SEC Filing | Vicor Corporation

================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ---------- FORM 10-Q |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 -------------------------------------------------- |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from__________________________________________________ Commission File Number 0-18277 --------------------------------------------------- VICOR CORPORATION (Exact name of registrant as specified in its charter) Delaware 04-2742817 (State of Incorporation) (IRS Employer Identification Number) 25 Frontage Road, Andover, Massachusetts 01810 (Address of registrant's principal executive office) (978) 470-2900 (Registrant's telephone number) ---------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| Indicate the number of shares outstanding of each of the issuer's classes of common stock as of September 30, 2000. Common Stock, $.01 par value ............ 30,305,047 Class B Common Stock, $.01 par value .... 11,993,348 ----------

VICOR CORPORATION INDEX TO FORM 10-Q Page ---- Part I - Financial Information: Item 1 - Financial Statements (Unaudited) Condensed Consolidated Balance Sheet at 1 September 30, 2000 and December 31, 1999 Condensed Consolidated Statement of Income 2 for the quarters ended September 30, 2000 and 1999 and for the nine months ended September 30, 2000 and 1999 Condensed Consolidated Statement of Cash Flows 3 for the nine months ended September 30, 2000 and 1999 Notes to Condensed Consolidated Financial 4-5 Statements Item 2 - Management's Discussion and Analysis of 6-9 Financial Condition and Results of Operations Item 3 - Quantitative and Qualitative Disclosures About Market Risk 10 Part II - Other Information: Item 1 - Legal Proceedings 11 Item 2 - Changes in Securities 11 Item 3 - Defaults Upon Senior Securities 11 Item 4 - Submission of Matters to a Vote of 11 Security Holders Item 5 - Other Information 11 Item 6 - Exhibits and Reports on Form 8-K 11 Signature(s) 12

FORM 10-Q PART 1 ITEM 1 PAGE 1 VICOR CORPORATION Condensed Consolidated Balance Sheet (In thousands) (Unaudited) Assets September 30, 2000 December 31, 1999 - --------------------------------------- ------------------ ----------------- Current assets: Cash and cash equivalents $ 76,037 $ 69,109 Accounts receivable, net 44,241 32,465 Inventories, net 42,051 33,360 Other current assets 7,068 6,940 --------- --------- Total current assets 169,397 141,874 Property, plant and equipment, net 107,864 109,079 Notes receivable 8,712 8,698 Other assets 7,634 9,254 --------- --------- $ 293,607 $ 268,905 ========= ========= Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 10,752 $ 10,317 Accrued compensation and benefits 5,247 3,553 Accrued liabilities 9,662 4,987 --------- --------- Total current liabilities 25,661 18,857 Deferred income taxes 5,515 5,515 Stockholders' equity: Preferred Stock -- -- Class B Common Stock 120 121 Common Stock 365 356 Additional paid-in capital 136,977 124,451 Retained earnings 211,349 185,979 Accumulated other comprehensive income 529 889 Treasury stock, at cost (86,909) (67,263) --------- --------- Total stockholders' equity 262,431 244,533 --------- --------- $ 293,607 $ 268,905 ========= ========= Note: The balance sheet at December 31, 1999 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See accompanying notes.

FORM 10-Q PART I ITEM 1 PAGE 2 VICOR CORPORATION Condensed Consolidated Statement of Income (In thousands except per share data) (Unaudited) Three Months Ended Nine Months Ended -------------------- --------------------- September 30, September 30, 2000 1999 2000 1999 ------- -------- -------- -------- Net revenues: Product $65,422 $ 45,660 $180,593 $122,502 License 2,429 3,713 7,822 13,643 ------- -------- -------- -------- 67,851 49,373 188,415 136,145 Costs and expenses: Cost of revenue 37,821 28,002 106,462 77,285 Selling, general and administrative 11,155 9,052 32,035 26,495 Research and development 4,962 4,933 15,581 14,953 ------- -------- -------- -------- 53,938 41,987 154,078 118,733 ------- -------- -------- -------- Income from operations 13,913 7,386 34,337 17,412 Other income 743 788 2,698 2,282 ------- -------- -------- -------- Income before income taxes 14,656 8,174 37,035 19,694 Provision for income taxes 4,617 2,616 11,665 6,303 ------- -------- -------- -------- Net income $10,039 $ 5,558 $ 25,370 $ 13,391 ======= ======== ======== ======== Net income per common share: Basic $ 0.24 $ 0.13 $ 0.60 $ 0.32 Diluted $ 0.23 $ 0.13 $ 0.59 $ 0.32 Shares used to compute net income per share: Basic 42,216 41,318 42,284 41,392 Diluted 43,435 42,372 43,300 42,151 See accompanying notes.

