Power Integrations Reports Third-Quarter Financial Results

® 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, amortization of acquisition-related intangible assets, a 2013 gain related to asset sales, the tax effects of these items, and a tax benefit recognized in the second quarter of 2014. 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 relating to the company’s projected fourth-quarter financial performance and its optimism about its expanding addressable market, pipeline of innovative products, and the growing demand for energy-efficiency and renewable energy, 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; and 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. 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 July 31, 2014. 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 INCOME
(in thousands, except per-share amounts)
 
 
Three Months Ended Nine Months Ended

September 30, 2014

June 30, 2014

September 30, 2013

September 30, 2014

September 30, 2013

NET REVENUES $ 90,144 $ 88,985 $ 91,715 $ 262,202 $ 256,677
 
COST OF REVENUES   41,092     40,249     42,941     118,437     121,832  
 
GROSS PROFIT   49,052     48,736     48,774     143,765     134,845  
 
OPERATING EXPENSES:
Research and development 13,458 14,366 12,984 41,314 38,745
Sales and marketing 10,935 11,434 10,091 33,344 29,992
General and administrative 7,155 7,813 7,984 22,614 23,784
Amortization of acquisition-related intangible assets   629     798     1,121     2,562     3,365  
Total operating expenses   32,177     34,411     32,180     99,834     95,886  
 
INCOME FROM OPERATIONS 16,875 14,325 16,594 43,931 38,959
 
Gain on sale of assets held for sale - - - - 497
Other income, net   381     198     82     836     367  
 
INCOME BEFORE PROVISION (BENEFIT) FOR INCOME TAXES 17,256

 

14,523

 

16,676 44,767 39,823
 
PROVISION (BENEFIT) FOR INCOME TAXES   1,145     (2,193 )   22     (423 )   (1,406 )
 
NET INCOME $ 16,111   $ 16,716   $ 16,654   $ 45,190   $ 41,229  
 
EARNINGS PER SHARE:
Basic $ 0.54   $ 0.55   $ 0.56   $ 1.50   $ 1.41  
Diluted $ 0.52   $ 0.54   $ 0.54   $ 1.46   $ 1.36  
 
SHARES USED IN PER-SHARE CALCULATION:
Basic 30,013 30,310 29,762 30,186 29,235
Diluted 30,757 31,110 30,652 31,053 30,237
 
 
SUPPLEMENTAL INFORMATION:
 
Stock-based compensation expenses included in:
Cost of revenues $ 131 $ 298 $ 296 $ 648 $ 824
Research and development 971 1,339 1,485 3,522 4,231
Sales and marketing 779 864 964 2,578 2,588
General and administrative   699     1,674     1,446     3,922     4,512  
Total stock-based compensation expense $ 2,580   $ 4,175   $ 4,191   $ 10,670   $ 12,155  
 
Cost of revenues includes:
Amortization of acquisition-related intangible assets $ 645   $ 645   $ 645   $ 1,935   $ 1,935  
 
General & administrative expenses include:
Patent-litigation expenses $ 1,529   $ 1,127   $ 1,667   $ 3,842   $ 3,873  
 
 
REVENUE MIX BY END MARKET
Communications 18 % 15 % 21 % 17 % 21 %
Computer 11 % 12 % 10 % 11 % 10 %
Consumer 36 % 38 % 34 % 37 % 35 %
Industrial 35 % 35 % 35 % 35 % 34 %
 

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