Power Integrations Reports Third-Quarter Financial Results

October 27, 2010
Quarterly Revenues Grew 26 Percent Year-Over-Year to $75.5 Million

SAN JOSE, Calif., Oct 27, 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 September 30, 2010.

Net revenues for the third quarter were $75.5 million, up 26 percent compared with the third quarter of 2009, and down six percent compared with the second quarter of 2010. Net income was $12.6 million or $0.43 per diluted share, compared with $9.2 million or $0.32 per diluted share in the year-ago quarter and $15.6 million or $0.53 per diluted share in the second quarter of 2010. Gross margin for the third quarter was 51.7 percent; operating margin was 20.2 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 third quarter was $15.5 million or $0.53 per diluted share, compared with $10.4 million or $0.36 per diluted share in the year-ago quarter and $17.7 million or $0.60 per diluted share, in the second quarter of 2010. Non-GAAP gross margin for the third quarter was 51.9 percent; non-GAAP operating margin was 24.1 percent.

Commented Balu Balakrishnan, president and CEO of Power Integrations, "As discussed in our earnings announcement last quarter, a transition in our European distribution relationships caused some sales to be accelerated into the second quarter at the expense of third-quarter sales. We believe this timing issue accounted for most of the sequential decrease in our third-quarter revenues. Nevertheless, revenues increased 26 percent versus last year's strong third quarter, and we believe we are on track for full-year revenue growth of between 36 percent and 39 percent."

Balakrishnan continued: "Like many of our peers, we are seeing a moderation in sales as the supply chain digests an apparent excess of inventory. Cyclical fluctuations notwithstanding, we believe we are continuing to gain share in the power-supply market by enabling customers to meet increasingly stringent efficiency specs without adding cost and complexity. In fact, designers looking to cut standby waste all the way to zero can now do so with our new 'Zero' series of products. Our new LinkZero(TM)-AX family, used in conjunction with our recently introduced CapZero(TM) and SenZero(TM) power-saving products, enables designers to achieve 0.00 watts of standby waste in appliances, TVs and other products that utilize an auxiliary power supply."

Additional Highlights

 -- Power Integrations paid a quarterly dividend of $0.05 per share on September 30, 2010. The next quarterly dividend of $0.05 per share will be paid on December 31, 2010 to stockholders of record as of November 30, 2010. -- Power Integrations received and acquired a total of 20 U.S. patents and 5 foreign patents during the quarter, and had a total of 329 U.S. patents and 201 foreign patents as of September 30, 2010. -- On October 22, Power Integrations announced a strategic investment in SemiSouth Laboratories, a Mississippi-based manufacturer of high-voltage silicon-carbide (SiC) power devices. Power Integrations' commitment of $30 million, which includes an equity investment in SemiSouth, a technology license and other financial commitments, will help drive the continued expansion of SemiSouth's SiC fabrication facility. The companies will collaborate to drive adoption of SemiSouth's SiC technology, which enables ultra-efficient power conversion for solar and wind inverters, hybrid/electric vehicles and other very high-power applications that benefit from exceptionally high energy efficiency. 

Financial Outlook

The company expects its fourth-quarter revenues to be between $67 million and $73 million. Fourth-quarter gross margin is expected to be between 49 percent and 50 percent, with operating expenses between $24 million and $25 million including approximately $3 million of stock-based compensation expenses.

Conference Call Today at 1:30 p.m. Pacific Time

Power Integrations management will hold a conference call today at 1:30 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 $4.4 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 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 projected fourth-quarter 2010 financial performance and its future collaborative efforts with SemiSouth 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; fluctuations in currency exchange rates; and SemiSouth's progress in the development of its technology. 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 (SEC) on August 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, except as otherwise required by the rules and regulations of the SEC.

Power Integrations, EcoSmart, LinkZero, CapZero, SenZero 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           Nine Months Ended

                            September   June 30,  September   September   September
                             30, 2010     2010     30, 2009   30, 2010    30, 2009
                            ---------  ---------  ---------  ----------  ----------
  NET REVENUES               $ 75,452   $ 79,858   $ 60,024   $ 226,817   $ 149,563


  COST OF REVENUES             36,447     38,369     30,901     110,402      75,311
                            ---------  ---------  ---------  ----------  ----------


  GROSS PROFIT                 39,005     41,489     29,123     116,415      74,252
                            ---------  ---------  ---------  ----------  ----------

  OPERATING EXPENSES:
  Research and development      9,348      8,674      6,846      26,133      22,259
  Sales and marketing           7,657      7,527      5,744      22,104      17,891
  General and
   administrative               6,746      6,465      5,465      19,223      16,740
                            ---------  ---------  ---------  ----------  ----------
      Total operating
       expenses                23,751     22,666     18,055      67,460      56,890
                            ---------  ---------  ---------  ----------  ----------

