What changed in this filing

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Item 1. Financial Statements

2023-08-03 compared with 2023-05-04 · 102 added, 64 removed, 392 unchanged (30% of the section changed)

3 unchanged sentences

(In thousands)

March 31, 2023

June 30, 2023

December 31, 2022

29 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands, except per share amounts)

4 unchanged sentences

General and administrative

Other operating expenses, net

Total operating expenses

8 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, 2023 and 2022

Unrealized gain (loss) on marketable securities, net of $ 0 tax in each of the three months ended March 31, 2023 and 2022

Amortization of defined benefit pension items, net of tax of ($ 4 ) and $ 3 in the three months ended March 31, 2023 and 2022, respectively

Foreign currency translation adjustments, net of $ 0 tax in each of the three and six months ended June 30, 2023 and 2022

Unrealized gain (loss) on marketable securities, net of $ 0 tax in each of the three and six months ended June 30, 2023 and 2022

Amortization of defined benefit pension items, net of tax of ($ 4 ) and ($ 7 ) in the three and six months ended June 30, 2023, respectively, and $ 0 and $ 3 in the three and six months ended June 30, 2022, respectively

Total other comprehensive income (loss)

4 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands)

14 unchanged sentences

Beginning balance

Repurchase of common stock

Payment of dividends to stockholders

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

Six Months Ended

(In thousands)

24 unchanged sentences

Net cash used in financing activities

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

NET DECREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

30 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands)

11 unchanged sentences

Intangible Assets

March 31, 2023

June 30, 2023

December 31, 2022

3 unchanged sentences

Total intangible assets

The estimated future amortization expense related to finite-lived intangible assets at March 31, 2023, is as follows:

The estimated future amortization expense related to finite-lived intangible assets at June 30, 2023, is as follows:

(In thousands)

2023 (remaining nine months)

2023 (remaining six months)

Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss for the three months ended March 31, 2023 and 2022, were as follows:

Changes in accumulated other comprehensive loss for the three and six months ended June 30, 2023 and 2022, 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, 2023 and 2022.

(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, 2023 and 2022.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unrealized Gains

and Losses on

Defined Benefit

Foreign Currency

Marketable Securities

Pension Items

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, 2023 and 2022.

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, 2023 and December 31, 2022, was as follows:

The fair-value hierarchy of the Company’s cash equivalents and marketable securities at June 30, 2023 and December 31, 2022, was as follows:

Fair Value Measurement at

March 31, 2023

June 30, 2023

Quoted Prices in

20 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, 2023 and the twelve months ended December 31, 2022.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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, 2023 and the twelve months ended December 31, 2022.

MARKETABLE SECURITIES:

Amortized cost and estimated fair market value of marketable securities classified as available-for-sale (excluding cash equivalents) at March 31, 2023, were as follows:

Amortized cost and estimated fair market value of marketable securities classified as available-for-sale (excluding cash equivalents) at June 30, 2023, were as follows:

Gross Unrealized

8 unchanged sentences

Total marketable securities

Accrued interest receivable was $ 1.7 million at March 31, 2023 and was recorded within prepaid expenses and other current assets on the condensed consolidated balance sheet.

Accrued interest receivable was $ 2.0 million at June 30, 2023 and was recorded within prepaid expenses and other current assets on the condensed consolidated balance sheet.

Amortized cost and estimated fair market value of marketable securities classified as available-for-sale (excluding cash equivalents) at December 31, 2022, were as follows:

10 unchanged sentences

Accrued interest receivable was $ 1.2 million at December 31, 2022 and was recorded within prepaid expenses and other current assets on the condensed consolidated balance sheet.

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 March 31, 2023:

Less Than 12 Months

3 unchanged sentences

Total marketable securities

In the three months ended March 31, 2023 and 2022, no unrealized losses on marketable securities were recognized in income.

In the three and six months ended June 30, 2023 and 2022, no unrealized losses on marketable securities were recognized in income.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

1 unchanged sentence

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

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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, 2023 and 2022:

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, 2023 and 2022:

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, 2023, was approximately $ 7.4 million, comprising approximately $ 5.9 million related to restricted stock unit (RSU) awards, $ 1.0 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 three months ended March 31, 2022, was approximately $ 9.0 million, comprising approximately $ 5.6 million related to RSUs, $ 3.0 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, 2023, was approximately $ 6.8 million, comprising approximately $ 5.3 million related to restricted stock unit (“RSU”) awards, $ 0.5 million related to the Company’s employee stock purchase plan and $ 1.0 million related to performance-based (“PSU”) awards and long-term performance-based (“PRSU”) awards.

Stock-based compensation expense in the six months ended June 30, 2023, was approximately $ 14.1 million, comprising approximately $ 11.2 million related to RSUs, $ 1.0 million related to the Company’s employee stock purchase plan and $ 1.9 million related to PSUs and PRSUs.

Stock-based compensation expense in the three months ended June 30, 2022, was approximately $ 3.7 million, comprising approximately $ 5.3 million related to RSUs, $ 0.5 million related to the Company’s employee stock purchase plan and $ 2.1 million credit related to PSUs and PRSUs.

