Power Integrations Reports Record Quarterly Revenues and Net Income


Fourth-Quarter Revenues Increased 56 Percent Year-over-Year to $66.1 Million; GAAP
Gross Margin Expanded to 51.1 Percent

Full-Year Revenues Grew Seven Percent to $215.7 Million

Quarterly Dividend Doubles to $0.05 Per Share

SAN JOSE, Calif., Feb. 4, 2010 (GLOBE NEWSWIRE) -- Power Integrations (Nasdaq:POWI), the leader in high-voltage integrated circuits for energy-efficient power conversion, today announced financial results for the quarter and year ended December 31, 2009.   Net revenues for the fourth quarter of 2009 were $66.1 million, up 10 percent sequentially and an increase of 56 percent compared with the fourth quarter of 2008. Gross margin for the fourth quarter was 51.1 percent. 

Net income for the quarter was a record $9.18 million, or $0.32 per diluted share, compared with net income of $9.15 million, or $0.32 per diluted share in the prior quarter and a net loss of $20.7 million, or $0.72 per share, in the fourth quarter of 2008. The company's results for the fourth quarter of 2008 included $19.3 million of non-cash stock-based compensation expenses arising from the repurchase of employee stock options, as well as a non-cash charge of $2.0 million for the impairment of intangible assets. 

In addition to its GAAP results, the company provided certain non-GAAP measures that exclude stock-based compensation expenses, the asset-impairment charge recognized in the fourth quarter of 2008, and the related tax effects.  Non-GAAP net income for the fourth quarter of 2009 was $12.2 million or $0.42 per diluted share, compared with $10.4 million, or $0.36 per diluted share in the prior quarter and $4.6 million or $0.15 per diluted share in the fourth quarter of 2008.  Non-GAAP gross margin for the fourth quarter was 51.4 percent. 

Commented Balu Balakrishnan, president and CEO of Power Integrations: "We completed an outstanding year with another strong quarter, delivering ten-percent sequential revenue growth, a significant increase in our gross margin, and record net income.  Despite the challenging economic environment, our annual revenues grew seven percent, marking our eighth consecutive year of top-line growth. Electronics manufacturers are demanding ever-higher levels of energy efficiency and reliability from their power supplies, and Power Integrations is succeeding in the market as a leading enabler of that trend."

Balakrishnan added: "We are excited about the opportunities that lie ahead in 2010 and beyond. Energy efficiency will be a major factor in the power-supply industry for years to come as the drive toward greener products continues. The need to conserve energy is also driving the adoption of LEDs for general lighting, creating a fast-growing, emerging market for our products. And we have a strong pipeline of new products, including ICs that will offer an unprecedented level of integration for high-power applications that have historically used only discrete solutions."

Added Bill Roeschlein, Power Integrations' chief financial officer: "We ended 2009 on a high note, and 2010 is off to a good start with a strong starting backlog and record monthly bookings in January. We expect first-quarter revenues to be between $70 million and $74 million, an increase of between 74 percent and 84 percent compared with the first quarter of 2009. We expect our first-quarter gross margin to be similar to the fourth quarter of 2009." 

"Patent-litigation expenses were higher than expected in the fourth quarter, reflecting the unpredictable nature of expenses during the discovery phase of a lawsuit," Roeschlein continued. "However, litigation expenses should decrease significantly in the first quarter now that discovery is essentially complete. We expect total operating expenses in the first quarter to be between $21 million and $21.5 million, including $2.5 million of non-cash stock-based compensation expenses and about $1 million of patent-litigation expenses."   

Full-Year Results

Full-year 2009 revenues were $215.7 million, an increase of seven percent compared with $201.7 million in 2008. Net income for the year was $23.3 million, or $0.82 per diluted shared, compared with $1.8 million or $0.06 per diluted share in 2008. Non-GAAP net income for the year was $33.3 million or $1.18 per diluted share, compared with $36.9 million or $1.16 per diluted share in 2008. Cash flow from operations totaled $46.2 million for the year, compared with $36.2 million in 2008.

