Power Integrations Reports Record Quarterly Revenues and Earnings

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 drivers 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, certain charges and gains associated with strategic investments, non-cash interest income, the tax effects of the above items, and a one-time tax related charge incurred in the second quarter of 2012. 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 in Mr. Balakrishnan’s quote and under the caption “Financial Outlook” relating to the company’s projected fourth-quarter financial performance 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 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 August 1, 2013. 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,
2013

June 30,
2013

September 30,
2012

September 30,
2013

September 30,
2012

NET REVENUES $ 91,715 $ 87,922 $ 78,045 $ 256,677 $ 226,200
 
COST OF REVENUES   42,941     41,715     39,294     121,832     115,101  
 
GROSS PROFIT   48,774     46,207     38,751     134,845     111,099  
 
OPERATING EXPENSES:
Research and development 12,984 13,489 11,428 38,745 34,134
Sales and marketing 10,091 10,242 9,206 29,992 25,736
General and administrative 7,984 8,066 7,912 23,784 21,203
Amortization of acquisition-related intangible assets 1,121 1,122 1,123 3,365 1,908
Charge related to SemiSouth - - 25,300 - 25,300
Acquisition expenses   -     -     29     -     931  
Total operating expenses   32,180     32,919     54,998     95,886     109,212  
 
INCOME (LOSS) FROM OPERATIONS 16,594 13,288 (16,247 ) 38,959 1,887
 
Non-cash interest income - - 665 - 1,445
Cost of acquisition-related currency option - - - - (635 )
Gain (charge) related to SemiSouth - 497 (33,937 ) 497 (33,937 )
Other income (expense), net   82     68     172     367     837  
 
INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES 16,676 13,853 (49,347 ) 39,823 (30,403 )
 
PROVISION (BENEFIT) FOR INCOME TAXES   22     181     (4,941 )   (1,406 )   13,718  
 
NET INCOME (LOSS) $ 16,654   $ 13,672   $ (44,406 ) $ 41,229   $ (44,121 )
 
EARNINGS (LOSS) PER SHARE:
Basic $ 0.56   $ 0.47   $ (1.54 ) $ 1.41   $ (1.54 )
Diluted $ 0.54   $ 0.45   $ (1.54 ) $ 1.36   $ (1.54 )
 
SHARES USED IN PER-SHARE CALCULATION:
Basic 29,762 29,178 28,908 29,235 28,586
Diluted 30,652 30,158 28,908 30,237 28,586
 
 
SUPPLEMENTAL INFORMATION:
 
Stock-based compensation expenses included in:
Cost of revenues $ 296 $ 264 $ 271 $ 824 $ 772
Research and development 1,485 1,640 1,467 4,231 4,154
Sales and marketing 964 795 940 2,588 2,433
General and administrative   1,446     1,629     1,169     4,512     3,161  
Total stock-based compensation expense $ 4,191   $ 4,328   $ 3,847   $ 12,155   $ 10,520  
 
Cost of revenues includes:
Amortization of write-up of acquired inventory $ -   $ -   $ 1,597   $ -   $ 2,813  
Amortization of acquisition-related intangible assets $ 645   $ 645   $ 645   $ 1,935   $ 1,189  
 
Operating expenses include:
Patent-litigation expenses $ 1,667   $ 807   $ 1,885   $ 3,873   $ 4,590  
 
 
REVENUE MIX BY END MARKET
Communications 21 % 21 % 23 % 21 % 25 %
Computer 10 % 10 % 10 % 10 % 11 %
Consumer 34 % 34 % 36 % 35 % 37 %
Industrial 35 % 35 % 31 % 34 % 27 %
 

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