e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2005
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from
Commission File Number 0-18277
VICOR CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware
(State of Incorporation)
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04-2742817
(IRS Employer Identification Number) |
25 Frontage Road, Andover, Massachusetts 01810
(Address of registrants principal executive office)
(978) 470-2900
(Registrants 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 þ No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2
of the Exchange Act). Yes þ No o
Indicate the number of shares outstanding of each of the issuers classes of common stock as of
June 30, 2005.
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Common Stock, $.01 par value
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29,966,100 |
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Class B Common Stock, $.01 par value
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11,866,952 |
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VICOR CORPORATION
INDEX TO FORM 10-Q
FORM 10-Q
PART 1
ITEM 1
PAGE 1
Item 1
Financial Statements
VICOR CORPORATION
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
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June 30, 2005 |
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December 31, 2004 |
Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
55,423 |
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$ |
36,277 |
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Short-term investments |
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64,282 |
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77,371 |
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Accounts receivable, net |
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26,285 |
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23,359 |
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Inventories, net |
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20,763 |
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26,229 |
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Deferred tax assets |
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2,497 |
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2,497 |
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Other current assets |
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3,112 |
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2,245 |
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Total current assets |
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172,362 |
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167,978 |
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Property, plant and equipment, net |
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61,129 |
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67,001 |
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Other assets |
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10,136 |
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9,903 |
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$ |
243,627 |
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$ |
244,882 |
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Liabilities and Stockholders Equity |
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Current liabilities: |
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Accounts payable |
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$ |
6,723 |
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$ |
5,806 |
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Accrued compensation and benefits |
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4,577 |
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4,265 |
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Accrued expenses |
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2,462 |
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2,815 |
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Dividend payable |
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5,020 |
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Income taxes payable |
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6,323 |
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6,367 |
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Deferred revenue |
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309 |
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306 |
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Total current liabilities |
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25,414 |
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19,559 |
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Deferred income taxes |
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3,113 |
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3,173 |
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Minority interests |
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1,848 |
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1,527 |
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Stockholders equity: |
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Preferred Stock |
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Class B Common Stock |
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119 |
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119 |
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Common Stock |
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374 |
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373 |
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Additional paid-in capital |
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149,704 |
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148,821 |
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Retained earnings |
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171,877 |
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176,769 |
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Accumulated other comprehensive loss |
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(97 |
) |
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(11 |
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Treasury stock, at cost |
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(108,725 |
) |
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(105,448 |
) |
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Total stockholders equity |
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213,252 |
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220,623 |
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$ |
243,627 |
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$ |
244,882 |
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See accompanying notes.
FORM 10-Q
PART I
ITEM 1
PAGE 2
VICOR CORPORATION
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2005 |
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2004 |
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2005 |
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2004 |
Net revenues: |
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Product |
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$ |
44,579 |
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$ |
45,374 |
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$ |
87,759 |
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$ |
87,520 |
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License |
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375 |
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44,579 |
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45,374 |
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87,759 |
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87,895 |
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Cost of revenues |
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29,000 |
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27,994 |
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55,135 |
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55,515 |
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Gross margin |
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15,579 |
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17,380 |
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32,624 |
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32,380 |
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Operating expenses: |
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Selling, general and administrative |
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10,137 |
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10,607 |
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20,241 |
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20,785 |
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Research and development |
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7,380 |
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6,505 |
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14,476 |
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12,448 |
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Gain from litigation-related
settlement, net |
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(2,250 |
) |
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(2,250 |
) |
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Total operating expenses |
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15,267 |
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17,112 |
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32,467 |
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33,233 |
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Income (loss) from operations |
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312 |
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268 |
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157 |
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(853 |
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Other income (expense), net |
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183 |
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94 |
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677 |
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309 |
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Income (loss) before income taxes |
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495 |
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362 |
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834 |
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(544 |
) |
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Provision for income taxes |
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406 |
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301 |
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706 |
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585 |
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Net income (loss) |
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$ |
89 |
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$ |
61 |
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$ |
128 |
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$ |
(1,129 |
) |
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Net income (loss) per common share: |
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Basic |
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$ |
0.00 |
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$ |
0.00 |
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$ |
0.00 |
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$ |
(0.03 |
) |
Diluted |
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$ |
0.00 |
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$ |
0.00 |
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$ |
0.00 |
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$ |
(0.03 |
) |
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Shares used to compute
net income (loss) per share: |
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Basic |
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41,795 |
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42,049 |
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41,888 |
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41,983 |
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Diluted |
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41,938 |
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42,344 |
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42,027 |
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41,983 |
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See accompanying notes.
FORM 10-Q
PART I
ITEM 1
PAGE 3
VICOR CORPORATION
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
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Six Months Ended |
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June 30, 2005 |
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June 30, 2004 |
Operating activities: |
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Net income (loss) |
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$ |
128 |
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$ |
(1,129 |
) |
Adjustments to reconcile net income (loss) to net
cash provided by operating activities: |
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Depreciation and amortization |
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8,652 |
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10,648 |
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Amortization of bond premium |
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332 |
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538 |
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Minority interest in net income of subsidiaries |
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321 |
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396 |
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Other than temporary decline in investment |
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27 |
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Loss on disposal of equipment |
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12 |
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5 |
|
Change in current assets and liabilities, net |
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2,309 |
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|
521 |
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Net cash provided by operating activities |
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11,754 |
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|
11,006 |
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Investing activities: |
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Purchases of short-term investments |
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(27,851 |
) |
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(45,265 |
) |
Sales and maturities of short-term investments |
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40,581 |
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36,419 |
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Additions to property, plant and equipment |
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(2,613 |
) |
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(2,244 |
) |
Increase in other assets |
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(432 |
) |
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(1,188 |
) |
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Net cash provided by (used in) investing
activities |
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9,685 |
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(12,278 |
) |
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Financing activities: |
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Proceeds from issuance of Common Stock |
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884 |
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2,065 |
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Acquisitions of treasury stock |
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(3,277 |
) |
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Net cash (used in) provided by financing
activities |
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(2,393 |
) |
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2,065 |
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Effect of foreign exchange rates on cash |
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100 |
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11 |
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Net increase in cash and cash equivalents |
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19,146 |
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|
804 |
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Cash and cash equivalents at beginning of period |
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36,277 |
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41,723 |
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Cash and cash equivalents at end of period |
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$ |
55,423 |
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$ |
42,527 |
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See accompanying notes.
