International Rectifier Corp. (IRF) reported fourth-quarter 2013 loss per share of 2 cents, narrower than the Zacks Consensus Estimate of 11 cents loss per share.
Revenues
The company reported revenues of $276.5 million, up 2.5% year over year and above management’s guidance of $255 million–$265 million due to strong demand across Power management devices, Energy saving and Automotive products, partially offset by weakness in other segments.
Segment wise, Power management devices revenues increased 4.7% year over year to $108.5 million; Energy saving products revenues increased 2.3% to $52.1 million; Automotive products revenues increased 17.2% to $36.3 million. However, Enterprise power and HiRel revenues dropped 12.3% and 1.0% to $29.4 million and $49.8 million, respectively.
Intellectual property revenues were $0.37 million in the quarter, up 13.0% year over year.
Margins
Reported gross margin for the quarter was 30.0%, up 570 basis points (bps) sequentially and 410 bps from the year-ago quarter. The increase was due to better mix and manufacturing efficiencies in the quarter.
Reported operating expenses of $82.8 million decreased 47.4% year over year due to solid expense management. Both selling, general and administrative (SG&A) and research and development (R&D) expenses decreased as a percentage of sales from the year-ago quarter. The net result was an operating margin of 0.1%, up significantly from the year-ago quarter’s operating loss margin of 32.5%.
The quarter’s GAAP net loss was $6.1 million or 9 cents per share, compared with a net loss of $68.2 million or 99 cents per share in the comparable quarter last year. Excluding special items, non-GAAP net loss was $1.16 million 2 cents per share compared with net loss of $10.5 million or 15 cents a share in the year-ago quarter.
Balance Sheet
The company has cash and cash equivalents, restricted cash and short-term investments balance of $455.2 million, up from $402.7 million in the prior quarter. Trade receivables were $137.8 million, up from $135.0 million in the prior quarter.
Cash flow from operations was $57.8 million, up from $33.2 million in the prior quarter. Capital expenditure (Capex) was $11.7 million versus $12.9 million in the prior quarter.
Guidance
For the first quarter of 2014, International Rectifier expects total revenue in the range of $260 million–$268 million, representing a sequential increase of 2.5% at the mid -point. GAAP Gross margins are expected in the range of 33% to 34% and non-GAAP gross margins are expected in the range of 33.2% to 34.2%. Total GAAP operating expenses are likely to be in the range of $77.5 million to $78.5 million and non-GAAP operating expenses are expected to be $75.0 million. Net other expense is expected to be about $1 million. GAAP tax amount and non-GAAP tax amount are likely to be in the range of $6.5 million-$7.5 million and $3 million-$4 million, respectively.
For the first quarter, capex is expected to be about $17 million.
Conclusion
International Rectifier designs, manufactures and markets analog integrated circuits (ICs) and power components, focused on power management applications. The loss incurred in the quarter was narrower than expected.
In the quarter, the company’s top- and bottom-lines figures were above the year-ago quarter. The company’s gross margins increased sequentially and its cost reduction initiative seems to be paying off. Management also provided a modest first-quarter guidance reflecting slight improvement in the fundamentals.
We remain optimistic about the company’s long-term prospects. Its decision to initiate operational restructuring activities will reduce fixed cost base and hence reduce operating expenses.
Currently, International Rectifier has a Zacks Rank #2 (Buy). Other stocks that are performing well at current levels include SanDisk (SNDK), Syntel Inc. (SYNT) and Silicom Ltd. (SILC). All these stocks carry a Zacks Rank #1 (Strong Buy).
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