Fairchild Semiconductor (NYSE: FCS), a leading global supplier
of high performance products to drive energy-efficiency, today
announced results for the second quarter ended June 28, 2009.
Fairchild reported second quarter sales of $277.9 million, up 25
percent from the prior quarter and 34 percent lower than the second
quarter of 2008.
Fairchild reported a second quarter net loss of $24.9 million or
$0.20 per share compared to a net loss of $51.1 million or $0.41
per share in the prior quarter and net income of $6.9 million or
$0.05 per diluted share in the second quarter of 2008. Gross margin
was 23.2 percent compared to 15.2 percent in the prior quarter and
28.6 percent in the year ago quarter. Included in these results is
an $11.3 million charge for restructuring and impairments, a net
$2.1 million impairment of equity investments, a $0.8 million gain
associated with debt buyback as well as $3.7 million of accelerated
depreciation and a $0.6 million inventory write-off related to
previously announced fab closures.
Fairchild reported a second quarter adjusted net loss of $3.5
million or $0.03 per share, compared to an adjusted net loss of
$40.1 million or $0.32 per share in the prior quarter and adjusted
net income of $21.5 million or $0.17 per diluted share in the
second quarter of 2008. Adjusted gross margin was 24.8 percent, up
nearly 10 percentage points sequentially and 4 percentage points
lower than in the second quarter of 2008. Adjusted gross margin
excludes accelerated depreciation and inventory write-offs related
to fab closures. Adjusted net income and loss excludes amortization
of acquisition-related intangibles, restructuring and impairments,
gain on the sale of equity investments, impairment of equity
investments, gain associated with debt buyback, costs associated
with the redemption of convertible debt, accelerated depreciation
and inventory write-offs related to fab closures, associated net
tax effects of these items and other acquisition-related
intangibles, and tax effects from finalized tax filings and
positions.
�We delivered strong sequential sales and margin growth even as
we further improved our inventory position in the second quarter,�
said Mark Thompson, Fairchild�s president and CEO. �Distribution
sell-through was better than expected which helped us to again
reduce channel inventory while still posting sales higher than our
original expectations entering the quarter. We estimate consumption
demand, which consists of distributor sell through plus direct
sales, was approximately $300 million in the second quarter and
believe the stronger order rates and higher starting backlog
position for Q3 indicates that end market demand will increase
again this quarter. Fairchild is focused on disciplined cost
management to deliver solid earnings leverage and greater cash flow
on incremental sales. Our lower capital spending needs and
effective inventory and working capital management enabled us to
deliver $46.9 million in free cash flow. Despite the difficult
macro-economic environment, we delivered the highest first-half
free cash flow since 2000.�
End Markets and Channel Activity
�As planned, we under-shipped consumption demand again in the
second quarter resulting in an approximately $24 million reduction
in channel inventory,� said Thompson. �Order rates improved
throughout the quarter across a broad range of end markets enabling
us to significantly increase our backlog position from a quarter
ago. Overall product pricing was down about three percent
sequentially which is slightly weaker than prior quarters, but we
believe the trend is now moderating as order rates improve. We
maintained lead times within a stable range of five to six weeks
during the quarter.�
Second Quarter Financials
�We generated solid financial performance while reducing
internal inventory by more than $8 million,� said Mark Frey,
Fairchild�s executive vice president and CFO. �We increased factory
loadings in response to improving demand throughout the quarter
which, coupled with aggressive cost controls, enabled us to
increase adjusted gross margin nearly 10 percentage points
sequentially to 24.8 percent in Q2. R&D and SG&A expenses
were in line with expectations at $69.3 million. Cash and
securities increased $36.1 million from the prior quarter to $423.4
million which reflects cash flow from operations of $53.4 million,
capital spending of $6.5 million and a $16 million reduction in
debt.�
Current Status of Third Quarter Business
�Our scheduled backlog for third quarter shipments is currently
about $300 million which is roughly $50 million higher than this
point a quarter ago,� said Frey. �Included in this amount is
approximately $25 million of backlog that we booked in the first
two and a half weeks of this quarter. Assuming we continue to
record positive backlog fill consistent with the current order
patterns, we believe sales in the range of $300 to $325 million are
possible for the third quarter. For this range of revenue, we
anticipate adjusted gross margin to be between 25 and 27 percent.
