Back to GetFilings.com

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ý Annual report pursuant to section 13 or 15
of the Securities Exchange Act of 1934 (fee required)

For the fiscal year ended June 30, 2002

or

o Transition report pursuant to section 13 or 15
of the Securities Exchange Act of 1934 (no fee required)

For the transition period from                          to                         
Commission file number 1-7935

INTERNATIONAL RECTIFIER CORPORATION
(Exact name of registrant as specified in its charter)

233 Kansas Street
El Segundo, CA 90245
(Address of principal executive offices, zip code)
Registrant's telephone number, including area code: (310) 726-8000

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

        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 report(s)), and (2) has been subject to such filing requirements for the past 90 days. Yes    X    No

        The aggregate market value of the registrant's voting Common Stock held by non-affiliates of the registrant was approximately $977,273,000 (computed using the closing price of a share of Common Stock on September 27, 2002 reported by New York Stock Exchange).

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    X

        There were 63,847,750 shares of the registrant's Common Stock, par value $1.00 per share, outstanding on September 27, 2002.

        Portions of the registrant's definitive Proxy Statement for the Annual Meeting of Stockholders scheduled to be held on November 25, 2002, which Proxy Statement will be filed no later than 120 days after the close of the registrant's fiscal year ended June 30, 2002, are incorporated by reference in Part III of this Annual Report on Form 10-K.

TABLE OF CONTENTS

PART I

Item 1. Business

Introduction

        We are a leading designer, manufacturer and marketer of power management products and the leading worldwide supplier of a type of power semiconductor called a MOSFET (a metal oxide semiconductor field effect transistor). Power semiconductors process electricity into a form more usable by electrical products. The technology advancements of power semiconductors increase system efficiency, allow more compact end products, improve features and functionality and extend battery life. Our products are used in a range of end-markets, including consumer electronics, information technology, automotive, aerospace and defense, communications and industrial.

        International Rectifier Corporation ("IR®") uses proprietary technology, comprehensive experience in power management, and low-cost manufacturing platforms to offer what we believe are one of the industry's most advanced and competitive lines of power management products. Our products are divided among three broad product categories:

•

Analog Integrated Circuits and Advanced Circuit Devices.  Our Analog Integrated Circuits, or Analog ICs, are semiconductors that integrate logic and power management functions on the same chip to optimize system performance. Advanced Circuit Devices are chipsets, multichip modules and advanced-performance discrete devices that address power management requirements in demanding applications. Our Analog ICs and Advanced Circuit Devices provide application-specific power management solutions for computers, servers and routers, consumer electronics, automotive systems, home appliances and other motor-control appliances, aircraft and satellites, defense electronic systems, video game consoles, and wireless and wireline communication devices.



•

Power Systems.  Power Systems combine power semiconductors with other power management components in modules that improve power efficiency, provide a cost-effective alternative to custom analog designs and enable customers to introduce new products more quickly. We supply Power Systems for automotive electronics, including electric fan control, electric power steering and integrated starter/alternator motors, other motor control applications, including home appliances and industrial refrigeration and air conditioning, and commercial and military aircraft.



•

Power Components.  Power Components are discrete devices used in general power management applications. These include some power MOSFETs and insulated gate bipolar transistors (IGBTs), rectifiers, diodes and thyristors. Power MOSFETs and IGBTs rapidly and efficiently switch electricity on and off in order to supply power in a form that can be formatted to the specific requirements of a circuit. Our power components are used in virtually all our end markets.

Industry Overview

        Power semiconductors convert power from an electrical outlet, a battery, or an alternator running off an internal combustion engine into more efficient and useful power for a wide range of electrical and electronic systems and equipment. The more sophisticated the end product, the greater its need for specially-formatted, finely-regulated power. The need for power semiconductor technology rises with the increasing complexity of electronic products and the proliferation of electronic features in communications, consumer electronics, information technology, automotive and industrial products. Within the power semiconductor market, MOSFETs and IGBTs are important components in power management. Based on statistics published by the Semiconductor Industry Association, industry-wide revenues from sales of power MOSFETs and IGBTs were $4.3 billion in calendar 2001 and are forecasted to total approximately $3.8 billion in calendar 2002.

1

        Demand for power semiconductors is driven largely by the following:

•

Increased Speed and Functionality in Information Technology ("IT").  Product development roadmaps for the IT industry call for continued increases in speed and functionality and improvements in computers, servers, consumer electronics, and a variety of leading-edge electronic devices and equipment. The need for greater processing power drives up current levels and operating frequencies, and each new generation of IT relies more heavily on — and places a higher value on — efficient, precise power management technology.



•

Applications in Automotive Electronics and Motor Controls.  In the automotive market, the proliferation of power features and high-end electronics for entertainment, communications, navigation, and diagnostics increases the load on the engine, reduces fuel efficiency, and strains the capacity of 12V electrical systems. The need to meet conflicting demands for more features and less gas consumption is prompting a fundamental re-design of automotive electrical systems. That re-design is shaped in large part by advancements in power management technology.



•

Demand for Energy-Efficient Motor Controls.  Worldwide demand for household appliances and industrial motors continues to rise. Whether the end product will be sold to customers in a developing nation with a modest energy budget or an industrialized nation with stringent environmental standards, energy-efficient motor control is essential. Advanced power management technology provides products to fulfill this need.



•

Defense/Aerospace Demand for Advanced Power Management Technology.  In the defense/aerospace industry, power management technology is critical to meeting the rigorous space, weight, and reliability requirements of highly- demanding applications. A renewed commitment to security drives strong demand in this sector for advanced power management technology. In addition, aircraft designs are converting from hydraulic control systems to electronic control systems. Aerospace systems designers are constantly striving for higher efficiency power conversion solutions.

Strategy

        We pioneered a core power management technology. We build on our industry leadership in components to develop certain key products based on our proprietary technology. Proprietary products form an increasing proportion of our business, and we believe improve our growth and profit potentials. We focus on market sectors where our advancements can provide enabling technology in targeted applications for better, more competitive products: information technology, automotive, aerospace and satellites, home appliances and motor-driven equipment.

        We implement our strategy through the following initiatives:

Focus on Adding Value in High Growth Markets.    We leverage our leadership position in power semiconductors to offer proprietary products in targeted applications. We focus all of our efforts in power management products and believe that this focus has helped IR to develop the most advanced products for these markets. For example, our Analog ICs are used in power management for Intel's and Advanced Micro Devices' most advanced microprocessors, portable electronics, and next-generation Sony PlayStations. In Power Systems, we are working with major automotive suppliers in designing next generation systems to replace traditional hydraulic and belt-driven applications with more cost-effective electronic systems that improve performance and fuel efficiency. We are also targeting a wide range of applications that have not historically utilized Power Systems, including refrigerators, washing machines, air conditioners and other appliances from such market leaders as Maytag, GE, and Miele.

Leverage Our Leading Edge Technology.    Our leading edge technology enables us to set performance and architecture standards for power electronics in targeted applications. Our research and development program focuses on Analog ICs, Advanced Circuit Devices and Power Systems and the

2

advancement and diversification of our HEXFET® power MOSFET and IGBT product lines. Over the three years ended June 30, 2002, we spent approximately $186.6 million on research and development. Our research and development facility provides submicron process capability and capacity for rapid product development. Our long-term investment in research and development has resulted in a broad worldwide patent portfolio, consisting of 436 issued patents and 355 patents pending. In fiscal 2002, 2001, and 2000, licenses under our patents generated approximately $47.6 million, $51.1 million, and $36.4 million, respectively, in royalties. We believe our technology leadership and product innovation will continue to be a source of growth in the fastest growing segments of the power semiconductor industry.

Capitalize on Relationships with Market Leaders.    Industry leaders look to IR for products and programs that address their most challenging power management needs. These relationships put us at the forefront of developing products for new trends in the marketplace. We offer high quality customer service with comprehensive sales and engineering support, including Internet service applications, electronic order entry and just-in-time delivery. Our market leading customers include American Power Conversion, Artesyn Technologies, Boeing, Bosch, Chrysler, Delphi, Emerson, Fujitsu, Grundfos, IBM, Matsushita, Nippon Denso, Philips, Raytheon, Sanken, Sanyo, Siemens, Sony and TRW.

