Power Integrations Reports Fourth-Quarter and Full-Year

Power Integrations Reports Fourth-Quarter and Full-Year Financial Results

POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per-share amounts)


		Three Months Ended									Twelve Months Ended
		December 31, 2019			September 30, 2019			December 31, 2018			December 31, 2019			December 31, 2018
NET REVENUES		$	114,457		$	114,159		$	93,307		$	420,669		$	415,955

COST OF REVENUES			56,232			56,028			45,302			207,267			201,167

GROSS PROFIT			58,225			58,131			48,005			213,402			214,788

OPERATING EXPENSES:
Research and development			18,298			17,957			17,965			73,470			70,580
Sales and marketing			14,241			13,074			12,746			52,720			51,165
General and administrative			10,634			9,224			8,796			37,582			35,496
Amortization of acquisition-related intangible assets			378			378			455			1,577			1,899
Litigation settlement			(168,969	)		-			-			(168,969	)		-
	Total operating expenses		(125,418	)		40,633			39,962			(3,620	)		159,140

INCOME FROM OPERATIONS			183,643			17,498			8,043			217,022			55,648

OTHER INCOME			1,852			1,078			1,297			5,392			4,116

INCOME BEFORE INCOME TAXES			185,495			18,576			9,340			222,414			59,764

PROVISION (BENEFIT) FOR INCOME TAXES			27,204			1,477			(13,396	)		28,946			(10,220	)

NET INCOME		$	158,291		$	17,099		$	22,736		$	193,468		$	69,984

EARNINGS PER SHARE:
	Basic	$	5.38		$	0.58		$	0.78		$	6.61		$	2.38
	Diluted	$	5.28		$	0.57		$	0.77		$	6.49		$	2.32

SHARES USED IN PER-SHARE CALCULATION:
	Basic		29,427			29,385			29,164			29,267			29,456
	Diluted		30,005			29,866			29,651			29,816			30,147



SUPPLEMENTAL INFORMATION:		Three Months Ended									Twelve Months Ended
		December 31, 2019			September 30, 2019			December 31, 2018			December 31, 2019			December 31, 2018
Stock-based compensation expenses included in:
	Cost of revenues	$	413		$	280		$	313		$	1,237		$	1,097
	Research and development		2,754			1,893			1,944			8,423			7,688
	Sales and marketing		1,602			1,211			1,222			5,015			4,729
	General and administrative		3,569			1,722			1,963			8,672			8,066
	Total stock-based compensation expense	$	8,338		$	5,106		$	5,442		$	23,347		$	21,580

Cost of revenues includes:
	Amortization of acquisition-related intangible assets	$	955		$	940		$	813		$	3,483		$	3,253

General & administrative expenses include:
	Patent-litigation expenses	$	2,253		$	2,573		$	2,304		$	9,425		$	8,525


		Three Months Ended									Twelve Months Ended
REVENUE MIX BY END MARKET		December 31, 2019			September 30, 2019			December 31, 2018			December 31, 2019			December 31, 2018
	Communications		29	%		29	%		20	%		26	%		20	%
	Computer		6	%		5	%		6	%		5	%		5	%
	Consumer		35	%		32	%		34	%		35	%		38	%
	Industrial		30	%		34	%		40	%		34	%		37	%

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, 2019			September 30, 2019			December 31, 2018			December 31, 2019			December 31, 2018
RECONCILIATION OF GROSS PROFIT
GAAP gross profit			$	58,225		$	58,131		$	48,005		$	213,402		$	214,788
	GAAP gross margin			50.9	%		50.9	%		51.4	%		50.7	%		51.6	%

Stock-based compensation included in cost of revenues				413			280			313			1,237			1,097
Amortization of acquisition-related intangible assets				955			940			813			3,483			3,253

Non-GAAP gross profit			$	59,593		$	59,351		$	49,131		$	218,122		$	219,138
	Non-GAAP gross margin			52.1	%		52.0	%		52.7	%		51.9	%		52.7	%


			Three Months Ended									Twelve Months Ended
RECONCILIATION OF OPERATING EXPENSES			December 31, 2019			September 30, 2019			December 31, 2018			December 31, 2019			December 31, 2018
GAAP operating expenses			$	(125,418	)	$	40,633		$	39,962		$	(3,620	)	$	159,140

