Non-GAAP earnings increased 31 percent year-over-year to $0.47 per diluted share; GAAP earnings were $0.37 per diluted share

Cash flow from operations was $21.6 million; cash and investments increased $23.9 million during the quarter to $119.0 million

SAN JOSE, Calif.--(BUSINESS WIRE)--May 2, 2013--Power Integrations (Nasdaq: POWI) today announced financial results for the quarter ended March 31, 2013. Net revenues for the quarter were $77.0 million, down three percent from the prior quarter and up seven percent from the first quarter of 2012. GAAP net income for the quarter was $10.9 million or $0.37 per diluted share, compared with $0.33 per diluted share in the prior quarter and $0.25 per diluted share in the first quarter of 2012. GAAP gross margin for the first quarter was 51.7 percent; operating margin was 11.8 percent.

In addition to its GAAP results, the company provided non-GAAP financial measures that exclude stock-based compensation expenses, certain acquisition-related expenses, charges related to SemiSouth Laboratories, non-cash interest income, and the tax effects of these items. Non-GAAP net income for the quarter was $14.0 million or $0.47 per diluted share, compared with $0.47 per diluted share in the prior quarter and $0.36 per diluted share in the first quarter of 2012. Non-GAAP gross margin for the first quarter was 52.9 percent; non-GAAP operating margin was 18.8 percent.

Commented Balu Balakrishnan, president and CEO of Power Integrations: “First-quarter revenues were within our projected range, albeit toward the lower end due in large part to a decline of nearly 20 percent in revenues from the computer market. Nevertheless, recent trends indicate that the broader demand environment is improving. Revenues from industrial and consumer applications, which account for nearly 70 percent of our sales, both increased sequentially in the first quarter. Book-to-bill was well above 1.0 for the quarter as total bookings increased more than 10 percent sequentially. While economic conditions remain uncertain, we believe these factors point toward sequential growth in the second quarter, and we expect our revenues for Q2 to be between $79 million and $85 million.”

Power Integrations management will hold a conference call today at 2:00 p.m. Pacific time. Members of the investment community can join the call by dialing 1-877-317-6789 from within the United States or 1-412-317-6789 from outside the U.S. The call will be available via a live and archived webcast on the investor section of the company's website, http://investors.powerint.com.

Power Integrations, Inc., is a Silicon Valley-based supplier of high-performance electronic components used in high-voltage power-conversion systems. The company’s integrated circuits and diodes enable compact, energy-efficient AC-DC power supplies for a vast range of electronic products including mobile devices, TVs, PCs, appliances, smart utility meters and LED lights. CONCEPT IGBT drivers enhance the efficiency, reliability and cost of high-power applications such as industrial motor drives, solar and wind energy systems, electric vehicles and high-voltage DC transmission. Since its introduction in 1998, Power Integrations’ EcoSmart^® 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 Index^SM. 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.

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, acquisition-related expenses, amortization of acquisition-related intangible assets and the fair-value write-up of acquired inventory, charges associated with SemiSouth, non-cash interest income, and the tax effects of the above items. 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.

The statements in this press release under the caption “Financial Outlook” and in Mr. Balakrishnan’s quote relating to the company’s projected second-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 changes. 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; 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; and the challenges inherent in integrating and forecasting the performance of acquired businesses. 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 Annual Report on Form 10-K, filed with the Securities and Exchange Commission (SEC) on February 22, 2013. 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 OPERATIONS
(in thousands, except per-share amounts)


	Three Months Ended
	March 31, 2013			December 31, 2012			March 31, 2012
NET REVENUES	$	77,040		$	79,170		$	71,773

COST OF REVENUES		37,176			39,767			37,181

GROSS PROFIT		39,864			39,403			34,592

OPERATING EXPENSES:
Research and development		12,272			11,575			10,640
Sales and marketing		9,659			9,232			8,111
General and administrative		7,734			8,109			6,603
Amortization of acquisition-related intangible assets		1,122			1,122			28
Gain related to SemiSouth		-			(100	)		-
Acquisition expenses		-			-			489
Total operating expenses		30,787			29,938			25,871

INCOME (LOSS) FROM OPERATIONS		9,077			9,465			8,721

Gain related to SemiSouth		-			192			-
Non-cash interest income		-			-			157
Other income (expense), net		217			(36	)		458

