10-Q 1 d385444d10q.htm 10-Q 10-Q
Table of Contents
falseQ30000751978--12-31The deferred tax assets associated with foreign currency translation losses and unrealized losses on available-for-sale securities are completely offset by a tax valuation allowance as of September 30, 2022 and 2021. Therefore, there is no income tax benefit (provision) recognized for the three and nine months ended September 30, 2022 and 2021.Denominator represents weighted average number of shares of Common Stock and Class B Common Stock outstanding.Options to purchase 1,037,640 and 772,240 shares of Common Stock for the three and nine months ended September 30, 2022, respectively, and options to purchase 76,114 and 134,822 shares of Common Stock for the three and nine months ended September 30, 2021, respectively, were not included in the calculations of net income per share as the effect would have been antidilutive. 0000751978 2022-09-30 0000751978 2021-12-31 0000751978 2022-07-01 2022-09-30 0000751978 2021-07-01 2021-09-30 0000751978 2022-01-01 2022-09-30 0000751978 2021-01-01 2021-09-30 0000751978 2022-06-30 0000751978 2021-06-30 0000751978 2020-12-31 0000751978 2021-09-30 0000751978 us-gaap:USTreasurySecuritiesMember 2022-09-30 0000751978 us-gaap:AuctionRateSecuritiesMember 2022-09-30 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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
 
FORM
10-Q
 
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
                    
Commission File Number
0-18277
 
 
VICOR CORPORATION
(Exact name of registrant as specified in its charter)
 
 
 
     
Delaware
 
04-2742817
(State of Incorporation)
 
(I.R.S. Employer
Identification No.)
25 Frontage Road, Andover, Massachusetts 01810
(Address of Principal Executive Office)
(978)
470-2900
(Registrant’s telephone number)
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
         
Title of each class
 
Trading
Symbol(s)
 
Name of each exchange
on which registered
Common Stock, par value
$0.01 per share
 
VICR
 
The NASDAQ Stock Market LLC
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  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     
Yes
  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
 
             
Large accelerated filer
 
  
Accelerated filer
 
       
Non-accelerated filer
 
  
Smaller reporting company
 
       
 
 
 
  
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).     Yes  ☐    No  
The number of shares outstanding of each of the issuer’s classes of Common Stock as of October 25, 2022 was:
 
         
Common Stock, $.01 par value   
 
32,305,315
 
Class B Common Stock, $.01 par value   
 
11,743,218
 
 
 
 
 


Table of Contents

VICOR CORPORATION

INDEX

 

     Page  

Part I — Financial Information:

  

Item 1 - Financial Statements (Unaudited)

  

Condensed Consolidated Balance Sheets at September 30, 2022 and December 31, 2021

     1  

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021

     2  

Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2022 and 2021

     3  

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021

     4  

Condensed Consolidated Statements of Equity for the three and nine months ended September 30, 2022 and 2021

     5  

Notes to Condensed Consolidated Financial Statements

     7  

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

     18  

Item 3 - Quantitative and Qualitative Disclosures About Market Risk

     31  

Item 4 - Controls and Procedures

     31  

Part II — Other Information:

  

Item 1 - Legal Proceedings

     33  

Item 1A - Risk Factors

     33  

Item 6 - Exhibits

     34  

Signature(s)

     35  

EX-31.1 SECTION 302 CERTIFICATION OF CEO

  

EX-31.2 SECTION 302 CERTIFICATION OF CFO

  

EX-32.1 SECTION 906 CERTIFICATION OF CEO

  

EX-32.2 SECTION 906 CERTIFICATION OF CFO

  


Table of Contents
0.010.010.010.01
VICOR CORPORATION
Part I – Financial Information
Item 1 – Financial Statements
Condensed Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
 

  
September 30, 2022
 
 
December 31, 2021
 
Assets
  
     
 
     
Current assets:
  
     
 
     
Cash and cash equivalents
   $ 182,098     $ 182,418  
Short-term investments
     19,949       45,215  
Accounts receivable, net
     56,287       55,097  
Inventories
     94,336       67,322  
Other current assets
     5,483       6,708  
    
 
 
   
 
 
 
Total current assets
     358,153       356,760  
Long-term deferred tax assets, net
     260       208  
Long-term investment, net
     2,552       2,639  
Property, plant and equipment, net
     163,198       115,975  
Other assets
     2,939       1,623  
    
 
 
   
 
