EX-99.1 2 a06-17319_1ex99d1.htm EX-99

Exhibit 99.1

International Rectifier Fourth-Quarter Revenue up 9 Percent
over Prior Quarter with Strong Demand Momentum

Company Achieves Record Quarterly Revenue, Orders and Backlog

EL SEGUNDO, Calif., August 3, 2006 – International Rectifier Corporation (NYSE: IRF) today reported adjusted earnings of $33.8 million (or $0.47 per share) for the June quarter on revenue of $322.7 million. This compares to adjusted earnings of $28.1 million (or $0.39 per share) for the March quarter on revenue of $297.1 million. For the prior-year June quarter, adjusted earnings were $38.4 million (or $0.54 per share) on revenue of $281.8 million.

Adjusted earnings for the June 2006 quarter excluded $5.2 million of pretax severance and restructuring charges, $13.6 million of pretax gain from the sale of an equity investment, and $1.4 million of pretax expenses associated with the proposed convertible debt offering, subsequently withdrawn, and the company’s repatriation of special dividends under the American Jobs Creation Act of 2004. Adjusted earnings for the June 2006 quarter also excluded a $6.9 million tax expense from the repatriation of special dividends. For the March 2006 quarter, adjusted earnings excluded $3.3 million in pretax severance and restructuring charges. For the prior-year June 2005 quarter, adjusted earnings excluded $12.4 million in pretax severance and restructuring charges and $6.0 million in pretax charges from the accelerated vesting of employee stock options.

For the fiscal year just ended, adjusted net income was $117.7 million (or $1.64 per share) on revenue of $1.17 billion, compared to the prior-year adjusted net income of $167.3 million (or $2.30 per share) on revenue of $1.17 billion. Adjusted earnings for fiscal 2006 and 2005 excluded $15.9 million and $34.0 million, respectively, in pretax severance and restructuring charges. Also excluded are the gain and expenses, and tax impact from the special dividend repatriation in the fourth quarter in fiscal 2006, and the charge from the accelerated vesting of options in the fourth quarter of fiscal 2005, referenced above. A $3.5 million pretax stock option expense is included in the adjusted earnings beginning fiscal 2006 due to the adoption of Statement of Accounting Standards No. 123R.



On a GAAP basis, net income was $31.0 million (or $0.43 per share) for the June quarter versus $25.7 million (or $0.36 per share) in the March quarter and $24.7 million (or $0.35 per share) for the prior-year June quarter. On a GAAP basis for fiscal 2006, IR reported net income of $107.2 million (or $1.49 per share) compared to net income of $137.5 million (or $1.91 per share) for fiscal 2005.

Stock-based compensation expense lowered both the adjusted and GAAP EPS for the June 2006 quarter by $0.01 per share.

For the June quarter, gross margin was 39.6 percent versus 40.0 percent in the March quarter. IR reported gross margin of 43.5 percent in the year-ago June quarter.  Thirteen-week product backlog was $276 million at the end of the June quarter, up 12 percent over the prior quarter.

CEO Alex Lidow said, “Business conditions remained strong with backlog expanding to record levels, led by 27 percent order growth over the prior quarter. We were especially pleased with our largest business segment, Computing and Communications, which delivered 17 percent sequential revenue growth in the June quarter. This reflects the continued success we are having with ramping our fab capacity to support the largest program in the company’s history for a major next-generation game station, as well as new computing programs.”

In the June quarter, IR’s Focus Products revenue grew 8 percent quarter-on-quarter.

·                  Computing and Communications (C&C) revenue was up 17 percent over the prior quarter, led by strength in the latest generation of game stations from the top two manufacturers, as well as strength in the new generation of AMD and Intel-based servers.

·                  Energy-Savings Products (ESP) revenue was down 1 percent from the prior quarter, primarily due to the focus that was placed on the ramp of major programs in the C&C segment..

·                  Aerospace and Defense (A&D) revenue was up 3 percent over the prior quarter led by new commercial and military surveillance satellite programs.



In the Non-Focus Products group, revenue increased 11 percent over the March quarter due to strong end market conditions.

