International Rectifier Reports Third Quarter Results
International Rectifier Reports Third Quarter Results
EL SEGUNDO, Calif.--(BUSINESS WIRE)-- International Rectifier Corporation (NYS: IRF) today announced financial results for the third quarter (ended March 24, 2013) of its fiscal year 2013. Revenue was $224.3 million, which was flat compared to $223.8 million in the prior quarter and a 9.6% decrease from $248.1 million in the prior year quarter. GAAP net loss for the third quarter was $21.2 million, or $0.31 per fully diluted share compared to GAAP net loss of $32.7 million, or $0.47 per fully diluted share, in the prior quarter and GAAP net loss of $2.5 million, or $0.04 per fully diluted share in the prior year quarter.
"Throughout the March quarter, we saw booking trends improve across all our end markets," stated President and Chief Executive Officer Oleg Khaykin. "In addition, we decreased inventory, closed our El Segundo manufacturing facility, reduced our capital expenditures and increased our cash balance by $20 million. As a result of improving business demand, resizing our manufacturing footprint and reducing fixed costs, our gross margin recovery is currently tracking ahead of prior expectations."
GAAP gross margin for the third quarter was 24.3% compared to 21.9% in the prior quarter and 29.8% in the prior year quarter. GAAP operating loss for the third quarter was $20 million compared to an operating loss of $34.7 million in the prior quarter and an operating loss of $7.1 million in the prior year quarter.
Cash, cash equivalents and marketable investments increased $20 million and totaled $403.4 million at the end of the third quarter, including restricted cash of $1.4 million.
Cash provided by operating activities for the quarter was $33.2 million and free cash flow was $20.3 million.
Non-GAAP Results
The non-GAAP results the Company provides exclude the effects of accelerated depreciation, asset impairment and inventory write-offs associated with our El Segundo fab closure, restructuring costs, severance costs, impairment of goodwill, amortization of intangibles, the associated net tax effects of these items, and discrete tax provisions and benefits. The Company excludes any tax provisions (benefits) that are not directly related to ongoing operations and which are either isolated or cannot be expected to occur again with any regularity or predictability.
A reconciliation of these non-GAAP measures to the Company's reported net income (loss), gross margin and operating income (loss) in accordance with U.S. GAAP are set forth in the attached schedules below and on our web-site at www.investor.irf.com.
On this basis, non-GAAP net loss for the third quarter was $19.8 million, or $0.29 per fully diluted share compared to non-GAAP net loss of $30.3 million, or $0.44 per fully diluted share in the prior quarter and non-GAAP net loss of $14.9 million, or $0.22 per fully diluted share in the prior year quarter.
GAAP gross margin for the third quarter (there is no non-GAAP gross margin for the third quarter) was 24.3% compared to non-GAAP gross margin of 22.2% in the prior quarter and GAAP gross margin of 29.8% in the prior year quarter (there is no non-GAAP gross margin for the third quarter of prior year quarter). Non-GAAP operating loss for the third quarter was $17.5 million compared to non-GAAP operating loss of $27.6 million in the prior quarter and non-GAAP operating loss of $10.3 million in the prior year quarter.
June Quarter Outlook
Mr. Khaykin noted: "Looking ahead to our 14-week June quarter, we are seeing solid revenue growth as the demand across our end markets is showing improvement. With improving demand and lower inventory we are starting to see positive gross margin leverage from rising utilization, improving product mix and manufacturing efficiencies. As a result, we currently expect revenue for the June quarter to range between $255 million to $265 million and gross margin to range between 28% and 30%."
The following table outlines International Rectifier's current forward looking June quarter outlook (on a GAAP basis):
Revenue (14-week quarter) | $255 to $265 million | |||
Gross margin | 28% to 30% | |||
Research and development expense (14-week quarter) | $32 million | |||
Sales, general and administrative expense (14-week quarter) | $47 million | |||
Asset impairment, restructuring and other charges | $1 to $2 million | |||
Amortization of acquisition related intangibles | $1.7 million | |||
Other expense, net | $1 million | |||
Tax expense | $4 million | |||
Segment Table Information/Customer Segments
The business segment tables included with this release for the Company's fiscal quarters ended March 24, 2013, December 23, 2012, and March 25, 2012, respectively, reconcile revenue and gross margin for the Company's segments to the consolidated total amounts of such measures for the Company.
Quarterly Report on Form 10-Q
The Company expects to file its Quarterly Report on Form 10-Q for the third quarter of the 2013 fiscal year with the Securities and Exchange Commission on Tuesday, April 30, 2013. This financial report will be available for viewing and download at http://investor.irf.com.
NOTE: A conference call will begin today at 2:00 p.m. Pacific time. CEO Oleg Khaykin and CFO Ilan Daskal will discuss the Company's March quarter results and June quarter outlook. All participants, both in the U.S. and international, may join the call by dialing 706-679-3195 by 1:55 p.m. Pacific time. In order to join this conference call, participants will be required to provide the Conference Passcode: "International Rectifier". Participants may also listen over the Internet at http://investor.irf.com. To listen to the live call, please go to the web site at least 15 minutes early to register, download, and install any necessary audio software.
