<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 DECEMBER 31, 1994
------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________________ TO _____________________
COMMISSION FILE NO. 1-7935
---------------------------------------------------------------
INTERNATIONAL RECTIFIER CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-1528961
- ------------------------------------- --------------------------------
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER 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 25,042,209 SHARES OF $1 PAR VALUE COMMON STOCK OUTSTANDING AT
FEBRUARY 14, 1995.
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
PAGE
REFERENCE
ITEM 1. FINANCIAL STATEMENTS
Unaudited Consolidated Statement of
Income for the Three and Six Month
Periods Ended December 31, 1994 and 1993 2
Consolidated Balance Sheet as of
December 31, 1994 (unaudited) and
June 30, 1994 3
Unaudited Consolidated Statement of
Cash Flows for the Six Month
Periods Ended December 31, 1994
and 1993 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
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF 11
SECURITY HOLDERS
<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 SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
----------------------- -----------------------
1994 1993 1994 1993
--------- ------- -------- --------
<S> <C> <C> <C> <C>
Revenues $102,814 $79,104 $195,067 $152,198
Cost of sales 67,022 53,491 127,761 103,165
-------- ------- -------- --------
Gross profit 35,792 25,613 67,306 49,033
Selling and administrative expense 19,947 16,791 38,433 33,141
Research and development expense 4,944 3,969 9,055 7,779
-------- ------- -------- --------
Operating profit 10,901 4,853 19,818 8,113
Other income (expense):
Interest, net (522) (794) (1,434) (1,554)
Other, net (310) (297) (489) (491)
-------- ------- -------- --------
Income before income taxes 10,069 3,762 17,895 6,068
Provision for income taxes 1,701 692 3,029 1,022
-------- ------- -------- --------
Net income $ 8,368 $ 3,070 $ 14,866 $ 5,046
-------- ------- -------- --------
-------- ------- -------- --------
Net income per share $ 0.37 $ 0.15 $ 0.69 $ 0.25
-------- ------- -------- --------
-------- ------- -------- --------
Average common and common
equivalent shares outstanding 22,737 20,398 21,667 20,379
-------- ------- -------- --------
-------- ------- -------- --------
</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>
DECEMBER 31,
1994 JUNE 30,
(unaudited) 1994
-------- --------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 34,272 $ 13,051
Short-term investments 42,581 -
Trade accounts receivable, net 79,594 67,595
Inventories 72,335 73,429
Prepaid expenses 2,652 2,779
-------- --------
Total current assets 231,434 156,854
Property, plant and equipment, net 186,187 158,567
Investments and long-term notes receivable 2,236 2,248
Other assets 13,234 12,905
-------- --------
Total assets $433,091 $330,574
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank loans $ 18,739 $ 27,205
Long-term debt, due within one year 6,613 6,105
Accounts payable 32,932 36,965
Accrued salaries, wages and commissions 9,747 10,264
Other accrued expenses 10,695 9,150
-------- --------
Total current liabilities 78,726 89,689
Long-term debt, less current maturities 27,431 26,817
Deferred income 961 1,199
Other long-term liabilities 9,510 9,320
Deferred income taxes 617 606
Stockholders equity:
Common stock 24,947 20,352
Capital contributed in excess of par value 261,506 168,078
Retained earnings 34,366 19,500
Cumulative translation adjustments (4,973) (4,987)
-------- --------
Total stockholders' equity 315,846 202,943
-------- --------
Total liabilities and stockholders' equity $433,091 $330,574
-------- --------
-------- --------
</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>
SIX MONTHS ENDED
DECEMBER 31,
----------------------
1994 1993
--------- ---------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 14,866 $ 5,046
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 11,105 8,527
Deferred income (238) (203)
Deferred income taxes - 361
Deferred compensation 649 759
Change in working capital (13,914) (9,830)
--------- ---------
Net cash provided by operating activities 12,468 4,660
--------- ---------
Cash flow from investing activities:
Additions to property, plant and equipment (37,015) (7,644)
Purchase of short-term investments (42,581) -
Investment in other noncurrent assets (1,220) (1,498)
--------- ---------
Net cash used in investing activities (80,816) (9,142)
--------- ---------
Cash flow from financing activities:
Proceeds from issuance of (payments on)
short-term bank debt, net (8,436) 5,012
Proceeds from issuance of long-term debt 3,410 4,258
Payments on long-term debt and obligations
under capital leases (3,172) (1,848)
Net proceeds from issuance of common stock 98,023 539
Other (222) 139
--------- ---------
Net cash provided by financing activities 89,603 8,100
--------- ---------
Effect of exchange rate changes on cash and
cash equivalents (34) (137)
--------- ---------
Net increase in cash and cash equivalents 21,221 3,481
Cash and cash equivalents beginning of period 13,051 8,545
--------- ---------
Cash and cash equivalents end of period $ 34,272 $ 12,026
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of this statement.
