Fairchild Semiconductor Reports Results for the Third Quarter 2011

Fairchild Semiconductor (NYSE: FCS), a leading global supplier of high performance power and mobile products, today announced results for the third quarter ended September 25, 2011. Fairchild reported third quarter sales of $403.2 million, down 7 percent from the prior quarter and 3 percent lower than the third quarter of 2010.

Fairchild reported third quarter net income of $35.8 million or $0.28 per diluted share compared to $44.9 million or $0.34 per diluted share in the prior quarter and $35.8 million or $0.28 per diluted share in the third quarter of 2010. Gross margin was 35.9 percent compared to 37.1 percent in the prior quarter and 36.4 percent in the year ago quarter.

Fairchild reported third quarter adjusted gross margin of 36.0 percent, down 120 basis points sequentially and 50 basis points from the third quarter of 2010. Adjusted gross margin excludes accelerated depreciation and inventory reserve releases/write offs related to fab closures. Adjusted net income was $44.5 million or $0.34 per diluted share, compared to $54.6 million or $0.41 per diluted share in the prior quarter and $52.8 million or $0.42 per diluted share in the third quarter of 2010. Adjusted net income excludes amortization of acquisition-related intangibles, restructuring and impairments, accelerated depreciation and inventory reserve releases/write offs related to fab closures, write off of deferred financing fees, charge for litigation and associated net tax effects of these items and other acquisition-related intangibles.

“We delivered double-digit sales growth for our mobile analog products during the quarter,” said Mark Thompson, Fairchild’s president and CEO. “MCCC sales were flat from the prior quarter which reflects this increase in mobile demand offset by weaker sales into the computing and consumer end markets. PCIA sales were down 10 percent sequentially due to customers in the consumer, appliance and solar sectors reducing inventories in addition to the normal seasonal weakness for industrial and automotive markets in the second half.”

End Markets and Channel Activity

“Mobile and automotive demand was in line with expectations,” stated Thompson. “Computing demand remained muted and we continue to drive inventory lower in the distribution channel for these products. Consumer and solar demand remains weak. Distribution sell-through decreased 9 percent sequentially which was more than expected and resulted in a modest build of channel inventory. We plan to ship substantially less into the channel than our distribution customers are forecasting for sell through in the fourth quarter. This should enable us to exit this year with a leaner inventory position and be ready to grow sales again in 2012.”

Third Quarter Financials

“Gross margin decreased due primarily to lower factory loadings,” said Mark Frey, Fairchild’s executive vice president and CFO. “Margins were also reduced due to 8 inch fab start-up costs. R&D and SG&A expenses were favorable to guidance at $92.2 million due to aggressive cost controls and lower variable compensation. We also generated $19.4 million of free cash flow during the quarter. We increased internal inventory dollars by 2 percent as we reduced factory loadings nearly as fast as demand slowed.”

Forward Guidance

“We expect sales to be in the range of $350 to 370 million for the fourth quarter,” said Frey. “Our current scheduled backlog is nearly sufficient to achieve the low end of this range. We expect adjusted gross margin to be between 32 to 34 percent as we adjust factory loadings lower in the fourth quarter to reduce inventory. We anticipate R&D and SG&A spending to be approximately flat with third quarter. The adjusted tax rate is forecast at 15 percent plus or minus 3 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 fourth quarter results.”

Adjusted gross margin, adjusted net income and free cash flow are non-GAAP financial measures and should not be considered replacements for GAAP results. We exclude accelerated depreciation and inventory reserve releases/write offs 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, accelerated depreciation and inventory reserve releases/write offs related to fab closures, write off of deferred financing fees, charge for litigation and associated net tax effects 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.

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 Nine Months Ended September 25, June 26, September 26, September 25, September 26,

2011

2010

2011

2010

Total revenue $ 403.2 $ 433.2 $ 414.4 $ 1,249.4 $ 1,202.0 Cost of sales (1) 258.4 272.5 263.5 791.9 786.2 Gross margin 144.8 160.7 150.9 457.5 415.8 Gross margin % 35.9 % 37.1 % 36.4 % 36.6 % 34.6 % Operating expenses: Research and development (2) 37.8 39.9 30.5 114.6 88.0 Selling, general and administrative (3) 54.4 58.3 57.3 167.8 165.6 Amortization of acquisition-related intangibles 4.7 4.7 5.5 15.0 16.7 Restructuring and impairments 4.1 2.9 1.3 9.5 3.7 Charge for litigation - - 8.0 - 8.0 Total operating expenses 101.0 105.8 102.6 306.9 282.0 Operating income 43.8 54.9 48.3 150.6 133.8 Other expense, net 1.4 3.3 $ 3.8 5.8 8.8 Income before income taxes 42.4 51.6 44.5 144.8 125.0 Provision (benefit) for income taxes 6.6 6.7 8.7 20.6 22.8 Net income $ 35.8 $ 44.9 $ 35.8 $ 124.2 $ 102.2 Net income per common share: Basic $ 0.28 $ 0.35 $ 0.29 $ 0.98 $ 0.82 Diluted $ 0.28 $ 0.34 $ 0.28 $ 0.95 $ 0.80 Weighted average common shares: Basic 126.9 127.9 124.5 127.0 124.8 Diluted 129.9 131.7 $ 127.1 130.8 128.0 (1) Equity compensation expense included in cost of sales $ 1.2 $ 1.1 $ 0.9 $ 3.2 $ 4.8 (2) Equity compensation expense included in research and development $ 1.3 $ 1.3 $ 1.0 $ 3.5 $ 3.2 (3) Equity compensation expense included in selling, general and administrative $ 3.5 $ 5.6 $ 2.8 $ 12.3 $ 8.4 Fairchild Semiconductor International, Inc.

