International Rectifier Reports Fiscal First Quarter Results
EL SEGUNDO, Calif.--Oct. 2, 20038, 2003--For the fiscal first quarter, International Rectifier Corporation today reported pro forma net income of $19.8 million (or $0.30 per share), which excludes charges for severance and restructuring activities previously announced in December 2002, on revenues of $234.1 million, compared to pro forma net income of $15.4 million (or $0.24 per share) on revenues of $228.4 million from the June quarter. Including the above charges of $4.0 million, IR posted a net income of $16.7 million (or $0.25 per share) for the fiscal first quarter compared to net income of $13.2 million (or $0.20 per share) including the $3.8 million charge in the June quarter. For the fiscal first quarter ended September 2002, pro forma net income was $13.9 million (or $0.21 per share) on revenues of $212.2 million. Net income was $11.0 million (or $0.17 per share) in that quarter.Orders rose 5 percent from the June quarter and 30 percent from the prior year quarter, led by a continued increase in information technology orders, up 31 percent from the June quarter and more than double from a year ago. PC orders grew dramatically from the June quarter fueled by the continuing success of Intel's Centrino(TM) and Pentium M(TM) based products. Over the past nine months, IT orders are up 70 percent from the same period a year ago and represented 47 percent of IR's total bookings in the September quarter. Bookings for the consumer market also grew, increasing 13 percent from the June quarter led by new plasma and high definition TVs, energy-efficient home appliances, and lighting.
Bookings surged in the Asia Pacific region, up 18 percent from the June quarter and 55 percent from the prior year quarter. Marking 10 years of production in China, IR announced earlier today that it intends to significantly expand its manufacturing capacity in China, IR's fastest growing region. This will be a multi-phased program with the first stage planned for completion in 2005.
ICs and advanced circuit devices sales grew 13 percent from the June quarter and 34 percent from the prior year quarter. Proprietary products accounted for 59 percent of customer sales, up from 54 percent a year ago. Overall, revenues increased 3 percent from the June quarter and 10 percent over the prior year quarter.
OEM shipments were driven by growth in the IT sector, up 18 percent from the June quarter and 54 percent from the prior year quarter. Revenues from PCs increased 24 percent from the June quarter and 66 percent from the prior year quarter. Distributor shipments to their end customers hit an 11-quarter record high while channel inventories dropped to a 3-year low.
Fiscal first quarter 2004 gross margin expanded 110 basis points from the June quarter to 35.9 percent. Gross margin on incremental sales exceeded expectations at 79 percent. The improvement resulted from a richer mix of proprietary products shipped in the quarter and cost reductions.
Chief Executive Officer Alex Lidow stated, "We see our leading position in power management continuing to drive strong results. Our focus in content-rich advanced IT applications is paying off as we continue to see widespread acceptance of our proprietary products complemented by an emerging recovery in the PC market."
In the first quarter, IR won significant new business in target markets:
-- Proprietary products including DCBus(TM), XPhase(TM), DirectFET(TM), and iPOWIR(TM) took leading positions in the top three PC and server companies as well as the top two communications networking companies. IR captured 9 new designs in Centrino and Pentium M notebooks where content is significantly higher than previous generations and 8 new designs in the next-generation servers like Intel's latest server platform, dubbed "Nocona."
-- Analog ICs and advanced circuit devices from IR were selected for upcoming Delphi programs and for Daimler-Chrysler, Peugeot, and Audi vehicles to power engine cooling systems, electronic suspension, electric fan control, direct fuel injection systems, and new engine preheat systems.
-- Samsung and Sony chose proprietary analog ICs and advanced circuit devices from IR to power their new plasma and high definition TVs.
-- IR secured five new lighting contracts from top suppliers in each region around the world including General Electric, Osram, and Mitsubishi Electric.
-- IR analog ICs continued to ramp in next-generation General Electric appliances, Maytag washers, Sanyo refrigerators and Toshiba-Carrier air conditioners.
-- Power systems and advanced circuit devices were selected in 16 new defense programs for F-22 and F-35 Joint Strike Fighter aircraft, advanced satellites, electronic flight control systems, and smart missiles for such customers as Lockheed-Martin, Boeing, Sandia National Labs, Raytheon, and Northrup-Grumman.
With indicators pointing to a sustainable recovery and IR's continued success with its proprietary products, the company has decided to divest or discontinue certain commodity products that are not strategic to its business model, totaling approximately $100 million of annual revenue. This action is being taken to further focus resources on value-added opportunities and is expected to incrementally raise overall gross margins by 200 basis points within four quarters. This is in addition to the 100 basis point gain that IR previously announced for each of the December, March, and June quarters. IR anticipates no new charges associated with these activities and expects these actions to be accretive to company earnings.
