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EXCEL - IDEA: XBRL DOCUMENT - MONOLITHIC POWER SYSTEMS INC | Financial_Report.xls |
EX-31 - EXHIBIT 31.2 - MONOLITHIC POWER SYSTEMS INC | ex31-2.htm |
EX-31 - EXHIBIT 31.1 - MONOLITHIC POWER SYSTEMS INC | ex31-1.htm |
EX-32 - EXHIBIT 32.1 - MONOLITHIC POWER SYSTEMS INC | ex32-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2014
OR
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number: 000-51026
Monolithic Power Systems, Inc.
(Exact name of registrant as specified in its charter)
Delaware |
77-0466789 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
79 Great Oaks Boulevard, San Jose, CA 95119
(Address of principal executive offices)(Zip code)
(408) 826-0600
(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 Exchange 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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ |
Accelerated filer ☒ |
Non-accelerated filer ☐ |
Smaller reporting company ☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
There were 38,745,011 shares of the registrant’s common stock issued and outstanding as of October 24, 2014.
MONOLITHIC POWER SYSTEMS, INC.
TABLE OF CONTENTS |
PAGE | |
PART I. FINANCIAL INFORMATION |
3 | |
ITEM 1. |
FINANCIAL STATEMENTS (Unaudited) |
3 |
|
CONDENSED CONSOLIDATED BALANCE SHEETS |
3 |
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
4 |
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
5 |
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
6 |
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
7 |
ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
21 |
ITEM 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
28 |
ITEM 4. |
CONTROLS AND PROCEDURES |
28 |
PART II. OTHER INFORMATION |
29 | |
ITEM 1. |
LEGAL PROCEEDINGS |
29 |
ITEM 1A. |
RISK FACTORS |
29 |
ITEM 2. |
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
44 |
ITEM 6. |
EXHIBITS |
45 |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MONOLITHIC POWER SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
(Unaudited)
September 30, |
December 31, |
|||||||
2014 |
2013 |
|||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 101,812 | $ | 101,213 | ||||
Short-term investments |
126,849 | 125,126 | ||||||
Accounts receivable, net |
24,274 | 23,730 | ||||||
Inventories |
41,587 | 39,737 | ||||||
Prepaid expenses and other current assets |
2,788 | 2,280 | ||||||
Total current assets |
297,310 | 292,086 | ||||||
Property and equipment, net |
63,428 | 64,837 | ||||||
Long-term investments |
9,795 | 9,860 | ||||||
Goodwill |
6,571 | - | ||||||
Acquisition-related intangible assets, net |
7,178 | - | ||||||
Deferred income tax assets, net |
477 | 481 | ||||||
Other long-term assets |
7,940 | 1,644 | ||||||
Total assets |
$ | 392,699 | $ | 368,908 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 14,793 | $ | 10,694 | ||||
Accrued compensation and related benefits |
6,607 | 10,419 | ||||||
Accrued liabilities |
15,528 | 17,376 | ||||||
Total current liabilities |
36,928 | 38,489 | ||||||
Income tax liabilities |
4,746 | 5,542 | ||||||
Other long-term liabilities |
9,364 | 1,478 | ||||||
Total liabilities |
51,038 | 45,509 | ||||||
Commitments and contingencies (Notes 8 and 12) |
||||||||
Stockholders' equity: |
||||||||
Common stock, $0.001 par value; shares authorized: 150,000; shares issued and outstanding: 38,804 and 38,291 as of September 30, 2014 and December 31, 2013, respectively |
238,602 | 234,201 | ||||||
Retained earnings |
97,398 | 82,938 | ||||||
Accumulated other comprehensive income |
5,661 | 6,260 | ||||||
Total stockholders’ equity |
341,661 | 323,399 | ||||||
Total liabilities and stockholders’ equity |
$ | 392,699 | $ | 368,908 |
See accompanying notes to unaudited condensed consolidated financial statements.
MONOLITHIC POWER SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2014 |
2013 |
2014 |
2013 |
|||||||||||||
Revenue |
$ | 78,335 | $ | 65,347 | $ | 206,832 | $ | 174,531 | ||||||||
Cost of revenue |
35,872 | 30,053 | 95,173 | 80,924 | ||||||||||||
Gross profit |
42,463 | 35,294 | 111,659 | 93,607 | ||||||||||||
Operating expenses: |
||||||||||||||||
Research and development |
14,679 | 12,643 | 43,649 | 37,246 | ||||||||||||
Selling, general and administrative |
17,006 | 13,891 | 49,968 | 40,941 | ||||||||||||
Litigation expense (benefit), net |
332 | 104 | (8,093 | ) | (455 | ) | ||||||||||
Total operating expenses |
32,017 | 26,638 | 85,524 | 77,732 | ||||||||||||
Income from operations |
10,446 | 8,656 | 26,135 | 15,875 | ||||||||||||
Interest and other income (expense), net |
202 | (59 | ) | 686 | 149 | |||||||||||
Income before income taxes |
10,648 | 8,597 | 26,821 | 16,024 | ||||||||||||
Income tax provision (benefit) |
(573 | ) | 1,187 | 186 | 625 | |||||||||||
Net income |
$ | 11,221 | $ | 7,410 | $ | 26,635 | $ | 15,399 | ||||||||
Net income per share: |
||||||||||||||||
Basic |
$ | 0.29 | $ | 0.20 | $ | 0.69 | $ | 0.42 | ||||||||
Diluted |
$ | 0.28 | $ | 0.19 | $ | 0.67 | $ | 0.40 | ||||||||
Weighted-average shares outstanding: |
||||||||||||||||
Basic |
38,785 | 37,910 | 38,646 | 37,079 | ||||||||||||
Diluted |
39,727 | 39,009 | 39,618 | 38,419 | ||||||||||||
Cash dividends declared per common share |
$ | 0.15 | $ | - | $ | 0.30 | $ | - |
See accompanying notes to unaudited condensed consolidated financial statements.
