International Rectifier to Restate

Tripped up by presentation of excess tax benefits under FAS 123R.

International Rectifier disclosed that it will restate results for the first two quarters of fiscal 2006 to correct its cash flow statements regarding the classification of excess tax benefits generated from the exercise of stock options.

The power management technology company stated that it had presented these excess tax benefits as operating cash flows. The company explained that FAS 123R, the Financial Accounting Standards Board’s revised rule on stock-option expensing, requires these benefits to be presented as financing cash flows.

International Rectifier stressed that it does not believe the change will impact its previously announced earnings and financial position for the March 2006 quarter, but it will delay filing its third-quarter results.

For the six months ended December 31, 2005, the excess tax benefit from options exercised was $4.3 million, most of which was reflected in the September 2005 quarter. As a result, net cash provided by operating activities will be reduced by $4.3 million and net cash provided by financing activities will be increased by the same amount.

The company also stated that in those September and December quarterly reports, it had originally asserted that its disclosure controls and procedures were effective as of those dates. In light of the restatement, however, the company has reassessed those controls and procedures and concluded that they were not effective as of those dates due to a material weakness.


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