# NVE Corp: Form 10-Q for the period ended Dec 31, 2012

- Company: [NVE Corp](/companies/nvec.md) (CIK 724910)
- Form: 10-Q
- Filed: 2013-01-23
- Accepted by EDGAR: Jan 23, 2013, 21:24 ET
- Period: 2012-12-31
- Accession: 0000724910-13-000004
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/724910/000072491013000004/NVE_Q3_FY2013_10Q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/724910/000072491013000004/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2012-12-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2012-10-01 to 2012-12-31 | $6.5m | us-gaap:Revenues |
| Revenue | 9 months, 2012-04-01 to 2012-12-31 | $19.8m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2012-10-01 to 2012-12-31 | $1.7m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2012-04-01 to 2012-12-31 | $5.1m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2012-10-01 to 2012-12-31 | $4.8m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2012-04-01 to 2012-12-31 | $14.7m | us-gaap:GrossProfit |
| Research and development | 3 months, 2012-10-01 to 2012-12-31 | $501.3k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2012-04-01 to 2012-12-31 | $1.8m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2012-10-01 to 2012-12-31 | $570.7k | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2012-04-01 to 2012-12-31 | $1.7m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2012-10-01 to 2012-12-31 | $3.7m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2012-04-01 to 2012-12-31 | $11.1m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2012-10-01 to 2012-12-31 | $1.4m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2012-04-01 to 2012-12-31 | $4.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2012-10-01 to 2012-12-31 | $2.9m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2012-04-01 to 2012-12-31 | $8.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2012-10-01 to 2012-12-31 | $0.60 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2012-04-01 to 2012-12-31 | $1.80 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2012-10-01 to 2012-12-31 | $0.60 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2012-04-01 to 2012-12-31 | $1.80 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2012-10-01 to 2012-12-31 | 4,872,019 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2012-04-01 to 2012-12-31 | 4,856,851 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2012-04-01 to 2012-12-31 | $8.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2012-04-01 to 2012-12-31 | $1.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2012-12-31 | $843.0k | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2012-12-31 | $24.2m | us-gaap:AssetsCurrent |
| Total assets | at 2012-12-31 | $92.6m | us-gaap:Assets |
| Current liabilities | at 2012-12-31 | $1.8m | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2012-12-31 | $90.8m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 10,158 characters.

### Forward-looking statements

Some of the statements made in this Report or in the documents incorporated by reference in this Report and in other materials filed or to be filed by us with the Securities and Exchange Commission (“SEC”) as well as information included in verbal or written statements made by us constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to the safe harbor provisions of the reform act. Forward-looking statements may be identified by the use of the terminology such as may, will, expect, anticipate, intend, believe, estimate, should, or continue, or the negatives of these terms or other variations on these words or comparable terminology. To the extent that this Report contains forward-looking statements regarding the financial condition, operating results, business prospects or any other aspect of NVE, you should be aware that our actual financial condition, operating results and business performance may differ materially from that projected or estimated by us in the forward-looking statements. We have attempted to identify, in context, some of the factors that we currently believe may cause actual future experience and results to differ from their current expectations. These differences may be caused by a variety of factors, including but not limited to risks associated with competition, progress in research and development activities by us and others, variations in costs that are beyond our control, decreased sales, failure of suppliers to meet our requirements, loss of supply from any of our packaging vendors, failure to obtain new customers, inability to meet customer technical requirements, litigation risks, and other specific risks that may be alluded to in this Report or in the documents incorporated by reference in this Report.

More information regarding our risks and uncertainties are contained in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended March 31, 2012, as updated in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2012.

### General

NVE Corporation, referred to as NVE, we, us, or our, develops and sells devices that use spintronics, a nanotechnology that relies on electron spin rather than electron charge to acquire, store and transmit information. We manufacture high-performance spintronic products including sensors and couplers that are used to acquire and transmit data. We have also licensed our spintronic magnetoresistive random access memory technology, commonly known as MRAM.

