# NVE Corp: Form 10-Q for the period ended Jun 30, 2015

- Company: [NVE Corp](/companies/nvec.md) (CIK 724910)
- Form: 10-Q
- Filed: 2015-07-22
- Accepted by EDGAR: Jul 22, 2015, 20:27 ET
- Period: 2015-06-30
- Accession: 0000724910-15-000024
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/724910/000072491015000024/NVE_Q1_FY2016_10Q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/724910/000072491015000024/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2015-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2015-04-01 to 2015-06-30 | $8.3m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2015-04-01 to 2015-06-30 | $2.0m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2015-04-01 to 2015-06-30 | $6.3m | us-gaap:GrossProfit |
| Research and development | 3 months, 2015-04-01 to 2015-06-30 | $681.0k | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2015-04-01 to 2015-06-30 | $484.8k | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2015-04-01 to 2015-06-30 | $5.2m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2015-04-01 to 2015-06-30 | $1.8m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2015-04-01 to 2015-06-30 | $3.8m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2015-04-01 to 2015-06-30 | $0.78 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2015-04-01 to 2015-06-30 | $0.78 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2015-04-01 to 2015-06-30 | 4,860,848 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2015-04-01 to 2015-06-30 | $5.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2015-04-01 to 2015-06-30 | $23.1k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2015-04-01 to 2015-06-30 | $4.9m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 3 months, 2015-04-01 to 2015-06-30 | $556.8k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2015-06-30 | $12.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2015-06-30 | $37.1m | us-gaap:AssetsCurrent |
| Total assets | at 2015-06-30 | $109.6m | us-gaap:Assets |
| Current liabilities | at 2015-06-30 | $2.4m | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2015-06-30 | $107.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 9,301 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 our reliance on several large customers for a significant percentage of revenue, uncertainties related to possible renewal of agreements with large customers, uncertainties related to the economic environments in the industries we serve, uncertainties related to future contract research and development revenue, uncertainties related to future stock repurchases and dividend payments, and other specific risks that may be alluded to in this Report or in the documents incorporated by reference in this Report.

Further 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, 2015.

### 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, 2015. At June 30, 2015 our critical accounting policies and estimates continued to include investment valuation, inventory valuation, and deferred tax assets estimation.

### Quarter ended June 30, 2015 compared to quarter ended June 30, 2014

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

*Revenue*

| 2015 | Percentage of Revenue Quarter Ended June 30 | 2014 | Quarter- to-Quarter Change |
| --- | ---: | ---: | ---: |
| Product sales | 93.0% | 98.8% | (7.3)% |
| Contract research and development | 7.0% | 1.2% | 457.4% |
| Total revenue | 100.0% | 100.0% | (1.6)% |
| Cost of sales | 24.0% | 18.4% | 28.0% |
| Gross profit | 76.0% | 81.6% | (8.2)% |
| Expenses |  |  |  |
| Selling, general, and administrative | 5.8% | 7.5% | (23.0)% |
| Research and development | 8.2% | 9.5% | (15.2)% |
| Total expenses | 14.0% | 17.0% | (18.7)% |
| Income from operations | 62.0% | 64.6% | (5.5)% |
| Interest and other income | 5.9% | 6.5% | (11.4)% |
| Income before taxes | 67.9% | 71.1% | (6.0)% |
| Provision for income taxes | 22.2% | 23.3% | (6.6)% |
| Net income | 45.7% | 47.8% | (5.8)% |

Total revenue for the quarter ended June 30, 2015 (the first quarter of fiscal 2016) decreased 2% compared to the quarter ended June 30, 2014 (the first quarter of fiscal 2015). The decrease was due to a 7% decrease in product sales, partially offset by a 457% increase in contract research and development revenue.

The decrease in product sales from the prior-year quarter was due to decreased purchase volume by existing customers. Based on customer forecasts and a more aggressive pricing strategy in certain markets, we currently expect product sales for future quarters, including the remaining quarters in fiscal 2016, to be significantly less than product sales for the first quarter of fiscal 2016.

The increase in contract research and development revenue for the first quarter of fiscal 2016 was due to new contracts.

