Power Integrations Reports Fourth Straight Quarter of Record Revenues and Net Income

August 2, 2010
Quarterly Revenues Grew 62 Percent Year-Over-Year, 12 Percent Sequentially to $79.9 Million

 

SAN JOSE, Calif., Aug 2, 2010 (GlobeNewswire via COMTEX News Network) -- Power Integrations (Nasdaq:POWI), the leader in high-voltage integrated circuits for energy-efficient power conversion, today announced financial results for the quarter ended June 30, 2010.

Net revenues for the quarter were $79.9 million, up 12 percent compared with the prior quarter and 62 percent compared with the second quarter of 2009. Net income was a record $15.6 million, or $0.53 per diluted share, compared with net income of $12.3 million, or $0.42 per diluted share in the prior quarter and net income of $4.5 million, or $0.16 per diluted share, in the second quarter of 2009. Gross margin for the second quarter was 52.0 percent; operating margin was 23.6 percent.

In addition to its GAAP results, the company provided certain non-GAAP financial measures that exclude stock-based compensation expenses and the related tax effects. Non-GAAP net income for the second quarter was $17.7 million or $0.60 per diluted share, compared with $14.3 million or $0.49 per diluted share in the prior quarter and $6.9 million or $0.25 per diluted share in the second quarter of 2009. Non-GAAP gross margin for the quarter was 52.2 percent; non-GAAP operating margin was 26.7 percent.

Commented Balu Balakrishnan, president and CEO of Power Integrations: "Our second-quarter results were strong across the board, with record revenues, significant margin expansion and strong cash flow. Our quarterly revenues have nearly doubled over the past five quarters, and we are almost 50 percent above our pre-recession peak in the third quarter of 2008."

Balakrishnan added: "Tighter energy-efficiency requirements -- both policy- and market-driven -- are transforming the power-supply market, and we believe we are gaining market share by offering innovative products that enable high efficiency without adding cost and complexity. We continue to extend our market leadership and broaden our addressable market with innovative new product families such as our Hiper(TM) products for the high-power market, and the brand-new LinkSwitch(TM)-PL and LinkSwitch-PH, which bring unprecedented integration to the LED lighting market."

Additional Highlights

 --  Quarterly cash flow from operations was $35.1 million. The company had
      $228.9 million in cash and investments at June 30, 2010, an increase of
      $18.7 million from the prior quarter.
  --  The company repurchased approximately 225,000 shares of its common stock
      during the quarter for $7.9 million.
  --  The company paid a quarterly dividend of $0.05 per share on June 30,
      2010. The next quarterly dividend of $0.05 per share will be paid on
      September 30, 2010 to stockholders of record as of August 31, 2010.
  --  Power Integrations received 13 U.S. patents and 3 foreign patents during
      the quarter, and had a total of 309 U.S. patents and 196 foreign patents
      as of June 30, 2010.
  --  Last month, a federal court ruled that Fairchild Semiconductor had
      willfully infringed four of Power Integrations' patents, determining
      that Fairchild had engaged in "blatant copying" of the company's
      patented technologies. In light of the finding of willfulness, Power
      Integrations now intends to seek enhancement of the pending damage
      award, which currently stands at $6.1 million.

Financial Outlook

Regarding the company's third-quarter outlook, Mr. Balakrishnan noted: "We saw exceptionally strong sales in Europe during the second quarter due to distributor transitions that resulted in some end-customer purchases being pulled into the second quarter. Although this will have the effect of reducing our sequential growth rate in the third quarter, this is simply a matter of timing. Also, our third-quarter sales are likely to be constrained by shortages of our LinkSwitch-II products, which continue to be in high demand. Nevertheless, we expect third-quarter revenues to be in the range of $78 million to $82 million, which would be an increase of 30 percent or more from last year's strong third quarter."

The company added that it expects its third-quarter gross margin to be between 51 percent and 52 percent, with operating expenses between $23.5 million and $24.5 million including approximately $2.7 million of stock-based compensation expenses.

Conference Call Today at 1:45 p.m. Pacific Time

Power Integrations management will hold a conference call today at 1:45 p.m. Pacific time. Members of the investment community can join the call by dialing 1-877-303-9795 from within the United States or 1-631-291-4581 from outside the U.S. The call will be available via a live and archived webcast on the investor section of the company's website, http://powerintegrations2014.q4web.com.