IR generated $87 million in cash from operations in the June quarter and $160 million for fiscal 2006. Total cash and cash investments were over $1 billion at the end of the June quarter.

A breakout of revenue and gross margin by segment follows for the periods shown:

Product Segment
($ in millions)

 

June 30,
2006

 

March 31,
2006

 

June 30,
2005

 

Computing & Comms (C&C)

 

 

 

 

 

 

 

Revenue

 

$

117.8

 

$

100.6

 

$

89.5

 

Gross Margin

 

40.0

%

39.6

%

44.1

%

Energy-Saving Products (ESP)

 

 

 

 

 

 

 

Revenue

 

$

80.7

 

$

81.4

 

$

79.5

 

Gross Margin

 

48.1

%

50.1

%

55.3

%

Aerospace & Defense (A&D)

 

 

 

 

 

 

 

Revenue

 

$

37.3

 

$

36.2

 

$

32.4

 

Gross Margin

 

50.0

%

48.1

%

44.7

%

Intellectual Property (IP)

 

 

 

 

 

 

 

Revenue

 

$

10.3

 

$

10.0

 

$

10.1

 

Gross Margin

 

100.0

%

100.0

%

100.0

%

FOCUS PRODUCTS

 

 

 

 

 

 

 

Total Revenue

 

$

246.1

 

$

228.2

 

$

211.5

 

Gross Margin

 

46.7

%

47.4

%

51.1

%

 

 

 

 

 

 

 

 

Non-Aligned Products (NAP)

 

 

 

 

 

 

 

Revenue

 

$

28.9

 

$

26.0

 

$

27.1

 

Gross Margin

 

9.4

%

10.7

%

12.0

%

Commodity Products (CP)

 

 

 

 

 

 

 

Revenue

 

$

47.7

 

$

42.9

 

$

43.2

 

Gross Margin

 

21.2

%

18.5

%

25.8

%

NON-FOCUS PRODUCTS

 

 

 

 

 

 

 

Total Revenue

 

$

76.6

 

$

68.9

 

$

70.3

 

Gross Margin

 

16.8

%

15.6

%

20.5

%

 

 

 

 

 

 

 

 

CONSOLIDATED TOTAL

 

 

 

 

 

 

 

Revenue

 

$

322.7

 

$

297.1

 

$

281.8

 

Gross Margin

 

39.6

%

40.0

%

43.5

%

 



OUTLOOK

For the September quarter, IR expects revenue to be up 5 to 7 percent over the prior quarter. IR’s backlog currently stands at more than 90 percent of target shipments. With higher absorption of new fab ramp-up costs, IR expects September-quarter gross margin to be flat to up 100 basis points sequentially.

CEO Alex Lidow stated, “IR is uniquely positioned over the next 12 months with a strong lineup of leading-edge products designed in by major technology companies worldwide. These opportunities are translating into strong business prospects, and IR is positioned to take advantage of them with the second phase of our aggressive capacity expansion nearing completion.  In calendar 2006, we will have added incremental production capacity of $200 to $300 million in annual revenue. In the new fiscal year, we look forward to significantly outperforming industry growth at higher levels of profitability for the company.”

GAAP Adjustment

In addition to disclosing results that are determined in accordance with Generally Accepted Accounting Principles (GAAP), IR also discloses adjusted or non-GAAP results of operations that exclude costs related to restructuring activities and certain one-time income/loss items, if any.  IR discloses both adjusted and actual results of operations to allow the users of its financial statements to assess the company’s operating results with and without charges associated with the company’s ongoing restructuring initiatives previously announced in December 2002, and with and without certain one-time income/loss items, if any. In connection with the restructuring activities, the company is de-emphasizing some parts of its commodity business and accelerating the move to its proprietary products and how they relate to its Focus Product segments.  The company expects to record severance and restructuring charges as incurred in accordance with SFAS 146, “Accounting for the Costs Associated with Exit or Disposal Activities”, through approximately calendar year-end 2006.



