International Rectifier Corporation (IRF) F4Q2010 Earnings Call Transcript August 26, 2010 5:00 pm ET Executives Chris Toth – IR Ilan Daskal – CFO Oleg Khaykin – President and CEO Analysts Steve Smigie – Raymond James Terence Whalen – Citi Craig Berger – FBR Capital Markets Ramesh Misra – Brigantine Advisors Bill Ong – Merriman & Company Stephen Chin – UBS Brian Piccioni – BMO Capital Markets Ian Eigenbrod – Goldman Sachs Presentation Operator
A conference call replay will also be available through September 2, 2010. After our prepared comments, we will open the lines for questions.Our discussion today will include some forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. We caution that such statements are subject to a number of uncertainties and actual results may differ materially. Risk factors that could affect the company's actual results are included in our press release issued today, and the company's filings with the SEC including the most recent forms 10-K and 10-Q. Before we begin, I would also like to mention that International Rectifier will be presenting at the 2010 Citi Technology Conference in New York City on September 8 at 10.20 am, and at the 2010 Deutsche Bank Technology Conference in San Francisco on September 14 at 8.40 am. Now Ilan will discuss our most recent financials. Ilan? Ilan Daskal Thank you, Chris. Good afternoon and thank you all for joining us. Before we begin our review of our financial results, there are two items that I would like to highlight. First, I would like to report that we have completed the remediation of our all of our material weaknesses. We are confident that we now have the policies and procedures in place to maintain effective internal controls over our period end reporting and other internal financial and IT processes. Over the next 18 months, we expect to complete the design and implementation of a new ERP system which we believe will further enhance our controls and reporting capabilities. Second, during the June quarter we aligned the reporting for certain products between our PMD and Automotive segments. Revenue and gross margin for certain products previously reported under the PMD segment are now reported under the Automotive segment.
The changes resulted in $1 million increase in revenue for our Automotive segment and corresponding decrease in revenue for our PMD segment in the March and the June quarters.Prior periods had also been adjusted to reflect this realignment. I recommend reviewing the segment status in the press release issued today or in our 2010 Annual Report on Form 10-K to be filed with the SEC this afternoon. So you can adjust your models accordingly. Moving on to our financial results; for the fourth quarter of the fiscal 2010 IR reported revenue of $263.8 million, which was a 9.1% increase from the prior quarter and 65.3% increase from the fourth quarter of fiscal year 2009. We continue to see a healthy increase in revenue, driven by continued strong end market demand from distribution sell-through and our OEM customers. Gross margin was 36.1%, which was flat compared with the prior quarter. If you recall, in the last quarter we had a rich product mix within our HiRel business unit that increased our overall margins by almost 100 basis points in that quarter. Overall, we are seeing good progression in our margins and remain confident in our target range of low 40s that we laid out at our Analyst Day in June. We reported a net income of $29 million or $0.41 per fully diluted share compared with $40.4 million or $0.56 per fully diluted share in the March quarter. The result for the June and March quarters included an $8.5 million and $23 million of gross stock benefit respectively. For the June quarter, R&D expenses were $26.6 million which represent about 10% of revenue. SG&A expenses were $45.2 million, which represents about 17% of revenue. Operating income for the quarter was $22.2 million, an increase of about 28% compared with the prior quarter. Operating income represented about 8.4% of sales for the quarter. Other expense net was an $86,000 benefit in the June quarter, and interest income net was $2.2 million, primarily from our existing investment in sales of some of our Level 3 investments. Read the rest of this transcript for free on seekingalpha.com