Gross profit margin decreased to 76% of revenue for the first quarter of fiscal 2016 compared to 82% for the first quarter of fiscal 2015, due primarily to a less profitable revenue mix caused by a large increase in contract research and development revenue.

Total expenses decreased 19% for the first quarter of fiscal 2016 compared to the first quarter of fiscal 2015, due to a 23% decrease in selling, general, and administrative expense and a 15% decrease in research and development expense. The decrease in selling, general, and administrative expense was primarily due to decreased performance-based compensation. The decrease in research and development expense was due to an increase in contract research and development activities, which caused us to reallocate resources to expensed research and development activities. Research and development expense can fluctuate significantly depending on staffing, project requirements, and contract research and development activities.

Interest income for the first quarter of fiscal 2016 decreased 11% due to a decrease in interest-bearing marketable securities. The decrease in marketable securities was because we used proceeds from maturating securities to help fund cash dividends, rather than reinvesting proceeds as we had generally done in the past.

The provision for income taxes was $1,843,798 for the first quarter of fiscal 2016 compared to $1,973,055 for the first quarter of fiscal 2015. The effective tax rate was 33% of income before taxes for the first quarters of fiscal 2016 and 2015.

The 6% decrease in net income in the first quarter of fiscal 2016 compared to the prior-year quarter was primarily due to decreased product sales and decreased interest income, partially offset by decreased expenses.

### Liquidity and capital resources

### Overview

Cash and cash equivalents were $12,290,435 at June 30, 2015 compared to $9,437,262 at March 31, 2015. The $2,853,173 increase in cash and cash equivalents during the quarter was due to $5,172,722 in net cash provided by operating activities and $2,513,921 net cash provided by investing activities, less $4,833,470 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

Inventories decreased $571,891, primarily due to a reduction in work in process related to contract research and development revenue recognition timing.

Income taxes payable increased $1,475,474 in the first quarter of fiscal 2016 because we had no estimated income tax payments due in the quarter.

### Investing Activities

Net cash provided by investing activities in the first quarter of fiscal 2016 was primarily due to marketable security maturities of $2,400,000.

Purchases of fixed assets were $23,057 in the first quarter of fiscal 2016 compared to $27,710 in the first quarter of fiscal 2015. Our capital expenditures can vary significantly from from quarter to quarter 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 $5,149,665 for the first quarter of fiscal 2016.

### Financing Activities

Net cash used in financing activities in the first quarter of fiscal 2016 was primarily a $4,857,953 cash dividend to shareholders.

In addition to the $4,857,953 dividend paid in the first quarter of fiscal 2016, on July 22, 2015 we announced that our Board had declared a cash quarterly dividend of an additional $**1.00** per share of common stock, or $**4,866,181** based on shares outstanding as of July 17, 2015 to be paid August 31, 2015. We plan to fund such 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 company’s 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.

A program announced January 21, 2009 authorized the repurchase of up to $2,500,000 of our Common Stock, $1,236,595 of which remained available as of June 30, 2015. The repurchase program may be modified or discontinued at any time without notice. We did not repurchase any stock under the program in the first quarter of fiscal 2016.

## Market risk

As filed, 1,209 characters.

As discussed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2015, we are exposed to financial market risks, primarily marketable securities and, to a lesser extent, changes in currency exchange rates.

### Marketable Securities

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 securities including 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 or loss, net of estimated tax. Our marketable securities as of June 30, 2015 had remaining maturities between five and 211 weeks. Marketable securities had a market value of $87,991,589 at June 30, 2015, representing approximately 80% of our total assets. We have not used derivative financial instruments in our investment portfolio.

## Controls and procedures

As filed, 1,331 characters.

### Disclosure Controls and Procedures

Management, with the participation of the Chief Executive Officer and Chief Financial Officer, has performed an evaluation of our disclosure controls and procedures that are defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “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 June 30, 2015, our disclosure controls and procedures were effective.

### Changes in Internal Controls

During the quarter ended June 30, 2015, 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, 143 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, 2015.

Filed Jul 22, 2015.
Source: SEC EDGAR, the filing index for accession 0000724910-15-000024. Last ingested by Listed: Oct 24, 2026, 14:55 ET. No prices; not investment advice.