INTERNATIONAL RECTIFIER ANNUAL REPORT 2000 International Rectifie
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POWER MAKE THINGS HAPPEN.
INTERNATIONAL RECTIFIER ANNUAL REPORT 2000
International Rectifier world leader power management, technology that provides reliable, precise power digital economy improves performance productivity home appliances, cars, satellites, wide range industrial applications.
building leadership power management component technology develop proprietary solutions that benchmarks, define power architectures, capture more value fastestgrowing market segments: information technology, motion control, automotive. strategic focus power management unique competitive advantages have attracted roster blue-chip customers emerging industry leaders around world. company comprises three product groups that offer industry's premier power management technology every level integration. Analog power advanced-circuit devices designed work together proprietary chipsets that optimize overall circuit end-product performance. Power systems modules assemblies that combine multiple power technologies proprietary packages capture more value target applications. Components discrete devices that serve basic building blocks power management. International Rectifier shares traded York Stock Exchange, company included Standard Poors Mid-Cap Index.
MARKET DRIVERS
LETTER SHAREHOLDERS
Demand power management technology continues rapid rise, reflecting powerful fundamental market forces.We believe power management offers next great opportunity technology. Here's why:
First, internet enterprise computing: brokerage giants serving e-customers around world, intranets connecting field salesmen their factories, far-flung families sharing lives on-line, up-time everything. growth e-commerce hunger connectivity sending demand high-quality, reliable power soaring placing premium power management technology that provides Just internet relies power management world your fingertips, portable electronics depend power management world your pocket. Internet appliances, PDAs, cell phones, pagers need efficient power management cooler, provide greater horsepower, deliver more features functions more compact products, give more web-surfing, messaging, talk-time single battery charge. fact, Information accelerating electricity consumption adding strain power grids around world. U.S. cities suffering rolling brownouts during periods peak demand. Developing economies struggling support full production week electrify remote areas. Motors consume biggest piece world's electricity pie, power management enabling technology smart motors that electricity consumption much percent home appliances industrial applications. Motor vehicles pose another dilemma, automakers grapple with escalating performance demands tougher fuel economy standards. Here, too, power management plays pivotal role: Innovations power management improve performance fuel consumption much percent conventional vehicles more vehicles powered batteries fuel cells. Power management helping world advance standard living protect natural resources, International Rectifier leading charge. International Rectifier. power make things happen.
ended fiscal 2000 strongest position International Rectifier's history. just last year, power management moved center stage technology that provides high-quality fuel digital economy increases productivity-per-watt everything from servers broadband networks anti-lock brakes home appliances. pioneered core technology leads world power management, this letter will reflect unique viewpoint discuss competitive advantages. International Rectifier's leadership power management gives preview most profitable opportunties fastestgrowing market segments positions establish dominant power management architectures. Before return these topics pages that follow, we'll recap company's accomplishments over past year outline goals coming years. Over last three years, invested over $125 million research development, we're taking high ground leading-edge applications. Fiscal 2000 year important technology developments major design wins target markets: information technology, motion control, automotive. Sophisticated servers, routers, computers that climb steep performance curves
need multiple levels power management that spring from sleep mode high-current power with unprecedented speed accuracy. fiscal 2000, took bold leadership initiative with campaign that defined architecture roadmap "dc-to-dc" power. campaign with family analog power advanced-circuit devices tailored communications computing applications. second phase campaign, extended product family with chipsets that achieve benchmark efficiency internet appliances, servers, top-of-the-line notebook PCs. another initiative extend leadership target applications, introduced family advanced-circuit devices propr ietar FlipFET packages that achieve breakthrough power density. These proprietary devices occupy one-third board space industry-standard packages offer valuable advantages portable electronics other super-compact applications.When used cell phones, these benchmark devices substantially increase talk-time standard lithium-ion battery. Industry leaders including Intel, Lucent, Motorola, Dell, AMD, Sony, have built power systems their most advanced products around IR's analog power advanced-
INFORMAT CHNOLOGY
Fiscal
1998
1999
2000
circuit devices. fiscal 2000, sweep design wins information technology, motion control, automotive applications position dominate most rewarding applications power management. analog power secured solesource position next-generation broadband network took lion's share business major communications satellite program. advanced-circuit devices powering high-performance graphic processor Sony PlayStation®2, major cell phone manufacturer specified suite these devices full line latest-generation digital cell phones. Eight makers motor drives factory automation selected analog power
from world's leading motor control suppliers adopted analog power across entire product range. vast majority energy-efficient appliances designs appliances industrial motor drives analog power ICs. earned sole-source position four electric steering programs 42-volt power distribution integrated starter-alternator designs that poised revolutionize power management motor vehicles.The world leader minivans will power modules exclusively drive motors. Technologically-advanced products served powerful engine IR's growth. Sales analog power ICs, advanced-circuit devices, power systems grew percent fiscal 2000, these largely-proprietary products increased from just percent revenues fiscal 1998 percent latest quarter. richer business commanding position target markets began yield substantial rewards fiscal 2000. International Rectifier grew revenues percent. expanded gross margin nearly points over course year reduced company's selling, general, administrative expense ratio nearly three points. fiscal year 2000, expanded operating margin points closed year
with record quarterly revenues earnings. Leadership power management International Rectifier unique position augment organic rowth with strateg acquisitions. Last fiscal year, took important
ADVANCE CHNOL PRODUCT ENUES
dollars millions
$28.9 $34.8 $44.2
$59.2
Fiscal 2000
Includes analog power ICs, advanced-circuit devices, power systems, components
first step this direction acquiring Zing Technologies, supplier power management modules components that complement IR's value-added technology. acquisition accelerates growth power systems business enhances product offerings aviation aerospace, undersea cable systems, other demanding lucrative applications.
Late fiscal year, took steps gain flexibility strengthen balance sheet with successful offering 9.25 million shares common stock that netted company $361 million. Then July, with shares standing percent above March offering price, raised additional $533 million with notes convertible into common stock price just under share. all, fiscal 2000 stands year meaningful accomplishments. International Rectifier defined power management architectures fastest-growing, most profitable market segments. records quarterly revenues earnings.We completed successful acquisition secured financial resources consolidate industry leadership number levels. shares more than tripled value outperformed major technology indices. Shortly after close fiscal year, Standard Poors named International Rectifier bellwether Mid-Cap Index. strategy shown early signs success, coming into fiscal 2001 with ambitious goals vision resources achieve them. We'll outline objectives here. first enhancing company's long-term growth profile. technology earning right-of-first-refusal industry's
best opportunities. We're mapping dominant position fastest-growing segments market, expect grow faster than industry. expect shift towards proprietary products provide valuable buffer market down-cycles.And automotive motion-control applications that promise huge increases power management content should start moving into volume production point when explosive growth information technology applications could begin moderate. position exceptional growth, we're targeting top-tier design programs strategic acquisitions. Other companies have come seeking benefits focus commitment power management, credibility access that industry leadership confers. Whether they offer complementary technology attractive opportunities vertical integration, plan selectively pursue acquisitions that meet rigorous standard synergy value.
second goal increasing inherent profitability. plan further reduce selling, general administrative cost ratio those efficiencies fund increased investments technology. accelerating shift favor value-added business that drive gross operating margins highs reduce exposure adverse business conditions. Meanwhile, business conditions outlook remain strongly positive. Based leadership position power management continued favorable market dynamics, expect year accelerating revenue growth, continued nings expansion, success competitive high ground. begin fiscal year century, world just beginning grasp potential power management.We welcome recognition appreciate company's unique opportunity create benefits society value shareholders.
POWER MAKE THINGS HAPPEN.
Eric Lidow Chairman
Alex Lidow Chief Executive Officer
POWER MAKE THINGS HAPPEN.
Behind every screen, story high drama unfolds makers portable leading-edge electronics struggle cram more more features functions into less less space. Demand data media exploding, clock cycles accelerating, operating voltages dropping while electrical current climbing, up-time requirements escalating. world information technology, push coming shove. International Rectifier coming rescue with advanced technology that re-configures electrical power flexibility. Efficient power management gives PDAs cell phones power more last longer.With high-precision power management, servers routers what they need keep world connected.The beat goes
WISH COULD STREAMING VIDEO YOUR HANDHELD?
MARKET ANAGEM CONDUCTO
dollars billions
$55.9
$43.5 $33.8 $26.3
$20.5 $15.9 $12.4 $4.6 $5.9 $9.7 $7.5
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Source: Dataquest,Venture Development Corp.,
POWER MAKE THINGS HAPPEN.
They used freak occurrences, power outages becoming regular feature summertime America. Every year, inefficient motors waste billion world's electricity, booming economy explosive growth information technology driving power consumption perilously close limits power grid.Then weather hits, conditioners crank from coast coast. realm home appliances high-rise elevators, push coming shove. International Rectifier coming rescue with proprietary analog technology that links heavy metal digital smarts. Sophisticated power management makes motors versatile enough vary their speed efficient enough electricity consumption half. Power restored.
WISH COULD THROUGH SUMMER
MOTI ARKE POWE MANAGE ICONDUCT
dollars billions
$2.5
$2.4
$2.0
$2.0
$1.7
$1.5 $1.3 $1.2 $1.1 $1.0 $0.9 $0.8 $1.0
$0.5
2001
2002
2003
2004
2005
2006
2007
2008
2009
Includes refrigerators, washers, residential A/C, light industrial motors
Source: Automation Research Corp., Freedonia Group,
POWER MAKE THINGS HAPPEN.
love cars love wide-open spaces. power features crave burden engines, fuel mileage, best intentions. keep adding power features, every extra watt they draw puts more drag engine burns more gas. Meanwhile, standards fuel economy keep getting tougher. world wheels,push coming shove.International Rectifier coming rescue with advanced power management technology electric steering, integrated starter-alternator motors, 42-volt distribution systems that save million barrels day. tomorrow will comfort you, body soul.
WISH COULD DRIVE HIGH-PERFORMANCE ENVIRONMENT?
ARKE POWE MANAGE ICONDUCT
dollars billions
$8.1 $8.0
$7.0
$6.0 $5.1 $5.0
$4.0 $3.6 $3.0 $2.2 $2.0 $1.5 $1.0 $1.0 $0.3 2000 $0.4 2001 $0.5 $0.7
2002
2003
2004
2005
2006
2007
2008
2009
Source: Strategy Analytics,Visteon,
dollars millions
PROF RGIN 36.6%
$250
$232.0
38.5%
$200 $171.1 $152.2 $150
$198.0
31.7%
34.0%
$100
Fiscal 2000 Fiscal 2000
POWER MAKE THINGS HAPPEN.
