-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BgM00ziO4kDzZZxIXwxEjMv0KFBp6p1thGDLa/Hgc0K7qYwjMrWYtioUF2/GR0Ke 7prXNeIE94JQAFdZ0Xonmg== 0000912057-97-017630.txt : 19970515 0000912057-97-017630.hdr.sgml : 19970515 ACCESSION NUMBER: 0000912057-97-017630 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL RECTIFIER CORP /DE/ CENTRAL INDEX KEY: 0000316793 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 951528961 STATE OF INCORPORATION: DE FISCAL YEAR END: 0629 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07935 FILM NUMBER: 97604951 BUSINESS ADDRESS: STREET 1: 233 KANSAS ST CITY: EL SEGUNDO STATE: CA ZIP: 90245 BUSINESS PHONE: 3103223331 10-Q 1 FORM 10Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) [X] Quarterly report pursuant to section 13 or 15 (d) of the securities exchange act of 1934 For the quarterly period ended March 31, 1997 -------------- OR [ ] Transition report pursuant to section 13 or 15 (d) of the securities exchange act of 1934 FOR THE TRANSITION PERIOD FROM TO -------------- ------------------ COMMISSION FILE No. 1-7935 ----------- International Rectifier Corporation (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Delaware 95-1528961 - -------------------------------- ----------------------------------- (State or other jurisdiction of (IRS employer identification incorporation or organization) number) 233 Kansas Street El Segundo, California 90245 - -------------------------------- ----------------------------------- (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 726-8000 NO CHANGE - -------------------------------------------------------------------------- (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT) INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. Yes X No --- --- THERE WERE 51,045,507 SHARES OF THE REGISTRANT'S COMMON STOCK, PAR VALUE $1.00 PER SHARE, OUTSTANDING ON MAY 13, 1997. TABLE OF CONTENTS PART I. FINANCIAL INFORMATION PAGE REFERENCE ------------- ITEM 1. Financial Statements Unaudited Consolidated Statement of Income for the Three and Nine Month Periods Ended March 31, 1997 and 1996.................................. 2 Consolidated Balance Sheet as of March 31, 1997 (unaudited) and June 30, 1996....................... 3 Unaudited Consolidated Statement of Cash Flows for the Nine Month Periods Ended March 31, 1997 and 1996.................................. 4 Notes to Unaudited Consolidated Financial Statements............................................... 5 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............................................. 8 PART II. OTHER INFORMATION NONE PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements 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, ---------------------- ---------------------- 1997 1996 1997 1996 ---------- ---------- ---------- ---------- Revenues......................................................... $ 122,750 $ 154,070 $ 355,950 $ 421,193 Cost of sales.................................................... 80,428 93,976 234,481 259,899 ---------- ---------- ---------- ---------- Gross profit.................................................. 42,322 60,094 121,469 161,294 Selling and administrative expense............................... 26,098 26,634 78,618 74,980 Research and development expense................................. 9,144 7,185 25,803 19,197 ---------- ---------- ---------- ---------- Operating profit.............................................. 7,080 26,275 17,048 67,117 Other income (expense): Interest, net................................................. (1,515) (560) (2,647) (279) Other, net.................................................... 50 283 578 (367) ---------- ---------- ---------- ---------- Income before income taxes....................................... 5,615 25,998 14,979 66,471 Provision for income taxes....................................... 1,741 7,987 4,644 20,412 ---------- ---------- ---------- ---------- Net income....................................................... $ 3,874 $ 18,011 $ 10,335 $ 46,059 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net income per share............................................. $ 0.08 $ 0.35 $ 0.20 $ 0.90 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Average common and common equivalent shares outstanding.......... 51,430 51,363 51,394 51,326 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
The accompanying notes are an integral part of this statement. 2 INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (In thousands)
MARCH 31, 1997 JUNE 30, (UNAUDITED) 1996 ----------- ---------- ASSETS Current assets: Cash and cash equivalents........................................ $ 32,282 $ 35,760 Short-term investments........................................... 17,150 18,000 Trade accounts receivable, net................................... 125,225 126,341 Inventories...................................................... 123,293 82,852 Deferred income taxes............................................ 8,804 9,801 Prepaid expenses................................................. 4,520 3,772 ----------- ---------- Total current assets.......................................... 311,274 276,526 Property, plant and equipment, net................................... 369,849 327,978 Other assets......................................................... 27,178 24,575 ----------- ---------- Total assets.................................................. $ 708,301 $ 629,079 ----------- ---------- ----------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Bank loans....................................................... $ 15,205 $ 13,302 Long-term debt, due within one year.............................. 15,192 10,268 Accounts payable................................................. 