What changed in this filing

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Item 1. Financial Statements

2021-07-29 compared with 2021-04-29 · 116 added, 72 removed, 401 unchanged (32% of the section changed)

3 unchanged sentences

(In thousands)

March 31, 2021

June 30, 2021

December 31, 2020

29 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands, except per share amounts)

16 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands)

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments, net of $ 0 tax in each of the three months ended March 31, 2021 and 2020

Unrealized loss on marketable securities, net of $ 0 tax in each of the three months ended March 31, 2021 and 2020

Amortization of defined benefit pension items, net of tax of $ 135 and $ 31 in the three months ended March 31, 2021, and 2020, respectively

Total other comprehensive loss

Foreign currency translation adjustments, net of $ 0 tax in each of the three and six months ended June 30, 2021 and 2020

Unrealized gain (loss) on marketable securities, net of $ 0 tax in each of the three and six months ended June 30, 2021 and 2020

Amortization of defined benefit pension items, net of tax of $ 6 and $ 141 in the three and six months ended June 30, 2021, respectively, and $ 24 and $ 55 in the three and six months ended June 30, 2020, respectively

Total other comprehensive income (loss)

TOTAL COMPREHENSIVE INCOME

3 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands)

11 unchanged sentences

Beginning balance

Other comprehensive loss

Other comprehensive income (loss)

Ending balance

7 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

Six Months Ended

(In thousands)

6 unchanged sentences

Deferred income taxes

Decrease in accounts receivable allowance for credit losses

Increase (decrease) in accounts receivable allowance for credit losses

Change in operating assets and liabilities:

21 unchanged sentences

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for income taxes, net

Cash paid (received) for income taxes, net

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

28 unchanged sentences

Receivables determined to be uncollectible are written off and deducted from the allowance.

Allowance for Credit Losses

Three Months Ended

Six Months Ended

(In thousands)

9 unchanged sentences

Intangible Assets

March 31, 2021

June 30, 2021

December 31, 2020

4 unchanged sentences

Total intangible assets

The estimated future amortization expense related to finite-lived intangible assets at March 31, 2021, is as follows:

The estimated future amortization expense related to finite-lived intangible assets at June 30, 2021, is as follows:

(In thousands)

2021 (remaining nine months)

2021 (remaining six months)

POWER INTEGRATIONS, INC.

1 unchanged sentence

Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss for three months ended March 31, 2021 and 2020, were as follows:

Changes in accumulated other comprehensive loss for the three and six months ended June 30, 2021 and 2020, were as follows:

Unrealized Gains

14 unchanged sentences

Ending balance

(1) This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost for the three months ended March 31, 2021 and 2020.

(1) This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost for the three months ended June 30, 2021 and 2020.

Unrealized Gains

and Losses on

Defined Benefit Pension

Foreign Currency

Marketable Securities

Six Months Ended

(In thousands)

Beginning balance

Other comprehensive income (loss) before reclassifications

Amounts reclassified from accumulated other comprehensive loss

Net-current period other comprehensive income (loss)

Ending balance

(1) This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost for the six months ended June 30, 2021 and 2020.

FAIR VALUE MEASUREMENTS:

5 unchanged sentences

The Company’s cash equivalents and short-term marketable securities are classified within Level 1 or Level 2 of the fair-value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

The fair-value hierarchy of the Company’s cash equivalents and marketable securities at March 31, 2021, and December 31, 2020, was as follows:

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The fair-value hierarchy of the Company’s cash equivalents and marketable securities at June 30, 2021, and December 31, 2020, was as follows:

Fair Value Measurement at

March 31, 2021

June 30, 2021

Quoted Prices in

5 unchanged sentences

Total Fair Value

Corporate securities

Commercial paper

Corporate securities

Money market funds

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Value Measurement at

10 unchanged sentences

Money market funds

The Company did not transfer any investments between Level 1 and Level 2 of the fair-value hierarchy in the three months ended March 31, 2021, and the twelve months ended December 31, 2020.

The Company did not transfer any investments between Level 1 and Level 2 of the fair-value hierarchy in the six months ended June 30, 2021, and the twelve months ended December 31, 2020.