+350% +300% +250% +200% +150% +100% +50% -50% Fiscal 2000 Philadelphia Semiconductor Index (SOX) NASDAQ
Results Operations
following table sets forth certain items included selected financial data percentage revenues.
Fiscal Years Ended June 2000 1999 1998
Revenues Cost sales Gross profit Selling administrative expense Research development expense Impairment assets, restructuring severance charges Operating profit (loss) Interest expense, Other income (expense), Income before income taxes, extraordinary charge cumulative effect accounting change Provision income taxes Income before extraordinary charge cumulative effect accounting change Extraordinary charge cumulative effect accounting change income (loss)
2000 Compared with 1999
100.0% 64.4 35.6 15.2 14.1 (0.8) 13.5 (0.6) 9.1%
100.0% 72.1 27.9 18.0 (2.0) (2.0) (4.8) (1.1)%
100.0% 68.1 31.9 19.0 (1.3) (0.1) 3.0%
Revenues fiscal 2000 were $753.3 million, 38.1% higher than fiscal 1999 revenue $545.3 million. This includes $9.4 million revenue from acquisition Zing Technologies, Inc. ("Zing") wholly-owned subsidiary Omnirel ("Omnirel"). Revenues proprietary products (Power Integrated Circuits, Advanced Circuit Devices, Power Systems) grew revenue fiscal 2000 compared revenue fiscal 1999. patent royalties contributed $36.4 million revenue, compared $26.5 million fiscal 1999, reflecting number license agreements market growth. Based location customer, revenues region (excluding contribution Zing) were approximately from North America, from Europe, from Japan Asia Pacific fiscal 2000.This compares 42%, 24%, these regions, respectively, fiscal 1999.Year-to-year, revenue increased Asia Pacific Japan, reflecting continued movement American European manufacturing activities this region well strong demand sectors. European revenue increased year-to-year, continuing strength automotive cellular phone industries. Revenue North America increased year-to-year, strength computer industry. Gross profit $268.1 million (35.6% revenues) fiscal 2000, versus $152.0 million (27.9% revenues) fiscal 1999. gross margin increase reflected higher proportion revenue from proprietary products, increased royalty income firm pricing. During fiscal 1999, $2.5 million charged cost goods sold write-down inventory result planned relocation assembly lines from facility England facility Mexico. Excluding inventory charge, gross profit fiscal 1999 28.3% revenue. "Notes Consolidated Financial Statements, Note Impairment Assets, Restructuring Severance Charges." fiscal 2000, selling administrative expense $114.7 million (15.2% revenues), versus $98.2 million (18.0% revenues) comparable year-ago period.A reduction ratio selling
administrative expense revenues reflects results ongoing initiatives increase productivity selling administrative activities benefit restructuring programs. Selling administrative expenses percentage revenues expected further decrease over near term. fiscal 2000, research development expenditures increased $47.2 million (6.3% revenues) compared $40.5 million (7.4% revenues) comparable prior-year period. $6.7 million increase reflects among other things, initiatives accelerate development products. With respect current year activity related restructuring severance charges taken prior periods, refer "Notes Consolidated Financial Statements, Note Impairment Assets, Restructuring Severance Charges." Other income $1.3 million fiscal 2000 versus other income $53.5 million comparable prior-year period. fiscal 1999, other income consisted proceeds related settlements patent litigation.The income reported from these settlements advanced deferred royalty payments, patent defense costs, share royalty proceeds payable Unitrode Corporation. interest expense decreased $5.1 million fiscal 2000 versus prior year.This decrease reflected higher interest income fiscal 2000 result cash generated from common stock offering March 2000. foreign currency gains losses were less than $1.0 million each fiscal year. effective rate fiscal 2000 approximately 28.0%, which differs from U.S. federal statutory rate 35%, primarily decrease valuation allowance, benefit foreign research development credits, partially offset higher statutory rates certain foreign jurisdictions foreign jurisdiction losses without foreign benefit. difference between U.S. federal statutory rate 35.0% effective rate approximately 34.6% 33.0% fiscal 1999 1998, respectively, attributable mainly benefits foreign credits, research development credits state credits partially offset increase valuation allowance, higher statutory rates certain foreign jurisdictions foreign jurisdiction losses without foreign benefit, increase deferred compensation 1999. quarter ended March 2000, recorded extraordinary charge $6.6 million ($4.8 million benefit) early extinguishment debt result early payoff outstanding loans, accrued interest prepayment penalties (aggregating $192.3 million) under syndicated Credit Agreement with Banque Nationale Paris. fiscal 1999, reported non-cash, after-tax charge $26.2 million associated with early adoption Statement Position ("SOP") 98-5, mandated change accounting practices certain start-up preoperating costs.This cumulative effect accounting change recorded retroactively first quarter fiscal 1999 one-time charge.We previously deferred amortized such costs.
1999 Compared with 1998
Fiscal 1999 52-week year compared 53-week year fiscal 1998. Revenues fiscal 1999 were $545.4 million, slightly lower than fiscal 1998 revenue $551.9 million. patent royalties contributed $26.5 million revenue, compared $17.2 million prior period. During fiscal 1999, global pricing averaged decline compared drop prior period. fiscal 1999, product sales region (based location customer) were approximately from North America, from Europe from Asia, which includes Japan Asia Pacific, compared 47%, 27%, respectively, fiscal 1998. Year-to-year, revenue Japan decreased 8.5% increased Asia Pacific 35.4%, reflecting partial economic recovery penetration into market segments Asian market. Europe down 10.1% year-to-year, with weakness most market segments. Revenue North America decreased 12.4% year-to-year, reflecting distributors' efforts reduce their inventories shift some U.S. based customers' assembly operations locations Asia. Unit shipments increased percent year-to-year.The revenue comparison over same period reflects price pressure shift smaller, lower-priced products, particularly Asian markets. Gross profit $152.0 million (27.9% revenues) fiscal 1999, versus $176.2 million (31.9% revenues) fiscal 1998.The year-to-year gross profit comparison reflected intense industry-wide price
declines, unfavorable fluctuations product mix, certain other expenses: $2.5 million inventory write-down associated with transfer manufacturing lines part restructuring program, $2.7 million related adoption Statement Position ("SOP") 98-5, ("Reporting Costs Start-up Activities"). Total cost sales reflected substantial increase unit shipments meet rising demand. effort offset price pressure, substantially reduced unit costs achieved approximately million manufacturing cost reductions fiscal 1999. Cost reduction measures included re-negotiation prices paid materials subcontract manufacturing services process changes that benefited manufacturing yields, well increased utilization production capacity. Selling administrative expense $98.2 million (18.0% revenues) fiscal 1999 versus $104.7 million (19.0% revenues) fiscal 1998.The improvement absolute dollars percent sales reflects initiatives increase productivity selling administrative activities well benefit restructuring programs. fiscal 1999, research development expenditures increased $1.4 million $40.5 million (7.4% revenues) from $39.1 million (7.1% revenues) prior period. Higher research development expenses fiscal 1999 reflect accelerated development products, well higher overhead costs associated with research development facility. expect this increased development activity yield significant products. second third quarters fiscal 1999, took restructuring charges totaling $18.7 million. charges associated with streamlining worldwide sales administration with transfer high-volume assembly lines from operation England facility Mexico. This total charge consisted inventory write-down $2.5 million $16.2 million restructuring charge consisting $10.1 million estimated severance costs $6.1 million write-down related assets.We expect generate savings million fiscal 2000 savings approximately million annually thereafter when these restructuring activities fully implemented. expect savings resulting from these activities reduce product cost selling administrative expense percentage sales. During June 1999, recorded $8.3 million charge related employee severance associated with elimination approximately positions.This severance consisted costs resignation Derek Lidow, shared responsibility Chief Executive Officer, reduction sales administrative management staff levels. Other income $53.5 million fiscal 1999, compared other expense $0.5 million fiscal 1998. Other income primarily consisted proceeds from license agreements prior periods amounts settlement litigation past patent infringement (net legal costs share royalty proceeds payable Unitrode Corporation). fiscal 1999, interest expense increased $3.8 million from prior year. increase higher interest expense incurred higher average debt balances over prior year, which partially offset increases interest income investments. reported non-cash, after-tax charge $26.2 million associated with early adoption 98-5, AICPA-mandated change accounting practices certain start-up preoperating costs. previously deferred amortized these costs. realized unrealized foreign currency gains losses were less than million each year.
Seasonality
ended June 2000, operating activities generated cash flow $96.4 million. investing activities consumed $145.8 million, primarily capital expenditures $64.6 million purchases short-term investments $49.0 million. June 2000, made purchase commitments capital expenditures approximately $15.2 million. Assuming existing market conditions, plan fiscal 2001 capital investments approximately $125 million, principally fabrication assembly capacity meet market demand. intend fund capital expenditures working capital requirements through cash cash equivalents hand, anticipated cash flow from operations, and, needed, from funds available from equipment financing facilities. July 2000, subsequent fiscal 2000, sold $550 million 4.25% convertible subordinated notes. received proceeds approximately $533 million (net underwriting commissions).The notes mature seven years. notes converted into common stock conversion price $73.935 share. redeem notes after July 2003. more information notes, "Notes Consolidated Financial Statements Note Subsequent Events." Although believe that funding will sufficient, also consider funds from other external sources including, limited public private offerings debt equity. fiscal 2000, cash provided financing activities amounted $214.3 million. March 2000, completed offering 9,250,000 shares common stock which 8,850,000 shares were sold remaining 400,000 shares were sold stockholder) that generated proceeds $360.7 million (net $2.7 million transaction costs $17.9 million underwriting commissions).We used portion proceeds outstanding loans, accrued interest prepayment penalties (aggregating $192.3 million) under syndicated Credit Agreement with Banque Nationale Paris. remaining proceeds will used general corporate purposes, including capital expenditures possible acquisitions.As June 2000, also $19.3 million foreign revolving lines credit, against which $12.1 million been borrowed. addition, foreign term loan facilities $2.2 million domestic equipment financing facilities $4.4 million, which were both fully utilized. June 2000, credit facilities $26.0 million, against which $18.6 million been borrowed. Based cash, cash equivalents hand, short-term investments unused credit facilities June 2000, liquidity $261.6 million.
