<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
Subject to Completion, dated October 28, 1994
PROSPECTUS
4,500,000 SHARES
[LOGO]
INTERNATIONAL RECTIFIER CORPORATION
COMMON STOCK
----------------
All of the 4,500,000 shares of Common Stock, par value $1.00 per share (the
"Shares"), offered hereby are being sold by International Rectifier Corporation
("IR" or the "Company"). Of the 4,500,000 shares of Common Stock offered,
3,600,000 shares will be offered initially in the United States and Canada by
the U.S. Underwriters (the "U.S. Offering") and 900,000 shares will be offered
concurrently outside the United States and Canada by the International Managers
(the "International Offering" and, together with the U.S. Offering, the
"Offerings"). The offering price and underwriting discounts and commissions for
the U.S. Offering and the International Offering will be identical. See
"Underwriting."
The Company's Common Stock is listed on the New York Stock Exchange and the
Pacific Stock Exchange under the symbol "IRF." On October 27, 1994, the closing
price for the Company's Common Stock on the New York Stock Exchange Composite
Tape was $23.625 per share. See "Price Range of Common Stock and Dividend
Policy."
---------------------
SEE "RISK FACTORS" FOR CERTAIN MATTERS RELEVANT TO AN INVESTMENT IN THE
COMPANY'S COMMON STOCK.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting
Discounts
Price and Proceeds to
to Public Commissions (1) Company (2)
<S> <C> <C> <C>
Per Share.............................. $ $ $
Total (3).............................. $ $ $
<FN>
(1) The Company has agreed to indemnify the U.S. Underwriters and the
International Managers against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting estimated expenses of the Offerings of $ payable
by the Company.
(3) The Company has granted the U.S. Underwriters and the International
Managers a 30-day option to purchase up to 675,000 additional shares of
Common Stock on the same terms and conditions as set forth above solely to
cover over-allotments, if any. If such option is exercised in full, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to Company will be $ , $ and $ , respectively.
See "Underwriting."
</TABLE>
---------------------
The shares of Common Stock offered by this Prospectus are offered by the
U.S. Underwriters subject to prior sale, to withdrawal, cancellation or
modification of the offer without notice, to delivery to and acceptance by the
U.S. Underwriters and to certain further conditions. It is expected that
delivery of the Shares will be made at the offices of Lehman Brothers Inc., New
York, New York, on or about , 1994.
---------------------
LEHMAN BROTHERS
KIDDER, PEABODY & CO.
Incorporated
MONTGOMERY SECURITIES
PAINEWEBBER INCORPORATED
SMITH BARNEY INC.
, 1994
<PAGE>
[INSIDE FRONT COVER PHOTO]
[PHOTO1]
Schematic illustration of generic automobile showing color-coded application
points for International Rectifier components.
[CAPTION]
In recent model years the proliferation of safety and comfort features that use
electronic components has made automobiles the fastest-growing market for
International Rectifier products.
IN CONNECTION WITH THE OFFERINGS, THE U.S. UNDERWRITERS AND THE
INTERNATIONAL MANAGERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR
MAINTAIN THE MARKET PRICE OF THE COMPANY'S COMMON STOCK AT A LEVEL ABOVE THAT
WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE
EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL
INFORMATION IN THE PROSPECTUS ASSUMES NO EXERCISE OF THE U.S. UNDERWRITERS' AND
INTERNATIONAL MANAGERS' OVER-ALLOTMENT OPTION (SEE "UNDERWRITING"). THE
COMPANY'S FISCAL YEAR END IS JUNE 30 (SEE "NOTE 1 -- NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS").
THE COMPANY
International Rectifier Corporation ("IR" or the "Company") is a major
worldwide supplier of power semiconductors, which convert electricity in
products using electrical current. The Company's trademarked HEXFET-R- power
MOSFETs (Metal Oxide Semiconductor Field Effect Transistors), IGBTs (Insulated
Gate Bipolar Transistors), rectifiers and thyristors enable IR to provide
customers with integrated solutions to their power conversion needs.
According to statistics published by the Semiconductor Industry Association
("SIA") for calendar 1993, the Company had a 17% market share of the $1.1
billion power MOS transistor segment, comprised of power MOSFETs and IGBTs. In
addition, the Company sold approximately $19.1 million of power MOSFET and IGBT
chips and wafers to third parties in calendar 1993. Accordingly, the Company
believes it is the world leader in the power MOS transistor market. Power
MOSFETs, IGBTs, chips and wafers comprised over two-thirds of the Company's
fiscal 1994 sales. SIA data indicates that industry-wide sales of power MOS
transistors in calendar 1993 increased 23% over 1992 levels, and that, over the
past five years, power MOSFET and IGBT sales have grown at an average annual
rate of 26%.
Applications for the Company's products include:
AUTOMOBILES: anti-lock braking systems, fuel injection systems, air bags and
power accessories;
COMMUNICATIONS EQUIPMENT: telephone networks, satellites and modems;
COMPUTERS AND PERIPHERALS: power supplies and disk drives in desktop,
mainframe and portable computers and printers;
CONSUMER ELECTRONICS AND LIGHTING: fluorescent lighting ballasts, home
entertainment equipment and household appliances;
INDUSTRIAL EQUIPMENT: motor-driven production lines, instrumentation and
test equipment, machine tools, fork lifts and welders; and
OFFICE EQUIPMENT: copiers and facsimile machines.
The Company has operated internationally for 35 years. In fiscal 1994, over
50% of the Company's sales were to foreign customers, divided almost evenly
between Europe and Asia, and the remainder were to customers in North America.
The Company's customers include global industry leaders such as AT&T
Technologies Inc., Conner Peripherals, Inc., General Motors Corporation, Hewlett
Packard Co., International Business Machines Corp., Matsushita Electric Industry
Company, Ltd., Sanken Electric Company, Ltd., Siemens AG and Sony Corporation.
To meet rising demand for power MOS transistors, the Company is expanding
its wafer fabrication capacity at HEXFET America, its power MOSFET plant in
Temecula, California. The estimated $75.0 million expansion, which will be
funded in part with the proceeds of the Offerings, should be completed by the
end of calendar 1995. The expansion is estimated ultimately to increase HEXFET
America's wafer fabrication capacity by about 75%. See "Use of Proceeds" and
"Business -- Manufacturing."
At September 30, 1994, the Company had an order backlog of approximately
$132.5 million as compared to $85.6 million at September 30, 1993 and $121.8
million at June 30, 1994.
Reference is made to the Glossary for the definition of certain technical
terms used in this Prospectus.
3
<PAGE>
THE OFFERINGS
<TABLE>
<S> <C>
Common Stock offered by the Company.............................. 4,500,000 shares
Common Stock outstanding after the Offerings..................... 24,892,323(1)
New York Stock Exchange Symbol................................... IRF
Use of Proceeds.................................................. To expand the Company's wafer fabrication capacity at its HEXFET
America facility, repay debt and for general corporate purposes
including working capital.
<FN>
- ------------------------
(1) Based on 20,392,323 shares outstanding on September 30, 1994 and excluding
an aggregate of 268,320 shares issuable upon exercise of options
outstanding on September 30, 1994 under the Company's stock option plans.
</TABLE>
SUMMARY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS
ENDED SEPTEMBER
30, (UNAUDITED) FISCAL YEARS ENDED JUNE 30,
---------------- ----------------------------
1994 1993 1994 1993 1992
------- ------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Revenues...................... $92,253 $73,094 $328,882 $281,732 $265,495
Gross profit.................. 31,514 23,420 108,938 79,048 79,058
Operating profit.............. 8,917 3,260 23,549 2,328 10,882
Interest expense, net......... (912) (760) (3,625) (2,250) (1,436)
Income (loss) before income
taxes........................ 7,826 2,306 18,874 (2,597) 10,512
Net income (loss)............. 6,498 1,976 15,714 (3,033) 9,237
Net income (loss) per share... $ 0.32 $ 0.10 $ 0.78 $ (0.15) $ 0.46
Average common and common
equivalent shares
outstanding.................. 20,596 20,360 20,428 20,087 20,107
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
(UNAUDITED)
----------------------
ACTUAL ADJUSTED (1)
-------- ------------
<S> <C> <C>
(IN THOUSANDS)
BALANCE SHEET
Working capital................................... $ 66,888 $167,901
Total assets...................................... 348,489 432,602
Short-term debt................................... 41,467 24,567
Long-term debt, less current maturities........... 28,605 28,605
Stockholders' equity.............................. 210,303 311,316
<FN>
- ------------------------
(1) Adjusted to reflect the sale of 4,500,000 shares by the Company pursuant to
the Offerings, and the application of the net proceeds.
</TABLE>
4
<PAGE>
THE COMPANY
IR is a major worldwide supplier of power semiconductors which convert
electricity at relatively high voltage and current levels in products such as
automobiles, communications equipment, computers and peripherals, consumer
electronics and lighting, industrial equipment and office equipment. The process
of power conversion can be viewed in four stages: input rectification, control,
switching and output rectification. Input rectification conditions off-line
electricity, typically rectifying alternating current to direct current. The
control function measures incoming electricity and sends a signal to a switch.
The switch packages the current into discrete units. Output rectification
reconfigures the elements into a form useable by electrically operated
equipment. IR supplies products that perform each of these four basic functions.
IR was founded as a California corporation in 1947 and reincorporated in
Delaware in 1979. Its executive offices are located at 233 Kansas Street, El
Segundo, California 90245 and its telephone number is (310) 322-3331.
RISK FACTORS
Prospective investors should carefully consider the following factors in
addition to the other information provided elsewhere in this Prospectus or
incorporated by reference herein in evaluating an investment in the Company's
Common Stock.
EXPANSION RISKS
The Company is expanding wafer fabrication capacity at HEXFET America, its
power MOSFET plant in Temecula, California. Although the Company has not yet
experienced, and does not anticipate, any delays in construction or existing
production at HEXFET America, there can be no assurance that the Company will
not experience such delays or other delays in ramping up production or in
changing process technologies. See "Business -- Manufacturing."
MANUFACTURING RISKS
The Company's manufacturing processes are highly complex, require advanced
and costly equipment and are continuously being modified in an effort to improve
yields and product performance. Minute impurities or other difficulties in the
manufacturing process can lower yields. In the past, the Company has experienced
assembly output limitations that have constrained sales. There can be no
assurance that the Company will not experience manufacturing difficulties in the
future. In addition, although HEXFET America is designed to resist large
magnitude earthquakes and other natural disasters, the Company's operations
would be materially adversely affected if production at this facility were
interrupted. See "Business -- Manufacturing."
CONCENTRATION OF SUPPLIERS AND ASSEMBLERS
Although the Company generally uses materials and parts available from
multiple suppliers, the Company has only a limited number of suppliers for
certain materials and parts. The Company has not experienced any substantial
production delays from materials or parts shortages in the past. The Company
believes that alternate suppliers for these materials and parts are available,
but there can be no assurance that the Company will not experience interruption
of such supplies in the future.
During IR's recent expansion program at HEXFET America, a subcontractor that
provided assembly for up to 30% of IR's fastest-growing product line
discontinued this kind of production, resulting in product shortages.
Approximately 25% of the Company's power MOSFETs are currently assembled by two
subcontractors in Southeast Asia. The Company believes that these subcontractors
and alternative assembly subcontractors provide adequate assembly capacity.
Interruptions in assembly could, however, have a material adverse impact on the
Company's operations. There can be no assurance that the Company will not
experience interruption of such assembly operations in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
SIGNIFICANT INTERNATIONAL OPERATIONS
Over 50% of the Company's revenues were derived from sales in foreign
markets in fiscal 1994. The Company expects revenues from foreign markets to
continue to represent a significant portion of total revenues. The Company owns
and uses subcontract manufacturing and assembly facilities in England, Italy,
5
<PAGE>
Mexico, Japan and the Philippines, among others, and sells products manufactured
domestically to foreign customers. The Company's foreign operations are subject
to the usual risks that may affect such operations, including currency
fluctuations, difficulty collecting receivables and possible governmental
actions, tariffs, taxes, future import and export restrictions and political and
governmental changes.
TECHNOLOGICAL CHANGE
The power semiconductor market is subject to technological change and
evolving industry standards. To remain competitive, the Company must continue to
devote significant resources to advance process technologies to reduce
semiconductor die size, increase product performance and improve manufacturing
yields. There can be no assurance that the Company's competitors will not
develop new technologies that are substantially equivalent or superior to the
Company's patented technology or that the Company will be able to continue
enhancing existing processes or developing new technologies. See "Business --
Research and Development," and "-- Competition."
PROTECTION OF INTELLECTUAL PROPERTY
The Company relies on its patents and technological know-how to protect its
market position. See "Business -- Intellectual Property." There can be no
assurance that the Company will be able to protect its intellectual property
rights effectively. In addition, protection of the Company's intellectual
property rights in foreign markets is not as strong as the protection afforded
to its intellectual property in the United States. From time to time, the
Company and certain companies have asserted patent rights against each other.
The Company is presently engaged in such litigation, involving power MOSFET and
IGBT patents, with one of its competitors. There can be no assurance that the
Company will be successful with respect to litigation or other proceedings
involving patent rights or that such litigation might not increase the Company's
costs of doing business, expose the Company to substantial monetary damages or
interfere with the sale of its products. The Company has incurred, and could
incur in the future, substantial costs protecting its intellectual property or
defending infringement claims. See "Business -- Legal Proceedings."
SECURITIES LAWS LITIGATION
The Company, its directors and certain officers have been named as
defendants in three class action lawsuits in California which allege certain
intentional and negligent misrepresentations and violations of the federal
securities laws in connection with the Company's public offering of common stock
in April 1991 and the redemption in June 1991 of the Company's 9% Convertible
Subordinated Debentures and certain other matters. Although the Company believes
that the allegations in these lawsuits are without merit, the ultimate outcome
cannot be presently determined, and a substantial judgment or settlement, if
any, could have a material adverse effect on the Company's financial condition
and results of operations. See "Business -- Legal Proceedings."
COMPETITION
The Company competes with a number of different manufacturers in each of its
major product areas. Many of these companies have substantially greater
financial, technical, manufacturing and marketing resources than the Company.
IR's ability to compete depends upon a number of factors, including new product
and process technologies introduced by the Company and its competitors, customer
acceptance of the Company's products, cost-effective manufacturing, enforcement
of intellectual property rights and general market and economic conditions. Some
of these factors are out of the Company's control. There can be no assurance
that the Company will be able to compete successfully in the future against
existing or potential competitors. See "Business -- Competition."
CHANGE OF CONTROL PROVISIONS
The Company's Certificate of Incorporation and Bylaws contain provisions
that make it more difficult for a third party to acquire, or that discourage a
third party from attempting to acquire, control of the Company. In addition, as
a Delaware corporation, the Company is subject to the restrictions imposed under
Section 203 of the Delaware General Corporation Law which prevent the Company
from engaging in certain change of control transactions with certain of its
stockholders under certain circumstances. See "Description of Capital Stock."
6
<PAGE>
STOCK PRICE VOLATILITY
The Company's Common Stock has experienced substantial price volatility
which also may occur in the future, particularly as a result of
quarter-to-quarter variations in the actual or anticipated financial results of
the Company or other companies in the semiconductor industry or in the markets
served by the Company, or announcements by the Company or its competitors
regarding new product introductions. In addition, the stock market has
experienced extreme price and volume fluctuations that have affected the market
price of many technology companies' stocks in particular and that have often
been unrelated to the operating performance of these companies. These factors
may adversely affect the market price of the Common Stock. See "Price Range of
Common Stock."
7
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 4,500,000 shares of
Common Stock offered hereby are estimated to be approximately $101.0 million
($116.2 million if the Underwriters' over-allotment option is exercised in
full). The Company anticipates spending approximately $70.1 million of the
proceeds to expand its wafer fabrication capacity at HEXFET America. See
"Business -- Manufacturing." Approximately $9.9 million of the proceeds will be
used to repay amounts outstanding under the Company's domestic revolving credit
facility and approximately $7.0 million of the proceeds will be used to repay
amounts outstanding under short-term foreign loans. The interest rate on
domestic borrowings to be repaid is either LIBOR plus 1.25% or prime and the
weighted average rate on foreign debt that will be repaid was 7.9% at September
30, 1994. The remainder of the proceeds will be used for working capital and
general corporate purposes. Notwithstanding the debt repayments, the Company may
reborrow in the future to support potential expansion and growth activities.
Pending application of the funds, the net proceeds may be used to pay down
additional short-term debt obligations and may be invested in short-term,
interest-bearing obligations.
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
the Company at September 30, 1994, and as adjusted for the sale by the Company
of the 4,500,000 shares of Common Stock offered hereby, and the application of
the net proceeds therefrom as described under "Use of Proceeds."
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
----------------------
AS
ACTUAL ADJUSTED
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Bank loans.............................................................................. $ 34,853 $ 17,953
Long-term debt -- due within one year, including current maturities..................... 6,614 6,614
---------- ----------
$ 41,467 $ 24,567
---------- ----------
---------- ----------
Long-term debt, less current maturities:
Capitalized lease obligations payable in varying monthly installments primarily at rates
from 6.9% to 16.6%..................................................................... $ 11,747 $ 11,747
10.55% property mortgage due in equal monthly installments to 2011...................... 4,170 4,170
Domestic bank loans collateralized by equipment, payable in varying monthly installments
at rates from 7.1% to 9.0%, due in 1995 through 1999................................... 4,834 4,834
Foreign bank loans collateralized by property and/or equipment, payable in varying
monthly installments at rates from 6.5% to 10.8%, due in 1997 through 2000............. 3,787 3,787
Foreign unsecured bank loans payable in varying monthly installments at rates from 4.0%
to 11.9%, due in 1998 through 2006..................................................... 4,067 4,067
---------- ----------
28,605 28,605
---------- ----------
Stockholders' equity:
Common shares, $1.00 par value, 30,000,000 shares authorized, 20,392,323 shares issued
and outstanding (24,892,323 shares as adjusted)(1)..................................... 20,392 24,892
Capital contributed in excess of par value of shares.................................... 168,508 265,021
Retained earnings....................................................................... 25,998 25,998
Cumulative translation adjustments...................................................... (4,595) (4,595)
---------- ----------
Total stockholders' equity............................................................ 210,303 311,316
---------- ----------
Total capitalization.................................................................. $ 238,908 $ 339,921
---------- ----------
---------- ----------
<FN>
- ------------------------
(1) Excludes 268,320 shares issuable upon exercise of options pursuant to the
Company's stock option plans as of September 30, 1994.
</TABLE>
8
<PAGE>
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on the New York Stock Exchange and the
Pacific Stock Exchange under the symbol "IRF." The following table sets forth
the range of high and low closing prices of the Common Stock on the New York
Stock Exchange Composite Tape for the periods presented.
<TABLE>
<CAPTION>
PRICE RANGE
----------------------
FISCAL YEAR HIGH LOW
- -------------------------------------------------- -------- --------
<S> <C> <C>
1993
First Quarter................................... $ 10 $ 8
Second Quarter.................................. 13 8 7/8
Third Quarter................................... 13 1/2 11
Fourth Quarter.................................. 12 5/8 10
1994
First Quarter................................... 13 1/8 10 1/4
Second Quarter.................................. 14 7/8 10 1/4
Third Quarter................................... 19 13 7/8
Fourth Quarter.................................. 17 1/8 13 1/2
1995
First Quarter................................... 22 1/4 15 1/8
Second Quarter (through October 27)............. 24 19 1/4
</TABLE>
The closing price of the Company's Common Stock is set forth on the cover
page of this Prospectus. On October 20, 1994, the Company had 1,759 stockholders
of record.
