<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995
------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NO. 1-7935
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INTERNATIONAL RECTIFIER CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-1528961
- ---------------------------------- -----------------------------
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
233 KANSAS STREET
EL SEGUNDO, CALIFORNIA 90245
- ---------------------------------- -----------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 322-3331
NO CHANGE
- -------------------------------------------------------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT
WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
----- ------
THERE WERE 25,235,645 SHARES OF $1 PAR VALUE COMMON STOCK OUTSTANDING AT
NOVEMBER 13, 1995.
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TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
PAGE
REFERENCE
ITEM 1. FINANCIAL STATEMENTS
Unaudited Consolidated Statement of
Income for the Three Month Periods
Ended September 30, 1995 and 1994 2
Consolidated Balance Sheet as of
September 30, 1995 (unaudited) and
June 30, 1995 3
Unaudited Consolidated Statement of
Cash Flows for the Three Month
Periods Ended September 30, 1995
and 1994 4
Notes to Unaudited Consolidated
Financial Statements 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS 7
PART II. OTHER INFORMATION
None
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1995 1994
-------- ---------
<S> <C> <C>
Revenues $126,097 $ 92,253
Cost of sales 78,786 60,739
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Gross profit 47,311 31,514
Selling and administrative expense 23,159 18,486
Research and development expense 5,687 4,111
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Operating profit 18,465 8,917
Other income (expense):
Interest, net 450 (912)
Other, net (402) (179)
-------- --------
Income before income taxes 18,513 7,826
Provision for income taxes 5,684 1,328
-------- --------
Net income $ 12,829 $ 6,498
-------- --------
-------- --------
Net income per share $ 0.50 $ 0.32
-------- --------
-------- --------
Average common and common
equivalent shares outstanding 25,606 20,596
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of this statement.
2
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30,
1995 JUNE 30,
(UNAUDITED) 1995
------------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 35,600 $ 50,820
Short-term investments 17,941 3,000
Trade accounts receivable, net 94,283 94,095
Inventories 74,038 73,155
Deferred income taxes 10,630 10,630
Prepaid expenses 4,355 2,112
-------- --------
Total current assets 236,847 233,812
Property, plant and equipment, net 262,255 245,218
Investments and long-term notes receivable 2,362 2,362
Other assets 15,596 14,792
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Total assets $517,060 $496,184
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-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank loans $ 11,492 $ 17,250
Long-term debt, due within one year 10,052 7,985
Accounts payable 47,759 53,771
Accrued salaries, wages and commissions 9,590 11,517
Other accrued expenses 16,044 15,538
-------- --------
Total current liabilities 94,937 106,061
Long-term debt, less current maturities 39,200 23,881
Deferred income 532 675
Other long-term liabilities 11,102 10,311
Deferred income taxes 12,363 10,075
Stockholders' equity:
Common stock 25,229 25,180
Capital contributed in excess of par value 266,229 265,326
Retained earnings 71,727 58,898
Cumulative translation adjustments (4,259) (4,223)
-------- --------
Total stockholders' equity 358,926 345,181
-------- --------
Total liabilities and stockholders' equity $517,060 $496,184
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of this statement.
3
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
------------------------
1995 1994
---------- -----------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 12,829 $ 6,498
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,527 5,365
Deferred income (143) (95)
Deferred income taxes 2,281 -
Deferred compensation 686 165
Change in working capital (12,942) (8,749)
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Net cash provided by operating activities 9,238 3,184
--------- ---------
Cash flow from investing activities:
Additions to property, plant and equipment (23,745) (13,267)
Purchase of short-term investments (20,441) -
Proceeds from sale of short-term investments 5,500 -
Investment in other noncurrent assets (1,117) (709)
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Net cash used in investing activities (39,803) (13,976)
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Cash flow from financing activities:
Proceeds from issuance of (payments on)
short-term bank debt, net (4,963) 7,403
Proceeds from issuance of long-term debt 19,554 3,098
Payments on long-term debt and obligations
under capital leases (1,639) (1,208)
Net proceeds from issuance of common stock 952 470
Other 1,916 (459)
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Net cash provided by financing activities 15,820 9,304
--------- ---------
Effect of exchange rate changes on cash and
cash equivalents (475) 47
--------- ---------
Net decrease in cash and cash equivalents (15,220) (1,441)
Cash and cash equivalents beginning of period 50,820 13,051
--------- ---------
Cash and cash equivalents end of period $ 35,600 $ 11,610
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of this statement.