Additional Highlights

  • Power Integrations' board of directors declared a quarterly dividend of $0.05 per share, payable on March 31, 2010 to stockholders of record as of February 26, 2010. 
  • Power Integrations was issued 6 U.S. patents and 4 foreign patents during the fourth quarter. The company received a total of 47 U.S. patents and 33 foreign patents during 2009 and had a total of 291 U.S. patents and 171 foreign patents as of December 31, 2009.

Conference Call Today at 6:00 am Pacific Time

Power Integrations management will hold a conference call today at 6:00 am Pacific time. Members of the investment community can join the call by dialing 1-800-930-7616 from within the United States or 1-913-312-0709 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://investors.powerint.com/">http://investors.powerint.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®energy-efficiency technology has saved an estimated $3.9 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"), as well as impairment of intangible assets 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 company's historical results and 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 first-quarter 2010 financial performance and future growth opportunities 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; 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; and fluctuations in currency 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 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 on November 5, 2009. 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.

 

POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per-share amounts)
           
  Three Months Ended Twelve Months Ended
  December 31, 2009 September 30, 2009 December 31, 2008 December 31, 2009 December 31, 2008
NET REVENUES $66,138 $60,024 $42,417 $215,701 $201,708
           
COST OF REVENUES 32,322 30,901 23,472 107,633 96,678
           
GROSS PROFIT 33,816 29,123 18,945 108,068 105,030
           
OPERATING EXPENSES:          
Research and development 8,214 6,846 14,114 30,473 36,867
Sales and marketing 7,127 5,744 13,569 25,018 35,898
General and administrative 7,227 5,465 9,240 23,967 27,296
Impairment of intangibles -- -- 1,958 -- 1,958
Total operating expenses 22,568 18,055 38,881 79,458 102,019
           
INCOME (LOSS) FROM OPERATIONS 11,248 11,068 (19,936) 28,610 3,011
           
OTHER INCOME, net 157 178 1,836 1,913 7,713
           
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES 11,405 11,246 (18,100) 30,523 10,724
           
PROVISION FOR INCOME TAXES 2,221 2,094 2,553 7,254 8,921
           
NET INCOME (LOSS) $9,184 $9,152 $(20,653) $23,269 $1,803
           
EARNINGS (LOSS) PER SHARE:          
Basic $0.34 $0.34 $(0.72) $0.86 $0.06
Diluted $0.32 $0.32 $(0.72) $0.82 $0.06
           
SHARES USED IN PER-SHARE CALCULATION:          
Basic 27,106 26,723 28,860 26,920 30,099
Diluted 29,116 28,431 28,860 28,297 31,755
           
SUPPLEMENTAL INFORMATION:          
           
Stock-based compensation expenses included in:          
Cost of revenues $176 $188 $2,204 $790 $3,481
Research and development 1,115 339 7,749 4,371 11,773
Sales and marketing 820 172 7,992 2,548 11,878
General and administrative 1,174 705 4,937 3,619 7,832
Total stock-based compensation expense $3,285 $1,404 $22,882 $11,328 $34,964
           
           
Operating expenses include the following:          
Patent-litigation expenses $2,334 $1,473 $1,012 $5,572 $3,415
           
           
REVENUE MIX BY PRODUCT FAMILY          
TOPSwitch 22% 24% 24% 23% 25%
TinySwitch 41% 43% 42% 43% 44%
LinkSwitch 36% 32% 32% 33% 29%
Other 1% 1% 2% 1% 2%
           
REVENUE MIX BY END MARKET          
Communications 36% 32% 36% 34% 34%
Computer 14% 14% 16% 14% 16%
Consumer 33% 37% 31% 35% 33%
Industrial 17% 17% 17% 17% 17%

 

POWER INTEGRATIONS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP RESULTS
(in thousands, except per-share amounts)
           
