Correspondence 0001193125-22-285450 from VICOR CORP (VICR) (CIK 0000751978) (VICR)
VICOR CORP (VICR) (CIK 0000751978)
Date: Nov. 15, 2022 · CIK: 0000751978 · Accession: 0001193125-22-285450
AI Filing Summary & Sentiment
File numbers found in text: 000-18277
Referenced dates: November 1, 2022
Letter
Via EDGAR Office of Manufacturing Division of Corporation Finance Securities and Exchange Commission Re: Vicor Corporation Form 10-K for the Year Ended December 31, 2021 Form 10-Q for the Quarter Ended June 30, 2022 File No. 000-18277
Dear Ms. Erlanger and Mr. Woody:
This letter is submitted on behalf of Vicor Corporation (“Vicor” or the “Company”) in response to comments of the staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “Commission”) with respect to the Company’s Form 10-K for the year ended December 31, 2021 and Form 10-Q for the quarter ended June 30, 2022, as set forth in the letter dated November 1, 2022, from the Staff to Mr. James Schmidt (the “Comment Letter”).
For ease of reference, the text of the Comment Letter has been reproduced herein with responses below each numbered comment.
Form 10-K for the Year Ended December 31, 2021
Note 17. Segment Information, page 71
1. We note your disclosure that in the second quarter of 2019, management determined, with the approval of the Company’s BOD and CODM, Dr. Vinciarelli, you would report as one segment, rather than under the three segment approach previously employed since 2007. We also note your disclosure that your CODM now determines the allocation of resources based upon the two product groupings, which constitute one segment. Please clarify for us if you are referring to one reportable segment, or one operating segment. If you believe you have one reportable segment, but more than one operating segment, please provide us your aggregation analysis under ASC 280-10-50-11. If you believe you only have one operating segment, please provide us the following information:
Ms. Claire Erlanger
Mr. Kevin Woody
Securities and Exchange Commission
November 15, 2022
Page of 13
•
Provide us with details about your management structure and how your company is organized;
•
Describe the role of your CODM and each of the individuals reporting to the CODM;
•
Identify and describe the role of each of your segment managers;
•
Describe the key operating decisions, who makes these decisions, how performance is assessed and how resources are allocated within your business;
•
Tell us how often the CODM meets with his direct reports, the financial information the CODM reviews in conjunction with those meetings, and the other participants at those meetings;
•
Explain how budgets are prepared, who approves the budget at each step of the process, the level of detail discussed at each step, and the level at which the CODM makes changes to the budget; and
•
Describe the basis for determining the compensation for each individual that reports to the CODM.
Response to Comment No. 1
The Company acknowledges the Staff’s comment and respectfully advises the Staff that, in accordance with Accounting Standards Codification (“ASC”) 280, the Company considered the information provided to and used by its Chief Operating Decision Maker (“CODM”) for evaluating performance of the operating segment and other information used to evaluate the segment’s financial performance or make resource allocation decisions when assessing the appropriate segments disclosures. We considered the provisions of ASC 280-10-50 when determining our operating segments. Based on the operational changes to our business, the lack of discrete information provided to the CODM, and the way the CODM views and manages the business, we concluded that, beginning in the second quarter of 2019 and continuing today, there is one operating segment. The Company discloses product information based on its two primary product portfolios, Brick Products and Advanced Products, under the guidance of ASC 606, Revenue from Contracts with Customers, as additional information to evaluate our business.
The Company’s CODM, Vicor’s Chief Executive Officer, Dr. Patrizio Vinciarelli, is responsible for making decisions about resource allocations and assessing the performance of the Company’s operating segment.
Furthermore, the Company respectfully provides the following responses to the individual bullet points in the Staff’s comment.
First Bullet: Provide us with details about your management structure and how your company is organized.
Ms. Claire Erlanger
Mr. Kevin Woody
Securities and Exchange Commission
November 15, 2022
Page of 13
The executive management team that reports to the CODM is based in the United States with the majority of the team based at the Company’s headquarters in Andover, Massachusetts. The team includes the head of manufacturing operations responsible for manufacturing, supply chain and distribution activities, as well as other functional leaders for sales and marketing, engineering, information technology, human resources, and finance. Also reporting to the CODM is the head of design of microcontrollers consumed across all Vicor product families.