FORM 10-Q
PART I
ITEM 1
PAGE 4
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2005
(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 normal recurring adjustments)
considered necessary for a fair presentation have been included. Operating results for the
three and six months ended June 30, 2005 are not necessarily indicative of the results that
may be expected for any other interim period or the year ending December 31, 2005. The
balance sheet at December 31, 2004 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 included in
the Companys audited financial statements for the year ended December 31, 2004, contained
in the Companys annual report filed on Form 10-K (File No. 0-18277) with the Securities
and Exchange Commission.
FORM 10-Q
PART I
ITEM 1
PAGE 5
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements (Continued)
June 30, 2005
(Unaudited)
2. Stock-Based Compensation
The Company uses the intrinsic value method in accounting for its employee stock options in
accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB 25) and related interpretations, as permitted under FASB Statement No. 123,
Accounting for Stock-Based Compensation (FAS 123) and FASB Statement No. 148, Accounting
for Stock-Based Compensation Transition and Disclosure (FAS 148). Under APB 25, because
the exercise price of the Companys employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized. For purposes
of pro forma disclosures, the estimated fair value of the options is amortized over the
options vesting period. Had expense been recognized using the fair value method described
in FAS 123, using the Black-Scholes option pricing model, the following pro forma results of
operations would have been reported (in thousands except for per share information):
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Three Months Ended |
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Six Months Ended |
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|
June 30, |
|
June 30, |
|
|
2005 |
|
2004 |
|
2005 |
|
2004 |
Net income (loss) as reported |
|
$ |
89 |
|
|
$ |
61 |
|
|
$ |
128 |
|
|
$ |
(1,129 |
) |
Stock-based employee compensation cost,
net of related tax effects |
|
|
(195 |
) |
|
|
(403 |
) |
|
|
(427 |
) |
|
|
(894 |
) |
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Pro forma net loss |
|
$ |
(106 |
) |
|
$ |
(342 |
) |
|
$ |
(299 |
) |
|
$ |
(2,023 |
) |
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Net income (loss) per share, as reported: |
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
$ |
(0.03 |
) |
Diluted |
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
$ |
(0.03 |
) |
|
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Pro forma net loss per share: |
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|
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|
|
|
|
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|
|
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|
|
Basic |
|
$ |
(0.00 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.05 |
) |
Diluted |
|
$ |
(0.00 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.05 |
) |
FORM 10-Q
PART I
ITEM 1
PAGE 6
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements (Continued)
June 30, 2005
(Unaudited)
2. Stock-Based Compensation (Continued)
Pro forma information regarding net income (loss) and net income (loss) per share is
required by FAS 123, which also requires that the information be determined as if the
Company had accounted for its employee stock options granted subsequent to December 31, 1994
under the fair value method described in FAS 123. The fair value for these options was
estimated at the date of grant using a Black-Scholes option pricing model with the following
weighted-average assumptions:
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|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2005 |
|
2004 |
|
2005 |
|
2004 |
Risk-free interest rate |
|
|
3.8 |
% |
|
|
3.5 |
% |
|
|
3.8 |
% |
|
|
3.3 |
% |
Expected dividend |
|
|
.12 |
|
|
|
|
|
|
|
.08 |
|
|
|
|
|
Expected volatility |
|
|
.65 |
|
|
|
.68 |
|
|
|
.65 |
|
|
|
.68 |
|
Expected lives |
|
3.3 years |
|
3.5 years |
|
3.8 years |
|
3.8 years |
The Black-Scholes option valuation model was developed for use in estimating the fair value
of traded options which have no vesting restrictions and are fully transferable. In
addition, option valuation models require the input of subjective assumptions including the
expected stock price volatility. Because the Companys employee stock options have
characteristics different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in managements
opinion, the existing models do not necessarily provide a reliable single measure of the
fair values of its employee stock options.
FORM 10-Q
PART I
ITEM 1
PAGE 7
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements (Continued)
June 30, 2005
(Unaudited)
3. 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, |
|
|
2005 |
|
2004 |
|
2005 |
|
2004 |
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
89 |
|
|
$ |
61 |
|
|
$ |
128 |
|
|
$ |
(1,129 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic income (loss)
per share-weighted average shares |
|
|
41,795 |
|
|
|
42,049 |
|
|
|
41,888 |
|
|
|
41,983 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee stock options |
|
|
143 |
|
|
|
295 |
|
|
|
139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted income (loss) per
share adjusted weighted-average shares
and assumed conversions |
|
|
41,938 |
|
|
|
42,344 |
|
|
|
42,027 |
|
|
|
41,983 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share |
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
$ |
(0.03 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) per share |
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
$ |
(0.03 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The effect of outstanding stock options has been excluded from the calculation of diluted
income (loss) per share for the six months ended June 30, 2004, as the effect would be
anti-dilutive.
4. Inventories
Inventories are valued at the lower of cost (determined using the first-in, first-out
method) or market. The Company provides reserves for inventories estimated to be excess,
obsolete or unmarketable. The Companys estimation process for such reserves is based upon
its known backlog, projected future demand and expected market conditions. If sales for
the Companys products were to decline, the Companys estimation process may cause larger
inventory reserves to be recorded, resulting in larger charges to cost of revenues.
