Fairchild Q1 cash and securities exceed debt by record $136.8million

The company's first quarter net income was $43.5m compared to $51m in the prior quarter and $22.6m year on year. Gross margin was 36.8% compared to 37% in the previous quarter and 32.2% in the year ago quarter. "Gross margin came in at the high end of expectations due to further progress on improving product mix and higher factory utilisation," said Mark Frey, Fairchild's executive vice president and cfo. "R&D and SG&A expenses were $92m which was favourable to our guidance range due to lower payroll and variable compensation expenses. Adjusted tax expense was $7.8m or 13% of adjusted income before taxes. We generated $22.4m of free cash flow during the quarter and paid $17m to acquire a silicon carbide power transistor company. At the end of the quarter, total cash and securities exceeded our debt by a record $136.8m. We increased internal inventory dollars by 4% to hold our days of inventory flat with the prior quarter." Frey expects sales to be $425 to $435m in the second quarter, adding that the company's current scheduled backlog is sufficient to achieve this range. "We expect to increase adjusted gross margin to 37 to 37.5% due primarily to the impact of better mix and higher factory utilisation in Q1. We anticipate R&D and SG&A spending of $96 to $98m in the second quarter as we increase our investment in new product development and sales and incur greater equity compensation expenses driven by our higher stock price. Net interest expense is expected to be roughly $2m per quarter going forward. The adjusted tax rate is forecast at 15% plus or minus 3% 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 second quarter results."