Quantitative Qualitative Disclosures about Market Risk
exposed various risks including changes interest rates affecting repayment debt return investments foreign currency rate fluctuations.We hold purchase foreign currency interest rate contracts trading purposes. objective managing exposure foreign currency changes reduce risk earnings cash flow entering into forward exchange contracts which intended reduce risks associated with value existing foreign currency assets, liabilities, firm commitments anticipated foreign revenues costs.The gains losses these contracts intended offset changes related exposures. hedge foreign currency exposure manner that would entirely eliminate effects changes foreign exchange rates consolidated income. normal course business, also face risks that either nonfinancial nonquantifiable. Such risks principally include country risk, credit risk legal risk discussed quantified following analyses. Interest Rate Risk financial assets liabilities that subject interest rate risk short-term investments. June 2000, change interest rates would have immaterial effect results operations, financial position cash flows. Foreign Currency Risk conduct business various parts world various foreign currencies.We manage potential foreign currency exposure entering into forward foreign exchange contracts other non-speculative risk management instruments hedge foreign currency denominated receivables payables certain international subsidiaries. June 2000, evaluated effect that near-term changes foreign exchange rates would have fair value combined foreign currency position, related
have experienced moderate seasonality business recent years. average over past three years, have reported approximately annual revenues first half second half fiscal year.
Liquidity Capital Resources
June 2000, maintained cash, cash equivalents short-term investments $254.3 million compared $40.4 million June 1999.The increase primarily result cash generated from operating activities common stock offering March 2000. During twelve-month period
outstanding foreign currency forward exchange contracts. experienced adverse change foreign exchange rates much 10%, potential change foreign currency position would have immaterial effect results operations, financial position cash flows. fiscal 2000, derived large portion revenues from sales foreign markets. notional value foreign currency forward contracts $37.4 million June 2000 compared $44.5 million June 1999. This decrease primarily sale certain foreign currency forward contracts.The fair market value foreign currency forward contracts $0.5 million June 2000 $0.7 million June 1999. realized unrealized foreign currency gains losses were less than million twelve months ended June 1999 2000.
Impact Introduction Euro
During June 1999, recorded $8.3 million charge related employee severance associated with elimination approximately positions. This includes reduction sales administrative management staff levels resignation Derek Lidow, shared responsibility Chief Executive Officer. June 2000, eliminated positions paid $6.3 million termination benefits.The remaining unutilized severance accrual $2.0 million June 2000, which classified current, relates severance payments certain employees were notified prior June 2000 elimination their positions.
Recent Accounting Pronouncements
January 1999, eleven member states European Union established fixed conversion rates between their existing national currency common currency, "euro." Until January 2002, either euro participating country's present currency will accepted non-cash transactions. January 2002, euro-denominated bills coins will issued participating country's present currency will gradually withdrawn during short period dual circulation more than three months. have initiated internal analysis determine effects January 2002 conversion. current assessment includes potential impact technical challenges adapt information technology other systems accommodate euro-denominated transactions, impact currency exchange rate risk currency exchange costs, impact existing contracts. Based currently available information, believe that euro conversion will have material adverse impact business financial condition.We will continue evaluate impact euro conversion.
Impairment Assets, Restructuring Severance Charges
During December 1998, recorded $14.5 million restructuring charge associated with plans relocate high-volume assembly lines from facility England facility Mexico take advantage labor rate savings, centralize more European customer service administrative activities, resulting reductions personnel.We essentially completed this operational transition June 2000. charge consisted $5.9 million, substantially estimated severance costs associated with elimination approximately positions, primarily consisting operators technicians, $6.1 million write-off assets abandoned, $2.5 million write-down inventory related specialty product lines. None assets written down, which consist primarily building improvements relating high-volume assembly production lines, production information systems, remain them have been abandoned. third quarter fiscal 1999, recorded final charge $4.2 million relating additional severance costs, after appropriate notification given remaining affected employees sales, customer service administrative areas.The severance person larger March 1999 restructuring versus December 1998 restructuring positions included March 1999 restructuring were primarily highly-paid employees sales administrative management. approximately positions December 1998 restructuring were primarily operators technicians have much lower salary level. cost savings from fiscal 1999 restructuring activities resulted annual savings approximately million fiscal 2000 expected result approximately million annually thereafter. These estimated savings consist lower direct labor costs, lower factory overhead (including lower depreciation expense), lower materials costs lower selling administrative costs. June 2000, eliminated positions, paid $9.5 million termination benefits related this program recorded asset impairments totaling $8.5 million. remaining unutilized restructuring accrual $0.7 million, which classified current, relates severance payments certain notified employees, were notified prior June 2000 elimination their positions.We estimate that, ultimately, charges associated with these actions will total approximately $18.7 million.
March 2000, Financial Accounting Standards Board ("FASB") issued Interpretation 44,"Accounting Certain Transactions involving Stock Compensation", interpretation Opinion Interpretation clarifies application Opinion definition employee purposes applying Opinion criteria determining whether plan qualifies non-compensatory plan, accounting consequence various modifications terms previously fixed stock option award accounting exchange stock compensation awards business combination.The interpretation effective July 2000, certain conclusions cover specific events that occur after either December 1998 January 2000. believe that this interpretation will have material impact consolidated financial statements. Effective first fiscal 2000, adopted 98-1, "Accounting Costs Computer Software Developed Obtained Internal Use," issued American Institute Certified Public Accountants ("AICPA"). 98-1 provides standards accounting costs computer software developed obtained internal use. standards significantly differ from previous accounting treatment software developed obtained internal have significant impact Consolidated Financial Statements. During fiscal 1999, elected early adoption Statement Position 98-5, "Reporting Costs Start-Up Activities. This accounting standard, issued April 1998 AICPA, requires most entities expense start-up preoperating costs they incurred.We previously deferred such costs amortized them over life related asset following start-up each process.The early adoption 98-5 required made retroactive beginning first quarter fiscal 1999. cumulative effect this change accounting principle, income benefit $5.4 million, $26.2 million $0.50 basic diluted share recorded retroactively first quarter 1999 one-time charge. Currently, start-up preoperating costs expensed incurred. December 1999, Securities Exchange Commission issued Staff Accounting Bulletin "Revenue Recognition Financial Statements" ("SAB 101"). summarized certain areas Staff views applying generally accepted accounting principles revenue financial statements. 101, amended 101A,"Amendment: Revenue Recognition Financial Statements" 101B, "Second Amendment: Revenue Recognition Financial Statements" effective commencing fourth quarter fiscal 2001. believe that 101, amended 101A 101B, will have material impact consolidated financial statements. June 1998, FASB issued Statement Financial Accounting Standards ("SFAS") "Accounting Derivative Instruments Hedging Activities," which later amended SFAS "Accounting Derivative Instruments Hedging Activities Deferral Effective Date FASB Statement 133." SFAS establishes standards accounting reporting derivative instruments, including certain derivative instruments embedded other contracts, hedging activities. This Statement generally requires recognition gains losses hedging instruments, based changes fair value earnings effect forecasted transaction. SFAS 133, amended SFAS 137, effective fiscal quarters fiscal years beginning after June 2000.We believe that SFAS 133, amended SFAS 137, will have material impact consolidated financial statements.
thousands except share amounts) Fiscal Years Ended June
2000
1999
1998
thousands except share amounts) Fiscal Years Ended June
2000
1999
1998
Revenues Cost sales Gross profit Selling administrative expense Research development expense Impairment assets, restructuring severance charges (Note Operating profit (loss) Other income (expense): Interest, Other, Income before income taxes, extraordinary charge cumulative effect accounting change Provision income taxes (Note Income before extraordinary charge cumulative effect accounting change Cumulative effect accounting change, income benefit $5,431 Extraordinary charge early repayment debt, income benefit $1,856 income (loss) income (loss) common share: Basic: Income before extraordinary charge cumulative effect accounting change Extraordinary charge cumulative effect accounting change income (loss) common share-Basic (Note Diluted: Income before extraordinary charge cumulative effect accounting change Extraordinary charge cumulative effect accounting change income (loss) common share-Diluted (Note Average common shares outstanding-Basic (Note Average common shares potentially dilutive securities outstanding-Diluted (Note
accompanying notes integral part this statement.
$753,327 485,240 268,087 114,664 47,180 106,243 (6,012) 1,309 101,540 28,431 73,109 (4,772) 68,337
$545,371 393,379 151,992 98,193 40,512 24,520 (11,233) (11,120) 53,509 31,156 10,780 20,376 (26,154) (5,778)
$551,891 375,727 176,164 104,661 39,132 32,371 (7,288) (494) 24,589 8,114 16,475 16,475
income (loss) Other comprehensive income (loss), effect $(105), $305 $904, respectively: Foreign currency translation adjustments Unrealized gains securities: Unrealized holding gains arising during period Other comprehensive income Comprehensive income (loss)
accompanying notes integral part this statement.
$68,337
$(5,778)
$16,475
(1,670) 1,940 $68,607
(579) (579) $(6,357)
(1,835) (1,835) $14,640
1.33 (0.08)
0.39 (0.50)
0.32
1.25
(0.11)
0.32
1.27 (0.08)
0.39 (0.50)
0.32
1.19 54,803 57,662
(0.11) 51,612 51,788
0.32 51,248 51,674
thousands except share amounts) June Assets
2000
1999
thousands except share amounts)
Common Shares
Capital Contributed Excess Value Shares
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Total
Current assets: Cash cash equivalents Short-term investments Trade accounts receivable, less allowance doubtful accounts ($1,280 2000 $1,886 1999) Inventories Deferred income taxes (Note Prepaid expenses other receivables Total current assets Property, plant equipment, cost, less accumulated depreciation ($304,644 2000 $252,707 1999) Other assets Total assets
Liabilities Stockholders' Equity
196,406 57,930 180,349 117,974 21,953 17,011 591,623 390,787 43,560 $1,025,970
31,497 8,900 121,659 108,463 16,078 19,677 306,274 380,504 22,307 $709,085
Balance, June 1997 $51,052 Issuance common shares: 82,361 exercise stock options 216,655 stock purchase plan benefits from exercise stock options stock purchase plan income year ended June 1998 Foreign currency translation adjustments Balance, June 1998 51,351 Issuance common shares: 85,600 exercise stock options 344,177 stock purchase plan Adjustment benefits from exercise stock options stock purchase plan loss year ended June 1999 Foreign currency translation adjustments Balance, June 1999 51,781 Issuance common shares: 8,850,000 issuance common stock 8,850 726,271 exercise stock options 237,210 stock purchase plan benefits from exercise stock options stock purchase plan Unrealized gain available-for-sale securities, less deferred provision $1,140 income year ended June 2000 Foreign currency translation adjustments Balance, June 2000 $61,594
$252,199 2,181 255,195 2,040
82,171 16,475 98,646
$(3,707) (1,835) (5,542)
$381,715 2,398 16,475 (1,835) 399,650 2,384
(38) 257,746
(5,778) 92,868
(579) (6,121)
(38) (5,778) (579) 396,274
Current liabilities: Bank loans (Note Long-term debt, within year (Note Accounts payable Accrued salaries, wages commissions Other accrued expenses Total current liabilities Long-term debt, less current maturities Other long-term liabilities Deferred income taxes (Note Commitments contingencies (Notes Stockholders' equity (Notes Common shares, value, authorized: 150,000,000; issued outstanding: 61,594,181 shares 2000 51,780,700 shares 1999 Preferred shares, value, authorized: 1,000,000; issued outstanding: none 2000 1999 Capital contributed excess value shares Retained earnings Accumulated other comprehensive loss Total stockholders' equity Total liabilities stockholders' equity
accompanying notes integral part this statement.
