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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For the transition period from
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Commission File Number 0-18277
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VICOR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 04-2742817
(State of Incorporation) (IRS Employer Identification Number)
23 Frontage Road, Andover, Massachusetts 01810
(Address of registrant's principal executive office)
(508) 470-2900
(Registrant's telephone number)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of March 31, 1997.
Common Stock, $.01 par value ----------------30,296,240
Class B Common Stock, $.01 par value --------12,247,309
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2
VICOR CORPORATION
INDEX TO FORM 10-Q
Page
----
Part I - Financial Information:
Item 1 - Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet at 1
March 31, 1997 and December 31, 1996
Condensed Consolidated Statement of Income 2
for the three months ended March 31, 1997 and 1996
Condensed Consolidated Statement of Cash Flows 3
for the three months ended March 31, 1997 and 1996
Notes to Condensed Consolidated Financial 4
Statements
Item 2 - Management's Discussion and Analysis of 5-6
Financial Condition and Results of Operations
Part II - Other Information:
Item 1 - Legal Proceedings 7
Item 2 - Changes in Securities 7
Item 3 - Defaults Upon Senior Securities 7
Item 4 - Submission of Matters to a Vote of 7
Security Holders
Item 5 - Other Information 7
Item 6 - Exhibits and Reports on Form 8-K 7
Signature(s) 8
3
FORM 10-Q
PART I
ITEM 1
PAGE 1
VICOR CORPORATION
Condensed Consolidated Balance Sheet
(In thousands)
(Unaudited)
Assets March 31, 1997 December 31, 1996
- -------------------------------------------- ---------------- ------------------
Current assets:
Cash and cash equivalents $ 82,097 $ 73,647
Accounts receivable, net 28,125 25,001
Inventories 19,869 21,129
Other current assets 2,829 2,765
-------- --------
Total current assets 132,920 122,542
Property, plant and equipment, net 59,509 57,613
Notes receivable 3,939 3,795
Other assets 2,516 2,493
-------- --------
$198,884 $186,443
======== ========
Liabilities and Stockholders' Equity
- --------------------------------------------
Current liabilities:
Accounts payable $ 5,244 $ 5,558
Accrued liabilities 9,374 8,433
-------- --------
Total current liabilities 14,618 13,991
Deferred income taxes 1,708 1,708
Stockholders' equity:
Preferred Stock - -
Class B Common Stock 122 123
Common Stock 336 331
Additional paid-in capital 91,676 85,842
Retained earnings 130,815 124,839
Treasury stock, at cost (40,391) (40,391)
-------- --------
Total stockholders' equity 182,558 170,744
-------- --------
$198,884 $186,443
======== ========
Note: The balance sheet at December 31, 1996 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.
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FORM 10-Q
PART I
ITEM 1
PAGE 2
VICOR CORPORATION
Condensed Consolidated Statement of Income
(In thousands except per share data)
(Unaudited)
Three Months Ended
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March 31, 1997 March 31, 1996
-------------- --------------
Net revenues $37,939 $35,806
Costs and expenses:
Cost of revenue 17,877 16,547
Selling, general and administrative 7,447 6,235
Research and development 4,379 3,442
------- -------
29,703 26,224
------- -------
Income from operations 8,236 9,582
Other income 1,102 990
------- -------
Income before income taxes 9,338 10,572
Provision for income taxes 3,362 3,912
------- -------
Net income $ 5,976 $ 6,660
======= =======
Net income per common share $ .14 $ .16
======= =======
Weighted average number of common
shares and equivalents 42,987 42,781
======= =======
See accompanying notes.
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FORM 10-Q
PART I
ITEM 1
PAGE 3
VICOR CORPORATION
Condensed Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended
--------------------------------
March 31, 1997 March 31, 1996
-------------- --------------
Operating activities:
Net income $ 5,976 $ 6,660
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,170 2,024
Gain on disposal of equipment (1) -
Change in current assets and
liabilities, net (1,301) (2,272)
------- -------
Net cash provided by operating activities 6,844 6,412
Investing activities:
Additions to property, plant and equipment (4,000) (3,196)
Increase in notes receivable (144) -
Increase in other assets (88) (1,070)
------- -------
Net cash used in investing activities (4,232) (4,266)
Financing activities:
Tax benefit relating to stock option plans 269 100
Proceeds from issuance of Common Stock 5,569 251
Acquisitions of treasury stock - (8,812)
------- -------
Net cash provided by (used in) financing
activities 5,838 (8,461)
------- -------
Net increase (decrease) in cash and cash equivalents 8,450 (6,315)
Cash and cash equivalents at beginning of period 73,647 65,244
------- -------
Cash and cash equivalents at end of period $ 82,097 $ 58,929
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See accompanying notes.
