Power Integrations Reports Fourth-Quarter Financial Results

February 4, 2015

Net revenues were $86.6 million; non-GAAP earnings were $0.59/diluted share; GAAP earnings were $0.48/diluted share

SAN JOSE, Calif.--(BUSINESS WIRE)-- Power Integrations (Nasdaq: POWI) today announced financial results for the quarter and year ended December 31, 2014. Net revenues for the fourth quarter were $86.6 million, down four percent from both the prior quarter and the fourth quarter of 2013. GAAP gross margin for the fourth quarter was 52.9 percent; operating margin was 13.7 percent. Net income for the quarter was $14.4 million or $0.48 per diluted share, compared with $0.52 per diluted share in both the prior quarter and the fourth quarter of 2013.

In addition to its GAAP results, the company provided non-GAAP financial measures that exclude stock-based compensation expenses, acquisition-related expenses, a 2013 gain on assets held for sale, the related tax effects of these items, and a benefit stemming from the completion of a tax audit in the second quarter of 2014. Non-GAAP gross margin for the fourth quarter was 53.9 percent; operating margin was 20.3 percent. Non-GAAP net income for the quarter was $17.8 million or $0.59 per diluted share, compared with $0.65 per diluted share in the prior quarter and $0.66 per diluted share in the fourth quarter of 2013.

For the full year 2014, the company reported net revenues of $348.8 million, a slight increase compared with $347.1 million in 2013. GAAP net income for the year was $1.93 per diluted share compared with $1.88 per diluted share in 2013. Non-GAAP net income for the year was $2.40 per diluted share compared with $2.46 per diluted share in 2013.

Commented Balu Balakrishnan , president and CEO of Power Integrations: “While disappointed with our 2014 results overall, we closed out the year with a solid quarter and now look forward to renewed growth in 2015. We are embarking on a promising new product cycle led by the revolutionary InnoSwitch™ family, which brings an unprecedented level of integration to a wide range of AC-DC applications. At the same time, secular trends such as energy efficiency, renewable energy and faster charging of mobile devices continue to drive adoption of our highly integrated power-conversion products across the appliance, electronics, industrial and lighting markets.”

Additional Highlights

  • Power Integrations repurchased approximately 728,000 shares of its common stock during the fourth quarter for $35.5 million. As of December 31, 2014, the company had $23.7 million remaining on its repurchase authorization.
  • The company paid a dividend of $0.12 per share on December 31, 2014. The company’s board has declared dividends of $0.12 per share for each quarter of 2015, the first of which will be paid on March 31, 2015, to stockholders of record as of February 27.
  • Power Integrations had $175.3 million in cash and investments at quarter-end, a decrease of $38.6 million during the quarter.
  • In January 2015 Power Integrations acquired Cambridge Semiconductor, a UK-based supplier of controller chips for low-power AC-DC power supplies.
  • Power Integrations received nine U.S. patents during the fourth quarter of 2014 and had 677 U.S. patents at year-end.

Financial Outlook

The company issued the following forecast for the first quarter of 2015:

  • First-quarter revenues are expected to be between $82 million and $88 million.
  • Non-GAAP gross margin is expected to be between 53 percent and 53.5 percent. (Excludes approximately $0.3 million of stock-based compensation, $1 million of amortization of acquisition-related intangibles and $0.3 million for amortization of the write-up of acquired inventory.) GAAP gross margin is expected to be between 51 percent and 51.5 percent.
  • Non-GAAP operating expenses are expected to be approximately $31 million. (Excludes approximately $4.2 million of stock-based compensation, $0.8 million of amortization of acquisition-related intangibles and $1 million of other acquisition-related expenses.) GAAP operating expenses are expected to be approximately $37 million.

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

Power Integrations management will hold a conference call today at 1:45 p.m. PT. Members of the investment community can join the call by dialing 1-647-788-4901. The call will also be available on the investor section of the company's website, http://investors.power.com.

About Power Integrations

Power Integrations, Inc. is a leading innovator in semiconductor technologies for high-voltage power-conversion. The company’s products are key building blocks in the clean-power ecosystem, enabling the generation of renewable energy as well as the efficient transmission and consumption of power in applications ranging from milliwatts to megawatts. For more information please visit www.power.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, amortization of acquisition-related intangible assets, acquisition-related transaction expenses, a 2013 gain related to asset sales, the tax effects of these items, and a tax benefit recognized in the second quarter of 2014. 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 measures differently, limiting their usefulness as comparative measures.