MONOLITHIC POWER SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(Unaudited)
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2014 |
2013 |
2014 |
2013 |
|||||||||||||
Net income |
$ | 11,221 | $ | 7,410 | $ | 26,635 | $ | 15,399 | ||||||||
Other comprehensive income (loss), net of tax: |
||||||||||||||||
Change in unrealized gains (losses) on auction-rate securities, net of $0 tax for the three and nine months ended September 30, 2014 and 2013 |
(53 | ) | 149 | (65 | ) | 117 | ||||||||||
Change in unrealized gains (losses) on other available-for-sale securities, net of $0 tax for the three and nine months ended September 30, 2014 and 2013 |
(28 | ) | 34 | (16 | ) | 12 | ||||||||||
Foreign currency translation adjustments |
(98 | ) | 431 | (518 | ) | 1,595 | ||||||||||
Total other comprehensive income (loss), net of tax |
(179 | ) | 614 | (599 | ) | 1,724 | ||||||||||
Comprehensive income |
$ | 11,042 | $ | 8,024 | $ | 26,036 | $ | 17,123 |
See accompanying notes to unaudited condensed consolidated financial statements.
MONOLITHIC POWER SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Nine Months Ended September 30, |
||||||||
2014 |
2013 |
|||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 26,635 | $ | 15,399 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
9,688 | 8,960 | ||||||
Amortization and realized gain/loss on investments |
197 | 320 | ||||||
Stock-based compensation |
24,872 | 15,081 | ||||||
Changes in operating assets and liabilities, net of effects of an acquisition: |
||||||||
Accounts receivable |
(516 | ) | (2,573 | ) | ||||
Inventories |
(1,800 | ) | (10,851 | ) | ||||
Prepaid expenses and other assets |
(1,868 | ) | 463 | |||||
Accounts payable |
3,864 | 1,164 | ||||||
Accrued liabilities |
(2,885 | ) | 3,492 | |||||
Accrued income taxes payable and noncurrent tax liabilities |
(801 | ) | (215 | ) | ||||
Accrued compensation and related benefits |
(3,789 | ) | (1,002 | ) | ||||
Net cash provided by operating activities |
53,597 | 30,238 | ||||||
Cash flows from investing activities: |
||||||||
Property and equipment purchases |
(7,730 | ) | (15,424 | ) | ||||
Purchases of short-term investments |
(100,706 | ) | (62,374 | ) | ||||
Proceeds from sale of short-term investments |
98,752 | 55,700 | ||||||
Proceeds from sale of long-term investments |
- | 25 | ||||||
Investments related to deferred compensation plan |
(4,860 | ) | (309 | ) | ||||
Cash paid for an acquisition, net of cash acquired |
(11,590 | ) | - | |||||
Net cash used in investing activities |
(26,134 | ) | (22,382 | ) | ||||
Cash flows from financing activities: |
||||||||
Property and equipment purchased on extended payment terms |
(250 | ) | - | |||||
Proceeds from issuance of common shares |
10,403 | 32,654 | ||||||
Proceeds from employee stock purchase plan |
2,078 | 2,145 | ||||||
Repurchases of common shares |
(32,976 | ) | (7,973 | ) | ||||
Dividends and dividend equivalents paid |
(5,817 | ) | - | |||||
Net cash provided by (used in) financing activities |
(26,562 | ) | 26,826 | |||||
Effect of change in exchange rates |
(302 | ) | 660 | |||||
Net increase in cash and cash equivalents |
599 | 35,342 | ||||||
Cash and cash equivalents, beginning of period |
101,213 | 75,104 | ||||||
Cash and cash equivalents, end of period |
$ | 101,812 | $ | 110,446 | ||||
Supplemental disclosures for cash flow information: |
||||||||
Cash paid for taxes |
$ | 981 | $ | 847 | ||||
Supplemental disclosures of non-cash investing and financing activities: |
||||||||
Liability accrued for property and equipment purchases |
783 | 2,081 | ||||||
Liability accrued for dividends and dividend equivalents |
6,359 | - | ||||||
Fair value of contingent consideration related to an acquisition |
2,507 | - |
See accompanying notes to unaudited condensed consolidated financial statements.
