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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31,
2010
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission file number 0-18277
VICOR CORPORATION
(Exact name of registrant as
specified in its charter)
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Delaware
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04-2742817
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(State or other jurisdiction of
incorporation or organization)
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(IRS employer
identification no.)
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25 Frontage Road, Andover,
Massachusetts
(Address of principal executive offices)
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01810
(Zip code)
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Registrants telephone number, including area code:
(978) 470-2900
Securities registered pursuant to Section 12(b) of the
Act:
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Common Stock, $.01 par Value
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The NASDAQ Stock Market, LLC
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(Title of Class)
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(Name of Each Exchange on Which Registered
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Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
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 if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large Accelerated Filer o
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Accelerated Filer þ
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Non-accelerated Filer o
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Smaller Reporting Company o
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
The aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $246,164,100
as of June 30, 2010.
On February 28, 2011, there were 30,003,149 shares of
Common Stock outstanding and 11,767,052 shares of
Class B Common Stock outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions of the Companys definitive proxy statement (the
Definitive Proxy Statement) to be filed with the
Securities and Exchange Commission pursuant to
Regulation 14A and relating to the Companys 2011
annual meeting of stockholders are incorporated by reference
into Part III.
PART I
In this Annual Report on
Form 10-K,
unless the context indicates otherwise, references to
Vicor, the Company, our
company, we, us, our,
and similar references, refer to Vicor Corporation.
This Annual Report on
Form 10-K
contains 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. Forward-looking
statements also include statements regarding: the level of
customer orders and the delivery lead times associated
therewith; the derivation of a portion of our sales in each
quarter from orders booked in the same quarter; our plans to
invest in research and development and expanded manufacturing
capacity; our belief regarding currency risk being mitigated
because of limited foreign exchange fluctuation exposure; our
continued success depending in part on its ability to attract
and retain qualified personnel; our belief that cash generated
from operations and the total of our cash and cash equivalents
and short-term investments will be sufficient to fund operations
for the foreseeable future; our intention regarding protecting
our rights under our patents; and our expectation that no
current litigation or claims will have a material adverse impact
on its financial position or results of operations. These
statements are based upon our current expectations and estimates
as to the prospective events and circumstances that may or may
not be within our control and as to which there can be no
assurance. Actual results could differ materially from those
implied by forward-looking statements as a result of various
factors, including our ability to: hire and retain key
personnel; develop and market new products and technologies cost
effectively and on a timely basis; leverage our new technologies
in standard products to promote market acceptance of our new
approach to power system architecture; leverage design wins into
increased product sales; continue to meet requirements of key
customers and prospects; enter into licensing agreements
increasing our market opportunity and accelerating market
penetration; realize significant royalties under such licensing
agreements; achieve sustainable bookings rates for our products
across both markets and geographies; improve manufacturing and
operating efficiencies; successfully enforce our intellectual
property rights; successfully defend outstanding litigation; and
maintain an effective system of internal controls over financial
reporting, including our ability to obtain required financial
information for investments on a timely basis, our ability to
assess the value of assets, including illiquid investments, and
the accounting therefor. These and other factors that may
influence actual results are described in this Annual Report on
Form 10-K,
including but not limited to those described under Part I,
Item I Business, under
Part I, Item 1A 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 discussion of our business contained herein, including the
identification and assessment of factors that may influence
actual results, may not be exhaustive. Therefore, the
information presented should be read together with other
documents we file with the Securities and Exchange Commission
from time to time, including
Forms 10-Q
and 8-K,
which may supplement, modify, supersede or update the factors
discussed in this Annual Report on
Form 10-K.
We do not undertake any obligation to update any forward-looking
statements as a result of future events or developments.
Overview
We design, develop, manufacture and market modular power
components and complete power systems. Power systems are
incorporated into virtually all electronic equipment. In
equipment utilizing Alternating Current (AC) voltage
from a primary source (for example, a wall outlet), a power
system converts AC voltage into the stable Direct Current
(DC) voltage necessary to power subsystems
and/or
individual applications or loads. In many electronic
devices, this DC voltage may be further converted to one or more
lower voltages required by a range of loads. In equipment
utilizing DC voltage from a primary source (for example, a
generator or battery pack), the initial DC voltage frequently
requires further conversion to one or more lower voltages.
Because numerous applications requiring different DC voltages
and varied power ratings may exist within an electronic device,
and system power architectures themselves vary, we offer an
extensive range of products and accessories in a myriad of
application-specific configurations.
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Since our founding, our product strategy has been driven by
innovations in design, largely enabled by our focus on the
development of differentiated technologies, which often are
implemented in proprietary semiconductor circuitry. Many of our
products incorporate a high frequency electronic power
conversion technology called zero current / zero
voltage switching (ZCS/ZVS), which enabled the
design of DC-DC converter modules that were much smaller and
more efficient than conventional alternatives. Emphasizing the
superior power density and performance advantages of this
technology, our primary product strategy since our founding has
been to offer a comprehensive range of component-level building
blocks to configure a power system specific to a customers
needs. Since introducing and popularizing the encapsulated
brick during the 1980s, our product focus has been
on high density DC-DC converters, which provide the isolation,
transformation, regulation, filtering,
and/or input
protection necessary to power and protect sophisticated
electronic loads. A secondary and highly complementary product
strategy has been to incorporate our component-level building
blocks into complete power systems representing turnkey AC-DC
and DC-DC solutions for our customers power needs.
Our product strategy is now increasingly focused on the next
generation of component-level building block, the V*I
Chiptm
module, which incorporates our latest advances in
ZCS/ZVS technology and other proprietary power conversion
innovations. We believe V*I Chip converters offer unprecedented
power conversion density (i.e., the output power in Watts as a
function of the size of the component in cubic inches),
performance (i.e., benchmarks related to the capabilities of the
component, such as conversion efficiency), and flexibility
(i.e., the ability of our customers to implement a broad range
of possible configurations).
The applications in which these power conversion and power
management products are used are in the higher-performance,
higher-power segments of the power systems market, including, in
alphabetical order, aerospace and defense electronics,
enterprise and high performance computing, industrial
automation, telecommunications and networking infrastructure,
test and measurement instrumentation, and vehicles and
transportation. Our products are sold worldwide to customers
ranging from global original equipment manufacturers
(OEMs) and their contract manufacturers to smaller,
independent manufacturers of highly specialized electronic
devices.
Our business segments are organized by key product lines:
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Our Brick Business Unit (BBU) segment designs,
develops, manufactures and markets modular power converters in
two formats: our well-established encapsulated modules , known
as bricks, and our newer line of modular power converters that
incorporate our V*I Chip technology into innovative packaging,
which we market as VI
Bricktm
modules. The BBU also designs, develops, manufactures and
markets a line of configurable products, which are
complete power supplies assembled using our modular power
components. The BBU includes the operations of our
Westcortm
division, which is focused only on AC-input configurable
products, the operations of Vicor Custom
Powertm
(previously known as Vicor Integration
Architectstm),
which is our turnkey custom power solutions business, and Vicor
Japan Company, Ltd. (VJCL), our Japanese subsidiary.
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Our V*I Chip Business Unit (V*I Chip) consists of
V*I Chip Corporation, a wholly-owned subsidiary that designs,
develops, manufactures and markets a range of advanced power
conversion components, including those that enable our
Factorized Power
Architecturetm
(FPA). In 2003, we introduced FPA, a new power
system architecture based on an array of proprietary power
conversion innovations building upon our long-standing
leadership in the design of power conversion technologies. We
believe FPA provides power system designers enhanced performance
at a lower cost than can be attained with conventional power
architectures. In 2010, we introduced two new power converter
products, the
PFMtm
and the
DCMtm,
which exploit proprietary V*I Chip power conversion innovations.
The PFM and DCM can be used either as components of FPA or other
power system distribution architectures. As V*I Chip converters
and FPA represent innovative alternatives to such conventional
products and architectures, we established a separate business
unit to enable the organizational focus necessary to support
early adopters of these disruptive technologies.
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Our Picor Business Unit (Picor) consists of Picor
Corporation, a majority-owned subsidiary of Vicor. Picor is a
fabless (i.e., it utilizes third parties to manufacture its
products) designer, developer,
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and marketer of high performance integrated circuits and related
products for use in a variety of power system applications.
Picor develops these products to be incorporated into
Vicors products, to be sold as a complement to our
products, or for sale to third parties for separate
applications. Much of the differentiation of our BBU and V*I
Chip products has been a result of implementation of our power
conversion innovations in proprietary semiconductor circuitry.
Because of the considerable design expertise embodied in this
captive organization and the potential for success as a merchant
vendor of an expanding portfolio of proprietary products, we
established Picor as a separate business unit to enable
organizational focus and to facilitate a distinct
go-to-market
strategy.
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Vicor B.V., a wholly-owned subsidiary incorporated in the
Netherlands, serves as a European distribution center. VLT, Inc.
is our wholly-owned licensing subsidiary. VICR Securities
Corporation is our wholly-owned subsidiary established to hold
certain investment securities.
We are headquartered in Andover, Massachusetts, where our
manufacturing facility is located. V*I Chip Corporation also is
headquartered in Andover, Massachusetts. Our Westcor division
has a design and assembly facility in Sunnyvale, California. Our
VJCL subsidiary, which is engaged in sales and customer support
activities exclusively for the Japanese market, is located in
Tokyo, Japan. Our six Vicor Custom Power locations are
geographically distributed around the United States. We have
customer support and engineering offices, which we call
Technical Support Centers, in the United States, the United
Kingdom, France, Germany, Italy, and Hong Kong, China. Picor
Corporation is headquartered in North Smithfield, Rhode Island.
All of the above named entities are consolidated in the
financial statements presented herein.
We were incorporated in Delaware in 1981, and our common stock
was listed on the NASDAQ National Market System in April 1990
under the ticker symbol of VICR.
We maintain a website with the address www.vicorpower.com and
make available free of charge through this website our Annual
Reports on
Form 10-K,
Quarterly Reports on
Form 10-Q,
Current Reports on
Form 8-K,
and amendments to these reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of
1934 (the Exchange Act), as soon as reasonably
practicable after we electronically file such material with, or
furnish such material to, the Securities and Exchange
Commission. The information contained on our website is not a
part of, nor incorporated by reference into, this Annual Report
on
Form 10-K
and shall not be deemed filed under the Exchange Act.
Market
Background, Product Trends and Vicor Strategy
The market for power supplies and their enabling components
continues to evolve in response to advancing technologies and
corresponding changes in customer requirements. Similarly, we
evolved our strategy to address evolving market challenges and
opportunities. Many of the ongoing changes in the market,
particularly in those segments in which we compete, have been
characterized by improvement in product performance (e.g., power
conversion efficiency), reduction in product form factor (i.e.,
size), and increased design flexibility (i.e., the ability of
customers to address their power requirements with a broad range
of alternative solutions). Product trends have been
characterized by the disaggregation of the functions of power
components such as DC-DC converters, thereby driving further
improvement in overall power supply performance, further
reduction in form factor, and greater flexibility in the way
designers implement power supply solutions.
In 1984, we introduced an enhancement of the standardized,
high-density power converter to the market: the
fully-encapsulated brick, utilizing our ZCS/ZVS technology, in
standardized dimensions of 4.6 x 2.4
x 0.5. Our innovative, patented technology provided
superior efficiency and overall performance in a small form
factor, while full encapsulation provided not only full
shielding from environmental influences, but enhanced thermal
performance characteristics. Such thermal performance
enhancement has been critical to the differentiated performance
of our power converters, as the by-product of voltage conversion
is heat, which must be dissipated in order to assure the
performance of the converter itself and the overall system to
which it is delivering power.
In response to market and technology trends and changes in our
customer requirements, we have implemented a strategy addressing
both the realities of the current power conversion marketplace
and our
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vision of the long-term direction of that marketplace. Our
strategy involves maintaining a viable, profitable legacy
business, while investing in the next generation of power
management components.
Our early technical and performance leadership contributed to
the development of an image in the market as a power component
innovator. The BBU experienced strong revenue growth and robust
profitability during the 1980s and 1990s, as important markets
for our products expanded. However, a significant amount of our
revenue was derived from the telecommunications infrastructure
market and, when that market collapsed in the early 2000s, we
had to reassess our product portfolio and overall competitive
positioning. Many of our domestic competitors faced the same
circumstances and reoriented their strategies to serve high
volume applications of large OEMs. In doing so, they moved much
of their manufacturing from the United States to lower cost
countries where the contract manufacturers used by their OEM
customers were based. We chose not to follow these competitors,
remained a domestic manufacturer, and shifted our competitive
positioning to one based on mass customization,
thereby offering customers a wider range of possible solutions
than those offered by our competitors.
As a part of our repositioning, we invested significantly in new
product designs that emphasized low cost and flexible
manufacturing, as well as the plant equipment and information
technology necessary to support such low cost and flexible
manufacturing, as well as shorter delivery lead times. We also
modified our
go-to-market
strategy to emphasize serving lower volume customers requiring
higher value solutions. As such, today our product portfolio is
extremely broad, while our customer base and the market segments
we serve are far more diverse than prior to the change in our
go-to-market
strategy. Our mass customization model allows us to profitably
meet the specific design and volume requirements of numerous,
relatively low volume customers, while avoiding the costs
associated with maintaining extensive inventories of finished
goods. Our decision to not pursue higher volume commodity
opportunities constrained our growth during the economic
recovery from 2004 into 2008, but our profitability during this
period benefited from our value-added approach. We believe this
approach has contributed to reduced volatility of our financial
performance during the current period of economic decline, as
our customers rely on us for power conversion solutions they
generally cannot obtain from our volume-oriented,
commodity-focused competitors.
At the same time we undertook a repositioning of the BBU, our
legacy business, we announced our vision for the future of
component-based power conversion: FPA and V*I Chip modules.
Since our founding, our products have been based on advanced,
highly-differentiated designs. Much of our intellectual property
is patented or otherwise proprietary to us. However, as is
typical across the information technology and electronics
markets, the segments in which we have competed matured
relatively quickly and became characterized by product
commoditization and price competition. Given our extensive
experience with power conversion technologies and our
understanding of trends in both technology and our markets, we
concluded the appropriate complement to maintaining our legacy
business would be to seek to redefine the competitive landscape
in the long-term in targeted market segments with our
innovative, flexible new power distribution architecture and our
next generation of advanced designs appropriate for applications
requiring highly differentiated performance (i.e., conversion
efficiency) and power density.
Picor is a highly complementary element of our strategy to
redefine the competitive landscape in the long term. Many of the
differentiated capabilities of our Brick and V*I Chip products
have been a result of implementation of our power conversion
innovations in proprietary semiconductor circuitry. Most
notably, proprietary, highly advanced microcontroller circuits
are found in many of our most successful switching power
components. While the majority of Picors activities to
date have involved supplying integrated circuits for internal
use, Picors strategy is to become a merchant vendor of
innovative power management circuitry, whether in individual
packages, multi-chip modules, or subassemblies. Picors
product roadmap includes the development of integrated power
management products targeted at lower power applications. As
such, Picors current and planned products represent a
complement to FPA and V*I Chip modules.
An important element of our strategy is to protect our
competitive leadership with domestic and foreign patents and
patent applications that cover our products and much of their
enabling technologies. We believe our competitive leadership is
further protected by proprietary trade secrets associated with
our use of certain
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components and materials of our own design, as well as our
significant experience with manufacturing, packaging and testing
these complex devices.
We continue to believe traditional power architectures, in the
longer run, may not provide the performance necessary to address
future power system requirements, given the trends toward lower
bus and load voltages, higher currents, more and diverse
on-board voltages, and the higher speeds and performance demands
of numerous complex loads. Our overall strategy is to develop
differentiated products to address these trends, while providing
competitively superior performance and reliability at a lower
overall cost.
Our
Products
Our website, www.vicorpower.com, sets forth detailed information
describing all of products and the applications for which they
may be used. The information contained on our website is not a
part of, nor incorporated by reference into, this Annual Report
on
Form 10-K
and shall not be deemed filed under the Exchange Act.
Our principal product lines are:
Bricks:
Modular Power Converters
Brick DC-DC power converters are well-established as an
important enabling component of conventional power systems
architectures. The BBU currently offers seven families of high
power density,
component-level DC-DC
power converters: the
VI-200tm,
VI-J00tm,
MI-200tm,
MI-J00tm,
Maxi, Mini and Micro families. Designed to be mounted directly
on a printed circuit board chassis using contemporary
manufacturing processes, each brick family is a comprehensive
set of products offered in a wide range of input voltage (10 to
425 Volts DC) and output power (10 to 600 Watts). This
allows end users to select power component products appropriate
to their individual applications. The product families differ in
maximum power ratings, performance characteristics, package size
and, in certain cases, characteristics specific to the targeted
market.
All of our traditional brick modules are encapsulated with a
dielectric, elastomeric, thermally conductive material, thereby
providing electrical insulation, thermal conductivity, and
environmental protection of the electronic circuitry.
Our Custom Module Design
Systemtm
(CMDS), a core component of the Vicor
PowerBenchtm
tool suite on our website, is a proprietary system enabling our
customers to specify on-line, and verify in real time, the
performance and attributes of its DC-DC converters. Not merely a
product configuration tool like those offered by competitors,
the CMDS enables the comprehensive design of DC-DC converters in
all of our established brick form factors (i.e., full, half and
quarter size), using patented web-based technology. CMDS is an
important element of our mass customization strategy.
The VI Brick combines the superior technical attributes of our
V*I Chip technology with robust packaging offering superior
thermal characteristics and facilitating a range of board
mounting alternatives. VI Brick models include high current
density / low voltage DC-DC converters, a wide range
of highly efficient bus converters, and individual models for
both regulation and transformation. We continue to focus our
product development efforts within the BBU on the design of VI
Brick modules. During 2010, we introduced the VI Brick
PFMtm,
an innovative AC-DC converter using V*I Chip technology. The
module incorporates active power factor correction and operates
over a wide rectified AC input voltage range providing a
regulated and isolated 48 Volt direct current output at up to
330 Watts. The high efficiency (93%) of the module and its
thermally adept VI Brick package provide a flexible AC to DC
power component.
Accessory
Power System Components
Accessory power system components, used with our component-level
power converters, integrate other important functions of the
power system, facilitating the design of complete power systems
by interconnecting several modules. These other functions
include input filtering, power factor correction, transient
protection and AC line rectification. In general, our broad line
of proprietary accessory components are used to condition
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and/or
filter the input and output voltages of the modular power
components, and therefore represents an important complement to
our converter component lines.
Examples of accessory products include our
VI-HAMtm
(Harmonic Attenuator Module), a universal-AC-input,
power-factor-correcting front end for use with compatible DC-DC
power converters, and our
VI-AIMtm
(AC Input Module), which provides input filtering, transient
protection and rectification of the AC line.
Configurable
Products
Utilizing our modular power components as core elements, we have
developed several configurable product families that provide
complete power solutions configured to a customers
specific needs. These products exploit the benefits and
flexibility of the modular approach to offer higher performance,
higher power densities, lower costs, and faster delivery than
many competitive offerings. Configurable products are designed,
developed and manufactured by the BBU, which offers a range of
AC-DC and DC-DC products, by its Westcor division, which focuses
on high-power AC-DC power supplies, and by VJCL, which offers
configurable power supplies addressing the specific requirements
of Japanese customers.
Most information technology, process control, and industrial
electronic products operate directly off of AC lines and, as
such, require circuitry to convert AC line voltage into the
required DC voltage. Our configurable AC-DC power systems, the
FlatPACtm,
VIPACtm
Power System, and
LoPACtm
families, incorporate front-end AC-DC circuitry subassemblies,
thereby providing a complete power solution from AC line input
to one or more DC outputs. These configurable products are
characterized by their low-profile design and are configurable
in a range of sizes and outputs up to 1,500 Watts.
Many telecommunications switching, transportation and defense
electronic products are powered from central DC sources (e.g.,
generators or banks of batteries). Our configurable DC-DC power
systems, the VIPAC Array,
ComPACtm,
and
MegaModtm
families, also are characterized by a low-profile design,
including rugged, compact assemblies for chassis-mounted, bulk
power applications.
Our highest power configurable product line, the
MegaPACtm
family, is also among our most flexible solutions. A MegaPAC
consists of a fan-cooled chassis with up to 10 slots into which
are placed
ConverterPACtm
modules, which incorporate our brick power conversion modules,
allowing for a broad range of customer-specific configurations.
The MegaPAC itself can be configured to accept either AC or DC
inputs, and output power can be as high as 4,000 Watts with up
to 20 outputs.
The VIPAC family of power systems is a class of user defined,
integrated modular power solution that leverages the latest
advances in Maxi, Mini, and Micro DC-DC converter technology and
modular front ends. VIPAC combines application specific front
end units, a choice of advantageous chassis styles and, in AC
input versions, remotely located
hold-up
capacitors to provide fast, flexible and highly reliable power
solutions for a wide range of demanding applications.
The web-based Vicor Computer Assisted Design (VCAD)
tool, a component of Vicor PowerBench, can be utilized by the
customer to specify and verify, in real time, that
customers desired configuration of our VIPAC family of
configurable products from a broad range of inputs, outputs,
packaging and optional features. Similarly, our web-based Vicor
System Product Online Configurator (VSPOC), also a
component of Vicor PowerBench, allows customers to configure and
order Westcor AC-DC power supplies.
Customer
Specific Power System Products
Certain customers rely on us to design, develop and manufacture
customized power systems to meet performance
and/or form
factor requirements that cannot be met with
off-the-shelf
system solutions. By utilizing our power components as
building-blocks in developing these custom power systems, we
have been able to meet such customers needs with reliable,
high power density, turnkey solutions. These low-volume, high
value-add products, besides meeting customers specific
requirements, frequently are designed to function reliably in
the harsh environments associated with aerospace and defense
applications.
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We pursue custom opportunities through our Vicor Custom Power
network, which consists of six regional design, assembly and
customer support locations. Of the six locations, one is a
division, three are either wholly-owned or majority-owned
subsidiaries, and two are less than 50%-owned subsidiaries.
V*I
Chip Products
We have pioneered an innovative new board level power
architecture, FPA, which separates (or factorizes)
the basic functions of DC-DC power conversion (voltage
transformation, regulation, and isolation) into separate power
components called V*I Chip modules. Our V*I Chip converters
represent the next generation of modular power components,
providing power systems designers the ability to address
increasingly challenging requirements. With each new generation
of microprocessor, application specific integrated circuit, and
memory, the trend has been toward lower voltages, higher
currents, higher speeds and more on-board voltages. System
designers must contend with a range of lower voltages, improve
overall power system efficiency, and deliver the solution in an
ever-smaller form factor.
We believe FPA provides power system designers superior power
density, conversion efficiency, transient responsiveness, noise
performance, reliability, and design flexibility at a lower
overall cost than attained with conventional board level power
architectures. We currently offer three V*I Chip modules for
implementation of FPA designs: the
BCMtm
(Bus Converter Module), an intermediate bus converter; the
PRMtm
(Pre-Regulator Module), a non-isolated regulator; and the
VTMtm
(Voltage Transformation Module), an isolated current multiplier.
All three modules are offered in full (i.e., 1.1 square
inch) and half (i.e., 0.57 square inch) modules.
The BCM provides an isolated, unregulated intermediate bus
voltage, at efficiencies up to 96%, to power non-isolated
converters at the
point-of-load
from a narrow range DC input. The PRM is a non-isolated
regulator, operating at up to 97% efficiency, capable of both
boosting (i.e., increasing) and bucking (i.e., reducing) an
input voltage and providing a regulated, adjustable output
voltage or factorized bus. VTMs are designed to meet
the demands of advanced microprocessor and memory applications
at the point of load with fixed ratio voltage transformation
with extremely fast transient response, while providing
isolation from input to output.
We have successfully deployed V*I Chip modules in FPA
implementations in several demanding application categories for
which they are well suited, including high performance
computing, advanced test and measurement, and defense
electronics.
As addressed above in the context of its use in a VI Brick
product, in 2010 V*I Chip introduced the PFM converter, an
isolated AC-DC module offering active PFC. The PFM has
dimensions of 1.92 x 1.91 x 0.37
(approximately twice size of a full size BCM, PRM or VTM module).
Picor
Products
Picor designs, develops, and markets high performance integrated
circuits and related products for use in a variety of power
system applications. Picor is pursuing a merchant strategy and
offers a growing range of products for sale to third parties.
In 2010, Picor introduced the
Cool-Powertm
module, a DC-DC converter delivering 60 Watts of output power in
half the size of competitive solutions. Picors product
portfolio includes a range of
Cool-ORingtm
full-function Active ORing solutions and discrete Active ORing
controllers. These solutions address the requirements of
redundant power architectures implemented in todays
high-availability systems such as enterprise servers, high
performance computing, and telecom and communications
infrastructure systems. Picor also offers a range of
QuietPowertm
output (QPO) and input (QPI) electromagnetic interference
filters differentiated by their small, surface mount
System-in-Package
and low cost. Products are targeted at a range of industry and
customer applications.
MIL-COTS
Products
We offer versions of our commercial-off-the-shelf brick
converters and accessories, configurable power supplies, and V*I
Chip converters meeting certain specification standards
established by the U.S. Department of Defense. Such
MIL-COTS products meet the performance and
reliability requirements associated with use in harsh and
demanding environments.
8
Sales and
Marketing
We sell our products in North America and South America through
a network of independent sales representative organizations and
in other areas of the world through independent distributors.
Sales activities are managed by a staff of Area Sales Directors,
Regional and National Account Sales Managers, and sales
personnel in the following locations: our world headquarters in
Andover, Massachusetts; a Technical Support Center in Lombard,
Illinois; our Westcor division in Sunnyvale, California; Vicor
Custom Power locations in Cedar Park (Austin), Texas, Milwaukie
(Portland), Oregon, and Oceanside (San Diego), California;
our subsidiary in Tokyo, Japan; and our Technical Support
Centers in Munich, Germany, Camberley, Surrey, England, Milan,
Italy, Paris, France, and Hong Kong, China.
International sales, as a percentage of total net revenues, were
approximately 49% in 2010, 41% in 2009, and 42% in 2008,
respectively.
Because of the technically complex nature of our products, we
maintain a staff of Field Applications Engineers to support our
sales activities. Field Application Engineers provide direct
technical sales support worldwide by reviewing new applications
and technical matters with existing and potential customers.
Product Line Engineers, located in our Andover headquarters,
support field application engineers assigned to all of our
locations.
We generally warrant our products for a period of two years.
During 2010, we introduced an electronic commerce capability
through our website, www.vicorpower.com. Registered customers in
the U.S., Canada and certain European countries are now able to
purchase prototype quantities of selected products online. We
intend to expand our online capability in the near future to
include customers from other countries.
We also sell directly to customers through Vicor
Expresstm,
an in-house distribution group. Through advertising and periodic
mailing of its catalogs, Vicor Express generally offers
customers rapid delivery on small quantities of certain standard
products. Through Vicor B.V., Vicor Express operates in Germany,
France, Italy and England.
Applications
and Customers
The applications in which our power conversion and power
management products are used are in the higher-performance,
higher-power segments of the power systems market. Our products
are sold worldwide to customers ranging from global OEMs and
their contract manufacturers to smaller, independent
manufacturers of highly specialized electronic devices. For the
years ended December 31, 2010, two customers accounted for
approximately 12.3% and 11.5% of net revenues, respectively.
During 2009 and 2008, no single customer accounted for more than
10% of our net revenues.
Backlog
As of December 31, 2010, we had a backlog of approximately
$78,900,000 compared to $57,200,000 on December 31, 2009.
Backlog is comprised of orders for products for which shipment
is scheduled within the next 12 months. A portion of our
sales in any quarter is, and will continue to be, derived from
orders booked in the same quarter.
Research
and Development
As a basic element of our long-term strategy, we are committed
to the continued advancement of power conversion technology and
power component product development. We invested approximately
$36,000,000, $31,600,000, and $31,400,000 in research and
development in 2010, 2009, and 2008, respectively. Investment in
research and development represented approximately 14.4%, 16.0%,
and 15.3% of net revenues in 2010, 2009, and 2008, respectively.
We intend to continue to invest a significant percentage of
revenues in research and development activities.
9
Manufacturing
and Quality Assurance
Our principal manufacturing processes consist of assembly of
electronic components onto printed circuit boards, automatic
testing of components, wave, reflow and infrared soldering of
assembled components, encapsulation of converter subassemblies,
final environmental stress screening of certain products and
product test using automatic test equipment.
We continue to pursue a manufacturing strategy based upon the
phased acquisition
and/or
fabrication, qualification and integration of automated
manufacturing equipment to reduce manufacturing costs, increase
product quality and reliability and enable rapid and effective
expansion of capacity, as needed. We intend to make continuing
investments in manufacturing equipment, particularly for our V*I
Chip and VI Brick products and replacement of manufacturing
equipment utilized by the BBU.
