Power Integrations Reports Second-Quarter Financial Results

August 6, 2012
Non-GAAP gross margin for Q2 was 51.9%; non-GAAP earnings were $0.49/diluted share
GAAP gross margin was 49.4%; GAAP net loss of $0.25/share reflects one-time tax charge
Announces resolution of tax audit and substantial reduction in future effective tax rate

SAN JOSE, Calif.--(BUSINESS WIRE)-- Power Integrations (Nasdaq: POWI) today announced financial results for the quarter ended June 30, 2012. Net revenues for the second quarter were $76.4 million, up six percent from the prior quarter and down five percent compared with the second quarter of 2011. GAAP gross margin for the quarter was 49.4 percent; operating margin was 12.3 percent. The company reported a GAAP net loss for the quarter of $7.2 million or $0.25 per share, driven by a one-time net charge of $15.7 million associated with the tax settlement described below. The second-quarter net loss compares to net income of $0.25 per diluted share in the prior quarter and $0.35 per diluted share in the second quarter of 2011.

In addition to its GAAP results, the company provided certain non-GAAP financial measures that exclude stock-based compensation expenses, acquisition-related costs and expenses, non-cash interest income, the tax effects of these items, and the one-time charge associated with the tax settlement. Non-GAAP gross margin for the second quarter was 51.9 percent, an increase of 310 basis points sequentially; non-GAAP operating margin was 20.7 percent, up 340 basis points sequentially.

Non-GAAP net income for the quarter was $14.6 million or $0.49 per diluted share, compared with $0.36 per diluted share in the prior quarter and $0.43 per diluted share in the second quarter of 2011. The company's non-GAAP effective tax rate for the second quarter was 9.0 percent, reflecting a reduction in the company's expected full-year 2012 non-GAAP tax rate to approximately 13 percent, compared with the prior expectation of a full-year rate in the high teens.

The company today announced a settlement with the U.S. Internal Revenue Service that resolves the IRS audit of the company's taxes for the years 2003 through 2006. The settlement includes the following elements:

  • During the third quarter of 2012 Power Integrations will make a one-time payment of $42.6 million in taxes and interest relating primarily to the revaluation of a license to certain intellectual property rights of the company to one of its foreign subsidiaries. As noted above, the company's GAAP results for the second quarter include a one-time net charge of $15.7 million reflecting the taxes and interest to be paid, partially offset by the reversal of previously accrued tax liabilities and valuation allowances. Of the $15.7 million charge, approximately $12.7 million relates to taxes and $3.0 million to interest.
  • The company expects a substantial reduction in its ongoing effective tax rates. Specifically, the company expects its 2013 GAAP and non-GAAP effective tax rates to be in the high single digits. For the remaining two quarters of 2012 the GAAP and non-GAAP effective tax rates are expected to be approximately 18 percent and 13 percent, respectively.
  • The agreement permits Power Integrations to repatriate approximately $102 million of earnings from its foreign subsidiaries without further U.S. federal income-tax consequences.

Commented Balu Balakrishnan, president and CEO of Power Integrations: "Like many of our peers, we have experienced a slowdown in demand of late, and second-quarter revenues fell short of our expectations. However, our non-GAAP gross margin expanded by more than three percentage points thanks to continued execution on our cost-reduction efforts and a more favorable end-market mix during the quarter. In all, our non-GAAP gross margin is up nearly five points in the past three quarters, and we expect it to remain above the 50-percent benchmark in the second half of the year. The combination of a higher gross margin and our lower tax rate will help support our earnings and cash flow even in the face of a muted demand environment."

Additional Highlights

  • On May 1 the company completed its acquisition of CT-Concept Technologie AG, a Swiss developer of highly efficient drivers for high-voltage IGBT modules, for approximately $116 million net of cash acquired.
  • Cash flow from operations was $27.7 million for the quarter.
  • The company paid a dividend of $0.05 per share on June 29, 2012. The next dividend of $0.05 per share will be paid on September 28, 2012 to stockholders of record as of August 31, 2012.
  • Power Integrations received or acquired 25 U.S. patents and 13 non-U.S. patents during the quarter and had a total of 499 U.S. patents and 360 non-U.S. patents as of June 30, 2012.