Extend Leadership in Power Components.    We pioneered a fundamental technology for power MOSFETs and estimate that the majority of the world's power MOSFETs are produced by IR or use our patented technology. Over the last two years, we have invested aggressively to advance trench, planar and other process technologies. These investments have produced what we believe are the most efficient power MOSFET components in the marketplace. Our leadership position in Power Components provides us with a platform for continued expansion in value-added growth markets.

Capitalize on Low Cost Manufacturing.    We fabricate most of our chips in facilities designed to address the specific requirements of power semiconductors. We believe that our wafer fabrication costs are among the lowest in the industry. We have wafer fabrication and/or assembly production facilities in California, Massachusetts, the United Kingdom, Germany, Italy, Mexico, India and China. We also use third-party foundries and assemblers to supplement our internal manufacturing.

Products and Applications

        Our products process electrical power into a form that is more readily usable by electric products. We believe that our full complement of power management technology represents a competitive advantage, enabling us to provide customers with solutions that shorten their overall product development cycle time. Our products are broadly divided among three product categories: Analog ICs and Advanced Circuit Devices, Power Systems and Power Components.

Analog ICs and Advanced Circuit Devices

        An Analog IC is a semiconductor that integrates logic and power management functions on the same chip. These devices optimize the performance of circuits that often include power MOSFETs and IGBTs and allow our customers to simplify circuit design and assembly, improve reliability, and reduce overall system size and cost. The ability of an Analog IC to sense and respond to circuit conditions makes its performance superior to discrete components. Our ICs often use our proprietary power MOSFET technology. We have obtained substantial patent protection for our ICs and have additional patent applications pending.

        Advanced Circuit Devices are chipsets, multichip modules and advanced performance discrete devices that address power management requirements in demanding applications.

        Increased complexity in computers, routers, servers, other devices require increased levels of power and more effective heat dissipation, making power management one of the most critical tasks. IT

3

applications are trending to lower voltages and higher current levels, which require greater efficiency and more complex power management to meet speed and performance demands. Advanced consumer electronics such as PDP televisions and game consoles also require more efficient and complex power management. We continue to invest aggressively in Analog IC technology and key trench, planar and other process technologies. These investments have resulted in what we believe are the most efficient Analog ICs and Advance Circuit Devices. We believe these product offerings set the industry standard for performance and cost-efficiency in high-volume consumer electronics applications.

Power Systems

        Power Systems combine power semiconductors with other power management components in specialized modules that improve power efficiency and simplify circuit design. We focus our Power Systems on automotive electronics and motor control. Our products provide a cost-effective alternative to custom analog designs.

        The proliferation of power features in automobiles and tougher standards for safety, fuel economy, and emissions are driving the adoption of more complex power electronics. Our Power Systems can help reconcile conflicting demands for more power features and better fuel mileage by replacing traditional hydraulic and belt-driven applications with electronic systems. In addition, electrically operated automotive systems improve reliability and maintenance. Power Systems are designed into integrated starter/alternator motors, electronic power steering systems, fuel and water pumps, and fan controls. The recently-completed acquisition of TechnoFusion, a leading supplier for power generation systems for automotive electronics, enhances our product offerings and customer relationships in this target application.

        Motors consume approximately half of the world's electricity. New variable-speed motors equipped with Power Systems increase energy efficiency and performance in a wide range of household, commercial and industrial applications. For example, most refrigerator motors can operate only at full speed, but a variable-speed motor can run at the lowest speed needed to maintain the required temperature. Our Power Systems designed for variable-speed motors reduce electricity consumption, simplify product design, shorten time-to-market, improve product performance, and reduce overall costs. We have achieved multiple sole-source design wins from leading worldwide manufacturers in high-end washers, refrigerators and home appliances.

Power Components

Switching Products.    Power MOSFETs and IGBTs rapidly and efficiently switch electricity on and off in order to supply power in a form that can be formatted to the specific requirements of a circuit. Our HEXFET® power MOSFET and IGBT component products, which includes Advanced Circuit Devices, comprised approximately 56 percent of our sales for fiscal 2002 and approximately 60 percent of our sales for fiscal 2001.

        Through our HEXFET® product line, we believe that we are the market leader in power MOSFETs. Our emphasis on quality control and reliability has helped us maintain market acceptance and brand recognition of our HEXFET® line of products. We pioneered the fundamental technology that set the industry standard for power MOSFETs.

        MOSFETs are critical in a wide variety of electric products. Communications applications include cellular phones, telephone networks and modems. Computer and peripheral applications include power supplies, disk drives and printers. Office equipment applications include copiers and facsimile machines. Consumer electronics applications include home entertainment, video cameras, household appliances, and power tools. Automobile applications include anti-lock braking systems, fuel injection systems, power accessories and air bags. Industrial applications include automated production equipment,

4

instrumentation and test equipment. Government/space applications include communications satellites and satellite command-and-control systems.

        IGBTs typically perform the switch function in industrial applications that require higher current and voltage than power MOSFETs can handle efficiently. The performance and ruggedness of these devices enable them to replace bipolar transistors and thyristors in many high-voltage, high-current motor control and power conditioning applications. Energy-efficient, variable-speed motor controls are an emerging application, and we believe hybrid and electric vehicles may require large quantities of IGBTs for each vehicle. Our IGBT technology is closely related to our power MOSFET technology. We believe that our patents on fundamental power MOSFET technology also apply to IGBTs.

Rectifiers, Diodes and Thyristors.    We manufacture a broad line of rectifiers, diodes and thyristors. These products, which also condition electrical power to make it more efficient and usable, are used in industrial end products that require power-handling capability from one amp to 5,000 amps and from 20 volts to 5,000 volts. Applications include motor and lighting controls, welding equipment, forklifts, machine tools, induction heating, locomotives, motor-driven production lines, smelting equipment and power supplies.

        Our Schottky diodes and fast-recovery diodes serve the output rectification function of power conversion. A diode is a discrete device that conducts current in one direction. A Schottky diode is an ultra-fast diode used in high-frequency, low-voltage circuits. A fast-recovery diode is a diode suited to applications above 200 volts where high switching speed is desirable. Schottky diodes are used with power MOSFETs in high-frequency applications such as computers and peripherals. Our HEXFRED® fast-recovery diodes are used with IGBTs in higher-current, lower-frequency applications such as motor controls.

Manufacturing

        Semiconductor manufacturing involves two phases of production: wafer fabrication and assembly. Wafer fabrication requires a sequence of process steps that expose silicon wafers to chemicals that change their electrical properties. The chemicals are applied in patterns that define cells or circuits within numerous individual devices, termed "die" or "chips," on each wafer. Assembly is the sequence of production steps that divide the wafer into individual chips and enclose the chips in structures, termed "packages," that make them usable in a circuit. Power semiconductors generally use process technology and equipment already proven in the manufacturing of integrated circuits.

        We have production facilities in California, Massachusetts, Mexico, the United Kingdom, Germany, Italy, India and China. In addition, we have equipment at, or manufacturing supply agreements with, subcontractors located in the Philippines, Thailand, Taiwan, Malaysia, the Czech Republic, Germany, and the United States.

        Our most advanced wafer fabrication facility, located in Newport, Wales (United Kingdom), expands our manufacturing resources, as well as our development capability. Our highest volume wafer fabrication facility is the HEXFET America facility in Temecula, California. A wafer fabrication facility for high-voltage Analog ICs and other Advanced Circuit Devices is also located in El Segundo, California. Assembly operations for components used in government/space applications are located in Leominster, Massachusetts and Santa Clara, California. We manufacture substantially all of our Schottky diodes, high-power rectifiers and thyristors at our Turin, Italy facility. Plants that assemble power MOSFETs and other products are located overseas in facilities we own or in subcontracted facilities. Our high-volume assembly lines for power MOSFETs, IGBTs and diodes are located in our facility in Mexico. We have installed a production facility in Penllergaer, Wales, to assemble Power Systems.