12,089 1,984 85,580 17,757 32,750 150,160 4,589 8,486 18,669
14,996 8,047 64,809 19,546 33,234 140,632 158,418 7,142 6,619
351,838 9,817 2,047 5,670
360,688 10,543 2,284 5,670
$627,118
68,337 $161,205
1,940 (1,670) $(5,851)
1,940 68,337 (1,670) $844,066
61,594 627,118 161,205 (5,851) 844,066 $1,025,970
51,781 257,746 92,868 (6,121) 396,274 $709,085
accompanying notes integral part this statement.
thousands except share amounts) Fiscal Years Ended June
2000
1999
1998
Note Business Summary Significant Accounting Policies
Cash flow from operating activities: income (loss) 68,337 Adjustments reconcile income (loss) cash provided operating activities: Depreciation amortization 55,937 Deferred income (350) Deferred income taxes 6,178 Deferred compensation other (70) Impairment assets, restructuring severance charges Cumulative effect accounting change Extraordinary charge 4,772 Change operating assets liabilities (Note (38,439) cash provided operating activities Cash flow from investing activities: Additions property, plant equipment Proceeds from sale property, plant equipment Acquisition business Purchase short-term investments Proceeds from sale short-term investments Change other noncurrent assets cash used investing activities Cash flow from financing activities: proceeds from issuance (repayments short-term bank debt proceeds from issuance long-term debt Payments long-term debt obligations under capital leases proceeds from issuance common stock Other cash provided (used financing activities Effect exchange rate changes cash cash equivalents increase (decrease) cash cash equivalents Cash cash equivalents, beginning year Cash cash equivalents, year
accompanying notes integral part this statement.
(5,778)
16,475
46,162 (600) (7,231) (6,888) 27,020 26,154 18,373 97,212 (71,577) (12,900) 17,232 8,862 (58,383)
38,937 (600) 9,452 (1,892) (16,291) 46,081 (90,280) (47,550) 51,168 (5,596) (92,258)
Business International Rectifier Corporation ("IR" "Company") leading designer, manufacturer marketer power semiconductors leading worldwide supplier type power semiconductor called MOSFET, metal oxide semiconductor field effect transistor. Power semiconductors perform power management function converting electricity into form more usable electrical products. technology advancements power semiconductors increase system efficiency, allow more compact products, improve features functionality extend battery life.The Company's products used range markets, including communications, consumer electronics, information technology, automotive, industrial government/space. founded California corporation 1947 reincorporated Delaware 1979. Principles Consolidation consolidated financial statements include accounts Company majority-owned subsidiaries, which located Europe, Mexico, Japan, Southeast Asia. material intercompany transactions have been eliminated. Fiscal Year Company operates fiscal calendar under which fiscal 2000 consisted weeks ending July Fiscal 1999 consisted weeks ending July Fiscal 1998 consisted weeks ending July convenience, references herein fiscal years fiscal years ended June Revenue Recognition Company recognizes revenues from product sales customers, including distributors, when agreement sale exists, product delivery occurred, pricing fixed determinable, collection reasonably assured. Research Development Research development costs expensed incurred. Advertising Company expenses advertising costs periods which those costs incurred.The Company shares portions certain distributors' advertising expenses through cooperative advertising arrangements. fiscal 2000, 1999, 1998, Company incurred approximately $4.2 million, $3.9 million, $3.6 million, respectively, advertising costs. Environmental Costs Costs incurred investigate remediate contaminated sites expensed. Income Taxes Deferred income taxes determined based difference between financial reporting bases assets liabilities using enacted rates effect during year which differences expected reverse.Valuation allowances established when necessary reduce deferred assets amount expected realized. Income expense payable period change during period deferred assets liabilities. U.S. income taxes have been provided approximately $53.3 million undistributed earnings foreign subsidiaries since management considers these earnings invested indefinitely substantially offset foreign credits. practicable estimate amount unrecognized deferred U.S. taxes these undistributed earnings.
96,365 (64,616) 4,118 (28,500) (49,030) (7,755) (145,783)
(2,712) (164,134) 379,185 1,810 214,302 164,909 31,497 196,406
(12,727) 192,669 (217,352) 2,981 (5,647) (40,076) (797) 32,294 31,497
16,922 42,128 (18,650) 3,295 (1,560) 42,135 (228) (4,270) 36,564 32,294
Income (Loss) Common Share income (loss) common share-Basic computed dividing income (loss) available common stockholders (the numerator) weighted average number common shares outstanding (the denominator) during period.The computation income (loss) common share-Diluted similar computation income (loss) common share-Basic except that denominator increased include number potential common shares, such options, that would have been outstanding. Treasury Stock Method used calculate dilutive shares, which reduces gross number dilutive shares number shares purchasable from proceeds options assumed exercised. Statement Cash Flows Company invests excess cash from operations investment grade money market instruments. Company considers highly liquid debt instruments with purchased maturity three months less cash equivalents. Components change operating assets liabilities fiscal years ended June 2000, 1999, 1998 were comprised following:
thousands) 2000 1999 1998
Property, Plant Equipment Property, plant equipment stated cost. Upon retirement other disposal, asset cost related accumulated depreciation removed from accounts gain loss disposition included other income. Depreciation provided straight-line method, based estimated useful lives assets, ranging from years, units production method based upon estimated output equipment. Depreciation amortization expense fiscal years ended June 2000, 1999 1998 $55.9 million, $46.2 million $38.9 million, respectively. Property, plant equipment June 2000 1999 were comprised following:
thousands) 2000 1999 Range useful life
Buildings improvements Equipment Construction-in-progress Less accumulated depreciation Land
146,627 481,145 56,993 (304,644) 380,121 10,666 390,787
120,872 425,194 76,841 (252,707) 370,200 10,304 380,504
3-30 3-15
Trade accounts receivable, Inventories Prepaid expenses other receivables Accounts payable Accrued salaries, wages commissions Other accrued expenses
$(49,090) (5,295) (52) 19,871 (2,527) (1,346) $(38,439)
(1,107) 15,494 (6,704) 18,525 3,893 (11,728) 18,373
(8,381) (16,104) (279) 7,106 1,660 (293) $(16,291)
Depreciation improvements leased premises provided straight-line method over shorter remaining term lease estimated useful lives improvements. Capital leases included property, plant equipment June 2000 1999 were follows:
thousands) 2000 1999
Supplemental disclosures cash flow information:
thousands) 2000 1999 1998
Equipment Less accumulated depreciation
2,208 (1,459)
13,607 (10,882) 2,725
Cash paid during year for: Interest Income taxes Interest capitalized
$12,205 7,005
6,497 18,274 1,142
$7,423 2,050 2,434
Short-Term Investments Company's short-term investments consist investment-grade money market instruments. Company's investments have original maturities less than year. accordance with criteria established Statement Financial Accounting Standards ("SFAS") 115,"Accounting Certain Investments Debt Equity Securities," Company's investments classified "available-for-sale." accordance with SFAS 115, these investments carried market value, unrealized gains losses, tax, reported shareholders' equity component accumulated other comprehensive income loss. June 1999, cost investments approximated market value. Unrealized holding gains $1.9 million included other comprehensive income fiscal 2000. Unrealized gains losses were immaterial fiscal 1999 1998. Inventories Inventories stated lower cost (principally first-in, first-out) market. Inventories June 2000 1999 were comprised following:
thousands) 2000 1999
Repairs maintenance costs charged expense. fiscal years ended June 2000, 1999, 1998, repairs maintenance costs were $23.5 million, $16.7 million, $18.8 million, respectively. Historically, preoperating start-up costs incurred connection with construction major production facilities were capitalized until such facilities become operational. These costs were then amortized over lives such facilities. Effective fiscal 1999, preoperating start-up costs expensed incurred accordance with 98-5, described more fully Recent Accounting Pronouncements section Note Consolidated Financial Statements. Long-Lived Assets Company defines long-lived assets property, plant, equipment less accumulated depreciation, other intangible assets. Company identifies records impairment losses long-lived assets when events circumstances indicate that such assets might impaired. Company periodically evaluates recoverability long-lived assets based expected undiscounted cash flows recognizes impairments, any, based fair value assets. Intangible Assets Patent related costs amortized using straight-line method over life related patent portfolio. March 2000, Company completed acquisition merger between Company's acquisition subsidiary Zing Technologies, Inc. ("Zing"), wholly-owned subsidiary, Omnirel ("Omnirel"). Total consideration exceeded fair market value tangible assets acquired $14.2 million, which $1.5 million been recorded goodwill $12.7 million been allocated other intangibles consisting assembled workforce, trade name, completed technology customer base. goodwill other intangibles being amortized straight-line basis over periods years.