  Three Months
Ended
Twelve Months Ended
  Dec. 31,
2009
Sept. 30,
2009
Dec. 31,
2008
Dec. 31, 2009 Dec. 31, 2008
RECONCILIATION OF GROSS PROFIT          
GAAP gross profit $33,816 $29,123 $18,945 $108,068 $105,030
GAAP gross profit margin 51.1% 48.5% 44.7% 50.1% 52.1%
           
Stock-based compensation expense included in
cost of revenues
176 188 2,204 790 3,481
           
Non-GAAP gross profit $33,992 $29,311 $21,149 $108,858 $108,511
Non-GAAP gross profit margin 51.4% 48.8% 49.9% 50.5% 53.8%
           
           
RECONCILIATION OF OPERATING EXPENSES          
GAAP operating expenses $22,568 $18,055 $38,881 $79,458 $102,019
           
Less: Stock-based compensation expense
included in operating expenses:
         
           
Research and development 1,115 339 7,749 4,371 11,773
Sales and marketing 820 172 7,992 2,548 11,878
General and administrative 1,174 705 4,937 3,619 7,832
Total 3,109 1,216 20,678 10,538 31,483
           
Impairment of intangibles -- -- 1,958 -- 1,958
           
Non-GAAP operating expenses $19,459 $16,839 $16,245 $68,920 $68,578
           
           
RECONCILIATION OF INCOME FROM OPERATIONS          
GAAP income from operations $11,248 $11,068 $(19,936) $28,610 $3,011
GAAP operating margin 17.0% 18.4% N/A 13.3% 1.5%
           
Stock-based compensation included in
cost of revenues
176 188 2,204 790 3,481
Stock-based compensation included in
operating expenses
3,109 1,216 20,678 10,538 31,483
Impairment of intangibles -- -- 1,958 -- 1,958
           
Non-GAAP income from operations $14,533 $12,472 $4,904 $39,938 $39,933
Non-GAAP operating margin 22.0% 20.8% 11.6% 18.5% 19.8%
           
           
RECONCILIATION OF PROVISION FOR INCOME TAXES          
GAAP provision for income taxes $2,221 $2,094 $2,553 $7,254 $8,921
GAAP effective tax rate 19.5% 18.6% N/A 23.8% 83.2%
           
Tax effect of items excluded from non-GAAP results (290) (202) 513 (1,249) (1,797)
           
Non-GAAP provision for income taxes $2,511 $2,296 $2,040 $8,503 $10,718
Non-GAAP effective tax rate 17.1% 18.2% 30.3% 20.3% 22.5%
           
           
RECONCILIATION OF NET INCOME PER SHARE (DILUTED)          
GAAP net income (loss) $9,184 $9,152 $(20,653) $23,269 $1,803
           
Adjustments to GAAP net income (loss)          
Total stock-based compensation 3,285 1,404 22,882 11,328 34,964
Impairment of intangibles -- -- 1,958 -- 1,958
Tax effect of items excluded from
non-GAAP results
(290) (202) 513 (1,249) (1,797)
           
Non-GAAP net income $12,179 $10,354 $4,700 $33,348 $36,928
           
Average shares outstanding for calculation
of non-GAAP income per share (diluted)
29,116 28,431 29,819 28,297 31,755
           
Non-GAAP income per share (diluted)          
  $0.42 $0.36 $0.16 $1.18 $1.16
           
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, impairment of intangible assets, 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 company's historical results and 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)
       
  December 31, 2009 September 30, 2009 December 31, 2008
ASSETS      
CURRENT ASSETS:      
Cash and cash equivalents $134,974 $150,024 $167,472
Restricted cash 250 250 250
Short-term investments 20,567 3,192 6,363
Accounts receivable 21,756 20,440 13,042
Inventories 26,248 20,335 28,468
Note receivable -- 10,000 10,000
Deferred tax assets 1,389 1,275 1,274
Prepaid expenses and other current assets 10,691 7,951 7,099
Total current assets 215,875 213,467 233,968
       
