SAN JOSE, Calif., Feb. 4, 2009 (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 fiscal year ended December 31, 2008.
Net revenues for the quarter were $42.4 million, a decrease of 19 percent from $52.7 million in the fourth quarter of 2007, and down 21 percent compared with $53.8 million in the prior quarter. Under generally accepted accounting principles (GAAP), fourth-quarter gross margin was 44.7 percent, including impacts of approximately five percentage points from stock-based compensation expenses and approximately two percentage points from an increase in the company's inventory reserves. The company reported a GAAP net loss for the quarter of $20.7 million, or $0.72 per share, compared with net income of $6.6 million or $0.20 per diluted share in the year-ago quarter.
The company's fourth-quarter results include non-cash stock-based compensation expenses of $22.9 million, including $19.3 million in accelerated expenses arising from the repurchase of employee stock options via a tender offer completed in December 2008. Options to purchase 2.4 million shares of the company's common stock were repurchased by the company for $9.0 million. The accelerated expenses would otherwise have been recognized over the remaining vesting periods of the tendered options. Also included in the company's results was a non-cash charge of $2.0 million reflecting the impairment of certain intangible assets.
Along with its GAAP results, the company provided certain non-GAAP measures that exclude the above-mentioned stock-based compensation expenses and asset-impairment charge, as well as the related tax effects. Fourth-quarter non-GAAP gross margin was 49.9 percent, including the above-mentioned impact of approximately two percentage points from an increase in the company's inventory reserves. Non-GAAP net income was $4.6 million, or $0.15 per diluted share, compared with $12.4 million or $0.38 per share in the fourth quarter of 2007.
The company ended the quarter with $174 million in cash, cash equivalents and short-term investments, down $51 million from the prior quarter and $30 million from the end of the prior year due primarily to share repurchases. Power Integrations repurchased 2.9 million shares during the quarter and 4.0 million shares during the year for $53 million and $82 million, respectively. The company had 27.5 million shares outstanding as of December 31, 2008, compared with 30.1 million at the end of 2007. As of December 31, 2008, the company had approximately $18 million remaining in the $50 million stock-repurchase program announced in October 2008.
"The global economic downturn has had a significant impact on demand in the power supply market, and business conditions remain challenging and unpredictable," said Balu Balakrishnan, president and CEO of Power Integrations. "In response, we are taking steps designed to achieve continued profitability and cash-flow generation, including a number of expense-reduction measures implemented over the past several months.
"Notwithstanding the difficult economic climate, we believe we are well positioned to succeed competitively in the power supply market in 2009," added Balakrishnan. "We introduced a number of innovative new products in 2008, making us even more competitive in our core low-power market while also expanding our addressable market to include high-power AC-DC power supplies.
"Meanwhile, as policymakers and consumers seek cost-effective ways to reduce carbon emissions, we believe our EcoSmart(r) technology is the right technology at the right time," Balakrishnan noted. "We estimate that EcoSmart technology saved about five billion kilowatt-hours of standby power in 2008, averting millions of tons of CO2 emissions and saving consumers and businesses around the world up to half a billion dollars on their energy bills."
2008 Full-Year Results
For the full year, net revenues were $201.7 million, an increase of six percent compared with $191.0 million in 2007. Net income was $1.8 million or $0.06 per diluted share, compared with $26.6 million or $0.85 per diluted share in 2007. Non-GAAP net income was $36.8 million or $1.16 per diluted share, compared with $40.8 million or $1.31 per diluted share in 2007. Non-GAAP results for 2007 exclude stock-based compensation expenses, an in-process research and development charge recognized in conjunction with the acquisition of Potentia Semiconductor in December 2007, and the related tax effects.
Quarterly Dividend
Power Integrations will pay a quarterly dividend of $0.025 per share on March 31, 2009 to stockholders of record as of February 27, 2009.
First-Quarter Outlook
The company expects its revenues for the first quarter of 2009 to be down 15 to 25 percent compared to the fourth quarter. GAAP gross margin is expected to be between 49 percent and 51 percent, including an impact of 50 basis points from stock-based compensation. First-quarter operating expenses are expected to be between $18 million and $19 million, including approximately $2 million of stock-based compensation expenses and patent-litigation expenses between $1.0 million and $1.5 million.
Conference Call at 1:30 pm Pacific Time
Power Integrations management will hold a conference call today at 1:30 pm Pacific time. Members of the investment community can access the call by dialing 877-604-9674 from within the U.S., or 719-325-4889 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.