Inventories were as follows as of June 30, 2005 and December 31, 2004 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30, 2005 |
|
December 31, 2004 |
Raw materials |
|
$ |
24,697 |
|
|
$ |
27,212 |
|
Work-in-process |
|
|
2,393 |
|
|
|
2,568 |
|
Finished goods |
|
|
4,224 |
|
|
|
4,293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
31,314 |
|
|
|
34,073 |
|
Inventory reserves |
|
|
(10,551 |
) |
|
|
(7,844 |
) |
|
|
|
|
|
|
|
|
|
Net balance |
|
$ |
20,763 |
|
|
$ |
26,229 |
|
|
|
|
|
|
|
|
|
|
FORM 10-Q
PART I
ITEM 1
PAGE 8
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements (Continued)
June 30, 2005
(Unaudited)
4. Inventories (Continued)
During the second quarter of 2005, the Company provided additional reserves of
approximately $1,600,000 for potential obsolete inventory arising primarily from the
European Union Restriction of Hazardous Substances (RoHS) initiative and the conversion
of second-generation products to the FasTrak platform. In addition, the Company identified
other slow-moving and potential obsolete inventory of approximately $1,200,000, of which
$300,000 related to raw material inventories in support of pilot
production of V I
Chips.
5. Product Warranties
The Company generally offers a two-year warranty for all of its products. The Company
provides for the estimated cost of product warranties at the time product revenue is
recognized. Factors that affect the Companys warranty reserves include the number of
units sold, historical and anticipated rates of warranty returns and the cost per return.
The Company periodically assesses the adequacy of the warranty reserves and adjusts the
amounts as necessary. Warranty obligations are included in accrued expenses in the
accompanying condensed consolidated balance sheets.
Product warranty activity for the six months ended June 30, 2005 was as follows (in
thousands):
|
|
|
|
|
Balance as of December 31, 2004 |
|
$ |
1,042 |
|
Accruals for warranties for products sold in the period |
|
|
94 |
|
Fulfillment of warranty obligations |
|
|
(118 |
) |
Revisions of estimated obligations |
|
|
(200 |
) |
|
|
|
|
|
Balance as of June 30, 2005 |
|
$ |
818 |
|
|
|
|
|
|
6. Income Taxes
Tax provisions in 2005 and 2004 have been provided for estimated income taxes due in various
state and international taxing jurisdictions for which losses incurred by the Company cannot
be offset, for federal and state taxes for certain minority-owned subsidiaries that are not
part of the Companys consolidated income tax returns, and for the Federal alternative
minimum tax.
The Company operates in numerous taxing jurisdictions and is, therefore, subject to a
variety of income and related taxes. The Company has provided for potential tax liabilities
due in various jurisdictions which it judges to be probable and reasonably estimable in
accordance with Statement of Financial Accounting Standards No. 5 Accounting for
Contingencies. Judgment is required in determining the income tax expense and related tax
liabilities. In the ordinary course of business, there are transactions and calculations
where the ultimate tax outcome is uncertain. The Company believes it has reasonably
estimated its accrued taxes for all jurisdictions for all open tax periods. The Company
assesses the adequacy of its tax and related accruals on a quarterly basis and adjusts
appropriately as events warrant and open tax periods close. It is possible that the final
tax outcome of these matters will be different from managements estimate reflected in the
income tax provisions and accrued taxes. Such differences
FORM 10-Q
PART I
ITEM 1
PAGE 9
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements (Continued)
June 30, 2005
(Unaudited)
6. Income Taxes (Continued)
could have a material impact on the Companys income tax provision and operating results in
the period in which such determination is made.
7. Comprehensive Income (Loss)
The following table sets forth the computation of comprehensive income (loss) for the three
and six months ended June 30 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2005 |
|
2004 |
|
2005 |
|
2004 |
Net income (loss) |
|
$ |
89 |
|
|
$ |
61 |
|
|
$ |
128 |
|
|
$ |
(1,129 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation loss |
|
|
(28 |
) |
|
|
(50 |
) |
|
|
(69 |
) |
|
|
(11 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) on
available for sale securities |
|
|
75 |
|
|
|
(351 |
) |
|
|
(17 |
) |
|
|
(269 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
|
$ |
136 |
|
|
$ |
(340 |
) |
|
$ |
42 |
|
|
$ |
(1,409 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8. Legal Proceedings
Vicor and VLT, Inc. (VLT), a wholly owned subsidiary of the Company, are pursuing Reset
Patent infringement claims directly against Artesyn Technologies, Lucent Technologies and
Tyco Electronics Power Systems, Inc. in the United States District Court in Boston,
Massachusetts. The lawsuit against Lucent was filed in May 2000 and in April 2001, the
Company added Tyco Electronics as a defendant in that lawsuit. The lawsuit against Artesyn
was filed in February 2001. In January 2003, the District Court issued a pre-trial decision
in each of these patent infringement lawsuits relating to claim construction of the Reset
Patent. The District Courts decisions rejected assertions that the Reset Patent claims are
invalid for indefiniteness; and affirmed Vicors interpretation of several terms used in the
Reset Patent claims. However, the District Court adopted interpretations of certain terms
of the Reset Patent claims that are contrary to Vicors position. On May 24, 2004, the
United States Court of Appeals for the Federal Circuit affirmed the decisions issued in
January 2003 by the District Court. Vicor believes that the District Courts decisions, and
the affirmation of these decisions by the Federal Circuit, strengthens its position
regarding validity of the patent, but reduces the cumulative amount of infringing power
supplies and the corresponding amount of potential damages. The Federal Circuit has
referred the proceedings back to the District Court for trials on validity of the Reset
Patent and infringement and damages by Lucent, Tyco and Artesyn.
