Probe at IR reveals errors in financial reports

By Colleen Taylor, Contributing Editor -- Electronic News, 4/9/2007

A probe at International Rectifier Corp. (IR) has uncovered accounting errors that have rendered at least its last six financial statements unreliable.

The company said today that an audit committee has determined that the company's financial statements for the quarters ended December 31, 2006; September 30, 2006; March 31, 2006; December 31, 2005; and September 30, 2005; and for the year ended June 30, 2006, included in the company's quarterly reports on Form 10-Q and the annual report on Form 10-K for such periods, should no longer be relied upon. Today's findings are based on an interim report of an investigation conducted at IR's request by independent investigators hired by outside legal counsel, the company said.

According to IR, it has not yet been determined whether and to what extent financial statements for earlier periods may have been affected by the matters discovered in the investigation.

Based on the probe's interim results, the audit committee has determined that "material weaknesses in the internal control over financial reporting" exist at an unnamed foreign subsidiary of IR. Consequently, the audit committee has determined that management's report on internal control over financial reporting as of June 30, 2006, included in the company's annual report on Form 10-K for the year then ended, should no longer be relied upon.

IR said that the foreign subsidiary's accounting irregularities include, among other things, recorded premature revenue recognition of product sales. The investigation is continuing, IR said, and additional information will be sought to allow the audit committee to determine the extent by which accounts receivable, revenues and possibly other entries in the financial statements may have been misstated in any given accounting period, including possibly periods preceding the year ended June 30, 2006.

Details such as the impact of the accounting errors on IR's financial statements or the likelihood, amount or timing of any possible restatement are not yet available, IR said.

In the meantime, IR said that it will be unable to file on time its quarterly report on form 10-Q for the period ending March 31 until the investigation is completed, identified errors quantified, and previously issued financial statements revised, as may be necessary. Additionally, IR's analyst day planned for May 11 has been postponed.

IR's stock dipped this morning as news of the accounting errors spread. Shares of the company, which had been steadily selling for weeks between $38 and $39 each, hit $34.86 this morning, down more than 10 percent from its Thursday closing price of $38.80.