Fairchild Semi Financial Results Hampered by ‘Less Favorable Product Mix’
Fairchild Semiconductor Corp. announced results for the fourth quarter and full year 2013 ended December 29, 2013, including fourth quarter sales of $341.1 million, down 6 percent from the prior quarter and up 2 percent from the fourth quarter of 2012. Fairchild reported fourth quarter net income of $0.9 million or $0.01 per diluted share compared to $12.1 million or $0.09 per diluted share in the prior quarter and a loss of $13.6 million or $0.11 per diluted share in the fourth quarter of 2012. Gross margin was 30.9 percent compared to 31.5 percent in the prior quarter and 29.8 percent in the year-ago quarter.
Fairchild reported fourth quarter adjusted gross margin of 31.3 percent, down 80 basis points from the prior quarter and 150 basis points higher than the fourth quarter of 2012. Adjusted gross margin excludes accelerated depreciation related to a line closure. Adjusted net income was $13.5 million or $0.11 per diluted share, compared to $21.4 million or $0.17 per diluted share in the prior quarter and $12.3 million or $0.10 per diluted share in the fourth quarter of 2012.
Full year revenue for 2013 was flat compared to 2012 at $1.4 billion. Fairchild reported net income of 5 million or $0.04 per diluted share in 2013, compared to net income of $25 million or $0.19 per diluted share in 2012. Adjusted net income for 2013 was $35 million or $0.27 per diluted share, compared to $71 million or $0.55 per diluted share in 2012.
"Incoming order volume increased noticeably in December and so far in January," said Mark Thompson, Fairchild's chairman and CEO. "We enter 2014 with solid demand momentum, short lead times and an excellent inventory position. Looking at our results by end market, sales into the industrial and appliance markets remained solid in the fourth quarter and were up 11 percent in 2013. Automotive sector demand was seasonally lower in the fourth quarter but we grew our sales into this market by 8 percent in 2013. We expect sales into these end markets to be seasonally higher in the first quarter. As expected, demand from the mobile end market was sequentially lower as customers adjusted inventories and responded to changes in demand. We expect mobile demand to remain soft in the first quarter and improve as new models launch later in the year."
"Adjusted gross margin decreased from the prior quarter due to less favorable product mix and project costs related to our fab streamlining efforts," said Mark Frey, Fairchild's executive vice president and CFO. "R&D and SG&A expenses were down 5 percent sequentially to $90 million due to further cost reductions and about $2.5 million of non-recurring favorable items. We reduced factory loadings during the fourth quarter to lower internal inventory by 5 percent or $12 million. Free cash flow was $81 million for the fourth quarter and $101 million for the full year 2013. We also initiated an enhanced stock buyback program that authorizes the company to repurchase up to $100 million in stock in 2014."
"We expect sales to be in the range of $340 to $355 million for the first quarter," said Frey. "We expect adjusted gross margin to be 28.0 to 29.0 percent due primarily to lower factory loadings from the prior quarter, the resumption of some payroll related taxes and ongoing fab streamlining costs. We have increased factory loadings this quarter and expect to recover the underutilization impact to gross margin in the second quarter. We anticipate R&D and SG&A spending to be $93 to $95 million due to resumption of FICA and other payroll related taxes and the lack of non-recurring favorable items from the prior quarter. 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 first quarter results."