We expect R&D and SG&A spending to be roughly $70 million
in Q3. Interest expense for the third quarter is expected to be
between $4.5 and $5.0 million while our tax expense should be
approximately zero. We anticipate recording approximately $4
million in restructuring charges and $3.6 million of accelerated
depreciation in Q3 associated with previously announced cost
reduction actions. As with last quarter, we are not assuming any
obligation to update this information, although we may choose to do
so before we announce third quarter results.�
This press release includes references to adjusted gross margin
(which excludes accelerated depreciation and inventory write-offs
related to fab closures) and adjusted net income and loss (which
excludes amortization of acquisition-related intangibles,
restructuring and impairments, gain on the sale of equity
investments, impairment of equity investments, gain associated with
debt buyback, costs associated with the redemption of convertible
debt, accelerated depreciation and inventory write-offs related to
fab closures, associated net tax effects of these items and other
acquisition-related intangibles, and tax effects from finalized tax
filings and positions), statements of operations prepared in
accordance with generally accepted accounting principles (GAAP)
(which include these items), and a reconciliation from adjusted
gross margin to GAAP gross margin, from adjusted net income and
loss to GAAP net income and loss, and from cash provided by
operating activities to free cash flow. 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, including the one headed �Current
Status of Third Quarter Business,� contain forward-looking
statements that are based on management�s assumptions and
expectations and 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:
failure to maintain order rates at expected levels; failure to
achieve expected savings from cost reduction actions or other
adverse results from those actions; 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
www.ir-site.com/fairchildsemi/profile 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.
Visit us on Twitter @Fairchildsemi
View product and company videos at:
http://www.fairchildsemi.com/video/index.html.
Listen to our podcasts at:
http://www.fairchildsemi.com/company/media_center/index.html.
Comment on our blog, EngineeringConnections.com.
Fairchild Semiconductor International, Inc. Consolidated
Statements of Operations (In millions, except per share
amounts) (Unaudited) � � � � � � � Three Months Ended
Six Months Ended June 28, March 29, June 29, June 28, June 29,
2009 2009 2008
2009 2008 � Total revenue $ 277.9 $ 223.3
$ 418.7 $ 501.2 $ 825.0 Cost of sales (1) �
213.3 � �
189.3 � �
299.1 � �
402.6 �
�
582.9 � Gross margin �
64.6 � �
34.0 � �
119.6 � �
98.6 � �
242.1 � Gross margin % 23.2 % 15.2 %
28.6
% 19.7 % 29.3 % � Operating expenses: Research and development (2)
25.6 23.8 30.3 49.4 60.1 Selling, general and administrative (3)
43.7 44.7 58.6 88.4 118.7 Amortization of acquisition-related
intangibles 5.6 5.5 5.5 11.1 11.1 Restructuring and impairments �
11.3 � �
6.7 � �
11.3 � �
18.0 � �
11.5 � Total operating expenses
�
86.2 � �
80.7 � �
105.7 �
�
166.9 � �
201.4 � � Operating income