### Critical accounting policies

A description of our critical accounting policies is provided in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended March 31, 2012. At December 31, 2012 our critical accounting policies and estimates continued to include research and development contract percentage of completion estimation, inventory valuation, allowance for doubtful accounts estimation, and deferred tax assets estimation.

### Quarter ended December 31, 2012 compared to quarter ended December 31, 2011

The table shown below summarizes the percentage of revenue and quarter-to-quarter changes for various items:

*Revenue*

| 2012 | Percentage of Revenue Quarter Ended Dec. 31 | 2011 | Quarter- to-Quarter Change |
| --- | ---: | ---: | ---: |
| Product sales | 88.3% | 87.6% | 6.8% |
| Contract research and development | 11.7% | 12.4% | (0.2)% |
| Total revenue | 100.0% | 100.0% | 6.0% |
| Cost of sales | 26.6% | 35.3% | (20.1)% |
| Gross profit | 73.4% | 64.7% | 20.2% |
| Expenses |  |  |  |
| Selling, general, and administrative | 8.8% | 8.4% | 9.7% |
| Research and development | 7.7% | 11.7% | (30.2)% |
| Total expenses | 16.5% | 20.1% | (13.5)% |
| Income from operations | 56.9% | 44.6% | 35.3% |
| Interest income | 9.2% | 9.6% | 1.5% |
| Income before taxes | 66.1% | 54.2% | 29.3% |
| Provision for income taxes | 21.7% | 17.0% | 35.1% |
| Net income | 44.4% | 37.2% | 26.7% |

Total revenue for the quarter ended ended December 31, 2012 (the third quarter of fiscal 2013) increased 6% to $6,525,221 compared to $6,158,526 for the quarter ended December 31, 2011 (the third quarter of fiscal 2012). The increase was due to a 7% increase in product sales.

Gross profit margin increased to 73% of revenue for the third quarter of fiscal 2013 compared to 65% for the third quarter of fiscal 2012, due to a more favorable revenue mix and more efficient product manufacturing.

Total expenses decreased 13% for the third quarter of fiscal 2013 compared to the third quarter of fiscal 2012 due to a 30% decrease in research and development expense, partially offset by a 10% increase in selling, general, and administrative expense. The decrease in research and development expense was due to the completion of certain research and development projects, and may not be representative of future trends. Research and development expense can fluctuate significantly depending on staffing, project requirements, and contract research and development activities. The increase in selling, general, and administrative expense was primarily due to increases in sales commissions and legal expenses.

The provision for income taxes was $1,415,590 for the third quarter of fiscal 2013 compared to $1,047,519 for the third quarter of fiscal 2012. The effective tax rate was 33% of income before taxes for the third quarter of fiscal 2013 compared to 31% for the third quarter of fiscal 2012. The increase in effective tax rate was due to a higher Federal effective tax rate. Our effective tax rates can fluctuate due to a number of factors, including Federal and state tax rates and regulations, the mix between taxable and tax-exempt securities in our marketable securities, and other factors, some of which are outside our control.

The 27% increase in net income in the third quarter of fiscal 2013 compared to the prior-year quarter was primarily due to increased product sales and increased gross profit margin.

### Nine months ended December 31, 2012 compared to nine months ended December 31, 2011

The table shown below summarizes the percentage of revenue and period-to-period changes for various items:

*Revenue*

| 2012 | Percentage of Revenue Nine Months Ended Dec. 31 | 2011 | Period- to-Period Change |
| --- | ---: | ---: | ---: |
| Product sales | 91.0% | 85.7% | 0.3% |
| Contract research and development | 9.0% | 14.3% | (40.4)% |
| Total revenue | 100.0% | 100.0% | (5.5)% |
| Cost of sales | 26.0% | 33.6% | (27.0)% |
| Gross profit | 74.0% | 66.4% | 5.3% |
| Expenses |  |  |  |
| Selling, general, and administrative | 8.6% | 8.3% | (1.6)% |
| Research and development | 9.1% | 8.7% | (1.3)% |
| Total expenses | 17.7% | 17.0% | (1.4)% |
| Income from operations | 56.3% | 49.4% | 7.7% |
| Interest income | 9.0% | 8.3% | 1.7% |
| Income before taxes | 65.3% | 57.7% | 6.8% |
| Provision for income taxes | 21.3% | 18.2% | 10.1% |
| Net income | 44.0% | 39.5% | 5.3% |

Total revenue for the nine months ended December 31, 2012 decreased 6% to $19,810,922 compared to $20,970,921 for the nine months ended December 31, 2011, due to a 40% decrease in contract research and development revenue.

