<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, 1995
-------------------------------------------------
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
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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 50,612,827 SHARES OF $1 PAR VALUE COMMON STOCK OUTSTANDING AT
FEBRUARY 12, 1996.
<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, 1995 and 1994 2
Consolidated Balance Sheet as of
December 31, 1995 (unaudited) and
June 30, 1995 3
Unaudited Consolidated Statement of
Cash Flows for the Six Month
Periods Ended December 31, 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
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 11
ITEM 5. OTHER INFORMATION 11
<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,
1995 1994 1995 1994
------------------------- -------------------------
<S> <C> <C> <C> <C>
Revenues $ 141,026 $ 102,814 $ 267,123 $ 195,067
Cost of sales 87,137 67,022 165,923 127,761
---------- ---------- ---------- ----------
Gross profit 53,889 35,792 101,200 67,306
Selling and administrative expense 25,187 19,947 48,346 38,433
Research and development expense 6,325 4,944 12,012 9,055
---------- ---------- ---------- ----------
Operating profit 22,377 10,901 40,842 19,818
Other income (expense):
Interest, net (169) (522) 281 (1,434)
Other, net (248) (310) (650) (489)
---------- ---------- ---------- ----------
Income before income taxes 21,960 10,069 40,473 17,895
Provision for income taxes 6,741 1,701 12,425 3,029
---------- ---------- ---------- ----------
Net income $ 15,219 $ 8,368 $ 28,048 $ 14,866
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income per share (A) $ 0.30 $ 0.18 $ 0.55 $ 0.34
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Average common and common
equivalent shares outstanding (A) 51,403 45,474 51,308 43,334
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
(A) Reflects the two-for-one stock split declared on November 20, 1995.
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,
1995 June 30,
(Unaudited) 1995
----------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 36,933 $ 50,820
Short-term investments 18,076 3,000
Trade accounts receivable, net 104,498 94,095
Inventories 76,947 73,155
Deferred income taxes 6,065 10,630
Prepaid expenses 4,076 2,112
--------- ---------
Total current assets 246,595 233,812
Property, plant and equipment, net 271,589 245,218
Investments and long-term notes receivable 2,362 2,362
Other assets 19,224 14,792
--------- ---------
Total assets $ 539,770 $ 496,184
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank loans $ 13,932 $ 17,250
Long-term debt, due within one year 9,501 7,985
Accounts payable 44,184 53,771
Accrued salaries, wages and commissions 9,985 11,517
Other accrued expenses 14,367 15,538
--------- ---------
Total current liabilities 91,969 106,061
Long-term debt, less current maturities 50,571 23,881
Deferred income 389 675
Other long-term liabilities 12,059 10,311
Deferred income taxes 10,544 10,075
Stockholders' equity:
Common stock(A) 50,477 50,360
Capital contributed in excess of par value (A) 241,115 240,146
Retained earnings 86,946 58,898
Cumulative translation adjustments (4,300) (4,223)
--------- ---------
Total stockholders' equity 374,238 345,181
--------- ---------
Total liabilities and stockholders' equity $ 539,770 $ 496,184
--------- ---------
--------- ---------
</TABLE>
(A) Reflects the two-for-one stock split declared on November 20, 1995.
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,
------------------------
1995 1994
---------- ---------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 28,048 $ 14,866
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 13,965 11,105
Deferred income (286) (238)
Deferred income taxes 5,030 -
Deferred compensation 1,548 649
Change in working capital (31,100) (13,914)
--------- --------
Net cash provided by operating activities 17,205 12,468
--------- --------
Cash flow from investing activities:
Additions to property, plant and equipment (40,313) (37,015)
Purchase of short-term investments (34,071) (42,581)
Proceeds from sale of short-term investments 18,995 -
Investment in other noncurrent assets (2,237) (1,220)
--------- ---------
Net cash used in investing activities (57,626) (80,816)
--------- ---------
Cash flow from financing activities:
Proceeds from issuance of (payments on)
short-term bank debt, net (2,476) (8,436)
Proceeds from issuance of long-term debt 32,495 3,410
Payments on long-term debt and obligations
under capital leases (3,505) (3,172)
Net proceeds from issuance of common stock 1,086 98,023
Other (473) (222)
--------- ---------
Net cash provided by financing activities 27,127 89,603
--------- ---------
Effect of exchange rate changes on cash and
cash equivalents (593) (34)
--------- ---------
Net decrease in cash and cash equivalents (13,887) 21,221
Cash and cash equivalents beginning of period 50,820 13,051
--------- ---------
Cash and cash equivalents end of period $ 36,933 $ 34,272
--------- ---------
--------- ---------
</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, 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 December 31, 1995 and the consolidated results
of operations and cash flows for the six month periods ended December 31,
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 six month period ended December
31, 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 931,400 and
512,000 were utilized in the computation of earnings per share for the
three month periods ended December 31, 1995 and 1994, respectively. All
share and per share amounts have been retroactively restated to reflect a
Common Stock split.