The following reconciles reported net income and earnings per share to adjusted net income and earnings per share for the fiscal quarters ended June 30, 2006, March 31, 2006, and June 30, 2005 (in thousands, except per share amounts):

 

For the Fiscal Quarter Ended

 

 

 

June 30,
2006

 

March 31,
2006

 

June 30,
2005

 

 

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

 

 

 

 

 

 

 

 

Net income

 

$

31,004

 

$

25,654

 

$

24,693

 

Restructuring charges (net of tax)

 

3,007

 

2,427

 

9,268

 

Gain from sale of equity investment (net of tax)

 

(7,866

)

—

 

—

 

Other charges (net of tax) (1)

 

788

 

—

 

—

 

Tax expense from the special dividend repatriation

 

6,895

 

—

 

—

 

Stock options accelerated vesting charge (net of tax)

 

—

 

—

 

4,479

 

 

 

 

 

 

 

 

 

Adjusted net income

 

$

33,828

 

$

28,081

 

$

38,440

 

 

 

 

 

 

 

 

 

EPS, basic

 

$

0.43

 

$

0.36

 

$

0.36

 

Effect of dilutive securities

 

—

 

—

 

(0.01

)

 

 

 

 

 

 

 

 

EPS, diluted (2)

 

0.43

 

0.36

 

0.35

 

Restructuring charges (net of tax)

 

0.04

 

0.03

 

0.13

 

Gain from sale of equity investment (net of tax)

 

(0.11

)

—

 

—

 

Other charges (net of tax) (1)

 

0.01

 

—

 

—

 

Tax expense from the special dividend repatriation

 

0.10

 

—

 

—

 

Stock options accelerated vesting charge (net of tax)

 

—

 

—

 

0.06

 

 

 

 

 

 

 

 

 

Adjusted EPS, diluted (2)

 

$

0.47

 

$

0.39

 

$

0.54

 

 

 

 

 

 

 

 

 

Basic EPS shares

 

71,573

 

70,948

 

69,108

 

Effect of dilutive securities:

 

 

 

 

 

 

 

Stock options

 

999

 

666

 

2,012

 

 

 

 

 

 

 

 

 

Diluted EPS shares

 

72,572

 

71,614

 

71,120

 

 

(1)          Other charges consist of incremental legal and accounting costs of the proposed convertible debt offering which was subsequently withdrawn, and the special dividend repatriation under the American Jobs Creation Act of 2004.

(2)          The reported and adjusted diluted EPS for the fiscal quarters ended June 30, 2006, March 31, 2006, and June 30, 2005 did not include the effect from the conversion of the Company’s outstanding convertible subordinated notes into 7,439,000 shares of common stock (“the Effect”), as the Effect would have been anti-dilutive.



The following reconciles reported net income and earnings per share to adjusted net income and earnings per share for the fiscal years ended June 30, 2006 and June 30, 2005 (in thousands, except per share amounts):

 

For the Fiscal Year Ended

 

 

 

June 30,
2006

 

June 30,
2005

 

 

 

(unaudited)

 

(unaudited)

 

 

 

 

 

 

 

Net income

 

$

107,156

 

$

137,460

 

Restructuring charges (net of tax)

 

10,766

 

25,387

 

Gain from sale of equity investment (net of tax)

 

(7,866

)

—

 

Other charges (net of tax) (3)

 

788

 

—

 

Tax expense from the special dividend repatriation

 

6,895

 

—

 

Stock options accelerated vesting charge (net of tax)

 

—

 

4,479

 

Adjusted net income

 

117,739

 

167,326

 

Conversion of subordinated notes (net of tax)

 

—

 

9,838

 

 

 

 

 

 

 

Adjusted net income

 

$

117,739

 

$

177,164

 

 

 

 

 

 

 

EPS, basic

 

$

1.51

 

$

2.03

 

Effect of dilutive securities

 

(0.02

)

(0.12

)

 

 

 

 

 

 

EPS, diluted (4)

 

1.49

 

1.91

 

Restructuring charges (net of tax)

 

0.15

 

0.38

 

Gain from sale of equity investment (net of tax)

 

(0.11

)

—

 

Other charges (net of tax) (3)

 

0.01

 

—

 

Tax expense from the special dividend repatriation

 

0.10

 

—

 

Stock options accelerated vesting charge (net of tax)