4
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
1. BASIS OF PRESENTATION
The consolidated financial statements included herein are unaudited,
however, they contain all normal recurring accruals which, in the opinion of
management, are necessary to present fairly the consolidated financial
position of the Company at December 31, 1994 and the consolidated results of
operations and cash flows for the six month periods ended December 31, 1994
and 1993. It should be understood that accounting measurements at interim
dates inherently involve greater reliance on estimates than at year end.
The results of operations for the six month period ended December 31, 1994
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, 1994.
Certain reclassifications have been made to the prior year's financial
statements to conform to current year presentation.
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 256,000 and
92,000 were utilized in the computation of earnings per share for the three
month periods ended December 31, 1994 and 1993, respectively.
3. INVENTORIES
Inventories are stated at the lower of cost (principally first-in, first-
out) or market. Inventories at December 31, 1994 (unaudited) and June 30,
1994 were comprised of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1994 JUNE 30, 1994
----------------- -------------
<S> <C> <C>
Raw materials $14,943 $15,118
Work-in-process 28,590 26,965
Finished goods 28,802 31,346
------- -------
$72,335 $73,429
------- -------
------- -------
</TABLE>
5
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4. LONG-TERM DEBT AND OTHER LOANS
A summary of the Company's long-term debt and other loans at December 31,
1994 is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
1994
------------
<S> <C>
Capitalized lease obligations payable in varying monthly
installments primarily at rates from 6.9% to 16.6% $ 15,150
10.55% property mortgage due in equal monthly installments
to 2011 4,250
Domestic bank loans collateralized by equipment, payable in
varying monthly installments at rates from 7.1% to 9.0%, due
in 1995 through 1999 6,088
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 4,301
Foreign unsecured bank loans payable in varying monthly
installments at rates from 4.0% to 11.9%, due in 1998
through 2006 4,255
--------
34,044
Less current portion of long-term debt (6,613)
--------
$ 27,431
--------
--------
</TABLE>
5. ENVIRONMENTAL MATTERS
The Company and Rachelle Laboratories, Inc. ("Rachelle"), its discontinued
pharmaceutical subsidiary, 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"). The EPA advised the Company on October 31, 1994 that it is in the
process of reassessing the allocation of responsibility for clean-up costs
in preparation for a new settlement offer. When the new settlement offer is
received from the EPA, the Company may be able to delimit the range of
possible loss (if known) or state that no range of loss can reasonably be
determined. If a range of possible loss is determined, the minimum amount
(if no amount within the range is more likely) will then be accrued.
On October 11, 1994, the Company received a letter from the Department of
Ecology of the State of Washington notifying the Company of its finding that
the Company is a potentially liable person for alleged PCE
(perchloroethylene) contamination of ground water and real property in
Yakima County, Washington. The Company is
6
<PAGE>
unable at this time to estimate its potential liability, if any, in this
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 potentially responsible party for the deposit of hazardous
substances at a facility in Whittier, California. The Company is unable at
this time to estimate its potential liability, if any, in this matter.
6. INTELLECTUAL PROPERTY
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"). If the patentability of the
Company's patents involved in such proceedings is not confirmed, loss of the
patents would allow competitors to use currently patented features of the
Company's MOS transistor technology without liability for infringement of
those patents. On December 15, 1994, the PTO advised the Company of its
intent to confirm the patentability of U.S. patent 4,705,759, one of the
Company's MOSFET patents under reexamination.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTH PERIODS ENDED DECEMBER 31,
1994 COMPARED WITH THE THREE AND SIX MONTH PERIODS ENDED DECEMBER 31, 1993
The following table sets forth certain items as a percentage of revenues.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
(UNAUDITED) (UNAUDITED)
-------------------- --------------------
1994 1993 1994 1993
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of sales 65.2 67.6 65.5 67.8
----- ----- ----- -----
Gross profit 34.8 32.4 34.5 32.2
Selling and administrative expense 19.4 21.2 19.7 21.8
Research and development expense 4.8 5.0 4.6 5.1
----- ----- ----- -----
Operating profit 10.6 6.2 10.2 5.3
Interest expense, net (0.5) (1.0) (0.7) (1.0)
Other expense, net (0.3) (0.4) (0.3) (0.3)
----- ----- ----- -----
Income before income taxes 9.8 4.8 9.2 4.0
Provision for income taxes 1.7 0.9 1.6 0.7
----- ----- ----- -----
Net income 8.1% 3.9% 7.6% 3.3%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
7
<PAGE>
Revenues for the three months ended December 31, 1994 increased 30% to $102.8
million from $79.1 million in the prior year period. Revenues for the six month
period ended December 31, 1994 increased to $195.1 million from $152.2 million
in the previous year. The Company's revenue increase reflected rising demand
for the Company's power MOSFETs and related devices, which resulted in a 32%
increase in revenues from these products. Revenues from the thyristor and
rectifier product lines increased 19% which reflected unseasonally strong demand
in Europe. Changes in foreign exchange rates positively impacted revenues by
approximately $2.5 million in the three months ended December 31, 1994.