MARKETABLE SECURITIES:

Amortized cost and estimated fair market value of marketable securities classified as available-for-sale (excluding cash equivalents) at March 31, 2021, were as follows:

Amortized cost and estimated fair market value of marketable securities classified as available-for-sale (excluding cash equivalents) at June 30, 2021, were as follows:

Gross Unrealized

7 unchanged sentences

Corporate securities

Investments due in 12 months or greater:

Corporate securities

Total marketable securities

Accrued interest receivable was $ 1.2 million at March 31, 2021 and was recorded within prepaid expenses and other current assets on the condensed consolidated balance sheet.

Accrued interest receivable was $ 0.6 million at June 30, 2021 and was recorded within prepaid expenses and other current assets on the condensed consolidated balance sheet.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Amortized cost and estimated fair market value of marketable securities classified as available-for-sale (excluding cash equivalents) at December 31, 2020, were as follows:

9 unchanged sentences

Accrued interest receivable was $ 0.8 million at December 31, 2020 and was recorded within prepaid expenses and other current assets on the condensed consolidated balance sheet.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes marketable securities classified as available-for-sale (excluding cash equivalents) in a continuous unrealized loss position for which an allowance for credit losses was not recorded at June 30, 2021:

Less Than 12 Months

12 Months or Longer

(In thousands)

Corporate securities

Total marketable securities

In the three and six months ended June 30, 2021 and 2020, no unrealized losses on marketable securities were recognized in income.

The Company does not intend to sell and it is unlikely that it will be required to sell the securities prior to their anticipated recovery.

The issuers are high quality (investment grade) and the decline in fair value is largely due to changes in interest rates and other market conditions.

Additionally, the issuers continue to make timely interest payments on the marketable securities with the fair value expected to recover as they reach maturity.

STOCK-BASED COMPENSATION:

The following table summarizes the stock-based compensation expense recognized in accordance with ASC 718-10 for the three months ended March 31, 2021, and March 31, 2020:

The following table summarizes the stock-based compensation expense recognized in accordance with ASC 718-10 for the three and six months ended June 30, 2021 and 2020:

Three Months Ended

Six Months Ended

(In thousands)

4 unchanged sentences

Total stock-based compensation expense

Stock-based compensation expense in the three months ended March 31, 2021, was approximately $ 8.5 million, comprising approximately $ 5.3 million related to restricted stock unit (RSU) awards, $ 2.7 million related to performance-based (PSU) awards and long-term performance-based (PRSU) awards and $ 0.5 million related to the Company’s employee stock purchase plan.

In the three months ended March 31, 2020, stock-based compensation expense was approximately $ 6.7 million, comprising approximately $ 5.0 million related to RSUs, $ 1.3 million related to PSUs and PRSUs and $ 0.4 million related to the Company’s employee stock purchase plan.

Stock-based compensation expense in the three months ended June 30, 2021, was approximately $ 9.2 million, comprising approximately $ 4.7 million related to restricted stock unit (RSU) awards, $ 4.0 million related to performance-based (PSU) awards and long-term performance-based (PRSU) awards and $ 0.5 million related to the Company’s employee stock purchase plan.

Stock-based compensation expense in the six months ended June 30, 2021, was approximately $ 17.7 million, comprising approximately $ 10.0 million related to RSUs, $ 6.7 million related to PSUs and PRSUs and $ 1.0 million related to the Company’s employee stock purchase plan.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock-based compensation expense in the three months ended June 30, 2020, was approximately $ 6.0 million, comprising approximately $ 4.5 million related to RSUs, $ 1.1 million related to PSUs and PRSUs and $ 0.4 million related to the Company’s employee stock purchase plan.

Stock-based compensation expense in the six months ended June 30, 2020, was approximately $ 12.7 million, comprising approximately $ 9.5 million related to RSUs, $ 2.4 million related to PSUs and PRSUs and $ 0.8 million related to the Company’s employee stock purchase plan.

Stock Options

A summary of stock options outstanding as of March 31, 2021, and activity during the three months then ended, is presented below:

A summary of stock options outstanding as of June 30, 2021, and activity during the six months then ended, is presented below:

Intrinsic Value

3 unchanged sentences

Forfeited or expired

Outstanding at March 31, 2021

Vested and exercisable at March 31, 2021

Outstanding at June 30, 2021

Vested and exercisable at June 30, 2021

Under the performance-based awards program, the Company grants awards in the performance year in an amount equal to twice the target number of shares to be issued if the maximum performance metrics are met.