36,800 41,645 Accrued salaries, wages and commissions.......................... 10,831 13,953 Other accrued expenses........................................... 17,637 19,286 ----------- ---------- Total current liabilities..................................... 95,665 98,454 Long-term debt, less current maturities.............................. 135,311 47,994 Other long-term liabilities.......................................... 17,847 42,262 Deferred income taxes................................................ 25,821 19,156 Stockholders' equity: Common stock..................................................... 51,045 50,821 Capital contributed in excess of par value....................... 251,998 249,388 Retained earnings................................................ 135,712 125,377 Cumulative translation adjustments............................... (5,098) (4,373) ----------- ---------- Total stockholders' equity................................... 433,657 421,213 ----------- ---------- Total liabilities and stockholders' equity................... $ 708,301 $ 629,079 ----------- ---------- ----------- ----------
The accompanying notes are an integral part of this statement. 3 INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS (In thousands)
NINE MONTHS ENDED MARCH 31, -------------------- 1997 1996 --------- --------- Cash flow from operating activities: Net income.......................................................... $ 10,335 $ 46,059 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization................................... 27,984 21,715 Deferred income................................................. (508) 1,871 Deferred income taxes........................................... 7,569 4,207 Deferred compensation........................................... 2,988 2,271 Change in working capital........................................... (53,333) (28,949) --------- --------- Net cash provided by (used in) operating activities..................... (4,965) 47,174 --------- --------- Cash flow from investing activities: Additions to property, plant and equipment.......................... (68,940) (66,336) Purchase of short-term investments.................................. (50,150) (50,821) Proceeds from sale of short-term investments........................ 51,000 32,141 Investment in other noncurrent assets............................... (4,254) (6,698) --------- --------- Net cash used in investing activities................................... (72,344) (91,714) --------- --------- Cash flow from financing activities: Proceeds from issuance of (payments on) short-term bank debt, net.......................................... 3,536 (3,809) Proceeds from issuance of long-term debt............................ 102,784 32,495 Payments on long-term debt and obligations under capital leases..... (10,354) (6,484) Net proceeds from issuance of common stock.......................... 2,834 3,416 Increase (decrease) in other long-term liabilities to be financed with long-term debt................................. (24,035) 2,004 Other............................................................... (777) 3,610 --------- --------- Net cash provided by financing activities............................... 73,988 31,232 --------- --------- Effect of exchange rate changes on cash and cash equivalents............ (157) (755) --------- --------- Net decrease in cash and cash equivalents............................... (3,478) (14,063) Cash and cash equivalents beginning of period........................... 35,760 50,820 --------- --------- Cash and cash equivalents end of period................................. $ 32,282 $ 36,757 --------- --------- --------- ---------
The accompanying notes are an integral part of this statement. 4 INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS March 31, 1997 1. BASIS OF PRESENTATION The consolidated financial statements included herein are unaudited, however, they contain all normal recurring accruals which, in the opinion of management, are necessary to present fairly the consolidated financial position of the Company at March 31, 1997 and the consolidated results of operations and cash flows for the nine month periods ended March 31, 1997 and 1996. It should be understood that accounting measurements at interim dates inherently involve greater reliance on estimates than at year end. The results of operations for the nine month period ended March 31, 1997 are not necessarily indicative of the results to be expected for the full year. The accompanying consolidated financial statements do not include footnotes and certain financial presentations normally required under generally accepted accounting principles and, therefore, should be read in conjunction with the Annual Report on Form 10-K for the year ended June 30, 1996. Certain reclassifications have been made to previously reported amounts to conform with the current year presentation. 2. EARNINGS PER SHARE Earnings per share is computed by dividing earnings by the weighted average number of common stock and common stock equivalents outstanding. Stock options outstanding under stock option plans are considered common stock equivalents. Common stock equivalents for stock options of 403,100 and 757,400 shares were utilized in the computation of earnings per share for the three month periods ended March 31, 1997 and 1996, respectively. 3. INVENTORIES Inventories are stated at the lower of cost (principally first-in, first-out) or market. Inventories at March 31, 1997 (unaudited) and June 30, 1996 were comprised of the following (in thousands):
MARCH 31, 1997 JUNE 30, 1996 -------------- ------------- Raw materials.................................................. $ 28,161 $ 20,203 Work-in-process................................................ 60,220 40,895 Finished goods................................................. 34,912 21,754 -------------- ------------- $ 123,293 $ 82,852 -------------- ------------- -------------- -------------