About Power Integrations

Power Integrations is the leading supplier of high-voltage analog integrated circuits used in energy-efficient power conversion. The company's innovative technology enables compact, energy-efficient power supplies in a wide range of electronic products, in AC-DC, DC-DC and LED lighting applications. Since its introduction in 1998, Power Integrations' EcoSmart(TM)energy-efficiency technology has saved an estimated $4.2 billion of standby energy waste and prevented millions of tons of CO2 emissions. The company's Green Room web site (www.powerint.com/greenroom) provides a wealth of information about "energy vampires" and the issue of standby energy waste, along with a comprehensive guide to energy-efficiency standards around the world. Reflecting the environmental benefits of EcoSmart technology, Power Integrations is included in clean-technology stock indices sponsored by the Cleantech Group (Amex:CTIUS) and Clean Edge (Nasdaq:CELS). For more information, please visit 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 stock-based compensation expenses recorded under Accounting Standard Codification 718-20 ("ASC 718-20"), and the related tax effects. The company uses these non-GAAP measures in its own financial and operational decision-making processes and, with respect to one measure, 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. For example, 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, but is not reflected in the non-GAAP measures. Also, other companies, including companies in Power Integrations' industry, may calculate non-GAAP financial measures differently, limiting their usefulness as comparative measures.

Note Regarding Forward-Looking Statements

The statements in this press release relating to the company's expectation of the timing of production shipments of its new product families and its projected third-quarter 2010 financial performance 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 these forward-looking statements. These risks and uncertainties include, but are not limited to: changes in global macroeconomic conditions that may impact the level of demand for the company's products; the ability of the company to obtain sufficient quantities of wafers in a timely manner from its suppliers; potential changes and shifts in customer demand away from end products that utilize the company's integrated circuits to end products that do not incorporate the company's products; the company's ability to maintain and establish strategic relationships; the effects of competition; customer reaction to the effects of design wins may not be as the company expects; 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; unforeseen costs and expenses; and fluctuations in currency exchange rates. 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 under the caption "Risk Factors" in the company's most recent quarterly report on Form 10-Q, filed with the Securities and Exchange Commission on May 6, 2010. 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, EcoSmart, LinkSwitch, Hiper and the Power Integrations logo are trademarks or registered trademarks of Power Integrations, Inc. All other trademarks are the property of their respective owners.

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


                                   Three Months Ended           Six Months Ended

                             June 30,  March 31,   June 30,   June 30,    June 30,
                               2010       2010       2009       2010        2009
                            ---------  ---------  ---------  ----------  ---------
  NET REVENUES               $ 79,858   $ 71,507   $ 49,250   $ 151,365   $ 89,539


  COST OF REVENUES             38,369     35,585     25,053      73,954     44,410
                            ---------  ---------  ---------  ----------  ---------


  GROSS PROFIT                 41,489     35,922     24,197      77,411     45,129
                            ---------  ---------  ---------  ----------  ---------

  OPERATING EXPENSES:
  Research and development      8,674      8,111      7,689      16,785     15,413
  Sales and marketing           7,527      6,920      5,925      14,447     12,147
  General and
   administrative               6,465      6,013      5,594      12,478     11,275
                            ---------  ---------  ---------  ----------  ---------
      Total operating
       expenses                22,666     21,044     19,208      43,710     38,835
                            ---------  ---------  ---------  ----------  ---------

  INCOME FROM OPERATIONS       18,823     14,878      4,989      33,701      6,294


  OTHER INCOME, net               471        494        754         965      1,578
                            ---------  ---------  ---------  ----------  ---------

  INCOME BEFORE PROVISION FOR
      INCOME TAXES             19,294     15,372      5,743      34,666      7,872

  PROVISION FOR INCOME
   TAXES                        3,707      3,058      1,214       6,765      2,939
                            ---------  ---------  ---------  ----------  ---------


  NET INCOME                 $ 15,587   $ 12,314    $ 4,529    $ 27,901    $ 4,933
                            =========  =========  =========  ==========  =========

  EARNINGS PER SHARE:

      Basic                    $ 0.56     $ 0.45     $ 0.17      $ 1.01     $ 0.18
                            =========  =========  =========  ==========  =========

      Diluted                  $ 0.53     $ 0.42     $ 0.16      $ 0.95     $ 0.18
                            =========  =========  =========  ==========  =========