materials Work-in-process Finished goods
18,296 59,654 40,024 $117,974
15,277 52,124 41,062 $108,463
Concentration Risk Company places cash investment-grade vehicles with high credit quality financial institutions. Company performs periodic credit evaluations customers' financial conditions generally does require collateral. Credit losses have consistently been within management's expectations. Foreign Currency Translations Transactions general, functional currency foreign operation deemed local country's currency. Assets liabilities operations outside United States translated into U.S. dollars using current exchange rates. Income expense translated average exchange rates prevailing during period. effects foreign currency translation adjustments included component stockholders' equity. June 2000 1999, accumulated foreign currency translation losses were $5.8 million $6.1 million, respectively. Company hedges certain portions exposure foreign currency fluctuations foreign currency denominated receivables payables certain international subsidiaries through forward foreign exchange contracts.At June 2000 1999, Company approximately $37.4 million $44.5 million notional value forward foreign exchange contracts outstanding with fair values $0.5 million $0.7 million, respectively. fair value foreign currency contracts estimated based spot rate various hedged currencies period. realized unrealized gains losses forward contracts years ending June 2000 1999 were less than $1.0 million, were included "Other Income (Expense)." Company does hold issue forward contracts trading purposes. June 2000 1999, majority maturities Company's forward foreign exchange contracts were three months less term. Interest Rate Swaps Under Company's Credit Agreement entered into June 1999, Company required hedge interest rate least half outstanding term loans under agreement.The Company entered into interest rate swap agreements hedge approximately these outstanding term loans. March 2000, Company paid outstanding loans sold unexpired interest rate swap agreements, resulting nominal gain. Estimates preparation financial statements conformity with generally accepted accounting principles requires management make estimates assumptions that affect reported amounts assets liabilities disclosure contingent assets liabilities date financial statements reported amounts revenues expenses during reporting period. Actual results could differ from those estimates. Stock-Based Compensation Company accounts stock-based compensation plans using intrinsic value method prescribed Accounting Principles Board ("APB") Opinion 25,"Accounting Stock Issued Employees. SFAS 123,"Accounting Stock-Based Compensation, encourages, does require companies record stock-based employee compensation plans fair value. Company elected continue accounting stock-based compensation accordance with providing required disclosures under SFAS Notes Consolidated Financial Statements. Recent Accounting Pronouncements March 2000, Financial Accounting Standards Board issued Interpretation "Accounting Certain Transactions involving Stock Compensation, interpretation Opinion 25." Interpretation clarifies application Opinion definition employee purposes applying Opinion criteria determining whether plan qualifies non-compensatory plan, accounting consequence various modifications terms previously fixed stock option award accounting exchange stock compensation awards business combination. interpretation effective July 2000, certain conclusions cover specific events that occur after either
December 1998 January 2000. Company believes that this interpretation will have material impact consolidated financial statements. Effective first fiscal 2000, Company adopted 98-1,"Accounting Costs Computer Software Developed Obtained Internal Use," issued American Institute Certified Public Accountants ("AICPA"). 98-1 provides standards accounting costs computer software developed obtained internal use. standards significantly differ from Company's previous accounting treatment software developed obtained internal have significant impact Consolidated Financial Statements. During fiscal 1999, Company elected early adoption Statement Position 98-5, "Reporting Costs Start-Up Activities. This accounting standard, issued April 1998 AICPA, requires most entities expense start-up preoperating costs they incurred. Company previously deferred such costs amortized them over life related asset following start-up each process.The early adoption 98-5 required made retroactive beginning first quarter fiscal 1999.The cumulative effect this change accounting principle, income benefit $5.4 million, $26.2 million $0.50 basic diluted share recorded retroactively first quarter 1999 one-time charge. Currently, start-up preoperating costs expensed incurred. December 1999, Securities Exchange Commission issued Staff Accounting Bulletin "Revenue Recognition Financial Statements" ("SAB 101"). summarizes certain areas Staff views applying generally accepted accounting principles revenue financial statements. 101, amended 101A,"Amendment: Revenue Recognition Financial Statements" 101B, "Second Amendment: Revenue Recognition Financial Statements" effective Company commencing fourth quarter fiscal 2001.The Company does believe that 101, amended 101A 101B, will have material impact consolidated financial statements. June 1998, FASB issued Statement Financial Accounting Standards ("SFAS") "Accounting Derivative Instruments Hedging Activities, which later amended SFAS "Accounting Derivative Instruments Hedging Activities Deferral Effective Date FASB Statement 133." SFAS establishes standards accounting reporting derivative instruments, including certain derivative instruments embedded other contracts, hedging activities. This Statement generally requires recognition gains losses hedging instruments, based changes fair value earnings effect forecasted transaction. SFAS 133, amended SFAS 137, effective fiscal quarters fiscal years beginning after June 2000.The Company does believe that SFAS 133, amended SFAS 137, will have material impact Consolidated Financial Statements. Reclassification Certain reclassifications have been made previously reported amounts conform current- year presentation.
Note Bank Loans Long-Term Debt
quarter ended March 2000, Company successfully completed offering 9,250,000 shares common stock, which 8,850,000 shares were sold Company, which generated proceeds Company $360.7 million (net $2.7 million transaction costs $17.9 million underwriting commissions). remaining 400,000 shares were sold stockholder. portion Company's proceeds used outstanding loans, accrued interest prepayment penalties (aggregating $192.3 million) under Company's syndicated Credit Agreement with Banque Nationale Paris. result early extinguishment debt, Company incurred extraordinary charge $6.6 million ($4.8 million benefit). June 2000, Company $19.3 million foreign revolving lines credit, against which $12.1 million been borrowed. Foreign term loan facilities $2.2 million equipment financing facilities $4.4 million were both fully utilized.
following summary Company's long-term debt other loans June 2000, 1999:
thousands) 2000 1999
Domestic bank loans collateralized majority Company's assets, payable quarterly installments principal interest variable rates 8.3% 8.8%, 2004 2005 Capitalized lease obligations payable varying monthly installments primarily variable rates from 6.3% 12.0%, 2002 through 2004 Foreign bank loans collateralized property and/or equipment, payable varying monthly installments 10.8%, 2000 Foreign unsecured bank loans payable varying monthly installments rates from 4.3% 8.4%, 2001 through 2006 Debt, including current portion long-term debt ($1,984 2000 $8,047 1999) Foreign unsecured revolving bank loans rates from 1.5% 8.5% Total debt
4,406 1,934
$155,213 5,298 5,738 166,465 14,996 $181,461
6,573 12,089 $18,662
June 2000, scheduled principal payments long-term debt follows: fiscal 2001: $2.1 million; fiscal 2002: $1.8 million; fiscal 2003: $1.4 million; fiscal 2004: $1.1 million; fiscal 2005: $0.1 million $0.1 million thereafter. During fiscal 2000, 1999 1998, Company incurred interest expense, capitalized interest, $11.2 million, $12.7 million, $10.1 million, respectively. accordance with SFAS "Disclosures About Fair Value Financial Instruments," fair values Company's debt been estimated based current rates offered Company debt same remaining maturities. carrying amounts loans Company approximate their fair values.
Note Capital Stock
1984 Plan terminated August, 1994. June 1999, there remaining options outstanding under 1984 Plan. During fiscal 1998 1999, 2,800 14,000 shares under option, respectively, expired under 1984 plan. November 1996, stockholders Company approved amendment stock option plan 1992. amendment broadened types options other stock-based awards (e.g., restricted stock, SARs performance shares) that granted (prior amendment, only nonqualified options could granted), extended term 1992 Plan three years December 2002, retained provision annual increase shares Company's common stock available grant 1.5% outstanding shares, increased maximum number shares that granted non-employee directors from 100,000 120,000 (including annual grant 5,000 shares each such director), reduced holding period full vesting certain non-employee director options from year months, generally provided committee Board Directors that administers 1992 Plan with substantial powers discretion with respect awards. During fiscal 1998, 1999, 2000, only non-qualified options were issued, market, under 1992 Plan. January 1998, 1999 2000, 767,928, 773,019 780,922 shares, respectively, were added 1992 Plan. Board Directors adopted 1997 Plan November 1997. terms options authorized granted under 1997 Plan substantially similar those under 1992 Plan. June 2000, there were 40,750 shares available future grants eligible employees; awards granted after December 2002. Executive officers directors eligible grants under 1997 Plan. During fiscal 1998, 1999, 2000, only non-qualified options were issued under 1997 Plan. November 1999, stockholders Company approved 2000 Plan.The 2000 Plan effective January 2000. awards granted under 2000 Plan after December 2009. June 2000, there were 2,311,400 shares available future grants eligible persons. summary status options under 1984, 1992, 1997 2000 Plans follows:
Weighted Average Option Exercise Price Share Weighted Average Grant Date Fair Value Share
Shares
Employee Stock Purchase Plan Company compensatory employee stock purchase plan ("ESPP"). Under this plan employees allowed designate between percent their base compensation purchase shares Company's common stock percent fair market value designated date. During fiscal 2000, 1999 1998, 237,210, 344,177 216,655 shares were purchased weighted average share exercise prices $9.63, $6.93 $11.07, respectively. Shares authorized under this plan that remained unissued were 859,499, 1,096,709, 1,440,886 June 2000, 1999 1998, respectively. weighted average share fair value ESPP options granted, using Black-Scholes method, 2000, 1999 1998 $5.81, $2.84 $4.31 share, respectively. Stock Option Plans Company four stock option plans, Stock Option Plan 1984 amended) ("1984 Plan"), Amended Restated Stock Incentive Plan 1992 ("1992 Plan"), 1997 Employee Stock Incentive Plan ("1997 Plan") 2000 Stock Incentive Plan ("2000 Plan"). Under 1984 Plan 1992 Plan, options purchase shares Company's common stock granted Company's employees, including executive officers, members Company's Board Directors. Under 1997 Plan, options purchase shares Company's common stock granted Company's employees consultants, executive officers Company members Board Directors. Under 2000 Plan, options purchase shares Company's common stock granted Company's employees, officers, directors, consultants advisors. Options have been issued with exercise price least equal fair value Company's common stock date grant ("at market") become generally exercisable annual installments 20%, beginning first anniversary date.
Outstanding, June 1997 Options granted Options exercised Options expired canceled Outstanding, June 1998 Options granted Options exercised Options expired canceled Outstanding, June 1999 Options granted Options exercised Options expired canceled Outstanding June 2000
2,798,185 1,666,960 (82,361) (88,002) 4,294,782 1,388,050 (85,600) (207,485) 5,389,747 3,850,350 (726,271) (257,649) 8,256,177
$14.55 15.22 7.41 15.29 14.93 9.20 7.42 13.69 13.62 33.52 14.50 14.50 $22.79
7.73 4.20 20.14
following table summarizes significant option groups outstanding June 2000 related weighted average price life information:
Options Outstanding Range Exercise Prices Share Number Outstanding June 2000 Weighted Average Remaining Life (Years) Weighted Average Exercise Price Options Exercisable Number Exercisable June 2000 Weighted Average Exercise Price
5.50 8.50 9.31 $11.88 $12.63 $16.75 $17.44 $20.75 $21.25 $33.88 $40.31 $54.13
1,088,300 1,237,510 1,343,239 1,528,031 1,143,847 1,915,250 8,256,177
7.67 $10.84 $13.68 $19.14 $26.99 $45.91 $22.79
511,850 846,470 307,350 514,199 303,742 2,483,611
7.63 $11.08 $14.66 $19.00 $21.83 $13.77
Additional information relating 1984, 1992, 1997 2000 Plans June 2000, 1999 1998 follows:
2000 1999 1998
Shareholder Rights Plan August 1996, Company's Board Directors adopted Shareholder Rights Plan (the "Plan") under which preferred stock purchase rights (the "Rights") have been will continue granted each outstanding share Company's common stock held close business August 1996. Plan intended ensure fair equitable treatment shareholders event unsolicited attempts acquire Company. Rights will become exercisable days after person group (the "Acquiror") acquired beneficial ownership more Company's common stock other than pursuant qualified offer, announces commences tender offer exchange offer that could result acquisition beneficial ownership more. Once exercisable, each Right entitles holder purchase onethousandth share series preferred stock exercise price $135, subject adjustment prevent dilution. Acquiror acquires more Company's common stock, each Right (except those held Acquiror) entitles holder purchase either Company's stock stock merged entity half market value.The Rights have voting power, expire August 2006, redeemed price $0.01 Right including tenth business after public announcement that more Company's shares have been acquired Acquiror. Company amended restated Rights Agreement, December 1998, remove requirement that continuing directors vote board approvals certain corporate transactions.