The decrease in research and development revenue was due to the completion of certain contracts and contract activities. Contract research and development activities can fluctuate for a number of reasons, some of which are beyond our control, and there can be no assurance of additional or follow-on contracts for expired or completed contracts.

Gross profit margin increased to 74% of revenue for the first nine months of fiscal 2013 compared to 66% for the first nine months of fiscal 2012, due to a more favorable revenue mix, a more favorable product sales mix, and more efficient product manufacturing.

Total expenses decreased 1% for the first nine months of fiscal 2013 compared to the first nine months of fiscal 2012 due to a 2% decrease in research and development expense and a 1% decrease in selling, general, and administrative expense. The expense decreases may not be representative of future periods. Research and development expense can fluctuate significantly depending on staffing, project requirements, and contract research and development activities. Selling, general, and administrative expense can fluctuate significantly depending on a number of factors including legal expenses.

The provision for income taxes was $4,211,964 for the first nine months of fiscal 2013 compared to $3,825,819 for the first nine months of fiscal 2012. The effective tax rate was 33% of income before taxes for the first nine months of fiscal 2013 compared to 32% for the first nine months of fiscal 2012. Our effective tax rates can fluctuate due to a number of factors, including Federal and state tax rates and regulations, the mix between taxable and tax-exempt securities in our marketable securities, and other factors, some of which are outside our control.

The 5% increase in net income in the first nine months of fiscal 2013 compared to the prior-year period was primarily due to increased gross profit margin, partially offset by decreased contract research and development revenue.

### Liquidity and capital resources

At December 31, 2012 we had $81,228,528 in cash plus short-term and long-term marketable securities compared to $73,541,463 at March 31, 2012. Our entire portfolio of short-term and long-term marketable securities is classified as available for sale. The increase in cash plus marketable securities in the first nine months of fiscal 2013 was primarily due to $8,422,080 in net cash provided by operating activities and a $800,305 net increase in the market value of our marketable securities, partially offset by purchases of fixed assets of $1,607,130. Fixed asset purchases were primarily for production equipment and leasehold improvements.

We currently believe our working capital and cash generated from operations will be adequate for our needs at least for the next 12 months.

## Market risk

As filed, 1,036 characters.

The primary objective of our investment activities is to preserve principal while at the same time maximizing after-tax yields without significantly increasing risk. To achieve this objective, we maintain our portfolio of cash equivalents and marketable securities in a variety of securities including government agency obligations, municipal obligations, corporate obligations, and money market funds. Short-term and long-term marketable securities are generally classified as available-for-sale and consequently are recorded on the balance sheet at fair value with unrealized gains or losses reported as a separate component of accumulated other comprehensive income, net of estimated tax. Marketable securities as of December 31, 2012 had remaining maturities between one day and 246 weeks. Our short-term and long-term marketable securities had a fair market value of $80,385,505 at December 31, 2012, representing approximately 87% of our total assets. We have not used derivative financial instruments in our investment portfolio.

## Controls and procedures

As filed, 1,284 characters.

Management, with the participation of the Chief Executive Officer and Chief Financial Officer, has performed an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (Exchange Act)) as of the end of the period covered by this report. This evaluation included consideration of the controls, processes and procedures that are designed to ensure that information required to be disclosed by us in the reports we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective.

During the quarter ended December 31, 2012, there was no change in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 247 characters.

There have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2012 as updated in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2012.

Filed Jan 23, 2013.
Source: SEC EDGAR, the filing index for accession 0000724910-13-000004. Last ingested by Listed: Oct 24, 2026, 14:55 ET. No prices; not investment advice.