Product category:
Power Supply ICs and Controllers
News Release from: Fairchild Semiconductor
Edited by the Electronicstalk Editorial
Team on 22 October 2003
Increased backlog brings optimism for
Fairchild
Fairchild Semiconductor has reported results for the third quarter that ended 28th September 2003.
Fairchild Semiconductor has reported results for the third quarter that ended 28th September 2003 Fairchild reported third quarter sales of $328.4 million, with a net loss of $5.4 million or $0.05 per share
This article was originally published on Electronicstalk on 28 Feb 2001 at 8.00am (UK)
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Included in the third quarter 2003 results are pre-tax charges of $6.0 million associated with restructuring activities announced in July 2003.
Fairchild reported a sequential increase in pro forma net income to $5.5 million, or $0.05 per diluted share, compared with pro forma net income of $3.8 million, or $0.03 per diluted share in the previous quarter.
Pro forma net income excludes amortisation of acquisition-related intangibles, restructuring and impairments and other items.
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Excluding these charges, pro forma operating margin for the third quarter was 5.8%, up 10 basis points sequentially.
"I'm very pleased with our performance in the third quarter", said Kirk Pond, Fairchild's President, CEO and Chairman of the Board.
"We met our guidance on sales, exceeded our forecast on operating margin and improved our pro forma EPS over last quarter despite our lower starting backlog and excess inventory in the Asian distribution channel at the beginning of the third quarter.
Turns business accelerated as we moved through the third quarter, enabling us to more than double our shipments in September compared to July.
We built backlog for fourth quarter deliveries at a consistently high pace throughout the quarter and entered the fourth quarter with our 13 week backlog at its highest level in over a year.
This improved demand visibility allows us to be more selective in taking additional business.
Our power discrete business is quite strong, especially in low voltage where our backlog is at its highest level this year, with generally higher margins than for products that we shipped in the third quarter.
Business has improved, as we would expect, entering the fourth quarter.
If we have a good holiday sell-through and business remains strong in the latter half of the fourth quarter, this should set a positive tone for the first half of next year and may signal something greater than a normal seasonal uptick for the industry.
"I'm also very excited about our pipeline of new products", Pond stated.
"Products like the monolithic green mode power switches, our new VRM10 power management chipsets, high voltage IGBTs and our leading edge power mosfets in advanced packages are driving increased revenue at better margins.
We are winning new designs at key customers by delivering higher value power solutions".
"We experienced strong, broad-based demand throughout the third quarter", explained Hans Wildenberg, Fairchild's Executive Vice President and Chief Operating Officer.
"End markets that were particularly strong included cell phones, industrial, computing, and consumer where orders were up and backlog is now above first quarter and well above second quarter 2003 levels".
"We saw increased bookings across all channels with OEM and distribution orders higher sequentially and up more than 15% from first quarter 2003", said Wildenberg.
"We believe that supply chain inventory remains lean for all our products, especially for our power discrete business where demand has been the strongest.
We successfully worked down the abnormally high distribution inventory that was a result of the impact of SARS on Asian demand.
Our distribution inventory dropped by more than 10% sequentially, while resales were up over 10% during the third quarter.
We started the fourth quarter with inventory at our distributors under our target of 13 weeks of supply on hand, compared to the approximately 15 weeks of supply at distributors a quarter ago".
"Regional activity reflected a strong resurgence in Asian demand", stated Wildenberg.
"It seems that the SARS impact is truly behind us.
Orders in Asia, including China and Korea, were up substantially from the prior quarter and more than 20% from first quarter 2003.
Demand in the Americas also increased sequentially, and the other regions were in line with our expectations.
Asia is growing quickly and Fairchild has a dominant power market share in the region.
We believe the addition of our new, state-of-the-art assembly and test facility in Suzhou, China, as well as the six new power system design 'centres of excellence', four of which are in Asia, will extend our market leadership in the region".
"We're driving new business opportunities and higher revenue with our new product introductions", stated Wildenberg.
"This quarter we released a number of new green mode analogue power switches that offer our customers a smaller, lighter and more efficient power conversion solution for applications as diverse as cell phone battery chargers to plasma display panels".
"We're continuing to expand our power management solutions for computing end markets", said Wildenberg.
"Our combination of leading-edge power supply controllers, drivers and power mosfets, that support the VRM10 specification for desktop computers and servers, continue to gain momentum with a number of design wins at key customers in the third quarter.
We are also expanding our business in IGBT products for ignition control and induction heating applications.
Our latest IGBT solutions for induction heating, commonly used in household appliances, continue to win new designs at attractive margins.
We're also seeing significant demand for our new power mosfets in advanced ball grid array (BGA) packages.
We believe our continued investment in new products, during every phase of the last business cycle, will enable Fairchild to improve margins and increase revenue as we extend our lead as the number-one power semiconductor supplier in the world".
"Fairchild executed well in the third quarter, exceeding our operating margin guidance and beating the consensus estimate for earnings", said Matt Towse, Fairchild's Senior Vice President and Chief Financial Officer.
"We generated $19.9 million in operating cash flow and held our cash and marketable investments roughly flat to the second quarter at $612.5 million.
Net interest expense dropped to $14.3 million due to our previously announced debt refinancing, which we completed in the second quarter of this year.
Given our potential for increased cash flow with an improving business outlook, we expect to continue to strengthen our balance sheet over the next several quarters".
"We expect fourth quarter revenues to increase 6 to 8% sequentially", said Towse.
"We had roughly 75% of this amount already on backlog as we entered the quarter and have seen continued strong bookings and turns business so far in the fourth quarter.
We believe this level of revenue growth, that is on the high side of our typical seasonality, is being driven largely by our leading position in the fast growing power analogue and discrete market and our regional strength in Asia".
"We anticipate operating margins will be up 100 to 200 basis points sequentially due to the combined effect of the leverage we expect to get from higher revenue, improved product mix driving higher margins and lower costs", said Towse.
"We also expect net interest expense to be approximately $15 million and depreciation and amortisation, net of amortisation of intangibles, to be around $39-40 million in the fourth quarter.
We continue to plan capex spending at around 8-10% of sales.
We expect our tax rate to be about 20% in the fourth quarter and about 25% during 2004.
Overall, I am very encouraged with our third quarter results and am optimistic about our potential for increased profitability in the fourth quarter and 2004".
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