e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2009
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from
Commission File Number 0-18277
VICOR CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware
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04-2742817 |
(State of Incorporation)
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|
(I.R.S. Employer Identification No.) |
25 Frontage Road, Andover, Massachusetts 01810
(Address of Principal Executive Office)
(978) 470-2900
(Registrants telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes o No
o
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):
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
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 number of shares outstanding of each of the issuers classes of common stock as of July 31,
2009 was:
|
|
|
|
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Common Stock, $.01 par value |
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29,897,510 |
|
Class B Common Stock, $.01 par value |
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11,767,052 |
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VICOR CORPORATION
INDEX TO FORM 10-Q
VICOR CORPORATION
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
Item 1. Financial Statements
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|
|
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June 30, 2009 |
|
December 31, 2008 |
Assets |
|
|
|
|
|
|
|
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Current assets: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
30,429 |
|
|
$ |
22,639 |
|
Restricted cash equivalents |
|
|
176 |
|
|
|
176 |
|
Short-term invesments |
|
|
845 |
|
|
|
1,773 |
|
Accounts receivable, less allowance of $266 in 2009 and $300 in 2008 |
|
|
25,985 |
|
|
|
28,757 |
|
Inventories, net |
|
|
24,763 |
|
|
|
26,681 |
|
Deferred tax assets |
|
|
451 |
|
|
|
451 |
|
Other current assets |
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|
3,119 |
|
|
|
2,279 |
|
|
|
|
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|
Total current assets |
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|
85,768 |
|
|
|
82,756 |
|
Restricted cash and cash equivalents |
|
|
388 |
|
|
|
561 |
|
Long-term investments, net |
|
|
35,851 |
|
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|
33,735 |
|
Auction rate securities rights |
|
|
1,685 |
|
|
|
1,926 |
|
Property, plant and equipment, net |
|
|
45,912 |
|
|
|
48,254 |
|
Other assets |
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|
4,982 |
|
|
|
4,690 |
|
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|
|
|
|
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$ |
174,586 |
|
|
$ |
171,922 |
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|
|
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|
Liabilities and Stockholders Equity |
|
|
|
|
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|
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Current liabilities: |
|
|
|
|
|
|
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Accounts payable |
|
$ |
6,142 |
|
|
$ |
5,592 |
|
Accrued compensation and benefits |
|
|
7,114 |
|
|
|
6,783 |
|
Accrued expenses |
|
|
3,027 |
|
|
|
3,073 |
|
Accrued severance charges |
|
|
1,810 |
|
|
|
- |
|
Income taxes payable |
|
|
68 |
|
|
|
1,349 |
|
Deferred revenue |
|
|
1,312 |
|
|
|
662 |
|
|
|
|
|
|
Total current liabilities |
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19,473 |
|
|
|
17,459 |
|
Long-term deferred revenue |
|
|
1,314 |
|
|
|
1,118 |
|
Long-term income taxes payable |
|
|
276 |
|
|
|
259 |
|
Deferred income taxes |
|
|
1,659 |
|
|
|
1,660 |
|
|
|
|
|
|
|
|
|
|
Equity: |
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|
|
|
|
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Vicor Corporation stockholders equity: |
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Class B Common Stock |
|
|
118 |
|
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|
118 |
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Common Stock |
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|
384 |
|
|
|
384 |
|
Additional paid-in capital |
|
|
161,452 |
|
|
|
161,089 |
|
Retained earnings |
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|
108,972 |
|
|
|
110,174 |
|
Accumulated other comprehensive loss |
|
|
(1,686 |
) |
|
|
(2,767 |
) |
Treasury stock, at cost |
|
|
(121,827 |
) |
|
|
(121,827 |
) |
|
|
|
|
|
Total Vicor Corporation stockholders equity |
|
|
147,413 |
|
|
|
147,171 |
|
Noncontrolling interest |
|
|
4,451 |
|
|
|
4,255 |
|
|
|
|
|
|
Total equity |
|
|
151,864 |
|
|
|
151,426 |
|
|
|
|
|
|
|
|
$ |
174,586 |
|
|
$ |
171,922 |
|
|
|
|
|
|
See accompanying notes.
-1-
VICOR CORPORATION
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
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Three Months Ended |
|
Six Months Ended |
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|
June 30, |
|
June 30, |
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
50,627 |
|
|
$ |
49,297 |
|
|
$ |
101,075 |
|
|
$ |
102,766 |
|
Cost of revenues |
|
|
28,029 |
|
|
|
28,184 |
|
|
|
56,646 |
|
|
|
59,193 |
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
22,598 |
|
|
|
21,113 |
|
|
|
44,429 |
|
|
|
43,573 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
12,019 |
|
|
|
13,975 |
|
|
|
24,842 |
|
|
|
28,027 |
|
Research and development |
|
|
7,611 |
|
|
|
8,080 |
|
|
|
15,362 |
|
|
|
15,591 |
|
Severance charges |
|
|
859 |
|
|
|
- |
|
|
|
3,957 |
|
|
|
- |
|
Gain from litigation-related settlements, net |
|
|
- |
|
|
|
(177 |
) |
|
|
- |
|
|
|
(177 |
) |
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
20,489 |
|
|
|
21,878 |
|
|
|
44,161 |
|
|
|
43,441 |
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
2,109 |
|
|
|
(765 |
) |
|
|
268 |
|
|
|
132 |
|
Other income (expense), net: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other than temporary impairment gains on
available-for-sale securities |
|
|
869 |
|
|
|
- |
|
|
|
703 |
|
|
|
- |
|
Portion of gain recognized in Other
comprehensive income |
|
|
(1,342 |
) |
|
|
- |
|
|
|
(1,176 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
Net impairment losses recognized in earnings |
|
|
(473 |
) |
|
|
- |
|
|
|
(473 |
) |
|
|
- |
|
Other income (expense), net |
|
|
666 |
|
|
|
470 |
|
|
|
784 |
|
|
|
1,670 |
|
|
|
|
|
|
|
|
|
|
Total other income (expense), net |
|
|
193 |
|
|
|
470 |
|
|
|
311 |
|
|
|
1,670 |
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
2,302 |
|
|
|
(295 |
) |
|
|
579 |
|
|
|
1,802 |
|
Provision for income taxes |
|
|
544 |
|
|
|
350 |
|
|
|
972 |
|
|
|
592 |
|
Loss from equity method investment (net of tax) |
|
|
- |
|
|
|
172 |
|
|
|
- |
|
|
|
962 |
|
|
|
|
|
|
|
|
|
|
Consolidated net income (loss) |
|
|
1,758 |
|
|
|
(817 |
) |
|
|
(393 |
) |
|
|
248 |
|
Less: Net income attributable to
noncontrolling interest |
|
|
417 |
|
|
|
506 |
|
|
|
809 |
|
|
|
951 |
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Vicor Corporation |
|
$ |
1,341 |
|
|
$ |
(1,323 |
) |
|
$ |
(1,202 |
) |
|
$ |
(703 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share attributable to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vicor Corporation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.03 |
|
|
$ |
(0.03 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.02 |
) |
Diluted |
|
$ |
0.03 |
|
|
$ |
(0.03 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.02 |
) |
Shares used to compute net income (loss) per share
attributable to Vicor Corporation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
41,665 |
|
|
|
41,643 |
|
|
|
41,665 |
|
|
|
41,640 |
|
Diluted |
|
|
41,665 |
|
|
|
41,643 |
|
|
|
41,665 |
|
|
|
41,640 |
|
Cash dividends declared per share |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
0.15 |
|
See accompanying notes.
-2-
VICOR CORPORATION
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
June 30, 2009 |
|
June 30, 2008 |
|
|
|
|
|
|
|
|
|
Operating activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(1,202 |
) |
|
$ |
(703 |
) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
5,234 |
|
|
|
5,211 |
|
Severance charges |
|
|
3,957 |
|
|
|
- |
|
Credit loss on available for sale securities |
|
|
473 |
|
|
|
- |
|
Unrealized gain on trading securities |
|
|
(425 |
) |
|
|
- |
|
Stock compensation expense |
|
|
363 |
|
|
|
588 |
|
Unrealized loss on auction rate security rights |
|
|
145 |
|
|
|
- |
|
Increase in long-term deferred revenue |
|
|
196 |
|
|
|
882 |
|
Deferred income taxes |
|
|
94 |
|
|
|
- |
|
Gain on disposal of equipment |
|
|
(25 |
) |
|
|
(22 |
) |
Loss from equity method investee (net of tax) |
|
|
- |
|
|
|
962 |
|
Change in current assets and liabilities, net |
|
|
1,788 |
|
|
|
233 |
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
10,598 |
|
|
|
7,151 |
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
Purchases of investments |
|
|
(1,515 |
) |
|
|
(9,812 |
) |
Sales and maturities of investments |
|
|
1,549 |
|
|
|
26,139 |
|
Additions to property, plant and equipment |
|
|
(2,749 |
) |
|
|
(4,169 |
) |
Purchase of equity method investment |
|
|
- |
|
|
|
(1,000 |
) |
Proceeds from sale of equipment |
|
|
5 |
|
|
|
22 |
|
Change in restricted cash |
|
|
173 |
|
|
|
33 |
|
(Increase) decrease in other assets |
|
|
(435 |
) |
|
|
(119 |
) |
|
|
|
|
|
Net cash (used in) provided by investing activities |
|
|
(2,972 |
) |
|
|
11,094 |
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
Net income attributable to noncontrolling interest |
|
|
809 |
|
|
|
951 |
|
Proceeds from issuance of Common Stock |
|
|
- |
|
|
|
93 |
|
Common Stock dividends paid |
|
|
(612 |
) |
|
|
(6,245 |
) |
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
197 |
|
|
|
(5,201 |
) |
|
|
|
|
|
|
|
|
|
Effect of foreign exchange rates on cash |
|
|
(33 |
) |
|
|
(61 |
) |
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
7,790 |
|
|
|
12,983 |
|
Cash and cash equivalents at beginning of period |
|
|
22,639 |
|
|
|
20,017 |
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
30,429 |
|
|
$ |
33,000 |
|
|
|
|
|
|
See accompanying notes.