Components and materials used in our products are purchased from
a variety of vendors. Most of the components are available from
multiple sources. In instances of single source items, we
maintain levels of inventories we consider to be appropriate to
enable meeting the delivery requirements of customers. Incoming
components, assemblies and other parts are subjected to several
levels of inspection procedures.
Our compliance with applicable environmental laws has not had a
material effect on our financial condition or operating results.
Product quality and reliability are a critical to our success
and, as such, we emphasize quality and reliability in our design
and manufacturing activities. We follow industry best practices
in manufacturing and are compliant with ISO 9001 certification
standards (as set forth by the International Organization for
Standardization). Our quality assurance practices include
rigorous testing and, as necessary, burn-in of our products
using automated equipment.
Competition
The power conversion industry is highly competitive. It remains
highly fragmented, despite significant consolidation during the
prior decade. Numerous power supply manufacturers target market
segments and applications similar to those we target. Several of
these competitors have significantly greater financial and
marketing resources and longer operating histories than we do.
With the BBU, our strategy is largely based on differentiated
responsiveness to customer requirements enabled by our mass
customization capabilities. We believe we have a strong
competitive position, particularly with customers who need
small, high density power system solutions requiring a variety
of input-output configurations. We compete on the basis of
differentiation, offering a broad product line and mass
customization abilities. We also compete by emphasizing
technical innovation, product performance, and service and
technical support. We believe the principal competitive
variables in the market segments in which the BBU competes are
price, performance, and the level of service and technical
support offered.
With V*I Chip, our strategy is largely based on differentiated
products offered to, at least during the early adoption of such
products, a limited number of larger potential customers
well-positioned to benefit from the advantages offered by our
products (e.g., global original equipment manufacturers in
computing, networking, and test and measurement). V*I Chip
currently competes with vendors of power component solutions,
many of which are the manufacturers with which the BBU competes.
In the coming years, we anticipate a significantly broadened
market for V*I Chip, as awareness of the advantages of V*I Chip
spreads and a broader audience of potential customers is
reached. We also anticipate the introduction of the PFM and DCM
concepts will accelerate adoption of our broadened V*I Chip
product line, as we will be well-positioned to offer
comprehensive AC-DC and DC-DC solutions across a wider range of
applications.
Picor and, to a lesser extent, V*I Chip compete with suppliers
of integrated circuits for power conversion applications, many
of which have significantly greater financial and marketing
resources and longer operating histories. We believe Picor is
developing a strong competitive position based on innovative
semiconductor design and PSiP packaging. Based on Picors
expanding product roadmap, we anticipate Picor will experience
10
more direct competition with these larger suppliers, as we
target their customers with our increasingly silicon-centric
power conversion solutions.
Patents
and Intellectual Property
We believe our patents afford advantages by building fundamental
and multilayered barriers to competitive encroachment upon key
features and performance benefits of our principal product
families. Our patents cover the fundamental conversion
topologies used to achieve the performance attributes of our
converter product lines; converter array architectures; product
packaging design; product construction; high frequency magnetic
structures; as well as automated equipment and methods for
circuit and product assembly.
We have been issued 129 patents in the United States (which
expire between 2010 and 2026). We also have a number of patent
applications pending in the United States, Europe and the Far
East. We intend to vigorously protect our rights under these
patents. Although we believe patents are an effective way of
protecting our technology, there can be no assurances that our
patents will prove to be enforceable.
Licensing
In addition to generating revenue from product sales, licensing
is an element of our strategy for building worldwide product and
technology acceptance and market share. In granting licenses, we
generally retain the right to use our patented technologies and
manufacture and sell our products in all licensed geographic
areas and fields of use. Licenses are granted and administered
through our wholly-owned subsidiary, VLT, Inc., which owns our
patents. Revenues from licensing arrangements have not exceeded
10% of our consolidated revenues in any of the last three fiscal
years.
Employees
As of December 31, 2010, we had approximately 1,002 full
time employees and 68 part time employees.
We believe our continued success depends, in part, on our
ability to attract and retain qualified personnel. Although
there is strong demand for qualified personnel, we have not to
date experienced difficulty in attracting and retaining
sufficient engineering and technical personnel to meet our needs
(see Part I, Item 1A Risk
Factors).
None of our employees are subject to a collective bargaining
agreement.
11
This Annual Report on
Form 10-K
contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as
amended. Actual results could differ materially from those
projected in the forward-looking statements as a result of,
among other factors, the risk factors set forth below.
Our
future operating results are difficult to predict and are
subject to fluctuations.
Our future operating results, including revenues, gross margins,
operating expenses and net income (loss), have fluctuated on a
quarterly and annual basis, are difficult to predict, and may be
materially affected by a number of factors, many of which are
beyond our control, including:
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the effects of adverse economic conditions in the United States
and international markets, especially in light of the continued
challenges in global credit and financial markets;
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changes in customer demand for our products and for end products
that incorporate our products;
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the timing of our new product announcements or introductions, as
well as those by our competitors;
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our ability to effectively coordinate changes in the mix of
products we manufacture and sell, while managing our ongoing
transition in organizational focus from traditional brick power
components to our new V*I Chip, VI Brick and Picor products;
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the level of demand and purchase orders from our customers, and
our ability to adjust to changes in demand and purchase order
patterns;
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changes in order lead times and our turns volumes
(i.e., the volumes of purchase orders received and shipped
within an individual quarter);
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the timing, delay or cancellation of significant customer orders
and our ability to manage inventory;
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the ability of our third party suppliers, subcontractors and
manufactures to supply us with sufficient quantities of high
quality products or components, on a timely basis;
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the effectiveness of our efforts to reduce product costs and
manage operating expenses;
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our ability to utilize our manufacturing facilities at efficient
levels, maintaining production capacity and manufacturing yields;
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the ability to hire, retain and motivate qualified employees to
meet the demands of our customers;
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intellectual property disputes;
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potential significant litigation-related costs;
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costs related to compliance with increasing worldwide
environmental and other regulations; and
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the effects of public health emergencies, natural disasters,
security risk, terrorist activities, international conflicts and
other events beyond our control.
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As a result of these and other factors, we cannot assure you
that we will not experience significant fluctuations in future
operating results on a quarterly or annual basis. In addition,
if our operating results do not meet the expectations of
investors, the market price of our common stock may decline.
Our
stock price has been volatile and may fluctuate in the
future.
The trading price of our common stock has and may continue to
fluctuate significantly. Such fluctuations may be influenced by
many factors, including:
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the recent unprecedented volatility of the financial markets;
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uncertainty regarding the prospects of domestic and foreign
economies;
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uncertainty regarding domestic and international political
conditions, including tax policies;
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our performance and prospects;
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the performance and prospects of our major customers;
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investor perception of our company and the industry in which we
operate;
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the absence of earnings estimates and supporting research by
investment analysts;
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the liquidity of the market for our common stock;
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the uncertainty of the declaration and payment of future cash
dividends on our common stock; and
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the concentration of ownership of our common stock by
Dr. Vinciarelli, our Chairman of the Board, Chief Executive
Officer, and President.
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Public stock markets have recently experienced extreme price and
trading volume volatility. This volatility significantly and
negatively affected the market prices of securities of many
technology companies, including the market price of our common
stock in late 2008 and early 2009. The return of such volatility
could result in broad market fluctuations that could materially
and adversely affect the market price of our common stock for
indefinite periods. In addition, fluctuations in our stock
price, volume of shares traded, and changes in our trading
multiples may make our stock attractive to certain categories of
investors who often shift funds into and out of stocks rapidly,
exacerbating price fluctuations in either direction.
The ownership of our common stock is concentrated between
Dr. Vinciarelli and a limited number of institutional
investors. Dr. Vinciarelli owned, as of December 31,
2010, 9,675,480 shares of our common stock, as well as
11,023,648 shares of our Class B common stock
(convertible on a
one-for-one
basis into common stock), together representing 50.5% of total
issued and outstanding shares. Certain institutional investors
have been long-term owners of our common stock and held in
aggregate, as of September 30, 2010 (the most recent
reporting date for institutional holders), over 15% of our
issued and outstanding shares. Accordingly, the market float for
our common stock and average daily trading volumes are
relatively small, which can negatively impact investors
ability to buy or sell shares of our common stock in a timely
manner.
We do not actively communicate with investment analysts and, as
a consequence, there are no earnings estimates or supporting
research coverage of our company. Because operating results have
fluctuated on a quarterly and annual basis, investors may have
difficulty in assessing our current and future performance.
In the past, we have declared and paid cash dividends on our
common stock. The payment of dividends is based on the periodic
determination by the Board of Directors that we have adequate
capital to fund anticipated operating requirements and that
excess cash is available for distribution to shareholders via a
dividend. We have no formal policy regarding dividends and, as
such, investors cannot make assumptions regarding the
possibility of future dividend payments nor the amounts and
timing thereof.
Dr. Vinciarelli owns 93.7% of our issued and outstanding
Class B shares, which possess 10 votes per share.
(Dr. Estia J. Eichten, a member of our Board of Directors,
owns the balance of Class B shares issued and outstanding.)
As such, Dr. Vinciarelli, controlling in aggregate 81.3% of
share voting power, has effective control of the governance of
the Company.
The
ongoing disruptions in the global economy, as well as continued
uncertainty in global financial markets, could materially and
adversely affect our business and results of
operations.
While global credit and financial markets appear to be
recovering from extreme disruptions experienced over the past
two years, uncertainty about continuing economic stability
remains. Global financial markets continue to experience
disruptions, including diminished liquidity and credit
availability. In particular, the recent European debt crisis and
related financial restructuring efforts has contributed to the
instability in global credit markets. Further disruption and
deterioration in economic conditions may reduce customer
purchases of our products, thereby reducing our revenues and
earnings. In addition, such adverse conditions may, among other
things, result in increased price competition for our products,
increased risk of excess and obsolete
13
inventories, increased risk in the collectability of our
accounts receivable from our customers, increased risk in
potential reserves for doubtful accounts and write-offs of
accounts receivable, and higher operating costs as a percentage
of revenues. The recent debt crisis in certain European
countries could cause the value of the Euro to deteriorate, thus
reducing the purchasing power of our European customers. Any of
these items individually, or in combination, could materially
and adversely affect our business and the results of operations.
In 2009, we took actions to address the effects of the economic
crisis, including a reduction in force and the implementation of
cost control and reduction efforts. While these actions
contributed to the positive operating results in 2010, it is
possible that we may need to take further cost control and
reduction efforts if economic conditions deteriorate again.
We
compete with many companies possessing far greater
resources.
Some of our competitors have greater financial, manufacturing,
technical, sales and marketing resources than we have. We
compete with domestic and foreign manufacturers of integrated
power supplies and power conversion components. With the growth
of our V*I Chip and Picor product lines, we increasingly are
competing with global manufacturers of power management
products. Competition is generally based on design and quality
of products, product performance, features and functionality,
and product pricing, availability and capacity, with the
relative importance of these factors varying among products,
markets and customers. Existing or new competitors may develop
products or technologies that more effectively address the
demands of our customers and markets with enhanced performance,
features and functionality or lower cost. If we fail to continue
to develop and commercialize leading-edge technologies and
products that are cost effective and maintain high standards of
quality, and introduce them to the market on a timely basis, our
competitive position and results of operations could be
materially adversely affected.
Our
future success increasingly depends upon our ability to develop
and market differentiated,
leading-edge
power conversion products for larger customers, potentially
contributing to lengthy product development and sales cycles
that may result in significant expenditures before revenues are
generated.
The power system industry and the industries in which many of
our customers operate are characterized by intense competition,
rapid technological change, product obsolescence and price
erosion for mature products, each of which could have an adverse
effect on our results of operations. We are following a strategy
based on the development of differentiated products addressing
what we believe to be the long-term limitations of traditional
power architectures. The development of such new products is
often a complex, time-consuming and costly process involving
significant investment in research and development, with no
assurance of return on investment. There can be no assurance we
will be able to develop and introduce new and improved products
in a timely or efficient manner or new and improved products, if
developed, will achieve market acceptance.
Our future success depends substantially upon customer
acceptance of our innovative products. As we have been in the
early stages of market penetration for these products, we have
experienced lengthy periods during which we have focused our
product development efforts on the specific requirements of a
limited number of large customers, followed by further periods
of delay before meaningful purchase orders are received. These
lengthy development and sales cycle times increases the
possibility that a customer may decide to cancel or change
product plans, which could reduce or eliminate our sales to that
customer. As a result, we may incur significant product
development expenses, as well as significant sales and marketing
expenses, before we generate the related revenues for these
products. Furthermore, we may never generate the anticipated
revenues from a product after incurring such expenses if our
customer cancels or changes its product plans.
Our
future operating results are dependent on the growth in our
customers businesses and on our ability to identify and
enter new markets.
We manufacture modular power components and power systems that
are incorporated into our customers electronic products.
Our growth is therefore dependent on the growth in the sales of
our customers products as well as the development by our
customers of new products. If we fail to anticipate changes in
our customers businesses and their changing product needs
or successfully identify and enter new markets, our results of
operations and financial position could be negatively impacted.
We cannot assure you that the
14
markets we serve will grow in the future, that our existing and
new products will meet the requirements of these markets or that
we can maintain adequate gross margins or profits in these
markets.
In particular, revenue growth in the V*I Chip segment and the
Vicor Custom Power group over the last several years has come
from either a limited number of customers or from a limited
number of significant customer programs. A decline in or
deferral of demand from one or several of these large customers
or the discontinuation of certain programs, or declines in our
other end-user markets in general, could have a material adverse
impact on our results of operations. In 2009 and 2010 several
large customers, due to uncertain conditions in their own
businesses, deferred placing purchase orders with us
and/or
deferred delivery of scheduled product shipments. As a result,
we incurred additional costs associated with managing our
inventory levels and scheduling our production activity. In
addition, our increased focus on either a limited number of
customers or a limited number of significant customer programs,
as well as our experience with the deferred purchase orders
and/or
delivery of certain scheduled product shipments, have
contributed to large variances in our reported quarterly ratio
of bookings to billings. Accordingly, comparison of our
book to bill ratios on a
quarter-to-quarter
basis can be misleading and may not accurately represent revenue
trends.
We
rely on third-party vendors and subcontractors for supply of
components and assemblies and, therefore, cannot control their
availability or quality.
We depend on third party vendors and subcontractors to supply
components and assemblies used in our products, some of which
are sole-sourced. If suppliers or subcontractors cannot provide
their products or services on time or to our specifications, we
may not be able to meet the demand for our products and our
delivery times may be negatively affected. In addition, we
cannot directly control the quality of the products and services
provided by third parties. In order to grow, we may need to find
new or change existing suppliers and subcontractors. This could
cause disruptions in production, delays in the shipping of
product or increases in prices paid to third-parties.
We may
not be able to procure necessary key components for our
products, or we may purchase excess raw material inventory or
unusable inventory, possibly impacting our results of
operations.
The power systems industry, and the electronics industry as a
whole, can be subject to pronounced business cycles and
otherwise subject to sudden and sharp changes in demand. Our
success, in part, is dependent on our ability to forecast and
procure inventories of raw materials and components to match
production schedules and customer delivery requirements. Many of
our products, notably V*I Chip modules and Picor PSiPs, require
raw materials and components supplied by a limited number of
vendors and, in some instances, a single vendor. During periods
of demand growth, key materials and components required to build
our products may become unavailable in the timeframe required
for us to meet our customers needs. Our inability to
secure sufficient materials and components to build products for
our customers could negatively impact our sales and operating
results. We may choose to mitigate this risk by increasing the
levels of inventory for certain raw materials and components.
Such increased inventory levels may increase the potential risk
for excess and obsolescence should our forecasts fail to
materialize or if there are negative factors impacting our
customers end markets, leading to order cancellation. If
we purchase excess inventory or determine certain inventory is
unusable, we may have to record additional inventory reserves or
write-off the unneeded inventory, which could have a material
adverse effect on our gross margins and on our results of
operations.
Our
revenues and profits may not increase enough to offset the
expense of additional production capacity.
We have made significant additions to our manufacturing
equipment and capacity over the past several years, including
equipment for both our new V*I Chip products and for BBU
products. During 2010, we added equipment to the V*I Chip
production lines that more than doubled production capacity. We
have also replaced certain equipment and added new, more
efficient equipment for certain processes on the BBU production
lines. If overall revenue levels do not increase enough to
offset the increased fixed costs, or significant revenues do not
materialize for the V*I Chip products, or if there is
deterioration in our overall business, our future operating
results could be adversely affected. In addition, asset values
could be impaired if the additional capacity is underutilized
for an extended period of time, resulting in impairment charges
that could have a material adverse effect on our financial
position and results of operations.
15
If we
were unable to use our manufacturing facility in Andover,
Massachusetts, we would not be able to manufacture for an
extended period of time.
All modular power components, whether for direct sale to
customers or for sale to our subsidiaries and divisions for
incorporation into their respective products, are manufactured
at our Andover, Massachusetts, production facility. Substantial
damage to this facility due to fire, natural disaster, power
loss or other events could interrupt manufacturing. Any
prolonged inability to utilize all or a significant portion of
this facility could have a material adverse effect on our
results of operations.
We are
exposed to foreign economic, political and other
risks.
International sales have been and are expected to be a
significant component of total sales. Dependence on unaffiliated
third party distributors for our international sales exposes us
to special risks, such as foreign economic and political
instability, foreign currency controls and market fluctuations,
trade barriers and tariffs, foreign regulations and exchange
rates. Our international customers business may be
negatively affected by the current crisis in the global credit
and financial markets. Sudden or unexpected changes in the
foregoing could have a material adverse effect on our results of
operations.
We may
be unable to adequately protect our proprietary rights, which
may limit our ability to compete effectively.
We operate in an industry in which the ability to compete
depends on the development or acquisition of proprietary
technologies that must be protected to preserve the exclusive
use of such technologies. We devote substantial resources to
establish and protect our patents and proprietary rights, and we
rely on patent and intellectual property law to protect such
rights. This protection, however, may not prevent competitors
from independently developing products similar or superior to
our products. We may be unable to protect or enforce current
patents, may rely on unpatented technology that competitors
could restrict, or may be unable to acquire patents in the
future, and this may have a material adverse affect on our
competitive position. In addition, the intellectual property
laws of foreign countries may not protect our rights to the same
extent as those of the United States. We have been and may need
to continue to defend or challenge patents. We have incurred and
expect to incur significant costs in and devote significant
resources to these efforts which, if unsuccessful, may have a
material adverse effect on our results of operations and
financial position.
We may
face intellectual property infringement claims that could be
costly to resolve.
The power supply industry is characterized by vigorous
protection and pursuit of intellectual property rights. We may
in the future receive communications from third parties
asserting that our products or manufacturing processes infringe
on a third partys patent or other intellectual property
rights. In January 2011, we were named in a complaint for patent
infringement filed by SynQor, Inc. (see Part I
Item 3-
Legal Proceedings). In the event a third party makes a valid
intellectual property claim against us and a license is not
available to us on commercially reasonable terms, or at all, we
could be forced to either redesign or stop production of
products incorporating that technology, and our operating
results could be materially and adversely affected. In addition,
litigation may be necessary to defend us against claims of
infringement, and this litigation could be costly and divert the
attention of key personnel. An adverse outcome in these types of
matters could have a material adverse impact on the results of
our operations and financial condition.
We may
face legal claims and litigation from product warranty or other
claims that could be costly to resolve.
We may in the future encounter legal action from customers,
vendors or others concerning product warranty or other claims.
We generally offer a two-year warranty from the date title
passes from us for all of our standard products. We invest
significant resources in the testing of our products; however,
if any of our products contain defects, we may be required to
incur additional development and remediation costs, pursuant to
our warranty policies. These issues may divert our technical and
other resources from other product development efforts and could
result in claims against us by our customers or others,
including liability for
16
costs associated with product returns, which may adversely
impact our operating results. If any of our products contains
defects, or has reliability, quality or compatibility problems,
our reputation may be damaged, which could make it more
difficult for us to sell our products to existing and
prospective customers and could adversely affect our operating
results.
Our
ability to successfully implement our business strategy may be
limited if we do not retain our key personnel and attract and
retain skilled and experienced personnel.
Our success depends on our ability to retain the services of our
executive officers. The loss of one or more members of senior
management could materially adversely affect our business and
financial results. In particular, we are dependent on the
services of Dr. Vinciarelli, our founder, Chairman of the
Board, Chief Executive Officer, and President. The loss of the
services of Dr. Vinciarelli could have a material adverse
effect on our development of new products and on our results of
operations. In addition, we depend on highly skilled engineers
and other personnel with technical skills that are in high
demand and are difficult to replace. Our continued operations
and growth depend on our ability to attract and retain skilled
and experienced personnel in a very competitive employment
market. If we are unable to attract and retain these employees,
our ability to successfully implement our business strategy may
be harmed.
Funds
associated with our investments in auction rate securities may
not be accessible at par value in the short term, and given this
illiquidity, we may be required to make additional adjustments
to their carrying value.
As of December 31, 2010, we held $19,075,000 of auction
rate securities at par value, consisting of collateralized debt
obligations, supported by pools of student loans, sponsored by
state student loan agencies and corporate student loan servicing
firms. We purchased these securities through the investment
banking affiliate of Bank of America, N.A. Before February 2008,
the investment banks conducting the periodic Dutch
auctions by which interest rates for the securities had
been established had committed their capital to support such
auctions in the event of insufficient third-party investor
demand. Starting the week of February 11, 2008, a
substantial number of auctions failed, as demand from
third-party investors weakened and the investment banks
conducting the auctions chose not to commit capital to support
such auctions (i.e., investment banks chose not to purchase
securities themselves in order to balance supply and demand,
thereby facilitating a successful auction, as they had done in
the past). We accepted a settlement offer from UBS AG
(UBS) in November 2008, and, as called for in the
settlement, UBS purchased the then outstanding par value of
$8,600,000 of auction rate securities purchased through UBS on
June 30, 2010. However, we have received no settlement
offer from Bank of America to date. While we do not currently
anticipate the lack of liquidity of our auction rate securities
to adversely affect our ability to conduct business, the funds
associated with auction rate securities may not be accessible
until a successful auction occurs, a buyer is found outside of
the auction process, the security is called or the underlying
securities have matured.
In order to record the value of our auction rate securities
appropriately each quarter, we have estimated their market value
and recorded an impairment charge. Deemed
available-for-sale,
these securities are carried at fair value, with unrealized
gains and losses, net of tax, attributable to credit loss
recorded through the statement of operations and unrealized
gains and losses, net of tax, attributable to other non-credit
factors reported in Accumulated other comprehensive (loss)
income, a component of Stockholders Equity. We
periodically evaluate if an investment is considered impaired,
whether impairment is other than temporary, and the measurement
of an impairment loss.
The following circumstances, among others, may cause us to
record such impairment charges to our Consolidated Statements of
Operations:
|
|
|
|
|
the default of an issuer or a specific security of that issuer;
|
|
|
|
the significant deterioration of the credit rating of a security
or its issuer;
|
|
|
|
a tender offer for a specific security from the issuer valuing
the security at less than par that is accepted by the number of
holders necessary to require all holders to tender their
securities; and
|
17
|
|
|
|
|
development of a robust secondary market for auction rate
securities, establishing an active market value for our
securities or similar securities that represents a substantial
discount to par.
|
Such impairment charges or, in the event of a sale, realized
losses could be material in amount and be detrimental to our
financial position, potentially impacting our ability to fund
operations.
Changes
in our effective tax rate may impact our results of
operations.
Our effective tax rate has been difficult to predict in recent
reporting periods due to the volatility of our financial
performance, as well as a range of factors outside of our
control. Factors that may increase our future effective tax rate
include: increases in tax rates in various jurisdictions; the
resolution of issues arising from tax audits with various tax
authorities; changes in the valuation of our deferred tax assets
and liabilities; adjustments to income taxes upon finalization
of various tax returns; and changes in tax laws or the
interpretation of such tax laws. Any significant increase in our
future effective tax rates could adversely impact our net income
in future periods.
If we
fail to maintain an effective system of internal controls or
discover material weaknesses in our internal controls over
financial reporting, we may not be able to report our financial
results accurately or timely or detect fraud, which could have a
material adverse effect on our business.
An effective internal control environment is necessary for the
Company to produce reliable financial reports and is an
important part of its effort to prevent financial fraud.
Section 404 of the Sarbanes-Oxley Act of 2002 requires our
management to report on, and our independent registered public
accounting firm to attest to, the effectiveness of our internal
control structure and procedures for financial reporting. We
have an ongoing program to perform the system and process
evaluation and testing necessary to comply with these
requirements and to continuously improve and remediate internal
controls over financial reporting.
While management evaluates the effectiveness of our internal
controls on a regular basis, these controls may not always be
effective. There are inherent limitations on the effectiveness
of internal controls, including collusion, management override,
and failure in human judgment. In addition, control procedures
are designed to reduce rather than eliminate business risks. In
the event that our Chief Executive Officer, Chief Financial
Officer, or independent registered public accounting firm
determines that our internal controls over financial reporting
are not effective as defined under Section 404, we may be
unable to produce reliable financial reports or prevent fraud,
which could materially adversely affect our business. In
addition, we may be subject to sanctions or investigation by
government authorities or self-regulatory organizations, such as
the Securities and Exchange Commission or The NASDAQ Stock
Market, LLC. Any such actions could affect investor perceptions
of the Company and result in an adverse reaction in the
financial markets due to a loss of confidence in the reliability
of our financial statements, which could cause the market price
of our common shares to decline or limit our access to capital.
|
|
ITEM 1B.
|
UNRESOLVED
STAFF COMMENTS
|
We have not received written comments from the Securities and
Exchange Commission regarding our periodic or current reports
under the Securities Exchange Act of 1934, as amended, that were
received 180 days or more before December 31, 2010 and
remain unresolved. There are no unresolved comments from the
Securities and Exchange Commission as of December 31, 2010.
Our corporate headquarters building in Andover, Massachusetts,
which we own, provides approximately 90,000 square feet of
office space for our sales, marketing, engineering and
administration personnel.
We also own a building of approximately 230,000 square feet
in Andover, Massachusetts, which houses all Massachusetts
manufacturing activities.
Our Westcor division owns and occupies a building of
approximately 31,000 square feet in Sunnyvale, California.
18
|
|
ITEM 3.
|
LEGAL
PROCEEDINGS
|
As disclosed in prior filings, we received total payments of
$1,770,000 in the second quarter of 2007 in full settlement of
patent infringement litigation against Artesyn Technologies,
Inc., Lucent Technologies Inc., and the Tyco Power Systems, a
unit of Tyco International Ltd. (which had acquired the Power
Systems business of Lucent Technologies). The full amount of the
payments, net of a $177,000 contingency fee we had accrued for
our litigation counsel, was included in the second quarter of
2007 in (Gain) loss from litigation-related and other
settlements, net in the Consolidated Statement of
Operations. We were subsequently informed by its litigation
counsel that the full amount of the contingency fee was waived
and, therefore, the related accrual of $177,000 was reversed in
the second quarter of 2008.
On February 22, 2007, we announced an agreement in
principle with Ericsson, Inc., the U.S. affiliate of LM
Ericsson, to settle a lawsuit brought by Ericsson against us in
California state court. Under the terms of the settlement
agreement entered into on March 29, 2007, after a court
ordered mediation, we paid $50,000,000 to Ericsson, of which
$12,800,000 was reimbursed by our insurance carriers.
Accordingly, we recorded a net loss of $37,200,000 from the
litigation-related settlements in the fourth quarter of 2006. We
have been seeking further reimbursement from its insurance
carriers. On November 14, 2008, a jury in the United States
District Court for the District of Massachusetts found in favor
of us in a lawsuit against certain of its insurance carriers
with respect to the Ericsson settlement. The jury awarded
$17,300,000 in damages to us, although the verdict is subject to
challenge in the trial court and on appeal. Both parties filed
certain motions subsequent to the ruling and, on March 2,
2009, the judge in the case rendered his decision on the
subsequent motions, reducing the jury award by $4,000,000. On
March 26, 2009, the U.S. District Court, District of
Massachusetts (the Court) issued its judgment in the
matter, affirming the award of $13,300,000, plus prejudgment
interest from the date of breach on March 29, 2007 through
March 26, 2009, the date of judgment in the amount of
approximately $3,179,000. The insurance carriers have filed
their appeal to this total judgment in the amount of
approximately $16,479,000. No final and collectible judgment yet
has been entered by the court.
