Power Integrations Reports Third-Quarter Financial Results

November 3, 2011

Net revenues were $75.1 million; cash flow from operations was $19.4 million

Company repurchased 1.0 million shares during the third quarter; repurchase authorization increased by $30 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 September 30, 2011. Net revenues for the third quarter were $75.1 million, down six percent from the prior quarter and down one percent compared with the third quarter of 2010. Net income was $7.5 million or $0.25 per diluted share, compared with $0.35 per diluted share in the prior quarter and $0.43 per diluted share in the third quarter of 2010. Gross margin for the third quarter was 46.7 percent; operating margin was 14.1 percent.

In addition to its GAAP results, the company provided certain non-GAAP financial measures that exclude stock-based compensation expenses, amortization of acquisition-related intangible assets and the fair-value write-up of acquired inventory, and the tax effects of these items. Non-GAAP net income for the quarter was $9.5 million or $0.32 per diluted share, compared with $0.43 per diluted share in the prior quarter and $0.53 per diluted share in the third quarter of 2010. Non-GAAP gross margin for the third quarter was 47.2 percent; non-GAAP operating margin was 16.6 percent.

Commented Balu Balakrishnan, president and CEO of Power Integrations: "Like much of the semiconductor industry, we are experiencing a downturn in demand driven by macroeconomic factors. Third-quarter revenues were down six percent from the prior quarter, but within the range of our guidance. Order rates remain relatively subdued, and we expect sales to decline further in the fourth quarter."

Balakrishnan continued: "While the current business environment is challenging, we believe our long-term growth drivers are intact. Manufacturers continue to specify more efficient power supplies in response to both regulatory and market forces. Our LED-lighting and high-power businesses continue to ramp. Meanwhile, we have made good progress on cost reductions to help offset the margin impact of higher input costs, and we expect our gross margin to increase in the fourth quarter as a result. We also expect our operating expenses to decrease in the fourth quarter as we have implemented expense-saving measures in response to the weaker business environment."

Additional Highlights

  • Cash flow from operations was $19.4 million for the quarter and totaled $60.0 million for the nine months ended September 30.
  • Power Integrations repurchased approximately 1.0 million shares of its common stock during the third quarter for $31.4 million. As of September 30 the company had used $35.8 million of its $50 million repurchase authorization, repurchasing a total of 1.1 million shares. The company's board of directors has authorized the use of an additional $30 million for share repurchases on top of the $14.2 million that remained at quarter-end.
  • The company paid a dividend of $0.05 per share on September 30, 2011. The next dividend of $0.05 per share will be paid on December 30, 2011 to stockholders of record as of November 30.
  • Power Integrations was issued 18 U.S. patents and 26 non-U.S. patents during the quarter and had a total of 440 U.S. patents and 293 non-U.S. patents as of September 30.

Financial Outlook for Fourth Quarter of 2011

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

  • Revenues are expected to be between $63 million and $69 million;
  • Gross margins are expected to increase by approximately 100 basis points compared with the third quarter;
  • Operating expenses:
    • GAAP: between $24 million and $25 million;
    • Non-GAAP: between $21.5 million and $22.5 million (excluding approximately $2.4 million of stock-based compensation expenses and less than $0.1 million of amortization expense related to 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 $5 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 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 fourth-quarter 2011 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; 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; 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; unfavorable fluctuations in component costs resulting from changes in commodity prices and/or the exchange rate between the U.S. dollar and the Japanese yen; 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 Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission (SEC) on August 8, 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 Nine Months Ended

September 30, 2011

June 30, 2011

September 30, 2010

September 30, 2011

September 30, 2010

NET REVENUES $ 75,063 $ 80,184 $ 75,452 $ 232,009 $ 226,817
 
COST OF REVENUES   40,020     42,558     36,447     122,917     110,402  
 
GROSS PROFIT   35,043     37,626     39,005     109,092     116,415  
 
OPERATING EXPENSES:
Research and development 10,345 10,195 9,348 30,563 26,133
Sales and marketing 7,990 8,104 7,657 24,342 22,104
General and administrative   6,145     6,141     6,746     18,761     19,223  
Total operating expenses   24,480     24,440     23,751     73,666     67,460  
 