FORM 10-Q PART I ITEM 1 PAGE 3 VICOR CORPORATION Condensed Consolidated Statement of Cash Flows (In thousands) (Unaudited) Nine Months Ended -------------------------------------- September 30, 2000 September 30, 1999 ------------------ ------------------ Operating activities: Net income $ 25,370 $ 13,391 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 13,518 11,266 Loss on disposal of equipment 166 101 Tax benefit relating to stock option plans 4,985 330 Change in current assets and liabilities, net (13,649) (9,796) -------- -------- Net cash provided by operating activities 30,390 15,292 Investing activities: Additions to property, plant and equipment (11,932) (10,572) Proceeds from sale of equipment 2 17 Increase in notes receivable (14) (24) Decrease (increase) in other assets 693 (1,183) -------- -------- Net cash used in investing activities (11,251) (11,762) Financing activities: Proceeds from issuance of Common Stock 7,549 1,242 Acquisitions of treasury stock (19,646) (8,564) -------- -------- Net cash used in financing activities (12,097) (7,322) Effect of foreign exchange rates on cash (114) 142 -------- -------- Net increase (decrease) in cash and cash equivalents 6,928 (3,650) Cash and cash equivalents at beginning of period 69,109 58,897 -------- -------- Cash and cash equivalents at end of period $ 76,037 $ 55,247 ======== ======== See accompanying notes.

FORM 10-Q PART I ITEM 1 PAGE 4 VICOR CORPORATION Notes to Condensed Consolidated Financial Statements September 30, 2000 (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 nine-month periods ended September 30, 2000 are not necessarily indicative of the results that may be expected for the year ended December 31, 2000. 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, 1999, contained in the Company's annual report filed on Form 10-K (File No. 0-18277) with the Securities and Exchange Commission. 2. Net Income per Share The following table sets forth the computation of basic and diluted income per share for the three and nine months ended September 30 (in thousands, except per share amounts): Three Months Ended Nine Months Ended ------------------ ----------------- September 30, September 30, 2000 1999 2000 1999 ------- ------- ------- ------- Numerator: Net Income $10,039 $ 5,558 $25,370 $13,391 ======= ======= ======= ======= Denominator: Denominator for basic income per share-weighted average shares 42,216 41,318 42,284 41,392 Effect of dilutive securities: Employee stock options 1,219 1,054 1,016 759 ------- ------- ------- ------- Denominator for diluted income per share- adjusted weighted-average shares and assumed conversions 43,435 42,372 43,300 42,151 ------- ------- ------- ------- Basic income per share $ 0.24 $ 0.13 $ 0.60 $ 0.32 ======= ======= ======= ======= Diluted income per share $ 0.23 $ 0.13 $ 0.59 $ 0.32 ======= ======= ======= =======

FORM 10-Q PART I ITEM 2 PAGE 5 VICOR CORPORATION Notes to Condensed Consolidated Financial Statements September 30, 2000 (Continued) 3. Inventories Inventories are valued at the lower of cost (determined using the first-in, first-out method) or market. Inventories were as follows as of September 30, 2000 and December 31, 1999 (in thousands): September 30, 2000 December 31, 1999 ------------------ ----------------- Raw materials ..................... $28,038 $22,924 Work-in-process ................... 7,497 4,957 Finished goods .................... 6,516 5,479 ------- ------- $42,051 $33,360 ======= ======= 4. Comprehensive Income Total comprehensive income was $9,931,000 and $25,010,000 for the three and nine months ended September 30, 2000 and $6,336,000 and $13,659,000 for the three and nine months ended September 30, 1999. Other comprehensive income consisted of adjustments for foreign currency translation gains in the amounts of $108,000 and $360,000 for the three and nine months ended September 30, 2000.