 
 
Total assets
   $ 527,102     $ 477,205  
    
 
 
   
 
 
 
Liabilities and Equity
                
Current liabilities:
                
Accounts payable
   $ 24,004     $ 21,189  
Accrued compensation and benefits
     13,070       12,660  
Accrued litigation
     6,500       —    
Accrued expenses
     5,754       4,158  
Short-term lease liabilities
     1,449       1,551  
Sales allowances
     1,427       1,464  
Accrued severance and other charges
     —         93  
Income taxes payable
     7       66  
Short-term deferred revenue and customer prepayments
     12,148       7,912  
    
 
 
   
 
 
 
Total current liabilities
     64,359       49,093  
Long-term deferred revenue
     1,833       413  
Long-term income taxes payable
     529       569  
Long-term lease liabilities
     7,520       3,225  
    
 
 
   
 
 
 
Total liabilities
     74,241       53,300  
Commitments and contingencies (Note 10)
                
Equity:
                
Vicor Corporation stockholders’ equity:
                
Class B Common Stock: 10 votes per share, $.01 par value, 14,000,000 shares authorized, 11,758,218 shares issued and outstanding in 2022 and 2021
     118       118  
Common Stock: 1 vote per share, $.01 par value, 62,000,000 shares authorized 43,923,786 shares issued and 32,288,980 shares outstanding in 2022; 43,789,528 shares issued and 32,154,722 shares outstanding in 2021
     440       439  
Additional
paid-in
capital
     357,255       345,664  
Retained earnings
     235,017       217,633  
Accumulated other comprehensive loss
     (1,279     (1,328
Treasury stock at cost: 11,634,806 shares in 2022 and 2021
     (138,927     (138,927
    
 
 
   
 
 
 
Total Vicor Corporation stockholders’ equity
     452,624       423,599  
Noncontrolling interest
     237       306  
    
 
 
   
 
 
 
Total equity
     452,861       423,905  
    
 
 
   
 
 
 
Total liabilities and equity
   $ 527,102     $ 477,205  
    
 
 
   
 
 
 
See accompanying notes.
 
-1-

VICOR CORPORATION
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
 
 
  
Three Months Ended
 
 
Nine Months Ended
 
 
  
September 30,
 
 
September 30,
 
 
  
2022
 
 
2021
 
 
2022
 
 
2021
 
Net revenues
   $ 103,118     $ 84,911     $ 293,586     $ 269,083  
Cost of revenues
     56,148       42,098       162,166       131,699  
    
 
 
   
 
 
   
 
 
   
 
 
 
Gross margin
     46,970       42,813       131,420       137,384  
Operating expenses:
                                
Selling, general and administrative
     22,719       17,322       61,322       50,865  
Research and development
     14,747       13,519       44,516       39,818  
Litigation-related
     6,500       —         6,500       —    
    
 
 
   
 
 
   
 
 
   
 
 
 
Total operating expenses
     43,966       30,841       112,338       90,683  
    
 
 
   
 
 
   
 
 
   
 
 
 
Income from operations
     3,004       11,972       19,082       46,701  
Other income (expense), net:
                                
Total unrealized gains (losses) on
available-for-sale
securities, net
              37       (87     81  
Less: portion of losses (gains) recognized in other comprehensive income
     1       (36     90       (78
    
 
 
   
 
 
   
 
 
   
 
 
 
Net credit gains recognized in earnings
     1       1       3       3  
Other income (expense), net
     (569     393       (325     996  
    
 
 
   
 
 
   
 
 
   
 
 
 
Total other income (expense), net
     (568     394       (322     999  
    
 
 
   
 
 
   
 
 
   
 
 
 
Income before income taxes
     2,436       12,366       18,760       47,700  
Provision for income (benefit) taxes
     641       (886     1,395       (30
    
 
 
   
 
 
   
 
 
   
 
 
 
Consolidated net income
     1,795       13,252       17,365       47,730  
Less: Net income (loss) attributable to noncontrolling interest
     3       (7     (19     (15
    
 
 
   
 
 
   
 
 
   
 
 
 
Net income attributable to Vicor Corporation
   $ 1,792     $ 13,259     $ 17,384     $ 47,745  
    
 
 
   
 
 
   
 
 
   
 
 
 
Net income per common share attributable to Vicor Corporation:
                                
Basic
   $ 0.04     $ 0.30     $ 0.40     $ 1.10  
Diluted
   $ 0.04     $ 0.29     $ 0.39     $ 1.06  
Shares used to compute net income per common share attributable to Vicor Corporation:
                                
Basic
     44,031       43,710       43,986       43,573  
Diluted
     44,898       45,034       44,906       44,905  
See accompanying notes.
 
