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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended June 30, 1994
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) 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)
Delaware 95-1528961
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
233 Kansas Street
El Segundo, CA 90245
(Address of principal executive offices, zip code)
Registrant's telephone number, including area code: (310) 322-3331
______________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
------------------- ------------------------------------
Common Stock, par value $1 New York Stock Exchange
Pacific Stock Exchange
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 $375,324,681 (computed using the
closing price of a share of Common Stock on September 27, 1994 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 20,392,023 shares of the registrant's Common Stock, par value $1.00
per share, outstanding on September 28, 1994.
Portions of the registrant's definitive Proxy Statement for the Annual Meeting
of Stockholders scheduled to be held on November 21, 1994, which Proxy Statement
will be filed no later than 120 days after the close of the registrant's fiscal
year ended June 30, 1994, are incorporated by reference in Part III of this
Annual Report on Form 10-K.
TABLE OF CONTENTS
PART I
ITEM PAGE
- - - ---- ----
1. Business 1
2. Properties 10
3. Legal Proceedings 10
4. Submission of Matters to a Vote of the Security Holders 11
Additional Item. Directors and Executive Officers of the Registrant 12
PART II
5. Market for the Registrants' Common Equity and Related Stockholders'
Matters 14
6. Selected Financial Data 15
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 16
8. Financial Statements and Supplementary Data 20
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure (-NONE) 39
PART III
10. Directors and Executive Officers of the Registrant 39
11. Executive Compensation 39
12. Security Ownership of Certain Beneficial Owners and Management 39
13. Certain Relationships and Related Transactions 39
PART IV
14. Exhibits, Financial Statement Schedules, and Reports 39
PART I
ITEM 1. BUSINESS
INTRODUCTION
International Rectifier Corporation ("IR" or the "Company") is a major worldwide
supplier of power semiconductors. Power semiconductors switch or condition
electricity at relatively high voltage and current levels in products such as
automobiles, computers/peripherals, communications equipment and copiers.
The Company designs, manufactures and markets power semiconductors which are
used for power conversion. In the same way that oil is refined to produce
gasoline to power a car, electricity has to be converted to create power to
operate equipment. This process of power conversion can be viewed in four
stages: input rectification, control, switching, and output rectification.
Input rectification conditions off-line electricity, typically rectifying
alternating-current to direct-current. The control function measures incoming
electricity and sends a signal to the switch. The switch chops the energy into
small elements. Output rectification re-configures the elements into a form
usable by electrically operated equipment.
Because IR supplies products that perform each of the four basic functions in
power conversion, many circuits use more than one type of IR product. This
allows IR to develop products that work together to optimize overall circuit
performance, and enables the Company to capitalize more broadly on market-
leading products.
IR's products are used in all major market sectors. Applications for power
semiconductors in automobiles include anti-lock braking and fuel injection
systems, power accessories, and air bags. Computer/peripheral applications
include power supplies, disk drives, and printers. Office equipment
applications include copiers and facsimile machines. Consumer electronics and
lighting applications include home entertainment, household appliances and
fluorescent lighting ballasts. Communications applications include telephone
networks and modems. Power semiconductors are also used widely in industrial
applications such as motor-driven production lines, machine tools, fork lifts,
and welders.
According to statistics published by the Semiconductor Industry Association (the
"SIA"), the Company is the leader in the power MOSFET (Metal Oxide Semiconductor
Field Effect Transistor) segment with a 19% market share in calendar year 1993
for its trademarked HEXFET-R- power MOSFETs and IGBTs. SIA data indicates that
industry-wide sales of power MOSFETs were $1.1 billion in calendar 1993, an
increase of 23% over 1992 levels, and that, over the past five years, power
MOSFET sales have grown at an average rate of 26% per year.
The Company's major customers include industry leaders such as AT&T Technologies
Inc., Conner Peripherals, Inc., General Motors Corp., Hewlett Packard Co.,
International Business Machines Corp., Matsushita Electronics Corporation,
Sanken Electric Company, Ltd., Sony Corporation, Sporele and Siemens AG. In
fiscal year 1994 the Company's sales by region were approximately 46% from North
America, 27% from Europe, and 27% from Asia. IR has manufacturing facilities in
North America, Europe, and Asia, and uses subcontract assembly in Asia.
IR was founded as a California corporation in 1947 and reincorporated in
Delaware in 1979. Its executive offices are located at 233 Kansas Street, El
Segundo, California 90245 and its telephone number is (310) 322-3331.
POWER SEMICONDUCTOR INDUSTRY
Semiconductors are silicon-based chips that conduct and block electricity. The
semiconductor industry consists of integrated circuits ("ICs") and power
semiconductors. ICs operate at low power levels and perform multiple functions
to process and convey information in electronic signal form. IC capability is
largely defined by circuit density, which increases as its features are
miniaturized. The applications for ICs are generally concentrated in the
computer industry and have been subject to frequent redesign, short product life
cycles and rapid obsolescence. As a result, the demand for ICs has been highly
cyclical.
In contrast to ICs, power semiconductors operate at higher power levels and
perform a single function: they condition and control electricity to operate a
power supply, control a motor, or light a lamp. Their capability is largely
defined by the level of power that they can handle and their efficiency in
converting raw electric current into a more useful form. The amount of electric
current handled and the heat it generates limit the rate at which power
semiconductors can be miniaturized.
Advances in power semiconductor performance and cost-per-function have been
achieved through the use of MOS technology. MOS power transistors (power
MOSFETs and IGBTs) have gained an increasing share of the power transistor
market at the expense of bipolar transistors that also serve the switch
function.
MOS power transistors offer significant benefits over bipolar power transistors.
They provide much greater switching speed, which allows the design of higher
frequency, more compact circuits. They are activated by voltage rather than
current, so they require less external circuitry. MOS transistors are more
compatible with microprocessor controls. They offer more reliable long-term
performance and are more rugged, so they can better withstand adverse operating
conditions. Power MOSFETs and IGBTs compare favorably to bipolar power
transistors on a price/performance basis.
APPLICATIONS
Power semiconductors are used in a broad spectrum of commercial and industrial
applications, including many products with long life cycles. Because of this
more gradual rate of technological change and the diversity of applications, the
Company believes that the demand for power semiconductors is less cyclical than
ICs. Power semiconductor demand is driven by growth in the end markets,
conversion to new technologies, and the proliferation of new end-product
applications. The Company believes that markets driving future demand for power
semiconductors include:
PORTABLE ELECTRONICS. Advances in power semiconductors help extend battery
life and reduce product size and weight in a variety of battery-operated
products such as lap-top and notebook computers, personal digital
organizers, cellular telephones, household appliances and hand tools.
2
AUTOMOTIVE ELECTRONIC SYSTEMS. The concentration of solid state
electronics in recent model year automobiles has increased rapidly, as
safety and comfort features increase demands on the battery. Applications
include anti-lock braking systems, air-bags, fuel injection systems,
electric windows and adjustable mirrors and seats. Adoption of battery
operated electric vehicles to reduce emissions would dramatically increase
consumption of MOS transistors.
ELECTRONIC LIGHTING BALLASTS. Electronic lighting ballasts, which
incorporate MOS power semiconductors, significantly reduce the amount of
energy consumed in lighting. Conversion to electronic ballasts has been
driven by lower end-user operating costs and incentives from electric
utilities to encourage energy efficiency.
VARIABLE SPEED MOTORS. Variable-speed solid-state controls increase energy
efficiency and performance in a broad range of industrial and appliance
motors. In addition, clean air legislation is driving the conversion from
traditional chlorofluorocarbons ("CFCs") to less toxic but less efficient
refrigerants. Manufacturers of refrigerators and air conditioners
compensate for these less efficient chemicals by using more efficient
variable-speed motors.
PRODUCTS
The Company's products convert electrical power to make it more useable and
efficient in performing work such as operating power supplies, controlling
motors, and lighting lamps. The ability of the products to minimize energy lost
at each point in the power conversion process is central to their value.
Important growth applications include such energy-sensitive products as electric
automobiles, electronic fluorescent lights and more energy efficient
refrigeration and air conditioning equipment.
The Company's HEXFET power MOSFET products comprised about 66% of fiscal 1994
sales. IR also supplies IGBT transistors, Control ICs, high performance diodes,
and high power rectifiers and thyristors. The Company believes that this
complete line of power conversion products represents a competitive advantage,
as it is able to provide customers with integrated solutions to their power
conversion needs.
The Company's fastest-growing products have comprised a greater proportion of
its total revenues during each of the past three fiscal years. The table below
shows revenues of IR's growth and mature products as a percentage of revenues
for the periods indicated.
FISCAL YEARS ENDED JUNE 30,
---------------------------
1994 1993 1992
---- ---- ----
Growth (1) 81.9% 77.5% 75.8%
Mature (2) 18.1% 22.5% 24.2%
------ ------ ------
Total 100.0% 100.0% 100.0%
------ ------ ------
------ ------ ------
____________________
(1) Growth products consist of Hexfets, Schottky diodes, Fast Recovery diodes,
IGBT, Control ICs, and royalties.
(2) Mature products consist of high power rectifiers and thyristors.
3
SWITCHING PRODUCTS
MOS TRANSISTORS. MOS transistors (power MOSFETs and IGBTs) serve the switch
function in power conversion to provide an even, useable flow of power for
electronic equipment.
POWER MOSFETS. Through its HEXFET product line, the Company is the world leader
in power MOSFETs. The breadth and diversity of the market for these products
provide an element of stability in demand.
Applications for MOSFETs in automobiles include anti-lock braking and fuel
injection systems, power accessories and air bags. Computer/peripheral
applications include power supplies, disk drives, and printers. Office
equipment applications include copiers and facsimile machines. Consumer
electronics applications include home entertainment, videocameras, household
appliances, and power tools. Lighting applications include electronic
fluorescent ballasts and compact fluorescent bulbs. Industrial applications
include instrumentation and test equipment. Communications applications include
telephone networks and modems. Government and aerospace applications include
commercial and military satellites, communications equipment, command-and-
control systems, and missiles.
Market acceptance and brand recognition of HEXFETs have benefited from the
Company's emphasis on quality control and reliability, and the Company believes
its standards to be among the most stringent in the industry. Cumulative and
current data on long and short term product reliability is made available to
customers quarterly.
The Company fabricates the large majority of its power MOSFET wafers at HEXFET
America. Die from these wafers are assembled into packaged devices at HEXFET
America, IR's facilities in England and Mexico, and subcontract facilities in
Asia. See "-Manufacturing."
IGBTS. IGBTs also serve the switch function in power conversion applications
that require higher current and voltage than power MOSFETs handle efficiently.
IGBTs combine the ease of voltage-driven power MOSFET technology with the
conduction efficiency of bipolar transistor technology. 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 the Company believes electric vehicles will require
large quantities of IGBTs for each vehicle.
The Company's IGBT technology is closely related to its HEXFET technology, and
the Company views them as complementary products. The Company believes that its
patents on fundamental MOSFET technology also apply to IGBTs, and it is seeking
further patent protection on its IGBT technology.
CONTROL PRODUCTS
CONTROL ICS. Control ICs serve the control function of power conversion. These
devices perform the functions of several discrete components. This integration
allows circuit designers to simplify circuit design and assembly, improve
reliability and reduce overall system size and
4
cost. In sensing and responding to adverse operating conditions, Control IC
performance is superior to a safety or diagnostic circuit using discrete
components. IR's Control ICs draw on the Company's power MOSFET technology and
are designed to optimize the performance of both MOSFETs and IGBTs. The Company
believes that its power MOSFET patents also apply to a broad range of Control
ICs.
Control ICs are used in a wide variety of power supply, motor and lighting
control applications. These include industrial motor controls, stepper motor
controls, solenoid drivers, welding equipment, telecom switchers,
computer/peripherals, instrumentation and test equipment, fluorescent lighting
ballasts, and compact fluorescent light bulbs.
INPUT RECTIFICATION PRODUCTS
The Company also manufactures a broad line of rectifiers, diodes and thyristors
that serve the input rectification function of power conversion. These products
condition power to make it more efficient and useable, in principally industrial
end products that require power-handling capability from one amp to 5000 amps
and from 20 volts to 5000 volts. Applications include motor and lighting
controls, welding equipment, fork lifts, machine tools, induction heating,
locomotives, motor-driven production lines, smelting equipment, and power
supplies.
