Power Integrations Reports First-Quarter Financial Results

May 2, 2011
Quarterly revenues grew five percent sequentially to $76.8 million

SAN JOSE, Calif.--(BUSINESS WIRE)-- Power Integrations (Nasdaq:POWI), the leader in high-voltage integrated circuits for energy-efficient power conversion, today announced financial results for the quarter ended March 31, 2011. Net revenues for the quarter were $76.8 million, up seven percent compared with the first quarter of 2010, and up five percent compared with the fourth quarter of 2010. Net income was $9.9 million or $0.33 per diluted share, compared with $0.42 per diluted share in the year-ago quarter and $0.30 per diluted share in the fourth quarter of 2010. Gross margin for the first quarter was 47.4 percent; operating margin was 15.2 percent.

In addition to its GAAP results, the company provided certain non-GAAP financial measures that exclude stock-based compensation expenses, amortization of the fair-value write-up of acquired inventory and acquisition-related intangible assets, and the tax effects of these items. Non-GAAP net income for the quarter was $12.1 million or $0.40 per diluted share, compared with $0.49 per diluted share in the year-ago quarter and $0.39 per diluted share in the fourth quarter of 2010. Non-GAAP gross margin for the first quarter was 48.0 percent; non-GAAP operating margin was 18.7 percent.

Commented Balu Balakrishnan, president and CEO of Power Integrations: "Our revenues grew five percent sequentially in the first quarter, with all four major end-market categories contributing to the increase. We also saw an increase in bookings for the second consecutive quarter, and orders remained healthy through the month of April. We believe these trends provide further evidence that the inventory correction that began last summer may now be behind us."

Balakrishnan continued: "With respect to the tragedy in Japan, we have not experienced any interruption in our ability to supply customers thus far, despite the fact that one of our Japanese foundries has been inoperative since the earthquake due to the ongoing shortage of electricity. We believe that our operational safeguards — including dual-sourcing and a healthy inventory buffer — will enable us to continue meeting customer demand. Also, while we continue to monitor the supply of raw materials into our supply chain, at this time we are not aware of any shortages or other issues that would prevent us from meeting customer demand.

"However, the uncertainty created by the Japan crisis does make forecasting demand more challenging than usual. We have seen some negative impact on demand from our Japanese customers, which account for approximately six percent of our sales; there may also be some effect on overall demand if the manufacturing of power supplies or end products is impacted by shortages of other components or materials. Taking these uncertainties into consideration along with the healthy underlying trends in our business, we expect our second-quarter revenues to be between $76 million and $82 million."

Additional Highlights

  • The company paid a quarterly dividend of $0.05 per share on March 31, 2011. The next dividend of $0.05 per share will be paid on June 30, 2011 to stockholders of record as of May 31, 2011.
  • Power Integrations was issued 16 new U.S. patents and 16 new foreign patents during the quarter, and had a total of 410 U.S. patents and 225 foreign patents as of March 31, 2011.

Financial Outlook for Second Quarter of 2011

The company issued the following forecast for the second quarter of 2011:

  • Revenues are expected to be between $76 million and $82 million;
  • Gross margin:
    • GAAP: between 47 percent and 48 percent;
    • Non-GAAP: 48 percent, plus or minus half a percentage point (excludes stock-based compensation and acquisition-related amortization);
  • Operating expenses:
    • GAAP: Approximately $25.5 million;
    • Non-GAAP: similar to the first quarter of 2011 (excludes stock-based compensation and amortization of acquisition-related intangible assets).

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 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™ energy-efficiency technology has saved an estimated $4.7 billion of standby energy waste and prevented millions of tons of CO2 emissions. The company's Green Room web site 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' stock is included in The Cleantech Index® and the NASDAQ® Clean Edge® Green Energy Index. 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 718-10, certain acquisition-related expenses such as the amortization of acquisition-related intangible assets and the fair-value write-up value of acquired inventory, and the tax effects of these items. 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 second-quarter 2011 financial performance, its belief that the inventory correction is behind it, the expected effects of the tragedy in Japan and its ability to continue meeting customer demand, 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, especially in light of the uncertainty resulting from the earthquakes and tsunami in Japan; 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 the challenges inherent in integrating acquired businesses. 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 Annual Report on Form 10-K, filed with the Securities and Exchange Commission (SEC) on February 25, 2011. 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, and the Power Integrations logo are trademarks or registered trademarks of Power Integrations, Inc. All other trademarks are property of their respective owners.