DIVIDEND POLICY
No dividends have been declared or paid since October 1, 1981. The Company
does not intend to pay cash dividends in the foreseeable future as all funds
will be reinvested in its operations. Furthermore, under certain credit
agreements, the Company is not permitted to pay any cash dividends.
9
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data as of June 30, 1994 and 1993 and
for the fiscal years ended June 30, 1994, 1993 and 1992 are derived from the
audited consolidated financial statements of the Company and should be read in
conjunction with the audited consolidated financial statements and notes with
respect thereto included herein. The selected consolidated financial data as of
June 30, 1992, 1991 and 1990, and for the fiscal years ended June 30, 1991 and
1990 are derived from audited consolidated financial statements of the Company
which are not included herein. Information at September 30, 1994 and 1993 and
for the three month periods ended September 30, 1994 and 1993 is unaudited but
reflects all material adjustments (consisting of normal recurring adjustments)
which in the Company's opinion are necessary to present the information in
accordance with generally accepted accounting principles. The operating results
for the three month period ended September 30, 1994 are not necessarily
indicative of the operating results for the full fiscal year.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, FISCAL YEARS ENDED JUNE 30,
-------------------- -----------------------------------------------------
1994 1993 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1)
Revenues................................. $ 92,253 $ 73,094 $ 328,882 $ 281,732 $ 265,495 $ 252,800 $ 229,863
Cost of sales............................ 60,739 49,674 219,944 202,684 186,437 167,044 162,075
--------- --------- --------- --------- --------- --------- ---------
Gross profit............................. 31,514 23,420 108,938 79,048 79,058 85,756 67,788
Selling and administrative expense....... 18,486 16,350 69,008 62,637 58,771 51,544 41,526
Research and development expense......... 4,111 3,810 16,381 14,083 9,405 7,538 6,585
Restructuring charge..................... -- -- -- -- -- 1,000 --
--------- --------- --------- --------- --------- --------- ---------
Operating profit......................... 8,917 3,260 23,549 2,328 10,882 25,674 19,677
Interest expense, net.................... (912) (760) (3,625) (2,250) (1,436) (13,266) (17,062)
Other income (expense)................... (179) (194) (1,050) (2,675) 1,066 5,825 8
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes and
extraordinary item...................... 7,826 2,306 18,874 (2,597) 10,512 18,233 2,623
Provision for income taxes............... 1,328 330 3,160 436 1,275 1,086 466
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before extraordinary
item.................................... 6,498 1,976 15,714 (3,033) 9,237 17,147 2,157
Extraordinary item, net.................. -- -- -- -- -- 726 --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)........................ $ 6,498 $ 1,976 $ 15,714 $ (3,033) $ 9,237 $ 16,421 $ 2,157
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
INCOME (LOSS) PER SHARE:
Before extraordinary item.............. $ 0.32 $ 0.10 $ 0.78 $ (0.15) $ 0.46 $ 1.30 $ 0.18
Extraordinary item..................... -- -- -- -- -- (0.06) --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) per share............ $ 0.32 $ 0.10 $ 0.78 $ (0.15) $ 0.46 $ 1.24 $ 0.18
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Average common and common equivalent
shares outstanding...................... 20,596 20,360 20,428 20,087 20,107 13,210 11,733
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
AT SEPTEMBER 30, AT JUNE 30,
-------------------- -----------------------------------------------------
1994 1993 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital.......................... $ 66,888 $ 61,319 $ 67,165 $ 58,116 $ 67,538 $ 74,900 $ 25,889
Total assets............................. 348,489 287,461 330,574 278,448 285,880 250,263 217,532
Short-term debt.......................... 41,467 29,852 33,310 27,539 27,135 15,821 27,309
Long-term debt, less current
maturities.............................. 28,605 14,158 26,817 11,810 11,535 11,921 120,139
Stockholders' equity..................... 210,303 188,295 202,943 186,074 191,703 179,535 21,572
<FN>
- ------------------------------
(1) Certain reclassifications have been made to previously reported amounts to
conform with current year presentation.
</TABLE>
10
<PAGE>
QUARTERLY RESULTS OF OPERATIONS
The following table presents certain unaudited quarterly information for
each of the Company's last nine quarters. Quarterly results of operations are
not necessarily indicative of the results expected for the full year period. For
a discussion of seasonality, see "Management's Discussion and Analysis of
Financial Condition and Operations -- Seasonality."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------------------------------------------------
SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30,
1994 1994 1994 1993 1993 1993 1993 1992 1992
------------- -------- --------- ------------ ------------- -------- --------- ------------ -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.......... $92,253 $92,432 $84,252 $79,104 $73,094 $75,728 $70,572 $70,452 $64,980
Cost of sales..... 60,739 60,637 56,142 53,491 49,674 53,547 50,059 51,035 48,043
------------- -------- --------- ------------ ------------- -------- --------- ------------ -------------
Gross profit.... 31,514 31,795 28,110 25,613 23,420 22,181 20,513 19,417 16,937
Selling and
administrative
expense.......... 18,486 18,402 17,465 16,791 16,350 16,182 15,827 15,502 15,126
Research and
development
expense.......... 4,111 4,401 4,201 3,969 3,810 3,929 3,606 3,593 2,955
------------- -------- --------- ------------ ------------- -------- --------- ------------ -------------
Operating profit
(loss)......... 8,917 8,992 6,444 4,853 3,260 2,070 1,080 322 (1,144)
Other income
(expense)
Interest --
net............ (912) (910) (1,161) (794) (760) (698) (574) (445) (533)
Other -- net.... (179) (341) (218) (297) (194) (432) (180) (1,674) (389)
------------- -------- --------- ------------ ------------- -------- --------- ------------ -------------
Income (loss)
before income
taxes............ 7,826 7,741 5,065 3,762 2,306 940 326 (1,797) (2,066)
Provision for
income taxes..... 1,328 1,279 859 692 330 227 201 196 (188)
------------- -------- --------- ------------ ------------- -------- --------- ------------ -------------
Net income
(loss)........... $ 6,498 $ 6,462 $ 4,206 $ 3,070 $ 1,976 $ 713 $ 125 $(1,993) $(1,878)
------------- -------- --------- ------------ ------------- -------- --------- ------------ -------------
------------- -------- --------- ------------ ------------- -------- --------- ------------ -------------
Net income (loss)
per share........ $ 0.32 $ 0.32 $ 0.21 $ 0.15 $ 0.10 $ 0.04 $ 0.01 $ (0.10) $ (0.09)
------------- -------- --------- ------------ ------------- -------- --------- ------------ -------------
------------- -------- --------- ------------ ------------- -------- --------- ------------ -------------
Average common and
common equivalent
shares
outstanding...... 20,596 20,476 20,477 20,398 20,360 20,315 20,299 19,982 19,968
------------- -------- --------- ------------ ------------- -------- --------- ------------ -------------
------------- -------- --------- ------------ ------------- -------- --------- ------------ -------------
</TABLE>
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth certain items included in selected
consolidated financial data as a percentage of revenues.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
(UNAUDITED) FISCAL YEARS ENDED JUNE 30,
------------------ -----------------------------
1994 1993 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues...................... 100.0% 100.0% 100.0% 100.0% 100.0 %
Cost of sales................. 65.8 68.0 66.9 71.9 70.2
------- ------- ------- ------- -------
Gross profit.................. 34.2 32.0 33.1 28.1 29.8
Selling and administrative
expense...................... 20.1 22.3 21.0 22.2 22.1
Research and development
expense...................... 4.5 5.2 5.0 5.0 3.5
------- ------- ------- ------- -------
Operating profit.............. 9.6 4.5 7.1 0.9 4.2
Interest expense, net......... (1.0) (1.0) (1.1) (0.8) (0.6)
Other income (expense)........ (0.2) (0.3) (0.3) (1.0) 0.4
------- ------- ------- ------- -------
Income (loss) before income
taxes........................ 8.4 3.2 5.7 (0.9) 4.0
Provision for income taxes.... 1.4 0.5 0.9 0.2 0.5
------- ------- ------- ------- -------
Net income (loss)............. 7.0% 2.7% 4.8% (1.1)% 3.5%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1994 COMPARED WITH THE THREE MONTHS ENDED
SEPTEMBER 30, 1993
Revenues for the three months ended September 30, 1994 increased 26.2% to
$92.3 million from $73.1 million in the prior year period. The Company's revenue
increase reflected rising demand for the Company's power MOSFETs and related
devices, which resulted in a 29% increase in revenues from these products.
Revenues from the thyristor and rectifier product lines increased 20% which
reflected unseasonally strong demand in Europe. Changes in foreign exchange
rates positively impacted revenues by approximately $1.0 million. Revenues in
the current quarter included $2.2 million of net patent royalties compared to
$2.4 million in the prior year period.
Gross profit for the three months ended September 30, 1994 was 34.2% of
revenues ($31.5 million) versus 32.0% of revenues ($23.4 million) in the prior
year period. The increased margin reflected greater manufacturing volume and
efficiencies in both the Company's growth and mature products.
In the three months ended September 30, 1994, selling and administrative
expense was 20.1% of revenues ($18.5 million) versus 22.3% of revenues ($16.4
million) in the prior year period. The decreased percentage reflects the
Company's continued commitment to reducing operating expenses as a percentage of
revenues.
In the three months ended September 30, 1994, the Company's research and
development expenditures increased $0.3 million to $4.1 million (4.5% of
revenues) from $3.8 million (5.2% of revenues) in the prior year period. The
Company's research and development program was, and continues to be, focused on
the advancement and diversification of the HEXFET product line, the expansion of
the related IGBT products and the development of Control ICs and power products
that work in combination with HEXFETs and IGBTs to improve system performance.
FISCAL YEAR 1994 COMPARED WITH FISCAL YEAR 1993
The Company operates on a fiscal calendar under which the twelve months
ended July 3, 1994 consisted of 52 weeks compared to 53 weeks in the twelve
months ended July 4, 1993.
12
<PAGE>
Revenues for fiscal 1994 increased 16.7% to $328.9 million from $281.7
million in the prior year. The Company's revenue increase reflected continued
growing demand for the Company's power MOSFETs and related devices which
resulted in a 23.4% increase in revenues from these products. Offsetting this
revenue increase was a 6.2% decrease in revenues from the Company's thyristor
and rectifier product lines. This downturn reflected slow starting economies in
key European markets in the first half, and the planned consolidation of these
mature product lines. Changes in foreign exchange rates negatively impacted
revenues by approximately $2.0 million. Revenues for fiscal 1994 also included
$9.0 million of net patent royalties compared to $9.5 million in the prior
period.
Gross profit was 33.1% of revenues ($108.9 million) in fiscal 1994 versus
28.1% of revenues ($79.0 million) in fiscal 1993. The increased margin reflected
IR's recovery from production constraints in fiscal 1993. In addition, greater
MOSFET manufacturing volume and efficiencies resulted in lower per unit product
costs and enabled the Company to balance output to market demand and return to a
normal mix of original equipment manufacturers, distribution and higher margin
spot market business.
In the fourth quarter of fiscal 1993 the Company extended the useful lives
of certain assets. This change positively impacted gross profit by approximately
$2.6 million (0.8% of revenues) during fiscal 1994.
In fiscal 1994, selling and administrative expense was 21.0% of revenues
($69.0 million) versus 22.2% of revenues ($62.6 million) in fiscal 1993. The
decreased percentage reflects the Company's continued commitment to reducing
operating expenses as a percentage of revenues.
In fiscal 1994, the Company's research and development expenditures
increased $2.3 million to $16.4 million (5.0% of revenues) from $14.1 million
(5.0% of revenues) in the prior period. The Company's research and development
program was focused on the advancement and diversification of the HEXFET product
line, the expansion of the related IGBT products and the development of Control
ICs and power products that work in combination with HEXFETs and IGBTs to
improve system performance. Included in 1994 research and development expenses
are the costs associated with efforts started in Japan in fiscal 1994 to reduce
assembly costs and to develop new assembly processes.
The major components of other expense include a $0.9 million charge for the
consolidation of the Company's power products operations, $0.4 million of
severance costs and $0.3 million on the disposal of property, plant and
equipment, offset by $0.4 million in foreign currency transaction gains.
FISCAL YEAR 1993 COMPARED WITH FISCAL YEAR 1992
The Company operates on a fiscal calendar year under which the twelve months
ended July 4, 1993 consisted of 53 weeks compared to 52 weeks in the twelve
months ended June 28, 1992.
Revenues for fiscal 1993 increased 6.1% to $281.7 million from $265.5
million in the prior year. The Company's revenue increase was primarily a result
of higher sales of the Company's power MOSFET devices and increased net patent
royalties. Changes in foreign exchange rates negatively impacted revenues by
approximately $2.5 million. Revenues for fiscal 1993 also include $9.5 million
of net patent royalties compared to $5.7 million in the prior period.
During fiscal 1992 and the first three fiscal quarters of 1993, sales of the
Company's power MOSFET devices were constrained because of assembly output
limitations. In the second half of fiscal 1992, the Company began a program to
expand assembly capacity for power MOSFETs at HEXFET America. During this
expansion program a subcontractor that provided assembly for up to 30% of IR's
fastest-growing product line discontinued this kind of production. Delays in
receiving and ramping up equipment at HEXFET America were compounded by the need
to replace the subcontractor. Product shortages curtailed IR's growth and
negatively affected its share of the power MOSFET market.
Gross profit was 28.1% of revenues ($79.0 million) in fiscal 1993 versus
29.8% of revenues ($79.1 million) in fiscal 1992. Margins reflected less
efficient operation during the above assembly expansion ramp-up and product
allocation that favored industry-leading original equipment manufacturer
customers over higher-margin spot market business. Gross profit for the first
half of fiscal 1993 was 26.8% of revenues as compared to 29.2% of revenues for
the last half of fiscal 1993. First-half margins also reflected a decrease in
wafer fabrication rates to accommodate a lower assembly production rate.
Second-half margins reflected greater manufacturing volume and efficiencies and
an increase in net patent royalties.
13
<PAGE>
In fiscal 1993, selling and administrative expense increased $3.8 million to
$62.6 million (22.2% of revenues) from $58.8 million (22.1% of revenues) in the
prior period. These increases reflect planned revenue increases, as well as
increases associated with an additional week of operations reported in fiscal
1993.
In fiscal 1993, the Company's research and development expenditures
increased $4.7 million to $14.1 million (5.0% of revenues) from $9.4 million
(3.5% of revenues) in the prior period. The Company's research and development
program is focused on the advancement and diversification of the HEXFET product
line and expansion of the related IGBT products. Efforts are also directed to
the development of Control ICs and power products that work in combination with
HEXFETs and IGBTs to improve system performance. The increase in research and
development expenditures in fiscal 1993 contributed to more new product
introductions in fiscal 1993.
Other expense included a $1.1 million charge for the settlement of a breach
of contract lawsuit, $1.1 million of severance costs and $0.2 million related to
the buyout of a lease upon early termination.
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.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1994, the Company had established $79.0 million in domestic
and foreign revolving credit facilities, of which $34.9 million had been
borrowed by the Company. Based upon covenant and collateral limitations under
the revolving credit facilities, the Company had $23.9 million available for
borrowing at September 30, 1994. In addition, at September 30, 1994 the Company
had available $16.6 million of unused lines of credit for capital equipment,
$11.6 million of cash and cash equivalents and had made purchase commitments of
approximately $9.2 million for capital equipment. See "Note 2 -- Notes to
Consolidated Financial Statements -- Long-Term Debt and Other Loans."
The Company intends to spend approximately $75.0 million (of which $4.9
million has been spent through September 30, 1994) to expand wafer fabrication
capacity at its HEXFET America facility, most of which is expected to be
expended in fiscal 1995. In addition, the Company intends to spend approximately
$35.0 million (of which $9.3 million has been spent through September 30, 1994)
to expand and maintain assembly capacity, to enhance its Management Information
Systems infrastructure and to maintain its existing facilities. The Company
intends to fund these capital expenditures and meet its short-term liquidity
requirements through cash and cash equivalents on hand, anticipated cash flows
from operations, funds available from existing credit facilities and from funds
received from the Offerings. The Company is also negotiating with the Industrial
Development Authority of the County of Riverside, California for an issuance of
$25.0 million of taxable industrial development bonds which will be indirectly
backed by the U.S. Department of Housing and Urban Development. The proceeds
will be loaned to IR for the expansion at HEXFET America and will be
collateralized by the real property at HEXFET America. However, there can be no
assurance that any financing will be available under cost-effective terms.
Although the Company believes that the class action lawsuits brought against
the Company and its Board of Directors (See "Business -- Legal Proceedings") are
without merit, the ultimate outcome, and any effect on liquidity, thereof cannot
be presently determined. For the possible effects of environmental and patent
matters on liquidity, see "Business -- Environmental Matters," "-- Intellectual
Property" and "-- Legal Proceedings." The Company has not made any provision for
liability, if any, that may result upon adjudication of these matters.
INCOME TAXES
Due in part to the utilization of net operating loss carryforwards ("NOLs"),
the Company's effective income tax rate for the three months ended September 30,
1994 and fiscal 1994 was approximately 17%. At September 30, 1994, the Company
had NOLs of approximately $23.5 million for federal income tax purposes. These
NOLs expire beginning in 2004. The Company also has approximately $5.3 million
of tax credits available to offset future U.S. taxes. In addition, the Company
anticipates that it will be eligible to receive California state tax credits
equal to 6% of the cost of most of the Company's equipment purchased and placed
in service in California on or after January 1, 1994. When the NOLs and other
available tax credits are fully utilized, the Company will be subject to a
normalized tax rate in the range of 35% to 40%.
14
<PAGE>
BUSINESS
The Company is a major worldwide supplier of power semiconductors which
convert electricity at relatively high voltage and current levels in products
such as automobiles, communications equipment, computers and peripherals,
consumer electronics and lighting, industrial equipment and office equipment.
The Company designs, manufactures and markets power semiconductors which are
used for power conversion. In the same way that oil is refined to produce
gasoline to power a car, electricity has to be converted to create useable power
to operate equipment. This process of power conversion can be viewed in four
stages: input rectification, control, switching and output rectification. Input
rectification conditions off-line electricity, typically rectifying alternating
current to direct current. The control function measures incoming electricity
and sends a signal to a switch. A switch packages the current into discrete
units. Output rectification reconfigures the elements into a form usable by
electrically operated equipment. The ability of power conversion products to
minimize energy lost at each stage in the power conversion process is central to
their value.
Because IR supplies products that perform each of the four basic functions
in power conversion, many circuits use more than one type of IR product. This
allows IR to develop and package products that work together to optimize overall
circuit performance and enables the Company to capitalize more broadly on
market-leading products.
[CHART]
ILLUSTRATION DESCRIPTION:
Block diagram demonstrating sequence of four power conversion functions with
detail of associated processes and products.
IR's products are used in all major market sectors. Applications for power
semiconductors in automobiles include anti-lock braking and fuel injection
systems, power accessories and air bags. Communications applications include
telephone networks, satellites and modems. Computer and peripheral applications
include power supplies and disk drives for desktop, mainframe and portable
computers and printers. Consumer electronics and lighting applications include
home entertainment equipment, household appliances and fluorescent lighting
ballasts. Power semiconductors are also used widely in industrial applications
such as motor-driven production lines, instrumentation and test equipment,
machine tools, fork lifts and welders. Office equipment applications include
copiers and facsimile machines.
