International Rectifier Reports March-Quarter Results; Company Sees Largest Order Increase in Seven Quarters
EL SEGUNDO, Calif.--April 25, 2002--International Rectifier Corporation today reported net income of $12.2 million (or $0.19 per share) on revenues of $178.6 million for the quarter ended March, compared to net income of $10.8 million (or $0.17 per share) on revenue of $172.1 million in the immediately-preceding quarter.The company posted net income of $47.9 million (or $0.73 per share) on revenues of $276.0 million in the comparable prior-year quarter.
March-quarter orders climbed 13 percent quarter-to-quarter, the largest sequential increase since the quarter ended June 2000. Orders for proprietary products (analog ICs, advanced-circuit devices, and power systems) represented more than half of total bookings.
Revenues from proprietary products comprised half of total revenues, compared to 37 percent in the prior-year quarter. IR revenues from the Information Technology market rose by 22 percent sequentially, reflecting the company's rising content in Pentium 4 systems. In the Industrial market, IR recorded a 19 percent sequential increase, reflecting a pick-up in capital equipment spending. In the Consumer Electronics market, IR posted 17 percent sequential revenue growth, led by new applications in leading-edge home appliances.
IR's March-quarter shipments into the distribution channel declined by 6 percent sequentially. In contrast, distributor sales of IR products rose by 7 percent sequentially, the largest increase in six quarters. These dynamics in the quarter further compressed channel inventories, stretched leadtimes, and triggered a 19 percent sequential rise in distributor orders, the strongest growth since the quarter ended March 2000.
March-quarter gross margin was 35.1 percent, compared to 35.2 percent in the prior quarter and 41.6 percent in the year-ago quarter. Strength in higher-margin proprietary products helped to counter the impact of lower production volumes for components, a 3 percent price decline, and lower royalties. Royalties were $11.5 million compared to $12.5 million in the immediately preceding quarter, consistent with company guidance.
Chief Executive Officer Alex Lidow noted, "Our drive to a richer business mix is increasing IR's structural profitability. As proprietary products form a growing share of our business and component pricing continues to stabilize, IR is showing higher gross margin on customer shipments and in our backlog. March-quarter gross margin remained just six points below peak levels."
IR continued to strengthen its franchise in target markets with significant new business that demonstrates the value of its proprietary technology.
| -- | During the quarter, the first electronic steering program to incorporate a power system from IR went into production for a major European automaker. IR's analog ICs won multi-year sole-source business with broad automotive applications at Bosch, where the first program will go into production in the current quarter. |
| -- | IR analog ICs won sole-source motion control designs in next-generation smart washers from Maytag, GE, and Whirlpool. |
| -- | IR technology won proprietary slots in new Intel-powered servers, Apple's iMac, and next-generation routers and switches for the industry leader in networking technology. |
| -- | IR power systems won sole-source designs on new missile and satellite programs at Raytheon, as well as a British Aerospace program for electronic countermeasure systems on military aircraft. Boeing selected proprietary advanced-circuit devices from IR for a new satellite design. |
The company also announced three acquisitions that reflected its focus on proprietary technology for target markets. In March, IR acquired the assets of European Semiconductor Manufacturing (ESM), Ltd., which include 80,000 sq. ft. of wafer fabrication capacity with leading-edge mixed-signal and analog process capabilities to support growth in the company's most advanced proprietary products. Later in the month, the company added to its power management product offerings for defense and aerospace applications by acquiring the "high-reliability" power MOSFET line of Fairchild Semiconductor. Shortly after the close of the quarter, IR announced plans to acquire TechnoFusion GmbH, a leading maker of power generation systems for automotive electronics, from Royal Philips Electronics. The acquisition, which is expected to close by the end of June, complements IR's leadership in advanced automotive power systems with proprietary architectures, a highly-skilled staff, and an excellent customer base. All three acquisitions are expected to be accretive within the first year.
Alex Lidow noted, "These acquisitions enhance IR's position in strategic markets. At a time when market conditions show substantial improvement, our technology and manufacturing capabilities position the company to address the best opportunities in the field of power management. We closed the March quarter with the highest backlog in five quarters, and we expect to resume year-on-year revenue growth in the June quarter."
In its fourth fiscal quarter, ending June, IR expects to grow revenues sequentially by 10 percent, plus or minus a couple of points. For the next fiscal year, the company is raising its revenue target to about 35 percent from earlier guidance of 25 to 30 percent, with gross margin of 45 to 50 percent on incremental revenues and overall gross margin nearing peak levels by June 2003.
For the nine months ended March, net income of $32.6 million (or $0.50 per share) on revenues of $519.2 million compared to prior-year net income of $136.5 million (or $2.07 per share) on revenues of $793.5 million.
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. The company is the pioneer and market leader in the $4 billion power MOSFET industry, and over 20 companies are licensed under its power MOSFET patents. IR serves market leaders around the world, and more than half its revenue comes from outside the United States.