3. INVENTORIES
Inventories are stated at the lower of cost (principally first-in, first-
out) or market. Inventories at December 31, 1995 (unaudited) and June
30, 1995 were comprised of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1995 JUNE 30, 1995
----------------- -------------
<S> <C> <C>
Raw materials $ 23,183 $ 19,974
Work-in-process 36,447 32,967
Finished goods 17,317 20,214
---------- ----------
$ 76,947 $ 73,155
---------- ----------
---------- ----------
</TABLE>
5
<PAGE>
4. LONG-TERM DEBT AND OTHER LOANS
A summary of the Company's long-term debt and other loans at December 31,
1995 is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
Capitalized lease obligations payable in varying monthly
installments primarily at rates from 6.0% to 12.6% $11,434
Domestic bank loans collateralized by equipment, payable in
varying monthly installments at rates from 6.7% to 8.7%, due
in 1995 through 2000 19,657
Domestic unsecured bank loan payable in varying monthly
installments at a current variable rate of 6.6% to 6.9%, due
in 1998 through 2001 15,700
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 5,401
Foreign unsecured bank loans payable in varying monthly
installments at rates from 3.0% to 8.4%, due in 1998
through 2006 7,880
--------
60,072
Less current portion of long-term debt (9,501)
--------
$ 50,571
--------
--------
</TABLE>
5. 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 from the PTO a reexamination certificate, issued on
December 26, 1995, for 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 DECEMBER 31, 1995
COMPARED WITH THE THREE MONTH PERIOD ENDED DECEMBER 31, 1994
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)
--------------------- --------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of sales 61.8 65.2 62.1 65.5
----- ----- ----- -----
Gross profit 38.2 34.8 37.9 34.5
Selling and administrative expense 17.9 19.4 18.1 19.7
Research and development expense 4.5 4.8 4.5 4.6
----- ----- ----- -----
Operating profit 15.8 10.6 15.3 10.2
Interest income (expense), net (0.1) (0.5) 0.1 (0.7)
Other expense, net (0.2) (0.3) (0.2) (0.3)
----- ----- ----- -----
Income before income taxes 15.5 9.8 15.2 9.2
Provision for income taxes 4.7 1.7 4.7 1.6
----- ----- ----- -----
Net income 10.8% 8.1% 10.5% 7.6%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
Revenues for the three months ended December 31, 1995 increased 37.2% to $141.0
million from $102.8 million in the prior year period. Revenues for the six
month period ended December 31, 1995 increased 36.9% to $267.1 million from
$195.1 million in the previous year. The Company's revenue increase reflected
rising demand for power MOSFETs and related devices; revenues from these
products increased 42% from the year ago quarter. Revenues from the mature
product lines increased 12%. Changes in foreign exchange rates increased
revenues by approximately $0.8 million and $3.2 million in the three and six
month periods ended December 31, 1995. Revenues in the current quarter included
$3.5 million of net patent royalties, versus $2.3 million in the prior year
period.
Gross profit for the three and six month periods ended December 31, 1995 was
38.2% and 37.9% of revenues ($53.9 million and $101.2 million), respectively,
versus 34.8% and 34.5% of revenues ($35.8 million and $67.3 million) in the
comparable prior year periods. Gross profit margins reflected a richer mix of
new and higher-margin products, as well as greater manufacturing volume and
efficiencies.
7
<PAGE>
In the three and six month periods ended December 31, 1995, selling and
administrative expense was 17.9% and 18.1% of revenues ($25.2 million and $48.3
million), respectively, versus 19.4% and 19.7% of revenues ($19.9 million and
$38.4 million) in the comparable prior year periods. The decreased percentage
reflected improvements in systems, procedures, and operating discipline.
