Fairchild reports Q2 results

Fairchild Semiconductor, a supplier of power semiconductors, announced results for the second quarter ended July 2, 2006. Fairchild reported second quarter sales of $406.3 million, a 1 percent decrease from the prior quarter and 17 percent more than the second quarter of 2005. Fairchild said its second quarter returned to the normal 13 week duration compared to the first quarter of 2006 that included 14 weeks.

Fairchild reported second quarter net income of $23 million or 18 cents per diluted share compared to a net income of $26.6 million or 21 cents per diluted share in the prior quarter and a net loss of $205.3 million or $1.71 per share in the second quarter of 2005. Gross margin was 30.8 percent, 90 basis points higher sequentially and 10.9 percentage points higher than in the second quarter of 2005.

Fairchild reported second quarter adjusted net income of $28.8 million or 23 cents per diluted share compared to adjusted net income of $25.6 million or 21 cents per diluted share in the prior quarter and an adjusted net loss of $2.2 million or 2 cents per share in the second quarter of 2005.

"We continued our steady improvement in gross margins and delivered significant year over year earnings growth during the second quarter," said Mark Thompson, Fairchild's president and CEO. "We increased our average daily sales rate by more than 6 percent sequentially in the second quarter, keeping in mind that we returned to a normal 13 week fiscal second quarter from the 14 week first quarter. Our gross margin improvement was a result of this higher daily sales rate and a richer product mix partially offset by increases in certain raw material costs."

According to Mark Frey, Fairchild's executive vice president and CFO, the company is expecting Q3 revenues to be roughly flat and gross margins to be flat to up 50 basis points sequentially. "We expect R&D and SG&A spending, including equity-based compensation, to remain at about 21 percent to 21.5 percent of sales for the third quarter. Equity-based compensation expense is expected to be between $6 million to $7 million and we expect the effective tax rate to be approximately 15 percent in the third quarter," said Frey.