1
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- - - --- EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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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)
------------------------------
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, 1996.
Common Stock, $.01 par value ----------------29,555,252
Class B Common Stock, $.01 par value --------12,288,309
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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
June 30, 1996 and December 31, 1995
Condensed Consolidated Statement of Income 2
for the quarters ended June 30, 1996 and 1995 and
for the six months ended June 30, 1996 and 1995
Condensed Consolidated Statement of Cash Flows 3
for the six months ended June 30, 1996 and 1995
Notes to Condensed Consolidated Financial 4-5
Statements
Item 2 - Management's Discussion and Analysis of 6-8
Financial Condition and Results of Operations
Part II - Other Information:
Item 1 - Legal Proceedings 9
Item 2 - Changes in Securities 9
Item 3 - Defaults Upon Senior Securities 9
Item 4 - Submission of Matters to a Vote of 9
Security Holders
Item 5 - Other Information 9
Item 6 - Exhibits and Reports on Form 8-K 9
Signature(s) 10
3
FORM 10-Q
PART I
ITEM 1
PAGE 1
VICOR CORPORATION
Condensed Consolidated Balance Sheet
(In thousands)
(Unaudited)
Assets June 30, 1996 December 31, 1995
- - - ------------------------------------------ --------------- ------------------
Current assets:
Cash and cash equivalents $ 61,567 $ 65,244
Accounts receivable, net 25,751 26,171
Inventories 19,364 16,685
Other current assets 3,264 3,015
-------- --------
Total current assets 109,946 111,115
Property, plant and equipment, net 53,929 51,516
Notes receivable 3,662 2,500
Other assets 2,033 1,866
-------- --------
$169,570 $166,997
======== ========
Liabilities and Stockholders' Equity
- - - ------------------------------------------
Current liabilities:
Accounts payable $ 5,074 $ 7,647
Accrued liabilities 6,819 7,568
-------- --------
Total current liabilities 11,893 15,215
Deferred income taxes 1,726 1,726
Commitments and contingencies - -
Stockholders' equity:
Preferred Stock - -
Class B Common Stock 123 123
Common Stock 326 324
Additional paid-in capital 79,120 77,793
Retained earnings 112,578 99,200
Treasury stock, at cost (36,196) (27,384)
-------- --------
Total stockholders' equity 155,951 150,056
-------- --------
$169,570 $166,997
======== ========
Note: The balance sheet at December 31, 1995 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.
4
FORM 10-Q
PART I
ITEM 1
PAGE 2
VICOR CORPORATION
Condensed Consolidated Statement of Income
(In thousands except per share data)
(Unaudited)
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30,
1996 1995 1996 1995
------- ------- ------- -------
Net revenues $36,702 $35,125 $72,508 $68,911
Costs and expenses:
Cost of sales 16,855 16,103 33,402 31,915
Selling, general and administrative 6,772 5,216 13,007 10,164
Research and development 3,306 2,927 6,748 5,488
------- ------- ------- -------
26,933 24,246 53,157 47,567
------- ------- ------- -------
Income from operations 9,769 10,879 19,351 21,344
Other income 893 1,030 1,883 1,913
------- ------- ------- -------
Income before income taxes 10,662 11,909 21,234 23,257
Provision for income taxes 3,944 4,526 7,856 8,838
------- ------- ------- -------
Net income $ 6,718 $ 7,383 $13,378 $14,419
======= ======= ======= =======
Net income per share $ 0.16 $ 0.17 $ 0.32 $ 0.34
======= ======= ======= =======
Weighted average number of common
shares and equivalents 42,567 43,350 42,437 42,928
======= ====== ====== =======
See accompanying notes.
5
FORM 10-Q
PART I
ITEM 1
PAGE 3
VICOR CORPORATION
Condensed Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
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June 30, 1996 June 30, 1995
------------- -------------
Cash flows from operating activities:
Net income $13,378 $14,419
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,082 4,059
(Gain) loss on disposal of equipment 3 (19)
Change in current assets and
liabilities, net (5,830) (6,714)
------- -------
Total adjustments (1,745) (2,674)
------- -------
Net cash provided by
operating activities 11,633 11,745
Cash flows from investing activities:
Additions to property, plant and equipment (6,445) (7,200)
Proceeds from sale of equipment 16 31
Decrease (increase) in notes receivable (1,162) -
Decrease (increase) in other assets (236) 24
------- -------
Net cash used in investing activities (7,827) (7,145)
Cash flows from financing activities:
Payments on long-term debt - (51)
Income tax benefit from stock option activity 850 2,472
Proceeds from issuance of Common Stock 479 8,058
Acquisition of treasury stock (8,812) -
------- -------
Net cash provided by (used in) financing
activities (7,483) 10,479
------- -------
Net (decrease) increase in cash and cash equivalents (3,677) 15,079
Cash and cash equivalents at beginning of period 65,244 43,201
------- -------
Cash and cash equivalents at end of period $61,567 $58,280
======= =======
See accompanying notes.