FORM 10-Q PART I ITEM 2 PAGE 6 VICOR CORPORATION Management's Discussion and Analysis of Financial Condition and Results of Operations September 30, 2000 Except for historical information contained herein, some matters discussed in this report constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words "believes," "expects," "anticipates," "intend," "estimate," "plan," "assumes," and other similar expressions identify forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements as a result of the risk factors set forth in this report and in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. 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 -- Second-Generation Automated Manufacturing Line," "--Competition," "--Patents," "--Licensing," and "--Risk Factors," and under Item 7 -- "Management's Discussion and Analysis of Financial Condition and Results of Operations." The risk factors contained in the Annual Report on Form 10-K may not be exhaustive. Therefore, the information contained in that Form 10-K should be read together with other reports and documents that the Company files with the Securities and Exchange Commission from time to time, including Forms 10-Q, 8-K and 10-K, which may supplement, modify, supersede or update those risk factors. Results of Operations Three months ended September 30, 2000 compared to three months ended September 30, 1999 Net revenues for the third quarter of 2000 were $67,851,000, an increase of $18,478,000 (37.4%) as compared to $49,373,000 for the same period a year ago. The growth in net revenues resulted primarily from a net increase of unit shipments of standard and custom products of approximately $19,762,000 due to increases in demand for first and second generation products. Gross margin increased $8,659,000 (40.5%) to $30,030,000 from $21,371,000, and increased as a percentage of net revenues from 43.3% to 44.3%. The primary component of the increase in gross margin dollars and percentage was due to an increase in net revenues. Selling, general and administrative expenses were $11,155,000 for the period, an increase of $2,103,000 (23.2%) over the same period in 1999. As a percentage of net revenues, selling, general and administrative expenses decreased to 16.4% from 18.3%. The principal components of the $2,103,000 increase were $662,000 (21.1%) of increased compensation expense, $566,000 (44.5%) of increased sales commission expense, $319,000 (233.3%) of increased legal expense and $285,000 of payroll tax expense associated with the exercise of stock options.

FORM 10-Q PART I ITEM 2 PAGE 7 VICOR CORPORATION Management's Discussion and Analysis of Financial Condition and Results of Operations September 30, 2000 (continued) Research and development expenses increased $29,000 (0.6%) to $4,962,000 and decreased as a percentage of net revenues to 7.3% from 10.0%. The principal components of the $29,000 increase were $238,000 (9.3%) of increased compensation expense and $61,000 (25.4%) of increased research and development costs associated with the operations of the Vicor Integrated Architects (VIA), offset by $335,000 (40.0%) of decreased project materials costs. Other income decreased $45,000 (5.7%) from the same period a year ago to $743,000. Other income is primarily comprised of interest income derived from invested cash and cash equivalents, as well as a note receivable associated with the Company's real estate transaction. Other income decreased due to the write-down of $390,000 for certain equipment no longer in use, offset by an increase in interest income due to an increase in cash and cash equivalent balances and an increase in average interest rates. Income before income taxes was $14,656,000, an increase of $6,482,000 (79.3%) compared to the same period in 1999. As a percentage of net revenues, income before income taxes increased to 21.6% from 16.6% primarily due to the gross margin increase generated by the increased net revenues, combined with a decrease in operating expenses as a percentage of net revenues. The effective tax rate for the third quarter of 2000 was 31.5%, compared to 32.0% for the same period in 1999. Net income per share (diluted) was $.23 for the third quarter of 2000, compared to $.13 for the third quarter of 1999, an increase of $.10. Nine months ended September 30, 2000 compared to nine months ended September 30, 1999 Net revenues for the first nine months of 2000 were $188,415,000, an increase of $52,270,000 (38.4%) as compared to $136,145,000 for the same period a year ago. The growth in net revenues resulted primarily from a net increase of unit shipments of standard and custom products of approximately $58,091,000 offset by a decrease in license revenue of $5,821,000. The decrease in license revenues was primarily due to non-recurring payments from licensees for past use of Vicor's intellectual property in 1999. Gross margin increased $23,093,000 (39.2%) to $81,953,000 from $58,860,000 and increased as a percentage of net revenues from 43.2% to 43.5%. The primary components of the increase in gross margin dollars and percentage was the increase in net revenues, partially offset by changes in the revenue mix.

