Fairchild Semiconductor reported fourth quarter sales of $370.8 million, a 7% increase from the prior quarter but 2% lower than the fourth quarter of 2004. The company reported a fourth quarter net loss of $4.7 million or $0.04 per share compared to a net loss of $20.8 million or $0.17 per share in the prior quarter and net income of $15.8 million or $0.13 per diluted share in the fourth quarter of 2004.
Full year revenues in 2005 for Fairchild were $1,425.1 million, a decrease of 11% compared to $1,603.1 million in 2004. Fairchild reported a net loss of $241.2 million or $2.01 per share in 2005, compared to net income of $59.2 million or $0.48 per diluted share in 2004.
"We had a strong finish to 2005, a year of major transition for Fairchild, by delivering solid fourth quarter sales and gross margin growth," said Mark Thompson, Fairchild's president and CEO in a statement. "During 2005, we improved the management of our distribution supply chain by focusing primarily on channel sell-through, which has helped us to reduce internal inventories by more than 20% and channel inventories about 16% compared to 2004. We also significantly reduced our capital expenditures during 2005 to $97 million, or slightly less than 7% of sales, well below the $190 million or 12% of sales we spent in 2004.
"We enter 2006 with great momentum and a clear strategy to succeed," explained Thompson. "We're focused on improving gross margins by increasing the mix of our leadership new products while we use our lean capital budget to drive a disciplined approach to reduce the mix of our lower margin products. The recently announced sale of our lower margin LED lamps and display product line is also indicative of our commitment to divest, harvest or exit businesses that are non-core, and we expect to continue this effort in 2006. It's an exciting time at Fairchild as we enter the new year with a very lean supply chain, better channel management, compelling new products and a disciplined approach to improving our product mix."
Gross margin was 24.2%, 340 basis points higher sequentially and 140 basis points lower than in the fourth quarter of 2004. Fairchild reported fourth quarter pro forma net income of $13.6 million or $0.11 per diluted share, better than the pro forma net loss of $3.0 million or $0.03 per share in the prior quarter and lower than the pro forma net income of $24.8 million or $0.21 per diluted share in the fourth quarter of 2004. On a pro forma basis, the company reported 2005 net income of $20.9 million or $0.17 per diluted share, compared to $109.9 million or $0.89 per diluted share in 2004.
"We expect first quarter revenues to increase 5 - 7% sequentially due to our higher starting backlog position and our return to shipping at levels more in line with end market demand," said Thompson. "We forecast gross margins to increase another 200 - 300 basis points sequentially, exclusive of stock based compensation expense, as we benefit from the full effect of lower depreciation expense, higher factory utilization and better product mix."