INCOME BEFORE PROVISION (BENEFIT) FOR INCOME TAXES		9,294			9,621			9,336

PROVISION (BENEFIT) FOR INCOME TAXES		(1,609	)		(96	)		1,875

NET INCOME	$	10,903		$	9,717		$	7,461

EARNINGS PER SHARE:
Basic	$	0.38		$	0.34		$	0.26
Diluted	$	0.37		$	0.33		$	0.25

SHARES USED IN PER-SHARE CALCULATION:
Basic		28,754			28,785			28,227
Diluted		29,783			29,436			29,435


SUPPLEMENTAL INFORMATION:

Stock-based compensation expenses included in:
Cost of revenues	$	264		$	286			245
Research and development		1,106			1,349			1,120
Sales and marketing		829			884			747
General and administrative		1,437			1,185			919
Total stock-based compensation expense	$	3,636		$	3,704		$	3,031

Cost of revenues includes:
Amortization of write-up of acquired inventory	$	-		$	1,459		$	80
Amortization of acquisition-related intangible assets	$	645		$	645		$	85

Operating expenses include:
Patent-litigation expenses	$	1,399		$	2,099		$	1,296


REVENUE MIX BY END MARKET
Communications		22	%		24	%		27	%
Computer		10	%		12	%		12	%
Consumer		36	%		33	%		40	%
Industrial		32	%		31	%		21	%

POWER INTEGRATIONS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP RESULTS
(in thousands, except per-share amounts)

	Three Months Ended
	March 31, 2013			December 31, 2012			March 31, 2012
RECONCILIATION OF GROSS PROFIT
GAAP gross profit	$	39,864		$	39,403		$	34,592
GAAP gross profit margin		51.7	%		49.8	%		48.2	%

Stock-based compensation included in cost of revenues		264			286			245
Amortization of write-up of acquired inventory		-			1,459			80
Amortization of acquisition-related intangible assets		645			645			85

Non-GAAP gross profit	$	40,773		$	41,793		$	35,002
Non-GAAP gross profit margin		52.9	%		52.8	%		48.8	%


RECONCILIATION OF OPERATING EXPENSES
GAAP operating expenses	$	30,787		$	29,938		$	25,871

Less: Stock-based compensation expense included in operating expenses
Research and development		1,106			1,349			1,120
Sales and marketing		829			884			747
General and administrative		1,437			1,185			919
Total		3,372			3,418			2,786

Acquisition expenses		-			-			489

Amortization of acquisition-related intangible assets		1,122			1,122			28

Gain related to SemiSouth		-			(100	)		-

Non-GAAP operating expenses	$	26,293		$	25,498		$	22,568


RECONCILIATION OF INCOME FROM OPERATIONS
GAAP income from operations	$	9,077		$	9,465		$	8,721
GAAP operating margin		11.8	%		12.0	%		12.2	%

Add: Total stock-based compensation		3,636			3,704			3,031
Amortization of write-up of acquired inventory		-			1,459			80
Amortization of acquisition-related intangible assets		1,767			1,767			113
Acquisition expenses		-			-			489
Gain related to SemiSouth		-			(100	)		-

Non-GAAP income from operations	$	14,480		$	16,295		$	12,434
Non-GAAP operating margin		18.8	%		20.6	%		17.3	%


RECONCILIATION OF PROVISION FOR INCOME TAXES
GAAP provision (benefit) for income taxes	$	(1,609	)	$	(96	)	$	1,875
GAAP effective tax rate		-17.3	%		-1.0	%		20.1	%

Tax effect of adjustments to GAAP results		(2,295	)		(2,634	)		(304	)

Non-GAAP provision for income taxes	$	686		$	2,538		$	2,179
Non-GAAP effective tax rate		4.7	%		15.6	%		16.9	%


RECONCILIATION OF NET INCOME PER SHARE (DILUTED)
GAAP net income	$	10,903		$	9,717		$	7,461

Adjustments to GAAP net income
Stock-based compensation		3,636			3,704			3,031
Amortization of write-up of acquired inventory		-			1,459			80
Amortization of acquisition-related intangible assets		1,767			1,767			113
Acquisition expenses		-			-			489
Non-cash interest income		-			-			(157	)
Gain related to SemiSouth		-			(292	)		-
Tax effect of items excluded from non-GAAP results		(2,295	)		(2,634	)		(304	)

