Fairchild Semiconductor Reports Results for the First Quarter of 2008
April 17 2008 - 7:30AM
Business Wire
Fairchild Semiconductor (NYSE: FCS), the leading global supplier of
power semiconductors, today announced results for the first quarter
that ended March 30, 2008. Fairchild reported first quarter sales
of $406.3 million, down 6 percent from the prior quarter and 1
percent higher than the first quarter of 2007. Fairchild reported
first quarter net income of $17.1 million or $0.14 per diluted
share compared to net income of $34.0 million or $0.27 per diluted
share in the prior quarter and net income of $6.3 million or $0.05
per diluted share in the first quarter of 2007. Gross margin was
30.2 percent, 110 basis points lower sequentially and 250 basis
points higher than in the first quarter of 2007. Fairchild reported
first quarter adjusted net income of $23.2 million or $0.19 per
diluted share, compared to adjusted net income of $41.8 million or
$0.33 per diluted share in the prior quarter and adjusted net
income of $20.1 million or $0.16 per diluted share in the first
quarter of 2007. Adjusted net income excludes amortization of
acquisition-related intangibles, restructuring and impairments,
purchased in-process research and development, System General
purchase accounting charges, associated net tax benefits of these
items and other acquisition-related intangibles, and tax benefits
from finalized tax filings and audit outcomes. �Bookings have been
strong since Lunar New Year, which supports our expectation of
second quarter revenue growth,� said Mark Thompson, Fairchild�s
president and CEO. �Distributor sell-through also increased in
March after a weak February and we expect channel sales to grow
sequentially in the second quarter. Our continued supply chain
discipline should allow us to quickly respond to improving demand.
We also expect our new products to drive sales growth at strong
margins. We reported record sales for our Smart Power Modules and
anticipate this trend to continue in Q2. Sales of our latest video
filters for set-top box applications jumped more than 35 percent
sequentially in the first quarter and bookings were even stronger.
We also increased our sales of high frequency voltage regulators
for the handset market and expect solid growth across 2008. End
Markets and Channel Activity �End market demand was roughly inline
with our expectations with the exception of weaker distribution
sales in China during February,� said Thompson. �First quarter
sales into Europe and Korea were up about 9 percent while the
Americas and Japan were flat to slightly lower sequentially. Our
sales into the OEM channel were sequentially flat as increased new
product revenue offset the normal seasonal decline in demand. Since
the holiday period, bookings have been strong across a wide range
of end markets. Distributor sell-through was down about 6 percent
sequentially in Q1 due to the softer China demand in February, but
has since rebounded solidly and is back to normal seasonal levels.
We decreased our channel inventory by about $6 million from the
prior quarter and remain within our target range for weeks of
supply. Overall product pricing was down slightly more than 1
percent sequentially, which remains at a reasonable level. We held
lead times within a stable range of 7 � 9 weeks during the quarter
and expect to maintain this level during Q2. First Quarter
Financials �We reported a modest decrease in gross margin as we
lowered our factory loadings and shipments to reduce channel
inventory dollars,� said Mark Frey, Fairchild�s executive vice
president and CFO. �Gross margin was also impacted by planned
seasonal increases in payroll and benefit costs as well as higher
gold and copper related expenses. R&D and SG&A expenses
were inline with our expectations in the first quarter. Cash and
marketable securities increased $3 million to $465.1 million in the
first quarter which reflected cash flow from operations of $38.4
million and capital spending of $30.7 million. Second Quarter
Guidance �We expect second quarter revenue to be flat to up 3
percent in response to higher demand,� said Frey. �At the start of
the quarter, we had about 89 percent of this sales guidance booked
and scheduled to ship. We expect gross margin to be down 75 to 125
basis points sequentially due to the delayed impact of lower
factory starts in the first quarter. We expect R&D and SG&A
expenses to be approximately $89 to $91 million and net interest
and other expenses to be about $5.5 million for the second
quarter.� This press release includes references to adjusted net
income (which excludes amortization of acquisition-related
intangibles, restructuring and impairments, purchased in-process
research and development, System General purchase accounting
charges, associated net tax benefits of these items and other
acquisition-related intangibles, and tax benefits from finalized
tax filings and audit outcomes), statements of operations prepared
in accordance with generally accepted accounting principles (GAAP)
(which include these items), and a reconciliation from adjusted net
income to GAAP net income and adjusted gross margin to GAAP gross
margin. GAAP and adjusted results both include equity based
compensation expense. Adjusted results are not meant as a
substitute for GAAP, but are included solely for informational and
comparative purposes. Fairchild presents adjusted results because
its management uses them as additional measures of the company�s
operating performance, and management believes adjusted financial
information is useful to investors because it illuminates
underlying operational trends by excluding significant
non-recurring, non-cash or otherwise unusual transactions.