  INCOME FROM OPERATIONS       15,254     18,823     11,068      48,955      17,362


  OTHER INCOME, net               415        471        178       1,379       1,756
                            ---------  ---------  ---------  ----------  ----------

  INCOME BEFORE PROVISION
   FOR INCOME TAXES            15,669     19,294     11,246      50,334      19,118

  PROVISION FOR INCOME
   TAXES                        3,035      3,707      2,094       9,800       5,033
                            ---------  ---------  ---------  ----------  ----------


  NET INCOME                 $ 12,634   $ 15,587    $ 9,152    $ 40,534    $ 14,085
                            ---------  ---------  ---------  ----------  ----------

  EARNINGS PER SHARE:

     Basic                     $ 0.45     $ 0.56     $ 0.34      $ 1.46      $ 0.52
                            ---------  ---------  ---------  ----------  ----------

     Diluted                   $ 0.43     $ 0.53     $ 0.32      $ 1.38      $ 0.50
                            ---------  ---------  ---------  ----------  ----------

  SHARES USED IN PER-SHARE
   CALCULATION:
     Basic                     27,894     27,844     26,723      27,737      26,857
     Diluted                   29,283     29,535     28,431      29,406      28,108


  SUPPLEMENTAL
   INFORMATION:

  Stock-based compensation
   expenses included in:
     Cost of revenues           $ 153      $ 173      $ 188       $ 481       $ 614
     Research and
      development               1,125        929        340       2,782       3,256
     Sales and marketing          727        639        173       1,776       1,729
     General and
      administrative              930        775        705       2,438       2,446
                            ---------  ---------  ---------  ----------  ----------
      Total stock-based
       compensation
       expense                $ 2,935    $ 2,516    $ 1,406     $ 7,477     $ 8,045
                            ---------  ---------  ---------  ----------  ----------


  Operating expenses
   include the following:
     Patent-litigation
      expenses                $ 1,801    $ 1,516    $ 1,473     $ 4,404     $ 3,238
                            ---------  ---------  ---------  ----------  ----------


  REVENUE MIX BY PRODUCT
   FAMILY
     TOPSwitch                    23%        25%        24%         24%         24%
     TinySwitch                   37%        39%        43%         38%         44%
     LinkSwitch                   39%        35%        32%         37%         31%
     Other                         1%         1%         1%          1%          1%

  REVENUE MIX BY END
   MARKET
     Communications               30%        28%        32%         30%         32%
     Computer                     11%        12%        14%         12%         15%
     Consumer                     37%        40%        37%         38%         36%
     Industrial                   22%        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          Nine Months Ended

                                       Sept. 30,   June 30,  Sept. 30,   Sept. 30,  Sept. 30,
                                          2010       2010       2009       2010        2009
                                       ---------  ---------  ---------  ----------  ---------
  RECONCILIATION OF GROSS PROFIT
  GAAP gross profit                     $ 39,005   $ 41,489   $ 29,123   $ 116,415   $ 74,252
     GAAP gross profit margin              51.7%      52.0%      48.5%       51.3%      49.6%

  Stock-based compensation included
   in cost of revenues                       153        173        188         481        614
                                       ---------  ---------  ---------  ----------  ---------


  Non-GAAP gross profit                 $ 39,158   $ 41,662   $ 29,311   $ 116,896   $ 74,866
                                       ---------  ---------  ---------  ----------  ---------
    Non-GAAP gross profit margin           51.9%      52.2%      48.8%       51.5%      50.1%


  RECONCILIATION OF OPERATING
   EXPENSES
  GAAP operating expenses               $ 23,751   $ 22,666   $ 18,055    $ 67,460   $ 56,890

  Less: Stock-based compensation
   included in operating expenses:
       Research and development            1,125        929        340       2,782      3,256
       Sales and marketing                   727        639        173       1,776      1,729

       General and administrative            930        775        705       2,438      2,446
                                       ---------  ---------  ---------  ----------  ---------

       Total                               2,782      2,343      1,218       6,996      7,431
                                       ---------  ---------  ---------  ----------  ---------


  Non-GAAP operating expenses           $ 20,969   $ 20,323   $ 16,837    $ 60,464   $ 49,459
                                       ---------  ---------  ---------  ----------  ---------


  RECONCILIATION OF INCOME FROM
   OPERATIONS
  GAAP income from operations           $ 15,254   $ 18,823   $ 11,068    $ 48,955   $ 17,362
    GAAP operating margin                  20.2%      23.6%      18.4%       21.6%      11.6%