Financial Outlook

The company issued the following forecast for the third quarter of 2012:

  • Third-quarter revenues are expected to be between $76 million and $82 million.
  • Non-GAAP gross margin is expected to be 51.5 percent, plus or minus 50 basis points (calculated by excluding from GAAP gross profit approximately $0.3 million of stock-based compensation, $0.6 million of amortization of acquisition-related intangible assets, and $1.5 million of amortization of the write-up of acquired inventory). GAAP gross margin is expected to be between 48 percent and 49 percent.
  • Non-GAAP operating expenses are expected to be $25.2 million, plus or minus $0.5 million. (Excludes from GAAP operating expenses approximately $4 million of stock-based compensation expenses and approximately $1 million of amortization expense for acquisition-related intangible assets). GAAP operating expenses are expected to be between $30 million and $31 million.
  • The third-quarter GAAP and non-GAAP effective tax rates are expected to be approximately 18 percent and 13 percent, respectively.

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, Inc., is a Silicon Valley-based supplier of high-performance electronic components used in high-voltage power-conversion systems. The company's integrated circuits and diodes enable compact, energy-efficient AC-DC power supplies for a vast range of electronic products including mobile devices, TVs, PCs, appliances, smart utility meters and LED lights. CONCEPT IGBT driver systems enhance the efficiency, reliability and cost of high-power applications such as industrial motor drives, solar and wind energy systems, electric vehicles and high-voltage DC transmission. Since its introduction in 1998, Power Integrations' EcoSmart® energy-efficiency technology has prevented billions of dollars' worth of energy waste and millions of tons of carbon emissions. Reflecting the environmental benefits of the company's products, Power Integrations' stock is included in the NASDAQ® Clean Edge® Green Energy Index, The Cleantech Index®, and the Ardour Global IndexSM. For more information, including design-support tools and resources, please visit www.powerint.com; visit Power Integrations' Green Room for a comprehensive guide to energy-efficiency standards around the world.

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, acquisition-related expenses, amortization of acquisition-related intangible assets and the fair-value write-up of acquired inventory, non-cash interest income, the tax effects of these items and the one-time tax charge described above. 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 third-quarter and second-half 2012 financial performance and the expected effect of higher gross margin and lower tax rate on earnings and cash flow are forward-looking statements reflecting management's current expectations and beliefs. 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, which 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 effects of competition, which may cause the company to decrease its selling prices for its products; the outcome and cost of patent litigation, which may affect sales of the company's products or could result in higher expenses and charges than currently expected; 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 and forecasting the performance of 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 that may cause actual results to differ 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 May 8, 2012. 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   Six Months Ended
          June 30, 2012   March 31, 2012   June 30, 2011   June 30, 2012   June 30, 2011
NET REVENUES     $ 76,382     $ 71,773     $ 80,184     $ 148,155     $ 156,946  
                           
COST OF REVENUES     38,627       37,181       42,558       75,807       82,897  
                           
GROSS PROFIT       37,755       34,592       37,626       72,348       74,049  
                           
OPERATING EXPENSES:                    
Research and development     12,066       10,640       10,195       22,706       20,218  
Sales and marketing     8,419       8,111       8,076       16,530       16,296  
General and administrative     6,687       6,603       6,141       13,291       12,616  
Amortization of acquisition-related intangible assets     757       28       28       785       56  
Acquisition expenses     413       489       -       902       -  
  Total operating expenses     28,342       25,871       24,440       54,214       49,186  
                           
INCOME FROM OPERATIONS     9,413       8,721       13,186       18,134       24,863  
                           
Non-cash interest income     623       157       -       780       -  
Cost of acquisition-related currency option     (635 )     -       -       (635 )     -  
Other income (expense), net     207       458       461       665       903  
                           
INCOME BEFORE PROVISION FOR INCOME TAXES     9,608       9,336       13,647       18,944       25,766  
                           
PROVISION FOR INCOME TAXES     16,784       1,875       3,048       18,659       5,313  
                           
NET INCOME (LOSS)   $ (7,176 )   $ 7,461     $ 10,599     $ 285     $ 20,453  
                           
EARNINGS (LOSS) PER SHARE:                    
  Basic       $ (0.25 )   $ 0.26     $ 0.37     $ 0.01     $ 0.71  
  Diluted       $ (0.25 )   $ 0.25     $ 0.35     $ 0.01     $ 0.68  
                           