Note Regarding Forward-Looking Statements

The statements in this press release regarding the company’s forecast for its first-quarter financial performance and its prospects for growth in 2015 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 change. Due to risks and uncertainties associated with the company's business, actual results could differ materially from those projected or implied by these 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; and unfavorable fluctuations in component costs or operating expenses resulting from changes in commodity prices and/or exchange rates. In addition, new product introductions and design wins are subject to the risks and uncertainties that typically accompany development and delivery of complex technologies to the marketplace, including product development delays and defects and market acceptance of the new products. These and other risk factors 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 November 3, 2014. 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, InnoSwitch 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 INCOME
(in thousands, except per-share amounts)
             
 
Three Months Ended Twelve Months Ended
December 31, 2014 September 30, 2014 December 31, 2013 December 31, 2014 December 31, 2013
NET REVENUES $ 86,595 $ 90,144 $ 90,412 $ 348,797 $ 347,089
 
COST OF REVENUES   40,790     41,092     42,021     159,227     163,853  
 
GROSS PROFIT   45,805     49,052     48,391     189,570     183,236  
 
OPERATING EXPENSES:
Research and development 13,667 13,458 12,909 54,981 51,654
Sales and marketing 11,262 10,935 10,951 44,606 40,943
General and administrative 7,574 7,155 8,266 30,188 32,050
Amortization of acquisition-related intangible assets 628 629 1,158 3,190 4,523
Acquisition expenses   809     -     -     809     -  
Total operating expenses   33,940     32,177     33,284     133,774     129,170  
 
INCOME FROM OPERATIONS 11,865 16,875 15,107 55,796 54,066
 
Gain on sale of assets held for sale - - - - 497
Other income, net   182     381     497     1,018     864  
 
INCOME BEFORE PROVISION (BENEFIT) FOR INCOME TAXES 12,047

 

17,256

 

15,604 56,814 55,427
 
PROVISION (BENEFIT) FOR INCOME TAXES   (2,307 )   1,145     (433 )   (2,730 )   (1,839 )
 
NET INCOME $ 14,354   $ 16,111   $ 16,037   $ 59,544   $ 57,266  
 
EARNINGS PER SHARE:
Basic $ 0.49   $ 0.54   $ 0.54   $ 1.99   $ 1.95  
Diluted $ 0.48   $ 0.52   $ 0.52   $ 1.93   $ 1.88  
 
SHARES USED IN PER-SHARE CALCULATION:
Basic 29,350 30,013 29,974 29,976 29,421
Diluted 30,051 30,757 30,924 30,829 30,420
 
 
SUPPLEMENTAL INFORMATION:
 
Stock-based compensation expenses included in:
Cost of revenues $ 231 $ 131 $ 250 $ 879 $ 1,074
Research and development 1,262 971 1,515 4,784 5,746
Sales and marketing 962 779 1,054 3,540 3,642
General and administrative   1,157     699     1,511     5,079     6,023  
Total stock-based compensation expense $ 3,612   $ 2,580   $ 4,330   $ 14,282   $ 16,485  
 
Cost of revenues includes:
Amortization of acquisition-related intangible assets $ 646   $ 645   $ 645   $ 2,581   $ 2,580  
 
General & administrative expenses include:
Patent-litigation expenses $ 1,815   $ 1,529   $ 1,772   $ 5,657   $ 5,645  
 
 
REVENUE MIX BY END MARKET
Communications 21 % 18 % 21 % 18 % 21 %
Computer 9 % 11 % 11 % 10 % 10 %
Consumer 37 % 36 % 34 % 37 % 35 %
Industrial 33 % 35 % 34 % 35 % 34 %
 

POWER INTEGRATIONS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP RESULTS
(in thousands, except per-share amounts)
               
Three Months Ended Twelve Months Ended
December 31, 2014 September 30, 2014 December 31, 2013 December 31, 2014 December 31, 2013
RECONCILIATION OF GROSS PROFIT
GAAP gross profit $ 45,805 $ 49,052 $ 48,391 $ 189,570 $ 183,236
GAAP gross margin 52.9 % 54.4 % 53.5 % 54.3 % 52.8 %
 
Stock-based compensation included in cost of revenues 231 131 250 879 1,074
Amortization of acquisition-related intangible assets   646     645     645     2,581     2,580  
 