The Company recently consolidated its manufacturing facilities for its input
rectification products from three sites to a single site at its existing
facility in Turin, Italy. The consolidation was completed in the third quarter
of fiscal 1994.
OUTPUT RECTIFICATION PRODUCTS
The Company's Schottky diodes and Fast-Recovery diodes serve the output
rectification function of power conversion. Output rectification re-configures
the elements into a form usable by electrically operated equipment. Schottky
diodes are used with power MOSFETs in high-frequency applications such as
computer/peripherals. The Company's trademarked HEXFRED-R- 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 (or packaging). Wafer fabrication is 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 (often termed "die" or "chips") on each wafer.
Packaging or assembly is the sequence of production steps that divide the wafer
into individual chips and enclose the chips in external structures (termed
packages) that make them useable in a circuit. Power semiconductors generally
use the process technology and equipment already proven in ICs manufacturing.
The Company has production facilities in California, England, Italy, Mexico and
India. In addition, the Company has equipment at, or manufacturing supply
agreements with, subcontractors located in the Philippines, Japan, Taiwan and
Malaysia. IR fabricates substantially all of its power MOSFET wafers at HEXFET
America in Temecula, California. A wafer fabrication facility for IGBTs and
other
5
MOSFET devices as well as assembly operations for government and other advanced
products are located in El Segundo, California. Facilities that assemble
HEXFETs and other growth products are located in the United States and overseas,
in Company-owned and subcontract facilities, in order to take advantage of low
assembly costs and provide maximum customer service. In Tijuana, Mexico, the
Company assembles MOSFET products, IGBTs and other modules. The Company's
Oxted, England facility, which qualifies as a duty-free warehouse, assembles
MOSFETs and IGBTs as well as products used in certain military applications.
Since April 1, 1994 the Company has manufactured substantially all its high
power rectifiers and thyristors at its Turin, Italy facility. The Company also
has arrangements with third parties for product assembly in the Philippines,
Malaysia, Taiwan and Japan. In a duty-free zone in India, the Company has an
assembly facility for rectifiers and thyristors.
To meet rising demand for power MOSFETs, the Company is expanding wafer
fabrication at HEXFET America. Planned to be in production by the end of
calendar 1995, the Company believes that the estimated $75 million expansion
will increase by about 75% the Company's wafer capacity in power MOSFETs.
The expansion will position IR to aggressively address the fastest growing
segments of the power transistor market, high density MOSFETs and IGBTs.
Next-generation devices designed for production in the new fabrication facility
incorporate design and process advancements in the Company's proprietary HEXFET
and IGBT technologies. A core process with shared elements for both products
will enable the facility to combine flexibility with efficient high-volume
manufacturing techniques. The fabrication will be performed on six-inch
wafers and will use a continuous-flow layout similar to the one already in use
at HEXFET America which was designed for efficient, high volume fabrication with
reduced cycle times and is different from the functional layout that the
Company believes is commonly used by semiconductor manufacturers. Highly
automated processing and supply systems for gases, water, and other processing
chemicals have also contributed to continuous improvements in wafer yields at
this facility. Pilot runs of the new products on the specified equipment are
already underway at the Company's headquarters in El Segundo, California.
HEXFET America was selected for the fabrication expansion because it offers
several important benefits. Expanding at an existing facility allows the
Company to invest less in construction and more in production capacity. It
should require fewer additional employees than a totally new facility would and
enables IR to start up and operate the fabrication with seasoned staff already
in place. The accessibility of HEXFET America to the Company's research and
development staff in El Segundo eases the transition of the products from
development to manufacturing.
MARKETING, SALES AND DISTRIBUTION
The Company markets its products through sales personnel, representatives, or
distributors. The Company believes its ability to offer products that serve
each of the four functions of power conversion enhances its competitive position
in the overall power semiconductor market.
In fiscal year 1994 the Company's sales by region were approximately 46% from
North America, 27% from Europe, and 27% from Asia. The Company's domestic
direct sales force is organized in four sales zones. In Western Europe, the
Company's products are sold through its own sales force as well as through sales
agents and distributors. The Company's European sales and representative
offices are in England, Italy, Sweden, France, Germany, Finland, Denmark,
Poland, the Czech Republic, and
6
Hungary. In Asia IR has sales and representative offices in India, Japan,
Singapore, Hong Kong, and Korea.
Because many applications require products from several product groups, the
Company has organized its marketing efforts by market sector, rather than
product type. These business management groups focus on several key commercial
sectors and on government and aerospace business. In addition, the Company's
staff of applications engineers provides customers with technical advice and
support regarding the use of IR's products.
CUSTOMERS
In most cases, the Company's devices are incorporated in larger systems
manufactured by end product manufacturers. The Company's customers in the
automotive segment include General Motors Corp., Ford, Delco, Siemens AG and
Bosch. International Business Machines Corp., Hewlett Packard Co., Apple
Computer Inc. and Compaq purchase the Company's products in the computer
segment. Consumer electronics customers include Philips. Customers in the
telecommunications segment include AT&T Technologies, Inc. and Nokia. The
Company also sells its products to distributors including Arrow Electronics,
Future Electronics, and Pioneer Electronics/Pioneer Technology.
BACKLOG
As of June 30, 1994, the Company's backlog of orders was $121.8 million compared
to $85.3 million as of June 30, 1993. Backlog represents purchase orders which
have been released for shipment and are scheduled to be shipped within the
following 12 months. In accordance with industry practice, IR may in certain
circumstances release customers from purchase orders without penalty.
Increasingly, major customers are operating their businesses with shorter lead
times and are placing orders on a periodic rather than an annual basis. Orders
are cancelable and backlog is not necessarily indicative of sales for any future
period.
RESEARCH AND DEVELOPMENT
The Company is involved in ongoing research and development directed toward new
processes, devices and packages as well as continued improvement of quality and
reliability in existing products. In fiscal years 1994, 1993 and 1992, the
Company spent approximately $16.4 million, $14.1 million, and $9.4 million,
respectively, on research and development activities. In fiscal 1994, the
Company introduced a variety of products designed to address growth
opportunities identified by market sector: high-density, high-efficiency HEXFETs
and surface-mount packages for portable electronics; Control ICs for lighting
and motor control applications; IGBT modules for motor controls; and HEXFETs
with diagnostic and safety features for auto applications. IR's research and
development program is focused on advancing and diversifying the HEXFET product
line, expanding the related IGBT products, and developing Control ICs and other
power products that work in combination with HEXFETs and IGBTs to improve system
performance. IR's research and development staff also works with the marketing
staff to develop new products that address specific customer needs. Efforts are
directed towards developing new processes that enable the Company to produce
smaller, more efficient devices. Efforts are also directed at reducing assembly
costs and developing new package designs and assembly processes.
7
INTELLECTUAL PROPERTY
The Company has made significant investments in developing and protecting its
intellectual property. Through successful enforcement of its patents, the
Company has entered into a number of license agreements, generated royalty
income, and received substantial payments in settlement of litigation. The
Company currently has 61 unexpired U.S. patents, which expire from 1995 to 2011
(those patents fundamental to the Company's operations expire between 2000 and
2010), 29 U.S. patents pending, and 67 unexpired and 58 pending corresponding
foreign patents in a number of countries. IR is also licensed to use certain
patents owned by others. Under the terms of an agreement with Unitrode
Corporation that terminates in March 2000, the Company pays Unitrode Corporation
approximately 12% of IR's net patent royalty income. The Company has several
registered trademarks in the United States and abroad including trademarks for
HEXFET. The Company believes that its proprietary technology and intellectual
property contribute to its competitive advantage.
Since the Company believes that its power MOSFET patents are broadly applicable
in the marketplace, it is committed to enforcing its rights under those patents
and is pursuing additional license agreements. The Company presently has
royalty-bearing license agreements with ten companies, most of which are
competitors: Harris Corporation; Hitachi, Ltd.; Matsushita Electronics
Corporation; National Semiconductor Corporation; NEC Corporation; Sanken
Electric Company, Ltd.; SGS-Thomson Microelectronics, Inc.; Siliconix
incorporated; Toshiba Corporation; and Unitrode Corporation.
Certain of the Company's fundamental MOSFET patents have been subjected to
reexamination in the United States Patent and Trademark Office. See "Note 9 -
Intellectual Property Rights." Although no assurance can be given as to the
ultimate outcome of the Company's patent enforcement efforts or the success of
the Company's patent licensing program, the Company believes that its patent
portfolio will be the source of continuing royalty income.
COMPETITION
The Company encounters differing degrees of competition for its various
products, depending upon the nature of the product and the particular market
served. Generally, the semiconductor industry is highly competitive, and many
of the Company's competitors are larger companies with greater financial
resources than IR. The Company believes that its breadth of product line and
its ability to bundle products that serve the different functions into one
package distinguish it from its competitors. IR's products compete with
products manufactured by others based on breadth of product line, quality,
price, reliability, over-all performance of the products, delivery time to the
customer, and service (including technical advice and support). The Company's
competitors include Eupec, Harris Corporation, Hitachi Ltd., Motorola, Inc., NEC
Corporation, Philips International B.V., Powerex, Inc., Samsung Semiconductor
Inc., SGS-Thomson Microelectronics, Siemens AG, Siliconix incorporated, Toshiba
Corporation and Westcode Semiconductors Ltd.
8
ENVIRONMENTAL MATTERS
Federal, state and local laws and regulations impose various restrictions and
controls on the discharge of certain materials, chemicals and gases used in
semiconductor processing. The Company does not believe that compliance with
such laws and regulations will have a material adverse effect on its financial
position.
The Company and Rachelle Laboratories, Inc. ("Rachelle"), its former
pharmaceutical subsidiary which discontinued operations in 1986, have been named
among several hundred entities as potentially responsible parties ("PRPs") under
the provisions of the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), in connection with the United States
Environmental Protection Agency's ("EPA") investigation of the disposal of
allegedly hazardous substances at a major superfund site in Monterey Park,
California (the "OII site"). Certain PRPs who settled certain claims with the
EPA under two consent decrees, filed suit in Federal Court in May 1992 against a
number of other PRPs, including IR, for cost recovery and contribution under
CERCLA. The lawsuit against IR, relating to the first and second consent
decrees, was settled in August 1993 for the sum of $40,000 to avoid protracted
and expensive litigation. Claims have been made with the Company's insurers
with respect to the OII site matter; however, there can be no assurance that the
insurance coverage attaches to these claims. There remains the potential for
litigation against IR relating to future consent decrees. The Company does not
believe that either it or Rachelle is responsible for the disposal at the OII
site of any material constituting hazardous substances under CERCLA. Although
the ultimate resolution of this matter is unknown, the Company believes that it
will not have a material adverse impact on its financial position.
In May 1993 the Company purchased property from its Employee Profit Sharing and
Retirement Plan. At the time of the purchase it was determined that the
property required clean up of seepage from a storage tank, at an estimated
additional cost of $500,000. The Company commenced the clean up in fiscal year
1994, and the costs to be incurred will be capitalized as additional costs of
the property.
On July 18, 1994, the Company received a letter from the State of Washington
Department of Ecology notifying the Company of a proposed finding that the
Company is a potentially liable person ("PLP") for alleged PCE contamination
(also known as perchloroethylene, tetrachloroethylene, and other names) ("PCE")
of real property and groundwater in Yakima County, Washington. The letter
alleges that the Company arranged for disposal or treatment of the PCE or
arranged with a transporter for the disposal or treatment of the PCE in Yakima
County. The Company replied on August 11, 1994 to this letter and stated that
it has not contributed to PCE or other solvent contamination at the Yakima
County site and that it should not be designated a PLP.
The Company received a letter dated September 9, 1994, from the State of
California Department of Toxic Substances Control stating that the Company may
be a PRP for the deposit of hazardous substances at a facility in Whittier,
California. The Company's investigation of this matter has just begun and
therefore an opinion cannot be expressed as to any ultimate responsibility.