6
FORM 10-Q
PART I
ITEM 1
PAGE 4
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 1996
(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, 1996 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1996. 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, 1995, 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.
3. Inventories
-----------
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 (in thousands), as of June 30,
1996 and December 31, 1995:
June 30, 1996 December 31, 1995
------------- -------------------
Raw materials .......................... $11,100 $10,396
Work-in-process ........................ 2,665 2,754
Finished goods ......................... 5,575 3,421
Unbilled costs ......................... 24 114
------- -------
$19,364 $16,685
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FORM 10-Q
PART I
ITEM 2
PAGE 5
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
(continued)
4. Adoption of New Accounting Pronouncements
-----------------------------------------
The Company has adopted Statement of Financial Accounting Standards No. 121
("SFAS 121"), Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, which requires impairment losses to be
recorded on the long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amount. SFAS
121 also addresses the accounting for long-lived assets that are expected
to be disposed of. The adoption of SFAS 121 has no impact on the financial
position or results of operations of the Company as no indicators of
impairment currently exist.
The Company has adopted the disclosure provisions of Financial Accounting
Standards No. 123 ("SFAS 123"), Accounting and Disclosure of Stock-Based
Compensation. The Company will continue to account for its stock-based
compensation arrangements under the provisions of APB 25, Accounting for
Stock Issued to Employees.
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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
June 30, 1996
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, 1995. 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
- - - ---------------------
Quarter ended June 30, 1996, compared to quarter ended June 30, 1995
- - - --------------------------------------------------------------------
Net revenues for the second quarter of 1996 were $36,702,000, an increase of
$1,577,000 (4.5%) as compared to $35,125,000 for the same period a year ago. The
increase in net revenues was primarily due to an increase of unit shipments of
standard products.
Gross margin increased $825,000 (4.3%) to $19,847,000 from $19,022,000, but
decreased slightly as a percentage of net revenues from 54.2% to 54.1%,
primarily due to changes in the revenue mix.
Selling, general and administrative expenses were $6,772,000 for the period, an
increase of $1,556,000 (29.8%) over the same period in 1995. As a percentage of
net revenues, selling, general and administrative expenses increased to 18.5%
compared to 14.8% in 1995. The principal components of the $1,556,000 increase
were $377,000 (18.3%) of increased compensation expense due to growth in
staffing levels of selling and administrative personnel, primarily in the
international sales offices; $296,000 (200.1%) of VIA related expense (see the
discussion under "Liquidity and Capital Resources"); $229,000 (365.6%) of other
international sales office expenses; $147,000 (339.8%) of increased legal
expenses; and $102,000 (10.8%) of increased sales commission expense.
Research and development expenses increased $379,000 (12.9%) to $3,306,000 and
increased as a percentage of net revenues to 9.0% from 8.3%. The principal
component of the $379,000 increase was $346,000 (21.7%) of increased
compensation expense due to growth in staffing levels of engineering personnel.
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 decreased $137,000 (13.3%) from the same period a year ago, to
$893,000. 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. This decrease primarily reflects a decrease in the market
interest rates during the quarter as compared to the prior year.
Income before income taxes was $10,662,000, a decrease of $1,247,000 (10.5%)
compared to the same period in 1995. As a percentage of net revenues, income
before income taxes decreased from 33.9% to 29.1% primarily due to the increase
in operating expenses related to the Company's continued investment in
international expansion and VIA related expenses.
9
PART I
ITEM 2
PAGE 7
VICOR CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
June 30, 1996
(continued)
Net income per share for the second quarter of 1996 was $.16, compared to $.17
for the second quarter of 1995, a decrease of $.01 (5.9%).
Six months ended June 30, 1996, compared to six months ended June 30, 1995
- - - --------------------------------------------------------------------------
Net revenues for the first six months of 1996 were $72,508,000, an increase of
$3,597,000 (5.2%) as compared to $68,911,000 for the same period a year ago. The
increase in net revenues was primarily due to an increase of unit shipments of
standard products.
Gross margin increased $2,110,000 (5.7%) to $39,106,000 from $36,996,000, and
increased as a percentage of net revenues to 53.9% from 53.7%. The increase in
gross margin resulted primarily from changes in the revenue mix.
Selling, general and administrative expenses were $13,007,000 for the period, an
increase of $2,843,000 (28.0%) over the same period in 1995. As a percentage of
net revenues, selling, general and administrative expenses increased to 17.9%
compared to 14.7% in 1995. The principal components of the $2,843,000 increase
were $812,000 (20.4%) of compensation expense due to growth in staffing levels
of selling and administrative personnel, primarily in the international sales
offices; $648,000 (380.2%) of VIA related expense; $446,000 (379.1%) of other
international sales office expenses; and $214,000 (136.6%) of increased legal
expenses.
