UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended June 30, 2003. |
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from to |
Commission File Number 0-23441
POWER INTEGRATIONS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 94-3065014 | |
| (State or other jurisdiction of Incorporation or organization) |
(I.R.S. Employer Identification No.) |
5245 Hellyer Avenue, San Jose, California 95138
(Address of principal executive offices) (Zip code)
(408) 414-9200
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x No ¨
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class |
Outstanding at July 31, 2003 | |
| Common Stock, $.001 par value |
29,587,246 shares |
POWER INTEGRATIONS, INC.
TABLE OF CONTENTS
| Page | ||||
| PART I. |
FINANCIAL INFORMATION | |||
| Item 1. |
Financial Statements (unaudited) | |||
| Condensed Consolidated Balance Sheets as of June 30, 2003 and December 31, 2002 | 3 | |||
| Condensed Consolidated Statements of Income for the three and six months ended June 30, 2003 and 2002 | 4 | |||
| Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2003 and 2002 | 5 | |||
| Notes To Condensed Consolidated Financial Statements | 6 | |||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 12 | ||
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risks | 23 | ||
| Item 4. |
Controls and Procedures | 23 | ||
| PART II. |
OTHER INFORMATION | |||
| Item 1. |
Legal Proceedings | 24 | ||
| Item 2. |
Changes in Securities and Use of Proceeds | 24 | ||
| Item 3. |
Defaults upon Senior Securities | 24 | ||
| Item 4. |
Submission of Matters to Vote of Security Holders | 24 | ||
| Item 5. |
Other Information | 24 | ||
| Item 6. |
Exhibits and Reports on Form 8-K | 25 | ||
| 26 | ||||
TOPSwitch, TinySwitch, LinkSwitch, DPA-Switch, EcoSmart and P I Expert are trademarks of Power Integrations, Inc.
2
PART I. FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS |
POWER INTEGRATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(In thousands)
| June 30, 2003 |
December 31, 2002 |
|||||||
| ASSETS |
||||||||
| CURRENT ASSETS: |
||||||||
| Cash and cash equivalents |
$ | 95,979 | $ | 77,524 | ||||
| Short-term investments |
20,902 | 31,876 | ||||||
| Accounts receivable |
11,126 | 8,522 | ||||||
| Inventories |
19,984 | 15,028 | ||||||
| Deferred tax assets |
6,064 | 6,064 | ||||||
| Prepaid expenses and other current assets |
1,871 | 1,672 | ||||||
| Total current assets |
155,926 | 140,686 | ||||||
| PROPERTY AND EQUIPMENT, net |
22,698 | 21,008 | ||||||
| $ | 178,624 | $ | 161,694 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| CURRENT LIABILITIES: |
||||||||
| Current portion of capitalized lease obligations |
$ | 154 | $ | 233 | ||||
| Accounts payable |
5,849 | 7,727 | ||||||
| Accrued payroll and related expenses |
3,833 | 4,389 | ||||||
| Taxes payable |
4,267 | 4,412 | ||||||
| Other accrued liabilities |
1,156 | 816 | ||||||
| Deferred income on sales to distributors |
3,238 | 2,718 | ||||||
| Total current liabilities |
18,497 | 20,295 | ||||||
| LONG TERM LIABILITIES: |
||||||||
| Capitalized lease obligations, net of current portion |
— | 41 | ||||||
| Deferred rent |
759 | 725 | ||||||
| Total long term liabilities |
759 | 766 | ||||||
| STOCKHOLDERS’ EQUITY: |
||||||||
| Common stock |
29 | 28 | ||||||
| Additional paid-in capital |
100,144 | 89,473 | ||||||
| Cumulative translation adjustment |
(117 | ) | (117 | ) | ||||
| Retained earnings |
59,312 | 51,249 | ||||||
| Total stockholders’ equity |
159,368 | 140,633 | ||||||
| $ | 178,624 | $ | 161,694 | |||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
