Fairchild Semiconductor (NYSE: FCS), a leading global supplier
of high performance power and mobile products, today announced
results for the second quarter ended June 27, 2010. Fairchild
reported second quarter sales of $409.6 million, up 8 percent from
the prior quarter and 47 percent higher than the second quarter of
2009.
Fairchild reported second quarter net income of $43.8 million or
$0.34 per diluted share compared to net income of $22.6 million or
$0.18 per diluted share in the prior quarter and a net loss of
$24.9 million or $0.20 per share in the second quarter of 2009.
Results for the second quarter of 2010 include $0.9 million of
accelerated depreciation. Gross margin was 35.0 percent compared to
32.2 percent in the prior quarter and 23.2 percent in the year ago
quarter.
Fairchild reported second quarter adjusted gross margin of 35.2
percent, up 270 basis points sequentially and 10 percentage points
higher than in the second quarter of 2009. Adjusted gross margin
excludes accelerated depreciation and inventory write-offs/reserve
releases related to fab closures. Adjusted net income was $51.3
million or $0.40 per diluted share, compared to $31.8 million or
$0.25 per diluted share in the prior quarter and a net loss of $3.5
million or $0.03 per share in the second quarter of 2009. Adjusted
net income and loss excludes amortization of acquisition-related
intangibles, restructuring and impairments, gain associated with
debt buyback, net impairment/gain on equity investments,
accelerated depreciation and inventory write-offs/reserve releases
related to fab closures, and associated net tax benefits of these
items and other acquisition-related intangibles.
“We delivered strong sales and earnings growth in the second
quarter due to seasonally higher demand across a broad range of our
product lines,” said Mark Thompson, Fairchild’s president and CEO.
“The investments we made in the last few years to ramp our high
voltage power management solutions, coupled with our leading
technologies in mobile analog and low voltage MOSFETs, are fueling
this acceleration in sales and margin improvement. We grew sales 8
percent sequentially and maintained channel inventory at
historically low levels. Adjusted gross margin topped 35 percent
which is the highest level since the year 2000 due to a richer
product mix on the strength of numerous design win ramps. We expect
to continue this trajectory of growth and margin improvement and
will provide an update to our target business model at our upcoming
analyst day on September 16. I am also pleased to report that we
reduced debt by $26 million this quarter and plan to pay off
another $122 million at the end of this month. This will reduce our
debt to roughly $322 million by the end of July which is the lowest
level in our history and will add about $0.03 to annual earnings
per share.”
End Markets and Channel Activity
“Demand was strong across a broad range of end markets and in
all regions,” stated Thompson. “End market demand improved
sequentially with consumer and handset order rates seasonally
higher while industrial sales continued to be robust. Our sales
growth was slightly stronger for OEMs than the distribution channel
in the second quarter.
“Distributor sell-through increased about 5 percent sequentially
which is slightly better than normal seasonality,” said Thompson.
“We maintained channel inventory at about 8 weeks which is in the
middle of our target range and expect to hold this level in the
third quarter.”
Second Quarter Financials
“We posted excellent financial results for the second quarter
due primarily to a continued improvement in our product mix,” said
Mark Frey, Fairchild’s executive vice president and CFO. “We
increased adjusted gross margin nearly 3 percentage points
sequentially to 35.2 percent and our order flow and backlog
momentum indicate continued progression in the second half of 2010.
R&D and SG&A expenses of $85.1 million were slightly above
our original forecast due primarily to higher variable compensation
costs driven by higher sales and profitability. Adjusted tax
expense was $5.2 million or 9 percent of adjusted income before
taxes, which was lower than expected due to the distribution of
profits in various tax jurisdictions. We paid off $26.3 million in
debt and repurchased $10 million in stock while generating $54.5
million of free cash flow. At the end of the quarter, total cash
and securities exceeded our debt by a record high $52 million. We
held internal inventory roughly flat at 70 days.”
Forward Guidance
“We expect sales to be $415 to $425 million in the third
quarter,” said Frey. “Our current scheduled backlog is sufficient
to achieve the low end of this range. We expect to increase gross
margin another 50 to 100 basis points due primarily to continued
improvements in product mix. We anticipate R&D and SG&A
spending of $86 to $88 million in the third quarter, which at the
mid-point moves us closer to our target of 20 percent of sales.
After we complete the planned debt reduction this month, net
interest expense is expected to be roughly $2 million per quarter
going forward. The adjusted tax rate is forecast at 15 to 20
percent for the quarter. 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.”