The foregoing material includes some forward-looking statements made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. We caution that such statements are subject to a number of uncertainties, and actual results may differ materially. Factors that could affect the company's actual results include the failure of market demand to materialize as anticipated; weakness or program or order postponements in the information technology segments of our business; the effectiveness of cost controls and cost reductions; litigation and other unexpected costs associated with cost-reduction efforts, including reductions in force and the transfer and consolidation of product lines and equipment; the effectiveness of integration of acquisitions into our operations; the ability or the timing of the company to achieve strategic acquisitions and the effect of associated costs; the accuracy of customers' forecasts; product returns and recalls; market and sector conditions that affect our customers, licensees, and suppliers; introduction, acceptance, availability, and continued demand and growth of new and high-performance products; delays in transferring and ramping production lines or completing customer qualifications; company and market impact due to the cancellation or delays in customer and/or industry programs and/or orders; the company's mix of product shipments; availability of adequate capacity and unanticipated costs of refurbishment or replacement of equipment; pricing pressures; failure of suppliers and subcontractors to meet their delivery commitments; unfavorable changes in industry and competitive conditions; impact of any disruption in, or increased cost of, electricity and/or other critical supplies; economic conditions in the company's markets around the world and the timing of changes in market conditions; changes in interest and investment rates; impacts on our business or financial condition due to changes in currency valuation or to the euro conversion; impact of changes in accounting methods; the impact of changes in laws and regulations, including tax, trade, and export regulations and policies; the actual results of any outstanding litigation; and other uncertainties disclosed in the company's reports filed with the Securities and Exchange Commission, including its most recent report on form 10-K. To the foregoing factors should be added the financial and other disruptive effects of terrorist actions.
NOTE: A conference call will begin today at 5:15 pm Eastern daylight time (2:15 pm Pacific daylight time). Participants can join the call by dialing 212.896.6123 or by logging onto the Internet at http://www.irf.com, http://www.vcall.com, or http://www.streetevents.com at least 15 minutes ahead of the start time. A replay of the call will be available through 4:15 pm Pacific daylight time (7:15 PM Eastern daylight time) on Tuesday, April 30. To hear the replay, phone 800.633.8284 (for international callers 858.812.6440) and use reservation # 2044-9001 or use the websites listed above.
International Rectifier Corporation and Subsidiaries
Unaudited Consolidated Statement of Income
(In thousands except per share amounts)
Three Months Ended Nine Months Ended
March 31 March 31
2002 2001 2002 2001
Revenues $ 178,633 $ 275,994 $ 519,212 $ 793,498
Cost of sales 115,988 161,044 336,073 470,739
Gross profit 62,645 114,950 183,139 322,759
Selling & administrative
expense 31,171 35,111 92,443 103,602
Research & development
expense 16,646 18,169 50,523 49,805
Amortization of
acquisition-related
intangibles 968 2,663 2,904 3,354
Operating profit 13,860 59,007 37,269 165,998
Other income (expense)
Interest, net 1,055 5,039 5,308 16,820
Other, net 1,581 542 1,450 1,517
Income before income taxes 16,496 64,588 44,027 184,335
Provision for income taxes 4,289 16,729 11,447 47,863
Net income $ 12,207 $ 47,859 $ 32,580 $ 136,472
Net income per common share
Basic $ 0.19 $ 0.77 $ 0.51 $ 2.20
Diluted $ 0.19 $ 0.73 $ 0.50 $ 2.07
Average common shares
outstanding - Basic 63,415 62,248 63,321 62,028
Average common shares
and potentially dilutive
securities outstanding -
Diluted 65,453 65,943 65,105 66,034
International Rectifier Corporation and Subsidiaries
Unaudited Consolidated Balance Sheet
(In thousands)
June 30
March 31 2001
2002 (Audited)
Assets
Current assets:
Cash, cash equivalents and
short-term investments $ 354,899 $ 851,361
Trade accounts receivable, net 139,466 138,595
Inventories 168,972 149,375
Deferred income taxes 23,371 31,339
Prepaid expenses and other
receivables 36,180 38,511
Total current assets 722,888 1,209,181
Long-term investments in
debt securities 350,992 -
Property, plant and equipment, net 455,932 381,916
Other assets 219,860 155,365
Total assets $1,749,672 $1,746,462
Liabilities and Stockholders' Equity
Current liabilities:
Bank loans $ 15,929 $ 13,343
Long-term debt, due within one year 1,108 1,363
Accounts payable 56,578 87,130
Accrued salaries, wages and commissions 21,774 20,414
Other accrued expenses 39,695 73,725
Total current liabilities 135,084 195,975
Long-term debt, less current maturities 550,888 552,751
Other long-term liabilities 18,333 6,300
Deferred income taxes 20,205 11,779
Stockholders' equity:
Common stock 63,493 63,132
Capital contributed in excess of
par value of shares 685,522 676,783
Retained earnings 281,434 248,854
Accumulated other comprehensive loss (5,287) (9,112)
Total stockholders' equity 1,025,162 979,657
Total liabilities and
stockholders' equity $1,749,672 $1,746,462