Fairchild Semiconductor Reports Results for the Fourth Quarter and Full Year 2012

  Fairchild Semiconductor Reports Results for the Fourth Quarter and Full Year
  2012

Business Wire

SAN JOSE, Calif. -- 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.”

Forward Guidance

“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 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.

Fairchild Semiconductor International, Inc.
Consolidated Statements of Operations
(In millions, except per share amounts)
(Unaudited)
                                                                  
                        Three Months Ended                  Year Ended
                        December    September   December    December      December
                        30,         30,         25,         30,           25,
                        2012        2012        2011        2012          2011
                                                                          
Total revenue           $ 333.4     $ 358.8     $ 339.4     $ 1,405.9     $ 1,588.8
Cost of sales (1)        234.1     238.7     237.7     963.9       1,029.6 
  Gross margin           99.3      120.1     101.7     442.0       559.2   
  Gross margin %          29.8  %     33.5  %     30.0  %     31.4    %     35.2    %
                                                                          
Operating expenses:
  Research and            37.9        37.8        38.8        156.9         153.4
  development (2)
  Selling, general
  and administrative      49.0        48.0        50.6        206.8         218.4
  (3)
  Amortization of
  acquisition-related     4.5         4.5         4.7         18.2          19.7
  intangibles
  Restructuring and       7.8         3.4         (6.7  )     14.1          2.8
  impairments
  Charge for             -         -         -         1.3         -       
  litigation
          Total
          operating      99.2      93.7      87.4      397.3       394.3   
          expenses
                                                                          
Operating income          0.1         26.4        14.3        44.7          164.9
Realized loss on sale     12.9        -           -           12.9          -
of securities
Other expense, net       3.9       1.2       1.4       8.1         7.2     
Income (loss) before      (16.7 )     25.2        12.9        23.7          157.7
income taxes
                                                                          
Provision (benefit)      (3.1  )    0.5       (8.4  )    (0.9    )    12.2    
for income taxes
Net income (loss)       $ (13.6 )   $ 24.7     $ 21.3     $ 24.6       $ 145.5   
                                                                          
Net income (loss) per
common share:
  Basic                 $ (0.11 )   $ 0.19     $ 0.17     $ 0.19       $ 1.15    
  Diluted               $ (0.11 )   $ 0.19     $ 0.17     $ 0.19       $ 1.12    
Weighted average
common shares:
  Basic                  126.9     126.8     126.0     126.7       126.7   
  Diluted                126.9     128.8     128.8     129.0       130.3   
                                                                          
                                                                          
(1) Equity
compensation expense    $ 0.8       $ 1.0       $ 1.1       $ 4.5         $ 4.3
included in cost of
sales
(2) Equity
compensation expense    $ 1.4       $ 1.3       $ 1.3       $ 5.7         $ 4.8
included in research
and development
(3) Equity
compensation expense
included in selling,    $ 2.0       $ 1.9       $ 3.4       $ 12.4        $ 15.7
general and
administrative
                                                                          
                                                                          
Fairchild Semiconductor International, Inc.
Reconciliation of Net Income To Adjusted Net Income
(In millions)
(Unaudited)
                                                                          
                        Three Months Ended                  Year Ended
                        December    September   December    December      December
                        30,         30,         25,         30,           25,
                        2012        2012        2011        2012          2011
                                                                          
                                                                          
Net income (loss)       $ (13.6 )   $ 24.7      $ 21.3      $ 24.6        $ 145.5
Adjustments to
reconcile net income
to adjusted net
income:
Restructuring and         7.8         3.4         (6.7  )     14.1          2.8
impairments
VAT expense on            2.1         -           -           2.1           -
internal IP sale
Accelerated
depreciation on           -           -           -           -             0.7
assets related to fab
closure (1)
Write-off of deferred     -           -           -           -             2.1
financing fees
Realized Loss on sale     12.9        -           -           12.9          -
of securities
Charge for litigation     -           -           -           1.3           -
Inventory write
off/release               -           -           (0.2  )     -             (0.2    )
associated with fab
closure (1)
Change in retirement      -           -           2.7         -             2.7
plans
Amortization of
acquisition-related       4.5         4.5         4.7         18.2          19.7
intangibles
Associated net tax
effects of the above
and other                (1.4  )    (0.3  )    (2.5  )    (2.7    )    (3.6    )
acquisition-related
intangibles
Adjusted net income     $ 12.3     $ 32.3     $ 19.3     $ 70.5       $ 169.7   
                                                                          
Adjusted net income
per common share:
  Basic                 $ 0.10     $ 0.25     $ 0.15     $ 0.56       $ 1.34    
  Diluted               $ 0.10     $ 0.25     $ 0.15     $ 0.55       $ 1.30    
                                                                          
                                                                          
(1) Recorded in cost of sales
                                                                          
                                                                          
Fairchild Semiconductor International, Inc.
Reconciliation of Gross Margin To Adjusted Gross Margin
(In millions)
(Unaudited)
                                                                          
                        Three Months Ended                  Year Ended
                        December    September   December    December      December
                        30,         30,         25,         30,           25,
                        2012        2012        2011        2012          2011
                                                                          
                                                                          
Gross margin            $ 99.3      $ 120.1     $ 101.7     $ 442.0       $ 559.2
Adjustments to
reconcile gross
margin
to adjusted gross
margin:
Change in retirement      -           -           1.7         -             1.7
plans
Accelerated
depreciation on           -           -           -           -             0.7
assets related to fab
closure
Inventory write
off/release              -         -         (0.2  )    -           (0.2    )
associated with fab
closure
Adjusted gross margin   $ 99.3     $ 120.1    $ 103.2    $ 442.0      $ 561.4   
                                                                          
