Fairchild Semiconductor Reports Results for the Second Quarter 2011

SALES UP 5 PERCENT SEQUENTIALLY IN THE SECOND QUARTER

PCIA SALES UP 7 PERCENT SEQUENTIALLY TO RECORD QUARTERLY LEVEL

SAN JOSE, Calif. – July 14, 2011 – Fairchild Semiconductor (NYSE: FCS), a leading global supplier of high performance power and mobile products, today announced results for the second quarter ended June 26, 2011. Fairchild reported second quarter sales of $433.2 million, up 5 percent from the prior quarter and 6 percent higher than the second quarter of 2010.

Fairchild reported second quarter net income of $44.9 million or $0.34 per diluted share compared to $43.5 million or $0.33 per diluted share in the prior quarter and $43.8 million or $0.34 per diluted share in the second quarter of 2010. Gross margin was 37.1 percent compared to 36.8 percent in the prior quarter and 35.0 percent in the year ago quarter.

Fairchild reported second quarter adjusted gross margin of 37.2 percent, up 30 basis points sequentially and 200 basis points higher than in the second quarter of 2010. Adjusted gross margin excludes accelerated depreciation and inventory reserve releases/write offs related to fab closures. Adjusted net income was $54.6 million or $0.41 per diluted share, compared to $51.3 million or $0.39 per diluted share in the prior quarter and $51.3 million or $0.40 per diluted share in the second quarter of 2010. Adjusted net income excludes amortization of acquisition-related intangibles, restructuring and impairments, accelerated depreciation and inventory reserve releases/write offs related to fab closures, write off of deferred financing fees, and associated net tax effects of these items and other acquisition-related intangibles.

"We delivered solid sales growth at the high end of our guidance for the second quarter," said Mark Thompson, Fairchild's president and CEO. "We grew PCIA sales 7 percent sequentially which was paced by our capacity additions to support strong high voltage demand from industrial, automotive and appliance customers. We increased MCCC sales 3 percent sequentially which reflects generally seasonal strength in their key end markets. Fairchild continues to benefit from increased content in the industrial, appliance, automotive and alternative energy sectors plus share gains in mobile analog."

End Markets and Channel Activity

"Demand was generally in-line with expectations for all segments," stated Thompson. "We continue to see good demand for our high voltage solutions from the industrial, automotive and appliance end markets. Handset order rates were seasonally higher and we have excellent design win momentum going into the second half. As expected, we saw muted but still seasonally better sales in the computing and consumer markets. Distribution sell-through increased 7 percent sequentially and channel inventory remains within our target range."

Second Quarter Financials

"Gross margin improved sequentially in the second quarter," said Mark Frey, Fairchild's executive vice president and CFO. "Margins benefited from higher utilization and a customs duty settlement which offset higher input costs, unfavorable currency exchange and 8 inch fab start-up costs. R&D and SG&A expenses were in line with guidance at $98 million. Adjusted net income was $55 million, the highest second quarter performance since the year 2000. We generated $39 million of free cash flow during the quarter. We paid off another $20 million in debt and at the end of the quarter, total cash and securities exceeded our debt by a record $167 million. We increased internal inventory dollars by 5 percent to hold our days of inventory flat with the prior quarter."

Forward Guidance

"We expect sales to be flat to up 3 percent in the third quarter," said Frey. "Our current scheduled backlog is sufficient to achieve this range. We expect adjusted gross margin to be down 25 to 75 basis points as the impact of better mix is offset by higher input costs. Factory utilization should also be lower as we follow our normal process of reducing internal and channel inventory during the second half. We anticipate R&D and SG&A spending to be approximately $99 million. Net interest expense is expected to be roughly $1.5 million per quarter going forward. The adjusted tax rate is forecast at 15 percent plus or minus 3 percent for the quarter. As with last quarter, we are not assuming any obligation to update this information, although we may choose to do so before we announce third 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. We exclude accelerated depreciation and inventory reserve releases/write offs related to fab closures from GAAP gross margins to determine adjusted gross margins. To determine adjusted net income/loss, we exclude amortization of acquisition-related intangibles, restructuring and impairments, accelerated depreciation and inventory reserve releases/write offs related to fab closures, write off of deferred financing fees, and associated net tax effects of these items and other acquisition-related intangibles. To determine free cash flow, we subtract capital expenditures from GAAP cash provided by operating activities. Fairchild presents adjusted results because its management uses them as additional measures of the company's operating performance, and management believes adjusted financial information is useful to investors because it illuminates underlying operational trends by excluding significant non-recurring, non-cash or otherwise unusual transactions. Fairchild's criteria for determining adjusted results may differ from methods used by other companies, and should not be regarded as a replacement for corresponding GAAP measures.

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 low 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.

View the financial table pdf file. (You will need Adobe Acrobat Reader which can be downloaded for free by clicking here.)

View product and company videos, listen to podcasts and comment on our blog @ http://www.fairchildsemi.com/engineeringconnections

Visit us on Facebook @ http://www.facebook.com/FairchildSemiconductor

Editorial Contacts:

Fairchild Semiconductor:
Corporate Communications:
Patti Olson
1 (800) 341-0392 X 8728
Email: patti.olson@fairchildsemi.com

Investor Relations:
Dan Janson
1 (207) 775-8660
Email: investor@fairchildsemi.com

Agency:
Sarah Thomas
Topaz Partners
1 (781) 404-2427
Email: fairchild@topazpartners.com

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.