Fairchild Semiconductor (NYSE: FCS), a leading global supplier
of high performance products to drive energy-efficiency, today
announced results for the fourth quarter ended December 27, 2009.
Fairchild reported fourth quarter sales of $354.5 million, up 7
percent from the prior quarter and 11 percent higher than the
fourth quarter of 2008.
Fairchild reported fourth quarter net income of $13.1 million or
$0.10 per diluted share compared to net income of $2.7 million or
$0.02 per diluted share in the prior quarter and a net loss of
$218.1 million or $1.76 per share in the fourth quarter of 2008.
The fourth quarter of 2008 includes a $203 million goodwill
impairment charge. Results for the fourth quarter of 2009 include a
$6.0 million charge for litigation, $5.8 million in restructuring
and impairments, $2.1 million of accelerated depreciation and a
$1.2 million gain associated with debt buyback. Gross margin was
29.7 percent compared to 26.0 percent in the prior quarter and 26.5
percent in the year ago quarter.
Fairchild reported fourth quarter adjusted net income of $29.9
million or $0.23 per diluted share, compared to adjusted net income
of $14.9 million or $0.12 per diluted share in the prior quarter
and adjusted net income of $7.7 million or $0.06 per diluted share
in the fourth quarter of 2008. Adjusted gross margin was 30.3
percent, up 340 basis points sequentially and 380 basis points
higher than in the fourth quarter of 2008. Adjusted gross margin
excludes accelerated depreciation and inventory write-offs/reserve
releases related to fab closures.
Full year revenues for 2009 were $1.2 billion, a decrease of 25
percent compared to 2008. Fairchild reported a net loss of $60
million or $0.49 per share in 2009, compared to a net loss of $167
million or $1.35 per share in 2008. On an adjusted basis, the
company reported 2009 net income of $1 million or $0.01 per diluted
share, compared to $86 million or $0.69 per diluted share in 2008.
Adjusted net income and loss excludes amortization of
acquisition-related intangibles, restructuring and impairments, net
impairment/gain on equity investments, gain associated with debt
buyback, goodwill impairment charge, impairment of investments,
charge/release for litigation, accelerated depreciation and
inventory write-offs/reserve releases related to fab closures, cost
associated with the redemption of convertible debt, tax effects
from finalized tax filings and positions, and associated net tax
benefits of these items and other acquisition-related
intangibles.
“We delivered results in the fourth quarter that exceeded our
initial expectations in virtually all aspects of the business,”
said Mark Thompson, Fairchild’s president and CEO. “We grew sales 7
percent sequentially in what is typically a flat quarter while
further reducing our days of inventory both internally and in our
distribution channel. Our channel inventories are at record low
levels while the mix of fast moving products to slow turning
inventory is the best on record. We pushed adjusted gross margin
over 30 percent and have strong momentum heading into the first
quarter to exceed our past gross margin peak. Strong execution on
sales growth, margins and cost reductions also enabled us to
generate $43 million of free cash flow in Q4 and a record $129
million for all of 2009.”
End Markets and Channel Activity
“Order rates were solid throughout the quarter across a broad
range of end markets enabling us to increase our backlog position
from a quarter ago,” stated Thompson. “Overall product pricing in
Q4 moderated to down less than 1 percent sequentially as customers
focus more on product availability.
“Distributor sell through increased nearly 8 percent
sequentially which was well above our initial expectations,” said
Thompson. “The strong sell through drove a channel inventory
reduction of about 7 percent from the prior quarter, resulting in a
record low 8.3 weeks of inventory. If we add this channel inventory
reduction to our sales we estimate actual consumption demand in Q4
was approximately $363 million.”