According to statistics for calendar 1993 published by the SIA, the Company
had a 17% market share of the $1.1 billion power MOS transistor segment. In
addition, the Company sold approximately $19.1 million of power MOSFET and IGBT
chips and wafers to third parties in calendar 1993. Accordingly, the Company
believes it is the world leader in the power MOS transistor market. SIA data
indicates that industry-wide sales of power MOS transistors in calendar 1993
increased 23% over 1992 levels, and that, over the past five years, power MOS
transistor sales have grown at an average rate of 26% per year.
The Company's major customers include industry leaders such as AT&T
Technologies Inc., Conner Peripherals, Inc., General Motors Corporation, Hewlett
Packard Co., International Business Machines Corp., Matsushita Electric
Industrial Company, Ltd., Sanken Electric Company, Ltd., Siemens AG and Sony
Corporation. In fiscal 1994, over 50% of the Company's sales were to foreign
customers, divided almost evenly between Europe and Asia, and the remainder were
to customers in North America.
15
<PAGE>
POWER SEMICONDUCTOR INDUSTRY
Semiconductors are silicon-based chips that conduct and block electricity.
The semiconductor industry consists principally of the integrated circuit ("IC")
and power semiconductor segments. Power semiconductors operate differently from
ICs that operate at low power levels and process and convey information in
electronic form. IC capability is largely defined by circuit density, which
increases as its features are miniaturized. The applications for ICs are
generally concentrated in the computer industry and have been subject to
frequent redesign, short product life cycles and rapid obsolescence. As a
result, the demand for ICs has been highly cyclical.
In contrast to ICs, power semiconductors operate at higher power levels and
perform a single function: they convert electricity to operate a power supply,
control a motor or light a lamp. Their capability is largely defined by the
level of power that they can handle and their efficiency in converting electric
current into a more useful form. The amount of electric current handled and the
heat generated limit the rate at which power semiconductors can be miniaturized.
Advances in power semiconductor performance and decreases in
cost-per-function have been achieved through the use of MOS technology. Power
MOS transistors (power MOSFETs and IGBTs) have gained an increasing share of the
power transistor market. Power MOS transistors offer significant benefits over
bipolar transistors, which are power semiconductors that also serve the
switching function. Power MOS transistors provide much greater switching speed,
which allows the design of higher frequency, more compact circuits. Power MOS
transistors are activated by voltage rather than current, so they require less
external circuitry to operate, making them more compatible with IC controls.
They also offer more reliable long-term performance and are more rugged, so they
can better withstand adverse operating conditions. In addition, power MOSFETs
and IGBTs compare favorably to bipolar power transistors on a price/ performance
basis. The graph below presents SIA data on sales of bipolar transistors and
sales of power MOS transistors from calendar 1987 to 1993.
SALES OF BIPOLAR TRANSISTORS AND POWER MOS TRANSISTORS
[GRAPH]
GRAPH DESCRIPTION:
Area graph of SIA figures on worldwide bipolar and MOS power transistor sales in
dollars for calendar years 1987-1993.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Power Bipolar
<S> <C> <C>
1987 0.2 1.2
1988 0.3 1.5
1989 0.4 1.4
1990 0.6 1.5
1991 0.7 1.4
1992 0.9 1.4
1993 1.1 1.6
</TABLE>
APPLICATIONS
Power semiconductors are used in a broad spectrum of commercial and
industrial applications, including many products with long life cycles. The
Company believes that the demand for power semiconductors is less cyclical than
ICs, given power semiconductors' longer product lives and diverse
16
<PAGE>
applications. Power semiconductor demand is driven by growth in their end-user
markets, replacement of bipolar transistors and proliferation of new end-product
applications. The Company believes that markets driving future demand for power
semiconductors include:
PORTABLE ELECTRONICS. Advances in power semiconductors help extend battery
life and reduce product size and weight in a variety of products such as laptop
and notebook computers, personal digital organizers, cellular telephones,
battery-operated appliances and hand tools.
AUTOMOTIVE ELECTRONIC SYSTEMS. The concentration of solid state electronics
in recent model year automobiles has increased rapidly with the proliferation of
safety and comfort features. Applications include anti-lock braking systems, air
bags, fuel injection systems, electric windows and adjustable mirrors and seats.
Adoption of battery operated electric vehicles to reduce emissions would
dramatically increase consumption of power MOS transistors.
ELECTRONIC LIGHTING BALLASTS. Electronic lighting ballasts, which
incorporate power MOS transistors, significantly reduce the amount of energy
consumed in lighting. Conversion to electronic ballasts has been driven by lower
end-user operating costs, longer product life and incentives from electric
utilities to encourage energy efficiency.
VARIABLE SPEED MOTORS. Variable-speed, solid-state controls increase energy
efficiency and performance in a broad range of industrial and appliance motors.
In addition, clean air legislation is driving the conversion from traditional
chlorofluorocarbons ("CFCs") to less toxic refrigerants which compromise energy
efficiency. Manufacturers of refrigerators and air conditioners compensate for
these less efficient chemicals by using more efficient variable-speed motors
controlled by power semiconductors.
PRODUCTS
The Company's power MOS transistors (principally power MOSFETs), chips and
wafers comprised over two-thirds of fiscal 1994 sales. IR also supplies Control
ICs, high performance diodes and high power rectifiers and thyristors. The
Company believes that this complete line of power conversion products represents
a competitive advantage, as IR is able to provide customers with integrated
solutions to their power conversion needs.
The Company's fastest-growing products have comprised a greater proportion
of its total revenues during each of the past three fiscal years. The table
below shows revenues of IR's growth and mature products in dollar amounts and as
a percentage of revenues for the periods indicated. Dollar amounts in the table
below are in millions.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED) FISCAL YEARS ENDED JUNE 30,
--------------------------------- ------------------------------------------------------
1994 1993 1994 1993 1992
--------------- --------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth (1).......... $ 77.1 83.6% $ 60.5 82.8% $ 269.3 81.9% $ 218.2 77.5% $ 201.2 75.8%
Mature (2).......... 15.2 16.4 12.6 17.2 59.6 18.1 63.5 22.5 64.3 24.2
----- -------- ----- -------- ------ -------- ------ -------- ------ --------
Total............ $ 92.3 100.0% $ 73.1 100.0% $ 328.9 100.0% $ 281.7 100.0% $ 265.5 100.0%
----- -------- ----- -------- ------ -------- ------ -------- ------ --------
----- -------- ----- -------- ------ -------- ------ -------- ------ --------
<FN>
- ------------------------
(1) Growth product revenues consist of revenues from HEXFETs, Schottky diodes,
Fast Recovery diodes, IGBTs, Control ICs and patent royalties.
(2) Mature product revenues consist of revenues from high power rectifiers and
thyristors.
</TABLE>
SWITCHING PRODUCTS
Power MOS transistors (power MOSFETs and IGBTs) serve the switching function
in power conversion to provide an even, useable flow of power for electronic
equipment.
POWER MOSFETS. Through its HEXFET product line, the Company believes it
is the world leader in power MOSFETs. The breadth and diversity of the market
for these products provide an element of stability in demand.
17
<PAGE>
Applications for MOSFETs in automobiles include anti-lock brakes, fuel
injection systems, power accessories and air bags. Computer/peripheral
applications include power supplies, disk drives and printers. Office equipment
applications include copiers and facsimile machines. Consumer electronics
applications include home entertainment, videocameras, household appliances and
power tools. Lighting applications include electronic fluorescent ballasts and
compact fluorescent bulbs. Industrial applications include welding,
instrumentation and test equipment and automated production lines.
Communications applications include telephone networks and modems. Government
and aerospace applications include commercial and military satellites,
communications equipment, command-and-control systems and missiles.
Market acceptance and brand recognition of HEXFETs have benefited from the
Company's emphasis on quality control and reliability, and the Company believes
its standards to be among the most stringent in the industry. Cumulative and
current data on long and short-term product reliability is made available to
customers quarterly.
IGBTS. IGBTs are particularly effective in providing the switching
function in power conversion applications that require higher current and
voltage. IGBTs combine the ease of voltage-driven power MOSFET technology with
the conduction efficiency of bipolar transistor technology. The performance and
ruggedness of these devices enable them to replace bipolar transistors and
thyristors in many high-voltage, high-current motor control and power
conditioning applications. Energy-efficient, variable-speed motor controls are
an emerging application, and the Company believes electric vehicles will require
large quantities of IGBTs for each vehicle. The Company's IGBT technology is
closely related to its HEXFET technology, and the Company views them as
complementary products.
CONTROL PRODUCTS
Control ICs serve the control function in power conversion. These devices
perform the functions of several discrete components. This integration allows
circuit designers to simplify circuit design and assembly, improve reliability
and reduce overall system size and cost. In sensing and responding to adverse
operating conditions, Control IC performance is superior to a safety or
diagnostic circuit using discrete components. IR's Control ICs draw on the
Company's power MOSFET technology and are designed to operate at very high
voltages and optimize the performance of both MOSFETs and IGBTs.
Control ICs are used in a wide variety of power supply, motor control and
lighting applications. These include industrial motor controls, stepper motor
controls, solenoid drivers, welding equipment, telecom switchers, computer and
peripherals, instrumentation and test equipment, fluorescent lighting ballasts
and compact fluorescent light bulbs.
INPUT RECTIFICATION PRODUCTS
The Company also manufactures a broad line of rectifiers, diodes and
thyristors that serve the input rectification function in power conversion.
These products convert power to make it more efficient and useable, principally
in industrial end products that require power-handling capability from one amp
to 5,000 amps and from 120 volts to 5,000 volts. Applications include motor
controls and lighting, welding equipment, fork lifts, machine tools, induction
heating, locomotives, motor-driven production lines, smelting equipment and
power supplies.
OUTPUT RECTIFICATION PRODUCTS
The Company's Schottky diodes and Fast Recovery diodes serve the output
rectification function in power conversion. Output rectification reconfigures
electricity into a form useable by electrically operated equipment. Schottky
diodes are used with power MOSFETs in high-frequency applications such as
computers and peripherals. The Company's trademarked HEXFRED-R- Fast Recovery
diodes are used with IGBTs in higher current, lower frequency applications such
as motor controls.
MANUFACTURING
Semiconductor manufacturing involves two phases of production: wafer
fabrication and assembly (or packaging). Wafer fabrication is a sequence of
process steps that exposes silicon wafers to chemicals that change their
electrical properties. The chemicals are applied in sequences that create cells
or circuits within
18
<PAGE>
numerous individual devices (often termed "die" or "chips") on each wafer.
Packaging or assembly is the sequence of production steps that divide the wafer
into individual chips and enclose the chips in external structures (termed
packages) that make them useable in a circuit. Wafer fabrication generally
employs process technology and equipment already proven in IC manufacturing.
The Company has production facilities in California, England, Italy and
Mexico. In addition, the Company has equipment at, or manufacturing supply
agreements with, assembly subcontractors located in the United States, the
Philippines, Japan, Taiwan and Malaysia. IR fabricates substantially all of its
power MOSFET wafers at HEXFET America in Temecula, California. A wafer
fabrication facility for IGBTs and other power MOSFET devices, and assembly
operations for government and other advanced products are located in El Segundo,
California. Facilities that assemble HEXFETs and other growth products are
located in the United States and overseas, in Company-owned and subcontract
facilities, in order to take advantage of low assembly costs and provide maximum
customer service. In Tijuana, Mexico, the Company assembles power MOSFET
products, IGBTs and other modules. The Company's Oxted, England facility, which
qualifies as a duty-free warehouse, assembles power MOSFETs and IGBTs as well as
products used in certain military applications. Since completion of
consolidation of its three input rectification manufacturing sites in the third
quarter of fiscal 1994, the Company has manufactured substantially all its high
power rectifiers and thyristors at its Turin, Italy facility. In addition, the
Company has an assembly facility for rectifiers and thyristors in a duty-free
zone in India.
To meet rising demand for power MOS transistors, the Company is expanding
wafer fabrication capacity at HEXFET America. Planned to be in production by the
end of calendar 1995, the Company believes that the estimated $75 million
expansion will ultimately increase HEXFET America's wafer capacity in power MOS
transistors by about 75%. The expansion will position IR to aggressively address
the fastest growing segments of the power transistor market, high density power
MOSFETs and IGBTs. Next-generation devices designed for production in the new
fabrication facility incorporate design and process advancements in the
Company's proprietary HEXFET and IGBT technologies. The facility is designed to
combine the flexibility of manufacturing both power MOSFETs and IGBTs with
efficient, high-volume manufacturing techniques that reduce cycle times. The
fabrication will be performed on six-inch wafers and will use a continuous-flow
layout similar to the one already in use at HEXFET America. The facility is
different from the functional layout that the Company believes is commonly used
by other semiconductor manufacturers. Highly automated processing and supply
systems for gases, water, and other processing chemicals have also contributed
to continuous improvements in wafer yields at this facility. Pilot runs of the
new products on the specified equipment are already underway at the Company's
facility in El Segundo, California.
HEXFET America was selected for the fabrication expansion because the
Company believes it offers several important benefits. Expanding at an existing
facility should allow the Company to invest less in construction and more in
production capacity. It should require fewer additional employees than a totally
new facility would and will enable IR to start up and operate the fabrication
with experienced staff already on site. The Company believes that the
accessibility of HEXFET America to the Company's research and development staff
in El Segundo has eased in the past, and should ease in the future, the
transition of the products from development to manufacturing. See "Risk Factors
- -- Expansion Risks" and "-- Manufacturing Risks."
MARKETING, SALES AND DISTRIBUTION
The Company markets its products through sales personnel, representatives
and distributors. The Company believes its ability to offer products that serve
each of the four functions of power conversion enhances its competitive position
in the overall power semiconductor market.
In fiscal year 1994, more than half of the Company's sales were to foreign
customers, divided almost evenly between Europe and Asia, and the remainder were
to customers in North America. The Company's domestic direct sales force is
organized in four sales zones. In Europe, the Company's products are sold
through its own sales force as well as through sales agents and distributors.
The Company has European sales and representative offices in England, Italy,
Sweden, France, Germany, Finland, Denmark, Poland, the
19
<PAGE>
Czech Republic and Hungary. In Asia, IR has sales and representative offices in
Japan, Singapore, Hong Kong, Korea and India. IR has well established, exclusive
relationships with agents and representatives in most major markets which are
not served directly by IR personnel. See "Risk Factors -- Significant
International Operations."
Because many applications require products from several product groups, the
Company has organized its marketing efforts by market sector, rather than
product type. These business management groups focus on several key commercial
sectors and on government and aerospace business. In addition, the Company's
staff of applications engineers provides customers with technical advice and
support regarding the use of IR's products.
CUSTOMERS
In most cases, the Company's devices are incorporated in larger systems
manufactured by end product manufacturers. The Company's customers in the
automotive segment include Robert Bosch, Ltd., Ford Motor Company, General
Motors Corporation, NipponDenso Co., Ltd., and Siemens AG. In the computer
segment, IR's customers include Apple Computer, Inc., Compaq Computer
Corporation, Hewlett Packard Co. and International Business Machines Corp.
Consumer electronics customers include Bose Corporation, Philips and Electronics
N.V. and Sony Corporation. Customers in the telecommunications segment include
AT&T Technologies, Inc. and Nokia. The Company also sells its products to
distributors including Arrow Electronics, Inc. and Future Electronics, Inc.
BACKLOG
As of September 30, 1994, the Company's backlog of orders was $132.5 million
compared to $85.6 million as of September 30, 1993 and $121.8 million as of June
30, 1994. Backlog represents purchase orders which have been released for
shipment and are scheduled to be shipped within the following 12 months. In
accordance with industry practice, IR may in certain circumstances release
customers from purchase orders without penalty. Increasingly, major customers
are operating their businesses with shorter lead times and are placing orders on
a periodic rather than an annual basis. Orders are cancelable and backlog is not
necessarily indicative of sales for any future period.
RESEARCH AND DEVELOPMENT
The Company is involved in ongoing research and development directed toward
new processes, devices and packages as well as continued improvement of quality
and reliability in existing products. In fiscal years 1994, 1993 and 1992, the
Company spent approximately $16.4 million, $14.1 million and $9.4 million,
respectively, on research and development activities. In fiscal 1994, the
Company introduced a variety of products designed to address growth
opportunities identified by market sector: high-density, high-efficiency HEXFETs
and surface-mount packages for portable electronics; Control ICs for lighting
and motor control applications; IGBT modules for motor controls; and HEXFETs
with diagnostic and safety features for auto applications. IR's research and
development program is focused on advancing and diversifying the power MOSFET
product line, expanding the related IGBT products and developing Control ICs and
other power products that work in combination with power MOSFETs and IGBTs to
improve system performance. IR's research and development staff also works with
the marketing staff to develop new products that address specific customer
needs. Efforts are directed towards developing new processes that enable the
Company to produce smaller, more efficient devices. Efforts are also directed at
reducing assembly costs and developing new package designs and assembly
processes.
INTELLECTUAL PROPERTY
The Company has made significant investments in developing and protecting
its intellectual property. Through successful enforcement of its patents, the
Company has entered into a number of license agreements, generated royalty
income and received substantial payments in settlement of litigation. The
Company currently has 61 U.S. patents and 37 U.S. patents pending. Those patents
fundamental to the Company's operations expire between 2000 and 2010. In
addition, the Company has 67 foreign patents and 57 foreign patents pending in a
number of countries. IR is also licensed to use certain patents owned by others.
Under the terms of an agreement with Unitrode Corporation that terminates in
March 2000, the
20
<PAGE>
Company pays Unitrode Corporation approximately 12% of IR's net patent royalty
income. The Company has several registered trademarks in the United States and
abroad including trademarks for HEXFET. The Company believes that its
proprietary technology and intellectual property contribute to its competitive
advantage. See "Risk Factors -- Protection of Intellectual Property."
Since the Company believes that its power MOSFET patents are broadly
applicable, it is committed to enforcing its rights under those patents and is
pursuing additional license agreements. The Company presently has
royalty-bearing license agreements with 11 companies: Harris Corporation;
Hitachi, Ltd.; Matsushita Electronics Corporation; National Semiconductor
Corporation; NEC Corporation; Nihon Inter Electronics Corporation; Sanken
Electric Company, Ltd.; SGS-Thomson Microelectronics, Inc.; Siliconix
incorporated; Toshiba Corporation; and Unitrode Corporation. In fiscal 1994,
$9.0 million of revenues were derived from such royalty-bearing license
agreements.
Certain of the Company's fundamental power MOSFET patents have been
subjected, and continue to be subjected, to reexamination in the United States
Patent and Trademark Office ("PTO"). In September 1994 the PTO undertook the
reexamination of U.S. patent 5,008,725, one of the Company's principal power MOS
transistor patents. This patent has previously been confirmed on reexamination.
See "Note 9 -- Notes to Consolidated Financial Statements--Intellectual Property
Rights." Although no assurance can be given as to the ultimate outcome of the
Company's patent enforcement efforts, the PTO reexamination proceedings or the
success of the Company's patent licensing program, the Company believes that its
patent portfolio will be the source of continuing royalty income.