POWER INTEGRATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(In thousands, except per share amounts)
| Three Months Ended June 30, |
Six Months Ended June 30, | |||||||||||
| 2003 |
2002 |
2003 |
2002 | |||||||||
| NET REVENUES: |
||||||||||||
| Product sales |
$ | 29,377 | $ | 26,861 | $ | 58,106 | $ | 50,251 | ||||
| License fees and royalties |
423 | 287 | 784 | 567 | ||||||||
| Total net revenues |
29,800 | 27,148 | 58,890 | 50,818 | ||||||||
| COST OF REVENUES |
14,670 | 15,758 | 28,686 | 29,126 | ||||||||
| GROSS PROFIT |
15,130 | 11,390 | 30,204 | 21,692 | ||||||||
| OPERATING EXPENSES: |
||||||||||||
| Research and development |
4,181 | 3,648 | 8,265 | 7,255 | ||||||||
| Sales and marketing |
3,919 | 3,645 | 7,965 | 7,047 | ||||||||
| General and administrative |
1,804 | 1,548 | 3,431 | 2,981 | ||||||||
| Total operating expenses |
9,904 | 8,841 | 19,661 | 17,283 | ||||||||
| INCOME FROM OPERATIONS |
5,226 | 2,549 | 10,543 | 4,409 | ||||||||
| OTHER INCOME, net |
387 | 493 | 656 | 898 | ||||||||
| INCOME BEFORE PROVISION FOR INCOME TAXES |
5,613 | 3,042 | 11,199 | 5,307 | ||||||||
| PROVISION FOR INCOME TAXES |
1,460 | 913 | 3,136 | 1,592 | ||||||||
| NET INCOME |
$ | 4,153 | $ | 2,129 | $ | 8,063 | $ | 3,715 | ||||
| EARNINGS PER SHARE: |
||||||||||||
| Basic |
$ | 0.14 | $ | 0.08 | $ | 0.28 | $ | 0.13 | ||||
| Diluted |
$ | 0.13 | $ | 0.07 | $ | 0.26 | $ | 0.12 | ||||
| SHARES USED IN PER SHARE CALCULATION: |
||||||||||||
| Basic |
29,173 | 28,317 | 28,999 | 28,222 | ||||||||
| Diluted |
31,126 | 29,873 | 30,793 | 29,619 | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
POWER INTEGRATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(In thousands)
| Six Months Ended June 30, |
||||||||
| 2003 |
2002 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net income |
$ | 8,063 | $ | 3,715 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
3,414 | 3,344 | ||||||
| Deferred rent |
34 | 154 | ||||||
| Provision for accounts receivable and other allowances |
350 | 141 | ||||||
| Tax benefit associated with employee stock plans and stock compensation to non-employees |
2,678 | 1,377 | ||||||
| Change in operating assets and liabilities: |
||||||||
| Accounts receivable |
(2,954 | ) | (3,327 | ) | ||||
| Inventories |
(4,956 | ) | 9,621 | |||||
| Prepaid expenses and other current assets |
(199 | ) | 299 | |||||
| Accounts payable |
(1,878 | ) | (365 | ) | ||||
| Taxes payable and accrued liabilities |
(361 | ) | 1,927 | |||||
| Deferred income on sales to distributors |
520 | 414 | ||||||
| Net cash provided by operating activities |
4,711 | 17,300 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Purchases of property and equipment |
(5,104 | ) | (815 | ) | ||||
| Purchases of short-term investments |
(6,210 | ) | (25,575 | ) | ||||
| Proceeds from maturities of short-term investments |
17,184 | 4,659 | ||||||
| Net cash provided by (used in) investing activities |
5,870 | (21,731 | ) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Net proceeds from issuance of common stock |
7,994 | 3,312 | ||||||
| Proceeds from stockholder note repayment |
— | 38 | ||||||
| Principal payments under capitalized lease obligations |
(120 | ) | (322 | ) | ||||
| Net cash provided by financing activities |
7,874 | 3,028 | ||||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS |
18,455 | (1,403 | ) | |||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
77,524 | 62,141 | ||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD |
$ | 95,979 | $ | 60,738 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
||||||||
| Cash paid for interest |
$ | 5 | $ | 16 | ||||