Fairchild management will be making forward-looking statements on this conference call. These statements, including all statements about future results and performance, are made based on assumptions and estimates that involve risk and uncertainty. Many factors could cause actual results to differ materially from those expressed in forward-looking statements. A discussion of these risk factors is provided in the quarterly and annual reports we file with the SEC.In addition, during this call we may refer to adjusted or financial measures that are not prepared according to generally accepted accounting principals. We use non-GAAP measures because we believe they provide useful information about the operating performance of our businesses that should be considered by our investors in conjunction with GAAP measures that we also provide. You can find a reconciliation of non-GAAP to comparable GAAP measures at the Investor Relations of our website at fairchildsemi.com. The website also contains a variety of useful information for investors including an extensive financial section to facilitate your investment analysis. Now I’ll turn the discussion over to Mark Frey. Mark Frey Thanks Dan. Good morning and thank you for joining us. I’m sure most of you have had a chance to review our earnings press release, so I’ll focus on just the key points in my comments. In the third quarter, our distribution sell-through was down 9% sequentially, which was well below our original expectations, while sales into our direct OEM customers were modestly higher. Accordingly, we reduced shipments and factory loadings during the quarter, which impacted margins but will allow us to maintain a lean supply chain as we manage through the current cycle. We are controlling costs very aggressively and will keep the reins tight until we are able to start growing sales and margins again. Let’s review some of the details, starting with the income statement. For the third quarter of 2011, Fairchild reported sales of $403 million, down 7% sequentially and down 3% from the third quarter of 2010. Adjusted gross margin, which excludes accelerated depreciation and write-offs related to fab closures, was 36%, down 120 basis points from the prior quarter. Gross margin was impacted by lower factory utilization and roughly a full point now of 8 inch fab start-up costs.
R&D and SG&A expenses were $92 million in the third quarter, down 6 million sequentially as we aggressively manage OPEX. We continued to invest in R&D and applications engineering to support our future growth, but all other spending is being tightly controlled.Third quarter adjusted net income was $45 million and adjusted EPS was $0.34. Diluted share count was down nearly 2 million shares in the third quarter. We bought back 1.4 million shares as we capitalized on the lower stock prices during the quarter. Now I’d like to review third quarter highlights of our sales and gross margin performance by our two major product groups. PCIA sales were up 5% from the year-ago quarter but down 10% sequentially due to weaker demand from appliance, consumer and solar end markets as customers continue to reduce inventories. This is also a seasonally weaker period for most of the PCIA end markets. Gross margin decreased two points to 38% due primarily to lower factory loadings and increased start-up costs for the transition to 8-inch wafers, which was partially offset by favorable foreign exchange trends. In our MCCC business, sales were flat sequentially as strong mobile analog sales were offset by weak demand from consumer and computing customers. MCCC gross margin was flat with the prior quarter at 37% as a richer mobile analog mix offset lower factory loadings supporting consumer and computing products. Turning to our balance sheet, we grew internal inventory dollars by about 2%, which resulted in an 8-day increase to 91 days at the end of Q3. We like to maintain internal inventories closer to 80 days, so we plan to work this down over the next one to two quarters. Days of sales outstanding, or DSOs, were flat at 34 days while payables decreased to 49 days. Read the rest of this transcript for free on seekingalpha.com