In the second quarter of 2005, the Company entered into a settlement agreement with Lambda
Americas, Inc., successor to Lambda Electronics, Inc., under which the Company received a
payment of $2,500,000 in full settlement of the Companys Reset Patent claims against Lambda
and which settled the lawsuit
FORM 10-Q
PART I
ITEM 1
PAGE 10
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements (Continued)
June 30, 2005
(Unaudited)
8. Legal Proceedings (Continued)
that the Company had filed against Lambda in June 2001. The full amount of the payment, net
of a $250,000 contingency fee paid by the Company to its litigation counsel, has been
included in gain from litigation-related settlement, net in the accompanying condensed
consolidated statement of operations. The District Court has not yet set dates for the
remaining trials. 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.
In May 2004, Ericsson Wireless Communications, Inc. v. Vicor Corporation was filed in
Superior Court of the State of California, County of San Diego. The plaintiff has brought
an action against the Company claiming unspecified damages for failure of out-of warranty
products previously purchased by it from the Company. In November 2004, Ericsson filed a
First Amended Complaint adding claims against Exar Corporation, a former vendor of the
Company. The Company denies the claims made against it, and intends to defend the action
vigorously.
On March 4, 2005, Exar filed a declaratory judgment action against Vicor in the Superior
Court of the State of California, County of Santa Clara, in which Exar seeks a declaration
by the Court that Exar is not obligated to reimburse or indemnify Vicor for any claims
brought against Vicor for alleged damages incurred as a result of the use of Exar components
in Vicor products. Vicor intends to vigorously defend the declaratory judgment action.
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 to have a material adverse
impact on the Companys financial position or results of operations.
9. Impact of Recently Issued Accounting Standards
In November 2004, the FASB issued Statement of Financial Accounting Standards No. 151,
Inventory Costs, an amendment of Accounting Research Bulletin (ARB) No. 43, Chapter 4
(FAS 151). FAS 151 amends the guidance in ARB No 43, Chapter 4, Inventory Pricing to
clarify that abnormal amounts of idle facility expense, freight, handling costs, and wasted
material (spoilage) should be recognized as current-period charges. In addition, FAS 151
requires that allocation of fixed production overhead to the costs of conversion be based on
the normal capacity of the production facilities. The provisions of FAS 151 are effective
for fiscal years beginning after June 15, 2005. The Company is currently evaluating the
provisions of FAS 151 and does not believe that its adoption will have a material impact on
the Companys financial position or results of operations.
In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123
(revised 2004), Share-Based Payment (FAS 123R), which is a revision of FAS No. 123,
Accounting for Stock-Based Compensation. FAS 123(R) supersedes APB Opinion No. 25,
Accounting for Stock Issued to
FORM 10-Q
PART I
ITEM 1
PAGE 11
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements (Continued)
June 30, 2005
(Unaudited)
9. Impact of Recently Issued Accounting Standards (Continued)
Employees, and amends SFAS No. 95, Statement of Cash Flows. Generally, the approach in
FAS 123(R) is similar to the approach described in FAS 123. However, FAS 123(R) requires
all share-based payments to employees, including grants of employee stock options, to be
recognized in the income statement based on their fair values at the date of grant. Pro
forma disclosure is no longer an alternative.
FAS 123(R) permits public companies to adopt its requirements using one of two methods. A
modified prospective method in which compensation cost is recognized beginning with the
effective date (a) based on the requirements of FAS 123(R) for all share-based payments
granted after the effective date and (b) based on the requirements of FAS 123 for all awards
granted to employees prior to the effective date of FAS 123(R) that remain unvested on the
effective date. A modified retrospective method which includes the requirements of the
modified prospective method described above, but also permits entities to restate based on
the amounts previously recognized under FAS 123 for purposes of pro forma disclosures either
(a) all prior periods presented or (b) prior interim periods of the year of adoption. The
Company has yet to determine which method to use in adopting FAS 123(R).
As permitted by FAS 123, the Company currently accounts for share-based payments to
employees using APB Opinion No. 25s intrinsic value method and, as such, generally
recognizes no compensation cost for employee stock options. Accordingly, the adoption of
FAS 123(R)s fair value method will have a significant impact on the Companys results of
operations, although it will have no impact on the Companys overall financial position.
The Company is evaluating FAS 123(R) and has not yet determined the amount of stock option
expense which will be incurred in future periods.
FAS 123(R) must be adopted in fiscal periods beginning after June 15, 2005. Early adoption
will be permitted in periods in which financial statements have not yet been issued. On
April 14, 2005, the Securities and Exchange Commission amended the compliance dates for FAS
123(R). The Company will be required to adopt FAS 123(R) on January 1, 2006, the
commencement of its first quarter of fiscal 2006.
10. Reclassification
Certain amounts in the 2004 financial statements were reclassified to conform to the 2005
presentation.
11. Dividend
On June 24, 2005, the Companys Board of Directors approved an annual cash dividend for 2005
of $.12 per share of the Companys stock. The dividend is payable on August 31, 2005 to
shareholders of record at the close of business on August 11, 2005.
Dividends are declared at the discretion of the Companys Board of Directors and depend on
actual cash from operations, the Companys financial condition and capital requirements and
any other factors the Companys Board of Directors may consider relevant.
FORM 10-Q
PART I
ITEM 2
PAGE 12
VICOR CORPORATION
Managements Discussion and Analysis of
Financial Condition and Results of Operations
June 30, 2005
Item 2 Managements Discussion and Analysis of Financial Condition and Results of
Operations
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, plans, assumes, may, will,
would, should, continue, prospective, project, and other similar expressions identify
forward-looking statements. These statements are based upon the Companys current expectations and
estimates as to the prospective events and circumstances which may or may not be within the
Companys control and as to which there can be no assurance. Actual results could differ
materially from those projected in the forward-looking statements as a result of various factors,
including our ability to develop and market new products and technologies cost effectively, to
leverage design wins into increased product sales, to decrease manufacturing costs, to enter into
licensing agreements that amplify the market opportunity and accelerate market penetration, to
realize significant royalties under the license agreements, to achieve a sustainable increased
bookings rate over a longer period, to hire key personnel and build our business units, and to
successfully leverage the V I Chips in standard products to promote market acceptance of
Factorized Power, factors impacting the Companys various end markets, including Consumer
Electronics, Communications, Information Technology and Automotive, as well as those factors
described in the risk factors set forth in this report and in the Companys Annual Report on Form
10-K for the year ended December 31, 2004. Reference is made in particular to the discussions set
forth below in this report under Managements 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 Managements 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. The Company does not undertake any obligation to update any forward-looking statements as
a result of future events or developments.
