Power Integrations Announces Second-Quarter Financial Results

August 1, 2007
Net Revenues Were $43.2 Million; Non-GAAP Gross Margin Was 56.0 Percent

SAN JOSE, Calif., Aug 1, 2007 (PrimeNewswire via COMTEX News Network) --

Power Integrations (Pink Sheets:POWI) today announced financial results for the three months ended June 30, 2007, and issued its previously unreleased final results for the three months ended March 31, 2007. The company's consolidated statements of operations and consolidated balance sheets for these periods, as well as certain supplemental information, are contained in the tables accompanying this press release.

The company's net revenues for the three months ended June 30, 2007 were $43.2 million, an increase of 4 percent compared to $41.5 million in the year-ago quarter, and a decrease of 5 percent compared to $45.3 million in the first quarter of 2007. Net revenues for the second quarter of 2006 included a net benefit of $2.7 million from the settlement of prior-period ship-and-debit claims with two of the company's distributors. Revenues from product sales, which do not include the impact of this benefit, increased 12 percent compared to the year-ago quarter.

Second-quarter gross margin under generally accepted accounting principles (GAAP) was 55.4 percent. Second-quarter operating expenses on a GAAP basis totaled $17.6 million, including $2.2 million in stock-based compensation expenses. Also included in operating expenses were $0.9 million in expenses related to the company's ongoing efforts to complete its outstanding SEC filings, and $0.6 million in expenses related to patent litigation. Net income under GAAP was $6.8 million, or $0.22 per diluted share.

On a non-GAAP basis, which excludes expenses for stock-based compensation, second-quarter gross margin was 56.0 percent. Non-GAAP operating expenses, which also exclude stock-based compensation expenses, totaled $15.4 million. Non-GAAP net income was $9.2 million, or $0.30 per diluted share.

At June 30, 2007 the company had $149.7 million in cash and investments, an increase of $12.0 million during the quarter.

"As we announced in June, our second-quarter revenues were impacted by the adoption of a competitor's products at a top cellphone OEM," said Balu Balakrishnan, president and CEO of Power Integrations. "However, our business overall remains on track. Revenues came in slightly higher than our revised expectations for the quarter, gross margin was above the high end of the expected range, and cash and investments increased by $12 million during the quarter.

"We had a record quarter in terms of design wins, and the pipeline of ongoing design activity remains very promising," added Balakrishnan. "In particular, adoption of our LinkSwitch products continues to accelerate, driven by energy-efficiency standards as well as the cost-effectiveness of LinkSwitch compared to linear power supplies. LinkSwitch revenues grew more than 30 percent sequentially in the second quarter and comprised 13 percent of revenues, up from 10 percent in the prior quarter."

Revenue mix for the second quarter was 30 percent consumer, 26 percent communications, 20 percent computer, 17 percent industrial and 7 percent other. By product family, preliminary revenue mix for the first quarter was 53 percent TinySwitch(r), 32 percent TOPSwitch(r), 13 percent LinkSwitch and 2 percent DPA-Switch(r).

Power Integrations received 13 U.S. patents and 6 foreign patents during the quarter and had a total of 184 U.S. patents and 89 foreign patents as of June 30.

Status of SEC Filings

Earlier today, the company filed its Forms 10-Q for the first three quarters of 2006. The company currently expects to file its remaining outstanding SEC filings and regain its Nasdaq listing in approximately two weeks.

Third-Quarter Outlook

The company expects its revenues for the third quarter of 2007 to be between $45 million and $47 million, and its GAAP gross margin to be between 53 percent and 55 percent, including an impact of approximately one margin point from stock-based compensation. Operating expenses are expected to total between $18.5 million and $20 million, including $3 million to $4 million in stock-based compensation expenses and approximately $1.3 million related to the company's restatement and efforts to complete its outstanding SEC filings. Of this amount, approximately $1 million relates to charges the company expects to take in connection with addressing the tax implications to non-officer employees arising from certain past stock-option grants.

Conference call at 1:45 pm Pacific time

Power Integrations management will hold a conference call for members of the investment community today at 1:45 pm Pacific time. Members of the investment community may access the call by dialing 800-811-0667 from within the U.S. or 913-981-4901 from abroad. A replay of the call will be available for 48 hours by dialing 888-203-1112 (U.S.) or 719-457-0820 (non-U.S.) and entering access code 4083413. The call will also be available via a live and archived webcast on the "investor info" section of the company's website, http://powerintegrations2014.q4web.com.

