Power Integrations (Nasdaq: POWI) today announced financial results for the quarter ended June 30, 2012. Net revenues for the second quarter were $76.4 million, up six percent from the prior quarter and down five percent compared with the second quarter of 2011. GAAP gross margin for the quarter was 49.4 percent; operating margin was 12.3 percent. The company reported a GAAP net loss for the quarter of $7.2 million or $0.25 per share, driven by a one-time net charge of $15.7 million associated with the tax settlement described below. The second-quarter net loss compares to net income of $0.25 per diluted share in the prior quarter and $0.35 per diluted share in the second quarter of 2011.
In addition to its GAAP results, the company provided certain non-GAAP financial measures that exclude stock-based compensation expenses, acquisition-related costs and expenses, non-cash interest income, the tax effects of these items, and the one-time charge associated with the tax settlement. Non-GAAP gross margin for the second quarter was 51.9 percent, an increase of 310 basis points sequentially; non-GAAP operating margin was 20.7 percent, up 340 basis points sequentially.
Non-GAAP net income for the quarter was $14.6 million or $0.49 per diluted share, compared with $0.36 per diluted share in the prior quarter and $0.43 per diluted share in the second quarter of 2011. The company’s non-GAAP effective tax rate for the second quarter was 9.0 percent, reflecting a reduction in the company’s expected full-year 2012 non-GAAP tax rate to approximately 13 percent, compared with the prior expectation of a full-year rate in the high teens.
The company today announced a settlement with the U.S. Internal Revenue Service that resolves the IRS audit of the company’s taxes for the years 2003 through 2006. The settlement includes the following elements:
- During the third quarter of 2012 Power Integrations will make a one-time payment of $42.6 million in taxes and interest relating primarily to the revaluation of a license to certain intellectual property rights of the company to one of its foreign subsidiaries. As noted above, the company’s GAAP results for the second quarter include a one-time net charge of $15.7 million reflecting the taxes and interest to be paid, partially offset by the reversal of previously accrued tax liabilities and valuation allowances. Of the $15.7 million charge, approximately $12.7 million relates to taxes and $3.0 million to interest.
- The company expects a substantial reduction in its ongoing effective tax rates. Specifically, the company expects its 2013 GAAP and non-GAAP effective tax rates to be in the high single digits. For the remaining two quarters of 2012 the GAAP and non-GAAP effective tax rates are expected to be approximately 18 percent and 13 percent, respectively.
- The agreement permits Power Integrations to repatriate approximately $102 million of earnings from its foreign subsidiaries without further U.S. federal income-tax consequences.