Fairchild�s criteria for determining adjusted results may differ
from methods used by other companies, and should not be regarded as
a replacement for corresponding GAAP measures. Special Note on
Forward Looking Statements: Some of the paragraphs above contain
forward-looking statements that are based on management�s
assumptions and expectations and that involve risk and uncertainty.
Other forward-looking statements may also be found in this news
release. Forward-looking statements usually, but do not always,
contain forward-looking terminology such as �we believe,� �we
expect,� or �we anticipate,� or refer to management�s expectations
about Fairchild�s future performance. Many factors could cause
actual results to differ materially from those expressed in
forward-looking statements. Among these factors are the following:
changes in demand for our products; changes in inventories at our
customers and distributors; technological and product development
risks, including the risks of failing to maintain the right to use
some technologies or failing to adequately protect our own
intellectual property against misappropriation or infringement;
availability of manufacturing capacity; the risk of production
delays; availability of raw materials at competitive prices;
competitors� actions; loss of key customers, including but not
limited to distributors; the inability to attract and retain key
management and other employees; order cancellations or reduced
bookings; changes in manufacturing yields or output; risks related
to warranty and product liability claims; risks inherent in doing
business internationally; changes in tax regulations or the
migration of profits from low tax jurisdictions to higher tax
jurisdictions; regulatory risks and significant litigation. These
and other risk factors are discussed in the company�s quarterly and
annual reports filed with the Securities and Exchange Commission
(SEC) and available at the Investor Relations section of Fairchild
Semiconductor�s web site at investor.fairchildsemi.com or the SEC�s
web site at www.sec.gov. About Fairchild Semiconductor: Fairchild
Semiconductor (NYSE: FCS) is a global leader delivering
energy-efficient power analog and power discrete solutions.
Fairchild is The Power Franchise�, providing leading-edge silicon
and packaging technologies, manufacturing strength and system
expertise for consumer, communications, industrial, portable,
computing and automotive systems. An application-driven,
solution-based semiconductor supplier, Fairchild provides online
design tools and design centers worldwide as part of its
comprehensive Global Power ResourceSM. Please contact us on the web
at www.fairchildsemi.com. Fairchild Semiconductor International,
Inc. Consolidated Statements of Operations (In millions, except per
share amounts) (Unaudited) � � � � Three Months Ended March 30,
December 30, April 1, � 2008 � � 2007 � � 2007 � � Total revenue $
406.3 $ 431.9 $ 402.6 Cost of sales (1) � 283.8 � � 296.9 � � 291.1
� Gross margin � 122.5 � � 135.0 � � 111.5 � Gross margin % 30.2 %
31.3 % 27.7 % � Operating expenses: Research and development (2)
29.8 27.4 26.9 Selling, general and administrative (3) 60.1 55.3
57.2 Amortization of acquisition-related intangibles 5.6 5.5 6.8
Restructuring and impairments 0.2 2.3 0.6 Purchased in-process
research and development � - � � - � � 3.7 � Total operating
expenses � 95.7 � � 90.5 � � 95.2 � � Operating income 26.8 44.5
16.3 Other expense, net � 5.2 � � 5.0 � � 4.7 � Income before
income taxes 21.6 39.5 11.6 � Provision for income taxes � 4.5 � �
5.5 � � 5.3 � Net income $ 17.1 � $ 34.0 � $ 6.3 � � Net income per
common share: Basic $ 0.14 � $ 0.27 � $ 0.05 � Diluted $ 0.14 � $
0.27 � $ 0.05 � Weighted average common shares: Basic � 124.4 � �
124.4 � � 123.4 � Diluted � 125.1 � � 126.2 � � 125.7 � � � (1)
Equity compensation expense included in cost of sales $ 1.0 $ 1.1 $
1.7 (2) Equity compensation expense included in research and
development $ 0.9 $ 1.2 $ 0.9 (3) Equity compensation expense
included in selling, general and administrative $ 5.0 $ 3.5 $ 3.5 �
� � Fairchild Semiconductor International, Inc. Reconciliation of
Net Income To Adjusted Net Income (In millions) (Unaudited) � Three