In the three and six month periods ended December 31, 1995, the Company's
research and development expenditures increased to $6.3 million (4.5% of
revenues) and $12.0 million (4.5% of revenues), versus $4.9 million (4.8% of
revenues) and $9.1 million (4.6% of revenues) in the comparable prior year
periods. The Company's research and development program continues to focus 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.
Interest (net) in the three and six month periods ended December 31, 1995
decreased $0.4 million and $1.7 million from the comparable prior year periods
because of interest income earned on higher average short-term investment
balances and the capitalization of certain interest costs.
Changes in foreign currency exchange rates positively impacted net income by
$0.1 million and negatively impacted net income by $0.1 million in the three and
six month periods ending December 31, 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 December 31, 1995, the Company maintained cash and cash equivalent balances
of $36.9 million and short term investments of $18.1 million. In addition, the
Company had established $70.9 million of domestic and foreign revolving lines of
credit, against which $13.9 million had been borrowed. Based on covenant and
collateral limitations, the Company had $50.8 million available for borrowing at
December 31, 1995. Additionally, the Company had at its disposal $9.3 million
of unused bank term-loan facilities and $22.5 million of unused capital
equipment credit lines. At December 31, 1995, the Company had made purchase
commitments for capital equipment of approximately $37.6 million.
The Company intends to spend approximately $40 million to purchase additional
equipment to expand wafer fabrication capacity at its HEXFET America facility.
This planned expansion is expected to be in production by December 1996.
The Company believes that it has adequate liquidity, through cash and cash
equivalents on hand, short term investments, anticipated cash flow from
operations and funds from existing credit facilities to meet its cash
requirements for the foreseeable future. However, the Company may also
8
<PAGE>
consider the use of funds from other external sources including, but not limited
to, public or private offerings of debt or equity.
On November 20, the Board of Directors declared a two-for-one split of the
Company's common stock, which increased the number of shares of common stock
outstanding from approximately 25.2 million to approximately 50.4 million.
The shares were distributed on December 22, 1995 to stockholders of record on
December 1, 1995.
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 12, 1996 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 20, 1995, with the following
results:
<TABLE>
<CAPTION>
Authority
Description of Matter For Withheld
--- ---------
<S> <C> <C> <C>
1. Election of Directors
George Krsek 23,159,723 67,504
Derek B. Lidow 23,051,707 175,520
Jack O. Vance 23,163,198 64,029
For Against Abstentions
--- ------- -----------
2. Amendment of the Certificate
of Incorporation to increase
the authorized number of shares
of the company's common stock
from 30,000,000 to 150,000,000 13,711,958 9,442,859 72,410
3. Ratification of Coopers & Lybrand
as Independent Auditors 23,144,966 52,449 29,812
Broker Non-Vote on Proposal 2 1,030,204
</TABLE>
ITEM 5. OTHER INFORMATION
On November 20, the Board of Directors declared a two-for-one split of the
Company's common stock, which increased the number of shares of common stock
outstanding from approximately 25.2 million to approximately 50.4 million.
The shares were distributed on December 22, 1995 to stockholders of record on
December 1, 1995.
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 36,933
<SECURITIES> 18,076
<RECEIVABLES> 105,363
<ALLOWANCES> 865
<INVENTORY> 76,947
<CURRENT-ASSETS> 246,595
<PP&E> 415,645
<DEPRECIATION> 144,056
<TOTAL-ASSETS> 539,770
<CURRENT-LIABILITIES> 91,969
<BONDS> 0
0
0
<COMMON> 50,477 <F1>
<OTHER-SE> 323,761 <F1>
<TOTAL-LIABILITY-AND-EQUITY> 539,770
<SALES> 267,123
<TOTAL-REVENUES> 267,123
<CGS> 165,923
<TOTAL-COSTS> 165,923
<OTHER-EXPENSES> 60,358
<LOSS-PROVISION> 26
<INTEREST-EXPENSE> 281
<INCOME-PRETAX> 40,473
<INCOME-TAX> 12,425
<INCOME-CONTINUING> 28,048
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,048
<EPS-PRIMARY> 0.55 <F1>
<EPS-DILUTED> 0.55 <F1>
<FN>
<F1>Reflects two-for-one stock split declared on November 20, 1995.
</FN>
</TABLE>