5

        In the third quarter of fiscal year 2002, we acquired the Newport, Wales facility described above, which provides 80,000 square feet of wafer fabrication capacity for mixed-signal and analog processes. During the fourth quarter of fiscal year 2002, we acquired TechnoFusion GmbH, a manufacturer of power generation systems for the automotive industry, with a manufacturing facility in Krefeld, Germany. We also have arrangements with third parties for product assembly in the Philippines, Malaysia, Taiwan, Thailand, the Czech Republic, Germany, and China. In a duty-free zone in India, we have an assembly facility for rectifiers and thyristors.

Marketing, Sales and Distribution

        We market our products through direct sales staff, representatives and distributors. We believe the depth of our power management product line enhances our competitive position in the overall power semiconductor market.

        In fiscal 2002, our product sales by region, based on the location of the customer, were approximately 34 percent from North America, 22 percent from Europe and 44 percent from Asia, which includes Japan and Asia Pacific. Our domestic direct sales force is organized into five regional sales zones. In Europe, our products are sold through our own sales force as well as through independent sales agents and distributors. Our European sales and representative offices are in the United Kingdom, Italy, Sweden, France, Germany, Finland, Denmark, Switzerland, Russia, the Czech Republic and Hungary. In Asia, we have sales representative or liaison offices in India, Japan, Singapore, China, Hong Kong, South Korea, Taiwan, the Philippines, Australia and New Zealand.

        For financial information about the results for our geographic areas for each of the last three fiscal years, refer to "Notes to the Consolidated Financial Statements Note 8. Geographic Information and Foreign Operations."

        Because many applications require products from several product groups, we have organized our product development and marketing efforts by sector and application, rather than product type. In addition, our staff of application engineers provides customers with technical advice and support regarding the use of our products.

Customers

        Our devices are incorporated in subsystems and end-products manufactured by other companies. No single OEM customer accounted for more than 10 percent of our revenue. Approximately 37 percent of our revenue in fiscal 2002 came from sales of our products to distributors. The following table lists some of our major customers by end-market for fiscal 2002:

6

Backlog

        As of June 30, 2002, our backlog of orders was $277.6 million compared to $237.0 million as of June 30, 2001. Backlog is comprised of purchase orders and customer forecast commitments scheduled to be shipped within the following twelve months. Increasingly, major customers are operating their businesses with shorter lead-times and are placing their orders at shorter intervals, which tend to reduce backlog relative to future revenue. The increase in backlog at June 30, 2002 is largely attributable to several new customers, new program with existing customers, and acquisitions. Given adequate notice, we usually allow customers to cancel purchase orders without penalty. Backlog is not necessarily indicative of sales for any future period.

Research and Development

        We conduct research and development activities to improve the performance and cost effectiveness of our product offerings in target applications. Our research and development program focuses on Analog ICs, Advanced Circuit Devices and Power Systems and the advancement and diversification of our HEXFET® power MOSFET and IGBT product lines. We also direct our research and development toward reducing our customers' time-to-market and reducing the cost of their products. Our program places increasing emphasis on the development of chipsets and system-level solutions that improve overall system performance and cost, and help customers to accelerate market introduction of their products.

        In fiscal 2002, 2001, and 2000, we spent approximately $69.8 million, $69.6 million, and $47.2 million, respectively, on research and development activities.

        Our research and development center in El Segundo, California provides capacity for innovative starting material for IR's next generation high-voltage devices. The 55,000 square-foot facility incorporates a 12,000 square-foot clean-room. In addition, we also have research and development centers in Rhode Island, Italy and France.

        During fiscal 2002, we achieved performance enhancements and cost reductions across most of our product line. Our new products for target applications introduced in fiscal 2002 included: a) High-performance proprietary Analog ICs and systems that won major sole-source designs in electric fan controls, electric power steering, integrated starter/alternator and 42-volt automotive applications; b) Analog ICs for compact fluorescent lights (CFLs) that significantly reduce part count and simplify design; c) Exclusive iPOWIR™ technology devices, which simplify and shrink complex power conversion circuits, while increasing performance for servers, network processing units, and application-specific ICs in networking, telecom switches and routers; d) Trench and planar low-voltage MOSFETs that increased our penetration into high-end portable and desktop PCs, advanced digital cell phones, and next-generation PDAs; e) The FlipFET, an advanced IR packaging technique in which "the die is the package" to increase performance and power density for automotive and portable equipment; f) High-voltage (1000V) radiation-hardened (RAD-Hard) MOSFETs for specialized high frequency, space-level switching applications; g) Plastic-packaged MOSFETs, rated at 200 degrees Celsius — an

7

industry first — for existing and emerging automotive applications; h) High-voltage power MOSFETs that combine process technologies to achieve benchmark performance in power supplies for servers and routers needed to carry Internet traffic.

Intellectual Property

        We have made significant investments in developing and protecting our intellectual property. Through successful enforcement of our patents, we have entered into more than 20 license agreements, generated royalty income, and received substantial payments in settlement of litigation. We have 234 issued U.S. patents and 151 U.S. patents pending. Our power MOSFET patents expire between 2002 and 2010, with the broadest remaining in effect until 2007 and 2008. In addition, IR has 202 issued foreign patents and 204 foreign patents pending in a number of countries. We are also licensed to use certain patents owned by others. We have several registered trademarks in the United States and abroad, including the trademark HEXFET®. We believe that our intellectual property contributes to our competitive advantage.

        We are committed to enforcing our patent rights, including through litigation, if necessary. Consistent with this policy, we have filed suits against Hitachi Ltd. and affiliated companies in January 2002 and IXYS Corporation in June 2000 charging infringement of several of our MOSFET patents. Our broadest power MOSFET patents were subject to, and have successfully emerged from, reexamination by the United States Patent and Trademark Office. We currently have license agreements with the majority of power MOSFET manufacturers in the United States and abroad. In fiscal 2002 and 2001, we derived $47.6 million and $51.1 million of royalty revenues from license agreements, respectively. Our royalty income stream is dependent on the continued enforceability and validity of our patents, the ability of our competitors to design around our MOSFET technology or develop competing technologies, and general market conditions.

Competition

        We encounter differing degrees of competition for our various products, depending upon the nature of the product and the particular market served. Generally, the semiconductor industry is highly competitive and subject to rapid price changes and product design changes. Several of our competitors are larger companies with greater financial resources. We believe that we are distinguished from our competitors by our comprehensive line of power management products and ability to combine these products into compact, cost-effective packages and system-level solutions. Our products compete with products manufactured by others on the basis of enabling capability, performance, reliability, quality, price, delivery time to customer and service (including technical advice and support). Our major competitors include: ST Microelectronics, Toshiba Corporation, Infineon Technologies AG, Fairchild Semiconductor Corporation, NEC Corporation, ON Semiconductor, Phillips International B.V., and Vishay-Siliconix Incorporated. Increasingly, we also compete with Linear Technology Corporation, Maxim Integrated Products, Inc., Analog Devices, Inc. and Texas Instruments Incorporated.

Environmental Matters

        Federal, state, and local laws and regulations impose various restrictions and controls on the storage, use and discharge of certain materials, chemicals, and gases used in semiconductor manufacturing processes. We do not believe that compliance with such laws and regulations as now in effect will have a material adverse effect on our results of operations, financial position or cash flows.

8

        However, under some of these laws and regulations, we could be held financially responsible for remedial measures if properties are contaminated or if waste is sent to a landfill or recycling facility that becomes contaminated. Also, we may be subject to common law claims if we release substances that damage or harm third parties. We cannot make assurances that changes in environmental laws and regulations will not require additional investments in capital equipment and the implementation of additional compliance programs in the future, which could have a material adverse effect on our results of operations, financial position or cash flows, as could any failure by us to comply with environmental laws and regulations.

