-----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, CjYOzivydNvtxj4BazipegNGvD3G8UxT6NXYDGoTwjGO8OwvsxQiwL8X9KC3cjtd KvbTO4o/YpympRfRhzywLA== 0001047469-98-006819.txt : 19980219 0001047469-98-006819.hdr.sgml : 19980219 ACCESSION NUMBER: 0001047469-98-006819 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980218 SROS: NYSE SROS: PCX 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: SEC FILE NUMBER: 001-07935 FILM NUMBER: 98544674 BUSINESS ADDRESS: STREET 1: 233 KANSAS ST CITY: EL SEGUNDO STATE: CA ZIP: 90245 BUSINESS PHONE: 3103223331 10-Q 1 FORM 10-Q 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 December 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 51,330,923 shares of the registrant's common stock, par value $1.00 per share, outstanding on February 17, 1998. TABLE OF CONTENTS PART I. FINANCIAL INFORMATION PAGE REFERENCE --------- ITEM 1. FINANCIAL STATEMENTS Unaudited Consolidated Statement of Income for the Three and Six Month Periods Ended December 31, 1997 and 1996 2 Consolidated Balance Sheet as of December 31, 1997 (unaudited) and June 30, 1997 3 Unaudited Consolidated Statement of Cash Flows for the Six Month Periods Ended December 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 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 12 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 SIX MONTHS ENDED DECEMBER 31, DECEMBER 31, -------------------------- -------------------------- 1997 1996 1997 1996 ---------- ----------- ---------- ---------- Revenues $ 144,622 $ 118,007 $ 277,733 $ 233,200 Cost of sales 96,772 77,672 184,932 154,053 ---------- ----------- ---------- ---------- Gross profit 47,850 40,335 92,801 79,147 Selling and administrative expense 26,988 26,331 52,336 52,520 Research and development expense 8,778 8,635 17,509 16,659 ---------- ----------- ---------- ---------- Operating profit 12,084 5,369 22,956 9,968 Other income (expense): Interest, net (1,933) (788) (3,560) (1,132) Other, net (153) 352 (301) 528 ---------- ----------- ---------- ---------- Income before income taxes 9,998 4,933 19,095 9,364 Provision for income taxes 3,299 1,529 6,301 2,903 ---------- ----------- ---------- ---------- Net income $ 6,699 $ 3,404 $ 12,794 $ 6,461 ---------- ----------- ---------- ---------- ---------- ----------- ---------- ---------- Net income per share Basic $ 0.13 $ 0.07 $ 0.25 $ 0.13 ---------- ----------- ---------- ---------- ---------- ----------- ---------- ---------- Diluted $ 0.13 $ 0.07 $ 0.25 $ 0.13 ---------- ----------- ---------- ---------- ---------- ----------- ---------- ---------- Average common and common equivalent shares outstanding Basic 51,191 50,936 51,171 50,923 ---------- ----------- ---------- ---------- ---------- ----------- ---------- ---------- Diluted 51,616 51,327 51,814 51,376 ---------- ----------- ---------- ---------- ---------- ----------- ---------- ----------
The accompanying notes are an integral part of this statement. 2 INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (In thousands)
DECEMBER 31, 1997 JUNE 30, (UNAUDITED) 1997 ---------- ---------- ASSETS Current assets: Cash and cash equivalents $ 36,906 $ 36,564 Short-term investments 15,000 16,850 Trade accounts receivable, net 133,745 125,481 Inventories 119,853 115,754 Deferred income taxes 13,593 18,800 Prepaid expenses 2,630 3,032 ---------- ---------- Total current assets 321,727 316,481 Property, plant and equipment, net 360,397 333,559 Other assets 29,986 29,713 ---------- ---------- Total assets $ 712,110 $ 679,753 ---------- ---------- ---------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Bank loans $ 21,837 $ 12,710 Long-term debt, due within one year 25,388 19,110 Accounts payable 46,506 40,332 Accrued salaries, wages and commissions 12,940 14,517 Other accrued expenses 32,032 26,596 ---------- ---------- Total current liabilities 138,703 113,265 Long-term debt, less current maturities 136,822 143,164 Other long-term liabilities 24,904 28,982 Deferred income taxes 17,010 12,627 Stockholders' equity: Common stock 51,195 51,052 Capital contributed in excess of par value 253,648 252,199 Retained earnings 94,965 82,171 Cumulative translation adjustments (5,137) (3,707) ---------- ---------- Total stockholders' equity 394,671 381,715 ---------- ---------- Total liabilities and stockholders' equity $ 712,110 $ 679,753 ---------- ---------- ---------- ----------
The accompanying notes are an integral part of this statement. 3 INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS (In thousands)
