Product category: Power Supply ICs and Controllers
News Release from: Fairchild Semiconductor
Edited by the Electronicstalk Editorial Team on 18 April 2005

Restructuring costs push
Fairchild into the red

Fairchild Semiconductor has announced results for the first quarter ended 27th March 2005

Fairchild reported first quarter sales of $362.8 million, a 9% decrease from the first quarter of 2004 and 4% lower than the prior quarter. Fairchild reported a first quarter net loss of $10.4 million or $0.09 per share compared with net income of $13.0 million or $0.10 per diluted share in the first quarter of 2004 and net income of $15.8 million or $0.13 per diluted share in the prior quarter.

As previously announced, included in this quarter's results are $23.9 million in expenses associated with calling the company's 10.5% senior subordinated notes in February.

The company also recorded $4.1 million of restructuring expenses related to employee severance.

Gross margin was 23.1%, 320 basis points lower than the first quarter of 2004 and 250 basis points lower sequentially.

Fairchild reported first quarter pro forma net income of $12.5 million or $0.10 per diluted share, compared with pro forma net income of $21.4 million or $0.17 per diluted share in the first quarter of 2004 and $24.8 million or $0.21 per diluted share in the prior quarter.

Pro forma net income excludes amortisation of acquisition-related intangibles, restructuring and impairments, expenses associated with calling the notes, and other items.

'We increased power products to a record 76% of total sales in the first quarter', said Kirk Pond, Fairchild's President, CEO and Chairman of the Board.

'Since we started the company in 1997, we've grown our power sales from less than $90 million to nearly $1.2 billion in 2004'.

'In the first quarter, our power sales were down less than 3% sequentially, once again highlighting the greater stability of this business'.

'We reached a significant milestone by shipping over one million smart power modules (SPM) in the first quarter'.

'These highly integrated, complete power management solutions sell for $5 to $6 a piece, a significant increase from our overall average selling prices'.

'Fairchild continues to make solid progress focusing our business on the fast-growing power market'.

'Order rates were strong in January, then as expected, slowed in February during the Chinese New Year holidays', explained Pond.

'Bookings did improve in March over the February levels, but were lower than January and less than seasonal'.

'Order rates were strongest for our products serving the computing, power supply and communications end markets, while orders for displays, monitors, and consumer products were weaker'.

'We paid off the last of our high yield notes this quarter, which will significantly reduce our interest expense and improve our cash flow going forward', said Matt Towse, Fairchild's Senior Vice President and Chief Financial Officer.

'Based on current interest rates, we expect to save nearly $25.0 million in pre-tax net interest expense this year compared with 2004'.

'Gross margins were 23.1% in the first quarter', stated Towse.

'Margins were impacted primarily by lower prices due to aggressive competition for standard products as well as a mix shift in our analogue business'.

'In the second quarter, we expect revenue to be flattish and gross margins to be flat to slightly higher sequentially', said Towse.

'Our backlog entering the quarter was slightly lower than a quarter ago, so we'll need to book and ship a higher percentage of our sales in the second quarter compared with the first quarter'.

'Lead times are shorter than a quarter ago, especially for our high power switches, which we expect will help us to achieve the bookings we need to meet our revenue guidance this quarter'.

'Our current backlog also indicates firmer pricing and a better mix than the prior quarter'.

'At current interest rates, we forecast net interest expense to be about $6.2 million per quarter for the rest of 2005'.

'I'm excited about our potential as we look to the future'.

'In just eight years we've built the world's leading power semiconductor business, building a great foundation of operations and process capabilities'.

'Our fab processes are at the leading edge of the industry and our packaging capabilities are exceptional'.

'We have consistently generated cash during this time which has enabled us to de-lever and strengthen our balance sheet'.

'Under the leadership of our new CEO, Mark Thompson, we are firmly committed to delivering more innovative power semiconductor solutions and driving higher, and more stable gross margins and earnings throughout the business cycle'.

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