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, 1994
[ ] Transition report pursuant to section 13 or 15 (d) of the securities
exchange act of 1934 (no fee required)
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
incorporation or organization) identification number)
233 Kansas Street
El Segundo, California 90245
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 322-3331
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 20,350,077 shares of $1 par value common stock outstanding
at May 13, 1994.
Table of Contents
PART I. FINANCIAL INFORMATION
Page
Reference
ITEM 1. Financial Statements
Unaudited Consolidated Statement
of Operations for the Three and Nine Month
Periods Ended March 31, 1994
and March 31, 1993
Consolidated Balance Sheet as of
March 31, 1994 (unaudited)
and June 30, 1993
Unaudited Consolidated Statement of
Cash Flows for the Nine Month
Periods Ended March 31, 1994
and 1993
Notes to Unaudited Consolidated
Financial Statements
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations
PART II. OTHER INFORMATION
NONE
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
International Rectifier Corporation and Subsidiaries
Unaudited Consolidated Statement of Operations
(In thousands except per share amounts)
Three Months Ended Nine Months Ended
March 31, March 31,
------------------- -------------------
1994 1993 1994 1993
-------- -------- -------- --------
Revenues $ 84,252 $ 70,572 $236,450 $ 206,004
Cost of sales 56,142 50,059 159,307 149,137
-------- -------- -------- --------
Gross profit 28,110 20,513 77,143 56,867
Selling and administrative expense 17,465 15,827 50,606 46,455
Research and development expense 4,201 3,606 11,980 10,154
-------- -------- -------- --------
Operating profit 6,444 1,080 14,557 258
Other income (expense):
Interest - net (1,161) (574) (2,715) (1,552)
Other - net (218) (180) (709) (2,243)
-------- -------- -------- --------
Income (loss) before income taxes 5,065 326 11,133 (3,537)
Provision for income taxes 859 201 1,881 209
-------- -------- -------- --------
Net income (loss) $ 4,206 $ 125 $ 9,252 $ (3,746)
======== ======== ======== ========
Net income (loss) per share $ 0.21 $ 0.01 $ 0.46 $ (0.18)
======== ======== ======== ========
Average common and common
equivalent shares outstanding 20,477 20,299 20,412 20,040
======== ======== ======== ========
The accompanying notes are an integral part of this statement.
International Rectifier Corporation and Subsidiaries
Consolidated Balance Sheet
(In thousands)
March 31,
1994 June 30,
(unaudited) 1993
----------- -----------
Assets
Current assets:
Cash and cash equivalents $ 13,026 $ 8,545
Trade accounts receivable (net) 63,045 55,004
Inventories 69,661 62,609
Prepaid expenses 2,174 1,731
----------- -----------
Total current assets 147,906 127,889
Property, plant and equipment (net) 152,005 138,518
Investments and long-term notes receivable 2,242 2,251
Other assets 11,368 9,790
----------- -----------
Total assets $ 313,521 $ 278,448
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Bank loans $ 29,204 $ 24,007
Long-term debt - due within one year 5,788 3,532
Accounts payable 30,074 27,846
Accrued salaries, wages and commissions 8,342 9,376
Other accrued expenses 8,985 5,012
----------- -----------
Total current liabilities 82,393 69,773
Long-term debt, less current maturities 24,611 11,810
Deferred income 1,199 1,402
Other long-term liabilities 9,101 9,073
Deferred income taxes 607 316
Stockholders' equity:
Common stock 20,345 20,234
Capital contributed in excess of par value 168,022 167,148
Retained earnings 13,038 3,786
Cumulative translation adjustments (5,795) (5,094)
----------- -----------
Total stockholders' equity 195,610 186,074
----------- -----------
Total liabilities and stockholders' equity $ 313,521 $ 278,448
=========== ===========
The accompanying notes are an integral part of this statement.
