Special Note on Forward-Looking Statements:
Some of the paragraphs above contain forward-looking statements that are based on management’s assumptions and expectations and involve risk and uncertainty. Other forward-looking statements may also be found in this news release. Forward-looking statements usually, but do not always contain forward-looking terminology such as “we believe,” “we expect,” or “we anticipate,” or refer to management’s expectations about Fairchild’s future performance. Many factors could cause actual results to differ materially from those expressed in forward-looking statements. Among these factors are the following: changes in demand for our products; changes in inventories at our customers and distributors; technological and product development risks, including the risks of failing to maintain the right to use some technologies or failing to adequately protect our own intellectual property against misappropriation or infringement; availability of manufacturing capacity; the risk of production delays; availability of raw materials at competitive prices; competitors’ actions; loss of key customers, including but not limited to distributors; the inability to attract and retain key management and other employees; order cancellations or reduced bookings; changes in manufacturing yields or output; risks related to warranty and product liability claims; risks inherent in doing business internationally; changes in tax regulations or the migration of profits from low tax jurisdictions to higher tax jurisdictions; regulatory risks and significant litigation. These and other risk factors are discussed in the company’s quarterly and annual reports filed with the Securities and Exchange Commission (SEC) and available at the Investor Relations section of Fairchild Semiconductor’s web site at investor.fairchildsemi.com or the SEC’s web site at www.sec.gov.
About Fairchild Semiconductor:
Fairchild Semiconductor (NYSE: FCS) is a global leader delivering energy-efficient power analog and power discrete solutions. Fairchild is The Power Franchise®, providing leading-edge silicon and packaging technologies, manufacturing strength and system expertise for consumer, communications, industrial, portable, computing and automotive systems. An application-driven, solution-based semiconductor supplier, Fairchild provides online design tools and design centers worldwide as part of its comprehensive Global Power ResourceSM. Please contact us on the web at www.fairchildsemi.com.
| Fairchild Semiconductor International, Inc. | ||||||||||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||||||||||
| (In millions, except per share amounts) | ||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||
| September 28, | June 29, | September 30, | September 28, | September 30, | ||||||||||||||||||
| 2008 | 2008 | 2007 | 2008 | 2007 | ||||||||||||||||||
| Total revenue | $ | 428.3 | $ | 418.7 | $ | 426.8 | $ | 1,253.3 | $ | 1,238.3 | ||||||||||||
| Cost of sales (1) | 300.1 | 299.1 | 297.4 | 883.0 | 882.8 | |||||||||||||||||
| Gross margin | 128.2 | 119.6 | 129.4 | 370.3 | 355.5 | |||||||||||||||||
| Gross margin % | 29.9 | % | 28.6 | % | 30.3 | % | 29.5 | % | 28.7 | % | ||||||||||||
| Operating expenses: | ||||||||||||||||||||||
| Research and development (2) | 29.1 | 30.3 | 26.9 | 89.2 | 82.4 | |||||||||||||||||
| Selling, general and administrative (3) | 54.7 | 58.6 | 57.3 | 173.4 | 175.0 | |||||||||||||||||
| Amortization of acquisition-related intangibles | 5.5 | 5.5 | 5.6 | 16.6 | 18.0 | |||||||||||||||||
| Restructuring and impairments | 1.8 | 11.3 | 2.4 | 13.3 | 8.5 | |||||||||||||||||
| Purchased in-process research and development | - | - | 0.2 | - | 3.9 | |||||||||||||||||
| Charge for potential litigation outcomes, net | - | - | 7.8 | - | 9.5 | |||||||||||||||||
| Loss on sale of product line, net | - | - | 0.4 | - | 0.4 | |||||||||||||||||
| Total operating expenses | 91.1 | 105.7 | 100.6 | 292.5 | 297.7 | |||||||||||||||||
| Operating income | 37.1 | 13.9 | 28.8 | 77.8 | 57.8 | |||||||||||||||||
| Other expense, net | 5.4 | 6.3 | 5.0 | 16.9 | 15.2 | |||||||||||||||||
| Income before income taxes | 31.7 | 7.6 | 23.8 | 60.9 | 42.6 | |||||||||||||||||