-3-
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2009
(unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial information and
pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly,
they do not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
The Company adopted Statement of Financial Accounting Standards 160 (SFAS 160),
Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting
Research Bulletin No. 51, Consolidated Financial Statements, effective January 1, 2009. SFAS 160
changes the accounting and reporting for minority interests, which are now recharacterized as
noncontrolling interests. Noncontrolling interests are classified as a component of stockholders
equity in the balance sheet and changes the presentation of the statement of operations,
requiring consolidated net income (loss) to be reported at amounts that include the amounts
attributable to both parent and the noncontrolling interest. SFAS 160 requires retroactive
adoption of the presentation and disclosure requirements for existing minority interests and,
accordingly, amounts as of December 31, 2008 and for the three and six months ended June 30, 2008
in the accompanying condensed consolidated financial statements have been restated in accordance
with the presentation requirements under SFAS 160.
In the opinion of management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. Operating results for the three
and six months ended June 30, 2009, are not necessarily indicative of the results that may be
expected for any other interim period or the year ending December 31, 2009. The balance sheet at
December 31, 2008, presented herein has been derived from the audited financial statements at
that date but does not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. For further information, refer
to the consolidated financial statements and notes thereto contained in the Companys Annual
Report on Form 10-K for the year ended December 31, 2008, (File No. 0-18277) filed by the Company
with the Securities and Exchange Commission.
2. 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 and has historically invested
its substantial cash balances in demand deposit accounts, money market funds meeting certain
quality criteria, 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. The Company adopted FASB Statement of Position (FSP)
FAS 115-2 and FAS 124-2 (FSP FAS 115-2), effective for its reporting for the second quarter of
2009. Under FSP FAS 115-2, 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 a separate component of Stockholders Equity. Trading securities
are recorded at fair value, with unrealized gains and losses recorded through the statement of
operations. The amortized cost of debt securities is adjusted for amortization of premiums and
accretion of discounts to maturity. Such amortization, along with interest and realized gains and
losses, are included in Other income (expense), net in the Condensed Consolidated Statements of
Operations.
-4-
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2009
(unaudited)
The following is a summary of available-for-sale securities (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
Gross |
|
Estimated |
|
|
|
|
|
|
Unrealized |
|
Unrealized |
|
Fair |
June 30, 2009 |
|
Cost |
|
Gains |
|
Losses |
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction rate
securities - student loans |
|
$ |
19,975 |
|
|
$ |
- |
|
|
$ |
2,635 |
|
|
$ |
17,340 |
|
Certificates of deposit |
|
|
2,750 |
|
|
|
24 |
|
|
|
- |
|
|
|
2,774 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
22,725 |
|
|
$ |
24 |
|
|
$ |
2,635 |
|
|
$ |
20,114 |
|
|
|
|
|
|
|
|
|
|
All of the auction rate securities-student loans as of June 30, 2009 have been in an
unrealized loss position for greater than 12 months.
|
|
December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction rate
securities - student loans |
|
$ |
20,025 |
|
|
$ |
- |
|
|
$ |
3,334 |
|
|
$ |
16,691 |
|
Certificates of deposit |
|
|
2,735 |
|
|
|
20 |
|
|
|
- |
|
|
|
2,755 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
22,760 |
|
|
$ |
20 |
|
|
$ |
3,334 |
|
|
$ |
19,446 |
|
|
|
|
|
|
|
|
|
|
The amortized cost and estimated fair value of available-for-sale securities on June 30, 2009, by contractual maturities, are shown
below (in thousands):
|
|
|
|
|
|
|
|
Estimated |
|
|
|
|
|
|
|
|
|
|
Cost |
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
Due in one year or less |
|
$ |
1,115 |
|
|
$ |
1,120 |
|
Due in two to ten years |
|
|
1,710 |
|
|
|
1,729 |
|
Due in twenty to forty years |
|
|
19,900 |
|
|
|
17,265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
22,725 |
|
|
$ |
20,114 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a summary of trading securities (in thousands):
|
|
|
|
|
|
|
|
Gross |
|
Gross |
|
Estimated |
|
|
|
|
|
|
Unrealized |
|
Unrealized |
|
Fair |
June
30, 2009 |
|
Cost |
|
Gains |
|
Losses |
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction rate
securities - student loans |
|
$ |
18,300 |
|
|
$ |
- |
|
|
$ |
1,717 |
|
|
$ |
16,583 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction rate
securities - student loans |
|
$ |
18,300 |
|
|
$ |
- |
|
|
$ |
2,238 |
|
|
$ |
16,062 |
|
-5-
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2009
(unaudited)
The amortized cost and estimated fair value of trading securities on June 30, 2009, by contractual maturities, are shown
below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated |
|
|
Cost |
|
Fair Value |
|
|
|
|
|
|
|
|
|
Due in one year or less |
|
$ |
- |
|
|
$ |
- |
|
Due in two to ten years |
|
|
- |
|
|
|
- |
|
Due in ten to twenty years |
|
|
2,000 |
|
|
|
1,846 |
|
Due in twenty to forty years |
|
|
16,300 |
|
|
|
14,737 |
|
|
|
|
|
|
|
|
$ |
18,300 |
|
|
$ |
16,583 |
|
|
|
|
|
|
As of June 30, 2009, the Company held $38,275,000 of auction rate securities (ARS),
consisting 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 ninety days. The
auction rate securities held by the Company, prior to February 2008, historically traded at par
and are callable at par at the option of the issuer. On June 30, 2009, the majority of the
auction rate 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.
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 June 30, 2009, the Company held auction rate securities that had experienced failed
auctions totaling $38,275,000 at par value (the Failed Auction Securities), of which $75,000
was redeemed at par subsequent to June 30, 2009. Management is not aware of any reason to
believe any of the issues of the Failed Auction Securities held by the Company are presently at
risk of default. Through June 30, 2009, the Company has continued to receive interest payments on
the Failed Auction Securities in accordance with their terms. Management believes the Company
ultimately should be able to liquidate all of its auction rate security investments 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 June 30, 2009.
In November 2008, the Company entered into an agreement with UBS AG (UBS) regarding
$18,300,000 of auction rate securities, at par value, held by the Company with a broker-dealer
affiliate of UBS (the UBS ARS). The agreement provides the Company a contractual right (the
ARS Right) that entitles the Company to sell the auction rate securities it holds with UBS to
UBS at par during the period of June 30, 2010 through July 2, 2012. Until then, the Company is
entitled to receive interest payments on its auction rate securities in accordance with their
terms. The terms and conditions of the settlement offer include a release of claims against UBS
and its affiliates. The Company also may be eligible to borrow at no net cost from UBS an
amount up to 75% of the market value of the auction rate securities held with UBS, should the
Company enter into a separate credit agreement with a commercial banking affiliate of UBS. As of
June 30, 2009, the Company had not entered into such a credit
-6-
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2009
(unaudited)
agreement. The ARS Right is a separate free-standing instrument accounted for separately from the
UBS ARS and is accounted for as a purchased put option. In accordance with SFAS 159, The Fair
Value Option for Financial Assets and Financial Liabilities, the Company elected fair value
accounting for the ARS Right. The election was made to mitigate volatility in earnings caused by
accounting for the receipt of the ARS Right and the underlying auction rate securities under
different methods. The fair value of the ARS Right was estimated by the Company to be
approximately $1,685,000 on June 30, 2009, a decrease of approximately $145,000 and $241,000 from
the estimated fair value on March 31, 2009 and December 31, 2008, respectively. This decrease in
fair value is recorded as an unrealized loss in Other income (expense), net in the Condensed
Consolidated Statements of Operations. Due to entering into this agreement with UBS, the Company
intends to exercise the ARS Right in June 2010 and does not intend to hold the associated UBS ARS
until recovery or maturity. Therefore, the total amount of the UBS ARS are classified as trading
securities. Based on the fair value measurements described in Note 3, the fair value of the UBS
ARS on June 30, 2009 was estimated to be approximately $16,583,000, an increase in fair value of
approximately $494,000 and $521,000 from March 31, 2009 and December 31, 2008, respectively. This
increase has been recorded as an unrealized gain in Other income (expense), net in the
Condensed Consolidated Statements of Operations.
The remaining balance of ARS is held with a broker-dealer affiliate of Bank of America (the
BofA ARS). Based on the fair value measurements described in Note 3, the fair value of the BofA
ARS on June 30, 2009, was estimated by the Company to be approximately $17,340,000, compared with
a par value of $19,975,000. Of the total difference of $2,635,000, $473,000 was determined to
be due to credit loss and was recorded in Net impairment losses recognized in earnings in the
Condensed Consolidated Statement of Operations in accordance with FSB FAS 115-2. Management
considers the remaining difference of $2,162,000 to be temporary and has recorded this amount,
net of taxes, in Accumulated other comprehensive (loss) income in the Condensed Consolidated
Balance Sheet. 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 risks probabilities and changes in credit ratings as significant inputs, among
other factors (See Note 3).