Fourth Quarter Financials
“Strong sales growth coupled with disciplined cost and asset
management allowed us to post solid improvements in our financial
results for the fourth quarter,” said Mark Frey, Fairchild’s
executive vice president and CFO. “We exceeded our adjusted gross
margin guidance for the quarter and are well positioned to continue
this trend in 2010 as we benefit from a better mix due to new
products and our focus on higher value sockets as well as firmer
pricing and higher factory loadings. R&D and SG&A expenses
of $72.9 million were higher than forecast due primarily to greater
variable costs driven by the stronger than expected demand. Cash
and securities held roughly flat from the prior quarter at $452
million as we used our strong free cash flow to retire $44 million
in debt and pay a $6 million cash settlement of litigation. We
reduced internal inventory by three days to 69 days as sales growth
more than offset the $7 million increase primarily in finished
goods. We reduced our outstanding debt level by $63 million or 12
percent in 2009. We opportunistically bought back debt below par
where possible and recorded a $2 million net gain in 2009 as a
result of these actions.”
Current Status of First Quarter Business
“Our scheduled backlog for first quarter shipments is currently
about $369 million which is roughly $33 million higher than this
point a quarter ago,” said Frey. “Included in this amount is
approximately $20 million of backlog that we booked in the first
three and a half weeks of this quarter. We expect that both
distributor sell through and OEM demand will continue to track
above seasonal levels in Q1. Given the solid order rates this
quarter and our starting backlog position, we expect first quarter
sales to be roughly $370 million while further improvements in
product mix help drive adjusted gross margin to a range of 31 to 32
percent. We expect R&D and SG&A spending to be
approximately $78 million in Q1. Interest expense for the first
quarter is expected to be roughly $3 million while our adjusted tax
rate should be in the range of 15 to 20 percent. We remain
disciplined in our capital investment plans with spending forecast
to be between 6 to 7 percent of sales in 2010. We anticipate
recording approximately $2 million in charges and $2 million of
accelerated depreciation in the first quarter associated with
previously announced fab closure 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 first quarter
results.”
Adjusted gross margin, adjusted net income and loss and free
cash flow are non-GAAP financial measures and should not be
considered replacements for GAAP results. We exclude accelerated
depreciation and inventory write-offs/reserves related to fab
closures from GAAP gross margins to determine adjusted gross
margins. To determine adjusted net income/loss, we exclude
amortization of acquisition-related intangibles, restructuring and
impairments, net impairment/gain on equity investments, gain
associated with debt buyback, goodwill impairment charge,
impairment of investments, charge/release for litigation,
accelerated depreciation and inventory write-offs/reserve releases
related to fab closures, cost associated with the redemption of
convertible debt, tax effects from finalized tax filings and
positions, and associated net tax benefits of these items and other
acquisition-related intangibles. To determine free cash flow, we
subtract capital expenditures from GAAP cash provided by operating
activities. 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 First 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
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.
Follow us on Twitter @ http://twitter.com/fairchildSemi
View product and company videos, listen to podcasts and comment
on our blog @
http://www.fairchildsemi.com/engineeringconnections
Visit us on facebook @
http://www.facebook.com/FairchildSemiconductor
Fairchild Semiconductor International, Inc.