| Provision for income taxes | 5.0 | 0.7 | 3.5 | 10.2 | 12.6 | |||||||||||||||||
| Net income | $ | 26.7 | $ | 6.9 | $ | 20.3 | $ | 50.7 | $ | 30.0 | ||||||||||||
| Net income per common share: | ||||||||||||||||||||||
| Basic | $ | 0.21 | $ | 0.06 | $ | 0.16 | $ | 0.41 | $ | 0.24 | ||||||||||||
| Diluted | $ | 0.21 | $ | 0.05 | $ | 0.16 | $ | 0.40 | $ | 0.24 | ||||||||||||
| Weighted average common shares: | ||||||||||||||||||||||
| Basic | 124.4 | 124.9 | 124.5 | 124.6 | 123.9 | |||||||||||||||||
| Diluted | 125.0 | 125.8 | 126.8 | 125.3 | 126.2 | |||||||||||||||||
| (1) Equity compensation expense included in cost of sales | $ | 1.3 | $ | 1.3 | $ | 1.2 | $ | 3.6 | $ | 4.2 | ||||||||||||
| (2) Equity compensation expense included in research and development | $ | 1.0 | $ | 1.3 | $ | 0.9 | $ | 3.2 | $ | 2.9 | ||||||||||||
| (3) Equity compensation expense included in selling, general and administrative | $ | 1.7 | $ | 3.3 | $ | 4.0 | $ | 10.0 | $ | 11.9 | ||||||||||||
| Fairchild Semiconductor International, Inc. | ||||||||||||||||||||||
| Reconciliation of Net Income To Adjusted Net Income | ||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||
| September 28, | June 29, | September 30, | September 28, | September 30, | ||||||||||||||||||
| 2008 | 2008 | 2007 | 2008 | 2007 | ||||||||||||||||||
| Net income | $ | 26.7 | $ | 6.9 | $ | 20.3 | $ | 50.7 | $ | 30.0 | ||||||||||||
| Adjustments to reconcile net income | ||||||||||||||||||||||
| to adjusted net income: | ||||||||||||||||||||||
| Restructuring and impairments | 1.8 | 11.3 | 2.4 | 13.3 | 8.5 | |||||||||||||||||
| Purchased in-process research and development | - | - | 0.2 | - | 3.9 | |||||||||||||||||
| Charge for potential litigation outcomes, net | - | - | 7.8 | - | 9.5 | |||||||||||||||||
| System General purchase accounting charges | - | - | - | - | 3.7 | |||||||||||||||||
| (Gain) loss on sale of product line, net | - | - | 0.4 | - | 0.4 | |||||||||||||||||
| Costs associated with the redemption of convertible debt | - | 0.4 | - | 0.4 | - | |||||||||||||||||
| Amortization of acquisition-related intangibles | 5.5 | 5.5 | 5.6 | 16.6 | 18.0 | |||||||||||||||||
| Associated tax effects of the above and other acquisition-related intangibles | - | (0.1 | ) | (2.6 | ) | 0.2 | (3.0 | ) | ||||||||||||||
| Tax benefits from finalized tax filings and positions | - | (2.5 | ) | - | (2.5 | ) | 0.9 | |||||||||||||||
| Adjusted net income | $ | 34.0 | $ | 21.5 | $ | 34.1 | $ | 78.7 | $ | 71.9 | ||||||||||||
| Adjusted net income per common share: | ||||||||||||||||||||||
| Basic | $ | 0.27 | $ | 0.17 | $ | 0.27 | $ | 0.63 | $ | 0.58 | ||||||||||||
| Diluted | $ | 0.27 | $ | 0.17 | $ | 0.27 | $ | 0.63 | $ | 0.57 | ||||||||||||
| Fairchild Semiconductor International, Inc. | ||||||||||||||||||||||
| Reconciliation of Gross Margin To Adjusted Gross Margin | ||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||
| September 28, | June 29, | September 30, | September 28, | September 30, | ||||||||||||||||||
| 2008 | 2008 | 2007 | 2008 | 2007 | ||||||||||||||||||
| Gross margin | $ | 128.2 | $ | 119.6 | $ | 129.4 | $ | 370.3 | $ | 355.5 | ||||||||||||
| Adjustments to reconcile gross margin | ||||||||||||||||||||||
| to adjusted gross margin: | ||||||||||||||||||||||
| System General purchase accounting charges | - | - | - | - | 3.7 | |||||||||||||||||
| Adjusted gross margin | $ | 128.2 | $ | 119.6 | $ | 129.4 | $ | 370.3 | $ | 359.2 | ||||||||||||
| Adjusted gross margin % | 29.9 | % | 28.6 | % | 30.3 | % | 29.5 | % | 29.0 | % | ||||||||||||
| Adjusted net income, adjusted net income per share, and adjusted gross margin should not be considered as alternatives to net income, net income per share, gross margin or other measures of consolidated operations and cash flow data prepared in accordance with accounting principles generally accepted in the United States of America, as indicators of our operating performance, or as alternatives to cash flow as a measure of liquidity. | ||||||||||||||||||||||
| Fairchild Semiconductor International, Inc. | |||||||||||||
| Consolidated Balance Sheets | |||||||||||||
| (In millions) | |||||||||||||
| (Unaudited) | |||||||||||||
| September 28, | June 29, | December 30, | |||||||||||
| 2008 | 2008 | 2007 | |||||||||||