Based on design, performance, and form factor considerations, as well as the range of evolving applications for which our products are appropriate, we categorize our product portfolios as either “Advanced Products” or “Brick Products.” The Advanced Products category consists of our more recently introduced products, which are largely used to implement our proprietary Factorized Power Architecture™, an innovative power distribution architecture enabling flexible, rapid power system design using individual components optimized to perform a specific conversion function.
The Brick Products category largely consists of our broad and well-established families of integrated power converters, incorporating multiple conversion stages, used in conventional power systems architectures. Given the growth profiles of the markets we serve with our Advanced Products line and our Brick Products line, our strategy involves a transition in organizational focus, emphasizing investment in our Advanced Products line and targeting high growth market segments with a low-mix, high-volume operational model, while maintaining a profitable business in the mature market segments we serve with our Brick Products line with a high-mix, low-volume operational model.
Both product lines are built in the Company’s manufacturing facility in Andover, Massachusetts employing similar processing and production techniques, and are supported and managed by the same sales and marketing, engineering, and administrative organizations.
Second Bullet: Describe the role of your CODM and each of the individuals reporting to the CODM.
As previously mentioned, the Company’s CODM is Dr. Vinciarelli, Vicor’s founder, Chairman of the Board, President, and Chief Executive Officer, who holds approximately 80% of share-based voting control and approximately 48% of all outstanding shares of our common stock. Vicor is a controlled company under the rules of The NASDAQ Stock Market. Dr. Vinciarelli has comprehensive oversight of the consolidated Company affairs and is the key, controlling individual making decisions about the resources to be allocated.
Ms. Claire Erlanger
Mr. Kevin Woody
Securities and Exchange Commission
November 15, 2022
Page of 13
The CODM determines the Company’s overall strategy and is responsible for the allocation of resources and assessment of operating performance. In particular, he makes the Company’s key operating decisions related to how much to invest in the consolidated business, as well as corporate overhead and research and development activities. He also makes the Company’s key strategic and operating decisions, including launching new products and offerings, approving significant capital and research and development expenditures, implementing brand marketing strategies, and directing strategic partnerships and initiatives to further key manufacturing capabilities.
The following individuals report directly to the CODM and support the consolidated business. These individuals are responsible for managing the following functional areas: manufacturing operations including manufacturing, supply chain and distribution activities, sales and marketing, engineering, information technology, human resources, and finance and also include the head of design of microcontrollers consumed across all Vicor products.
•
Michael McNamara- Corporate Vice President, General Manager, Operations
•
Philip Davies- Corporate Vice President, Global Sales and Marketing
•
Sean Crilly- Corporate Vice President, Engineering, Power Systems
•
Al Doyle- Corporate Vice President and Chief Information Officer
•
Nancy Grava- Corporate Vice President, Human Resources
•
James Schmidt- Corporate Vice President, Chief Financial Officer, Treasurer and Corporate Secretary
•
Claudio Tuozzolo- Corporate Vice President and President of Vicor Power Components
Despite the titles and roles of the members of the executive management team, Dr. Vinciarelli firmly asserts his control over all strategic, product development, and operational matters.
Third Bullet: Identify and describe the role of each of your segment managers.
The Company does not have any segment managers and is functional based on the consolidated operations of the business.
Fourth Bullet: Describe the key operating decisions, who makes these decisions, how performance is assessed and how resources are allocated within your business.
The Company’s key operating decisions relate to the allocation of resources and investments for (i) the continued growth and increased profitability of the business, (ii) the product portfolio, and (iii) research and development activities that relate to expected future products to meet customer demands. Consistently, decisions related to research and development activities, new designs, markets, and manufacturing capabilities are key operating decisions, all of which are made by the CODM.