        IR and Rachelle Laboratories, Inc. ("Rachelle"), a former operating subsidiary of ours that discontinued operations in 1986, were each named a potentially responsible party ("PRP") in connection with the investigation by the United States Environmental Protection Agency ("EPA") of the disposal of allegedly hazardous substances at a major superfund site in Monterey Park, California ("OII Site"). Certain PRPs who settled certain claims with the EPA under consent decrees filed suit in Federal Court in May 1992 against a number of other PRPs, including us, for cost recovery and contribution under the provisions of the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"). IR has settled all outstanding claims that have arisen against it out of the OII Site. No claims against Rachelle have been settled. The Company has taken the position that none of the wastes generated by Rachelle were hazardous.

        Counsel for Rachelle received another letter, dated August 2001, from the U.S. Department of Justice, directed to all or substantially all PRPs for the OII Site, offering to settle claims against such parties for all work performed through and including the final remedy for the OII Site. The offer required a payment from Rachelle in the amount of approximately $9.3 million in order to take advantage of the settlement. Rachelle did not accept the offer.

        In as much as Rachelle has not accepted the settlement, we cannot predict whether the EPA or others would attempt to assert an action for contribution or reimbursement for monies expended to perform remedial actions at the OII Site. We cannot predict the likelihood that the EPA or such others would prevail against Rachelle in any such action. We maintain the position of Rachelle that its wastes were not hazardous. Our insurer has not accepted liability, although it has made payments for defense costs for the lawsuit against us. We have made no accrual for potential loss, if any; however, an adverse outcome could have a material adverse effect on our results of operations.

        We received a letter in June 2001 from a law firm representing UDT Sensors, Inc. relating to environmental contamination (chlorinated solvents such as trichlorethene) assertedly found in UDT's properties in Hawthorne, California. The letter alleges that we operated a manufacturing business at that location in the 1970's and/or 1980's and that we may have liability in connection with the claimed contamination. We have made no accrual for any potential loss.

Employees

        As of June 30, 2002, we employed approximately 5,900 people, of whom approximately 3,800 were employed in North America, 1,500 in Europe and 600 in Asia Pacific and Japan. The only collective bargaining agreements to which we are subject apply to our employees in Italy. We have approximately 500 employees in Italy. We consider our relations with our employees to be good.

Item 2. Properties

        Our operations occupy a total of approximately 1.7 million square feet, of which approximately 744,000 square feet are located within the United States. Of the worldwide total, approximately 464,000 square feet are leased and the remaining is owned by us.

9

        Our leases expire between 2002 and 2012. If we are unable to renew these leases upon expiration, we believe that we could find other suitable premises without any material adverse impact on our operations. Our major facilities are in the following locations:

        We believe that these facilities are adequate for our current and anticipated near-term operating needs. We estimate that we currently utilize approximately 84 percent of our worldwide manufacturing capacity.

        We have sales or technical support offices located throughout the United States and in Canada, China, the Czech Republic, Denmark, Finland, the United Kingdom, France, Germany, Hong Kong, Hungary, India, Japan, Korea, the Philippines, Russia, Scandinavia, Singapore, Switzerland and Taiwan.

Item 3. Legal Proceedings

        We and certain of our directors and officers were named as defendants in three class action lawsuits filed in Federal District Court for the Central District of California in 1991. These suits sought unspecified but substantial compensatory and punitive damages for alleged intentional and negligent misrepresentations and violations of the federal securities laws in connection with the public offering of our common stock completed in April 1991 and the redemption and conversion in June 1991 of our 9% Convertible Subordinated Debentures due 2010. They also allege that our projections for growth in fiscal 1992 were materially misleading. Two of these suits also named our underwriters, Kidder, Peabody & Co. Incorporated and Montgomery Securities, as defendants.

        In August 2001, we reached a settlement in principle with respect to the lawsuits. The settlement contemplates the dismissal of all claims without any payments. The settlement requires the filing of formal documents with the court and court approval.

        In June 2000, we filed suit in Federal District Court in Los Angeles, California against IXYS Corporation, alleging infringement of our key U.S. patents 4,959,699, 5,008,725 and 5,130,767. The suit seeks damages and other relief customary in such matters. In August 2000, IXYS filed an answer and counterclaim, and in February 2002, amended its answer and counterclaim, denying infringement and alleging patent invalidity and unenforceability. The Federal District Court entered a permanent injunction on May 21, 2002, which became effective on June 5, 2002, barring IXYS "and all persons in active concert or participation with them who receive actual notice" of the injunction from "making, using, offering to sell or selling in, or importing into, the United States, MOSFETs (including IGBTs) covered by" IR's U.S. patents 4,959,699, 5,008,725 and/or 5,130,767. On August 2, 2002, the Court of Appeals for the Federal Circuit stayed that injunction, pending appeal on the merits. In the Federal District Court, on August 2, 2002, following trial on damages issues the jury awarded us $9.06 million in compensatory damages. We anticipate that IXYS will appeal. In January 2002, IXYS filed suit in the

10

Federal Northern District of California alleging infringement of its U.S. patents 4,636,580, 4,670,771, 4,970,576, 4,483,810 and 4,505,418. The latter suit is in a preliminary phase.

        In January 2002, we filed suit in the Federal District Court in Los Angeles, California against Hitachi, Ltd. and affiliated companies alleging infringement of certain of IR's U.S. patents. The suit seeks damages and such other relief as is customary in such matters. Hitachi has denied infringement and validity of the patents and has entered a counterclaim of patent misuse. At IR's request, the District Court issued a preliminary injunction against certain infringing acts and, as a result of further action by the Court of Appeals for the Federal Circuit, as of August 2, 2002, the Hitachi defendants were enjoined from making, using, offering for sale or selling in, or importing into, the United States certain Hitachi planar power MOSFETs. Trial in the case is currently scheduled for December 2002. Hitachi filed suit against us in the Federal Northern District of California in April 2002 on its U.S. patent 5,101,244. The latter suit was transferred to, and is now pending in, the Central District of California; it is in a preliminary phase. In April 2002, Hitachi filed suit against the Company in Tokyo, Japan, District Court alleging infringement of certain of its Japanese patents. Hitachi seeks an injunction in this Japanese action.

Item 4. Submission of Matters to a Vote of the Security Holders

        Not applicable.

11

Additional Item. Executive Officers of the Registrant

        Our executive officers serve at the discretion of the Board of Directors. Mr. Eric Lidow's employment with IR is subject to the provisions of an executive employment agreement with IR dated May 15, 1991, and subsequently amended on April 12, 1995, June 22, 1998 and August 5, 1998.

        The executive officers of IR are:

        Eric Lidow, the founder of the Company, has been a director since our inception in 1947 and was Chief Executive Officer until March 1995. Mr. Lidow continues as Chairman of the Board and also served as Chairman of our Executive Committee.

        Alexander Lidow, Ph.D., has been employed by us since 1977. He was elected a director in September 1994 and Chief Executive Officer in March 1995. Dr. Lidow serves on the Board of Trustees of the California Institute of Technology. Dr. Lidow is a son of Eric Lidow.

        Robert J. Mueller has been employed by us since 1961. He has been Executive Vice President, External Affairs since July 1993. He was first elected a director in 1990.

        Michael P. McGee joined us in July 1990. He became Vice President and Chief Financial Officer in 1993. In November 1998, Mr. McGee was elected Executive Vice President. In June 2000 he was elected Chairman and Co-CEO of Nihon Inter Electronics Corporation.

        Robert Grant has been employed by us since 1992. He joined the company in February 1992 as Director, Worldwide Customer Operations. In October 1998, Mr. Grant became Senior Vice President, Customer Service and Sales Systems, and in October 1999 became Senior Vice President, Marketing Communications and eCommerce. In July 2000, Mr. Grant was elected Executive Vice President. He was promoted to Executive Vice President, Global Sales and Corporate Marketing in November 2001.

        Walter Lifsey has been employed by us since 1999. His most recent assignment was as Senior Vice President, Corporate Development before being appointed Executive Vice President, Operations in April, 2002. Prior to joining IR, he held senior management positions at AMP, Inc. and TRW Inc.

        Donald R. Dancer joined IR in August 2002. He most recently was General Counsel for GE Industrial Systems Solutions, and served 22 years in various senior legal positions with General Electric.