-2-

VICOR CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(In thousands)
(Unaudited)
 
 
  
Three Months Ended
 
 
Nine Months Ended
 
 
  
September 30,
 
 
September 30,
 
 
  
2022
 
 
2021
 
 
2022
 
 
2021
 
Consolidated net income
   $ 1,795     $ 13,252     $ 17,365     $ 47,730  
Foreign currency translation losses, net of tax (1)
     (94     (12     (672     (283
Unrealized income (loss) on
available-for-sale
securities, net of tax (1)
     1,054       (215     671       (574
    
 
 
   
 
 
   
 
 
   
 
 
 
Other comprehensive income (loss)
     960       (227     (1     (857
    
 
 
   
 
 
   
 
 
   
 
 
 
Consolidated comprehensive income
     2,755       13,025       17,364       46,873  
Less: Comprehensive loss attributable to noncontrolling interest
     (4     (7     (69     (36
    
 
 
   
 
 
   
 
 
   
 
 
 
Comprehensive income attributable to Vicor Corporation
   $ 2,759     $ 13,032     $ 17,433     $ 46,909  
    
 
 
   
 
 
   
 
 
   
 
 
 
 
(1)
The deferred tax assets associated with foreign currency translation losses and unrealized losses on
available-for-sale
securities are completely offset by a tax valuation allowance as of September 30, 2022 and 2021. Therefore, there is no income tax benefit (provision) recognized for the three and nine months ended September 30, 2022 and 2021.
See accompanying notes.
 
-3-
VICOR CORPORATION
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
 
  
Nine Months Ended
 
 
  
September 30,
 
 
  
2022
 
 
2021
 
Operating activities:
  
     
 
     
Consolidated net income
   $ 17,365     $ 47,730  
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
                
Depreciation and amortization
     10,250       8,564  
Stock-based compensation expense
     7,445       5,005  
Litigation-related
 
expense
     6,500       —    
Increase (decrease) in long-term deferred revenue
     1,420       (240
Amortization of bond premium
     1,027       —    
Decrease in contingent consideration obligations
              (74
(Decrease) increase in other assets
     (1,451     56  
Decrease in long-term income taxes payable
     (40     (79
Deferred income taxes
     (52     5  
Credit gain on
available-for-sale
securities
     (3     (3
Provision for doubtful accounts
     5           
Change in current assets and liabilities, net
     (20,456     (20,737
    
 
 
   
 
 
 
Net cash provided by operating activities
     22,010       40,227  
Investing activities:
                
Purchases of short-term investments
              (50,706
Sales or maturities of short-term investments
     25,000       50,000  
Additions to property, plant and equipment
     (51,279     (30,942
    
 
 
   
 
 
 
Net cash used for investing activities
     (26,279     (31,648
Financing activities:
                
Proceeds from employee stock plans
     4,147       8,621  
Payment of contingent consideration obligations
              (153
    
 
 
   
 
 
 
Net cash provided by financing activities
     4,147       8,468  
Effect of foreign exchange rates on cash
     (198     (126
    
 
 
   
 
 
 
Net (decrease) increase in cash and cash equivalents
     (320     16,921  
Cash and cash equivalents at beginning of period
     182,418       161,742  
    
 
 
   
 
 
 
Cash and cash equivalents at end of period
   $ 182,098     $ 178,663  
    
 
 
   
 
 
 
See accompanying notes.
 
-4-

VICOR CORPORATION
Condensed Consolidated Statements of Equity
(In thousands)
(Unaudited)
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
 
 
 
Total
 
  
 
 
 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
Accumulated
 
 
 
 
 
Vicor
 
  
 
 
 
 
 
 
  
Class B
 
  
 
 
  
Additional
 
  
 
 
  
Other
 
 
 
 
 
Corporation
 
  
 
 
 
 
 
 
  
Common
 
  
Common
 
  
Paid-In
 
  
Retained
 
  
Comprehensive
 
 
Treasury
 
 
Stockholders’
 
  
Noncontrolling
 
 
Total
 
 
  
Stock
 
  
Stock
 
  
Capital
 
  
Earnings
 
  
Income (loss)
 
