Power Integrations Reports Second-Quarter Financial Results

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 the above-mentioned 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 third-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; 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 April 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 Six Months Ended

June 30, 2015

March 31, 2015

June 30, 2014

June 30, 2015

June 30, 2014

NET REVENUES $ 85,265 $ 82,557 $ 88,985 $ 167,822 $ 172,058
 
COST OF REVENUES   41,247     40,265     40,249     81,512     77,345  
 
GROSS PROFIT   44,018     42,292     48,736     86,310     94,713  
 
OPERATING EXPENSES:
Research and development 14,683 14,573 14,366 29,256 27,856
Sales and marketing 11,567 11,307 11,434 22,874 22,409
General and administrative 7,480 7,983 7,813 15,463 15,459
Amortization of acquisition-related intangible assets 693 750 798 1,443 1,933
Acquisition expenses, severance and transition costs   391     722     -     1,113     -  
Total operating expenses   34,814     35,335     34,411     70,149     67,657  
 
INCOME FROM OPERATIONS 9,204 6,957 14,325 16,161 27,056
 
Other income (expense), net   14     (223 )   198     (209 )   455  
 
INCOME BEFORE INCOME TAXES 9,218 6,734 14,523 15,952 27,511
 
PROVISION (BENEFIT) FOR INCOME TAXES   628     391     (2,193 )   1,019     (1,568 )
 
NET INCOME $ 8,590   $ 6,343   $ 16,716   $ 14,933   $ 29,079  
 
EARNINGS PER SHARE:
Basic $ 0.29   $ 0.22   $ 0.55   $ 0.51   $ 0.96  
Diluted $ 0.29   $ 0.21   $ 0.54   $ 0.50   $ 0.93  
 
SHARES USED IN PER-SHARE CALCULATION:
Basic 29,368 29,309 30,310 29,339 30,275
Diluted 30,034 30,058 31,110 30,075 31,150
 
 
SUPPLEMENTAL INFORMATION:
 
Stock-based compensation expenses included in:
Cost of revenues $ 257 $ 249 $ 298 $ 506 $ 517
Research and development 1,306 1,391 1,339 2,697 2,551
Sales and marketing 878 1,012 864 1,890 1,799
General and administrative   1,309     1,739     1,674     3,048     3,223  
Total stock-based compensation expense $ 3,750   $ 4,391   $ 4,175   $ 8,141   $ 8,090  
 
Cost of revenues includes:
Amortization of write-up of acquired inventory $ -   $ 309   $ -   $ 309   $ -  
Amortization of acquisition-related intangible assets $ 961   $ 961   $ 645   $ 1,922   $ 1,290  
 
General & administrative expenses include:
Patent-litigation expenses $ 1,501   $ 1,457   $ 1,127   $ 2,958   $ 2,313  
 
 
REVENUE MIX BY END MARKET
Communications 21 % 21 % 15 % 21 % 17 %
Computer 7 % 8 % 12 % 7 % 11 %
Consumer 36 % 38 % 38 % 37 % 37 %
Industrial 36 % 33 % 35 % 35 % 35 %

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