4
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
1. BASIS OF PRESENTATION
The consolidated financial statements included herein are unaudited,
however, they contain all normal recurring accruals which, in the opinion
of management, are necessary to present fairly the consolidated financial
position of the Company at September 30, 1995 and the consolidated results
of operations and cash flows for the three month periods ended September
30, 1995 and 1994. 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, 1995 are not necessarily indicative of the results to be expected for
the full year.
The accompanying consolidated financial statements do not include footnotes
and certain financial presentations normally required under generally
accepted accounting principles and, therefore, should be read in
conjunction with the Annual Report on Form 10-K for the year ended June 30,
1995.
2. 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 common stock
equivalents. Common stock equivalents for stock options of 389,300 and
212,200 were utilized in the computation of earnings per share for the
three month periods ended September 30, 1995 and 1994, respectively.
3. INVENTORIES
Inventories are stated at the lower of cost (principally first-in, first-
out) or market. Inventories at September 30, 1995 (unaudited) and June 30,
1995 were comprised of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 JUNE 30, 1995
------------------ -------------
<S> <C> <C>
Raw materials $22,625 $19,974
Work-in-process 33,003 32,967
Finished goods 18,410 20,214
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$74,038 $73,155
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------- -------
</TABLE>
4. LONG-TERM DEBT AND OTHER LOANS
5
<PAGE>
A summary of the Company's long-term debt and other loans at September 30,
1995 is as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
1995
---------------
<S> <C>
Capitalized lease obligations payable in varying monthly
installments primarily at rates from 6.0% to 12.6% $ 12,450
Domestic bank loans collateralized by equipment, payable in
varying monthly installments at rates from 7.0% to 8.6%, due
in 1995 through 2000 14,684
Domestic unsecured bank loan payable in varying monthly
installments at a current variable rate of 6.9%, due in 1998
through 2001 8,000
Foreign bank loans collateralized by property and/or equipment,
payable in varying monthly installments at rates from 8.0% to
10.8%, due in 1997 through 2000 5,938
Foreign unsecured bank loans payable in varying monthly
installments at rates from 3.0% to 8.4%, due in 1998
through 2006 8,180
--------
49,252
Less current portion of long-term debt (10,052)
--------
$ 39,200
--------
--------
</TABLE>
5. LITIGATION
SGS-Thomson Microelectronics, Inc. and SGS-Thomson Microelectronics S.A.
filed suit in Great Britain in September 1995 against International
Rectifier (Great Britain) Limited and International Rectifier Corporation
alleging infringement of their United Kingdom (U.K.) patents 1595546 and
0068945. The U.K. patents are foreign counterparts of U.S. patents
4,495,513 and 4,712,127 on which suit is pending against the Company in
Federal District Court in Los Angeles. The U.K. action is being reviewed by
counsel for the Company.