Our decision to enter into the settlement followed an adverse
ruling by the court in January 2007 in connection with a
settlement between Ericsson and co-defendants Exar Corporation
(Exar) and Rohm Device USA, LLC (Rohm),
two of our component suppliers prior to 2002. Our writ of
mandate appeal of this ruling was denied in April, 2007. In
September 2007, we filed a notice of appeal of the courts
decision upholding the Ericsson-Exar-Rohm settlement. In
December 2007, the court awarded Exar and Rohm amounts for
certain statutory and discovery costs associated with this
ruling. As such, we accrued $240,000 in the second quarter of
2007, included in (Gain) loss from litigation-related and
other settlements, net in the Consolidated Statements of
Operations, of which $78,000 of the award was paid in the second
quarter of 2008. On February 9, 2009, the Court of Appeals
issued its opinion affirming the judgment for Exar and Rohm in
full. During the third quarter of 2009, we completed
negotiations with Exar and Rohm, resulting in separate
settlement agreements calling for a final payment to Exar of
$70,000 and no additional payment due Rohm. As a result of the
settlements, we reversed a remaining excess accrual of
approximately $96,000 in the third quarter of 2009, which is
recorded in Gain from litigation-related and other
settlements, net in the accompanying Consolidated
Statement of Operations.
During the third quarter of 2009, we entered into a release and
settlement agreement with a vendor over alleged product
performance issues with certain products the vendor had sold to
us. We received a payment of $750,000 in consideration for the
settlement, which is recorded in Gain from
litigation-related and other settlements, net in the
accompanying Consolidated Statement of Operations.
On January 28, 2011, SynQor, Inc. (SynQor)
filed a complaint for patent infringement against Ericsson, Inc.
(Ericsson), Cisco Systems, Inc. (Cisco)
and us in U.S. District Court for the Eastern District of
Texas. This immediately followed a complaint filed by us on
January 26, 2011 in U.S. District Court for the
District of Massachusetts, in which we sought a declaratory
judgment that our bus converter products do not infringe any
valid claim of certain of SynQors U.S. patents, and
that the claims of those patents are invalid. With respect to
us, SynQors complaint alleges that our products,
including, but not limited to, unregulated bus converters used
in intermediate bus architecture power supply systems, infringe
certain SynQor patents.
19
SynQor seeks, amongst other items, an injunction against further
infringement and an award of unspecified compensatory and
enhanced damages, interest, costs and attorney fees. On
February 8, 2011, SynQor filed a motion for preliminary
injunction seeking an order enjoining us from manufacturing,
using, selling, and offering for sale in the United States
and/or
importing into the United States certain identified unregulated
bus converters, as well as any other bus converters not
significantly different from those products. On
February 17, 2011, we dismissed our Massachusetts action
without prejudice to allow the litigation to proceed in Texas.
We do not believe any of our products, including our unregulated
bus converters, infringe any valid claim of the SynQor patents,
either alone or when used in an intermediate bus architecture
implementation. We believe SynQors claims lack merit and
therefore plan to vigorously defend ourselves against
SynQors patent infringement allegations.
We are involved in certain other litigation and claims
incidental to the conduct of its business. While the outcome of
lawsuits and claims against us cannot be predicted with
certainty, we do not expect any current litigation or claims to
have a material adverse impact on our financial position or
results of operations.
|
|
ITEM 4.
|
(REMOVED
AND RESERVED)
|
PART II
|
|
ITEM 5.
|
MARKET
FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
|
Our Common Stock is listed on The NASDAQ Stock Market, LLC,
under the trading symbol VICR. Shares of our
Class B Common Stock are not registered with the Securities
and Exchange Commission, are not listed on any exchange nor
traded on any market, and are subject to transfer restrictions
under our Restated Certificate of Incorporation, as amended.
The following table sets forth the quarterly high and low sales
prices for the Common Stock as reported by The NASDAQ Stock
Market for the periods indicated:
|
|
|
|
|
|
|
|
|
2010
|
|
High
|
|
|
Low
|
|
|
First Quarter
|
|
$
|
14.31
|
|
|
$
|
7.98
|
|
Second Quarter
|
|
|
16.24
|
|
|
|
10.87
|
|
Third Quarter
|
|
|
16.35
|
|
|
|
11.98
|
|
Fourth Quarter
|
|
|
19.50
|
|
|
|
14.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
High
|
|
|
Low
|
|
|
First Quarter
|
|
$
|
6.75
|
|
|
$
|
3.86
|
|
Second Quarter
|
|
|
7.30
|
|
|
|
4.63
|
|
Third Quarter
|
|
|
7.97
|
|
|
|
6.42
|
|
Fourth Quarter
|
|
|
9.68
|
|
|
|
6.50
|
|
As of February 28, 2011, there were 228 holders of record
of our Common Stock and 16 holders of record of our Class B
Common Stock. These numbers do not reflect persons or entities
that hold their stock in nominee or street name
through various brokerage firms.
Dividend
Policy
Dividends are declared at the discretion of our Board of
Directors and depend on actual cash from operations, our
financial condition and capital requirements, and any other
factors the Board of Directors may consider relevant.
On June 28, 2010, the Companys Board of Directors
approved a cash dividend of $0.30 per share of the
Companys stock. The total dividend of approximately
$12,506,000 was paid on July 30, 2010 to shareholders of
record at the close of business on July 16, 2010.
20
From time to time, excess cash held at the subsidiary level is
transferred to the Company via cash dividends. Because we own
less than 100% of the common stock of certain subsidiaries, such
subsidiary dividends can result in payments to outside
shareholders of those subsidiaries. During the year ending
December 31, 2009, two subsidiaries paid a total of
$4,690,000 in cash dividends on subsidiary common stock, of
which $3,421,000 was paid to the Company and $1,269,000 was paid
to outside shareholders (i.e., paid to certain subsidiary
employees who own common stock in the subsidiary). During the
year ending December 31, 2010, three subsidiaries paid a
total of $5,457,000 in cash dividends, of which $4,905,000 was
paid to the Company and $552,000 was paid to outside
shareholders. Dividends paid to outside shareholders are
accounted for as a reduction in noncontrolling interest.
Issuer
Purchases of Equity Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum
|
|
|
|
|
|
|
|
|
|
|
|
|
Number (of
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximate
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
|
Dollar Value) of
|
|
|
|
|
|
|
|
|
|
Shares (or Units)
|
|
|
Shares (or Units)
|
|
|
|
Total Number
|
|
|
|
|
|
Purchased as
|
|
|
that May Yet Be
|
|
|
|
of Shares
|
|
|
|
|
|
Part of Publicly
|
|
|
Purchased Under
|
|
|
|
(or Units)
|
|
|
Average Price Paid
|
|
|
Announced Plans
|
|
|
the Plans or
|
|
Period
|
|
Purchased
|
|
|
per Share (or Unit)
|
|
|
or Programs
|
|
|
Programs
|
|
|
October 1 31, 2010
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
8,541,000
|
|
November 1 30, 2010
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
8,541,000
|
|
December 1 31, 2010
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
8,541,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
8,541,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In November 2000, our Board of Directors authorized the
repurchase of up to $30,000,000 of our Common Stock (the
November 2000 Plan). The November 2000 Plan
authorizes us 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. We did not repurchase shares of Common Stock during
the year ended December 31, 2010.
21
Stockholder
Return Performance Graph
The graph set forth below presents the cumulative, five-year
stockholder return for each of the Corporations Common
Stock, the Standard & Poors 500 Index
(S&P 500 Index), a value-weighted index made up
of 500 of the largest, by market capitalization, listed
companies, and the Standard & Poors SmallCap 600
Index (S&P SmallCap 600 Index), a
value-weighted index of 600 listed companies with market
capitalizations between $200,000,000 and $1,000,000,000.
The graph assumes an investment of $100 on December 31,
2005, in each of our Common Stock, the S&P 500 Index, and
the S&P SmallCap 600 Index, and assumes reinvestment of all
dividends. The historical information set forth below is not
necessarily indicative of future performance.
Comparison
of Five Year Cumulative Return
Among Vicor Corporation, S&P 500 Index
and S&P SmallCap 600 Index
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
Vicor Corporation
|
|
|
$
|
100.00
|
|
|
|
$
|
71.62
|
|
|
|
$
|
103.31
|
|
|
|
$
|
45.02
|
|
|
|
$
|
63.34
|
|
|
|
$
|
113.84
|
|
S&P 500 Index
|
|
|
$
|
100.00
|
|
|
|
$
|
115.79
|
|
|
|
$
|
122.16
|
|
|
|
$
|
76.97
|
|
|
|
$
|
97.32
|
|
|
|
$
|
111.99
|
|
S&P SmallCap 600 Index
|
|
|
$
|
100.00
|
|
|
|
$
|
115.11
|
|
|
|
$
|
114.77
|
|
|
|
$
|
79.12
|
|
|
|
$
|
99.35
|
|
|
|
$
|
125.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
|
|
ITEM 6.
|
SELECTED
FINANCIAL DATA
|
The following selected consolidated financial data with respect
to our statements of operations for the years ended
December 31, 2010, 2009, and 2008, and with respect to our
balance sheets as of December 31, 2010 and 2009, are
derived from our Consolidated Financial Statements, which appear
elsewhere in this report and which have been audited by Grant
Thornton LLP, our independent registered public accounting firm.
The following selected consolidated financial data with respect
to our statements of operations for the years ended
December 31, 2007 and 2006, and with respect to our balance
sheets as of December 31, 2008, 2007 and 2006 are derived
from our Consolidated Financial Statements, which are not
included herein.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Statement of Operations
Data
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
(In thousands, except per share data)
|
|
|
|
|
|
Net revenues
|
|
$
|
250,733
|
|
|
$
|
197,959
|
|
|
$
|
205,368
|
|
|
$
|
195,827
|
|
|
$
|
192,047
|
|
Income (loss) from operations
|
|
|
29,122
|
|
|
|
4,773
|
|
|
|
(1,142
|
)
|
|
|
1,071
|
|
|
|
(33,182
|
)
|
Consolidated net income (loss)
|
|
|
33,539
|
|
|
|
4,093
|
|
|
|
(1,778
|
)
|
|
|
5,874
|
|
|
|
(28,497
|
)
|
Net income attributable to noncontrolling interest
|
|
|
214
|
|
|
|
1,295
|
|
|
|
1,817
|
|
|
|
539
|
|
|
|
562
|
|
Net income (loss) attributable to Vicor Corporation
|
|
|
33,325
|
|
|
|
2,798
|
|
|
|
(3,595
|
)
|
|
|
5,335
|
|
|
|
(29,059
|
)
|
Net income (loss) per share basic and diluted
attributable to Vicor Corporation
|
|
|
0.80
|
|
|
|
0.07
|
|
|
|
(0.09
|
)
|
|
|
0.13
|
|
|
|
(0.69
|
)
|
Weighted average shares basic
|
|
|
41,700
|
|
|
|
41,665
|
|
|
|
41,651
|
|
|
|
41,597
|
|
|
|
41,839
|
|
Weighted average shares diluted
|
|
|
41,772
|
|
|
|
41,671
|
|
|
|
41,651
|
|
|
|
41,687
|
|
|
|
41,839
|
|
Cash dividends per share
|
|
$
|
0.30
|
|
|
$
|
-
|
|
|
$
|
0.30
|
|
|
$
|
0.30
|
|
|
$
|
0.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
Balance Sheet Data
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Working capital
|
|
$
|
105,454
|
|
|
$
|
74,791
|
|
|
$
|
65,297
|
|
|
$
|
114,924
|
|
|
$
|
123,467
|
|
Total assets
|
|
|
204,912
|
|
|
|
180,577
|
|
|
|
171,922
|
|
|
|
192,458
|
|
|
|
247,461
|
|
Total liabilities
|
|
|
25,900
|
|
|
|
24,511
|
|
|
|
20,496
|
|
|
|
23,978
|
|
|
|
73,696
|
|
Total equity
|
|
|
179,012
|
|
|
|
156,066
|
|
|
|
151,426
|
|
|
|
168,480
|
|
|
|
173,765
|
|
|
|
ITEM 7.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
Overview
We design, develop, manufacture and market modular power
components and complete power systems based upon a portfolio of
patented technologies. We sell our products primarily to
customers in the higher-performance, higher-power segments of
the power systems market, including aerospace and defense
electronics, enterprise and high performance computing,
industrial equipment and automation, telecommunications and
network infrastructure, and vehicles and transportation through
a network of independent sales representative organizations in
North and South America and, internationally, through
independent distributors. International sales as a percentage of
total revenues were approximately 49% in 2010, 41% in 2009 and
42% in 2008, respectively.
We have organized our business segments according to our key
product lines. The BBU segment designs, develops, manufactures
and markets modular power converters and configurable products,
and also includes the operations of our Westcor division, the
six entities comprising Vicor Custom Power, and the BBU
activities through VJCL. The V*I Chip segment includes V*I Chip
Corporation which designs, develops, manufactures
23
and markets our FPA products. V*I Chip activities conducted
through VJCL are included in the V*I Chip segment. Picor
develops, manufactures and markets integrated circuits and
related products for use in a variety of power management and
power system applications. Picor develops these products to be
sold as part of Vicors products or to be sold to third
parties for separate applications.
For the year ended December 31, 2010, revenues increased to
$250,733,000 from $197,959,000 in 2009. We had income before
taxes of $29,619,000 in 2010 as compared to $5,455,000 in 2009.
We reported net income in 2010 of $33,325,000 as compared to
$2,798,000 in 2009, and a diluted income per share of $0.80 in
2010 as compared with a diluted income per share of $0.07 in
2009. The gross margin for 2010 increased to 45.7%, compared
with 44.2% in 2009. The primary components of the increase in
gross margin dollars and percentage were the increase in net
revenues and lower BBU Andover and V*I Chip per unit productions
costs. During the third and fourth quarters of 2010,
respectively, the Company recorded non-recurring, non-cash tax
benefits of $5,158,000, or approximately $0.12 per diluted
share, and $1,159,000, or approximately $0.03 per diluted share,
due to the release of portions of its deferred tax valuation
allowance (See Note 14).
The book to bill ratio, calculated as the dollar amount of
orders placed with scheduled delivery dates within one year
divided by the net revenues in the respective period, for the
third and fourth quarters of 2010 was 1.02:1 and 0.66:1,
respectively. The book to bill ratio for the year ended
December 31, 2010 was 1.09:1, compared to 1.03:1 for the
year ended December 31, 2009. We ended 2010 with
approximately $78,900,000 in backlog, representing the total of
purchase orders received for which product has not yet been
shipped, compared to $57,200,000 at the end of 2009.
Operating expenses for 2010 increased $2,577,000, or 3.1%, to
$85,398,000 from $82,821,000 in 2009, principally due to
increases in research and development of $4,345,000, selling,
general and administrative expenses of $1,485,000, and a
decrease in Gain from litigation-related and other
settlements, net of $846,000, offset by a decrease in
aggregate pre-tax severance charges of $4,099,000 in connection
with workforce reductions implemented during 2009. The key
increases in research and development expenses were compensation
expenses of $2,101,000, outside services of $787,000, deferred
costs of $454,000, project materials of $328,000, facilities
expenses of $152,000, employment recruiting of $117,000,
depreciation and amortization of $110,000, and
set-up and
tooling charges of $100,000. The key increases in selling,
general and administrative expenses were commissions expense of
$543,000, advertising expenses of $465,000, outside services of
$237,000, travel expenses of $185,000, employment advertising
and recruiting of $136,000, and facilities expense of $114,000,
offset by a decrease in legal fees of $302,000.
During the third quarter of 2009, we entered into a release and
settlement agreement with a vendor over alleged product
performance issues with certain products the vendor had sold to
us. We received a payment of $750,000 in consideration for the
settlement, which is recorded in Gain from
litigation-related and other settlements, net in the
accompanying Consolidated Statement of Operations. In addition,
we completed negotiations with Exar and Rohm, resulting in
separate settlement agreements calling for a final payment to
Exar of $70,000 and no additional payment due Rohm. As a result
of the settlements, we reversed a remaining excess accrual of
approximately $96,000 in the third quarter of 2009, which is
recorded in Gain from litigation-related and other
settlements, net in the accompanying Consolidated
Statement of Operations.
Other income, net decreased $185,000 to $497,000
from $682,000 in 2009. The primary reasons for the decline were
decreases in unrealized gain on trading securities of $298,000,
interest income of $279,000, and foreign currency gains of
$193,000, offset by an increase in credit losses on available
for sale securities of $318,000 and gain on disposal of
equipment of $218,000.
In 2010, depreciation and amortization totaled $10,222,000, and
capital additions were $12,103,000, compared to $10,198,000 and
$10,643,000, respectively, for 2009.
Inventories increased by approximately $14,132,000, or 66.2%, to
$35,489,000 in 2010 as compared with $21,357,000 at the end of
2009 in order to meet the increase in demand across all three
segments. V*I Chip, BBU, and Picor inventories increased
approximately $8,105,000, $5,334,000, and $693,000, respectively.
The following table sets forth certain items of selected
consolidated financial information as a percentage of net
revenues for the years ended December 31. This table and
the subsequent discussion should be read in
24
conjunction with the selected financial data and the
Consolidated Financial Statements and related footnotes
contained elsewhere in this report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Net revenues
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Gross margin
|
|
|
45.7
|
%
|
|
|
44.2
|
%
|
|
|
42.0
|
%
|
Selling, general and administrative expenses
|
|
|
19.7
|
%
|
|
|
24.2
|
%
|
|
|
27.4
|
%
|
Research and development expenses
|
|
|
14.4
|
%
|
|
|
16.0
|
%
|
|
|
15.3
|
%
|
Income before income taxes
|
|
|
11.8
|
%
|
|
|
2.8
|
%
|
|
|
0.4
|
%
|
Critical
Accounting Policies and Estimates
Managements Discussion and Analysis of Financial Condition
and Results of Operations discusses our Consolidated Financial
Statements, which have been prepared in accordance with
accounting principles generally accepted in the United States.
The preparation of these financial statements requires
management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses,
and related disclosure of contingent assets and liabilities. On
an ongoing basis, management evaluates its estimates and
judgments, including those related to revenue recognition,
allowance for doubtful accounts, product warranties,
inventories, investments, intangible assets, income taxes,
impairment of long-lived assets, share-based compensation,
contingencies and litigation. Management bases its estimates and
judgments on historical experience, knowledge of current
conditions and on various other factors that are believed to be
reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying value of
assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under
different assumptions or conditions.
Allowance
for Doubtful Accounts
We maintain allowances for doubtful accounts for estimated
losses resulting from the inability of its customers to make
required payments, based on assessments of customers
credit-risk profiles and payment histories. If the financial
condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional
allowances may be required.
Inventories
We employ a variety of methodologies to estimate allowances for
its inventory for estimated obsolescence or unmarketable
inventory, based upon its known backlog and historical usage,
and assumptions about future demand and market conditions. For
BBU products produced at our Andover facility, our principal
manufacturing location, the model used is based upon a
comparison of on-hand quantities to projected demand, such that
amounts of inventory on hand in excess of a three-year projected
usage are fully reserved. Since V*I Chip products are still at a
relatively early stage, a one-year projected usage assumption is
used. 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.
Fair
Value Measurements
We account for certain financial assets at fair value, defined
as the price that would be received to sell an asset or paid to
transfer a liability (i.e., an exit price) in the principal or
most advantageous market for the asset or liability in an
orderly transaction between market participants on the
measurement date. As such, fair value is a market-based
measurement that is determined based on assumptions that market
participants would use in pricing an asset or liability. If
management made different assumptions or judgments, material
differences in fair values could occur.
25
Short-Term
and Long-Term Investments
Our short-term and long-term investments are classified as
either trading or
available-for-sale
securities.
Available-for-sale
securities are carried at fair value, with unrealized gains and
losses, net of tax, attributable to credit loss recorded through
the statement of operations and unrealized gains and losses, net
of tax, attributable to other non-credit factors reported in
Accumulated other comprehensive (loss) income, a
component of Total Equity. In determining the amount of credit
loss, we compare the present value of cash flows expected to be
collected to the amortized cost basis of the securities,
considering credit default risks probabilities and changes in
credit ratings as significant inputs, among other factors.
Trading securities are carried at fair value, with unrealized
gains and losses recognized through the statement of operations
each reporting period. We periodically evaluate if an investment
is considered impaired, whether an impairment is other than
temporary, and the measurement of an impairment loss. We
consider a variety of impairment indicators such as, but not
limited to, a significant deterioration in the earnings
performance, credit rating, or asset quality of the investment.
As of December 31, 2010, we held $19,075,000 of auction
rate securities at par value. These auction rate securities
consist of collateralized debt obligations, supported by pools
of student loans, sponsored by state student loan agencies and
corporate student loan servicing firms. The interest rates for
these securities are reset at auction at regular intervals
ranging from seven to 90 days. The auction rate securities
held by us traded at par prior to February 2008 and are callable
at par at the option of the issuer.
Until February 2008, the auction rate securities market was
liquid, as the investment banks conducting the periodic
Dutch auctions by which interest rates for the
securities had been established had committed their capital to
support such auctions in the event of insufficient third-party
investor demand. Starting the week of February 11, 2008, a
substantial number of auctions failed, as demand from
third-party investors weakened and the investment banks
conducting the auctions chose not to commit capital to support
such auctions (i.e., investment banks chose not to purchase
securities themselves in order to balance supply and demand,
thereby facilitating a successful auction, as they had done in
the past). The consequences of a failed auction are (a) an
investor must hold the specific security until the next
scheduled auction (unless that investor chooses to sell the
security to a third party outside of the auction process) and
(b) the interest rate on the security generally resets to
an interest rate set forth in each securitys indenture.
As of December 31, 2010, we held auction rate securities
that had experienced failed auctions totaling $19,075,000 at par
value, all of which had been purchased through and are held by a
broker-dealer affiliate of Bank of America, N.A. (the
Failed Auction Securities). The majority of the
Failed Auction Securities held by us were AAA/Aaa rated by the
major credit rating agencies, with all of the securities
collateralized by student loans, of which most are guaranteed by
the U.S. Department of Education under the Federal Family
Education Loan Program. Management is not aware of any reason to
believe any of the issuers of the Failed Auction Securities held
by us are presently at risk of default. Through
December 31, 2010, we have continued to receive interest
payments on the Failed Auction Securities in accordance with the
terms of their respective indentures. We believe that all of our
auction rate security investments will ultimately be liquidated
without significant loss primarily due to the overall quality of
the issues held and the collateral securing the substantial
majority of the underlying obligations. However, current
conditions in the auction rate securities market have led us to
conclude the recovery period for the Failed Auction Securities
exceeds 12 months. As a result, we have continued to
classify the Failed Auction Securities as long-term as of
December 31, 2010.
Long-Lived
Assets
We evaluate the recoverability of our identifiable intangible
assets, goodwill and other long-lived assets when events or
circumstances indicate a potential impairment. We periodically
assess the remaining use of fixed assets based upon operating
results and cash flows from operations. Equipment has been
written-down as a result of these assessments as necessary.
Goodwill is tested for potential impairment at least annually at
the reporting unit level.
26
Stock-Based
Compensation
We record stock-based compensation expense based on the fair
value of stock-based awards measured at the grant date and
recognized over the relevant service period. We estimate the
fair value of each stock-based award on the measurement date
using either the current market price or the Black-Scholes
option valuation model. The Black-Scholes option valuation model
incorporates assumptions as to stock price volatility, the
expected life of options, forfeiture rate, a risk-free interest
rate and dividend yields.
During 2010, we granted stock-based awards with
performance-based vesting provisions tied to achievements of
certain performance conditions. For performance-based awards, we
assess, on an ongoing basis, the probability of whether the
performance criteria will be achieved. If and when achievement
of the performance criteria is deemed probable, we begin to
recognize the associated compensation expense for the stock
options over the relevant performance period.
Many of these assumptions are highly subjective and require the
exercise of management judgment. If management made different
estimates or judgments, material differences in the amount of
stock-based compensation could occur.
Product
Warranties
We generally warrant our products for a period of two years. We
maintain allowances for estimated product returns under warranty
based upon a review of known or potential product failures in
the field and upon historical patterns of product returns. If
unforeseen product issues arise or product returns increase
above expected rates, additional allowances may be required.
Income
Taxes
We recognize deferred tax assets and liabilities using enacted
rates for the effect of temporary differences between the book
and tax bases of recorded assets and liabilities. We reduce
deferred tax assets by a valuation allowance if it is more
likely than not that some portion or all of the deferred tax
assets will not be realized. Prior to September 30, 2010,
we maintained a valuation allowance against a significant
portion of our deferred tax assets, consisting of net operating
loss carryforwards, tax credit carryforwards and deductible
temporary differences. Based on our pre-tax income for the nine
months ended September 30, 2010 being sufficient to fully
utilize our net operating loss carryforwards, a history of
cumulative earnings before taxes for financial reporting
purposes over a
12-quarter
period, and expected future taxable income, we determined it was
more likely than not a significant portion of the deferred tax
assets would be realized. As a result, at September 30,
2010, we determined that it was appropriate to reverse a portion
of its valuation allowance by $5,158,000 as a discrete benefit
for income taxes for certain deductible temporary differences
expected to be realized in future periods. An additional benefit
of $1,159,000 was recorded in the fourth quarter of 2010. We
could not make such a determination in the prior quarters of
fiscal 2010 due to a lack of confidence in being able to
accurately forecast the expected ordinary income (loss) for the
year largely due to global economic conditions and the possible
impact continued economic and business uncertainty would have on
our business at those times.
As of December 31, 2010, we have a remaining valuation
allowance of approximately $10,259,000 against certain deferred
tax assets, for which realization cannot be considered more
likely than not at this time. Such deferred tax assets
principally relates to tax credit carryforwards in certain state
tax jurisdictions for which sufficient taxable income for
utilization cannot be projected at this time or the credits may
expire without being utilized. We assess the need for the
valuation allowance on a quarterly basis. The valuation
allowance against these deferred tax assets may require
adjustment in the future based on changes in the mix of
temporary differences, changes in tax laws, and operating
performance. In addition, the assessment of the valuation
allowance requires us to make estimates of future taxable income
and to estimate reversals of temporary differences. Changes in
the assumptions or other circumstances may require additional
valuation allowances if actual reversals of temporary
differences differ from those estimates. If and when we
determine the valuation allowance should be released, the
adjustment would result in a tax benefit in the Consolidated
Statements of Operations and may include a portion to be
accounted for through Additional paid-in capital,
27
a component of Stockholders Equity. The amount of the tax
benefit to be recorded in a particular quarter could be material.
We follow a two-step process to determine the amount of tax
benefit to recognize in our financial statements. First, the tax
position must be evaluated to determine the likelihood that it
will be sustained upon examination by a tax authority. If the
tax position is deemed more-likely-than-not to be
sustained, the tax position is then assessed to determine the
amount of benefit to recognize in the financial statements. The
amount of the benefit that may be recognized is the largest
amount that has a greater than 50 percent likelihood of
being realized upon ultimate settlement. If the tax position
does not meet the more-likely-than-not threshold
then it is not recognized in the financial statements. We accrue
interest and penalties, if any, related to unrecognized tax
benefits as a component of income tax expense. If the judgments
and estimates made by us are not correct, the unrecognized tax
benefits may have to be adjusted, and the adjustments could be
material.
Contingencies
From time to time, we receive notices of product failure claims,
infringement of patent or intellectual property rights of others
or for other claims. In fact, we have recently been named in a
complaint for patent infringement filed by SynQor, Inc. in
January 2011 (see Part I Item 3 - Legal
Proceedings). We assess each matter to determine if a contingent
liability should be recorded. In making this assessment, we may
consult, depending on the nature of the matter, with external
legal counsel and technical experts. Based on the information we
obtain, combined with our judgment regarding all the facts and
circumstances of each matter, we determine whether it is
probable that a contingent loss may be incurred and whether the
amount of such loss can be reasonably estimated. Should a loss
be probable and reasonably estimable, we record a loss. In
determining the amount of the loss, we consider advice received
from experts in the specific matter, current status of legal
proceedings, if any, prior case history and other factors.
Should the judgments and estimates made by us be incorrect, we
may need to record additional contingent losses that could
materially adversely impact our results of operations and
financial position.
Year
ended December 31, 2010 compared to Year ended
December 31, 2009
Net revenues for fiscal 2010 were $250,733,000, an increase of
$52,774,000 or 26.7%, as compared to $197,959,000 for the same
period in 2009.