Critical Accounting Policies and Estimates
Please refer to the Companys Annual Report on Form 10-K for the year ended December 31, 2004 for a
complete summary of the critical accounting policies and estimates.
Inventories
Inventories are valued at the lower of cost (first-in, first-out method) or market. The Company
employs a variety of methodologies to determine the amount of inventory reserve. Historically, the
Company estimated reserves for its inventory at all significant locations based upon its known
backlog and historical usage, and assumptions about future demand and market conditions. In the
second quarter of 2005, the Company revised its method for estimating inventory reserves at the
Andover location, its principal manufacturing location. The revised model is based upon a
comparison of on-hand quantities to projected demand, without reference to historical usage, such
FORM 10-Q
PART I
ITEM 2
PAGE 13
VICOR CORPORATION
Managements Discussion and Analysis of
Financial Condition and Results of Operations
June 30, 2005
(Continued)
that amounts on-hand in excess of three-year projected usage are fully reserved. While we have
used our best efforts and believe we have used the best available information to estimate future
demand, due to uncertainty in the economy and our business and the inherent difficulty in
predicting future demand, it is possible that actual demand for our products will differ from our
estimates. If actual future demand or market conditions are less favorable than those projected by
management, additional inventory reserves for existing inventories may need to be recorded in
future periods.
Results of Operations
Three months ended June 30, 2005 compared to three months ended June 30, 2004
Net revenues for the second quarter of 2005 were $44,579,000, a decrease of $795,000, or 1.8%, as
compared to $45,374,000 for the same period a year ago, and an increase of 3.2% on a sequential
basis from the first quarter of 2005. The decrease in net revenues from the prior year resulted
from a decrease in unit shipments of standard and custom products. The book-to-bill ratio for the
second quarter of 2005 was 0.99:1 as compared to 0.97:1 for the second quarter of 2004 and 1.09:1
in the first quarter of 2005.
Gross margin for the second quarter of 2005 decreased $1,801,000, or 10.4%, to $15,579,000 from
$17,380,000 for the second quarter of 2004, and decreased to 34.9% from 38.3% as a percentage of
net revenues. The primary components of the decrease in gross margin dollars and percentage were
due to the decrease in net revenues and by an increase in inventory reserves. During the second
quarter of 2005, the Company provided additional reserves of approximately $1,600,000 for potential
obsolete inventory arising primarily from the European Union Restriction of Hazardous Substances
(RoHS) initiative and the conversion of second-generation products to the FasTrak platform. In
addition, the Company identified other slow-moving and potential obsolete inventory of
approximately $1,200,000, of which $300,000 related to raw material inventories in support of pilot
production of V I Chips. These decreases were partially offset by increased manufacturing
efficiencies resulting in lower average unit costs.
Selling, general and administrative expenses were $10,137,000 for the period, a decrease of
$470,000, or 4.4%, from the same period in 2004. As a percentage of net revenues, selling, general
and administrative expenses decreased to 22.7% from 23.4%. The principal components of the
$470,000 decrease were $665,000, or 88.9%, of decreased legal fees and $196,000, or 17.3%, of
decreased commission payments due to the reduction of product revenues discussed above. The
overall decrease in legal expense was primarily due to litigation with Exar Corporation that was
settled in July 2004. The principal components partially offsetting the above decreases were
$156,000, or 30.2%, in increased advertising expenses, $149,000, or 10.7%, in increased costs
associated with Vicor Japan Company, Ltd. (VJCL) and the Vicor Integration Architects (VIAs),
and $54,000, or 1.2%, in increased compensation expense.
FORM 10-Q
PART I
ITEM 2
PAGE 14
VICOR CORPORATION
Managements Discussion and Analysis of
Financial Condition and Results of Operations
June 30, 2005
(Continued)
Research and development expenses increased $875,000, or 13.5%, to $7,380,000, and increased as a
percentage of net revenues to 16.6% from 14.3%. The principal components of the $875,000 increase
were $602,000, or 15.7%, in increased compensation expense, $74,000, or 7.7%, in increased project
material costs, $68,000, or 19.6%, in increased facilities costs and $59,000, or 160.5%, in
increased outside services. The increases in compensation expense, project materials and outside
services were principally due to the development efforts associated with the Companys new
Factorized Power Architecture (FPA) products. The Company has a long-term commitment to
investing in new product design and development in order to maintain and improve its competitive
position.
In the second quarter of 2005, the Company entered into a settlement agreement with Lambda
Americas, Inc., successor to Lambda Electronics, Inc., under which the Company received a payment
of $2,500,000 in full settlement of the Companys Reset Patent claims against Lambda and which
settled the lawsuit that the Company had filed against Lambda in June 2001. The full amount of the
payment, net of a $250,000 contingency fee paid by the Company to its litigation counsel, has been
included in gain from litigation-related settlement, net in the accompanying condensed consolidated
statement of operations.
