8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): January 23, 2014

FAIRCHILD SEMICONDUCTOR INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware	001-15181	04-3363001
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

3030 Orchard Parkway

San Jose, CA 95134

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (408) 822-2000

Check the appropriate box below if the form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition

On January 23, 2014, we announced consolidated financial results for the quarter ended December 29, 2013. The press release announcing the results is included as Exhibit 99.1 to this report. Additional information about non-GAAP financial measures included in the press release is included in Exhibit 99.2. Each exhibit is incorporated herein by reference.

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Fairchild Semiconductor International, Inc.
Date: January 23, 2014	/s/ Mark S. Frey
	Mark S. Frey
	Executive Vice President, Chief Financial Officer and Treasurer
	(Principal Accounting Officer and Duly Authorized Officer)

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press release dated January 23, 2014 announcing financial results for the quarter ended December 29, 2013.
99.2	Additional information about non-GAAP financial measures included in the press release.

EX-99.1

Exhibit 99.1

Fairchild Semiconductor Reports Results for the Fourth Quarter and Full Year 2013

Fairchild Semiconductor (NASDAQ: FCS), a leading global supplier of power semiconductors, today announced results for the fourth quarter and full year 2013 ended December 29, 2013. Fairchild reported fourth quarter sales of $341.1 million, down 6 percent from the prior quarter and up 2 percent from the fourth quarter of 2012.

Fairchild reported fourth quarter net income of $0.9 million or $0.01 per diluted share compared to $12.1 million or $0.09 per diluted share in the prior quarter and a loss of $13.6 million or $0.11 per diluted share in the fourth quarter of 2012. Gross margin was 30.9 percent compared to 31.5 percent in the prior quarter and 29.8 percent in the year-ago quarter.

Fairchild reported fourth quarter adjusted gross margin of 31.3 percent, down 80 basis points from the prior quarter and 150 basis points higher than the fourth quarter of 2012. Adjusted gross margin excludes accelerated depreciation related to a line closure. Adjusted net income was $13.5 million or $0.11 per diluted share, compared to $21.4 million or $0.17 per diluted share in the prior quarter and $12.3 million or $0.10 per diluted share in the fourth quarter of 2012. See the Reconciliation of Net Income to Adjusted Net Income exhibit included in this press release for more details on the other adjustment items.

Full year revenue for 2013 was flat compared to 2012 at $1.4 billion. Fairchild reported net income of $5 million or $0.04 per diluted share in 2013, compared to net income of $25 million or $0.19 per diluted share in 2012. Adjusted net income for 2013 was $35 million or $0.27 per diluted share, compared to $71 million or $0.55 per diluted share in 2012.

“Incoming order volume increased noticeably in December and so far in January,” said Mark Thompson, Fairchild’s chairman and CEO. “We enter 2014 with solid demand momentum, short lead times and an excellent inventory position. Looking at our results by end market, sales into the industrial and appliance markets remained solid in the fourth quarter and were up 11 percent in 2013. Automotive sector demand was seasonally lower but we grew our sales into this market by 8 percent in 2013. We expect sales into these end markets to be seasonally higher in the first quarter. As expected, demand from the mobile end market was sequentially lower as customers adjusted inventories and responded to changes in demand. We expect mobile demand to remain soft in the first quarter and improve as new models launch later in the year.”

Fourth Quarter Financials

“Adjusted gross margin decreased from the prior quarter due to less favorable product mix and project costs related to our fab streamlining efforts,” said Mark Frey, Fairchild’s executive vice president and CFO. “R&D and SG&A expenses were down 5 percent sequentially to $90 million due to further cost reductions and about $2.5 million of non-recurring favorable items. We reduced factory loadings during the fourth quarter to lower internal inventory by 5 percent or $12 million. Free cash flow was $81 million for the fourth quarter and $101 million for the full year 2013. We also initiated an enhanced stock buyback program that authorizes the company to repurchase up to $100 million in stock in 2014.”

Forward Guidance

“We expect sales to be in the range of $340 to $355 million for the first quarter,” said Frey. “We expect adjusted gross margin to be 28.0 to 29.0 percent due primarily to lower factory loadings from the prior quarter, the resumption of some payroll related taxes and ongoing fab streamlining costs. We have increased factory loadings this quarter and expect to recover the underutilization impact to gross margin in the second quarter. We anticipate R&D and SG&A spending to be $93 to $95 million due to resumption of FICA and other payroll related taxes and the lack of non-recurring favorable items from the prior quarter. The adjusted tax rate is forecast at 15 percent plus or minus 3 percentage points for the quarter. Consistent with our usual practices, we are not assuming any obligation to update this information, although we may choose to do so before we announce first quarter results.”