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, gain associated with debt buyback, net impairment/gain
on equity investments, accelerated depreciation and inventory
write-offs/reserve releases related to fab closures, 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 “Forward
Guidance,” 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) – global presence, local
support, smart ideas. Fairchild delivers energy-efficient,
easy-to-use and value-added semiconductor solutions for power and
mobile designs. We help our customers differentiate their products
and solve difficult technical challenges with our expertise in
power and signal path products. 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 Six Months
Ended June 27, March 28, June 28, June 27, June 28,
2010
2010
2009
2010
2009
Total revenue $ 409.6 $ 378.0 $ 277.9 $ 787.6 $ 501.2 Cost
of sales (1)
266.3
256.4 213.3
522.7 402.6 Gross
margin
143.3 121.6
64.6 264.9
98.6 Gross margin % 35.0 % 32.2 %
23.2 % 33.6 % 19.7 % Operating expenses: Research and
development (2) 29.1 28.4 25.6 57.5 49.4 Selling, general and
administrative (3) 56.0 52.3 43.7 108.3 88.4 Amortization of
acquisition-related intangibles 5.6 5.6 5.6 11.2 11.1 Restructuring
and impairments
-
2.4 11.3
2.4 18.0 Total
operating expenses
90.7
88.7 86.2
179.4 166.9
Operating income (loss) 52.6 32.9 (21.6 ) 85.5 (68.3 ) Other
expense, net
2.6 2.4
5.7 5.0
11.0 Income (loss) before income
taxes 50.0 30.5 (27.3 ) 80.5 (79.3 ) Provision (benefit) for
income taxes
6.2 7.9
(2.4 )
14.1 (3.3 )
Net income (loss)
$ 43.8
$ 22.6 $
(24.9 ) $ 66.4
$ (76.0 ) Net
income (loss) per common share: Basic
$
0.35 $ 0.18
$ (0.20 ) $
0.53 $ (0.61
) Diluted
$ 0.34
$ 0.18 $
(0.20 ) $ 0.52
$ (0.61 ) Weighted
average common shares: Basic
125.2
124.7 123.9
125.0 123.7
Diluted
128.1 128.6
123.9 128.3
123.7 (1) Equity
compensation expense included in cost of sales $ 1.6 $ 2.3 $ 0.6 $
3.9 $ 0.8 (2) Equity compensation expense included in research and
development $ 1.1 $ 1.1 $ 1.2 $ 2.2 $ 1.5 (3) Equity compensation
expense included in selling, general and administrative $ 3.2 $ 2.4
$ 2.1 $ 5.6 $ 4.2
Fairchild Semiconductor
International, Inc.
Reconciliation of Net Income
(Loss) To Adjusted Net Income (Loss)
(In millions) (Unaudited) Three Months Ended
Six Months Ended June 27, March 28, June 28, June 27, June 28,
2010
2010
2009
2010
2009
Net income (loss) $ 43.8 $ 22.6 $ (24.9 ) $ 66.4 $
(76.0 )
Adjustments to reconcile net
income (loss) to adjusted net income (loss):
Restructuring and impairments - 2.4 11.3 2.4 18.0 Net
impairment/gain on equity investments (1) - - 2.1 2.1 Gain
associated with debt buyback (1) - - (0.8 ) (0.8 ) Accelerated
depreciation on assets related to fab closure (2) 0.9 1.3 3.7 2.2
3.7 Inventory write off/release associated with fab closure (2) -
(0.1 ) 0.6 (0.1 ) 0.6 Amortization of acquisition-related
intangibles 5.6 5.6 5.6 11.2 11.1 Associated net tax effects of the
above and other acquisition-related intangibles
1.0 -
(1.1 ) 1.0
(2.3 ) Adjusted net income (loss)
$ 51.3 $
31.8 $ (3.5
) $ 83.1
$ (43.6 ) Adjusted
net income (loss) per common share: Basic
$
0.41 $ 0.26
$ (0.03 ) $
0.66 $ (0.35
) Diluted
$ 0.40
$ 0.25 $
(0.03 ) $ 0.65
$ (0.35 ) (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 27, March 28, June 28, June 27, June 28,
2010
2010
2009
2010
2009
Gross margin $ 143.3 $ 121.6 $ 64.6 $ 264.9 $ 98.6
Adjustments to reconcile gross
margin to adjusted gross margin:
