IR Reports Backlog Up, Margins Down

April 27, 2006 by Jeff Shepard

International Rectifier Corp. reported adjusted earnings of $28.1 million (or $0.39 per share) for the March quarter on revenue of $297.1 million. This compares to $26.5 million (or $0.37 per share) for the December quarter on revenue of $278.8 million. For the prior-year quarter, adjusted earnings were $41.7 million (or $0.56 per share) on revenue of $281.9 million. For the March 2006, December 2005 and March 2005 quarters, adjusted earnings excluded $3.3 million, $3.1 million and $8.1 million in pretax charges, respectively, for severance and restructuring activities announced in December 2002.

On a GAAP basis, net income was $25.7 million (or $0.36 per share) for the March quarter versus $24.3 million (or $0.34 per share) in the December quarter and $35.7 million (or $0.48 per share) for the prior-year March quarter. The expense for stock-based compensation lowered both the adjusted and GAAP EPS for the March quarter by $0.01 per share. Gross margin was 40.0 percent in the third quarter, unchanged from the December quarter. IR reported gross margin of 44.4 percent in the year-ago March quarter. Thirteen-week product backlog was $247 million at the end of the March quarter, up 22 percent sequentially.

CEO Alex Lidow said, "Demand soared in the March quarter. Our orders grew 27 percent over the prior quarter as customers continue to turn to IR's leading power management solutions. Demand was strongest in Japan, where our orders were up 110 percent on the strength of new digital TV and game station programs. We are especially pleased to announce that IR has been selected for the key power management solution in a major next-generation game station platform. This platform presents one of the most difficult power management challenges in the industry. Our iPOWIR™ integrated modules have been selected to provide the power management for the high-performance processor as well as the advanced graphics processor. In addition, our high-performance analog ICs have been selected to power the external adapter. We look forward to this unique, high-volume business opportunity."

In the March quarter, IR's Focus Products revenue grew 6 percent quarter-on-quarter. Revenue in each product segment in the Focus Products group was up from the prior quarter and up double-digit percentages from a year ago.

Computing & Communications (C&C) revenue was up 6 percent quarter-on-quarter, led by strength in the company's game station and AMD and Intel-based server business. Energy-Savings Products (ESP) revenue grew 8 percent from the prior quarter, led by energy-efficient air conditioners and automotive. Aerospace & Defense (A&D) revenue was up 5 percent over the prior quarter, due to military and commercial aviation programs, including the new Airbus A380 and Boeing 787, where IR's power management content is significantly higher than in prior generations.

In the Non-Focus Products group, revenue increased 8 percent over the December quarter. In the Commodity Products segment, revenue grew 8 percent over the prior quarter in an improved market environment. Non-Aligned Products segment revenue was up 8 percent due to program timing and improved manufacturing throughput. On April 12, IR announced plans for a potential sale of its Non-Focus Products business, and anticipates it could enter into an agreement by the end of June for the sale. In the March quarter, these businesses had revenue totaling $69 million, or 23 percent of company revenue.