 

—

 

0.07

 

Effect of dilutive securities on adjusting items

 

—

 

(0.06

)

 

 

 

 

 

 

Adjusted EPS, diluted (4)

 

$

1.64

 

$

2.30

 

 

 

 

 

 

 

Basic EPS shares

 

70,914

 

67,621

 

Effect of dilutive securities:

 

 

 

 

 

Convertible subordinated notes

 

—

 

7,439

 

Stock options

 

839

 

2,029

 

 

 

 

 

 

 

Diluted EPS shares

 

71,753

 

77,089

 

 

(3)          Other charges consist of incremental legal and accounting costs of the proposed convertible debt offering which was subsequently withdrawn, and the special dividend repatriation under the American Jobs Creation Act of 2004.

(4)          The reported and adjusted diluted EPS for the fiscal year ended June 30, 2006 did not include the effect from the conversion of the Company’s outstanding convertible subordinated notes into 7,439,000 shares of common stock (“the Effect”), as the Effect would have been anti-dilutive.  The reported and adjusted diluted EPS for the fiscal year ended June 30, 2005 included the Effect, which negatively impacted reported and adjusted diluted EPS by $0.06 and $0.10, respectively.



International Rectifier (NYSE:IRF) is a world leader in power management technology.  IR’s digital, analog and mixed signal ICs, advanced circuit devices, integrated power systems and components enable high performance computing and reduce energy waste in 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.

The foregoing material includes some “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995.  The materials presented can be identified by the use of forward-looking terminology such as “anticipate”, “believe”, “estimate”, “may”, “should”, “will”, or “expects” or the negative or variations thereof, whether set out in the text of documents or in tables.  Such forward-looking statements include, among other things, our statements that (i) for our fiscal 2007 first-quarter, overall revenues will be up 5 to 7 percent over our fiscal 2006 fourth quarter; (ii)  for our fiscal 2007 first quarter, overall gross margin is expected to be flat to up 100 basis points; (iii) our expectation that current backlog and orders can be converted into revenues in the periods for which they are measured; and (iv) our expectation that stated design and program awards can be converted into revenues in the periods where they are being planned. Forward-looking statements are subject to a number of uncertainties and risks, and actual results may differ materially from those projected.  Factors that could affect the company’s actual results include the failure of customer programs and market demand to materialize as anticipated (and the product mix of those programs and demand); company and market impact due to the cancellation or delays in customer and/or industry programs and/or orders, whether or not due to industry conditions; the failure of our ability to timely and adequately align our capacity (whether or not through increasing capacity) or inventory with market demand or product mix; impacts on revenue and margin due to pricing pressures; impacts due to unexpected or greater than expected costs or delays associated with cost-reduction and restructuring efforts, including reductions in force and the transfer, discontinuance, divestiture or consolidation of product lines and equipment;



changes in assumptions or events that adversely affect the timing and realization of anticipated cost savings from cost reduction efforts, including restructuring plans; any adverse impact from quality and product disputes, claims, litigation, investigations, returns and recalls, and the costs of defense; introduction, acceptance, availability, and continued demand and growth of new and high-performance products; any adverse impacts from customer credit or bankruptcy issues;  impacts on our royalties from patent licensee redesign, a decline in sales by licensees (due to market conditions or otherwise), changes in product mix to non-infringing devices or our inability to obtain new licenses; greater than expected manufacturing and administrative costs; unfavorable results in connection with asset audit processes; changes in interest and investment rates; impacts on our business or financial condition due to changes in currency valuation; impact of changes in accounting methods and the timing of completion of necessary compliance certifications; the unfavorable impact of changes in laws and regulations, including tax, trade and export regulations and policies; impacts due to environmental compliance and/or regulation for our facilities; and other uncertainties disclosed in the company’s reports filed with the Securities and Exchange Commission, including its most recent reports on Form 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.