9
EMPLOYEES
As of June 30, 1994, the Company employed approximately 3,100 people, of whom
approximately 2,085 are employed in North America, 970 in Western Europe and 45
in Asia. The Company is not a party to any collective bargaining agreements.
The Company considers its relations with its employees to be good.
ITEM 2. PROPERTIES
The Company's operations occupy a total of approximately 864,000 square feet, of
which approximately 477,000 square feet are located within the United States.
Of the worldwide total, approximately 247,000 square feet are leased and the
balance is owned by the Company.
IR's leases expire between 1994 and 2012. If the Company is unable to renew
these leases upon expiration, it believes that it could find other suitable
premises without any material adverse impact on its operations.
The Company's major facilities are in the following locations:
Total Square Feet
-----------------
Facility Owned Leased Expiration of Lease
- - - -------- ----- ------ -------------------
Temecula, California 287,000 --- ---
El Segundo, California 93,000 91,000 July 31, 1995 - July 31, 2004
Tijuana, Mexico --- 89,000 (1)
Oxted, England 45,000 15,000 March 27, 2012
Turin, Italy 110,000 6,000 June 30, 1995 - March 31,1998
(1) Since the Company's lease on its assembly facility in Mexico expired, it
has rented the same space on a month to month basis due to pending rezoning
of the neighborhood. The Company has identified comparable space available
for lease on comparable terms if such assembly facility needs to be moved.
The Company believes that these facilities are adequate for its current and
anticipated near term operating needs. IR estimates that it currently utilizes
approximately 81% of its worldwide manufacturing capacity. To meet rising
demand for power MOSFETs, the Company is expanding wafer fabrication at HEXFET
America. Planned to be in production by the end of calendar 1995, the Company
believes that the estimated $75 million expansion will increase by about 75% the
Company's wafer capacity in power MOSFETs.
The Company has nine sales offices located throughout the United States, and
other sales and technical support offices in Canada, France, Germany, Hong Kong,
India, China, Singapore, and Scandinavia which operate in leased facilities.
ITEM 3. LEGAL PROCEEDINGS
SGS-Thomson Microelectronics, Inc. filed suit against the Company in June 1991
in Federal District Court in Texas, charging infringement of U.S. patent
4,553,314. The suit was thereafter transferred to the Federal District Court in
Los Angeles, California. Subsequent to transfer, SGS amended its complaint
10
to charge additionally infringement of U.S. patents 4,495,513 and 4,712,127.
The District Court on February 1, 1993 dismissed for lack of standing SGS's
claims for infringement of the '127 and '513 patents. The same Court ruled on
March 15, 1993 that the remaining SGS patent in the same case ('314) is
unenforceable. SGS appealed the February and March summary judgment rulings, as
well as the order transferring the case to California, to the Court of Appeals
for the Federal Circuit. IR then cross-appealed the District Court's denial of
IR's motion for summary judgment as to the invalidity of the '314 patent. In
July 1994, the Federal Circuit vacated the District Court's grants of summary
judgment as to the '513, '127 and '314 patents, affirmed the District Court's
denial of summary judgment, and reversed the transfer order, but remanded the
case for continued proceedings in California. SGS petitioned the U.S. Supreme
Court for a writ of certiorari as to various rulings of the Federal Circuit
relating to jurisdictional and venue issues. No trial date has yet been set and
the ultimate outcome of the case as to the three patents is unknown. In a
separate proceeding before the California District Court, the Court in July 1994
granted the Company's motions to enforce its license agreement with SGS,
requiring SGS to pay royalties under IR's patents 4,959,699 and 4,642,666 as to
SGS's sales of power MOSFET, IGBT and power IC products. SGS is appealing this
ruling on royalties to the Federal Circuit. The Company's separate action
against SGS and its Italian affiliate, SGS-Thomson Microelectronics, S.r.L., for
infringement of the Company's U.S. patents 5,008,725 and 5,130,767 is continuing
before the same Court. Trial of the Company's action has been set for January
25, 1995.
The Company, its directors and certain officers have been named as defendants in
three class action lawsuits filed in federal court in California. The last two
suits also name Kidder, Peabody & Co. Incorporated and Montgomery Securities.
These suits seek unspecified compensatory and punitive damages for alleged
intentional and negligent misrepresentations and violations of the federal
securities laws. They generally allege that the Company and the other
defendants made materially false statements and/or omitted to state material
facts in connection with the public offering of the Company's common stock
completed on April 24, 1991 and/or the redemption and conversion of the
Company's 9% Convertible Subordinated Debentures Due 2010 completed in June
1991. Although the Company believes that the claims alleged in the suits are
without merit, the ultimate outcome thereof cannot be presently determined.
Accordingly, no provision for any liability that may result upon adjudication of
these matters has been made in the consolidated financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF THE SECURITY HOLDERS
Not applicable.
11
ADDITIONAL ITEM. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers and directors of IR are:
Eric Lidow 81 President; Chairman of the Board; Chief Executive
Officer
Alexander Lidow 39 Executive Vice President-Operations; Director
Derek Lidow 41 Executive Vice President; Director
Robert J. Mueller 65 Executive Vice President-External Affairs and Business
Development; Director
Michael P. McGee 35 Vice President-Chief Financial Officer
George Krsek 73 Director
Jack O. Vance 69 Director
Rochus E. Vogt 64 Director
Donald S. Burns 69 Director
James D. Plummer 49 Director
Eric Lidow is a founder of the Company and has been the Chief Executive Officer
and a director of the Company since its inception in 1947.
Alexander Lidow, Ph.D., has been employed by the Company since 1977. He served
as the Semiconductor Division's Vice President-Research and Development since
July 1979, was promoted to Semiconductor Division Executive Vice President-
Manufacturing and Technology in March 1985, and became the President of the
Electronic Products Division in July 1989. In August 1992, Dr. Lidow was
elected Executive Vice President of Operations. He was elected a director in
September 1994. Dr. Lidow is a son of Eric Lidow.
Derek B. Lidow, Ph.D., has been employed by the Company since 1976. He served
as the Semiconductor Division's Vice President-Operations since March 1980, was
promoted to Semiconductor Division Executive Vice President-Marketing and
Administration in March 1985, and became President of the Power Products
Division in July 1989. In August 1992, Dr. Lidow was elected Executive Vice
President and in July 1993 assumed responsibilities for worldwide sales and
marketing. He was elected a director in September 1994. Dr. Lidow is a son of
Eric Lidow.
Robert J. Mueller has been employed by the Company since November 1961. He
served as Vice President of Marketing for the U.S. Semiconductor Division from
1963 until October 1969 when he was promoted to Corporate Vice President-Foreign
Operations. Mr. Mueller became Executive Vice President-World Marketing and
Foreign Operations in April 1978, Corporate Executive Vice President-External
Affairs and Worldwide Sales in July 1989, and in July 1993 became Executive Vice
President-External Affairs and Business Development. He was elected a director
in 1990.
Michael P. McGee has been employed by the Company since 1990. He joined the
Company in July 1990 as Director of Corporate Accounting and was promoted to
Corporate Controller in December 1990. Mr. McGee became Vice President,
Controller and Principal Accounting Officer in 1991, and in 1993,
12
became Vice President-Chief Financial Officer. From 1985 to the time he joined
the Company, Mr. McGee was a senior manager and audit manager at Ernst and
Young.
George Krsek, Ph.D., was President of Houba, Inc. a pharmaceutical firm from
1975 to July 1994, and is currently President of Konec L.L.C., a management
consulting company. He has been a director of the Company since 1979.
Jack O. Vance became the Managing Director of Management Research, a management
consulting firm in November 1990. From 1960 through 1989 he was a director of
McKinsey & Co., Inc., a management consulting firm. During the years 1973
through 1989 he was also the Managing Director of the firm's Los Angeles office.
He has been a director of the Company since 1988. He is also a director of
Hillhaven Corporation, International Technology Corporation, Escorp, The Nichols
Institute, The Olson Company, University Restaurant Group, and FCG Enterprises,
Inc.
Rochus E. Vogt, Ph.D., is a Professor of Physics, California Institute of
Technology, and acted as Provost from 1983 through 1987. He has been a director
of the Company since 1984.
Donald S. Burns has been Chairman, President and Chief Executive Officer of
Prestige Holdings, Ltd., a property management and business consulting firm
since 1978. Mr. Burns was elected a director of the Company in 1993. He is
also a director of ESI Corporation and International Technology Corporation.
James D. Plummer, Ph.D., has been the John M. Fluke Professor of Electrical
Engineering, Stanford University since 1988 and Director of Stanford's
Integrated Circuits Laboratory since 1984. Mr. Plummer was elected a director
of the Company in September 1994.
13
PART II
ITEM 5. MARKET FOR THE REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDERS'
MATTERS
Price Range of Common Stock
---------------------------
(in Dollars)
First Second Third Fourth Stockholders
Fiscal Quarter Quarter Quarter Quarter at
Year High Low High Low High Low High Low Year End
- - - ---- ---- --- ---- --- ---- --- ---- --- --------
1994 13 10 1/4 14 7/8 10 1/4 19 13 7/8 17 1/8 13 1/2 1,787
1993 9 7/8 7 3/4 13 8 3/4 13 5/8 11 12 5/8 9 7/8 2,006
The Company's Common Stock is traded on the New York Stock Exchange under the
symbol "IRF".
No dividends have been recently declared or paid. The Company does not intend
to pay cash dividends in the foreseeable future as all funds will be used to
expand operations. Furthermore, under certain credit agreements, the Company is
not permitted to pay any cash dividends.
14
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data as of June 30, 1994 and 1993 and for
the fiscal years ended June 30, 1994, 1993 and 1992 are derived from the audited
consolidated financial statements of the Company and should be read in
conjunction with the audited consolidated financial statements and notes with
respect thereto included herein. The selected consolidated financial data as of
June 30, 1992, 1991 and 1990, and for the fiscal years ended June 30, 1991 and
1990 are derived from audited consolidated financial statements of the Company
which are not included herein.
FISCAL YEARS ENDED JUNE 30,
---------------------------------------------------------------------
1994 1993 1992 1991 1990
--------- --------- --------- --------- ---------
STATEMENT OF OPERATIONS DATA (IN THOUSANDS
EXCEPT PER SHARE DATA) (1)
Revenues $ 328,882 $ 281,732 $ 265,495 $ 252,800 $ 229,863
Cost of sales 219,944 202,684 186,437 167,044 162,075
--------- --------- --------- --------- ---------
Gross profit 108,938 79,048 79,058 85,756 67,788
Selling and administrative expense 69,008 62,637 58,771 51,544 41,526
Research and development expense 16,381 14,083 9,405 7,538 6,585
Restructuring charge -- -- -- 1,000 --
--------- --------- --------- --------- ---------
Operating profit 23,549 2,328 10,882 25,674 19,677
Interest expense, net (3,625) (2,250) (1,436) (13,266) (17,062)
Other income (expense) (1,050) (2,675) 1,066 5,825 8
--------- --------- --------- --------- ---------
Income (loss) before income taxes and
extraordinary item 18,874 (2,597) 10,512 18,233 2,623
Provision for income tax 3,160 436 1,275 1,086 466
--------- --------- --------- --------- ---------
Income (loss) before extraordinary item 15,714 (3,033) 9,237 17,147 2,157
Extraordinary item, net -- -- -- 726 --
--------- --------- --------- --------- ---------
Net income (loss) $ 15,714 $ (3,033) $ 9,237 $ 16,421 $ 2,157
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Income (loss) per share:
Before extraordinary item $ 0.78 $ (0.15) $ 0.46 $ 1.30 $ 0.18
Extraordinary item -- -- -- (0.06) --
--------- --------- --------- --------- ---------
Net income (loss) per share $ 0.78 $ (0.15) $ 0.46 $ 1.24 $ 0.18
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Average common and common equivalent
shares outstanding 20,428 20,087 20,107 13,210 11,733
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
AT JUNE 30,
---------------------------------------------------------------------
Balance Sheet Data (In thousands) 1994 1993 1992 1991 1990
--------- --------- --------- --------- ---------
Working capital $ 67,165 $ 58,116 $ 67,538 $ 74,900 $ 25,889
Total assets 330,574 278,448 285,880 250,263 217,532
Short-term debt 33,310 27,539 27,135 15,821 27,309
Long-term debt, less current maturities 26,817 11,810 11,535 11,921 120,139
Stockholders' equity 202,943 186,074 191,703 179,535 21,572
(1) Certain reclassifications have been made to previously reported amounts to
conform with current year presentation.
