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International Rectifier reported a first quarter fiscal year 2010 net loss of $16.9 million, or $0.24 per share, compared with net income of $29.1 million, or $0.40 per share in the prior quarter, and a net loss of $4.2 million, or $0.06 per share in the first quarter fiscal year 2009. The results for the fourth quarter fiscal year 2009 included a $96.1 million gain on the divestiture of the Power Control Systems (PCS) business, related to the settlement agreement with Vishay Intertechnology, Inc., a $45.0 million charge related to an agreement in principle to settle the pending securities class action litigation, a $9.6 million tax benefit and a $9.5 million expense recovery from an insurance reimbursement.
Gross margin was 26.4%, up from 20.8% in the prior quarter and down from 39.4% in the first quarter fiscal year 2009. Gross margin for the first quarter fiscal year 2009 included a benefit from $18.7 million of Intellectual Property revenue with a 100% gross margin recognized from a one-time patent license amendment.
Research and development expenses for the first quarter fiscal year 2010 were $22.8 million, down from $26.2 million in the prior quarter.
Selling, general and administrative expenses for the first quarter fiscal year 2010 were $43.6 million, compared with $83.0 million in the prior quarter. Selling, general and administrative expenses for the fourth quarter fiscal year 2009 included a $45.0 million charge related to the agreement in principle to settle the pending securities class action litigation and a $9.5 million expense recovery from an insurance reimbursement.
Cash, cash equivalents and marketable investments totaled $591.0 million at the end of the first quarter fiscal year 2010. This included restricted cash of $3.9 million. Net cash used in operating activities for the first quarter fiscal year 2010 was $7.1 million.
The Company had 71,270,161 shares outstanding at the end of the quarter.
Second Quarter Outlook
International Rectifier President and Chief Executive Officer Oleg Khaykin stated: "The growth momentum we experienced in the September quarter continues into the December quarter. We currently expect second quarter fiscal year 2010 revenue to range from $185 million to $200 million."
"The strong design win activity in the past year in discrete products, servers and notebooks and energy saving appliances, together with recovery in automotive and industrial demand, is starting to show results. We are confident that we are taking steps in the right direction to better position IR for future growth."
Segment Table Information
The customer segment tables included with this release for the Company's fiscal quarters ended September 27, 2009, June 28, 2009 and September 28, 2008, respectively, reconcile revenue and gross margin for the Company's ongoing customer segments to the consolidated total amounts of such measures for the Company.
Quarterly Report on Form 10-Q
The Company expects to file its 2010 fiscal first quarter report on Form 10-Q with the Securities and Exchange Commission on Friday, November 6, 2009. This financial report will be available for viewing and download at http://investor.irf.com.
About International Rectifier
International Rectifier Corporation (NYSE:IRF) is a world leader in power management technology. IR's analog, digital, and mixed signal ICs, and other advanced power management products, enable high performance computing and save energy in a wide variety of business and consumer applications. Leading manufacturers of computers, energy efficient appliances, lighting, automobiles, satellites, aircraft, and defense systems rely on IR's power management solutions to power their next generation products. For more information, go to www.irf.com.
Forward-Looking Statements:
This document contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to expectations concerning matters that (a) are not historical facts, (b) predict or forecast future events or results, or (c) embody assumptions that may prove to have been inaccurate. These forward-looking statements involve risks, uncertainties and assumptions. When we use words such as "believe," "expect," "anticipate," "will" or similar expressions, we are making forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give readers any assurance that such expectations will prove correct. The actual results may differ materially from those anticipated in the forward-looking statements as a result of numerous factors, many of which are beyond our control. Important factors that could cause actual results to differ materially from our expectations include, but are not limited to, reduced demand arising from a decline or volatility in general market and economic conditions; reduced margins from low factory utilization and inventory reduction efforts; continued volatility and further deterioration of the capital markets; the effects of longer lead times for certain products on meeting demand; unexpected costs or delays in implementing our cost savings programs, including the ability to transfer, consolidate and qualify product lines and unexpected costs in connection with the closure of facilities; the ability of the Company to achieve the expected reductions in headcount and expected savings; the impact of regulatory, investigative and legal actions; increased competition in the highly competitive semiconductor business that could adversely affect the prices of our products; the effects of manufacturing, operational and vendor disruptions and inefficiencies from swine flu and similar influenza; our ability to maintain current IP licenses and obtain new IP licenses; the material weaknesses in our internal control over financial reporting that we have identified that could impact our ability to report our results of operations and financial condition accurately and in a timely manner and the extensive work remaining to remedy these material weaknesses in our internal control over financial reporting; and other uncertainties disclosed in the Company's reports filed from time to time with the Securities and Exchange Commission, including its most recent reports on Forms 10-K and 10-Q. Additionally, to the foregoing factors should be added the financial, market, supply disruption and other ramifications of terrorist actions and natural disasters.
