International Rectifier Corp. Reports Operating Results (10-Q)
International Rectifier Corp. has a market cap of $1.63 billion; its shares were traded at around $23.65 with a P/E ratio of 11.6 and P/S ratio of 1.3.
Highlight of Business Operations:The Company evaluates securities for other-than-temporary impairment on a quarterly basis. Impairment is evaluated considering numerous factors, and their relative significance varies depending on the situation. Factors considered include the length of time and extent to which the market value has been less than cost; the financial condition and near-term prospects of the issuer of the securities; and the intent and ability of the Company to retain the security in order to allow for an anticipated recovery in fair value. If, based upon the analysis, it is determined that the impairment is other-than-temporary, the security is written down to fair value, and a loss is recognized through earnings. Total other-than-temporary impairments relating to available-for-sale securities for the three months ended December 25, 2011 were $1.8 million and for the six months ended December 25, 2011, and December 26, 2010 were $2.3 million and $0.5 million, respectively. There was no other-than-temporary impairments during the three months ended December 26, 2010. 16 Table of Contents INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company had approximately $66.7 million in notional amounts of currency forward contracts not designated as accounting hedges at December 25, 2011. The net realized and unrealized foreign currency gains (losses) related to forward contracts not designated as accounting hedges recognized in earnings as a component of other expense were $0.1 million and $1.7 million, and $0.9 million and $1.2 million for the three and six months ended December 25, 2011 and December 26, 2010, respectively.
Our revenues were $230.1 million and $281.7 million for the three months ended December 25, 2011 and December 26, 2010, respectively, and $532.8 million and $562.6 million for the six months ended December 25, 2011 and December 26, 2010, respectively. We experienced strong demand for our products during fiscal year 2011; however during the six months ended December 25, 2011 we experienced a sharp decline in demand. Our revenues decreased 18.3 percent and 5.3 percent for the three and six months ended December 25, 2011 compared to the prior year comparable period. Our lower revenues during the first and second fiscal quarters of 2012 were due to lower demand in China, particularly in the appliance end market, lower demand in Europe among industrial customers, and weakness in the computing end market as a result of the recent flooding in Thailand which occurred during our fiscal second quarter. In addition, during the first two fiscal quarters of 2012, we decided not to pursue highly discounted spot market business in our commercial segments which negatively impacted our revenue. We currently expect revenues to range between $230 million and $250 million for the next fiscal quarter.
Our IP segment revenues decreased $3.1 million or 78.9 percent, to $0.8 million. The decline in revenue was due to a significant decline in royalty payments from our largest licensee effective as of late fiscal year 2011. Additionally, the licensee requested a refund of an overpayment from fiscal year 2011. Excluding this refund, our IP revenue would have been $1.2 million for the six months ended December 25, 2011. With the expiration of some of our patents we expect our IP segment revenues will be approximately $0.5 million in each of the next several quarters absent the consummation of additional license agreements.
Selling, general and administrative expense was $50.6 million (22.0 percent of revenues) and $46.6 million (16.5 percent of revenues) for the three months ended December 25, 2011 and December 26, 2010, respectively. Selling, general and administrative expense was $99.5 million (18.7 percent of revenue) and $94.9 million (16.9 percent of revenue) for the six months ended December 25, 2011 and December 26, 2010, respectively. The year-over-year increase in selling, general and administrative expense for the three and six months ended December 25, 2011 was primarily due to increased expenses related to implementation of our ERP system. The depreciation associated with the new ERP system is approximately $2.0 million per quarter beginning with the second quarter of fiscal year 2012 and is charged to SG&A expense.
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