UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended December 31, 2015
For the transition
period from to
Commission File Number: 000-12196
Minnesota | 41-1424202 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
11409 Valley View Road, Eden Prairie, Minnesota | 55344 | |
(Address of principal executive offices) | (Zip Code) | |
(952) 829-9217 | ||
(Registrants telephone number, including area code) |
Large accelerated filer [ ] | Accelerated filer [X] |
Non-accelerated filer [ ] (Do not check if a smaller reporting company) | Smaller reporting company [ ] |
(Unaudited) Dec. 31, 2015 |
March 31, 2015* | ||||||
ASSETS | |||||||
Current assets | |||||||
Cash and cash equivalents
|
$ | 3,594,164 | $ | 9,437,262 | |||
Marketable securities, short term
|
23,629,484 | 20,099,288 | |||||
Accounts receivable, net of allowance for uncollectible
accounts of $15,000
|
1,753,689 | 2,963,974 | |||||
Inventories
|
3,108,911 | 3,742,492 | |||||
Deferred tax assets
|
152,789 | 102,052 | |||||
Prepaid expenses and other assets
|
903,568 |
574,913 | |||||
Total current assets | 33,142,605 | 36,919,981 | |||||
Fixed assets | |||||||
Machinery and equipment
|
8,766,708 | 8,604,926 | |||||
Leasehold improvements
|
1,539,965 | 1,524,298 | |||||
10,306,673 | 10,129,224 | ||||||
Less accumulated depreciation and amortization
|
8,502,002 | 7,873,816 | |||||
Net fixed assets | 1,804,671 | 2,255,408 | |||||
Long-term deferred tax assets | 99,958 | - | |||||
Marketable securities, long term | 68,127,073 | 70,913,807 | |||||
Total assets | $ | 103,174,307 | $ | 110,089,196 | |||
LIABILITIES AND SHAREHOLDERS EQUITY | |||||||
Current liabilities | |||||||
Accounts payable
|
$ | 209,686 | $ | 358,818 | |||
Accrued payroll and other
|
650,846 | 1,127,136 | |||||
Deferred revenue
|
714,805 | - | |||||
Total current liabilities | 1,575,337 | 1,485,954 | |||||
Long-term deferred tax liabilities | - | 275,708 | |||||
Shareholders equity | |||||||
Common stock, $0.01 par value,
6,000,000 shares authorized; 4,844,845 issued and outstanding as of December 31,
2015 and 4,857,953 issued and outstanding as of March 31, 2015
|
48,449 | 48,580 | |||||
Additional paid-in capital
|
19,665,966 | 20,850,762 | |||||
Accumulated other comprehensive income
|
81,357 | 746,447 | |||||
Retained earnings
|
81,803,198 | 86,681,745 | |||||
Total shareholders equity | 101,598,970 |
108,327,534 |
|||||
Total liabilities and shareholders equity | $ | 103,174,307 | $ | 110,089,196 |
Quarter Ended Dec. 31 | |||||||
2015 | 2014 | ||||||
Revenue | |||||||
Product sales
|
$ | 5,025,041 | $ | 5,883,690 | |||
Contract research and development
|
990,974 |
408,058 | |||||
Total revenue | 6,016,015 | 6,291,748 | |||||
Cost of sales | 1,508,361 | 1,473,655 | |||||
Gross profit | 4,507,654 | 4,818,093 | |||||
Expenses | |||||||
Selling, general, and administrative
|
406,676 | 533,695 | |||||
Research and development
|
738,657 | 694,758 | |||||
Total expenses | 1,145,333 | 1,228,453 | |||||
Income from operations | 3,362,321 | 3,589,640 | |||||
Interest income | 468,367 | 557,843 | |||||
Income before taxes | 3,830,688 | 4,147,483 | |||||
Provision for income taxes | 1,253,237 | 1,354,577 | |||||