| ASSETS | |||||||||||||
| Current assets: | |||||||||||||
| Cash and cash equivalents | $ | 379.8 | $ | 390.8 | $ | 409.0 | |||||||
| Short-term marketable securities | 0.8 | 0.9 | 2.1 | ||||||||||
| Receivables, net | 200.1 | 186.3 | 179.0 | ||||||||||
| Inventories | 233.3 | 240.7 | 243.5 | ||||||||||
| Other current assets | 44.7 | 37.9 | 51.9 | ||||||||||
| Total current assets | 858.7 | 856.6 | 885.5 | ||||||||||
| Property, plant and equipment, net | 717.7 | 701.9 | 676.0 | ||||||||||
| Intangible assets, net | 107.1 | 112.6 | 123.7 | ||||||||||
| Goodwill | 365.0 | 365.0 | 353.2 | ||||||||||
| Long-term marketable securities | 38.7 | 44.6 | 51.0 | ||||||||||
| Other assets | 35.2 | 39.9 | 43.2 | ||||||||||
| Total assets | $ | 2,122.4 | $ | 2,120.6 | $ | 2,132.6 | |||||||
| LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY | |||||||||||||
| Current liabilities: | |||||||||||||
| Current portion of long-term debt | $ | 5.3 | $ | 5.3 | $ | 203.7 | |||||||
| Accounts payable | 135.0 | 146.2 | 130.6 | ||||||||||
| Accrued expenses and other current liabilities | 101.9 | 96.9 | 110.5 | ||||||||||
| Total current liabilities | 242.2 | 248.4 | 444.8 | ||||||||||
| Long-term debt, less current portion | 531.2 | 532.5 | 385.9 | ||||||||||
| Other liabilities | 83.4 | 87.5 | 80.2 | ||||||||||
| Total liabilities | 856.8 | 868.4 | 910.9 | ||||||||||
| Temporary equity - deferred stock units | 2.7 | 3.2 | 3.2 | ||||||||||
| Total stockholders' equity | 1,262.9 | 1,249.0 | 1,218.5 | ||||||||||
| Total liabilities, temporary equity and stockholders' equity | $ | 2,122.4 | $ | 2,120.6 | $ | 2,132.6 | |||||||
| Fairchild Semiconductor International, Inc. | |||||||||||||||
| Condensed Consolidated Statements of Cash Flows | |||||||||||||||
| (In millions) | |||||||||||||||
| (Unaudited) | |||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 28, | September 28, | September 30, | |||||||||||||
| 2008 | 2008 | 2007 | |||||||||||||
| Cash flows from operating activities: | |||||||||||||||
| Net income | $ | 26.7 | $ | 50.7 | $ | 30.0 | |||||||||
| Adjustments to reconcile net income to cash provided | |||||||||||||||
| by operating activities: | |||||||||||||||
| Depreciation and amortization | 34.7 | 100.8 | 94.8 | ||||||||||||
| Non-cash stock-based compensation expense | 4.0 | 16.8 | 19.0 | ||||||||||||
| Non-cash restructuring and impairments expense | - | 8.0 | 2.4 | ||||||||||||
| Purchased in-process research & development | - | - | 3.9 | ||||||||||||
| Deferred income taxes, net | 1.9 | 2.6 | (6.2 | ) | |||||||||||
| Other | 0.5 | 2.0 | 2.3 | ||||||||||||
| Changes in operating assets and liabilities, net | |||||||||||||||
| of acquisitions | (18.9 | ) | (10.2 | ) | (14.4 | ) | |||||||||
| Cash provided by operating activities | 48.9 | 170.7 | 131.8 | ||||||||||||
| Cash flows from investing activities: | |||||||||||||||
| Capital expenditures | (44.5 | ) | (133.1 | ) | (99.1 | ) | |||||||||
| Purchase of marketable securities | (0.3 | ) | (3.8 | ) | (162.2 | ) | |||||||||
| Sale of marketable securities | - | 5.0 | 170.7 | ||||||||||||
| Maturity of marketable securities | 0.1 | 0.2 | 0.1 | ||||||||||||
| Other | (2.0 | ) | (3.0 | ) | (1.2 | ) | |||||||||
| Acquisitions and divestitures, net of cash acquired | - | - | (178.3 | ) | |||||||||||
| Cash used in investing activities | (46.7 | ) | (134.7 | ) | (270.0 | ) | |||||||||
| Cash flows from financing activities: | |||||||||||||||
| Repayment of long-term debt | (1.2 | ) | (203.1 | ) | (2.8 | ) | |||||||||
| Issuance of long-term debt | - | 150.0 | - | ||||||||||||
| Proceeds from issuance of common stock and | |||||||||||||||
| from exercise of stock options, net | 2.0 | 7.2 | 32.3 | ||||||||||||
| Purchase of treasury stock | (13.9 | ) | (15.9 | ) | (19.4 | ) | |||||||||
| Other | (0.1 | ) | (3.4 | ) | - | ||||||||||
| Cash provided by (used in) financing activities | (13.2 | ) | (65.2 | ) | 10.1 | ||||||||||
| Net change in cash and cash equivalents | (11.0 | ) | (29.2 | ) | (128.1 | ) | |||||||||
| Cash and cash equivalents at beginning of period | 390.8 | 409.0 | 525.2 | ||||||||||||
| Cash and cash equivalents at end of period | $ | 379.8 | $ | 379.8 | $ | 397.1 | |||||||||
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