Consolidated Statements of Operations (In millions,
except per share amounts) (Unaudited)
Three Months Ended Twelve
Months Ended December 27, September 27, December 28, December 27,
December 28,
2009
2009
2008
2009
2008
Total revenue $ 354.5 $ 331.8 $ 320.9 $ 1,187.5 $ 1,574.2
Cost of sales (1)
249.1
245.5 235.8
897.2 1,118.8 Gross
margin
105.4 86.3
85.1 290.3
455.4 Gross margin % 29.7 % 26.0
% 26.5 % 24.4 % 28.9 % Operating expenses: Research and
development (2) 25.4 24.9 23.7 99.7 112.9 Selling, general and
administrative (3) 47.5 43.4 44.3 179.3 217.7 Amortization of
acquisition-related intangibles 5.6 5.6 5.5 22.3 22.1 Restructuring
and impairments 5.8 4.1 15.9 27.9 29.2 Goodwill impairment charge -
- 203.3 - 203.3 Charge (release) for litigation
6.0 -
(3.3 ) 6.0
(3.3 ) Total operating expenses
90.3 78.0
289.4 335.2
581.9 Operating income (loss)
15.1 8.3 (204.3 ) (44.9 ) (126.5 ) Impairment of investments - -
19.0 - 19.0 Other expense, net
3.0
4.4 6.2
18.4 23.1
Income (loss) before income taxes 12.1 3.9 (229.5 ) (63.3 ) (168.6
) Provision (benefit) for income taxes
(1.0 ) 1.2
(11.4 ) (3.1
) (1.2 ) Net income
(loss)
$ 13.1 $
2.7 $ (218.1
) $ (60.2 )
$ (167.4 ) Net income
(loss) per common share: Basic
$ 0.11
$ 0.02 $
(1.76 ) $ (0.49
) $ (1.35 )
Diluted
$ 0.10 $
0.02 $ (1.76
) $ (0.49 )
$ (1.35 ) Weighted average
common shares: Basic
124.0
123.9 123.6
123.8 124.3 Diluted
127.6 127.5
123.6 123.8
124.3 (1) Equity
compensation expense included in cost of sales $ 2.6 $ 2.4 $ 0.9 $
5.8 $ 4.5 (2) Equity compensation expense included in research and
development $ 1.2 $ 1.1 $ 0.9 $ 3.8 $ 4.1 (3) Equity compensation
expense included in selling, general and administrative $ 2.0 $ 1.7
$ 0.5 $ 7.9 $ 10.5
Fairchild Semiconductor
International, Inc. Reconciliation of Net Income (Loss) To
Adjusted Net Income (In millions) (Unaudited)
Three Months Ended Twelve Months Ended December 27,
September 27, December 28, December 27, December 28,
2009
2009
2008
2009
2008
Net income (loss) $ 13.1 $ 2.7 $ (218.1 ) $ (60.2 ) $
(167.4 ) Adjustments to reconcile net income (loss) to adjusted net
income (loss): Restructuring and impairments 5.8 4.1 15.9 27.9 29.2
Net impairment/gain on equity investments (1) - - - 2.1 - Gain
associated with debt buyback (1) (1.2 ) - - (2.0 ) - Accelerated
depreciation on assets related to fab closure (2) 2.1 3.0 - 8.8 -
Goodwill impairment charge - - 203.3 - 203.3
Impairment of investments
- - 19.0 - 19.0 Charge (release) for litigation 6.0 - (3.3 ) 6.0
(3.3 ) Inventory write-off(release) associated with fab closure (2)
(0.1 ) (0.1 ) - 0.4 - Costs associated with the redemption of
convertible debt (1) - - - - 0.4 Amortization of
acquisition-related intangibles 5.6 5.6 5.5 22.3 22.1 Associated
net tax effects of the above and other acquisition-related
intangibles (1.4 ) (0.4 ) (14.6 ) (4.1 ) (14.4 ) Tax effects from
finalized tax filings and positions
-
- -
- (2.5 )
Adjusted net income
$ 29.9
$ 14.9 $
7.7 $ 1.2
$ 86.4 Adjusted net income
per common share: Basic
$ 0.24
$ 0.12 $
0.06 $ 0.01
$ 0.70 Diluted
$
0.23 $ 0.12
$ 0.06 $
0.01 $ 0.69
(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 Twelve Months Ended December 27, September 27,
December 28, December 27, December 28,
2009
2009
2008
2009
2008
Gross margin $ 105.4 $ 86.3 $ 85.1 $ 290.3 $ 455.4
Adjustments to reconcile gross margin to adjusted gross margin:
Accelerated depreciation on assets related to fab closure 2.1 3.0 -
8.8 - Inventory write-off (release) associated with fab closure