The major changes in the components of the other income (expense), net were as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase |
|
|
2005 |
|
2004 |
|
(decrease) |
Interest income |
|
$ |
683 |
|
|
$ |
385 |
|
|
$ |
298 |
|
Foreign currency losses |
|
|
(254 |
) |
|
|
(52 |
) |
|
|
(202 |
) |
Minority interest in net income of
subsidiaries |
|
|
(231 |
) |
|
|
(209 |
) |
|
|
(22 |
) |
Other than temporary decline in
Scipher plc investment |
|
|
|
|
|
|
(27 |
) |
|
|
27 |
|
Other |
|
|
(15 |
) |
|
|
(3 |
) |
|
|
(12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
183 |
|
|
$ |
94 |
|
|
$ |
89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The increase in interest income is due to higher interest rates and higher average balances on the
Companys cash equivalents and short-term investments. The increase in foreign currency losses is
due to the unfavorable exchange rates in 2005 as compared to 2004.
Income before income taxes was $495,000 for the second quarter of 2005 compared to $362,000 for the
same period in 2004.
Tax provisions in 2005 and 2004 have been provided for estimated income taxes due in various state
and international taxing jurisdictions for which losses incurred by the Company cannot be offset,
for federal and state
FORM 10-Q
PART I
ITEM 2
PAGE 15
VICOR CORPORATION
Managements Discussion and Analysis of
Financial Condition and Results of Operations
June 30, 2005
(Continued)
taxes for certain minority-owned subsidiaries that are not part of the Companys consolidated
income tax returns, and for the Federal alternative minimum tax.
Diluted income per share was $0.00 for the second quarter of 2005 compared to $0.00 for the second
quarter of 2004.
Six months ended June 30, 2005 compared to six months ended June 30, 2004
Net revenues for the first six months of 2005 were $87,759,000, a decrease of $136,000, or 0.2%, as
compared to $87,895,000 for the same period a year ago. The decrease in net revenues resulted
primarily from a decrease in license revenues of $375,000 due to the receipt of the final royalty
payment from Nagano Japan Radio Company, Ltd. (NJRC) in January 2004, partially offset by an
increase in unit shipments of standard and custom products of $239,000. Orders during the first
six months of 2005 increased by 15.9% compared with the second half of 2004. The book-to-bill
ratio was 1.04:1 for the first six months of 2005 compared to 1.05:1 for the same period a year
ago, and 0.94:1 for the second half of 2004.
Gross margin for the first six months of 2005 increased $244,000, or 0.8%, to $32,624,000 from
$32,380,000, and increased to 37.2% from 36.8% as a percentage of net revenues. The primary
component of the increase in gross margin dollars and percentage was due to increased manufacturing
efficiencies resulting in lower average unit costs. These increases were partially offset by an
increase in inventory reserve expense of approximately $2,700,000 compared with the first six
months of 2004. During the second quarter of 2005, the Company provided reserves of approximately
$1,600,000 for potential obsolete inventory arising primarily from the European Union Restriction
of Hazardous Substances (RoHS) initiative and the conversion of second-generation products to the
FasTrak platform. In addition, the Company identified other slow-moving and potential obsolete
inventory of approximately $1,200,000, of which $300,000 related to raw material inventories in
support of pilot production of V I Chips.
Selling, general and administrative expenses were $20,241,000 for the period, a decrease of
$544,000, or 2.6%, over the same period in 2004. As a percentage of net revenues, selling,
general and administrative expenses decreased to 23.1% from 23.6%. The principal components of
the $544,000 decrease were $1,027,000, or 71.9%, of decreased legal fees and $264,000, or 21.4%,
of decreased depreciation expense, due to certain computer hardware and software becoming fully
depreciated in 2004. The overall decrease in legal expense was primarily due to litigation with
Exar Corporation that was settled in July 2004. The principal components partially offsetting the
above decreases were $225,000, or 22.5%, in increased advertising expenses, $213,000, or 2.4%, in
increased compensation expense, $196,000, or 7.0%, in increased costs associated with VJCL and the
VIAs and $132,000, or 26.5%, in increased audit and tax fees due to the requirements of complying
with the Sarbanes-Oxley Act of 2002.
Research and development expenses increased $2,028,000, or 16.3%, to $14,476,000 and increased as a
percentage of net revenues to 16.5% from 14.2%. The principal components of the $2,028,000
increase were $1,191,000, or 15.7%, of increased compensation expense, principally due to increased
headcount, $465,000, or 30.1%, of increased project material costs, $93,000, or 82.8%, in increased
supplies and $72,000, or 10.1%, of
FORM 10-Q
PART I
ITEM 2
PAGE 16
VICOR CORPORATION
Managements Discussion and Analysis of
Financial Condition and Results of Operations
June 30, 2005
(Continued)
increased facilities costs. The increases in compensation expense, project material costs and
supplies were principally due to the development efforts associated with the Companys new FPA
products.
In the second quarter of 2005, the Company entered into a settlement agreement with Lambda
Americas, Inc., successor to Lambda Electronics, Inc., under which the Company received a payment
of $2,500,000 in full settlement of the Companys Reset Patent claims against Lambda and which
settled the lawsuit that the Company had filed against Lambda in June 2001. The full amount of the
payment, net of a $250,000 contingency fee paid by the Company to its litigation counsel, has been
included in gain from litigation-related settlement, net in the accompanying condensed consolidated
statement of operations.
The major changes in the components of the other income (expense), net were as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase |
|
|
2005 |
|
2004 |
|
(decrease) |
Interest income |
|
$ |
1,325 |
|
|
$ |
764 |
|
|
$ |
561 |
|
Minority interest in net income of
subsidiaries |
|
|
(321 |
) |
|
|
(396 |
) |
|
|
75 |
|
Foreign currency gains (losses) |
|
|
(434 |
) |
|
|
(55 |
) |
|
|
(379 |
) |
Other than temporary decline in
Scipher plc investment |
|
|
|
|
|
|
(27 |
) |
|
|
27 |
|
Other |
|
|
107 |
|
|
|
23 |
|
|
|
84 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
677 |
|
|
$ |
309 |
|
|
$ |
368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The increase in interest income is due to higher interest rates and higher average balances on the
Companys cash equivalents and short-term investments. The increase in foreign currency losses is
due to the unfavorable exchange rates in 2005 as compared to 2004.