Adjusted gross margin, adjusted net income and free cash flow are non-GAAP financial measures and should not be considered replacements for GAAP results. See additional information on our non-GAAP financial measures and reconciliations to the most comparable GAAP measures in the appropriate reconciliation exhibit included in this press release as well as our SEC filings related to this announcement.

Special Note on Forward Looking Statements:

Some of the paragraphs above, including the one headed “Forward Guidance,” 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: failure to maintain order rates at expected levels; failure to achieve expected savings from cost reduction actions or other adverse results from those actions; 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 lower 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) – global presence, local support, smart ideas. Fairchild delivers energy-efficient, easy-to-use and value-added semiconductor solutions for power and mobile designs. We help our customers differentiate their products and solve difficult technical challenges with our expertise in power and signal path products. 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									Year Ended
	December 29, 2013			September 29, 2013			December 30, 2012			December 29, 2013			December 30, 2012
Total revenue	$	341.1		$	364.6		$	333.4		$	1,405.4		$	1,405.9
Cost of sales (1)		235.6			249.7			234.1			988.9			963.9
Gross margin		105.5			114.9			99.3			416.5			442.0
Gross margin %		30.9	%		31.5	%		29.8	%		29.6	%		31.4	%
Operating expenses:
Research and development (2)		40.2			42.8			37.9			171.6			156.9
Selling, general and administrative (3)		49.9			52.0			49.0			205.7			206.8
Amortization of acquisition-related intangibles		3.9			3.9			4.5			15.5			18.2
Restructuring and impairments		7.8			3.5			7.8			15.9			14.1
Charge for (release of) litigation		—			—			—			(12.6	)		1.3
Total operating expenses		101.8			102.2			99.2			396.1			397.3
Operating income		3.7			12.7			0.1			20.4			44.7
Realized loss on sale of securities		—			—			12.9			—			12.9
Other expense, net		1.6			1.4		$	3.9			9.2			8.1
Income (loss) before income taxes		2.1			11.3			(16.7	)		11.2			23.7
Provision (benefit) for income taxes		1.2			(0.8	)		(3.1	)		6.2			(0.9	)
Net income (loss)	$	0.9		$	12.1		$	(13.6	)	$	5.0		$	24.6
Net income (loss) per common share:
Basic	$	0.01		$	0.10		$	(0.11	)	$	0.04		$	0.19
Diluted	$	0.01		$	0.09		$	(0.11	)	$	0.04		$	0.19
Weighted average common shares:
Basic		126.6			127.3			126.9			127.2			126.7
Diluted		127.9			128.4		$	126.9			128.7			129.0
(1)    Equity compensation expense included in cost of sales	$	1.3		$	1.2		$	0.8		$	4.9		$	4.5
(2)    Equity compensation expense included in research and development	$	1.9		$	1.9		$	1.4		$	7.5		$	5.7
(3)    Equity compensation expense included in selling, general and administrative	$	3.4		$	4.0		$	2.0		$	15.5		$	12.4

Fairchild Semiconductor International, Inc.

Reconciliation of Net Income To Adjusted Net Income

(In millions)

(Unaudited)

	Three Months Ended									Year Ended
	December 29, 2013			September 29, 2013			December 30, 2012			December 29, 2013			December 30, 2012
Net income (loss)	$	0.9		$	12.1		$	(13.6	)	$	5.0		$	24.6
Adjustments to reconcile net income (loss) to adjusted net income (loss):
Restructuring and impairments		7.8			3.5			7.8			15.9			14.1
Write off of equity investments		—			—			—			3.0			—
VAT expense on internal IP sale		—			—			2.1			—			2.1
Accelerated depreciation on assets related to line closure (1)		1.2			2.1			—			8.7			—
Realized loss on sale of securities		—			—			12.9			—			12.9
Charge for (release of) litigation		—			—			—			(12.6	)		1.3
Amortization of acquisition-related intangibles		3.9			3.9			4.5			15.5			18.2
Associated net tax effects of the above and other acquisition-related intangibles		(0.3	)		(0.2	)		(1.4	)		(0.9	)		(2.7	)
Adjusted net income (loss)	$	13.5		$	21.4		$	12.3		$	34.6		$	70.5
Adjusted net income (loss) per common share:
Basic	$	0.11		$	0.17		$	0.10		$	0.27		$	0.56
Diluted	$	0.11		$	0.17		$	0.10		$	0.27		$	0.55

(1) Recorded in cost of sales

Fairchild Semiconductor International, Inc.