INVESTMENTS 40,100 23,347 1,011
PROPERTY AND EQUIPMENT, net 62,381 57,512 56,911
INTANGIBLE ASSETS, net 3,099 3,270 3,818
GOODWILL 1,824 1,824 1,824
DEFERRED TAX ASSETS 14,590 13,934 15,362
OTHER ASSETS 6,698 5,483 184
Total assets $344,567 $318,837 $313,078
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
CURRENT LIABILITIES:      
Accounts payable $16,944 $14,875 $9,319
Accrued payroll and related expenses 6,145 4,656 15,947
Income taxes payable 478 677 588
Deferred income on sales to distributors 9,040 7,322 4,798
Other accrued liabilities 3,309 3,335 2,319
Total current liabilities 35,916 30,865 32,971
       
LONG-TERM LIABILITIES      
Income taxes payable 23,859 22,519 20,426
       
Total liabilities 59,775 53,384 53,397
       
STOCKHOLDERS' EQUITY:      
Common stock 27 27 28
Additional paid-in capital 150,021 139,186 145,544
Cumulative translation adjustment 4 3 (57)
Retained earnings 134,740 126,237 114,166
Total stockholders' equity 284,792 265,453 259,681
Total liabilities stockholders' equity $344,567 $318,837 $313,078

 

 

POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
         
  Three Months Ended Twelve Months Ended
  Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net income $9,184 $(20,653) $23,269 $1,803
Adjustments to reconcile net income to net cash provided by operating activities        
Depreciation and amortization 2,790 2,491 10,340 9,816
Intangible Impairment -- 1,958 -- 1,958
Gain on sale of property, plant and equipment 5 -- (5) (13)
Stock-based compensation expense 3,284 22,887 11,330 34,975
Amortization of discount on held-to-maturity investments 214 (15) 319 (755)
Deferred income taxes (770) (757) 658 18
Provision for (reduction in provision for) accounts receivable and other allowances   (1,179) (4) 124
Excess tax benefit from stock options exercised (462) (109) (564) (972)
Tax benefit associated with employee stock plans 849 (387) 1,403 2,170
Change in operating assets and liabilities:        
Accounts receivable (1,316) 5,110 (8,709) 1,055
Inventories (5,874) (2,135) 2,136 (8,928)
Prepaid expenses and other assets (2,757) 1,315 (8,908) (3,672)
Accounts payable 1,324 (5,103) 6,838 (1,436)
Taxes payable and other accrued liabilities 2,652 2,986 3,825 486
Deferred income on sales to distributors 1,719 (2,270) 4,243 (428)
Net cash provided by operating activities 10,842 4,139 46,171 36,201
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchases of property and equipment (6,789) (1,929) (14,356) (9,097)
Note to supplier 10,000 -- 10,000 --
Investment in third party (1,200) -- (1,200) 0
Release of restricted cash -- -- -- 1,050
Purchases of held-to-maturity investments (34,841) (6,369) (60,461) (29,172)
Proceeds from held-to-maturity investments 500 6,000 6,849 108,373
Net cash provided by (used in) investing activities (32,330) (2,298) (59,168) 71,154
         
CASH FLOWS FROM FINANCING ACTIVITIES        
Net proceeds from issuance of common stock 6,655 1,104 20,353 23,880
Repurchase of common stock -- (53,153) (28,674) (82,358)
Repurchase of stock options     (9,048) --
Payments of dividends to stockholders (679) (730) (2,696) (730)
Excess tax benefit from stock options exercised 462 109 564 972
Net cash provided by (used in) financing activities 6,438 (52,670) (19,501) (58,236)
         
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (15,050) (50,829) (32,498) 49,119
         
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 150,024 218,301 167,472 118,353
         
CASH AND CASH EQUIVALENTS AT END OF PERIOD $134,974 $167,472 $134,974 $167,472
         
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
     
Accrued payment for employee tender offer $-- $9,048 $-- $9,048
Unpaid property and equipment, net $741 $(117) $785 $(37)
         
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION        
Cash paid for interest $-- $-- $397 $9
Cash paid for income taxes, net of refunds  $63  $617  $150  $5,283

 



            

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