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  Date: 17th Apr 2011

Fairchild Semiconductor reported 1Q 2011 sales of $413 million, up 4% sequentially

Fairchild Semiconductor reported its first quarter 2011 (ended March 27, 2011) sales of $413 million, up 4 percent from the 4Q 2010 and 9 percent higher than the 1Q of 2010.

Fairchild reported first quarter net income of $43.5 million or $0.33 per diluted share compared to $51.0 million or $0.40 per diluted share in the prior quarter and $22.6 million or $0.18 per diluted share in the first quarter of 2010. Gross margin was 36.8 percent compared to 37.0 percent in the prior quarter and 32.2 percent in the year ago quarter.

Fairchild reported first quarter adjusted gross margin of 36.9 percent, down 20 basis points sequentially and 440 basis points higher than in the first quarter of 2010. Adjusted gross margin excludes accelerated depreciation and inventory reserve releases related to fab closures. Adjusted net income was $51.3 million or $0.39 per diluted share, compared to $57.3 million or $0.45 per diluted share in the prior quarter and $31.8 million or $0.25 per diluted share in the first quarter of 2010. Adjusted net income excludes amortization of acquisition-related intangibles, restructuring and impairments, accelerated depreciation and inventory reserve releases related to fab closures, and associated net tax impact of these items and other acquisition-related intangibles.

"We got off to great start for 2011 by delivering strong sales growth and gross margin at the high end of expectations," said Mark Thompson, Fairchild's Chairman, CEO and president. "We grew PCIA sales 9 percent sequentially due to the capacity additions we made to support strong demand from industrial, automotive, appliance and alternative energy customers. We have excellent backlog visibility in this business and continue to add capacity to support our customers' requirements. We posted 1 percent sequential sales growth in our MCCC business which is particularly notable given normal end market seasonality and the weakness seen in the computing and consumer segments. MCCC sales growth was driven by further share gains in smart phones, tablets and consumer applications. Our standard product sales were down sequentially as we continue to shift capacity to higher margin business. Our core businesses, which now drive 90 percent of our total sales, are growing well and we expect to continue this trend as we enter what is typically the highest demand quarters of the year."

"Demand was generally in-line with expectations for all segments except the computing end market which was weaker due to Intel chipset delays," stated Thompson. "We saw a solid improvement in computing orders in March and expect good sales growth from this segment in Q2. We continue to see robust demand for our high voltage solutions from the industrial, automotive, appliance and alternative energy end markets. Distribution sell through was impacted by the weakness in the computing market but rebounded in March and is tracking to solid growth in Q2. Channel inventory remains within our target range."

"Gross margin came in at the high end of expectations due to further progress on improving product mix and higher factory utilization," said Mark Frey, Fairchild's executive vice president and CFO. "R&D and SG&A expenses were $92 million which was favorable to our guidance range due to lower payroll and variable compensation expenses. Adjusted tax expense was $7.8 million or 13 percent of adjusted income before taxes. We generated $22.4 million of free cash flow during the quarter and paid $17 million to acquire a silicon carbide power transistor company. At the end of the quarter, total cash and securities exceeded our debt by a record $136.8 million. We increased internal inventory dollars by 4 percent to hold our days of inventory flat with the prior quarter."

Forward Guidance: "We expect sales to be $425 to $435 million in the second quarter," said Frey. "Our current scheduled backlog is sufficient to achieve this range. We expect to increase adjusted gross margin to 37.0 percent to 37.5 percent due primarily to the impact of better mix and higher factory utilization in Q1. We anticipate R&D and SG&A spending of $96 to $98 million in the second quarter as we increase our investment in new product development and sales and incur greater equity compensation expenses driven by our higher stock price. Net interest expense is expected to be roughly $2 million per quarter going forward. 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 second quarter results."


 
          
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