A taped replay of this call will be available from approximately 6:00 p.m. Pacific time on Monday, April 29 through Monday, May 6, 2013. To listen to the replay by phone, call 855-859-2056 or 404-537-3406 for international callers and enter reservation number 40285252. To listen to the replay over the Internet, please go to http://investor.irf.com. The live call and replay will also be available on www.streetevents.com.
About International Rectifier
International Rectifier Corporation (NYS: IRF) is a world leader in power management technology. IR's analog, digital, and mixed signal ICs, and other advanced power management products, enable high performance computing and save energy in a wide variety of business and consumer applications. Leading manufacturers of computers, energy efficient appliances, lighting, automobiles, satellites, aircraft, and defense systems rely on IR's power management solutions to power their next generation products. For more information, go to www.irf.com.
Forward-Looking Statements:
This document contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to expectations concerning matters that (a) are not historical facts, (b) predict or forecast future events or results, or (c) embody assumptions that may prove to have been inaccurate. These forward-looking statements involve risks, uncertainties and assumptions. When we use words such as "believe," "expect," "anticipate," "will", "outlook" or similar expressions, we are making forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give readers any assurance that such expectations will prove correct. The actual results may differ materially from those anticipated in the forward-looking statements as a result of numerous factors, many of which are beyond our control. Important factors that could cause actual results to differ materially from our expectations include, but are not limited to, lower than expected demand or greater than expected order cancellations arising from a decline or volatility in general market and economic conditions and the failure of the market to improve as anticipated; reduced margins from lower than expected factory utilization, higher than expected costs and customer shifts to lower margin products; changes in the timing or amount of costs associated with, or disruptions caused by, our restructuring initiatives; our ability to implement our restructuring initiatives as planned and achieve the anticipated benefits, which may be affected by, among other things: customer requirements, changes in business conditions and/or operational needs, retention of key employees, governmental regulations, delays and increased costs; unexpected costs or delays in implementing our plans to secure and qualify external manufacturing capacity for our products, including the purchase and installation of additional manufacturing equipment; the effects of longer lead times for certain products on meeting demand and any inability by us to satisfy or to timely satisfy customer demand; volatility or deterioration of capital markets; the adverse impact of regulatory, investigative and legal actions; increased competition in the highly competitive semiconductor business that could adversely affect the prices of our products or our ability to secure additional business; the effects of manufacturing, operational and vendor disruptions; unexpected delays and disruptions in our supply, manufacturing and delivery efforts due to, among other things, supply constraints, equipment malfunction or natural disasters; delays in launching new technology products; our ability to maintain current intellectual property licenses and obtain new intellectual property licenses; costs arising from pending and threatened litigation or claims; the effects of natural disasters; and other uncertainties disclosed in the Company's reports filed from time to time with the Securities and Exchange Commission, including its most recent reports on Forms 10-K and 10-Q.
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES | ||||||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||
(In thousands, except per share data) | ||||||||||||
Three Months Ended | ||||||||||||
March 24, 2013 | December 23, 2012 | March 25, 2012 | ||||||||||
Revenues | $ | 224,268 | $ | 223,822 | $ | 248,094 | ||||||
Cost of sales | 169,860 | 174,733 | 174,132 | |||||||||
Gross profit | 54,408 | 49,089 | 73,962 | |||||||||
Selling, general and administrative expense | 43,020 | 45,083 | 49,578 | |||||||||
Research and development expense | 28,876 | 32,125 | 34,798 | |||||||||
Amortization of acquisition-related intangible assets | 1,663 | 1,680 | 2,097 | |||||||||
Asset impairment, restructuring and other charges | 880 | 4,941 | — | |||||||||
Gain on disposition of property | — | — | (5,410 | ) | ||||||||
Operating loss | (20,031 | ) | (34,740 | ) | (7,101 | ) | ||||||
Other expense (income), net | (450 | ) | 411 | (46 | ) | |||||||
Interest expense (income), net | 64 | (8 | ) | (47 | ) | |||||||
Loss before income taxes | (19,645 | ) | (35,143 | ) | (7,008 | ) | ||||||
Provision for (benefit from) income taxes | 1,600 | (2,421 | ) | (4,518 | ) | |||||||
Net loss | $ | (21,245 | ) | $ | (32,722 | ) | $ | (2,490 | ) | |||
Net loss per common share—basic (1) | $ | (0.31 | ) | $ | (0.47 | ) | $ | (0.04 | ) | |||
Net loss per common share—diluted (1) | $ | (0.31 | ) | $ | (0.47 | ) | $ | (0.04 | ) | |||
Average common shares outstanding—basic | 69,273 | 69,144 | 69,104 | |||||||||
Average common shares and potentially dilutive securities outstanding—diluted | 69,273 | 69,144 | 69,104 | |||||||||
(1) Net income (loss) per common share is computed using the two-class method as required by accounting rules.We do not pay dividends; however, net income must be allocated to unvested restricted stock units ("RSUs") on which we could pay dividend equivalents.The amount of net income allocated to these RSUs is excluded from income available to common shareholders in the calculation of earnings per share.As we were in a net loss for the three months ended March 24, 2013, December 23, 2012, and March 25, 2012, we did not have any income to allocate to unvested RSUs on which we could pay dividend equivalents.