Net income | $ | 2,577,451 | $ | 2,792,906 | |||
Net income per share basic | $ | 0.53 | $ | 0.57 | |||
Net income per share diluted | $ | 0.53 | $ | 0.57 | |||
Cash dividends declared per common share | $ | 1.00 | $ | - | |||
Weighted average shares outstanding | |||||||
Basic
|
4,844,845 | 4,857,953 | |||||
Diluted
|
4,846,970 | 4,876,074 |
Quarter Ended Dec. 31 | |||||||
2015 | 2014 | ||||||
Net income | $ | 2,577,451 | $ | 2,792,906 | |||
Unrealized loss from marketable securities, net of tax | (321,222 | ) | (41,941 | ) | |||
Comprehensive income | $ | 2,256,229 | $ | 2,750,965 |
Nine Months Ended Dec. 31 | |||||||
2015 | 2014 | ||||||
Revenue | |||||||
Product sales
|
$ | 19,197,578 | $ | 22,345,577 | |||
Contract research and development
|
2,419,113 | 666,579 | |||||
Total revenue | 21,616,691 | 23,012,156 | |||||
Cost of sales | 5,146,803 | 4,641,633 | |||||
Gross profit | 16,469,888 | 18,370,523 | |||||
Expenses | |||||||
Selling, general, and administrative
|
1,416,071 | 1,788,944 | |||||
Research and development
|
2,048,620 | 2,285,465 | |||||
Total expenses | 3,464,691 | 4,074,409 | |||||
Income from operations | 13,005,197 | 14,296,114 | |||||
Interest income | 1,422,696 | 1,669,320 | |||||
Income before taxes | 14,427,893 | 15,965,434 | |||||
Provision for income taxes | 4,736,421 | 5,259,796 | |||||
Net income | $ | 9,691,472 | $ | 10,705,638 | |||
Net income per share basic | $ | 2.00 | $ | 2.21 | |||
Net income per share diluted | $ | 2.00 | $ | 2.20 | |||
Cash dividends declared per common share | $ | 3.00 | $ | - | |||
Weighted average shares outstanding | |||||||
Basic
|
4,853,970 | 4,854,702 | |||||
Diluted
|
4,857,103 | 4,871,270 |
Nine Months Ended Dec. 31 | |||||||
2015 | 2014 | ||||||
Net income | $ | 9,691,472 | $ | 10,705,638 | |||
Unrealized loss from marketable securities, net of tax | (665,090 | ) | (351,824 | ) | |||
Comprehensive income | $ | 9,026,382 | $ | 10,353,814 |
Nine Months Ended Dec. 31 | |||||||
2015 | 2014 | ||||||
OPERATING ACTIVITIES | |||||||
Net income | $ | 9,691,472 | $ | 10,705,638 | |||
Adjustments to reconcile net income to net cash
provided by operating activities:
|
|||||||
Depreciation and amortization
|
628,186 | 698,820 | |||||
Stock-based compensation
|
21,160 | 58,960 | |||||
Excess tax benefits
|
(352,294 | ) | (24,288 |
) | |||
Deferred income taxes
|
305,391 | 141,060 | |||||
Changes in operating assets and liabilities:
|
|||||||
Accounts receivable
|
1,210,285 | 476,495 | |||||
Inventories
|
633,581 | (478,791 | ) | ||||
Prepaid expenses and other assets
|
(328,655 | ) | (709,502 | ) | |||
Accounts payable and accrued expenses
|
(625,422 | ) | (20,142 | ) | |||
Deferred revenue
|
714,805 | - |
|||||
Net cash provided by operating activities | 11,898,509 | 10,848,250 | |||||
INVESTING ACTIVITIES | |||||||
Purchases of fixed assets | (177,449 | ) | (114,139 | ) | |||
Purchases of marketable securities | (9,613,052 |
) | (9,136,457 | ) | |||
Proceeds from maturities and sales of marketable securities | 7,825,000 | 8,610,000 | |||||
Net cash used in investing activities | (1,965,501 | ) | (640,596 |
) | |||
FINANCING ACTIVITIES | |||||||