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 $3.2 billion of standby energy waste and prevented millions of tons of CO2 emissions. The company's Green Room web site 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 expenses (and the related tax effects thereof) recorded under SFAS 123R, "Share-based Payment," as well as non-recurring, non-cash charges for in-process research and development (IPRD) and the write-down of intangible assets. 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, acquisitions and other activity resulting in the creation of intangible assets are a part of the company's business activities, and the write-down or write-off of such assets due to reductions in their estimated value is not reflected in the non-GAAP measures. Also, other companies, including other companies in Power Integrations' industry, may calculate non-GAAP financial measures differently than the company, limiting their usefulness as a comparative measure.
Note Regarding Forward-Looking Statements
The statements in this press release relating to the company's beliefs with respect to its cost-reduction efforts, being well positioned to succeed in 2009, and its projected first-quarter 2009 financial performance 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 management's forward-looking statements. These risks and uncertainties include, but are not limited to: decreases in customer demand greater than the company expects may occur as a result of the current credit and economic crisis; 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; the benefits of the company's cost-reduction efforts may not be as great as the company expects due to delays in implementing such measures or unforeseen costs and expenses that offset the benefits of such measures; 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 annual report on Form 10-K, filed with the Securities and Exchange Commission on March 10, 2008, and in the company's most recent quarterly report on Form 10-Q, filed on November 7, 2008. 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
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
2008 2008 2007 2008 2007
-------- -------- -------- -------- --------
NET REVENUES $ 42,417 $ 53,816 $ 52,680 $201,708 $191,043
COST OF REVENUES 23,472 24,659 24,661 96,678 87,558
-------- -------- -------- -------- --------
GROSS PROFIT 18,945 29,157 28,019 105,030 103,485
-------- -------- -------- -------- --------
OPERATING EXPENSES:
Research and
development 14,114 7,022 6,702 36,867 25,176
Sales and
marketing 13,569 7,058 7,452 35,898 26,940
General and
administrative 9,240 6,418 5,846 27,296 24,249
Impairment of
intangibles 1,958 -- -- 1,958 --
Purchased
in-process
research and
development -- -- 1,370 -- 1,370
-------- -------- -------- -------- --------
Total operating
expenses 38,881 20,498 21,370 102,019 77,735
-------- -------- -------- -------- --------
INCOME FROM
OPERATIONS (19,936) 8,659 6,649 3,011 25,750
OTHER INCOME, net 1,836 1,600 2,855 7,713 8,801
INCOME BEFORE
PROVISION FOR
INCOME TAXES (18,100) 10,259 9,504 10,724 34,551
PROVISION FOR
INCOME TAXES 2,553 2,622 2,916 8,921 7,927
-------- -------- -------- -------- --------
NET INCOME $(20,653) $ 7,637 $ 6,588 $ 1,803 $ 26,624
======== ======== ======== ======== ========
EARNINGS PER SHARE:
Basic $ (0.72) $ 0.25 $ 0.22 $ 0.06 $ 0.92
======== ======== ======== ======== ========
Diluted $ (0.72) $ 0.23 $ 0.20 $ 0.06 $ 0.85
======== ======== ======== ======== ========
SHARES USED IN
PER-SHARE
CALCULATION:
Basic 28,860 30,791 29,741 30,105 28,969
Diluted 28,860 32,582 32,269 31,762 31,254
SUPPLEMENTAL INFORMATION:
Stock-based
compensation
expenses
included in:
Cost of revenues $ 2,204 $ 385 $ 330 $ 3,480 $ 1,268
Research and
development 7,749 1,396 1,180 11,770 3,829
Sales and
marketing 7,992 1,243 1,304 11,879 4,620
General and
administrative 4,937 1,023 1,006 7,832 3,548
-------- -------- -------- -------- --------
Total stock-based
compensation
expense $ 22,882 $ 4,048 $ 3,820 $ 34,962 $ 13,265
======== ======== ======== ======== ========
Operating expenses
include the following:
Patent-litigation
expenses $ 1,012 $ 735 $ 1,262 $ 3,415 $ 2,945
======== ======== ======== ======== ========
REVENUE MIX BY
PRODUCT FAMILY
TOPSwitch 24% 26% 25% 25% 28%
TinySwitch 42% 44% 45% 44% 52%
LinkSwitch 32% 28% 28% 29% 18%
DPA-Switch 2% 2% 2% 2% 2%
REVENUE MIX BY END
MARKET
Communications 29% 26% 28% 28% 27%
Computer 22% 21% 20% 21% 21%
Consumer 29% 31% 31% 30% 30%
Industrial 14% 15% 14% 15% 15%
Other 6% 7% 7% 6% 7%
