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02.02.2010 21:15:00
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International Rectifier Announces Second Quarter Fiscal Year 2010 Results
International Rectifier Corporation (NYSE:IRF) today announced financial results for the second quarter (ended December 27, 2009) of its fiscal year 2010. Revenue for the second quarter fiscal year 2010 was $210.2 million, a 17.2% increase from $179.4 million in the first quarter fiscal year 2010 and a 10.8% increase from $189.7 million in the second quarter fiscal year 2009.
International Rectifier reported net income of $28.3 million, or $0.39 per fully diluted share for second quarter fiscal year 2010, compared with a net loss of $16.9 million, or $0.24 per share, in the prior quarter, and a net loss of $189.8 million, or $2.61 per share in the second quarter fiscal year 2009. The results for the second quarter fiscal year 2010 included $27.8 million of tax benefits from a release of tax reserves.
Gross margin was 29.9%, up from 26.4% in the prior quarter and down from 33.9% in the second quarter fiscal year 2009.
Research and development expenses for the second quarter fiscal year 2010 were $24.2 million, up from $22.8 million in the prior quarter.
Selling, general and administrative expenses for the second quarter fiscal year 2010 were $37.3 million, compared with $43.6 million in the prior quarter. Selling, general and administrative expenses for the second quarter fiscal year 2010 included $3.2 million of cost benefits which are not expected to recur in the March quarter.
Cash, cash equivalents and marketable investments totaled $549.5 million at the end of the second quarter fiscal year 2010, including restricted cash of $3.4 million.
Net cash used in operating activities for the second quarter fiscal year 2010 was $27.4 million. This included a previously reported $45.0 million payment related to a litigation settlement.
During the second quarter fiscal year 2010, the Company purchased 260,683 shares of its common stock under its existing share repurchase program. The Company had 71,072,883 shares outstanding at the end of the quarter.
Third Quarter Outlook
International Rectifier President and Chief Executive Officer Oleg Khaykin stated: "We believe that IR’s growth momentum and improving operational performance reflect the strategic repositioning undertaken by the Company over the past eighteen months.
"Our design win activity remains strong across all our market segments and we continue to see robust customer demand in the March quarter. We currently expect third quarter revenue to range from $225 million to $235 million and gross margin to range from 34% to 35%.
"Increased focus on energy efficiency continues to drive demand for power management semiconductors. Our revitalized product portfolio has gained share over the past year and has led to increased orders in key end market segments such as servers, appliances, notebooks and high definition televisions,” Khaykin concluded.
Segment Table Information
The customer segment tables included with this release for the Company’s fiscal quarters ended December 27, 2009, September 27, 2009 and December 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 second quarter report on Form 10-Q with the Securities and Exchange Commission on Wednesday, February 3, 2010. This financial report will be available for viewing and download at http://investor.irf.com.
Adjustment to Opening Retained Earnings
During fiscal years 1998 through 2006 the Company reported foreign currency gains and losses from intra-company notes with its foreign subsidiaries in other comprehensive income. These gains and losses should have been reported in other expense, net and, as a result, should have affected net income (loss). The effect of the correction is an increase in retained earnings of $13.3 million and a decrease in accumulated other comprehensive income of $13.3 million. See the attached tables for the effect of this adjustment on stockholders’ equity as of September 27, 2009, June 28, 2009 and December 28, 2008.
NOTE: A conference call will begin today at 5:15 p.m. Eastern time (2:15 p.m. Pacific time). All participants, both in the U.S. and international, may join the call by dialing 706-679-3195 by 2:10 p.m. Pacific time. In order to join this conference call, participants will be required to provide the Conference Passcode – "International Rectifier”. Participants may also listen over the Internet at http://investor.irf.com. To listen to the live call, please go to the web site at least 15 minutes early to register, download, and install any necessary audio software.
A taped replay of this call will be available from approximately 5:15 p.m. Pacific time on Tuesday, February 2, through Tuesday, February 9, 2010. To listen to the replay by phone, call 800-642-1687 or 706-645-9291 for international callers and enter reservation number 52875492. 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.