The components of revenue for the years ended December 31 were
as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
2010
|
|
|
2009
|
|
|
$
|
|
|
%
|
|
|
BBU
|
|
$
|
217,018
|
|
|
$
|
186,980
|
|
|
$
|
30,038
|
|
|
|
16.1
|
%
|
V*I Chip(1)
|
|
|
28,972
|
|
|
|
8,960
|
|
|
|
20,012
|
|
|
|
223.3
|
%
|
Picor
|
|
|
4,743
|
|
|
|
2,019
|
|
|
|
2,724
|
|
|
|
134.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
250,733
|
|
|
$
|
197,959
|
|
|
$
|
52,774
|
|
|
|
26.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
V*I Chip products sold by VJCL are
included in the V*I Chip amounts in both years. The 2009 amounts
were previously included in BBU.
|
Overall orders for fiscal year 2010 increased by 33.5% compared
with 2009. This increase was caused by increases in BBU, V*I
Chip, and Picor orders during the period of 18.3%, 197.1% and
174.5%, respectively. The
book-to-bill
ratio for fiscal year 2010 was 1.09:1 as compared to 1.03:1 in
2009.
Gross margin for fiscal 2010 increased $26,926,000, or 30.7%, to
$114,520,000 from $87,594,000 in 2009. Gross margin as a
percentage of net revenues increased to 45.7% from 44.2%
compared to the same period a year ago. The primary components
of the increase in gross margin dollars and percentage were the
increase in net revenues and lower BBU Andover and V*I Chip per
unit productions costs.
28
Selling, general and administrative expenses were $49,417,000
for 2010, an increase of $1,485,000, or 3.1%, as compared to
$47,932,000 for the same period in 2009. As a percentage of net
revenues, selling, general and administrative expenses decreased
to 19.7% from 24.2%, due to the increase in net revenues.
The components of the $1,485,000 increase were as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease)
|
|
Commissions expense
|
|
$
|
543
|
|
|
|
8.6
|
%
|
|
(1)
|
Advertising expenses
|
|
|
465
|
|
|
|
19.0
|
%
|
|
(2)
|
Outside services
|
|
|
237
|
|
|
|
23.1
|
%
|
|
(3)
|
Travel expenses
|
|
|
185
|
|
|
|
10.8
|
%
|
|
(4)
|
Employment advertising and recruiting
|
|
|
136
|
|
|
|
111.4
|
%
|
|
(5)
|
Facilities expense
|
|
|
114
|
|
|
|
8.6
|
%
|
|
|
Telephone
|
|
|
98
|
|
|
|
9.9
|
%
|
|
|
Audit and tax fees
|
|
|
64
|
|
|
|
5.1
|
%
|
|
|
Legal fees
|
|
|
(302
|
)
|
|
|
(28.5
|
)%
|
|
(6)
|
Depreciation and amortization
|
|
|
(167
|
)
|
|
|
(4.9
|
)%
|
|
(7)
|
Other, net
|
|
|
112
|
|
|
|
0.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,485
|
|
|
|
3.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Increase primarily attributed to the increase in net revenues,
subject to changes in the mix of revenues subject to commissions. |
|
(2) |
|
Increase primarily attributed to the increase trade publication
advertising and increased participation in trade shows,
primarily by V*I Chip. |
|
(3) |
|
Increase primarily attributed to the outsourcing of certain
information technology functions that were performed in-house in
prior periods. |
|
(4) |
|
Represents an overall increase in travel across all business
units. |
|
(5) |
|
Increase due to increase in recruiting costs for newly hired
personnel. |
|
(6) |
|
Decrease primarily attributed to a decrease in activity
associated with the Companys litigation brought against
certain of its insurance carriers with respect to the Ericsson,
Inc. settlement of product liability litigation in 2010 compared
to 2009. |
|
(7) |
|
Decrease due to certain fixed assets becoming fully depreciated
during 2010. |
Research and development expenses increased $4,345,000, or
13.7%, to $35,981,000 in 2010 from $31,636,000 in 2009. As a
percentage of net revenues, research and development decreased
to 14.4% from 16.0%, due to the increase in net revenues.
The components of the $4,345,000 increase were as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
Compensation
|
|
$
|
2,101
|
|
|
|
8.8
|
%
|
|
(1)
|
Outside services/subcontract labor
|
|
|
787
|
|
|
|
98.1
|
%
|
|
(2)
|
Deferred costs
|
|
|
454
|
|
|
|
53.6
|
%
|
|
(3)
|
Project materials
|
|
|
328
|
|
|
|
11.3
|
%
|
|
(4)
|
Facilities expenses
|
|
|
152
|
|
|
|
8.8
|
%
|
|
|
Employment recruiting
|
|
|
117
|
|
|
|
132.3
|
%
|
|
(5)
|
Depreciation and amortization
|
|
|
110
|
|
|
|
7.6
|
%
|
|
|
Set-up and
tooling charges
|
|
|
100
|
|
|
|
47.1
|
%
|
|
|
Other, net
|
|
|
196
|
|
|
|
13.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,345
|
|
|
|
13.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
|
|
|
(1) |
|
Increase primarily attributed to an increase in research and
development personnel for the BBU and V*I Chip business units,
annual compensation adjustments in May 2010, and an increase in
fringe expense due to increase in premiums for employee health
benefits. |
|
(2) |
|
Increase primarily attributed to increased use of outside
services and subcontract labor due to increased activity at
Vicor Custom subsidiaries, in lieu of hiring permanent employees. |
|
(3) |
|
Increase primarily attributed to a decrease as compared to the
prior year, in the deferral of costs capitalized for certain
non-recurring engineering projects for which the related
revenues have been deferred. |
|
(4) |
|
Increase primarily attributed to an increase in project
materials associated with the development of V*I Chip and Picor
products. |
|
(5) |
|
Increase primarily attributed to relocation costs for newly
hired research and development personnel for the V*I Chip
business unit. |
During 2009, we initiated and completed workforce reductions and
pre-tax charges were recorded for the cost of severance and
other employee-related costs involving cash payments during 2009
and 2010 based on each employees length of service. Total
severance charges of $4,099,000 were recorded in 2009.
During the third quarter of 2009, we entered into a release and
settlement agreement with a vendor over alleged product
performance issues with certain products the vendor had sold to
us. We received a payment of $750,000 in consideration for the
settlement, which is recorded in Gain from
litigation-related and other settlements, net in the
accompanying Consolidated Statement of Operations. In addition,
we completed negotiations with Exar and Rohm, resulting in
separate settlement agreements calling for a final payment to
Exar of $70,000 and no additional payment due Rohm. As a result
of the settlements, we reversed a remaining excess accrual of
approximately $96,000 in the third quarter of 2009, which is
recorded in Gain from litigation-related and other
settlements, net in the accompanying Consolidated
Statement of Operations.
The major changes in the components of the Other income,
net for the years ended December 31 were as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
2010
|
|
|
2009
|
|
|
(decrease)
|
|
|
Interest income
|
|
$
|
438
|
|
|
$
|
717
|
|
|
$
|
(279
|
)
|
Unrealized gain on trading securities
|
|
|
970
|
|
|
|
1,268
|
|
|
|
(298
|
)
|
Unrealized loss on auction rate securities rights
|
|
|
(962
|
)
|
|
|
(964
|
)
|
|
|
2
|
|
Credit losses on available for sale securities
|
|
|
(146
|
)
|
|
|
(464
|
)
|
|
|
318
|
|
Foreign currency (losses) gains, net
|
|
|
(158
|
)
|
|
|
35
|
|
|
|
(193
|
)
|
Gain on disposal of equipment
|
|
|
248
|
|
|
|
30
|
|
|
|
218
|
|
Other
|
|
|
107
|
|
|
|
60
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
497
|
|
|
$
|
682
|
|
|
$
|
(185
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The unrealized gains (losses) and estimated credit loss on our
auction rate securities and securities rights results from the
change in the estimate fair value of these investments as of
December 31, 2010 and 2009, compared to December 31,
2009 and 2008, respectively. The decrease in interest income is
due to lower average balances on certain of our cash accounts
that bear interest as well as a decrease in interest rates. Our
exposure to market risk for fluctuations in foreign currency
exchange rates relates primarily to the operations of VJCL. The
functional currency of our subsidiaries in Europe and Hong Kong
is the U.S. dollar.
Income before income taxes was $29,619,000 in 2010 compared to
$5,455,000 for 2009.
30
The (benefit) provision for income taxes and the effective
income tax rate for the years ended December 31 were as follows
(dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
(Benefit) provision for income taxes
|
|
$
|
(3,920)
|
|
|
$
|
1,362
|
|
Effective income tax rate
|
|
|
(13.2%)
|
|
|
|
25.0%
|
|
The increase in the benefit for income taxes and the decrease in
the effective income tax rate for the year ended
December 31, 2010, compared to 2009, was principally due to
the tax benefits of ($5,158,000) and ($1,159,000) recorded as a
result of reversing portions of our deferred tax valuation
allowance in the third and fourth quarters of 2010,
respectively, partially offset by an increase in federal, state
and foreign income taxes as compared to 2009. Please see
Note 14 of the Consolidated Financial Statements for a
discussion of the accounting for the tax benefit, deferred tax
assets and deferred tax valuation allowances.
Net income of noncontrolling interest decreased $1,081,000 from
$1,295,000 for 2009 to $214,000 in 2010. This was due to lower
net income at certain entities in which we hold a noncontrolling
interest.
Basic and diluted income per share attributable to Vicor
Corporation was $0.80 for the year ended December 31, 2010
compared to $0.07 for the year ended December 31, 2009.
Year
ended December 31, 2009 compared to Year ended
December 31, 2008
Net revenues for fiscal 2009 were $197,959,000, a decrease of
$7,409,000 or 3.6%, as compared to $205,368,000 for the same
period in 2008.
The components of revenue for the years ended were as follows
(dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease)
|
|
|
|
2009
|
|
|
2008
|
|
|
$
|
|
|
%
|
|
|
BBU
|
|
$
|
186,980
|
|
|
$
|
189,360
|
|
|
$
|
(2,380
|
)
|
|
|
(1.3
|
)%
|
V*I Chip (1)
|
|
|
8,960
|
|
|
|
14,991
|
|
|
|
(6,031
|
)
|
|
|
(40.2
|
)%
|
Picor
|
|
|
2,019
|
|
|
|
1,017
|
|
|
|
1,002
|
|
|
|
98.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
197,959
|
|
|
$
|
205,368
|
|
|
$
|
(7,409
|
)
|
|
|
(3.6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
V*I Chip products sold by VJCL are
included in the V*I Chip amounts in 2009. The 2009 amounts were
previously included in BBU. Sales of V*I Chip products by VJCL
in 2008 were not material.
|
Overall orders for fiscal year 2009 decreased by 3.6% compared
with 2008. This decrease was caused by a decrease in BBU orders
during the period of 4.8%, offset by an increase in V*I Chip
orders of 6.1% and an increase in Picor orders of 140.1%. The
book-to-bill
ratio for fiscal year 2009 and 2008 was 1.03:1.
Gross margin for fiscal 2009 increased $1,309,000, or 1.5%, to
$87,594,000 from $86,285,000 in 2008. Gross margin as a
percentage of revenues increased to 44.2% from 42.0% compared to
the same period a year ago. The increase in gross margin dollars
and gross margin percentage was the result of a more favorable
product mix, principally due to increased shipments of higher
gross margin products from the Vicor Custom Power subsidiaries
and a decrease in shipments of lower gross margin V*I Chip
products. Lower production costs also contributed to the higher
gross margin.
Selling, general and administrative expenses were $47,932,000
for 2009, a decrease of $8,274,000, or 14.7%, as compared to
$56,206,000 for the same period in 2008. As a percentage of net
revenues, selling, general and administrative expenses decreased
to 24.2% from 27.4%.
31
The components of the $8,274,000 decrease were as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease)
|
|
Compensation
|
|
$
|
(3,000
|
)
|
|
|
(10.6
|
)%
|
|
(1)
|
Legal fees
|
|
|
(1,672
|
)
|
|
|
(61.7
|
)%
|
|
(2)
|
Audit and tax fees
|
|
|
(923
|
)
|
|
|
(42.6
|
)%
|
|
(3)
|
Advertising expenses
|
|
|
(886
|
)
|
|
|
(27.9
|
)%
|
|
(4)
|
Travel expenses
|
|
|
(657
|
)
|
|
|
(29.2
|
)%
|
|
(5)
|
Training expenses
|
|
|
(245
|
)
|
|
|
(17.0
|
)%
|
|
|
Depreciation and amortization
|
|
|
(197
|
)
|
|
|
(5.8
|
)%
|
|
|
International office expenses
|
|
|
(104
|
)
|
|
|
(28.5
|
)%
|
|
|
Employment advertising and recruiting
|
|
|
(97
|
)
|
|
|
(87.0
|
)%
|
|
|
Facilities expense
|
|
|
(53
|
)
|
|
|
(3.3
|
)%
|
|
|
Stockholder reporting
|
|
|
(82
|
)
|
|
|
(32.7
|
)%
|
|
|
Commissions expense
|
|
|
75
|
|
|
|
1.2
|
%
|
|
|
Other, net
|
|
|
(433
|
)
|
|
|
(10.9
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(8,274
|
)
|
|
|
(14.7
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Decrease primarily attributable to the workforce reductions
completed in 2009. |
|
(2) |
|
Decrease primarily attributed to a decrease in activity
associated with our lawsuit brought against certain of its
insurance carriers with respect to the Ericsson, Inc. settlement
of product liability litigation in 2009 compared to 2008. |
|
(3) |
|
Decrease primarily attributed to the late filings of our 2007
Forms 10-Q
and additional work related to accounting for our investment in
GWS in the first quarter of 2008. |
|
(4) |
|
Decrease primarily attributed to decreased advertising in trade
publications. |
|
(5) |
|
Represents an overall reduction in travel across all business
units and functional groups. |
Research and development expenses increased $238,000, or 0.8%,
to $31,636,000 in 2009 from $31,398,000 in 2008. As a percentage
of net revenues, research and development increased to 16.0%
from 15.3%.
The components of the $238,000 increase were as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease)
|
|
|
|
|
|
Project materials
|
|
$
|
710
|
|
|
|
19.5
|
%
|
|
|
(1
|
)
|
Picor non-recurring engineering charges
|
|
|
371
|
|
|
|
(79.2
|
)%
|
|
|
(2
|
)
|
Set-up and
tooling expenses
|
|
|
55
|
|
|
|
38.0
|
%
|
|
|
|
|
Travel expenses
|
|
|
(83
|
)
|
|
|
(30.2
|
)%
|
|
|
|
|
Compensation
|
|
|
(380
|
)
|
|
|
(1.6
|
)%
|
|
|
(3
|
)
|
Deferred costs
|
|
|
(666
|
)
|
|
|
(368.5
|
)%
|
|
|
(4
|
)
|
Other, net
|
|
|
231
|
|
|
|
4.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
238
|
|
|
|
0.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Increase primarily attributed to an increase in materials
associated with the development of V*I Chip and Picor products. |
|
(2) |
|
The Picor business unit provides engineering services to BBU and
V*I Chip to support certain manufacturing processes and research
and development activities. A decline in services related to
manufacturing processes resulted in an increase in the amount of
charges allocated to research and development expense. |
|
(3) |
|
Decrease primarily attributable to the workforce reduction
completed in the first quarter of 2009. |
32
|
|
|
(4) |
|
Decrease primarily attributed to an increase in deferred costs
capitalized for certain non-recurring engineering projects for
which the related revenues have been deferred. |
On January 14, 2009, senior management authorized and we
announced a plan to reduce our workforce by approximately eight
percent by the end of January 2009. Senior management authorized
additional reductions to our workforce in the second and third
quarters of 2009. We completed these reductions in workforce and
recorded pre-tax charges for severance and other
employee-related costs of $4,099,000 for 2009.
During the third quarter of 2009, we entered into a release and
settlement agreement with a vendor over alleged product
performance issues with certain product the vendor had sold to
us. We received a payment of $750,000 in consideration for the
settlement, which is recorded in Gain from
litigation-related and other settlements, net in the
accompanying Consolidated Statement of Operations. In addition,
we completed negotiations with Exar and Rohm, resulting in
separate settlement agreements calling for a final payment to
Exar of $70,000 and no additional payment due Rohm. As a result
of the settlements, we reversed a remaining excess accrual of
approximately $96,000 in the third quarter of 2009, which is
recorded in Gain from litigation-related and other
settlements, net in the accompanying Consolidated
Statement of Operations.
The major changes in the components of the Other income,
net for the years ended December 31 were as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
(decrease)
|
|
|
Interest income
|
|
$
|
717
|
|
|
$
|
2,138
|
|
|
$
|
(1,421
|
)
|
Unrealized gain (loss) on trading securities
|
|
|
1,268
|
|
|
|
(2,238
|
)
|
|
|
3,506
|
|
Unrealized (loss) gain on auction rate securities rights
|
|
|
(964
|
)
|
|
|
1,926
|
|
|
|
(2,890
|
)
|
Credit losses on available for sale securities
|
|
|
(464
|
)
|
|
|
-
|
|
|
|
(464
|
)
|
Foreign currency gains, net
|
|
|
35
|
|
|
|
82
|
|
|
|
(47
|
)
|
Gain on disposal of equipment
|
|
|
30
|
|
|
|
19
|
|
|
|
11
|
|
Other
|
|
|
60
|
|
|
|
101
|
|
|
|
(41
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
682
|
|
|
$
|
2,028
|
|
|
$
|
(1,346
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The decrease in interest income is due to lower average balances
on our cash equivalents and short and long-term investments as
well as a decrease in interest rates. The unrealized gains
(losses) and credit loss on our auction rate securities and
securities rights results from the change in fair value of these
investments during the period.
Income before income taxes was $5,455,000 in 2009 compared to
$886,000 for 2008.
The provision for income taxes and the effective income tax rate
for the years ended December 31 were as follows (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
Provision for income taxes
|
|
$
|
1,362
|
|
|
$
|
976
|
|
Effective income tax rate
|
|
|
25.0%
|
|
|
|
110.2%
|
|
The lower effective income tax rate for the year ended
December 31, 2009 compared to the same period in 2008 is
principally due an increase in income before income taxes from
$886,000 in 2008 to $5,455,000 in 2009, with only a $386,000
increase in the provision for income taxes from 2008 to 2009.
The provision for income taxes was higher in 2009 than 2008 due
to a reduction in tax reserves due to closing tax periods in
certain jurisdictions of $1,123,000 in 2008, partially offset by
higher estimated federal and state income taxes for one of the
noncontrolling interests that is not part of our consolidated
tax return in 2008 compared to 2009.
Loss from equity method investment (net of tax) decreased from
$1,688,000 in 2008 to $0 in 2009. This was principally due to
the equity method investment in GWS being adjusted for a decline
in value judged to
33
be other than temporary of $706,000 in the first quarter of 2008
and $555,000 in the fourth quarter, respectively, the allocation
of equity method losses for 2008, and bringing the investment
balance in GWS to zero as of December 31, 2008.
Net income of noncontrolling interest decreased $522,000 from
$1,817,000 for 2008 to $1,295,000 in 2009. This was due to lower
net income at certain entities in which we hold a noncontrolling
interest.
Basic and diluted income (loss) per share attributable to Vicor
Corporation was $0.07 for the year ended December 31, 2009,
compared to $(0.09) for the year ended December 31, 2008.
LIQUIDITY
AND CAPITAL RESOURCES
At December 31, 2010, we had $49,279,000 in unrestricted
cash and cash equivalents. The ratio of current assets to
current liabilities was 5.6:1 at December 31, 2010,
compared to 4.6:1 at December 31, 2009. Working capital
increased $30,663,000 to $105,454,000 at December 31, 2010
from $74,791,000 at December 31, 2009. The primary factors
affecting the working capital increase were increases in
inventories of $14,132,000, accounts receivable of $12,260,000,
cash and cash equivalents of $9,055,000, deferred tax assets of
$1,983,000, as well as a decrease in deferred revenue of
$1,832,000, offset by increases in accounts payable of
$2,541,000, accrued compensation and benefits of $1,032,000, as
well a decreases in short term investments of $2,583,000 and
other current assets of $1,948,000. The primary source of cash
for the year ended December 31, 2010, was $16,894,000 from
operating activities and $14,860,000 in net sales of short-term
and long-term investments. The primary use of cash for the year
ended December 31, 2010 was $12,103,000 for the purchase of
equipment, $12,506,000 for the payments of common stock
dividends, and $552,000 for the payments of noncontrolling
interest dividends, discussed below.
As of December 31, 2010, we held $19,075,000 of auction
rate securities classified as long-term investments. Please see
Note 4 of the Consolidated Financial Statements for a
discussion of the securities and our accounting treatment
thereof.
In November 2000, our Board of Directors authorized the
repurchase of up to $30,000,000 of Common Stock (the
November 2000 Plan). The November 2000 Plan
authorizes us 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. We did not repurchase shares of Common Stock during
the year ended December 31, 2010. As of December 31,
2010, we had approximately $8,541,000 remaining under the
November 2000 Plan.
On June 28, 2010, our Board of Directors approved a cash
dividend of $0.30 per share of the Companys common stock.
The total dividend of approximately $12,506,000 was paid on
July 30, 2010, to shareholders of record at the close of
business on July 16, 2010.
During the year ending December 31, 2010, three
subsidiaries paid a total of $5,457,000 in dividends, of which
$552,000 was paid to outside shareholders. Dividends paid to
outside shareholders are accounted for as a reduction in
noncontrolling interest.
The table below summarizes our contractual obligations as of
December 31, 2010 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
Less than
|
|
|
|
|
|
|
|
|
More Than
|
|
Contractual
Obligations
|
|
Total
|
|
|
1 Year
|
|
|
Years 2 & 3
|
|
|
Years 4 & 5
|
|
|
5 Years
|
|
|
Operating lease obligations
|
|
$
|
2,607
|
|
|
$
|
1,264
|
|
|
$
|
1,059
|
|
|
$
|
284
|
|
|
$
|
-
|
|
Purchase obligations
|
|
|
1,332
|
|
|
|
305
|
|
|
|
625
|
|
|
|
402
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,939
|
|
|
$
|
1,569
|
|
|
$
|
1,684
|
|
|
$
|
686
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We also have a contract with a third-party to supply nitrogen
for our manufacturing and research and development activities.
Under the contract, we are obligated to pay a minimum of
$300,000 annually, subject to semi-annual price adjustments,
through March 2015.
34
In addition to the amounts shown in the table above,
approximately $958,000 of unrecognized tax benefits have been
recorded as liabilities, and we are uncertain as to if or when
such amounts may be settled. Related to these unrecognized tax
benefits, we have also recorded a liability for potential
interest and penalties of approximately $77,000 on
December 31, 2010.
Our primary liquidity needs are for making continuing
investments in manufacturing equipment, particularly equipment
to increase capacity for our V*I Chip products and to upgrade
equipment for BBU production. We believe cash generated from
operations and the total of its cash and cash equivalents and
short-term investments will be sufficient to fund planned
operations and capital equipment purchases for the foreseeable
future. We have approximately $2,080,000 of capital expenditure
commitments, principally for manufacturing equipment, as of
December 31, 2010.
Based on our ability to access cash and other short-term
investments and our expected operating cash flows, we do not
anticipate that the current lack of liquidity of our auction
rate securities will affect our ability to execute our current
operating plan.
We do not consider the impact of inflation and changing prices
on our business activities or fluctuations in the exchange rates
for foreign currency transactions to have been significant
during the last three fiscal years.
|
|
ITEM 7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
We are exposed to a variety of market risks, including changes
in interest rates affecting the return on our cash and cash
equivalents and short-term investments and fluctuations in
foreign currency exchange rates. As our cash and cash
equivalents consist principally of money market securities,
which are short-term in nature, we believe our exposure to
market risk on interest rate fluctuations for these investments
is not significant. Our short-term and long-term investments
consist mainly of municipal and corporate debt securities, of
which the Failed Auction Securities represent a significant
portion. While the Failed Auction Securities are all highly
rated investments, generally with AAA/Aaa ratings, continued
failure to sell at their reset dates could negatively impact the
carrying value of the investments, in turn leading to impairment
charges in future periods. Changes in the fair value of the
Failed Auction Securities attributable to credit loss are
recorded through earnings, with the remainder of any change
recorded in Accumulated other comprehensive (loss)
income. Should a decline in the value of the Failed
Auction Securities be other than temporary, the losses would be
recorded in Other income (expense), net. We do not
believe there was an
other-than-temporary
decline in value in these securities as of December 31,
2010. We estimate that our annual interest income would change
by approximately $1,200,000 in 2010 for each 100 basis
point increase or decrease in interest rates.
Our exposure to market risk for fluctuations in foreign currency
exchange rates relates primarily to the operations of VJCL and
changes in the dollar/yen exchange rate, as the functional
currency of our subsidiaries in Europe and Hong Kong is the
U.S. dollar. Therefore, we believe market risk is mitigated
since these operations are not materially exposed to foreign
exchange fluctuations. Relative to foreign currency exposure
against the yen existing on December 31, 2010, we estimate
that a 10% unfavorable movement in the dollar/yen exchange rate
would increase foreign currency loss by approximately $157,000.
35
|
|
ITEM 8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
INDEX
|
|
|
|
|
|
|
Page
|
|
FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
37
|
|
|
|
|
38
|
|
|
|
|
39
|
|
|
|
|
40
|
|
|
|
|
41
|
|
|
|
|
42
|
|
|
|
|
77
|
|
36
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Vicor Corporation:
We have audited the accompanying consolidated balance sheets of
Vicor Corporation (a Delaware Corporation) and its subsidiaries
(collectively, the Company) as of December 31,
2010 and 2009, and the related consolidated statements of
operations, equity, and cash flows for each of the three years
in the period ended December 31, 2010. Our audits of the
basic financial statements included the financial statement
schedule listed in the index appearing under Item 15(a)(2).
These financial statements and financial statement schedule are
the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the Consolidated Financial Statements referred
to above present fairly, in all material respects, the financial
position of Vicor Corporation and subsidiaries as of
December 31, 2010 and 2009, and the results of their
operations and their cash flows for the three years in the
period ended December 31, 2010 in conformity with
accounting principles generally acceptable in the United States
of America. Also in our opinion, the related financial statement
schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), Vicor
Corporation and subsidiaries internal control over
financial reporting as of December 31, 2010, based on
criteria established in Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) and our report dated March 3,
2011 expressed an unqualified opinion thereon.