Non-GAAP gross profit $ 46,682   $ 49,828   $ 49,286   $ 193,030   $ 186,890  
Non-GAAP gross margin 53.9 % 55.3 % 54.5 % 55.3 % 53.8 %
 
 
RECONCILIATION OF OPERATING EXPENSES
GAAP operating expenses $ 33,940 $ 32,177 $ 33,284 $ 133,774 $ 129,170
 
Less: Stock-based compensation expense included in operating expenses
Research and development 1,262 971 1,515 4,784 5,746
Sales and marketing 962 779 1,054 3,540 3,642
General and administrative   1,157     699     1,511     5,079     6,023  
Total   3,381     2,449     4,080     13,403     15,411  
 
Amortization of acquisition-related intangible assets   628     629     1,158     3,190     4,523  
 
Acquisition expenses   809     -     -     809     -  
 
Non-GAAP operating expenses $ 29,122   $ 29,099   $ 28,046   $ 116,372   $ 109,236  
 
 
RECONCILIATION OF INCOME FROM OPERATIONS
GAAP income from operations $ 11,865 $ 16,875 $ 15,107 $ 55,796 $ 54,066
GAAP operating margin 13.7 % 18.7 % 16.7 % 16.0 % 15.6 %
 
Add: Total stock-based compensation 3,612 2,580 4,330 14,282 16,485
Amortization of acquisition-related intangible assets 1,274 1,274 1,803 5,771 7,103
Acquisition expenses   809     -     -     809     -  
 
Non-GAAP income from operations $ 17,560   $ 20,729   $ 21,240   $ 76,658   $ 77,654  
Non-GAAP operating margin 20.3 % 23.0 % 23.5 % 22.0 % 22.4 %
 
 
RECONCILIATION OF PROVISION (BENEFIT) FOR INCOME TAXES
GAAP provision (benefit) for income taxes $ (2,307 ) $ 1,145 $ (433 ) $ (2,730 ) $ (1,839 )
GAAP effective tax rate -19.1 % 6.6 % -2.8 % -4.8 % -3.3 %
 
Benefit associated with tax settlement - - - (3,331 ) -
Tax effect of other adjustments to GAAP results   (2,251 )   (120 )   (1,751 )   (3,034 )   (5,624 )
 
Non-GAAP provision (benefit) for income taxes $ (56 ) $ 1,265   $ 1,318   $ 3,635   $ 3,785  
Non-GAAP effective tax rate -0.3 % 6.0 % 6.1 % 4.7 % 4.8 %
 
 
RECONCILIATION OF NET INCOME PER SHARE (DILUTED)
GAAP net income $ 14,354 $ 16,111 $ 16,037 $ 59,544 $ 57,266
 
Adjustments to GAAP net income
Stock-based compensation 3,612 2,580 4,330 14,282 16,485
Amortization of acquisition-related intangible assets 1,274 1,274 1,803 5,771 7,103
Acquisition expenses 809 - - 809 -
Gain on sale of assets held for sale - - - - (497 )
Benefit associated with tax settlement - - - (3,331 ) -
Tax effect of items excluded from non-GAAP results   (2,251 )   (120 )   (1,751 )   (3,034 )   (5,624 )
 
Non-GAAP net income $ 17,798   $ 19,845   $ 20,419   $ 74,041   $ 74,733  
 

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

  30,051     30,757     30,924     30,829     30,420  
 
Non-GAAP net income per share (diluted) $ 0.59   $ 0.65   $ 0.66   $ 2.40   $ 2.46  
 
GAAP income per share $ 0.48   $ 0.52   $ 0.52   $ 1.93   $ 1.88  
 

POWER INTEGRATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
         
 
December 31, 2014 September 30, 2014 December 31, 2013
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 60,708 $ 60,720 $ 92,928
Short-term marketable securities 114,575 153,144 109,179
Accounts receivable 10,186 10,381 12,389
Inventories 64,025 56,958 42,235
Deferred tax assets 39 2,103 2,059
Prepaid expenses and other current assets   16,379     8,773     18,632  
Total current assets   265,912     292,079     277,422  
 