SHARES USED IN PER-SHARE CALCULATION:                    
  Basic         28,619       28,227       28,938       28,423       28,784  
  Diluted         28,619       29,435       30,346       29,624       30,271  
                           
                           
SUPPLEMENTAL INFORMATION:                    
                           
Stock-based compensation expenses included in:                    
  Cost of revenues   $ 256     $ 245     $ 216     $ 501     $ 455  
  Research and development     1,566       1,120       980       2,687       1,791  
  Sales and marketing     746       747       543       1,493       1,210  
  General and administrative     1,074       919       705       1,992       1,492  
  Total stock-based compensation expense   $ 3,642     $ 3,031     $ 2,444     $ 6,673     $ 4,948  
                           
Cost of revenues includes:                    
  Amortization of write-up of acquired inventory   $ 1,136     $ 80     $ 148     $ 1,216     $ 210  
  Amortization of acquisition-related intangible assets   $ 459     $ 85     $ 85     $ 544     $ 170  
                           
Operating expenses include:                    
  Patent-litigation expenses   $ 1,409     $ 1,296     $ 1,210     $ 2,705     $ 2,467  
                           
                           
REVENUE MIX BY END MARKET                    
  Communications     24 %     27 %     28 %     25 %     30 %
  Computer       12 %     12 %     13 %     12 %     12 %
  Consumer       36 %     40 %     36 %     38 %     36 %
  Industrial       28 %     21 %     23 %     25 %     22 %
                                             
                                             

 

POWER INTEGRATIONS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP RESULTS
(in thousands, except per-share amounts)
                           
    Three Months Ended     Six Months Ended
    June 30, 2012   March 31, 2012   June 30, 2011     June 30, 2012   June 30, 2011
RECONCILIATION OF GROSS PROFIT                          
GAAP gross profit   $ 37,755       $ 34,592       $ 37,626       $ 72,348     $ 74,049  
GAAP gross profit margin     49.4 %       48.2 %       46.9 %       48.8 %     47.2 %
                           
Stock-based compensation included in cost of revenues     256         245         216         501       455  
Amortization of write-up of acquired inventory     1,136         80         148         1,216       210  
Amortization of acquisition-related intangible assets     459         85         85         544       170  
                           
Non-GAAP gross profit   $ 39,606       $ 35,002       $ 38,075       $ 74,609     $ 74,884  
Non-GAAP gross profit margin     51.9 %       48.8 %       47.5 %       50.4 %     47.7 %
                           
                           
RECONCILIATION OF OPERATING EXPENSES                          
GAAP operating expenses   $ 28,342       $ 25,871       $ 24,440       $ 54,214     $ 49,186  
                           

Less: Stock-based compensation expense included in operating expenses

                   
Research and development     1,566         1,120         980         2,687       1,791  
Sales and marketing     746         747         543         1,493       1,210  
General and administrative     1,074         919         705         1,992       1,492  
Total     3,386         2,786         2,228         6,172       4,493  
                           
Acquisition expenses     413         489         -         902       -  
                           
Amortization of acquisition-related intangible assets     757         28         28         785       56  
                           
Non-GAAP operating expenses   $ 23,786       $ 22,568       $ 22,184       $ 46,355     $ 44,637  
                           
                           
RECONCILIATION OF INCOME FROM OPERATIONS                          
GAAP income from operations   $ 9,413       $ 8,721       $ 13,186       $ 18,134     $ 24,863  
GAAP operating margin     12.3 %       12.2 %       16.4 %       12.2 %     15.8 %
                           

Add: Total stock-based compensation

    3,642         3,031         2,444         6,673       4,948  
Amortization of write-up of acquired inventory     1,136         80         148         1,216       210  
Amortization of acquisition-related intangible assets     1,216         113         113         1,329       226  
Acquisition expenses     413         489         -         902       -  
                           
