EL SEGUNDO, Calif.--(BUSINESS WIRE)--Oct. 27, 2005--International
Rectifier Corporation (NYSE: IRF) today reported adjusted earnings of
$29.4 million (or $0.41 per share) for the September quarter on
revenues of $272.6 million. This compares to $38.4 million (or $0.54
per share) for the June quarter on revenues of $281.8 million. For the
prior-year quarter, adjusted earnings were $42.4 million on revenues
of $312.2 million. For the September 2005, June 2005 and September
2004 quarters, adjusted earnings excluded $4.3 million, $12.4 million
and $6.7 million in pretax charges, respectively, for severance and
restructuring activities announced in December 2002. The June 2005
quarter also excluded a one-time $6.0 million pretax charge from the
accelerated vesting of options.
On a GAAP basis, net income was $26.2 million (or $0.36 per share)
for the September quarter versus $24.7 million (or $0.35 per share) in
the June quarter and $37.6 million (or $0.53 per share) for the
prior-year quarter.
Gross margin was 40.7 percent in the first quarter, down 280 basis
points from 43.5 percent in the June quarter. The company reported
gross margin of 42.7 percent in the year-ago September quarter.
PRODUCT SEGMENTS
Focus Products
Overall Focus Products had revenues of $201.9 million, or 74.1
percent of total IR revenues, compared to $211.5 million, or 75.1
percent in the June quarter. In this category, backlog requested by
customers for delivery in the quarter, or "shippable demand," exceeded
June quarter revenues by 17 percent. A large percentage of the orders,
however, came late in the quarter, and the product mix was different
than forecasted. The company did not have the incremental capacity to
respond to the mix change by the end of the quarter. The output
constraints placed significant pressure on operating efficiencies and
limited profit opportunities. Gross margin for Focus Products declined
to 48.8 percent compared to 51.1 percent in the prior quarter. The
decline was primarily due to seasonality, product mix and the effect
of profit sharing and employee stock option expense.
A breakdown of revenues and gross margins by segment follows for
the periods shown:
Product Segment September 30, June 30, September 30,
($ in millions) 2005 2005 2004
------------------------------ ------------- ---------- --------------
Computing & Comms (C&C)
Revenues $89.7 $89.5 $106.0
Gross Margin 41.6% 44.1% 43.7%
Energy-Saving Products (ESP)
Revenues $72.4 $79.5 $73.1
Gross Margin 52.4% 55.3% 53.6%
Aerospace & Defense (A&D)
Revenues $29.4 $32.4 $32.3
Gross Margin 43.8% 44.7% 41.3%
Intellectual Property (IP)
Revenues $10.4 $10.1 $10.0
Gross Margin 100.0% 100.0% 100.0%
------------- ---------- --------------
FOCUS PRODUCTS
Total Revenues $201.9 $211.5 $221.4
Gross Margin 48.8% 51.1% 49.2%
============= ========== ==============
Non-Aligned Products (NAP)
Revenues $28.6 $27.1 $31.3
Gross Margin 14.6% 12.0% 19.6%
Commodity Products (CP)
Revenues $42.1 $43.2 $59.5
Gross Margin 19.3% 25.8% 30.9%
------------- ---------- --------------
NON-FOCUS PRODUCTS
Total Revenues $70.7 $70.3 $90.8
Gross Margin 17.4% 20.5% 27.0%
============= ========== ==============
In Computing and Communications (C&C), revenues represented about
a third of total company revenues and were flat with last quarter. The
gross margin declined 2.5 percentage points. While shippable demand
for C&C products exceeded expectations, up 27 percent from June
quarter revenues, orders arrived late in the quarter and capacity
constraints did not allow the company to adjust to the unexpected mix
in time.
Energy-Saving Products (ESP) revenues accounted for about 27
percent of total company revenues. Revenues in this segment declined 9
percent compared to last quarter with margin down 2.9 percentage
points. The decline in this segment was due to seasonal downturns in
the automotive, white goods, and industrial markets, somewhat offset
by an increase in digital TV and audio.
