Vicor Corporation Announces 2nd Quarter Results

Business Wire, July 16, 2003

Business/Technology Editors

ANDOVER, Mass.--(BUSINESS WIRE)--July 16, 2003

Vicor Corporation (NASDAQ: VICR) today announced its financial results for the quarter ended June 30, 2003. Revenues for the quarter were $38,693,000 compared with $36,831,000 for the corresponding period a year ago. The Company reported a loss before taxes of $5,729,000 compared with a loss before taxes of $7,642,000 in 2002. The Company reported a net loss for the quarter of $5,958,000 compared with a net loss of $4,852,000 in 2002, and a diluted loss per share of $.14 compared with a diluted loss per share of $.11 in 2002. Net loss for the quarter ended June 30, 2003 was higher than the comparable quarter in 2002 because of a tax rule change limiting the availability of tax loss carry-backs in 2003 as discussed below.

For the six months ended June 30, 2003 revenues increased to $76,433,000 from $71,451,000 for the same period of 2002. The Company reported a loss before taxes of $12,103,000 compared with a loss before taxes of $15,407,000 in 2002. The Company reported a net loss for the period of $12,587,000 compared with a net loss of $9,783,000 in 2002, and a diluted loss per share of $.30 compared with a diluted loss per share of $.23 in 2002.

In the second quarter, revenues increased by 5.1% over the second quarter of 2002, and increased by 2.5% on a sequential basis from the first quarter of 2003. The overall book to bill for the second quarter was slightly below 1. The order pattern by most customers continued to be focused on filling short-term requirements and, consequently, visibility based on backlog remained limited. The Company finished the second quarter with approximately $31.8 million in backlog compared to $31.9 million at the end of 2002.

In the second quarter, gross margin increased to 27.2%, compared with 23.6% in the second quarter of 2002. Gross margin increased by 3.6% sequentially from the first quarter of 2003. The gross margin improvement was due to a more favorable product mix and to unit cost reductions due to productivity improvements.

In consideration of the excess in factory capacity that has persisted for nearly three years, the potential for further improvements in productivity and the prospective lower labor content of its new V-I Chips, the Company will end the general furlough program for all of its hourly factory workers effective October 10, 2003. As of this date, approximately 74% of factory workers will return to full time, productive employment. Approximately 26% of the factory workers will be notified within the next week that the Company will not continue to employ them after October 10, 2003. Affected employees that are unable to obtain other employment will be provided with health benefits until the end of this year.

Depreciation and amortization in the quarter was $5.6 million and capital additions were $1.4 million. For the first six months of 2003 depreciation and amortization was $11.3 million and capital additions were $3.3 million.

Within the quarter, the Company recorded a loss of $387,000 for a decline in the value of an investment judged to be other than temporary, which was charged to other income (expense), net.

The tax provision for the first six months of 2003 was 4%. During 2002, the Company recorded a tax benefit of 36.5% reducing pre-tax losses due to a carry-back provision allowed by a temporary change in the tax laws. Beginning in 2003, with tax rules reverting to a carry-back limited to two years, any losses incurred will only be available to offset future taxable income. A provision in 2003 is required as the Company operates in various state and international taxing jurisdictions, subject to a variety of income and related taxes.

Cash and short-term investments were $110.9 million, an increase of $10.0 million from the end of 2002 and an increase of $13.0 million from the end of the first quarter of 2003. This increase is largely attributable to $11.7 million of tax refunds received during the quarter. The Company did not repurchase any shares during the quarter and has $26.0 million remaining on its authorized stock buy-back plan.

Inventories decreased by approximately $6.1 million to $24.2 million as compared with $30.3 million at the end of 2002 and decreased by $2.1 million from the end of the first quarter of 2003.

During the quarter, the Company and Artesyn agreed to conditionally resolve a pending patent infringement case. The parties stipulated that certain of Artesyn's accused products infringed a Vicor patent based on claim interpretations handed down by the Massachusetts Federal District Court. This allows both parties to appeal these interpretations to the Federal Circuit, the appeals court that decides patent appeals in the U.S. The Company also reached agreement with Lambda, Power-One, Lucent and Tyco to allow appeal by these parties. Pending these appeals, the Massachusetts Federal District Court has stayed all of the pending cases. The Company anticipates that a decision by the Federal Circuit will likely be rendered in 2004.