Power Integrations Reports Fourth-Quarter Financial Results

By: Power Integrations, Inc. via Business Wire News Releases

February 04, 2016 at 16:02 PM EST

Power Integrations (Nasdaq: POWI) today announced financial results for the quarter and year ended December 31, 2015. Net revenues for the fourth quarter were $87.3 million, down two percent from the prior quarter and up one percent compared to the fourth quarter of 2014. Net income was $12.7 million or $0.44 per diluted share, compared to $0.39 in the prior quarter and $0.48 in the fourth quarter of 2014. Cash flow from operations for the fourth quarter was $24.8 million.

In addition to its GAAP results, the company provided non-GAAP financial measures that exclude stock-based compensation expenses, amortization of intangible assets and other acquisition-related expenses, the tax effects of these items, and a tax benefit recognized in 2014. Non-GAAP net income for the fourth quarter was $16.9 million or $0.58 per diluted share, compared with $0.55 in the prior quarter and $0.59 in the fourth quarter of 2014.

For the full year, net revenues were $344.0 million, down one percent from the prior year. Net income for the year was $39.1 million or $1.32 per diluted share, compared to $1.93 in the prior year. Non-GAAP net income for 2015 was $2.03 per diluted share, compared to $2.40 in the prior year. Cash flow from operations for the year was $92.2 million, compared to $85.6 million in the prior year.

Commented Balu Balakrishnan, president and CEO of Power Integrations: “Despite challenging economic conditions and a steep year-over-year decline in revenues from the PC market, quarterly revenues grew modestly from a year ago, and we generated nearly $25 million in cash flow from operations for the quarter. While we expect the March quarter to be sequentially lower due to seasonal factors, recent order trends and design wins point to strong sequential growth in the second quarter. The InnoSwitch™ product cycle continues to gain steam, and we have a promising pipeline of innovative new products on the way for key growth areas such as rapid charging, efficient lighting, renewable energy and high-power industrial applications.”

Additional Highlights

The company paid a dividend of $0.12 per share on December 31. The company’s board has declared dividends of $0.13 per share for each quarter of 2016, the first of which will be paid on March 31, 2016 to stockholders of record as of February 29, 2016.
Power Integrations had $173.9 million in cash and short-term marketable securities at quarter-end, an increase of $22.9 million during the quarter.
Power Integrations was issued 16 U.S. patents during the fourth quarter and had 764 U.S. patents at quarter-end.

Financial Outlook

The company issued the following forecast for the first quarter of 2016:

Revenues are expected to be in a range of $84 million plus or minus $3 million.
Non-GAAP gross margin is expected to be approximately 51 percent. (Excludes approximately $0.2 million of stock-based compensation expense and $1 million of amortization of acquisition-related intangible assets.) GAAP gross margin is expected to be approximately 49.6 percent.
Non-GAAP operating expenses are expected to be between $30 million and $31 million. (Excludes approximately $4 million of stock-based compensation expenses and $0.7 million of amortization of acquisition-related intangible assets.) GAAP operating expenses are expected to be between $34.7 million and $35.7 million.

Conference Call Today at 1:30 p.m. Pacific Time

Power Integrations management will hold a conference call today at 1:30 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 ASC 718-10, amortization of acquisition-related intangible assets and the write-up of acquired inventory, acquisition expenses, severance and transition expenses, the tax effects of these items, and a tax benefit recognized in 2014. The company uses these measures in its own financial and operational decision-making 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 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 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 including its InnoSwitch 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 October 30, 2015. 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, 2015			September 30, 2015			December 31, 2014			December 31, 2015			December 31, 2014
NET REVENUES		$	87,289		$	88,878		$	86,595		$	343,989		$	348,797

COST OF REVENUES			44,373			44,717			40,790			170,602			159,227

GROSS PROFIT			42,916			44,161			45,805			173,387			189,570

OPERATING EXPENSES:
Research and development			13,856			13,888			13,667			57,000			54,981
Sales and marketing			10,449			10,463			11,262			43,786			44,606
General and administrative			6,896			7,361			7,574			29,720			30,188
Amortization of acquisition-related intangible assets			666			666			628			2,775			3,190
Acquisition expenses, severance and transition costs			-			-			809			1,113			809
	Total operating expenses		31,867			32,378			33,940			134,394			133,774