 
Stock
 
 
Equity
 
  
Interest
 
 
Equity
 
Three months ended September 30, 2022
  
     
  
     
  
     
  
     
  
     
 
     
 
     
  
     
 
     
Balance on June 30, 2022
 
$
118
 
 
$
440
 
 
$
352,253
 
 
$
233,225
 
 
$
(2,246
 
$
(138,927
 
$
444,863
 
 
$
241
 
 
$
445,104
 
Issuance of Common Stock under employee stock plans
 
 
 
 
 
 
 
 
 
 
2,173
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,173
 
 
 
 
 
 
 
2,173
 
Stock-based compensation expense
 
 
 
 
 
 
 
 
 
 
2,829
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,829
 
 
 
 
 
 
 
2,829
 
Components of comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,792
 
 
 
 
 
 
 
 
 
 
 
1,792
 
 
 
3
 
 
 
1,795
 
Other comprehensive income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
967
 
 
 
 
 
 
 
967
 
 
 
(7
 
 
960
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total comprehensive income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,759
 
 
 
(4
 
 
2,755
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance on September 30, 2022
 
$
118
 
 
$
440
 
 
$
357,255
 
 
$
235,017
 
 
$
(1,279
 
$
(138,927
 
$
452,624
 
 
$
237
 
 
$
452,861
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
 
 
 
Total
 
  
 
 
 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
Accumulated
 
 
 
 
 
Vicor
 
  
 
 
 
 
 
 
  
Class B
 
  
 
 
  
Additional
 
  
 
 
  
Other
 
 
 
 
 
Corporation
 
  
 
 
 
 
 
 
  
Common
 
  
Common
 
  
Paid-In
 
  
Retained
 
  
Comprehensive
 
 
Treasury
 
 
Stockholders’
 
  
Noncontrolling
 
 
Total
 
 
  
Stock
 
  
Stock
 
  
Capital
 
  
Earnings
 
  
Income (loss)
 
 
Stock
 
 
Equity
 
  
Interest
 
 
Equity
 
Nine months ended September 30, 2022
  
     
  
     
  
     
  
     
  
     
 
     
 
     
  
     
 
     
Balance on December 31, 2021
 
$
118
 
 
$
439
 
 
$
345,664
 
 
$
217,633
 
 
$
(1,328
 
$
(138,927
 
$
423,599
 
 
$
306
 
 
$
423,905
 
Issuance of Common Stock under employee stock plans
 
 
 
 
 
 
1
 
 
 
4,146
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,147
 
 
 
 
 
 
 
4,147
 
Stock-based compensation expense
 
 
 
 
 
 
 
 
 
 
7,445
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7,445
 
 
 
 
 
 
 
7,445
 
Components of comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17,384
 
 
 
 
 
 
 
 
 
 
 
17,384
 
 
 
(19
 
 
17,365
 
Other comprehensive income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
49
 
 
 
 
 
 
 
49
 
 
 
(50
 
 
(1
                                                   
 
 
   
 
 
   
 
 
 
Total comprehensive income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17,433
 
 
 
(69
 
 
17,364
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance on September 30, 2022
 
$
118
 
 
$
440
 
 
$
357,255
 
 
$
235,017
 
 
$
(1,279
 
$
(138,927
 
$
452,624
 
 
$
237
 
 
$
452,861
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
Accumulated
 
 
 
 
 
Vicor
 
 
 
 
 
 
 
 
  
Class B
 
  
 
 
  
Additional
 
  
 
 
  
Other
 
 
 
 
 
Corporation
 
 
 
 
 
 
 
 
  
Common
 
  
Common
 
  
Paid-In
 
  
Retained
 
  
Comprehensive
 
 
Treasury
 
 
Stockholders’
 
 
Noncontrolling
 
 
Total
 
 
  
Stock
 
  
Stock
 
  
Capital
 
  
Earnings
 
  
Loss
 
 
Stock
 
 
Equity
 
 
Interest
 
 
Equity
 
Three months ended September 30, 2021
  
     
  
     
  
     
  
     
  
     
 
     
 
     
 
     
 
     
Balance on June 30, 2021
 
$
118
 
 
$
436
 
 
$
336,278
 
 
$
195,494
 
 
$
(813
 
$
(138,927
 
$
392,586
 
 
$
306
 
 
$
392,892
 
Issuance of Common Stock under employee stock plans
 
 
 