Non-GAAP net income	$	14,011		$	13,721		$	10,713

Average shares outstanding for calculation of non-GAAP income per share (diluted)		29,783			29,436			29,435

Non-GAAP net income per share (diluted)	$	0.47		$	0.47		$	0.36

GAAP income per share	$	0.37		$	0.33		$	0.25

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


	March 31, 2013			December 31, 2012
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	69,489		$	63,394
Short-term marketable securities		49,530			31,766
Accounts receivable		14,739			7,326
Inventories		43,708			44,625
Deferred tax assets		349			352
Prepaid expenses and other current assets		13,296			17,401
Total current assets		191,111			164,864

PROPERTY AND EQUIPMENT, net		89,872			89,724
INTANGIBLE ASSETS, net		45,896			47,738
GOODWILL		80,599			80,599
DEFERRED TAX ASSETS		14,034			11,532
OTHER ASSETS		5,137			4,673
Total assets	$	426,649		$	399,130

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	19,743		$	16,452
Accrued payroll and related expenses		6,713			6,720
Taxes payable		1,444			1,213
Deferred taxes		687			1,193
Deferred income on sales to distributors		14,487			11,550
Other accrued liabilities		4,022			3,439
Total current liabilities		47,096			40,567

LONG-TERM LIABILITIES
Income taxes payable		8,484			7,937
Deferred taxes		7,948			8,179
Pension liability		1,353			1,398

Total liabilities		64,881			58,081

STOCKHOLDERS' EQUITY:
Common stock		29			28
Additional paid-in capital		187,984			175,668
Accumulated other comprehensive income (loss)		(484	)		(293	)
Retained earnings		174,239			165,646
Total stockholders' equity		361,768			341,049
Total liabilities and stockholders' equity	$	426,649		$	399,130

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

	Three Months Ended
	March 31, 2013			Dec. 31, 2012			March 31, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	10,903		$	9,717		$	7,461
Adjustments to reconcile net income to cash provided by operating activities
Depreciation		3,975			3,830			3,732
Amortization of intangible assets		1,842			1,842			189
Gain related to SemiSouth		-			(292	)		-
Gain on sale of property and equipment		-			-			(1	)
Stock-based compensation expense		3,636			3,704			3,031
Amortization of premium on marketable securities		104			112			309
Non-cash interest income		-			-			(157	)
Deferred income taxes		(3,236	)		(2,072	)		(327	)
Decrease in accounts receivable allowances		(20	)		(45	)		-
Excess tax benefit from stock options exercised		-			(144	)		(198	)
Tax benefit (deficiency) associated with employee stock plans		-			(110	)		782
Change in operating assets and liabilities:
Accounts receivable		(7,393	)		3,824			(7,300	)
Inventories		893			2,281			9,161
Prepaid expenses and other assets		3,928			327			1,306
Accounts payable		2,832			(2,771	)		1,485
Taxes payable and other accrued liabilities		1,172			2,226			604
Deferred income on sales to distributors		2,936			(278	)		1,490
Net cash provided by operating activities		21,572			22,151			21,567

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(3,950	)		(4,177	)		(7,471	)
Proceeds from sale of property and equipment		-			-			2
Increase in financing lease receivables		-			-			(383	)
Collections of financing lease receivables		-			-			299
Loan to SemiSouth		-			-			(18,000	)
Payment of guarantee of SemiSouth debt		-			(15,200	)		-
Purchases of marketable securities		(19,422	)		-			-
Proceeds from maturities of marketable securities		1,500			3,675			6,065
Net cash used in investing activities		(21,872	)		(15,702	)		(19,488	)

CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of common stock		8,705			3,975			6,457
Repurchase of common stock		-			(20,467	)		-
Payments of dividends to stockholders		(2,310	)		(1,454	)		(1,415	)
Excess tax benefit from stock options exercised		-			144			198
Net cash provided by (used in) financing activities		6,395			(17,802	)		5,240

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		6,095			(11,353	)		7,319

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		63,394			74,747			139,836

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	69,489		$	63,394		$	147,155

CONTACT:
Power Integrations, Inc.
Joe Shiffler, 408-414-8528
jshiffler@powerint.com