  SHARES USED IN PER-SHARE
   CALCULATION:
      Basic                    27,844     27,470     26,804      27,658     26,925
      Diluted                  29,535     29,358     27,944      29,460     28,009


  SUPPLEMENTAL
   INFORMATION:

  Stock-based compensation expenses
   included in:
      Cost of revenues          $ 173      $ 157      $ 264       $ 330      $ 426
      Research and
       development                929        727      1,080       1,656      2,916
      Sales and marketing         639        410        562       1,049      1,556
      General and
       administrative             775        733        748       1,508      1,741
                            ---------  ---------  ---------  ----------  ---------
       Total stock-based
        compensation
        expense               $ 2,516    $ 2,027    $ 2,654     $ 4,543    $ 6,639
                            =========  =========  =========  ==========  =========


  Operating expenses include the
   following:
      Patent-litigation
       expenses               $ 1,516    $ 1,087      $ 934     $ 2,603    $ 1,765
                            =========  =========  =========  ==========  =========


  REVENUE MIX BY PRODUCT FAMILY
      TOPSwitch                   25%        24%        25%         25%        24%
      TinySwitch                  39%        39%        43%         39%        44%
      LinkSwitch                  35%        36%        31%         35%        30%
      Other                        1%         1%         1%          1%         2%

  REVENUE MIX BY END
   MARKET
      Communications              28%        32%        32%         30%        32%
      Computer                    12%        12%        14%         12%        15%
      Consumer                    40%        36%        37%         38%        36%
      Industrial                  20%        20%        17%         20%        17%



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


                                              Three Months Ended          Six Months Ended

                                        June 30,  March 31,   June 30,   June 30,   June 30,
                                          2010       2010       2009       2010       2009
                                       ---------  ---------  ---------  ---------  ---------
  RECONCILIATION OF GROSS PROFIT
  GAAP gross profit                     $ 41,489   $ 35,922   $ 24,197   $ 77,411   $ 45,129
      GAAP gross profit margin             52.0%      50.2%      49.1%      51.1%      50.4%

  Stock-based compensation included
   in cost of revenues                       173        157        264        330        426
                                       ---------  ---------  ---------  ---------  ---------


  Non-GAAP gross profit                 $ 41,662   $ 36,079   $ 24,461   $ 77,741   $ 45,555
                                       ---------  ---------  ---------  ---------  ---------
      Non-GAAP gross profit margin         52.2%      50.5%      49.7%      51.4%      50.9%


  RECONCILIATION OF OPERATING EXPENSES
  GAAP operating expenses               $ 22,666   $ 21,044   $ 19,208   $ 43,710   $ 38,835

  Less: Stock-based compensation
   included in operating expenses
       Research and development              929        727      1,080      1,656      2,916
       Sales and marketing                   639        410        562      1,049      1,556

       General and administrative            775        733        748      1,508      1,741
                                       ---------  ---------  ---------  ---------  ---------

       Total                               2,343      1,870      2,390      4,213      6,213
                                       ---------  ---------  ---------  ---------  ---------


  Non-GAAP operating expenses           $ 20,323   $ 19,174   $ 16,818   $ 39,497   $ 32,622
                                       ---------  ---------  ---------  ---------  ---------


  RECONCILIATION OF INCOME FROM OPERATIONS
  GAAP income from operations           $ 18,823   $ 14,878    $ 4,989   $ 33,701    $ 6,294
      GAAP operating margin                23.6%      20.8%      10.1%      22.3%       7.0%

      Stock-based compensation
       included in cost of revenues          173        157        264        330        426
      Stock-based compensation
       included in operating expenses      2,343      1,870      2,390      4,213      6,213
                                       ---------  ---------  ---------  ---------  ---------


  Non-GAAP income from operations       $ 21,339   $ 16,905    $ 7,643   $ 38,244   $ 12,933
                                       ---------  ---------  ---------  ---------  ---------
      Non-GAAP operating margin            26.7%      23.6%      15.5%      25.3%      14.4%


  RECONCILIATION OF PROVISION FOR INCOME TAXES
  GAAP provision for income taxes        $ 3,707    $ 3,058    $ 1,214    $ 6,765    $ 2,939
      GAAP effective tax rate              19.2%      19.9%      21.1%      19.5%      37.3%