 
 
 
1
 
 
 
3,869
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,870
 
 
 
 
 
 
 
3,870
 
Stock-based compensation expense
 
 
 
 
 
 
 
 
 
 
1,867
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,867
 
 
 
 
 
 
 
1,867
 
Components of comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13,259
 
 
 
 
 
 
 
 
 
 
 
13,259
 
 
 
(7
 
 
13,252
 
Other comprehensive loss
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(227
 
 
 
 
 
 
(227
 
 
  
 
 
 
(227
                                                   
 
 
   
 
 
   
 
 
 
Total comprehensive income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13,032
 
 
 
(7
 
 
13,025
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance on September 30, 2021
 
$
118
 
 
$
437
 
 
$
342,014
 
 
$
208,753
 
 
$
(1,040
 
$
(138,927
 
$
411,355
 
 
$
299
 
 
$
411,654
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
-5-
VICOR CORPORATION
Condensed Consolidated Statements of Equity
(In thousands)
(Unaudited)
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
Accumulated
 
 
 
 
 
Vicor
 
 
 
 
 
 
 
 
  
Class B
 
  
 
 
  
Additional
 
  
 
 
  
Other
 
 
 
 
 
Corporation
 
 
 
 
 
 
 
 
  
Common
 
  
Common
 
  
Paid-In
 
  
Retained
 
  
Comprehensive
 
 
Treasury
 
 
Stockholders’
 
 
Noncontrolling
 
 
Total
 
 
  
Stock
 
  
Stock
 
  
Capital
 
  
Earnings
 
  
Loss
 
 
Stock
 
 
Equity
 
 
Interest
 
 
Equity
 
Nine months ended September 30, 2021
  
  
  
  
  
 
 
 
 
Balance on December 31, 2020
 
$
118
 
 
$
433
 
 
$
328,392
 
 
$
161,008
 
 
$
(204
 
$
(138,927
 
$
350,820
 
 
$
335
 
 
$
351,155
 
Issuance of Common Stock under employee stock plans
 
 
 
 
 
 
4
 
 
 
8,617
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8,621
 
 
 
 
 
 
 
8,621
 
Stock-based compensation expense
 
 
 
 
 
 
 
 
 
 
5,005
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5,005
 
 
 
 
 
 
 
5,005
 
Components of comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
47,745
 
 
 
 
 
 
 
 
 
 
 
47,745
 
 
 
(15
 
 
47,730
 
Other comprehensive loss
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(836
 
 
 
 
 
 
(836
 
 
(21
 
 
(857
                                                   
 
 
   
 
 
   
 
 
 
Total comprehensive income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
46,909
 
 
 
(36
 
 
46,873
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance on September 30, 2021
 
$
118
 
 
$
437
 
 
$
342,014
 
 
$
208,753
 
 
$
(1,040
 
$
(138,927
 
$
411,355
 
 
$
299
 
 
$
411,654
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
See accompanying notes.
 
-6-

VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
September 30, 2022
(unaudited)
1.
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements of Vicor Corporation and its consolidated subsidiaries (collectively, the “Company”) 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 (the “SEC”). Accordingly, these interim financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for any other interim period or the year ending December 31, 2022. “Other income
(
expense
)
, net”, includes an immaterial error correction of $990,000 and $834,000 for the three and nine months ended September 30, 2022, respectively, related to the amortization of bond premiums on available for sale securities. The balance sheet at December 31, 2021 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 Company’s Annual Report on Form
10-K
for the year ended December 31, 2021 filed by the Company with the SEC on March 1, 2022 (“2021 Form
 
10-K”).
2.
Inventories
Inventories were as follows (in thousands):
 
 
  
September 30, 2022
 
  
December 31, 2021
 
Raw materials
   $ 73,940      $ 51,289  
Work-in-process
     11,967        12,514  
Finished goods
     8,429        3,519  
    
 
 
    
 
 
 
     $ 94,336      $ 67,322  
    
 
 
    
 
 
 