(0.1 ) (0.1
) - 0.4
- Adjusted gross margin
$ 107.4 $
89.2 $ 85.1
$ 299.5 $
455.4 Adjusted gross margin % 30.3 %
26.9 % 26.5 % 25.2 % 28.9 % Adjusted net income, adjusted
net income 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)
December 27, September 27, December 28,
2009
2009
2008
ASSETS Current assets: Cash and cash equivalents $
415.8 $ 416.4 $ 351.5 Short-term marketable securities 0.1 0.7 0.8
Receivables, net 134.0 131.5 155.6 Inventories 189.5 182.6 231.0
Other current assets
41.8
43.1 40.0 Total current assets
781.2 774.3 778.9 Property, plant and equipment, net 653.2
662.7 731.6 Intangible assets, net 81.1 86.7 102.1 Goodwill 161.3
161.3 161.7 Long-term securities 35.8 35.4 34.6 Other assets
49.8 40.9 40.9
Total assets
$ 1,762.4 $
1,761.3 $ 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 119.6 106.8 94.4 Accrued expenses and other
current liabilities
70.6
67.1 94.4 Total current
liabilities 195.5 179.2 194.1 Long-term debt, less current
portion 466.9 511.3 529.9 Other liabilities
71.1 63.4 65.9
Total liabilities 733.5 753.9 789.9 Temporary equity -
deferred stock units 2.3 2.2 2.8 Total stockholders' equity
1,026.6 1,005.2
1,057.1 Total liabilities, temporary equity and
stockholders' equity
$ 1,762.4
$ 1,761.3 $
1,849.8 Fairchild Semiconductor
International, Inc. Condensed Consolidated Statements of
Cash Flows (In millions) (Unaudited)
Three Months Ended
Twelve Months Ended December 27, December 27, December 28,
2009
2009
2008
Cash flows from operating activities: Net income (loss) $ 13.1 $
(60.2 ) $ (167.4 ) Adjustments to reconcile net income (loss) to
cash provided by operating activities: Depreciation and
amortization 39.7 160.4 136.6 Non-cash stock-based compensation
expense 5.8 17.5 19.1 Non-cash restructuring and impairments
expense 0.8 1.6 12.2 Non-cash impairment of investments - - 19.0
Non-cash goodwill impairment - - 203.3 Non-cash write-off of equity
investment - 2.3 - Gain on debt buyback (1.4 ) (2.2 ) - Gain on
sale of equity investment - (0.2 ) - Deferred income taxes, net 3.0
(8.6 ) (11.2 ) Other 1.0 1.9 2.3 Changes in operating assets and
liabilities, net of acquisitions
7.5
75.9 (28.5
) Cash provided by operating activities
69.5 188.4
185.4 Cash flows from investing
activities: Capital expenditures (26.8 ) (59.8 ) (168.7 ) Purchase
of marketable securities (0.1 ) (0.5 ) (3.8 ) Sale of marketable
securities 0.6 0.9 5.1 Maturity of marketable securities - 0.2 0.2
Other (0.7 ) (1.9 ) (5.2 ) Acquisitions
-
(1.5 )
- Cash used in investing activities
(27.0 ) (62.6
) (172.4 )
Cash flows from financing activities: Repayment of long-term debt
(42.9 ) (60.6 ) (204.4 ) Issuance of long-term debt - - 150.0
Proceeds from issuance of common stock and
from exercise of stock options,
net
- - 9.0 Purchase of treasury stock - - (21.7 ) Other
(0.2 ) (0.9
) (3.4 ) Cash used in
financing activities
(43.1 )
(61.5 ) (70.5
) Net change in cash and cash equivalents (0.6
) 64.3 (57.5 ) Cash and cash equivalents at beginning of period
416.4 351.5
409.0 Cash and cash equivalents at end
of period
$ 415.8 $
415.8 $ 351.5
Fairchild Semiconductor International,
Inc. Reconciliation of Cash Provided by Operating Activities
to Free Cash Flow (In millions) (Unaudited)
Three Months Ended Twelve Months Ended December 27, December
27, December 28,
2009
2009
2008
Cash provided by operating activities $ 69.5 $ 188.4 $ 185.4
Capital expenditures
(26.8 )
(59.8 ) (168.7
) Free cash flow
$ 42.7
$ 128.6 $
16.7
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