  Tax effect of items excluded from
   non-GAAP results                        (356)        (6)      (307)      (362)      (757)
                                       ---------  ---------  ---------  ---------  ---------


  Non-GAAP provision for income taxes    $ 4,063    $ 3,064    $ 1,521    $ 7,127    $ 3,696
                                       ---------  ---------  ---------  ---------  ---------
      Non-GAAP effective tax rate          18.6%      17.6%      18.1%      18.2%      25.5%


  RECONCILIATION OF NET INCOME PER SHARE (DILUTED)
  GAAP net income                       $ 15,587   $ 12,314    $ 4,529   $ 27,901    $ 4,933

  Adjustments to GAAP net income
      Total stock-based compensation       2,516      2,027      2,654      4,543      6,639
      Tax effect of items excluded
       from non-GAAP results               (356)        (6)      (307)      (362)      (757)
                                       ---------  ---------  ---------  ---------  ---------


  Non-GAAP net income                   $ 17,747   $ 14,335    $ 6,876   $ 32,082   $ 10,815
                                       ---------  ---------  ---------  ---------  ---------

  Average shares outstanding for
   calculation of non-GAAP income per
   share (diluted)                        29,535     29,358     27,944     29,460     28,009
                                       ---------  ---------  ---------  ---------  ---------

  Non-GAAP income per share (diluted)

                                          $ 0.60     $ 0.49     $ 0.25     $ 1.09     $ 0.39
                                       =========  =========  =========  =========  =========



  Note on use of non-GAAP financial measures:
  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 stock-based compensation expenses recognized under Accounting Standard
   Codification ("ASC") 718-20 and the related tax effects. The company uses these non-GAAP
   measures in its own financial and operational decision-making processes and, with respect
   to one measure, 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)
                           (unaudited)


                              June 30,    March 31,   December
                                2010        2010      31, 2009
                             ----------  ----------  ----------
  ASSETS
    CURRENT ASSETS:
      Cash and cash
       equivalents            $ 159,775   $ 125,295   $ 134,974
      Restricted cash               250         250         250
      Short-term
       investments               12,273      22,129      20,567
      Accounts receivable        18,282      27,586      21,756
      Inventories                35,724      31,426      26,248
      Notes receivable            4,750          --          --
      Deferred tax assets         1,474       1,486       1,389
      Prepaid expenses and
       other current assets       7,144      13,130      10,691
                             ----------  ----------  ----------

       Total current assets     239,672     221,302     215,875
                             ----------  ----------  ----------

    INVESTMENTS                  56,609      62,562      40,100
    PROPERTY AND EQUIPMENT,
     net                         70,739      65,877      62,381
    INTANGIBLE ASSETS, net        2,755       2,927       3,099
    GOODWILL                      1,824       1,824       1,824
    DEFERRED TAX ASSETS          13,796      12,996      14,590

    OTHER ASSETS                  6,686       6,683       6,698
                             ----------  ----------  ----------

       Total assets           $ 392,081   $ 374,171   $ 344,567
                             ==========  ==========  ==========

  LIABILITIES AND STOCKHOLDERS' EQUITY
    CURRENT LIABILITIES:
      Accounts payable         $ 23,109    $ 26,158    $ 16,944
      Accrued payroll and
       related expenses           6,922       5,227       6,145
      Taxes payable                 251         453         478
      Deferred income on
       sales to
       distributors              14,926      11,917       9,040
      Other accrued
       liabilities                3,481       2,543       3,309
                             ----------  ----------  ----------
       Total current
        liabilities              48,689      46,298      35,916
                             ----------  ----------  ----------

  LONG-TERM LIABILITIES

      Income taxes payable       26,188      25,023      23,859
                             ----------  ----------  ----------


       Total liabilities         74,877      71,321      59,775
                             ----------  ----------  ----------

  STOCKHOLDERS' EQUITY:
      Common stock                   28          28          27
      Additional paid-in
       capital                  157,354     157,193     150,021
      Cumulative
       translation
       adjustment                  (51)        (46)           4

      Retained earnings         159,873     145,675     134,740
                             ----------  ----------  ----------
       Total stockholders'
        equity                  317,204     302,850     284,792
                             ----------  ----------  ----------
       Total liabilities
        stockholders'
        equity                $ 392,081   $ 374,171   $ 344,567
                             ==========  ==========  ==========