Reconciliation of Gross Margin To Adjusted Gross Margin

(In millions)

(Unaudited)

	Three Months Ended									Year Ended
	December 29, 2013			September 29, 2013			December 30, 2012			December 29, 2013			December 30, 2012
Gross margin	$	105.5		$	114.9		$	99.3		$	416.5		$	442.0
Adjustments to reconcile gross margin to adjusted gross margin:
Accelerated depreciation on assets related to line closure		1.2			2.1			—			8.7			—
Adjusted gross margin	$	106.7		$	117.0		$	99.3		$	425.2		$	442.0
Adjusted gross margin %		31.3	%		32.1	%		29.8	%		30.3	%		31.4	%

Fairchild Semiconductor International, Inc.

Consolidated Balance Sheets

(In millions)

(Unaudited)

	December 29, 2013		September 29, 2013		December 30, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	417.8	$	348.2	$	405.9
Short-term marketable securities		0.1		0.2		0.1
Receivables, net		127.4		172.6		136.7
Inventories		228.1		240.4		236.7
Other current assets		51.2		50.8		52.6
Total current assets		824.6		812.2		832.0
Property, plant and equipment, net		707.9		727.1		764.9
Intangible assets, net		31.7		35.6		47.3
Goodwill		169.3		169.3		169.3
Long-term securities		2.2		2.3		2.6
Other assets		60.3		62.7		67.8
Total assets	$	1,796.0	$	1,809.2	$	1,883.9
LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	95.8	$	102.0	$	115.7
Accrued expenses and other current liabilities		88.0		93.2		89.2
Total current liabilities		183.8		195.2		204.9
Long-term debt, less current portion		200.1		200.1		250.1
Other liabilities		48.0		47.2		58.9
Total liabilities		431.9		442.5		513.9
Temporary equity - deferred stock units		3.6		3.2		2.9
Total stockholders’ equity		1,360.5		1,363.5		1,367.1
Total liabilities, temporary equity and stockholders’ equity	$	1,796.0	$	1,809.2	$	1,883.9

Fairchild Semiconductor International, Inc.

Consolidated Statements of Cash Flows

(In millions)

(Unaudited)

	Three Months Ended			Year Ended
	December 29, 2013			December 29, 2013			December 30, 2012
Cash flows from operating activities:
Net income (Loss)	$	0.9		$	5.0		$	24.6
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization		35.6			145.2			135.3
Non-cash stock-based compensation expense		6.6			27.9			22.6
Non-cash restructuring and impairments expense		1.5			1.5			0.1
Non-cash realized loss on sale of investments		—						12.9
Deferred income taxes, net		(1.8	)		(4.8	)		(11.2	)
Release of litigation charge		—			(12.6	)		—
Other		0.6			5.2			2.5
Changes in operating assets and liabilities, net of acquisitions		53.4			8.7			(3.6	)
Cash provided by operating activities		96.8			176.1			183.2
Cash flows from investing activities:
Capital expenditures		(16.0	)		(75.2	)		(151.9	)
Purchase of marketable securities		—			—			(0.5	)
Sale of marketable securities		—			—			23.6
Maturity of marketable securities		0.2			0.3			0.2
Other		(0.3	)		(2.1	)		(2.4	)
Cash used in investing activities		(16.1	)		(77.0	)		(131.0	)
Cash flows from financing activities:
Repayment of long-term debt		—			(50.0	)		(50.0	)
Proceeds from issuance of common stock and from exercise of stock options, net		0.2			1.1			5.0
Purchase of treasury stock		(10.8	)		(29.0	)		(13.9	)
Shares withheld for employees taxes		(0.5	)		(9.3	)		(10.7	)
Cash used in financing activities		(11.1	)		(87.2	)		(69.6	)
Net change in cash and cash equivalents		69.6			11.9			(17.4	)
Cash and cash equivalents at beginning of period		348.2			405.9			423.3
Cash and cash equivalents at end of period	$	417.8		$	417.8		$	405.9

Fairchild Semiconductor International, Inc.