About Power Integrations

Power Integrations, Inc. is the leading supplier of high-voltage analog integrated circuits used in power conversion. The company's breakthrough integrated-circuit technology enables compact, energy-efficient power supplies in a wide range of electronic products, in both AC-DC and DC-DC applications. The company's EcoSmart(r) energy-efficiency technology, which dramatically reduces energy waste, has saved consumers and businesses around the world more than an estimated $2.3 billion on their electricity bills since its introduction in 1998. For more information, visit the company's website at www.powerint.com.

Note Regarding Use of Non-GAAP Financial Measures

In addition to the company's consolidated financial statements, which are presented according to GAAP, the company provides certain non-GAAP financial information that excludes expenses (and the related tax effects thereof) recorded under Statement of Financial Accounting Standards No. 123R, "Share-based Payment," which requires the recognition of expenses relating to share-based payments such as stock options. The company uses these non-GAAP measures in its own financial and operational decision-making processes and in setting performance targets for employee-compensation purposes. Further, the company believes that these non-GAAP measures offer an important analytical tool to help investors understand the company's core operating results and trends, and to facilitate comparability with the company's historical results and with the operating results of other companies that provide similar non-GAAP measures.

These non-GAAP measures have certain limitations as analytical tools and are not meant to be considered in isolation or as a substitute for GAAP financial information. Stock-based compensation is an important component of the company's compensation mix, and will continue to result in significant expenses in the company's GAAP results for the foreseeable future. Also, other companies, including other companies in Power Integrations' industry, may calculate non-GAAP financial measures differently than the company, limiting their usefulness as a comparative measure.

Note Regarding Forward-Looking Statements

The statements in this press release relating to the company's projected third-quarter financial performance, promising pipeline and expectations regarding the timeline for filing its outstanding SEC filings are forward-looking statements, reflecting management's current forecast. These forward-looking statements are based on current information that is, by its nature, subject to rapid and even abrupt changes. Due to risks and uncertainties associated with the company's business, actual results could differ materially from those projected or implied by management's forward-looking statements. These risks and uncertainties include, but are not limited to: changes and shifts in customer demand away from products that utilize the company's integrated circuits to products that do not incorporate the company's products; the company's ability to maintain and establish strategic relationships; the effects of competition; the risks inherent in the development and delivery of complex technologies; the outcome and cost of patent litigation; the company's ability to attract, retain and motivate qualified personnel; the emergence of new markets for the company's products and services; the company's ability to compete in those markets based on timeliness, cost and market demand; fluctuations in currency exchange rates; and unexpected delays in filing the company's SEC filings. In addition, new product introductions and design wins are subject to the risks and uncertainties that typically accompany development and delivery of complex technologies to the marketplace, including product development delays and defects and market acceptance of the new products. These and other risk factors are more fully explained in the company's most recent annual report on Form 10-K, filed with the Securities and Exchange Commission on March 7, 2006. The company is under no obligation (and expressly disclaims any obligation) to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.

                                  POWER INTEGRATIONS, INC.
                           CONSOLIDATED STATEMENTS OF OPERATIONS
                          (in thousands, except per-share amounts)

                          Three Months Ended        Six Months Ended
                     June 30,  March 31, June 30,  June 30,  June 30,
                       2007      2007      2006      2007      2006
                     -------   -------   -------   -------   -------
 NET REVENUES        $43,240   $45,317   $41,465   $88,557   $76,718

 COST OF REVENUES     19,288    20,200    17,359    39,488    34,267
                     -------   -------   -------   -------   -------

 GROSS PROFIT         23,952    25,117    24,106    49,069    42,451
                     -------   -------   -------   -------   -------

 OPERATING EXPENSES:
 Research and
  development          5,916     5,894     6,018    11,810    11,827
 Sales and marketing   6,171     6,341     6,497    12,512    12,724
 General and
  administrative       5,546     6,382     8,133    11,928    16,522
                     -------   -------   -------   -------   -------
   Total Operating
    Expenses          17,633    18,617    20,648    36,250    41,073
                     -------   -------   -------   -------   -------


 INCOME FROM
  OPERATIONS           6,319     6,500     3,458    12,819     1,378

 OTHER INCOME, net     1,641     1,665     1,494     3,306     2,772
 INSURANCE
  REIMBURSEMENT          723        --        --       723        --
                     -------   -------   -------   -------   -------