/s/ Grant Thornton LLP
Boston, Massachusetts
March 3, 2011
37
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
49,279
|
|
|
$
|
40,224
|
|
Restricted cash equivalents
|
|
|
-
|
|
|
|
192
|
|
Short-term investments
|
|
|
-
|
|
|
|
2,583
|
|
Accounts receivable, less allowance of $309 in 2010 and $260 in
2009
|
|
|
38,825
|
|
|
|
26,565
|
|
Inventories, net
|
|
|
35,489
|
|
|
|
21,357
|
|
Deferred tax assets
|
|
|
2,164
|
|
|
|
181
|
|
Other current assets
|
|
|
2,397
|
|
|
|
4,345
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
128,154
|
|
|
|
95,447
|
|
Restricted cash and cash equivalents
|
|
|
-
|
|
|
|
223
|
|
Long-term investments, net
|
|
|
18,417
|
|
|
|
29,995
|
|
Auction rate securities rights
|
|
|
-
|
|
|
|
962
|
|
Property, plant and equipment, net
|
|
|
50,848
|
|
|
|
49,009
|
|
Long-term deferred tax assets
|
|
|
2,805
|
|
|
|
-
|
|
Other assets
|
|
|
4,688
|
|
|
|
4,941
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
204,912
|
|
|
$
|
180,577
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
11,999
|
|
|
$
|
9,458
|
|
Accrued compensation and benefits
|
|
|
6,772
|
|
|
|
5,740
|
|
Accrued expenses
|
|
|
3,138
|
|
|
|
2,618
|
|
Accrued severance charges
|
|
|
-
|
|
|
|
259
|
|
Income taxes payable
|
|
|
102
|
|
|
|
60
|
|
Deferred revenue
|
|
|
689
|
|
|
|
2,521
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
22,700
|
|
|
|
20,656
|
|
Long-term deferred revenue
|
|
|
2,178
|
|
|
|
2,196
|
|
Long-term income taxes payable
|
|
|
1,022
|
|
|
|
384
|
|
Deferred income taxes
|
|
|
-
|
|
|
|
1,275
|
|
Commitments and contingencies (Note 15)
|
|
|
-
|
|
|
|
-
|
|
Equity:
|
|
|
|
|
|
|
|
|
Vicor Corporation stockholders equity:
|
|
|
|
|
|
|
|
|
Preferred Stock, $.01 par value, 1,000,000 shares
authorized; no shares issued
|
|
|
|
|
|
|
|
|
Class B Common Stock: 10 votes per share, $.01 par
value, 14,000,000 shares authorized, 11,767,052 shares
issued and outstanding
|
|
|
118
|
|
|
|
118
|
|
Common Stock: 1 vote per share, $.01 par value,
62,000,000 shares authorized 38,400,897 shares issued
and 30,002,499 shares outstanding (38,296,408 shares
issued and 29,898,010 shares outstanding in 2009)
|
|
|
385
|
|
|
|
384
|
|
Additional paid-in capital
|
|
|
163,933
|
|
|
|
161,746
|
|
Retained earnings
|
|
|
133,791
|
|
|
|
112,972
|
|
Accumulated other comprehensive loss
|
|
|
(1,369
|
)
|
|
|
(1,608
|
)
|
Treasury stock at cost: 8,398,398 shares in 2010 and 2009
|
|
|
(121,827
|
)
|
|
|
(121,827
|
)
|
|
|
|
|
|
|
|
|
|
Total Vicor Corporation stockholders equity
|
|
|
175,031
|
|
|
|
151,785
|
|
Noncontrolling interest
|
|
|
3,981
|
|
|
|
4,281
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
179,012
|
|
|
|
156,066
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
204,912
|
|
|
$
|
180,577
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Net revenues
|
|
$
|
250,733
|
|
|
$
|
197,959
|
|
|
$
|
205,368
|
|
Cost of revenues
|
|
|
136,213
|
|
|
|
110,365
|
|
|
|
119,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
114,520
|
|
|
|
87,594
|
|
|
|
86,285
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
49,417
|
|
|
|
47,932
|
|
|
|
56,206
|
|
Research and development
|
|
|
35,981
|
|
|
|
31,636
|
|
|
|
31,398
|
|
Severance charges
|
|
|
-
|
|
|
|
4,099
|
|
|
|
-
|
|
Gain from litigation-related and other settlements, net
|
|
|
-
|
|
|
|
(846
|
)
|
|
|
(177
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
85,398
|
|
|
|
82,821
|
|
|
|
87,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
29,122
|
|
|
|
4,773
|
|
|
|
(1,142
|
)
|
Other income, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other than temporary impairment (losses) gains on
available-for-sale
securities
|
|
|
(271
|
)
|
|
|
759
|
|
|
|
-
|
|
Portion of gains (losses) recognized in other comprehensive
income
|
|
|
125
|
|
|
|
(1,223
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net impairment losses recognized in earnings
|
|
|
(146
|
)
|
|
|
(464
|
)
|
|
|
-
|
|
Other income, net
|
|
|
643
|
|
|
|
1,146
|
|
|
|
2,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income, net
|
|
|
497
|
|
|
|
682
|
|
|
|
2,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
29,619
|
|
|
|
5,455
|
|
|
|
886
|
|
(Benefit) provision for income taxes
|
|
|
(3,920
|
)
|
|
|
1,362
|
|
|
|
976
|
|
Loss from equity method investment (net of tax)
|
|
|
-
|
|
|
|
-
|
|
|
|
1,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income (loss)
|
|
|
33,539
|
|
|
|
4,093
|
|
|
|
(1,778
|
)
|
Less: Net income attributable to noncontrolling interest
|
|
|
214
|
|
|
|
1,295
|
|
|
|
1,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Vicor Corporation
|
|
$
|
33,325
|
|
|
$
|
2,798
|
|
|
$
|
(3,595
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share attributable to Vicor
Corporation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.80
|
|
|
$
|
0.07
|
|
|
$
|
(0.09
|
)
|
Diluted
|
|
$
|
0.80
|
|
|
$
|
0.07
|
|
|
$
|
(0.09
|
)
|
Shares used to compute net income (loss) per common share
attributable to Vicor Corporation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
41,700
|
|
|
|
41,665
|
|
|
|
41,651
|
|
Diluted
|
|
|
41,772
|
|
|
|
41,671
|
|
|
|
41,651
|
|
Cash dividends declared per share
|
|
$
|
0.30
|
|
|
$
|
-
|
|
|
$
|
0.30
|
|
See accompanying notes.
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income (loss)
|
|
$
|
33,539
|
|
|
$
|
4,093
|
|
|
$
|
(1,778
|
)
|
Adjustments to reconcile consolidated net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
10,222
|
|
|
|
10,198
|
|
|
|
10,515
|
|
Deferred income taxes
|
|
|
(6,274
|
)
|
|
|
(74
|
)
|
|
|
127
|
|
Unrealized (gain) loss on trading securities
|
|
|
(970
|
)
|
|
|
(1,268
|
)
|
|
|
2,238
|
|
Unrealized loss on auction rate security rights
|
|
|
962
|
|
|
|
964
|
|
|
|
-
|
|
Stock compensation expense
|
|
|
871
|
|
|
|
657
|
|
|
|
1,121
|
|
Gain on disposal of equipment
|
|
|
(249
|
)
|
|
|
(30
|
)
|
|
|
(22
|
)
|
Excess tax benefit of share-based compensation
|
|
|
(213
|
)
|
|
|
-
|
|
|
|
-
|
|
Credit loss on available for sale securities
|
|
|
146
|
|
|
|
464
|
|
|
|
-
|
|
(Decrease) increase in long-term deferred revenue
|
|
|
(18
|
)
|
|
|
1,078
|
|
|
|
1,076
|
|
Severance charges
|
|
|
-
|
|
|
|
4,099
|
|
|
|
-
|
|
Unrealized gain on acquisition of auction rate security rights
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,926
|
)
|
Loss from equity method investee (net of tax)
|
|
|
-
|
|
|
|
-
|
|
|
|
1,688
|
|
Change in current assets and liabilities, net
|
|
|
(21,122
|
)
|
|
|
4,617
|
|
|
|
(3,976
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
16,894
|
|
|
|
24,798
|
|
|
|
9,063
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of investments
|
|
|
(908
|
)
|
|
|
(1,695
|
)
|
|
|
(11,574
|
)
|
Sales and maturities of investments
|
|
|
15,768
|
|
|
|
6,650
|
|
|
|
28,004
|
|
Additions to property, plant and equipment
|
|
|
(12,103
|
)
|
|
|
(10,643
|
)
|
|
|
(8,265
|
)
|
Purchase of equity method investment
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,000
|
)
|
Proceeds from sale of equipment
|
|
|
421
|
|
|
|
32
|
|
|
|
25
|
|
Change in restricted cash
|
|
|
415
|
|
|
|
322
|
|
|
|
215
|
|
Decrease (increase) in other assets
|
|
|
172
|
|
|
|
(572
|
)
|
|
|
(229
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
3,765
|
|
|
|
(5,906
|
)
|
|
|
7,176
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of Common Stock
|
|
|
1,104
|
|
|
|
-
|
|
|
|
202
|
|
Common stock dividends paid
|
|
|
(12,506
|
)
|
|
|
-
|
|
|
|
(12,494
|
)
|
Noncontrolling interest dividends paid
|
|
|
(552
|
)
|
|
|
(1,269
|
)
|
|
|
(1,168
|
)
|
Excess tax benefit of share-based compensation
|
|
|
213
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(11,741
|
)
|
|
|
(1,269
|
)
|
|
|
(13,460
|
)
|
Effect of foreign exchange rates on cash
|
|
|
137
|
|
|
|
(38
|
)
|
|
|
(157
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
9,055
|
|
|
|
17,585
|
|
|
|
2,622
|
|
Cash and cash equivalents at beginning of period
|
|
|
40,224
|
|
|
|
22,639
|
|
|
|
20,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
49,279
|
|
|
$
|
40,224
|
|
|
$
|
22,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(11,926
|
)
|
|
|
2,148
|
|
|
|
3,684
|
|
Inventories, net
|
|
|
(13,928
|
)
|
|
|
5,291
|
|
|
|
(3,311
|
)
|
Other current assets
|
|
|
2,050
|
|
|
|
(2,065
|
)
|
|
|
559
|
|
Accounts payable and accrued liabilities
|
|
|
3,881
|
|
|
|
2,550
|
|
|
|
(4,410
|
)
|
Accrued severance
|
|
|
(259
|
)
|
|
|
(3,840
|
)
|
|
|
-
|
|
Accrual for litigation settlement
|
|
|
-
|
|
|
|
(162
|
)
|
|
|
(78
|
)
|
Income taxes payable
|
|
|
892
|
|
|
|
(1,164
|
)
|
|
|
(141
|
)
|
Deferred revenue
|
|
|
(1,832
|
)
|
|
|
1,859
|
|
|
|
(279
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(21,122
|
)
|
|
$
|
4,617
|
|
|
$
|
(3,976
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for income taxes, net of refunds
|
|
$
|
1,113
|
|
|
$
|
3,122
|
|
|
$
|
602
|
|
See accompanying notes.
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
Vicor
|
|
|
|
|
|
|
|
|
|
Class B
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
Corporation
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
Common
|
|
|
Paid-In
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Treasury
|
|
|
Stockholders
|
|
|
Noncontrolling
|
|
|
Total
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Capital
|
|
|
Earnings
|
|
|
Income (Loss)
|
|
|
Stock
|
|
|
Equity
|
|
|
Interest
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance on December 31, 2007
|
|
$
|
118
|
|
|
$
|
384
|
|
|
$
|
159,332
|
|
|
$
|
126,263
|
|
|
$
|
170
|
|
|
$
|
(121,827
|
)
|
|
$
|
164,440
|
|
|
$
|
4,040
|
|
|
$
|
168,480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of Common Stock
|
|
|
|
|
|
|
|
|
|
|
202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
202
|
|
|
|
|
|
|
|
202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock dividends paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,494
|
)
|
|
|
|
|
|
|
|
|
|
|
(12,494
|
)
|
|
|
|
|
|
|
(12,494
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest dividends paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,168
|
)
|
|
|
(1,168
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
1,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,121
|
|
|
|
|
|
|
|
1,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest adjustment (1)
|
|
|
|
|
|
|
|
|
|
|
434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
434
|
|
|
|
(434
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,595
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,595
|
)
|
|
|
1,817
|
|
|
|
(1,778
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,314
|
)
|
|
|
|
|
|
|
(3,314
|
)
|
|
|
|
|
|
|
(3,314
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustments, net of tax of $226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
377
|
|
|
|
|
|
|
|
377
|
|
|
|
|
|
|
|
377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,532
|
)
|
|
|
|
|
|
|
(4,715
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance on December 31, 2008
|
|
|
118
|
|
|
|
384
|
|
|
|
161,089
|
|
|
|
110,174
|
|
|
|
(2,767
|
)
|
|
|
(121,827
|
)
|
|
|
147,171
|
|
|
|
4,255
|
|
|
|
151,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest dividends paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,269
|
)
|
|
|
(1,269
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
657
|
|
|
|
|
|
|
|
657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,798
|
|
|
|
|
|
|
|
|
|
|
|
2,798
|
|
|
|
1,295
|
|
|
|
4,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,223
|
|
|
|
|
|
|
|
1,223
|
|
|
|
|
|
|
|
1,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustments, net of tax of $30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(64
|
)
|
|
|
|
|
|
|
(64
|
)
|
|
|
|
|
|
|
(64
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,957
|
|
|
|
|
|
|
|
5,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance on December 31, 2009
|
|
|
118
|
|
|
|
384
|
|
|
|
161,746
|
|
|
|
112,972
|
|
|
|
(1,608
|
)
|
|
|
(121,827
|
)
|
|
|
151,785
|
|
|
|
4,281
|
|
|
|
156,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of Common Stock
|
|
|
|
|
|
|
1
|
|
|
|
1,103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,104
|
|
|
|
|
|
|
|
1,104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock dividends paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,506
|
)
|
|
|
|
|
|
|
|
|
|
|
(12,506
|
)
|
|
|
|
|
|
|
(12,506
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest dividend paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(552
|
)
|
|
|
(552
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess tax benefit of share-based compensation
|
|
|
|
|
|
|
|
|
|
|
213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
213
|
|
|
|
|
|
|
|
213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
871
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
871
|
|
|
|
|
|
|
|
871
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,325
|
|
|
|
|
|
|
|
|
|
|
|
33,325
|
|
|
|
214
|
|
|
|
33,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(123
|
)
|
|
|
|
|
|
|
(123
|
)
|
|
|
(2
|
)
|
|
|
(125
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustments, net of tax of $169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
362
|
|
|
|
|
|
|
|
362
|
|
|
|
40
|
|
|
|
402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,564
|
|
|
|
252
|
|
|
|
33,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance on December 31, 2010
|
|
$
|
118
|
|
|
$
|
385
|
|
|
$
|
163,933
|
|
|
$
|
133,791
|
|
|
$
|
(1,369
|
)
|
|
$
|
(121,827
|
)
|
|
$
|
175,031
|
|
|
$
|
3,981
|
|
|
$
|
179,012
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
A noncontrolling interest had a
redemption of preferred stock that resulted in a $434,000
adjustment to Additional
Paid-In-Capital.
|
See accompanying notes.
41
VICOR
CORPORATION
|
|
1.
|
DESCRIPTION
OF BUSINESS
|
Vicor Corporation (the Company or Vicor)
designs, develops, manufactures and markets modular power
converters, power system components, and power systems. The
Company also licenses certain rights to its technology in return
for ongoing royalties. The principal markets for the power
converters and systems are large Original Equipment
Manufacturers and their contract manufacturers, and smaller,
lower volume users which are broadly distributed across several
major market areas.
|
|
2.
|
SIGNIFICANT
ACCOUNTING POLICIES
|
Principles
of consolidation
The Consolidated Financial Statements include the accounts of
the Company and its subsidiaries. All intercompany transactions
and balances have been eliminated upon consolidation. Certain of
the Companys Vicor Custom Power entities are not majority
owned by the Company. These entities are consolidated by the
Company as management believes that the Company has the ability
to exercise control over their activities and operations.
Revenue
recognition
Product revenue is recognized in the period when persuasive
evidence of an arrangement with a customer exists, the products
are shipped and title has transferred to the customer, the price
is fixed or determinable, and collection is considered probable.
License fees are recognized as earned. The Company recognizes
revenue on such arrangements only when the contract is signed,
the license term has begun, all obligations have been delivered
to the customer, and collection is probable. The Company
evaluates revenue arrangements with potential multi-element
deliverables to determine if there is more than one unit of
accounting. A deliverable constitutes a separate unit of
accounting when it has standalone value and there are no
customer-negotiated refund or return rights for the undelivered
elements. The selling price for each deliverable is based on
vendor-specific objective evidence (VSOE) if
available, third-party evidence (TPE) if VSOE is not
available, or best estimate of selling price (BESP)
if neither VSOE or TPE is available.
The Company enters into arrangements containing multiple
elements which may include a combination of non-recurring
engineering services (NRE), prototype units and
production units. The Company has determined that the NRE and
prototype units represent one unit of accounting and the
production units a separate unit of accounting, based on an
assessment of the respective standalone value. When possible,
revenue is allocated to the elements based on VSOE or TPE for
each element. For arrangements where VSOE or TPE cannot be
established, the Company uses BESP for the allocation of
arrangement consideration. The objective of BESP is to determine
the price at which the Company would typically transact a
standalone sale of the product or service. BESP is determined by
considering a number of factors including the Companys
pricing policies, internal costs and gross margin objectives,
current market conditions, information gathered from experience
in customer negotiations and the competitive landscape.
The Company defers revenue recognition for the NRE and prototype
units until completion of the final milestone under the NRE
arrangement. Recognition generally takes place within six to
twelve months of the initiation of the arrangement. Revenue for
the production units is recognized upon shipment, as for product
revenue, as summarized above. For certain multiple-element
arrangements entered into prior to January 1, 2009 which
contained a combination of technical support services, NRE,
minimum license payments and future royalties, separate units of
accounting could not be established. Therefore, revenue under
these arrangements is deferred and recognized over the term of
the arrangement. During 2010, 2009 and 2008, revenue recognized
under multi-element arrangements accounted for less than 3% of
net revenues.
42
VICOR
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Foreign
currency translation
The financial statements of Vicor Japan Company, Ltd.
(VJCL), a majority owned subsidiary, for which the
functional currency is the Japanese yen, have been translated
into U.S. dollars using the exchange rate in effect at the
balance sheet date for balance sheet amounts and the average
exchange rates in effect during the year for income statement
amounts. The gains and losses resulting from the changes in
exchange rates from year to year have been reported in other
comprehensive income.
Transaction gains and losses and translation gains (losses)
resulting from the remeasurement of foreign currency denominated
assets and liabilities of the Companys foreign
subsidiaries where the functional currency is the
U.S. dollar are included in other income, net. Foreign
currency gains (losses) included in other income, net, were
approximately ($158,000), $35,000, and $82,000 in 2010, 2009 and
2008, respectively.
Cash
and cash equivalents
Cash and cash equivalents include funds held in checking and
money market accounts, certificates of deposit and debt
securities with maturities of less than three months at the time
of purchase. Cash and cash equivalents are valued at cost which
approximates market value. The Companys money market
securities, which are classified as cash equivalents on the
balance sheet, are purchased and redeemed at par. The estimated
fair value is equal to the cost of the securities and due to the
nature of the securities there are no unrealized gains or losses
at the balance sheet dates.
Restricted
cash and short-term investments
Restricted cash and short-term investments represent the amount
of cash and short-term investments required to be set aside as a
guarantee for certain foreign letters of credit.
Short-term
and long-term investments
The Companys principal sources of liquidity are its
existing balances of cash, cash equivalents and short-term
investments, as well as cash generated from operations.
Consistent with the Companys investment policy guidelines,
the Company can invest, and has historically invested, its cash
balances in demand deposit accounts, money market funds,
brokered certificates of deposit and auction rate securities
meeting certain quality criteria. All of the Companys
investments are subject to credit, liquidity, market, and
interest rate risk.
The Companys short-term and long-term investments are
classified as either
available-for-sale
or trading securities.
Available-for-sale
securities are recorded at fair value, with unrealized gains and
losses, net of tax, attributable to credit loss recorded through
the statement of operations and unrealized gains and losses, net
of tax, attributable to other non-credit factors recorded in
Accumulated other comprehensive loss, a component of
Stockholders Equity. In determining the amount of credit
loss, the Company compares the present value of cash flows
expected to be collected to the amortized cost basis of the
securities, considering, among other factors, credit default
risk probabilities and changes in credit ratings as significant
inputs. Trading securities are recorded at fair value, with
unrealized gains and losses recorded through the Consolidated
Statements of Operations each reporting period.
The amortized cost of debt securities is adjusted for
amortization of premiums and accretion of discounts to maturity,
the net amount of which, along with interest and realized gains
and losses, is included in Other income, net in the
Consolidated Statements of Operations. The Company periodically
evaluates investments to determine if impairment is required,
whether an impairment is other than temporary, and the
measurement of an impairment loss. The Company considers a
variety of impairment indicators such as, but not limited to, a
significant deterioration in the earnings performance, credit
rating, or asset quality of the investment.
43
VICOR
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Fair
value measurements
The Company accounts for certain financial assets at fair value,
defined as the price that would be received to sell an asset or
paid to transfer a liability (i.e., an exit price) in the
principal or most advantageous market for the asset or liability
in an orderly transaction between market participants on the
measurement date. As such, fair value is a market-based
measurement that should be determined based on assumptions that
market participants would use in pricing an asset or liability.
A three-level hierarchy is used to show the extent and level of
judgment used to estimate fair value measurements:
|
|
|
|
Level 1
|
Inputs used to measure fair value are unadjusted quoted prices
available in active markets for the identical assets or
liabilities as of the reporting date.
|
|
|
Level 2
|
Inputs used to measure fair value, other than quoted prices
included in Level 1, are either directly or indirectly
observable as of the reporting date through correlation with
market data, including quoted prices for similar assets and
liabilities in active markets and quoted prices in inactive
markets. Level 2 also includes assets and liabilities
valued using models or other pricing methodologies that do not
require significant judgment since the input assumptions used in
the models, such as interest rates and volatility factors, are
corroborated by readily observable data from actively quoted
markets for substantially the full term of the financial
instrument.
|
|
|
Level 3
|
Inputs used to measure fair value are unobservable inputs
supported by little or no market activity and reflect the use of
significant management judgment. These values are generally
determined using pricing models for which the assumptions
utilize managements estimates of market participant
assumptions.
|
The Company uses the fair value option for certain financial
assets, which allows an entity the irrevocable option to elect
fair value for the initial and subsequent measurement for
specified financial assets and liabilities on a
case-by-case
basis.
Allowance
for doubtful accounts
The Company maintains allowances for doubtful accounts for
estimated losses resulting from the inability of its customers
to make required payments, based on assessments of
customers credit-risk profiles and payment histories. If
the financial condition of the Companys customers were to
deteriorate, resulting in an impairment of their ability to make
payments, additional allowances may be required. The Company
does not require collateral from its customers.
Inventories
Inventories are valued at the lower of cost (determined using
the
first-in,
first-out method) or net realizable value. The Company provides
reserves for inventories estimated to be excess, obsolete or
unmarketable. The Companys estimation process for
assessing net realizable value is based upon its known backlog,
projected future demand and expected market conditions. If the
Companys estimated demand
and/or
market expectation were to change or if product sales were to
decline, the Companys estimation process may cause larger
inventory reserves to be recorded, resulting in larger charges
to cost of revenues.
Concentrations
of credit risk
Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist principally of
cash and cash equivalents, short-term and long-term investments
and trade accounts receivable. The Company maintains cash and
cash equivalents and certain other financial instruments with
various financial institutions. The Companys short-term
and long-term investments consist of highly rated
44
VICOR
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AAA/Aaa) municipal and corporate debt securities in which a
significant portion are invested in auction rate securities. As
of December 31, 2010, the Company was holding a total of
approximately $19,075,000 in auction rate securities, the
significant majority of which are student loan backed
securities. Through December 31, 2010, auctions held for
all of the Companys auction rate securities have failed.
The funds associated with auction rate securities that have
failed auction may not be accessible until a successful auction
occurs, a buyer is found outside of the auction process, the
security is called, or the underlying securities have matured.
If the credit rating of the issuer of any auction rate security
held deteriorates, the Company may be required to adjust the
carrying value of the investment for an
other-than-temporary
decline in value through an impairment charge. The
Companys investment policy, approved by the Board of
Directors, limits the amount the Company may invest in any
issuer, thereby reducing credit risk concentrations.
Concentrations of credit risk with respect to trade accounts
receivable are limited due to the number of entities comprising
the Companys customer base. As of December 31, 2010,
one customer accounted for approximately 10.7% of trade account
receivables. Credit losses have consistently been within
managements expectations.
Goodwill,
other intangible assets, and long-lived assets
The Company performs a test of goodwill for potential impairment
at least annually. Values assigned to patents are amortized
using the straight-line method over periods ranging from three
to twenty years.
Long-lived assets such as property, plant and equipment and
intangible assets, are included in impairment evaluations when
events or circumstances exist that indicate the carrying amount
of those assets may not be recoverable. If the impairment
evaluation indicates the affected asset is not recoverable, the
assets carrying value would be reduced to fair value. No
event has occurred that would suggest any impairment in the
value of long-lived assets recorded in the accompanying
Consolidated Financial Statements.
Other
investments
The Company accounts for its investment in Great Wall
Semiconductor Corporation (GWS) under the equity
method of accounting.
Advertising
expense
The cost of advertising is expensed as incurred. The Company
incurred $2,378,000, $1,969,000 and $2,735,000 in advertising
costs during 2010, 2009 and 2008, respectively.
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
Consolidated Balance Sheets.
Net
income (loss) per common share
The Company computes basic earnings per share using the weighted
average number of common shares outstanding and diluted
earnings per share using the weighted average number of common
shares outstanding plus the effect of outstanding dilutive stock
options, if any. The following table sets forth the computation
of
45
VICOR
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
basic and diluted income (loss) per share for the years ended
December 31 (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Vicor Corporation
|
|
$
|
33,325
|
|
|
$
|
2,798
|
|
|
$
|
(3,595
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic income (loss) per share-weighted average
shares (1)
|
|
|
41,700
|
|
|
|
41,665
|
|
|
|
41,651
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee stock options(2)
|
|
|
72
|
|
|
|
6
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted income (loss) per share
adjusted weighted-average shares and assumed conversions(3)
|
|
|
41,772
|
|
|
|
41,671
|
|
|
|
41,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share
|
|
$
|
0.80
|
|
|
$
|
0.07
|
|
|
$
|
(0.09
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) per share
|
|
$
|
0.80
|
|
|
$
|
0.07
|
|
|
$
|
(0.09
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Denominator represents weighted average number of Common Shares
and Class B Common Shares outstanding. |
|
(2) |
|
Options to purchase 345,998 and 720,823 shares of Common
Stock were outstanding in 2010 and 2009, respectively, but were
not included in the computation of diluted income per share
because the options exercise prices were greater than the
average market price of the Common Stock and, therefore, the
effect would have been antidilutive. Options to purchase
1,084,175 shares of Common Stock in 2008 were not included
in the calculation of net loss per share as the effect would
have been antidilutive. |
|
(3) |
|
Denominator represents weighted average number of Common Shares
and Class B Common Shares outstanding for the year,
adjusted to include the dilutive effect, if any, of outstanding
options. |
Income
taxes
Deferred tax assets and liabilities are determined based on the
differences between financial reporting and tax bases of assets
and liabilities and are measured using the enacted income tax
rates and laws that are expected to be in effect when the
temporary differences are expected to reverse. Deferred tax
assets are reduced by a valuation allowance if it is more likely
than not that some portion or all of the deferred tax assets
will not be realized. Additionally, deferred tax assets and
liabilities are separated into current and noncurrent amounts
based on the classification of the related assets and
liabilities for financial reporting purposes or the expected
reversal.
The Company follows a two-step process to determine the amount
of tax benefit to recognize. First, the tax position must be
evaluated to determine the likelihood that it will be sustained
upon examination by a tax authority. If the tax position is
deemed more-likely-than-not to be sustained, the tax
position is then assessed to determine the amount of benefit to
recognize in the financial statements. The amount of the benefit
that may be recognized is the largest amount that has a greater
than 50 percent likelihood of being realized upon ultimate
settlement. If the tax position does not meet the
more-likely-than-not threshold then it is not
recognized in the financial statements. Additionally, the
Company accrues interest and penalties, if any, related to
unrecognized tax benefits as a component of income tax expense.
46
VICOR
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Stock-based
compensation
The Company uses the Black-Scholes option-pricing model to
calculate the grant-date fair value of stock option awards. The
resulting compensation expense, net of expected forfeitures, for
non performance-based stock options is recognized on a
straight-line basis over the service period of the award, which
is generally five years for stock options. For stock options
with performance-based vesting provisions, recognition of
compensation expense, net of expected forfeitures, commences if
and when the achievement of the performance criteria is deemed
probable. The compensation expense, net of expected forfeitures,
for performance-based stock options is recognized over the
relevant performance period.
Use of
estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingencies at the date of the financial
statements and the reported amounts of revenue and expenses
during the reporting period. Such estimates relate to the useful
lives of fixed assets and identified intangible assets, fair
value of short and long-term investments, allowances for
doubtful accounts, the net realizable value of inventory,
potential reserves relating to litigation matters, accrued
liabilities, accrued taxes, deferred tax valuation allowances,
assumptions pertaining to share-based payments and other
reserves. Actual results could differ from those estimates, and
such differences may be material to the financial statements.
Comprehensive
(loss) income
The components of comprehensive income (loss) include, in
addition to net income (loss), unrealized gains and losses on
investments, net of tax and foreign currency translation
adjustments related to VJCL.
Impact
of recently issued accounting standards
Effective January 1, 2010, the Company adopted new
accounting guidance related to the Consolidation of Variable
Interest Entities. The new accounting standard replaces the
quantitative-based risks and rewards calculation for determining
which enterprise, if any, has a controlling financial interest
in a variable interest entity with an approach focused on
identifying which enterprise has the power to direct the
activities of a variable interest entity that most significantly
impact the entitys economic performance and (1) the
obligation to absorb losses of the entity or (2) the right
to receive benefits from the entity. The new standard also
provides additional reconsideration events for determining
whether an entity is a variable interest entity and requirements
for ongoing assessments of whether an enterprise is the primary
beneficiary of a variable interest entity. The adoption of this
new accounting guidance did not have a material effect on the
Companys financial position or results of operations.
Effective January 1, 2010, the Company adopted new
accounting guidance on fair value measurements and disclosures.
The new guidance requires more robust disclosures about
(1) the different classes of assets and liabilities
measured at fair value, (2) the valuation techniques and
inputs used, (3) the activity in Level 3 fair value
measurements, and (4) the transfers between Levels 1,
2, and 3. The adoption of this new accounting guidance did not
have a material effect on the Companys financial position
or results of operations.