12

PART II

Item 5. Market for the Registrants' Common Equity and Related Stockholders' Matters

Price Range of Common Stock
(Closing Prices in Dollars)

        Our Common Stock is traded on The New York Stock Exchange and the Pacific Exchange under the symbol "IRF." No dividends were declared or paid in any of the referenced years.

        The quoted market prices are as reported on the New York Stock Exchange Composite.

13

Item 6. Selected Financial Data

        The selected consolidated financial data as of June 30, 2002 and 2001 and for the fiscal years ended June 30, 2002, 2001 and 2000 are derived from our audited consolidated financial statements and should be read in conjunction with our audited consolidated financial statements and notes beginning on page 28. The selected consolidated financial data as of June 30, 2000, 1999 and 1998, and for the fiscal years ended June 30, 1999 and 1998 are derived from our audited consolidated financial statements which are not included in this document.

(1)

Certain reclassifications have been made to previously reported amounts to conform to the current year presentation.

14

(2)

Gross profit includes charges of $38.4 million and $2.5 million for inventory written down to net realizable value during fiscal years 2001 and 1999, respectively. Gross profit, excluding the inventory writedown charges, was $394.6 million and $154.5 million, for the fiscal years 2001 and 1999, respectively.

(3)

Net income includes total pretax restructuring charges of $86.4 million and $27.0 million, for the fiscal years 2001 and 1999, respectively, which are comprised of the inventory writedowns outlined in (1) and $48.0 million and $24.5 million in restructuring charges for impairment of assets and personnel severance payments for the fiscal years 2001 and 1999, respectively. Income, excluding the restructuring charges, was $151.6 million and $13.4 million, for the fiscal years 2001 and 1999, respectively.

(4)

Net income excludes an extraordinary charge on the early repayment of debt of $4.8 million (net of income tax benefit of $1.9 million) and the cumulative effect of an accounting change of $26.2 million (net of income tax benefit of $5.4 million), for fiscal years 2000 and 1999, respectively. Including these charges, basic and diluted net income (loss) per share would have been $1.25 and $1.19, respectively, for fiscal 2000 and ($0.11) and ($0.11), respectively, for fiscal 1999.

(5)

Working capital is defined as current assets less current liabilities.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

        The following table sets forth certain items included in selected financial data as a percentage of revenues.

15

Fiscal Year 2002 Compared with Fiscal Year 2001

Revenues

        Revenues for 2002 were $720.2 million, versus $978.6 million in 2001. Fiscal 2002 revenues were impacted by the downturn in the semiconductor industry. For the 12 months ended June, Semiconductor Industry Association data shows a 32 percent decline in semiconductor industry revenues, whereas IR's revenues declined by 26 percent during this period. Despite this challenging environment, revenues from IR's proprietary products (Analog ICs, Advanced Circuit Devices, and Power Systems) grew by 5 percent and comprised half of product revenues in fiscal 2002, compared to 35 percent in 2001. Royalties contributed $47.6 million to revenues, compared to $51.1 million in 2001.

        In line with the industry downturn, IR experienced a 47 percent decline year-over-year in the information technology sector and a 40 percent decline in revenues in the industrial sector for fiscal 2002. However, the Company returned to sequential revenue growth in the second half, with revenues increasing 13 percent sequentially over the first half of fiscal 2002.

        Notwithstanding the downturn, IR achieved growth in several target sectors. IR strengthened its position in the aerospace and defense sector by securing multiple sole-source design wins in leading defense and satellite programs. Revenues from this sector grew 18 percent over the prior year. Revenues from the consumer electronics market rose 19 percent, reflecting increased demand for applications in high-end household appliances. Including acquisitions, revenues from the automotive sector grew 13 percent compared to fiscal 2001. Excluding acquisitions, IR's revenue growth in the automotive sector was approximately 7 percent.

        Orders for our proprietary products represented more than half of total bookings for fiscal 2002. Orders climbed 13 percent sequentially in the fourth quarter, including bookings from TechnoFusion. Shipments into the distribution channel declined by 34 percent year-over-year, but strengthened in the fourth quarter, rising 21 percent from the third quarter level.

        During the third quarter of fiscal 2002, we acquired the assets of European Semiconductor Manufacturing, Ltd. and the "high-reliability" power MOSFET line of Fairchild Semiconductor. In the fourth quarter of fiscal 2002 we completed the acquisition of TechnoFusion GmbH, a leading maker of power generation products for the automotive industry, from Royal Philips Electronics. In total, these acquisitions contributed about $8.9 million to the Company's revenues for the year.

Gross Profit Margin

        Gross profit was $256.9 million (35.7% of revenues) in 2002, versus $356.2 million (36.4% of revenues) in 2001, including an inventory write down of $38.4 million in the fourth quarter of fiscal 2001. Without the write down, gross profit in 2001 was 40.3 percent of revenues. Strength in higher-margin proprietary products helped to counter the impact of price declines, lower production volumes for components, and lower royalties.

Operating Expenses

        In 2002, selling and administrative expense was $125.6 million (17.4% of revenues), versus $137.7 million (14.1% of revenues) in the comparable year-ago period. The decline in absolute spending reflected the benefits of our cost containment programs and selling commissions paid on a lower sales base and was partially offset by $0.6 million from acquisitions. Expenses rose as a percentage of revenues because of lower sales compared to 2001.

        In 2002, our research and development expenditures were $69.8 million (9.7% of revenues), compared to $69.6 million (7.1% of revenues) in the prior-year period. We continue to invest in the

16

development of new proprietary products for information technology, automotive, aerospace and defense, and home appliances and other motion control applications.

        In 2002, amortization of acquisition-related intangible assets was $4.1 million (0.6% of revenues), compared to $6.0 million (0.6% of revenues) in 2001. In 2002, we adopted Statement of Financial Accounting Standards ("SFAS") No. 142, which eliminated the amortization of goodwill and assembled workforce.

Interest Income and Expenses

        Interest income was $28.6 million and $47.8 million for the year ended June 30, 2002 and 2001, respectively. The 2002 figure primarily reflected the impact of lower interest rates.

        Interest expense was $22.1 million and $26.1 million for the years ended June 30, 2002 and 2001, respectively. The decrease principally reflected realized savings from the $412.5 million notional amount interest rate swap transaction with JP Morgan Chase Bank. See Notes to the Consolidated Financial Statements ("Note") 3.

Other Income and Expenses

        In 2002, we reached a settlement with our insurance carrier for equipment that was damaged at one of our wafer fabrication lines (See Note 7). We recognized a $4.0 million gain for the involuntary conversion of the damaged equipment. The gain primarily represents the excess of the proceeds received and used to replace the damaged equipment over the net book value of the replaced equipment. Additionally, a resulting net gain on the settlement of the claim of $3.4 million was recorded within other income and expenses.

        Net foreign currency losses and gains in fiscal 2002 and 2001, respectively, were less than $1.2 million in each year.

Income Taxes

        Our effective tax rate in 2002 and 2001 was approximately 26 percent, which differed from the U.S. federal statutory tax rate of 35 percent and reflected the benefits of foreign tax credits, research and development credits and state tax credits, partially offset by higher statutory tax rates in certain foreign jurisdictions, foreign jurisdiction losses without foreign tax benefit, and higher state taxes.

Fiscal Year 2001 Compared with Fiscal Year 2000

Revenues

        Revenues for 2001 were $978.6 million versus revenues of $753.3 million in 2000. The overall growth of 30 percent in revenues reflected strong business conditions early in the year. Revenues for our proprietary products (analog ICs, advanced circuit devices, and power systems) grew 91 percent, to comprise 35 percent of product revenues in 2001 compared to 23 percent of product revenues in 2000. Component product revenues increased 11 percent, but declined, as a percent of revenues, by 12 percent from the prior year, reflecting a drop off in demand for the multi-market products that account for about 30 percent of our business.

        Net patent royalties contributed $51.1 million to revenues, compared to $36.4 million in 2000, reflecting market growth, operative changes in license agreements and the expiration of the royalty sharing agreement with Unitrode Corporation.

        Our 2001 revenues from selected information technology, automotive, aerospace and industrial applications increased by 37 percent over the prior year. Demand in the telecom/datacom subsector

17

(which includes servers, routers, and infrastructure) began to show signs of weakness late in the third quarter 2001.