6 unchanged sentences

the shares were released to the Company’s employees and executives in the first quarter of 2021.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of PSUs outstanding as of March 31, 2021, and activity during the three months then ended, is presented below:

A summary of PSUs outstanding as of June 30, 2021, and activity during the six months ended, is presented below:

Grant Date Fair

5 unchanged sentences

Outstanding at January 1, 2021

Outstanding at March 31, 2021

Outstanding and expected to vest at March 31, 2021

Outstanding at June 30, 2021

Outstanding and expected to vest at June 30, 2021

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company’s PRSU program provides for the issuance of PRSUs which will vest based on the Company’s performance measured against the PRSU program’s established performance targets.

6 unchanged sentences

the shares were released to the Company’s executives in the first quarter of 2021.

A summary of PRSUs outstanding as of March 31, 2021, and activity during the three months then ended, is presented below:

A summary of PRSUs outstanding as of June 30, 2021, and activity during the six months ended, is presented below:

Weighted-Average

6 unchanged sentences

Outstanding at January 1, 2021

Outstanding at March 31, 2021

Outstanding and expected to vest at March 31, 2021

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of RSUs outstanding as of March 31, 2021, and activity during the three months then ended, is presented below:

Outstanding at June 30, 2021

Outstanding and expected to vest at June 30, 2021

A summary of RSUs outstanding as of June 30, 2021, and activity during the six months then ended, is presented below:

Weighted-Average

6 unchanged sentences

Outstanding at January 1, 2021

Outstanding at March 31, 2021

Outstanding and expected to vest at March 31, 2021

Outstanding at June 30, 2021

Outstanding and expected to vest at June 30, 2021

SIGNIFICANT CUSTOMERS AND GEOGRAPHIC NET REVENUES:

2 unchanged sentences

The Company’s chief operating decision maker, the Chief Executive Officer, reviews financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial performance.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Customer Concentration

The Company’s top ten customers accounted for approximately 79 % of net revenues for the three months ended March 31, 2021, and approximately 55 % in the corresponding period of 2020.

The Company’s top ten customers accounted for approximately 80 % of net revenues in both the three and six months ended June 30, 2021, and approximately 59 % and 56 %, respectively, of net revenues in the corresponding periods of 2020.

A significant portion of these revenues are attributable to sales of the Company’s products to distributors of electronic components.

These distributors sell the Company’s products to a broad, diverse range of end users, including original equipment manufacturers, or OEMs, and merchant power supply manufacturers.

Sales to distributors were $ 134.2 million in the three months ended March 31, 2021, and $ 83.5 million for the corresponding period of 2020.

Sales to distributors were $ 136.4 million and $ 270.7 million in the three and six months ended June 30, 2021, respectively, and $ 87.3 million and $ 170.8 million, respectively, for the corresponding periods of 2020.

Direct sales to OEMs and power-supply manufacturers accounted for the remainder.

1 unchanged sentence

Three Months Ended

Six Months Ended

Honestar Technologies Co., Ltd.

Powertech Distribution Ltd.

Total customer revenue was less than 10% of net revenues.

3 unchanged sentences

The Company does not have any off-balance-sheet credit exposure related to its customers.

As of March 31, 2021, and December 31, 2020, 86 % and 90 %, respectively, of accounts receivable were concentrated with the Company’s top ten customers.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of June 30, 2021, and December 31, 2020, 84 % and 90 %, respectively, of accounts receivable were concentrated with the Company’s top ten customers.

The following customers represented 10% or more of accounts receivable:

2 unchanged sentences

No other customers accounted for 10% or more of the Company’s accounts receivable in the periods presented.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Geographic Net Revenues

The Company markets its products globally through its sales personnel and a worldwide network of independent sales representatives and distributors.

Geographic net revenues, based on “bill to” customer locations, for the three months ended March 31, 2021, and March 31, 2020, were as follows:

Geographic net revenues, based on “bill to” customer locations, for the three and six months ended June 30, 2021 and 2020, were as follows:

Three Months Ended

Six Months Ended

(In thousands)

6 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands)

6 unchanged sentences

Common Stock Repurchases

The Company did not repurchase any common stock during the three months ended March 31, 2021.