Non-GAAP income from operations   $ 15,820       $ 12,434       $ 15,891       $ 28,254     $ 30,247  
Non-GAAP operating margin     20.7 %       17.3 %       19.8 %       19.1 %     19.3 %
                           
                           
RECONCILIATION OF PROVISION FOR INCOME TAXES                          
GAAP provision for income taxes   $ 16,784       $ 1,875       $ 3,048       $ 18,659     $ 5,313  
GAAP effective tax rate     174.7 %       20.1 %       22.3 %       98.5 %     20.6 %
                           
One-time charge associated with tax settlement     15,749         -         -         15,749       -  
Tax effect of other adjustments to GAAP results     (405 )       (304 )       (225 )       (709 )     (629 )
                           
Non-GAAP provision for income taxes   $ 1,440       $ 2,179       $ 3,273       $ 3,619     $ 5,942  
Non-GAAP effective tax rate     9.0 %       16.9 %       20.0 %       12.5 %     19.1 %
                           
                           
RECONCILIATION OF NET INCOME (LOSS) PER SHARE (DILUTED)                    
GAAP net income (loss)   $ (7,176 )     $ 7,461       $ 10,599       $ 285     $ 20,453  
                           
Adjustments to GAAP net income (loss)                          
Stock-based compensation     3,642         3,031         2,444         6,673       4,948  
Amortization of write-up of acquired inventory     1,136         80         148         1,216       210  
Amortization of acquisition-related intangible assets     1,216         113         113         1,329       226  
Acquisition expenses     413         489         -         902       -  
Non-cash interest income     (623 )       (157 )       -         (780 )     -  
Cost of acquisition-related currency option     635         -         -         635       -  
One-time charge associated with tax settlement     15,749         -         -         15,749       -  
Tax effect of items excluded from non-GAAP results     (405 )       (304 )       (225 )       (709 )     (629 )
                           
Non-GAAP net income   $ 14,587       $ 10,713       $ 13,079       $ 25,300     $ 25,208  
                           

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

    29,792         29,435         30,346         29,624       30,271  
                           
Non-GAAP net income per share (diluted)   $ 0.49       $ 0.36       $ 0.43       $ 0.85     $ 0.83  
                           
GAAP income (loss) per share   $ (0.25 )     $ 0.25       $ 0.35       $ 0.01     $ 0.68  
                                               
                                               

 

POWER INTEGRATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
               
               
      June 30, 2012   March 31, 2012   December 31, 2011
ASSETS            
  CURRENT ASSETS:            
  Cash and cash equivalents   $ 73,360   $ 147,155   $ 139,836
  Short-term marketable securities     60,068     66,855     40,899
  Accounts receivable     17,966     16,696     9,396
  Inventories     48,555     42,851     52,010
  Deferred tax assets     893     890     892
  Prepaid expenses and other current assets     7,758     6,222     7,068
  Total current assets     208,600     280,669     250,101
               
  MARKETABLE SECURITIES     -     -     32,041
  PROPERTY AND EQUIPMENT, net     91,738     89,695     88,241
  INTANGIBLE ASSETS, net     51,422     8,663     8,852
  GOODWILL     77,354     14,786     14,786
  DEFERRED TAX ASSETS     7,120     12,716     12,387
  OTHER ASSETS     43,380     43,724     26,511
  Total assets   $ 479,614   $ 450,253   $ 432,919
               
LIABILITIES AND STOCKHOLDERS' EQUITY            
  CURRENT LIABILITIES:            
  Accounts payable   $ 21,108   $ 15,165   $ 16,532
  Accrued payroll and related expenses     6,650     5,279     5,911
  Taxes payable     37,936     -     -
  Deferred tax liabilities     1,961     -     -
  Deferred income on sales to distributors     11,270     9,373     7,883
  Other accrued liabilities     2,514     2,661     2,305
  Total current liabilities     81,439     32,478     32,631
               
  LONG-TERM LIABILITIES            
  Income taxes payable     7,364     35,190     34,368
  Deferred tax liabilities     4,185     -     -
  Pension liability     622     -     -
               
