Fairchild survives traditionally soft quarter

Fairchild Semiconductor has reported results for the first quarter ended 30th March 2003.

Fairchild Semiconductor has reported results for the first quarter ended 30th March 2003.

First quarter sales were $351.1 million, 4% higher than first quarter 2002 sales.

Fairchild reported a net loss in the quarter of $17.6 million, or $0.15 per share, compared with net income of $2.7 million, or $0.03 per diluted share in the first quarter of 2002.

During the quarter Fairchild had charges of $12.6 million associated with the previously announced closure of its 6in wafer fab in Mountaintop, PA, as well as other charges primarily associated with the company's Integrated Circuits Group restructuring.

On a pro forma basis, which excludes amortisation of acquisition-related intangibles, restructuring and impairments and other items, Fairchild reported first quarter net income of $4.5 million, or $0.04 per diluted share, compared with a pro forma net loss of $1.1 million, or $0.01 per share in the first quarter of 2002.

"We executed well on the top line in what is historically a seasonally soft quarter in the industry, with sales near the high end of our previous guidance.

Our revenue growth was driven by sales from products that have been in the market for less than three years.

These new product sales grew 23% from first quarter of 2002, and topped $100 million for the second straight quarter", said Kirk Pond, President, CEO and Chairman of the Board.

"The power markets we serve continue to outgrow the overall semiconductor market, and we are improving our product offerings and manufacturing capabilities to more profitably serve them.

According to recently released 2002 annual rankings from Gartner, Fairchild moved up in rank to the number 6 analogue supplier worldwide.

This is especially gratifying as we grew our 2002 analogue revenues faster than all five companies ranked higher than Fairchild - and we only entered the analogue business six years ago".

"We remained focused on introducing new products, winning designs and reducing manufacturing costs.

Our new Suzhou, China assembly and test factory is nearing completion of qualification runs, and we continue to expect reduced manufacturing assembly and test costs as production in that facility ramps over the next several quarters.

Overall we are continuing to improve our operations to take advantage of the multiple power application markets we serve".

"In our major market segments, orders from notebooks, printers, lighting, and power supply manufacturers grew quarter on quarter", said Pond.

"Bookings from desktops, displays, cellular phones and white goods suppliers were down sequentially.

In our distribution channels, currently accounting for about 61% of our total sales inventories remained flat at about 13 weeks.

Lead times remained unchanged and pricing remains aggressive in all product areas".

"In the first quarter we generated $40.5 million in operating cash flow and $11.7 million in free cash flow", stated Matt Towse, Senior Vice President and Chief Financial Officer.

"We increased our cash and marketable investments for the seventh straight quarter, to $662 million.

In these times of limited market visibility and aggressive price competition, we continue to focus on generating cash".

"Industry visibility remains limited, so we are cautiously guiding second quarter revenues to be roughly flat with first quarter revenues", said Towse.

"Our entering backlog for the second quarter was about 3-4% below first quarter and at slightly lower margins, due partly to cancellations and slower order rates beginning in mid-March.

We are planning additional spending cuts this quarter in manufacturing and operations to offset the pricing pressure on our gross margins.

We expect to deliver operating margins in the second quarter similar to or better than first quarter operating margins.

In the second half of the year and beyond, we expect our revenues to continue to trend either in line with or better than the industry".

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