Proceeds from sale of common stock | 292,909 | 302,701 | |||||
Excess tax benefits | 352,294 | 24,288 | |||||
Repurchase of common stock | (1,851,290 | ) | - | ||||
Payment of dividends to shareholders | (14,570,019 | ) | - | ||||
Net cash (used in) provided by financing activities | (15,776,106 | ) | 326,989 | ||||
(Decrease) increase in cash and cash equivalents | (5,843,098 | ) | 10,534,643 |
||||
Cash and cash equivalents at beginning of period | 9,437,262 | 1,262,300 | |||||
Cash and cash equivalents at end of period | $ | 3,594,164 | $ | 11,796,943 | |||
Supplemental disclosures of cash flow information: | |||||||
Cash paid during the period for income taxes
|
$ | 4,490,000 | $ | 5,600,000 |
Quarter Ended Dec. 31 | |||
2015 | 2014 | ||
Weighted average common shares outstanding basic | 4,844,845 | 4,857,953 | |
Dilutive effect of stock options | 2,125 | 18,121 | |
Shares used in computing net income per share diluted | 4,846,970 | 4,876,074 |
Nine Months Ended Dec. 31 | |||
2015 | 2014 | ||
Weighted average common shares outstanding basic | 4,853,970 | 4,854,702 | |
Dilutive effect of stock options | 3,133 | 16,568 | |
Shares used in computing net income per share diluted | 4,857,103 | 4,871,270 |
Total | <1 Year | 13 Years | 35 Years | |||||||
$ | 91,756,557 | $ | 23,629,484 | $ | 43,633,379 | $ | 24,493,694 |
As of December 31, 2015 | As of March 31, 2015 | ||||||||||||||||||||||||
Adjusted Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Market Value |
Adjusted Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Market Value |
||||||||||||||||||
Corporate bonds | $ | 90,274,572 | $ | 280,496 | $ | (153,811 | ) | $ | 90,401,257 | $ | 88,456,886 |
$ | 1,185,469 | $ | (16,371 | ) | $ | 89,625,984 | |||||||
Municipal bonds | 1,354,206 | 1,094 | - | 1,355,300 | 1,383,839 | 3,272 | - | 1,387,111 | |||||||||||||||||
Total | $ | 91,628,778 | $ | 281,590 | $ | (153,811 | ) | $ | 91,756,557 | $ | 89,840,725 | $ | 1,188,741 | $ | (16,371 | ) | $ | 91,013,095 |
Less Than 12 Months | 12 Months or Greater | Total | |||||||||||||||||||
Fair Market Value |
Gross Unrealized Losses |
Fair Market Value |
Gross Unrealized Losses |
Fair Market Value |
Gross Unrealized Losses |
||||||||||||||||
As of December 31, 2015 | |||||||||||||||||||||
Corporate bonds | $ | 39,526,380 | $ | (132,870 |
) | $ | 2,583,664 | $ | (20,941 | ) | $ | 42,110,044 | $ | (153,811 | ) | ||||||
Municipal bonds | - | - | - | - | - | - | |||||||||||||||
Total | $ | 39,526,380 | $ |
(132,870 |
) | $ | 2,583,664 | $ | (20,941 | ) | $ | 42,110,044 | $ | (153,811 | ) | ||||||
As of March 31, 2015 | |||||||||||||||||||||
Corporate bonds | $ | 3,015,900 | $ | (163 |
) | $ | 2,590,240 | $ | (16,208 |
) | $ | 5,606,140 | $ | (16,371 | ) | ||||||
Municipal bonds | - | - | - | - | - | - | |||||||||||||||
Total | $ | 3,015,900 | $ | (163 | ) | $ | 2,590,240 | $ |
(16,208 |
) | $ | 5,606,140 | $ | (16,371 | ) |
December 31, 2015 |
March
31, 2015 |
||||
Raw materials | $ | 734,094 | $ | 738,169 | |
Work in process | 1,568,449 | 2,302,751 | |||
Finished goods | 806,368 | 701,572 | |||
Total inventories | $ | 3,108,911 | $ | 3,742,492 |
Percentage
of Revenue Quarter Ended Dec. 31 |