3.
Short-Term and Long-Term Investments
As of September 30, 2022 and December 31, 2021, the Company held $19,949,000 and $45,215,000, respectively, of short-term investments, consisting of obligations of the U.S. Treasury, all of which were debt securities with original maturities greater than three months but less than one year at the time of purchase.
As of September 30, 2022 and December 31, 2021, the Company held one auction rate security with a par value of $3,000,000 and an estimated fair value of approximately $2,552,000 and $2,639,000, respectively, purchased through and held in custody by a broker-dealer affiliate of Bank of America, N.A., that has experienced failed auctions (the “Failed Auction Security”) since February 2008. The Failed Auction Security held by the Company is Aaa/AA+ rated by major credit rating agencies, is collateralized by student loans, and is guaranteed by the U.S. Department of Education under the Federal Family Education Loan Program. Management is not aware of any reason to believe the issuer of the Failed Auction Security is presently at risk of default. Through September 30, 2022, the Company has continued to receive interest payments on the Failed Auction Security in accordance with the terms of its indenture. Management believes the Company ultimately should be able to liquidate the Failed Auction Security without significant loss primarily due to the overall quality of the issue held and the collateral securing the substantial majority of the underlying obligation. However, current conditions in the auction rate securities market have led management to conclude the recovery period for the Failed Auction Security exceeds 12 months. As a result, the Company continued to classify the Failed Auction Security as long-term as of September 30, 2022.
 
-7-

VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
September 30, 2022
(unaudited)
 
Details of our investments are as follows (in thousands):
 
 
  
September 30, 2022
 
 
  
Cash and
Cash
Equivalents
 
  
Short-Term
Investments
 
  
Long-Term

Investment
 
Measured at fair value:
  
     
  
     
  
     
Available-for-sale
debt securities:
  
     
  
     
  
     
Money market funds
   $ 120,217      $ —        $ —    
U.S. Treasury Obligations
     —          19,949        —    
Failed Auction Security
     —          —          2,552  
    
 
 
    
 
 
    
 
 
 
Total
     120,217        19,949        2,552  
Other measurement basis:
                          
Cash on hand
     61,881        —          —    
    
 
 
    
 
 
    
 
 
 
Total
   $ 182,098      $ 19,949      $ 2,552  
    
 
 
    
 
 
    
 
 
 
 
 
  
December 31, 2021
 
 
  
Cash and
 
  
 
 
  
 
 
 
  
Cash
 
  
Short-Term
 
  
Long-Term
 
 
  
Equivalents
 
  
Investments
 
  
Investment
 
Measured at fair value:
  
     
  
     
  
     
Available-for-sale
debt securities:
  
     
  
     
  
     
Money market funds
   $ 94,282      $ —        $ —    
U.S. Treasury Obligations
     —          45,215        —    
Failed Auction Security
     —          —          2,639  
    
 
 
    
 
 
    
 
 
 
Total
     94,282        45,215        2,639  
Other measurement basis:
                          
Cash on hand
     88,136        —          —    
    
 
 
    
 
 
    
 
 
 
Total
   $ 182,418      $ 45,215      $ 2,639  
    
 
 
    
 
 
    
 
 
 
 
-8-

VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
September 30, 2022
(unaudited)
 
The following is a summary of the
available-for-sale
securities (in thousands):
 
 
  
 
 
  
Gross
 
  
Gross
 
  
Estimated
 
 
  
 
 
  
Unrealized
 
  
Unrealized
 
  
Fair
 
September 30, 2022
  
Cost
 
  
Gains
 
  
Losses
 
  
Value
 
U.S. Treasury Obligations
   $ 20,028      $         $ 79      $ 19,949  
Failed Auction Security
     3,000        —          448        2,552  
 
 
  
 
 
  
Gross
 
  
Gross
 
  
Estimated
 
 
  
 
 
  
Unrealized
 
  
Unrealized
 
  
Fair
 
December 31, 2021
  
Cost
 
  
Gains
 
  
Losses
 
  
Value
 
U.S. Treasury Obligations
   $ 45,238      $         $ 23      $ 45,215  
Failed Auction Security
     3,000        —          361        2,639  
As of September 30, 2022, the Failed Auction Security had been in an unrealized loss position for greater than 12 months.
The amortized cost and estimated fair value of the
available-for-sale
securities on September 30, 2022, by type and contractual maturities, are shown below (in thousands):
 
 
  
Cost
 
  
Estimated
Fair Value
 
U.S. Treasury Obligations:
  
  
Maturities greater than three months but less than one year
   $ 20,028      $ 19,949  
    
 
 
    
 
 
 
 
 
  
 
 
  
Estimated
 
 
  
Cost
 
  
Fair Value
 
Failed Auction Security:
  
  
Due in twenty years
   $ 3,000      $ 2,552  
    
 
 
    
 
 
 
4.
Fair Value Measurements
The Company accounts for certain financial assets at fair value, defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions market participants would use in pricing an asset or liability. A three-level hierarchy is used to show the extent and level of judgment used to estimate fair value measurements.
 