INCOME FROM OPERATIONS			11,049			11,783			11,865			38,993			55,796

Other income, net			206			428			182			425			1,018

INCOME BEFORE INCOME TAXES			11,255			12,211			12,047			39,418			56,814

PROVISION (BENEFIT) FOR INCOME TAXES			(1,446	)		698			(2,307	)		271			(2,730	)

NET INCOME		$	12,701		$	11,513		$	14,354		$	39,147		$	59,544

EARNINGS PER SHARE:
	Basic	$	0.45		$	0.40		$	0.49		$	1.35		$	1.99
	Diluted	$	0.44		$	0.39		$	0.48		$	1.32		$	1.93

SHARES USED IN PER-SHARE CALCULATION:
	Basic		28,483			28,855			29,350			29,001			29,976
	Diluted		29,126			29,298			30,051			29,696			30,829


SUPPLEMENTAL INFORMATION:

Stock-based compensation expenses included in:
	Cost of revenues	$	208		$	219		$	231		$	933		$	879
	Research and development		1,281			1,277			1,262			5,255			4,784
	Sales and marketing		877			877			962			3,644			3,540
	General and administrative		899			988			1,157			4,935			5,079
	Total stock-based compensation expense	$	3,265		$	3,361		$	3,612		$	14,767		$	14,282

Cost of revenues includes:
	Amortization of write-up of acquired inventory	$	-		$	-		$	-		$	309		$	-
	Amortization of acquisition-related intangible assets	$	961		$	961		$	646		$	3,844		$	2,581

General & administrative expenses include:
	Patent-litigation expenses	$	1,517		$	1,500		$	1,815		$	5,975		$	5,657

Other income, net includes:
	Amortization of in-place lease intangible assets	$	90		$	30		$	-		$	120		$	-


REVENUE MIX BY END MARKET
	Communications		26	%		26	%		21	%		24	%		18	%
	Computer		7	%		7	%		9	%		7	%		10	%
	Consumer		34	%		36	%		37	%		36	%		37	%
	Industrial		33	%		31	%		33	%		33	%		35	%



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, 2015			September 30, 2015			December 31, 2014			December 31, 2015			December 31, 2014
RECONCILIATION OF GROSS PROFIT
GAAP gross profit			$	42,916		$	44,161		$	45,805		$	173,387		$	189,570
	GAAP gross margin			49.2	%		49.7	%		52.9	%		50.4	%		54.3	%

Stock-based compensation included in cost of revenues				208			219			231			933			879
Amortization of write-up of acquired inventory				-			-			-			309			-
Amortization of acquisition-related intangible assets				961			961			646			3,844			2,581

Non-GAAP gross profit			$	44,085		$	45,341		$	46,682		$	178,473		$	193,030
	Non-GAAP gross margin			50.5	%		51.0	%		53.9	%		51.9	%		55.3	%


RECONCILIATION OF OPERATING EXPENSES
GAAP operating expenses			$	31,867		$	32,378		$	33,940		$	134,394		$	133,774

Less:	Stock-based compensation expense included in operating expenses
		Research and development		1,281			1,277			1,262			5,255			4,784
		Sales and marketing		877			877			962			3,644			3,540
		General and administrative		899			988			1,157			4,935			5,079
		Total		3,057			3,142			3,381			13,834			13,403

	Amortization of acquisition-related intangible assets			666			666			628			2,775			3,190

	Acquisition expenses, severance and transition costs			-			-			809			1,113			809

Non-GAAP operating expenses			$	28,144		$	28,570		$	29,122		$	116,672		$	116,372


RECONCILIATION OF INCOME FROM OPERATIONS
GAAP income from operations			$	11,049		$	11,783		$	11,865		$	38,993		$	55,796
	GAAP operating margin			12.7	%		13.3	%		13.7	%		11.3	%		16.0	%

