Fairchild Semiconductor today announced results for the first quarter ended March 27, 2016. Fairchild reported first quarter sales of $327.0 million, up 3 percent from the prior quarter and 8 percent lower than the first quarter of 2015.
Fairchild reported first quarter net income of $14.8 million or $0.13 per diluted share compared to a net loss of $7.1 million or $0.06 per diluted share in the prior quarter and net income of $1.1 million or $0.01 per diluted share in the first quarter of 2015. Gross margin was 30.6 percent compared to 33.1 percent in the prior quarter and 30.4 percent in the year-ago quarter.
As previously announced on November 18, 2015, Fairchild entered into an Agreement and Plan of Merger with ON Semiconductor, under which a wholly owned subsidiary of ON Semiconductor agreed to acquire all of the outstanding shares of Fairchild common stock for $20.00 per share in cash. Fairchild and ON Semiconductor continue to work cooperatively and expeditiously to obtain required regulatory approvals in connection with the transaction.
Fairchild reported first quarter adjusted gross margin of 31.1 percent, down 190 basis points from the prior quarter and 50 basis points from the first quarter of 2015. Adjusted gross margin excludes accelerated depreciation, inventory write-offs related to factory closures and acquisition-related costs. Adjusted net income was $11.6 million or $0.10 per diluted share, compared to $12.7 million or $0.11 per diluted share in the prior quarter and $13.3 million or $0.11 per diluted share in the first quarter of 2015. See the Reconciliation of Net Income (Loss) to Adjusted Net Income in the table below for more details on the other adjustment items.
â€œFirst quarter sales were largely as expected with normal seasonal demand patterns evident across all our end markets,â€ said Mark Thompson, Fairchildâ€™s chairman, president and CEO. â€œBookings increased sequentially in the first quarter and remain strong in the first weeks of the current quarter. Our starting backlog is higher than a quarter ago which should enable us to grow sales seasonally in the second quarter. We saw solid demand growth for our products serving the automotive, appliance, enterprise computing and industrial end markets. We expect this strength to continue in the second quarter. In the mobile sector, one large customer worked through some short-term inventory reductions which were partially offset by strength at other accounts. We expect strong sales growth in this sector for the second quarter as these inventory corrections do not reoccur and we benefit from design wins and new product launches.â€
â€œAdjusted gross margin decreased sequentially due primarily to lower factory loadings as we reduced internal inventory by $20 million from the prior quarter,â€ said Mark Frey, Fairchildâ€™s executive vice president and CFO. â€œAdjusted R&D and SG&A expenses were down 1 percent sequentially to $85 million as the impact of lower headcount more than offset seasonally higher payroll taxes and less vacation. Free cash flow was $4 million for the first quarter as proceeds from the sale of a factory offset variable compensation expenses. At the end of the first quarter our total cash and securities exceeded debt by $75 million.â€
Given the current acquisition process, Fairchild has discontinued its practice of providing detailed forward guidance and conducting an earnings conference call to discuss its financial results.