Ms. Claire Erlanger
Mr. Kevin Woody
Securities and Exchange Commission
November 15, 2022
Page of 13
Dr. Vinciarelli’s review since early 2019 has been on consolidated financial results, major customer accounts, and new product initiatives, particularly on a product line basis within our Brick Products line and our Advanced Products line. Given the growth profiles of the markets the Company serves, the Company’s strategy has evolved with a transition in organizational focus, emphasizing investment in Advanced Products, which target high growth market segments with a low-mix, high-volume operational model, while maintaining a profitable business in mature market segments served with Brick Products with a high-mix, low-volume operational model.
Performance measures used in the assessment of the Company and how resources are allocated are as follows:
•
Consolidated and Product Line Net Revenues: Measure used by the CODM to assess overall consolidated top line performance of the Company. Consolidated Net Revenue is reviewed by the CODM and the executive management team.
•
Consolidated Gross Margin: Measure used by the Company to assess profitability of the products sold, which includes cost of revenues.
•
Consolidated Operating Margin: Measure used by the Company to assess overall profitability and level of investment across the consolidated Company, which includes Income from Operations after Selling, general and administrative expenses and Research and development expenses. The CODM and executive management team are responsible for managing the overall results of the Consolidated Operating Margin.
•
Bookings and Backlog: Metrics used by the Company to assess overall amount and volume of bookings activity and remaining backlog. Bookings and Backlog are reviewed by the CODM and the Company’s executive management team.
Fifth Bullet: Tell us how often the CODM meets with his direct reports, the financial information the CODM reviews in conjunction with those meetings, and the other participants at those meetings.
Our CODM meets with those reporting to him on a regular and as-needed basis, including individual meetings and formal meetings, such as weekly meetings of the executive leadership team. These meetings are held with the CODM’s direct reports to obtain updates on key initiatives, including initiatives related to people, development, projects, engineering design and strategy. Our CODM is a PhD Engineer so the focus of these meetings tends to be customer, product and operational in nature and financial information is not regularly prepared for these meetings.
Ms. Claire Erlanger
Mr. Kevin Woody
Securities and Exchange Commission
November 15, 2022
Page of 13
However, on a weekly basis, the CODM participates in a revenue update meeting where he receives weekly and quarter to date revenue information relevant to monitoring our business on a product line and consolidated basis. Such information relates to actual, planned and estimated revenue throughout the month and on a quarter to date basis, as well as the status of bookings and backlog. The CODM does not receive a measure of profitability below the consolidated level.
Sixth Bullet: Explain how budgets are prepared, who approves the budget at each step of the process, the level of detail discussed at each step, and the level at which the CODM makes changes to the budget.
The Company does not utilize a typical budget process, rather we use a rolling plan approach looking out to the next quarter and to the end of the then-current fiscal year in our planning cycle. At the end of each year, we will plan for the next full year. The plan starts with a product line revenue goal being determined and agreed to by the operations and sales teams to ensure that demand and supply are achievable in the given planning horizon. The revenue goal, along with the current bookings and backlog reporting, will help form a view of the product mix to be manufactured, along with the associated costs to manufacture the products to determine the consolidated gross margin amount at the total company level. Operating expenses for sales, general and administrative functions, and research and development expenses are determined based upon historical trends, run rates, and future growth plans to ultimately build a consolidated Company rolling plan and Income from Operations.
The plan is reviewed with the CODM for necessary changes on a quarterly basis, compared with actual results and informed by strategic considerations as well as external factors such as the macroeconomic environment and specific customer information. Any updates required due to significant changes for new business initiatives, manufacturing capabilities or current market conditions are incorporated into the plan during the next update cycle.
As discussed above, the discrete financial information that is available and regularly provided to the CODM that is used to allocate resources, assess the operating results of the business including comparison to plans, and make the key operating decisions of the Company includes product line revenue details and overall profitability on a consolidated basis.
Seventh Bullet: Describe the basis for determining the compensation for each individual that reports to the CODM.
