Product category:
Power Supply ICs and Controllers
News Release from: Fairchild Semiconductor
Edited by the Electronicstalk Editorial
Team on 26 January 2005
Fairchild looks to stronger profit
performance
Fairchild Semiconductor has reported results for the fourth quarter and full year ended 26th December 2004.
Fairchild Semiconductor has reported results for the fourth quarter and full year ended 26th December 2004 Fairchild reported fourth quarter sales of $379.4 million, a 3% increase from the fourth quarter of 2003 and 7% lower than the prior quarter
This article was originally published on Electronicstalk on 28 Feb 2001 at 8.00am (UK)
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Fairchild reported fourth quarter net income of $15.8 million or $0.13 per diluted share compared with net income of $5.3 million or $0.04 per diluted share in the fourth quarter of 2003 and net income of $13.4 million or $0.11 per diluted share in the prior quarter.
Gross margin was 25.6%, 150 basis points higher than the fourth quarter of 2003 and 470 basis points lower sequentially.
Fourth quarter net income also benefited from a decrease in the company's effective tax rate, which resulted from a shift in the company's regional income profile.
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Fairchild reported fourth quarter pro forma net income of $24.8 million or $0.21 per diluted share, 42% higher than the pro forma net income of $17.5 million or $0.14 per diluted share in the fourth quarter of 2003 and 23% lower than the $32.0 million or $0.26 per diluted share in the prior quarter.
Pro forma net income excludes amortisation of acquisition-related intangibles, restructuring and impairments and other items.
Full year revenues for 2004 were $1603.1 million, an increase of 15% compared with $1395.8 million in 2003.
Fairchild reported net income of $59.2 million or $0.48 per diluted share in 2004, compared with a net loss of $81.5 million or $0.69 per share in 2003.
On a pro forma basis, the company reported 2004 net income of $109.9 million or $0.89 per diluted share, compared with $31.3 million or $0.26 per diluted share in 2003.
"We grew our power business 24% year over year in 2004, which reflects steady market share gains, especially for power analogue", said Kirk Pond, Fairchild's President, CEO and Chairman of the Board.
"During this same time our non-power sales were down 6%, reflecting our continued focus on increasing power product sales".
"This was particularly evident during the fourth quarter with power sales down only 6% while non-power revenues fell 11% sequentially".
"Gross margins for power products were about 10 percentage points higher than non-power in the fourth quarter, which helped to offset the pricing pressure we saw in non-power standard products".
"We continued to be very successful in the power semiconductor market by increasing our mix of higher value products throughout the year, especially in the power analogue product line where fourth quarter gross margins were down less than 1% sequentially".
"We made excellent progress building the Fairchild Power Franchise during 2004 and expect to continue this success as we release more high value new power products throughout 2005".
"Order rates improved steadily during the fourth quarter, and we have turned the corner to start building backlog again", explained Pond.
"This improvement in demand has continued during the first weeks of January, an encouraging sign in what is typically a seasonally slow month for orders".
"I would expect bookings to improve and backlog to continue building as we progress through this quarter and position ourselves for what is typically a stronger second quarter".
"Fourth quarter bookings were strongest in the computing, consumer, and power supply and battery charger end markets", said Pond.
"In other end markets, booking rates were typically stronger than the prior quarter but well below the abnormally high levels of the first half of 2004".
"I'm impressed with the progress Fairchild has made shifting its focus from standard products to higher value power management solutions", stated Mark Thompson, Fairchild's new Executive Vice President of the Manufacturing and Technology Group.
"Profitably growing a technology business requires a commitment to developing high value new products by working closely with your key customers".
"A great example of this is our multichannel motor controllers for DVD-RW and digital camera end markets".
"Our latest solutions, with as many as seven separate channels, provide customers with greater flexibility to control more motors in each application".
"We're designed into a number of leading consumer electronics manufacturers' applications and expect to grow the sales of these products at well above the market growth rate".
"The Smart Power Module (SPM) family, which provides customers with a complete power management solution in a proprietary highly integrated, single package solution, is the best example of how we can leverage our strengths in both analogue control and discrete power switch technologies to provide a higher level of integration and performance to our customers".
"Sales of SPM products tripled in 2004, and with our continuing new design wins in the white goods, fan motor and industrial end markets, we expect to triple the sales of these products again in 2005".
"These new product successes are driving higher sales at better margins", stated Thompson.
"I look forward to our next phase of growth as we intensify our focus on developing higher value new products in closer cooperation with our customers to create even more success stories like these".
"We managed our business effectively in the fourth quarter and delivered solid financial performance despite the continuing inventory correction", said Matt Towse, Fairchild's Senior Vice President and Chief Financial officer".
""Gross margins fell sequentially due to greater pricing pressure on non-power products and low power switches, coupled with lower factory utilisation".
"Pricing for our proprietary high power switches and power analogue products generally remained more stable".
"During the fourth quarter we increased our cash and marketable investments to a record $692.4 million and generated $85.5 million in operating cash flow, while investing $45.7 million in capital expenditures to support our high growth power products and to continue lowering our subcontracting costs", stated Towse.
"We grew gross margins 590 basis points for the full year of 2004 compared with 2003 due primarily to our steady progress in increasing our mix of power products", said Towse.
"In 2004, we generated $244.7 million in cash from operations, once again demonstrating our ability to generate cash in all phases of the business cycle".
"Fairchild made significant strides towards our goal of increasing our percentage of power product sales to drive higher and more stable margins in 2004, and we expect to continue this strategy in 2005".
"In the first quarter, we expect revenues to be down 2 to 6% and gross margins to be about 200 basis points lower sequentially, due mainly to seasonally lower demand, pricing pressure, and lower utilisation rates due to our plans to reduce inventory in the distribution channel", said Towse.
"We expect lower interest expenses to help offset the impact of lower margins as we have given notice to call all of the company's $350 million in 10.5% senior subordinated notes using a combination of cash and additional term debt".
"This refinancing will reduce the company's debt by approximately $200 million, and is expected to reduce the company's annual gross interest expense by approximately $33 million, based on current LIBOR rates".
"Net interest expense savings should equate to an annual earnings per share of approximately $0.13 to $0.15".
"Our actual interest savings will of course depend on the prevailing interest rates".
"We'll incur a one-time charge of approximately $24 million in the first quarter for the call premium and the write-off of deferred financing fees associated with our redeemed 10.5% notes".
"I'm confident that the positive changes we're making to both our balance sheet and our product mix should drive stronger profit performance for the company through all phases of the business cycle".
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