                                   POWER INTEGRATIONS, INC.
                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                                         (in thousands)
                                          (unaudited)
                                                 Three Months Ended       Six Months Ended

                                                June 30,    June 30,    June 30,    June 30,
                                                  2010        2009        2010        2009
                                               ----------  ----------  ----------  ----------
  CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income                                   $ 15,587     $ 4,529    $ 27,901     $ 4,933
    Adjustments to reconcile net income to
     net cash provided by operating
     activities
     Depreciation and amortization                  3,201       2,482       6,134       4,978
     Gain on sale of property and equipment         (362)        (10)       (349)        (10)
     Stock-based compensation expense               2,516       2,655       4,543       6,641
     Amortization of discount on
      held-to-maturity investments                    508         104         858          51
     Deferred income taxes                          (788)       (952)         710         280
     Provision for (reduction in provision
      for) accounts receivable and other
      allowances                                     (18)         184        (18)          85
     Excess tax benefit from stock options
      exercised                                       285         (6)       (891)        (11)
     Tax benefit associated with employee
      stock plans                                     115         110       2,040         183
     Change in operating assets and
      liabilities:
      Accounts receivable                           9,322       3,614       3,492     (1,417)
      Inventories                                 (4,275)       6,284     (9,460)       6,034
      Prepaid expenses and other assets             4,234     (3,090)       3,562     (3,819)
      Accounts payable                            (1,842)       1,733       4,453         839
      Taxes payable and other accrued
       liabilities                                  3,596         263       3,006       (792)
      Deferred income on sales to
       distributors                                 3,008       (509)       5,885       1,265
                                               ----------  ----------  ----------  ----------
       Net cash provided by operating
        activities                                 35,087      17,391      51,866      19,240
                                               ----------  ----------  ----------  ----------

  CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchases of property and equipment          (10,153)     (1,721)    (13,513)     (3,488)
    Proceeds from sale of property and
     equipment                                      1,415          --       1,415          --
    Notes to third party                          (3,000)          --     (4,750)          --
    Purchases of held-to-maturity investments          --          --    (27,224)     (2,755)
    Proceeds from held-to-maturity
     investments                                   15,300         850      18,150       3,850
                                               ----------  ----------  ----------  ----------
     Net cash provided by (used in) investing
      activities                                    3,562       (871)    (25,922)     (2,393)
                                               ----------  ----------  ----------  ----------

  CASH FLOWS FROM FINANCING ACTIVITIES
    Net proceeds from issuance of common
     stock                                          5,428       1,137      15,463       5,254
    Repurchase of common stock                    (7,922)     (8,904)    (13,960)    (26,539)
    Repurchase of stock options                        --          --          --     (9,048)
    Retirement of performance shares for
     income tax withholding                            --          --       (769)          --
    Payments of dividends to stockholders         (1,390)       (673)     (2,768)     (1,345)
    Excess tax benefit from stock options
     exercised                                      (285)           6         891          11
                                               ----------  ----------  ----------  ----------

     Net cash used in financing activities        (4,169)     (8,434)     (1,143)    (31,667)
                                               ----------  ----------  ----------  ----------

  NET INCREASE (DECREASE) IN CASH AND CASH
   EQUIVALENTS                                     34,480       8,086      24,801    (14,820)

  CASH AND CASH EQUIVALENTS AT BEGINNING OF
   PERIOD                                         125,295     144,566     134,974     167,472
                                               ----------  ----------  ----------  ----------


  CASH AND CASH EQUIVALENTS AT END OF PERIOD    $ 159,775   $ 152,652   $ 159,775   $ 152,652
                                               ==========  ==========  ==========  ==========

  SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
  FINANCING ACTIVITIES:

    Unpaid property and equipment, net          $ (1,207)     $ (430)     $ 1,711     $ (262)
                                               ==========  ==========  ==========  ==========

  SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

    Cash paid for interest                            $ 1       $ 394         $ 1       $ 397
                                               ==========  ==========  ==========  ==========
    Cash paid for income taxes, net of
     refunds                                        $ 598       $ 180       $ 614       $ 353
                                               ==========  ==========  ==========  ==========

This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: Power Integrations, Inc.

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

(C) Copyright 2010 GlobeNewswire, Inc. All rights reserved.

News Provided by COMTEX

NASDAQ: POWI $117.24 -0.38
-0.32% Volume: 222,691 August 11, 2020

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

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




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