 INCOME BEFORE
  PROVISION FOR
  INCOME TAXES         8,683     8,165     4,952    16,848     4,150

 PROVISION FOR
  INCOME TAXES         1,906     1,659       446     3,565       423
                     -------   -------   -------   -------   -------

 NET INCOME          $ 6,777   $ 6,506   $ 4,506   $13,283   $ 3,727
                     =======   =======   =======   =======   =======

 EARNINGS PER SHARE:
  Basic              $  0.24   $  0.23   $  0.15   $  0.46   $  0.13
                     =======   =======   =======   =======   =======
  Diluted            $  0.22   $  0.21   $  0.15   $  0.43   $  0.12
                     =======   =======   =======   =======   =======

 SHARES USED IN
  PER-SHARE
  CALCULATION:
  Basic               28,674    28,660    29,356    28,667    29,468

  Diluted             30,942    30,691    30,955    30,823    31,267

 SUPPLEMENTAL
  INFORMATION:

 Stock-based
  compensation
  expenses included
  in:
  Cost of revenues   $   280   $   332   $   412   $   612   $   459
  Research and
  development            642       919     1,119     1,561     2,317
  Sales and
   marketing             851     1,013     1,473     1,864     2,963
  General and
   administrative        730       771     1,120     1,501     2,260
                     -------   -------   -------   -------   -------
   Total stock-based
    compensation
    expense          $ 2,503   $ 3,035   $ 4,124   $ 5,538   $ 7,999
                     =======   =======   =======   =======   =======

 Operating expenses
  include the
  following:
  Patent-litigation
   expenses          $   559   $   550   $   823   $ 1,109   $ 3,686
                     =======   =======   =======   =======   =======
  Special
   investigation/
   restatement
   expenses          $   941   $ 2,281   $ 4,020   $ 3,222   $ 5,957
                     =======   =======   =======   =======   =======

                            POWER INTEGRATIONS, INC.
        SUPPLEMENTAL RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
                               TO GAAP RESULTS
                   (in thousands, except per-share amounts)

                             Three Months Ended      Six Months Ended
                         June 30, March 31, June 30, June 30, June 30,
                           2007     2007      2006     2007     2006
                         -------  -------   -------  -------  -------
 RECONCILIATION OF GROSS
  PROFIT MARGIN
  GAAP gross profit      $23,952  $25,117   $24,106  $49,069  $42,451
   GAAP gross profit
    margin                  55.4%    55.4%     58.1%    55.4%    55.3%

  Stock-based compensation
   expense included in
   cost of revenues          280      332       412      612      459
                         -------  -------   -------  -------  -------

  Non-GAAP gross profit
   excluding stock-based
   compensation           24,232   25,449    24,518   49,681   42,910
                         -------  -------   -------  -------  -------
   Non-GAAP gross profit
    margin                  56.0%    56.2%     59.1%    56.1%    55.9%


 RECONCILIATION OF
  OPERATING MARGIN
  GAAP income from
   operations            $ 6,319  $ 6,500   $ 3,458  $12,819  $ 1,378
   GAAP operating margin    14.6%    14.3%      8.3%    14.5%     1.8%

  Stock-based compensation
   expense included in
   cost of revenues and
   operating expenses:


   Cost of revenues          280      332       412      612      459

   Research and
    development              642      919     1,119    1,561    2,317

   Sales and marketing       851    1,013     1,473    1,864    2,963

   General and
    administrative           730      771     1,120    1,501    2,260
                         -------  -------   -------  -------  -------

   Total                   2,503    3,035     4,124    5,538    7,999
                         -------  -------   -------  -------  -------


  Non-GAAP income from
   operations excluding
   stock-based
   compensation            8,822    9,535     7,582   18,357    9,377
                         -------  -------   -------  -------  -------
   Non-GAAP operating
    margin                  20.4%    21.0%     18.3%    20.7%    12.2%


 RECONCILIATION OF NET
  INCOME PER SHARE
  (DILUTED)
  GAAP net income        $ 6,777  $ 6,506   $ 4,506  $13,283  $ 3,727

  Adjustments to GAAP net
   income

   Total stock-based
    compensation           2,503    3,035     4,124    5,538    7,999
   Tax effect of stock-
    based compensation       (94)    (436)     (825)    (531)  (1,420)

   Non-GAAP income
    excluding stock-based
    compensation         $ 9,186  $ 9,105   $ 7,805  $18,290  $10,306
                         -------  -------   -------  -------  -------