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 three months ended June 30, 2009 (in thousands):
|
|
|
|
|
Balance at the beginning of the period |
|
$ |
- |
|
|
|
|
|
|
Additions for the amount related to the credit loss for which an
other-than-temporary impairment was not previously recognized |
|
|
473 |
|
|
|
|
|
|
|
|
|
Balance at the end of the period |
|
$ |
473 |
|
|
|
|
At this time, the Company has no intent to sell any of the impaired BofA ARS and does not
believe that it is more likely than not that 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 Condensed 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 auction rate securities held will affect the Companys ability to execute its
current operating plan.
3. Fair Value Measurements
The Company accounts for the fair value of certain financial assets in accordance with SFAS
157, Fair Value Measurements (SFAS 157) and its related amendments. SFAS 157 defines fair
value 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
-7-
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2009
(unaudited)
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. SFAS 157 establishes a three-level hierarchy for
disclosure to show the extent and level of judgment used to estimate fair value measurements.
Assets measured at fair value on a recurring basis include the following as of June 30, 2009
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at June 30, 2009 |
|
|
|
|
Using |
|
|
|
|
|
|
|
|
Significant |
|
|
|
|
|
|
Quoted Prices |
|
Other |
|
Significant |
|
|
|
|
in Active |
|
Observable |
|
Unobservable |
|
Total Fair |
|
|
Markets |
|
Inputs |
|
Inputs |
|
Value as of |
|
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
June 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
9,987 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
9,987 |
|
Restricted money market |
|
|
176 |
|
|
|
|
|
|
|
|
|
|
|
176 |
|
Short term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificate of deposit |
|
|
770 |
|
|
|
|
|
|
|
|
|
|
|
770 |
|
Auction rate securities |
|
|
|
|
|
|
75 |
|
|
|
|
|
|
|
75 |
|
Long term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction rate securities |
|
|
|
|
|
|
|
|
|
|
33,848 |
|
|
|
33,848 |
|
Auction rate security rights |
|
|
|
|
|
|
|
|
|
|
1,685 |
|
|
|
1,685 |
|
Certificate of deposit |
|
|
2,003 |
|
|
|
|
|
|
|
|
|
|
|
2,003 |
|
Restricted long term investment |
|
|
388 |
|
|
|
|
|
|
|
|
|
|
|
388 |
|
As of June 30, 2009, there was insufficient observable auction rate security market
information available to determine the fair value of the Failed Auction Securities and the ARS
Right. As such, the Companys investments in Failed Auction Securities were deemed to require
valuation using Level 3 inputs. Consistent with SFAS 157, 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 June 30, 2009. 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 is 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 $1,200,000.
-8-
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2009
(unaudited)
The following table summarizes the change in the fair values for those assets valued on a recurring basis utilizing Level 3
inputs for the six months ended June 30, 2009 (in thousands):
|
|
|
|
|
|
|
Level 3 |
|
|
|
|
|
Balance at the beginning of the period |
|
$ |
34,654 |
|
Transfers into Level 3 categorization |
|
|
|
|
Redemptions |
|
|
(25 |
) |
Transfers into Level 2 categorization |
|
|
(75 |
) |
Unrealized loss on trading securities included in Other income (expense), net |
|
|
280 |
|
Credit losses on available for sales securities included in Other
income(expense), net |
|
|
(473 |
) |
Unrealized gain (loss) included in Other comprehensive (loss) income |
|
|
1,172 |
|
|
|
|
Balance at the end of the period |
|
$ |
35,533 |
|
|
|
|
4. Stock Based Compensation
The Company accounts for stock-based compensation in accordance with SFAS 123R, Share Based
Payment. Stock compensation expenses for the three and six months ended June 30 was as follows
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues |
|
$ |
4 |
|
|
$ |
30 |
|
|
$ |
8 |
|
|
$ |
45 |
|
Selling, general and administrative |
|
|
112 |
|
|
|
206 |
|
|
|
261 |
|
|
|
431 |
|
Research and development |
|
|
48 |
|
|
|
50 |
|
|
|
94 |
|
|
|
112 |
|
|
|
|
|
|
|
|
|
|
Total stock based compensation |
|
$ |
164 |
|
|
$ |
286 |
|
|
$ |
363 |
|
|
$ |
588 |
|
|
|
|
|
|
|
|
|
|
-9-
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2009
(unaudited)
5. Net
Income (Loss) per Share
The following table sets forth the computation of basic and diluted income (loss) per share for the three and six months ended
June 30 (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Vicor Corporation |
|
$ |
1,341 |
|
|
$ |
(1,323 |
) |
|
$ |
(1,202 |
) |
|
$ |
(703 |
) |
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
for basic income (loss) per share-weighted average shares (1) |
|
|
41,665 |
|
|
|
41,643 |
|
|
|
41,665 |
|
|
|
41,640 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee stock options (2) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Denominator
for diluted income (loss) per share adjusted
weighted-average shares and assumed conversions |
|
|
41,665 |
|
|
|
41,643 |
|
|
|
41,665 |
|
|
|
41,640 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share |
|
$ |
0.03 |
|
|
$ |
(0.03 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.02 |
) |
|
|
|
|
|
|
|
|
|
Diluted income (loss) per share |
|
$ |
0.03 |
|
|
$ |
(0.03 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.02 |
) |
|
|
|
|
|
|
|
|
|
(1) Denominator represents weighted average number of Common Shares and Class B Common Shares outstanding.
(2) Options to purchase 780,148 shares of Common Stock for the three months ended June 30, 2009 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 be antidilutive. Options to purchase 884,875 shares of Common Stock
for the six months ended June 30, 2009 were not included in the calculation of net loss per share as the effect would have
been antidilutive. Options to purchase 1,007,761 and 1,044,879 shares of Common Stock were outstanding for the three
and six months ended June 30, 2008 but were not included in the calculation of net loss per share as the effect would have
been antidilutive.
6. Inventories
Inventories are valued at the lower of cost (determined using the first-in, first-out
method) or market. The Company provides reserves for inventories estimated to be excess, obsolete
or unmarketable. The Companys estimation process for such reserves is based upon its known
backlog, projected future demand and expected market conditions. If 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.
-10-
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2009
(unaudited)
Inventories, net as of June 30, 2009, and December 31, 2008, were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009 |
|
December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
Raw materials |
|
$ |
22,436 |
|
|
|
$ |
23,275 |
|
Work-in-process |
|
|
3,326 |
|
|
|
|
3,152 |
|
Finished goods |
|
|
5,848 |
|
|
|
|
6,612 |
|
|
|
|
|
|
|
|
|
|
|
31,610 |
|
|
|
|
33,039 |
|
Inventory reserves |
|
|
(6,847) |
|
|
|
|
(6,358) |
|
|
|
|
|
|
|
|
|
Net balance |
|
$ |
24,763 |
|
|
|
$ |
26,681 |
|
|
|
|
|
|
|
|
7. Other Investments
The Companys gross investment in non-voting convertible preferred stock of Great Wall
Semiconductor Corporation (GWS) totaled $5,000,000 as of June 30, 2009, and December 31, 2008,
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, and the Company purchases certain components
from GWS. Purchases from GWS totaled approximately $491,000 and $970,000 for the six months
ended June 30, 2009, and 2008, respectively. During the first quarter of 2009, the Company
signed a memorandum of understanding with GWS to enter into an agreement which will expand the
Companys existing license to technology associated with certain GWS semiconductor devices,
provide technical assistance for the manufacture by the Company of such licensed devices, and
facilitate the execution of a contract between the Company, GWS and GWS current and future
foundries that will provide direct access to such foundries on terms equal to those enjoyed by
GWS. In addition, GWS agreed to develop, design, acquire tooling and manufacture several high
voltage devices for the Company. During the second quarter of 2009, the Company and GWS completed
the new license agreement and executed a contract with GWS current foundry. The new license
agreement calls for GWS to develop, design, acquire tooling and manufacture several additional
high voltage devices for the Company. The aggregate amount of milestone payments to GWS from the
Company under these arrangements will be $800,000. Payment is contingent on the meeting of
stipulated milestones per the license agreement. During the second quarter of 2009, the Company
made a payment of $400,000 under the license agreement. An additional payment of $100,000 under
the agreement was made in July 2009.
The Company accounts for its investment in GWS under the equity method of accounting, in
accordance with Accounting Principles Board Opinion No. 18, The Equity Method of Accounting for
Investments in Common Stock. The Company has considered the requirements of FASB Interpretation
No. 46 Revised, Consolidation of Variable Interest Entities, an Interpretation of Accounting
Research Bulletin No. 51 (FIN 46R) in accounting its investment in GWS, and determined that GWS
is a variable interest entity. However, the Company also concluded that it is not the primary
beneficiary. In the context of FIN 46R, the key factor in the Companys assessment was that the
CEO of GWS is the member of the related party group more closely related to the operations of
GWS. In addition, the Companys assessment took into consideration the absence of voting rights
for its preferred stock holdings, the lack of a representative on the GWS board of directors, no
significant decision making ability on the operations of GWS, and the absence of contractual
commitments of any kind to provide any future equity capital for GWS. 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 Condensed Consolidated
Balance Sheets related to the net GWS investment were zero as of June 30, 2009, and December 31,
2008.