    Stock-based compensation included
     in cost of revenues                     153        173        188         481        614
    Stock-based compensation included
     in operating expenses                 2,782      2,343      1,218       6,996      7,431
                                       ---------  ---------  ---------  ----------  ---------


  Non-GAAP income from operations       $ 18,189   $ 21,339   $ 12,474    $ 56,432   $ 25,407
                                       ---------  ---------  ---------  ----------  ---------
    Non-GAAP operating margin              24.1%      26.7%      20.8%       24.9%      17.0%


  RECONCILIATION OF PROVISION FOR
   INCOME TAXES
  GAAP provision for income taxes        $ 3,035    $ 3,707    $ 2,094     $ 9,800    $ 5,033
    GAAP effective tax rate                19.4%      19.2%      18.6%       19.5%      26.3%

  Tax effect of items excluded from
   non-GAAP results                         (93)      (356)      (202)       (455)      (959)
                                       ---------  ---------  ---------  ----------  ---------


  Non-GAAP provision for income taxes    $ 3,128    $ 4,063    $ 2,296    $ 10,255    $ 5,992
                                       ---------  ---------  ---------  ----------  ---------
    Non-GAAP effective tax rate            16.8%      18.6%      18.1%       17.7%      22.1%


  RECONCILIATION OF NET INCOME PER
   SHARE (DILUTED)
  GAAP net income                       $ 12,634   $ 15,587    $ 9,152    $ 40,534   $ 14,085

  Adjustments to GAAP net income
   Total stock-based compensation          2,935      2,516      1,406       7,477      8,045
   Tax effect of items excluded from
    non-GAAP results                        (93)      (356)      (202)       (455)      (959)
                                       ---------  ---------  ---------  ----------  ---------


  Non-GAAP net income                   $ 15,476   $ 17,747   $ 10,356    $ 47,556   $ 21,171
                                       ---------  ---------  ---------  ----------  ---------


  Average shares outstanding for
   calculation
  of non-GAAP income per share
   (diluted)                              29,283     29,535     28,431      29,406     28,108
                                       ---------  ---------  ---------  ----------  ---------

  Non-GAAP income per share (diluted)

                                          $ 0.53     $ 0.60     $ 0.36      $ 1.62     $ 0.75
                                       =========  =========  =========  ==========  =========

  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 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)


                               September   June 30,    December
                               30, 2010      2010      31, 2009
                              ----------  ----------  ----------
  ASSETS
   CURRENT ASSETS:
     Cash and cash
      equivalents              $ 164,083   $ 159,775   $ 134,974
     Short-term investments       16,039      12,273      20,567
     Accounts receivable           7,925      18,282      21,756
     Inventories                  49,120      35,724      26,248
     Notes receivable              5,000       4,750          --
     Deferred tax assets           1,452       1,474       1,389
     Prepaid expenses and
      other current assets         6,279       7,394      10,941
                              ----------  ----------  ----------

       Total current assets      249,898     239,672     215,875
                              ----------  ----------  ----------

   INVESTMENTS                    44,023      56,609      40,100
   PROPERTY AND EQUIPMENT,
    net                           74,280      70,739      62,381
   GOODWILL AND INTANGIBLE
    ASSETS                        15,316       4,579       4,923
   DEFERRED TAX ASSETS            14,280      13,796      14,590

   OTHER ASSETS                    5,550       6,686       6,698
                              ----------  ----------  ----------

       Total assets            $ 403,347   $ 392,081   $ 344,567
                              ==========  ==========  ==========

  LIABILITIES AND
   STOCKHOLDERS' EQUITY
   CURRENT LIABILITIES:
     Accounts payable           $ 16,505    $ 23,109    $ 16,944
     Accrued payroll and
      related expenses             5,864       6,922       6,145
     Taxes payable                 1,220         251         478
     Deferred income on
      sales to distributors       14,849      14,926       9,040
     Other accrued
      liabilities                  3,496       3,481       3,309
                              ----------  ----------  ----------
       Total current
        liabilities               41,934      48,689      35,916
                              ----------  ----------  ----------

   LONG-TERM LIABILITIES:

     Income taxes payable         27,457      26,188      23,859
                              ----------  ----------  ----------


       Total liabilities          69,391      74,877      59,775
                              ----------  ----------  ----------

   STOCKHOLDERS' EQUITY:
     Common stock                     28          28          27
     Additional paid-in
      capital                    162,764     157,354     150,021
     Cumulative translation
      adjustment                      54        (51)           4

     Retained earnings           171,110     159,873     134,740
                              ----------  ----------  ----------
      Total stockholders'
       equity                    333,956     317,204     284,792
                              ----------  ----------  ----------
      Total liabilities
       stockholders' equity    $ 403,347   $ 392,081   $ 344,567
                              ==========  ==========  ==========