Income before income taxes was $834,000 compared to a loss before income taxes of $544,000 for the
same period in 2004.
Tax provisions in 2005 and 2004 have been provided for estimated income taxes due in various state
and international taxing jurisdictions for which losses incurred by the Company cannot be offset,
for federal and state taxes for certain minority-owned subsidiaries that are not part of the
Companys consolidated income tax returns, and for the Federal alternative minimum tax.
Diluted income per share was $0.00 for the first six months of 2005, compared to diluted loss per
share of $(0.03) for the first six months of 2004.
FORM 10-Q
PART I
ITEM 3
PAGE 17
VICOR CORPORATION
June 30, 2005
Liquidity and Capital Resources
At June 30, 2005 the Company had $55,423,000 in cash and cash equivalents. The ratio of current
assets to current liabilities was 6.8:1 at June 30, 2005 compared to 8.6:1 at December 31, 2004.
Working capital decreased $1,471,000, from $148,419,000 at December 31, 2004 to $146,948,000 at
June 30, 2005. The primary factors affecting the working capital decrease were a decrease in
short-term investments of $13,089,000, a decrease in inventory of $5,466,000 and an increase in
dividend payable of $5,020,000. These decreases were partially offset by an increase in cash and
cash equivalents of $19,146,000 and in accounts receivable of $2,926,000. The primary sources of
cash for the six months ended June 30, 2005 were $11,754,000 from operating activities and
$12,730,000 of net sales of short-term investments. The primary uses of cash for the six months
ended June 30, 2005 were for the acquisition of equipment of approximately $2,613,000 and treasury
stock of $3,277,000.
The Companys primary liquidity needs are for making continuing investments in manufacturing
equipment, much of which is built internally, particularly equipment for the Companys new FPA
products. The internal construction of manufacturing machinery, in order to provide for
additional manufacturing capacity, is a practice which the Company expects to continue in the
future. The Company expects capital spending to increase in 2005 as compared to 2004. In April
2005, management authorized the purchase of approximately $4,000,000 of FPA equipment during the
remainder of the year.
In November 2000, the Board of Directors of the Company authorized the repurchase of up to
$30,000,000 of the Companys 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 and amounts of stock repurchases are at the
discretion of management based on its view of economic and financial market conditions. The
Company spent approximately $3,277,000 for the repurchase of 312,700 shares of Common Stock during
the six months ended June 30, 2005. As of June 30, 2005, the Company had approximately
$21,643,000 remaining under the plan.
On June 24, 2005, the Companys Board of Directors approved an annual cash dividend for 2005 of
$.12 per share of the Companys stock, which will approximate $5,020,000. The dividend is payable
on August 31, 2005 to shareholders of record at the close of business on August 11, 2005.
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, 2005, the
Company had approximately $2,114,000 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.
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 and fluctuations in foreign
currency exchange rates.
FORM 10-Q
PART I
ITEM 4
PAGE 18
VICOR CORPORATION
June 30, 2005
As the Companys cash and cash equivalents consist principally of money market securities, which
are short-term in nature, the Companys exposure to market risk on interest rate fluctuations for
these investments is not significant. The Companys short-term investments consist mainly of
corporate debt securities. 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 Companys exposure to market risk for fluctuations in foreign currency exchange rates relates
primarily to the operations of Vicor Japan Company, Ltd. (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 VJCLs operations. In addition, the functional currency of the Companys
subsidiaries in Europe and Hong Kong is the U.S. Dollar. Therefore, the Company believes that
market risk is mitigated since these operations are not exposed to foreign exchange fluctuations.
Item 4 Controls and Procedures
(a) Disclosure controls and procedures.
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the Exchange
Act), the Companys management conducted an evaluation with the participation of the Companys
Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of the Companys
disclosure controls and procedures, as of the end of the last fiscal quarter. In designing and
evaluating the Companys disclosure controls and procedures, the Company and its management
recognize that any controls and procedures, no matter how well designed and operated, can provide
only a reasonable assurance of achieving the desired control objectives, and management necessarily
was required to apply its judgment in evaluating and implementing possible controls and procedures.
Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that
they believe the Companys disclosure controls and procedures are reasonably effective to ensure
that information required to be disclosed by the Company in the reports it files or submits under
the Exchange Act is recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commissions rules and forms. We intend to continue to review and
document our disclosure controls and procedures, including our internal controls and procedures for
financial reporting, and we may from time to time make changes to the disclosure controls and
procedures to enhance their effectiveness and to ensure that our systems evolve with our business.
The Companys management, including the CEO and CFO, does not expect that our disclosure controls
or our internal control over financial reporting will prevent or detect all error and all fraud. A
control system, no matter how well designed and operated, can provide only reasonable, not
absolute, assurance that the control systems objectives will be met. The design of a control
system must reflect the fact that 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 that 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 likelihood of
future events,
FORM 10-Q
PART I
ITEM 4
PAGE 19
VICOR CORPORATION
June 30, 2005
and there can be no assurance that any design will succeed in achieving its stated goals under all
potential future conditions. Projections of any evaluation of controls 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 were no changes in the Companys internal control over financial reporting identified in
connection with the Companys evaluation of internal control over financial reporting that occurred
during the Companys last fiscal quarter that have materially affected, or are reasonably likely to
materially affect, the Companys internal control over financial reporting.