5 4. LONG-TERM DEBT AND OTHER LOANS A summary of the Company's long-term debt and other loans at March 31, 1997 is as follows (in thousands): March 31, 1997 ------------ Capitalized lease obligations payable in varying monthly installments primarily at rates from 6.0% to 12.0% $ 6,249 Domestic bank loans collateralized by equipment, payable in varying monthly installments at rates from 6.4% to 8.7%, due in 1998 through 2002 41,956 Domestic unsecured bank loans payable in varying monthly installments at rates from 6.1% to 6.5%, due in 2001 through 2003 84,700 Foreign bank loans collateralized by property and/or equipment, payable in varying monthly installments at rates from 8.0% to 10.8%, due in 1997 through 2000 3,704 Foreign unsecured bank loans payable in varying monthly installments at rates from 2.6% to 8.4%, due in 1998 through 2006 13,894 -------- 150,503 Less current portion of long-term debt (15,192) -------- $ 135,311 ======== 5. LITIGATION In connection with the three class action lawsuits filed in Federal District Court in Los Angeles against the Company, its Directors and certain officers relating to the public offering of securities by the Company in 1991, the Court on March 31, 1997 rendered its decision on a motion for summary judgment brought by these defendants. The Court issued the following orders: (a) the motion for summary judgment was granted as to claims brought under Sections 11 and 12(2) of the Securities Act of 1933; (b) the motion was denied as to claims brought under Section 10(b) of the Securities Exchange Act of 1934 and the Securities and Exchange Commission Rule 10b-5; and (c) the motion was granted as to the common law claims for fraud and negligent misrepresentation to the extent said claims are based on representations contained in the offering prospectus and denied in all other. The trial of this action has been rescheduled to January 1998. Trial of the action brought by the Company against SGS-Thomson Microelectronics, Inc. charging infringement of its U.S. patent 5,545,955 is scheduled for July 1997. 6 ITEM 6. SUBSEQUENT EVENT On May 9, 1997, the Company's Board of Directors approved a restructuring plan that will result in a fourth quarter non-recurring pretax charge of approximately $75 million. The charge will be taken to cover the one time costs of transferring certain manufacturing operations to more advanced facilities, moving research and development activity into a new facility, and writing down the assets of older production facilities and information systems. Included in the charge are severance costs associated with a planned reduction of the Company's payroll by approximately 5% to 7%. It is estimated that the annual savings from the restructuring plan will be approximately $15 million in fiscal 1998 and about $20 million per year thereafter. The foregoing comments include some forward-looking statements. International Rectifier cautions that such statements are subject to a number of uncertainties, and actual results may differ materially. Factors that could affect the Company's achievement of pretax savings include manufacturing yields, delays in constructing and equipping new facilities or in transferring operations, the rate at which current payroll is reduced, currency exchange rates, general economic conditions in the Company's markets around the world, and other uncertainties disclosed in the Company's filings with the Securities and Exchange Commission. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations for the Three and Nine Month Periods Ended March 31, 1997 Compared with the Three and Nine Month Periods Ended March 31, 1996 The following table sets forth certain items as a percentage of revenues.
THREE MONTHS ENDED NINE MONTHS ENDED MARCH 31, MARCH 31, (UNAUDITED) (UNAUDITED) -------------------- -------------------- 1997 1996 1997 1996 --------- --------- --------- --------- Revenues.............................. 100.0% 100.0% 100.0% 100.0% Cost of sales......................... 65.5 61.0 65.9 61.7 --------- --------- --------- --------- Gross profit.......................... 34.5 39.0 34.1 38.3 Selling and administrative expense.... 21.3 17.3 22.1 17.8 Research and development expense...... 7.4 4.7 7.2 4.6 --------- --------- --------- --------- Operating profit...................... 5.8 17.0 4.8 15.9 Interest income (expense), net........ (1.2) (0.4) (0.7) (0.1) Other income (expense), net........... 0.0 0.2 0.1 (0.1) --------- --------- --------- --------- Income before income taxes........... 4.6 16.8 4.2 15.7 Provision for income taxes........... 1.4 5.1 1.3 4.8 --------- --------- --------- --------- Net income........................... 3.2% 11.7% 2.9% 10.9% --------- --------- --------- --------- --------- --------- --------- ---------
Revenues for the three and nine month periods ended March 31, 1997 decreased 20.3% and 15.5% to $122.8 million and $356.0 million, from $154.1 million and $421.2 million in the respective prior year periods. The Company's revenue decrease reflected continued efforts, principally by distributors, to reduce inventory levels. Distributors accounted for approximately 30% of fiscal 1996 annual revenues. Changes in foreign exchange rates impacted revenues favorably by $0.2 million and negatively by $3.3 million for the three and nine month periods ended March 31, 1997, versus a negative impact of $0.6 million and a favorable impact of $2.6 million in the respective prior year periods. Revenues in the current quarter included $5.1 million of net patent royalties, versus $4.3 million in the prior year period. March-quarter gross profit was $42.3 million (34.5% of revenues) versus $60.1 million (39.0% of revenues) in the comparable year-ago quarter. For the nine months ended March 31, 1997, gross profit was $121.5 million (34.1% of revenues) versus $161.3 million (38.3% of revenues) in the year-ago period. Current year gross profit margins reflected lower dollar volumes, the effect of meeting competitive price moves, the impact of price reductions on International Rectifier products held in inventory, principally by distributors, and higher fixed overhead expense. In the three and nine month periods ended March 31, 1997, selling and administrative expense was $26.1 million and $78.6 million (21.3% and 22.1% of revenues), respectively, versus $26.6 million and $75.0 million (17.3% and 17.8% 8 of revenues) in the comparable year-ago periods. The Company's current-year spending ratio reflected lower-than-expected revenues. In the three and nine month periods ended March 31, 1997, the Company's research and development expenditures were $9.1 million and $25.8 million (7.4% and 7.2% of revenues), respectively, compared to $7.2 million and $19.2 million (4.7% and 4.6% of revenues) in the comparable prior year periods. The Company's research and development program actively focuses on the advancement and diversification of its HEXFET-Registered Trademark- and IGBT product lines and the development of high voltage control integrated circuits and power products that work in combination with HEXFET power MOSFETs and IGBTs. IR's program places increasing emphasis on the development of chipsets, hybrids and board-level devices that tune and combine components to optimize overall system performance and cost. These devices will also enable customers to accelerate market introduction of their products. Net interest expense increased $1.0 million and $2.4 million in the three and nine month periods ended March 31, 1997, compared to the respective prior year periods, reflecting increased interest expense incurred on higher average debt balances. Changes in foreign currency exchange rates negatively impacted net income by $0.1 million and $0.2 million in the three and nine month periods ended March 31,1997. Changes in foreign currency exchange rates had no impact on net income in the three months ended March 31, 1996 and negatively impacted net income by $0.1 million in the nine month period ended March 31, 1996. SEASONALITY The Company has experienced moderate seasonality in its business in recent years. On average over the past three years, the Company has reported approximately 46% of annual revenues in the first half and 54% in the second half of its fiscal year. Historical averages are not necessarily indicative of future results. LIQUIDITY AND CAPITAL RESOURCES At March 31, 1997, the Company maintained cash and cash equivalent balances of $32.3 million and short-term investments of $17.2 million. In addition, the Company had established $75.3 million of domestic and foreign revolving lines of credit, against which $15.2 million had been borrowed. Based on covenant and collateral limitations, the amount available for borrowing against these lines at March 31, 1997 was $53.6 million. Additionally, the Company had at its disposal $2.2 million of unused capital equipment credit lines. At March 31, 1997, the Company had made purchase commitments for capital equipment of approximately $32.7 million. The Company intends to fund operations and planned capital expenditures through cash and cash equivalents on hand, short-term investments, anticipated cash flow from operations, and funds from existing credit facilities. The Company may also seek financing from other external sources including, but not limited to, public or private offerings of debt or equity, although no assurance can be given that cost effective funds will be available. 9 RESTRUCTURING PLAN On May 9, 1997, the Company's Board of Directors approved a restructuring plan that will result in a fourth quarter non-recurring pretax charge of approximately $75 million. The charge will be taken to cover the one time costs of transferring certain manufacturing operations to more advanced facilities, moving research and development activity into a new facility, and writing down the assets of older production facilities and information systems. Included in the charge are severance costs associated with a planned reduction of the Company's payroll by approximately 5% to 7%. It is estimated that the annual savings from the restructuring plan will be approximately $15 million in fiscal 1998 and about $20 million per year thereafter. The foregoing comments include some forward-looking statements. International Rectifier cautions that such statements are subject to a number of uncertainties, and actual results may differ materially. Factors that could affect the Company's achievement of pretax savings include manufacturing yields, delays in constructing and equipping new facilities or in transferring operations, the rate at which current payroll is reduced, currency exchange rates, general economic conditions in the Company's markets around the world, and other uncertainties disclosed in the Company's filings with the Securities and Exchange Commission. 10 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. INTERNATIONAL RECTIFIER CORPORATION ----------------------------------- Registrant May 13, 1997 MICHAEL P. MCGEE ---------------------- Michael P. McGee Vice President, Chief Financial Officer and Principal Accounting Officer 11 PART II. OTHER INFORMATION NONE 12 EX-27 2 EX 27
5 1,000 9-MOS JUN-30-1997 JUL-01-1996 MAR-31-1997 32,282 17,150 126,294 1,069 123,293 311,274 553,488 183,639 708,301 95,665 0 0 0 51,045 382,612 708,301 355,950 355,950 234,481 234,481 104,421 282 2,647 14,979 4,644 10,335 0 0 0 10,335 0.20 0.20
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