-11-
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2009
(unaudited)
Loss from equity method investment, net of tax for the three and six months ended June 30 consists
of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of
losses from equity
method investment
(net of tax) |
|
$ |
|
|
|
$ |
145 |
|
|
$ |
|
|
|
$ |
174 |
|
Amortization of
intangible assets
and other (net of
tax) |
|
|
|
|
|
|
27 |
|
|
|
|
|
|
|
82 |
|
Other than
temporary decline
in investment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
706 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
172 |
|
|
$ |
|
|
|
$ |
962 |
|
|
|
|
|
|
|
|
|
|
8. Severance Charges
On January 14, 2009, management authorized and the Company announced a plan to reduce its
workforce by approximately eight percent by the end of January 2009. The workforce reduction was
completed and, accordingly, a pre-tax charge was recorded during the first quarter of 2009 of
approximately $3,098,000 for the cost of severance and other employee-related costs that will
involve cash payments during 2009 based on each employees respective length of service. During
the second quarter of 2009, the Company made additional reductions to its workforce. These
additional reductions were completed and, accordingly, a pre-tax charge was recorded during the
second quarter of 2009 of approximately $859,000 for the cost of severance and other
employee-related costs that will involve cash payments during 2009 based on each employees
respective length of service. These charges were recorded as Severance charges in the
Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2009.
The related liability is presented as Accrued severance charges in the Condensed Consolidated
Balance Sheet as of June 30, 2009.
A
summary of the activity related to the severance charges, by segment (see Note 13), is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BBU |
|
V*I Chip |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2008 |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Charges relating to first quarter of 2009 workforce reduction |
|
|
2,485 |
|
|
|
613 |
|
|
|
3,098 |
|
Charges relating to second quarter of 2009 workforce reduction |
|
|
859 |
|
|
|
- |
|
|
|
859 |
|
Payments |
|
|
(1,872 |
) |
|
|
(275 |
) |
|
|
(2,147 |
) |
|
|
|
|
|
|
|
Balance as of June 30, 2009 |
|
$ |
1,472 |
|
|
$ |
338 |
|
|
$ |
1,810 |
|
|
|
|
|
|
|
|
9. Product Warranties
The Company generally offers a two-year warranty for all of its products. The Company
provides for the estimated cost of product warranties at the time product revenue is recognized.
Factors that affect the Companys warranty reserves include the number of units sold, historical
and anticipated rates of warranty returns, and the cost per return. The Company periodically
assesses the adequacy of the warranty reserves and adjusts the amounts as necessary. Warranty
obligations are included in accrued expenses in the accompanying condensed consolidated balance
sheets.
-12-
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2009
(unaudited)
Product warranty activity for the three and six months ended June 30, 2009 and 2008 was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the beginning of the period |
|
$ |
904 |
|
|
$ |
693 |
|
|
$ |
896 |
|
|
$ |
679 |
|
Accruals for warranties for products
sold in the period |
|
|
72 |
|
|
|
209 |
|
|
|
103 |
|
|
|
269 |
|
Fulfillment of warranty obligations |
|
|
(40 |
) |
|
|
(19 |
) |
|
|
(82 |
) |
|
|
(71 |
) |
Revisions of estimated obligations |
|
|
(37 |
) |
|
|
(77 |
) |
|
|
(18 |
) |
|
|
(71 |
) |
|
|
|
|
|
|
|
|
|
Balance at the end of the period |
|
$ |
899 |
|
|
$ |
806 |
|
|
$ |
899 |
|
|
$ |
806 |
|
|
|
|
|
|
|
|
|
|
The tax provision in 2009 provides 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 minority-owned subsidiaries that are not
part of the Companys consolidated income tax returns. The 2009 tax provision also includes
discrete items, including a benefit for the receipt of a refund for a net operating loss
carryback claim and expense for certain state assessments, each of which involved a
minority-owned subsidiary, and for increases in accrued interest for potential liabilities. In
2008, the tax provision was based on the estimated annual effective tax rate for 2008, which
includes estimated federal, state and foreign income taxes on the Companys projected annual
pre-tax income and estimated federal and state income taxes for certain minority-owned
subsidiaries that are not part of the Companys consolidated income tax returns, offset by the
expected utilization of federal and foreign net operating loss carryforwards. The 2008 tax
provision also includes discrete items, principally for increases in accrued interest for
potential liabilities and expense associated with a reduction in state income tax refunds
receivable.
The Company recorded income tax expense for the three and six months ended June 30, 2009
based on a discrete-period computation because it believed a reliable estimate of its effective
annual tax rate could not be made at this time. This is due to the difficulty in accurately
forecasting the expected ordinary income (loss) for the year and that small variations in any
forecast would cause wide variability in the estimated tax rate.
The provision for income taxes and the effective income tax rate for the three and six months ended June 30, 2009, and 2008
were as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30 |
|
June 30 |
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
$ |
544 |
|
|
$ |
350 |
|
|
$ |
972 |
|
|
$ |
592 |
|
Effective income tax rate |
|
|
23.6% |
|
|
|
(118.6% |
) |
|
|
167.9% |
|
|
|
32.9% |
|
The lower effective income tax rate for the three months ended June 30, 2009 compared to the
same period in 2008 is principally due to higher income (loss) before income taxes than in 2008.
The higher effective income tax rate for the six months ended June 30, 2009, compared to the same
period in 2008 is principally due to the lower income (loss) before income taxes than in 2008.
-13-
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2009
(unaudited)
11. |
|
Comprehensive Income (Loss) |
The following table sets forth the computation of comprehensive income loss for the three and six months ended June 30
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income (loss) attributable
to Vicor Corporation |
|
$ |
1,341 |
|
|
$ |
(1,323 |
) |
|
$ |
(1,202 |
) |
|
$ |
(703 |
) |
Foreign
currency translation gains (losses) |
|
|
50 |
|
|
|
(109 |
) |
|
|
(95 |
) |
|
|
74 |
|
Unrealized (losses) gains (net of tax) on
available-for-sale securities |
|
|
1,342 |
|
|
|
(250 |
) |
|
|
1,176 |
|
|
|
(2,250 |
) |
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
|
$ |
2,733 |
|
|
$ |
(1,682 |
) |
|
$ |
(121 |
) |
|
$ |
(2,879 |
) |
Less: comprehensive income (loss)
attributable to noncontrolling interest |
|
|
(2 |
) |
|
|
- |
|
|
|
4 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to
Vicor Corporation |
|
$ |
2,735 |
|
|
$ |
(1,682 |
) |
|
$ |
(125 |
) |
|
$ |
(2,879 |
) |
|
|
|
|
|
|
|
|
|
The Company performed a valuation of its Failed Auction Securities (see Note 3) and recorded
an increase (decrease) in the aggregate value of these investments of $1,172,000 and $(2,250,000)
for the six months ended June 30, 2009 and 2008, respectively.
12. |
|
Commitments and Contingencies |
At June 30, 2009, the Company had approximately $1,082,000 of capital expenditure
commitments.
As disclosed in prior filings, the Company 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 the Company had accrued for our
litigation counsel, was included in the second quarter of 2007 in (Gain) loss from litigation
related settlements, net in the Condensed Consolidated Statement of Operations. The Company was
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 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
-14-
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2009
(unaudited)
of Massachusetts 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.
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
settlements, net in the Condensed 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. The Company expects the remaining
amount accrued in the second quarter of 2007 will be sufficient to cover the required payments
under this final ruling.
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. The V*I Chip segment consists of V*I Chip
Corporation, a wholly-owned subsidiary which designs, develops, manufactures and markets the
Companys Factorized Power Architecture products. The Picor segment consists of Picor
Corporation, a majority-owned subsidiary of the Company, which 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 the Companys
products or to third parties for separate applications.
-15-
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2009
(unaudited)
The following table provides significant segment financial data as of and for the three months ended June 30, 2009 and
2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BBU |
|
V*I Chip |
|
Picor |
|
Corporate |
|
Eliminations |
|
Total |
2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
47,622 |
|
|
$ |
3,711 |
|
|
$ |
1,614 |
|
|
$ |
- |
|
|
$ |
(2,320 |
) |
|
$ |
50,627 |
|
Income (loss) from operations |
|
|
8,379 |
|
|
|
(5,470 |
) |
|
|
(1,075 |
) |
|
|
(171 |
) |
|
|
446 |
|
|
|
2,109 |
|
Total assets |
|
|
191,939 |
|
|
|
14,330 |
|
|
|
9,244 |
|
|
|
94,012 |
|
|
|
(134,939 |
) |
|
|
174,586 |
|
Depreciation and amortization |
|
|
1,391 |
|
|
|
728 |
|
|
|
96 |
|
|
|
394 |
|
|
|
- |
|
|
|
2,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
45,963 |
|
|
$ |
3,195 |
|
|
$ |
1,192 |
|
|
$ |
- |
|
|
$ |
(1,053 |
) |
|
$ |
49,297 |
|
Income (loss) from operations |
|
|
6,220 |
|
|
|
(6,614 |
) |
|
|
(542 |
) |
|
|
39 |
|
|
|
132 |
|
|
|
(765 |
) |
Total assets |
|
|
161,878 |
|
|
|
16,084 |
|
|
|
7,757 |
|
|
|
102,813 |
|
|
|
(103,913 |
) |
|
|
184,619 |
|
Depreciation and amortization |
|
|
1,469 |
|
|
|
674 |
|
|
|
94 |
|
|
|
388 |
|
|
|
- |
|
|
|
2,625 |
|
The following table provides significant segment financial data as of and for the six months ended June 30, 2009 and
2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BBU |
|
V*I Chip |
|
Picor |
|
Corporate |
|
Eliminations |
|
Total |
2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
96,382 |
|
|
$ |
6,962 |
|
|
$ |
2,899 |
|
|
$ |
- |
|
|
$ |
(5,168 |
) |
|
$ |
101,075 |
|
Income (loss) from operations |
|
|
13,833 |
|
|
|
(11,873 |
) |
|
|
(2,299 |
) |
|
|
(339 |
) |
|
|
946 |
|
|
|
268 |
|
Total assets |
|
|
191,939 |
|
|
|
14,330 |
|
|
|
9,244 |
|
|
|
93,664 |
|
|
|
(134,591 |
) |
|
|
174,586 |
|
Depreciation and amortization |
|
|
2,808 |
|
|
|
1,463 |
|
|
|
188 |
|
|
|
775 |
|
|
|
- |
|
|
|
5,234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
94,975 |
|
|
$ |
7,508 |
|
|
$ |
2,335 |
|
|
$ |
- |
|
|
$ |
(2,052 |
) |
|
$ |
102,766 |
|
Income (loss) from operations |
|
|
13,797 |
|
|
|
(12,757 |
) |
|
|
(1,223 |
) |
|
|
(109 |
) |
|
|
424 |
|
|
|
132 |
|
Total assets |
|
|
161,878 |
|
|
|
16,084 |
|
|
|
7,757 |
|
|
|
102,813 |
|
|
|
(103,913 |
) |
|
|
184,619 |
|
Depreciation and amortization |
|
|
3,010 |
|
|
|
1,249 |
|
|
|
191 |
|
|
|
761 |
|
|
|
- |
|
|
|
5,211 |
|
The elimination for net revenues is principally related to inter-segment revenues of Picor
from BBU and V*I Chip and for inter-segment revenues of V*I Chip from 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.