   Average shares
    outstanding for
    calculation of non-
    GAAP income per share
    diluted)              30,942   30,691    30,955   30,823   31,267
                         -------  -------   -------  -------  -------

   Non-GAAP income per
    share excluding stock-
    based compensation
    (diluted)            $  0.30  $  0.30   $  0.25  $  0.59  $  0.33
                         =======  =======   =======  =======  =======


 Note on use of non-GAAP financial measures:

 Effective January 1, 2006, Power Integrations adopted SFAS 123R,
 which requires the company to recognize compensation expenses
 relating to stock-based payments. In addition to the company's
 consolidated financial statements, which are prepared according to
 GAAP, the company provides certain non-GAAP financial information
 that excludes expenses recognized under SFAS 123R, and the related
 tax effects. The company uses these non-GAAP measures in its own
 financial and operational decision-making processes and in setting
 performance targets for employee-compensation purposes. Further, the
 company believes that these non-GAAP measures offer an important
 analytical tool to help investors understand the company's core
 operating results and trends, and to facilitate comparability with
 the company's historical results and with the operating results of
 other companies that provide similar non-GAAP measures. These
 non-GAAP measures have certain limitations as analytical tools and
 are not meant to be considered in isolation or as a substitute for
 GAAP financial information.

                        POWER INTEGRATIONS, INC.
                       CONSOLIDATED BALANCE SHEETS
                             (in thousands)

                                     June 30,   March 31, December 31,
                                       2007       2007       2006
                                     --------   --------   --------
 ASSETS
  CURRENT ASSETS:
  Cash and cash equivalents          $137,325   $130,811   $124,937
  Restricted cash                       1,300      1,300      1,300
  Short-term investments               10,038      4,505      2,506
  Accounts receivable                  14,322     17,784     10,489
  Inventories                          24,669     26,142     28,280
  Deferred tax assets                   2,199      2,199      2,199
  Prepaid expenses and other current
   assets                               3,210      4,195      4,009
                                     --------   --------   --------
   Total current assets               193,063    186,936    173,720
                                     --------   --------   --------

  INVESTMENTS                           1,000      1,000      3,999
  NOTE RECEIVABLE                      10,000     10,000     10,000
  PROPERTY AND EQUIPMENT, net          54,911     54,398     53,475
  INTANGIBLE ASSETS, NET                5,508      5,702      5,895
  DEFERRED TAX ASSETS                  13,483     12,978     13,485
  OTHER ASSETS                            244        145        285
                                     --------   --------   --------
   Total assets                      $278,209   $271,159   $260,859
                                     ========   ========   ========
 LIABILITIES AND STOCKHOLDERS'
  EQUITY
  CURRENT LIABILITIES:
  Accounts payable                   $  7,361   $ 10,513   $  8,592
  Accrued payroll and related
   expenses                             5,335      5,722      8,668
  Income taxes payable                  2,404      1,574     14,509
  Deferred income on sales to
   distributors                         4,727      5,469      4,901
  Accrued professional fees             3,387      3,495      3,294
  Other accrued liabilities               180        135        129
                                     --------   --------   --------
   Total current liabilities           23,394     26,908     40,093
                                     --------   --------   --------

  LONG-TERM INCOME TAXES PAYABLE       14,237     12,912         --
                                     --------   --------   --------
   Total liabilities                   37,631     39,820     40,093
                                     --------   --------   --------

 STOCKHOLDERS' EQUITY:
  Common stock                             29         29         29
  Additional paid-in capital          140,765    138,321    135,307
  Cumulative translation adjustment        32         14          4
  Retained earnings                    99,752     92,975     85,426
                                     --------   --------   --------
   Total stockholders' equity         240,578    231,339    220,766
                                     --------   --------   --------
   Total liabilities stockholders'
    equity                           $278,209   $271,159   $260,859
                                     ========   ========   ========

This news release was distributed by PrimeNewswire, www.primenewswire.com

SOURCE: Power Integrations

Power Integrations, Inc. Joe Shiffler (408) 414-8528 jshiffler@powerint.com 

 

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NASDAQ: POWI $117.24 -0.38
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Contact Us

Joe Shiffler
Director, Investor Relations & Corporate Communications
(408) 414-8528
joe@power.com

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Mailing Address:
Power Integrations
Attn: Investor Relations
5245 Hellyer Avenue San Jose, CA. 95138

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P.O. Box 30170
College Station, TX 77842
Phone: (781) 575-2879




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