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 lower than expected 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 and any inability by us to satisfy or to timely satisfy customer 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; delays in launching new technology products; our ability to maintain current IP licenses and obtain new IP licenses; costs arising from pending and threatened litigation or claims; inefficiencies from swine flu and similar influenza; 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.
| INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES | ||||||||||||
| UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS | ||||||||||||
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(In thousands, except per share data) |
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| Three Months Ended | ||||||||||||
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December 27, |
September 27, |
December 28, |
||||||||||
| Revenues | $ | 210,244 | $ | 179,371 | $ | 189,746 | ||||||
| Cost of sales | 147,426 | 132,014 | 125,403 | |||||||||
| Gross profit | 62,818 | 47,357 | 64,343 | |||||||||
| Selling, general and administrative expense | 37,285 | 43,582 | 61,528 | |||||||||
| Research and development expense | 24,215 | 22,827 | 24,901 | |||||||||
| Amortization of acquisition-related intangible assets | 1,094 | 1,094 | 1,098 | |||||||||
| Asset impairment, restructuring and other charges | (30 | ) | 167 | 48,976 | ||||||||
| Operating income (loss) | 254 | (20,313 | ) | (72,160 | ) | |||||||
| Other expense, net | 1,009 | 778 | 10,626 | |||||||||
| Interest (income) expense, net | (2,488 | ) | (3,970 | ) | 769 | |||||||
| Income (loss) before income taxes | 1,733 | (17,121 | ) | (83,555 | ) | |||||||
| Provision for (benefit from) income taxes | (26,585 | ) | (221 | ) | 106,197 | |||||||
| Net income (loss) | $ | 28,318 | $ | (16,900 | ) | $ | (189,752 | ) | ||||
| Net income (loss) per share-basic | $ | 0.40 | $ | (0.24 | ) | $ | (2.61 | ) | ||||
| Net income (loss) per share-diluted | $ | 0.39 | $ | (0.24 | ) | $ | (2.61 | ) | ||||
| Average common shares outstanding—basic | 71,605 | 71,218 | 72,692 | |||||||||
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Average common shares and potentially dilutive securities outstanding—diluted |
71,827 | 71,218 | 72,692 | |||||||||
| INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES | |||||||||
| UNAUDITED CONSOLIDATED BALANCE SHEETS | |||||||||
| (In thousands) | |||||||||
|
December 27, |
September 27, |
December 28, |
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| Assets | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $209,406 | $292,499 | $399,390 | ||||||
| Restricted cash | 3,405 | 3,925 | 2,925 | ||||||
| Short-term investments | 260,727 | 199,116 | 112,209 | ||||||
| Trade accounts receivable, net | 127,141 | 112,928 | 86,997 | ||||||
| Inventories | 157,973 | 152,586 | 175,508 | ||||||
| Current deferred tax assets | 1,257 | 1,248 | 7,425 | ||||||
| Prepaid expenses and other receivables | 59,431 | 30,002 | 54,861 | ||||||
| Total current assets | 819,340 | 792,304 | 839,315 | ||||||
| Restricted cash | — | — | 15,080 | ||||||
| Long-term investments | 75,996 | 95,278 | 170,359 | ||||||
| Property, plant and equipment, net | 352,855 | 358,684 | 380,913 | ||||||
| Goodwill | 74,955 | 74,955 | 98,822 | ||||||
| Acquisition-related intangible assets, net | 9,633 | 10,727 | 14,030 | ||||||
| Long-term deferred tax assets | 7,049 | 7,913 | 467 | ||||||
| Other assets | 47,483 | 55,652 | 44,717 | ||||||
| Total assets | $1,387,311 | $1,395,513 | $1,563,703 | ||||||
| Liabilities and Stockholders’ Equity | |||||||||
| Current liabilities: | |||||||||
| Accounts payable | $81,960 | $70,627 | $62,525 | ||||||
| Accrued income taxes | 13,271 | 8,417 | 37,982 | ||||||
| Accrued salaries, wages and commissions | 25,039 | 20,890 | 21,930 | ||||||
| Current deferred tax liabilities | 2,793 | 2,793 | 2,266 | ||||||
| Other accrued expenses | 68,292 | 116,201 | 91,866 | ||||||
| Total current liabilities | 191,355 | 218,928 | 216,569 | ||||||
| Long-term deferred tax liabilities | 5,188 | 5,266 | 13,874 | ||||||
| Deferred gain on divestiture | — | — | 116,341 | ||||||
| Other long-term liabilities | 48,352 | 53,270 | 55,372 | ||||||