Ms. Claire Erlanger
Mr. Kevin Woody
Securities and Exchange Commission
November 15, 2022
Page of 13
The Company respectfully advises the Staff that the determination of compensation for the Company’s executive officers is described in its Definitive Proxy Statement on Schedule 14A, filed with the Commission on April 29, 2022. The guidelines and principles described therein are applied to the CODM’s direct reports. The Company further notes that when determining compensation for the CODM’s direct reports, none are compensated based on the financial performance of any specific
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CORRESP 1 filename1.htm CORRESP November 15, 2022 Via EDGAR Ms. Claire Erlanger Mr. Kevin Woody Office of Manufacturing Division of Corporation Finance Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549-0306 Re: Vicor Corporation Form 10-K for the Year Ended December 31, 2021 Form 10-Q for the Quarter Ended June 30, 2022 File No. 000-18277 Dear Ms. Erlanger and Mr. Woody: This letter is submitted on behalf of Vicor Corporation (“Vicor” or the “Company”) in response to comments of the staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “Commission”) with respect to the Company’s Form 10-K for the year ended December 31, 2021 and Form 10-Q for the quarter ended June 30, 2022, as set forth in the letter dated November 1, 2022, from the Staff to Mr. James Schmidt (the “Comment Letter”). For ease of reference, the text of the Comment Letter has been reproduced herein with responses below each numbered comment. Form 10-K for the Year Ended December 31, 2021 Note 17. Segment Information, page 71 1. We note your disclosure that in the second quarter of 2019, management determined, with the approval of the Company’s BOD and CODM, Dr. Vinciarelli, you would report as one segment, rather than under the three segment approach previously employed since 2007. We also note your disclosure that your CODM now determines the allocation of resources based upon the two product groupings, which constitute one segment. Please clarify for us if you are referring to one reportable segment, or one operating segment. If you believe you have one reportable segment, but more than one operating segment, please provide us your aggregation analysis under ASC 280-10-50-11. If you believe you only have one operating segment, please provide us the following information: Ms. Claire Erlanger Mr. Kevin Woody Securities and Exchange Commission November 15, 2022 Page 2 of 13 • Provide us with details about your management structure and how your company is organized; • Describe the role of your CODM and each of the individuals reporting to the CODM; • Identify and describe the role of each of your segment managers; • Describe the key operating decisions, who makes these decisions, how performance is assessed and how resources are allocated within your business; • Tell us how often the CODM meets with his direct reports, the financial information the CODM reviews in conjunction with those meetings, and the other participants at those meetings; • Explain how budgets are prepared, who approves the budget at each step of the process, the level of detail discussed at each step, and the level at which the CODM makes changes to the budget; and • Describe the basis for determining the compensation for each individual that reports to the CODM. Response to Comment No. 1 The Company acknowledges the Staff’s comment and respectfully advises the Staff that, in accordance with Accounting Standards Codification (“ASC”) 280, the Company considered the information provided to and used by its Chief Operating Decision Maker (“CODM”) for evaluating performance of the operating segment and other information used to evaluate the segment’s financial performance or make resource allocation decisions when assessing the appropriate segments disclosures. We considered the provisions of ASC 280-10-50 when determining our operating segments. Based on the operational changes to our business, the lack of discrete information provided to the CODM, and the way the CODM views and manages the business, we concluded that, beginning in the second quarter of 2019 and continuing today, there is one operating segment. The Company discloses product information based on its two primary product portfolios, Brick Products and Advanced Products, under the guidance of ASC 606, Revenue from Contracts with Customers, as additional information to evaluate our business. The Company’s CODM, Vicor’s Chief Executive Officer, Dr. Patrizio Vinciarelli, is responsible for making decisions about resource allocations and assessing the performance of the Company’s operating segment. Furthermore, the Company respectfully provides the following responses to the individual bullet points in the Staff’s comment. First Bullet: Provide us with details about your management structure and how your company is organized. Ms. Claire Erlanger Mr. Kevin Woody Securities and Exchange Commission November 15, 2022 Page 3 of 13 The executive management team that reports to the CODM is based in the United States with the majority of the team based at the Company’s headquarters in Andover, Massachusetts. The team includes the head of manufacturing operations responsible for manufacturing, supply chain and distribution activities, as well as other functional leaders for sales and marketing, engineering, information technology, human