NOTE: A conference call will begin today at 5:15 p.m. Eastern time (2:15 p.m. Pacific time). Participants can join the call by dialing 212-896-6121 or by logging onto the Internet at http://investor.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 from 7:15 p.m. Eastern time (4:15 p.m. Pacific time) on Thursday, August 3 until 7:15 p.m. Eastern time (4:15 p.m. Pacific time) on Tuesday, August 8. To hear the replay, call 800-633-8284 (for international callers 402-977-9140) and use reservation number 21261686, or use the websites listed above.

Company contact: Steve Harrison, 310.252.7731.

Website:  http://www.irf.com



INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(In thousands except per share amounts)

 

 

Three Months Ended
June 30,

 

Twelve Months Ended
June 30,

 

 

 

2006

 

2005

 

2006

 

2005

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

322,658

 

$

281,768

 

$

1,171,118

 

$

1,174,424

 

Cost of sales

 

194,874

 

159,330

 

702,079

 

663,901

 

Gross profit

 

127,784

 

122,438

 

469,039

 

510,523

 

 

 

 

 

 

 

 

 

 

 

Selling and administrative expense

 

51,273

 

45,003

 

193,436

 

173,037

 

Research and development expense

 

30,410

 

24,497

 

111,418

 

104,876

 

Amortization of acquisition-related intangible assets

 

1,070

 

1,570

 

5,250

 

5,939

 

Impairment of assets, restructuring and severance charges

 

5,210

 

12,353

 

15,912

 

33,952

 

Other (income) expense, net

 

(11,934

)

6,552

 

(9,023

)

7,377

 

Interest (income) expense, net

 

(1,958

)

(454

)

(6,704

)

1,274

 

Income before income taxes

 

53,713

 

32,917

 

158,750

 

184,068

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

22,709

 

8,224

 

51,594

 

46,608

 

Net income

 

$

31,004

 

$

24,693

 

$

107,156

 

$

137,460

 

 

 

 

 

 

 

 

 

 

 

Net income per common share – basic

 

$

0.43

 

$

0.36

 

$

1.51

 

$

2.03

 

 

 

 

 

 

 

 

 

 

 

Net income per common share – diluted

 

$

0.43

 

$

0.35

 

$

1.49

 

$

1.91

 

 

 

 

 

 

 

 

 

 

 

Average common shares outstanding – basic

 

71,573

 

69,108

 

70,914

 

67,621

 

 

 

 

 

 

 

 

 

 

 

Average common shares and potentially dilutive securities outstanding – diluted

 

72,572

 

71,120

 

71,753

 

77,089

 

 



INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

June 30,

 

June 30,

 

 

 

2006

 

2005

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash, cash equivalents and cash investments

 

$

603,779

 

$

638,135

 

Trade accounts receivable, net

 

182,774

 

158,510

 

Inventories, net

 

214,094

 

177,560

 

Short-term deferred income taxes

 

23,353

 

34,784

 

Prepaid expenses and other receivables

 

51,456

 

53,387

 

 

 

 

 

 

 

Total current assets

 

1,075,456

 

1,062,376

 

 

 

 

 

 

 

Long-term cash investments

 

488,849

 

302,585

 

 

 

 

 

 

 

Property, plant and equipment, net

 

576,380

 

488,204

 

 

 

 

 

 

 

Other assets

 

364,338

 

370,379

 

 

 

 

 

 

 

Total assets

 

$

2,505,023

 

$

2,223,544

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Bank loans

 

$

6,501

 

$

18,168

 

Long-term debt, due within one year

 

627

 

163

 

Accounts payable

 

85,009

 

81,893

 

Accrued salaries, wages and commissions

 

57,643

 

33,344

 

Other accrued expenses

 

104,870

 

91,328

 

Total current liabilities

 

254,650

 

224,896

 

 

 

 

 

 

 

Long-term debt, less current maturities

 

617,540

 

547,259

 

Other long-term liabilities

 

28,501

 

26,186

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock

 

71,988

 

69,826

 

Capital contributed in excess of par value of shares

 

925,603

 

854,045

 

Retained earnings

 

542,283

 

435,145

 

Accumulated other comprehensive income

 

64,458

 

66,187

 

Total stockholders’ equity

 

1,604,332

 

1,425,203

 

Total liabilities and stockholders’ equity

 

$2,505,023

 

$

2,223,544