Note Impairment Assets, Restructuring Severance Charges
Options exercisable Options available grant Total reserved common stock shares stock option plans
2,483,611 2,998,123 11,254,300
2,388,781 1,314,902 6,699,649
1,178,881 746,448 5,041,230
fair value options date grant estimated using Black-Scholes model with following weighted average assumptions:
2000 1999 1998
Expected life (years) Interest rate Volatility Dividend yield
6.38% 64.00%
5.40% 57.03%
5.81% 49.88%
Company applies Opinion related interpretations accounting stock-based compensation programs. Company recorded compensation expense using accounting method recommended SFAS 123, income (loss) income (loss) common share-Basic Diluted would approximate following:
thousands except share data) 2000 1999 1998
income (loss) reported forma income (loss) common share-Basic reported forma income (loss) common share-Diluted reported forma
$68,337 $60,202 1.25 1.10 1.19 1.04
(5,778) $(10,091) (0.11) (0.20) (0.11) (0.20)
$16,475 $12,918 0.32 0.25 0.32 0.25
effects applying SFAS this forma disclosure indicative future amounts. SFAS does apply awards prior 1996. Company anticipates grants additional awards future years.
During December 1998, Company recorded $14.5 million restructuring charge associated with plans relocate high-volume assembly lines from facility England facility Mexico take advantage labor rate savings, centralize more European customer service administrative activities, resulting reductions personnel. Company essentially completed this operational transition June 2000. charge consisted $5.9 million estimated severance costs associated with elimination approximately positions, primarily consisting operators technicians, $6.1 million write-off assets abandoned, $2.5 million write-down inventory related specialty product lines. None assets written down, which consist primarily building improvements relating high-volume assembly production lines, production information systems, remain them have been abandoned. third quarter fiscal 1999, Company recorded final charge $4.2 million relating additional severance costs, after appropriate notification given remaining affected employees sales, customer service administrative areas. severance person larger March 1999 restructuring versus December 1998 restructuring positions included March 1999 restructuring were primarily highly paid employees sales administrative management. approximately positions December 1998 restructuring were primarily operators technicians have much lower salary level. June 2000, Company eliminated positions, paid $9.5 million termination benefits related this program recorded asset impairment $8.5 million. remaining unutilized restructuring accrual $0.7 million, which classified current, relates severance payments certain notified employees, were notified prior June 2000 elimination their positions. company estimates that, ultimately, charges associated with these actions will total approximately $18.7 million. During June 1999, Company recorded $8.3 million charge related employee severance associated with elimination approximately positions. This includes reduction sales administrative management staff levels resignation Derek Lidow shared responsibility Chief Executive Officer. June 2000, Company eliminated positions paid $6.3 million termination benefits.The remaining unutilized severance accrual $2.0 million June 2000, which classified current, relates severance payments certain employees were notified prior June 2000 elimination their positions.
Note Geographic Segments Foreign Operations
Company operates business segment. Revenues from unaffiliated customers based location which sale originated. Geographic information fiscal years ended June 2000, 1999 1998 presented below:
thousands) 2000 1999 1998
Deferred taxes result primarily from temporary differences relating depreciation, financial statement reserves state taxes. Company's effective rate pretax income differs from U.S. Federal Statutory rate fiscal years ended June 2000, 1999 1998 follows:
2000 1999 1998
Revenues from Unaffiliated Customers Great Britain Singapore Other foreign Subtotal-Foreign United States Unallocated royalties Total Long-lived Assets Great Britain Singapore Other foreign Subtotal-Foreign United States Total
$106,157 128,813 200,823 435,793 281,121 36,413 $753,327 24,674 3,235 47,839 386,508 $434,347
77,457 79,489 125,173 282,119 236,732 26,520 $545,371 26,237 4,948 23,118 54,303 348,508 $402,811
85,900 59,840 138,635 284,375 250,283 17,233 $551,891
Statutory rate Change valuation allowance Foreign differential Foreign credit benefit Research credit benefit State taxes, federal benefit Deferred compensation Other,
35.0% (7.7) (2.1) (3.4) 28.0%
35.0% 37.6 51.2 (48.4) (42.1) (7.6) 34.6%
35.0% (5.1) (1.0) (4.8) 33.0%
major components deferred asset (liability) June 2000 1999 follows:
thousands) 2000 1999
Deferred liabilities: Depreciation Effect state taxes Other Total deferred liabilities Deferred assets: Financial statement reserves Credit carryovers Impairment assets, restructuring severance charges Inventory adjustment operating loss carryovers Other Total deferred assets Valuation allowance deferred asset
$(57,908) (3,185) (2,803) (63,896) 4,724 61,614 6,370 6,634 79,789 (12,609) 3,284
$(48,651) (3,185) (1,370) (53,206) 5,348 67,386 17,941 2,582 94,477 (31,812) 9,459
distributor accounted 12%, 11%, Company's consolidated revenues fiscal 2000, 1999, 1998 respectively.
Note Income Taxes
Income before income taxes, cumulative effect accounting change extraordinary charges fiscal years ended June 2000, 1999 1998 follows:
thousands) 2000 1999 1998
Operations: Domestic Foreign
64,311 37,229 $101,540
$29,907 1,249 $31,156
$14,389 10,200 $24,589
provision (benefit) income taxes fiscal years ended June 2000, 1999 1998 consists
thousands) 2000 1999 1998
Current income taxes: Domestic Foreign Deferred income taxes: Domestic Foreign Total provision
6,257 15,362 21,619 6,814 6,812 $28,431
17,413 18,093 (3,515) (3,798) (7,313) $10,780
$(4,940) 3,597 (1,343) 9,009 9,457 8,114
fiscal year 2000, Company federal operating loss ("NOL") carryforwards approximately $2.0 million. addition, Company approximately $19.7 million, $0.4 million $30.4 million, foreign credits, investment credits, research development credit carryforwards, before valuation allowance, available reduce income taxes otherwise payable, which expire from 2001 2020. Furthermore, Company approximately $3.5 million alternative minimum credits, which carried over indefinitely offset regular liabilities extent alternative minimum tax, $7.7 million state investment credits, before valuation allowance, which expire from 2004 2008. Pursuant Sections Internal Revenue Code, utilization credit carryovers subject substantial limitations certain ownership changes occur during three-year testing period defined). June 2000, ownership change occurred which would limit Company's utilization credit carryovers. However, connection with acquisition Zing, Company acquired NOLs approximately $2.0 million. utilization such NOLs will subject annual limitations under Section 382. Company carry forwards approximately $19.8 million, which were generated
from Company's United Kingdom subsidiaries.The NOLs generally carried forward indefinitely, with certain limitations. Realization deferred assets dependent upon generating sufficient taxable income. Management believes that there risk that certain deferred assets result benefit and, accordingly, established valuation allowance $12.6 million against them. Although realization assured remaining deferred assets, management believes more likely than that they will realized through future taxable earnings alternative strategies. Internal Revenue Service currently auditing Company's income returns fiscal 1995 through 1997. Management believes that resolution audit will have material impact Company's consolidated financial position, results operations cash flows.
Note Income (Loss) Common Share
reconciliation numerator denominator income (loss) common share-Basic Diluted determined accordance with SFAS "Earnings Share," follows years ended June 2000, 1999 1998:
thousands except share amounts) Income (Numerator) Shares (Denominator) Share Amount
Year ended June 1998 income common share Basic Effect dilutive securities: Stock options income common share Diluted Year ended June 1999 loss common share Basic Effect dilutive securities: Stock options loss common share Diluted Year ended June 2000 income common share Basic Effect dilutive securities: Stock options income common share Diluted
Note Profit Sharing Retirement Plans
$16,475 $16,475 (5,778) (5,778) $68,337 $68,337
51,248 51,674 51,612 51,788 54,803 2,859 57,662
0.32 0.32 $(0.11) $(0.11) 1.25 (0.06) 1.19
Under established Retirement Savings Plan (401K), Company made annual contribution each participating employee $1,200 fiscal 2000, 1999 1998. Combined plan contributions Company totaled $1.2 million, $1.2 million, $1.3 million fiscal 2000, 1999 1998, respectively.