FORM 10-Q
PART II
ITEM 1
PAGE 20
VICOR CORPORATION
Part II Other Information
June 30, 2005
Item 1 Legal Proceedings
As previously disclosed in the Companys Form 10-K for the year ended December 31, 2004,
Vicor and VLT, Inc. (VLT), a wholly owned subsidiary of the Company, are pursuing Reset
Patent infringement claims directly against Artesyn Technologies, Lucent Technologies and
Tyco Electronics Power Systems, Inc. in the United States District Court in Boston,
Massachusetts. The lawsuit against Lucent was filed in May 2000 and in April 2001, the
Company added Tyco Electronics as a defendant in that lawsuit. The lawsuit against Artesyn
was filed in February 2001. In January 2003, the District Court issued a pre-trial decision
in each of these patent infringement lawsuits relating to claim construction of the Reset
Patent. The District Courts decisions rejected assertions that the Reset Patent claims are
invalid for indefiniteness; and affirmed Vicors interpretation of several terms used in the
Reset Patent claims. However, the District Court adopted interpretations of certain terms
of the Reset Patent claims that are contrary to Vicors position. On May 24, 2004, the
United States Court of Appeals for the Federal Circuit affirmed the decisions issued in
January 2003 by the District Court. Vicor believes that the District Courts decisions, and
the affirmation of these decisions by the Federal Circuit, strengthens its position
regarding validity of the patent, but reduces the cumulative amount of infringing power
supplies and the corresponding amount of potential damages. The Federal Circuit has
referred the proceedings back to the District Court for trials on validity of the Reset
Patent and infringement and damages by Lucent, Tyco and Artesyn.
In the second quarter of 2005, the Company entered into a settlement agreement with Lambda
Americas, Inc., successor to Lambda Electronics, Inc., under which the Company received a
payment of $2,500,000 in full settlement of the Companys Reset Patent claims against Lambda
and which settled the lawsuit that the Company had filed against Lambda in June 2001. The
full amount of the payment, net of a $250,000 contingency fee paid by the Company to its
litigation counsel, has been included in gain from litigation-related settlement, net in the
accompanying condensed consolidated statement of operations. The District Court has not yet
set dates for the remaining trials. 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.
FORM 10-Q
PART II
ITEMS 2 4
PAGE 21
VICOR CORPORATION
Part II Other Information
June 30, 2005
(Continued)
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Number |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(or Approximate |
|
|
|
|
|
|
|
|
|
|
Total Number of |
|
Dollar Value) of |
|
|
|
|
|
|
|
|
|
|
Shares (or Units) |
|
Shares (or Units) |
|
|
|
|
|
|
|
|
|
|
Purchased as Part |
|
that May Yet Be |
|
|
Total Number of |
|
|
|
|
|
of Publicly |
|
Purchased Under |
|
|
Shares (or Units) |
|
Average Price Paid |
|
Announced Plans |
|
the Plans or |
Period |
|
Purchased |
|
per Share (or Unit) |
|
or Programs |
|
Programs |
April 1
30, 2005 |
|
|
134,300 |
|
|
$ |
10.24 |
|
|
|
134,300 |
|
|
$ |
21,643,000 |
|
May 1 31, 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
21,643,000 |
|
June 1
30, 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
21,643,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
134,300 |
|
|
$ |
10.24 |
|
|
|
134,300 |
|
|
$ |
21,643,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In November 2000, the Board of Directors of the Company authorized the repurchase of up to
$30,000,000 of the Companys Common Stock.
Item 3 Defaults Upon Senior Securities
Not applicable.
Item 4 Submission of Matters to a Vote of Security Holders
The 2005 Annual Meeting of Stockholders of the Company was held on June 23, 2005. Under
the Companys charter, each share of the Companys Common Stock entitles the holder thereof
to one vote per share, and each share of the Companys 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 |
|
|
139,683,468 |
|
|
|
5,991,896 |
|
Estia J. Eichten |
|
|
143,522,054 |
|
|
|
2,153,310 |
|
Barry Kelleher |
|
|
139,622,678 |
|
|
|
6,052,686 |
|
Jay M. Prager |
|
|
139,613,278 |
|
|
|
6,062,086 |
|
David T. Riddiford |
|
|
144,703,927 |
|
|
|
971,437 |
|
M. Michael Ansour |
|
|
144,694,045 |
|
|
|
981,319 |
|
Samuel Anderson |
|
|
139,692,276 |
|
|
|
5,983,088 |
|
There were 0 broker non-votes and 0 abstentions on this proposal.
FORM 10-Q
PART II
ITEMS 5 6
PAGE 22
VICOR CORPORATION
Part II Other Information
June 30, 2005
(Continued)
Item 5 Other Information
Not applicable.
Item 6 Exhibits
|
|
|
Exhibit Number |
|
Description |
31.1
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934 |
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934 |
|
|
|
32.1
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
32.2
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
FORM 10-Q
PART II
PAGE 23
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 9, 2005 |
By: |
/s/ Patrizio Vinciarelli
|
|
|
|
Patrizio Vinciarelli |
|
|
|
President, Chief Executive Officer
and Chairman of the Board
(Principal Executive Officer) |
|
|
|
|
|
Date: August 9, 2005 |
By: |
/s/ Mark A. Glazer
|
|
|
|
Mark A. Glazer |
|
|
|
Chief Financial Officer
(Principal Financial Officer
and Principal Accounting Officer) |
|
|
Exhibit 31.1
CERTIFICATIONS
I, Patrizio Vinciarelli, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Vicor
Corporation;
2. Based on my knowledge, this quarterly 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(s) 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(s) 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: August 9, 2005 /s/ Patrizio Vinciarelli
-------------------------
Patrizio Vinciarelli
Chief Executive Officer
Exhibit 31.2
CERTIFICATIONS
I, Mark A. Glazer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Vicor
Corporation;
2. Based on my knowledge, this quarterly 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(s) 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(s) 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: August 9, 2005 /s/ Mark A. Glazer
-------------------
Mark A. Glazer
Chief 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 ending June 30, 2005 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
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Patrizio Vinciarelli
President, Chairman of the Board and
Chief Executive Officer
August 9, 2005
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 ending June 30, 2005 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Mark A. Glazer, 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/ Mark A. Glazer
- -----------------------
Mark A. Glazer
Chief Financial Officer
August 9, 2005
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.