resources, and finance. Also reporting to the CODM is the head of design of microcontrollers consumed across all Vicor product families. Based on design, performance, and form factor considerations, as well as the range of evolving applications for which our products are appropriate, we categorize our product portfolios as either “Advanced Products” or “Brick Products.” The Advanced Products category consists of our more recently introduced products, which are largely used to implement our proprietary Factorized Power Architecture™, an innovative power distribution architecture enabling flexible, rapid power system design using individual components optimized to perform a specific conversion function. The Brick Products category largely consists of our broad and well-established families of integrated power converters, incorporating multiple conversion stages, used in conventional power systems architectures. Given the growth profiles of the markets we serve with our Advanced Products line and our Brick Products line, our strategy involves a transition in organizational focus, emphasizing investment in our Advanced Products line and targeting high growth market segments with a low-mix, high-volume operational model, while maintaining a profitable business in the mature market segments we serve with our Brick Products line with a high-mix, low-volume operational model. Both product lines are built in the Company’s manufacturing facility in Andover, Massachusetts employing similar processing and production techniques, and are supported and managed by the same sales and marketing, engineering, and administrative organizations. Second Bullet: Describe the role of your CODM and each of the individuals reporting to the CODM. As previously mentioned, the Company’s CODM is Dr. Vinciarelli, Vicor’s founder, Chairman of the Board, President, and Chief Executive Officer, who holds approximately 80% of share-based voting control and approximately 48% of all outstanding shares of our common stock. Vicor is a controlled company under the rules of The NASDAQ Stock Market. Dr. Vinciarelli has comprehensive oversight of the consolidated Company affairs and is the key, controlling individual making decisions about the resources to be allocated. Ms. Claire Erlanger Mr. Kevin Woody Securities and Exchange Commission November 15, 2022 Page 4 of 13 The CODM determines the Company’s overall strategy and is responsible for the allocation of resources and assessment of operating performance. In particular, he makes the Company’s key operating decisions related to how much to invest in the consolidated business, as well as corporate overhead and research and development activities. He also makes the Company’s key strategic and operating decisions, including launching new products and offerings, approving significant capital and research and development expenditures, implementing brand marketing strategies, and directing strategic partnerships and initiatives to further key manufacturing capabilities. The following individuals report directly to the CODM and support the consolidated business. These individuals are responsible for managing the following functional areas: manufacturing operations including manufacturing, supply chain and distribution activities, sales and marketing, engineering, information technology, human resources, and finance and also include the head of design of microcontrollers consumed across all Vicor products. • Michael McNamara- Corporate Vice President, General Manager, Operations • Philip Davies- Corporate Vice President, Global Sales and Marketing • Sean Crilly- Corporate Vice President, Engineering, Power Systems • Al Doyle- Corporate Vice President and Chief Information Officer • Nancy Grava- Corporate Vice President, Human Resources • James Schmidt- Corporate Vice President, Chief Financial Officer, Treasurer and Corporate Secretary • Claudio Tuozzolo- Corporate Vice President and President of Vicor Power Components Despite the titles and roles of the members of the executive management team, Dr. Vinciarelli firmly asserts his control over all strategic, product development, and operational matters. Third Bullet: Identify and describe the role of each of your segment managers. The Company does not have any segment managers and is functional based on the consolidated operations of the business. Fourth Bullet: Describe the key operating decisions, who makes these decisions, how performance is assessed and how resources are allocated within your business. The Company’s key operating decisions relate to the allocation of resources and investments for (i) the continued growth and increased profitability of the business, (ii) the product portfolio, and (iii) research and development activities that relate to expected future products to meet customer demands. Consistently, decisions related to research and development activities, new designs, markets, and manufacturing capabilities are key operating decisions, all of which are made by the CODM. Ms. Claire Erlanger Mr. Kevin Woody Securities and Exchange Commission November 15, 2022 Page 5 of 13 Dr. Vinciarelli’s review since early 2019 has been on consolidated financial results, major customer accounts, and new product initiatives, particularly on a product line basis within our Brick Products line and our Advanced Products line. Given the growth profiles of the markets the Company serves, the Company’s strategy