internally designated as FastTrack, which the Company anticipates will help to increase production capacity and reduce costs. In February 2001, management approved approximately $16,000,000 in new capital expenditures to execute this plan. The Company currently estimates that it will spend approximately $12,000,000 under this plan. Through June 30, 2002, the Company has spent approximately $10,700,000 under this plan, with the remainder expected to be spent in 2002.
FORM 10-Q PART I ITEM 2 PAGE 11 VICOR CORPORATION Management's Discussion and Analysis of Financial Condition and Results of Operations June 30, 2002 (continued) In November 2000, the Board of Directors of the Company authorized the repurchase of up to $30,000,000 of the Company's Common Stock (the "November 2000 Plan"). The November 2000 Plan authorizes the Company to make such repurchases from time to time in the open market or through privately negotiated transactions. The timing of this program and the amount of the stock that may be repurchased are at the discretion of management based on its view of economic and financial market conditions. There were no stock repurchases during the six months ended June 30, 2002. Subsequent to June 30, 2002, the Company has spent approximately $580,000 for the repurchase of shares of its Common Stock. The Company believes that cash generated from operations and the total of its cash and cash equivalents, together with other sources of liquidity, will be sufficient to fund planned operations and capital equipment purchases for the foreseeable future. At June 30, 2002, the Company had approximately $740,000 of capital expenditure commitments. The Company does not consider the impact of inflation and changing prices on its business activities or fluctuations in the exchange rates for foreign currency transactions to have been significant during the last three fiscal years.
FORM 10-Q PART I ITEM 3 PAGE 12 VICOR CORPORATION June 30, 2002 ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to a variety of market risks, including changes in interest rates affecting the return on its cash and cash equivalents and short-term investments, changes in the equity price of the Company's investment in Scipher, plc, a U.K. company, and fluctuations in foreign currency exchange rates. As the Company's cash and cash equivalents consist principally of money market securities, which are short-term in nature, the Company's exposure to market risk on interest rate fluctuations for these investments is not significant. The Company's short-term investments consist mainly of corporate and government debt securities, a major portion of which have maturities of less than one year. These debt securities are all highly rated investments, in which a significant portion have interest rates reset at auction at regular intervals. As a result, the Company believes there is minimal market risk to these investments. The Company's exposure to market risk for fluctuations in foreign currency exchange rates relates primarily to the operations of VJCL, and changes in the dollar/yen exchange rate. The Company believes that this market risk is currently not material due to the relatively small size of VJCL's operations. The equity price risk for the Company's investment in Scipher, plc may be material as the market price of the stock has experienced significant fluctuations over the past several months. At June 30, 2002, the Company recorded a loss of $1,078,000 in the investment in Scipher, plc, for a decline in the value of the investment judged to be other than temporary. At June 30, 2002 the fair value of the investment was approximately $1,447,000.
FORM 10-Q PART II ITEM 1-6 PAGE 13 VICOR CORPORATION Part II - Other Information June 30, 2002 ITEM 1 - LEGAL PROCEEDINGS As previously disclosed in Vicor's Form 10-K for the fiscal year ended December 31, 2001 and Form 10-Q for the fiscal quarter ended March 31, 2002, Vicor and VLT, Inc. ("VLT"), a wholly owned subsidiary of the Company, are pursuing Reset Patent infringement claims directly against Artesyn Technologies, Lambda Electronics, Lucent Technologies, Tyco Electronics Power Systems, Inc. and Power-One in the United States District Court in Boston, Massachusetts. There can be no assurance that Vicor and VLT will ultimately prevail with respect to any of these claims or, if they prevail, as to the amount of damages that would be awarded. The Company is also in the process of enforcing its rights against other third parties that it believes are infringing the Company's intellectual property. In addition, the Company is involved in certain other litigation incidental to the conduct of its business. While the outcome of lawsuits against the Company cannot be predicted with certainty, management does not expect any current litigation against the Company to have a material adverse impact on the Company.
FORM 10-Q PART II ITEM 1-6 PAGE 14 VICOR CORPORATION Part II - Other Information June 30, 2002 (continued) ITEM 2 - CHANGES IN SECURITIES Not applicable. ITEM 3 - DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The 2002 Annual Meeting of Stockholders of the Company was held on June 27, 2002. Under the Company's charter, each share of the Company's Common Stock entitles the holder thereof to one vote per share, and each share of the Company's Class B Common Stock entitles the holder thereof to ten votes per share. All nominees of the Board of Directors of the Company were re-elected for a one year term. Votes were cast in the election of the directors as follows: NOMINEE VOTES FOR VOTES WITHHELD Patrizio Vinciarelli 133,211,097 1,240,551 Estia J. Eichten 133,898,153 553,495 Barry Kelleher 133,201,870 1,249,778 Jay M. Prager 133,203,970 1,247,678 David T. Riddiford 133,900,253 551,395 M. Michael Ansour 133,900,253 551,395 Samuel Anderson 133,900,253 551,395 There were 0 broker non-votes and 0 abstentions on this proposal. A proposal to approve the Amended and Restated 2000 Stock Option and Incentive Plan was approved by the Company's stockholders. Votes were cast for the proposal as follows: VOTES FOR VOTES AGAINST ABSTAINED 125,117,044 4,354,445 45,178 There were 4,934,981 broker non-votes on this proposal.
FORM 10-Q PART II ITEM 1-6 PAGE 15 VICOR CORPORATION Part II - Other Information June 30, 2002 (continued) ITEM 5 - OTHER INFORMATION Not applicable. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits Exhibits Description of Document 99.1 Amended and Restated 2000 Stock Option and Incentive Plan (incorporated by reference to Exhibit A to the Company's Proxy Statement for use in connection with the 2002 Annual Meeting of Stockholders, which was filed with the Securities and Exchange Commission on April 29, 2002). b. Reports on Form 8-K - None.
FORM 10-Q PART II PAGE 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. VICOR CORPORATION Date: August 13, 2002 By: /s/ Patrizio Vinciarelli ------------------------- Patrizio Vinciarelli President, Chief Executive Officer and Chairman of the Board (Principal Executive Officer) Date: August 13, 2002 By: /s/ Mark A. Glazer ------------------- Mark A. Glazer Chief Financial Officer (Principal Financial Officer)