International Rectifier Corporation and Subsidiaries
Unaudited Consolidated Statement of Cash Flows
(In thousands)
Nine Months Ended
March 31,
------------------
1994 1993
-------- --------
Cash flow from operating activities:
Net income (loss) $ 9,252 $ (3,746)
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 13,286 12,777
Deferred income (203) (387)
Deferred income taxes 294 (7)
Deferred compensation 1,158 1,116
-------- --------
Cash flow from operating activities prior to 23,787 9,753
working capital requirements
Change in working capital (10,840) 6,385
-------- --------
Net cash provided by operating activities 12,947 16,138
-------- --------
Cash flow from investing activities:
Additions to property, plant and equipment (19,080) (15,463)
Investment in non-current assets (2,818) (2,398)
-------- --------
Net cash used in investing activities (21,898) (17,861)
-------- --------
Cash flow from financing activities:
Proceeds from issuance of (payments on) bank debt 5,592 (258)
Proceeds from issuance of debt and obligations 9,972 4,281
under capital leases
Payments on debt and obligations under capital leases (3,162) (3,753)
Net proceeds from issuance of common stock 985 1,823
Proceeds from (payments on) other long-term liabilities 206 (888)
-------- --------
Net cash provided by financing activities 13,593 1,205
Effect of exchange rate changes on cash and cash equivalents (161) 9
-------- --------
Net increase (decrease) in cash and cash equivalents 4,481 (509)
-------- --------
Cash and cash equivalents, beginning of period 8,545 8,547
-------- --------
Cash and cash equivalents, end of period $ 13,026 $ 8,038
======== ========
The accompanying notes are an integral part of this statement.
International Rectifier Corporation
Notes to unaudited consolidated financial statements
March 31, 1994
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, 1994 and the consolidated results of operations for the
nine month periods ended March 31, 1994 and 1993, and cash flows for the nine
month periods ended March 31, 1994 and 1993. 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, 1994, are not necessarily indicative of the results to be
expected for the full year.
The Company operates on a fiscal year calendar. Normally each fiscal year
consists of 52 weeks; however, fiscal 1993 consisted of 53 weeks. The extra
week was included in the quarter ended December 31, 1992 which resulted in 40
weeks in the nine month period ended March 31, 1993 versus 39 weeks in the
comparable 1994 fiscal period.
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, 1993.
In the fourth quarter of fiscal 1993 the Company extended the useful life of
certain assets. This change positively impacted gross profit in the quarter
ended March 31, 1994 by approximately $0.6 million.
Effective July 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes"
which requires recognition of deferred tax assets and liabilities for temporary
differences and net operating loss and tax credit carryforwards. Adoption of
SFAS No. 109 had no material impact on the Company's financial position or
results from operations. For further disclosure, refer to the quarterly report
filed on form 10-Q for the quarter ended September 30, 1993.
Certain reclassifications have been made to the prior year's financial
statements to conform to current year presentation.
2. Per Share Information
Earnings per share are computed by dividing earnings by the weighted average
number of common and common stock equivalents outstanding. Stock options
outstanding under stock option plans are common stock equivalents. 108,000
common stock equivalents for stock options were utilized in the computation of
earnings per share for the nine months ended March 31, 1994. No common stock
equivalents for stock options were used in the nine months ended March 31, 1993
as the impact would have been anti-dilutive.
3. Inventories
Inventories are stated at the lower of cost (principally first-in, first-out) or
market. Inventories at March 31, 1994 and June 30, 1993 were comprised of the
following (in thousands):
March 31, 1994 June 30, 1993
Raw materials $ 12,556 $ 12,613
Work-in-process 28,407 24,943
Finished goods 28,698 25,053
-------- --------
$ 69,661 $ 62,609
======== ========
4. Long-Term Debt and Other Loans
A summary of the Company's long-term debt and other loans at March 31, 1994 is
as follows:
March 31, 1994
Capitalized lease obligations $ 18,828
Property mortgage notes 4,522
Other 7,049
--------
30,399
Less current portion of long-term debt (5,788)
--------
$ 24,611
========
5. Litigation
Oral argument took place on May 2, 1994 before the Court of Appeals for the
Federal Circuit on the appeal by SGS-Thomson Microelectronics, Inc., from the
rulings in 1993 of the Federal District Court in Los Angeles, California,
dismissing the claims of SGS against the Company for infringement of U.S.
patents 4,495,513; 4,712,127; and 4,553,314. The Company's action against SGS
and its Italian affiliate, SGS-Thomson Microelectronics, S.r.L., for
infringement of the Company's U.S. patents 5,008,725 and 5,130,167 is scheduled
for trial beginning June 14, 1994.