SIX MONTHS ENDED DECEMBER 31, ------------------------ 1997 1996 --------- -------- Cash flow from operating activities: Net income $ 12,794 $ 6,461 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 19,257 19,368 Deferred income (300) (374) Deferred income taxes 9,590 3,646 Deferred compensation (213) 2,118 Change in working capital (5,588) (38,367) --------- -------- Net cash provided by (used in) operating activities 35,540 (7,148) --------- -------- Cash flow from investing activities: Additions to property, plant and equipment (46,036) (51,871) Purchase of short-term investments (33,000) (33,000) Proceeds from sale of short-term investments 34,850 33,000 Investment in other noncurrent assets (1,529) (1,322) --------- -------- Net cash used in investing activities (45,715) (53,193) --------- -------- Cash flow from financing activities: Proceeds from issuance of short-term bank debt, net 10,192 5,604 Proceeds from issuance of long-term debt 9,017 84,464 Payments on long-term debt and obligations under capital leases (8,595) (6,851) Net proceeds from issuance of common stock 1,592 1,450 Decrease in other long-term liabilities to be financed with long-term debt (3,236) (23,557) Other 1,745 (2,768) --------- -------- Net cash provided by financing activities 10,715 58,342 --------- -------- Effect of exchange rate changes on cash and cash equivalents (198) 28 --------- -------- Net increase (decrease) in cash and cash equivalents 342 (1,971) Cash and cash equivalents beginning of period 36,564 35,760 --------- -------- Cash and cash equivalents end of period $ 36,906 $ 33,789 --------- -------- --------- --------
The accompanying notes are an integral part of this statement. 4 INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 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 December 31, 1997 and the consolidated results of operations and cash flows for the six month periods ended December 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 six month period ended December 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, 1997. 2. EARNINGS PER SHARE The Financial Accounting Standards Board issued Statement No. 128 "Earnings per Share" which modifies the calculation of earnings per share ("EPS") and its disclosure requirements. Upon adoption of this standard for the current interim period ended December 31, 1997, the Company is disclosing basic and diluted EPS for Fiscal 1998 and has restated all prior period EPS data presented. Basic earnings per share is computed by dividing earnings by the weighted average number of common stock outstanding. Diluted earnings per share is computed by dividing earnings by the weighted average number of common and common stock equivalents outstanding. Stock options outstanding under stock option plans are considered common stock equivalents. Common stock equivalents for stock options utilized in the computation of earnings per share were 425,200 and 643,000 for the three and six month periods ended December 31, 1997 with 391,000 and 452,500 utilized in the respective prior year periods. 3. INVENTORIES Inventories are stated at the lower of cost (principally first-in, first- out) or market. 5 Inventories at December 31, 1997 (unaudited) and June 30, 1997 were comprised of the following (in thousands):
DECEMBER 31, 1997 JUNE 30, 1997 ---------------- ------------- Raw materials $ 24,843 $ 25,002 Work-in-process 58,130 56,749 Finished goods 36,880 34,003 --------- --------- $ 119,853 $ 115,754 --------- --------- --------- ---------
4. LONG-TERM DEBT AND OTHER LOANS A summary of the Company's long-term debt and other loans at December 31, 1997 is as follows (in thousands):
DECEMBER 31, 1997 ------------ Capitalized lease obligations payable in varying monthly installments primarily at rates from 6.0% to 10.7% $ 2,597 Domestic bank loans collateralized by equipment, payable in varying monthly installments at rates from 6.4% to 8.7%, due in 1999 through 2003 43,881 Domestic unsecured bank loans payable in varying monthly installments at rates from 6.3% to 6.7%, due in 2000 through 2003 99,700 Foreign bank loans collateralized by property and/or equipment, payable in varying monthly installments at rates from 8.0% to 10.8%, due in 1998 through 2000 2,581 Foreign unsecured bank loans payable in varying monthly installments at rates from 2.6% to 8.4%, due in 1998 through 2006 13,451 ---------- 162,210 Less current portion of long-term debt (25,388) ---------- $ 136,822 ---------- ----------