15
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.
FISCAL YEARS ENDED JUNE 30,
----------------------------------
1994 1993 1992
---- ---- ----
Revenues 100.0% 100.0% 100.0%
Cost of sales 66.9 71.9 70.2
----- ----- -----
Gross profit 33.1 28.1 29.8
Selling and administrative expense 21.0 22.2 22.1
Research and development expense 5.0 5.0 3.5
----- ----- -----
Operating profit 7.1 0.9 4.2
Interest expense, net (1.1) (0.8) (0.6)
Other income (expense) (0.3) (1.0) 0.4
----- ----- -----
Income (loss) before income taxes 5.7 (0.9) 4.0
Provision for income taxes 0.9 0.2 0.5
----- ----- -----
Net income (loss) 4.8% (1.1)% 3.5%
----- ----- -----
----- ----- -----
1994 COMPARED WITH 1993
The Company operates on a fiscal calendar under which the twelve months ended
July 3, 1994 consisted of 52 weeks compared to 53 weeks in the twelve months
ended July 4, 1993.
Revenues for fiscal 1994 increased 16.7% to $328.9 million from $281.7 million
in the prior year. The Company's revenue increase reflected continued growing
demand for the Company's power MOSFET and related devices which resulted in a
23.4% increase in revenues from these products. Offsetting this revenue
increase was a 6.2% decrease in revenues from the Company's thyristor and
rectifier product lines. This downturn reflected slow starting economies in key
European markets in the first half, and the pruning of these mature product
lines. Changes in foreign exchange rates negatively impacted revenues by
approximately $2.0 million. Revenues for fiscal 1994 also included $9.0 million
of net patent royalties compared to $9.5 million in the prior period.
Gross profit was 33.1% of revenues ($108.9 million) in fiscal 1994 versus 28.1%
of revenues ($79.0 million) in fiscal 1993. The increased margin reflected IR's
recovery from production constraints in fiscal 1993. In addition, greater
MOSFET manufacturing volume and efficiencies resulted in lower per unit product
costs and enabled the Company to balance output to market demand and return to a
normal mix of original equipment manufacturers, distribution and higher margin
spot market business.
In the fourth quarter of fiscal 1993 the Company extended the useful lives of
certain assets. This change positively impacted gross profit by approximately
$2.6 million (0.8% of revenues) during fiscal 1994.
16
In fiscal 1994, selling and administrative expense was 21.0% of revenues ($69.0
million) versus 22.2% of revenues ($62.6 million) in fiscal 1993. The decreased
percentage reflects the Company's continued commitment to reducing
operating expenses as a percentage of revenues.
In fiscal 1994, the Company's research and development expenditures increased
$2.3 million to $16.4 million (5.0% of revenues) from $14.1 million (5.0% of
revenues) in the prior period. The Company's research and development program
was focused on the advancement and diversification of the HEXFET product line
and expansion of the related IGBT products, the development of Control ICs and
power products that work in combination with HEXFETs and IGBTs to improve system
performance. Included in 1994 research and development expenses are the costs
associated with an activity started in fiscal 1994, in Japan, where efforts are
directed at reducing assembly costs and developing new assembly processes.
The major components of other expense include a $0.9 million charge for the
consolidation of the Company's power products operations, $0.4 million of
severance costs and $0.3 million on the disposal of property, plant and
equipment, offset by $0.4 million in foreign currency transaction gains.
1993 COMPARED WITH 1992
The Company operates on a fiscal calendar year under which the twelve months
ended July 4, 1993 consisted of 53 weeks compared to 52 weeks in the twelve
months ended June 28, 1992.
Revenues for fiscal 1993 increased 6.1% to $281.7 million from $265.5 million in
the prior year. The Company's revenue increase was primarily a result of higher
sales of the Company's power MOSFET devices and increased net patent royalties.
Changes in foreign exchange rates negatively impacted revenues by approximately
$2.5 million. Revenues for fiscal 1993 also include $9.5 million of net patent
royalties compared to $5.7 million in the prior period.
During fiscal 1992 and the first three fiscal quarters of 1993, sales of the
Company's power MOSFET devices were constrained because of assembly output
limitations. In the second half of 1992, the Company began a program to expand
assembly capacity for power MOSFETs at HEXFET America. During this expansion
program a subcontractor that provided about 30% of IR's fast-growing product
assembly output quit the business. Delays in receiving and ramping up equipment
at HEXFET America were compounded by the need to replace the subcontractor.
Product shortages curtailed IR's growth and negatively affected its share of the
power MOSFET market.
Gross profit was 28.1% of revenues ($79.0 million) in fiscal 1993 versus 29.8%
of revenues ($79.1 million) in fiscal 1992. Margins reflected less efficient
operation during the above assembly expansion ramp-up and product allocation
that favored industry-leading original equipment manufacturer customers over
higher-margin spot market business. Gross margin for the first half of fiscal
1993 was 26.8% of revenues as compared to 29.2% of revenues for the last half of
fiscal 1993. First-half margins also reflected a decrease in wafer fabrication
rates to accommodate a lower assembly production rate. Second-half margins
reflected greater manufacturing volume and efficiencies and an increase in net
patent royalties.
17
In fiscal 1993, selling and administrative expense increased $3.8 million to
$62.6 million (22.2% of revenues) from $58.8 million (22.1% of revenues) in the
prior period. These increases reflect planned revenue increases, as well as
increases associated with an additional week of operations reported in fiscal
1993.
In fiscal 1993, the Company's research and development expenditures increased
$4.7 million to $14.1 million (5.0% of revenues) from $9.4 million (3.5% of
revenues) in the prior period. The Company's research and development program
is focused on the advancement and diversification of the HEXFET product line and
expansion of the related IGBT products. Efforts were also directed to the
development of Control ICs and power products that work in combination with
HEXFETs and IGBTs to improve system performance. The increase in research and
development expenditures in fiscal 1993 contributed to more new product
introductions in fiscal 1993.
Other expense included a $1.1 million charge for the settlement of a breach of
contract lawsuit, $1.1 million of severance costs and $0.2 million related to
the buyout of a lease upon early termination.
SEASONALITY
The Company has experienced moderate seasonality in its business in recent
years. On average over the past three years, the Company has reported
approximately 47% of annual revenues in the first half and 53% in the second
half of its fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1994, the Company had established $77.0 million in domestic and
foreign revolving credit facilities, of which $27.2 million had been borrowed by
the Company. Based upon covenant and collateral limitations under the revolving
credit facilities, the Company had $26.5 million available for borrowing at June
30, 1994. In addition, at June 30, 1994 the Company had available approximately
$20.0 million of unused lines of credit for capital equipment, $13.1 million of
cash and cash equivalents, and had commitments of approximately $7.5 million for
capital equipment.
During fiscal 1995 the Company intends to spend approximately $75 million to
expand wafer fabrication capacity at its HEXFET America facility. In addition,
the Company intends to spend approximately $35 million to expand or maintain
assembly capacity, to enhance its Management Information Systems infrastructure
and to maintain its existing facilities. The Company intends to fund these
capital expenditures and meet its short term liquidity requirements through cash
and cash equivalents on hand, anticipated cash flows from operations, funds
available from existing credit facilities, and funds from external financial
sources, including, but not limited to, public or private offerings of
debt or equity. The Company is currently negotiating the issuance of taxable
bonds by the County of Riverside, California, and backed by the U.S. Department
of Housing and Urban Development. However, there can be no assurance that any
financing will be available under cost effective terms.
Although the Company believes that the class action lawsuits brought against the
Company and its Board of Directors (See "Legal Proceedings") are without merit,
the ultimate outcome thereof cannot be presently determined. Accordingly, the
Company has not made any provision for any liability, if any,
18
that may result upon adjudication of these matters. For the possible effects of
environmental matters on liquidity, see "Business - Environmental Matters".
INCOME TAXES
Due in part to the utilization of net operating loss carryforwards ("NOLs"), the
Company's effective income tax rate in fiscal 1994 was approximately 17%. At
June 30, 1994, the Company had NOLs of approximately $28.8 million for federal
income tax purposes. These NOLs expire beginning in 2004. The Company also has
approximately $5.3 million of tax credits available to offset future U.S. taxes.
In addition, the Company anticipates that it will be eligible to receive
California state tax credits equal to 6% of the cost of most of the Company's
equipment purchased and placed in service in California on or after January 1,
1994. When the NOLs and other available tax credits are fully utilized, the
Company will be subject to a normalized tax rate in the range of 35% - 40%.
19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
PAGE
----
Report of Independent Accountants 21
Financial Statements
Consolidated Statement of Operations for the Fiscal Years Ended
June 30, 1994, 1993, and 1992 22
Consolidated Balance Sheet as of June 30, 1994 and 1993 23
Consolidated Statement of Stockholders' Equity for the Fiscal
Years Ended June 30, 1994, 1993, and 1992 24
Consolidated Statement of Cash Flows for the Fiscal Years Ended
June 30, 1994, 1993, and 1992 25
Notes to Consolidated Financial Statements 26
Supporting Financial Statement Schedules:
SCHEDULE NO. PAGE
- - - ------------ ----
V Property, Plant and Equipment for the Fiscal Years Ended
June 30, 1994, 1993, and 1992 F-1
VI Accumulated Depreciation, Depletion and Amortization of
Property, Plant and Equipment for the Fiscal Years Ended
June 30, 1994, 1993, and 1992 F-2
VIII Valuation and Qualifying Accounts and Reserves for the Fiscal
Years Ended June 30, 1994, 1993, and 1992 F-3
IX Short-Term Borrowings for the Fiscal Years Ended June 30,
1994, 1993, and 1992 F-4
X Supplementary Statement of Operations Information for the
Fiscal Years Ended June 30, 1994, 1993, and 1992 F-5
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.
20
REPORT OF INDEPENDENT ACCOUNTANTS
The Shareholders and Board of Directors
International Rectifier Corporation
We have audited the accompanying consolidated financial statements and the
financial statement schedules of International Rectifier Corporation and
Subsidiaries as of June 30, 1994 and 1993, and for the fiscal years ended June
30, 1994, 1993 and 1992 as listed on the index on page 20 of this Form 10-K.
These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedules based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of International
Rectifier Corporation and Subsidiaries at June 30, 1994 and 1993, and the
consolidated results of their operations and their cash flows for the fiscal
years ended June 30, 1994, 1993 and 1992, in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedules referred to above, when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material respects, the
information required to be included therein.
As discussed in Note 10 to the accompanying consolidated financial statements,
three class action lawsuits have been filed against the Company and its Board of
Directors (two of whom are also officers). The ultimate outcome thereof cannot
presently be determined. Accordingly, no provisions for any liability that may
result upon adjudication of these matters has been made in the accompanying
consolidated financial statements.
/s/ COOPERS & LYBRAND
- - - -----------------------
Coopers & Lybrand
Los Angeles, California
July 26, 1994
21
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In 000's except per share amounts)
FISCAL YEARS ENDED JUNE 30,
---------------------------
1994 1993 1992
---- ---- ----
Revenues $ 328,882 $ 281,732 $ 265,495
Cost of sales 219,944 202,684 186,437
--------- --------- ---------
Gross profit 108,938 79,048 79,058
Selling and administrative expense 69,008 62,637 58,771
Research and development expense 16,381 14,083 9,405
--------- --------- ---------
Operating profit 23,549 2,328 10,882
Other income (expense):
Interest expense, net (3,625) (2,250) (1,436)
Other, net (1,050) (2,675) 1,066
--------- --------- ---------
Income (loss) before income taxes 18,874 (2,597) 10,512
Provision for income taxes (Note 5) 3,160 436 1,275
--------- --------- ---------
Net income (loss) $ 15,714 $ (3,033) $ 9,237
--------- --------- ---------
--------- --------- ---------
Net income (loss) per share $ 0.78 $ (0.15) $ 0.46
--------- --------- ---------
--------- --------- ---------
Average common and common equivalent
shares outstanding 20,428 20,087 20,107
--------- --------- ---------
--------- --------- ---------
The accompanying notes are an integral part of this statement.