INCOME FROM OPERATIONS 10,563 13,186 15,254 35,426 48,955
 
OTHER INCOME, net   552     461     415     1,455     1,379  
 
INCOME BEFORE PROVISION FOR INCOME TAXES 11,115 13,647 15,669 36,881 50,334
 
PROVISION FOR INCOME TAXES   3,603     3,048     3,035     8,916     9,800  
 
NET INCOME $ 7,512   $ 10,599   $ 12,634   $ 27,965   $ 40,534  
 
EARNINGS PER SHARE:
Basic $ 0.26   $ 0.37   $ 0.45   $ 0.97   $ 1.46  
Diluted $ 0.25   $ 0.35   $ 0.43   $ 0.93   $ 1.38  
 
SHARES USED IN PER-SHARE CALCULATION:
Basic 28,799 28,938 27,894 28,789 27,737
Diluted 29,879 30,346 29,283 30,195 29,406
 
 
SUPPLEMENTAL INFORMATION:
 
Stock-based compensation expenses included in:
Cost of revenues $ 128 $ 216 $ 153 $ 584 $ 481
Research and development 564 980 1,125 2,354 2,782
Sales and marketing 449 543 727 1,659 1,776
General and administrative   527     705     930     2,020     2,438  
Total stock-based compensation expense $ 1,668   $ 2,444   $ 2,935   $ 6,617   $ 7,477  
 
Cost of revenues includes:
Amortization of write-up of acquired inventory $ 150   $ 148   $ -   $ 360   $ -  
Amortization of acquisition-related intangible assets $ 85   $ 85   $ 41   $ 255   $ 123  
 
Operating expenses include:
Amortization of acquisition-related intangible assets $ 28   $ 28   $ -   $ 84   $ -  
Patent-litigation expenses $ 1,751   $ 1,210   $ 1,801   $ 4,218   $ 4,404  
 
REVENUE MIX BY PRODUCT FAMILY
TOPSwitch 21 % 24 % 23 % 23 % 24 %
TinySwitch 33 % 31 % 37 % 33 % 38 %
LinkSwitch 43 % 43 % 39 % 42 % 37 %
Other 3 % 2 % 1 % 2 % 1 %
 
REVENUE MIX BY END MARKET
Communications 26 % 28 % 30 % 29 % 30 %
Computer 12 % 13 % 11 % 12 % 12 %
Consumer 39 % 36 % 37 % 37 % 38 %
Industrial 23 % 23 % 22 % 22 % 20 %
 

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

Sept. 30, 2011

June 30, 2011

Sept. 30, 2010

Sept. 30, 2011

Sept. 30, 2010

RECONCILIATION OF GROSS PROFIT
GAAP gross profit $ 35,043 $ 37,626 $ 39,005 $ 109,092 $ 116,415
GAAP gross profit margin 46.7 % 46.9 % 51.7 % 47.0 % 51.3 %
 
Stock-based compensation included in cost of revenues 128 216 153 584 481
Amortization of write-up of acquired inventory 150 148 - 360 -
Amortization of acquisition-related intangible assets   85     85     41     255     123  
 
Non-GAAP gross profit $ 35,406   $ 38,075   $ 39,199   $ 110,291   $ 117,019  
Non-GAAP gross profit margin 47.2 % 47.5 % 52.0 % 47.5 % 51.6 %
 
RECONCILIATION OF OPERATING EXPENSES
GAAP operating expenses $ 24,480 $ 24,440 $ 23,751 $ 73,666 $ 67,460
 
