updated 2/3/2011 4:16:57 PM ET 2011-02-03T21:16:57

2010 Revenues Grew 39 Percent to $299.8 Million; Annual Shipments Topped One Billion Units

Fourth-Quarter Revenues Grew 10 Percent Year-Over-Year to $73.0 Million

Company Expands High-Voltage Footprint With Acquisition of Qspeed Semiconductor

SAN JOSE, Calif., Feb. 3, 2011 (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, 2010. Net revenues for the fourth quarter were $73.0 million, up 10 percent compared with the fourth quarter of 2009, and down three percent compared with the third quarter of 2010. Net income was $8.9 million or $0.30 per diluted share, compared with $9.2 million or $0.32 per diluted share in the year-ago quarter and $12.6 million or $0.43 per diluted share in the third quarter of 2010. Gross margin for the fourth quarter was 49.5 percent; operating margin was 15.0 percent.

In addition to its GAAP results, the company provided certain non-GAAP financial measures that exclude stock-based compensation expenses and the related tax effects. Non-GAAP net income for the fourth quarter was $11.6 million or $0.39 per diluted share, compared with $12.2 million or $0.42 per diluted share in the year-ago quarter and $15.5 million or $0.53 per diluted share, in the third quarter of 2010. Non-GAAP gross margin for the fourth quarter was 49.8 percent; non-GAAP operating margin was 19.5 percent.

Full-year revenues for 2010 were $299.8 million, an increase of 39 percent compared with 2009. Net income for the full year was $1.67 per diluted share, more than double the $0.82 per diluted share reported in the prior year. Non-GAAP net income for the full year was $2.00 per diluted share, an increase of 69 percent from $1.18 per diluted share in the prior year.

Commented Balu Balakrishnan, president and CEO of Power Integrations: "2010 was a landmark year for Power Integrations, as shipments surpassed one billion units and we approached $300 million in annual revenues. We grew our top line by 39 percent, achieving our ninth consecutive year of revenue growth. We also had an excellent year from a profitability standpoint, expanding our non-GAAP operating margin by more than five percentage points and growing our non-GAAP earnings by more than 75 percent."

Balakrishnan continued: "We also made great progress last year in expanding our product portfolio and solidifying our leadership in high-voltage technology to position us for continued growth. We introduced a record eight new product families in 2010, including LinkSwitch-PH and LinkSwitch-PL for LED lighting, our Zero series for ultra-low standby, and two new members of our Hiper™ series, targeting high-power applications.

"We also expanded our high-voltage technology presence with multiple strategic transactions, including our investment in SemiSouth Laboratories and, most recently, our acquisition of Qspeed Semiconductor, whose high-performance diode technology is a great complement to our new high-power products. The expansion of our high-voltage footprint – both organically and through strategic transactions – is reflected in the growth of our patent portfolio. We received and acquired more than 100 U.S. patents during the year, increasing the size of our U.S. patent holdings by more than a third."

Additional Highlights

  • On December 31, 2010 Power Integrations acquired Qspeed Semiconductor, a supplier of high-performance high-voltage diodes, for a price of approximately $7 million in cash. Qspeed diodes utilize a proprietary silicon technology to provide a unique combination of high efficiency and low noise, as well as high-frequency operation, which reduces the cost and size of magnetic components in a power supply.
  • In October, Power Integrations announced a strategic investment in SemiSouth Laboratories, a Mississippi-based manufacturer of high-voltage silicon-carbide (SiC) power devices. Power Integrations' investment will facilitate the continued expansion of SemiSouth's SiC fabrication facility and driver adoption of SemiSouth's SiC technology, which enables ultra-efficient power conversion for solar and wind inverters, hybrid/electric vehicles and other high-power applications that benefit from exceptionally high efficiency.
  • Power Integrations received and acquired 66 U.S. patents and 10 foreign patents during the fourth quarter. The company had a total of 395 U.S. patents and 211 foreign patents at year end.
  • Last month a federal district court awarded Power Integrations double damages in one of its patent-infringement lawsuits against Fairchild Semiconductor, increasing the award to approximately $12.9 million. The ruling followed an earlier finding that Fairchild's infringement of Power Integrations' patents was willful.
  • Power Integrations paid a quarterly dividend of $0.05 per share on December 31, 2010. The next quarterly dividend of $0.05 per share will be paid on March 31, 2011 to stockholders of record as of February 28, 2011.