22
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In 000's except share amounts)
JUNE 30, JUNE 30,
1994 1993
---- ----
Assets
Current assets:
Cash and cash equivalents $ 13,051 $ 8,545
Trade accounts receivable, less allowance for doubtful accounts 67,595 55,004
($677 in 1994 and $607 in 1993)
Inventories 73,429 62,609
Prepaid expenses 2,779 1,731
--------- ---------
Total current assets 156,854 127,889
Property, plant and equipment, at cost, less accumulated depreciation 158,567 138,518
($112,411 in 1994 and $98,250 in 1993)
Investments and long-term notes receivable 2,248 2,251
Other assets 12,905 9,790
--------- ---------
Total assets $ 330,574 $ 278,448
--------- ---------
--------- ---------
Liabilities and stockholders' equity
Current liabilities:
Bank loans (Note 2) $ 27,205 $ 24,007
Long-term debt, due within one year (Note 2) 6,105 3,532
Accounts payable 36,965 27,846
Accrued salaries, wages and commissions 10,264 9,376
Other accrued expenses 9,150 5,012
--------- ---------
Total current liabilities 89,689 69,773
Long-term debt, less current maturities (Note 2) 26,817 11,810
Deferred income 1,199 1,402
Other long-term liabilities 9,320 9,073
Deferred income taxes (Note 5) 606 316
Commitments and contingencies (Notes 7, 8, 9, 10, and 11)
Stockholders' equity (Note 3):
Common shares, $1 par value, authorized: 30,000,000; issued 20,352 20,234
and outstanding: 20,352,277 shares in 1994 and 20,233,802
shares in 1993
Preferred shares, $1 par value, authorized: 1,000,000; issued -- --
and outstanding: none in 1994 and 1993
Capital contributed in excess of par value of shares 168,078 167,148
Retained earnings 19,500 3,786
Cumulative translation adjustments (4,987) (5,094)
--------- ---------
Total stockholders' equity 202,943 186,074
--------- ---------
Total liabilities and stockholders' equity $ 330,574 $ 278,448
--------- ---------
--------- ---------
The accompanying notes are an integral part of this statement.
23
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In 000's except share amounts)
CAPITAL
CONTRIBUTED
IN EXCESS OF RETAINED CUMULATIVE
COMMON PAR VALUE EARNINGS TRANSLATION
SHARES OF SHARES (DEFICIT) ADJUSTMENTS TOTAL
------ --------- --------- ----------- -----
BALANCE, JUNE 30, 1991 $ 19,810 $164,938 $ (2,418) $ (2,795) $179,535
Issuance of common shares:
30,916 - exercise of stock options 31 159 -- -- 190
48,956 - stock purchase plan 49 489 -- -- 538
40,000 - profit sharing contribution 40 184 -- -- 224
Stock offering costs -- (203) -- -- (203)
Net income for the year ended June 30, 1992 -- -- 9,237 -- 9,237
Cumulative translation adjustments -- -- -- 2,182 2,182
---------- ---------- ---------- ---------- ----------
BALANCE, JUNE 30, 1992 19,930 165,567 6,819 (613) 191,703
Issuance of common shares:
204,640 - exercise of stock options 205 992 -- -- 1,197
99,027 - stock purchase plan 99 589 -- -- 688
Net loss for the year ended June 30, 1993 -- -- (3,033) -- (3,033)
Cumulative translation adjustments -- -- -- (4,481) (4,481)
---------- ---------- ---------- ---------- ----------
BALANCE, JUNE 30, 1993 20,234 167,148 3,786 (5,094) 186,074
Issuance of common shares:
49,410 -- exercise of stock options 49 276 -- -- 325
69,065 -- stock purchase plan 69 654 -- -- 723
Net income for the year ended June 30, 1994 -- -- 15,714 -- 15,714
Cumulative translation adjustments -- -- -- 107 107
---------- ---------- ---------- ---------- ----------
BALANCE, JUNE 30, 1994 $ 20,352 $168,078 $ 19,500 $ (4,987) $202,943
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
The accompanying notes are an integral part of this statement.
24
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In 000's)
FISCAL YEARS ENDED JUNE 30,
---------------------------
1994 1993 1992
---- ---- ----
Cash flow from operating activities:
Net income (loss) $15,714 $(3,033) $9,237
Adjustment to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 18,018 16,524 16,597
Stock contribution to employee benefit plan -- -- 224
Deferred income (203) (513) (496)
Deferred income taxes 272 (159) (248)
Deferred compensation 1,473 1,529 978
---------- ---------- ----------
Cash flow from operating activities prior to
working capital requirements 35,274 14,348 26,292
Change in working capital (Note 1) (9,109) 3,943 (19,760)
---------- ---------- ----------
Net cash provided by operating activities 26,165 18,291 6,532
---------- ---------- ----------
Cash flow from investing activities:
Additions to property, plant and equipment (24,686) (16,994) (32,069)
Investment in other noncurrent assets (4,979) (4,158) (3,233)
---------- ---------- ----------
Net cash used in investing activities (29,665) (21,152) (35,302)
---------- ---------- ----------
Cash flow from financing activities:
Proceeds from issuance of short-term bank
debt, net 2,623 5,333 14,490
Proceeds from issuance of long-term debt 10,326 2,038 1,734
Payments on long-term debt and obligations
under capital leases (5,809) (5,268) (7,606)
Net proceeds from issuance of common stock 1,048 1,885 525
Other (125) (1,201) 4,085
---------- ---------- ----------
Net cash provided by financing activities 8,063 2,787 13,228
---------- ---------- ----------
Effect of exchange rate changes on cash and cash
equivalents (57) 72 (192)
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 4,506 (2) (15,734)
Cash and cash equivalents beginning of year 8,545 8,547 24,281
---------- ---------- ----------
Cash and cash equivalents end of year $13,051 $ 8,545 $ 8,547
---------- ---------- ----------
---------- ---------- ----------
The accompanying notes are an integral part of this statement.
25
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
all its majority-owned subsidiaries which are located in Europe, Mexico, Canada,
the Far East and South East Asia. All material intercompany transactions have
been eliminated.
FISCAL YEAR
Fiscal years 1994 and 1992 consist of 52 weeks ending July 3 and June 28,
respectively. Fiscal year 1993 consists of 53 weeks ending July 4. For
convenience, all references herein to fiscal years are to fiscal years ended
June 30.
REVENUE RECOGNITION
The Company recognizes revenues from product sales at the time of shipment
except on certain government contracts where revenues are recognized using the
percentage of completion method.
INVENTORIES
Inventories are stated at the lower of cost (principally first-in, first-out) or
market. Inventories at June 30, 1994 and 1993 were comprised of the following
(000's):
1994 1993
---- ----
Raw materials $15,118 $12,613
Work-in-process 26,965 24,943
Finished goods 31,346 25,053
-------- --------
$73,429 $62,609
-------- --------
-------- --------
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Upon retirement or other
disposal, the asset cost and related accumulated depreciation are removed from
the accounts and any gain or loss on disposition is included in income.
Depreciation is provided on the straight-line method, based on the estimated
useful lives of the assets, or the units of production method based upon the
estimated output of the equipment. In the fourth quarter of fiscal year 1993,
the Company extended the estimated useful lives of certain assets. This change
positively impacted 1994 and 1993 pre-tax results by $2,600,000 and $200,000,
respectively. Depreciation expense for the fiscal years ended June 30, 1994,
1993, and 1992 was $15,880,000, $14,160,000, and $15,358,000, respectively.
Property, plant and equipment at June 30, 1994 and 1993 was comprised of the
following (000's):
26
1994 1993
---------- ----------
Buildings and improvements $ 72,004 $ 71,859
Equipment 169,988 140,651
Construction in progress 22,525 17,795
Less accumulated depreciation (112,411) (98,250)
---------- ----------
152,106 132,055
Land 6,461 6,463
---------- ----------
$ 158,567 $ 138,518
---------- ----------
---------- ----------
Depreciation of improvements to leased premises is provided on the straight-line
method over the shorter of the remaining term of the lease or estimated useful
lives of the improvements. Capital leases included in property, plant and
equipment at June 30, 1994 and 1993 are as follows (000's):
1994 1993
---------- ----------
Equipment $ 62,533 $ 51,305
Less Accumulated depreciation (35,171) (31,800)
---------- ----------
$ 27,362 $ 19,505
---------- ----------
---------- ----------
FOREIGN CURRENCY TRANSLATION
The financial position and results of operation of the Company's foreign
subsidiaries are measured using the local currency as the functional currency.
Foreign assets and liabilities in the consolidated balance sheet have been
translated at the rate of exchange on the balance sheet date. Revenues and
expenses are translated at the average exchange rate for the year. Unrealized
translation adjustments do not affect the results of operations and are reported
as a separate component of stockholders' equity. In fiscal 1994, 1993 and 1992,
the Company recognized foreign currency transaction gains of $376,000, $129,000,
and $376,000, respectively.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
INCOME TAXES
Deferred income taxes are determined based on the difference between the
financial reporting and tax bases of assets and liabilities using enacted rates
in effect during the year in which the differences are expected to reverse.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Income tax expense is the tax
payable for the period and the change during the period in deferred tax assets
and liabilities.
U.S. income taxes have not been provided on approximately $14,260,000 of
undistributed earnings of foreign subsidiaries since management considers these
earnings to be invested indefinitely or substantially offset by foreign tax
credits.
27
EARNINGS PER SHARE
Earnings per share is computed by dividing earnings by the weighted average
number of common and common stock equivalents outstanding. Stock options
outstanding under stock option plans are considered common stock equivalents.
Common stock equivalents for stock options of 112,700 and 244,200 were utilized
in the computation of earnings per share in 1994 and 1992, respectively. No
common stock equivalents for stock options were used in 1993 as the impact would
have been anti-dilutive.
INTANGIBLE ASSETS
Patent costs are amortized using the straight-line method over the life of the
patent.
STATEMENT OF CASH FLOWS
The Company invests excess cash from operations in short term investment grade
money market funds. The Company considers all highly liquid debt instruments
purchased with an original maturity of three months or less to be cash
equivalents. Components in the changes in working capital are comprised of the
following (000's):
1994 1993 1992
---- ---- ----
Trade accounts receivable, net $ (11,701) $ (2,871) $ (8,386)
Inventories (10,427) 3,390 (19,333)
Prepaid expenses (1,031) (789) 796
Accounts payable 9,123 4,316 4,710
Accrued salaries, wages and commissions 918 243 1,686
Other accrued expenses 4,009 (346) 767
---------- ---------- ---------
$ (9,109) $ 3,943 $(19,760)
---------- ---------- ---------
---------- ---------- ---------
Supplemental disclosures of cash flow information (000's):
1994 1993 1992
---- ---- ----
Cash paid during the year for:
Interest $ 3,612 $ 3,246 $ 3,877
Income taxes 802 1,376 1,416
Interest capitalized 453 1,357 1,736
Non cash financing activity:
Assets acquired through capital leases 12,675 4,275 2,576
Included in assets acquired through capital leases in 1994 is $7.2 million in
existing operating leases that were renegotiated to capital leases.
CONCENTRATION OF RISK
The Company places its temporary cash investments with high credit quality
financial institutions. At times, such investments may be in excess of insured
limits.
28
The Company performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral. Receivables generally are
due in 60 days. Credit losses have consistently been within management's
expectations.
RECLASSIFICATION
Certain reclassifications have been made to previously reported amounts to
conform with the current year presentation.
2. LONG-TERM DEBT AND OTHER LOANS
In June 1994, the Company renewed and modified its existing $20 million
unsecured credit facility from Sanwa Bank California ("Sanwa Facility"). The
modified facility increases the revolving line of credit to $25 million. In
June 1994 the Company also added an unsecured revolving credit facility of
$10 million from Wells Fargo Bank. Interest rates on both facilities are at
prime, or the banks costs of funds plus 1.25%, or LIBOR plus 1.25% (at the
Company's option). Both facilities expire on October 31, 1996, contain the same
financial covenants and ratios, which impact the availability of funds, and
prohibit the Company from paying cash dividends. At June 30, 1994, $2.5 million
was outstanding under the Sanwa Facility. The Company also has a $3.0 million
uncommitted domestic credit facility of which $1.0 million was outstanding at
June 30, 1994.