14. |
|
Impact of Recently Issued Accounting Standards |
In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R)
(SFAS 167). SFAS 167 amends certain requirements of FASB Interpretation No. 46 (revised
December 2003), Consolidation of Variable Interest Entities, by replacing 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. SFAS 167 also identifies
additional reconsideration events for determining whether an entity is a variable interest entity
and requires an ongoing assessment of whether an enterprise is the primary beneficiary of a
variable interest entity. SFAS 167 shall be effective as of the beginning of each reporting
entitys first
-16-
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 2009
(unaudited)
annual reporting period that begins after November 15, 2009, for interim periods within that
first annual reporting period, and for interim and annual reporting periods thereafter. The
Company has not determined the impact, if any, SFAS 167 will have on the Companys financial
position or results from operations.
In April 2009, the FASB issued FSP FAS 107-1 and 28-1, Interim Disclosures about Fair Value
of Financial Instruments (FSP FAS 107-1 and 28-1), to require disclosures about fair value of
financial instruments for interim reporting periods of publicly traded companies as well as in
annual financial statements. FSP FAS 107-1 and 28-1 also amends APB Opinion No. 28, Interim
Financial Reporting, to require those disclosures in summarized financial information at interim
reporting periods. FSP FAS 107-1 and 28-1 were effective for interim reporting periods ending
after June 15, 2009. The adoption of FSP FAS 107-1 and 28-1 as of June 30, 2009 did not have a
material effect on the Companys financial position or results of operations.
In April 2009, the FASB issued FSP FAS 157-4, Determining Fair Value when the Volume and
Level of Activity for the Asset or Liability have Significantly Decreased and Identifying
Transactions that are not Orderly (FSP FAS 157-4), which provides additional guidance for
estimating fair value in accordance with SFAS No. 157, Fair Value Measurements, when the volume
and level of activity for the asset or liability have significantly decreased. FSP FAS 157-4 also
includes guidance on identifying circumstances that indicate a transaction is not orderly. FSP
FAS 157-4 was to be prospectively applied effective for interim and annual reporting periods
ending after June 15, 2009. The adoption of FSP FAS 157-4 as of June 30, 2009 did not have a
material effect on the Companys financial position or results of operations.
In April 2009, the FASB issued FSP FAS 115-2 and 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments (FSP FAS 115-2), which amends the other-than-temporary
impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to
improve the presentation and disclosure of other-than-temporary impairments on debt and equity
securities in the financial statements. FSP FAS 115-2 does not amend existing recognition and
measurement guidance related to other-than-temporary impairments of equity securities. FSP FAS
115-2 was effective for interim reporting periods ending after June 15, 2009. The adoption of
FSP FAS 115-2 resulted in an other-than-temporary impairment due to a credit loss of $473,000
recorded in the statement of operations for the quarter ended June 30, 2009.
In July 2009, the Company entered into a release and settlement agreement with a vendor over
alleged product performance issues with certain of the vendors products. The Company received a
payment of $750,000 in consideration for the settlement.
-17-
VICOR CORPORATION
Managements Discussion and Analysis of
Financial Condition and Results of Operation
June 30, 2009
Item 2 Managements Discussion and Analysis of Financial Condition and Results of
Operations
Except for historical information contained herein, some matters discussed in this report
constitute forward-looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words
believes, expects, anticipates, intend, estimate, plans, assumes, may, will,
would, should, continue, prospective, project, and other similar expressions identify
forward-looking statements. Forward-looking statements also include statements regarding the
derivation of a portion of the Companys sales in each quarter from orders booked in the same
quarter, the Companys plans to invest in research and development and manufacturing equipment, the
Companys belief regarding market risk being mitigated because of limited foreign exchange
fluctuation exposure, the Companys continued success depending in part on its ability to attract
and retain qualified personnel, the Companys belief that cash generated from operations and the
total of its cash and cash equivalents and short-term investments will be sufficient for the
foreseeable future, the Companys intention regarding protecting its rights under its patents and
the Companys 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 the Companys
current expectations and estimates as to the prospective events and circumstances which may or may
not be within the Companys control and as to which there can be no assurance. Actual results could
differ materially from those projected in the forward-looking statements as a result of various
factors, including our ability to develop and market new products and technologies cost
effectively, to leverage design wins into increased product sales, to continue to make progress
with key customers and prospects, to decrease manufacturing costs, to enter into licensing
agreements that amplify the market opportunity and accelerate market penetration, to realize
significant royalties under license agreements, to achieve a sustainable increased bookings rate
over a longer period, to hire key personnel and to continue to build our three business units, to
successfully enforce our intellectual property rights, to successfully defend outstanding
litigation, to successfully leverage the V*I Chips in standard products to promote market
acceptance of Factorized Power Architecture, to develop or maintain an effective system of internal
controls, to obtain required financial information for certain investments on a timely basis, and
factors impacting the Companys various end markets, the impact of write-downs in the value of
assets, the effects of equity accounting with respect to certain affiliates, the failure of auction
rate securities to sell at their reset dates as well as those factors described in the risk
factors set forth in the Companys Annual Report on Form 10-K for the year ended December 31, 2008,
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 risk factors contained in this report may not
be exhaustive. Therefore, the information contained in this report should be read together with
other reports and documents that the Company files with the Securities and Exchange Commission from
time to time, including Forms 10-Q, 8-K and 10-K, which may supplement, modify, supersede or update
those risk factors. The Company does not undertake any obligation to update any forward-looking
statements as a result of future events or developments.
Overview
Vicor Corporation designs, develops, manufactures and markets modular power components and
complete power systems based upon a portfolio of patented technologies. The Company sells its
products primarily to customers in the higher-performance, higher-power segments of the power
systems market, including telecommunications and networking infrastructure, enterprise and high
performance computing, industrial automation, vehicles and transportation, and defense electronics,
through a network of independent sales representative organizations in North and South America and,
internationally, through independent distributors. Export sales as a percentage of total revenues
for the six months ended June 30 were approximately 38% in 2009 and 43% in 2008, respectively.
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 includes the operations of the Companys Westcor
division, Vicor Customer Power and Vicor Japan Company, Ltd. (VJCL). The V*I Chip segment
consists of V*I Chip Corporation, a wholly owned subsidiary which designs, develops, manufactures
and markets the Companys Factorized Power Architecture (FPA) products. The Picor segment
consists of Picor Corporation, a majority-owned subsidiary of Vicor, which 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.
-18-
VICOR CORPORATION
Managements Discussion and Analysis of
Financial Condition and Results of Operation
June 30, 2009
Revenues for the second quarter increased by 2.7% to $50,627,000, compared to $49,297,000 for
the corresponding period a year ago, and increased 0.4% on a sequential basis from $50,448,000 for
the first quarter of 2009. Gross margin increased to $22,598,000 for the second quarter of 2009,
compared to $21,113,000 for the corresponding period a year ago, and increased on a sequential
basis from $21,831,000 for the first quarter of 2009. Gross margin, as a percentage of revenue,
increased to 44.6% for the second quarter of 2009 compared to 42.8% for the second quarter of 2008,
and increased on a sequential basis from 43.3% for the first quarter of 2009. Net income (loss)
attributable to Vicor Corporation for the second quarter was $1,341,000, or $0.03 per diluted
share, compared to net income (loss) attributable to Vicor Corporation of $(1,323,000), or $(0.03)
per diluted share, for the corresponding period a year ago and net loss attributable to Vicor
Corporation of $(2,543,000), or $(0.06) per diluted share, for the first quarter of 2009.
Revenues for the six months ended June 30, 2009 decreased by 1.6% to $101,075,000, compared to
$102,766,000 for the corresponding period a year ago. Net loss attributable to Vicor Corporation
for the six months ended June 30, 2009 was $1,202,000, or $(0.03) per diluted share, compared to
net loss attributable to Vicor Corporation of $703,000, or $(0.02) per diluted share, for the
corresponding period a year ago. The net loss for the six month period was primarily due to an
aggregate pre-tax charge of $3,957,000 for the cost of severance and other employee-related costs
in connection with the Companys workforce reductions implemented in the first and second quarters
of 2009.
The book-to-bill ratio, calculated by the dollar amount of orders placed with scheduled
delivery dates within one year divided by the net revenues in the respective period, was 0.79:1 for
the second quarter of 2009, compared to 0.99:1 for the first quarter of 2009. Backlog,
representing the total of purchase orders received for which product has not yet been shipped, was
$41,515,000 at the end of the second quarter of 2009, as compared to $52,068,000 at the end of the
first quarter of 2009.