Research and development expenses increased $1,260,000 (23.0%) to $6,748,000 and
increased as a percentage of net revenues to 9.3% from 8.0%. The principal
components of the $1,260,000 increase were $678,000 (21.7%) of compensation
expense due to growth in staffing levels of engineering personnel; VIA related
research and development costs of $180,000 (100.0%); and increased project
material costs of $180,000 (18.3%).
Other income decreased $30,000 (1.6%) to $1,883,000. 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.
Income before income taxes was $21,234,000, a decrease of $2,023,000 (8.7%)
compared to the same period in 1995. As a percentage of net revenues, income
before income taxes decreased from 33.7% to 29.3% primarily due to the increase
in operating expenses related to the Company's continued investment in
international expansion and VIA related expenses.
Net income per share for the first six months of 1996 was $.32, compared to $.34
for the first six months of 1995, a decrease of $.02 (5.9%).
Liquidity and Capital Resources
- - - -------------------------------
At June 30, 1996 the Company had $61,567,000 in cash and cash equivalents. The
ratio of current assets to current liabilities was 9.2:1 compared to 7.3:1 at
December 31, 1995. Working capital increased $2,153,000, from $95,900,000 at
December 31, 1995 to $98,053,000 at June 30, 1996. The principal component of
the working capital increase was an increase in inventory of $2,679,000 during
the first six months of 1996. The primary use of cash for the first six months
of 1996, was for the acquisition of treasury stock of $8,812,000.
10
PART I
ITEM 2
PAGE 8
VICOR CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
June 30, 1996
(continued)
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. All machinery and equipment, whether purchased externally or
built internally, are depreciated or amortized over five years after being
placed into service.
On June 27, 1996, the Company announced that it intends to begin introducing
selected models of its next-generation 700, 800 and 900 Series product families
for sale on September 3, 1996 and that it is planning a general introduction of
the three product families in the fall of 1996. The Company also announced
certain expected technical characteristics of the models to be introduced and
described an interactive computer-aided design tool that the Company is creating
to assist customers. In 1995, the Company had announced that it had started
prototype production on a new automated manufacturing line designed to
manufacture next-generation products. While management believes that the new
manufacturing line and the anticipated 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 introduction
of the products, require modification of product specifications or prevent
attainment of the anticipated capacity of the new manufacturing line.
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. The Company spent $8,812,000 in the repurchase of its Common
Stock in the quarter ended March 31, 1996. There were no repurchases in the
quarter ended June 30, 1996.
In 1995, the Company established a number of Vicor Integration Architects
(VIAs), which are majority owned companies that seek to provide customers with
local design and manufacturing support for turnkey custom power solutions.
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 June
30, 1996, the Company had approximately $1,500,000 of capital expenditure
commitments.
The Company does not consider the impact of inflation on its business activities
to have been significant to date.
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FORM 10-Q
PART II
ITEM 1-6
PAGE 9
VICOR CORPORATION
Part II - Other Information
June 30, 1996
Item 1 - Legal Proceedings
- - - --------------------------
The Company is involved in certain litigation incidental to the conduct of
its business. While the outcome of lawsuits against the Company cannot be
predicted with certainty, management does not expect any current litigation
to have a material adverse impact on the Company.
Item 2 - Changes in Securities
- - - ------------------------------
Not applicable.
Item 3 - Defaults Upon Senior Securities
- - - ----------------------------------------
Not applicable.
Item 4 - Submission of Matters to a Vote of Security-Holders
- - - ------------------------------------------------------------
The Annual Meeting of Stockholders of the Company was held on June 27,
1996. All nominees of the Board of Directors of the Company were re-elected
for a one year term. Votes were cast in the election of the directors as
follows:
Nominee Votes for Votes Withheld
------- --------- --------------
Patrizio Vinciarelli 143,863,572 167,867
Richard E. Beede 143,863,572 167,867
Estia J. Eichten 143,863,572 167,867
Jay M. Prager 143,863,572 167,867
David T. Riddiford 143,863,572 167,867
M. Michael Ansour 143,863,572 167,867
Item 5 - Other Information
- - - --------------------------
Not applicable.
Item 6 - Exhibits and Reports on Form 8-K
- - - -----------------------------------------
a. Reports on Form 8-K - none.
12
FORM 10-Q
PART II
PAGE 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VICOR CORPORATION
Date: August 8, 1996 By: /s/ Patrizio Vinciarelli
------------------------
Patrizio Vinciarelli
President and Chairman
of the Board
Date: August 8, 1996 By: /s/ Mark A. Glazer
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Mark A. Glazer
Vice President of Finance
and Administration
5
0000751978
VICOR CORP
1,000
6-MOS
DEC-31-1996
JAN-01-1996
JUN-30-1996
61,567
0
25,751
0
19,364
109,946
91,658
37,729
169,570
11,893
0
449
0
0
155,502
169,570
72,508
72,508
33,402
33,402
0
0
0
21,234
7,856
13,378
0
0
0
13,378
.32
.32