Note Environmental Matters
Federal, state, local laws regulations impose various restrictions controls storage, discharge certain materials, chemicals, gases used semiconductor manufacturing processes. Company does believe that compliance with such laws regulations effect will have material adverse effect Company's results operations, financial position cash flows. However, under some these laws regulations, Company could held financially responsible remedial measures properties contaminated, waste sent landfill recycling facility that becomes contaminated. Also, Company subject common claims releases substances that damage harm third parties.The Company cannot make assurances that changes environmental laws regulations will require additional investments capital equipment implementation additional compliance programs future which could have material adverse effect Company's results operIR
ations, financial position cash flows, could failure Company comply with environmental laws regulations. Company Rachelle Laboratories, Inc. ("Rachelle"), former operating subsidiary Company that discontinued operations 1986, were each named potentially responsible party ("PRP") connection with investigation United States Environmental Protection Agency ("EPA") disposal allegedly hazardous substances major superfund site Monterey Park, California ("OII Site"). Certain PRPs settled certain claims with under consent decrees filed suit Federal Court 1992 against number other PRPs, including Company, cost recovery contribution under provisions Comprehensive Environmental Response, Compensation Liability ("CERCLA").The Company settled outstanding claims that have arisen Site. claims against Rachelle have been settled. Company also received letter directed Rachelle, dated July 1995 from U.S. Department Justice, offering settle claims against Rachelle relating first elements clean-up work Site $4,953,148 (the final remedy assessment been made).The offer stated that settlement would cover cost additional remedial actions required finish clean-up.This settlement offer expired terms September 1995. August 1995, Company received Supplemental Information Request from directed Rachelle, which counsel Rachelle responded with information regarding waste shipped Site. Counsel Rachelle received letter from dated September 1997, requesting that Rachelle participate final remedial actions site, counsel replied October 1997.The Company taken position that none wastes generated Rachelle were hazardous. Counsel Rachelle received request from June 2000 update name contact party Rachelle designated receive information future proposed settlements.The request appears have been sent PRPs indicated that intends formulate final settlement offer near future. Company cannot determine with accuracy amount potential demand Rachelle cost final remedy. Based upon information received date, Company believes that demand cost final remedy would, made, likely significant, although should substantially below demand amount earlier phases Site clean-up.Any demands related costs final remedy would addition amount demanded earlier phases Site clean-up.The Company's insurer accepted liability although made payments defense costs lawsuit against Company. Company received letter dated September 1994, from State California Department Toxic Substances Control stating that deposit hazardous substances facility Whittier, California. June 1995, Company joined group other PRPs remove contamination from site. group currently estimates total cost clean-up between million million, although actual cost could much higher.The Company estimated that sent approximately 0.1% waste, weight, sent PRPs contributing clean-up site, Company believes cost clean-up will roughly allocated among PRPs amount waste contributed. July 1999, group proposed settlement offers Company: $34,165 second $68,330. first settlement offer covers investigation remediation site itself small area extending beyond site. second settlement offer covers this area plus additional downgradient contamination. September 1999, Company accepted $68,330 settlement offer, which requires acceptance, made required payment September 1999. There assurance, however, that will accept settlement offers what ultimate outcome this matter will be.The Company believes that, whatever outcome, will have material adverse effect Company's financial condition, results operations cash flows.
Note Commitments
future minimum lease commitments under non-cancelable capital operating leases equipment real property June 2000 follows:
Fiscal Years thousands) Capital Leases Operating Leases Total Commitments
2001 2002 2003 2004 2005 later Less imputed interest Total minimum lease payments
$1,192 1,153 1,088 (22) $4,406
$1,056 $1,713
$2,248 1,701 1,092 1,100 (22) $6,119
Total rental expense operating leases charged income $5.4 million, $6.7 million $7.7 million fiscal 2000, 1999 1998, respectively. Company outstanding purchase commitments capital expenditures approximately $15.2 million June 2000.
Note Intellectual Property Rights
Most Company's broadest power MOSFET patents were subject have successfully emerged from, reexamination United States Patent Trademark Office ("PTO"). Company's 5,130,767 patent currently undergoing reexamination PTO. Recently issued decision upholding patentability claims another Company's MOSFET patents, 5,008,725 patent, issued Notice Intent Issue Reexamination Certificate.
Note Other Income (Expense)
motion brought underwriters. plaintiffs' motion reconsideration certification interlocutory appeal these orders denied. January 1998, Court decertified class pursuing common claims fraud negligent misrepresentation granted defendants' motion narrow shareholder class period June 1991 through October 1991. Plaintiffs' motion reconsideration certification interlocutory appeal these rulings denied. June 1999, Court approved notice pendency class action proof claim form dissemination class members. Such dissemination took place June 1999.Trial currently scheduled October 2000. Although Company believes that remaining claims alleged suits without merit, ultimate outcome cannot presently determined. substantial judgment settlement, any, could have material adverse effect Company's results operations, financial position cash flows. provision liability that result upon adjudication these matters been made Consolidated Financial Statements. December 1999, Company filed suit Federal District Court Angeles, California against Semiconductor Components Industries, LLC, Semiconductor, alleging infringement certain Company's U.S. patents. suit sought damages customary relief such matters. April 2000, Company entered into worldwide royalty-bearing license agreement with Semiconductor covering certain patents.The license agreement effective January 2000 settled pending litigation. June 2000, Company filed suit Federal District Court Angeles, California against IXYS Corporation alleging infringement certain Company's U.S. patents. suit seeks damages other relief customary such matters. August 2000, IXYS filed answer counterclaim denying infringement alleging patent invalidity unenforceability.
Note Executive Agreement
Other income $1.3 million fiscal 2000, compared other income $53.5 million fiscal 1999. Fiscal 1999 other income primarily consisted proceeds from license agreements prior periods amounts settlement litigation past patent infringement (net legal costs share Company's royalty proceeds payable Unitrode Corporation).
Note Litigation
Company, along with other companies, sued Phoenix, Arizona federal court February 1999, Lemelson Foundation alleged infringement various Lemelson "machine-vision" "auto patents. July 1999, Company entered into agreement with Lemelson Foundation that settled outstanding claims grants Company license Lemelson patents asserted against Company. Company certain directors officers have been named defendants three class action lawsuits filed Federal District Court Central District California 1991.These suits seek unspecified substantial compensatory punitive damages alleged intentional negligent misrepresentations violations federal securities laws connection with public offering Company's common stock completed April 1991 redemption conversion June 1991 Company's Convertible Subordinated Debentures 2010.They also allege that Company's projections growth fiscal 1992 were materially misleading. these suits also named Company's underwriters, Kidder, Peabody Incorporated Montgomery Securities, defendants. March 1997, Court, Company individual defendants' motion summary judgment, issued following orders: motion summary judgment granted claims brought under Sections 12(2) Securities 1933; motion denied claims brought under Section 10(b) Securities Exchange 1934 Securities Exchange Commission Rule 10b-5; motion granted common claims fraud negligent misrepresentation extent said claims based representations contained offering prospectus denied other such claims.The Court also granted summary judgment
Company entered into executive agreement with Eric Lidow dated 1991.The agreement Lidow's annual salary $500,000, granted Board discretion increase salary bonuses, established pension. Based upon actuarial assumptions established PricewaterhouseCoopers LLP, Company funded trust cover liability under pension. Lidow's salary increased 1992 $550,000, August 1994 $632,500 July 1999 $670,450. Lidow awarded bonus fiscal 2000. agreement terminated either party upon days written notice. fiscal 1998, agreement amended cancel Company's obligations with respect pension consideration Company directing that corpus trust $8,096,663 distributed Lidow.The distribution made several installments, $6,596,663 fiscal 1999 $1,500,000 fiscal 1998.
Note Related Parties
June 1998, after discussing with Eric Lidow desire limit sale shares Common Stock meet commitments, Board approved unsecured loans aggregating $1,200,000, with interest annual rate eight one-half percent (8.5%).The first loan $600,000 made June 1998 second loan, also $600,000, made July 1998. Both loans were December 1998. Lidow repaid them with accrued interest $23,497 September 1998. Contemporaneously with approval loans, Company amended executive agreement. "Notes Consolidated Financial Statements Note Executive Agreement." 1999, after considering recommendation Chairman Chief Executive Officers, Board determined that Company should implement single management structure. effectuate this management change, Company entered into agreement with Derek Lidow 1999 ("Agreement"), which provided Lidow's resignation Chief Executive Officer employee Company. Under terms Agreement, Lidow received severance payment $3,200,000 June 1999, bonus $100,000 fiscal 1999 performance
August 1999 grant 200,000 stock options June 1999, which were fully vested, which expire June 2009.The Agreement also provided immediate acceleration vesting Lidow's outstanding unvested stock options extended period during which options could exercised. Under Agreement, Lidow will provide consulting services Company period years which will compensated $100,000 quarter plus associated expenses. connection with Derek Lidow's exercise option June 1999 purchase 64,000 shares Common Stock, Company outstanding receivable from Lidow $597,694 June 1999, which paid July 1999. During fiscal years 2000, 1999 1998, Company paid $62,860, $310,160, respectively, Offices Janet Hart legal negotiation services rendered Company. Hart wife Alexander Lidow.
Note Acquisition
Company agreed file shelf registration statement with SEC, covering resale notes underlying common stock, within days after closing date this offering.The Company also agreed reasonable efforts have registration statement declared effective within days date filing reasonable efforts keep shelf registration statement effective until either following occurred: securities covered registration statement have been sold; expiration holding period applicable with respect notes underlying common stock under Rule 144(k) under Securities Act, successor provision. notes common stock issuable upon conversion notes have been registered under Securities subject certain restrictions transfer.
Note Quarterly Financial Data (unaudited)
Summarized quarterly financial data follows:
Income (Loss) Common Share Income (Loss) Basic Before Diluted Before Cumulative Cumulative Effect Effect Accounting Accounting Change/ Change/ Extraordinary Extraordinary Charge Charge
January 2000, Company Zing announced that Company agreed acquire outstanding shares Zing, wholly-owned subsidiary sole operating business, Omnirel, cash purchase price $15.36 share. Omnirel manufactures sells high reliability multi-chip power semiconductor products military, industrial high-end commercial markets. acquisition accounted under purchase method accounting, consolidated financial results Zing have been included Company's consolidated financial statements from date acquisition. purchase price (net Zing's cash) transaction approximately $28.5 million. March 2000, Company completed acquisition merger between Company's acquisition subsidiary Zing. Total consideration exceeded fair value tangible assets acquired $14.2 million, which $1.5 million been recorded goodwill $12.7 million been allocated other intangibles consisting assembled workforce, trade name, completed technology customer base. purchase price been preliminarily allocated based estimated fair values date acquisition, pending final determination certain balances.The goodwill other intangibles being amortized straightline basis over periods years. sales since acquisition date Zing fiscal 2000 were approximately $9.4 million. Assuming this aquisition occured July 1997, consolidated forma sales, income earnings share would have been materially different from reported amounts fiscal years 2000, 1999, 1998.
Note Subsequent Events
thousands except share amounts)
Revenues
Gross Profit
Cumulative Effect Accounting Change/ Extraordinary Charge,
Loss Common Share Cumulative Effect Accounting Change/ Extraordinary Charge
Income (Loss)
Income (Loss) Common Share Basic Diluted
2000
Quarter $152,239 $48,219 Quarter 171,098 58,202 Quarter 197,959 72,429 Quarter 232,031 89,237
1999
5,129 12,384 21,695 33,901 19,794 4,004 (3,456)
0.10 0.23 0.38 0.52
(4,772)
5,129 12,384 $(0.09) 16,923 33,901 $(0.50) $(26,120) 19,794 4,004 (3,456) 6,095 6,699 3,284
0.10 0.23 0.29 0.52 $(0.50) 0.38 0.08 (0.07) 0.12 0.13 0.06 0.01
Quarter $127,493 $36,210 Quarter 132,837 36,153 Quarter 137,550 39,881 Quarter 147,491 39,748
1998
0.00 $(26,154) 0.38 0.08 (0.07)
July 2000, Company sold $550 million principal amount 41/4% Convertible Subordinated Notes 2007. interest rate 41/4% annum principal amount, payable semi-annually arrears cash January July each year, beginning January 2001. notes convertible into common stock time before July 2007, conversion price $73.935 share, subject adjustment certain events affecting Company's common stock occur. notes subordinated Company's existing future senior indebtedness debt other liabilities Company's subsidiaries.The Company redeem notes, whole part, after July 2003, giving least 30-days notice following prices expressed percentage principal amount:
Period Redemption Price
Quarter $133,111 $44,951 Quarter 144,622 47,850 Quarter 140,376 44,514 Quarter 133,782 38,849
results, noted above, first quarter fiscal 1999 differ from those previously reported Form 10-Q that quarter, adoption 98-5. changes were made remaining fiscal 1999 quarters immateriality.