COMPETITION
The Company encounters differing degrees of competition for its various
products, depending upon the nature of the product and the particular market
served. Generally, the semiconductor industry is highly competitive, and many of
the Company's competitors are larger companies with greater financial resources
than IR. The Company believes that its breadth of product line and its ability
to bundle products that serve the different power conversion functions into one
package distinguish it from its competitors. IR's products compete with products
manufactured by others based on quality, price, reliability, overall performance
of the products, breadth and availability of products, delivery time to the
customer and service (including technical advice and support). The Company's
competitors include Eupec, Harris Corporation, Hitachi Ltd., Motorola, Inc., NEC
Corporation, Philips International B.V., Powerex, Inc., Samsung Semiconductor
Inc., SGS-Thomson Microelectronics, Siemens AG, Siliconix incorporated, Toshiba
Corporation and Westcode Semiconductors Ltd. See "Risk Factors -- Competition."
ENVIRONMENTAL MATTERS
Federal, state and local laws and regulations impose various restrictions
and controls on the discharge of certain materials, chemicals and gases used in
semiconductor processing. The Company does not believe that compliance with such
laws and regulations will have a material adverse effect on its financial
position.
The Company and Rachelle Laboratories, Inc. ("Rachelle"), its former
pharmaceutical subsidiary which discontinued operations in 1986, have been named
among several hundred entities as potentially responsible parties ("PRPs") under
the provisions of the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), in connection with the United States
Environmental Protection Agency's ("EPA") investigation of the disposal of
allegedly hazardous substances at a major superfund site in Monterey Park,
California (the "OII site"). Certain PRPs who settled certain claims with the
EPA under consent decrees filed suit in Federal Court in May 1992 against a
number of other PRPs, including IR, for cost recovery and contribution under
CERCLA. The lawsuit against IR, relating to the first and second consent
decrees, was settled in August 1993 for the sum of $40,000 to avoid protracted
and expensive litigation. Claims have been made with the Company's insurers with
respect to the OII site matter; however, there can be no assurance that the
insurance coverage attaches to these claims. There remains the potential for
litigation against IR and Rachelle relating to the OII site. The Company does
not believe that either it or Rachelle is responsible for the disposal at the
OII site of any material constituting hazardous substances under CERCLA.
Although the ultimate resolution of this matter is unknown, the Company believes
that it will not have a material adverse impact on its financial position.
21
<PAGE>
In May 1993 the Company purchased property from its Employee Profit Sharing
and Retirement Plan. It was determined that the property required clean up of
seepage from a storage tank, at an estimated additional cost of $500,000. The
Company commenced the clean up in fiscal year 1994, and the costs to be incurred
will be capitalized as additional costs of the property.
On July 18, 1994, the Company received a letter from the State of Washington
Department of Ecology (the "Department") notifying the Company of a proposed
finding that the Company is a potentially liable person ("PLP") for alleged PCE
contamination (also known as perchloroethylene, tetrachloroethylene, and other
names) of real property and groundwater in Yakima County, Washington. The letter
alleges that the Company arranged for disposal or treatment of the PCE or
arranged with a transporter for the disposal or treatment of the PCE in Yakima
County. The Company replied by a letter dated August 11, 1994 stating that it
has not contributed to PCE or other solvent contamination at the Yakima County
site and that it should not be designated a PLP. On October 11, 1994 the Company
received a letter from the Department notifying the Company of its finding that
the Company is a PLP in the above matter.
The Company received a letter dated September 9, 1994, from the State of
California Department of Toxic Substances Control stating that the Company may
be a PRP for the deposit of hazardous substances at a facility in Whittier,
California. The Company's investigation of this matter has just begun and
therefore an opinion cannot be expressed as to any ultimate responsibility.
LEGAL PROCEEDINGS
The Company and SGS-Thomson Microelectronics, Inc. ("SGS") are engaged in
various legal proceedings relating to their respective power MOSFET patents. SGS
filed suit against the Company in June 1991 in Federal District Court in Texas,
charging infringement of U.S. patent 4,553,314. On motion by the Company, the
suit was transferred to the Federal District Court in Los Angeles, California,
and thereafter SGS amended its complaint to charge infringement of U.S. patents
4,495,513 and 4,712,127. SGS alleges, in substance, that the Company's power
MOSFET and IGBT products infringe the '314 patent, that the Company's IGBT
products infringe the '513 patent and that certain packages for IR's products
(including certain power MOSFET packages) infringe the '127 patent. The
complaint, as amended, seeks unspecified actual damages (but no less than an
unspecified reasonable royalty) and an injunction restraining further sales of
such products. On February 1, 1993, the District Court dismissed SGS's claims
for infringement of the '127 and '513 patents for lack of standing and on March
15, 1993 ruled that the SGS '314 patent is unenforceable due to inequitable
conduct. SGS appealed these rulings, as well as the order transferring the case
to California, to the Court of Appeals for the Federal Circuit. IR
cross-appealed a separate ruling by the District Court denying IR's motion for
summary judgment that the '314 patent is invalid. In July 1994, the Federal
Circuit reversed the District Court's grants of summary judgment as to the '513,
'127 and '314 patents and affirmed the District Court's denial of IR's motion
for summary judgment of invalidity of the '314 patent. The Federal Circuit
ordered, however, that the case should proceed in California. Cross-petitions
for writs of certiorari are pending before the U.S. Supreme Court as to the
jurisdictional and venue rulings of the Federal Circuit. No trial date has yet
been set and the ultimate outcome of the case as to the three SGS patents is
unknown.
In separate proceedings before the same California District Court, IR sought
enforcement of a prior license agreement between IR and SGS. The Court in July
1994 granted the Company's motions to enforce the license agreement with SGS,
requiring SGS to pay additional past and prospective royalties under IR's U.S.
patents 4,959,699 and 4,642,666 on SGS's sales of power MOSFET, IGBT and power
IC products. SGS has filed a separate appeal of this ruling with the Federal
Circuit.
The Company has also filed a separate action in the same District Court
against SGS and its Italian affiliate, SGS-Thomson Microelectronics, S.r.l.,
seeking an injunction against infringement of the Company's U.S. patents
5,008,725 and 5,130,767. Trial of the Company's action has been set for January
25, 1995.
The Company, its directors and certain officers have been named as
defendants in three class action lawsuits filed in federal court in California.
These suits seek unspecified but substantial compensatory and punitive damages
for alleged intentional and negligent misrepresentations and violations of the
federal
22
<PAGE>
securities laws. The complaints generally allege that the Company and the other
defendants made materially false statements or omitted to state material facts
in connection with the public offering of the Company's common stock completed
in April 1991 and the redemption and conversion in June 1991 of the Company's 9%
Convertible Subordinated Debentures Due 2010. They also allege that the
Company's projections for growth in fiscal 1992 were materially misleading.
Although the Company believes that the claims alleged in the suits are without
merit, the ultimate outcome cannot be presently determined. A substantial
judgment or settlement, if any, could have a material adverse effect on the
Company's financial condition and results of operations. Two of these suits also
name Kidder, Peabody & Co. Incorporated and Montgomery Securities as defendants.
No provision for any liability that may result upon adjudication of these
matters has been made in the consolidated financial statements.
EMPLOYEES
As of September 30, 1994, the Company employed approximately 3,150 people,
of whom approximately 2,140 are employed in North America, 960 in Europe and 50
in Asia. The Company is not a party to any collective bargaining agreements. The
Company considers its relations with its employees to be good.
PROPERTIES
The Company's operations occupy a total of approximately 864,000 square
feet, of which approximately 477,000 square feet are located within the United
States. Of the worldwide total, approximately 247,000 square feet are leased and
the balance is owned by the Company.
IR's leases expire between 1995 and 2012. If the Company is unable to renew
these leases upon expiration, it believes that it could find other suitable
premises without any material adverse impact on its operations.
The Company's major facilities are in the following locations:
<TABLE>
<CAPTION>
TOTAL SQUARE FEET
-----------------------
FACILITY OWNED LEASED EXPIRATION OF LEASE
- ------------------------------------------ --------- ------------ -----------------------------------
<S> <C> <C> <C>
Temecula, California...................... 287,000 -- --
El Segundo, California.................... 93,000 91,000 July 31, 1995 - July 31, 2004
Tijuana, Mexico........................... -- 89,000 (1)
Oxted, England............................ 45,000 15,000 March 27, 2012
Turin, Italy.............................. 110,000 6,000 June 30, 1995 - March 31, 1998
<FN>
- ------------------------
(1) Since the Company's lease on its assembly facility in Mexico expired, it
has rented the same space on a month to month basis due to pending rezoning
of the neighborhood. The Company has identified comparable space available
for lease on comparable terms if such assembly facility needs to be moved.
</TABLE>
The Company believes that these facilities are adequate for its current and
anticipated near term operating needs. IR estimates that it currently utilizes
approximately 81% of its worldwide manufacturing capacity. To meet rising demand
for power MOS transistors, the Company is expanding wafer fabrication at HEXFET
America. Planned to be in production by the end of calendar 1995, the Company
believes that the estimated $75 million expansion will ultimately increase
HEXFET America's wafer fabrication capacity by about 75%.
The Company has nine sales offices located throughout the United States, and
other sales and technical support offices in Canada, France, Germany, Hong Kong,
India, China, Singapore, and Scandinavia that operate in leased facilities.
23
<PAGE>
MANAGEMENT
The executive officers and directors of IR are:
<TABLE>
<CAPTION>
NAME AGE TITLE
- ---------------------------- --- ----------------------------------------------------------
<S> <C> <C>
Eric Lidow 81 President; Chairman of the Board; Chief Executive Officer
Alexander Lidow 39 Executive Vice President - Operations; Director
Derek B. Lidow 41 Executive Vice President; Director
Robert J. Mueller 65 Executive Vice President - External Affairs and Business
Development; Director
Michael P. McGee 35 Vice President - Chief Financial Officer
Donald S. Burns 69 Director
George Krsek 73 Director
James D. Plummer 49 Director
Jack O. Vance 69 Director
Rochus E. Vogt 64 Director
</TABLE>
Eric Lidow is a founder of the Company and has been the Chief Executive
Officer and a director of the Company since its inception in 1947.
Alexander Lidow, Ph.D., has been employed by the Company since 1977. He
served as the Semiconductor Division's Vice President - Research and Development
since July 1979, was promoted to Semiconductor Division Executive Vice President
- -Manufacturing and Technology in March 1985, and became the President of the
Electronic Products Division in July 1989. In August 1992, Dr. Lidow was elected
Executive Vice President of Operations. He was elected a director in September
1994. Dr. Lidow is a son of Eric Lidow.
Derek B. Lidow, Ph.D., has been employed by the Company since 1976. He
served as the Semiconductor Division's Vice President - Operations since March
1980, was promoted to Semiconductor Division Executive Vice President -
Marketing and Administration in March 1985, and became President of the Power
Products Division in July 1989. In August 1992, Dr. Lidow was elected Executive
Vice President and in July 1993 assumed responsibilities for worldwide sales and
marketing. He was elected a director in September 1994. Dr. Lidow is a son of
Eric Lidow.
Robert J. Mueller has been employed by the Company since November 1961. He
served as Vice President of Marketing for the U.S. Semiconductor Division from
1963 until October 1969 when he was promoted to Corporate Vice President -
Foreign Operations. Mr. Mueller became Executive Vice President - World
Marketing and Foreign Operations in April 1978, Corporate Executive Vice
President - External Affairs and Worldwide Sales in July 1989, and in July 1993
became Executive Vice President - External Affairs and Business Development. He
was elected a director in 1990.
Michael P. McGee has been employed by the Company since 1990. He joined the
Company in July 1990 as Director of Corporate Accounting and was promoted to
Corporate Controller in December 1990. Mr. McGee became Vice President,
Controller and Principal Accounting Officer in 1991, and in 1993, became Vice
President - Chief Financial Officer. From 1985 until he joined the Company, Mr.
McGee was a senior manager and audit manager at Ernst & Young.
Donald S. Burns has been Chairman, President and Chief Executive Officer of
Prestige Holdings, Ltd., a property management and business consulting firm,
since 1978. Mr. Burns was elected a director of the Company in 1993. He is also
a director of ESI Corporation and International Technology Corporation.
George Krsek, Ph.D., was President of Houba, Inc. a pharmaceutical firm from
1975 to July 1994, and is currently President of Konec L.L.C., a management
consulting company. He has been a director of the Company since 1979.
James D. Plummer, Ph.D., has been the John M. Fluke Professor of Electrical
Engineering, Stanford University since 1988 and Director of Stanford's
Integrated Circuits Laboratory since 1984. Dr. Plummer was elected a director of
the Company in September 1994.
24
<PAGE>
Jack O. Vance became the Managing Director of Management Research, a
management consulting firm, in November 1990. From 1960 through 1989 he was a
director of McKinsey & Co., Inc., a management consulting firm. During the years
1973 through 1989 he was also the Managing Director of the firm's Los Angeles
office. He has been a director of the Company since 1988. He is also a director
of Hillhaven Corporation, International Technology Corporation, Escorp, The
Olson Company, University Restaurant Group, and FCG Enterprises, Inc.
Rochus E. Vogt, Ph.D., is a Professor of Physics, California Institute of
Technology, and acted as Provost from 1983 through 1987. He has been a director
of the Company since 1984.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 30,000,000 shares of
Common Stock, $1.00 par value per share, and 1,000,000 shares of Preferred
Stock, $1.00 par value per share. No shares of Preferred Stock are outstanding.
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share held of
record on each matter submitted to a vote of shareholders. Subject to the
current prohibition in the Company's loan agreements on the payment of dividends
and to preferences which may be granted to the holders of Preferred Stock, each
holder of Common Stock is entitled to share ratably in distributions to
shareholders and to receive ratably such dividends as may be declared by the
Board of Directors out of funds legally available therefore and, in the event of
the liquidation, dissolution or winding up of the Company, is entitled to share
ratably in all assets of the Company remaining after payment of liabilities.
Holders of Common Stock have no conversion, preemptive or other rights to
subscribe for additional shares, and there are no redemption rights or sinking
fund provisions with respect to the Common Stock.
The Transfer Agent and Registrar for the Common Stock is Chemical Trust
Company of California, Los Angeles, California.
PREFERRED STOCK
The Board of Directors, without further action by the holders of Common
Stock, may issue shares of Preferred Stock in one or more series and may fix or
alter the rights, preferences, privileges and restrictions, including the voting
rights, redemption provisions (including sinking fund provisions), dividend
rights, dividend rates, liquidation preferences and conversion rights, and the
description of and number of shares constituting any wholly unissued series of
Preferred Stock. The Board of Directors, without further shareholder approval,
can issue Preferred Stock with voting and conversion rights which could
adversely affect the voting power of the holders of Common Stock. No shares of
Preferred Stock presently are outstanding, and the Company has no plans to issue
shares of Preferred Stock. The issuance of shares of Preferred Stock under
certain circumstances could have the effect of delaying or preventing a change
of control or other corporate action.
CHARTER AND BYLAW PROVISIONS
In addition to the authorized Preferred Stock, certain other provisions of
the Company's Certificate of Incorporation and Bylaws may make it more difficult
for a third party to acquire, or may discourage a third party from attempting to
acquire, control of the Company.
In accordance with provisions contained in the Company's Certificate of
Incorporation and its Bylaws, the Company's Board of Directors is divided into
three classes with staggered three year terms for each class. The Certificate of
Incorporation and Bylaws provide that the directors have the right to increase
(with certain restrictions) or decrease the number of directors. The Certificate
of Incorporation provides that vacancies for newly created directorships may be
filled by a majority vote of the remaining directors and removal for cause may
only be made by the vote of a majority of the outstanding shares.
Amendment of any of the foregoing provisions of the Company's Certificate of
Incorporation requires the approval of the holders of at least 66 2/3% of the
stock of the Company issued and outstanding having voting power, given at a duly
convened stockholders meeting upon a proposal adopted by the Board.
25
<PAGE>
Under the Company's Bylaws, a special meeting of stockholders may be called
only by certain officers or a majority of the Board.
LIMITATION ON DIRECTOR LIABILITY
In accordance with Section 102(b)(7) of the Delaware General Corporation Law
(the "DGCL"), the Company's Certificate of Incorporation limits a director's
liability to the Company or its stockholders for monetary damages for breach of
fiduciary duty to the fullest extent permitted by the DGCL. Section 102(b)(7) of
the DGCL enables a corporation in its certificate of incorporation to eliminate
or limit the personal liability of a director to the corporation or its
stockholders for monetary damages for violations of the director's fiduciary
duty, except that a corporation may not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) pursuant to
Section 174 of the DGCL (providing for liability of directors for unlawful
payment of dividends or unlawful stock purchases or redemptions) or (iv) for any
transaction from which the director derived an improper personal benefit.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Section 203 of the DGCL prevents a Delaware corporation from engaging in a
"Business Combination" (defined to include a variety of transactions, including
mergers, as set forth below) with an "Interested Stockholder" (generally defined
as a person with 15% or more of a corporation's outstanding voting stock) for
three years following the date such person became an Interested Stockholder
unless: (i) before such person became an Interested Stockholder, the board of
directors of the corporation approved either the Business Combination or the
transaction in which the Interested Stockholder became an Interested
Stockholder; (ii) upon consummation of the transaction the Interested
Stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding stock held by
directors who are also officers and employee stock ownership plans in which
employee participants do not have the right to determine confidentially whether
shares subject to the plan will be tendered in a tender or exchange offer); or
(iii) on or subsequent to the date on which such person became an Interested
Stockholder, the Business Combination is (x) approved by the board of directors
of the corporation and (y) authorized at a meeting of stockholders by the
affirmative vote of at least 66 2/3% of the outstanding voting stock of the
corporation not owned by the Interested Stockholder.
Under Section 203, the restrictions described above apply to the Company
unless, among other things, (i) by the affirmative vote of a majority of the
shares entitled to vote, it adopts an amendment to its certificate of
incorporation or bylaws expressly electing not to be governed by Section 203,
(such an amendment would not be effective until 12 months after its adoption and
would not apply to certain Business Combinations); or (ii) a class of its voting
stock is not (x) listed on a national securities exchange, (y) authorized for
quotation on an inter-dealer quotation system of a registered national
securities association or (z) held of record by more than 2,000 stockholders,
(unless any of the foregoing results from action taken, directly or indirectly,
by an Interested Stockholder or from a transaction in which a person becomes an
Interested Stockholder).
A Business Combination is defined in Section 203 as (i) a merger or
consolidation, (ii) any sale, lease, mortgage, transfer or other disposition of
assets having an aggregate market value of 10% or more of the aggregate market
value of either all assets of the corporation determined on a consolidated basis
or all outstanding stock of the corporation; (iii) any transaction which results
in the issuance or transfer by the corporation, or by certain of its
subsidiaries, of any of its stock to the Interested Stockholder, except pursuant
to (x) the exercise, exchange or conversion of securities exercisable for,
exchangeable for or convertible into stock of the corporation or any subsidiary
which were outstanding prior to the time the stockholder became an Interested
Stockholder or (y) a transaction which effects a pro rata distribution to all
stockholders of the corporation; (iv) any transaction involving the corporation
or certain subsidiaries thereof which has the effect of increasing the
proportionate share of the stock of any class or series, or securities
convertible into the stock of any class or series, of the corporation or any
such subsidiary which is owned directly or indirectly by the Interested
Stockholder (except as a result of immaterial changes due to fractional share
adjustments or any purchase or redemption not caused by the Interested
Stockholder); or (v) any receipt by the Interested Stockholder of the benefit,
directly or indirectly, (except proportionately as a stockholder of the
corporation) of any loans, advances or other financial benefits provided by or
through the corporation.