5. IMPAIRMENT OF ASSETS AND RESTRUCTURING CHARGE During the fourth quarter of fiscal 1997, the Company recorded a $75 million pretax charge related to a restructuring program designed to improve the Company's competitive position and further accelerate growth and earnings by streamlining operations and administration. The charge was composed of $65 million for the write-down of assets and $10 million for termination benefits to be paid in connection with the elimination of approximately 150 positions. As of December 31, 1997, the Company had recorded approximately $67.5 million in cumulative costs against its $75 million restructuring reserve, of which approximately 6 $65 million related to non-cash effects of asset write-offs and about $2.5 million represented cash expenditures for termination benefits paid to over 100 employees. 6. LITIGATION On January 16, 1998, the Company filed suit in Federal District Court in Los Angeles, California against Samsung Semiconductor, Inc. and Samsung Electronics Co., Ltd., alleging infringement of the Company's U.S. patents 4,959,699 and 4,705,759. The suit seeks customary relief in such matters. In the class action lawsuits alleging violation of federal securities laws by the Company, its directors and certain officers, the Federal District Court in California on January 28, 1998 issued several rulings. The court decertified the class pursuing common law claims for fraud and negligent misrepresentation, and granted the defendants' motion to narrow the shareholder class period to June 19, 1991 through October 21, 1991. The court also rescheduled trial of this action to November 10, 1998. 7. YEAR 2000 READINESS Many currently-installed computer systems and software products are coded to accept only two-digit entries in the date code field. Beginning in the year 2000, these date code fields will need to accept four-digit entries to distinguish 21st century dates from 20th century dates. As a result, computer systems and/or software used by many companies may need to be adapted to meet these requirements. International Rectifier has initiated a company-wide task force to assess and act on Year 2000 requirements relating to our internal computer systems and automated factory equipment. The Company expects to incur internal staff costs, as well as consulting and other expenses related to the Year 2000 adaptation. The Company's task force is also working with our vendors and customers to ensure the integrity of our interface with their systems. There can be no assurance that the adaptation of other companies' systems will be timely and successful. Failure to fully meet Year 2000 systems requirements could have a significant adverse impact on our operations. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTH PERIODS ENDED DECEMBER 31, 1997 COMPARED WITH THE THREE AND SIX MONTH PERIODS ENDED DECEMBER 31, 1996 The following table sets forth certain items as a percentage of revenues.
THREE MONTHS ENDED SIX MONTHS ENDED DECEMBER 31, DECEMBER 31, (UNAUDITED) (UNAUDITED) --------------------- -------------------- 1997 1996 1997 1996 ------ ------ ------ ------- Revenues 100.0% 100.0% 100.0% 100.0% Cost of sales 66.9 65.8 66.6 66.1 ------ ------ ------ ------- Gross profit 33.1 34.2 33.4 33.9 Selling and administrative expense 18.7 22.3 18.8 22.5 Research and development expense 6.1 7.3 6.3 7.1 ------ ------ ------ ------- Operating profit 8.3 4.6 8.3 4.3 Interest expense, net (1.3) (0.7) (1.3) (0.5) Other income (expense), net (0.1) 0.3 (0.1) 0.2 ------ ------ ------ ------- Income before income taxes 6.9 4.2 6.9 4.0 Provision for income taxes 2.3 1.3 2.3 1.2 ------ ------ ------ ------- Net income 4.6% 2.9% 4.6% 2.8% ------ ------ ------ ------- ------ ------ ------ -------
Revenues for the three and six month periods ended December 31, 1997 increased 22.6% and 19.1% respectively to $144.6 million and $277.7 million from $118.0 million and $233.2 million in the respective prior year periods. Growth in sales reflected stable demand in North America and increasing sales in Europe and Japan, offset by difficult market conditions elsewhere in Asia. This quarter, revenues reflected stronger industrial demand led by motor drives and to an increase in automotive business. While sales to computer customers softened, government and space shipments returned to expected levels and other business sectors were largely unchanged. Changes in foreign exchange rates impacted revenues negatively by $2.3 million and favorably by $0.4 million for the three and six month periods ended December 31, 1997, versus a favorable impact of $2.1 million and negative impact