Add:	Total stock-based compensation			3,265			3,361			3,612			14,767			14,282
	Amortization of write-up of acquired inventory			-			-			-			309			-
	Amortization of acquisition-related intangible assets			1,627			1,627			1,274			6,619			5,771
	Acquisition expenses, severance and transition costs			-			-			809			1,113			809

Non-GAAP income from operations			$	15,941		$	16,771		$	17,560		$	61,801		$	76,658
	Non-GAAP operating margin			18.3	%		18.9	%		20.3	%		18.0	%		22.0	%


RECONCILIATION OF PROVISION (BENEFIT) FOR INCOME TAXES
GAAP provision (benefit) for income taxes			$	(1,446	)	$	698		$	(2,307	)	$	271		$	(2,730	)
	GAAP effective tax rate			-12.8	%		5.7	%		-19.1	%		0.7	%		-4.8	%

Benefit associated with tax settlement				-			-			-			-			(3,331	)
Tax effect of other adjustments to GAAP results				(796	)		(310	)		(2,251	)		(1,824	)		(3,034	)

Non-GAAP provision (benefit) for income taxes			$	(650	)	$	1,008		$	(56	)	$	2,095		$	3,635
	Non-GAAP effective tax rate			-4.0	%		5.9	%		-0.3	%		3.4	%		4.7	%


RECONCILIATION OF NET INCOME PER SHARE (DILUTED)
GAAP net income			$	12,701		$	11,513		$	14,354		$	39,147		$	59,544

Adjustments to GAAP net income
	Stock-based compensation			3,265			3,361			3,612			14,767			14,282
	Amortization of write-up of acquired inventory			-			-			-			309			-
	Amortization of acquisition-related intangible assets			1,627			1,627			1,274			6,619			5,771
	Benefit associated with tax settlement			-			-			-			-			(3,331	)
	Acquisition expenses, severance and transition costs			-			-			809			1,113			809
	Amortization of in-place lease intangible assets			90			30			-			120			-
	Tax effect of items excluded from non-GAAP results			(796	)		(310	)		(2,251	)		(1,824	)		(3,034	)

Non-GAAP net income			$	16,887		$	16,221		$	17,798		$	60,251		$	74,041

Average shares outstanding for calculation
	of non-GAAP income per share (diluted)			29,126			29,298			30,051			29,696			30,829

Non-GAAP net income per share (diluted)			$	0.58		$	0.55		$	0.59		$	2.03		$	2.40

GAAP income per share			$	0.44		$	0.39		$	0.48		$	1.32		$	1.93



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


		December 31, 2015			September 30, 2015			December 31, 2014
ASSETS
	CURRENT ASSETS:
	Cash and cash equivalents	$	90,092		$	59,735		$	60,708
	Short-term marketable securities		83,769			91,222			114,575
	Accounts receivable		7,818			11,061			10,186
	Inventories		51,934			55,439			64,025
	Deferred tax assets		-			75			39
	Prepaid expenses and other current assets		6,790			5,780			16,379
	Total current assets		240,403			223,312			265,912

	PROPERTY AND EQUIPMENT, net		99,381			102,223			95,823
	INTANGIBLE ASSETS, net		38,165			39,957			35,524
	GOODWILL		91,849			91,849			80,599
	DEFERRED TAX ASSETS		11,843			10,647			11,562
	OTHER ASSETS		5,896			5,502			4,243
	Total assets	$	487,537		$	473,490		$	493,663

LIABILITIES AND STOCKHOLDERS’ EQUITY
	CURRENT LIABILITIES:
	Accounts payable	$	21,660		$	23,370		$	21,980
	Accrued payroll and related expenses		9,327			8,203			9,071
	Taxes payable		3,620			2,022			2,963
	Deferred tax liabilities		-			1,985			2,193
	Deferred income on sales to distributors		15,101			16,464			15,223
	Other accrued liabilities		2,285			3,182			3,730
	Total current liabilities		51,993			55,226			55,160