NOTE: A conference call will begin today at 5:15 p.m. Eastern time (2:15 p.m. Pacific time). Participants can join the call by dialing 706-679-3195 or by logging onto the Internet at http://investor.irf.com or http://www.streetevents.com at least 15 minutes ahead of the start time. A replay of the call will be available from approximately 5:15 p.m. Pacific time on Thursday, November 5, through Thursday, November 12, 2009. To listen to the replay by phone, call 800-642-1687 or 706-645-9291 for international callers and enter reservation number 37154132. To listen to the replay over the Internet, please go to http://investor.irf.com. The live call and replay will also be available on www.streetevents.com.
The Company plans to present an updated investor presentation at its 2009 Annual Meeting to be held at The Belamar Hotel, located at 3501 Sepulveda Boulevard in Manhattan Beach, California next Monday, November 9, at 9:00 a.m. A copy of the presentation will be posted and available for viewing at the Company's investor relations website at http://investor.irf.com that morning prior to the annual meeting.
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
Three Months Ended
September 27, June 28, September 28,
2009 2009 (1) 2008
Revenues $ 179,371 $ 159,557 $ 244,474
Cost of sales 132,014 126,372 148,082
Gross profit 47,357 33,185 96,392
Selling, general and administrative expense 43,582 82,959 64,877
Research and development expense 22,827 26,214 24,717
Amortization of acquisition-related intangible assets 1,094 1,117 1,097
Asset impairment, restructuring and other charges 167 (71 ) 471
Gain on divestiture -- (96,136 ) --
Operating (loss) income (20,313 ) 19,102 5,230
Other expense, net 778 2,910 14,582
Interest income, net (3,970 ) (3,312 ) (5,060 )
Loss (income) before income taxes (17,121 ) 19,504 (4,292 )
Benefit from income taxes (221 ) (9,589 ) (106 )
Net (loss) income $ (16,900 ) $ 29,093 $ (4,186 )
Net (loss) income per share-basic $ (0.24 ) $ 0.40 $ (0.06 )
Net (loss) income per share-diluted $ (0.24 ) $ 0.40 $ (0.06 )
Average common shares outstanding--basic 71,218 71,885 72,843
Average common shares and potentially dilutive
securities outstanding--diluted 71,218 71,895 72,843
(1) Beginning in fiscal year 2010 the Company's restricted stock units are treated as participating securities for the purpose of computing basic and diluted earnings per share as a result of the adoption of FASB ASC 260-10-45 (formerly FSP EITF 03-6-1) effective for the first quarter of fiscal 2010. Prior period basic and diluted shares have been adjusted to reflect this change.
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands)
September 27, June 28, September 28,
2009 2009 2008 (1)(2)
Assets
Current assets:
Cash and cash equivalents $ 292,499 $ 365,761 $ 302,782
Restricted cash 3,925 3,925 4,341
Short-term investments 199,116 113,247 102,965
Trade accounts receivable, net 112,928 97,572 110,322
Inventories 152,586 151,121 175,889
Current deferred tax assets 1,248 1,223 13,071
Prepaid expenses and other receivables 30,002 28,556 52,851
Total current assets 792,304 761,405 762,221
Restricted cash -- -- 15,046
Long-term investments 95,278 121,508 286,696
Property, plant and equipment, net 358,684 369,713 488,810
Goodwill 74,955 74,955 98,822
Acquisition-related intangible assets, net 10,727 11,821 15,128
Long-term deferred tax assets 7,913 7,994 89,971
Other assets 55,652 53,911 54,696
Total assets $ 1,395,513 $ 1,401,307 $ 1,811,390
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 70,627 $ 62,570 $ 66,349
Accrued income taxes 8,417 6,830 29,992
Accrued salaries, wages and commissions 20,890 22,325 26,989
Current deferred tax liabilities 2,793 2,793 2,266
Other accrued expenses 116,201 114,043 99,402
Total current liabilities 218,928 208,561 224,998
Long-term deferred tax liabilities 5,266 4,439 4,975
Deferred gain on divestiture -- -- 112,922
Other long-term liabilities 53,270 53,055 56,332
Total liabilities 277,464 266,055 399,227
Commitments and contingencies
Stockholders' equity:
Common shares 73,181 73,101 72,876
Capital contributed in excess of par value of shares 984,916 981,786 974,313
Treasury stock, at cost (23,632 ) (23,632 ) --
Retained earnings 68,115 85,015 328,246
Accumulated other comprehensive income 15,469 18,982 36,728
Total stockholders' equity 1,118,049 1,135,252 1,412,163
Total liabilities and stockholders' equity $ 1,395,513 $ 1,401,307 $ 1,811,390
(1) In the fourth quarter of fiscal year 2009, the Company changed its method of accounting for patent-related costs. Prior periods have been restated to reflect this change.