        Fourth quarter 2001 results reflected worsening business conditions. Shipments into the information technology sector, which accounted for 51 percent of our business during 2001, declined in the fourth quarter by 64 percent sequentially. Late in the fourth quarter, weakness in demand also spread to the industrial market. Pricing for multi-market products declined sequentially by nearly 8 percent. In the face of continuing price pressure and widespread concerns about semiconductor industry conditions through the balance of the calendar year, we took steps to align IR's cost structure with our revised outlook and financial targets. In light of the above business conditions, we recorded an $86.4 million pretax restructuring charge for the writedown of assets, the writedown of inventory, and severance. See further discussion of the June 2001 Restructuring Charge below.

        Including the impact of the restructuring charge recognized in 2001, we generated net income of $87.6 million or $1.35 per share, compared to the prior year's net income of $68.3 million or $1.19 per share. Excluding the charge, income for the full year 2001 was $151.6 million or $2.34 per share. The increase in earnings in 2001 compared to 2000 is attributed to higher sales volume, a higher proportion of proprietary products, manufacturing efficiencies and higher interest income from our investments.

Gross Profit Margin

        Gross profit was $356.2 million (36.4% of revenues) in 2001, versus $268.1 million (35.6% of revenues) in 2000. In the fourth quarter, $38.4 million was charged to cost of sales for the writedown of inventory as a result of the market downturn. Excluding the inventory charge, gross profit for fiscal 2001 was 40.3 percent of revenues. The gross margin increase reflected a higher proportion of revenues from our proprietary products, increased royalty income, and cost reductions.

Operating Expenses

        In 2001, selling and administrative expense was $137.7 million (14.1% of revenues), versus $114.7 million (15.2% of revenues) in the comparable year-ago period. The increase was attributable to commissions paid on higher sales revenues. A lower ratio of selling and administrative expense to revenues reflects the results of greater efficiencies and higher sales volume.

        In 2001, our research and development expenditures increased to $69.6 million (7.1% of revenues) compared to $47.2 million (6.3% of revenues) in the comparable prior-year period. The $22.4 million increase reflects, among other things, initiatives to accelerate the development of new proprietary products for automotive, information technology, appliances, and other motion control applications. We plan to maintain our current research and development spending level.

        In 2001, amortization of goodwill and acquisition-related intangible assets was $6.0 million (0.6% of revenues), principally related to the acquisitions of Omnirel LLC, Advanced Analog, Inc., Unisem, Inc. and the assets of Magnitude-3 LLC.

Interest Income and Expenses

        Interest income increased from $5.2 million in 2000 to $47.8 million in 2001 due to higher levels of cash and short-term investments.

        Interest expense increased from $11.2 million in 2000 to $26.1 million in 2001. The increase was a result of the $550 million convertible notes sold in July 2000.

Other Income and Expenses

        Net foreign currency gains and losses were less than $1.0 million in each year.

18

Income Taxes

        Our effective tax rate in 2001 was approximately 26 percent, which differs from the U.S. federal statutory tax rate of 35 percent, due primarily to the benefits of foreign tax and research and development credits, partially offset by higher statutory tax rates in certain foreign jurisdictions, foreign jurisdiction losses without foreign tax benefit and higher state taxes.

        Our effective tax rate for 2000 was approximately 28 percent, which differs from the U.S. federal statutory tax rate of 35 percent, due primarily to a decrease in valuation allowance, the benefits of foreign tax and research and development credits, partially offset by higher statutory rates in certain foreign jurisdictions and foreign jurisdiction losses without foreign tax benefit.

June 2001 Restructuring Charge

        In response to the impact on our business of the semiconductor industry downturn and the corresponding weakness in demand, we recorded an $86.4 million pretax restructuring charge in the quarter ended June 2001. The charge consisted of $45.2 million for the writedown of assets, $38.4 million for the writedown of inventory, and $2.8 million in personnel severance payments.

        The asset writedown of $45.2 million included both asset impairment and the recognition of assets to be disposed of or abandoned. In determining if an asset was impaired, we evaluated estimated undiscounted future cash flows and other factors such as changes in strategy or technology. In determining the amount of impairment losses, we reduced the carrying value of the asset to its expected discounted future cash flow or to an amount deemed recoverable by management after considering all relevant factors.

        The asset writedown included the following: a) An uncompleted wafer fabrication bay at our facility in Temecula, California with a carrying value of $26.8 million, was adjusted to a fair value of $0.6 million. We had no current plans to utilize these site-specific assets or complete the construction of the wafer bay; b) Equipment no longer utilized, located at our subcontract assembly facilities in Southeast Asia with a carrying value of $1.0 million, was written off; c) Building improvements and certain production lines at our facilities in the United Kingdom with a carrying value of $3.9 million were adjusted to a fair value of $0.2 million. These production lines were operating at very low utilization and we had no plans for future production; d) Building improvements and wafer and assembly equipment in Italy with a carrying value of $2.1 million were adjusted to a fair value of $0.2 million. These production lines were idle with no plans for future use, and production of certain products was transferred to our facilities in India; e) Information systems applications with a carrying value of $3.8 million were written down primarily as a result of a move to a new datacom/telecom infrastructure and the implementation of changes to our financial reporting systems; and f) Under the terms of certain of our subcontract assembly agreements in Southeast Asia, we had the obligation to purchase back $4.3 million of equipment because our order volume fell below predetermined thresholds. Order volumes were not expected to increase to a level which would relieve the obligation, and we had no other plans to utilize the equipment.

        The $38.4 million inventory writedown reflected a loss of utility as a result of the impact of the semiconductor industry downturn and weak demand in our end markets. In determining the inventory charge, we addressed the following factors: a) Market conditions made certain customer-specific inventory excessive. In light of current market conditions, we did not expect to sell a large portion of this inventory; b) We had built up inventory during fiscal 2001 to support a revenue level significantly higher than revised projections for our IT customers' current generation of datacom/telecom equipment. Reduced demand for these customer products made inventory levels excessive and reduced the expected recoverability; and c) We had excess inventory that we expect would be sold at prices lower than its historical cost. In line with management's expectations, substantially all of the inventory written down at June 30, 2001 was disposed of during the year.

19

        In the quarter ended June 2001, we recorded a $2.8 million charge for employee severance associated with the elimination of 29 positions related to a reduction in company-wide administrative staff levels and a reduction in operating personnel at our facilities in the United Kingdom. In addition, in the first quarter of fiscal y ear 2001, we announced a further workforce reduction of approximately 500 positions. We have absorbed the cost of this workforce reduction into fiscal year 2002 operations.

        We expect to reduce costs by approximately $35 million by the end of calendar year 2002 as a result of the fourth quarter 2001 restructuring activities and the reduction in workforce announced in the first quarter of fiscal 2002. The projected savings will consist primarily of lower direct labor costs, lower depreciation expense and lower selling and administrative costs.

Liquidity and Capital Resources

        At June 30, 2002, we had cash and cash equivalent balances of $240.4 million and cash investments in marketable debt securities of $430.9 million. Our cash, cash equivalents, cash investments in marketable debt securities and unused credit facilities of $120.5 million, totaled $791.8 million. Our investment portfolio consists of available-for-sale fixed income, investment-grade securities with maturities of up to 36 months.

        During 2002, operating activities generated cash flow of $51.3 million compared to $206.6 million in the prior year period. Working capital increased by $59.5 million this fiscal year period, primarily related to a reduction in accrued taxes, accrued interest and accounts payable, partially offset by increases in inventory and accounts receivable.

        During 2002, cash used in investing activities totaled $221.9 million. We added $63.5 million in capital equipment, and we sold $26.9 million of investments in marketable debt securities. In the second half of fiscal year 2002, we acquired certain business assets of European Semiconductor Manufacturing, Ltd., certain business assets of Fairchild Semiconductor Corporation, and the business of TechnoFusion GmbH and certain related assets for approximately $85 million, $30 million, and $55 million, respectively.