Quarter- to-Quarter Change |
|||||||
2015 | 2014 | |||||||
Revenue | ||||||||
Product sales
|
83.5 | % | 93.5 | % | (14.6 | )% | ||
Contract research and development
|
16.5 | % | 6.5 | % | 142.9 | % | ||
Total revenue | 100.0 | % | 100.0 | % | (4.4 | )% | ||
Cost of sales | 25.1 | % | 23.4 | % | 2.4 | % | ||
Gross profit | 74.9 | % | 76.6 | % | (6.4 | )% | ||
Expenses | ||||||||
Selling, general, and administrative
|
6.7 | % | 8.5 | % | (23.8 | )% | ||
Research and development
|
12.3 | % | 11.0 | % | 6.3 | % | ||
Total expenses | 19.0 | % | 19.5 | % | (6.8 | )% | ||
Income from operations | 55.9 | % | 57.1 | % | (6.3 | )% | ||
Interest income | 7.8 | % | 8.8 | % | (16.0 | )% | ||
Income before taxes | 63.7 | % | 65.9 | % | (7.6 | )% | ||
Provision for income taxes | 20.9 | % | 21.5 | % | (7.5 | )% | ||
Net income | 42.8 | % | 44.4 | % | (7.7 | )% |
Percentage
of Revenue Nine Months Ended Dec. 31 |
Period- to-Period Change |
|||||||
2015 | 2014 | |||||||
Revenue | ||||||||
Product sales
|
88.8 | % | 97.1 | % | (14.1 |
)% | ||
Contract research and development
|
11.2 | % | 2.9 | % | 262.9 | % | ||
Total revenue | 100.0 | % | 100.0 | % | (6.1 | )% | ||
Cost of sales | 23.8 | % | 20.2 | % | 10.9 | % | ||
Gross profit | 76.2 | % | 79.8 | % | (10.3 | )% | ||
Expenses | ||||||||
Selling, general, and administrative
|
6.5 | % | 7.8 | % | (20.8 | )% | ||
Research and development
|
9.5 | % | 9.9 | % | (10.4 | )% | ||
Total expenses | 16.0 | % | 17.7 | % | (15.0 | )% | ||
Income from operations | 60.2 | % | 62.1 | % | (9.0 | )% | ||
Interest income | 6.5 | % | 7.3 | % | (14.8 | )% | ||
Income before taxes | 66.7 | % | 69.4 | % | (9.6 | )% | ||
Provision for income taxes | 21.9 | % | 22.9 | % | (10.0 | )% | ||
Net income | 44.8 | % | 46.5 | % | (9.5 | )% |
Table
of Contents
Liquidity
and capital resources
Overview
Cash and cash equivalents were $3,594,164 at December 31,
2015 compared to $9,437,262 at March 31, 2015. The $5,843,098 decrease
in cash and cash equivalents during the quarter was due to $11,898,509 in net
cash provided by operating activities, less $1,965,501 in net cash used in investing
activities and $15,776,106 in net cash used in financing activities. We currently
believe our working capital and cash generated from operations will be adequate
for our needs at least for the next 12 months.
Operating Activities
Cash provided by operating activities increased
10% to $11,898,509 compared to $10,848,250 for the prior-year period.
Accounts receivable as of December 31, 2015
decreased $1,210,285 compared to March 31, 2015, primarily due to the
timing of payments by our customers.
Inventories as of December 31, 2015 decreased
$633,581 compared to March 31, 2015, primarily due to a reduction in
work in process related to contract research and development revenue recognition
timing.
Deferred revenue as of December 31, 2015 increased
$714,805 due to payments received related to future product sales.
Investing Activities
Net cash used in investing activities in the first
nine months of fiscal 2016 was primarily due to marketable security purchases
of $9,613,052 partially offset by marketable security maturities of $7,825,000.