Alex Lidow noted, "The outlook for our business continues to strengthen in the December quarter with orders up 30 percent through the first three weeks compared to the same period in the September quarter. Backlog visibility is the strongest that we've seen since the year 2000, greater than 80 percent of guidance revenue. For the quarter ending December, IR expects revenues to grow about 4 to 7 percent from the September quarter with gross margins up more than 100 basis points."
In addition to disclosing results that are determined in accordance with Generally Accepted Accounting Principles (GAAP), IR also discloses pro forma or non-GAAP results of operations that exclude costs related to restructuring activities. IR discloses such pro forma information in order to reflect underlying operating performance and to permit shareholders and other readers to better assess the company's operating results.
The following reconciles reported net income and earnings per share to pro forma net income and earnings per share for the fiscal quarters ended September 30, 2003, June 30, 2003, and September 30, 2002:
Sept. 30, June 30, Sept. 30,
2003 2003 2002
--------- -------- ---------
Reported net income $16,731 $13,238 $10,971
Costs from restructuring activities
(net of tax benefit) 3,062 2,157 2,917
--------- -------- ---------
Pro forma net income $19,793 $15,395 $13,888
========= ======== =========
Reported net income per common share,
basic $0.26 $0.21 $0.17
Costs from restructuring activities
(net of tax benefit) .05 .04 .05
--------- -------- ---------
Pro forma net income per common share,
basic $0.31 $0.25 $0.22
========= ======== =========
Reported net income per common share,
diluted $0.25 $0.20 $0.17
Costs from restructuring activities
(net of tax benefit) .05 .04 .05
Effect of dilutive securities - - (.01)
--------- -------- ---------
Pro forma net income per common share,
diluted $0.30 $0.24 $0.21
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International Rectifier is a world leader in power management technology. IR's analog and mixed signal ICs, advanced circuit devices, integrated power systems and components enable high performance computing and eliminate energy waste from motors, the world's single largest consumer of electricity. Leading manufacturers of computers, energy efficient appliances, lighting, automobiles, satellites, aircraft, and defense systems rely on IR's power management benchmarks to power their next generation products. For more information, go to www.irf.com.
International Rectifier Corporation and Subsidiaries
Unaudited Consolidated Statement of Income
(In thousands except per share amounts)
Three Months Ended
September 30
-------------------
2003 2002
--------- ---------
Revenues $234,129 $212,161
Cost of sales 149,985 137,886
--------- ---------
Gross profit 84,144 74,275
Selling and administrative expense 36,583 34,791
Research and development expense 20,663 19,531
Amortization of acquisition-related intangibles 1,389 1,327
Impairment of assets, restructuring, severance and
other charges 4,029 3,838
Other (income) expense, net 261 (308)
Interest (income) expense, net (795) 661
--------- ---------
Income before income taxes 22,014 14,435
Provision for income taxes 5,283 3,464
--------- ---------
Net income $16,731 $10,971
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Net income per common share
Basic $0.26 $0.17
========= =========
Diluted $0.25 $0.17
========= =========
Average common shares outstanding - basic 64,496 63,800
========= =========
Average common shares and potentially dilutive
securities outstanding - diluted 66,869 64,744
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International Rectifier Corporation and Subsidiaries
Condensed Consolidated Balance Sheet
(In thousands)
(Unaudited)
September 30 June 30
2003 2003
----------- -----------
Assets
Current assets:
Cash, cash equivalents and cash investments $512,745 $492,472
Trade accounts receivable 141,104 138,097
Inventories, net 165,596 173,577
Deferred income taxes 27,800 32,211
Prepaid expenses and other receivables 44,507 38,482
----------- -----------
Total current assets 891,752 874,839
Long-term cash investments 198,963 229,020
Property, plant and equipment, net 351,071 346,557
Other assets 372,303 371,436
----------- -----------
Total assets $1,814,089 $1,821,852
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Bank loans $23,307 $17,121
Long-term debt, due within one year 1,126 1,183
Accounts payable 64,409 86,911
Accrued salaries, wages and commissions 25,369 28,951
Other accrued expenses 62,131 77,567
----------- -----------
Total current liabilities 176,342 211,733
Long-term debt, less current maturities 570,194 579,379
Other long-term liabilities 15,203 14,208
Deferred income taxes 10,498 4,293
Stockholders' equity:
Common stock 64,590 64,186
Capital contributed in excess of par value
of shares 706,345 699,446
Retained earnings 224,646 207,915
Accumulated other comprehensive income 46,271 40,692
----------- -----------
Total stockholders' equity 1,041,852 1,012,239
----------- -----------
Total liabilities and stockholders'
equity $1,814,089 $1,821,852
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