Less:	Stock-based compensation expense included in operating expenses
		Research and development		2,754			1,893			1,944			8,423			7,688
		Sales and marketing		1,602			1,211			1,222			5,015			4,729
		General and administrative		3,569			1,722			1,963			8,672			8,066
		Total		7,925			4,826			5,129			22,110			20,483

	Amortization of acquisition-related intangible assets			378			378			455			1,577			1,899

Non-GAAP operating expenses			$	(133,721	)	$	35,429		$	34,378		$	(27,307	)	$	136,758


			Three Months Ended									Twelve Months Ended
RECONCILIATION OF INCOME FROM OPERATIONS			December 31, 2019			September 30, 2019			December 31, 2018			December 31, 2019			December 31, 2018
GAAP income from operations			$	183,643		$	17,498		$	8,043		$	217,022		$	55,648
	GAAP operating margin			160.4	%		15.3	%		8.6	%		51.6	%		13.4	%

Add:	Total stock-based compensation			8,338			5,106			5,442			23,347			21,580
	Amortization of acquisition-related intangible assets			1,333			1,318			1,268			5,060			5,152

Non-GAAP income from operations			$	193,314		$	23,922		$	14,753		$	245,429		$	82,380
	Non-GAAP operating margin			168.9	%		21.0	%		15.8	%		58.3	%		19.8	%


			Three Months Ended									Twelve Months Ended
RECONCILIATION OF PROVISION (BENEFIT) FOR INCOME TAXES			December 31, 2019			September 30, 2019			December 31, 2018			December 31, 2019			December 31, 2018
GAAP provision (benefit) for income taxes			$	27,204		$	1,477		$	(13,396	)	$	28,946		$	(10,220	)
	GAAP effective tax rate			14.7	%		8.0	%		-143.4	%		13.0	%		-17.1	%

Impact of U.S. tax legislation				-			-			(9,687	)		-			(9,687	)
Tax effect of adjustments to GAAP results				(53	)		(266	)		(3,846	)		(1,955	)		(5,361	)

Non-GAAP provision for income taxes			$	27,257		$	1,743		$	137		$	30,901		$	4,828
	Non-GAAP effective tax rate			14.0	%		7.0	%		0.9	%		12.3	%		5.6	%


			Three Months Ended									Twelve Months Ended
RECONCILIATION OF NET INCOME PER SHARE (DILUTED)			December 31, 2019			September 30, 2019			December 31, 2018			December 31, 2019			December 31, 2018
GAAP net income			$	158,291		$	17,099		$	22,736		$	193,468		$	69,984

Adjustments to GAAP net income
	Stock-based compensation			8,338			5,106			5,442			23,347			21,580
	Amortization of acquisition-related intangible assets			1,333			1,318			1,268			5,060			5,152
	Impact of U.S. tax legislation			-			-			(9,687	)		-			(9,687	)
	Tax effect of items excluded from non-GAAP results			(53	)		(266	)		(3,846	)		(1,955	)		(5,361	)

Non-GAAP net income			$	167,909		$	23,257		$	15,913		$	219,920		$	81,668

Average shares outstanding for calculation
	of non-GAAP net income per share (diluted)			30,005			29,866			29,651			29,816			30,147

Non-GAAP net income per share (diluted)			$	5.60		$	0.78		$	0.54		$	7.38		$	2.71

GAAP net income per share			$	5.28		$	0.57		$	0.77		$	6.49		$	2.32



POWER INTEGRATIONS, INC.
CALCULATION OF EARNINGS PER SHARE BENEFIT OF SETTLEMENT
(in thousands, except per-share amounts)

			Three Months Ended									Twelve Months Ended
			December 31, 2019			September 30, 2019			December 31, 2018			December 31, 2019			December 31, 2018
Gain from litigation settlement			$	168,969		$	-		$	-		$	168,969		$	-
Tax expense attributed to settlement				25,543			-			-			25,543			-
Litigation settlement net of tax			$	143,426		$	-		$	-		$	143,426		$	-

Earnings per share benefit of settlement (GAAP and non-GAAP)			$	4.78		$	-		$	-		$	4.81		$	-

Diluted average shares outstanding				30,005			29,866			29,651			29,816			30,147

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


		December 31, 2019			September 30, 2019			December 31, 2018
ASSETS
	CURRENT ASSETS:
	Cash and cash equivalents	$	178,690		$	80,162		$	134,137
	Short-term marketable securities		232,398			164,649			94,451
	Accounts receivable, net		24,274			25,819			11,072
	Inventories		90,380			88,710			80,857
	Prepaid expenses and other current assets		15,597			15,316			11,915
	Total current assets		541,339			374,656			332,432