Purchases of fixed assets were $177,449 in the first
nine months of fiscal 2016 compared to $114,139 in the first nine months of fiscal
2015. Our capital expenditures can vary significantly depending on our needs,
equipment purchasing opportunities, and production expansion activities.
Free cash flow, which is net cash provided by operating
activities less purchases of fixed assets, was $11,721,060 for the first nine
months of fiscal 2016.
Financing Activities
Net cash used in financing activities in the first
nine months of fiscal 2016 was primarily due to $1,851,290 for repurchases of
our common stock and $14,570,019 in cash dividends to shareholders.
In addition to cash dividends to shareholders paid
in the first nine months of fiscal 2016, on January 20, 2016 we announced
that our Board had declared a cash quarterly dividend of an additional $1.00 per share
of Common Stock, or $4,844,845 based
on shares outstanding as of January 15, 2016, to be paid February 29,
2016. We plan to fund dividends through cash provided by operating activities
and proceeds from maturities of marketable securities. All future dividends will
be subject to Board approval and subject to the companys results of operations,
cash and marketable security balances, estimates of future cash requirements,
and other factors the Board may deem relevant. Furthermore, dividends may be modified
or discontinued at any time without notice.
The repurchases of our common stock in the first
nine months of fiscal 2016 were under a program announced January 21, 2009
authorizing the repurchase of up to $2,500,000 of our Common Stock and an additional
$5,000,000 announced August 27, 2015. The remaining authorization was $5,001,189
as of December 31, 2015. We intend to finance any stock repurchases
with cash provided by operating activities or maturing marketable securities.
Exhibit # | Description |
10.8 | Supply Agreement by and between the company and Phonak AG (incorporated by reference to the Form 8-K filed May 6, 2009). |
10.9+ | Amendment to Supply Agreement by and between the company and Phonak (incorporated by reference to the Form 8-K/A filed January 12, 2011). |
10.10+ | Second Amendment to Supply Agreement by and between the company and Sonova AG (incorporated by reference to the Form 8-K/A filed November 16, 2015). |
31.1 | Certification by Daniel A. Baker pursuant to Rule 13a-14(a)/15d-14(a). |
31.2 | Certification by Curt A. Reynders pursuant to Rule 13a-14(a)/15d-14(a). |
32 | Certification by Daniel A. Baker and Curt A. Reynders pursuant to 18 U.S.C. Section 1350. |
101.INS | XBRL Instance Document |
101.SCH | XBRL Taxonomy Extension Schema Document |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
NVE CORPORATION | |
(Registrant) | |
January 20, 2016 | /s/ DANIEL A. BAKER |
Date | Daniel A. Baker |
President and Chief Executive Officer | |
January 20, 2016 | /s/ CURT A. REYNDERS |
Date | Curt A. Reynders |
Chief Financial Officer |
Exhibit 31.1
CERTIFICATION
I, Daniel A. Baker,
certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of NVE Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrants other certifying
officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)
and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrants disclosure controls
and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrants internal
control over financial reporting that occurred during the registrants most
recent fiscal quarter (the registrants fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrants internal control over financial reporting;
and
5.
The registrants other certifying
officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrants auditors and the audit
committee of the registrants board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: January 20, 2016
/s/ DANIEL A. BAKER | ||
Daniel A. Baker | ||
President and Chief Executive Officer |
Exhibit 31.2
CERTIFICATION
I, Curt A. Reynders, certify
that:
1. I have reviewed this Quarterly Report on Form 10-Q of NVE Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrants other certifying
officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)
and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrants disclosure controls
and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrants internal
control over financial reporting that occurred during the registrants most
recent fiscal quarter (the registrants fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrants internal control over financial reporting;
and
5.
The registrants other certifying
officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrants auditors and the audit
committee of the registrants board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: January 20, 2016
| /s/ CURT A. REYNDERS | |
Curt A. Reynders | ||
Chief Financial Officer |