	LONG-TERM LIABILITIES:
	Income taxes payable		2,511			746			743
	Deferred tax liabilities		1,291			3,752			4,272
	Other liabilities		3,123			2,569			2,812
	Total liabilities		58,918			62,293			62,987

STOCKHOLDERS' EQUITY:
	Common stock		28			28			29
	Additional paid-in capital		145,366			136,422			171,938
	Accumulated other comprehensive loss		(1,851	)		(1,043	)		(1,136	)
	Retained earnings		285,076			275,790			259,845
	Total stockholders' equity		428,619			411,197			430,676
	Total liabilities and stockholders' equity	$	487,537		$	473,490		$	493,663



POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

		Three Months Ended									Twelve Months Ended

		December 31, 2015			September 30, 2015			December 31, 2014			December 31, 2015			December 31, 2014
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income	$	12,701		$	11,513		$	14,354		$	39,147		$	59,544
	Adjustments to reconcile net income to cash provided by operating activities
	Depreciation		4,229			4,168			4,035			16,464			15,884
	Amortization of intangible assets		1,792			1,732			1,349			7,039			6,072
	Loss on disposal of property and equipment		91			270			80			361			250
	Stock-based compensation expense		3,265			3,361			3,612			14,767			14,282
	Amortization of premium on marketable securities		254			258			398			1,063			1,694
	Deferred income taxes		(5,568	)		66			939			(5,416	)		157
	Increase (decrease) in accounts receivable allowances		(1	)		213			(5	)		127			70
	Excess tax benefit from employee stock plans		-			-			-			-			(437	)
	Tax benefit (deficiency) associated with employee stock plans		-			-			-			(189	)		815
	Change in operating assets and liabilities:
	Accounts receivable		3,243			1,938			200			4,131			2,133
	Inventories		3,505			8,792			(7,064	)		13,500			(21,703	)
	Prepaid expenses and other assets		(887	)		2,428			(1,744	)		3,391			8,211
	Accounts payable		35			(8,338	)		(172	)		(2,000	)		2,337
	Taxes payable and other accrued liabilities		3,503			(1,752	)		15			(76	)		(3,242	)
	Deferred income on sales to distributors		(1,363	)		6			(3,522	)		(122	)		(505	)
	Net cash provided by operating activities		24,799			24,655			12,475			92,187			85,562

CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchases of property and equipment		(3,740	)		(2,475	)		(5,677	)		(11,359	)		(23,071	)
	Payment for purchase of building		-			(10,389	)		-			(10,389	)		-
	Payment for acquisition, net of cash acquired		-			-			-			(15,549	)		-
	Loan to third party		-			-			(6,600	)		-			(6,600	)
	Other assets		-			-			-			-			(1,261	)
	Purchases of marketable securities		(14,815	)		(4,940	)		-			(29,748	)		(45,269	)
	Proceeds from sales and maturities of marketable securities		21,850			8,424			38,052			59,309			38,052
	Net cash provided by (used in) investing activities		3,295			(9,380	)		25,775			(7,736	)		(38,149	)

CASH FLOWS FROM FINANCING ACTIVITIES
	Net proceeds from issuance of common stock		5,678			2,527			751			12,580			13,855
	Repurchase of common stock		-			(30,555	)		(35,502	)		(53,731	)		(80,760	)
	Payments of dividends to stockholders		(3,415	)		(3,453	)		(3,511	)		(13,916	)		(13,165	)
	Excess tax benefit from employee stock plans		-			-			-			-			437
	Net cash provided by (used in) financing activities		2,263			(31,481	)		(38,262	)		(55,067	)		(79,633	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			30,357			(16,206	)		(12	)		29,384			(32,220	)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			59,735			75,941			60,720			60,708			92,928

CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	90,092		$	59,735		$	60,708		$	90,092		$	60,708

View source version on businesswire.com: http://www.businesswire.com/news/home/20160204006515/en/

Contacts:

Power Integrations, Inc.
Joe Shiffler, 408-414-8528
joe@power.com