In IR's Aerospace and Defense (A&D) segment, shippable demand
exceeded June quarter revenues; however, due to a logistics
bottleneck, output was constrained and revenues declined 9 percent in
the quarter. Revenues in this segment were 11 percent of total
revenues. Gross margin was down about a percentage point to 43.8
percent.
In IR's Intellectual Property (IP) segment, revenues were $10.4
million.
Non-Focus Products
Non-Focus Product revenues were $70.7 million, or about 26 percent
of total IR revenues, compared to $70.3 million, or 24.9 percent in
the June quarter. Gross margin for Non-Focus Products was 17.4 percent
compared to 20.5 percent in the prior quarter. The gross margin
declined primarily due to aggressive pricing in the distribution
channel and low factory utilization.
In Non-Aligned Products, revenues increased 6 percent sequentially
and were about 11 percent of company revenues in the September
quarter. Gross margin was 14.6 percent, up 2.6 percentage points from
last quarter.
In Commodity Products, September quarter revenues were down about
3 percent from last quarter and represented about 16 percent of
company revenues. Margin was down 6.5 percentage points to 19.3
percent.
The company generated $13.8 million of cash from operations in the
first quarter, ending the quarter with $932 million in cash and cash
investments.
CEO Alex Lidow said, "September quarter results were
disappointing. Shippable demand for our Focus Products was very strong
late in the quarter, but capacity was stretched to the limit. In
addition, Non-Focus Product shipments were influenced by inventory
reductions in the distribution channel. Overall, shipments to
distributors were down 12 percent in the quarter.
"We have shipped unfulfilled September orders early in the
December quarter, positioning the company to reduce its overall
inventories by at least $10 million by the end of December.
"To address our capacity limitations, we have accelerated plans to
open our new 8-inch sub-micron wafer fab in Newport, Wales. The first
phase of capacity is planned to come on line by the end of the
December quarter. When phase two of the expansion is complete in
October 2006, we expect to have new capacity to produce between $210
million to $310 million in annual revenues depending on product mix.
We're opening capacity to increase shipments of our high performance
analog and mixed-signal ICs and DirectFET(TM) products."
DESIGN WIN UPDATE
In the September quarter, IR began shipping into Intel dual-core
Paxville server platforms. This, combined with other next-generation
server platforms ramping in the March and June quarters, represents
over $40 million of new business in calendar 2006. IR continued its
success in notebooks using Intel's latest platforms by securing
additional sockets that will ramp up in the March quarter for
customers including Samsung and the leading Chinese notebook
manufacturer. Last quarter, IR also began shipping into the industry's
most powerful desktop platform which requires IR's DirectFETs in order
to meet the stringent performance requirements of this platform's last
generation dual-core processor.
IR had design wins and began shipping to JVC with Focus Products
for digital audio, including IR's new IRS20124 Class D digital audio
IC. IR also continued to secure design wins in the digital TV market
for plasma displays and LCD panels at customers including Samsung and
LG. Toshiba, Hitachi, Haier, and Whirlpool selected IR Focus Products
for their next-generation energy-saving appliances. In automotive, IR
ICs were designed into ten direct diesel injection programs,
continuing the company's leadership in that application.
OUTLOOK
IR will continue to have capacity constraints in the December
quarter that will limit the company's growth potential in the period.
IR expects revenues to increase 1 to 4 percent from the prior quarter.
The expense of starting up the wafer fab and related costs will
constrain IR's gross margin potential in the December quarter. The
combination of these factors will result in the overall gross margin
declining by about 200 basis points from the September quarter.
CEO Alex Lidow stated, "In the March and June quarters, we are
looking forward to a recovery in operating performance. Added
capacity, the uptake of major design wins into production, and
improved ability to respond to short-term opportunities, should allow
us to deliver better than seasonally affected revenue results in the
March quarter. The June quarter has the potential to materially
improve upon those results, and lead us into fiscal 2007 with all
aspects of IR running at full efficiency, positioning the company to
once again achieve record results."
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 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 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 fiscal year-end 2006.