47
VICOR
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
3.
|
STOCK-BASED
COMPENSATION AND EMPLOYEE BENEFIT PLANS
|
Vicor currently grants stock options under the following equity
compensation plans that are shareholder-approved:
Amended and Restated 2000 Stock Option and Incentive Plan
(the Vicor 2000 Plan) Under
the Vicor 2000 Plan, the Board of Directors or the Compensation
Committee of the Board of Directors may grant stock incentive
awards based on the Companys Common Stock, including stock
options, stock appreciation rights, restricted stock,
performance shares, unrestricted stock, deferred stock and
dividend equivalent rights. Awards may be granted to employees
and other key persons, including non-employee directors.
Discretionary awards of stock options to non-employee directors
shall be in lieu of any automatic grant of stock options under
the Companys 1993 Stock Option Plan (the Vicor 1993
Plan) and the Companys 1998 Stock Option and
Incentive Plan (the Vicor 1998 Plan). Incentive
stock options may be granted to employees at a price at least
equal to the fair market value per share of the Common Stock on
the date of grant, and non-qualified options may be granted to
non-employee directors at a price at least equal to 85% of the
fair market value of the Common Stock on the date of grant. A
total of 4,000,000 shares of Common Stock have been
reserved for issuance under the Vicor 2000 Plan. The period of
time during which an option may be exercised and the vesting
periods are determined by the Compensation Committee. The term
of each option may not exceed ten years from the date of grant.
1998 Stock Option and Incentive Plan (the Vicor 1998
Plan) The Vicor 1998 Plan permitted the
grant of share options to its employees and other key persons,
including non-employee directors for the purchase of up to
2,000,000 shares of common stock. As a result of the
approval of the Vicor 2000 Plan, no further grants were made
under the Vicor 1998 Plan.
1993 Stock Option Plan (the Vicor 1993
Plan) The Vicor 1993 Plan permitted the
grant of share options to its employees and non-employee
directors for the purchase of up to 4,000,000 shares of
common stock. As a result of the approval of the Vicor 2000
Plan, no further grants were made under the 1993 Plan.
Picor Corporation (Picor), a privately held
majority-owned subsidiary of Vicor, currently grants stock
options under the following equity compensation plan that has
been approved by its Board of Directors:
2001 Stock Option and Incentive Plan, as amended (the
2001 Picor Plan) The 2001 Picor Plan
permits the grant of share options to its employees and other
key persons, including non-employee directors and full or
part-time officers, for the purchase of up to
80,000,000 shares of common stock.
V*I Chip Corporation (V*I Chip), a privately held
wholly-owned subsidiary of Vicor, currently grants stock options
under the following equity compensation plan that has been
approved by its Board of Directors:
2007 Stock Option and Incentive Plan, as amended (the
2007 V*I Chip Plan) The 2007 V*I
Chip Plan permits the grant of share options to its employees
and other key persons, including non-employee directors and full
or part-time officers, for the purchase of up to
100,000,000 shares of common stock.
All non performance-based option awards are granted at an
exercise price equal to or greater than the market price for
Vicor at the date of the grant, and are granted at a price equal
to or greater than the estimated fair value for both Picor and
V*I Chip at the date of grant. Options generally vest over
various periods of up to five years and may be exercised for up
to 10 years from the date of grant, which is the maximum
contractual term. The Company uses the graded attribution method
to recognize expense for all stock-based awards.
During the third quarter of 2010, the Company granted 1,243,750
non-qualified stock options under the Vicor 2000 Plan, with
performance-based vesting provisions tied to achievement of
certain quarterly revenue targets by the Brick Business Unit.
Under the accounting rules for performance-based awards, the
Company is
48
VICOR
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
required to assess, on an ongoing basis, the probability of
whether the performance criteria will be achieved. If and when
achievement is deemed probable, the Company will begin to
recognize the associated compensation expense for the stock
options over the relevant performance period. As of
December 31, 2010, the Company determined that it was not
probable that the revenue targets could be achieved and,
accordingly, has not recorded compensation expense relating to
these options since the grant date. The unrecognized
compensation expense of these performance-based options was
approximately $7,790,000 as of December 31, 2010. The fair
value for the options was estimated at the date of grant using
the Black Scholes option pricing model.
On December 31, 2010, the Company granted 2,984,250
non-qualified stock options under the 2007 V*I Chip Plan with
performance-based vesting provisions tied to achievement of
certain margin targets by the V*I Chip Business Unit. As of
December 31, 2010, the Company determined that it was
probable that the margin targets could be achieved and,
accordingly, will begin recording compensation expense relating
to these options beginning January 1, 2011. The
unrecognized compensation expense of these performance-based
options was approximately $1,481,000 as of December 31,
2010. The fair value for the options was estimated at the date
of grant using the Black Scholes option pricing model.
Stock compensation expense for the years ended December 31 was
as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Cost of revenues
|
|
$
|
19
|
|
|
$
|
20
|
|
|
$
|
52
|
|
Selling, general and administrative
|
|
|
618
|
|
|
|
456
|
|
|
|
818
|
|
Research and development
|
|
|
234
|
|
|
|
181
|
|
|
|
251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock based compensation
|
|
$
|
871
|
|
|
$
|
657
|
|
|
$
|
1,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair value for the options was estimated at the date of
grant using a Black-Scholes option pricing model under all
methods with the following weighted-average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non Performance-based Stock
|
|
Performance-based Stock
|
|
|
Options
|
|
Options(1)
|
Vicor:
|
|
2010
|
|
2009
|
|
2008
|
|
2010
|
|
Risk-free interest rate
|
|
|
2.3
|
%
|
|
|
1.1
|
%
|
|
|
2.8
|
%
|
|
|
2.0-2.7
|
%
|
Expected dividend yield
|
|
|
1.6
|
%
|
|
|
1.0
|
%
|
|
|
2.6
|
%
|
|
|
2.5
|
%
|
Expected volatility
|
|
|
54
|
%
|
|
|
67
|
%
|
|
|
47
|
%
|
|
|
55
|
%
|
Expected lives (years)
|
|
|
3.9
|
|
|
|
2.7
|
|
|
|
3.1
|
|
|
|
6.5-9.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
V*I Chip:
|
|
2010
|
|
2009(2)
|
|
2008
|
|
2010
|
|
Risk-free interest rate
|
|
|
2.7
|
%
|
|
|
-
|
|
|
|
3.7
|
%
|
|
|
2.7
|
%
|
Expected dividend yield
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Expected volatility
|
|
|
49
|
%
|
|
|
-
|
|
|
|
61
|
%
|
|
|
49
|
%
|
Expected lives (years)
|
|
|
6.5
|
|
|
|
-
|
|
|
|
6.5
|
|
|
|
6.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Picor:
|
|
2010
|
|
2009(2)
|
|
2008
|
|
|
|
Risk-free interest rate
|
|
|
2.0
|
%
|
|
|
-
|
|
|
|
3.7
|
%
|
|
|
|
|
Expected dividend yield
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Expected volatility
|
|
|
52
|
%
|
|
|
-
|
|
|
|
56
|
%
|
|
|
|
|
Expected lives (years)
|
|
|
6.5
|
|
|
|
-
|
|
|
|
6.5
|
|
|
|
|
|
|
|
|
(1) |
|
There were no Vicor or V*I Chip performance-based options
granted prior to 2010. |
|
(2) |
|
There were no Picor or V*I Chip options granted during 2009. |
49
VICOR
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Risk-free
interest rate:
Vicor The Company uses the yield on
zero-coupon U.S. Treasury Strip securities for
a period that is commensurate with the expected term assumption
for each vesting period.
Picor The Company uses the yield to maturity
of a seven-year U.S. Treasury bond, as it most closely
aligns to the expected exercise period.
V*I Chip The Company uses the yield to
maturity of a seven-year U.S. Treasury bond, as it most
closely aligns to the expected exercise period.
Expected
dividend yield:
Vicor The Company determines the expected
dividend yield by annualizing the most recent prior cash
dividends declared by the Companys Board of Directors and
dividing that result by the closing stock price on the date of
that dividend declaration. Dividends are not paid on options.
Picor Picor has not and does not expect to
declare and pay dividends in the foreseeable future. Therefore,
the expected dividend yield is not applicable.
V*I Chip V*I Chip has not and does not expect
to declare and pay dividends in the foreseeable future.
Therefore, the expected dividend yield is not applicable.
Expected
volatility:
Vicor Vicor uses historical volatility to
estimate the grant-date fair value of the options, using the
expected term for the period over which to calculate the
volatility (see below). The Company does not expect its future
volatility to differ from its historical volatility. The
computation of the Companys volatility is based on a
simple average calculation of monthly volatilities over the
expected term.
Picor As Picor is a nonpublic entity,
historical volatility information is not available. An industry
sector index of seven publicly traded fabless semiconductor
firms was developed for calculating historical volatility for
Picor. Historical prices for each of the companies in the index
based on the market price of the shares on each day of trading
over the expected term were used to determine the historical
volatility.
V*I Chip As V*I Chip is a nonpublic entity,
historical volatility information is not available. An industry
sector index of twelve publicly traded fabless semiconductor
firms was developed for calculating historical volatility for
V*I Chip. Historical prices for each of the companies in the
index based on the market price of the shares on each day of
trading over the expected term were used to determine the
historical volatility.
Expected
term:
Vicor The Company uses historical employee
exercise and option expiration data to estimate the expected
term assumption for the Black-Scholes grant-date valuation. The
Company believes that this historical data is currently the best
estimate of the expected term of options, and that generally all
groups of the Companys employees exhibit similar exercise
behavior.
Picor and V*I Chip Due to the lack of
historical information, the simplified method as
prescribed by the Security and Exchange Commission was used to
determine the expected term on grant awards that meet the
definition of plain vanilla. For options that did
not meet the criteria of plain vanilla, the Company
calculated the expected term based on its best estimate of what
the expected term would be.
50
VICOR
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Forfeiture
rate
The amount of stock-based compensation recognized during a
period is based on the value of the portion of the awards that
are ultimately expected to vest. Forfeitures are estimated at
the time of grant and revised, if necessary, in subsequent
periods if actual forfeitures differ from those estimates. The
term forfeitures is distinct from
cancellations or expirations and
represents only the unvested portion of the surrendered option.
Vicor The Company currently expects that for
Vicor options, based on an analysis of its historical
forfeitures, that approximately 71% of its options will actually
vest, and therefore has applied an annual forfeiture rate of
11.25% to all unvested options as of December 31, 2010. For
2009, the Company expected 75% of its options would actually
vest and applied an annual forfeiture rate of 9.5%. This
analysis is re-evaluated quarterly and the forfeiture rate is
adjusted as necessary. Ultimately, the actual expense recognized
over the vesting period will only be for those shares that vest.
Picor The Company currently expects that for
Picor options, based on an analysis of its historical
forfeitures, that approximately 94% of its options will actually
vest, and therefore has applied an annual forfeiture rate of
2.0% to all unvested options as of December 31, 2010 and
2009. This analysis will be re-evaluated quarterly and the
forfeiture rate will be adjusted as necessary. Ultimately, the
actual expense recognized over the vesting period will only be
for those shares that vest.
V*I Chip The Company currently expects that
for V*I Chip options, based on an analysis of its historical
forfeitures, that approximately 83% of its options will actually
vest, and therefore has applied an annual forfeiture rate of
6.25% to all unvested options as of December 31, 2010 and
2009. This analysis will be re-evaluated quarterly and the
forfeiture rate will be adjusted as necessary. Ultimately, the
actual expense recognized over the vesting period will only be
for those shares that vest.
Vicor
Stock Options
A summary of the activity under the Companys stock option
plans as of December 31, 2010 and changes during the year
then ended, is presented below (in thousands except for share
and weighted-average data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Options
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Outstanding
|
|
|
Price
|
|
|
Life in Years
|
|
|
Value
|
|
|
Outstanding on December 31, 2009
|
|
|
765,563
|
|
|
|
17.11
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,336,242
|
|
|
|
13.66
|
|
|
|
|
|
|
|
|
|
Forfeited and expired
|
|
|
(198,989
|
)
|
|
|
25.93
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(104,489
|
)
|
|
|
10.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding on December 31, 2010
|
|
|
1,798,327
|
|
|
|
13.95
|
|
|
|
7.76
|
|
|
$
|
5,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable on December 31, 2010
|
|
|
359,264
|
|
|
|
15.89
|
|
|
|
2.10
|
|
|
$
|
939
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested or expected to vest as of December 31, 2010 (1)
|
|
|
884,670
|
|
|
|
14.25
|
|
|
|
5.98
|
|
|
$
|
2,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
In addition to the vested options, the Company expects a portion
of the unvested options to vest at some point in the future.
Options expected to vest is calculated by applying an estimated
forfeiture rate to the unvested options. |
As of December 31, 2009 and 2008, the Company had shares
exercisable of 575,482 and 883,696 respectively, for which the
weighted average exercise prices were $19.12 and $17.57,
respectively.
51
VICOR
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
During the years ended December 31, 2010, 2009, and 2008
under all plans, the total intrinsic value of Vicor options
exercised (i.e. the difference between the market price at
exercise and the price paid by the employee to exercise the
options) was $723,000, $1,000 and $109,000, respectively. The
total amount of cash received by the Company from options
exercised in 2010 was $1,104,000. The total grant-date fair
value of stock options that vested during the years ended
December 31, 2010, 2009 and 2008 was approximately
$422,000, $432,000, and $462,000, respectively.
As of December 31, 2010, there was $275,000 of total
unrecognized compensation cost related to unvested
non-performance share-based awards for Vicor. That cost is
expected to be recognized over a weighted-average period of
8.56 years for all Vicor awards. The expense will be
recognized as follows: $180,000 in 2011, $61,000 in 2012,
$23,000 in 2013, $9,000 in 2014, and 2,000 in 2015. In addition,
as of December 31, 2010, there was $7,790,000 of
unrecognized compensation cost related to performance-based
options, for which expensing has not commenced.
The weighted-average fair value of Vicor options granted was
$4.78, $2.69 and $3.32 in 2010, 2009 and 2008, respectively. The
weighted-average contractual life for Vicor options outstanding
as of December 31, 2010 is 7.8 years.
Picor
Stock Options
Under the 2001 Picor Plan, the Board of Directors of Picor may
grant stock incentive awards based on the Picor Common Stock,
including stock options, restricted stock or unrestricted stock.
Awards may be granted to employees and other key persons,
including non-employee directors and full or part-time officers.
Incentive stock options may be granted to employees at a price
at least equal to the fair market value per share of the Picor
Common Stock, based on judgments made by the Company, on the
date of grant. A total of 80,000,000 shares of Picor Common
Stock have been reserved for issuance under the 2001 Picor Plan.
The period of time during which an option may be exercised and
the vesting periods are determined by the Picor Board of
Directors. The term of each option may not exceed ten years from
the date of grant.
A summary of the activity under the 2001 Picor Plan as of
December 31, 2010 and changes during the year then ended,
is presented below (in thousands except for share and
weighted-average data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Options
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Outstanding
|
|
|
Price
|
|
|
Life in Years
|
|
|
Value
|
|
|
Outstanding on December 31, 2009
|
|
|
5,021,040
|
|
|
|
0.62
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
5,412,123
|
|
|
|
0.57
|
|
|
|
|
|
|
|
|
|
Forfeited and expired
|
|
|
(431,400
|
)
|
|
|
0.74
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding on December 31, 2010
|
|
|
10,001,763
|
|
|
|
0.59
|
|
|
|
6.80
|
|
|
$
|
610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable on December 31, 2010
|
|
|
4,213,640
|
|
|
|
0.56
|
|
|
|
3.04
|
|
|
$
|
610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested or expected to vest as of December 31, 2010 (1)
|
|
|
9,700,333
|
|
|
|
0.59
|
|
|
|
6.72
|
|
|
$
|
610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
In addition to the vested options, the Company expects a portion
of the unvested options to vest at some point in the future.
Options expected to vest is calculated by applying an estimated
forfeiture rate to the unvested options. |
52
VICOR
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of December 31, 2009 and 2008, Picor had shares
exercisable of 3,977,940 and 3,526,220, respectively, for which
the weighted average exercise prices were $0.54 and $0.49,
respectively.
For years ended December 31, 2010, 2009, and 2008, Picor
did not have any options exercised. The total grant-date fair
value of stock options that vested during the years ended
December 31, 2010, 2009 and 2008 was approximately $68,000,
$189,000, and $276,000, respectively.
As of December 31, 2010, there was $1,571,000 of total
unrecognized compensation cost related to unvested share-based
awards for Picor. That cost is expected to be recognized over a
weighted-average period of 4.09 years for all Picor awards.
The expense will be recognized as follows: $475,000 in 2011,
$342,000 in 2012, $300,000 in 2013, $259,000 in 2014, and
$195,000 in 2015.
The weighted-average fair value of Picor options granted was
$0.60 in 2008. The weighted-average contractual life for Picor
options outstanding as of December 31, 2010 is
6.8 years.
V*I
Chip Stock Options
Under the 2007 V*I Chip Plan, the Board of Directors of V*I Chip
may grant stock incentive awards based on the V*I Chip Common
Stock, including stock options, restricted stock or unrestricted
stock. Awards may be granted to employees and other key persons,
including non-employee directors and full or part-time officers.
Incentive stock options may be granted to employees at a price
at least equal to the fair market value per share of the V*I
Chip Common Stock, based on judgments made by the Company, on
the date of grant. A total of 100,000,000 shares of V*I
Chip Common Stock have been reserved for issuance under the 2007
V*I Chip Plan. The period of time during which an option may be
exercised and the vesting periods are determined by the V*I Chip
Board of Directors. The term of each option may not exceed ten
years from the date of grant.
A summary of the activity under the 2007 V*I Chip Plan as of
December 31, 2010 and changes during the year then ended,
is presented below (in thousands except for share and
weighted-average data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Options
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Outstanding
|
|
|
Price
|
|
|
Life in Years
|
|
|
Value
|
|
|
Outstanding on December 31, 2009
|
|
|
7,617,500
|
|
|
|
1.00
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
3,322,750
|
|
|
|
1.00
|
|
|
|
|
|
|
|
|
|
Forfeited and expired
|
|
|
(150,000
|
)
|
|
|
1.00
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding on December 31, 2010(2)
|
|
|
10,790,250
|
|
|
|
1.00
|
|
|
|
8.14
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable on December 31, 2010
|
|
|
4,436,200
|
|
|
|
1.00
|
|
|
|
6.41
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested or expected to vest as of December 31, 2010 (1)
|
|
|
10,202,748
|
|
|
|
1.00
|
|
|
|
8.06
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
In addition to the vested options, the Company expects a portion
of the unvested options to vest at some point in the future.
Options expected to vest is calculated by applying an estimated
forfeiture rate to the unvested options. |
|
(2) |
|
Of the total V*I Chip options outstanding on December 31,
2010, 5,500,000 options have been granted to the Companys
Chief Executive Officer. |
53
VICOR
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of December 31, 2009 and 2008, V*I Chip had shares
exercisable of 2,987,200 and 1,516,600, respectively, for which
the weighted average exercise price was $1.00. For the years
ended December 31, 2010, 2009 and 2008, V*I Chip did not
have any options exercised.
As of December 31, 2010, there was $1,944,000 of total
unrecognized compensation cost related to unvested share-based
awards for V*I Chip. That cost is expected to be recognized over
a weighted-average period of 3.48 years for all V*I Chip
awards. The expense will be recognized as follows: $508,000 in
2011, $426,000 in 2012, $350,000 in 2013, $330,000 in 2014 and
$330,000 in 2015.
The weighted-average fair value of V*I Chip options granted was
$0.43 in 2008. The weighted-average contractual life for V*I
Chip options outstanding as of December 31, 2010 is
8.1 years.
401(k)
Plan
The Company sponsors a savings plan available to all domestic
employees, which qualifies under Section 401(k) of the
Internal Revenue Code. Employees may contribute to the plan from
1% to 20% of their pre-tax salary subject to statutory
limitations. The Company matches employee contributions to the
plan at a rate of 50% up to the first 3% of an employees
compensation. The Companys matching contributions
currently vest at a rate of 20% per year based upon years of
service. The Companys contribution to the plan was
approximately $760,000, $697,000 and $759,000 in 2010, 2009 and
2008, respectively.
Stock
Bonus Plan
Under the Companys 1985 Stock Bonus Plan, as amended,
shares of Common Stock may be awarded to employees from time to
time as determined by the Board of Directors. On
December 31, 2010, 109,964 shares were available for
further award. All shares awarded to employees under this plan
have vested. No further awards are contemplated under this plan
at the present time.
|
|
4.
|
SHORT-TERM
AND LONG-TERM INVESTMENTS
|
As of December 31, 2010, the Company held par value of
$19,075,000 of auction rate securities. These auction rate
securities consist of collateralized debt obligations, supported
by pools of student loans, sponsored by state student loan
agencies and corporate student loan servicing firms. The
interest rates for these securities are reset at auction at
regular intervals ranging from seven to 90 days. The
auction rate securities held by the Company traded at par prior
to February 2008 and are callable at par at the option of the
issuer.
Until February 2008, the auction rate securities market was
liquid, as the investment banks conducting the periodic
Dutch auctions by which interest rates for the
securities had been established had committed their capital to
support such auctions in the event of insufficient third-party
investor demand. Starting the week of February 11, 2008, a
substantial number of auctions failed, as demand from
third-party investors weakened and the investment banks
conducting the auctions chose not to commit capital to support
such auctions (i.e., investment banks chose not to purchase
securities themselves in order to balance supply and demand,
thereby facilitating a successful auction, as they had done in
the past). The consequences of a failed auction are (a) an
investor must hold the specific security until the next
scheduled auction (unless that investor chooses to sell the
security to a third party outside of the auction process) and
(b) the interest rate on the security generally resets to
an interest rate set forth in each securitys indenture.
As of December 31, 2010, the Company held auction rate
securities that had experienced failed auctions totaling
$19,075,000 at par value, all of which had been purchased
through and are held by a broker-dealer affiliate of Bank of
America, N.A. (the Failed Auction Securities). As of
December 31, 2010, the majority of the Failed Auction
Securities held by the Company were AAA/Aaa rated by the major
credit rating agencies, with all of the securities
collateralized by student loans, of which most are guaranteed by
the U.S. Department of Education under the Federal Family
Education Loan Program. Management is not aware
54
VICOR
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
of any reason to believe any of the issuers of the Failed
Auction Securities held by the Company are presently at risk of
default. Through December 31, 2010, the Company has
continued to receive interest payments on the Failed Auction
Securities in accordance with the terms of their respective
indentures. Management believes the Company ultimately should be
able to liquidate all of its Failed Auction Securities without
significant loss primarily due to the overall quality of the
issues held and the collateral securing the substantial majority
of the underlying obligations. However, current conditions in
the auction rate securities market have led management to
conclude the recovery period for the Failed Auction Securities
exceeds 12 months. As a result, the Company continued to
classify the Failed Auction Securities as long-term as of
December 31, 2010.
The following is a summary of
available-for-sale
securities (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
December 31,
2010
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
Failed Auction Securities
|
|
$
|
19,075
|
|
|
$
|
-
|
|
|
$
|
2,856
|
|
|
$
|
16,219
|
|
Certificates of deposit
|
|
|
448
|
|
|
|
-
|
|
|
|
-
|
|
|
|
448
|
|
Brokered certificates of deposit
|
|
|
1,720
|
|
|
|
30
|
|
|
|
-
|
|
|
|
1,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
21,243
|
|
|
$
|
30
|
|
|
$
|
2,856
|
|
|
$
|
18,417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
December 31,
2009
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
Failed Auction Securities
|
|
$
|
19,700
|
|
|
$
|
-
|
|
|
$
|
2,590
|
|
|
$
|
17,110
|
|
Certificates of deposit
|
|
|
434
|
|
|
|
-
|
|
|
|
-
|
|
|
|
434
|
|
Brokered certificates of deposit
|
|
|
2,070
|
|
|
|
34
|
|
|
|
-
|
|
|
|
2,104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
22,204
|
|
|
$
|
34
|
|
|
$
|
2,590
|
|
|
$
|
19,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All of the Failed Auction Securities as of December 31,
2010 and 2009, respectively have been in an unrealized loss
position for greater than 12 months.
The amortized cost and estimated fair value of
available-for-sale
securities on December 31, 2010, by contractual maturities,
are shown below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
Cost
|
|
|
Fair Value
|
|
|
Due in one year or less
|
|
$
|
1,078
|
|
|
$
|
1,089
|
|
Due in two to ten years
|
|
|
1,090
|
|
|
|
1,109
|
|
Due in ten to twenty years
|
|
|
-
|
|
|
|
-
|
|
Due in twenty to forty years
|
|
|
19,075
|
|
|
|
16,219
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
21,243
|
|
|
$
|
18,417
|
|
|
|
|
|
|
|
|
|
|
55
VICOR
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Trading
Securities
The following is a summary of trading securities (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
December 31,
2010
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
Failed Auction Securities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Failed Auction Securities
|
|
$
|
13,900
|
|
|
$
|
-
|
|
|
$
|
970
|
|
|
$
|
12,930
|
|
As of December 31, 2009, the Company held auction rate
securities that had experienced failed auctions totaling
$13,900,000 at par value, that were classified as trading
securities, all of which had been purchased through and were
held by a broker-dealer affiliate of UBS AG (UBS).
Pursuant to a settlement agreement reached with UBS, the
Companys then remaining par value of $8,600,000 of auction
rate securities held by UBS were purchased by UBS at par value
on June 30, 2010.
Based on the fair value measurements described in Note 5,
the fair value of the Failed Auction Securities on
December 31, 2010, with a par value of $19,075,000, was
estimated by the Company to be approximately $16,219,000, a
decrease in fair value of $266,000, net of $625,000 of
redemptions from December 31, 2009. The gross unrealized
loss of $2,856,000 on the Failed Auction Securities consists of
two types of estimated loss: an aggregate credit loss of
$610,000 and an aggregate temporary impairment of $2,246,000.
For the year ended December 31, 2010, the aggregate credit
loss on the Failed Auction Securities increased by a net amount
of $146,000, which was recorded in Net impairment (losses)
gains recognized in earnings in the Consolidated Statement
of Operations. In determining the amount of credit loss, the
Company compared the present value of cash flows expected to be
collected to the amortized cost basis of the securities,
considering credit default risk probabilities and changes in
credit ratings as significant inputs, among other factors (See
Note 5).
The following table represents a rollforward of the activity
related to the credit loss recognized in earnings on
available-for-sale
ARS securities held by the Company for the year ended
December 31, 2010 (in thousands):
|
|
|
|
|
Balance at the beginning of the period
|
|
$
|
464
|
|
Reductions for securities sold during the period
|
|
|
(18
|
)
|
Additions for the amount related to credit loss for which
other-than-temporary
impairment was not previously recognized
|
|
|
164
|
|
|
|
|
|
|
Balance at the end of the period
|
|
$
|
610
|
|
|
|
|
|
|
At this time, the Company has no intent to sell any of the
impaired Failed Auction Securities and does not believe it is
more likely than not the Company will be required to sell any of
these securities. Management expects the securities to regain
liquidity as the financial markets recover from the current
economic downturn. If current market conditions deteriorate
further, the Company may be required to record additional
unrealized losses. If the credit rating of the security
deteriorates, or the anticipated recovery in the market values
does not occur, the Company may be required to adjust the
carrying value of these investments through impairment charges
recorded in the Consolidated Statement of Operations, and any
such impairment adjustments may be material.
Based on the Companys ability to access cash and other
short-term investments and its expected operating cash flows,
management does not anticipate the current lack of liquidity
associated with the Failed Auction Securities held will affect
the Companys ability to execute its current operating plan.