        Capital expenditures for the year were primarily related to investments in manufacturing equipment, of which the majority is used to produce proprietary products. Additionally, at June 30, 2002, we had made purchase commitments for capital expenditures of approximately $11.6 million. We intend to fund capital expenditures and working capital requirements through cash and cash equivalents on hand and anticipated cash flow from operations.

        Financing activities during fiscal year 2002 generated $15.3 million. As of June 30, 2002, we had revolving, equipment and foreign credit facilities of $153.2 million, against which $32.7 million had been utilized. As discussed in Note 3, we are required to obtain irrevocable standby letters of credit in favor of JP Morgan Chase Bank, for $12.0 million plus a collateral requirement for the interest rate swap transaction, as determined periodically. At June 30, 2002, $12.0 million in letters of credit were outstanding related to the transaction. The collateral requirement of the transaction may be adversely affected by an increase in the five-year LIBOR curve, a decrease in our stock price, or both. We cannot predict what the collateral requirement of the transaction and the letter of credit requirement will be over time. To illustrate the potential impact, had a 10 percent increase in the five-year LIBOR curve and a 10 percent decrease in our stock price occurred at the close of the fiscal year, our letter of credit commitment would have been approximately $12.9 million.

        For the possible effects of environmental matters on liquidity, see Note 11.

        We lease certain of our administrative, research and development and manufacturing facilities, regional sales/service offices and certain equipment under non-cancelable operating and capital leases. Future minimum operating lease obligations are as follows: fiscal 2003: $5.6 million; fiscal 2004:

20

$5.0 million; fiscal 2005: $4.0 million; fiscal 2006: $3.1; fiscal 2007: $2.6 million; and $6.0 million thereafter. Future minimum capital lease obligations are $1.1 million in both fiscal 2003 and 2004.

        In July 2000, we sold $550 million principal amount of 4.25 percent Convertible Subordinated Notes due 2007. The interest rate is 4.25 percent per annum on the principal amount, payable semi-annually in arrears in cash on January 15 and July 15 of each year, beginning January 2001. The notes are convertible into shares of the IR's common stock at any time on or before July 15, 2007, at a conversion price of $73.935 per share, subject to certain adjustments. In December 2001, we entered into an interest rate swap transaction that modified the interest characteristic on $412.5 million of our outstanding convertible debt, (See Item 7a).

        In November 2000, we entered into a three-year syndicated multi-currency revolving credit facility (the "Credit Facility") led by BNP Paribas, which provided a credit line of $150 million, of which up to $100 million may be used for standby letters of credit. The credit agreement allows borrowings by IR's foreign subsidiaries and provides funding for IR's general corporate purposes. The facility bears interest at (i) local currency rates plus (ii) a margin between 0.25 percent and 1.125 percent for base rate advances and a margin of between 1.25 percent and 2.125 percent for euro-currency rate advances. Other advances bear interest as set forth in the credit agreement. The annual commitment fee for the credit agreement is 0.375 percent of the unused portion of the credit facility.

        As of June 30, 2002, total scheduled principal payments on the Credit Facility, Convertible Subordinated Notes, and other debt obligations are as follows: fiscal 2003: 18.2 million; fiscal 2004: $1.2 million; fiscal 2005: $0.1 million; fiscal 2006: $0; fiscal 2007: $565.1 million; and $0.5 million thereafter.

        We believe that our current cash and cash investment balances, cash flows from operations and borrowing capacity, including unused amounts under the $150 million Credit Facility, will be sufficient to meet our operations and to take advantage of strategic opportunities as they occur in the next 12 months. Although we believe that our current financial resources will be sufficient for normal operating activities, we may also consider the use of funds from other external sources, including, but not limited to, public or private offerings of debt or equity.

Recent Accounting Pronouncements

        In August 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 143, "Accounting for Obligations Associated with the Retirement of Long-Lived Assets." SFAS No. 143 establishes accounting standards for the recognition and measurement of asset retirement obligations and the associated asset retirement costs. We are required to adopt the provisions of SFAS No. 143 no later than the first quarter of fiscal 2003. SFAS No. 143 is not expected to have a material impact on our financial position, results of operations or cash flows.

        In September 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The new Statement provides a single accounting guidance with respect to reporting the effects of the disposal of a business. SFAS No. 144 is effective for us beginning July 1, 2002, with earlier adoption encouraged. SFAS No. 144 is not expected to have a material impact on our financial position, results of operations or cash flows.

        In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections". SFAS No. 145 concludes that debt extinguishments used as part of a company's risk management strategy should not be classified as an extraordinary item. SFAS No. 145 also requires sale-leaseback accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. We will be required to adopt the provisions of SFAS No. 145 on July 1, 2002. Upon adoption, the net extraordinary loss from the extinguishment of debt of approximately $4.8 million in fiscal year 2000 will

21

no longer be considered extraordinary, and will be classified within the consolidated statement of income as a component of continuing operations. Other than the reclassification of the debt extinguishment, management believes that SFAS No. 145 will not have a significant impact on the Company's financial position, results of operations, and cash flows.

        In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," which changes guidance that previously existed under Emerging Issues Task Force ("EITF") Issue No. 94-3. SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred, whereas liabilities were recorded under EITF No. 94-3 at the date of commitment to the plan. The provisions of SFAS No. 146 are effective for exit or disposal activities initiated after December 31, 2002. We are currently evaluating the impact of adoption of this statement.

Critical Accounting Policies

Revenue Recognition

        Our revenue recognition policy is driven by and is in compliance with Staff Accounting Bulletin No. 101, "Revenue Recognition." The majority of revenues are recognized upon shipment for product sales to all customers, including distributors, with a provision for estimated returns and allowances recorded at the time of shipment. No revenue is recognized unless the contractual terms and conditions provide evidence than an arrangement exists, pricing is fixed and determinable, collection is reasonably assured, and performance of services has occurred.

Inventories

        Inventories are stated at the lower of cost (principally first-in, first-out) or market. Inventories are reviewed for excess and obsolescence based upon demand forecasts within a specific time horizon and reserves are established accordingly.

Long-Lived Assets

        Long-lived assets are net property, plant and equipment and other intangible assets. Impairment losses on long-lived assets are identified and recorded when events and circumstances indicate that such assets might be impaired. The recoverability of long-lived assets is periodically evaluated based on expected undiscounted cash flows. Impairments, if any, are recognized based on the fair value of the assets.

Goodwill and Acquisition-Related Intangible Assets

        The difference between the purchase price and the fair value of net assets acquired at the date of acquisition is included in the accompanying consolidated balance sheet as goodwill and acquisition-related intangible assets. The amortization periods for these intangible assets subject to amortization range from 4 to 12 years, depending on the nature of the assets acquired. The carrying value of goodwill and acquisition-related intangible assets, including the related amortization period, are evaluated in the fourth quarter of each fiscal year. In evaluating goodwill and intangible assets not subject to amortization, the carrying value of each intangible asset is compared to its fair value to determine whether there has been any impairment. In evaluating intangible assets subject to amortization, the carrying value of each intangible asset is compared to its undiscounted operating cash flows.

22

Derivative Financial Instruments

        SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of SFAS 133," require that the derivative instruments be recorded at fair value. The accounting policies for these instruments are based on certain criteria for designating them as either cash flow or fair value hedges. A hedge of the exposure to variability in the cash flows of an asset or a liability, or of a forecasted transaction, is referred to as a cash flow hedge. A hedge of the exposure to changes in fair value of an asset or a liability, or of an unrecognized firm commitment, is referred to as a fair value hedge.

        Changes in fair value of derivatives that are highly effective cash flow hedges and qualify as hedging instruments, are recorded in other comprehensive income until the underlying hedged items are recognized in earnings. Any ineffective portion of a derivative change in fair value is recognized in current earnings. Changes in fair value of the derivatives that are highly effective fair value hedges and qualify as hedging instruments, are recognized in current earnings, in addition to the changes in the fair value of the underlying assets or liabilities being hedged. Changes in fair value of derivative instruments that do not qualify or are not designated as hedging transactions are recorded in current earnings.