Months Ended March 30, December 30, April 1, � 2008 � � 2007 � �
2007 � � � Net income $ 17.1 $ 34.0 $ 6.3 Adjustments to reconcile
net income to adjusted net income: Restructuring and impairments
0.2 2.3 0.6 Purchased in-process research and development - - 3.7
System General purchase accounting charges - - 2.1 Amortization of
acquisition-related intangibles 5.6 5.5 6.8 Associated tax effects
of the above and other acquisition intangibles 0.3 - (0.3 ) Tax
benefits from finalized tax filings and audit outcomes � - � � - �
� 0.9 � Adjusted net income $ 23.2 � $ 41.8 � $ 20.1 � � Adjusted
net income per common share: Basic $ 0.19 � $ 0.34 � $ 0.16 �
Diluted $ 0.19 � $ 0.33 � $ 0.16 � � � Fairchild Semiconductor
International, Inc. Reconciliation of Gross Margin To Adjusted
Gross Margin (In millions) (Unaudited) � Three Months Ended March
30, December 30, April 1, � 2008 � � 2007 � � 2007 � � � Gross
margin $ 122.5 $ 135.0 $ 111.5 Adjustments to reconcile gross
margin to adjusted gross margin: � System General purchase
accounting charges � - � � - � � 2.1 � Adjusted gross margin $
122.5 � $ 135.0 � $ 113.6 � � Adjusted gross margin % 30.2 % 31.3 %
28.2 % � Adjusted net income, adjusted net income per share, and
adjusted gross margin should not be considered as alternatives to
net income, net income per share, gross margin or other measures of
consolidated operations and cash flow data prepared in accordance
with accounting principles generally accepted in the United States
of America, as indicators of our operating performance, or as
alternatives to cash flow as a measure of liquidity. Fairchild
Semiconductor International, Inc. Consolidated Balance Sheets (In
millions) (Unaudited) � � � March 30, December 30, � 2008 � 2007 �
ASSETS Current assets: Cash and cash equivalents $ 417.0 $ 409.0
Short-term marketable securities 0.9 2.1 Receivables, net 190.8
179.0 Inventories 249.3 243.5 Other current assets � 40.0 � 51.9
Total current assets 898.0 885.5 � Property, plant and equipment,
net 679.1 676.0 Intangible assets, net 118.1 123.7 Goodwill 365.0
353.2 Long-term marketable securities 47.2 51.0 Other assets � 39.7
� 43.2 Total assets $ 2,147.1 $ 2,132.6 � LIABILITIES, TEMPORARY
EQUITY AND STOCKHOLDERS' EQUITY Current liabilities: Current
portion of long-term debt $ 203.7 $ 203.7 Accounts payable 127.2
130.6 Accrued expenses and other current liabilities � 104.8 �
110.5 Total current liabilities 435.7 444.8 � Long-term debt, less
current portion 385.0 385.9 Other liabilities � 90.8 � 80.2 Total
liabilities 911.5 910.9 � Temporary equity - deferred stock units
3.7 3.2 Total stockholders' equity � 1,231.9 � 1,218.5 Total
liabilities, temporary equity and stockholders' equity $ 2,147.1 $
2,132.6 Fairchild Semiconductor International, Inc. Condensed
Consolidated Statements of Cash Flows (In millions) (Unaudited) � �
� � � Three Months Ended March 30, April 1, � 2008 � � 2007 � Cash
flows from operating activities: Net income $ 17.1 $ 6.3
Adjustments to reconcile net income to cash provided by operating
activities: � Depreciation and amortization 33.1 32.0 Non-cash
stock-based compensation expense 6.9 6.1 Purchased in-process
research & development - 3.7 Deferred income taxes, net 1.4
(4.4 ) Other 0.4 0.4 Changes in operating assets and liabilities,
net of acquisitions � (20.5 ) � (20.1 ) Cash provided by operating
activities � 38.4 � � 24.0 � � Cash flows from investing
activities: Capital expenditures (30.7 ) (16.7 ) Purchase of
marketable securities (3.5 ) (79.1 ) Sale of marketable securities
5.0 28.2 Maturity of marketable securities 0.1 0.1 Other (0.3 )
(0.5 ) Acquisitions and divestitures, net of cash acquired � - � �
(171.8 ) Cash used in investing activities � (29.4 ) � (239.8 ) �
Cash flows from financing activities: Repayment of long-term debt
(0.9 ) (0.9 ) Proceeds from issuance of common stock and from
exercise of stock options, net 1.9 13.6 Other � (2.0 ) � (6.5 )
Cash provided by (used in) financing activities � (1.0 ) � 6.2 � �
Net change in cash and cash equivalents 8.0 (209.6 ) Cash and cash
equivalents at beginning of period � 409.0 � � 525.2 � Cash and
cash equivalents at end of period $ 417.0 � $ 315.6 �
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