  Total liabilities     93,610     67,668     66,999
               
STOCKHOLDERS' EQUITY:            
  Common stock     29     28     28
  Additional paid-in capital     181,203     168,918     158,646
  Accumulated other comprehensive income     145     398     50
  Retained earnings     204,627     213,241     207,196
  Total stockholders' equity     386,004     382,585     365,920
  Total liabilities and stockholders' equity   $ 479,614   $ 450,253   $ 432,919
                     
                     

 

POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
                         
      Three Months Ended     Six Months Ended
      June 30, 2012   March 31, 2012   June 30, 2011     June 30, 2012   June 30, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:                      
  Net income (loss)   $ (7,176 )   $ 7,461     $ 10,599       $ 285     $ 20,453  
  Adjustments to reconcile net income (loss) to cash provided by operating activities                  
  Depreciation     3,895       3,732       3,790         7,627       7,472  
  Amortization of intangible assets     1,290       189       243         1,479       486  
  Gain on sale of property and equipment     -       (1 )     (41 )       (1 )     (41 )
  Stock-based compensation expense     3,642       3,031       2,444         6,673       4,948  
  Amortization of premium on marketable securities     258       309       420         567       859  
  Non-cash interest income     (623 )     (157 )     -         (780 )     -  
  Deferred income taxes     5,161       (327 )     427         4,834       826  
  Increase (decrease) in accounts receivable allowances     (14 )     -       15         (14 )     37  
  Excess tax benefit from stock options exercised     (276 )     (198 )     (299 )       (474 )     (697 )
  Tax benefit associated with employee stock plans     749       782       755         1,531       1,538  
  Change in operating assets and liabilities:                      
  Accounts receivable     1,964       (7,300 )     5,230         (5,336 )     (2,392 )
  Inventories     4,958       9,161       8,879         14,119       7,915  
  Prepaid expenses and other assets     1,528       1,306       1,613         2,834       3,048  
  Accounts payable     2,310       1,485       (1,352 )       3,795       (4,260 )
  Taxes payable and other accrued liabilities     8,180       604       1,993         8,784       1,468  
  Deferred income on sales to distributors     1,897       1,490       248         3,387       (1,021 )
  Net cash provided by operating activities     27,743       21,567       34,964         49,310       40,639  
                         
CASH FLOWS FROM INVESTING ACTIVITIES:                      
  Purchases of property and equipment     (1,283 )     (7,471 )     (5,271 )       (8,754 )     (12,519 )
  Proceeds from sale of property and equipment     -       2       2,249         2       2,249  
  Other assets     -       -       (808 )       -       (808 )
  Acquisitions     (113,360 )     -       (13 )       (113,360 )     (6,914 )
  Increase in financing lease receivables     -       (383 )     (2,179 )       (383 )     (7,821 )
  Collections of financing lease receivables     -       299       103         299       205  
  Loan to SemiSouth     -       (18,000 )     (3,000 )       (18,000 )     (3,000 )
  Purchases of marketable securities     -       -       -         -       (11,508 )
  Proceeds from maturities of marketable securities     6,403       6,065       5,330         12,468       6,630  
  Net cash used in investing activities     (108,240 )     (19,488 )     (3,589 )       (127,728 )     (33,486 )
                         
CASH FLOWS FROM FINANCING ACTIVITIES                      
  Net proceeds from issuance of common stock     7,864       6,457       6,958         14,321       14,246  
  Repurchase of common stock     -       -       (4,384 )       -       (4,384 )
  Payments of dividends to stockholders     (1,438 )     (1,415 )     (1,448 )       (2,853 )     (2,885 )
  Excess tax benefit from stock options exercised     276       198       299         474       697  
  Net cash provided by financing activities     6,702       5,240       1,425         11,942       7,674  
                         
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS     (73,795 )     7,319       32,800         (66,476 )     14,827  
                         
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD     147,155       139,836       137,694         139,836       155,667  
                         
CASH AND CASH EQUIVALENTS AT END OF PERIOD   $ 73,360     $ 147,155     $ 170,494       $ 73,360     $ 170,494  

 

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

 

Source: Power Integrations, Inc.

News Provided by Acquire Media

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

Literature Requests
ir@power.com

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

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




Subscribe to Investor Alerts

Email Address *
Mailing Lists *



 
Enter the code shown above.