MONOLITHIC POWER SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been prepared by Monolithic Power Systems, Inc. (the “Company” or “MPS”) in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted in accordance with these rules and regulations. The information in this report should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on March 10, 2014.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company’s financial position, results of operations and cash flows for the interim periods presented. The financial statements contained in this Form 10-Q are not necessarily indicative of the results that may be expected for the year ending December 31, 2014 or for any other future period.
Summary of Significant Accounting Policies
Other than the adoption of the following new significant accounting policies, there have been no changes to the Company’s significant accounting policies during the three and nine months ended September 30, 2014 as compared to those described in the Company’s audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2013.
Goodwill and Acquisition-Related Intangible Assets – Goodwill represents the excess of the fair value of purchase consideration over the fair value of net tangible and identified intangible assets as of the date of acquisition. In-process research and development (“IPR&D”) assets represent the fair value of incomplete R&D projects that had not reached technological feasibility as of the date of acquisition. The IPR&D assets are initially capitalized at fair value as intangible assets with indefinite lives. When the IPR&D projects are completed, they are reclassified as amortizable intangible assets and are amortized over their estimated useful lives. Alternatively, if the IPR&D projects are abandoned, they are impaired and expensed to research and development. Acquisition-related intangible assets with finite lives consist of know-how and developed technologies. These assets are amortized on a straight-line basis over estimated useful lives ranging from three to five years and the amortization expense is recorded in cost of revenue in the Condensed Consolidated Statements of Operations.
Recent Accounting Pronouncements
In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The standard gives guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists, with the purpose of reducing diversity in practice. This new standard requires the netting of unrecognized tax benefits against a deferred tax asset for a loss or other carryforward that would apply in settlement of the uncertain tax positions. The Company adopted this standard in the first quarter of 2014 prospectively and the adoption did not have an impact on its consolidated financial position, results of operations or cash flows.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The standard’s core principle is that an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Under the new standard, entities will apply the following five-step model when evaluating revenue contracts with customers:
|
● |
Identify the contract with a customer |
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● |
Identify the performance obligations in the contract |
|
● |
Determine the transaction price |
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● |
Allocate the transaction price to the performance obligations in the contract |
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● |
Recognize revenue when the entity satisfies a performance obligation |
The new standard is effective for annual and interim reporting periods beginning after December 15, 2016. Entities have the option of using either a full retrospective or a modified retrospective application in the adoption of this standard. The Company will adopt the standard in the first quarter of 2017 and is evaluating the transition method and the impact of the adoption on its consolidated financial position, results of operations and cash flows.
2. STOCK-BASED COMPENSATION
Stock Plans
As of September 30, 2014, approximately 4.4 million shares were available for future issuance under the 2004 Equity Incentive Plan (the “2004 Plan”). The 2004 Plan will expire on November 12, 2014. Once the 2004 Plan expires, the Company will no longer be able to grant equity awards under the 2004 Plan, and any shares otherwise remaining available for future grants under the 2004 Plan will no longer be available for issuance.
The Company’s Board of Directors adopted the 2014 Equity Incentive Plan (the “2014 Plan”) in April 2013, and the Company’s stockholders approved it in June 2013. In October 2014, the Board of Directors approved certain amendments to the 2014 Plan. The 2014 Plan will become effective on November 13, 2014, the day after the 2004 Plan expires. The 2014 Plan provides for the issuance of up to 5,500,000 shares and will expire on November 13, 2024.
Stock-Based Compensation Expense
The Company recognized stock-based compensation expenses as follows (in thousands):
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2014 |
2013 |
2014 |
2013 |
|||||||||||||
Cost of revenue |
$ | 246 | $ | 163 | $ | 669 | $ | 465 | ||||||||
Research and development |
2,388 | 1,491 | 6,638 | 4,557 | ||||||||||||
Selling, general and administrative |
6,225 | 3,577 | 17,565 | 10,059 | ||||||||||||
Tax benefit |
- | (80 | ) | - | (175 | ) | ||||||||||
Total stock-based compensation expense |
$ | 8,859 | $ | 5,151 | $ | 24,872 | $ | 14,906 |
Restricted Stock
The Company’s restricted stock units (“RSUs”) include time-based RSUs, performance-based RSUs (“PSUs”) and market-based RSUs (“MSUs”). A summary of the RSUs is presented in the table below:
Time-Based RSUs |
Weighted- Average Grant Date Fair Value Per Share |
PSUs |
Weighted- Average Grant Date Fair Value Per Share |
MSUs |
Weighted- Average Grant Date Fair Value Per Share |
Total |
Weighted- Average Grant Date Fair Value Per Share |
|||||||||||||||||||||||||||
Outstanding at January 1, 2014 |
754,306 | $ | 19.41 |