26
<PAGE>
UNDERWRITING
Under the terms of and subject to the conditions contained in the U.S.
Underwriting Agreement, the form of which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, the underwriters
of the offering of the Shares in the United States and Canada named below (the
"U.S. Underwriters") for whom Lehman Brothers Inc., Kidder, Peabody & Co.
Incorporated, Montgomery Securities, PaineWebber Incorporated and Smith Barney
Inc. are acting as representatives (the "Representatives"), have severally
agreed to purchase from the Company, and the Company has agreed to sell to each
U.S. Underwriter, the aggregate number of Shares set forth opposite the name of
each such U.S. Underwriter below:
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS SHARES
- ------------------------------------------------------------ ---------
<S> <C>
Lehman Brothers Inc.........................................
Kidder, Peabody & Co. Incorporated..........................
Montgomery Securities.......................................
PaineWebber Incorporated....................................
Smith Barney Inc............................................
---------
Total................................................... 3,600,000
---------
---------
</TABLE>
Under the terms of and subject to the conditions contained in the
International Underwriting Agreement, the form of which is filed as an exhibit
to the Registration Statement of which this Prospectus is a part, the managers
of the concurrent offering of the Shares outside the United States and Canada
(the "International Managers" and together with the U.S. Underwriters, the
"Underwriters") for whom Lehman Brothers International (Europe), Kidder, Peabody
International PLC, Montgomery Securities, PaineWebber International (U.K.) Ltd.
and Smith Barney Inc. are acting as lead managers (the "Lead Managers"), have
severally agreed to purchase from the Company, and the Company has agreed to
sell to each International Manager, the aggregate number of Shares set forth
opposite the name of each such International Manager below:
<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL MANAGERS SHARES
- ------------------------------------------------------------ ---------
<S> <C>
Lehman Brothers International (Europe)......................
Kidder, Peabody International PLC...........................
Montgomery Securities.......................................
PaineWebber International (U.K.) Ltd........................
Smith Barney Inc............................................
---------
Total................................................... 900,000
---------
---------
</TABLE>
The Company has been advised that the U.S. Underwriters and the
International Managers, respectively, propose to offer part of the Shares to the
public at the public offering price set forth on the cover page hereof and part
to certain dealers at a price that represents a concession not in excess of
$ per share under the public offering price. The U.S. Underwriters and the
International Managers may allow, and such dealers may reallow, a concession not
in excess of $ per share to certain other brokers or dealers. After the
initial offering to the public, the offering price and other selling terms may
be changed by the U.S. Underwriters and International Managers.
The U.S. Underwriting Agreement and the International Underwriting Agreement
(collectively, the "Underwriting Agreements") provide that the obligations of
the several U.S. Underwriters and the International Managers to pay for and
accept delivery of the shares of Common Stock offered pursuant to the Offerings
are subject to certain conditions contained therein, and that if any of the
foregoing shares of Common Stock are purchased by the U.S. Underwriters pursuant
to the U.S. Underwriting Agreement or by the International Managers pursuant to
the International Underwriting Agreement, all the shares of Common Stock agreed
to be purchased by either the U.S. Underwriters or the International Managers,
as the case may be, pursuant to their respective Underwriting Agreements, must
be so purchased. The closing
27
<PAGE>
under the International Underwriting Agreement is a condition to the closing
under the U.S. Underwriting Agreement, and the closing under the U.S.
Underwriting Agreement is a condition to the closing under the International
Underwriting Agreement.
The Company has granted to the U.S. Underwriters and the International
Managers an option to purchase up to an aggregate of 675,000 additional shares
of Common Stock at the price to public less the underwriting discount, solely to
cover over-allotments, if any. Such option may be exercised at any time up to 30
days after the date of this Prospectus. To the extent that the U.S. Underwriters
or International Managers exercise such option, each of the U.S. Underwriters or
the International Managers, as the case may be, will be committed, subject to
certain conditions, to purchase a number of Common Stock shares proportionate to
such U.S. Underwriter's or International Manager's initial commitment as
indicated in the preceding tables.
The U.S. Underwriters and the International Managers have entered into an
Agreement Between U.S. Underwriters and International Managers (the "Agreement
Between U.S. Underwriters and International Managers"), pursuant to which each
U.S. Underwriter has agreed that, as part of the distribution of the Shares
(plus any of the shares to cover over-allotments) offered in the U.S. Offering,
(i) it is not purchasing any such Shares for the account of anyone other than a
U.S. Person (as defined below) and (ii) it has not offered or sold, and will not
offer, sell, resell or deliver, directly or indirectly, any of such Shares
outside the United States or Canada or to anyone other than a U.S. Person. In
addition, pursuant to such agreement, each International Manager has agreed
that, as part of the distribution of the Shares (plus any of the shares to cover
over-allotments) offered in the International Offering, (i) it is not purchasing
any such Shares for the account of a U.S. Person and (ii) it has not offered or
sold, and will not offer, sell, resell or deliver, directly or indirectly, any
of such Shares in the United States or Canada or to any U.S. Person. Each
International Manager has also agreed that it will offer to sell shares only in
compliance with all relevant requirements of any applicable laws.
The foregoing limitations do not apply to stabilization transactions or to
certain other transactions specified in the Underwriting Agreements and the
Agreement Between U.S. Underwriters and International Managers, including (i)
certain purchases and sales between the U.S. Underwriters and the International
Managers, (ii) certain offers, sales, resales, deliveries or distributions to or
through investment advisors or other persons exercising investment discretion,
(iii) purchases, offers or sales by a U.S. Underwriter who is also acting as an
International Manager or by an International Manager who is also acting as a
U.S. Underwriter and (iv) other transactions specifically approved by the U.S.
Underwriters and International Managers. As used herein, (a) the term "United
States" means the United States of America (including District of Columbia) and
its territories, its possessions and other areas subject to its jurisdiction,
and (b) the term "U.S. Person" means any resident or citizen of the United
States, any corporation, partnership or other entity created or organized in or
under the laws of the United States or any estate or trust the income of which
is subject to United States income taxation regardless of the source of its
income (other than the foreign branch of any U.S. Person), and includes any
United States branch of a person other than a U.S. Person.
Pursuant to the Agreement Between U.S. Underwriters and International
Managers, sales may be made between the U.S. Underwriters and the International
Managers of such number of shares of Common Stock as may be mutually agreed
upon. The price of any shares sold shall be the public offering price then in
effect for Shares being sold by the U.S. Underwriters and the International
Managers, less the selling concession unless otherwise determined by mutual
agreement. To the extent that there are sales between the U.S. Underwriters and
the International Managers pursuant to the Agreement Between U.S. Underwriters
and International Managers, the number of shares initially available for sale by
the U.S. Underwriters or by the International Managers may be more or less than
the amount appearing on the cover page of this Prospectus.
Each International Manager has represented and agreed that (i) it has not
offered or sold, and will not offer or sell, in the United Kingdom, by means of
any document, any Shares other than (a) to persons whose ordinary business it is
to buy or sell shares or debentures, whether as principal or agent, or (b) under
28
<PAGE>
circumstances which do not constitute an offer to the public within the meaning
of the Companies Act 1985; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 (the "1986 Act") with
respect to anything done by it in relation to the Shares in, from or otherwise
involving the United Kingdom; and (iii) it has only issued or passed on, and
will only issue or pass on to any person in the United Kingdom, any investment
advertisement (within the meaning of the 1986 Act) relating to the Shares if
that person falls within Article 9(3) of the Financial Services Act 1986
(Investment Advertisements) (exemptions) Order 1988.
No action has been taken or will be taken in any jurisdiction by the Company
or the International Managers that would permit a public offering of the shares
offered pursuant to the Offerings in any jurisdiction where action for that
purpose is required, other than the United States. Persons into whose possession
this Prospectus comes are required by the Company and the International Managers
to inform themselves about and to observe any restrictions as to the offering of
the shares offered pursuant to the Offerings and the distribution of this
Prospectus.
Purchasers of the shares of Common Stock offered hereby may be required to
pay stamp taxes and other charges in accordance with the laws and practices of
the country of purchase in addition to the offering price set forth on the cover
page hereof.
The Company and each of Alexander, Derek and Eric Lidow have agreed not to
sell or dispose of any shares of Common Stock, with certain exceptions, prior to
the expiration of 90 days from the date of this Prospectus without the prior
written consent of the U.S. Underwriters and International Managers. The Company
has agreed to indemnify the U.S. Underwriters and International Managers against
certain liabilities, including liabilities under the Securities Act, and to
contribute to payments that the U.S. Underwriters and the International Managers
may be required to make in respect hereof.
LEGAL OPINIONS
The validity of the Common Stock to be issued pursuant to the Offerings and
general corporate legal matters will be passed upon for the Company by O'Melveny
& Myers and for the U.S. Underwriters and the International Managers by Latham &
Watkins.
EXPERTS
The audited consolidated financial statements of the Company included in
this prospectus, have been audited by Coopers & Lybrand L.L.P., independent
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon such report, which include an explanatory
paragraph regarding three outstanding class action lawsuits, given upon the
authority of said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Company may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, as well as at the following Regional Offices of the Commission: 7
World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such
material may also be inspected at the offices of the New York Stock Exchange and
the Pacific Stock Exchange.
This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Commission under the Securities Act of 1933, as amended. This
Prospectus omits certain of the information contained in the Registration
Statement, and reference is hereby made to the Registration Statement and
29
<PAGE>
related exhibits for further information with respect to the Company and the
Common Stock. Any statements contained herein concerning the provisions of any
document are not necessarily complete, and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1994, which was filed by the Company with the Commission pursuant to the
Exchange Act, is hereby incorporated by reference in this Prospectus. All
documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of these offerings shall be deemed to be incorporated by reference
into this Prospectus and to be a part hereof from the respective dates of filing
of such documents.
Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon oral or written request, a copy of any or all of
the foregoing documents incorporated herein by reference, except for the
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into information that this Prospectus incorporates). Written
requests should be directed to International Rectifier Corporation, 233 Kansas
Street, El Segundo, California 90245, Attention: Corporate Secretary. Telephone
requests should be directed to (310) 322-3331.
30
<PAGE>
GLOSSARY
The following are definitions of certain technical terms used in the
Prospectus:
ASSEMBLY -- The process of encasing a semiconductor chip in a package to
produce a finished product.
BIPOLAR TRANSISTOR -- A transistor that is controlled by electrical current.
CONTROL IC -- A semiconductor device having logic or control and power
handling capability (e.g., a Power MOSFET) on the same chip.
DIODE -- A discrete device which conducts current in one direction.
DISCRETE DEVICE -- An electrical or electronic component that performs a
single function.
FAST RECOVERY DIODE -- A diode suited to applications above 200 volts where
high switching speed is desirable.
FET (FIELD EFFECT TRANSISTOR) -- A transistor that is controlled by
electrical voltage.
IGBT (INSULATED GATE BIPOLAR TRANSISTOR) -- A variant of the power MOSFET
that incorporates bipolar transistor technology.
IC (INTEGRATED CIRCUIT) -- A device that contains multiple components on a
single silicon chip to form an electronic circuit.
PACKAGE -- The external structure that encases a semiconductor chip.
POWER MOSFET -- A power field effect transistor (FET) that is manufactured
using MOS (Metal Oxide Semiconductor) processing technology similar to that used
in manufacturing certain integrated circuits. The Company's power MOSFETs are
sold under the trademark HEXFET.
POWER SEMICONDUCTOR -- A silicon-based component that operates at a power
level above approximately one watt and has the ability both to conduct and to
block the flow of electricity. Power semiconductors are used to switch (turn on
and off) electricity or to condition electricity, for example by converting
alternating current to direct current.
RECTIFIER -- A diode used to convert alternating current to direct current.
SCHOTTKY DIODE -- An ultra-fast rectifier for use in high-frequency,
low-voltage circuits.
THYRISTOR (SCR) -- A four layer semiconductor device that has a gate
structure allowing current to flow in an electrical circuit.
TRANSISTOR -- A semiconductor device that switches (turns on and off) or
amplifies electricity in a circuit.
WAFER FABRICATION -- The sequence of semiconductor processing steps that
creates semiconductor devices on a silicon wafer.
31
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Accountants.......................................................................... F-2
Consolidated Statement of Operations for the fiscal years ended June 30, 1994, 1993, and 1992 and the three
month periods ended September 30, 1994 and 1993 (unaudited)............................................... F-3
Consolidated Balance Sheet as of June 30, 1994 and 1993 and as of September 30, 1994 (unaudited)........... F-4
Consolidated Statement of Stockholders' Equity for the fiscal years ended June 30, 1994, 1993, and 1992 and
for the three month period ended September 30, 1994 (unaudited)........................................... F-5
Consolidated Statement of Cash Flows for the fiscal years ended June 30, 1994, 1993, and 1992 and for the
three month periods ended September 30, 1994 and 1993 (unaudited)......................................... F-6
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Shareholders and Board of Directors
International Rectifier Corporation
We have audited the accompanying consolidated financial statements of
International Rectifier Corporation and Subsidiaries as of June 30, 1994 and
1993, and for the fiscal years ended June 30, 1994, 1993 and 1992. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of International
Rectifier Corporation and Subsidiaries at June 30, 1994 and 1993, and the
consolidated results of their operations and their cash flows for the fiscal
years ended June 30, 1994, 1993 and 1992, in conformity with generally accepted
accounting principles.
As discussed in Note 10 to the accompanying consolidated financial
statements, three class action lawsuits have been filed against the Company and
its Board of Directors (two of whom are also officers). The ultimate outcome
thereof cannot presently be determined. Accordingly, no provisions for any
liability that may result upon adjudication of these matters has been made in
the accompanying consolidated financial statements.
COOPERS & LYBRAND
Los Angeles, California
July 26, 1994
F-2
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(IN 000'S EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
(UNAUDITED) FISCAL YEARS ENDED JUNE 30,
-------------------- ----------------------------------
1994 1993 1994 1993 1992
--------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues............................................... $ 92,253 $ 73,094 $ 328,882 $ 281,732 $ 265,495
Cost of sales.......................................... 60,739 49,674 219,944 202,684 186,437
--------- --------- ---------- ---------- ----------
Gross profit......................................... 31,514 23,420 108,938 79,048 79,058
Selling and administrative expense..................... 18,486 16,350 69,008 62,637 58,771
Research and development expense....................... 4,111 3,810 16,381 14,083 9,405
--------- --------- ---------- ---------- ----------
Operating profit..................................... 8,917 3,260 23,549 2,328 10,882
Other income (expense):
Interest expense, net................................ (912) (760) (3,625) (2,250) (1,436)
Other, net........................................... (179) (194) (1,050) (2,675) 1,066
--------- --------- ---------- ---------- ----------
Income (loss) before income taxes...................... 7,826 2,306 18,874 (2,597) 10,512
Provision for income taxes (Note 5).................... 1,328 330 3,160 436 1,275
--------- --------- ---------- ---------- ----------
Net income (loss)...................................... $ 6,498 $ 1,976 $ 15,714 $ (3,033) $ 9,237
--------- --------- ---------- ---------- ----------
--------- --------- ---------- ---------- ----------
Net income (loss) per share............................ $0.32 $0.10 $0.78 $(0.15) $0.46
------ ------ ------- ------- -------
------ ------ ------- ------- -------
Average common and common equivalent shares
outstanding........................................... 20,596 20,360 20,428 20,087 20,107
------ ------ ------- ------- -------
------ ------ ------- ------- -------
</TABLE>
The accompanying notes are an integral part of this statement.
F-3
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN 000'S EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
1994 JUNE 30, JUNE 30,
(UNAUDITED) 1994 1993
------------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................... $ 11,610 $ 13,051 $ 8,545
Trade accounts receivable, less allowance for doubtful accounts
($677 in 1994 and $607 in 1993)........................................ 76,071 67,595 55,004
Inventories............................................................. 75,288 73,429 62,609
Prepaid expenses........................................................ 2,542 2,779 1,731
------------- ---------- ----------
Total current assets.................................................. 165,511 156,854 127,889
Property, plant and equipment, at cost, less accumulated depreciation
($112,411 in 1994 and $98,250 in 1993)................................... 167,542 158,567 138,518
Investments and long-term notes receivable................................ 2,236 2,248 2,251
Other assets.............................................................. 13,200 12,905 9,790
------------- ---------- ----------
Total assets.......................................................... $ 348,489 $ 330,574 $ 278,448
------------- ---------- ----------
------------- ---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank loans (Note 2)..................................................... $ 34,853 $ 27,205 $ 24,007
Long-term debt, due within one year (Note 2)............................ 6,614 6,105 3,532
Accounts payable........................................................ 38,549 36,965 27,846
Accrued salaries, wages and commissions................................. 8,959 10,264 9,376
Other accrued expenses.................................................. 9,648 9,150 5,012
------------- ---------- ----------
Total current liabilities............................................. 98,623 89,689 69,773
Long-term debt, less current maturities (Note 2).......................... 28,605 26,817 11,810
Deferred income........................................................... 1,103 1,199 1,402
Other long-term liabilities............................................... 9,238 9,320 9,073
Deferred income taxes (Note 5)............................................ 617 606 316
Commitments and contingencies (Notes 7, 8, 9, 10, and 11)
Stockholders' equity (Note 3):
Common shares, $1 par value, authorized: 30,000,000; issued and
outstanding: 20,352,277 shares in 1994 and 20,233,802 shares in 1993... 20,392 20,352 20,234
Preferred shares, $1 par value, authorized: 1,000,000; issued and
outstanding: none in 1994 and 1993..................................... -- -- --
Capital contributed in excess of par value of shares.................... 168,508 168,078 167,148
Retained earnings....................................................... 25,998 19,500 3,786
Cumulative translation adjustments...................................... (4,595) (4,987) (5,094)
------------- ---------- ----------
Total stockholders' equity............................................ 210,303 202,943 186,074
------------- ---------- ----------
Total liabilities and stockholders' equity............................ $ 348,489 $ 330,574 $ 278,448
------------- ---------- ----------
------------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN 000'S EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
CAPITAL
CONTRIBUTED
IN EXCESS
OF RETAINED CUMULATIVE
COMMON PAR VALUE EARNINGS TRANSLATION
SHARES OF SHARES (DEFICIT) ADJUSTMENTS TOTAL
------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
BALANCE, JUNE 30, 1991............................ $19,810 $164,938 $ (2,418) $(2,795) $179,535
Issuance of common shares:
30,916 -- exercise of stock options............. 31 159 -- -- 190
48,956 -- stock purchase plan................... 49 489 -- -- 538
40,000 -- profit sharing contribution........... 40 184 -- -- 224
Stock offering costs.............................. -- (203) -- -- (203)
Net income for the year ended June 30, 1992....... -- -- 9,237 -- 9,237
Cumulative translation adjustments................ -- -- -- 2,182 2,182
------- ----------- -------- ----------- --------
BALANCE, JUNE 30, 1992............................ 19,930 165,567 6,819 (613) 191,703
Issuance of common shares:
204,640 -- exercise of stock options............ 205 992 -- -- 1,197
99,027 -- stock purchase plan................... 99 589 -- -- 688
Net loss for the year ended June 30, 1993......... -- -- (3,033) -- (3,033)
Cumulative translation adjustments................ -- -- -- (4,481) (4,481)
------- ----------- -------- ----------- --------
BALANCE, JUNE 30, 1993............................ 20,234 167,148 3,786 (5,094) 186,074
Issuance of common shares:
49,410 -- exercise of stock options............. 49 276 -- -- 325
69,065 -- stock purchase plan................... 69 654 -- -- 723
Net income for the year ended June 30, 1994....... -- -- 15,714 -- 15,714
Cumulative translation adjustments................ -- -- -- 107 107
------- ----------- -------- ----------- --------
BALANCE, JUNE 30, 1994............................ 20,352 168,078 19,500 (4,987) 202,943
Issuance of common shares:
5,500 -- exercise of stock options.............. 5 54 -- -- 59
34,546 -- stock purchase plan................... 35 376 -- -- 411
Net income for the three months ended September
30, 1994......................................... -- -- 6,498 -- 6,498
Cumulative translation adjustments................ -- -- -- 392 392
------- ----------- -------- ----------- --------
BALANCE, SEPTEMBER 30, 1994 (UNAUDITED)........... $20,392 $168,508 $ 25,998 $(4,595) $210,303
------- ----------- -------- ----------- --------
------- ----------- -------- ----------- --------
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN 000'S)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
(UNAUDITED) FISCAL YEARS ENDED JUNE 30,
---------------------- ----------------------------------
1994 1993 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Cash flow from operating activities:
Net income (loss)................................... $ 6,498 $ 1,976 $ 15,714 $ (3,033) $ 9,237
Adjustment to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization..................... 5,365 4,214 18,018 16,524 16,597
Stock contribution to employee benefit plan....... -- -- -- -- 224
Deferred income................................... (95) (126) (203) (513) (496)
Deferred income taxes............................. -- (78) 272 (159) (248)
Deferred compensation............................. 165 470 1,473 1,529 978
---------- ---------- ---------- ---------- ----------
Cash flow from operating activities prior to working
capital requirements............................... 11,933 6,456 35,274 14,348 26,292
Change in working capital (Note 1).................. (8,749) (3,591) (9,109) 3,943 (19,760)
---------- ---------- ---------- ---------- ----------
Net cash provided by operating activities............. 3,184 2,865 26,165 18,291 6,532
---------- ---------- ---------- ---------- ----------
Cash flow from investing activities:
Additions to property, plant and equipment.......... (13,267) (5,825) (24,686) (16,994) (32,069)
Investment in other noncurrent assets............... (709) (256) (4,979) (4,158) (3,233)
---------- ---------- ---------- ---------- ----------
Net cash used in investing activities................. (13,976) (6,081) (29,665) (21,152) (35,302)
---------- ---------- ---------- ---------- ----------
Cash flow from financing activities:
Proceeds from issuance of short-term bank debt,
net................................................ 7,403 3,007 2,623 5,333 14,490
Proceeds from issuance of long-term debt............ 3,098 3,038 10,326 2,038 1,734
Payments on long-term debt and obligations under
capital leases..................................... (1,208) (992) (5,809) (5,268) (7,606)
Net proceeds from issuance of common stock.......... 470 509 1,048 1,885 525
Other............................................... (459) (150) (125) (1,201) 4,085
---------- ---------- ---------- ---------- ----------
Net cash provided by financing activities............. 9,304 5,412 8,063 2,787 13,228
---------- ---------- ---------- ---------- ----------
Effect of exchange rate changes on cash and cash
equivalents.......................................... 47 39 (57) 72 (192)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in cash and cash
equivalents.......................................... (1,441) 2,235 4,506 (2) (15,734)
Cash and cash equivalents beginning of year........... 13,051 8,545 8,545 8,547 24,281
---------- ---------- ---------- ---------- ----------
Cash and cash equivalents end of year................. $ 11,610 $ 10,780 $ 13,051 $ 8,545 $ 8,547
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of this statement.