56
VICOR
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
5.
|
FAIR
VALUE MEASUREMENTS
|
Assets measured at fair value on a recurring basis include the
following as of December 31, 2010 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Using
|
|
|
|
|
|
|
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
Quoted Prices
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
in Active
|
|
|
Observable
|
|
|
Unobservable
|
|
|
Total Fair
|
|
|
|
Markets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
Value as of
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
December 31,
2010
|
|
|
Cash Equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
16,629
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
16,629
|
|
Long term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction rate securities
|
|
|
-
|
|
|
|
-
|
|
|
|
16,219
|
|
|
|
16,219
|
|
Certificates of deposit
|
|
|
448
|
|
|
|
-
|
|
|
|
-
|
|
|
|
448
|
|
Brokered certificates of deposit
|
|
|
-
|
|
|
|
1,750
|
|
|
|
-
|
|
|
|
1,750
|
|
As of December 31, 2010, there was insufficient observable
auction rate security market information available to determine
the fair value of the Failed Auction Securities using
Level 1 or Level 2 inputs. As such, the Companys
investments in Failed Auction Securities were deemed to require
valuation using Level 3 inputs. Management, after
consulting with advisors, valued the Failed Auction Securities
using analyses and pricing models similar to those used by
market participants (i.e., buyers, sellers, and the
broker-dealers responsible for execution of the Dutch auction
pricing mechanism by which each issues interest rate was
set). Management utilized a probability weighted discounted cash
flow (DCF) model to determine the estimated fair
value of these securities as of December 31, 2010. The
major assumptions used in preparing the DCF model included
estimates for the amount and timing of future interest and
principal payments based on default probability assumptions used
to measure the credit loss of approximately 2% for AAA rated
securities, the rate of return required by investors to own
these securities in the current environment, which we estimate
to be 5% above the risk free rate of return, and the estimated
timeframe for successful auctions for these securities to occur
being three to five years. In making these assumptions,
management considered relevant factors including: the formula
applicable to each security defining the interest rate paid to
investors in the event of a failed auction; forward projections
of the interest rate benchmarks specified in such formulas; the
likely timing of principal repayments; the probability of full
repayment considering the guarantees by the U.S. Department
of Education of the underlying student loans, guarantees by
other third parties, and additional credit enhancements provided
through other means; and publicly available pricing data for
recently issued student loan asset-backed securities not subject
to auctions. The estimate of the rate of return required by
investors to own these securities also considered the currently
reduced liquidity for auction rate securities. An increase or
decrease in the liquidity risk premium (i.e., the discount rate)
of 100 basis points as used in the model would decrease or
increase, respectively, the fair value of the Failed Auction
Securities by approximately $900,000.
57
VICOR
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes the change in the fair values for
those assets valued on a recurring basis utilizing Level 3
inputs for the year ended December 31, 2010 (in thousands):
|
|
|
|
|
Balance at the beginning of the period
|
|
$
|
28,852
|
|
Redemptions
|
|
|
(12,375
|
)
|
Unrealized loss on trading securities included in Other income,
net
|
|
|
8
|
|
Credit losses on available for sales securities included in
Other income, net
|
|
|
(146
|
)
|
Unrealized gain included in Other comprehensive (loss) income
|
|
|
(120
|
)
|
|
|
|
|
|
Balance at the end of the period
|
|
$
|
16,219
|
|
|
|
|
|
|
Inventories as of December 31 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Raw materials
|
|
$
|
31,750
|
|
|
$
|
18,675
|
|
Work-in-process
|
|
|
4,182
|
|
|
|
3,434
|
|
Finished goods
|
|
|
5,001
|
|
|
|
5,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,933
|
|
|
|
27,300
|
|
Inventory reserves
|
|
|
(5,444
|
)
|
|
|
(5,943
|
)
|
|
|
|
|
|
|
|
|
|
Net balance
|
|
$
|
35,489
|
|
|
$
|
21,357
|
|
|
|
|
|
|
|
|
|
|
|
|
7.
|
PROPERTY,
PLANT AND EQUIPMENT
|
Property, plant and equipment are stated at cost and are
depreciated and amortized over a period of three to
32 years generally under the straight-line method for
financial reporting purposes and accelerated methods for income
tax purposes.
Property, plant and equipment as of December 31 were as follows
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Land
|
|
$
|
2,089
|
|
|
$
|
2,089
|
|
Buildings and improvements
|
|
|
41,791
|
|
|
|
41,569
|
|
Machinery and equipment
|
|
|
203,744
|
|
|
|
192,805
|
|
Furniture and fixtures
|
|
|
5,847
|
|
|
|
5,808
|
|
Construction in-progress and deposits
|
|
|
4,499
|
|
|
|
5,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
257,970
|
|
|
|
248,081
|
|
Accumulated depreciation and amortization
|
|
|
(207,122
|
)
|
|
|
(199,072
|
)
|
|
|
|
|
|
|
|
|
|
Net balance
|
|
$
|
50,848
|
|
|
$
|
49,009
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense for the years ended December 31, 2010,
2009 and 2008 was approximately $9,778,000, $9,882,000, and
$10,266,000 respectively. As of December 31, 2010, the
Company had approximately $2,080,000 of capital expenditure
commitments.
58
VICOR
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Companys gross investment in non-voting convertible
preferred stock of GWS totaled $5,000,000 as of
December 31, 2010, and December 31, 2009, giving the
Company an approximately 30% ownership interest in GWS. GWS and
its subsidiary design and sell semiconductors, conduct research
and development activities, develop and license patents, and
litigate against those who infringe upon patented technology. A
director of the Company is the founder, Chairman of the Board,
President and Chief Executive Officer (CEO), as well
as the majority voting shareholder, of GWS. The Company and GWS
are parties to an intellectual property cross-licensing
agreement, a license agreement and two supply agreements under
which the Company purchases certain components from GWS.
Purchases from GWS totaled approximately $5,362,000, $1,608,000
and $1,702,000 in 2010, 2009, and 2008, respectively. The
Company owed GWS approximately $555,000 and $146,000 as of
December 31, 2010 and 2009, respectively. During 2009, the
Company made payments totaling $650,000 under the license
agreement.
The Company accounts for its investment in GWS under the equity
method of accounting. The Company has determined that, while GWS
is a variable interest entity, the Company is not the primary
beneficiary. The key factors in the Companys assessment
were that the CEO of GWS has: (i) the power to direct the
activities of GWS that most significantly impact its economic
performance, and (ii) has an obligation to absorb losses or
the right to receive benefits from GWS, respectively, that could
potentially be significant to GWS.
Loss from equity method investment, net of tax for the years
ended December 31 consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Allocation of losses from equity method investment (net of tax)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
321
|
|
Amortization of intangible assets and other (net of tax)
|
|
|
-
|
|
|
|
-
|
|
|
|
106
|
|
Other than temporary decline in investment
|
|
|
-
|
|
|
|
-
|
|
|
|
1,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There was no allocation of equity method income (loss) in 2010
and 2009 as GWS incurred a net loss for those years. Due to an
adjustment to the investment for a decline in value judged to be
other than temporary during the fourth quarter of 2008, the
amounts included in Other assets in the accompanying
Consolidated Balance Sheets related to the net GWS investment
were zero as of December 31, 2010 and 2009.
|
|
9.
|
GOODWILL
AND OTHER INTANGIBLE ASSETS
|
The Company tests goodwill and other indefinite lived intangible
assets for impairment at least annually at the reporting unit
level. Definite lived intangible assets, such as patent rights,
are amortized and tested for impairment at least annually at the
reporting unit level. The Company reassessed the carrying value
of its goodwill of approximately $2,000,000 related to the
operations of one of its subsidiaries, VJCL, during the fourth
quarter of fiscal 2010 and determined that there was no
impairment to the carrying value.
59
VICOR
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Patent costs, which are included in other assets in the
accompanying balance sheets, as of December 31 were as follows
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Patent costs
|
|
$
|
3,459
|
|
|
$
|
3,456
|
|
Accumulated amortization
|
|
|
(1,827
|
)
|
|
|
(1,683
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,632
|
|
|
$
|
1,773
|
|
|
|
|
|
|
|
|
|
|
In 2010 and 2009, the Company wrote off patent costs associated
with abandoned patents with net book values of approximately
$19,000 and $82,000, respectively, which was charged to
amortization expense. Patent renewal fees were $55,000 and
$62,000 in 2010 and 2009, respectively.
Amortization expense was approximately $318,000, $254,000 and
$249,000 in 2010, 2009 and 2008, respectively. The estimated
future amortization expense from patent assets held as of
December 31, 2010, is projected to be $200,000, $187,000,
$180,000, $166,000, and $138,000, in fiscal years 2011, 2012,
2013, 2014, and 2015, respectively.
During the second quarter of 2009, the Company entered into a
license agreement with GWS in which the Company paid $500,000 to
obtain certain rights to several GWS semiconductor devices (See
Note 8). The amount is being amortized on a straight-line
basis over four years, and is included in Other
assets in the accompanying Consolidated Balance Sheets.
Balances as of December 31 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
GWS intangibles
|
|
$
|
500
|
|
|
$
|
500
|
|
Accumulated amortization
|
|
|
(187
|
)
|
|
|
(62
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
313
|
|
|
$
|
438
|
|
|
|
|
|
|
|
|
|
|
The estimated future amortization expense from GWS intangible
assets held as of December 31, 2010, is projected to be
$125,000, $125,000, and $63,000 in fiscal years 2011, 2012, and
2013, respectively.
During 2009, the Company initiated workforce reductions and
recorded pre-tax charges for the cost of severance and other
employee-related costs involving cash payments during 2009 and
2010 based on each employees respective length of service.
Total severance charges of $4,099,000 were recorded as
Severance charges in the Consolidated Statement of
Operations. The related liability is presented as Accrued
severance charges in the Consolidated Balance Sheets.
A summary of the activity related to the severance charges, by
segment, is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BBU
|
|
|
V*I Chip
|
|
|
Total
|
|
|
Balance as of December 31, 2009
|
|
$
|
255
|
|
|
$
|
4
|
|
|
$
|
259
|
|
Payments
|
|
|
(255
|
)
|
|
|
(4
|
)
|
|
|
(259
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2010
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
VICOR
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Product warranty activity for the years ended December 31 was as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Balance at the beginning of the period
|
|
$
|
772
|
|
|
$
|
896
|
|
|
$
|
679
|
|
Accruals for warranties for products sold in the period
|
|
|
573
|
|
|
|
205
|
|
|
|
595
|
|
Fulfillment of warranty obligations
|
|
|
(548
|
)
|
|
|
(101
|
)
|
|
|
(385
|
)
|
Revisions of estimated obligations
|
|
|
(148
|
)
|
|
|
(228
|
)
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the end of the period
|
|
$
|
649
|
|
|
$
|
772
|
|
|
$
|
896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 plan authorizes the Company to make repurchases
from time to time in the open market or through privately
negotiated transactions. The timing of this program and the
amount of the stock that may be repurchased is at the discretion
of management based on its view of economic and financial market
conditions. There were no repurchases under the November 2000
Plan in 2009, 2008 or 2007. On December 31, 2010 and 2009,
the Company had approximately $8,541,000 available for use under
the November 2000 Plan.
Common
Stock
Each share of Common Stock entitles the holder thereof to one
vote on all matters submitted to the stockholders.
Each share of Class B Common Stock entitles the holder
thereof to ten votes on all such matters.
Shares of Class B Common Stock are not transferable by a
stockholder except to or among the stockholders spouse,
certain of the stockholders relatives, and certain other
defined transferees. Class B Common Stock is not listed or
traded on any exchange or in any market. Class B Common
Stock is convertible at the option of the holder thereof at any
time and without cost to the stockholder into shares of Common
Stock on a
one-for-one
basis.
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.
On March 14, 2008, the Companys Board of Directors
approved a cash dividend of $0.15 per share of the
Companys stock. The total dividend of approximately
$6,245,000 was paid on April 18, 2008 to shareholders of
record at the close of business on April 2, 2008.
On August 7, 2008, the Companys Board of Directors
approved a cash dividend of $0.15 per share of the
Companys stock. The total dividend of approximately
$6,249,000 was paid on September 10, 2008 to shareholders
of record at the close of business on August 25, 2008.
On June 28, 2010, the Companys Board of Directors
approved a cash dividend of $0.30 per share of the
Companys stock. The total dividend of approximately
$12,506,000 was paid on July 30, 2010 to shareholders of
record at the close of business on July 16, 2010.
During the year ending December 31, 2008, a subsidiary paid
a total of $2,290,000 in cash dividends on subsidiary common
stock, of which $1,122,000 was paid to the Company and
$1,168,000 was paid to an
61
VICOR
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
outside shareholder. During the year ending December 31,
2009, two subsidiaries paid a total of $4,690,000 in cash
dividends on subsidiary common stock, of which $3,421,000 was
paid to the Company and $1,269,000 was paid to outside
shareholders. During the year ending December 31, 2010,
three subsidiaries paid a total of $5,457,000 in cash dividends,
of which $4,905,000 was paid to the Company and $552,000 was
paid to outside shareholders. Dividends paid to outside
shareholders are accounted for as a reduction in noncontrolling
interest.
During 2010, a total of 104,489 shares of Common Stock were
issued upon the exercise of stock options. There were no shares
of Class B Common Stock converted into Common Stock during
2010.
On December 31, 2010, there were 14,957,861 shares of
Vicor Common Stock reserved for issuance under Vicor stock
options and upon conversion of Class B Common Stock.
The major changes in the components of the other income, net for
the years ended December 31 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Interest income
|
|
$
|
438
|
|
|
$
|
717
|
|
|
$
|
2,138
|
|
Unrealized gain (loss) on trading securities
|
|
|
970
|
|
|
|
1,268
|
|
|
|
(2,238
|
)
|
Unrealized (loss) gain on auction rate securities rights
|
|
|
(962
|
)
|
|
|
(964
|
)
|
|
|
1,926
|
|
Credit losses on available for sale securities
|
|
|
(146
|
)
|
|
|
(464
|
)
|
|
|
-
|
|
Foreign currency (losses) gains, net
|
|
|
(158
|
)
|
|
|
35
|
|
|
|
82
|
|
Gain on disposal of equipment
|
|
|
248
|
|
|
|
30
|
|
|
|
19
|
|
Other
|
|
|
107
|
|
|
|
60
|
|
|
|
101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
497
|
|
|
$
|
682
|
|
|
$
|
2,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62
VICOR
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. Significant components of the
Companys deferred tax assets and liabilities as of
December 31 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
Research and development tax credit carryforwards
|
|
$
|
7,772
|
|
|
$
|
9,122
|
|
Inventory reserves
|
|
|
1,905
|
|
|
|
2,229
|
|
Vacation accrual
|
|
|
1,500
|
|
|
|
1,228
|
|
Investment tax credit carryforwards
|
|
|
1,249
|
|
|
|
978
|
|
Stock-based compensation
|
|
|
1,224
|
|
|
|
974
|
|
Net operating loss carryforwards
|
|
|
1,075
|
|
|
|
8,130
|
|
Alternative minimum tax credit carryforward
|
|
|
1,045
|
|
|
|
590
|
|
Unrealized loss on investments
|
|
|
1,023
|
|
|
|
993
|
|
Capital loss carryforward
|
|
|
700
|
|
|
|
700
|
|
Deferred revenue
|
|
|
395
|
|
|
|
407
|
|
Warranty reserves
|
|
|
189
|
|
|
|
253
|
|
Bad debt reserves
|
|
|
103
|
|
|
|
87
|
|
Other
|
|
|
588
|
|
|
|
138
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
18,768
|
|
|
|
25,829
|
|
Less: Valuation allowance for deferred tax assets
|
|
|
(10,259
|
)
|
|
|
(24,803
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
|
8,509
|
|
|
|
1,026
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
(1,564
|
)
|
|
|
(380
|
)
|
Patent amortization
|
|
|
(594
|
)
|
|
|
(646
|
)
|
Goodwill
|
|
|
(549
|
)
|
|
|
(478
|
)
|
Unremitted Vicor Custom earnings
|
|
|
(320
|
)
|
|
|
(314
|
)
|
Other
|
|
|
(513
|
)
|
|
|
(303
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(3,540
|
)
|
|
|
(2,121
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets (liabilities)
|
|
$
|
4,969
|
|
|
$
|
(1,095
|
)
|
|
|
|
|
|
|
|
|
|
Prior to September 30, 2010, the Company maintained a
valuation allowance against a significant portion of its
deferred tax assets, consisting of net operating loss
carryforwards, tax credit carryforwards and deductible temporary
differences. Based on the Companys pre-tax income for the
nine months ended September 30, 2010 being sufficient to
fully utilize its net operating loss carryforwards, a history of
cumulative earnings before taxes for financial reporting
purposes over a
12-quarter
period, and expected future taxable income, management
determined it was more likely than not a significant portion of
the deferred tax assets would be realized. As a result, at
September 30, 2010, the Company determined that it was
appropriate to reverse a portion of its valuation allowance by
$5,158,000 as a discrete benefit for income taxes for certain
deductible temporary differences expected to be realized in
future periods. An additional benefit of $1,159,000 was recorded
in the fourth quarter of 2010. Management could not make such a
determination in the prior quarters of fiscal 2010 due to a lack
of confidence in being able to accurately forecast the expected
ordinary
63
VICOR
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
income (loss) for the year largely due to global economic
conditions and the possible impact continued economic and
business uncertainty would have on the Companys business
at those times. This tax benefit was partially offset by
estimated federal, state and foreign income taxes on the
Companys 2010 pre-tax income and estimated federal and
state income taxes for certain noncontrolling interests that are
not part of the Companys consolidated income tax returns.
The 2010 tax provision also includes discrete items, principally
related to tax credits and expense for net increases in state
taxes and accrued interest for potential liabilities.
The tax provisions in 2009 and 2008 provided for estimated
income taxes due in various state and international taxing
jurisdictions for which losses incurred by the Company cannot be
offset, and for estimated federal and state income taxes for
certain noncontrolling interests that are not part of the
Companys consolidated income tax returns, offset by the
expected utilization of federal and foreign net operating loss
carryforwards and the reduction in tax reserves in 2008
discussed below. The 2009 tax provision also includes discrete
items, including benefits for the receipt of refunds for net
operating loss carryback claims and for an expected refund due
to certain monetized credits, and expense for increases in state
taxes and accrued interest for potential liabilities. The 2008
tax provision also included discrete items principally for
increases in accrued interest for potential liabilities and
expense associated with a reduction in state income tax refunds
receivable. During 2008, the Company reduced its tax reserves by
$1,123,000 due to closing tax periods in certain jurisdictions.
As of December 31, 2010, the Company has a remaining
valuation allowance of approximately $10,259,000 against certain
deferred tax assets, for which realization cannot be considered
more likely than not at this time. Such deferred tax assets
principally relates to tax credit carryforwards in certain state
tax jurisdictions for which sufficient taxable income for
utilization cannot be projected at this time or the credits may
expire without being utilized. Management assesses the need for
the valuation allowance on a quarterly basis. If and when
management determines the valuation allowance should be
released, the adjustment would result in a tax benefit in the
Consolidated Statements of Operations and may include a portion
to be accounted for through Additional paid-in
capital, a component of Stockholders Equity. The
amount of the tax benefit to be recorded in a particular quarter
could be material.
For financial reporting purposes, income before income taxes for
the years ended December 31 include the following components (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Domestic
|
|
$
|
28,973
|
|
|
$
|
5,236
|
|
|
$
|
654
|
|
Foreign
|
|
|
646
|
|
|
|
219
|
|
|
|
232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
29,619
|
|
|
$
|
5,455
|
|
|
$
|
886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant components of the provision (benefit) for income
taxes for the years ended December 31 are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
1,187
|
|
|
$
|
939
|
|
|
$
|
1,355
|
|
State
|
|
|
958
|
|
|
|
422
|
|
|
|
(533
|
)
|
Foreign
|
|
|
209
|
|
|
|
75
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,354
|
|
|
|
1,436
|
|
|
|
849
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(6,274
|
)
|
|
|
(74
|
)
|
|
|
127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(3,920
|
)
|
|
$
|
1,362
|
|
|
$
|
976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64
VICOR
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company continues to intend to reinvest certain of its
foreign earnings indefinitely. Accordingly, no U.S. income
taxes have been provided for approximately $2,570,000 of
unremitted earnings of international subsidiaries. As of
December 31, 2010, the amount of unrecognized deferred tax
liability on these earnings was $195,000.
The reconciliation of the federal statutory rate to the
effective income tax rate for the years ended December 31 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
2009
|
|
|
|
2008
|
|
|
|
Statutory federal tax rate
|
|
|
34.0
|
%
|
|
|
|
|
35.0
|
%
|
|
|
|
|
35.0
|
%
|
|
|
State income taxes, net of federal income tax benefit
|
|
|
2.7
|
|
|
|
|
|
9.2
|
|
|
|
|
|
37.0
|
|
|
|
Increase (reduction) in tax reserves
|
|
|
2.3
|
|
|
|
|
|
(2.1
|
)
|
|
|
|
|
(104.3
|
)
|
|
|
Permanent items
|
|
|
0.2
|
|
|
|
|
|
4.0
|
|
|
|
|
|
31.8
|
|
|
|
Foreign rate differential and deferred items
|
|
|
(1.0
|
)
|
|
|
|
|
(0.9
|
)
|
|
|
|
|
(5.4
|
)
|
|
|
Tax credits
|
|
|
-
|
|
|
|
|
|
2.3
|
|
|
|
|
|
(30.9
|
)
|
|
|
Book income attributable to noncontrolling interest
|
|
|
(0.3
|
)
|
|
|
|
|
(8.3
|
)
|
|
|
|
|
(71.8
|
)
|
|
|
(Decrease) increase in valuation allowance
|
|
|
(49.7
|
)
|
|
|
|
|
(14.2
|
)
|
|
|
|
|
218.8
|
|
|
|
Other
|
|
|
(1.4
|
)
|
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13.2
|
)%
|
|
|
|
|
25.0
|
%
|
|
|
|
|
110.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a result of the difference in treatment of excess stock
option deductions available for income tax return and financial
statement reporting purposes, the Company has approximately
$1,949,000 of federal research and development tax credit and
$760,000 of federal alternative minimum tax credit carryforwards
that may be offset against future taxable income, which are
included in the components of deferred tax assets disclosed
above. It is anticipated that when these tax attributes are
realized on an income tax return in the future, the related
benefit will be recorded against Additional paid-in
capital. The research and development tax credit
carryforwards expire beginning in 2015 for state purposes and in
2028 for federal purposes. The Company has net operating loss
carryforwards in certain states, which expire beginning in 2010.
A reconciliation of the beginning and ending amount of
unrecognized tax benefits is as follows (in thousands):
|
|
|
|
|
Balance on January 1, 2010
|
|
$
|
712
|
|
Additions based on tax provisions related to the current year
|
|
|
746
|
|
Reductions based on tax provisions related to prior years
|
|
|
(356
|
)
|
|
|
|
|
|
Balance on December 31, 2010
|
|
$
|
1,102
|
|
|
|
|
|
|
The Company has reviewed the tax positions taken, or to be
taken, in its tax returns for all tax years currently open to
examination by a taxing authority. The total amount of
unrecognized tax benefits, that is the aggregate tax effect of
differences between tax return positions and the benefits
recognized in the Companys financial statements, on
December 31, 2010 of $1,102,000 including accrued interest,
if recognized, may decrease the Companys income tax
provision and effective tax rate. None of the unrecognized tax
benefits as of December 31, 2010 are expected to
significantly change during the next twelve months. The Company
recognizes accrued interest and penalties, if any, related to
unrecognized tax benefits as a component of income tax expense.
As of December 31, 2010, the Company has accrued
approximately $77,000 for the potential payment of interest and
recorded approximately $33,000 of income tax expense for
interest, net of related tax benefits, for the year ended
December 31, 2010.
65
VICOR
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company files income tax returns in the United States and
various foreign tax jurisdictions. These tax returns are
generally open to examination by the relevant tax authorities
from three to seven years from the date they are filed. The tax
filings relating to the Companys federal and state taxes
are currently open to examination for tax years 2007 through
2009 and 2000 through 2009, respectively. In addition, the 2003
and 2004 tax years resulted in losses. These years may be
subject to examination when the losses are carried forward and
utilized in the future. In January 2010, the Company received
notices from the Commonwealth of Massachusetts and the State of
New York that its Massachusetts corporate excise tax returns and
New York corporate tax returns, respectively, for tax years 2006
and 2007 had been selected for audit. In April 2010, Vicor Japan
Company, Ltd. received notice from the Regional Taxation Bureau
that its corporate tax and tax returns, respectively, for tax
years from 2007 to 2009 have been selected for audit. The audits
with the State of New York and the Regional Taxation Bureau of
Japan were both settled in the second quarter for immaterial
amounts. While the Massachusetts audit was still in process as
of December 31, 2010, there are no other income tax audits
currently in process.
|
|
15.
|
COMMITMENTS
AND CONTINGENCIES
|
The Company leases certain of its office, warehousing and
manufacturing space. The future minimum rental commitments under
non-cancelable operating leases with remaining terms in excess
of one year are as follows (in thousands):
|
|
|
|
|
Year
|
|
|
|
2011
|
|
$
|
1,264
|
|
2012
|
|
|
722
|
|
2013
|
|
|
337
|
|
2014
|
|
|
173
|
|
2015 and thereafter
|
|
|
111
|
|
Rent expense was approximately $1,492,000, $1,496,000 and
$1,445,000 in 2010, 2009 and 2008, respectively. The Company
also pays executory costs such as taxes, maintenance and
insurance.
The Company also has a contract with a third-party to supply
nitrogen for its manufacturing and research and development
activities. Under the contract, the Company is obligated to pay
a minimum of $300,000 annually, subject to semi-annual price
adjustments, through March 2015.
In addition to the amounts shown in the table above,
approximately $958,000 of unrecognized tax benefits has been
recorded as liabilities as the settlement amounts are uncertain.
The Company has recorded a liability related to these
unrecognized tax benefits for potential interest and penalties
of approximately $77,000 on December 31, 2010.
As disclosed in prior filings, we received total payments of
$1,770,000 in the second quarter of 2007 in full settlement of
patent infringement litigation against Artesyn Technologies,
Inc., Lucent Technologies Inc., and the Tyco Power Systems, a
unit of Tyco International Ltd. (which had acquired the Power
Systems business of Lucent Technologies). The full amount of the
payments, net of a $177,000 contingency fee we had accrued for
our litigation counsel, was included in the second quarter of
2007 in (Gain) loss from litigation-related and other
settlements, net in the Consolidated Statement of
Operations. We were subsequently informed by its litigation
counsel that the full amount of the contingency fee was waived
and, therefore, the related accrual of $177,000 was reversed in
the second quarter of 2008.
On February 22, 2007, the Company announced it had reached
an agreement in principle with Ericsson, Inc., the
U.S. affiliate of LM Ericsson, to settle a lawsuit brought
by Ericsson against the Company in California state court. Under
the terms of the settlement agreement entered into on
March 29, 2007, after a court ordered mediation, the
Company paid $50,000,000 to Ericsson, of which $12,800,000 was
reimbursed by
66
VICOR
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
the Companys insurance carriers. Accordingly, the Company
recorded a net loss of $37,200,000 from the
litigation related settlements in the fourth quarter
of 2006. The Company has been seeking further reimbursement from
its insurance carriers. On November 14, 2008, a jury in the
United States District Court for the District of Massachusetts
found in favor of the Company in a lawsuit against certain of
its insurance carriers with respect to the Ericsson settlement.
The jury awarded $17,300,000 in damages to Vicor, although the
verdict is subject to challenge in the trial court and on
appeal. Both parties filed certain motions subsequent to the
ruling and, on March 2, 2009, the judge in the case
rendered his decision on the subsequent motions, reducing the
jury award by $4,000,000. On March 26, 2009, the
U.S. District Court, District of Massachusetts (the
Court) issued its judgment in the matter, affirming the
award of $13,300,000, plus prejudgment interest from the date of
breach on March 29, 2007, through March 26, 2009, the
date of judgment in the amount of approximately $3,179,000. The
insurance carriers have filed their appeal to this total
judgment in the amount of approximately $16,479,000. No final
and collectible judgment yet has been entered by the Court.
The Companys decision to enter into the settlement
followed an adverse ruling by the court in January 2007 in
connection with a settlement between Ericsson and co-defendants
Exar Corporation (Exar) and Rohm Device USA, LLC
(Rohm), two of the Companys component
suppliers prior to 2002. The Companys writ of mandate
appeal of this ruling was denied in April, 2007. In September
2007, The Company filed a notice of appeal of the courts
decision upholding the Ericsson-Exar-Rohm settlement. In
December 2007, the court awarded Exar and Rohm amounts for
certain statutory and discovery costs associated with this
ruling. As such, the Company accrued $240,000 in the second
quarter of 2007, included in (Gain) loss from
litigation-related and other settlements, net in the
Consolidated Statements of Operations, of which $78,000 of the
award was paid in the second quarter of 2008. On
February 9, 2009, the Court of Appeals issued its opinion
affirming the judgment for Exar and Rohm in full. During the
third quarter of 2009, the Company completed negotiations with
Exar and Rohm, resulting in separate settlement agreements
calling for a final payment to Exar of $70,000 and no additional
payment due Rohm. As a result of the settlements, the Company
reversed a remaining excess accrual of approximately $96,000 in
the third quarter of 2009, which is recorded in Gain from
litigation-related and other settlements, net in the
accompanying Consolidated Statement of Operations.