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, 2005, June 30, 2005 and September 30,
2004 (in thousands, except per share amounts):
For the Quarter Ended
-----------------------------------
September September
30, June 30, 30,
2005 2005 2004
(unaudited) (unaudited) (unaudited)
----------- ----------- -----------
Net income $26,243 $24,693 $37,580
Restructuring charges (net of tax) 3,112 9,268 4,851
Stock options accelerated vesting
charge (net of tax) - 4,479 -
----------- ----------- -----------
Adjusted net income 29,355 $38,440 42,431
Conversion of subordinated notes
(net of tax) - - 2,386
----------- ----------- -----------
Adjusted net income, diluted $29,355 $38,440 $44,817
=========== =========== ===========
EPS, basic $0.37 $0.36 $0.56
Effect of dilutive securities (1) (0.01) (0.01) (0.03)
----------- ----------- -----------
EPS, diluted 0.36 0.35 0.53
Restructuring charges (net of tax) 0.05 0.13 0.07
Stock options accelerated vesting
charge (net of tax) - 0.06 -
Effect of dilutive securities on
adjusting items - - (0.01)
----------- ----------- -----------
Adjusted EPS, diluted (1) $0.41 $0.54 $0.59
=========== =========== ===========
Basic EPS shares 70,329 69,108 66,516
Effect of dilutive securities:
Convertible subordinated notes - - 7,439
Stock options 1,948 2,012 1,756
----------- ----------- -----------
Diluted EPS shares (1) 72,277 71,120 75,711
=========== =========== ===========
(1) The September 30, 2005 and June 30, 2005 quarters reported and
adjusted diluted EPS 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 September 30, 2004 quarter included the
Effect, which impacted reported and adjusted diluted EPS by ($0.02)
and ($0.03), respectively.
Segment Reporting
The company began reporting its financial results in six segments
commencing in its 10-K for Fiscal Year 2005 filed with the Securities
and Exchange Commission. Those reporting segments are Computing and
Communications, Energy-Saving Products, Aerospace and Defense,
Intellectual Property, Non-Aligned Products and Commodity Products.
IR's Focus Product segments include Computing and Communications
(C&C), Energy-Saving Products (ESP), Aerospace and Defense (A&D), and
Intellectual Property (IP). IR's Non-Focus Products segments include
Non-Aligned Products (NAP) and Commodity Products (CP).
Revenues by business sectors are as follows (in thousands):
For the Quarter Ended
------------------------------------
September 30, June 30, September 30,
2005 2005 2004
------------- --------- ------------
Computing and Communications (C&C) $89,640 $89,505 $105,991
Energy-Saving Products (ESP) 72,386 79,474 73,151
Aerospace and Defense (A&D) 29,401 32,405 32,277
Intellectual Property (IP) 10,440 10,091 10,019
------------- --------- ------------
Subtotal Focus Products 201,867 211,475 221,438
Non Aligned Products (NAP) 28,554 27,053 31,263
Commodity Products (CP) 42,152 43,240 59,524
------------- --------- ------------
Subtotal Non-Focus Products 70,706 70,293 90,787
------------- --------- ------------
Consolidated revenues $272,573 $281,768 $312,225
============= ========= ============
Gross margin by business sectors are as follows:
For the Quarter Ended
------------------------------------
September 30, June 30, September 30,
2005 2005 2004
------------- -------- -------------
Computing and Communications (C&C) 41.6% 44.1% 43.7%
Energy-Saving Products (ESP) 52.4 55.3 53.6
Aerospace and Defense (A&D) 43.8 44.7 41.3
Intellectual Property (IP) 100.0 100.0 100.0
Subtotal Focus Products 48.8 51.1 49.2
Non Aligned Products (NAP) 14.6 12.0 19.6
Commodity Products (CP) 19.3 25.8 30.9
Subtotal Non-Focus Products 17.4 20.5 27.0
Consolidated Gross Margin 40.7% 43.5% 42.7%
International Rectifier (NYSE:IRF) 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 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
graphs. Such 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 market demand to materialize as
anticipated (and the product mix of that demand); the failure of our
ability to adequately align our installed capacity with market demand
or product mix; delays in our ability to increase capacity in our
facilities to meet demand and the appropriate mix of demand; impacts
on revenues and margin due to pricing pressures; impacts due to
unexpected or greater than expected costs or delays associated with
cost-reduction, restructuring and margin improvement 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 restructuring plans and
the amount of anticipated charges; the effectiveness of cost controls
and cost reductions; any adverse impact from quality and product
disputes, claims, litigation, investigations, returns and recalls, and
the cost 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; company and
market impact due to the cancellation or delays in customer and/or
industry programs and/or orders; unfavorable changes in industry
conditions; unfavorable changes in economic conditions in the
company's markets around the world and the timing of changes in market
conditions; greater than expected manufacturing and administrative
costs; 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; impacts on our royalties from
patent licensee redesign, a decline in sales by licensees (due to
market conditions or otherwise), or change in product mix to
non-infringing devices; and other uncertainties disclosed in the
company's reports filed with the Securities and Exchange Commission,
including its most recent report on Form 10-K. Additionally, to the
foregoing factors should be added the financial, market, supply
disruption and other ramifications of terrorist actions and natural
disasters, including without limitation, the effects of Hurricanes
Katrina and Rita.