F-6
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and all its majority-owned subsidiaries which are located in Europe, Mexico,
Canada, the Far East and South East Asia. All material intercompany transactions
have been eliminated.
BASIS OF PRESENTATION FOR INTERIM FINANCIALS
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 September 30, 1994 and the consolidated results of operations
and cash flows for the three month periods ended September 30, 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 three month period ended September 30, 1994 are not
necessarily indicative of the results to be expected for the full year.
FISCAL YEAR
Fiscal years 1994 and 1992 consist of 52 weeks ending July 3 and June 28,
respectively. Fiscal year 1993 consists of 53 weeks ending July 4. For
convenience, all references herein to fiscal years are to fiscal years ended
June 30.
REVENUE RECOGNITION
The Company recognizes revenues from product sales at the time of shipment
except on certain government contracts where revenues are recognized using the
percentage of completion method.
INVENTORIES
Inventories are stated at the lower of cost (principally first-in,
first-out) or market. Inventories at June 30, 1994 and 1993, and for the period
ended September 30, 1994 (unaudited), were comprised of the following (000's):
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
JUNE 30,
THREE MONTHS ENDED --------------------
SEPTEMBER 30, 1994 1994 1993
------------------- --------- ---------
<S> <C> <C> <C>
Raw materials................................................ $ 15,579 $ 15,118 $ 12,613
Work-in-process.............................................. 29,734 26,965 24,943
Finished goods............................................... 29,975 31,346 25,053
------- --------- ---------
$ 75,288 $ 73,429 $ 62,609
------- --------- ---------
------- --------- ---------
</TABLE>
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Upon retirement or other
disposal, the asset cost and related accumulated depreciation are removed from
the accounts and any gain or loss on disposition is included in income.
Depreciation is provided on the straight-line method, based on the estimated
useful lives of the assets, or the units of production method based upon the
estimated output of the equipment. In the fourth quarter of fiscal year 1993,
the Company extended the estimated useful lives of certain assets. This change
positively impacted 1994 and 1993 pre-tax results by $2,600,000 and $200,000,
respectively.
F-7
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Depreciation expense for the fiscal years ended June 30, 1994, 1993, and 1992
was $15,880,000, $14,160,000, and $15,358,000, respectively. Property, plant and
equipment at June 30, 1994 and 1993 was comprised of the following (000's):
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Buildings and improvements.................................................... $ 72,004 $ 71,859
Equipment..................................................................... 169,988 140,651
Construction in progress...................................................... 22,525 17,795
Less accumulated depreciation................................................. (112,411) (98,250)
----------- -----------
152,106 132,055
Land.......................................................................... 6,461 6,463
----------- -----------
$ 158,567 $ 138,518
----------- -----------
----------- -----------
</TABLE>
Depreciation of improvements to leased premises is provided on the
straight-line method over the shorter of the remaining term of the lease or
estimated useful lives of the improvements. Capital leases included in property,
plant and equipment at June 30, 1994 and 1993 are as follows (000's):
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Equipment....................................................................... $ 62,533 $ 51,305
Less accumulated depreciation................................................... (35,171) (31,800)
---------- ----------
$ 27,362 $ 19,505
---------- ----------
---------- ----------
</TABLE>
FOREIGN CURRENCY TRANSLATION
The financial position and results of operation of the Company's foreign
subsidiaries are measured using the local currency as the functional currency.
Foreign assets and liabilities in the consolidated balance sheet have been
translated at the rate of exchange on the balance sheet date. Revenues and
expenses are translated at the average exchange rate for the year. Unrealized
translation adjustments do not affect the results of operations and are reported
as a separate component of stockholders' equity. In fiscal 1994, 1993 and 1992,
the Company recognized foreign currency transaction gains of $376,000, $129,000,
and $376,000, respectively.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
INCOME TAXES
Deferred income taxes are determined based on the difference between the
financial reporting and tax bases of assets and liabilities using enacted rates
in effect during the year in which the differences are expected to reverse.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Income tax expense is the tax
payable for the period and the change during the period in deferred tax assets
and liabilities.
U.S. income taxes have not been provided on approximately $14,260,000 of
undistributed earnings of foreign subsidiaries since management considers these
earnings to be invested indefinitely or substantially offset by foreign tax
credits.
EARNINGS PER SHARE
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
F-8
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
common stock equivalents. Common stock equivalents for stock options of 112,700
and 244,200 were utilized in the computation of earnings per share in 1994 and
1992, respectively. No common stock equivalents for stock options were used in
1993 as the impact would have been anti-dilutive.
INTANGIBLE ASSETS
Patent costs are amortized using the straight-line method over the life of
the patent.
STATEMENT OF CASH FLOWS
The Company invests excess cash from operations in short term investment
grade money market funds. The Company considers all highly liquid debt
instruments purchased with an original maturity of three months or less to be
cash equivalents. Components in the changes in working capital are comprised of
the following (000's):
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
JUNE 30,
THREE MONTHS ENDED ---------------------------------
SEPTEMBER 30, 1994 1994 1993 1992
------------------- ---------- --------- ----------
<S> <C> <C> <C> <C>
(UNAUDITED)
Trade accounts receivable, net.................. $ (8,070) $ (11,701) $ (2,871) $ (8,386)
Inventories..................................... (1,515) (10,427) 3,390 (19,333)
Prepaid expenses................................ 257 (1,031) (789) 796
Accounts payable................................ 1,431 9,123 4,316 4,710
Accrued salaries, wages and commissions......... (1,356) 918 243 1,686
Other accrued expenses.......................... 504 4,009 (346) 767
------- ---------- --------- ----------
$ (8,749) $ (9,109) $ 3,943 $ (19,760)
------- ---------- --------- ----------
------- ---------- --------- ----------
</TABLE>
Supplemental disclosures of cash flow information (000's):
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Cash paid during the year for:
Interest................................................................ $ 3,612 $ 3,246 $ 3,877
Income taxes............................................................ 802 1,376 1,416
Interest capitalized...................................................... 453 1,357 1,736
Non cash financing activity:
Assets acquired through capital leases.................................. 12,675 4,275 2,576
</TABLE>
Included in assets acquired through capital leases in 1994 is $7.2 million
in existing operating leases that were renegotiated to capital leases.
CONCENTRATION OF RISK
The Company places its temporary cash investments with high credit quality
financial institutions. At times, such investments may be in excess of insured
limits.
The Company performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral. Receivables generally are
due in 60 days. Credit losses have consistently been within management's
expectations.
RECLASSIFICATION
Certain reclassifications have been made to previously reported amounts to
conform with the current year presentation.
F-9
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. LONG-TERM DEBT AND OTHER LOANS
In June 1994, the Company renewed and modified its existing $20 million
unsecured credit facility from Sanwa Bank California ("Sanwa Facility"). The
modified facility increases the revolving line of credit to $25 million. In June
1994 the Company also added an unsecured revolving credit facility of $10
million from Wells Fargo Bank. Interest rates on both facilities are at prime,
or the banks costs of funds plus 1.25%, or LIBOR plus 1.25% (at the Company's
option). Both facilities expire on October 31, 1996, contain the same financial
covenants and ratios, which impact the availability of funds, and prohibit the
Company from paying cash dividends. At June 30, 1994, $2.5 million was
outstanding under the Sanwa Facility. The Company also has a $3.0 million
uncommitted domestic credit facility of which $1.0 million was outstanding at
June 30, 1994.
The Company also has an additional $39.0 million of credit facilities at
foreign locations. The interest rate on these facilities range from 3.0% to
12.25% at June 30, 1994. Under the terms of the agreements, the availability of
funds is impacted by various financial covenants and collateral requirements. At
June 30, 1994, $23.7 million was outstanding under these foreign facilities.
Based on covenant and collateral limitations under the above credit
facilities, the Company had $26.5 million available for borrowing at June 30,
1994.
The following is a summary of the Company's long-term debt and other loans
at June 30, 1994 and 1993 (000's):
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Capitalized lease obligations payable in varying monthly installments primarily at rates
from 6.9% to 16.6%......................................................................... $ 16,115 $ 7,543
10.55% property mortgage due in equal monthly installments to 2011.......................... 4,300 4,392
Domestic bank loans collateralized by equipment, payable in varying monthly installments at
rates from 8.0% to 9.0%, due in 1995 through 1999.......................................... 3,097 134
Foreign bank loans collateralized by property and/or equipment, payable in varying monthly
installments at rates from 6.5% to 10.8%, due in 1997 through 2000......................... 4,803 2,873
Foreign unsecured bank loans payable in varying monthly installments at rates from 4.0% to
11.9%, due in 1998 through 2006............................................................ 4,607 400
--------- ---------
32,922 15,342
Less current portion of long-term debt...................................................... (6,105) (3,532)
--------- ---------
$ 26,817 $ 11,810
--------- ---------
--------- ---------
</TABLE>
The net book value of properties mortgaged at June 30, 1994 amounted to
$6,134,000. Principal payments on long-term debt are as follows: 1996
$6,458,000; 1997 $6,246,000; 1998 $6,087,000; 1999 $2,769,000; and $5,257,000
thereafter.
In accordance with Statement of Financial Accounting Standards No. 107
"Disclosures About Fair Value of Financial Instruments," the fair values of the
Company's long-term debt has been estimated based on current rates offered to
the Company for debt of the same remaining maturities. The carrying amounts of
the Company's loans approximate their fair values.
3. CAPITAL STOCK
The Company has an employee stock purchase plan. Under this plan employees
are allowed to designate between two and ten percent of their base compensation
to purchase shares of the Company's common stock at 85 percent of fair market
value. In November 1993, the stock purchase plan was amended
F-10
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. CAPITAL STOCK (CONTINUED)
to cover an additional 1,000,000 shares. During fiscal 1994 and 1993, 69,065 and
99,027 shares were purchased at an aggregate purchase price of $723,000 and
$688,000, respectively. Shares authorized under this plan that remained unissued
were 1,055,003 and 124,068 at June 30, 1994 and 1993, respectively.
The Company has three stock option plans, the 1979, 1984, and 1992 Plans, as
amended. Under these plans, options to purchase shares of the Company's common
stock are issued to key employees as well as members of the Company's Board of
Directors. Options are issued at 100% of the fair value of the Company's common
stock at the date of grant and become exercisable in annual installments of 20%,
beginning on the first anniversary date. The 1992 plan provides for the increase
in options available for grant under the plan by 1 1/2% of total common stock
outstanding on January 1 of each year. On January 1, 1994 and 1993, 304,503 and
300,061 options, respectively, were added to the plan.
A summary of the status of options under the 1992, 1984, and 1979 plans is
as follows:
<TABLE>
<CAPTION>
SHARES PRICE RANGE
-------- -------------------
<S> <C> <C> <C> <C>
Outstanding, June 30, 1991................. 616,290 $ 4.00 to $21.62
Options granted.......................... 92,900 8.00 to 19.62
Options exercised........................ (30,916) 4.00 to 11.50
Options expired or canceled.............. (15,874) 4.37 to 19.62
--------
Outstanding, June 30, 1992................. 662,400 4.00 to 21.62
Options granted.......................... 73,700 8.00 to 12.50
Options exercised........................ (204,640) 4.00 to 10.00
Options expired or canceled.............. (17,650) 4.00 to 12.75
--------
Outstanding, June 30, 1993................. 513,810 4.00 to 21.62
Options granted.......................... 240,000 11.00 to 17.00
Options exercised........................ (49,410) 4.00 to 15.38
Options expired or canceled.............. (23,200) 5.75 to 21.62
--------
Outstanding, June 30, 1994 at an average
price of $13.97........................... 681,200 $ 4.50 to $21.62
--------
--------
</TABLE>
The following table summarizes the options exercisable:
<TABLE>
<CAPTION>
SHARES PRICE RANGE
------- -------------------
<S> <C> <C> <C> <C>
June 30, 1994.............................. 264,120 $ 4.50 to $21.62
June 30, 1993.............................. 216,760 4.00 to 21.62
June 30, 1992.............................. 275,900 4.00 to 21.62
</TABLE>
Additional information relating to the 1992, 1984, and 1979 plans is as
follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED JUNE 30,
--------------------------------
1994 1993 1992
---------- --------- ---------
<S> <C> <C> <C>
Options available for grant at June 30............................... 350,214 262,511 20,350
Total reserved common stock shares................................... 1,031,414 776,321 682,750
</TABLE>
F-11
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. GEOGRAPHIC SEGMENTS AND FOREIGN OPERATIONS
The Company operates in one business segment. Transfers between geographic
areas are made at prices reflecting market conditions. Geographic segment
information including sales and transfers between geographic areas is presented
below:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED (000'S)
----------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Revenues from Unaffiliated Customers
United States.................................................... $ 169,263 $ 137,765 $ 123,854
Europe........................................................... 89,073 79,930 83,382
Other............................................................ 70,546 64,037 58,259
---------- ---------- ----------
Total.......................................................... $ 328,882 $ 281,732 $ 265,495
---------- ---------- ----------
---------- ---------- ----------
Transfers between Geographic Areas
United States.................................................... $ 97,896 $ 84,753 $ 87,145
Europe........................................................... 48,864 56,119 52,150
Other............................................................ 1,379 2,602 5,281
---------- ---------- ----------
Total.......................................................... $ 148,139 $ 143,474 $ 144,576
---------- ---------- ----------
---------- ---------- ----------
Total Revenues
United States.................................................... $ 267,159 $ 222,518 $ 210,999
Europe........................................................... 137,937 136,049 135,532
Other............................................................ 71,925 66,639 63,540
Intersegment eliminations........................................ (148,139) (143,474) (144,576)
---------- ---------- ----------
Total.......................................................... $ 328,882 $ 281,732 $ 265,495
---------- ---------- ----------
---------- ---------- ----------
Operating Profit
United States.................................................... $ 18,173 $ 1,108 $ 7,285
Europe........................................................... 4,710 409 2,692
Other............................................................ 666 811 905
---------- ---------- ----------
Total.......................................................... $ 23,549 $ 2,328 $ 10,882
---------- ---------- ----------
---------- ---------- ----------
Identifiable Assets
United States (1)................................................ $ 189,591 $ 164,485 $ 164,778
Europe........................................................... 74,533 61,364 71,230
Other............................................................ 28,696 22,506 23,297
---------- ---------- ----------
Total.......................................................... $ 292,820 $ 248,355 $ 259,305
---------- ---------- ----------
---------- ---------- ----------
U.S. Export Sales to Unaffiliated Customers by Destination of Sale
Europe........................................................... $ 4,362 $ 3,293 $ 3,630
Asia............................................................. 20,094 13,319 10,709
Other............................................................ 4,829 4,057 2,448
---------- ---------- ----------
Total.......................................................... $ 29,285 $ 20,669 $ 16,787
---------- ---------- ----------
---------- ---------- ----------
<FN>
- ------------------------
(1) Excluding general corporate assets.
</TABLE>
5. INCOME TAXES
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
F-12
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES (CONTINUED)
assets and liabilities for temporary differences and net operating loss (NOL)
and tax credit carryforwards. Under SFAS No. 109, deferred income taxes are
established based on enacted tax rates expected to be in effect when temporary
differences are scheduled to reverse and NOL and tax credit carryforwards are
expected to be utilized. Adoption of SFAS No. 109 did not have a material impact
on the Company's financial position or results from operations. Prior year's
financial statements have not been restated.