During the third quarter of 2009, the Company entered into a
release and settlement agreement with a vendor over alleged
product performance issues with certain products the vendor had
sold to the Company. The Company received a payment of $750,000
in consideration for the settlement, which is recorded in
Gain from litigation-related and other settlements,
net in the accompanying Consolidated Statement of
Operations.
On January 28, 2011, SynQor, Inc. (SynQor)
filed a complaint for patent infringement against Ericsson, Inc.
(Ericsson), Cisco Systems, Inc. (Cisco)
and Vicor in U.S. District Court for the Eastern District
of Texas. This immediately followed a complaint filed by the
Company on January 26, 2011 in U.S. District Court for
the District of Massachusetts, in which the Company sought a
declaratory judgment that its bus converter products do not
infringe any valid claim of certain of SynQors
U.S. patents, and that the claims of those patents are
invalid. With respect to Vicor, SynQors complaint alleges
that Vicors products, including, but not limited to,
unregulated bus converters used in intermediate bus architecture
power supply systems, infringe certain SynQor patents. SynQor
seeks, amongst other items, an injunction against further
infringement and an award of unspecified compensatory and
enhanced damages, interest, costs and attorney fees. On
February 8, 2011, SynQor filed a motion for preliminary
injunction seeking an order enjoining Vicor from manufacturing,
using, selling, and offering for sale in the United States
and/or
importing into the United States certain identified unregulated
bus converters, as well as any other bus converters not
significantly different from those products. On
February 17, 2011, the Company dismissed its Massachusetts
action without prejudice to allow the litigation to proceed in
Texas. Vicor does not believe any of its products, including its
unregulated bus converters, infringe any valid claim of the
SynQor patents, either alone or when used in an intermediate bus
architecture implementation. Vicor believes SynQors claims
lack merit and therefore the Company plans to vigorously defend
itself against SynQors patent infringement allegations.
67
VICOR
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In addition, the Company is involved in certain other litigation
and claims incidental to the conduct of its business. While the
outcome of lawsuits and claims against the Company cannot be
predicted with certainty, management does not expect any current
litigation or claims to have a material adverse impact on the
Companys financial position or results of operations.
The Company has organized its business segments according to its
key product lines. The Brick Business Unit segment
(BBU) designs, develops, manufactures and markets
the Companys modular power converters and configurable
products, and also includes the operations of the Companys
Westcor division, the six entities comprising Vicor Custom
Power, and the Brick operations of VJCL. The V*I Chip segment
includes V*I Chip Corporation that designs, develops,
manufactures and markets the Companys factorized power
architecture (FPA) products along with the V*I Chip
business through VJCL. Picor designs, develops, manufactures and
markets Power Management Integrated Circuits and related
products for use in a variety of power system applications.
Picor develops these products to be sold as part of Vicors
products or to third parties for separate applications.
The Companys chief operating decision maker evaluates
performance and allocates resources based on segment revenues
and segment operating income (loss). The operating income (loss)
for each segment includes selling, general and administrative
and research and development expenses directly attributable to
the segment. Certain of the Companys indirect overhead
costs, which include corporate selling, general and
administrative expenses, are allocated among the segments based
upon an estimate of costs associated with each segment. Assets
allocated to each segment are based upon specific identification
of such assets, which include accounts receivable, inventories,
fixed assets and certain other assets. Corporate assets include
cash, cash equivalents, short-term investments, land and
buildings associated with operations in Massachusetts, deferred
tax assets, and other assets. The Companys accounting
policies and method of presentation for segments are consistent
with that used throughout the Consolidated Financial Statements.
During the fourth quarter of 2010, the Company began to include
the net revenues and cost of revenues for shipments of V*I Chip
products by VJCL in the V*I Chip segment, along with an
allocation of certain VJCL operating expenses from the BBU to
the V*I Chip segment. Previously, all VJCL operating activity
had been included in the BBU segment. The 2009 segment
information has been reclassified to conform to this new
presentation. The 2008 segment information was not reclassified
as V*I Chip revenues included in VJCL was not material in 2008.
68
VICOR
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table provides significant segment financial data
as of and for the years ended December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BBU
|
|
V*I Chip
|
|
Picor
|
|
Corporate
|
|
Eliminations
|
|
Total
|
|
|
(1)
|
|
(1)
|
|
|
|
|
|
(1)(2)
|
|
|
|
2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
217,018
|
|
|
$
|
33,842
|
|
|
$
|
11,061
|
|
|
$
|
-
|
|
|
$
|
(11,188
|
)
|
|
$
|
250,733
|
|
Income (loss) from operations
|
|
|
55,619
|
|
|
|
(24,565
|
)
|
|
|
(1,282
|
)
|
|
|
(640
|
)
|
|
|
(10
|
)
|
|
|
29,122
|
|
Total assets
|
|
|
78,014
|
|
|
|
31,278
|
|
|
|
7,463
|
|
|
|
103,486
|
|
|
|
(15,329
|
)
|
|
|
204,912
|
|
Depreciation and amortization
|
|
|
4,788
|
|
|
|
3,500
|
|
|
|
470
|
|
|
|
1,464
|
|
|
|
-
|
|
|
|
10,222
|
|
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
186,975
|
|
|
|
14,599
|
|
|
$
|
6,143
|
|
|
$
|
-
|
|
|
$
|
(9,758
|
)
|
|
$
|
197,959
|
|
Income (loss) from operations
|
|
|
29,173
|
|
|
|
(22,642
|
)
|
|
|
(4,265
|
)
|
|
|
(716
|
)
|
|
|
3,223
|
|
|
|
4,773
|
|
Total assets
|
|
|
204,611
|
|
|
|
19,124
|
|
|
|
9,352
|
|
|
|
98,209
|
|
|
|
(150,719
|
)
|
|
|
180,577
|
|
Depreciation and amortization
|
|
|
5,283
|
|
|
|
2,968
|
|
|
|
403
|
|
|
|
1,544
|
|
|
|
-
|
|
|
|
10,198
|
|
2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
189,362
|
|
|
$
|
16,766
|
|
|
$
|
5,096
|
|
|
$
|
-
|
|
|
$
|
(5,856
|
)
|
|
$
|
205,368
|
|
Income (loss) from operations
|
|
|
26,317
|
|
|
|
(25,123
|
)
|
|
|
(2,817
|
)
|
|
|
(441
|
)
|
|
|
922
|
|
|
|
(1,142
|
)
|
Total assets
|
|
|
177,331
|
|
|
|
14,850
|
|
|
|
9,011
|
|
|
|
87,072
|
|
|
|
(116,342
|
)
|
|
|
171,922
|
|
Depreciation and amortization
|
|
|
5,920
|
|
|
|
2,645
|
|
|
|
384
|
|
|
|
1,566
|
|
|
|
-
|
|
|
|
10,515
|
|
|
|
|
(1) |
|
During the fourth quarter of 2010, the Company completed a
recapitalization of V*I Chip. The impact of the recapitalization
on V*I Chip was to eliminate its intercompany payable to BBU of
approximately $172,100,000 and institute capital accounts
totaling $50,000,000 as of December 31, 2010. The impact on
segment reporting was to reduce Total assets for BBU and
increase Eliminations by $172,100,000 as of December 31,
2010. There was no impact on the consolidated financial
statements as a result of this recapitalization. |
|
(2) |
|
The elimination for net revenues is principally related to
inter-segment revenues of Picor to BBU and V*I Chip and for
inter-segment revenues of V*I Chip to BBU. The elimination for
total assets is principally related to inter-segment receivables
due to BBU for the funding of V*I Chip operations and for the
purchase of equipment for both V*I Chip and Picor. |
During 2010, two customers accounted for approximately 12.3% and
11.5% of net revenues, respectively. During 2009 and 2008, no
customer accounted for more than 10% of net revenues.
International sales, as a percentage of total net revenues, were
approximately 49% in 2010 and 41% in 2009 and 42% in 2008,
respectively. During 2010, net revenues from customers in Taiwan
and Hong Kong, China accounted for approximately 11.8% and
11.4%, respectively, of total net revenues.
69
VICOR
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
17.
|
QUARTERLY
RESULTS OF OPERATIONS (Unaudited)
|
The following table sets forth certain unaudited quarterly
financial data for the years ended December 31 (in thousands,
except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
Total
|
|
2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
51,709
|
|
|
$
|
57,377
|
|
|
$
|
68,672
|
|
|
$
|
72,975
|
|
|
$
|
250,733
|
|
Gross margin
|
|
|
23,324
|
|
|
|
25,739
|
|
|
|
32,473
|
|
|
|
32,984
|
|
|
|
114,520
|
|
Consolidated net income
|
|
|
2,005
|
|
|
|
4,747
|
|
|
|
15,869
|
|
|
|
10,918
|
|
|
|
33,539
|
|
Net income attributable to noncontrolling interest
|
|
|
53
|
|
|
|
-
|
|
|
|
50
|
|
|
|
111
|
|
|
|
214
|
|
Net income attributable to Vicor Corporation
|
|
|
1,952
|
|
|
|
4,747
|
|
|
|
15,819
|
|
|
|
10,807
|
|
|
|
33,325
|
|
Net income per share attributable to Vicor Corporation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
0.05
|
|
|
|
0.11
|
|
|
|
0.38
|
|
|
|
0.26
|
|
|
|
0.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
Total
|
|
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
50,448
|
|
|
$
|
50,627
|
|
|
$
|
47,746
|
|
|
$
|
49,138
|
|
|
$
|
197,959
|
|
Gross margin
|
|
|
21,831
|
|
|
|
22,598
|
|
|
|
20,668
|
|
|
|
22,497
|
|
|
|
87,594
|
|
Consolidated net income (loss)
|
|
|
(2,151
|
)
|
|
|
1,758
|
|
|
|
1,990
|
|
|
|
2,496
|
|
|
|
4,093
|
|
Net income attributable to noncontrolling interest
|
|
|
392
|
|
|
|
417
|
|
|
|
299
|
|
|
|
187
|
|
|
|
1,295
|
|
Net income (loss) attributable to Vicor Corporation
|
|
|
(2,543
|
)
|
|
|
1,341
|
|
|
|
1,691
|
|
|
|
2,309
|
|
|
|
2,798
|
|
Net income (loss) per share attributable to Vicor Corporation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
(0.06
|
)
|
|
|
0.03
|
|
|
|
0.04
|
|
|
|
0.06
|
|
|
|
0.07
|
|
In the fourth quarter of 2010, the Company recorded the
following adjustments:
|
|
|
|
|
Recognition of deferred revenue of $4,729,000 and $4,524,000 in
deferred costs in connection with the accounting for a
multiple-element revenue arrangement.
|
In the fourth quarter of 2009, the Company recorded the
following adjustments:
|
|
|
|
|
Reversal to defer $1,476,000 in Net revenues and $1,045,000 in
Cost of revenues in connection with the accounting for a
multiple-element revenue arrangement. The impact on prior
quarters in 2009 was not material.
|
|
|
|
An unrealized gain of $476,000 in connection with the fair value
measurements for its UBS ARS, which are classified as trading
securities, in Other income, net in the Consolidated
Statements of Operations.
|
|
|
|
An unrealized loss of $466,000 in connection with the fair value
measurements for its ARS Right, in Other income, net
in the Consolidated Statements of Operations.
|
|
|
|
An increase of $290,000 to inventory reserves for potential
excess and obsolete inventory charged against Cost of revenues.
|
70
|
|
ITEM 9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
None.
|
|
ITEM 9A.
|
CONTROLS
AND PROCEDURES
|
Attached as exhibits to this
Form 10-K
are certifications of our CEO and Chief Financial Officer
(CFO), which are required in accordance with
Rule 13a-14
of the Exchange Act of 1934, as amended (the Exchange
Act). This Controls and Procedures section
includes information concerning the controls and controls
evaluation referred to in the certifications.
|
|
(a)
|
Evaluation
of disclosure controls and procedures
|
As required by
Rule 13a-15
under the Exchange Act, management, with the participation of
our CEO and CFO, conducted an evaluation regarding the
effectiveness of our disclosure controls and procedures, as of
the end of the last fiscal year. In designing and evaluating our
disclosure controls and procedures, we recognize that any
controls and procedures, no matter how well designed and
operated, can provide only 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,
our management, including our CEO and CFO, has concluded that
our disclosure controls and procedures are reasonably effective
to ensure that information required to be disclosed in the
reports we file or submit 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.
|
|
(b)
|
Managements
Report on Internal Control Over Financial Reporting
|
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting to provide
reasonable assurance regarding the reliability of our financial
reporting and the preparation of financial statements for
external purposes in accordance with generally accepted
accounting principles. Internal control over financial reporting
includes those policies and procedures that (a) pertain to
the maintenance of records that in reasonable detail accurately
and fairly reflect the transactions and dispositions of our
assets; (b) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures are being made
only in accordance with authorizations of our management and
Board of Directors; and (c) provide reasonable assurance
regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of our assets that could have a
material effect on our financial statements.
Management assessed our internal control over financial
reporting as of December 31, 2010, the end of our fiscal
year. Management based its assessment on criteria established in
Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). Managements
assessment included evaluation of such elements as the design
and operating effectiveness of key financial reporting controls,
process documentation, accounting policies, and our overall
control environment.
Based on our assessment, management has concluded that our
internal control over financial reporting was effective as of
December 31, 2010.
The effectiveness of our internal control over financial
reporting as of December 31, 2010 has been audited by Grant
Thornton LLP, our independent registered public accounting firm,
as stated in their report which is included immediately below.
71
To The Board of Directors and Stockholders of
Vicor Corporation:
We have audited Vicor Corporation (a Delaware Corporation) and
its subsidiaries (collectively, the Company)
internal control over financial reporting as of
December 31, 2010, based on criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Vicor Corporation and subsidiaries
management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting,
included in the accompanying Managements Report on
Internal Control Over Financial Reporting. Our responsibility is
to express an opinion on Vicor Corporations internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed 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. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Vicor Corporation and subsidiaries maintained,
in all material respects, effective internal control over
financial reporting as of December 31, 2010, based on
criteria established in Internal Control-Integrated Framework
issued by COSO.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Vicor Corporation and
subsidiaries as of December 31, 2010 and 2009, and the
related consolidated statements of operations, equity and cash
flows for each of the three years in the period ended
December 31, 2010 and our report dated March 3, 2011
expressed an unqualified opinion.
Boston, Massachusetts
March 3, 2011
72
|
|
(c)
|
Inherent
Limitations on Effectiveness of Controls
|
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 errors 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, 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.
|
|
(d)
|
Changes
in Internal Control Over Financial Reporting
|
There was no change in our internal control over financial
reporting that occurred during the fiscal quarter ended
December 31, 2010, that has materially affected, or is
reasonably likely to materially affect, the Companys
internal control over financial reporting.
73
|
|
ITEM 9B.
|
OTHER
INFORMATION
|
None.
PART III
|
|
ITEM 10.
|
DIRECTORS
AND EXECUTIVE OFFICERS OF THE REGISTRANT
|
Incorporated by reference from the Companys Definitive
Proxy Statement for its 2011 annual meeting of stockholders.
|
|
ITEM 11.
|
EXECUTIVE
COMPENSATION
|
Incorporated by reference from the Companys Definitive
Proxy Statement for its 2011 annual meeting of stockholders.
|
|
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
|
Incorporated by reference from the Companys Definitive
Proxy Statement for its 2011 annual meeting of stockholders.
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
|
Incorporated by reference from the Companys Definitive
Proxy Statement for its 2011 annual meeting of stockholders.
|
|
ITEM 14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
Incorporated by reference from the Companys Definitive
Proxy Statement for its 2011 annual meeting of stockholders.
PART IV
|
|
ITEM 15.
|
EXHIBITS AND
FINANCIAL STATEMENTS
|
(a) (1) Financial Statements
See index in Item 8.
(a) (2) Schedules
Schedule II Valuation and Qualifying Accounts
All other schedules for which provision is made in the
applicable accounting regulation of the Securities and Exchange
Commission are not required under the related instructions or
are inapplicable, and therefore have been omitted.
74
(b) Exhibits
|
|
|
|
|
|
|
|
|
Exhibits
|
|
|
|
Description of
Document
|
|
|
3
|
.1
|
|
|
|
|
|
Restated Certificate of Incorporation, dated February 28,
1990(1)
|
|
3
|
.2
|
|
|
|
|
|
Certificate of Ownership and Merger Merging Westcor Corporation,
a Delaware Corporation, into Vicor Corporation, a Delaware
Corporation, dated December 3, 1990(1)
|
|
3
|
.3
|
|
|
|
|
|
Certificate of Amendment of Restated Certificate of
Incorporation, dated May 10, 1991(1)
|
|
3
|
.4
|
|
|
|
|
|
Certificate of Amendment of Restated Certificate of
Incorporation, dated June 23, 1992(1)
|
|
3
|
.5
|
|
|
|
|
|
Bylaws, as amended(9)
|
|
4
|
.1
|
|
|
|
|
|
Specimen Common Stock Certificate(2)
|
|
10
|
.1
|
|
|
|
|
|
1984 Stock Option Plan of the Company, as amended(2)
|
|
10
|
.2
|
|
|
|
|
|
1993 Stock Option Plan(3)
|
|
10
|
.3
|
|
|
|
|
|
1998 Stock Option and Incentive Plan(4)
|
|
10
|
.4
|
|
|
|
|
|
Amended and Restated 2000 Stock Option and Incentive Plan(5)
|
|
10
|
.5
|
|
|
|
|
|
Form of Non-Qualified Stock Option under the Vicor Corporation
Amended and Restated 2000 Stock Option and Incentive Plan(6)
|
|
10
|
.6
|
|
|
|
|
|
Sales Incentive Plan(7)
|
|
10
|
.7
|
|
|
|
|
|
Picor Corporation 2001 Stock Option and Incentive Plan(8)
|
|
10
|
.8
|
|
|
|
|
|
Form of Non-Qualified Stock Option under the Picor Corporation
2001 Stock Option and Incentive Plan(8)
|
|
10
|
.9
|
|
|
|
|
|
V*I Chip Corporation Amended 2007 Stock Option and Incentive
Plan(11)
|
|
10
|
.10
|
|
|
|
|
|
Form of Non-Qualified Stock Option Agreement under the V*I Chip
Corporation Amended 2007 Stock Option and Incentive Plan(10)
|
|
10
|
.11
|
|
|
|
|
|
Form of Incentive Stock Option Agreement under the V*I Chip
Corporation Amended 2007 Stock Option and Incentive Plan(11)
|
|
10
|
.12
|
|
|
|
|
|
Form of Stock Restriction Agreement under the V*I Chip
Corporation Amended 2007 Stock Option and Incentive Plan(11)
|
|
21
|
.1
|
|
|
|
|
|
Subsidiaries of the Company(12)
|
|
23
|
.1
|
|
|
|
|
|
Consent of Grant Thornton LLP(12)
|
|
31
|
.1
|
|
|
|
|
|
Certification of Chief Executive Officer pursuant to
Rule 13a-14(a)
of the Securities Exchange Act of 1934(12)
|
|
31
|
.2
|
|
|
|
|
|
Certification of Chief Financial Officer pursuant to
Rule 13a-14(a)
of the Securities Exchange Act of 1934(12)
|
|
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(12)
|
|
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(12)
|
|
|
|
(1) |
|
Filed as an exhibit to the Companys Annual Report on
Form 10-K
filed on March 29, 2001 and incorporated herein by
reference. |
|
(2) |
|
Filed as an exhibit to the Companys Registration Statement
on Form 10, as amended, under the Securities Exchange Act
of 1934 (File
No. 0-18277),
and incorporated herein by reference. |
|
(3) |
|
Filed as an exhibit to the Companys Registration Statement
on
Form S-8,
as amended, under the Securities Act of 1933
(No. 33-65154),
and incorporated herein by reference. |
|
(4) |
|
Filed as an exhibit to the Companys Registration Statement
on
Form S-8,
as amended, under the Securities Act of 1933
(No. 333-61177),
and incorporated herein by reference. |
75
|
|
|
(5) |
|
Filed as an exhibit to the Companys Proxy Statement for
use in connection with its 2002 Annual Meeting of Stockholders,
which was filed on April 29, 2002, and incorporated herein
by reference. |
|
(6) |
|
Filed as an exhibit to the Companys Quarterly Report on
Form 10-Q
filed on November 4, 2004 and incorporated herein by
reference. |
|
(7) |
|
Filed as an exhibit to the Companys Annual Report on
Form 10-K
filed on March 16, 2005 and incorporated herein by
reference. |
|
(8) |
|
Filed as an exhibit to the Companys Annual Report on
Form 10-K
filed on March 14, 2006 and incorporated herein by
reference. |
|
(9) |
|
Filed as an exhibit to the Companys Quarterly Report on
Form 10-Q
filed on November 8, 2006 and incorporated herein by
reference. |
|
(10) |
|
Filed as an exhibit to the Companys Current Report on
Form 8-K,
dated June 6, 2007 and incorporated herein by reference. |
|
(11) |
|
Filed as an exhibit to the Companys Current Report and
Form 8-K,
dated March 6, 2008 incorporated herein by reference. |
|
(12) |
|
Filed herewith. |
76
VICOR
CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 2010, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Credit)
|
|
|
|
|
|
|
|
|
Charge
|
|
|
|
|
|
|
Balance at
|
|
to Costs and
|
|
Other Charges,
|
|
Balance at
|
Description
|
|
Beginning of Period
|
|
Expenses
|
|
Deductions(1)
|
|
End of Period
|
|
Allowance for doubtful accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
$
|
260,000
|
|
|
$
|
57,000
|
|
|
$
|
(8,000
|
)
|
|
$
|
309,000
|
|
December 31, 2009
|
|
|
300,000
|
|
|
|
3,000
|
|
|
|
(43,000
|
)
|
|
|
260,000
|
|
December 31, 2008
|
|
|
398,000
|
|
|
|
39,000
|
|
|
|
(137,000
|
)
|
|
|
300,000
|
|
|
|
|
(1) |
|
Reflects uncollectible accounts written off, net of recoveries. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Credit)
|
|
|
|
|
|
|
|
|
Charge
|
|
|
|
|
|
|
Balance at
|
|
to Costs and
|
|
Other Charges,
|
|
Balance at
|
Description
|
|
Beginning of Period
|
|
Expenses
|
|
Deductions(2)
|
|
End of Period
|
|
Inventory Reserves:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
$
|
5,943,000
|
|
|
$
|
1,721,000
|
|
|
$
|
(2,220,000
|
)
|
|
$
|
5,444,000
|
|
December 31, 2009
|
|
|
6,358,000
|
|
|
|
1,010,000
|
|
|
|
(1,425,000
|
)
|
|
|
5,943,000
|
|
December 31, 2008
|
|
|
7,646,000
|
|
|
|
923,000
|
|
|
|
(2,211,000
|
)
|
|
|
6,358,000
|
|
|
|
|
(2) |
|
Reflects amounts associated with inventory that have been
discarded or sold. |
77
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
James A. Simms
Vice President, Chief Financial Officer
Date: March 3, 2011
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant in the capacities and on the dates
indicated.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Patrizio
Vinciarelli
Patrizio
Vinciarelli
|
|
President, Chief Executive Officer and
Chairman of the Board (Principal
Executive Officer)
|
|
March 3, 2011
|
|
|
|
|
|
/s/ James
A. Simms
James
A. Simms
|
|
Chief Financial Officer Vice President
(Principal Financial Officer and Principal
Accounting Officer)
|
|
March 3, 2011
|
|
|
|
|
|
/s/ Estia
J. Eichten
Estia
J. Eichten
|
|
Director
|
|
March 3, 2011
|
|
|
|
|
|
/s/ David
T. Riddiford
David
T. Riddiford
|
|
Director
|
|
March 3, 2011
|
|
|
|
|
|
/s/ Barry
Kelleher
Barry
Kelleher
|
|
Director
|
|
March 3, 2011
|
|
|
|
|
|
/s/ Samuel
Anderson
Samuel
Anderson
|
|
Director
|
|
March 3, 2011
|
|
|
|
|
|
/s/ Claudio
Tuozzolo
Claudio
Tuozzolo
|
|
Director
|
|
March 3, 2011
|
|
|
|
|
|
/s/ Jason
L. Carlson
Jason
L. Carlson
|
|
Director
|
|
March 3, 2011
|
|
|
|
|
|
/s/ Liam
K. Griffin
Liam
K. Griffin
|
|
Director
|
|
March 3, 2011
|
78
exv21w1
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY
|
|
|
|
|
State or Jurisdiction |
Name |
|
of Incorporation |
|
Picor Corporation |
|
Delaware, USA |
V*I Chip Corporation |
|
Delaware, USA |
VLT, Inc. |
|
California, USA |
Vicor GmbH |
|
Germany |
VICR Securities Corporation |
|
Massachusetts, USA |
Vicor France SARL |
|
France |
Vicor Italy SRL |
|
Italy |
Vicor Hong Kong Ltd. |
|
Hong Kong |
Vicor U.K. Ltd. |
|
United Kingdom |
Vicor B.V. |
|
Netherlands |
Vicor Japan Company, Ltd. |
|
Japan |
Vicor Development Corporation |
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Delaware, USA |
Aegis Power Systems, Inc. |
|
Delaware, USA |
Mission Power Systems, Inc. |
|
Delaware, USA |
Northwest Power Integration, Inc. |
|
Delaware, USA |
Converpower Corporation |
|
Delaware, USA |
Freedom Power Systems, Inc. |
|
Delaware, USA |
exv23w1
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our reports dated March 3, 2011 with respect to the consolidated financial
statements, schedule and internal control over financial reporting included in the Annual Report of
Vicor Corporation, Inc. and subsidiaries on Form 10-K for the year ended December 31, 2010. We
hereby consent to the incorporation by reference of said reports in the Registration Statements of
Vicor Corporation and subsidiaries on Forms S-8 (Nos. 33-46656, effective June 29, 1990, 33-65154,
effective June 29, 1993, 333-61177, effective August 11, 1998, 333-44790, effective August 30, 2000
and 333-99423, effective September 11, 2002).
/s/ Grant Thornton LLP
Boston, Massachusetts
March 3, 2011
exv31w1
Exhibit 31.1
CHIEF
EXECUTIVE OFFICER CERTIFICATION
I, Patrizio Vinciarelli, certify that:
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1.
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I have reviewed this report on
Form 10-K
of Vicor Corporation;
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2.
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Based on my knowledge, this 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;
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3.
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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;
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4.
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The registrants other certifying officers 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:
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a)
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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;
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b)
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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;
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c)
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Evaluated the effectiveness of the registrants 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
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d)
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Disclosed in this report any change in the registrants
internal control over financial reporting that occurred during
the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the registrants internal control over
financial reporting; and
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5.
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The registrants other certifying officers and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrants
auditors and the audit committee of the registrants board
of directors (or persons performing the equivalent functions):
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a)
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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
registrants ability to record, process, summarize and
report financial information; and
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b)
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Any fraud, whether or not material, that involves management or
other employees who have a significant role in the
registrants internal control over financial reporting.
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Dated: March 3, 2011
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/s/ Patrizio
Vinciarelli
Patrizio
Vinciarelli
Chief Executive Officer
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exv31w2
Exhibit 31.2
CHIEF
FINANCIAL OFFICER CERTIFICATION
I, James A. Simms, certify that:
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1.
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I have reviewed this report on
Form 10-K
of Vicor Corporation;
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2.
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Based on my knowledge, this 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;
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3.
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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;
|
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4.
|
The registrants other certifying officers 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;
|
|
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b)
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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;
|
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c)
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Evaluated the effectiveness of the registrants 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
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d)
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Disclosed in this report any change in the registrants
internal control over financial reporting that occurred during
the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the registrants internal control over
financial reporting; and
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5.
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The registrants other certifying officers and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrants
auditors and the audit committee of the registrants board
of directors (or persons performing the equivalent functions):
|
|
|
|
|
a)
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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
registrants ability to record, process, summarize and
report financial information; and
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b)
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Any fraud, whether or not material, that involves management or
other employees who have a significant role in the
registrants internal control over financial reporting.
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Dated: March 3, 2011
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/s/ James
A. Simms
James
A. Simms
Vice President, Chief Financial Officer
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exv32w1
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 Annual Report of Vicor Corporation (the
Company) on
Form 10-K
for the period ending December 31, 2010 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:
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(1)
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The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
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(2)
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The information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company.
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Patrizio Vinciarelli
President, Chairman of the Board and
Chief Executive Officer
March 3, 2011
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.
exv32w2
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 Annual Report of Vicor Corporation (the
Company) on
Form 10-K
for the period ending December 31, 2010 as filed with the
Securities and Exchange Commission on the date hereof (the
Report), I, James A. Simms, 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:
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(1)
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The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
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(2)
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The information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company.
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James A. Simms
Vice President, Chief Financial Officer
March 3, 2011
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.