(2) Certain reclassifications have been made to the previously reported amounts to conform to the current presentation.
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended
September 27, September 28,
2009 2008
Cash flow from operating activities:
Net loss $ (16,900 ) $ (4,186 )
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 16,558 16,622
Amortization of acquisition-related intangible assets 1,093 1,097
Stock compensation expense 2,539 1,190
Provision for bad debt 41 225
Provision for inventory write-downs (5,135 ) 951
Deferred income taxes (1,830 ) 163
Write-down of investments 1,905 15,198
(Gain) loss on derivatives (1,256 ) 178
(Gain) loss on sale of investments (2,560 ) 927
Changes in operating assets and liabilities, net (2,425 ) (52,260 )
Other 901 3,764
Net cash used in operating activities (7,069 ) (16,131 )
Cash flow from investing activities:
Additions to property, plant and equipment (9,466 ) (4,799 )
Proceeds from sale of property, plant and equipment 50 19
Additions to restricted cash -- (34 )
Sale or maturities of investments 52,757 60,086
Purchase of investments (110,420 ) (57,444 )
Other, net -- 1,032
Net cash used in investing activities (67,079 ) (1,140 )
Cash flow from financing activities:
Proceeds from exercise of stock options and stock participation plan 870 981
Net settlement of restricted stock units (192 ) --
Other, net -- (129 )
Net cash provided by financing activities 678 852
Effect of exchange rate changes on cash and cash equivalents 208 (1,263 )
Net decrease in cash and cash equivalents (73,262 ) (17,682 )
Cash and cash equivalents, beginning of period 365,761 320,464
Cash and cash equivalents, end of period $ 292,499 $ 302,782
For the three months ended September 27, 2009 and September 28, 2008, revenue and gross margin by reportable segments are as follows (in thousands, except percentages):
Three Months Ended Three Months Ended
September 27, 2009 September 28, 2008
(Unaudited) (Unaudited)
Business Segment Revenues Percentage Gross Revenues Percentage Gross
of Total Margin of Total Margin
Power Management Devices $ 66,524 37.1 % 5.3 % $ 73,778 30.2 % 21.4 %
Energy-Saving Products 37,863 21.1 34.6 46,136 18.9 42.9
HiRel 32,609 18.2 48.2 37,352 15.3 52.7
Automotive Products 13,192 7.4 18.3 17,593 7.2 33.4
Enterprise Power 27,445 15.3 39.6 37,279 15.2 42.6
Ongoing customer segments total 177,633 99.0 25.7 212,138 86.8 36.3
Intellectual Property 1,738 1.0 100.0 19,967 8.2 100.0
Ongoing segments total 179,371 100.0 26.4 232,105 95.0 41.8
Transition Services - - - 12,369 5.0 (4.7 )
Consolidated total $ 179,371 100.0 % 26.4 % $ 244,474 100.0 % 39.4 %
For the three months ended June 28, 2009, revenue and gross margin by reportable segments are as follows (in thousands, except percentages):
Three Months Ended
June 28, 2009
(Unaudited)
Business Segment Revenues Percentage Gross
of Total Margin
Power Management Devices $ 54,433 34.1 % (1.5 )%
Energy-Saving Products 30,255 19.0 21.0
HiRel 37,527 23.5 49.5
Automotive Products 12,340 7.7 8.4
Enterprise Power 19,534 12.2 36.0
Ongoing customer segments total 154,089 96.6 20.9
Intellectual Property 2,748 1.7 100.0
Ongoing segments total 156,837 98.3 22.3
Transition Services 2,720 1.7 (63.7 )
Consolidated total $ 159,557 100.0 % 20.8 %
SOURCE: International Rectifier Corporation
International Rectifier Corporation Investors: Chris Toth, 310.252.7731 Media: Graham Robertson, 310.529.0321
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