<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, 1996
-------------------------------------------------
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) 726-8000
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 50,935,372 SHARES OF THE REGISTRANT'S COMMON STOCK, PAR VALUE
$1.00 PER SHARE, OUTSTANDING ON NOVEMBER 11, 1996.
<PAGE>
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, 1996 and 1995 2
Consolidated Balance Sheet as of
September 30, 1996 (unaudited) and
June 30, 1996 3
Unaudited Consolidated Statement of
Cash Flows for the Three Month
Periods Ended September 30, 1996
and 1995 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)
THREE MONTHS ENDED
SEPTEMBER 30,
---------------------
1996 1995
--------- --------
Revenues $115,193 $126,097
Cost of sales 76,381 78,786
--------- --------
Gross profit 38,812 47,311
Selling and administrative expense 26,189 23,159
Research and development expense 8,024 5,687
--------- --------
Operating profit 4,599 18,465
Other income (expense):
Interest, net (344) 450
Other, net 176 (402)
--------- --------
Income before income taxes 4,431 18,513
Provision for income taxes 1,374 5,684
--------- --------
Net income $ 3,057 $12,829
--------- --------
--------- --------
Net income per share (A) $ 0.06 $ 0.25
--------- --------
--------- --------
Average common and common
equivalent shares outstanding (A) 51,425 51,213
--------- --------
--------- --------
(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)
SEPTEMBER 30,
1996 JUNE 30,
(UNAUDITED) 1996
------------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 32,463 $ 35,760
Short-term investments 20,000 18,000
Trade accounts receivable, net 125,648 126,341
Inventories 113,504 82,852
Deferred income taxes 10,409 9,801
Prepaid expenses 3,759 3,772
--------- --------
Total current assets 305,783 276,526
Property, plant and equipment, net 346,258 327,978
Other assets 23,986 24,575
--------- --------
Total assets $676,027 $629,079
--------- --------
--------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank loans $ 19,589 $ 13,302
Long-term debt, due within one year 10,992 10,268
Accounts payable 47,074 41,645
Accrued salaries, wages and commissions 12,151 13,953
Other accrued expenses 20,093 19,286
--------- --------
Total current liabilities 109,899 98,454
Long-term debt, less current maturities 93,992 47,994
Other long-term liabilities 26,208 42,262
Deferred income taxes 19,931 19,156
Stockholders' equity:
Common stock 50,934 50,821
Capital contributed in excess of
par value 250,692 249,388
Retained earnings 128,434 125,377
Cumulative translation adjustments (4,063) (4,373)
--------- --------
Total stockholders' equity 425,997 421,213
--------- --------
Total liabilities and
stockholders' equity $676,027 $629,079
--------- --------
--------- --------
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)
THREE MONTHS ENDED
SEPTEMBER 30,
----------------------
1996 1995
-------- --------
Cash flow from operating activities:
Net income $ 3,057 $ 12,829
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 9,966 6,527
Deferred income (238) (143)
Deferred income taxes - 2,281
Deferred compensation 1,075 686
Change in working capital (24,837) (11,311)
-------- --------
Net cash provided by (used in) operating activities (10,977) 10,869
-------- --------
Cash flow from investing activities:
Additions to property, plant and equipment (27,200) (23,745)
Purchase of short-term investments (20,000) (20,441)
Proceeds from sale of short-term investments 18,000 5,500
Investment in other noncurrent assets 140 (1,117)
-------- --------
Net cash used in investing activities (29,060) (39,803)
-------- --------
Cash flow from financing activities:
Proceeds from issuance of (payments on)
short-term bank debt, net 6,223 (4,963)
Proceeds from issuance of long-term debt 49,115 19,554
Payments on long-term debt and obligations
under capital leases (2,550) (1,639)
Net proceeds from issuance of common stock 1,417 952
Decrease in other long-term liabilities
to be financed with long-term debt (16,999) (1,631)
Other (444) 1,916
-------- --------
Net cash provided by financing activities 36,762 14,189
-------- --------
Effect of exchange rate changes on cash and
cash equivalents (22) (475)
-------- --------
Net decrease in cash and cash equivalents (3,297) (15,220)
Cash and cash equivalents beginning of period 35,760 50,820
-------- --------
Cash and cash equivalents end of period $ 32,463 $ 35,600
-------- --------
-------- --------
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, 1996
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, 1996 and the consolidated results
of operations and cash flows for the three month periods ended September 30,
1996 and 1995. 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, 1996 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, 1996.
Certain reclassifications have been made to previously reported amounts to
conform with the 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 514,000 and
778,600 were utilized in the computation of earnings per share for the three
month periods ended September 30, 1996 and 1995, respectively.
