Fairchild Reports Results for Q1 2013 - OEM Bookings at “Highest Level since 2010”
Fairchild Semiconductor today reported first quarter sales of $343.2 million for the first quarter ended March 31, 2013, up 3 percent from the prior quarter and 3 percent lower than the 14-week first quarter of 2012. Fairchild reported a first quarter net loss of $0.5 million or $0.00 per diluted share compared to a net loss of $13.6 million or $0.11 per diluted share in the prior quarter and net income of $1.6 million or $0.01 per diluted share in the first quarter of 2012. Gross margin was 26.9 percent compared to 29.8 percent in the prior quarter and in the year-ago quarter.
Fairchild reported first quarter adjusted gross margin of 27.8 percent, down 200 basis points from the prior quarter and the first quarter of 2012. Adjusted gross margin excludes accelerated depreciation related to a line closure. Adjusted net loss was $2.0 million or $0.02 per diluted share, compared to net income of $12.3 million or $0.10 per diluted share in the prior quarter and $8.3 million or $0.06 per diluted share in the first quarter of 2012. This adjusted net loss excludes the $12.6 million litigation charge reversal related to the recent favorable court ruling on the first Power Integrations lawsuit.
"First quarter sales and second quarter guidance are better than seasonal," said Mark Thompson, Fairchild's chairman and CEO. "Bookings were robust throughout the first quarter and so far through Q2 at about a $400 million quarterly rate. These strong order rates are especially evident for our direct OEM business which is booking at the highest level since 2010. We posted solid sales growth in our high voltage products serving the industrial, appliance and automotive markets as well as continued market share gains for our mobile analog and power management solutions. These markets now account for 74% of total company sales, the highest level in our history. We further reduced both distribution channel and internal inventory levels to maintain one of the leanest supply chains in the industry. We are excited to see a solid recovery in the industrial and appliance sector which coupled with our continued growth in mobile and automotive should enable us to accelerate sales growth in 2013."
"Adjusted gross margin decreased 2 points sequentially due primarily to continued reductions in internal inventory and nearly one full point of incrementally higher 8 inch wafer fab qualification costs," said Mark Frey, Fairchild's executive vice president and CFO. "We expect the impact of higher factory utilization and improved product mix to drive significant improvement in gross margin going forward. R&D and SG&A expenses were $94.2 million due primarily to increased R&D and selling expenses to support our sales growth as well as higher payroll-related taxes and equity compensation. Free cash flow was a negative $23.9 million for the first quarter which was driven by lower net income and payables coupled with higher receivables as we take more customers direct."
"We expect sales to be in the range of $355 to $375 million for the second 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 30 to 31 percent due primarily to improved factory utilization and better product mix. We anticipate R&D and SG&A spending to be $98 to $100 million due to the annual merit increase, higher variable compensation expenses and some equity vesting that occurs just in the second quarter of each year. 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 second 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.