Beginning Beginning Beginning Beginning
July July July July
2003 2004 2005 2006
ending ending ending ending
July July July July
2004 2005 2006 2007
102.429% 101.821% 101.214% 100.607%
REPORT INDEPENDENT ACCOUNTANTS
Stockholders Board Directors International Rectifier Corporation opinion, accompanying consolidated balance sheet related consolidated statements operations, comprehensive income, stockholders' equity, cash flows present fairly, material respects, financial position International Rectifier Corporation subsidiaries June 2000 1999, results their operations their cash flows each three years period ended June 2000, conformity with accounting principles generally accepted United States America. These financial statements responsibility Company's management; responsibility express opinion these financial statements based audits.We conducted audits these statements accordance with auditing standards generally accepted United States America which require that plan perform audit obtain reasonable assurance about whether financial statements free material misstatement. audit includes examining, test basis, evidence supporting amounts disclosures financial statements, assessing accounting principles used significant estimates made management, evaluating overall financial statement presentation.We believe that audits provide reasonable basis opinion expressed above.
Directors
Eric
Officers
Lidow Chairman Board
Eric Lidow Chairman Board Alexander Lidow Chief Executive Officer Robert Mueller Executive Vice President, External Affairs Business Development Michael McGee Executive Vice President, Chief Financial Officer Nabeel Gareeb Chief Operating Officer Robert Grant Executive Vice President, Marketing Communications eCommerce Michael Russell Executive Vice President, Secretary General Counsel Lesley Kleveter Assistant Secretary Counsel
*Donald Burns Chairman Board, President, Chief Executive Officer, Prestige Holdings, Ltd. *Dr. George Krsek Chairman Board President, Konec, Inc.
Alexander
Lidow Chief Executive Officer Derek Lidow Chairman Board, Chief Executive Officer, iSuppli, Inc.
**Minoru Matsuda, Esq. Professor, Kanazawa Institute Technology
Robert
Mueller Executive Vice President, External Affairs Business Development
PricewaterhouseCoopers Angeles, California July 2000
*Dr. James Plummer Dean School Engineering, Professor Electrical Engineering, Stanford University **Dr. Jack O.Vance Managing Director, Management Research, Inc. **Dr. Rochus E.Vogt Stanton Avery Distinguished Service Professor Professor Physics, California Institute Technology
*Member Audit Committee **Member Compensation Stock Option Committee Member Executive Committee
Transfer Agent Registrar
ChaseMellon Shareholder Services, L.L.C. South Hope Street Angeles, 90071
Independent Accountants
Price Range Common Stock (Closing Price Dollars) First Quarter Fiscal Year High Second Quarter High Third Quarter High Fourth Quarter High
PricewaterhouseCoopers South Grand Avenue Angeles, 90071
Annual Meeting
Stockholders Year (000's)
2000 1999 1998
89/16 233/40
41/4 180/0
2600/00 1013/16 233/800
41/40 119/16
460/00 117/80 149/16
63/80 109/16
131/20 73/160 121/20 83/160
1,546 1,839 1,837
Annual Meeting Stockholders will held November 2000, 10:00 a.m. HEXFET America Temecula,
Form 10-K
Common Stock traded York Stock Exchange Pacific Exchange under symbol "IRF." dividends have been recently declared paid.
copy Company's Annual Report Form 10-K obtained free charge from Company upon written request directed International Rectifier Corporation Corporate Finance Department Kansas Street Segundo, 90245
World Headquarters
International Rectifier Kansas Street Segundo, 90245 Phone: (310) 726-8000 FAX: (310) 322-3332 Internet: www.irf.com
North American Operations
International Rectifier Electronic Motion Systems, Ltd. Penllergaer Business Park Penllergaer Swansea, United Kingdom Phone: (++) 1792 3000 FAX: (++) 1792 3001 International Rectifier Corporation Italiana, S.p.A. Liguria 10071 Borgaro, Torino (To), Italy Phone: (++) 0111 FAX: (++) 0220 International Rectifier GmbH Frankfurter Strasse 63263 Neu-Isenburg Germany Phone: (++) 6102 FAX: (++) 6102 Branch Office Switzerland Riedmatt CH-8153 Phone: (++) 3615 FAX: (++) 6299 International Holdings, Inc. Branch Office Moscow, Russia Room Semenovsky per. Moscow, 105023, Russia Phone: (++) 5753 FAX: (++) 9560 E-mail: irmoscow@online.ru
Asian Operations
Representative Office Unit 13th Floor, Novel Plaze Jing Road Shanghai, China 200003 Phone: (++) 63608811 Fax: (++) 63603771 Representative Office 16th Floor, Suite 319, Sec. South Road Taipei 10673,Taiwan, R.O.C. Phone: (++) 2739 4230 FAX: (++) 2377 9936 Representative Office Suite 2111, Herrera Tower Herrera Corner Valero St., Salcedo Village Makati City, Philippines Phone/FAX: (++) 1653 International Holdings China, Inc. Xian International Rectifier Weiguang Street Xian, Shaanxi province, 710061, P.R. China Phone: (++) 7490/ FAX: (++) 7423 IR-PERI Power Electronics Ltd. Street Xian, Shaanxi province, 710061, P.R. China Phone: (++) 5895 FAX: (++) 5896 Liaison Office Seoul, Korea #402, Noksan Building, 106-8 Kuro-5Dong, Kuro-Gu Seoul, 152-055 Korea Phone: (++) 8773 FAX: (++) 8775 International Rectifier Southeast Asia Pte. Ltd. Kallang Avenue #08-01/03 Noel Corporate Building Singapore 339505 Phone: (++) 9555 FAX: (++) 3558 International Rectifier Hong Kong, Ltd. Unit 308, East Ocean Centre Science Museum Road Tsimshatsui East, Kowloon Hong Kong Phone: (++) 2803 7380 FAX: (++) 2540 5835 Semiconductor Electronics Ltd. S.D.F.I. Unit SEEPZ Andheri (East) Mumbai 096, India Phone: (++) 1055 FAX: (++) 0473
International Rectifier Kansas Street Segundo, 90245 Phone: (310)726-8000 FAX: (310) 322-3332 Internet: www.irf.com HEXFET America 41915 Business Park Drive Temecula, 92590 Phone: (909) 676-7500 FAX: (909) 676-9154 Rectificadores Internacionales, S.A. Prolongacion Ave. Cabos 9234 Parque Industrial Pacifico Tijuana, Baja California, Mexico C.P. 22709 Phone: (++) FAX: (++) Omnirel Crawford Street Leominster, 01453 Phone: (978) 534-5776 FAX: (978) 537-4246
European Operations
International Rectifier Company (Great Britain) Ltd. 439/445 Godstone Road Whyteleafe, Surrey OBL, United Kingdom Phone: (++) 8645 8000 FAX: (++) 8645 8077 Research Development Facility Holland Road, Hurst Green Oxted, Surrey, Phone: (++) 1883 732020 FAX: (++) 1883 733410 Branch Office Denmark Bagsvaerdvej DK-2800, KONGENS LYNGBY Phone: (++) FAX: (++) Branch Office Finland Mikkelankallio FIN-02770 ESPOO Phone: (++) 8599 FAX: (++) 8599 1560 Branch Office France Processions, BP61 91241 Michel Orge Cedex Phone: (++) FAX: (++) Branch Office Sweden 8159 S-163 Spanga Phone: (++) 9840 FAX: (++) 9895
International Rectifier Japan Company, Ltd. Bldg., 3-30-4 Nishi-Ikebukuro Toshima-ku,Tokyo, 171-0021 Japan Phone: (++) 0641 FAX: (++) 0642 Osaka Office Osaka, Japan KAZU Bldg. 2-10-27 Minami-Semba Chuo-ku 542-0081 Phone: (++) 7560 FAX: (++) 7561 Shanghai International Rectifier Trading Ltd. Road North Waigaoqiao Free Trade Zone Pudong, Shanghai, 200131, P.R. China Phone: (++) 5866 6060 FAX: (++) 5866 1654 International Holdings, Inc. Representative Office Canway Building, Suite Road, Cheng District Beijing, 100045, P.R. China Phone: (++) 6803 8195 6803 8196 FAX: (++) 6803 8194 Representative Office Block Electronic Science Technology Bldg. 2070 Shennan Road Shenzhen, 518031, P.R. China Phone: (++) 3683686 FAX: (++) 3683690
Cautionary Statement Under Private Securities Litigation Reform 1995
This Annual Report contains some statements that historical facts "forward-looking statements" that term defined Private Securities Litigation Reform 1995. These statements identified forward-looking terminology such "anticipate," "will" negative other variations thereof. Such forward-looking statements subject risks uncertainties that could cause actual results differ materially from those projected. Financial results large extent dependent power MOSFET segment power semiconductor industry. market demand does continue grow, revenue growth impacted, manufacturing capacity might under-utilized, capital spending might slowed, Company performance might negatively impacted. Other risks uncertainties that could negatively impact results include: delays higher-than-anticipated expenses associated with implementing planned cost reductions; effectiveness cost controls; impact changes accounting methods; impact trade export regulations policies; actual results outstanding litigation; changes environmental laws regulations; delays transferring ramping production lines completing customer qualifications; accuracy customers' forecasts; ability current manufacturing facilities meet future operating needs; product returns; changes customers' order patterns; product shipments; actual growth portable electronics industry; continued rapid growth demand more efficient semiconductor components power conversion solutions; market sector conditions that affect customers, licensees, suppliers; pricing pressures; acceptance competitors' products; introduction, acceptance, availability products; inability fund capital expenditures from existing credit facilities other external sources; failure suppliers subcontractors meet their delivery commitments unanticipated impacts business financial condition euro conversion; unfavorable changes industry competitive conditions; general economic conditions markets around world.
ANNUAL REPORT 2000
INTERNATIONAL RECTIFIER ANNUAL REPORT 2000
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