Less: Stock-based compensation expense included in operating expenses
Research and development 564 980 1,125 2,354 2,782
Sales and marketing 449 543 727 1,659 1,776
General and administrative   527     705     930     2,020     2,438  
Total   1,540     2,228     2,782     6,033     6,996  
 
Amortization of acquisition-related intangible assets   28     28     -     84     -  
 
Non-GAAP operating expenses $ 22,912   $ 22,184   $ 20,969   $ 67,549   $ 60,464  
 
RECONCILIATION OF INCOME FROM OPERATIONS
GAAP income from operations $ 10,563 $ 13,186 $ 15,254 $ 35,426 $ 48,955
GAAP operating margin 14.1 % 16.4 % 20.2 % 15.3 % 21.6 %
 

Less: Total stock-based compensation

1,668 2,444 2,935 6,617 7,477
Amortization of write-up of acquired inventory 150 148 - 360 -
Amortization of acquisition-related intangible assets   113  

 

  113  

 

  41     339     123  
 
Non-GAAP income from operations $ 12,494   $ 15,891   $ 18,230   $ 42,742   $ 56,555  
Non-GAAP operating margin 16.6 % 19.8 % 24.2 % 18.4 % 24.9 %
 
RECONCILIATION OF PROVISION FOR INCOME TAXES
GAAP provision for income taxes $ 3,603   $ 3,048   $ 3,035   $ 8,916   $ 9,800  
GAAP effective tax rate 32.4 % 22.3 % 19.4 % 24.2 % 19.5 %
 
Tax effect of items excluded from non-GAAP results 85 (225 ) (93 ) (544 ) (455 )
 
Non-GAAP provision for income taxes $ 3,518   $ 3,273   $ 3,128   $ 9,460   $ 10,255  
Non-GAAP effective tax rate 27.0 % 20.0 % 16.8 % 21.4 % 17.7 %
 
RECONCILIATION OF NET INCOME PER SHARE (DILUTED)
GAAP net income $ 7,512 $ 10,599 $ 12,634 $ 27,965 $ 40,534
 
Adjustments to GAAP net income
Stock-based compensation 1,668 2,444 2,935 6,617 7,477
Amortization of write-up of acquired inventory 150 148 - 360 -
Amortization of acquisition-related intangible assets 113 113 41 339 123
Tax effect of items excluded from non-GAAP results   85     (225 )   (93 )   (544 )   (455 )
 
Non-GAAP net income $ 9,528   $ 13,079   $ 15,517   $ 34,737   $ 47,679  
 

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

  29,879     30,346     29,283     30,195     29,406  
 
Non-GAAP income per share (diluted) $ 0.32   $ 0.43   $ 0.53   $ 1.15   $ 1.62  
 
GAAP income per share (diluted) $ 0.25   $ 0.35   $ 0.43   $ 0.93   $ 1.38  
 

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

September 30, 2011

June 30, 2011

December 31, 2010

ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 148,578 $ 170,494 $ 155,667
Short-term investments 48,932 33,091 27,355
Accounts receivable 10,330 8,070 5,713
Inventories 51,763 54,069 62,077
Deferred tax assets 1,440 1,437 1,435
Prepaid expenses and other current assets   6,864   9,572   9,263
Total current assets   267,907   276,733   261,510
 
INVESTMENTS 25,022 30,043 31,760
PROPERTY AND EQUIPMENT, net 85,271 85,449 84,470
INTANGIBLE ASSETS, net 9,066 9,309 9,795
GOODWILL 14,786 14,826 14,826
DEFERRED TAX ASSETS 12,637 12,593 13,421
OTHER ASSETS   25,799   25,355   17,288
Total assets $ 440,488 $ 454,308 $ 433,070
 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 17,318 $ 14,173 $ 20,291
Accrued payroll and related expenses 6,290 6,246 7,395
Income taxes payable 1,759 354 -
Deferred income on sales to distributors 10,316 11,199 12,221
Other accrued liabilities   2,613   2,367   9,548
Total current liabilities   38,296   34,339   49,455
 