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, October 27 until 7:15 p.m.
Eastern time (4:15 p.m. Pacific time) on Tuesday, November 1. To hear
the replay, call 800-633-8284 (for international callers 402-977-9140)
and use reservation number 21230148, or use the websites listed above.
DirectFET is a trademark of International Rectifier. Other names
and brands may be claimed as the property of others.
International Rectifier Corporation and Subsidiaries
Unaudited Consolidated Statement of Income
(In thousands except per share amounts)
Three Months Ended
September 30,
-------------------
2005 2004
--------- ---------
Revenues $272,573 $312,225
Cost of sales 161,680 178,788
--------- ---------
Gross profit 110,893 133,437
Selling and administrative expense 45,166 46,415
Research and development expense 25,212 25,366
Amortization of acquisition-related intangibles 1,453 1,439
Impairment of assets, restructuring and severance
charges 4,293 6,691
Other expense (income), net 124 (36)
Interest (income) expense, net (1,552) 1,717
--------- ---------
Income before income taxes 36,197 51,845
Provision for income taxes 9,954 14,265
--------- ---------
Net income $26,243 $37,580
========= =========
Net income per common share
Basic $0.37 $0.56
========= =========
Diluted $0.36 $0.53
========= =========
Average common shares outstanding - basic 70,329 66,516
========= =========
Average common shares and potentially dilutive
securities outstanding - diluted 72,277 75,711
========= =========
International Rectifier Corporation and Subsidiaries
Unaudited Condensed Consolidated Balance Sheet
(In thousands)
September 30, June 30,
2005 2005
----------- -----------
Assets
Current assets:
Cash, cash equivalents and cash investments $583,637 $638,135
Trade accounts receivable, less allowance
for doubtful accounts 159,685 158,510
Inventories, net 193,781 177,560
Current deferred income taxes 33,982 34,784
Prepaid expenses and other receivables 64,952 53,387
----------- -----------
Total current assets 1,036,037 1,062,376
Long-term cash investments 348,311 302,585
Property, plant and equipment, net 502,517 488,204
Other assets 363,985 370,379
----------- -----------
Total assets $2,250,850 $2,223,544
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Bank loans $20,437 $18,168
Long-term debt, due within one year 47 163
Accounts payable 78,157 81,893
Accrued salaries, wages and commissions 29,353 33,344
Other accrued expenses 82,415 91,328
----------- -----------
Total current liabilities 210,409 224,896
Long-term debt, less current maturities 542,322 547,259
Other long-term liabilities 25,188 26,186
Stockholders' equity:
Common stock 70,736 69,826
Capital contributed in excess of par value
of shares 882,388 854,045
Retained earnings 461,388 435,145
Accumulated other comprehensive income 58,419 66,187
----------- -----------
Total stockholders' equity 1,472,931 1,425,203
----------- -----------
Total liabilities and stockholders' equity $2,250,850 $2,223,544
=========== ===========
CONTACT: International Rectifier
Steve Harrison, 310-252-7731
Website: http://www.irf.com
SOURCE: International Rectifier