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FORM 10-Q
PART I
ITEM 1
PAGE 4
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
March 31, 1997
(Unaudited)
1. Basis of Presentation
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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 month
period ended March 31, 1997 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1997. 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, 1996, contained in the
Company's annual report filed on Form 10-K (File #0-18277) with the
Securities and Exchange Commission.
2. Net Income per Share
--------------------
Net income per common share is based on the weighted average number of
shares of common shares and common share equivalents.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share," which is effective for the
Company on December 31, 1997. At that time, the Company will be
required to change the method currently used to compute earnings per
share and to restate all prior periods. Under the new requirements for
calculating primary earnings per share, the dilutive effect of stock
options will be excluded. There is not expected to be any change to
either primary or fully diluted net income per share for the quarters
ended March 31, 1997 and 1996 as a result of the new method.
3. Inventories
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Inventories are valued at the lower of cost (determined using the
first-in, first-out method) or market. Costs associated with the
long-term contract for the sale of automated manufacturing line
equipment are included in inventories reduced by amounts identified
with revenues recognized under the contract. Inventories were as
follows as of March 31, 1997 and December 31, 1996 (in thousands):
March 31, 1997 December 31, 1996
-------------- -----------------
Raw materials ................ $11,408 $12,627
Work-in-process .............. 3,388 2,290
Finished goods ............... 5,073 6,212
Unbilled costs ............... - -
------- -------
$19,869 $21,129
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FORM 10-Q
PART I
ITEM 2
PAGE 5
VICOR CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
March 31, 1997
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. 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, 1996. Reference is made in particular to the
discussions set forth below in this Report under "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and set forth in the
Annual Report on Form 10-K under Item 1 -- "Business -- Next-Generation
Automated Manufacturing Line," "--Competition," "--Patents," and "--Licensing,"
and under Item 7 -- "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
Results of Operations
- ---------------------
Three months ended March 31, 1997, compared to three months ended March 31, 1996
- --------------------------------------------------------------------------------
Net revenues for the first quarter of 1997 were $37,939,000, an increase of
$2,133,000 (6.0%) as compared to $35,806,000 for the same period a year ago.
Approximately $1,165,000 (54.6%) of this increase in net revenues was due to an
increase in unit shipments of custom products. The balance of the increase was
primarily due to an increase in revenue recognized under the Company's long-term
contract for the sale of automated manufacturing line equipment.
Gross margin increased $803,000 (4.2%) from $19,259,000 to $20,062,000, but
decreased as a percentage of net revenues from 53.8% to 52.9%. The primary
components of the increase in gross margin were changes in the revenue mix.
Selling, general and administrative expenses were $7,447,000 for the period, an
increase of $1,212,000 (19.4%) over the same period in 1996. As a percentage of
net revenues, selling, general and administrative expenses increased to 19.6%
compared to 17.4% in 1996. The principal components of the $1,212,000 increase
were $468,000 (19.9%) of increased compensation expense due to growth in
staffing levels of selling and administrative personnel; $334,000 (52.2%) of
advertising expenses; $117,000 (61.7%) of legal expenses and $100,000 (26.7%) of
increased Vicor Integration Architects ("VIAs") related expense.
Research and development expenses increased $937,000 (27.2%) to $4,379,000 and
increased as a percentage of net revenues to 11.5% from 9.6%. The principal
components of the $937,000 increase were $566,000 (30.5%) of increased
compensation expense due to growth in staffing levels of engineering personnel;
$118,000 (148.4%) of VIA related expense, and increased project materials costs
of $115,000 (17.0%). The Company continues work on its next-generation products.
The Company does not expect revenues or earnings from this new product family to
be material over the next several quarters. See also the discussion under
"Liquidity and Capital Resources."
Other income increased $112,000 (11.3%) from the same period a year ago, to
$1,102,000. Other income is primarily comprised of interest income derived from
cash and cash equivalents, short-term investments, and notes receivable
associated with the Company's real estate transactions in Andover,
Massachusetts. Interest income increased primarily due to an increase in cash
balances earning interest.
Income before income taxes was $9,338,000, a decrease of $1,234,000 (11.7%)
compared to the same period in 1996. As a percentage of net revenues, income
before income taxes decreased from 29.5% to 24.6% primarily due to the increase
in operating expenses related to the Company's continued investments in research
and development, and in certain selling, general and administrative expenses as
discussed above.