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

March 31, 2011

 

December 31, 2010

 

March 31, 2010

NET REVENUES   $ 76,762     $ 72,986     $ 71,507  
             
COST OF REVENUES     40,339       36,860       35,585  
             
GROSS PROFIT     36,423       36,126       35,922  
             
OPERATING EXPENSES:            
Research and development     10,023       9,753       8,111  
Sales and marketing     8,248       9,063       6,920  
General and administrative     6,475       6,339       6,013  
Total operating expenses     24,746       25,155       21,044  
             
INCOME FROM OPERATIONS     11,677       10,971       14,878  
             
OTHER INCOME, net     442       500       494  
             
INCOME BEFORE PROVISION FOR            
INCOME TAXES     12,119       11,471       15,372  
             
PROVISION FOR INCOME TAXES     2,265       2,541       3,058  
             
NET INCOME   $ 9,854     $ 8,930     $ 12,314  
             
EARNINGS PER SHARE:            
Basic   $ 0.34     $ 0.32     $ 0.45  
Diluted   $ 0.33     $ 0.30     $ 0.42  
             
SHARES USED IN PER-SHARE CALCULATION:            
Basic     28,628       28,134       27,470  
Diluted     30,187       29,844       29,358  
             
             
SUPPLEMENTAL INFORMATION:            
             
Stock-based compensation expenses included in:            
Cost of revenues   $ 239     $ 205     $ 157  
Research and development     811       1,325       727  
Sales and marketing     667       817       410  
General and administrative     787       895       733  
Total stock-based compensation expense   $ 2,504     $ 3,242     $ 2,027  
             
Cost of revenues includes:            
Amortization of write-up of acquired inventory   $ 62     $ -     $ -  
Amortization of acquisition-related intangible assets   $ 85     $ 41     $ 41  
             
Operating expenses include:            
Amortization of acquisition-related intangible assets   $ 28     $ -     $ -  
Patent-litigation expenses   $ 1,257     $ 1,321     $ 1,087  
             
REVENUE MIX BY PRODUCT FAMILY            
TOPSwitch     23 %     23 %     24 %
TinySwitch     35 %     36 %     39 %
LinkSwitch     40 %     40 %     36 %
Other     2 %     1 %     1 %
             
REVENUE MIX BY END MARKET            
Communications     32 %     33 %     32 %
Computer     11 %     11 %     12 %
Consumer     37 %     37 %     36 %
Industrial     20 %     19 %     20 %

 

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

March 31, 2011

 

Dec. 31, 2010

 

March 31, 2010

RECONCILIATION OF GROSS PROFIT            
GAAP gross profit   $ 36,423     $ 36,126     $ 35,922  
  GAAP gross profit margin     47.4 %     49.5 %     50.2 %
               
Stock-based compensation included in cost of revenues     239       205       157  
Amortization of write-up of acquired inventory     62       -       -  
Amortization of acquisition-related intangible assets     85       41       41  
               
Non-GAAP gross profit   $ 36,809     $ 36,372     $ 36,120  
  Non-GAAP gross profit margin     48.0 %     49.8 %     50.5 %
               
               
RECONCILIATION OF OPERATING EXPENSES            
GAAP operating expenses   $ 24,746     $ 25,155     $ 21,044  
               
Less:Stock-based compensation expense included in operating expenses            
  Research and development     811       1,325       727  
  Sales and marketing     667       817       410  
  General and administrative     787       895       733  
  Total     2,265       3,037       1,870  
               
  Amortization of acquisition-related intangible assets     28       -       -  
               
Non-GAAP operating expenses   $ 22,453     $ 22,118     $ 19,174  
               
               
RECONCILIATION OF INCOME FROM OPERATIONS            
Non-GAAP gross profit   $ 36,809     $ 36,372     $ 36,120  
               
Less:Non-GAAP operating expenses     22,453       22,118       19,174  
               
Non-GAAP income from operations   $ 14,356     $ 14,254     $ 16,946  
  Non-GAAP operating margin     18.7 %     19.5 %     23.7 %
               
               
RECONCILIATION OF PROVISION FOR INCOME TAXES            
GAAP provision for income taxes   $ 2,265     $ 2,541     $ 3,058  
  GAAP effective tax rate     18.7 %     22.2 %     19.9 %
               
Tax effect of items excluded from non-GAAP results     (404 )     (523 )     (6 )
               
Non-GAAP provision for income taxes   $ 2,669     $ 3,064     $ 3,064  
  Non-GAAP effective tax rate     18.0 %     20.8 %     17.6 %
               
               
RECONCILIATION OF NET INCOME PER SHARE (DILUTED)            
GAAP net income   $ 9,854     $ 8,930     $ 12,314  
               
Adjustments to GAAP net income            
  Stock-based compensation     2,504       3,242       2,027  
  Amortization of write-up of acquired inventory     62       -       -  
  Amortization of acquisition-related intangible assets     113       41       41  
  Tax effect of items excluded from non-GAAP results     (404 )     (523 )     (6 )
               
Non-GAAP net income   $ 12,129     $ 11,690     $ 14,376  
               

 

           

Average shares outstanding for calculation of non-GAAP income per share (diluted)

    30,187       29,844       29,358  
               
Non-GAAP income per share (diluted)   $ 0.40     $ 0.39     $ 0.49  
               
GAAP income per share (diluted)   $ 0.33     $ 0.30     $ 0.42  
               
               
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 (as recognized under Accounting Standard Codification 718-10), certain acquisition-related expenses including amortization of intangible assets resulting from acquisitions, the amortization of the fair-value write-up of acquired inventory, and the related tax effects of these items. 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)
             