Stock-Based Compensation

        Stock-based compensation plans are accounted for using the intrinsic value method prescribed in Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." SFAS No. 123, "Accounting for Stock-Based Compensation," encourages, but does not require companies to record stock-based employee compensation plans at fair value. We have elected to continue accounting for stock-based compensation in accordance with APB No. 25 and have provided the required disclosures under SFAS No. 123 in the Notes to the Consolidated Financial Statements.

Statement of Caution Under the Private Securities Litigation Reform Act of 1995

        This Form 10-K Report contains some statements and other information that are not historical facts but are "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. The materials presented can be identified by the use of forward-looking terminology such as "anticipate," "believe," "estimate," "expect," "may," "should," "view," or "will" or the negative or other variations thereof. Such forward-looking materials are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Financial results are to a large extent dependent on the power MOSFET segments of the power semiconductor industry. If market demand does not continue to grow, revenue growth may be impacted, manufacturing capacity might be underutilized, capital spending might be slowed, and our performance might be negatively impacted. Additional factors that could affect actual results include the failure of market demand to materialize as anticipated; weakness or program or order postponements in the information technology sector of our business; the effectiveness of cost controls and cost reductions; litigation and other unexpected costs associated with cost-reduction efforts, including reductions-in-force and the transfer and consolidation of product lines and equipment; the effectiveness of integration of acquisitions into our operations; our ability and timing to achieve strategic acquisitions and the effect of associated costs; the availability of government incentives; the accuracy of customers' forecasts; product claims, returns and recalls; market and sector conditions that affect our customers, licensees and suppliers; introduction, acceptance, availability and continued demand and growth of new and high-performance products; delays in transferring and ramping production lines or completing customer qualifications; company and market impact due to the cancellation or delays in customer and/or industry programs or orders; our mix of product shipments; availability of adequate capacity and unanticipated costs of refurbishment or replacement of equipment; pricing pressures; the success of working capital management programs; failure of suppliers and subcontractors to meet their delivery commitments;

23

unfavorable changes in industry and competitive conditions; impact of any disruption in, or increased cost of, electricity and/or other critical supplies; economic conditions in our markets around the world and the timing of changes in market conditions; changes in interest and investment rates; impacts on our business or financial condition due to changes in currency valuation or to the euro conversion; impact of changes in accounting methods; the impact of changes in laws and regulations, including tax, trade, and export regulations and policies; the actual results of any outstanding patent and other litigation; and other uncertainties disclosed in our filings with the Securities and Exchange Commission, including, without limitation, our S-3 filing of October 16, 2000. Additionally, to the foregoing factors should be added the financial and other ramifications of terrorist actions.

Item 7a. Quantitative and Qualitative Disclosures about Market Risk

        We are exposed to various risks, including changes in interest rates affecting our return on investments and foreign currency rate fluctuations. We do not hold or purchase any foreign currency or interest rate contracts for trading purposes. Our objective in managing the exposure to foreign currency changes is to reduce the risk to earnings and cash flow by entering into forward exchange contracts which are intended to reduce risks associated with the value of our existing foreign currency assets, liabilities, firm commitments and anticipated foreign revenues and costs. The gains and losses on these contracts are intended to offset changes in the related exposures. We do not hedge our foreign currency exposure in a manner that would entirely eliminate the effects of changes in foreign exchange rates on our consolidated net income.

        In the normal course of business, we also face risks that are either nonfinancial or nonquantifiable. Such risks principally include country risk, credit risk and legal risk and are not discussed or quantified in the following analyses.

Interest Rate Risk

        Our financial assets and liabilities that are subject to interest rate risk are our investments in debt securities, our convertible debt and our interest rate swap transaction. Our primary objective is to preserve principal while at the same time maximizing yield without significantly increasing risk. At June 30, 2002, we evaluated the effect that near-term changes in interest rates would have had on these transactions. An adverse change of as much as 10 percent change in the interest rates would not have had a material effect on our results of operations, financial position or cash flows.

        In December 2001, we entered into an interest rate swap transaction (the "Transaction") with an investment bank, JP Morgan Chase Bank (the "Bank"), to modify the interest characteristic of our outstanding convertible debt (the "Debt"). (See Note 4.) The notional amount of the Transaction is $412.5 million, representing 75 percent of the Debt. We will receive from the Bank fixed payments equal to 4.25 percent of the notional amount, payable on January 15 and July 15 starting on January 15, 2002. In exchange, we will pay to the Bank floating rate payments based upon the London InterBank Offered Rate ("LIBOR") multiplied by the notional amount of the Transaction. During fiscal 2002, this arrangement reduced interest expense by $4.6 million. We valued the Transaction and the Debt on the transaction date. The mark-to-market adjustment of the Transaction included in long-term other assets was approximately $6.9 million at June 30, 2002.

        In April 2002, we entered into an interest rate contract (the "Contract") with an investment bank, Lehman Brothers ("Lehman"), to reduce the variable interest rate risk of the Transaction. The notional amount of the Contract is $412.5 million, representing 75 percent of the Debt. Under the terms of the Contract, we have the option to receive a payout from Lehman covering our exposure to LIBOR fluctuations between 5.5 percent and 7.5 percent for any four designated quarters. The Contract was valued at $5.7 million at inception and will be marked-to-market at each balance sheet date in accordance with SFAS No. 133. At June 30, 2002, the mark-to-market adjustment of the Contract was

24

$4.5 million. The mark-to-market adjustments of the Contract will be charged to interest expense through the Contract's termination date.

Foreign Currency Risk

        We conduct business on a global basis in several foreign currencies. We have established a foreign currency hedging program, utilizing foreign exchange forward contracts to hedge certain foreign currency transaction exposures. The objective of these forward contracts is to neutralize the impact of currency exchange rate movements on the operating results by offsetting gains and losses on the forward contracts with increases or decreases in foreign currency transactions. We do not use forward contracts for speculative or trading purposes. At June 30, 2002, we evaluated the effect that near-term changes in foreign exchange rates would have had on the fair value of our combined foreign currency position related to our outstanding forward contracts. If we had experienced an adverse change in foreign exchange rates of as much as 10 percent, the potential change in our foreign currency position would have had an immaterial effect on the results of our operations, financial position and cash flows.

        In March 2001, we entered into a 5-year foreign exchange forward contract (the "Forward Contract"), designated as a cash flow hedge, for the purpose of reducing the effect of exchange rate fluctuations on forecasted intercompany purchases by our subsidiary in Japan. Under the terms of the Forward Contract, we are required to exchange 1.2 billion yen for $11.0 million on a quarterly basis from June 2001 to March 2006. At June 30, 2002, 15 quarterly payments of 1.2 billion yen remained to be swapped at a forward exchange rate of 111.73 yen per U.S. dollar. At June 30, 2002, a mark-to-market adjustment, net of tax, of $1.0 million was reflected in the balance sheet. At June 30, 2002, based on effectiveness tests comparing forecasted transactions through the Forward Contract expiration date to the Forward Contract's cash flow requirements, the Company does not expect to incur a material charge to income during the next twelve months.

        We had approximately $27.0 million and $30.5 million of forward contracts not designated as hedges at June 30, 2002 and 2001, respectively. Unrealized losses of $2.0 million and $0.4 million were recognized in earnings as of June 30, 2002 and 2001, respectively.

        The net realized foreign currency transaction gain was $1.6 million for the year ended June 30, 2002.

25

Item 8. Financial Statements and Supplementary Data

Index to Consolidated Financial Statements and Financial Statement Schedule

Supporting Financial Statement Schedule:

Schedules other than those listed above have been omitted since they are either not required, are not applicable, or the required information is shown in the Consolidated Financial Statements or related Notes.

26

REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders and Board of Directors of International Rectifier Corporation

        In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of International Rectifier Corporation and its subsidiaries at June 30, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2002 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and the financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Los Angeles, California
July 25, 2002, except for Note 13 as to which the date is August 2, 2002.

27

INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

(In 000's except per share amounts)

The accompanying notes are an integral part of this statement.

28

INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(In 000's except share amounts)

The accompanying notes are an integral part of this statement.

29

INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME

(In 000's except share amounts)

The accompanying notes are an integral part of this statement.

30

INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(In 000's)