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FORM 10-Q
PART I
ITEM 2
PAGE 6
VICOR CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
March 31, 1997
(continued)
Net income per share for the first quarter of 1997 was $.14, compared to $.16
for the first quarter of 1996, a decrease of $.02 (12.5%).
Liquidity and Capital Resources
- -------------------------------
At March 31, 1997 the Company had $82,097,000 in cash and cash equivalents. The
ratio of current assets to current liabilities was 9.1:1 compared to 8.8:1 at
December 31, 1996. Working capital increased $9,751,000, from $108,551,000 at
December 31, 1996 to $118,302,000 at March 31, 1997. The primary factor
affecting the working capital increase was an increase in cash of $8,450,000
during the first three months of 1997. The increase in cash was primarily
attributable to cash derived from operating activities of $6,844,000; the net
proceeds from the issuance of Common Stock upon the exercise of stock options,
and the related income tax benefit derived from such issuance, of $5,838,000.
The primary use of cash for the first three months of 1997 was for additions to
property and equipment of $4,000,000.
The Company plans to make continuing investments in manufacturing equipment,
much of which is built internally. The internal construction of manufacturing
machinery is a practice which the Company expects to follow over the next
several years.
In 1995, the Company announced that it had started prototype production on a new
automated manufacturing line specifically designed to manufacture
next-generation products. In the fourth quarter of 1996, the Company began
introducing selected models of its next-generation product families. While
management believes that the initiation of limited production on the new
manufacturing line and the introduction of selected models of its
next-generation product families are important milestones, there can be no
assurance that problems will not substantially delay the ultimate general
introduction of the complete product line, require modification of product
specifications, or prevent attainment of the anticipated capacity of the new
manufacturing line. Significant revenues from the sale of any products in the
Company's next-generation product line are not expected to occur for several
quarters.
In February, 1996, the Board of Directors of the Company authorized the
repurchase of the Company's Common Stock up to an aggregate amount of
approximately $19,500,000, including amounts remaining under a prior
authorization. The plan authorized the Company to make such repurchases from
time to time in the open market or through privately negotiated transactions.
The timing of this program and the amount of the stock that may be repurchased
is at the discretion of management based on its view of economic and financial
market conditions. There were no repurchases in the quarter ended March 31,
1997.
The Company has an unused line of credit with a bank under which the Company may
borrow up to $4,000,000 on a revolving credit basis. 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 March
31, 1997, the Company had approximately $700,000 of capital expenditure
commitments.
The Company does not consider the impact of inflation on its business activities
or fluctuations in the exchange rates for foreign currency transactions to have
been significant to date.
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FORM 10-Q
PART II
ITEM 1-6
PAGE 7
VICOR CORPORATION
Part II - Other Information
March 31, 1997
Item 1 - Legal Proceedings
- --------------------------
On October 17, 1996, the Company filed a complaint in Munich District
Court, Federal Republic of Germany, citing Nemic-Lambda of Japan and
Lambda Electronics GmbH for infringement of Vicor's German "reset"
patent. Vicor seeks injunctive relief and damages.
The Company is involved in other certain litigation incidental to the
conduct of its business. While the outcome of lawsuits against the
Company cannot be predicted with certainty, management does not expect
any current litigation to have a material adverse impact on the
Company.
Item 2 - Changes in Securities
- ------------------------------
Not applicable.
Item 3 - Defaults Upon Senior Securities
- ----------------------------------------
Not applicable.
Item 4 - Submission of Matters to a Vote of Security-Holders
- ------------------------------------------------------------
Not applicable.
Item 5 - Other Information
- --------------------------
Not applicable.
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
a. Reports on Form 8-K - none.
10
FORM 10-Q
PART II
PAGE 8
SIGNATURES
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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 9,1997 By: /s/ Patrizio Vinciarelli
-------------------------
Patrizio Vinciarelli
President and Chairman
of the Board
Date: May 9,1997 By: /s/ Mark A. Glazer
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Mark A. Glazer
Vice President of Finance
and Administration
5
0000751978
VICOR CORPORATION
1,000
3-MOS
DEC-31-1997
JAN-01-1997
MAR-31-1997
82,097
0
28,125
0
19,869
132,920
103,400
43,891
198,884
14,618
0
0
0
458
182,100
198,884
37,939
37,939
17,877
17,877
0
0
0
9,338
3,362
5,976
0
0
0
5,976
.14
.14