             
   

March 31, 2011

 

December 31, 2010

 

March 31, 2010

ASSETS            
CURRENT ASSETS:            
Cash and cash equivalents   $ 137,694   $ 155,667   $ 125,295  
Short-term investments     32,070     27,355     22,129  
Accounts receivable     13,314     5,713     27,586  
Inventories     63,004     62,077     31,426  
Deferred tax assets     1,434     1,435     1,486  
Prepaid expenses and other current assets     8,217     9,263     13,380  
Total current assets     255,733     261,510     221,302  
             
INVESTMENTS     36,815     31,760     62,562  
PROPERTY AND EQUIPMENT, net     84,586     84,470     65,877  
GOODWILL AND INTANGIBLE ASSETS, net     24,378     24,621     4,751  
DEFERRED TAX ASSETS     13,022     13,421     12,996  
OTHER ASSETS     22,439     17,288     6,683  
Total assets   $ 436,973   $ 433,070   $ 374,171  
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
CURRENT LIABILITIES:            
Accounts payable   $ 13,932   $ 20,291   $ 26,158  
Accrued payroll and related expenses     5,455     7,395     5,227  
Income taxes payable     -     -     453  
Deferred income on sales to distributors     10,951     12,221     11,917  
Other accrued liabilities     2,918     9,548     2,543  
Total current liabilities     33,256     49,455     46,298  
             
LONG-TERM LIABILITIES            
Income taxes payable     30,676     29,580     25,023  
             
Total liabilities     63,932     79,035     71,321  
             
STOCKHOLDERS' EQUITY:            
Common stock     29     28     28  
Additional paid-in capital     185,834     175,295     157,193  
Accumulated translation adjustment     135     85     (46 )
Retained earnings     187,043     178,627     145,675  
Total stockholders' equity     373,041     354,035     302,850  
Total liabilities stockholders' equity   $ 436,973   $ 433,070   $ 374,171  

 

Tax benefit associated with employee stock plans
POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
             
    Three Months Ended
   

March 31, 2011

 

December 31, 2010

 

March 31, 2010

CASH FLOWS FROM OPERATING ACTIVITIES:            
Net income   $ 9,854     $ 8,930     $ 12,314  
Adjustments to reconcile net income to net cash provided by operating activities            
Depreciation     3,682       3,387       2,771  
Amortization of intangible assets     243       170       162  
Loss on sale of property and equipment     -       14       13  
Stock-based compensation expense     2,504       3,242       2,027  
Amortization of premium on held-to-maturity investments     439       428       350  
Deferred income taxes     399       875       1,498  
Provision for (reduction in provision for) accounts receivable and other allowances     22       (2 )     -  
Excess tax benefit from stock options exercised     (398 )     (370 )     (1,176 )
    783       940       2,535  
Change in operating assets and liabilities:            
Accounts receivable     (7,622 )     2,382       (5,830 )
Inventories     (964 )     (10,792 )     (5,185 )
Prepaid expenses and other assets     1,435       (13,125 )     (672 )
Accounts payable     (2,908 )     (576 )     6,295  
Taxes payable and other accrued liabilities     (525 )     1,522       (1,200 )
Deferred income on sales to distributors     (1,269 )     (2,628 )     2,877  
Net cash provided by (used in) operating activities     5,675       (5,603 )     16,779  
             
CASH FLOWS FROM INVESTING ACTIVITIES:            
Purchases of property and equipment     (7,248 )     (8,733 )     (3,360 )
Acquisition     (6,901 )     -       -  
Advance for acquisition of business     -       -       (1,750 )
Net increase in financing lease receivables     (5,540 )     -       -  
Investment in third party     -       (1,831 )     -  
Purchases of held-to-maturity investments     (11,508 )     -       (27,224 )
Proceeds from held-to-maturity investments     1,300       519       2,850  
Net cash used in investing activities     (29,897 )     (10,045 )     (29,484 )
             
CASH FLOWS FROM FINANCING ACTIVITIES            
Net proceeds from issuance of common stock     7,288       8,276       10,035  
Repurchase of common stock     -       -       (6,038 )
Retirement of performance shares for income tax withholding     -       -       (769 )
Payments of dividends to stockholders     (1,437 )     (1,414 )     (1,378 )
Excess tax benefit from stock options exercised     398       370       1,176  
Net cash provided by financing activities     6,249       7,232       3,026  
             
NET DECREASE IN CASH AND CASH EQUIVALENTS     (17,973 )     (8,416 )     (9,679 )
             
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD     155,667       164,083       134,974  
             
CASH AND CASH EQUIVALENTS AT END OF PERIOD   $ 137,694     $ 155,667     $ 125,295  
             
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND            
FINANCING ACTIVITIES:            
Unpaid property and equipment, net   $ 1,917     $ 5,369     $ 2,918  

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

Source: Power Integrations, Inc.

News Provided by Acquire Media

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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