Adjusted gross margin     29.8  %     33.5  %     30.4  %     31.4    %     35.3    %
%
                                                                          
                                                                          
                                                                          
                                                                          
Fairchild Semiconductor International, Inc.
Reconciliation of R&D and SG&A to Adjusted R&D and SG&A
(In millions)
(Unaudited)
                                                                          
                        Three Months Ended                  Year Ended
                        December    September   December    December      December
                        30,         30,         25,         30,           25,
                        2012        2012        2011        2012          2011
                                                                          
                                                                          
R&D and SG&A            $ 86.9      $ 85.8      $ 89.4      $ 363.7       $ 371.8
Adjustments to
reconcile R&D and
SG&A
to adjusted R&D and
SG&A:
Change in retirement     -         -         (1.0  )    -           (1.0    )
plans
Adjusted R&D and SG&A   $ 86.9     $ 85.8     $ 88.4     $ 363.7      $ 370.8   
                                                                          

Fairchild Semiconductor International, Inc.
Consolidated Balance Sheets
(In millions)
(Unaudited)
                                                            
                                    December 30,   September 30,   December
                                                                   25,
                                    2012           2012            2011
                                                                   
ASSETS
Current assets:
  Cash and cash equivalents         $   405.9      $   385.6       $  423.3
  Short-term marketable                 0.1            0.1            0.2
  securities
  Receivables, net                      136.7          162.5          142.9
  Inventories                           236.7          242.3          234.2
  Other current assets                 52.6          51.5          52.4
          Total current assets          832.0          842.0          853.0
                                                                   
Property, plant and equipment,          764.9          775.2          765.4
net
Intangible assets, net                  47.3           51.8           65.4
Goodwill                                169.3          169.3          169.3
Long-term securities                    2.6            28.4           32.3
Other assets                           67.8          59.5          51.5
          Total assets              $   1,883.9    $   1,926.2     $  1,936.9
                                                                   
LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                  $   115.7      $   117.7       $  132.5
  Accrued expenses and other           89.2          82.9          125.7
  current liabilities
          Total current                 204.9          200.6          258.2
          liabilities
                                                                   
Long-term debt, less current            250.1          300.1          300.1
portion
Other liabilities                      58.9          58.8          54.1
          Total liabilities             513.9          559.5          612.4
                                                                   
Temporary equity - deferred             2.9            2.6            2.3
stock units
Total stockholders' equity             1,367.1       1,364.1       1,322.2
          Total liabilities,
          temporary equity and      $   1,883.9    $   1,926.2     $  1,936.9
          stockholders' equity
                                                                   

Fairchild Semiconductor International, Inc.
Condensed Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
                                                           
                                                                  
                                 Three Months      Year Ended
                                 Ended
                                 December 30,      December 30,   December 25,
                                 2012              2012           2011
Cash flows from operating
activities:
Net income (loss)                $   (13.6  )         24.6        $  145.5
  Adjustments to reconcile net
  income to cash provided
  by operating activities:
  Depreciation and                   34.8             135.3          150.5
  amortization
  Non-cash stock-based               4.2              22.6           24.8
  compensation expense
  Non-cash restructuring and         0.1              0.1            -
  impairments expense
  Non-cash realized loss on          12.9             12.9           -
  sale of investments
  Purchased in-process               -                               -
  research & development
  Deferred income taxes, net         (4.5   )         (11.2   )      (12.5   )
  Other                              0.9              2.5            4.4
  Changes in operating assets
  and liabilities, net
       of acquisitions              44.1           (3.6    )     (44.2   )
       Cash provided by             78.9           183.2        268.5   
       operating activities
                                                                  
Cash flows from investing
activities:
  Capital expenditures               (29.5  )         (151.9  )      (186.4  )
  Purchase of marketable             -                (0.5    )      (0.1    )
  securities
  Sale of marketable                 23.3             23.6           -
  securities
  Maturity of marketable             -                0.2            0.1
  securities
  Other                              (0.5   )         (2.4    )      (3.5    )
  Acquisitions, net of cash         -              -            (16.5   )
  acquired
       Cash used in investing       (6.7   )        (131.0  )     (206.4  )
       activities
                                                                  
Cash flows from financing
activities:
  Repayment of long-term debt        (50.0  )         (50.0   )      (320.6  )
  Issuance of long-term debt         -                -              300.0
  Proceeds from issuance of
  common stock and
       from exercise of stock        0.6              5.0            35.5
       options, net
  Purchase of treasury stock         (1.9   )         (13.9   )      (42.3   )
  Shares withheld for                (0.6   )         (10.7   )      (10.8   )
  employees taxes
  Other                             -              -            (5.2    )
       Cash provided by (used
       in) financing                (51.9  )        (69.6   )     (43.4   )
       activities
                                                                  
Net change in cash and cash          20.3             (17.4   )      18.7
equivalents
Cash and cash equivalents at        385.6          423.3        404.6   
beginning of period
Cash and cash equivalents at     $   405.9        $  405.9      $  423.3   
end of period
                                                                  
                                                                  
                                                                  
Fairchild Semiconductor International, Inc.
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow
(In millions)
(Unaudited)
                                                                  
                                 Three Months      Year Ended
                                 Ended
                                 December 30,      December 30,   September
                                                                  25,
                                 2012              2012           2011
                                                                  
Cash provided by operating       $   78.9          $  183.2       $  268.5
activities
Capital expenditures                (29.5  )        (151.9  )     (186.4  )
Free cash flow                   $   49.4         $  31.3       $  82.1    

Contact:

Fairchild Semiconductor:
Dianna Fletcher, 207-775-8728
Corporate Communications
dianna.fletcher@fairchildsemi.com
or
Dan Janson, 207-775-8660
Investor Relations
investor@fairchildsemi.com
 
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