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, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
2008 2008 2007 2008 2007
-------- -------- -------- -------- --------
RECONCILIATION OF
GROSS PROFIT MARGIN
GAAP gross
profit $ 18,945 $ 29,157 $ 28,019 $105,030 $103,485
GAAP gross
profit margin 44.7% 54.2% 53.2% 52.1% 54.2%
Stock-based
compensation
expense included
in cost of
revenues 2,204 385 330 3,480 1,268
-------- -------- -------- ------------------
Non-GAAP gross
profit excluding
stock-based
compensation 21,149 29,542 28,349 108,511 104,753
-------- -------- -------- ------------------
Non-GAAP gross
profit margin 49.9% 54.9% 53.8% 53.8% 54.8%
RECONCILIATION OF
OPERATING MARGIN
GAAP income from
operations $(19,936) $ 8,659 $ 6,649 $ 3,011 $ 25,750
GAAP operating
margin N/A 16.1% 12.6% 1.5% 13.5%
Stock-based
compensation
expense included
in cost of
revenues and
operating
expenses:
Cost of
revenues 2,204 385 330 3,480 1,268
Research and
development 7,749 1,396 1,180 11,770 3,829
Sales and
marketing 7,992 1,243 1,304 11,879 4,620
General and
administrative 4,937 1,023 1,006 7,832 3,548
-------- -------- -------- ------------------
Total 22,882 4,048 3,820 34,962 13,265
-------- -------- -------- ------------------
Impairment of
intangibles 1,958 -- -- 1,958 --
Purchased
in-process R&D -- -- 1,370 -- 1,370
Non-GAAP income
from operations
excluding
stock-based
compensation 4,904 12,708 11,839 39,931 40,385
-------- -------- -------- ------------------
Non-GAAP
operating
margin 11.6% 23.6% 22.5% 19.8% 21.1%
RECONCILIATION OF
NET INCOME PER
SHARE (DILUTED)
GAAP net income $(20,653) $ 7,637 $ 6,588 $ 1,803 $ 26,624
Adjustments to
GAAP net income
Total stock-based
compensation 22,882 4,048 3,820 34,962 13,265
Impairment of
intangibles 1,958 -- -- 1,958 --
Purchased
in-process R&D -- -- 1,370 -- 1,370
Difference
between GAAP
and non-GAAP
provision for
income taxes 429 (829) 595 (1,882) (448)
Non-GAAP net
income $ 4,616 $ 10,857 $ 12,373 $ 36,841 $ 40,811
-------- -------- -------- ------------------
Average shares
outstanding for
calculation of
non-GAAP income
per share
(diluted) 29,845 32,582 32,269 31,762 31,254
-------- -------- -------- ------------------
Non-GAAP income
per share
excluding
stock-based
compensation
(diluted) $ 0.15 $ 0.33 $ 0.38 $ 1.16 $ 1.31
======== ======== ======== ==================
RECONCILIATION OF
OPERATING EXPENSES
GAAP operating
expenses $ 38,881 $ 20,498 $ 21,370 $102,019 $ 77,735
Adjustments to
GAAP operating
expenses
Stock-based
compensation 20,678 3,663 3,490 31,481 11,997
Impairment of
intangibles 1,958 -- -- 1,958 --
Purchased
in-process R&D -- -- 1,370 -- 1,370
Non-GAAP operating
expenses $ 16,245 $ 16,835 $ 16,510 $ 68,580 $ 64,368
------------------------------------------------
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 expenses recognized under SFAS123R, "Share-based payment," as well as non-recurring, non-cash charges for in-process research and development (IPRD) and the write-down of intangible assets. 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, 2008 December 31, 2007
----------------- -----------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 167,472 $ 118,353
Restricted cash 250 1,300
Short-term investments 6,363 85,821
Accounts receivable 13,042 14,221
Inventories 28,468 19,696
Note receivable 10,000 --
Deferred tax assets 1,274 1,259
Prepaid expenses and other
current assets 7,099 2,957
----------------- -----------------
Total current assets 233,968 243,607
----------------- -----------------
NOTE RECEIVABLE -- 10,000
PROPERTY AND EQUIPMENT, net 56,911 56,740
GOODWILL AND OTHER
INTANGIBLE ASSETS 5,642 8,555
DEFERRED TAX ASSETS 15,362 15,544
OTHER ASSETS 1,195 653
----------------- -----------------
Total assets $ 313,078 $ 335,099
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 9,319 $ 10,792
Accrued payroll and related
expenses 15,947 9,212
Income taxes payable 588 852
Deferred income on sales
to distributors 4,798 5,226
Other accrued liabilities 2,319 2,485
----------------- -----------------
Total current liabilities 32,971 28,567
----------------- -----------------
LONG-TERM LIABILITIES
Income taxes payable 20,426 17,042
Total liabilities 53,397 45,609
----------------- -----------------
STOCKHOLDERS' EQUITY:
Common stock 28 30
Additional paid-in capital 145,544 176,282
Cumulative translation
adjustment (57) 85
Retained earnings 114,166 113,093
----------------- -----------------
Total stockholders' equity 259,681 289,490
----------------- -----------------
Total liabilities
stockholders' equity $ 313,078 $ 335,099
================= =================