Operating expenses for the three months ended June 30, 2009 decreased $1,389,000, or 6.3%, to
$20,489,000 from $21,878,000 in 2008, principally due to decreases in selling, general and
administrative expenses of $1,956,000 and research and development expenses of $469,000, offset by
a pre-tax severance charge of $859,000 in connection with a workforce reduction completed in the
second quarter of 2009. The key decreases in selling, general and administrative expenses were
compensation expenses of $872,000, legal fees of $206,000, travel expenses of $198,000 and audit
and tax fees of $158,000.
Operating expenses for the six months ended June 30, 2009 increased $720,000, or 1.7%, to
$44,161,000 from $43,441,000 in 2008, principally due to an aggregate pre-tax severance charge of
$3,957,000 in connection with workforce reductions completed in the first and second quarters of
2009, offset by a decreases in selling, general and administrative expenses of $3,185,000 and
research and development expenses of $229,000. The key decreases in selling, general and
administrative expenses were compensation expenses of $1,054,000, legal fees of $853,000, and audit
and tax fees of $610,000.
Other income (expense), net for the three months ended June 30, 2009 decreased $277,000 to
$193,000 from $470,000 in 2008. The primary reasons for the decrease were a decrease in interest
income of $304,000.
Other income (expense), net for the six months ended June 30, 2009 decreased $1,359,000 to
$311,000 from $1,670,000 in 2008. The primary reasons for the decrease were a decrease in interest
income of $978,000 and a decrease in foreign currency gains of $205,000.
For the six months ended June 30, 2009, depreciation and amortization was $5,234,000, and
capital additions were $2,749,000, compared to $5,211,000 and $4,169,000, respectively, for the
first six months of 2008.
Inventories decreased by approximately $1,918,000 or 7.2% to $24,763,000 as compared with
$26,681,000 at December 31, 2008. The decrease was primarily attributed to a decrease in BBU
inventories of approximately $1,726,000 and a decrease in V*I Chip inventories of $436,000, offset
by an increase in Picors inventories of $244,000.
-19-
VICOR CORPORATION
Managements Discussion and Analysis of
Financial Condition and Results of Operation
June 30, 2009
Critical Accounting Policies and Estimates
Please refer to the Companys Annual Report on Form 10-K for the year ended December 31, 2008,
for a complete summary of the critical accounting policies and estimates.
Three months ended June 30, 2009 compared to three months ended June 30, 2008
Net revenues for the second quarter of 2009 were $50,627,000, an increase of $1,330,000 or
2.7%, as compared to $49,297,000 for the same period a year ago, and an increase of 0.4% on a
sequential basis from the first quarter of 2009.
The components of revenue were as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
June 30, |
|
|
Increase (decrease) |
|
|
|
2009 |
|
|
2008 |
|
|
$ |
|
|
% |
|
|
BBU |
|
$ |
47,621 |
|
|
$ |
45,963 |
|
|
$ |
1,658 |
|
|
|
3.6% |
|
V*I Chip |
|
|
2,431 |
|
|
|
3,129 |
|
|
|
(698 |
) |
|
|
(22.3)% |
|
Picor |
|
|
575 |
|
|
|
205 |
|
|
|
370 |
|
|
|
180.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
50,627 |
|
|
$ |
49,297 |
|
|
$ |
1,330 |
|
|
|
2.7% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book-to-Bill Ratio |
|
|
0.79:1 |
|
|
|
1.01:1 |
|
|
|
|
|
|
|
|
|
Orders during the quarter decreased by 20.0% compared with the first quarter of 2009. This
decrease was caused by a decrease in BBU orders of 20.8% and a decrease in V*I Chip orders during
the period of 9.8%. The quarterly book-to-bill ratio has been volatile and management believes
that the ratio is not always an accurate indicator of the amount or timing of future revenue.
However, given the magnitude of the ratios decline for the second quarter, and our backlog at June
30, 2009, management anticipates the Company will experience a sequential decline in revenue for
the third quarter of 2009.
Gross margin for the second quarter of 2009 increased $1,485,000, or 7.0%, to $22,598,000 from
$21,113,000 in the second quarter of 2008, and increased to 44.6% from 42.8% as a percentage of net
revenues. The primary component of the increase in gross margin dollars and percentage were the
increase in net revenues, a more favorable product mix, principally due to increased shipments of
higher gross margin brick and Vicor Custom Power products and a decrease in shipments of lower
gross margin V*I Chip products, along with lower brick production costs.
Selling, general and administrative expenses were $12,019,000 for the period, a decrease of
$1,956,000, or 14.0%, as compared to $13,975,000 for the same period in 2008. Selling, general and
administrative expenses as a percentage of net revenues, decreased to 23.7% from 28.3% for the same
period in 2008.
-20-
VICOR CORPORATION
Managements Discussion and Analysis of
Financial Condition and Results of Operation
June 30, 2009
The components of the $1,956,000 decrease were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) |
|
|
|
|
|
|
|
|
|
Compensation |
|
$ |
(872 |
) |
|
|
(14.1)% |
(1) |
Legal fees |
|
|
(206 |
) |
|
|
(41.8)% |
(2) |
Travel expenses |
|
|
(198 |
) |
|
|
(31.2)% |
(3) |
Commissions expense |
|
|
(185 |
) |
|
|
(15.2)% |
(4) |
Audit and tax fees |
|
|
(158 |
) |
|
|
(29.8)% |
(5) |
Advertising expenses |
|
|
(156 |
) |
|
|
(21.5)% |
(6) |
Training expenses |
|
|
(143 |
) |
|
|
(33.4)% |
|
International office expenses |
|
|
(85 |
) |
|
|
(57.8)% |
|
Vicor Japan expenses |
|
|
(76 |
) |
|
|
(7.9)% |
|
Vicor Custom Power related expenses |
|
|
179 |
|
|
|
17.6% |
(7) |
Other, net |
|
|
(56 |
) |
|
|
(3.5)% |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(1,956 |
) |
|
|
(14.0)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Decrease primarily attributable to the workforce reductions completed in the first and second quarters of
2009. |
|
(2) |
|
Decrease primarily attributed to a decrease in activity associated with the Companys lawsuit brought against
certain of its insurance carriers with respect to the Ericsson, Inc. settlement of product liability
litigation in the second quarter of 2009 compared to 2008. |
|
(3) |
|
Represents an overall reduction in travel across all business units and functional groups. |
|
(4) |
|
Decrease primarily attributed to the changes in the mix of revenues subject to commissions. |
|
(5) |
|
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. |
|
(6) |
|
Decrease is primarily attributed to decreased advertising in trade publications. |
|
(7) |
|
Increase primarily attributed to $132,000 in increased commissions expense due to increased revenues at Vicor
Custom Power subsidiaries. |
Research and development expenses were $7,611,000 for the period, a decrease of $469,000, or
5.8%, as compared to $8,080,000 for the same period in 2008. As a percentage of net revenues,
research and development decreased to 15.0% from 16.4%.
-21-
VICOR CORPORATION
Managements Discussion and Analysis of
Financial Condition and Results of Operation
June 30, 2009
The components of the $469,000 decrease were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) |
|
Vicor Custom Power related expenses |
|
$ |
218 |
|
|
|
37.0% |
(1) |
Picor non-recurring engineering charges |
|
|
159 |
|
|
|
(83.4)% |
(2) |
Facility expenses |
|
|
58 |
|
|
|
15.8% |
|
Project materials |
|
|
(247 |
) |
|
|
(23.4)% |
(3) |
Compensation |
|
|
(299 |
) |
|
|
(5.5)% |
(4) |
Deferred costs |
|
|
(339 |
) |
|
|
100.0% |
(5) |
Other, net |
|
|
(19 |
) |
|
|
(2.2)% |
|
|
|
|
|
|
|
|
|
|
$ |
(469 |
) |
|
|
5.8% |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Increase primarily attributed to increased outside services of $128,000 and an increase in compensation expense of
$94,000. |
|
(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 attributed to a decrease in project materials associated with V*I Chip products. |
|
(4) |
|
Decrease primarily attributed to the workforce reductions that were completed in the first and second
quarters of 2009. |
|
(5) |
|
Decrease primarily attributed to an increase in deferred costs associated with certain non-recurring
engineering projects for which the related revenues have been deferred. |
During the second quarter of 2009, senior management authorized additional reductions in its
workforce. The Company completed the workforce reduction in the second quarter of 2009 and
recorded a pre-tax charge for severance and other employee-related costs of $859,000 in the second
quarter of 2009.
The major changes in the components of the other income (expense), net were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase |
|
|
2009 |
|
2008 |
|
(decrease) |
Interest income |
|
$ |
216 |
|
|
$ |
520 |
|
|
$ |
(304 |
) |
Foreign currency gains (losses) |
|
|
63 |
|
|
|
(59 |
) |
|
|
122 |
|
Unrealized loss on auction rate securities
rights |
|
|
(145 |
) |
|
|
- |
|
|
|
(145 |
) |
Unrealized gain on trading securities |
|
|
494 |
|
|
|
- |
|
|
|
494 |
|
Credit loss on available for sale securities |
|
|
(473 |
) |
|
|
- |
|
|
|
(473 |
) |
Other |
|
|
38 |
|
|
|
9 |
|
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
193 |
|
|
$ |
470 |
|
|
$ |
(277 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
The decrease in interest income is due to lower average balances on the Companys cash
equivalents and short and long-term investments as well as a decrease in interest rates. The
increase in foreign currency gains is due to favorable exchange rates in the second quarter of 2009
as compared to 2008. The Companys exposure to market risk for fluctuations in foreign currency
exchange
-22-
VICOR CORPORATION
Managements Discussion and Analysis of
Financial Condition and Results of Operation
June 30, 2009
rates relates primarily to the operations of VJCL. The functional currency of the Companys
subsidiaries in Europe and Hong Kong is the U.S. dollar. The unrealized gains (losses) and credit
loss on the Companys auction rate securities and securities rights results from the change in fair
value of these investments during the period.
