International Rectifier Corp. (IRF) filed Quarterly Report for the period ended 2009-09-27.
International Rectifier Corporation is a technology pioneer and a leading designer and manufacturer of power semiconductors that refine electricity from wall outlets or batteries into a more usable form. This process which the company calls power conversion is conceptually similar to refining oil to produce efficient usable fuel. Power conversion reduces costs and enhances the performance and efficiency of electrically powered products. Power conversion can be viewed in four stages: input rectification control switching and output rectification. International Rectifier Corp. has a market cap of $1.34 billion; its shares were traded at around $18.88 with and P/S ratio of 1.8.
Highlight of Business Operations:
We are proceeding with our plans to consolidate our manufacturing sites in order to reduce our costs. The plans we initiated during fiscal year 2009 to reduce the size of our Newport, Wales wafer fabrication facility and to close our El Segundo, California wafer fabrication facility are proceeding. However, as we noted in our Annual Report on Form 10-K filed in August 2009, we postponed a portion of the initiative at our Newport, Wales wafer fabrication facility in the fourth quarter of fiscal year 2009, due to a significant increase in demand, until at least July 2010 or when sufficient alternative external capacity comes on-line. Since we already implemented fixed cost reductions associated with this initiative, we are saving $3.6 million on an annualized basis associated with this initiative beginning in the June 2009 quarter. The estimated completion of the closure of our El Segundo, California wafer fabrication facility is the end of the second quarter of fiscal year 2011. We estimate that this factory closure will save us approximately $12.7 million per year beginning in third quarter of fiscal year 2011.
In addition to reducing our manufacturing costs, we have continued our efforts to align our operating expense structure with our revenue levels. During the three months ended September 27, 2009, excluding a $45.0 million class action lawsuit settlement and a $9.5 million insurance reimbursement that were recorded in the prior quarter, we reduced our selling, general and administrative expenses from the prior quarter by $3.9 million. On a year over year basis, excluding $16.4 million of investigation, filing support and proxy contest and filing costs, selling, general and administrative expense decreased approximately $4.9 million. These selling, general and administrative savings were achieved through lower salary related costs due to headcount reductions which were partially offset by higher severance expenses. Although we plan to reduce our manufacturing and selling and administrative costs in the near term, we expect to maintain our investment levels in new product development in order to meet our longer term revenue goals. However, during the three months ended September 27, 2009, research and development spending declined by $3.4 million from the prior quarter. This reduction in research and development expense was driven by lower engineering builds rather than lower research and development headcount, which remained flat with the prior quarter.
Our cash flows from operations was a use of cash of approximately $7.1 million for the first three months of fiscal year 2010 an improvement from the prior year comparable period which was a use of cash of $16.1 million. Our cash, cash equivalents and investments, excluding restricted cash, as of September 27, 2009 totaled $586.9 million compared to $600.5 million as of June 28, 2009. The quarterly decline in cash and investments was driven primarily by cash used in operations and capital expenditures of approximately $9.5 million during the first three months of fiscal year 2010.
Revenue from our product sales segments declined by $34.5 million, or 16.3 percent for the three months ended September 27, 2009 compared to the three months ended September 28, 2008, due primarily to 1) a slowdown in the economy, 2) customer draw down of inventories, 3) lower sales of our game station related products and 4) the impact of lower average selling prices. Our IP segment reported lower revenue by $18.2 million due to the non-recurrence of an $18.7 million in royalties attributed to a one-time amendment to one of our patent licenses in the prior year.
Selling, general and administrative expense was $43.6 million (24.3 percent of revenue) and $64.9 million (26.6 percent of revenue) for the three months ended September 27, 2009 and September 28, 2008, respectively. The year-over-year decrease in selling, general and administrative expense was due primarily to the $14.5 million of investigation and filing support costs and $1.9 million of proxy contest and filing costs in
IRF is in the portfolios of Arnold Schneider of Schneider Capital Management, George Soros of Soros Fund Management LLC, Chris Davis of Davis Selected Advisers.
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