6. Settlement Charge
In the quarter ended December 31, 1992, the Company reached an agreement for
settlement of a lawsuit brought by a supplier against the Company in California
Superior Court. Under the terms of the agreement the Company paid the supplier
$1.0 million. In the quarter ended December 31, 1992, the Company recognized a
charge of approximately $1.0 million ($1 million payment plus legal fees, less
amounts previously provided) related to this settlement.
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, 1994,
as compared to the respective prior year period.
The Company operates on a fiscal calendar, under which the nine months ended
March 31, 1994 consisted of 39 weeks compared to 40 weeks in the nine months
ended March 31, 1993.
Revenues in the quarter ended March 31, 1994 increased to $84.3 million from
$70.6 million in the comparable prior year period. Revenues for the nine month
period ended March 31, 1994 increased to $236.5 million from $206.0 million in
the previous year. The Company's revenue increase is primarily a result of
rising demand for the Company's key growth products and increased manufacturing
output. Year-to-year, electronic products revenues grew by 27 percent.
Revenues for the quarters ended March 31, 1994 and 1993 include patent royalties
of $2.0 million and $2.7 million, respectively.
Gross profit in the three and nine month periods ended March 31, 1994 increased
to $28.1 million (33.4% of revenues) and $77.1 million (32.6% of revenues),
respectively, from $20.5 million (29.1% of revenues) and $56.9 million (27.6% of
revenues) in the respective prior year periods. This increase reflects greater
manufacturing output and efficiencies and a better product mix. In the fourth
quarter of fiscal 1993 the Company extended the useful lives of certain assets.
This change positively impacted gross profit in the three and nine month periods
ended March 31, 1994 by approximately $0.6 million (0.7% of revenues) and $1.6
million (0.7% of revenues), respectively.
In the three and nine month periods ended March 31, 1994, selling and
administrative expenses decreased to 20.7% and 21.4% of revenues ($17.5 million
and $50.6 million), respectively, compared to 22.4% and 22.6% of revenues ($15.8
million and $46.5 million) in the respective prior year periods.
The Company's research and development program is focused on diversifying its
MOSFET product line and expanding the related IGBT product line. Efforts are
also directed to the development of smart power ICs (integrated circuits) and
other power products that work in combination with MOSFETs and IGBTs to improve
system performance. In the three and nine month periods ended March 31, 1994,
research and development expenditures increased to $4.2 million (5.0% of
revenues) and $12.0 million (5.1% of revenues), compared to $3.6 million and
$10.2 million (5.1% and 4.9% of revenues) in the respective prior year periods.
Net interest expense in the three and nine month periods ended March 31, 1994
increased $0.6 million and $1.2 million, respectively, from the comparable prior
year periods. The increase in interest expense resulted from increased
borrowings, partially offset by lower average interest rates.
Results for the nine months ended March 31, 1993 include a $1.0 million charge
for settlement of a breach of contract lawsuit brought against the Company.
SEASONALITY
The Company has experienced moderate seasonality in its business in recent
years. On average, the Company has reported approximately 48% of annual
revenues in the first half and approximately 52% in the second half of its
fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1994, the Company had established $57.0 million in domestic and
foreign revolving credit facilities, of which $29.2 million had been borrowed by
the Company. Based upon covenant and collateral limitations under the revolving
credit facilities, the Company had $16.1 million available for borrowing at
March 31, 1994. In addition, at March 31, 1994, the Company had available
approximately $20.5 million of unused lease lines of credit for capital
equipment. At March 31, 1994, the Company had $13.0 million of cash and cash
equivalents on hand, and had made commitments of approximately $6.0 million for
capital equipment, primarily to expand the Company's assembly and wafer
capacity.
Although it periodically reevaluates its sources of financing, the Company
believes that cash and cash equivalents on hand, anticipated cash flows from
operations, and funds available from existing credit lines will be sufficient to
meet its cash requirements for the foreseeable future.
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
MICHAEL P. MCGEE
________________
Date: May 13, 1994 Michael P. McGee
Vice President,
Chief Financial Officer and
Principal Accounting Officer
PART II. OTHER INFORMATION
NONE
