International Rectifier Corporation (NYSE:IRF) grew revenue by 57 percent year-to-year and posted record earnings in its second fiscal quarter.

Net income increased sharply year-to-year, to reach $46.5 million ($0.71 per share) on revenue of $268.1 million, compared to net income of $12.4 million ($0.23 per share) on revenue of $171.1 million in the prior-year quarter.

Revenue for analog power ICs, advanced-circuit devices, and power systems surged 123 percent year-to-year, and these proprietary products accounted for 31 percent of revenue in the period, compared to 21 percent in the prior-year period. Following the recent completion of several strategic acquisitions, proprietary products are expected to account for approximately 35 percent of the company’s business in the current quarter and to approach 40 percent by fiscal year-end.

December-quarter orders grew 58 percent year-to-year and 3 percent sequentially, to reach another record high. Quarter-end backlog set record levels, and distributors’ stock of IR components remained lean.

Alex Lidow, Chief Executive Officer, commented, “Our richer product mix and higher IR content per application were fundamental to the company’s record sales and profits in the quarter. In the midst of difficult and uncertain market conditions, our focus on the industry’s fastest-growing market segments continues to yield significant benefits, with orders for our proprietary products growing 157 percent year-to-year. Demand for greater performance, speed, and portability, as well as growing concerns about electrical power only serve to increase the value of our leadership in power management.”
Gross margin was 40.7 percent for the quarter, compared to 34.0 percent in the prior-year quarter and 39.6 percent in the immediately-preceding quarter. The increase reflected a greater proportion of proprietary products, cost reductions, and higher royalties. Gross margins of 53 percent on incremental sales exceeded the company’s goal of 45 to 50 percent and reflected its continued execution of a more focused and profitable business model.

Royalties contributed $12.6 million in the quarter, compared to $11.4 million in the preceding and $7.7 million in the year-ago quarters. The year-over-year increase reflected new license agreements and higher shipments of products covered under existing license agreements.

The company generated a number of significant sole-source design wins during the December quarter, including:

– A world leader in flat-panel displays selected IR analog power ICs and advanced-circuit devices to power 32- and 37-inch flat-panel television screens in a new sole-source, multi-year program.

– IR’s advanced-circuit devices were designed into the first three Pentium(R) 4 server platforms.

– A world leader in compressor motors for home appliances selected IR’s new, energy-saving compressor control systems.

– Two leading auto suppliers selected advanced-circuit devices from IR exclusively for their new electronically-assisted power steering programs.

– International Rectifier proprietary technology won sole-source position on four new satellite programs and on the new Mars Exploratory Rovers.

Lidow noted, “Sole-source design wins for our proprietary products provide outstanding business opportunities and greater visibility than the multi-market components that constitute about a third of our business. Overall demand for our products remains strong: In the March quarter, we expect to add $5 million to $15 million of revenue sequentially and generate gross margins of 45 to 50 percent on the incremental sales. Notwithstanding widespread concern over near-term industry conditions, our market focus and proprietary business puts IR on track to reach our target of 40 to 45 percent growth this fiscal year. We believe that IR is well-positioned to continue outperforming our industry.”

International Rectifier is a world leader in power management devices and systems that enable information technology and other end products to improve functionality, speed, compactness, and portability. IR’s analog power ICs, advanced-circuit devices, power systems, and components enable Internet hardware to gain speed and reliability, allow portable electronics to run longer off a single charge, improve automotive fuel efficiency, and cut energy consumption in home appliances and industrial motors. International Rectifier is the pioneer and market leader in the $4 billion power MOSFET industry, and more than 20 companies are licensed under its power MOSFET patents. IR serves market leaders around the world, and more than half its revenue comes from outside the United States.

The foregoing material includes some forward-looking statements made pursuant to 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. Factors that could affect the Company’s actual results include the failure of market demand to grow as anticipated; the effectiveness of cost controls and cost reductions and the integration of recent acquisitions into our operations; impact of changes in accounting methods; the accuracy of customers’ forecasts; push-out of delivery dates; product returns; market and sector conditions that affect our customers, licensees, and suppliers; introduction, acceptance, and availability of new products; delays in transferring and ramping production lines or completing customer qualifications; the Company’s mix of product shipments; availability of adequate capacity and unanticipated costs of refurbishment or replacement of equipment; pricing pressures; product returns; failure of suppliers and subcontractors to meet their delivery commitments; unfavorable changes in industry and competitive conditions; impact of any disruption in, or increased cost of, electricity and/or other critical supplies; economic conditions in the Company’s markets around the world; unanticipated impacts on our business or financial condition due to changes in currency valuation or to the euro conversion; the impact of changes in laws and regulations, including trade and export regulations and policies; the actual results of any outstanding litigation; and other uncertainties disclosed in the Company’s S-3 filing with the Securities and Exchange Commission (”SEC”) on October 16, 2000, and the Company’s reports filed with the SEC, including its most recent reports on forms 10-K and 10-Q.