Reconciliation of Cash Provided (Used in) by Operating Activities to Free Cash Flow

(In millions)

(Unaudited)

	Three Months Ended			Year Ended
	December 29, 2013			December 29, 2013			December 30, 2012
Cash provided by (used in) operating activities	$	96.8		$	176.1		$	183.2
Capital expenditures		(16.0	)		(75.2	)		(151.9	)
Free cash flow	$	80.8		$	100.9		$	31.3

EX-99.2

Exhibit 99.2

Editorial Contacts:

Fairchild Semiconductor:	Agency Contact:
Dan Janson	Topaz Partners
Investor Relations	Sarah Thomas
(207) 775-8660	(781) 404-2427
Email: investor@fairchildsemi.com	fairchild@topazpartners.com

Information About Our Non-GAAP Financial Measures

Regulation G and other provisions of the securities laws regulate the use of financial measures that are not prepared in accordance with generally accepted accounting principles (we refer to such measures as “non-GAAP financial measures”). In the press release included in this current report on Form 8-K, we provide information on “free cash flow”, “adjusted net income”, the related “adjusted earnings per share” (or “adjusted EPS”), “adjusted gross margin” and the related “adjusted gross margin percent,” each of which is a non-GAAP financial measure.

We believe these measures provide important supplemental information to investors. We use these measures, together with GAAP measures, for internal managerial purposes and as a means to evaluate period-to-period comparisons. However, we do not, and you should not, rely on non-GAAP financial measures alone as measures of our performance. We believe that non-GAAP financial measures reflect an additional way of viewing aspects of our operations that – when taken together with GAAP results and the reconciliations to corresponding GAAP financial measures that we also provide in our press releases – provide a more complete understanding of factors and trends affecting our business. We strongly encourage you to review all of our financial statements and publicly-filed reports in their entirety and to not rely on any single financial measure.

For information about our financial results as reported in accordance with GAAP, see Item 8 of Part II, “Consolidated Financial Statements and Supplementary Data” in our annual report on Form 10-K for the year ended December 30, 2012. For a quantitative reconciliation of our non-GAAP financial measures to the most comparable GAAP measures, see “Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss)”, “Reconciliation of Gross Margin to Adjusted Gross Margin” and “Reconciliation of Cash Provided by Operating Activities to Free Cash Flow” in Exhibit 99.1 included in this current report on Form 8-K.

Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures, even if they have similar names.

Items That We Exclude In the Calculation of Adjusted Net Income (Loss)

Adjusted net income (loss), which we reconcile to net income (loss), excludes the following items:

• restructuring and impairments,

• costs associated with redemption of convertible debt,

• amortization of acquisition-related intangibles,

• gain on sale of equity investment,

• impairment/write-off of equity investment,

• gain associated with debt buyback,

• goodwill impairment loss,

• change in retirement plans,

• impairment of investments,

• loss on sale of securities,

• VAT expense on internal IP sale,

• charge (release) for litigation,

• write-off of deferred financing fees

• accelerated depreciation and inventory write-off (release) associated with fab closure,

• the tax effects associated with the above and other acquisition-related intangibles, and

• tax effects from finalized tax filings and positions.

Not all of these items are necessarily included in the calculation of net income (loss) each quarter. To understand which of the above items are included in the calculation of net income (loss), and excluded from the calculation of adjusted net income (loss), see the reconciliation data in Exhibit 99.1 included in this current report on Form 8-K.

Adjusted EPS is derived from adjusted net income (loss), using the same measures of outstanding shares as are used to calculate net income (loss) per share in accordance with GAAP.

Items That We Exclude In the Calculation of Adjusted Gross Margin

Adjusted gross margin, which we reconcile to gross margin, excludes accelerated depreciation, change in retirement plans, and inventory write-off (release) associated with fab closure.

Adjusted gross margin percent is derived from adjusted gross margin using the same measures of revenue as are used to calculate gross margin percent in accordance with GAAP.

Items That We Exclude In the Calculation of Free Cash Flow

Free cash flow, which we reconcile to cash provided by operating activities, excludes capital expenditures. Free cash flow is not intended as an alternative measure of cash flows provided by operating activities, as determined in accordance with GAAP.

We exclude these items for the following reasons:

• We believe such charges do not reflect results of our ongoing operations.

• We believe that, since such charges are not recorded in all periods, excluding them provides better comparability of our results of operations from period-to-period.

• Adjusted results provide an additional measure that our stockholders and debtholders have requested and expect as a means to project future results of operations.

• Although, for the reasons given above, our adjusted results may not be directly comparable with those of other companies, we believe they provide an additional point of comparison (particularly when viewed in the context of the reconciling data that we also provide) that investors may use to compare us with other companies in our industry, many of which also provide non-GAAP financial measures or highlight certain charges in their GAAP presentations.

• For comparison and projection purposes, GAAP measures alone may not provide all information that an investor may wish to consider. For example, amortization of acquisition-related intangibles, included in the GAAP measure, would be higher for a company that has grown through acquisitions than for a company that has grown internally. Excluding and explaining such charges as part of the presentation of the non-GAAP financial measure provides additional information for an investor to use, together with the GAAP measure, in comparing the performance of the two companies.