6. INTELLECTUAL PROPERTY RIGHTS
In connection with the reexamination in the United States Patent and
Trademark Office ("PTO") of certain of the Company's power MOSFET
patents, the Company received a notice from the PTO, dated October 23,
1995, of its intent to issue a certificate confirming the patentability
of the Company's U.S. patent 5,191,396.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 1995
COMPARED WITH THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 1994
The following table sets forth certain items as a percentage of revenues.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
(UNAUDITED)
--------------------
1995 1994
---- ----
<S> <C> <C>
Revenues 100.0% 100.0%
Cost of sales 62.5 65.8
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Gross profit 37.5 34.2
Selling and administrative expense 18.4 20.1
Research and development expense 4.5 4.5
----- -----
Operating profit 14.6 9.6
Interest income (expense), net 0.4 (1.0)
Other expense, net (0.3) (0.2)
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Income before income taxes 14.7 8.4
Provision for income taxes 4.5 1.4
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Net income 10.2% 7.0%
----- -----
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</TABLE>
Revenues for the three months ended September 30, 1995 increased 36.7% to $126.1
million from $92.3 million in the prior year period. The Company's revenue
increase reflected rising demand for the Company's power MOSFETs and related
devices; revenues from these products increased 41% from the year ago quarter.
Revenues from the thyristor and rectifier product lines increased 16%. Changes
in foreign exchange rates positively impacted revenues by approximately $2.4
million in the three months ended September 30, 1995. Revenues in the current
quarter included $3.3 million of net patent royalties, versus $2.2 million in
the prior year period.
September-quarter gross profit rose to $47.3 million and 37.5% of revenues,
versus $31.5 million and 34.2% in the comparable year-ago quarter. Gross profit
margins reflected a richer mix of new and higher-margin products, greater
manufacturing volume and efficiencies, and a favorable pricing environment.
September-quarter selling and administrative expense of $23.2 million
represented 18.4% of revenues, versus $18.5 million and 20.1% in the comparable
year-ago quarter. The decreased percentage reflected improvements in systems,
procedures, and operating discipline.
In the quarter ended September, the Company's research and development
expenditures
7
<PAGE>
increased to $5.7 million (4.5% of revenues) compared to $4.1 million (4.5% of
revenues) in the comparable prior year period. The Company's research and
development program 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 High Voltage Power ICs and high-performance
diodes that work in combination with HEXFETs and IGBTs to improve system
performance.
Net interest income of $0.5 million compared to net interest expense of $0.9
million in the prior year period, reflected interest income earned on higher
average short-term investment balances and the capitalization of certain
interest costs.
Changes in foreign currency exchange rates negatively impacted net income by
$0.2 million in the three month period ending September 30, 1995.
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, 1995, the Company maintained cash and cash equivalent balances
of $35.6 million and short term investments of $17.9 million. In addition, the
Company had established $73.5 million of domestic and foreign revolving lines of
credit, against which $11.5 million had been borrowed. Based on covenant and
collateral limitations, the Company had $55.0 million available for borrowing at
September 30, 1995. Additionally, the Company had at its disposal $17.0 million
of unused bank term-loan facilities and $17.7 million of unused capital
equipment credit lines. At September 30, 1995, the Company had made purchase
commitments for capital equipment of approximately $16.5 million.
8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERNATIONAL RECTIFIER CORPORATION
-----------------------------------
REGISTRANT
November 13, 1995 MICHAEL P. MCGEE
-------------------------------------------
Michael P. McGee
Vice President,
Chief Financial Officer and
Principal Accounting Officer
9
<PAGE>
PART II. OTHER INFORMATION
NONE
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 35,600
<SECURITIES> 17,941
<RECEIVABLES> 95,122
<ALLOWANCES> 839
<INVENTORY> 74,038
<CURRENT-ASSETS> 236,847
<PP&E> 396,865
<DEPRECIATION> 134,610
<TOTAL-ASSETS> 517,060
<CURRENT-LIABILITIES> 94,937
<BONDS> 0
<COMMON> 25,229
0
0
<OTHER-SE> 333,697
<TOTAL-LIABILITY-AND-EQUITY> 517,060
<SALES> 126,097
<TOTAL-REVENUES> 126,097
<CGS> 78,786
<TOTAL-COSTS> 78,786
<OTHER-EXPENSES> 28,846
<LOSS-PROVISION> 88
<INTEREST-EXPENSE> 450
<INCOME-PRETAX> 18,513
<INCOME-TAX> 5,684
<INCOME-CONTINUING> 12,829
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,829
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0.50
</TABLE>