PROPERTY AND EQUIPMENT, net 95,823 96,506 90,141
INTANGIBLE ASSETS, net 35,524 36,873 40,334
GOODWILL 80,599 80,599 80,599
DEFERRED TAX ASSETS 11,562 9,472 9,449
OTHER ASSETS   4,243     3,887     3,476  
Total assets $ 493,663   $ 519,416   $ 501,421  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $ 21,980 $ 24,777 $ 20,772
Accrued payroll and related expenses 9,071 8,834 8,900
Taxes payable 2,963 2,753 2,266
Deferred taxes 2,193 1,103 943
Deferred income on sales to distributors 15,223 18,744 15,727
Other accrued liabilities   3,730     2,224     1,810  
Total current liabilities   55,160     58,435     50,418  
 
LONG-TERM LIABILITIES
Income taxes payable 743 2,722 6,885
Deferred taxes 4,272 4,397 5,273
Other liabilities   2,812     2,229     2,159  
Total liabilities   62,987     67,783     64,735  
 
STOCKHOLDERS' EQUITY:
Common stock 29 29 30
Additional paid-in capital 171,938 203,076 223,660
Accumulated other comprehensive loss (1,136 ) (474 ) (470 )
Retained earnings   259,845     249,002     213,466  
Total stockholders' equity   430,676     451,633     436,686  
Total liabilities and stockholders' equity $ 493,663   $ 519,416   $ 501,421  
 

POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
               
Three Months Ended Twelve Months Ended
December 31, 2014 September 30, 2014 December 31, 2013 December 31, 2014 December 31, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 14,354 $ 16,111 $ 16,037 $ 59,544 $ 57,266
Adjustments to reconcile net income to cash provided by operating activities
Depreciation 4,035 4,002 4,026 15,884 16,088
Amortization of intangible assets 1,349 1,349 1,878 6,072 7,404
Loss (gain) on disposal of property and equipment 80 11 (148 ) 250 (131 )
Gain on sale of assets held for sale - - - - (497 )
Stock-based compensation expense 3,612 2,580 4,330 14,282 16,485
Amortization of premium on marketable securities 398 481 317 1,694 789
Deferred income taxes 939 (917 ) 2,025 157 (2,781 )
Increase (decrease) in accounts receivable allowances (5 ) 90 - 70 (127 )
Excess tax benefit from employee stock plans - (224 ) (734 ) (437 ) (734 )
Tax benefit associated with employee stock plans - 451 1,284 815 1,284
Change in operating assets and liabilities:
Accounts receivable 200 5,972 2,712 2,133 (4,936 )
Inventories (7,064 ) (5,693 ) (1,984 ) (21,703 ) 2,375
Prepaid expenses and other assets (1,744 ) 4,655 (3,118 ) 8,211 (1,523 )
Accounts payable (172 ) 639 (485 ) 2,337 2,467
Taxes payable and other accrued liabilities 15 1,486 (1,543 ) (3,242 ) 1,065
Deferred income on sales to distributors   (3,522 )   (384 )   (1,134 )   (505 )   4,177  
Net cash provided by operating activities   12,475     30,609     23,463     85,562     98,671  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (5,677 ) (7,509 ) (2,710 ) (23,071 ) (13,960 )
Proceeds from sale of property and equipment - - - - 36
Proceeds from sale of assets held for sale - - - - 959
Collections of financing lease and other receivables - - 433 - 433
Loan to third party (6,600 ) - - (6,600 ) -
Other assets - (1,261 ) - (1,261 ) -
Purchases of marketable securities - (20,518 ) (13,211 ) (45,269 ) (109,482 )
Proceeds from sales and maturities of marketable securities   38,052     -     5,900     38,052     31,350  
Net cash provided by (used in) investing activities   25,775     (29,288 )   (9,588 )   (38,149 )   (90,664 )
 
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of common stock 751 3,237 2,601 13,855 30,239
Repurchase of common stock (35,502 ) (19,527 ) - (80,760 ) -
Payments of dividends to stockholders (3,511 ) (3,595 ) (2,400 ) (13,165 ) (9,446 )
Excess tax benefit from employee stock plans   -     224     734     437     734  
Net cash provided by (used in) financing activities   (38,262 )   (19,661 )   935     (79,633 )   21,527  
 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (12 ) (18,340 ) 14,810 (32,220 ) 29,534
 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD   60,720     79,060     78,118     92,928     63,394  
 
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 60,708   $ 60,720   $ 92,928   $ 60,708   $ 92,928  

Source: Power Integrations, Inc.

Power Integrations, Inc.

Joe Shiffler, 408-414-8528

jshiffler@power.com

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




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