SAN JOSE, Calif. — (BUSINESS WIRE) — January 24, 2013 — Fairchild Semiconductor (NYSE: FCS), a leading global supplier of power semiconductors, today announced results for the fourth quarter and full year ended December 30, 2012. Fairchild reported fourth quarter sales of $333.4 million, down 7 percent from the prior quarter and 2 percent lower than the fourth quarter of 2011.
Fairchild reported a fourth quarter net loss of $13.6 million or $0.11 per share compared to net income of $24.7 million or $0.19 per diluted share in the prior quarter and $21.3 million or $0.17 per diluted share in the fourth quarter of 2011. Gross margin was 29.8 percent compared to 33.5 percent in the prior quarter and 30.0 percent in the year-ago quarter.
Adjusted net income was $12.3 million or $0.10 per diluted share, compared to $32.3 million or $0.25 per diluted share in the prior quarter and $19.3 million or $0.15 per diluted share in the fourth quarter of 2011. See the Reconciliation of Net Income to Adjusted Net Income exhibit included in this press release for more details on the adjustment items.
Full year revenues for 2012 were $1.4 billion, down about 12% from 2011. Fairchild reported net income of $25 million or $0.19 per diluted share in 2012, compared to net income of $146 million or $1.12 per diluted share in 2011. The company reported 2012 adjusted net income of $71 million or $0.55 per diluted share, compared to $170 million or $1.30 per diluted share in 2011.
“We saw better than seasonal distribution sell through and a significant improvement in bookings during the fourth quarter,” said Mark Thompson, Fairchild’s chairman and CEO. “The solid sell through contributed to our larger than expected channel inventory reduction of $17 million during the fourth quarter. Bookings were up substantially in the fourth quarter and we have a solidly positive book to bill so far in the first quarter. We also reduced internal inventory another 2% and now have very lean channel and internal inventories at levels not seen since we emerged from the recession. We believe we are well positioned to translate improving demand into higher sales and margins as we progress through 2013.”
Fourth Quarter Financials
“Gross margin decreased 370 basis points sequentially due primarily to lower factory loadings as we further reduced inventories,” said Mark Frey, Fairchild’s executive vice president and CFO. “R&D and SG&A expenses were $86.9 million which was better than guidance due primarily to spending controls. In the reconciliation of GAAP to non-GAAP results there are three noteworthy items totaling nearly $23 million for the fourth quarter. The largest is the realized loss we recorded after selling all our remaining auction rate securities in the quarter. There is also a restructuring expense related to organization streamlining and a small VAT expense due to an internal IP sale. Free cash flow was a positive $49 million for the fourth quarter which was driven by lower capital spending, reduced internal inventory and improved cash conversion cycle time. Given this strong cash flow we paid down our debt another $50 million in the fourth quarter to $250 million, the lowest level in our history.”
“We expect sales to be in the range of $330 to $350 million for the first 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 29% plus or minus 50 basis points due primarily to lower factory loadings and incrementally higher start up costs at our 8 inch wafer fab in Korea. We anticipate R&D and SG&A spending to be in the range of $90 to $93 million as we begin accruing again for variable compensation and increased payroll related taxes. The adjusted tax rate is forecast at 15 percent plus or minus 3 percentage points for the quarter. Consistent with our usual practices, 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 free cash flow are non-GAAP financial measures and should not be considered replacements for GAAP results. See additional information on our non-GAAP financial measures and reconciliations to the most comparable GAAP measures in the appropriate reconciliation exhibit included in this press release as well as our SEC filings related to this announcement.
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 lower 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