	PROPERTY AND EQUIPMENT, net		116,619			114,930			114,117
	INTANGIBLE ASSETS, net		16,865			18,238			21,152
	GOODWILL		91,849			91,849			91,849
	DEFERRED TAX ASSETS		2,836			5,564			6,906
	OTHER ASSETS		34,388			31,173			22,241
	Total assets	$	803,896		$	636,410		$	588,697

LIABILITIES AND STOCKHOLDERS’ EQUITY
	CURRENT LIABILITIES:
	Accounts payable	$	27,433		$	30,542		$	31,552
	Accrued payroll and related expenses		13,408			10,796			12,131
	Taxes payable		584			597			933
	Other accrued liabilities		9,051			7,717			3,750
	Total current liabilities		50,476			49,652			48,366

	LONG-TERM LIABILITIES:
	Income taxes payable		14,617			9,309			8,652
	Deferred tax liabilities		164			152			216
	Other liabilities		14,093			11,969			4,391
	Total liabilities		79,350			71,082			61,625

STOCKHOLDERS' EQUITY:
	Common stock		28			28			28
	Additional paid-in capital		152,117			143,554			126,164
	Accumulated other comprehensive loss		(3,130	)		(1,084	)		(1,689	)
	Retained earnings		575,531			422,830			402,569
	Total stockholders' equity		724,546			565,328			527,072
	Total liabilities and stockholders' equity	$	803,896		$	636,410		$	588,697

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

		Three Months Ended									Twelve Months Ended
		December 31, 2019			September 30, 2019			December 31, 2018			December 31, 2019			December 31, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income	$	158,291		$	17,099		$	22,736		$	193,468		$	69,984
	Adjustments to reconcile net income to cash provided by operating activities
	Depreciation		4,928			4,831			4,549			19,190			18,918
	Amortization of intangible assets		1,373			1,357			1,300			5,213			5,267
	Loss on disposal of property and equipment		35			62			98			249			553
	Stock-based compensation expense		8,338			5,106			5,442			23,347			21,580
	Amortization of premium (accretion of discount) on marketable securities		104			(66	)		(115	)		(192	)		227
	Deferred income taxes		2,741			(381	)		(3,070	)		4,019			(4,465	)
	Increase (decrease) in accounts receivable allowances		-			-			(198	)		57			(28	)
	Change in operating assets and liabilities:
	Accounts receivable		1,545			(351	)		2,868			(13,259	)		5,754
	Inventories		(1,670	)		487			(6,656	)		(9,523	)		(23,770	)
	Prepaid expenses and other assets		902			580			1,226			(2,132	)		(1,495	)
	Accounts payable		(3,920	)		(6,789	)		(1,311	)		(6,556	)		1,336
	Taxes payable and other accrued liabilities		9,492			(91	)		(8,540	)		10,618			(9,897	)
	Net cash provided by operating activities		182,159			21,844			18,329			224,499			83,964

CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchases of property and equipment		(9,789	)		(5,977	)		(5,557	)		(24,114	)		(24,677	)
	Acquisition of technology licenses		(675	)		(100	)		-			(1,026	)		(900	)
	Purchases of marketable securities		(71,952	)		(80,864	)		(4,612	)		(207,240	)		(62,833	)
	Proceeds from sales and maturities of marketable securities		4,150			46,762			10,050			70,334			157,551
	Net cash provided by (used in) investing activities		(78,266	)		(40,179	)		(119	)		(162,046	)		69,141

CASH FLOWS FROM FINANCING ACTIVITIES:
	Net proceeds from issuance of common stock		225			4,005			803			9,908			9,353
	Repurchase of common stock		-			-			(28,776	)		(7,302	)		(103,153	)
	Payments of dividends to stockholders		(5,590	)		(4,999	)		(4,651	)		(20,506	)		(18,823	)
	Proceeds from draw on line of credit		-			-			-			-			8,000
	Payments on line of credit		-			-			-			-			(8,000	)
	Net cash used in financing activities		(5,365	)		(994	)		(32,624	)		(17,900	)		(112,623	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			98,528			(19,329	)		(14,414	)		44,553			40,482

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			80,162			99,491			148,551			134,137			93,655

CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	178,690		$	80,162		$	134,137		$	178,690		$	134,137

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