-9-

VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
September 30, 2022
(unaudited)
 
Assets and liabilities measured at fair value on a recurring basis included the following as of September 30, 2022 (in thousands):
 
 
  
Using
 
  
 
 
 
  
Quoted Prices
in Active
Markets
(Level 1)
 
  
Significant
Other
Observable
Inputs
(Level 2)
 
  
Significant
Unobservable
Inputs
(Level 3)
 
  
Total Fair
Value as of
September 30, 2022
 
 
  
 
 
  
 
 
  
 
 
  
 
 
Cash equivalents:
  
  
  
  
Money market funds
   $ 120,217      $ —        $ —        $ 120,217  
Short-term investments:
                                   
U.S. Treasury Obligations
     19,949        —          —          19,949  
Long-term investment:
                                   
Failed Auction Security
     —          —          2,552        2,552  
Assets and liabilities measured at fair value on a recurring basis included the following as of December 31, 2021 (in thousands):
 
 
  
Using
 
  
 
 
 
  
Quoted Prices
in Active
Markets
(Level 1)
 
  
Significant
Other
Observable
Inputs
(Level 2)
 
  
Significant
Unobservable
Inputs
(Level 3)
 
  
Total Fair
Value as of
December 31, 2021
 
Cash equivalents:
  
  
  
  
Money market funds
   $ 94,282      $ —        $ —        $ 94,282  
Short-term investments:
                                   
U.S. Treasury Obligations
     45,215        —          —          45,215  
Long-term investment:
                                   
Failed Auction Security
     —          —          2,639        2,639  
The change in the estimated fair value calculated for the investment valued on a recurring basis utilizing Level 3 inputs (i.e., the Failed Auction Security) for the nine months ended September 30, 2022 was as follows (in thousands):
 
Balance at the beginning of the period
   $ 2,639  
Credit gain on
available-for-sale
security included in Other income (expense), net
     3  
Loss included in Other comprehensive income
     (90
    
 
 
 
Balance at the end of the period
   $ 2,552  
    
 
 
 
Management utilized a probability weighted discounted cash flow model to determine the estimated fair value as of September 30, 2022.
 
-10-
VICOR CORPORATION
Notes to Condensed Consolidated Financial Statements
September 30, 2022
(unaudited)
 
5.
Revenues
The following tables present the Company’s net revenues disaggregated by geography based on the location of the customer, by product line (in thousands):
 
 
  
Three Months Ended September 30, 2022
 
 
  
Brick Products
 
  
Advanced Products
 
  
Total
 
United States
   $ 21,559      $ 9,303      $ 30,862  
Europe
     7,101        1,954        9,055  
Asia Pacific
     14,800        47,704        62,504  
All other
     456        241        697  
    
 
 
    
 
 
    
 
 
 
     $ 43,916      $ 59,202      $ 103,118  
    
 
 
    
 
 
    
 
 
 
 
 
  
Nine Months Ended September 30, 2022
 
 
  
Brick Products
 
  
Advanced Products
 
  
Total
 
United States
   $ 54,288      $ 32,711      $ 86,999  
Europe
     19,184        6,951        26,135  
Asia Pacific
     38,167        139,749        177,916  
All other
     2,157        379        2,536  
    
 
 
    
 
 
    
 
 
 
     $ 113,796      $ 179,790      $ 293,586  
    
 
 
    
 
 
    
 
 
 
 
 
  
            Three Months Ended September 30, 2021        
 
 
  
Brick Products
 
  
Advanced Products
 
  
Total
 
United States
   $ 19,741      $ 12,178      $ 31,919  
Europe
     6,185        1,324        7,509  
Asia Pacific
     14,936        29,934        44,870  
All other
     582        31        613  
    
 
 
    
 
 
    
 
 
 
     $ 41,444      $ 43,467      $ 84,911  
    
 
 
    
 
 
    
 
 
 
 
 
  
Nine Months Ended September 30, 2021
 
 
  
Brick Products
 
  
Advanced Products
 
  
Total
 
United States
   $ 58,032      $ 35,083      $ 93,115  
Europe
     24,605        3,604        28,209