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

                                                   Sept. 30,   Sept. 30,   Sept. 30,   Sept. 30,
                                                     2010        2009        2010        2009
                                                  ----------  ----------  ----------  ----------
  CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                       $ 12,634     $ 9,152    $ 40,534    $ 14,085
   Adjustments to reconcile net income to net
    cash provided by operating activities
     Depreciation and amortization                     3,343       2,572       9,478       7,550
     Loss (gain) on sale of property and
      equipment                                            5          --       (344)        (10)
     Stock-based compensation expense                  2,916       1,406       7,459       8,046
     Amortization of premium on held-to-maturity
      investments                                        479          54       1,337         105
     Deferred income taxes                             (461)       1,148         249       1,428
     Decrease in accounts receivable and other
      allowances                                         (7)        (89)        (25)         (4)
     Excess tax benefit from stock options
      exercised                                         (48)        (87)       (939)       (102)
     Tax benefit associated with employee stock
      plans                                             (89)         371       1,951         554
     Change in operating assets and liabilities:
      Accounts receivable                             10,362     (5,976)      13,854     (7,393)
      Inventories                                   (13,336)       1,976    (22,796)       8,010
      Prepaid expenses and other assets                1,048     (2,332)       4,610     (6,151)
      Accounts payable                               (4,360)       4,674          93       5,514
      Taxes payable and other accrued
       liabilities                                     1,299       1,965       4,305       1,173

      Deferred income on sales to distributors          (77)       1,259       5,808       2,524
                                                  ----------  ----------  ----------  ----------

       Net cash provided by operating activities      13,708      16,093      65,574      35,329
                                                  ----------  ----------  ----------  ----------

  CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property and equipment               (8,320)     (4,079)    (21,833)     (7,567)
   Proceeds from sale of property and equipment           --          --       1,415          --
   Acquisition                                       (8,598)          --     (8,598)          --
   Notes to third parties                            (2,000)          --     (6,750)          --
   Purchases of held-to-maturity investments              --    (22,865)    (27,224)    (25,620)

   Proceeds from held-to-maturity investments          8,341       2,499      26,491       6,349
                                                  ----------  ----------  ----------  ----------

     Net cash used in investing activities          (10,577)    (24,445)    (36,499)    (26,838)
                                                  ----------  ----------  ----------  ----------

  CASH FLOWS FROM FINANCING ACTIVITIES:
   Net proceeds from issuance of common stock          2,524       8,444      17,987      13,698
   Repurchase of common stock                             --     (2,135)    (13,960)    (28,674)
   Repurchase of stock options                            --          --          --     (9,048)
   Retirement of performance shares for income
    tax withholding                                       --          --       (769)          --
   Payments of dividends to stockholders             (1,395)       (672)     (4,163)     (2,017)
   Excess tax benefit from stock options
    exercised                                             48          87         939         102
                                                  ----------  ----------  ----------  ----------
     Net cash provided by (used in) financing
      activities                                       1,177       5,724          34    (25,939)
                                                  ----------  ----------  ----------  ----------

  NET INCREASE (DECREASE) IN CASH AND CASH
   EQUIVALENTS                                         4,308     (2,628)      29,109    (17,448)

  CASH AND CASH EQUIVALENTS AT BEGINNING OF
   PERIOD                                            159,775     152,652     134,974     167,472
                                                  ----------  ----------  ----------  ----------


  CASH AND CASH EQUIVALENTS AT END OF PERIOD       $ 164,083   $ 150,024   $ 164,083   $ 150,024
                                                  ==========  ==========  ==========  ==========

  SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
   AND FINANCING ACTIVITIES:

   Unpaid property and equipment, net                $ 1,008       $ 305     $ 1,008        $ 44
                                                  ==========  ==========  ==========  ==========
   Conversion of notes receivable in connection
    with acquisition                                 $ 1,752        $ --     $ 1,752        $ --
                                                  ==========  ==========  ==========  ==========

   Application of prepayment to acquisition          $ 1,200        $ --     $ 1,200        $ --
                                                  ==========  ==========  ==========  ==========

  SUPPLEMENTAL DISCLOSURE OF CASH FLOW
   INFORMATION

   Cash paid for interest                               $ --        $ --        $ --       $ 397
                                                  ==========  ==========  ==========  ==========

   Cash paid for income taxes, net of refunds        $ 1,337     $ (267)     $ 1,951        $ 86
                                                  ==========  ==========  ==========  ==========

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

SOURCE: Power Integrations, Inc.

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

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

News Provided by COMTEX

NASDAQ: POWI $119.08 -1.23
-1.02% Volume: 129,556 August 7, 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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