Income (loss) before income taxes was $2,302,000 for the second quarter of 2009 compared to
$(295,000) for the same period in 2008.
The provision for income taxes and the effective income tax rate
for the three months ended June 30, 2009 and 2008 were as
follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
Provision for income taxes |
|
$ |
544 |
|
|
$ |
350 |
|
Effective income tax rate |
|
|
23.6% |
|
|
|
(118.6%) |
|
The lower effective income tax rate for the three months ended June 30, 2009 compared to the
same period in 2008 is principally due to the higher income (loss) before income taxes than in
2008.
Loss from equity method investment (net of tax) decreased from $172,000 in the second quarter
of 2008 to $0 in 2009. This was due to the allocation of equity method losses in the second quarter
of 2008 and bringing the investment balance in GWS to zero as of December 31, 2008.
Net income of noncontrolling interest decreased $89,000 to $417,000 in the second quarter of
2009 from $506,000 for the same period in 2008. This was due to lower net income at certain
entities in which the Company holds a noncontrolling interest.
Basic and diluted income (loss) per share attributable to Vicor Corporation was $0.03 for the
second quarter of 2009 compared to $(0.03) for the second quarter of 2008.
Six months ended June 30, 2009 compared to six months ended June 30, 2008
Net revenues for the six months of 2009 were $101,075,000, a decrease of $1,691,000 or 1.6%,
as compared to $102,766,000 for the same period a year ago.
The components of revenue were as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
Increase (decrease) |
|
|
|
2009 |
|
|
2008 |
|
|
$ |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BBU |
|
$ |
96,382 |
|
|
$ |
94,973 |
|
|
$ |
1,409 |
|
|
|
1.5% |
|
V*I Chip |
|
|
3,707 |
|
|
|
7,407 |
|
|
|
(3,700 |
) |
|
|
(50.0)% |
|
Picor |
|
|
986 |
|
|
|
386 |
|
|
|
600 |
|
|
|
155.4% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
101,075 |
|
|
$ |
102,766 |
|
|
$ |
(1,691 |
) |
|
|
-1.6% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book-to-Bill Ratio |
|
|
0.89:1 |
|
|
|
1.00:1 |
|
|
|
|
|
|
|
|
|
-23-
VICOR CORPORATION
Managements Discussion and Analysis of
Financial Condition and Results of Operation
June 30, 2009
Orders during the period decreased by 17.3% compared with the second half of 2008. This
decrease was caused by a decrease in BBU orders during the period of 20.3%, offset by an increase
in V*I Chip orders of 35.7%. The book-to-bill ratio for the first six months of 2009 was 0.89:1
as compared to 1.00:1 for the same period a year ago, and 1.06:1 for the second half of 2008.
Gross margin for the first six months of 2009 increased $856,000, or 2.0%, to $44,429,000 from
$43,573,000 and increased to 44.0% from 42.4% as a percentage of net revenues compared to the same
period a year ago. The primary component of the increase in gross margin dollars and percentage was
due to 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.
Selling, general and administrative expenses were $24,842,000 for the period, a decrease of
$3,185,000, or 11.4%, as compared to $28,027,000 for the same period in 2008. As a percentage of
net revenues, selling, general and administrative expenses decreased to 24.6% from 27.3%.
The components of the $3,185,000 decrease were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) |
Compensation |
|
$ |
(1,054 |
) |
|
|
(8.7)% |
(1) |
Legal fees |
|
|
(853 |
) |
|
|
(58.6)% |
(2) |
Audit and tax fees |
|
|
(610 |
) |
|
|
(45.1)% |
(3) |
Travel expenses |
|
|
(376 |
) |
|
|
(33.0)% |
(4) |
Advertising expenses |
|
|
(290 |
) |
|
|
(21.1)% |
(5) |
Commissions expense |
|
|
(245 |
) |
|
|
(10.6)% |
(6) |
Training expenses |
|
|
(192 |
) |
|
|
(24.6)% |
|
International office expenses |
|
|
(76 |
) |
|
|
(38.1)% |
|
Vicor Custom Power related expenses |
|
|
612 |
|
|
|
29.6% |
(7) |
Other, net |
|
|
(101 |
) |
|
|
(2.0)% |
|
|
|
|
|
|
|
|
|
|
|
(3,185 |
) |
|
|
(11.4)% |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Decrease primarily attributable to the workforce reductions completed in the first and second quarters of
2009. |
|
(2) |
|
Decrease primarily attributed to a decrease in activity associated with the Companys lawsuit brought against
certain of its insurance carriers with respect to the Ericsson, Inc. settlement of product liability
litigation in the first two quarters of 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) |
|
Represents an overall reduction in travel across all business units and functional groups. |
|
(5) |
|
Decrease primarily attributed to decreased advertising in trade publications. |
|
(6) |
|
Decrease primarily attributed to lower revenues and the changes in the mix of revenues subject to commissions. |
|
(7) |
|
Increase primarily attributed to $600,000 in increased commissions expense due to increased revenues at Vicor
Custom Power subsidiaries. |
Research and development expenses decreased $229,000, or 1.5%, to $15,362,000 from
$15,591,000. As a percentage of net revenues, research and development remained flat at 15.2%.
-24-
VICOR CORPORATION
Managements Discussion and Analysis of
Financial Condition and Results of Operation
June 30, 2009
The components of the $229,000 decrease were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) |
|
Deferred costs |
|
$ |
(576 |
) |
|
|
100.0% |
(1) |
Project materials |
|
|
(324 |
) |
|
|
(17.8)% |
(2) |
Compensation |
|
|
(72 |
) |
|
|
(0.7)% |
|
Travel Expenses |
|
|
(52 |
) |
|
|
(35.6)% |
|
Vicor Custom Power related expenses |
|
|
421 |
|
|
|
37.6% |
(3) |
Picor non-recurring engineering charges |
|
|
365 |
|
|
|
87.4% |
(4) |
Facilities expenses |
|
|
128 |
|
|
|
17.1% |
|
Other, net |
|
|
(119 |
) |
|
|
(7.2)% |
|
|
|
|
|
|
$ |
(229 |
) |
|
|
(1.5)% |
|
|
|
|
|
|
|
|
|
(1) |
|
Decrease primarily attributed to an increase in deferred costs capitalized for certain non-recurring
engineering projects for which the related revenues have been deferrred. |
|
|
(2) |
|
Decrease primarily attributed to a decrease in project materials associated with V*I Chip products. |
|
|
(3) |
|
Increase primarily attributed to increases in compensation expense of $163,000, outside services of
$146,000 and sub-contract labor of $44,000. |
|
|
(4) |
|
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. |
On January 14, 2009, senior management authorized and the Company announced a plan to reduce
its workforce by approximately eight percent by the end of January 2009. Senior management
authorized additional reductions to its workforce in the second quarter of 2009. The Company
completed these reductions in workforce and recorded pre-tax charges for severance and other
employee-related costs of $3,957,000 for the six months ended June 30, 2009.
The major changes in the components of the other income (expense), net for the six months ended June 30 were as follows
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase |
|
|
2009 |
|
2008 |
|
(decrease) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
$ |
446 |
|
|
$ |
1,424 |
|
|
$ |
(978 |
) |
Foreign currency (losses) gains |
|
|
(2 |
) |
|
|
203 |
|
|
|
(205 |
) |
Unrealized loss on auction rate securities
rights |
|
|
(145 |
) |
|
|
- |
|
|
|
(145 |
) |
Unrealized gain on trading securities |
|
|
425 |
|
|
|
- |
|
|
|
425 |
|
Credit losses on available for sale securities |
|
|
(473 |
) |
|
|
- |
|
|
|
(473 |
) |
Other |
|
|
60 |
|
|
|
43 |
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
$ |
311 |
|
|
$ |
1,670 |
|
|
$ |
(1,359 |
) |
|
|
|
|
|
|
|
The decrease in interest income is due to lower average balances on the Companys cash
equivalents and short and long-term investments as well as a decrease in interest rates. The
increase in foreign currency losses is due to unfavorable exchange rates in 2009 as compared to
2008. The Companys exposure to market risk for fluctuations in foreign currency exchange rates
relates primarily to the operations of VJCL. The functional currency of the Companys subsidiaries
in Europe and Hong Kong is the U.S. dollar. The
-25-
VICOR CORPORATION
Managements Discussion and Analysis of
Financial Condition and Results of Operation
June 30, 2009
unrealized gains (losses) and credit loss on the Companys auction rate securities and securities
rights results from the change in fair value of these investments during the period.
Income (loss) before income taxes was $579,000 for the first six months of 2009 compared to
$1,802,000 for the same period in 2008.
The provision for income taxes and the effective income tax
rate for the six months ended June 30, 2009 and 2008 were as
follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
June 30, |
|
|
2009 |
|
2008 |
Provision for income taxes |
|
$ |
972 |
|
|
$ |
592 |
|
Effective income tax rate |
|
|
167.9% |
|
|
|
32.9% |
|
The higher effective income tax rate for the six months ended June 30, 2009 compared to the
same period in 2008 is principally due to the lower income (loss) before income taxes than in 2008.