The Company also has an additional $39.0 million of credit facilities at foreign
locations. The interest rate on these facilities range from 3.0% to 12.25% at
June 30, 1994. Under the terms of the agreements, the availability of funds is
impacted by various financial covenants and collateral requirements. At June
30, 1994, $23.7 million was outstanding under these foreign facilities.
Based on covenant and collateral limitations under the above credit facilities,
the Company had $26.5 million available for borrowing at June 30, 1994.
29
The following is a summary of the Company's long-term debt and other loans at
June 30, 1994 and 1993 (000's):
1994 1993
---- ----
Capitalized lease obligations payable in varying
monthly installments primarily at rates from 6.9% to
16.6% $ 16,115 $ 7,543
10.55% property mortgage due in equal monthly
installments to 2011 4,300 4,392
Domestic bank loans collateralized by equipment,
payable in varying monthly installments at rates from
8.0% to 9.0%, due in 1995 through 1999 3,097 134
Foreign bank loans collateralized by property and/or
equipment, payable in varying monthly installments at
rates from 6.5% to 10.8%, due in 1997 through 2000 4,803 2,873
Foreign unsecured bank loans payable in varying monthly
installments at rates from 4.0% to 11.9%, due in 1998
through 2006 4,607 400
---------- ----------
32,922 15,342
Less current portion of long-term debt (6,105) (3,532)
---------- ----------
$ 26,817 $ 11,810
---------- ----------
---------- ----------
The net book value of properties mortgaged at June 30, 1994 amounted to
$6,134,000. Principal payments on long-term debt are as follows: 1996
$6,458,000; 1997 $6,246,000; 1998 $6,087,000; 1999 $2,769,000; and $5,257,000
thereafter.
In accordance with Statement of Financial Accounting Standards No. 107
"Disclosures About Fair Value of Financial Instruments," the fair values of the
Company's long-term debt has been estimated based on current rates offered to
the Company for debt of the same remaining maturities. The carrying amounts of
the Company's loans approximate their fair values.
3. CAPITAL STOCK
The Company has an employee stock purchase plan. Under this plan employees are
allowed to designate between two and ten percent of their base compensation to
purchase shares of the Company's common stock at 85 percent of fair market
value. In November 1993, the stock purchase plan was amended to cover an
additional 1,000,000 shares. During fiscal 1994 and 1993, 69,065 and 99,027
shares were purchased at an aggregate purchase price of $723,000 and $688,000,
respectively. Shares authorized under this plan that remained unissued were
1,055,003 and 124,068 at June 30, 1994 and 1993, respectively.
The Company has three stock option plans, the 1979, 1984, and 1992 Plans, as
amended. Under these plans, options to purchase shares of the Company's common
stock are issued to key employees as well as members of the Company's Board of
Directors. Options are issued at 100% of the fair value of the Company's common
stock at the date of grant and become exercisable in annual installments of 20%,
beginning on the first anniversary date. The 1992 plan provides for the
increase in options available for
30
grant under the plan by 1 1/2% of total common stock outstanding on January 1
of each year. On January 1, 1994 and 1993, 304,503 and 300,061 options,
respectively, were added to the plan.
A summary of the status of options under the 1992, 1984, and 1979 plans is as
follows:
SHARES PRICE RANGE
------ -----------
Outstanding, June 30, 1991 616,290 $ 4.00 to $21.62
Options granted 92,900 8.00 to 19.62
Options exercised (30,916) 4.00 to 11.50
Options expired or canceled (15,874) 4.37 to 19.62
---------
Outstanding, June 30, 1992 662,400 4.00 to 21.62
Options granted 73,700 8.00 to 12.50
Options exercised (204,640) 4.00 to 10.00
Options expired or canceled (17,650) 4.00 to 12.75
---------
Outstanding, June 30, 1993 513,810 4.00 to 21.62
Options granted 240,000 11.00 to 17.00
Options exercised (49,410) 4.00 to 15.38
Options expired or canceled (23,200) 5.75 to 21.62
---------
Outstanding, June 30, 1994 at
an average price of $13.97 681,200 $4.50 to $21.62
---------
---------
The following table summarizes the options exercisable:
SHARES PRICE RANGE
------- ------------------
June 30, 1994 264,120 $4.50 to $21.62
June 30, 1993 216,760 4.00 to 21.62
June 30, 1992 275,900 4.00 to 21.62
Additional information relating to the 1992, 1984, and 1979 plans is as follows:
FISCAL YEARS ENDED JUNE 30,
---------------------------
1994 1993 1992
---- ---- ----
Options available for grant at June 30 350,214 262,511 20,350
Total reserved common stock shares 1,031,414 776,321 682,750
31
4. GEOGRAPHIC SEGMENTS AND FOREIGN OPERATIONS
The Company operates in one business segment. Transfers between geographic areas
are made at prices reflecting market conditions. Geographic segment information
including sales and transfers between geographic areas is presented below:
FISCAL YEARS ENDED (000's)
--------------------------
1994 1993 1992
---- ---- ----
Revenues from Unaffiliated Customers
United States $169,263 $137,765 $123,854
Europe 89,073 79,930 83,382
Other 70,546 64,037 58,259
---------- ---------- ----------
Total $328,882 $281,732 $265,495
---------- ---------- ----------
---------- ---------- ----------
Transfers between Geographic Areas
United States $97,896 $84,753 $87,145
Europe 48,864 56,119 52,150
Other 1,379 2,602 5,281
---------- ---------- ----------
Total $148,139 $143,474 $144,576
---------- ---------- ----------
---------- ---------- ----------
Total Revenues
United States $267,159 $222,518 $210,999
Europe 137,937 136,049 135,532
Other 71,925 66,639 63,540
Intersegment eliminations (148,139) (143,474) (144,576)
---------- ---------- ----------
Total $328,882 $281,732 $265,495
---------- ---------- ----------
---------- ---------- ----------
Operating Profit
United States $18,173 $1,108 $7,285
Europe 4,710 409 2,692
Other 666 811 905
---------- ---------- ----------
Total $23,549 $2,328 $10,882
---------- ---------- ----------
---------- ---------- ----------
Identifiable Assets
United States(1) $189,591 $164,485 $164,778
Europe 74,533 61,364 71,230
Other 28,696 22,506 23,297
---------- ---------- ----------
Total $292,820 $248,355 $259,305
---------- ---------- ----------
---------- ---------- ----------
U.S. Export Sales to Unaffiliated Customers by
Destination of Sale
Europe $4,362 $3,293 $3,630
Asia 20,094 13,319 10,709
Other 4,829 4,057 2,448
---------- ---------- ----------
Total $29,285 $20,669 $16,787
---------- ---------- ----------
---------- ---------- ----------
(1) Excluding general corporate assets.
32
5. INCOME TAXES
Effective July 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes"
which requires recognition of deferred tax assets and liabilities for temporary
differences and net operating loss (NOL) and tax credit carryforwards. Under
SFAS No. 109, deferred income taxes are established based on enacted tax rates
expected to be in effect when temporary differences are scheduled to reverse and
NOL and tax credit carryforwards are expected to be utilized. Adoption of SFAS
No. 109 did not have a material impact on the Company's financial position or
results from operations. Prior year's financial statements have not been
restated.
The major components of the net deferred tax liability as of June 30, 1994 and
July 1, 1993 were as follows (000's):
JUNE 30, 1994 JULY 1, 1993
------------- ------------
Deferred tax liability:
Depreciation $ (9,215) $ (10,194)
Deferred tax assets:
Reserves for books, not deducted 3,380 2,851
Net operating loss carryovers 9,815 16,765
Credit carryovers 5,417 5,269
Other 593 539
---------- ----------
Total deferred tax assets 19,205 25,424
Valuation allowance (10,596) (15,546)
---------- ----------
Net deferred tax liabilities $ (606) $ (316)
---------- ----------
---------- ----------
Income (loss) before income taxes was as follow (000's):
FISCAL YEARS ENDED
------------------
1994 1993 1992
---- ---- ----
Operations:
Domestic $ 15,626 $ (1,590) $ 8,733
Foreign 3,248 (1,007) 1,779
---------- ---------- ----------
$ 18,874 $ (2,597) $ 10,512
---------- ---------- ----------
---------- ---------- ----------
33
The provision (benefit) for income taxes consisted of (000's):
FISCAL YEARS ENDED
----------------------------------------
1994 1993 1992
---------- ---------- ----------
Current income taxes:
Domestic $1,539 $(122) $614
Foreign 1,331 788 908
---------- ---------- ----------
2,870 666 1,522
---------- ---------- ----------
Deferred income taxes:
Domestic -- (160) --
Foreign 290 (70) (247)
---------- ---------- ----------
290 (230) (247)
---------- ---------- ----------
Total provision $3,160 $ 436 $1,275
---------- ---------- ----------
---------- ---------- ----------
Deferred taxes result primarily from temporary differences relating to
depreciation, inventory valuation and state taxes.
The Company's effective tax rate on pretax income (loss) differs from the U.S.
Federal Statutory tax rate as follows:
FISCAL YEARS ENDED
--------------------------------
1994 1993 1992
---- ---- ----
Statutory tax rate (benefit) 35.0% (34.0)% 34.0%
Utilization of domestic net operating loss
carryforward (36.6) -- (23.1)
Change in valuation allowance 9.6 -- --
Foreign tax differential 2.6 40.9 0.5
Domestic loss producing no current tax
benefit -- 16.6 --
State taxes, net of federal tax benefit 1.5 (7.5) --
Alternative minimum tax 2.2 -- --
Other, net 2.4 0.8 0.7
----- ----- -----
16.7% 16.8% 12.1%
----- ----- -----
----- ----- -----
At June 30, 1994, the Company had approximately $28.8 million of U.S. federal
income tax net operating loss carryovers which begin to expire in 2004. During
the year, the Company utilized approximately $20.4 million in U.S. federal net
operating loss carryovers. The estimated tax benefit from utilization of the
net operating loss carryover was $6.9 million.
The Company has approximately $3.1 million, $1.1 million, and $0.2 million,
respectively, of investment, research and development, and foreign tax credit
carryforwards which expire from 1995 to 2001. In addition, the Company has
approximately $0.9 million of alternative minimum tax credits which are
available to offset future regular tax.
34
In general, Section 382 of the United States Internal Revenue Code includes
provisions which limit the amount of net operating loss carryforwards and other
tax attributes that may be used annually in the event that a 50% ownership
change (as defined) takes place in any three year period. At June 30, 1994, the
Company had not experienced a change in ownership for purposes of Section 382.
6. PROFIT SHARING AND RETIREMENT PLANS
The Company has established defined contribution plans for all eligible
employees. The Profit Sharing and Retirement Plan provides for contributions by
the Company in such amounts as the Board of Directors may annually determine.
The Company has also established a voluntary Retirement Savings Plan (401K) to
which the Company makes an annual contribution of up to $600 for each
participating employee. Combined plan contributions totaled $841,000, $511,000,
and $1,250,000 for fiscal years 1994, 1993, and 1992, respectively. Fiscal year
1992 contributions included 40,000 shares of the Company's common stock to its
Profit Sharing and Retirement Plan.
7. ENVIRONMENTAL MATTERS
Federal, state and local laws and regulations impose various restrictions and
controls on the discharge of certain materials, chemicals and gases used in
semiconductor processing. The Company does not believe that compliance with
such laws and regulations will have a material adverse effect on its financial
position.