Financial Outlook for First Quarter of 2011

The company issued the following forecast for the first quarter of 2011:

  • Revenues are expected to be between $71 million and $77 million;
  • Gross margin:
  • GAAP: 48 percent plus or minus half a percentage point;
  • Non-GAAP: 48 percent to 49 percent (excludes impact of stock-based compensation and acquisition-related amortization);
  • Operating expenses:
  • GAAP: $25 million, plus or minus $0.5 million;
  • Non-GAAP: $22 million, plus or minus $0.5 million (excludes impact of stock-based compensation and amortization of acquisition-related intangibles).

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

Power Integrations management will hold a conference call today at 1:30 p.m. Pacific time. Members of the investment community can join the call by dialing 1-877-303-9795 from within the United States or 1-631-291-4581 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 $4.5 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"), and the related tax effects. 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 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 2011 financial performance and the expected effect of its investment in SemiSouth 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; the ability of the company to obtain sufficient quantities of wafers in a timely manner from its suppliers; 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; fluctuations in currency exchange rates; the challenges inherent in integrating acquired businesses; and SemiSouth's ability to develop its technology. 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 (SEC) on November 3, 2010. 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, LinkSwitch, Hiper, Qspeed, 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)
(unaudited)
           
  Three Months Ended Twelve Months Ended
  December 31, 2010 September 30, 2010 December 31, 2009 December 31, 2010 December 31, 2009
NET REVENUES  $ 72,986  $ 75,452  $ 66,138  $ 299,803  $ 215,701
           
COST OF REVENUES  36,860  36,447  32,322  147,262  107,633
           
GROSS PROFIT  36,126  39,005  33,816  152,541  108,068
           
OPERATING EXPENSES:          
Research and development  9,753  9,348  8,214  35,886  30,473
Sales and marketing  9,063  7,657  7,127  31,167  25,018
General and administrative  6,339  6,746  7,227  25,562  23,967
Total operating expenses  25,155  23,751  22,568  92,615  79,458
           
INCOME FROM OPERATIONS  10,971  15,254  11,248  59,926  28,610
           
OTHER INCOME, net  500  415  157  1,879  1,913
           
INCOME BEFORE PROVISION FOR INCOME TAXES  11,471  15,669  11,405  61,805  30,523
           
PROVISION FOR INCOME TAXES  2,541  3,035  2,221  12,341  7,254
           
NET INCOME  $ 8,930  $ 12,634  $ 9,184  $ 49,464  $ 23,269
           
EARNINGS PER SHARE:          
Basic  $ 0.32  $ 0.45  $ 0.34  $ 1.78  $ 0.86
Diluted  $ 0.30  $ 0.43  $ 0.32  $ 1.67  $ 0.82
           
SHARES USED IN PER-SHARE CALCULATION:          
Basic  28,134  27,894  27,106  27,837  26,920
Diluted  29,844  29,283  29,116  29,556  28,297
           
           
SUPPLEMENTAL INFORMATION:          
           
Stock-based compensation expenses included in:          
Cost of revenues  $ 205  $ 153  $ 176  $ 686  $ 790
Research and development  1,325  1,125  1,115  4,107  4,371
Sales and marketing  817  727  820  2,593  2,548
General and administrative  895  930  1,174  3,333  3,619
Total stock-based compensation expense  $ 3,242  $ 2,935  $ 3,285  $ 10,719  $ 11,328
           
           
Operating expenses include the following:          
Patent-litigation expenses  $ 1,321  $ 1,801  $ 2,334  $ 5,725  $ 5,572
           
           
REVENUE MIX BY PRODUCT FAMILY          
TOPSwitch 23% 23% 22% 24% 23%
TinySwitch 36% 37% 41% 38% 43%
LinkSwitch 40% 39% 36% 37% 33%
Other 1% 1% 1% 1% 1%
           
REVENUE MIX BY END MARKET          
Communications 33% 30% 36% 31% 34%
Computer 11% 11% 14% 12% 14%
Consumer 37% 37% 33% 38% 35%
Industrial 19% 22% 17% 19% 17%
 
 
POWER INTEGRATIONS, INC. 
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP RESULTS
(in thousands, except per-share amounts)  
(unaudited)
           