Accelerated depreciation on assets related to fab closure 0.9 1.3
3.7 2.2 3.7 Inventory write off/release associated with fab closure
- (0.1
) 0.6
(0.1 ) 0.6
Adjusted gross margin
$ 144.2
$ 122.8 $
68.9 $ 267.0
$ 102.9 Adjusted gross
margin % 35.2 % 32.5 % 24.8 % 33.9 % 20.5 %
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 27, March 28, December 27,
2010
2010
2009
ASSETS Current assets: Cash and cash
equivalents $ 459.7 $ 442.4 $ 415.8 Short-term marketable
securities 0.1 0.1 0.1 Receivables, net 173.1 151.8 134.0
Inventories 210.2 198.1 189.5 Other current assets
38.5 40.2 41.8
Total current assets 881.6 832.6 781.2 Property, plant and
equipment, net 640.2 635.1 653.2 Intangible assets, net 69.9 75.5
81.1 Goodwill 161.3 161.3 161.3 Long-term securities 36.7 38.7 35.8
Other assets
47.9 51.7
49.8 Total assets
$
1,837.6 $ 1,794.9
$ 1,762.4
LIABILITIES, TEMPORARY EQUITY
AND STOCKHOLDERS' EQUITY
Current liabilities: Current portion of long-term debt $ 5.3
$ 5.3 $ 5.3 Accounts payable 145.9 127.3 119.6 Accrued expenses and
other current liabilities
98.5
80.2 70.6 Total current
liabilities 249.7 212.8 195.5 Long-term debt, less current
portion 439.3 465.6 466.9 Other liabilities
61.3 62.1 71.1
Total liabilities 750.3 740.5 733.5 Temporary equity -
deferred stock units 2.1 2.5 2.3 Total stockholders' equity
1,085.2 1,051.9
1,026.6 Total liabilities, temporary equity and
stockholders' equity
$ 1,837.6
$ 1,794.9 $
1,762.4 Fairchild
Semiconductor International, Inc. Condensed Consolidated
Statements of Cash Flows (In millions)
(Unaudited)
Three Months Ended Six Months Ended
June 27, June 27, June 28,
2010
2010
2009
Cash flows from operating activities: Net income (loss) $ 43.8 $
66.4 $ (76.0 ) Adjustments to reconcile net income (loss) to cash
provided by operating activities: Depreciation and amortization
39.4 79.7 79.6 Non-cash stock-based compensation expense 5.9 11.2
6.5 Non-cash restructuring and impairments expense - - 0.8
Impairment of equity investment - - 2.3 Gain on debt buyback - -
(0.8 ) Gain on sale of equity investment - - (0.2 ) Deferred income
taxes, net 0.9 2.9 (7.7 ) Other 0.2 0.6 0.5
Changes in operating assets and
liabilities, net of acquisitions
(2.6 ) (19.7
) 67.8 Cash provided by
operating activities
87.6
141.1 72.8
Cash flows from investing activities: Capital expenditures (33.1 )
(50.9 ) (21.4 ) Purchase of marketable securities - - (0.3 ) Sale
of marketable securities - - 0.3 Maturity of marketable securities
- 0.1 0.1 Other (0.3 ) (0.6 ) (0.8 ) Acquisitions
- -
(1.5 ) Cash used in investing activities
(33.4 ) (51.4
) (23.6 ) Cash
flows from financing activities: Repayment of long-term debt (26.3
) (27.6 ) (16.4 )
Proceeds from issuance of common
stock and from exercise of stock options, net
0.2 0.2 - Purchase of treasury stock (10.0 ) (17.6 ) - Other
(0.8 ) (0.8
) (0.7 ) Cash used in
financing activities
(36.9 )
(45.8 ) (17.1
) Net change in cash and cash equivalents 17.3
43.9 32.1 Cash and cash equivalents at beginning of period
442.4 415.8
351.5 Cash and cash equivalents at end of
period
$ 459.7 $
459.7 $ 383.6
- - -
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 27, June 27, June
28,
2010
2010
2009
Cash provided by operating activities $ 87.6 $ 141.1 $ 72.8
Capital expenditures
(33.1 )
(50.9 ) (21.4
) Free cash flow
$ 54.5
$ 90.2 $
51.4
Fairchild Semiconductor (NASDAQ:FCS)
Historical Stock Chart
From Jun 2024 to Jul 2024
Fairchild Semiconductor (NASDAQ:FCS)
Historical Stock Chart
From Jul 2023 to Jul 2024