The Company and Rachelle Laboratories, Inc. ("Rachelle"), its pharmaceutical
subsidiary which discontinued operations in 1986, have been named among several
hundred entities as potentially responsible parties ("PRPs") under the
provisions of the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), in connection with the United States
Environmental Protection Agency's ("EPA") investigation of the disposal of
allegedly hazardous substances at a major superfund site in Monterey Park,
California (the "OII site"). Certain PRPs who settled certain claims with the
EPA under two consent decrees, filed suit in Federal Court in May 1992 against a
number of other PRPs, including IR, for cost recovery and contribution under
CERCLA. The lawsuit against IR, relating to the first and second consent
decrees, was settled in August 1993 for the sum of $40,000 to avoid protracted
and expensive litigation. Claims have been made with the Company's insurers
with respect to the OII site matter; however, there can be no assurance that the
insurance coverage attaches to these claims. There remains the potential for
litigation against IR relating to future consent decrees. The Company does not
believe that either it or Rachelle is responsible for the disposal at the OII
site of any material constituting hazardous substances under CERCLA. Although
the ultimate resolution of this matter is unknown, the Company believes that it
will not have a material adverse impact on its financial position.
In May 1993 the Company purchased property from its Employee Profit Sharing and
Retirement Plan. At the time of the purchase it was determined that the
property required clean up of seepage from a storage tank, at an estimated
additional cost of $500,000. The Company commenced the clean up in fiscal year
1994, and the costs to be incurred will be capitalized as additional costs of
the property.
35
On July 18, 1994, the Company received a letter from the State of Washington
Department of Ecology notifying the Company of a proposed finding that the
Company is a potentially liable person ("PLP") for alleged PCE contamination
(also known as perchloroethylene, tetrachloroethylene, and other names) ("PCE")
of real property and groundwater in Yakima County, Washington. The letter
alleges that the Company arranged for disposal or treatment of the PCE or
arranged with a transporter for the disposal or treatment of the PCE in Yakima
County. The Company replied on August 11, 1994 to this letter and stated that
it has not contributed to PCE or other solvent contamination at the Yakima
County site and that it should not be designated a PLP.
The Company received a letter dated September 9, 1994, from the State of
California Department of Toxic Substances Control stating that the Company may
be a PRP for the deposit of hazardous substances at a facility in Whittier,
California. The Company's investigation of this matter has just begun and
therefore an opinion cannot be expressed as to any ultimate responsibility.
8. COMMITMENTS
The future minimum lease commitments under non-cancelable capital and operating
leases of equipment and real property at June 30, 1994 were as follows (000's):
FISCAL CAPITAL OPERATING TOTAL
YEARS LEASES LEASES COMMITMENTS
----- ------ ------ -----------
1995 $ 5,282 $ 6,050 $ 11,332
1996 4,949 5,272 10,221
1997 4,436 4,457 8,893
1998 3,880 1,826 5,706
1999 977 628 1,605
Later years 3 1,208 1,211
Less imputed interest (3,412) -- (3,412)
--------- --------- ---------
Total minimum lease payment $ 16,115 $ 19,441 $ 35,556
--------- --------- ---------
--------- --------- ---------
Total rental expense on all operating leases charged to income was $6,723,000,
$5,591,000, and $3,193,000 in fiscal years 1994, 1993 and 1992, respectively.
9. INTELLECTUAL PROPERTY RIGHTS
A competitor, prior to settlement of patent litigation with the Company in
February 1992, obtained reexamination by the United States Patent and Trademark
Office ("PTO") of the Company's MOSFET patents 4,376,286, 4,959,699 and
5,008,725. The PTO confirmed the patentability of the '725 patent in January
1993 and the '286 patent in July 1993 and the '699 patent in October 1993. In
other reexamination proceedings the PTO in November 1992 agreed to reexamine the
Company's 4,642,666 patent and in July 1993 agreed to reexamine the Company's
4,705,759 patent. More recently, the PTO on September 12, 1994 agreed to
reexamine the Company's 4,642,666 and 4,959,699 patents. The patents subject to
reexamination are fundamental to the Company's MOS transistors.
36
10. LITIGATION
SGS-Thomson Microelectronics, Inc. filed suit against the Company in June 1991
in Federal District Court in Texas, charging infringement of U.S. patent
4,553,314. The suit was thereafter transferred to the Federal District Court in
Los Angeles, California. Subsequent to transfer, SGS amended its complaint to
charge additionally infringement of U.S. patents 4,495,513 and 4,712,127. The
District Court on February 1, 1993 dismissed for lack of standing SGS's claims
for infringement of the '127 and '513 patents. The same Court ruled on March
15, 1993 that the remaining SGS patent in the same case ('314) is unenforceable.
SGS appealed the February and March summary judgment rulings, as well as the
order transferring the case to California, to the Court of Appeals for the
Federal Circuit. IR then cross-appealed the District Court's denial of IR's
motion for summary judgment as to the invalidity of the '314 patent. In
July 1994, the Federal Circuit vacated the District Court's grants of summary
judgment as to the '513, '127 and '314 patents, affirmed the District Court's
denial of summary judgment, and reversed the transfer order, but remanded the
case for continued proceedings in California. SGS petitioned the U.S. Supreme
Court for a writ of certiorari as to various rulings of the Federal Circuit
relating to jurisdictional and venue issues. No trial date has yet been set and
the ultimate outcome of the case as to the three patents is unknown. In a
separate proceeding before the California District Court, the Court in July 1994
granted the Company's motions to enforce its license agreement with SGS,
requiring SGS to pay royalties under IR's patents 4,959,699 and 4,642,666 as to
SGS's sales of power MOSFET, IGBT and power IC products. SGS is appealing this
ruling on royalties to the Federal Circuit. The Company's separate action
against SGS and its Italian affiliate, SGS-Thomson Microelectronics, S.r.L., for
infringement of the Company's U.S. patents 5,008,725 and 5,130,767 is continuing
before the same Court. Trial of the Company's action has been set for January
25, 1995.
The Company, its directors and certain officers have been named as defendants in
three class action lawsuits filed in federal court in California. The last two
suits also name Kidder, Peabody & Co. Incorporated and Montgomery Securities.
These suits seek unspecified compensatory and punitive damages for alleged
intentional and negligent misrepresentations and violations of the federal
securities laws. They generally allege that the Company and the other
defendants made materially false statements and/or omitted to state material
facts in connection with the public offering of the Company's common stock
completed on April 24, 1991 and/or the redemption and conversion of the
Company's 9% Convertible Subordinated Debentures Due 2010 completed in June
1991. Although the Company believes that the claims alleged in the suits are
without merit, the ultimate outcome thereof cannot be presently determined.
Accordingly, no provision for any liability that may result upon adjudication of
these matters has been made in the consolidated financial statements.
The Company is currently involved in litigation arising in the normal course of
business. Management does not believe that the ultimate resolution of this
litigation will have a material adverse impact on the financial position of the
Company (also see Notes 7 and 9).
11. EXECUTIVE AGREEMENT
The Company entered into an executive agreement with Eric Lidow dated May 15,
1991 providing for his continued employment with the Company for a six year
period as Chief Executive Officer and President or in such other position as the
Board of Directors may determine. Mr. Lidow's salary at fiscal
37
year end under this agreement was $550,000. Upon Mr. Lidow's retirement from
the Company (or a change in control) he will receive annual payments (Founder's
Pension) of 90% of his then current salary. Upon Mr. Lidow's death, payments
will be continued to his wife, if she survives him, in an amount equal to two-
thirds of his retirement benefits for the remainder of her life. Under the
terms of the Founder's Pension, $572,000, $572,000, and $611,000 have been
expensed in fiscal years 1994, 1993, and 1992, respectively.
12. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data is as follows (000's):
NET
GROSS NET INCOME (LOSS)
REVENUES PROFIT INCOME (LOSS) PER SHARE
-------- ------ ------------- ---------
1994
----
1st Quarter $ 73,094 $ 23,420 $ 1,976 $ 0.10
2nd Quarter 79,104 25,613 3,070 0.15
3rd Quarter 84,252 28,110 4,206 0.21
4th Quarter 92,432 31,795 6,462 0.32
1993
----
1st Quarter $ 64,980 $ 16,937 $ (1,878) $ (0.09)
2nd Quarter 70,452 19,417 (1,993) (0.10)
3rd Quarter 70,572 20,513 125 0.01
4th Quarter 75,728 22,181 713 0.04
38
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable
PART III
For information called for by Items 10, 11, 12 and 13, reference is made to the
Registrant's definitive proxy statement for its Annual Meeting of Stockholders,
to be held November 21, 1994, which will be filed with the Securities and
Exchange Commission within 120 days after June 30, 1994, and which is
incorporated herein by reference. Certain information concerning the Directors
and Executive Officers of the Company is included in Part I. See "Additional
Item" page 12.
PART IV
ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
a. Financial Statements and Schedules being filed as part of this report are
listed in the index on page 20.
b. Exhibits filed as part of this report are listed on the Exhibit Index on
page 40.
39
EXHIBIT INDEX
INCORPORATED BY REFERENCE:
EXHIBIT NO. ITEM DOCUMENT
- - - ----------- ---- --------
3(a) Certificate of Report on Form 10-Q for the
Incorporation of the quarterly period ended December 31,
Company, as amended to 1990, as amended by Form 8 dated
date March 6 and March 12, 1991 as filed
with the Securities and Exchange
Commission, File No. 1-7935
(Exhibit 3(a))
3(b) Amended and restated By- Registration Statement on Form S-3
Laws of the Company as filed with the Securities and
Exchange Commission, Registration
No. 33-39226 (Exhibit 3(b))
10(a) Technical Assistance Registration Statement on Form S-2
Agreement dated March 30, as filed with the Securities and
1983 between the Company Exchange Commission, Registration
and Unitrode Corporation No. 2-89410 (Exhibit 10.8)
10(b) International Rectifier Registration Statement on Form S-8
Corporation 1979 Non- as filed with the Securities and
Qualified Stock Option Exchange Commission, Registration
Plan No. 2-69614
10(c) International Rectifier Registration Statement on Form S-8
Corporation Stock Option as filed with the Securities and
Plan of 1984 Exchange Commission, Registration
No. 2-94858 (Exhibit 4.1)
10(d) International Rectifier Registration Statement on Form S-8
Corporation 1984 Stock as filed with the Securities and
Participation Plan Exchange Commission, Registration
No. 2-94436
10(e) International Rectifier Registration Statement on Form S-8
Corporation Stock Option as filed with the Securities and
Plan of 1984 (Amended) Exchange Commission, Registration
No. 33-28596 (Exhibit 4.1)
10(f) Amended and Restated Form 10-K - Annual Report Pursuant
License Agreement between to Section 13 or 15(d) of the
International Rectifier Securities Exchange Act of 1934 for
Corporation and Siliconix Fiscal Year Ended June 30, 1990,
incorporated dated Commission File No. 1-7935
April 10, 1990
40
EXHIBIT NO. ITEM DOCUMENT
- - - ----------- ---- --------
10(g) Amended and Restated Form 10-K- Annual Report Pursuant
Settlement Agreement to Section 13 or 15(d) of the
between International Securities Exchange Act of 1934 for
Rectifier Corporation and Fiscal Year Ended June 30, 1990,
Siliconix incorporated Commission File No. 1-7935
dated July 27, 1990
10(h) Amendment to Technical Report on Form 10-Q for the
Assistance Agreement, quarterly period ended
effective as of December 31, 1990 as amended by
August 27, 1987, by and Form 8 dated April 15, 1991,
between the Company and Commission File No. 1-7935 (Exhibit
Unitrode Corporation 10(l))
10(i) International Rectifier Registration Statement on Form S-8
Corporation Stock Option as filed with the Securities and
Plan of 1984 (Second Exchange Commission, Registration
Amendment) No. 33-40208.
10(j) Executive Employment Form 10-K- Annual Report Pursuant
Agreement dated May 15, to Section 13 or 15(d) of the
1991 between Securities Exchange Act of 1934 for
International Rectifier Fiscal Year Ended June 30, 1991,
Corporation and Mr. Eric Commission File No. 1-7935
Lidow
10(k) International Rectifier Registration Statement on Form S-8
Corporation Stock Option as filed with the Securities and
Plan of 1992 Exchange Commission, Registration
No. 33-63958 (Exhibit 8)
10(l) Line of Credit Agreement Form 10-K- Annual Report Pursuant
between International to Section 13 or 15(d) of the
Rectifier Corporation and Securities Exchange Act of 1934 for
Sanwa Bank California Fiscal Year Ended June 30, 1993,
dated as of June 30, 1993 Commission File No. 1-7935
and amended as of
August 24, 1993
10(m) Amendment to Registration Statement on Form S-8
International Rectifer as filed with the Securities and
Corporation 1984 Stock Exchange Commission, Registration
Participation Plan No. 33-53589 (Exhibit 4.1)
41
Submitted Herewith:
See page 20 for an index of financial statements and schedules being filed as
part of this report.