The major components of the net deferred tax liability as of June 30, 1994
and July 1, 1993 were as follows (000's):
<TABLE>
<CAPTION>
JUNE 30, JULY 1,
1994 1993
------------ -----------
<S> <C> <C>
Deferred tax liability:
Depreciation..................................................... $ (9,215) $ (10,194)
Deferred tax assets:
Reserves for books, not deducted................................. 3,380 2,851
Net operating loss carryovers.................................... 9,815 16,765
Credit carryovers................................................ 5,417 5,269
Other............................................................ 593 539
------------ -----------
Total deferred tax assets........................................ 19,205 25,424
Valuation allowance.............................................. (10,596) (15,546)
------------ -----------
Net deferred tax liabilities..................................... $ (606) $ (316)
------------ -----------
------------ -----------
</TABLE>
Income (loss) before income taxes was as follows (000's):
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-------------------------------
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Operations:
Domestic................................................... $ 15,626 $ (1,590) $ 8,733
Foreign.................................................... 3,248 (1,007) 1,779
--------- --------- ---------
$ 18,874 $ (2,597) $ 10,512
--------- --------- ---------
--------- --------- ---------
</TABLE>
The provision (benefit) for income taxes consisted of (000's):
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-------------------------------
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Current income taxes:
Domestic........................................................ $ 1,539 $ (122) $ 614
Foreign......................................................... 1,331 788 908
--------- --------- ---------
$ 2,870 $ 666 $ 1,522
--------- --------- ---------
Deferred income taxes:
Domestic........................................................ -- (160) --
Foreign......................................................... 290 (70) (247)
--------- --------- ---------
290 (230) (247)
--------- --------- ---------
$ 3,160 $ 436 $ 1,275
--------- --------- ---------
--------- --------- ---------
</TABLE>
Deferred taxes result primarily from temporary differences relating to
depreciation, inventory valuation and state taxes.
F-13
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES (CONTINUED)
The Company's effective tax rate on pretax income (loss) differs from the
U.S. Federal Statutory tax rate as follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-----------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Statutory tax rate (benefit)...................... 35.0% (34.0)% 34.0%
Utilization of domestic net operating loss
carryforward..................................... (36.6) -- (23.1)
Change in valuation allowance..................... 9.6 -- --
Foreign tax differential.......................... 2.6 40.9 0.5
Domestic loss producing no current tax benefit.... -- 16.6 --
State taxes, net of federal tax benefit........... 1.5 (7.5) --
Alternative minimum tax........................... 2.2 -- --
Other, net........................................ 2.4 0.8 0.7
------- ------- -------
16.7% 16.8% 12.1%
------- ------- -------
------- ------- -------
</TABLE>
At June 30, 1994, the Company had approximately $28.8 million of U.S.
federal income tax net operating loss carryovers which begin to expire in 2004.
During the year, the Company utilized approximately $20.4 million in U.S.
federal net operating loss carryovers. The estimated tax benefit from
utilization of the net operating loss carryover was $6.9 million.
The Company has approximately $3.1 million, $1.1 million, and $0.2 million,
respectively, of investment, research and development, and foreign tax credit
carryforwards which expire from 1995 to 2001. In addition, the Company has
approximately $0.9 million of alternative minimum tax credits which are
available to offset future regular tax.
In general, Section 382 of the United States Internal Revenue Code includes
provisions which limit the amount of net operating loss carryforwards and other
tax attributes that may be used annually in the event that a 50% ownership
change (as defined) takes place in any three year period. At June 30, 1994, the
Company had not experienced a change in ownership for purposes of Section 382.
6. PROFIT SHARING AND RETIREMENT PLANS
The Company has established defined contribution plans for all eligible
employees. The Profit Sharing and Retirement Plan provides for contributions by
the Company in such amounts as the Board of Directors may annually determine.
The Company has also established a voluntary Retirement Savings Plan (401K) to
which the Company makes an annual contribution of up to $600 for each
participating employee. Combined plan contributions totaled $841,000, $511,000,
and $1,250,000 for fiscal years 1994, 1993, and 1992, respectively. Fiscal year
1992 contributions included 40,000 shares of the Company's common stock to its
Profit Sharing and Retirement Plan.
7. ENVIRONMENTAL MATTERS
Federal, state and local laws and regulations impose various restrictions
and controls on the discharge of certain materials, chemicals and gases used in
semiconductor processing. The Company does not believe that compliance with such
laws and regulations will have a material adverse effect on its financial
position.
The Company and Rachelle Laboratories, Inc. ("Rachelle"), its pharmaceutical
subsidiary which discontinued operations in 1986, have been named among several
hundred entities as potentially responsible parties ("PRPs") under the
provisions of the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), in connection with the United States
Environmental Protection Agency's ("EPA") investigation of the disposal of
allegedly hazardous substances at a major superfund site in Monterey Park,
California (the "OII site"). Certain PRPs who settled certain claims with the
EPA under two
F-14
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. ENVIRONMENTAL MATTERS (CONTINUED)
consent decrees, filed suit in Federal Court in May 1992 against a number of
other PRPs, including IR, for cost recovery and contribution under CERCLA. The
lawsuit against IR, relating to the first and second consent decrees, was
settled in August 1993 for the sum of $40,000 to avoid protracted and expensive
litigation. Claims have been made with the Company's insurers with respect to
the OII site matter; however, there can be no assurance that the insurance
coverage attaches to these claims. There remains the potential for litigation
against IR relating to future consent decrees. The Company does not believe that
either it or Rachelle is responsible for the disposal at the OII site of any
material constituting hazardous substances under CERCLA. Although the ultimate
resolution of this matter is unknown, the Company believes that it will not have
a material adverse impact on its financial position.
In May 1993 the Company purchased property from its Employee Profit Sharing
and Retirement Plan. At the time of the purchase it was determined that the
property required clean up of seepage from a storage tank, at an estimated
additional cost of $500,000. The Company commenced the clean up in fiscal year
1994, and the costs to be incurred will be capitalized as additional costs of
the property.
On July 18, 1994, the Company received a letter from the State of Washington
Department of Ecology (the "Department") notifying the Company of a proposed
finding that the Company is a potentially liable person ("PLP") for alleged PCE
contamination (also known as perchloroethylene, tetrachloroethylene, and other
names) ("PCE") of real property and groundwater in Yakima County, Washington.
The letter alleges that the Company arranged for disposal or treatment of the
PCE or arranged with a transporter for the disposal or treatment of the PCE in
Yakima County. The Company replied on August 11, 1994 to this letter and stated
that it has not contributed to PCE or other solvent contamination at the Yakima
County site and that it should not be designated a PLP. On October 11, 1994 the
Company received a letter from the Department notifying the Company of its
finding that the Company is a PLP in the above matter.
The Company received a letter dated September 9, 1994, from the State of
California Department of Toxic Substances Control stating that the Company may
be a PRP for the deposit of hazardous substances at a facility in Whittier,
California. The Company's investigation of this matter has just begun and
therefore an opinion cannot be expressed as to any ultimate responsibility.
8. COMMITMENTS
The future minimum lease commitments under non-cancelable capital and
operating leases of equipment and real property at June 30, 1994 were as follows
(000's):
<TABLE>
<CAPTION>
CAPITAL OPERATING TOTAL
FISCAL YEARS LEASES LEASES COMMITMENTS
- ------------------------------------------------------------------ --------- ----------- -------------
<S> <C> <C> <C>
1995.............................................................. $ 5,282 $ 6,050 $ 11,332
1996.............................................................. 4,949 5,272 10,221
1997.............................................................. 4,436 4,457 8,893
1998.............................................................. 3,880 1,826 5,706
1999.............................................................. 977 628 1,605
Later years....................................................... 3 1,208 1,211
Less imputed interest............................................. (3,412) -- (3,412)
--------- ----------- -------------
Total minimum lease payment....................................... $ 16,115 $ 19,441 $ 35,556
--------- ----------- -------------
--------- ----------- -------------
</TABLE>
Total rental expense on all operating leases charged to income was $6,723,000,
$5,591,000, and $3,193,000 in fiscal years 1994, 1993 and 1992, respectively.
9. INTELLECTUAL PROPERTY RIGHTS
A competitor, prior to settlement of patent litigation with the Company in
February 1992, obtained reexamination by the United States Patent and Trademark
Office ("PTO") of the Company's MOSFET
F-15
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INTELLECTUAL PROPERTY RIGHTS (CONTINUED)
patents 4,376,286, 4,959,699 and 5,008,725. The PTO confirmed the patentability
of the '725 patent in January 1993 and the '286 patent in July 1993 and the '699
patent in October 1993. In other reexamination proceedings the PTO in November
1992 agreed to reexamine the Company's 4,642,666 patent and in July 1993 agreed
to reexamine the Company's 4,705,759 patent. More recently, the PTO on September
12, 1994 agreed to reexamine the Company's 4,642,666 and 4,959,699 patents. The
patents subject to reexamination are fundamental to the Company's MOS
transistors.
10. LITIGATION
The Company and SGS-Thomson Microelectronics, Inc. ("SGS") are engaged in
various legal proceedings relating to their respective power MOSFET patents. SGS
filed suit against the Company in June 1991 in Federal District Court in Texas,
charging infringement of U.S. patent 4,553,314. On motion by the Company, the
suit was transferred to the Federal District Court in Los Angeles, California,
and thereafter SGS amended its complaint to charge infringement of U.S. patents
4,495,513 and 4,712,127. SGS alleges, in substance, that the Company's power
MOSFET and IGBT products infringe the '314 patent, that the Company's IGBT
products infringe the '513 patent and that certain packages for IR's products
(including certain power MOSFET packages) infringe the '127 patent. The
complaint, as amended, seeks unspecified actual damages (but no less than an
unspecified reasonable royalty) and an injunction restraining further sales of
such products. On February 1, 1993, the District Court dismissed SGS's claims
for infringement of the '127 and '513 patents for lack of standing and on March
15, 1993 ruled that the SGS '314 patent is unenforceable due to inequitable
conduct. SGS appealed these rulings, as well as the order transferring the case
to California, to the Court of Appeals for the Federal Circuit. IR
cross-appealed a separate ruling by the District Court denying IR's motion for
summary judgment that the '314 patent is invalid. In July 1994, the Federal
Circuit reversed the District Court's grants of summary judgment as to the '513,
'127 and '314 patents and affirmed the District Court's denial of IR's motion
for summary judgment of invalidity of the '314 patent. The Federal Circuit
ordered, however, that the case should proceed in California. Cross-petitions
for writs of certiorari are pending before the U.S. Supreme Court as to the
jurisdictional and venue rulings of the Federal Circuit. No trial date has yet
been set and the ultimate outcome of the case as to the three SGS patents is
unknown.
In separate proceedings before the same California District Court, IR sought
enforcement of a prior license agreement between IR and SGS. The Court in July
1994 granted the Company's motions to enforce the license agreement with SGS,
requiring SGS to pay additional past and prospective royalties under IR's U.S.
patents 4,959,699 and 4,642,666 on SGS's sales of power MOSFET, IGBT and power
IC products. SGS has filed a separate appeal of this ruling with the Federal
Circuit.
The Company has also filed a separate action in the same District Court
against SGS and its Italian affiliate, SGS-Thomson Microelectronics, S.r.l.,
seeking an injunction against infringement of the Company's U.S. patents
5,008,725 and 5,130,767. Trial of the Company's action has been set for January
25, 1995.
The Company, its directors and certain officers have been named as
defendants in three class action lawsuits filed in federal court in California.
These suits seek unspecified compensatory and punitive damages for alleged
intentional and negligent misrepresentations and violations of the federal
securities laws. They generally allege that the Company and the other defendants
made materially false statements and/or omitted to state material facts in
connection with the public offering of the Company's common stock completed on
April 24, 1991 and/or the redemption and conversion in June 1991 of the
Company's 9% Convertible Subordinated Debentures Due 2010. They also allege that
the Company's projections for growth in fiscal 1992 were materially misleading.
Although the Company believes that the claims alleged in the suits are without
merit, the ultimate outcome cannot be presently determined. A substantial
judgment or
F-16
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. LITIGATION (CONTINUED)
settlement, if any, could have a material adverse effect on the Company's
financial condition and results of operations. Two of these suits also name
Kidder, Peabody & Co. Incorporated and Montgomery Securities as defendants.
The Company is currently involved in litigation arising in the normal course
of business. Management does not believe that the ultimate resolution of this
litigation will have a material adverse impact on the financial position of the
Company (also see Notes 7 and 9).
11. EXECUTIVE AGREEMENT
The Company entered into an executive agreement with Eric Lidow dated May
15, 1991 providing for his continued employment with the Company for a six year
period as Chief Executive Officer and President or in such other position as the
Board of Directors may determine. Mr. Lidow's salary at fiscal year end under
this agreement was $550,000. Upon Mr. Lidow's retirement from the Company (or a
change in control) he will receive annual payments (Founder's Pension) of 90% of
his then current salary. Upon Mr. Lidow's death, payments will be continued to
his wife, if she survives him, in an amount equal to two-thirds of his
retirement benefits for the remainder of her life. Under the terms of the
Founder's Pension, $572,000, $572,000, and $611,000 have been expensed in fiscal
years 1994, 1993, and 1992, respectively.
12. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data is as follows (000's, except per share
amounts):
<TABLE>
<CAPTION>
NET
GROSS NET INCOME (LOSS)
REVENUES PROFIT INCOME (LOSS) PER SHARE
--------- --------- ------------- -------------
<S> <C> <C> <C> <C>
1994
- ---------------------------------------------------
1st Quarter........................................ $ 73,094 $ 23,420 $ 1,976 $ 0.10
2nd Quarter........................................ 79,104 25,613 3,070 0.15
3rd Quarter........................................ 84,252 28,110 4,206 0.21
4th Quarter........................................ 92,432 31,795 6,462 0.32
1993
- ---------------------------------------------------
1st Quarter........................................ $ 64,980 $ 16,937 $ (1,878) $ (0.09)
2nd Quarter........................................ 70,452 19,417 (1,993) (0.10)
3rd Quarter........................................ 70,572 20,513 125 0.01
4th Quarter........................................ 75,728 22,181 713 0.04
</TABLE>
F-17
<PAGE>
[INSIDE BACK COVER PHOTO]
[PHOTO2]
Daytime aerial photo of International Rectifier's HEXFET America site.
[CAPTION]
HEXFET America, International Rectifier's principal power MOS transistor
fabrication and assembly facility in Temecula, California, processes wafers
using linear flow manufacturing similar to a production line for automobiles.
In-line production sharply reduces manufacturing cycle time and inventory
requirements.
To meet rising demand for power MOSFETs and IGBTs, International Rectifier is
planning to increase the plant's wafer fabrication capacity by approximately
75%. The expansion is now in progress, and additional capacity is scheduled to
be in production by the end of calendar 1995.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY OF THE U.S.
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES
OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
---
<S> <C>
Prospectus Summary................................. 3
The Company........................................ 5
Risk Factors....................................... 5
Use of Proceeds.................................... 8
Capitalization..................................... 8
Price Range of Common Stock........................ 9
Dividend Policy.................................... 9
Selected Consolidated Financial Data............... 10
Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. 12
Business........................................... 15
Management......................................... 24
Description of Capital Stock....................... 25
Underwriting....................................... 27
Legal Opinions..................................... 29
Experts............................................ 29
Available Information.............................. 29
Incorporation of Certain Documents by Reference.... 30
Glossary........................................... 31
Index to Consolidated Financial Statements......... F-1
</TABLE>
4,500,000 SHARES
[LOGO]
INTERNATIONAL
RECTIFIER
CORPORATION
COMMON STOCK
-------------------
PROSPECTUS
, 1994
---------------------
LEHMAN BROTHERS
KIDDER, PEABODY & CO.
INCORPORATED
MONTGOMERY SECURITIES
PAINEWEBBER INCORPORATED
SMITH BARNEY INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
[ALTERNATE SECTION FOR INTERNATIONAL PROSPECTUS]
Subject to Completion, dated October 28, 1994
PROSPECTUS
4,500,000 SHARES
[LOGO]
INTERNATIONAL RECTIFIER CORPORATION
COMMON STOCK
----------------
All of the 4,500,000 shares of Common Stock, par value $1.00 per share (the
"Shares"), offered hereby are being sold by International Rectifier Corporation
("IR" or the "Company"). Of the 4,500,000 shares of Common Stock offered,
900,000 shares will be offered initially outside the United States and Canada by
the International Managers (the "International Offering") and 3,600,000 shares
will be offered concurrently in the United States and Canada by the U.S.
Underwriters (the "U.S. Offering" and, together with the International Offering,
the "Offerings"). The offering price and underwriting discounts and commissions
for the U.S. Offering and the International Offering will be identical. See
"Underwriting."
The Company's Common Stock is listed on the New York Stock Exchange and the
Pacific Stock Exchange under the symbol "IRF." On October 27, 1994, the closing
price for the Company's Common Stock on the New York Stock Exchange Composite
Tape was $23.625 per share. See "Price Range of Common Stock and Dividend
Policy."
---------------------
SEE "RISK FACTORS" FOR CERTAIN MATTERS RELEVANT TO AN INVESTMENT IN THE
COMPANY'S COMMON STOCK.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting
Discounts
Price and Proceeds to
to Public Commissions (1) Company (2)
<S> <C> <C> <C>
Per Share.............................. $ $ $
Total (3).............................. $ $ $
<FN>
(1) The Company has agreed to indemnify the International Managers and the U.S.
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting estimated expenses of the Offerings of $ payable
to the Company.
(3) The Company has granted the International Managers and the U.S.
Underwriters a 30-day option to purchase up to 675,000 additional shares of
Common Stock on the same terms and conditions as set forth above solely to
cover over-allotments, if any. If such option is exercised in full, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to Company will be $ , $ and $ , respectively.
See "Underwriting."
</TABLE>
---------------------
The shares of Common Stock offered by this Prospectus are offered by the
International Managers subject to prior sale, to withdrawal, cancellation or
modification of the offer without notice, to delivery to and acceptance by the
International Managers and to certain further conditions. It is expected that
delivery of the Shares will be made at the offices of Lehman Brothers Inc., New
York, New York, on or about , 1994.
---------------------
LEHMAN BROTHERS
KIDDER, PEABODY INTERNATIONAL PLC
MONTGOMERY SECURITIES
PAINEWEBBER INTERNATIONAL
SMITH BARNEY INC.
, 1994
<PAGE>
[ALTERNATE SECTION FOR INTERNATIONAL PROSPECTUS]
CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES TO
NON-UNITED STATES HOLDERS
The following is a general discussion of certain United States federal
income tax consequences of the ownership and disposition of the shares of Common
Stock by a holder who, for United States federal income tax purposes, is not a
United States person (a "Non-United States Holder") who holds such stock as a
capital asset. For these purposes, "United States person" means a citizen or
resident of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, or an estate or trust whose income is subject to United
States federal income tax regardless of its source. This discussion is based on
current provisions of the Internal Revenue Code of 1986, as amended, existing
and proposed regulations promulgated thereunder and administrative and judicial
interpretations thereof, all of which are subject to change possibly with
retroactive effect. This discussion is for general information only and does not
consider all specific facts and circumstances that may be relevant to a
particular holder's tax position. Each Non-United States Holder is urged to
consult its own tax adviser with respect to the United States federal income tax
consequences of owning and disposing of shares of Common Stock, as well as any
tax consequences that may arise under the laws of any state, municipality or
other taxing jurisdiction.