| Total liabilities | 244,895 | 277,464 | 402,156 | ||||||
| Commitments and contingencies | |||||||||
| Stockholders’ equity: | |||||||||
| Common shares | 73,243 | 73,181 | 72,928 | ||||||
| Capital contributed in excess of par value of shares | 988,113 | 984,916 | 975,878 | ||||||
| Treasury stock, at cost | (28,640 | ) | (23,632 | ) | (7,431 | ) | |||
| Retained earnings | 109,780 | 81,462 | 151,841 | ||||||
| Accumulated other comprehensive income | (80 | ) | 2,122 | (31,669 | ) | ||||
| Total stockholders’ equity | 1,142,416 | 1,118,049 | 1,161,547 | ||||||
| Total liabilities and stockholders’ equity | $1,387,311 | $1,395,513 | $1,563,703 | ||||||
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(1) During the second quarter we determined that in prior years, specifically fiscal 1998 through 2006, net foreign currency gains of $13.3 million related to intra-company loans with the Company’s foreign subsidiaries which should have been recorded in other expense, net and, as a result, should have impacted net income (loss), were recorded in other comprehensive income. This adjustment is reflected in the September 27, 2009 and December 28, 2008 balance sheets above. See adjustment of opening retained earnings table in this release. |
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(2) 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. |
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| INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES | |||||||||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
| (In thousands) | |||||||||
|
December 27, |
September 27, |
December 28, |
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| Cash flow from operating activities: | |||||||||
| Net income (loss) | $28,318 | $(16,900 | ) | $(189,752 | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | |||||||||
| Depreciation and amortization | 17,373 | 16,558 | 15,755 | ||||||
| Amortization of acquisition-related intangible assets | 1,094 | 1,093 | 1,098 | ||||||
| Stock compensation expense | 2,591 | 2,539 | 1,181 | ||||||
| Provision for bad debt | (1,811 | ) | 41 | (34 | ) | ||||
| Provision for inventory write-downs | (999 | ) | (5,135 | ) | 3,984 | ||||
| Deferred income taxes | (244 | ) | (1,830 | ) | 95,756 | ||||
| Other-than-temporary impairment of investments | 99 | 1,905 | 10,320 | ||||||
| (Gain) loss on derivatives | (1,664 | ) | (1,256 | ) | — | ||||
| Net settlement of restricted stock units for tax withholdings | (62 | ) | (192 | ) | (228 | ) | |||
| (Gain) loss on sale of investments | (1,329 | ) | (2,560 | ) | 5,035 | ||||
| Asset impairment | — | — | 50,824 | ||||||
| Changes in operating assets and liabilities, net | (71,113 | ) | (2,425 | ) | 15,612 | ||||
| Other | 306 | 901 | 2,254 | ||||||
| Net cash (used in) provided by operating activities | (27,441 | ) | (7,261 | ) | 11,805 | ||||
| Cash flow from investing activities: | |||||||||
| Additions to property, plant and equipment | (10,637 | ) | (9,466 | ) | (6,266 | ) | |||
| Proceeds from sale of property, plant and equipment | 7 | 50 | 162 | ||||||
| Sale or maturities of investments | 76,903 | 52,757 | 165,515 | ||||||
| Reductions (additions) to restricted cash | 520 | — | (34 | ) | |||||
| Purchase of investments | (118,292 | ) | (110,420 | ) | (65,040 | ) | |||
| Other, net | — | — | (1,032 | ) | |||||
|
Net cash (used in) provided by investing activities |
(51,499 | ) | (67,079 | ) | 93,305 | ||||
| Cash flow from financing activities: | |||||||||
| Proceeds from exercise of stock options | 719 | 870 | 382 | ||||||
| Reductions in restricted cash | — | — | 1,416 | ||||||
| Purchase of treasury stock | (5,008 | ) | — | (7,431 | ) | ||||
| Other, net | — | — | 131 | ||||||
| Net cash (used in) provided by financing activities | (4,289 | ) | 870 | (5,502 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | 136 | 208 | (3,000 | ) | |||||
| Net (decrease) increase in cash and cash equivalents | (83,093 | ) | (73,262 | ) | 96,608 | ||||
| Cash and cash equivalents, beginning of period | 292,499 | 365,761 | 302,782 | ||||||
| Cash and cash equivalents, end of period | $209,406 | $292,499 | $399,390 | ||||||
For the three months ended December 27, 2009 and December 28, 2008, revenue and gross margin by reportable segments are as follows (in thousands, except percentages):