Reconciliation of Net Income To Adjusted Net Income

(In millions) (Unaudited) Three Months Ended Nine Months Ended September 25, June 26, September 26, September 25, September 26,

2011

2010

2011

2010

Net income $ 35.8 $ 44.9 $ 35.8 $ 124.2 $ 102.2

Adjustments to reconcile net income to adjusted net income:

Restructuring and impairments 4.1 2.9 1.3 9.5 3.7 Accelerated depreciation on assets related to fab closure (1) 0.2 0.3 0.5 0.7 2.7 Write-off of deferred financing fees (1) - 2.1 2.1 2.1 2.1 Charge for litigation - - 8.0 - 8.0 Inventory write off/release associated with fab closure (1) - - (0.1 ) - (0.2 ) Amortization of acquisition-related intangibles 4.7 4.7 5.5 15.0 16.7 Associated net tax effects of the above and other acquisition-related intangibles (0.3 ) (0.3 ) (0.3 ) (1.1 ) 0.7 Adjusted net income $ 44.5 $ 54.6 $ 52.8 $ 150.4 $ 135.9 Adjusted net income per common share: Basic $ 0.35 $ 0.43 $ 0.42 $ 1.18 $ 1.09 Diluted $ 0.34 $ 0.41 $ 0.42 $ 1.15 $ 1.06 (1) Recorded in cost of sales Fairchild Semiconductor International, Inc. Reconciliation of Gross Margin To Adjusted Gross Margin (In millions) (Unaudited) Three Months Ended Nine Months Ended September 25, June 26, September 26, September 25, September 26,

2011

2010

2011

2010

Gross margin $ 144.8 $ 160.7 $ 150.9 $ 457.5 $ 415.8

Adjustments to reconcile gross margin to adjusted gross margin:

Accelerated depreciation on assets related to fab closure 0.2 0.3 0.5 0.7 2.7 Inventory write off/release associated with fab closure

- - (0.1 ) - (0.2 ) Adjusted gross margin $ 145.0 $ 161.0 $ 151.3 $ 458.2 $ 418.3 Adjusted gross margin % 36.0 % 37.2 % 36.5 % 36.7 % 34.8 %

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) September 25, June 26, December 26,

2011

2010

ASSETS Current assets: Cash and cash equivalents $ 433.4 $ 435.7 $ 404.6 Short-term marketable securities 0.2 0.2 0.1 Receivables, net 148.7 162.4 156.4 Inventories 259.6 253.4 232.7 Other current assets 57.7 55.6 49.3 Total current assets 899.6 907.3 843.1 Property, plant and equipment, net 746.7 722.9 689.3 Intangible assets, net 70.1 74.8 69.7 Goodwill 169.3 169.4 164.8 Long-term securities 31.5 31.6 30.3 Other assets 52.8 55.3 51.9 Total assets $ 1,970.0 $ 1,961.3 $ 1,849.1 LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ - $ - $ 3.8 Accounts payable 140.3 158.1 139.0 Accrued expenses and other current liabilities 149.3 132.1 139.2 Total current liabilities 289.6 290.2 282.0 Long-term debt, less current portion 300.1 300.1 316.9 Other liabilities 75.5

76.8

71.5 Total liabilities 665.2 667.1 670.4 Temporary equity - deferred stock units 2.1 1.9 2.4 Total stockholders' equity 1,302.7 1,292.3 1,176.3 Total liabilities, temporary equity and stockholders' equity $ 1,970.0 $ 1,961.3 $ 1,849.1 Fairchild Semiconductor International, Inc. Condensed Consolidated Statements of Cash Flows (In millions) (Unaudited) Three Months Ended Nine Months Ended September 25, September 25, September 26,

2011

2010

Cash flows from operating activities: Net income $ 35.8 $ 124.2 $ 102.2

Adjustments to reconcile net income to cash provided by operating activities:

Depreciation and amortization 37.9 113.5 118.9 Non-cash stock-based compensation expense 6.0 19.0 15.9 Deferred income taxes, net (2.0 ) (7.6 ) (0.3 ) Other 0.7 3.6 3.0

Changes in operating assets and liabilities, net of acquisitions

(5.5 ) (30.0 ) (2.4 ) Cash provided by operating activities 72.9 222.7 237.3 Cash flows from investing activities: Capital expenditures (53.5 ) (141.6 ) (89.5 ) Purchase of marketable securities (0.1 ) (0.1 ) - Sale of marketable securities - - 1.5 Maturity of marketable securities - 0.1 0.1 Other (0.6 ) (2.0 ) (3.9 ) Acquisitions, net of cash acquired - (16.5 ) - Cash used in investing activities (54.2 ) (160.1 ) (91.8 ) Cash flows from financing activities: Repayment of long-term debt - (320.6 ) (150.6 ) Issuance of long-term debt - 300.0 -

Proceeds from issuance of common stock and from exercise of stock options, net

0.2 35.4 0.2 Purchase of treasury stock (20.3 ) (33.1 ) (25.6 ) Shares withheld for employees taxes (0.9 ) (10.3 ) - Other - (5.2 ) (0.8 ) Cash provided by (used in) financing activities (21.0 ) (33.8 ) (176.8 ) Net change in cash and cash equivalents (2.3 ) 28.8 (31.3 ) Cash and cash equivalents at beginning of period 435.7 404.6 415.8 Cash and cash equivalents at end of period $ 433.4 $ 433.4 $ 384.5 Fairchild Semiconductor International, Inc. Reconciliation of Cash Provided by Operating Activities to Free Cash Flow (In millions) (Unaudited) Three Months Ended Nine Months Ended September 25, September 25, September 26,

2011

2010