(loss) (21.6 ) (46.7 ) 13.9 (68.3 ) 40.7 Other expense, net �
5.7 � �
5.3 � �
6.3 � �
11.0 � �
11.5 � Income (loss) before
income taxes (27.3 ) (52.0 ) 7.6 (79.3 ) 29.2 � Provision (benefit)
for income taxes �
(2.4 ) �
(0.9 ) �
0.7 � �
(3.3 ) �
5.2 � Net income
(loss)
$ (24.9 )
$ (51.1 ) $
6.9 �
$ (76.0 )
$ 24.0 � � Net income (loss) per common
share: Basic
$ (0.20 )
$ (0.41 ) $
0.06 �
$ (0.61
) $ 0.19 � Diluted
$ (0.20 ) $
(0.41 ) $ 0.05
�
$ (0.61 ) $
0.19 � Weighted average common shares: Basic �
123.9 � �
123.6 � �
124.9 �
�
123.7 � �
124.7 � Diluted �
123.9 � �
123.6 � �
125.8 �
�
123.7 � �
125.4 � � � (1) Equity
compensation expense included in cost of sales $ 0.6 $ 0.2 $ 1.3 $
0.8 $ 2.3 (2) Equity compensation expense included in research and
development $ 1.2 $ 0.3 $ 1.3 $ 1.5 $ 2.2 (3) Equity compensation
expense included in selling, general and administrative $ 2.1 $ 2.1
$ 3.3 $ 4.2 $ 8.3 � �
Fairchild Semiconductor International,
Inc. Reconciliation of Net Income (Loss) To Adjusted Net
Income (Loss) (In millions) (Unaudited) � Three
Months Ended Six Months Ended June 28, March 29, June 29, June 28,
June 29,
2009 2009 2008
2009 2008 � � Net income (loss) $ (24.9 )
$ (51.1 ) $ 6.9 $ (76.0 ) $ 24.0
Adjustments to reconcile net
income (loss) to adjusted net income (loss):
Restructuring and impairments 11.3 6.7 11.3 18.0 11.5 Gain on sale
of equity investment (1) (0.2 ) - - (0.2 ) - Impairment of equity
investment (1) 2.3 - - 2.3 - Gain associated with debt buyback (1)
(0.8 ) - - (0.8 ) - Accelerated depreciation on assets related to
fab closure (2) 3.7 - - 3.7 - Inventory write-off associated with
fab closure (2) 0.6 - - 0.6 - Costs associated with the redemption
of convertible debt (1) - - 0.4 - 0.4 Amortization of
acquisition-related intangibles 5.6 5.5 5.5 11.1 11.1 Associated
net tax effects of the above and other acquisition-related
intangibles (1.1 ) (1.2 ) (0.1 ) (2.3 ) 0.2 Tax effects from
finalized tax filings and positions �
- � �
- � �
(2.5 ) �
- � �
(2.5 ) Adjusted net
income (loss)
$ (3.5 )
$ (40.1 ) $
21.5 �
$ (43.6
) $ 44.7 � � Adjusted net
income (loss) per common share: Basic
$
(0.03 ) $ (0.32
) $ 0.17 �
$
(0.35 ) $ 0.36
� Diluted
$ (0.03 )
$ (0.32 ) $
0.17 �
$ (0.35
) $ 0.36 � �
(1) Recorded in other expense,
net
(2) Recorded in cost of sales
�
Fairchild Semiconductor International, Inc.
Reconciliation of Gross Margin To Adjusted Gross Margin
(In millions) (Unaudited) � Three Months Ended Six
Months Ended June 28, March 29, June 29, June 28, June 29,
2009
2009
2008
2009
2008
� � Gross margin $ 64.6 $ 34.0 $ 119.6 $ 98.6 $ 242.1
Adjustments to reconcile gross
margin to adjusted gross margin:
Accelerated depreciation on assets related to fab closure 3.7 - -
3.7 - Inventory write-off associated with fab closure �
0.6 � �
- � �
- � �
0.6 � �
- � Adjusted gross margin
$ 68.9 �
$ 34.0
�
$ 119.6 �
$
102.9 �
$ 242.1 � � Adjusted
gross margin % 24.8 % 15.2 % 28.6 % 20.5 % 29.3 % � Adjusted net
income (loss), adjusted net income (loss) per share, and adjusted
gross margin should not be considered as alternatives to net income
(loss), net income (loss) 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) � � � � � June 28, March 29, December 28,
2009 2009 2008 �
ASSETS Current assets: Cash and cash equivalents $ 383.6 $