of $0.3 million in the respective prior year periods. Revenues in the current quarter included $4.4 million of net patent royalties, versus $5.1 million in the prior year period. December-quarter gross profit increased to $47.9 million (33.1% of revenues) versus $40.3 million (34.2% of revenues) in the comparable year-ago quarter. Gross profit for the six month period ended December 31, 1997 increased to $92.8 million (33.4% of revenues) versus $79.1 million (33.9% of revenues) in the year-ago period, reflecting increased volume impacted by pressure on prices. In the three and six month periods ended December 31, 1997, selling and administrative expense was $27.0 million and $52.3 million (18.7% and 18.8% of revenues), respectively, versus $26.3 million and $52.5 million (22.3% and 22.5% of revenues) in the comparable 8 year-ago periods. The Company's current-year spending ratio reflected the benefit of greater sales volume and the restructuring of operations announced in May 1997. In the three and six month periods ended December 31, 1997, the Company's research and development expenditures increased to $8.8 million and $17.5 million (6.1% and 6.3% of revenues), respectively, compared to $8.6 million and $16.7 million (7.3% and 7.1% of revenues) in the comparable prior year periods. The Company's research and development program actively focuses on the advancement and diversification of HEXFET-Registered Trademark-power MOSFET and IGBT product lines and the development of high voltage control integrated circuits and power products that work in combination with HEXFETs power MOSFET and IGBTs. IR's program places increasing emphasis on the development of value-added chipsets, hybrids and board-level products that tune and combine components to optimize overall system performance and reduce customers' cost and development time. Net interest expense increased $1.1 million and $2.4 million in the three and six month periods ended December 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 impacted net income negatively by $0.1 million and positively by $0.2 million in the three and six month periods ended December 31,1997 compared to a negative impact of $.01 million in both the three and six month periods ended December 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 47% of annual revenues in the first half and 53% in the second half of its fiscal year. Historical averages are not necessarily indicative of future results. LIQUIDITY AND CAPITAL RESOURCES At December 31, 1997, the Company maintained cash and cash equivalent balances of $36.9 million and short-term investments of $15.0 million. In addition, the Company had established $78.1 million of domestic and foreign revolving lines of credit, against which $36.8 million had been borrowed. Based on covenant and collateral limitations, the Company had $37.7 million available for borrowing at December 31, 1997. Additionally, the Company had at its disposal $6.2 million of unused capital equipment credit lines. At December 31, 1997, the Company had made purchase commitments for capital equipment of approximately $23.7 million. In January 1998, the Company established an additional $10 million foreign term loan facility. 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. However, the Company may also 9 consider the use of funds from other external sources including, but not limited to, public or private offerings of debt or equity. 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 February 17, 1998 MICHAEL P. MCGEE ----------------------------- Michael P. McGee Vice President, Chief Financial Officer and Principal Accounting Officer 11 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The following matters were submitted to a vote of the stockholders of the Company at the Company's Annual Meeting of Stockholders held on November 24, 1997, with the following results:
Authority Description of matter For Withheld --- --------- 1. Election of Directors Eric Lidow 45,642,889 948,539 Donald S. Burns 45,672,224 919,204 James D. Plummer 46,196,071 395,357 For Against Abstentions --- ------- ----------- 2. Ratification of Coopers & Lybrand as Independent Auditors for fiscal 1998 46,398,052 117,196 76,180
12 EX-27 2 EXHIBIT 27
5 1,000 U.S. DOLLARS 6-MOS JUN-30-1998 JUL-01-1997 DEC-31-1997 1 36,906 15,000 134,889 1,144 119,853 321,727 523,016 162,619 712,110 138,703 0 0 0 51,195 343,476 712,110 277,733 277,733 184,932 184,932 69,845 123 3,560 19,095 6,301 12,794 0 0 0 12,794 0.25 0.25
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