Revenues in the current quarter included $2.3 million of net patent royalties
unchanged from the prior year period.
Gross profit for the three and six month periods ended December 31, 1994 was
34.8% and 34.5% of revenues ($35.8 million and $67.3 million), respectively,
versus 32.4% and 32.2% of revenues ($25.6 million and $49.0 million) in the
respective prior year periods. The increased margin reflected greater
manufacturing volume and efficiencies in both the Company's growth and mature
products and a more favorable product mix.
In the three and six month periods ended December 31, 1994, selling and
administrative expense was 19.4% and 19.7% of revenues ($19.9 million and $38.4
million), respectively, versus 21.2% and 21.8% of revenues ($16.8 million and
$33.1 million) in the respective prior year periods. The decreased percentage
reflects the Company's continued commitment to reducing operating expenses as a
percentage of revenues.
In the three and six month periods ended December 31, 1994, the Company's
research and development expenditures increased to $4.9 million (4.8% of
revenues) and $9.1 million (4.6% of revenues), compared to $4.0 million (5.0% of
revenues) and $7.8 million (5.1% of revenues) in the respective prior year
periods. 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.
Interest expense (net) in the three and six month periods ended December 31,
1994 decreased $0.3 million and $0.1 million from the respective prior year
periods. The decrease was due to approximately $0.4 million in interest income
earned in the current year on funds received from a November 1994 offering of
the Company's common stock, partially offset by increased interest expense in
the current period on higher debt balances.
Changes in foreign currency exchange rates did not have a material effect on net
income in the three and six month periods ending December 31, 1994.
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.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1994, the Company had established $78.7 million in domestic and
foreign revolving credit facilities, of which $18.7 million had been borrowed by
the Company. Based upon covenant and collateral limitations under the revolving
credit facilities, the Company had $45.0 million available for borrowing at
December 31, 1994. In addition, at December 31, 1994 the Company had available
$26.6 million of unused lines of credit for capital equipment, $42.6 million of
short-term investments, $34.3 million of cash and cash equivalents and had made
purchase commitments of approximately $31.6 million for capital equipment.
The Company intends to spend approximately $75.0 million (of which $16.9 million
has been spent through December 31, 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 $22.6 million had been spent in the six months ended December
31, 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 cash
requirements for the foreseeable future through cash and cash equivalents and
short-term investments on hand, anticipated cash flows from operations, funds
available from existing credit facilities, and with the proceeds of the public
stock offering referred to in the next paragraph.
In November 1994 the Company completed a public stock offering of 4.5 million
shares of common stock at $22.50 per share. Net proceeds of approximately $97
million will be used principally to expand wafer fabrication capacity at HEXFET
America, to repay debt and for general corporate purposes. In the three months
ended December 31, 1994, approximately $12 million in proceeds were used for
wafer fabrication expansion and $22.5 million were used to repay amounts
outstanding under the Company's domestic revolving credit facility. In January
1995, $4.3 million was used to repay a domestic property mortgage.
9
<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
February 14, 1995 /S/ MICHAEL P. MCGEE
-----------------------------------------
Michael P. McGee
Vice President,
Chief Financial Officer and
Principal Accounting Officer
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following matters were submitted to a vote of stockholders at the Company's
Annual Meeting of Stockholders held on November 21, 1994, with the following
results:
Authority
Description of Matter For Withheld
------------ ---------
1. Election of Directors:
Eric Lidow 18,199,161 116,111
Donald S. Burns 18,216,738 98,534
James D. Plummer 18,221,476 93,796
For Against Abstentions
---------- --------- -----------
2. Amendment to Stock Option Plan
of 1992: 16,701,609 1,109,949 118,899
3. Ratification of Coopers & Lybrand
as Independent Auditors: 18,212,471 45,469 57,332
Broker Non-Vote on Proposal 2 only: 1,759,261
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 34,272
<SECURITIES> 42,581
<RECEIVABLES> 82,222
<ALLOWANCES> (2,628)
<INVENTORY> 72,335
<CURRENT-ASSETS> 231,434
<PP&E> 307,781
<DEPRECIATION> (121,594)
<TOTAL-ASSETS> 433,091
<CURRENT-LIABILITIES> 78,726
<BONDS> 37,902
<COMMON> 24,947
0
0
<OTHER-SE> 290,899
<TOTAL-LIABILITY-AND-EQUITY> 433,091
<SALES> 195,067
<TOTAL-REVENUES> 195,067
<CGS> 127,761
<TOTAL-COSTS> 127,761
<OTHER-EXPENSES> 47,488
<LOSS-PROVISION> 126
<INTEREST-EXPENSE> 1,434
<INCOME-PRETAX> 17,895
<INCOME-TAX> 3,029
<INCOME-CONTINUING> 14,866
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,866
<EPS-PRIMARY> 0.69
<EPS-DILUTED> 0.69
</TABLE>