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES | ||||||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||||||
(In thousands) | ||||||||||||
March 24, 2013 | December 23, 2012 | March 25, 2012 | ||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 386,994 | $ | 366,656 | $ | 217,500 | ||||||
Restricted cash | 613 | 624 | 437 | |||||||||
Short-term investments | 15,058 | 10,104 | 126,134 | |||||||||
Trade accounts receivable, net of allowances | 134,987 | 134,029 | 173,819 | |||||||||
Inventories | 231,703 | 260,717 | 307,269 | |||||||||
Current deferred tax assets | 5,040 | 5,181 | 1,974 | |||||||||
Prepaid expenses and other receivables | 35,529 | 36,095 | 37,388 | |||||||||
Total current assets | 809,924 | 813,406 | 864,521 | |||||||||
Restricted cash | 738 | 940 | 942 | |||||||||
Long-term investments | — | 5,003 | 21,144 | |||||||||
Property, plant and equipment, net | 432,635 | 456,139 | 469,985 | |||||||||
Goodwill | 52,149 | 52,149 | 121,570 | |||||||||
Acquisition-related intangible assets, net | 23,553 | 25,216 | 30,294 | |||||||||
Long-term deferred tax assets | 34,775 | 37,456 | 26,501 | |||||||||
Other assets | 58,160 | 60,004 | 65,870 | |||||||||
Total assets | $ | 1,411,934 | $ | 1,450,313 | $ | 1,600,827 | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | $ | 64,565 | $ | 70,649 | $ | 79,053 | ||||||
Accrued income taxes | 470 | 496 | 2,840 | |||||||||
Accrued salaries, wages and commissions | 34,721 | 40,740 | 33,600 | |||||||||
Current deferred tax liabilities | — | — | 2 | |||||||||
Other accrued expenses | 77,211 | 73,822 | 90,004 | |||||||||
Total current liabilities | 176,967 | 185,707 | 205,499 | |||||||||
Long-term deferred tax liabilities | 4,479 | 4,928 | 3,857 | |||||||||
Other long-term liabilities | 25,882 | 30,186 | 36,720 | |||||||||
Total liabilities | 207,328 | 220,821 | 246,076 | |||||||||
Commitments and contingencies | ||||||||||||
Stockholders' equity: | ||||||||||||
Common shares | 75,609 | 75,353 | 74,887 | |||||||||
Capital contributed in excess of par value | 1,056,515 | 1,048,586 | 1,034,774 | |||||||||
Treasury stock, at cost | (113,175 | ) | (113,175 | ) | (104,821 | ) | ||||||
Retained earnings | 207,943 | 229,188 | 358,871 | |||||||||
Accumulated other comprehensive loss | (22,286 | ) | (10,460 | ) | (8,960 | ) | ||||||
Total stockholders' equity | 1,204,606 | 1,229,492 | 1,354,751 | |||||||||
Total liabilities and stockholders' equity | $ | 1,411,934 | $ | 1,450,313 | $ | 1,600,827 | ||||||
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES | ||||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||
(In thousands) | ||||||||||||
Three Months Ended | ||||||||||||
March 24, 2013 | December 23, 2012 | March 25, 2012 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net loss | $ | (21,245 | ) | $ | (32,722 | ) | $ | (2,490 | ) | |||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 22,787 | 23,088 | 21,893 | |||||||||
Amortization of acquisition-related intangible assets | 1,663 | 1,680 | 2,097 | |||||||||
Loss on disposal of fixed assets | 234 | 4,183 | 551 | |||||||||
Stock compensation expense | 5,297 | 5,378 | 4,140 | |||||||||
Gain on disposition of property | — | — | (5,410 | ) | ||||||||
(Gain) loss on sale of investments | — | (8 | ) | 17 | ||||||||
Other-than-temporary impairment of investments | 350 | — | 4 | |||||||||
Recovery of bad debts | (64 | ) | — | (241 | ) | |||||||
Provision for inventory write-downs | 3,884 | 6,060 | 4,185 | |||||||||
Impairment of long-lived assets | 415 | 2,376 | — | |||||||||
(Gain) loss on derivatives | (1,952 | ) | (93 | ) | 1,457 | |||||||
Deferred income taxes | 31 | 227 | (12,393 | |||||||||