LONG-TERM LIABILITIES
Income taxes payable   33,805   32,040   29,580
 
Total liabilities   72,101   66,379   79,035
 
STOCKHOLDERS' EQUITY:
Common stock 28 29 28
Additional paid-in capital 166,007 191,549 175,295
Accumulated translation adjustment 80 158 85
Retained earnings   202,272   196,193   178,627
Total stockholders' equity   368,387   387,929   354,035
Total liabilities and stockholders' equity $ 440,488 $ 454,308 $ 433,070
 

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

Sept. 30, 2011

June 30, 2011

Sept. 30, 2010

Sept. 30, 2011

Sept. 30, 2010

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,512 $ 10,599 $ 12,634 $ 27,965 40,534
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation 3,865 3,790 3,173 11,337 8,974
Amortization of intangible assets 243 243 170 729 504
(Gain) loss on sale of property and equipment - (41 ) 5 (41 ) (344 )
Stock-based compensation expense 1,668 2,444 2,916 6,617 7,459
Amortization of premium on held-to-maturity investments 396 420 479 1,255 1,337
Deferred income taxes (47 ) 427 (461 ) 779 249
Increase (decrease) in accounts receivable allowances (110 ) 15 (7 ) (74 ) (25 )
Excess tax benefit from stock options exercised (32 ) (299 ) (48 ) (729 ) (939 )
Tax benefit associated with employee stock plans 288 755 (89 ) 1,826 1,951
Change in operating assets and liabilities:
Accounts receivable (2,150 ) 5,230 10,362 (4,542 ) 13,854
Inventories 2,269 8,879 (13,336 ) 10,184 (22,796 )
Prepaid expenses and other assets (225 ) 1,613 1,048 2,823 4,610
Accounts payable 3,170 (1,352 ) (4,360 ) (1,090 ) 93
Taxes payable and other accrued liabilities 3,423 1,993 1,299 4,891 4,305
Deferred income on sales to distributors   (883 )   248     (77 )   (1,904 )   5,808  
Net cash provided by operating activities   19,387     34,964     13,708     60,026     65,574  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (3,710 ) (5,271 ) (8,320 ) (16,229 ) (21,833 )
Proceeds from sale of property and equipment - 2,249 - 2,249 1,415
Other assets (463 ) (808 ) - (1,271 ) -
Acquisition - (13 ) (8,598 ) (6,914 ) (8,598 )
Increase in financing lease receivables (157 ) (2,179 ) - (7,978 ) -
Collections of financing lease receivables 109 103 - 314 -
Notes to third parties - (3,000 ) (2,000 ) (3,000 ) (6,750 )
Collection of note to third parties 3,000 - - 3,000 -
Purchases of held-to-maturity investments (19,761 ) - - (31,269 ) (27,224 )
Proceeds from held-to-maturity investments   8,545     5,330     8,341     15,175     26,491  
Net cash used in investing activities   (12,437 )   (3,589 )   (10,577 )   (45,923 )   (36,499 )
 
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of common stock 3,972 6,958 2,524 18,218 17,987
Repurchase of common stock (31,435 ) (4,384 ) - (35,819 ) (13,960 )
Retirement of performance shares for income tax withholding - - - - (769 )
Payments of dividends to stockholders (1,435 ) (1,448 ) (1,395 ) (4,320 ) (4,163 )
Excess tax benefit from stock options exercised   32     299     48     729     939  
Net cash provided by (used in) financing activities   (28,866 )   1,425     1,177     (21,192 )   34  
 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (21,916 ) 32,800 4,308 (7,089 ) 29,109
 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD   170,494     137,694     159,775     155,667     134,974  
 
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 148,578   $ 170,494   $ 164,083   $ 148,578   $ 164,083  
 

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Unpaid property and equipment, net $ 3,486   $ 3,510   $ 1,008   $ 3,486   $ 1,008  
 

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

Source: Power Integrations

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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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