As of March 31, 2021, the Company had approximately $ 41.3 million remaining under its current repurchase program, which has no expiration date.

As of December 31, 2020, the Company had approximately $ 41.3 million remaining under its stock-repurchase program.

In April 2021, the Company’s board of directors authorized the use of an additional $ 50.0 million for the repurchase of the Company’s common stock, with repurchases to be executed according to pre-defined price/volume guidelines.

In the six months ended June 30, 2021 the Company purchased approximately 335,000 shares for approximately $ 26.4 million .

As of June 30, 2021, the Company had approximately $ 64.9 million remaining under its current repurchase program, which has no expiration date.

Authorization of future repurchase programs is at the discretion of the board of directors and will depend on the Company’s financial condition, results of operations, capital requirements, business conditions and other factors.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Cash Dividends

2 unchanged sentences

In July 2020, the Company’s board of directors raised the cash dividends further with the declaration of two cash dividends of $ 0.11 per share (in lieu of the $ 0.105 per share announced in April 2020) to be paid to stockholders of record at the end of each of the third and fourth quarter in 2020.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In January 2021, the Company’s board of directors raised the quarterly cash dividend by an additional $ 0.02 per share with the declaration of four cash dividends of $ 0.13 per share to be paid to stockholders of record at the end of each quarter in 2021.

For the three months ended March 31, 2021, and 2020, cash dividends declared and paid were as follows:

For the three and six months ended June 30, 2021 and 2020, cash dividends declared and paid were as follows:

Three Months Ended

Six Months Ended

(In thousands, except per share amounts)

7 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands, except per share amounts)

10 unchanged sentences

The Company has excluded the shares underlying the outstanding performance-based awards in the 2021 and 2020 calculations as the shares were not contingently issuable as of the end of the reporting periods.

In the three months ended March 31, 2021 and 2020, no outstanding stock awards were determined to be anti-dilutive and therefore excluded from the computation of diluted earnings per share.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In the three months ended June 30, 2021, approximately 134,000 stock awards were determined to be anti-dilutive and therefore excluded from the computation of diluted earnings per share, no outstanding stock awards were determined to be anti-dilutive in the comparable period of 2020.

In the six months ended June 30, 2021 and 2020, no outstanding stock awards were determined to be anti-dilutive and therefore excluded from the computation of diluted earnings per share.

In July 2020, the Company’s board of directors approved a two -for-one stock split in the form of a stock dividend to stockholders of record as of the close of business on August 14, 2020.

2 unchanged sentences

PROVISION FOR INCOME TAXES:

Income-tax expense includes a provision for federal, state and foreign taxes based on the annual estimated effective tax rate applicable to the Company and its subsidiaries, adjusted for certain discrete items which are fully recognized in the period they occur.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

recognized in the period they occur.

Accordingly, the interim effective tax rate may not be reflective of the annual estimated effective tax rate.

The Company’s effective tax rates for the three months ended March 31, 2021 and 2020, were 2.4 % and 5.8 %, respectively.

In the three months ended March 31, 2021 and 2020, the effective tax rate was lower than the statutory federal income-tax rate of 21 % due to the geographic distribution of the Company’s world-wide earnings in lower-tax jurisdictions, federal research tax credits and the recognition of excess tax benefits related to share-based payments.

Additionally, in the three months ended March 31, 2021, the Company’s effective tax rate was favorably impacted by a discrete item associated with the release of an unrecognized tax benefit.

The Company’s effective tax rates for the three and six months ended June 30, 2021, were 7.2 % and 4.9 %, respectively, and 8.4 % and 7.0 %, respectively, in the corresponding periods of 2020.

In the three and six months ended June 30, 2021 and 2020, the effective tax rate was lower than the statutory federal income-tax rate of 21 % due to the geographic distribution of the Company’s world-wide earnings in lower-tax jurisdictions, federal research tax credits and the recognition of excess tax benefits related to share-based payments.

Additionally, in the six months ended June 30, 2021, the Company’s effective tax rate was favorably impacted by a discrete item associated with the release of an unrecognized tax benefit.

