SAN JOSE, Calif. — (BUSINESS WIRE) — July 18, 2013 — Fairchild Semiconductor (NYSE: FCS), a leading global supplier of power semiconductors, today announced results for the second quarter ended June 30, 2013. Fairchild reported second quarter sales of $356.5 million, up 4 percent from the prior quarter and 1 percent lower than the second quarter of 2012.
Fairchild reported a second quarter net loss of $7.5 million or $0.06 per diluted share compared to a net loss of $0.5 million or $0.00 per diluted share in the prior quarter and net income of $11.9 million or $0.09 per diluted share in the second quarter of 2012. Gross margin was 29.1 percent compared to 26.9 percent in the prior quarter and 32.6 percent in the year-ago quarter.
Fairchild reported second quarter adjusted gross margin of 29.8 percent, up 200 basis points from the prior quarter and 280 basis points lower than the second quarter of 2012. Adjusted gross margin excludes accelerated depreciation related to a line closure. Adjusted net income was $1.7 million or $0.01 per diluted share, compared to a net loss of $2.0 million or $0.02 per diluted share in the prior quarter and net income of $17.6 million or $0.14 per diluted share in the second quarter of 2012. See the Reconciliation of Net Income to Adjusted Net Income exhibit included in this press release for more details on the other adjustment items.
“We grew sales 4 percent sequentially in the second quarter and 7 percent through the first half of 2013,” said Mark Thompson, Fairchild’s chairman and CEO. “Our high voltage product sales supporting the industrial and appliance markets were up 15 percent sequentially. We posted record quarterly sales for our products serving the automotive market. Power conversion products also recorded solid sales growth in the second quarter. We saw some incremental demand weakness from the notebook PC market and at a couple of large mobile customers that impacted Q2 sales and our backlog heading into the third quarter. We expect the weakness in notebooks to persist but have limited impact on our future results now that it accounts for less than 3 percent of total sales. Mobile sales are expected to increase in the third quarter due largely to one major customer and continued growth from our Chinese customers. Our guidance reflects some conservatism given how difficult it has been for our customers to forecast actual mobile demand.”
Second Quarter Financials
“Adjusted gross margin increased 2 points sequentially due to higher factory loadings and better mix primarily in our high voltage products,” said Mark Frey, Fairchild’s executive vice president and CFO. “We expect the impact of higher factory utilization and improved product mix to drive continued improvement in gross margin going forward. R&D and SG&A expenses came in at the low end of guidance at $98.2 million. The increase from the prior quarter was due primarily to the annual merit raise and higher variable compensation accruals. Free cash flow was $30 million for the second quarter which was driven by favorable changes in working capital and continued lower capital spending.”
“We expect sales to be in the range of $355 to $370 million for the third 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 31.5 to 33.0 percent due primarily to improved factory utilization and better product mix. We anticipate R&D and SG&A spending to be $97 to $99 million. 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 third 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