has evolved with a transition in organizational focus, emphasizing investment in Advanced Products, which target high growth market segments with a low-mix, high-volume operational model, while maintaining a profitable business in mature market segments served with Brick Products with a high-mix, low-volume operational model. Performance measures used in the assessment of the Company and how resources are allocated are as follows: • Consolidated and Product Line Net Revenues: Measure used by the CODM to assess overall consolidated top line performance of the Company. Consolidated Net Revenue is reviewed by the CODM and the executive management team. • Consolidated Gross Margin: Measure used by the Company to assess profitability of the products sold, which includes cost of revenues. • Consolidated Operating Margin: Measure used by the Company to assess overall profitability and level of investment across the consolidated Company, which includes Income from Operations after Selling, general and administrative expenses and Research and development expenses. The CODM and executive management team are responsible for managing the overall results of the Consolidated Operating Margin. • Bookings and Backlog: Metrics used by the Company to assess overall amount and volume of bookings activity and remaining backlog. Bookings and Backlog are reviewed by the CODM and the Company’s executive management team. Fifth Bullet: Tell us how often the CODM meets with his direct reports, the financial information the CODM reviews in conjunction with those meetings, and the other participants at those meetings. Our CODM meets with those reporting to him on a regular and as-needed basis, including individual meetings and formal meetings, such as weekly meetings of the executive leadership team. These meetings are held with the CODM’s direct reports to obtain updates on key initiatives, including initiatives related to people, development, projects, engineering design and strategy. Our CODM is a PhD Engineer so the focus of these meetings tends to be customer, product and operational in nature and financial information is not regularly prepared for these meetings. Ms. Claire Erlanger Mr. Kevin Woody Securities and Exchange Commission November 15, 2022 Page 6 of 13 However, on a weekly basis, the CODM participates in a revenue update meeting where he receives weekly and quarter to date revenue information relevant to monitoring our business on a product line and consolidated basis. Such information relates to actual, planned and estimated revenue throughout the month and on a quarter to date basis, as well as the status of bookings and backlog. The CODM does not receive a measure of profitability below the consolidated level. Sixth Bullet: Explain how budgets are prepared, who approves the budget at each step of the process, the level of detail discussed at each step, and the level at which the CODM makes changes to the budget. The Company does not utilize a typical budget process, rather we use a rolling plan approach looking out to the next quarter and to the end of the then-current fiscal year in our planning cycle. At the end of each year, we will plan for the next full year. The plan starts with a product line revenue goal being determined and agreed to by the operations and sales teams to ensure that demand and supply are achievable in the given planning horizon. The revenue goal, along with the current bookings and backlog reporting, will help form a view of the product mix to be manufactured, along with the associated costs to manufacture the products to determine the consolidated gross margin amount at the total company level. Operating expenses for sales, general and administrative functions, and research and development expenses are determined based upon historical trends, run rates, and future growth plans to ultimately build a consolidated Company rolling plan and Income from Operations. The plan is reviewed with the CODM for necessary changes on a quarterly basis, compared with actual results and informed by strategic considerations as well as external factors such as the macroeconomic environment and specific customer information. Any updates required due to significant changes for new business initiatives, manufacturing capabilities or current market conditions are incorporated into the plan during the next update cycle. As discussed above, the discrete financial information that is available and regularly provided to the CODM that is used to allocate resources, assess the operating results of the business including comparison to plans, and make the key operating decisions of the Company includes product line revenue details and overall profitability on a consolidated basis. Seventh Bullet: Describe the basis for determining the compensation for each individual that reports to the CODM. Ms. Claire Erlanger Mr. Kevin Woody Securities and Exchange Commission November 15, 2022 Page 7 of 13 The Company respectfully advises the Staff that the determination of compensation for the Company’s executive officers is described in its Definitive Proxy Statement on Schedule 14A, filed with the Commission on April 29, 2022. The guidelines and principles described therein are applied to the CODM’s direct reports. The Company further notes that when determining compensation for the CODM’s direct reports, none are compensated based on the financial performance of any specific