|
Three Months Ended |
Three Months Ended |
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| Business Segment | Revenues |
Percentage |
Gross Margin |
Revenues |
Percentage |
Gross Margin |
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| Power Management Devices | $75,994 | 36.1 | % | 9.9 | % | $64,134 | 33.8 | % | 19.4 | % | ||||||
| Energy-Saving Products | 40,358 | 19.2 | 36.4 | 39,422 | 20.8 | 43.3 | ||||||||||
| HiRel | 39,797 | 18.9 | 50.9 | 39,433 | 20.8 | 56.7 | ||||||||||
| Automotive Products | 16,935 | 8.1 | 13.7 | 13,474 | 7.1 | 27.9 | ||||||||||
| Enterprise Power | 33,741 | 16.0 | 43.2 | 19,350 | 10.2 | 42.4 | ||||||||||
| Ongoing customer segments total | 206,825 | 98.4 | 28.7 | 175,813 | 92.7 | 36.3 | ||||||||||
| Intellectual Property | 3,419 | 1.6 | 100.0 | 2,594 | 1.3 | 100.0 | ||||||||||
| Ongoing segments total | 210,244 | 100.0 | 29.9 | 178,407 | 94.0 | 37.3 | ||||||||||
| Transition Services |
— |
— | — | 11,339 | 6.0 | (18.6 | ) | |||||||||
| Consolidated total | $210,244 | 100.0 | % | 29.9 | % | $189,746 | 100.0 | % | 33.9 | % | ||||||
For the three months ended September 27, 2009, revenue and gross margin by reportable segments are as follows (in thousands, except percentages):
|
Three Months Ended |
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| Business Segment | Revenues |
Percentage of Total |
Gross Margin |
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| Power Management Devices | $66,524 | 37.1 | % | 5.3 | % | |||
| Energy-Saving Products | 37,863 | 21.1 | 34.6 | |||||
| HiRel | 32,609 | 18.2 | 48.2 | |||||
| Automotive Products | 13,192 | 7.4 | 18.3 | |||||
| Enterprise Power | 27,445 | 15.3 | 39.6 | |||||
| Ongoing customer segments total | 177,633 | 99.0 | 25.7 | |||||
| Intellectual Property | 1,738 | 1.0 | 100.0 | |||||
| Ongoing segments total | 179,371 | 100.0 | 26.4 | |||||
| Transition Services |
— |
— |
— |
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| Consolidated total | $179,371 | 100.0 | % | 26.4 | % | |||
Adjustment of Opening Retained Earnings
The effect of the adjustments to the previously reported retained earnings and accumulated other comprehensive income as of September 27, 2009, June 28, 2009, and December 28, 2008 to properly reflect these balances in the recording of net foreign currency gains related to intra-company loans are summarized below (in thousands):
| September 27, 2009 | |||||||||
| As Previously Reported | Effect of Adjustment |
As Adjusted |
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| Stockholders’ equity: | |||||||||
| Common shares | $73,181 | $— | $73,181 | ||||||
| Capital contributed in excess of par value of shares | 984,916 | — | 984,916 | ||||||
| Treasury stock, at cost | (23,632 | ) | — | (23,632 | ) | ||||
| Retained earnings | 68,115 | 13,347 | 81,462 | ||||||
| Accumulated other comprehensive income | 15,469 | (13,347 | ) | 2,122 | |||||
| Total stockholders’ equity | $1,118,049 | $— | $1,118,049 | ||||||
| June 28, 2009 | |||||||||
| As Previously Reported | Effect of Adjustment |
As Adjusted |
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| Stockholders’ equity: | |||||||||
| Common shares | $73,101 | $— | $73,101 | ||||||
| Capital contributed in excess of par value of shares | 981,786 | — | 981,786 | ||||||
| Treasury stock, at cost | (23,632 | ) | — | (23,632 | ) | ||||
| Retained earnings | 85,015 | 13,347 | 98,362 | ||||||
| Accumulated other comprehensive income | 18,982 | (13,347 | ) | 5,635 | |||||
| Total stockholders’ equity | $1,135,252 | $— | $1,135,252 | ||||||
| December 28, 2008 | |||||||||
| As Previously Reported | Effect of Adjustment |
As Adjusted |
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| Stockholders’ equity: | |||||||||
| Common shares | $72,928 | $— | $72,928 | ||||||
| Capital contributed in excess of par value of shares | 975,878 | — | 975,878 | ||||||
| Treasury stock, at cost | (7,431 | ) | — | (7,431 | ) | ||||
| Retained earnings | 138,494 | 13,347 | 151,841 | ||||||
| Accumulated other comprehensive income | (18,322 | ) | (13,347 | ) | (31,669 | ) | |||
| Total stockholders’ equity | $1,161,547 | $— | $1,161,547 | ||||||
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