DIVIDENDS. Dividends paid on shares of Common Stock to Non-United States
Holders generally will be subject to withholding of United States federal income
tax at the rate of 30 percent, subject to a reduction for Non-United States
Holders eligible for the benefits of an applicable tax treaty. In the event that
the dividend is effectively connected with the conduct of a trade or business
within the United States by the Non-United States Holder, the dividend (as
adjusted by any applicable deductions) will generally be subject to United
States federal income tax at regular graduated rates (if certain certification
and disclosure requirements are met) instead of the 30 percent withholding tax
described above. Any such effectively connected dividends received by a foreign
corporation may also, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty. Holders that are partnerships and trusts may be
subject to certain additional withholding requirements and are urged to consult
their tax advisers as to the applicability of such requirements. Non-United
States Holders may be required to comply with certain certification requirements
in order to claim treaty benefits or to be exempt from withholding.
The Company must report annually to the Internal Revenue Service and to each
Non-United States Holder the amount of dividends paid and tax withheld with
respect to shares of Common Stock held by such holder. These information
reporting requirements apply regardless of whether withholding was reduced or
eliminated by an applicable tax treaty. This information may also be made
available by the Internal Revenue Service to tax authorities of the country in
which the Non-United States Holder resides.
Under current U.S. Treasury regulations, dividends paid to an address
outside the United States are presumed to be paid to a resident of such country
for purposes of the withholding discussed above (unless the payor has knowledge
to the contrary), and, under the current interpretation of U.S. Treasury
regulations, for purposes of determining the applicability of a tax treaty rate.
These rules are currently being studied by the Internal Revenue Service and
Treasury Department and may be changed in the future to require certain
additional certifications by a non-U.S. Holder of Common Stock.
GAIN ON DISPOSITION. Any gain recognized upon a disposition of Common Stock
by a Non-United States Holder will generally not be subject to United States
federal income tax unless (i) the gain is effectively connected with the conduct
of a trade or business within the United States of the Non-United States Holder
or, if a tax treaty applies, attributable to a permanent establishment
maintained by the Non-United States Holder or (ii) the Non-United States Holder
is an individual who holds the Common Stock as a capital asset and is present in
the United States for 183 days or more in the taxable year of the disposition
and either (a) such individual has a "tax home" (as defined for U.S. federal
income tax purposes) in the United States or (b) the gain is attributable to an
office or other fixed place of business maintained in the United States by such
individual. If an individual Non-United States Holder falls under clause (i)
above, he or she will be taxed on his or her net gain derived from the sale
under regular graduated U.S. federal income tax rates. If the individual
Non-United States Holder falls under clause (ii) above, he or she will be
subject to
27
<PAGE>
[ALTERNATE SECTION FOR INTERNATIONAL PROSPECTUS]
a flat 30% tax on the gain derived from the sale which may be offset by U.S.
capital losses (notwithstanding the fact that he or she is not considered a
resident of the United States). Thus, individual Non-United States Holders who
have spent 183 days or more in the United States in the taxable year in which
they contemplate a sale of the Common Stock are urged to consult their tax
advisers as to the tax consequences of such sale. If a Non-United States Holder
that is a foreign corporation falls under clause (i) above, it will be taxed on
its gain under regular graduated U.S. federal income tax rates and, in addition,
may be subject to the branch profits tax equal to 30% of its "effectively
connected earnings and profits" within the meaning of the Code for the taxable
year, as adjusted for certain items, unless it qualifies for a lower rate under
an applicable income tax treaty. The foregoing treatment is based on the
Company's belief that it does not constitute a "United States real property
holding corporation" for United States income tax purposes. However, there can
be no assurance that the Company will not be so characterized in the future.
ESTATE TAX. Shares of Common Stock held by an individual Non-United States
Holder at the time of his death will be subject to the United States federal
estate tax imposed on the estates of nonresident aliens in the absence of a
contrary provision in an applicable estate tax treaty.
BACKUP WITHHOLDING AND INFORMATION REPORTING
DIVIDENDS. Dividends that are subject to U.S. withholding tax at the 30%
statutory rate or at a reduced tax treaty rate and dividends that are
effectively connected with the conduct of a trade or business in the United
States (if certain certification and disclosure requirements are met) are exempt
from backup withholding of U.S. federal income tax. In general, backup
withholding at a rate of 31% and information reporting will apply to other
dividends paid on shares of Common Stock to holders that are not "exempt
recipients" and fail to provide in the manner required certain identifying
information (such as the holder's name, address and taxpayer identification
number). Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients.
DISPOSITION OF COMMON STOCK. Information reporting and backup withholding
imposed at a rate of 31% will apply to the proceeds of a disposition of Common
Stock paid to or through a U.S. office of a broker unless the disposing holder
certifies its non-U.S. status or otherwise establishes an exemption. Generally,
U.S. information reporting and backup withholding will not apply to a payment of
disposition proceeds if the payment is made outside the United States through a
non-U.S. office of a non-U.S. broker. However, U.S. information reporting
requirements (but not backup withholding) will apply to a payment of disposition
proceeds outside the United States if (A) the payment is made through an office
outside the United States of a broker that is either (i) a U.S. person, (ii) a
foreign person which derives 50% or more of its gross income for certain periods
from the conduct of a trade or business in the United States or (iii) a
"controlled foreign corporation" for U.S. federal income tax purposes and (B)
the broker fails to maintain documentary evidence that the holder is a non-U.S.
holder and that certain conditions are met, or that the holder otherwise is
entitled to an exemption.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the U.S.
Internal Revenue Service.
These information and backup withholding rules are under review by the
United States Treasury. Their application to the ownership and disposition of
shares of Common Stock could be changed prospectively by future regulations.
28
<PAGE>
UNDERWRITING
Under the terms of and subject to the conditions contained in the U.S.
Underwriting Agreement, the form of which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, the underwriters
of the offering of the Shares in the United States and Canada named below (the
"U.S. Underwriters") for whom Lehman Brothers Inc., Kidder, Peabody & Co.
Incorporated, Montgomery Securities, PaineWebber Incorporated and Smith Barney
Inc. are acting as representatives (the "Representatives"), have severally
agreed to purchase from the Company, and the Company has agreed to sell to each
U.S. Underwriter, the aggregate number of Shares set forth opposite the name of
each such U.S. Underwriter below:
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS SHARES
- ------------------------------------------------------------ ---------
<S> <C>
Lehman Brothers Inc.........................................
Kidder, Peabody & Co. Incorporated..........................
Montgomery Securities.......................................
PaineWebber Incorporated....................................
Smith Barney Inc............................................
---------
Total................................................... 3,600,000
---------
---------
</TABLE>
Under the terms of and subject to the conditions contained in the
International Underwriting Agreement, the form of which is filed as an exhibit
to the Registration Statement of which this Prospectus is a part, the managers
of the concurrent offering of the Shares outside the United States and Canada
(the "International Managers" and together with the U.S. Underwriters, the
"Underwriters") for whom Lehman Brothers International (Europe), Kidder, Peabody
International PLC, Montgomery Securities, PaineWebber International (U.K.) Ltd.
and Smith Barney Inc. are acting as lead managers (the "Lead Managers"), have
severally agreed to purchase from the Company, and the Company has agreed to
sell to each International Manager, the aggregate number of Shares set forth
opposite the name of each such International Manager below:
<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL MANAGERS SHARES
- ------------------------------------------------------------ ---------
<S> <C>
Lehman Brothers International (Europe)......................
Kidder, Peabody International PLC...........................
Montgomery Securities.......................................
PaineWebber International (U.K.) Ltd........................
Smith Barney Inc............................................
---------
Total................................................... 900,000
---------
---------
</TABLE>
The Company has been advised that the U.S. Underwriters and the
International Managers, respectively, propose to offer part of the Shares to the
public at the public offering price set forth on the cover page hereof and part
to certain dealers at a price that represents a concession not in excess of
$ per share under the public offering price. The U.S. Underwriters and the
International Managers may allow, and such dealers may reallow, a concession not
in excess of $ per share to certain other brokers or dealers. After the
initial offering to the public, the offering price and other selling terms may
be changed by the U.S. Underwriters and International Managers.
The U.S. Underwriting Agreement and the International Underwriting Agreement
(collectively, the "Underwriting Agreements") provide that the obligations of
the several U.S. Underwriters and the International Managers to pay for and
accept delivery of the shares of Common Stock offered pursuant to the Offerings
are subject to certain conditions contained therein, and that if any of the
foregoing shares of Common Stock are purchased by the U.S. Underwriters pursuant
to the U.S. Underwriting Agreement or by the International Managers pursuant to
the International Underwriting Agreement, all the shares of Common Stock agreed
to be purchased by either the U.S. Underwriters or the International Managers,
as the case may be, pursuant to their respective Underwriting Agreements, must
be so purchased. The closing
29
<PAGE>
under the International Underwriting Agreement is a condition to the closing
under the U.S. Underwriting Agreement, and the closing under the U.S.
Underwriting Agreement is a condition to the closing under the International
Underwriting Agreement.
The Company has granted to the U.S. Underwriters and the International
Managers an option to purchase up to an aggregate of 675,000 additional shares
of Common Stock at the price to public less the underwriting discount, solely to
cover over-allotments, if any. Such option may be exercised at any time up to 30
days after the date of this Prospectus. To the extent that the U.S. Underwriters
or International Managers exercise such option, each of the U.S. Underwriters or
the International Managers, as the case may be, will be committed, subject to
certain conditions, to purchase a number of Common Stock shares proportionate to
such U.S. Underwriter's or International Manager's initial commitment as
indicated in the preceding tables.
The U.S. Underwriters and the International Managers have entered into an
Agreement Between U.S. Underwriters and International Managers (the "Agreement
Between U.S. Underwriters and International Managers"), pursuant to which each
U.S. Underwriter has agreed that, as part of the distribution of the Shares
(plus any of the shares to cover over-allotments) offered in the U.S. Offering,
(i) it is not purchasing any such Shares for the account of anyone other than a
U.S. Person (as defined below) and (ii) it has not offered or sold, and will not
offer, sell, resell or deliver, directly or indirectly, any of such Shares
outside the United States or Canada or to anyone other than a U.S. Person. In
addition, pursuant to such agreement, each International Manager has agreed
that, as part of the distribution of the Shares (plus any of the shares to cover
over-allotments) offered in the International Offering, (i) it is not purchasing
any such Shares for the account of a U.S. Person and (ii) it has not offered or
sold, and will not offer, sell, resell or deliver, directly or indirectly, any
of such Shares in the United States or Canada or to any U.S. Person. Each
International Manager has also agreed that it will offer to sell shares only in
compliance with all relevant requirements of any applicable laws.
The foregoing limitations do not apply to stabilization transactions or to
certain other transactions specified in the Underwriting Agreements and the
Agreement Between U.S. Underwriters and International Managers, including (i)
certain purchases and sales between the U.S. Underwriters and the International
Managers, (ii) certain offers, sales, resales, deliveries or distributions to or
through investment advisors or other persons exercising investment discretion,
(iii) purchases, offers or sales by a U.S. Underwriter who is also acting as an
International Manager or by an International Manager who is also acting as a
U.S. Underwriter and (iv) other transactions specifically approved by the U.S.
Underwriters and International Managers. As used herein, (a) the term "United
States" means the United States of America (including District of Columbia) and
its territories, its possessions and other areas subject to its jurisdiction,
and (b) the term "U.S. Person" means any resident or citizen of the United
States, any corporation, partnership or other entity created or organized in or
under the laws of the United States or any estate or trust the income of which
is subject to United States income taxation regardless of the source of its
income (other than the foreign branch of any U.S. Person), and includes any
United States branch of a person other than a U.S. Person.
Pursuant to the Agreement Between U.S. Underwriters and International
Managers, sales may be made between the U.S. Underwriters and the International
Managers of such number of shares of Common Stock as may be mutually agreed
upon. The price of any shares sold shall be the public offering price then in
effect for Shares being sold by the U.S. Underwriters and the International
Managers, less the selling concession unless otherwise determined by mutual
agreement. To the extent that there are sales between the U.S. Underwriters and
the International Managers pursuant to the Agreement Between U.S. Underwriters
and International Managers, the number of shares initially available for sale by
the U.S. Underwriters or by the International Managers may be more or less than
the amount appearing on the cover page of this Prospectus.
Each International Manager has represented and agreed that (i) it has not
offered or sold, and will not offer or sell, in the United Kingdom, by means of
any document, any Shares other than (a) to persons whose ordinary business it is
to buy or sell shares or debentures, whether as principal or agent, or (b) under
30
<PAGE>
circumstances which do not constitute an offer to the public within the meaning
of the Companies Act 1985; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 (the "1986 Act") with
respect to anything done by it in relation to the Shares in, from or otherwise
involving the United Kingdom; and (iii) it has only issued or passed on, and
will only issue or pass on to any person in the United Kingdom, any investment
advertisement (within the meaning of the 1986 Act) relating to the Shares if
that person falls within Article 9(3) of the Financial Services Act 1986
(Investment Advertisements) (exemptions) Order 1988.
No action has been taken or will be taken in any jurisdiction by the Company
or the International Managers that would permit a public offering of the shares
offered pursuant to the Offerings in any jurisdiction where action for that
purpose is required, other than the United States. Persons into whose possession
this Prospectus comes are required by the Company and the International Managers
to inform themselves about and to observe any restrictions as to the offering of
the shares offered pursuant to the Offerings and the distribution of this
Prospectus.
Purchasers of the shares of Common Stock offered hereby may be required to
pay stamp taxes and other charges in accordance with the laws and practices of
the country of purchase in addition to the offering price set forth on the cover
page hereof.
The Company and each of Alexander, Derek and Eric Lidow have agreed not to
sell or dispose of any shares of Common Stock, with certain exceptions, prior to
the expiration of 90 days from the date of this Prospectus without the prior
written consent of the U.S. Underwriters and International Managers. The Company
has agreed to indemnify the U.S. Underwriters and International Managers against
certain liabilities, including liabilities under the Securities Act, and to
contribute to payments that the U.S. Underwriters and the International Managers
may be required to make in respect hereof.
LEGAL OPINIONS
The validity of the Common Stock to be issued pursuant to the Offerings and
general corporate legal matters will be passed upon for the Company by O'Melveny
& Myers and for the U.S. Underwriters and the International Managers by Latham &
Watkins.
EXPERTS
The audited consolidated financial statements of the Company included in
this prospectus, have been audited by Coopers & Lybrand L.L.P., independent
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon such report, which include an explanatory
paragraph regarding three outstanding class action lawsuits, given upon the
authority of said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Company may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, as well as at the following Regional Offices of the Commission: 7
World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such
material may also be inspected at the offices of the New York Stock Exchange and
the Pacific Stock Exchange.
This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Commission under the Securities Act of 1933, as amended. This
Prospectus omits certain of the information contained in the Registration
Statement, and reference is hereby made to the Registration Statement and
31
<PAGE>
related exhibits for further information with respect to the Company and the
Common Stock. Any statements contained herein concerning the provisions of any
document are not necessarily complete, and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1994, which was filed by the Company with the Commission pursuant to the
Exchange Act, is hereby incorporated by reference in this Prospectus. All
documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of these offerings shall be deemed to be incorporated by reference
into this Prospectus and to be a part hereof from the respective dates of filing
of such documents.
Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon oral or written request, a copy of any or all of
the foregoing documents incorporated herein by reference, except for the
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into information that this Prospectus incorporates). Written
requests should be directed to International Rectifier Corporation, 233 Kansas
Street, El Segundo, California 90245, Attention: Corporate Secretary. Telephone
requests should be directed to (310) 322-3331.
32
<PAGE>
GLOSSARY
The following are definitions of certain technical terms used in the
Prospectus:
ASSEMBLY -- The process of encasing a semiconductor chip in a package to
produce a finished product.
BIPOLAR TRANSISTOR -- A transistor that is controlled by electrical current.
CONTROL IC -- A semiconductor device having logic or control and power
handling capability (e.g., a Power MOSFET) on the same chip.
DIODE -- A discrete device which conducts current in one direction.
DISCRETE DEVICE -- An electrical or electronic component that performs a
single function.
FAST RECOVERY DIODE -- A diode suited to applications above 200 volts where
high switching speed is desirable.
FET (FIELD EFFECT TRANSISTOR) -- A transistor that is controlled by
electrical voltage.
IGBT (INSULATED GATE BIPOLAR TRANSISTOR) -- A variant of the power MOSFET
that incorporates bipolar transistor technology.
IC (INTEGRATED CIRCUIT) -- A device that contains multiple components on a
single silicon chip to form an electronic circuit.
PACKAGE -- The external structure that encases a semiconductor chip.
POWER MOSFET -- A power field effect transistor (FET) that is manufactured
using MOS (Metal Oxide Semiconductor) processing technology similar to that used
in manufacturing certain integrated circuits. The Company's power MOSFETs are
sold under the trademark HEXFET.
POWER SEMICONDUCTOR -- A silicon-based component that operates at a power
level above approximately one watt and has the ability both to conduct and to
block the flow of electricity. Power semiconductors are used to switch (turn on
and off) electricity or to condition electricity, for example by converting
alternating current to direct current.
RECTIFIER -- A diode used to convert alternating current to direct current.
SCHOTTKY DIODE -- An ultra-fast rectifier for use in high-frequency,
low-voltage circuits.
THYRISTOR (SCR) -- A four layer semiconductor device that has a gate
structure allowing current to flow in an electrical circuit.
TRANSISTOR -- A semiconductor device that switches (turns on and off) or
amplifies electricity in a circuit.
WAFER FABRICATION -- The sequence of semiconductor processing steps that
creates semiconductor devices on a silicon wafer.
33
<PAGE>
[ALTERNATE SECTION FOR INTERNATIONAL PROSPECTUS]
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NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY OF THE INTERNATIONAL
MANAGERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER
THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
THERE ARE RESTRICTIONS ON THE OFFER AND SALE OF THE SHARES OF COMMON STOCK
OFFERED HEREBY IN THE UNITED KINGDOM. ALL APPLICABLE PROVISIONS OF THE FINANCIAL
SERVICES ACT 1986 AND THE COMPANIES ACT 1985 WITH RESPECT TO ANYTHING DONE BY
ANY PERSON IN RELATION TO THE COMMON STOCK IN, FROM OR OTHERWISE INVOLVING THE
UNITED KINGDOM MUST BE COMPLIED WITH. SEE "UNDERWRITING."
IN THIS PROSPECTUS, REFERENCES TO "DOLLARS" AND "$" ARE TO UNITED STATES
DOLLARS UNLESS STATED OTHERWISE.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Prospectus Summary................................. 3
The Company........................................ 5
Risk Factors....................................... 5
Use of Proceeds.................................... 8
Capitalization..................................... 8
Price Range of Common Stock........................ 9
Dividend Policy.................................... 9
Selected Consolidated Financial Data............... 10
Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. 12
Business........................................... 15
Management......................................... 24
Description of Capital Stock....................... 25
Certain United States Federal Tax
Consequences To Non-United States
Holders.......................................... 27
Underwriting....................................... 29
Legal Opinions..................................... 31
Experts............................................ 31
Available Information.............................. 31
Incorporation of Certain Documents by Reference.... 32
Glossary........................................... 33
Index to Consolidated Financial Statements......... F-1
</TABLE>
4,500,000 SHARES
[LOGO]
INTERNATIONAL
RECTIFIER
CORPORATION
COMMON STOCK
-------------------
PROSPECTUS
, 1994
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LEHMAN BROTHERS
KIDDER, PEABODY INTERNATIONAL PLC
MONTGOMERY SECURITIES
PAINEWEBBER INTERNATIONAL
SMITH BARNEY INC.
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