EXHIBIT NO. ITEM
10 (n) Amendments to Line of Credit
Agreement between International
Rectifier Corporation and Sanwa
Bank California dated as of
November 22, 1993 and
July 1, 1994
10 (o) Security Agreement between
International Rectifier Corporation
and Nationsbanc Leasing Corporation
of North Carolina dated as of
July 1, 1994
10 (p) Revolving Credit Agreement between
International Rectifier Corporation
and Wells Fargo Bank, N.A. dated as
of July 1, 1994
10 (q) Loan and Security Agreement between
Sanwa General Equipment Leasing, a
Division of Sanwa Business Credit
Corporation and International Rectifier
Corporation dated as of July 1, 1994
21 List of Subsidiaries
23 Consent of Independent Accountants
27 Financial Data Schedule
42
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
INTERNATIONAL RECTIFIER CORPORATION
(REGISTRANT)
By MICHAEL P. MCGEE Date: September 27, 1994
----------------------------- ------------------------------
Michael P. McGee
Vice President, Chief Financial Officer
and Principal Accounting Officer
Each person whose signature appears below hereby authorizes Michael P. McGee, as
attorney-in-fact and agent, with full powers of substitution, to sign on his
behalf, individually and in the capacities stated below, and to file any and all
amendments to this Form 10-K, and other documents in connection therewith, with
the Securities and Exchange Commission, granting to said attorney-in-fact and
agent full power and authority to perform any other act on behalf of the
undersigned required to be done in the premises.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
---------- ----- ----
ERIC LIDOW President, Chairman of the Board, 9/27/94
- - - ------------------------ Chief Executive Officer ------------
Eric Lidow
DONALD S. BURNS Director 9/27/94
- - - ----------------------- ------------
Donald S. Burns
GEORGE KRSEK Director 9/27/94
- - - ----------------------- ------------
George Krsek
ROBERT J. MUELLER Director, Executive Vice President 9/27/94
- - - ----------------------- ------------
Robert J. Mueller
JACK O. VANCE Director 9/27/94
- - - ----------------------- ------------
Jack O. Vance
ROCHUS E. VOGT Director 9/27/94
- - - ----------------------- ------------
Rochus E. Vogt
(Signatures continued on next page)
SIGNATURES
(continued)
SIGNATURES TITLE DATE
---------- ----- ----
ALEXANDER LIDOW Director, Executive Vice President of 9/27/94
- - - ----------------------- Operations ------------
Alexander Lidow
DEREK B. LIDOW Director, Executive Vice President 9/27/94
- - - ----------------------- ------------
Derek B. Lidow
Director
- - - ----------------------- ------------
James D. Plummer
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
SCHEDULE V
PROPERTY, PLANT AND EQUIPMENT FOR THE FISCAL YEARS ENDED
JUNE 30, 1994, 1993 AND 1992
(IN 000'S EXCEPT NOTES)
OTHER
BALANCE AT CHANGES BALANCE
BEGINNING ADDITIONS RETIREMENTS ADD (DEDUCT) AT END
CLASSIFICATION OF PERIOD AT COST (A) (B) OF PERIOD
- - - -------------- --------- --------- ------------ ------------- ---------
1994
----
Land $ 6,463 $ -- $ -- $ (2) $ 6,461
-------- -------- -------- -------- --------
Buildings 68,191 -- (1) (44) 68,146
Leasehold improvements 3,668 288 (89) (9) 3,858
-------- -------- -------- -------- --------
71,859 288 (90) (53) 72,004
-------- -------- -------- -------- --------
Machinery and equipment 135,400 17,851 (1,838) 12,515 163,928
Automotive equipment 260 -- (2) 2 260
Office furniture and fixtures 4,991 167 (179) 821 5,800
-------- -------- -------- -------- --------
140,651 18,018 (2,019) 13,338 169,988
-------- -------- -------- -------- --------
Construction in progress 17,795 18,839 (74) (14,035) 22,525
-------- -------- -------- -------- --------
$236,768 $ 37,145 $ (2,183) $ (752) $270,978
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
1993
----
Land $ 5,411 $ 1,121 $ -- $(69) $ 6,463
-------- -------- -------- -------- --------
Buildings 67,835 1,094 -- (738) 68,191
Leasehold improvements 3,130 246 (9) 301 3,668
-------- -------- -------- -------- --------
70,965 1,340 (9) (437) 71,859
-------- -------- -------- -------- --------
Machinery and equipment 120,508 10,299 (359) 4,952 135,400
Automotive equipment 314 60 (77) (37) 260
Office furniture and fixtures 6,327 275 (87) (1,524) 4,991
-------- -------- -------- -------- --------
127,149 10,634 (523) 3,391 140,651
-------- -------- -------- -------- --------
Construction in progress 24,783 8,706 -- (15,694) 17,795
-------- -------- -------- -------- --------
$228,308 $ 21,801 $ (532) $(12,809) $236,768
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
1992
----
Land $ 5,372 $ -- $ -- $ 39 $ 5,411
-------- -------- -------- -------- --------
Buildings 67,251 130 -- 454 67,835
Leasehold improvements 2,102 590 -- 438 3,130
-------- -------- -------- -------- --------
69,353 720 -- 892 70,965
-------- -------- -------- -------- --------
Machinery and equipment 100,803 8,955 (196) 10,946 120,508
Automotive equipment 281 51 (42) 24 314
Office furniture and fixtures 3,884 2,281 (38) 200 6,327
-------- -------- -------- -------- --------
104,968 11,287 (276) 11,170 127,149
-------- -------- -------- -------- --------
Construction in progress 11,798 22,914 -- (9,929) 24,783
-------- -------- -------- -------- --------
$191,491 $ 34,921 $ (276) $ 2,172 $228,308
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Notes:
(A) Sales, abandonments of fully depreciated assets.
(B) Reclassification of construction in progress, assets refinanced
through operating leases, and currency translation adjustments due to
SFAS 52 of $332,000, $(10,403,000), and $4,696,000 in 1994, 1993, and
1992 respectively.
F-1
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
SCHEDULE VI
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT
AND EQUIPMENT FOR THE FISCAL YEARS ENDED JUNE 30, 1994, 1993 AND 1992
(IN 000'S EXCEPT NOTES)
OTHER
BALANCE AT CHARGED TO CHANGES BALANCE
BEGINNING COST AND RETIREMENTS ADD (DEDUCT) AT END
DESCRIPTION OF PERIOD EXPENSES (A) (B) OF PERIOD
- - - -------------- --------- --------- ------------ ------------- ---------
1994
----
Buildings $ 11,029 $ 1,741 $ -- $ (9) $ 12,761
Leasehold improvements 1,784 362 (85) 2 2,063
Machinery and equipment 82,253 13,139 (1,086) (398) 93,908
Automotive equipment 179 22 (1) (3) 197
Office furniture and fixtures 3,005 616 (154) 15 3,482
-------- -------- -------- -------- --------
$ 98,250 $ 15,880 $ (1,326) $ (393) $112,411
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
1993
----
Buildings $ 9,738 $ 1,552 $ -- $ (261) $ 11,029
Leasehold improvements 1,455 340 (7) (4) 1,784
Machinery and equipment 74,786 11,712 (235) (4,010) 82,253
Automotive equipment 220 37 (55) (23) 179
Office furniture and fixtures 2,826 519 (70) (270) 3,005
-------- -------- -------- -------- --------
$ 89,025 $ 14,160 $ (367) $ (4,568) $ 98,250
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
1992
----
Buildings $ 7,929 $ 1,718 $ -- $ 91 $ 9,738
Leasehold improvements 1,208 251 -- (4) 1,455
Machinery and equipment 61,038 12,645 (127) 1,230 74,786
Automotive equipment 204 44 (35) 7 220
Office furniture and fixtures 2,053 700 (32) 105 2,826
-------- -------- -------- -------- --------
$ 72,432 $ 15,358 $ (194) $ 1,429 $ 89,025
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Notes:
(A) Sales, abandonments of fully depreciated assets.
(B) Includes currency translation adjustments due to SFAS 52 of
$(134,000), $(4,739,000), and $1,398,000 in fiscal 1994, 1993, and
1992, respectively.
Depreciation of property, plant and equipment is provided on the straight-line
method, based on the estimated useful lives of the assets at annual rates
explained below except at the Company's Rancho California and El Segundo
facilities where the unit of production method has been adopted for the wafer
fabrication facilities and related assets.
Buildings 2% to 4%
Leasehold improvements Lesser of term of lease or useful life
Equipment 8 1/3% to 33 1/3%
F-2
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE FISCAL YEARS ENDED JUNE 30, 1994, 1993 AND 1992
(IN 000'S)
ADDITIONS
------------------------
CHARGED
BALANCE AT TO CHARGED BALANCE
BEGINNING COST AND TO DEDUCTIONS AT END
DESCRIPTION OF PERIOD EXPENSES OTHER (A) OF PERIOD
- - - ----------- ---------- ----------- ---------- ----------- ----------
1994
----
Allowance for doubtful account $ 607 $ 577 $ -- $ (507) $ 677
--------- --------- --------- --------- ---------
Deferred tax valuation allowance (B) $ 15,546 $ -- $ (4,950) $ -- $ 10,596
--------- --------- --------- --------- ---------
1993
----
Allowance for doubtful account $ 1,413 $ (78) $ -- $ (728) $ 607
--------- --------- --------- --------- ---------
1992
----
Allowance for doubtful account $ 714 $ 712 $ -- $ (13) $ 1,413
--------- --------- --------- --------- ---------
(A) Deductions include the write-off of uncollectible amounts and the effects
of FAS 52.
(B) Effective July 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes" which requires recognition of deferred tax assets and liabilities
for temporary differences and net operating loss (NOL) and tax credit
carryforwards. Under SFAS No. 109, deferred income taxes are established
based on enacted tax rates expected to be in effect when temporary
differences are scheduled to reverse and NOL and tax credit carryforwards
are expected to be utilized. Adoption of SFAS No. 109 had no material
impact on the Company's financial position or results from operations.
Prior year's financial statements have not been restated.
F-3
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
SCHEDULE IX
SHORT TERM BORROWINGS (A)
FOR THE FISCAL YEARS ENDED JUNE 30, 1994, 1993 AND 1992
(IN 000'S EXCEPT INTEREST AMOUNTS)
WEIGHTED
WEIGHTED AVERAGE AVERAGE
BALANCE AVERAGE MAXIMUM OUTSTANDING INTEREST RATE
AT END INTEREST OUTSTANDING DURING YEAR DURING THE
BORROWING CATEGORY OF YEAR RATE DURING YEAR (B) YEAR (B)
- - - ------------------ -------- -------- ----------- ----------- ------------
1994
----
Banks $ 27,205 5.7% $ 29,204 $ 25,737 7.1%
1993
----
Banks $ 24,007 6.5% $ 24,007 $ 20,118 8.4%
1992
----
Banks $ 22,360 11.6% $ 23,196 $ 17,369 11.3%
Notes:
(A) See Long Term Debt and Other Loans note to the Consolidated Financial
Statements.
(B) The Average amounts outstanding and average interest rates were
determined on a monthly and quarterly basis, respectively.
F-4
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
SCHEDULE X
SUPPLEMENTARY STATEMENT OF OPERATIONS INFORMATION
FOR THE FISCAL YEARS ENDED JUNE 30, 1994, 1993 AND 1992
(IN 000'S)
CHARGED TO COST AND EXPENSES
--------------------------------------
ITEM 1994 1993 1992
- - - ---- ------ ------ ------
1. Maintenance and repairs $ 8,144 $ 7,721 $ 6,438
5. Advertising costs $ 1,549 $ 1,362 $ 1,044
F-5