Stock-based compensation expense in the six months ended June 30, 2022, was approximately $ 12.7 million, comprising approximately $ 10.9 million related to RSUs, $ 0.9 million related to the Company’s employee stock purchase plan and $ 0.9 million related to PSUs and PRSUs.

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 2023.

A summary of PSUs outstanding as of March 31, 2023, and activity during the three months ended, is presented below:

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of PSUs outstanding as of June 30, 2023 and activity during the six months ended, is presented below:

Weighted-Average

7 unchanged sentences

Outstanding at January 1, 2023

Outstanding at March 31, 2023

Outstanding and expected to vest at March 31, 2023

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Outstanding at June 30, 2023

Outstanding and expected to vest at June 30, 2023

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.

7 unchanged sentences

the shares were released to the Company’s executives in the first quarter of 2023.

A summary of PRSUs outstanding as of March 31, 2023 and activity during the three months ended, is presented below:

A summary of PRSUs outstanding as of June 30, 2023 and activity during the six months ended, is presented below:

Weighted-Average

6 unchanged sentences

Outstanding at January 1, 2023

Outstanding at March 31, 2023

Outstanding and expected to vest at March 31, 2023

A summary of RSUs outstanding as of March 31, 2023 and activity during the three months ended, is presented below:

Outstanding at June 30, 2023

Outstanding and expected to vest at June 30, 2023

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of RSUs outstanding as of June 30, 2023 and activity during the six months ended, is presented below:

Weighted-Average

6 unchanged sentences

Outstanding at January 1, 2023

Outstanding at March 31, 2023

Outstanding and expected to vest at March 31, 2023

Outstanding at June 30, 2023

Outstanding and expected to vest at June 30, 2023

SIGNIFICANT CUSTOMERS AND GEOGRAPHIC NET REVENUES:

1 unchanged sentence

The Company is organized and operates as one reportable segment, the design, development, manufacture and marketing of integrated circuits and related components for use primarily in the high-voltage power-conversion market.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

Customer Concentration

The Company’s top ten customers accounted for approximately 78 % and 77 % of net revenues for the three months ended March 31, 2023 and 2022, respectively.

The Company’s top ten customers accounted for approximately 82 % and 79 % of net revenues for the three and six months ended June 30, 2023, respectively, and 77 % for both the three and six months ended June 30, 2022.

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 $ 66.8 million and $ 135.7 million in the three months ended March 31, 2023, and 2022, respectively.

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

Similarly, merchant power-supply manufacturers sell power supplies incorporating the Company’s products to a broad range of OEMs.

Sales to distributors were $ 78.8 million and $ 145.5 million in the three and six months ended June 30, 2023, respectively, and $ 133.9 million and $ 269.7 million, respectively, in the corresponding periods of 2022.

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

1 unchanged sentence

Three Months Ended

Salcomp Group

Six Months Ended

Honestar Technologies Co., Ltd.

Salcomp Group

Flextronics Group

* 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, 2023, and December 31, 2022, 84 % and 87 %, respectively, of accounts receivable were concentrated with the Company’s top ten customers.

The following customer represented 10% or more of accounts receivable at March 31, 2023 and December 31, 2022:

As of both June 30, 2023 and December 31, 2022, 87 % of accounts receivable were concentrated with the Company’s top ten customers.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following customers represented 10% or more of accounts receivable at June 30, 2023 and December 31, 2022:

Salcomp Group

3 unchanged sentences

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, 2023 and 2022, were as follows:

Geographic net revenues, based on “bill to” customer locations, for the three and six months ended June 30, 2023 and 2022, were as follows:

Three Months Ended

Six Months Ended

(In thousands)

3 unchanged sentences

Total net revenues

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

STOCKHOLDERS’ EQUITY:

1 unchanged sentence

Three Months Ended

Six Months Ended

(In thousands)

4 unchanged sentences

As of December 31, 2022, the Company had $ 81.3 million remaining under its authorized stock-repurchase program.

In the three months ended March 31, 2023 the Company purchased 23,000 shares for $ 1.7 million, leaving $ 79.6 million remaining on the repurchase authorization as of March 31, 2023.

In the three and six months ended June 30, 2023, the Company purchased approximately 57,000 shares for $ 4.3 million and approximately 80,000 shares for $ 6.0 million, respectively, leaving $ 75.3 million remaining on the repurchase authorization as of June 30, 2023.

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

3 unchanged sentences

In February 2023, the Company’s board of directors declared dividends of $ 0.19 per share to be paid to stockholders of record at the end of each quarter in 2023.

For the three months ended March 31, 2023 and 2022, cash dividends declared and paid were as follows:

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the three and six months ended June 30, 2023 and 2022, cash dividends declared and paid were as follows:

Three Months Ended

Six Months Ended

(In thousands, except per share amounts)

5 unchanged sentences

Dilutive common equivalent shares included in this calculation consist of dilutive shares issuable upon the assumed exercise of outstanding common stock options, the assumed vesting of outstanding restricted stock units, the assumed issuance of awards under the stock purchase plan and contingently issuable performance-based awards, as computed using the treasury stock method.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of the earnings per share calculation is as follows:

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 2023 and 2022 calculations as the shares were not contingently issuable as of the end of the reporting periods.