Loss from equity method investment (net of tax) decreased $962,000 to $0. This was
principally due to the equity method investment in GWS being adjusted for a decline in value judged
to be other than temporary of $706,000 in the first quarter of 2008, the allocation of equity
method losses for the first half of 2008, and bringing the investment balance in GWS to zero as of
December 31, 2008.
Net income of noncontrolling interest decreased $142,000 to $809,000 in the first six months
of 2009 from $951,000 for the same period in 2008. This was due to lower net income at certain
entities in which the Company holds a noncontrolling interest.
Basic and diluted income (loss) per share attributable to Vicor Corporation was $(0.03) for
the first six months of 2009 compared to $(0.02) for the first six months of 2008.
Liquidity and Capital Resources
Due to the current economic environment, the Company has assessed its overall liquidity
position and has taken substantive steps to preserve cash and reduce expenses. In the first quarter
of 2009, the Company announced an indefinite suspension of its dividend and reduced its workforce
by approximately eight percent. Additional workforce reductions were implemented in the second
quarter of 2009.
At June 30, 2009, the Company had $30,429,000 in unrestricted cash and cash equivalents. The
ratio of current assets to current liabilities was 4.4:1 at June 30, 2009, compared to 4.7:1 at
December 31, 2008. Working capital increased $998,000 to $66,295,000 at June 30, 2009 from
$65,297,000 at December 31, 2008. The primary factors affecting the working capital increase were
increases in cash and cash equivalents of $7,790,000, other current assets of $840,000, and a
decrease in income taxes payable of $1,281,000, offset by increases in accrued severance charge of
$1,810,000, deferred revenue of $650,000, accounts payable of $550,000 , as well as decreases in
accounts receivable of $2,772,000, inventories of $1,918,000, and short term investments of
$928,000. The primary source of cash for the six months ended June 30, 2009, was $10,598,000 from
operating activities. The primary use of cash for the six months ended June 30, 2009 was $2,749,000
for the purchase of equipment and $612,000 for the payments of dividends, discussed below.
As of June 30, 2009, the Company held $38,275,000 of auction rate securities classified as
long-term investments. Please see Note 2. to the Companys Condensed Consolidated Financial
Statements for a discussion of the securities and the Companys accounting treatment thereof.
-26-
VICOR CORPORATION
Managements Discussion and Analysis of
Financial Condition and Results of Operation
June 30, 2009
In November 2000, the Board of Directors of the Company authorized the repurchase of up to
$30,000,000 of the Companys Common Stock (the November 2000 Plan). The November 2000 Plan
authorizes the Company to make such repurchases from time to time in the open market or through
privately negotiated transactions. The timing and amounts of stock repurchases are at the
discretion of management based on its view of economic and financial market conditions. The Company
did not repurchase shares of Common Stock during the six months ended June 30, 2009. As of June 30,
2009, the Company had approximately $8,541,000 remaining under the November 2000 Plan.
During the second quarter of 2009, a subsidiary paid a $612,000 dividend to an outside
shareholder, which was accounted for as a reduction in noncontrolling interest.
The Companys primary liquidity needs are for making continuing investments in manufacturing
equipment, particularly equipment to increase capacity for our V*I Chip products. The Company
believes 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. The Company had approximately $1,082,000 of capital
expenditure commitments, principally for manufacturing equipment, as of June 30, 2009.
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 of the
Companys ARS will affect the Companys ability to execute its current operating plan.
The Company does not consider the impact of inflation and changing prices on its business
activities or fluctuations in the exchange rates for foreign currency transactions to have been
significant during the last three fiscal years.
-27-
Vicor Corporation
June 30, 2009
Item 3 Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to a variety of market risks, including changes in interest rates
affecting the return on our cash and cash equivalents and short-term investments and fluctuations
in foreign currency exchange rates. As the Companys cash and cash equivalents consist principally
of money market securities, which are short-term in nature, the Company believes our exposure to
market risk on interest rate fluctuations for these investments is not significant. The Companys
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. Currently, changes in the fair value of the Failed
Auction Securities held with UBS are recorded through earnings. Changes in the fair value of the
Failed Auction Securities held with BofA 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 held with BofA be other than
temporary, the losses would be recorded in Other income (expense), net. The Company does not
believe there was an other-than-temporary decline in value in these securities as of June 30,
2009.
The Companys 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 the Companys subsidiaries in Europe and Hong Kong is the U.S. dollar.
Therefore, the Company believes market risk is mitigated since these operations are not materially
exposed to foreign exchange fluctuations.
Item 4 Controls and Procedures
(a) Disclosure regarding controls and procedures.
As required by Rule 13a-15 under the Securities Exchange Act, the Companys management, with
the participation of the Companys Chief Executive Officer (CEO) and Chief Financial Officer
(CFO), conducted an evaluation of the effectiveness of the Companys disclosure controls and
procedures, as of the end of the last fiscal quarter (i.e., June 30, 2009). In designing and
evaluating the Companys disclosure controls and procedures, the Company and its management
recognize that any controls and procedures, no matter how well designed and operated, can provide
only 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, management, including the Companys CEO and CFO, has concluded the
Companys disclosure controls and procedures as of June 30, 2009, were reasonably effective to
ensure that information required to be disclosed by the Company in the reports it files or submits
under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commissions rules and forms. Management intends to
continue to review and document the Companys disclosure controls and procedures, including
internal controls over financial reporting, and may from time to time make changes to the
disclosure controls and procedures to enhance their effectiveness and to ensure that the Companys
systems evolve with its business.
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. Accordingly, management,
including the CEO and CFO, recognizes the Companys disclosure controls or its internal control
over financial reporting may not prevent or detect all errors and all fraud. 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 controls effectiveness to future periods are subject to risks. Over
time, controls may become inadequate because of changes in conditions or deterioration in the
degree of compliance with policies or procedures.
(b) Changes in internal control over financial reporting.
There was no change in the Companys internal control over financial reporting that occurred
during the fiscal quarter ended June 30, 2009, that materially affected, or is reasonably likely to
materially affect, the Companys internal control over financial reporting.
-28-
Vicor Corporation
Part II Other Information
June 30, 2009
Item 1 Legal Proceedings
See Note 12. Commitments and Contingencies in the Notes to Condensed Consolidated Financial
Statements in Part I Item 1 - Financial Statements.
Item 1A Risk Factors
There have been no material changes in the risk factors described in Item 1A (Risk Factors) of
the Companys Annual Report on Form 10-K for the year ended December 31, 2008.
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuer Purchases of Equity Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Number |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(of Approximate |
|
|
|
|
|
|
|
|
|
|
Total Number of |
|
Dollar Value) of |
|
|
|
|
|
|
|
|
|
|
Shares (or Units) |
|
Shares (or Units) |
|
|
Total Number |
|
Average Price |
|
Purchased as Part |
|
that May Yet Be |
|
|
of Shares |
|
Paid |
|
of Publicly |
|
Purchased Under |
|
|
(or Units) |
|
per Share |
|
Announced Plans |
|
the Plans or |
Period |
|
Purchased |
|
(or Unit) |
|
or Programs |
|
Programs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 1 - 30, 2009 |
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
8,541,000 |
|
May 1 - 31, 2009 |
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
8,541,000 |
|
June 1 - 30, 2009 |
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
8,541,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
8,541,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In November 2000, the Board of Directors of the Company authorized the repurchase of up to
$30,000,000 of the Companys Common Stock.
Item 3 Defaults Upon Senior Securities
Not applicable.
Item 4 Submission of Matters to a Vote of Security Holders
The 2009 Annual Meeting of Stockholders of the company was held on June 25, 2009. Under
the Companys charter, each share of the Companys Common Stock entitles the holder thereof
to one vote per share, and each share of the Companys Class B Common Stock entitles the
holder thereof to ten votes per share.
The only matter submitted to a vote of security holders at the 2009 Annual Meeting of
Stockholders was to fix the number of directors at eight and the election of directors to
the Board of Directors of the Company. All nominees of the Board of Directors of the
Company were re-elected for a one year term. Votes were cast in the election of the
directors as follows:
-29-
Vicor Corporation
Part II Other Information
June 30, 2009
|
|
|
|
|
Nominee |
|
Votes For |
|
Votes Withheld |
|
|
|
|
|
Patrizio Vinciarelli |
|
137,889,512 |
|
6,468,611 |
Estia J. Eichten |
|
143,290,119 |
|
1,068,004 |
Barry Kelleher |
|
137,982,274 |
|
6,375,849 |
David T. Riddiford |
|
143,584,840 |
|
773,283 |
Samuel Anderson |
|
137,094,271 |
|
7,263,852 |
James A. Simms |
|
137,863,158 |
|
6,494,965 |
Claudio Tuozzolo |
|
137,347,865 |
|
7,010,258 |
Jason L. Carlson |
|
143,620,121 |
|
738,002 |
There were no broker non-votes and no abstentions on this proposal.
Item 5 Other Information
Not applicable.
Item 6 Exhibits
|
|
|
Exhibit Number |
|
Description |
|
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934 |
31.2
|
|
Certification of Chief Financial Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934 |
32.1
|
|
Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 |
32.2
|
|
Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 |
-30-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
VICOR CORPORATION
|
|
Date: August 5, 2009 |
By: |
/s/ Patrizio Vinciarelli
|
|
|
|
Patrizio Vinciarelli |
|
|
|
Chairman of the Board, President and
Chief Executive Officer
(Principal Executive Officer) |
|
|
|
|
Date: August 5, 2009 |
By: |
/s/ James A. Simms
|
|
|
|
James A. Simms |
|
|
|
Vice President, Chief Financial Officer
(Principal Financial Officer) |
|
|
-31-