FORM 10-Q PART I ITEM 2 PAGE 8 VICOR CORPORATION Management's Discussion and Analysis of Financial Condition and Results of Operations September 30, 2000 (continued) Selling, general and administrative expenses were $32,035,000 for the period, an increase of $5,540,000 (20.9%) over the same period in 1999. As a percentage of net revenues, selling, general and administrative expenses decreased to 17.0% from 19.5%. The principal components of the $5,540,000 increase were $1,594,000 (47.6%) increase in sales commission costs, $1,311,000 (13.8%) increase in compensation expense, $664,000 (39.1%) in increased advertising costs and $619,000 of payroll tax expense associated with the exercise of stock options. Research and development expenses increased $628,000 (4.2%) to $15,581,000 and decreased as a percentage of net revenues to 8.3% from 11.0%. The principal component of the $628,000 increase was $1,208,000 (16.2%) of increased compensation expense, offset by a $723,000 (26.1%) decrease in project material costs. Other income increased $416,000 (18.2%) from the same period a year ago, to $2,698,000. Other income is primarily comprised of interest income derived from invested cash and cash equivalents as well as from a note receivable associated with the Company's real estate transaction. Other income increased primarily due to an increase in interest income due to an increase in cash and cash equivalent balances and an increase in average interest rates, partially offset by write-downs of $550,000 for certain equipment no longer in use. Income before income taxes was $37,035,000, an increase of $17,341,000 (88.1%) compared to the same period in 1999. As a percentage of net revenues, income before income taxes increased from 14.5% to 19.7% primarily due to the gross margin increase generated by the increased net revenues. The effective tax rate for the nine months ended September 30, 2000 was 31.5%, compared to 32.0% for the same period in 1999. Net income per share (diluted) was $.59 for the nine months ended September 30, 2000, compared to $.32 for the same period in 1999, an increase of $.27.

FORM 10-Q PART I ITEM 2 PAGE 9 VICOR CORPORATION Management's Discussion and Analysis of Financial Condition and Results of Operations September 30, 2000 (continued) Liquidity and Capital Resources At September 30, 2000 the Company had $76,037,000 in cash and cash equivalents. The ratio of current assets to current liabilities was 6.6:1 compared to 7.5:1 at December 31, 1999. Working capital increased $20,719,000, from $123,017,000 at December 31, 1999 to $143,736,000 at September 30, 2000. The primary factors affecting the working capital increase were an increase in cash of $6,928,000 and accounts receivable and inventories of $20,467,000 offset by an increase in current liabilities of $6,804,000. The primary sources of cash were $30,390,000 from operating activities and $7,549,000 from the issuance of Common Stock upon the exercise of stock options. The primary uses of cash for the nine months of 2000 were for the acquisition of treasury stock of $19,646,000 and additions to property and equipment of $11,932,000. The Company plans to make continuing investments in manufacturing equipment, much of which is built internally, particularly for the Company's second generation products. The internal construction of manufacturing machinery, in order to provide for additional manufacturing capacity, is a practice which the Company expects to continue over the next several years. In February 2000, the Board of Directors of the Company authorized the repurchase of up to $30,000,000 of the Company's Common Stock, of which approximately $13,500,000 remains available as of September 30, 2000. The plan authorizes the Company to make such repurchases from time to time in the open market or through privately negotiated transactions. The timing of this program and the amount of the stock that may be repurchased is at the discretion of management based on its view of economic and financial market conditions. During the nine month period ended September 30, 2000, the Company spent $19,646,000 for the repurchase of its Common Stock under the current and a prior plan. 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 September 30, 2000, the Company had approximately $1,700,000 of capital expenditure commitments. The Company does not consider the impact of inflation and changing prices on its business activities or fluctuations in the exchange rates for foreign currency transactions to have been significant during the last three fiscal years.

FORM 10-Q PART I ITEM 3 PAGE 10 VICOR CORPORATION September 30, 2000 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 fluctuations in foreign currency exchange rates. The Company's exposure to market risk for a change in interest rates relates primarily to the Company's cash and cash equivalents. As the Company's cash and cash equivalents consist principally of money market securities, which are short-term in nature, the Company's exposure to market risk on interest rate fluctuations is not significant. Substantially all of the Company's international sales are priced in U.S. dollars. As a result, the Company's exposure to market risk for fluctuations in foreign currency exchange rates relates primarily to the operations of Vicor Japan Company, Ltd. ("VJCL"). The Company believes that this market risk is currently not material due to the relatively small size of VJCL's operations.

FORM 10-Q PART II ITEM 1-6 PAGE 11 VICOR CORPORATION Part II - Other Information September 30, 2000 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 Not applicable. Item 5 - Other Information Not applicable. Item 6 - Exhibits and Reports on Form 8-K a. Exhibits - 27.1 Financial Data Schedule b. Reports on Form 8-K - none.

FORM 10-Q PART II PAGE 12 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: November 9, 2000 By: /s/ Patrizio Vinciarelli ------------------------------------ Patrizio Vinciarelli President and Chairman of the Board Date: November 9, 2000 By: /s/ Mark A. Glazer ------------------------------------ Mark A. Glazer Chief Financial Officer

5 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 76,037 0 44,241 0 42,051 169,397 187,432 79,568 293,607 25,661 0 0 0 485 261,946 293,607 67,851 67,851 37,821 37,821 0 0 0 14,656 4,617 0 0 0 0 10,039 .24 .23