3. INVENTORIES
Inventories are stated at the lower of cost (principally first-in, first-
out) or market. Inventories at September 30, 1996 (unaudited) and June 30,
1996 were comprised of the following (in thousands):
SEPTEMBER 30, 1996 JUNE 30, 1996
------------------ -------------
Raw materials $ 27,036 $20,203
Work-in-process 55,315 40,895
Finished goods 31,153 21,754
------------------ -------------
$113,504 $82,852
5
<PAGE>
4. LONG-TERM DEBT AND OTHER LOANS
A summary of the Company's long-term debt and other loans at September 30,
1996 is as follows (in thousands):
SEPTEMBER 30,
1996
-------------
Capitalized lease obligations payable in varying
monthly installments primarily at rates from
6.0% to 12.6% $ 8,259
Domestic bank loans collateralized by equipment,
payable in varying monthly installments at
rates from 6.5% to 8.7%, due in 1998 through 2001 20,366
Domestic unsecured bank loans payable in varying monthly
installments at rates from 6.0% to 6.4%, due in 2001 64,700
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 4,400
Foreign unsecured bank loans payable in varying monthly
installments at rates from 2.6% to 8.4%, due in 1998
through 2006 7,259
------------
104,984
Less current portion of long-term debt (10,992)
------------
$ 93,992
------------
------------
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, 1996
COMPARED WITH THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 1995
The following table sets forth certain items as a percentage of revenues.
THREE MONTHS ENDED
SEPTEMBER 30,
(UNAUDITED)
-----------------
1996 1995
------ ------
Revenues 100.0% 100.0%
Cost of sales 66.3 62.5
------ ------
Gross profit 33.7 37.5
Selling and administrative expense 22.7 18.4
Research and development expense 7.0 4.5
------ ------
Operating profit 4.0 14.6
Interest income (expense), net (0.3) 0.4
Other income (expense), net 0.2 (0.3)
------ ------
Income before income taxes 3.9 14.7
Provision for income taxes 1.2 4.5
------ ------
Net income 2.7% 10.2%
------ ------
------ ------
Revenues for the three months ended September 30, 1996 decreased 8.6% to
$115.2 million from $126.1 million in the prior year period. The Company's
revenue decrease reflected weak industry conditions and aggressive efforts
by distributors to reduce their inventory levels. Distributors accounted for
approximately 30% of fiscal 1996 annual revenues. Changes in foreign exchange
rates negatively impacted revenues by approximately $2.4 million in the three
months ended September 30, 1996. Revenues in the current quarter included
$4.9 million of net patent royalties, versus $3.3 million in the prior year
period.
September-quarter gross profit fell to $38.8 million (33.7% of revenues)
versus $47.3 million (37.5% of revenues) in the comparable year-ago quarter.
Gross profit margins reflected lower dollar volumes, the effect of meeting
competitive price moves in the current quarter, and the impact of price
concessions on International Rectifier products held in inventory by
distributors.
September-quarter selling and administrative expense was $26.2 million (22.7%
of revenues) versus $23.2 million (18.4% of revenues) in the comparable
year-ago quarter. The Company's current-year spending ratio reflected
lower-than-expected revenues. September-quarter selling and administrative
expense was slightly lower than the immediately preceding quarter ended June
30, 1996.
7
<PAGE>
In the quarter ended September, the Company's research and development
expenditures increased to $8.0 million (7.0% of revenues) compared to $5.7
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 Control ICs
and power products that work in combination with HEXFETs and IGBTs to improve
system performance.
Net interest expense was $0.3 million compared to net interest income of
$0.5 million in the prior year period, reflecting increased interest expense
incurred on higher average debt balances.
Changes in foreign currency exchange rates had no material effect on net
income in the three month period ending September 30, 1996, and negatively
impacted net income by $0.2 million in the prior year period.
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 46% of annual revenues in the first half and 54%
in the second half of its fiscal year. Historical averages are not necessarily
indicative of future results.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company maintained cash and cash equivalent
balances of $32.5 million and short term investments of $20.0 million. In
addition, the Company had established $74.3 million of domestic and foreign
revolving lines of credit, against which $19.6 million had been borrowed.
Based on covenant and collateral limitations, the Company had $48.0 million
available for borrowing at September 30, 1996. Additionally, the Company had
at its disposal $20.0 million of unused bank term-loan facilities and
$18.4 million of unused capital equipment credit lines. At September
30, 1996, the Company had made purchase commitments for capital equipment of
approximately $19.5 million.
The Company intends to fund operations and planned capital expenditures
through cash and cash equivalents on hand, short-term investments,
anticipated cash flow from operations, and funds from existing credit
facilities. However, the Company may also consider the use of funds from
other external sources including, but not limited to, public or private
offerings of debt or equity.
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 12, 1996 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-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 32,463
<SECURITIES> 20,000
<RECEIVABLES> 126,629
<ALLOWANCES> 981
<INVENTORY> 113,504
<CURRENT-ASSETS> 305,783
<PP&E> 509,716
<DEPRECIATION> 163,458
<TOTAL-ASSETS> 676,027
<CURRENT-LIABILITIES> 109,899
<BONDS> 0
0
0
<COMMON> 50,934
<OTHER-SE> 375,063
<TOTAL-LIABILITY-AND-EQUITY> 676,027
<SALES> 115,193
<TOTAL-REVENUES> 115,193
<CGS> 76,381
<TOTAL-COSTS> 76,381
<OTHER-EXPENSES> 34,213
<LOSS-PROVISION> 60
<INTEREST-EXPENSE> 344
<INCOME-PRETAX> 4,431
<INCOME-TAX> 1,374
<INCOME-CONTINUING> 3,057
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,057
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
</TABLE>