In the three months ended March 31, 2023 and 2022, no stock awards were determined to be anti-dilutive and therefore excluded from the computation of diluted earnings per share.

In the three and six months ended June 30, 2023, and 2022, no outstanding stock awards were determined to be anti-dilutive and therefore excluded from the computation of diluted earnings per share.

PROVISION FOR INCOME TAXES:

1 unchanged sentence

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, 2023 and 2022, were 8.0 % and 10.4 %, respectively.

The Company’s effective tax rates for the three and six months ended June 30, 2023 were 3.7 % and 5.1 %, respectively, and 8.1 % and 9.2 %, respectively, in the three and six months ended June 30, 2022.

The effective tax rate in these periods were 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 and federal research tax credits.

Additionally, in the three months ended March 31, 2023, the Company’s effective tax rate was favorably impacted by a discrete item associated with the release of an unrecognized tax benefit.

Additionally, in the three months ended June 30, 2023, the Company’s effective tax rate was favorably impacted by a discrete item associated with recognition of excess tax benefits related to share-based payments.

In the six months ended June 30, 2023, the Company’s effective tax rate was favorably impacted by discrete items associated with the release of unrecognized tax benefits and

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

recognition of excess tax benefits related to share-based payments.

In the three months ended June 30, 2022, the Company’s effective tax rate was favorably impacted by the recognition of excess tax benefits related to share-based payments.

In the six months ended June 30, 2022, the Company’s effective tax rate was favorably impacted by discrete items associated with the release of unrecognized tax benefits and recognition of excess tax benefits related to share-based payments.

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, 2023, the Company maintained a valuation allowance on its California deferred tax assets, New Jersey deferred tax assets and a valuation allowance with respect to its deferred tax assets relating to tax credits in Canada.

As of June 30, 2023, the Company maintained a valuation allowance on its California deferred tax assets, New Jersey deferred tax assets 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.

4 unchanged sentences

("Lapis"), the wafers purchased from these suppliers are priced in U.S.

dollars, with mutual

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

sharing of the impact of fluctuations in the exchange rate between the Japanese yen and the U.S.

dollars, with mutual sharing of the impact of fluctuations in the exchange rate between the Japanese yen and the U.S.

dollar on future purchases.

9 unchanged sentences

That motion was granted, so CogniPower’s claims for infringement initially went forward separately in their lawsuit against the Company’s customers in the District of Delaware, but the Company filed a motion to intervene in that lawsuit and received a ruling allowing the Company to intervene in CogniPower’s customer lawsuit on February 1, 2021, and the parties thereafter agreed to dismiss the Company’s separate lawsuit against CogniPower.

The remaining case is currently stayed, 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.

The remaining case is currently stayed, but the Company recently filed a motion to amend its claims against CogniPower to include three additional patents that are in the same family as the two CogniPower patents that are already in the lawsuit, after CogniPower accused the Company’s customers of infringing those three related patents in a lawsuit in the Eastern District of Texas.

A ruling on the Company’s motion is expected in the coming months, and the Company believes it has strong claims and defenses with respect to all of CogniPower’s asserted patents, and intends to vigorously defend itself against CogniPower’s claims against the Company’s technology, with appeals to follow if necessary.

On October 31, 2022, Waverly Licensing LLC filed a complaint against the Company in the United States District Court for the Western District of Texas.

In its complaint, Waverly alleged that the Company was infringing one patent pertaining to charging a battery-operated device, the Company believes it has strong claims and defenses, and intends to vigorously defend itself against Waverly’s claims against the Company’s technology, with appeals to follow if necessary.

In its complaint, Waverly alleged that the Company was infringing one patent

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

pertaining to charging a battery-operated device.

The Company believes it has strong claims and defenses, and intends to vigorously defend itself against Waverly’s claims, with appeals to follow if necessary.

Because the Company believed that Waverly’s Texas complaint was improperly filed in the wrong court, the Company filed a motion to dismiss, and on November 30, 2022, the Company filed a complaint against Waverly Licensing LLC and related entities IP Edge LLC, Mavexar LLC, and Array IP LLC in the United States District Court for the District of Delaware seeking a declaration of non-infringement with respect to a patent that Waverly charged the Company with infringing.

6 unchanged sentences

The Company sells products to its distributors under contracts, collectively referred to as Distributor Sales Agreements (“DSA”).

Each DSA contains the relevant terms of the contractual arrangement with the distributor, and generally includes certain provisions for indemnifying the distributor against losses, expenses, and liabilities from damages that may be awarded against the distributor in the event the Company’s products are found to infringe upon a patent,

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The DSA generally limits the scope of and remedies for the Customer Indemnification obligations in a variety of industry-standard respects, including, but not limited to, limitations based on time and geography, and a right to replace an infringing product.

2 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, 2023.

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, 2023.

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