These benefits were partially offset by foreign income subject to U.S.

3 unchanged sentences

The Company has not been granted any incentivized tax rates and does not operate under any tax holidays in any jurisdiction.

As of March 31, 2021, the Company maintained a valuation allowance on its California deferred tax assets, New Jersey deferred tax assets, and capital losses for federal purposes, and a valuation allowance with respect to its deferred tax assets relating to tax credits in Canada.

As of June 30, 2021, the Company maintained a valuation allowance on its California deferred tax assets, New Jersey deferred tax assets, and capital losses for federal purposes, and a valuation allowance with respect to its deferred tax assets relating to tax credits in Canada.

Determining the consolidated provision for income-tax expense, income-tax liabilities and deferred tax assets and liabilities involves judgment.

16 unchanged sentences

On December 21, 2018, the Court granted the Company’s challenge to Opticurrent’s damages expert but denied the Company’s motion for summary judgment.

Following a trial in February 2019, a jury issued a finding of direct

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

infringement by the Company but found that the Company did not induce infringement, and awarded Opticurrent damages of $ 6.7 million.

Following a trial in February 2019, a jury issued a finding of direct infringement by the Company but found that the Company did not induce infringement, and awarded Opticurrent damages of $ 6.7 million.

The Company challenged those findings in post-trial proceedings, and the Court granted one of the Company’s post-trial motions, reducing the damages award to $ 1.2 million.

The Court of Appeals affirmed the original findings and the reduced damages award, but the Company believes Opticurrent made key disclaimers during reexamination proceedings after the original trial, giving rise to a motion to set aside the original judgment in view of a disclaimer, an issue that is currently on appeal to the Federal Circuit.

Briefing on the Company’s appeal is expected to take place over the coming months, with oral argument and a ruling thereafter.

The District Court has issued an order staying execution on the original judgment pending the Company’s appeal.

Briefing on the Company’s appeal is completed, with oral argument expected to take place in the coming months and a ruling thereafter.

The District Court has issued an order staying execution on the original judgment pending the Company’s appeal, and the Federal Circuit rejected Opticurrent’s

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

challenge to the order staying execution pending appeal.

As such, the Company continues to believe it has strong defenses, and intends to continue to vigorously defend itself against Opticurrent’s claims.

On June 19, 2019, Opticurrent, LLC filed a follow-on lawsuit in the United States District Court for the Northern District of California accusing more of the Company’s products of infringement and seeking damages for the alleged infringement of the same claim of the same patent asserted in the parties’ prior litigation, as described above.

Limited discovery has taken place, but proceedings are currently stayed, and no schedule has yet been set for expert discovery, dispositive motions, or trial.

Limited discovery has taken place, but proceedings are currently stayed for all but written discovery, and no schedule has yet been set for expert discovery, dispositive motions, or trial.

The Company believes it has strong defenses, independent of the issue on appeal in the first case, and intends to vigorously defend itself against Opticurrent’s claims, with appeals to follow if necessary.

3 unchanged sentences

Fact discovery is now under way, but the Company believes it has strong claims and defenses, and intends to vigorously defend itself against CogniPower’s claims against the Company’s technology, with appeals to follow if necessary.

Moreover, given the United States Patent and Trademark Office’s institution of inter partes review (IPR) proceedings against every independent claim CogniPower asserted in the litigation, the parties have agreed to stay the associated District Court litigation pending resolution of the IPRs.

The Company is unable to predict the outcome of legal proceedings with certainty, and there can be no assurance that the Company will prevail in the above-mentioned unsettled litigations.

8 unchanged sentences

In addition, the Company requires its employees to sign a proprietary information and inventions agreement, which assigns the rights to its employees’ development work to the Company.

To date, the Company has not had to reimburse any of its distributors or customers for any losses related to these indemnifications and no material claims were outstanding as of March 31, 2021.

To date, the Company has not had to reimburse any of its distributors or customers for any losses related to these indemnifications and no material claims were outstanding as of June 30, 2021.

For several reasons, including the lack of prior indemnification claims and the lack of a monetary liability limit for certain infringement cases, the Company cannot determine the maximum amount of potential future payments, if any, related to such indemnifications.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements