International Rectifier Reports Results for June Quarter and Fiscal Year
EL SEGUNDO, Calif.--July 26, 2001--International Rectifier Corp. today reported results for its fourth fiscal quarter and year ended June 2001.Before a restructuring charge, the company reported fourth-quarter income of $15.1 million (or $0.23 per share) on revenues of $185.1 million, compared with net income of $33.9 million (or $0.52 per share) on revenues of $232.0 million in the prior-year quarter. Including a pre-tax restructuring charge of $86.4 million, IR reported a net loss of $48.8 million (or $0.78 per share).
For the year ended June 2001, excluding the fourth-quarter restructuring charge, the company reported income of $151.6 million (or $2.34 per share) on record revenues of $978.6 million, compared with net income of $68.3 million (or $1.19 per share) on revenues of $753.3 million in the prior year. Including the charge, IR reported record net income of $87.6 million (or $1.35 per share) for the year.
Fourth-quarter results reflected a sharp downturn in key market segments. Shipments into the information technology segment, which accounted for 51 percent of IR's business in the fiscal year, declined in the fourth quarter by 64 percent sequentially. Late in the quarter, weakness in demand also spread to the industrial market segment. Pricing for multi-market products declined sequentially by nearly 8 percentage points, about a point more than the company expected.
In the face of widespread concerns about semiconductor industry conditions through the balance of the calendar year, the company now expects September-quarter revenues to be approximately 5 to 10 percent below the June level and to represent the trough of the current business cycle. Gross margins are expected to bottom-out this quarter at 37 percent, plus or minus a point or so. Fiscal 2002 revenues are now expected to be flat-to-down 10 percent from the prior year.
In light of depressed business conditions, IR is taking steps to align its cost structure with its revised outlook and financial targets. The company recorded an $86.4 million restructuring charge for obsolete inventory ($38.4 million), asset impairment ($45.2 million), and severance ($2.8 million). During the quarter, the company implemented the first phase of a planned 10 percent reduction in worldwide workforce. These measures are expected to reduce costs by approximately $35 million by the end of calendar 2002.
As expected, June-quarter gross margin before the restructuring charge was 38.8 percent, compared with a record 41.6 percent in the March quarter and 38.5 percent in the year-ago quarter. Strength in higher-margin proprietary products helped to counter the decline in component pricing.
Including the charge, IR recorded a June-quarter gross margin of 18.1 percent. For the year ended June, gross margin before the fourth-quarter restructuring charge was 40.3 percent versus 35.6 percent in the prior year. Including the charge, fiscal 2001 gross margin was 36.4 percent.
Royalties contributed $13.5 million in the quarter, compared with $13.6 million in the preceding quarter and $11.1 million in the year-ago quarter. For the year ended June 2001, royalties contributed $51.1 million, compared with $36.4 million in the prior year.
Despite what is widely seen as the worst industry downturn in semiconductor history, June-quarter shipments of IR's proprietary products (analog ICs, advanced-circuit devices, and power systems) grew by 25 percent year-to-year. These products now comprise 43 percent of total revenues.
IR continued to penetrate target applications with value-added technology. The company won sole-source positions for its power systems on an undersea fiber-optic cable installation and on two integrated starter-alternator programs for U.S. and European vehicles.
Design wins for the company's analog ICs included the next generation of product from the industry leader in graphics cards and processor power management for latest-generation Pentium(R)4 motherboards, as well as sole-source designs on high-end Class D audio amplifiers and plasma displays.
IR's advanced-circuit devices were designed into motor controls for new energy-efficient appliances and into leading notebook computers built on Pentium(R)3 Speedstep(TM) and AMD Athlon(TM) platforms. The company also secured sole-source positions for proprietary products designed into six new satellite programs for industry leaders such as Boeing, Lockheed Martin, and Honeywell.
Chief Executive Officer Alex Lidow noted, "With every new product cycle, market-leading customers rely more heavily on proprietary power management technology from IR for current- and next-generation products. Our design wins are capturing more silicon content in target applications, which should provide real momentum when industry conditions turn up.
"Meanwhile, we believe that IR's business model has significantly raised the floor on gross margins compared to previous down-cycles. We are in the strongest financial position in the company's history, and with $850 million in cash, we will continue to invest strategically to lengthen our competitive lead and enhance our profit potential."
International Rectifier is a world leader in power management technology that improves functionality, speed, compactness, and portability in information technology and other end products. IR's analog ICs, advanced-circuit devices, power systems, and components enable Internet hardware to gain speed and reliability, allow portable electronics to run longer off a single charge, improve automotive fuel efficiency, and cut energy consumption in home appliances and industrial motors.
International Rectifier Corp. and Subsidiaries
Unaudited Consolidated Statement of Operations
(In thousands except per share amounts)
Three Months Ended Twelve Months Ended
June 30 June 30
2001 2000 2001 2000
Revenues 185,087 232,031 978,585 753,327
Cost of sales 151,655 142,794 622,394 485,240
Gross profit 33,432 89,237 356,191 268,087
Selling & administrative expense 34,060 32,108 137,662 114,664
Research & development expense 19,843 13,725 69,648 47,180
Amortization of goodwill and
other intangibles 2,642 255 5,996 255
Impairment of assets and
restructuring charge 47,992 -- 47,992 --
Operating profit (loss) (71,105) 43,149 94,893 105,988
Other income (expense):
Interest, net 4,903 3,446 21,723 (6,012)
Other, net 248 489 1,765 1,564
Income (loss) before
income taxes (65,954) 47,084 118,381 101,540
Provision (benefit) for
income taxes (17,131) 13,183 30,732 28,431
Income (loss) before
extraordinary charge (48,823) 33,901 87,649 73,109
Extraordinary charge on
early extinguishment of debt,
net of income tax benefit
of $1,856 -- -- -- (4,772)
Net income (loss) $ (48,823) $ 33,901 $ 87,649 $ 68,337
Net income (loss) per common share:
Basic:
Income (loss) before
extraordinary charge: $ (0.78) $ 0.55 $ 1.41 $ 1.33
Extraordinary charge -- -- -- (0.08)
Net income (loss) per
common share - Basic $ (0.78) $ 0.55 $ 1.41 $ 1.25
Diluted:
Income (loss) before
extraordinary charge: $ (0.78) $ 0.52 $ 1.35 $ 1.27
Extraordinary charge -- -- -- (0.08)
Net income (loss) per
common share - Diluted $ (0.78) $ 0.52 $ 1.35 $ 1.19
Average common shares
outstanding - Basic 62,775 61,438 62,215 54,803
Average common shares and
potentially dilutive securities
outstanding - Diluted 62,775 65,700 64,800 57,662
International Rectifier Corp. and Subsidiaries
Consolidated Balance Sheet
(In thousands)
June 30 June 30
2001 2000
Assets
Current assets:
Cash, cash equivalents and
short-term investments $ 851,361 $ 254,336
Trade accounts receivable, net 138,595 180,349
Inventories 149,375 117,974
Deferred income taxes 31,339 21,953
Prepaid expenses and other receivables 38,511 17,011
Total current assets 1,209,181 591,623
Property, plant and equipment, net 381,916 390,787
Other assets 158,888 43,560
Total assets $ 1,749,985 $1,025,970
Liabilities and Stockholders' Equity
Current liabilities:
Bank loans $ 13,343 $ 12,089
Long-term debt, due within one year 1,363 1,984
Accounts payable 87,130 85,580
Accrued salaries, wages and commissions 20,414 17,757
Other accrued expenses 74,003 32,750
Total current liabilities 196,253 150,160
Long-term debt, less current maturities 552,751 4,589
Other long-term liabilities 6,300 8,486
Deferred income taxes 15,024 18,669
Stockholders' equity:
Common stock 63,132 61,594
Capital contributed in excess of
par value of shares 676,783 627,118
Retained earnings 248,854 161,205
Accumulated other comprehensive loss (9,112) (5,851)
Total stockholders' equity 979,657 844,066
Total liabilities and stockholders'
equity $ 1,749,985 $1,025,970