  Three Months Ended Twelve Months Ended
  Dec. 31, 2010 Sept. 30, 2010 Dec. 31, 2009 Dec. 31, 2010 Dec. 31, 2009
RECONCILIATION OF GROSS PROFIT          
GAAP gross profit  $ 36,126  $ 39,005  $ 33,816  $ 152,541  $ 108,068
GAAP gross profit margin 49.5% 51.7% 51.1% 50.9% 50.1%
           
Stock-based compensation included in cost of revenues  205  153  176  686  790
           
Non-GAAP gross profit  $ 36,331  $ 39,158  $ 33,992  $ 153,227  $ 108,858
Non-GAAP gross profit margin 49.8% 51.9% 51.4% 51.1% 50.5%
           
           
RECONCILIATION OF OPERATING EXPENSES          
GAAP operating expenses  $ 25,155  $ 23,751  $ 22,568  $ 92,615  $ 79,458
           
Less: Stock-based compensation included in operating expenses:          
Research and development  1,325  1,125  1,115  4,107  4,371
Sales and marketing  817  727  820  2,593  2,548
General and administrative  895  930  1,174  3,333  3,619
Total  3,037  2,782  3,109  10,033  10,538
           
Non-GAAP operating expenses  $ 22,118  $ 20,969  $ 19,459  $ 82,582  $ 68,920
           
           
RECONCILIATION OF INCOME FROM OPERATIONS          
GAAP income from operations  $ 10,971  $ 15,254  $ 11,248  $ 59,926  $ 28,610
GAAP operating margin 15.0% 20.2% 17.0% 20.0% 13.3%
           
Stock-based compensation included in cost of revenues  205  153  176  686  790
Stock-based compensation included in operating expenses  3,037  2,782  3,109  10,033  10,538
           
Non-GAAP income from operations  $ 14,213  $ 18,189  $ 14,533  $ 70,645  $ 39,938
Non-GAAP operating margin 19.5% 24.1% 22.0% 23.6% 18.5%
           
           
RECONCILIATION OF PROVISION FOR INCOME TAXES          
GAAP provision for income taxes  $ 2,541  $ 3,035  $ 2,221  $ 12,341  $ 7,254
GAAP effective tax rate 22.2% 19.4% 19.5% 20.0% 23.8%
           
Tax effect of items excluded from non-GAAP results  (523)  (93)  (290)  (979)  (1,249)
           
Non-GAAP provision for income taxes  $ 3,064  $ 3,128  $ 2,511  $ 13,320  $ 8,503
Non-GAAP effective tax rate 20.8% 16.8% 17.1% 18.4% 20.3%
           
           
RECONCILIATION OF NET INCOME PER SHARE (DILUTED)          
GAAP net income  $ 8,930  $ 12,634  $ 9,184  $ 49,464  $ 23,269
           
Adjustments to GAAP net income          
Total stock-based compensation  3,242  2,935  3,285  10,719  11,328
Tax effect of items excluded from non-GAAP results  (523)  (93)  (290)  (979)  (1,249)
           
Non-GAAP net income  $ 11,649  $ 15,476  $ 12,179  $ 59,204  $ 33,348
           
Average shares outstanding for calculation of GAAP and non-GAAP income per share (diluted)  29,844  29,283  29,116  29,556  28,297
           
Non-GAAP income per share (diluted)  $ 0.39  $ 0.53  $ 0.42  $ 2.00  $ 1.18
           
GAAP income per share (diluted)  $ 0.30  $ 0.43  $ 0.32  $ 1.67  $ 0.82
           
           
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 (as recognized under Accounting Standard Codification 718-20) and the related tax effects. 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.
 