352.8 $ 351.5 Short-term marketable securities 0.8 0.7 0.8
Receivables, net 115.5 112.5 155.6 Inventories 197.9 206.3 231.0
Other current assets �
36.9 �
37.3 �
40.0 Total current assets 734.7 709.6 778.9 �
Property, plant and equipment, net 682.7 707.2 731.6 Intangible
assets, net 92.3 97.9 102.1 Goodwill 161.7 161.7 161.7 Long-term
securities 39.0 33.8 34.6 Other assets �
37.4 �
40.6 �
40.9 Total assets
$
1,747.8 $ 1,750.8
$ 1,849.8 �
LIABILITIES, TEMPORARY
EQUITY AND STOCKHOLDERS' EQUITY Current liabilities: Current
portion of long-term debt $ 5.3 $ 5.3 $ 5.3 Accounts payable 106.3
71.2 94.4 Accrued expenses and other current liabilities �
60.9 �
67.8 �
94.4 Total
current liabilities 172.5 144.3 194.1 � Long-term debt, less
current portion 512.6 528.6 529.9 Other liabilities �
62.2 �
65.6 �
65.9 Total
liabilities 747.3 738.5 789.9 � Temporary equity - deferred stock
units 2.1 2.3 2.8 Total stockholders' equity �
998.4 �
1,010.0 �
1,057.1 Total liabilities,
temporary equity and stockholders' equity
$
1,747.8 $ 1,750.8
$ 1,849.8 Fairchild Semiconductor
International, Inc. Condensed Consolidated Statements of
Cash Flows (In millions) (Unaudited) � � � � � �
�
Three Months Ended
Six Months Ended
June 28,
June 28,
June 29,
2009
2009
2008
Cash flows from operating activities: Net income (loss) $ (24.9 ) $
(76.0 ) $ 24.0
Adjustments to reconcile net
income (loss) to cash provided by operating activities:
Depreciation and amortization 42.0 79.6 66.1 Non-cash stock-based
compensation expense 3.9 6.5 12.8 Non-cash restructuring and
impairments expense - 0.8 8.0 Gain on debt buyback (0.8 ) (0.8 ) -
Gain on sale of equity investment (0.2 ) (0.2 ) - Impairment of
equity investment 2.3 2.3 - Deferred income taxes, net (4.1 ) (7.7
) 0.7 Other 0.3 0.5 1.5
Changes in operating assets and
liabilities, net of acquisitions
�
34.9 � �
67.8 � �
8.7 �
Cash provided by operating activities �
53.4 � �
72.8 � �
121.8 � � Cash flows from
investing activities: Capital expenditures (6.5 ) (21.4 ) (88.6 )
Purchase of marketable securities (0.1 ) (0.3 ) (3.5 ) Sale of
marketable securities - 0.3 5.0 Maturity of marketable securities -
0.1 0.1 Other (0.2 ) (0.8 ) (1.0 ) Acquisitions �
- �
�
(1.5 ) �
- � Cash used in
investing activities �
(6.8 ) �
(23.6 ) �
(88.0
) � Cash flows from financing activities: Repayment of
long-term debt (15.1 ) (16.4 ) (201.9 ) Issuance of long-term debt
- - 150.0
Proceeds from issuance of common
stock and from exercise of stock options, net
- - 5.2 Purchase of treasury stock - - (2.0 ) Other �
(0.7 ) �
(0.7 )
�
(3.3 ) Cash used in financing
activities �
(15.8 ) �
(17.1
) �
(52.0 ) � Net change in
cash and cash equivalents 30.8 32.1 (18.2 ) Cash and cash
equivalents at beginning of period �
352.8 � �
351.5 � �
409.0 � Cash and cash
equivalents at end of period
$ 383.6 �
$ 383.6 �
$
390.8 � � �
Fairchild Semiconductor International,
Inc. Reconciliation of Cash Provided by Operating Activities
to Free Cash Flow (In millions) (Unaudited) � �
Three Months Ended
Six Months Ended
June 28,
June 28,
June 29,
2009
2009
2008
Cash provided by operating activities
$
53.4
$
72.8
$
121.8 Capital expenditures �
(6.5 ) �
(21.4 ) �
(88.6
) Free cash flow
$
46.9 �
$ 51.4 �
$ 33.2 �
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