 
POWER INTEGRATIONS, INC. 
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
       
  December 31, 2010 September 30, 2010 December 31, 2009
ASSETS      
CURRENT ASSETS:      
Cash and cash equivalents   $ 155,667  $ 164,083  $ 134,974
Short-term investments   27,355  16,039  20,567
Accounts receivable   5,713  7,925  21,756
Inventories   62,077  49,120  26,248
Notes receivable  --  5,000  --
Deferred tax assets   1,435  1,452  1,389
Prepaid expenses and other current assets   9,263  6,279  10,941
 Total current assets  261,510  249,898  215,875
       
INVESTMENTS  31,760  44,023  40,100
PROPERTY AND EQUIPMENT, net   84,470  74,280  62,381
GOODWILL AND INTANGIBLE ASSETS  24,621  15,316  4,923
DEFERRED TAX ASSETS  13,421  14,280  14,590
OTHER ASSETS  17,288  5,550  6,698
 Total assets  $ 433,070  $ 403,347  $ 344,567
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
CURRENT LIABILITIES:      
Accounts payable   $ 20,291  $ 16,505  $ 16,944
Accrued payroll and related expenses   7,395  5,864  6,145
Taxes payable   --  1,220  478
Deferred income on sales to distributors   12,221  14,849  9,040
Other accrued liabilities   9,548  3,496  3,309
 Total current liabilities  49,455  41,934  35,916
       
LONG-TERM LIABILITIES:      
Income taxes payable  29,580  27,457  23,859
       
 Total liabilities  79,035  69,391  59,775
       
STOCKHOLDERS' EQUITY:      
Common stock   28  28  27
Additional paid-in capital  175,295  162,764  150,021
Cumulative translation adjustment   85  54  4
Retained earnings  178,627  171,110  134,740
 Total stockholders' equity  354,035  333,956  284,792
 Total liabilities stockholders' equity  $ 433,070  $ 403,347  $ 344,567
 
 
POWER INTEGRATIONS, INC. 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
         
  Three Months Ended Twelve Months Ended
  Dec. 31, 2010 Dec. 31, 2009 Dec. 31, 2010 Dec. 31, 2009
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net income  $ 8,930  $ 9,184  $ 49,464  $ 23,269
Adjustments to reconcile net income to net cash provided by operating activities        
Depreciation and amortization  3,557  2,790 13,017 10,340
Loss (gain) on sale of property and equipment  14  5  (330) (5)
Stock-based compensation expense  3,242  3,284 10,719 11,330
Amortization of premium on held-to-maturity investments  428  214 1,765 319
Deferred income taxes  875  (770) 1,124 658
Decrease in accounts receivable and other allowances  (2)  -- (27) (4)
Excess tax benefit from stock options exercised  (370)  (462) (1,309) (562)
Tax benefit associated with employee stock plans  940  849 2,891 1,403
Change in operating assets and liabilities:        
 Accounts receivable 2,382 (1,316) 16,236 (8,709)
 Inventories (10,792) (5,874) (33,588) 2,136
 Prepaid expenses and other assets (13,125) (3,957) (8,515) (10,110)
 Accounts payable (576) 1,324 (483) 6,838
 Taxes payable and other accrued liabilities 1,522 2,652 5,827 3,825
 Deferred income on sales to distributors  (2,628)  1,719  3,180  4,243
     Net cash provided by (used in) operating activities  (5,603)  9,642  59,971  44,971
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchases of property and equipment  (8,733)  (6,789) (30,566) (14,356)
Proceeds from sale of property and equipment  --  -- 1,415  --
Acquisition  --  -- (8,598)  --
Investment in third party  (1,831)  -- (1,831)  --
Notes to third parties  --  10,000 (6,750)  10,000
Purchases of held-to-maturity investments  --  (34,841) (27,224)  (60,461)
Proceeds from held-to-maturity investments  519  500  27,010  6,849
Net cash used in investing activities  (10,045)  (31,130)  (46,544)  (57,968)
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Net proceeds from issuance of common stock  8,276  6,655 26,263 20,353
Repurchase of common stock  --  -- (13,960) (28,673)
Repurchase of stock options  --  --  -- (9,048)
Retirement of performance shares for income tax withholding  --  --  (769)  --
Payments of dividends to stockholders  (1,414)  (679) (5,577)  (2,695)
Excess tax benefit from stock options exercised  370  462  1,309  562
Net cash provided by (used in) financing activities  7,232  6,438  7,266  (19,501)
         
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS  (8,416)  (15,050)  20,693  (32,498)
         
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD  164,083  150,024  134,974  167,472
         
CASH AND CASH EQUIVALENTS AT END OF PERIOD  $ 155,667  $ 134,974  $ 155,667  $ 134,974
CONTACT: Joe Shiffler
         Power Integrations, Inc.
         (408) 414-8528
         jshiffler@powerint.com

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