Good day. And welcome to the Fairchild Fourth Quarter and Full Year 2014 Earnings Conference Call. Just as a reminder, that today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Dan Janson. Please go ahead sir.

Good morning. And thank you for dialing into Fairchild's fourth quarter and full year 2014 financial results conference call. With me today is Mark Thompson, Fairchild's Chairman and CEO; and Mark Frey, our Executive Vice President and CFO. Let me begin by mentioning that we'll be attending the Susquehanna Semi, Storage & Tech Summit on February 24 in New York then Morgan Stanley Tech, Media and Telecom Conference in San Francisco on March 4 and the Bank of America Small and Mid Cap Conference on March 17 in Boston. We'll start today's call with Mark Frey, who will review our fourth quarter financial results and discuss the current status of first quarter business. Mark Thompson will then discuss our product line results, end markets and operational performance in more detail. Finally, we'll reserve time for questions-and-answers. This call is scheduled to last approximately 60 minutes and is being simultaneously webcast from the Investor Relations section of our website at fairchildsemi.com. A replay of this call will be publicly available for approximately 30 days. Fairchild management will be making forward-looking statements in 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 other financial measures that are not prepared according to generally accepted accounting principles. We use non-GAAP measures, because we believe they provide useful information about the operating performance of our businesses that should be considered by investors in conjunction with the GAAP measures that we also provide. You can find a reconciliation of non-GAAP to comparable GAAP measures at the Investor Relations section of our website at investor.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.

Thanks, Dan. Good morning and thank you for joining us. I'm sure most of you had a chance to review our earnings press release, so I'll focus on just the key points in my comments. For the fourth quarter of 2014, Fairchild reported sales of $337 million, down 12% sequentially and 1% from the fourth quarter of 2013. Our adjusted gross margin was down three points to 32.4%. This was below the low end of our guidance, due primarily to lower sales and higher than expected inventory write-offs. R&D and SG&A expenses were $92 million, which was down 4% from the prior quarter. Spending was better than expected, due primarily to further G&A cost reductions and lower variable compensation. Fourth quarter adjusted net income was $12 million and adjusted EPS was $0.10. The adjusted tax expense was $4 million for the quarter. We reported a GAAP tax expense of $45 million, which was due primarily to a couple of non-cash tax asset charges. In Korea we concluded that the tax holiday available on profits from our eight-inch fab would limit our ability to utilize our deferred tax assets in the future. We recorded a full valuation allowance of $37 million against these deferred tax assets. In Malaysia we also adjusted down a deferred tax asset value associated with the expected sale of our Penang site after it was closed. Full year revenue for 2014 was up 2% compared to 2013 at $1.43 billion as sales growth in most of our businesses was partially offset by weakness at one large customer. Fairchild reported a net loss of $35 million or $0.29 per diluted share in 2014, compared to net income of $5 million or $0.04 a share -- per diluted share in 2013. Adjusted net income for 2014 was $76 million…

Thank you, Mark, and good morning, everyone. We significantly improved our financial performance in 2014, while making steady progress on our manufacturing and consolidation, which we expect will drive much of the margin and earnings growth for 2015. I'll begin with brief recap of our progress in 2014 and discuss the actions we are taking to further deliver -- deliver further improvements in 2015. Finally, I'll review some current quarter results and our perspective on the first quarter. Let's begin by looking at our progress in 2014. We grew sales 2% in 2014 compared to 2013 despite a significant decrease in one major customer that impacted sales by roughly 3%. We posted double-digit sales growth into the automotive, battery charging, communication infrastructure and data center end markets. We expect to continue growing our exposure to these important sectors in 2015 and in subsequent years. Our results in the automotive sector are particularly impressive as we grew sales every year since the recession up 250% since 2009 and now represent 15% of total company sales. While our sales in mobile end market were lower in 2014 compared to 2013, this is driven by decreased demand from one large customer. We maintained or increased content in all key mobile markets in 2014 with solid growth at a number of leading Chinese manufacturers. We increased adjusted gross margin three points in 2014 compared to 2013 and nearly doubled our EBIT. Capital spending was less than 4% of sales in 2014 and we expect to spend a similar amount in 2015. Lower CapEx and higher profitability enabled us to significantly improve free cash flow in 2014. I'm particularly pleased that we're able to buyback more than 10 million shares of Fairchild's stock at an average price of just over $14 during 2014. Overall, Fairchild…

Thanks Mark. We'll now open the call to questions. I would ask that allow -- in order to allow more of you to ask questions, we limit each person to one question and one follow-up. Thanks, and let's take the first question please.

Thank you. [Operator Instructions] And we'll take our first question from Ross Seymore with Deutsche Bank.

Good morning, guys. Thanks for letting me ask the question. I guess the first one is for Mark Thompson. You talked about the bookings being a little softer in aggregate in the months of October and November then improving in December and thus far strongly in January. You gave a little bit more color on the disti side being a little bit different than that trajectory in your comment about a minute ago. Can you just talk about what you're seeing in true end demand? That volatility, what caused it and what sustainability you view in the current bookings and the implications for the first half of the year? So any more color on what truly caused the weakness and then the rebounding strength would be helpful.

Sure, Ross. So, I think the weakness -- primarily I interpret it as normal year-end caution, slightly exaggerated. And I don’t really have a good explanation for the reluctance on the part of distribution. Primarily in November and December actually it's a place filled to match out going POS, and so that resulted in the channel going down. And so, if I look at it the incoming order rate is catching up to that, right. I mean I didn't expect it to be as low as it was in Q4 and I didn't expect it to be as high as it was starting Q1. So it's just a little bit of an exaggeration of a normal effect, right. The normal effect is you see some slowdown at the end of the fourth quarter. It's always a little hard to match what -- to model what it is. And then you start Q1 a little bit slowly and then it builds across. So instead there was a bigger than expected in end of Q4 and a stronger than expected rate as we start Q1. If you net across it again, I think we always go back to POS and the POS was actually very steady in the distribution channel across Q4, so steady POS declining, matching order fill resulted in a big channel drain. And so that's really -- I think people don't worry so much about supply in early January, so if you want to meet -- if you're distributor and you want to meet your asset management goals, it doesn't hurt to draw down the inventory a bit. And I don't think it was anything more than that. As we look at the demand pattern as we stand here in Q1, it's very broad based.

Great. And I guess it's my one follow-up switching over to Mark Frey. You guys have a lot of moving parts in your gross margin for this year. I know you don't formally guide beyond the first quarter, but can you go through some of the levers that we should think of, utilization in the first quarter, what that might mean for second quarter gross margin? And anyway to help us size the benefits in the second half of the year from the restructuring program that you're putting in place. Thank you.

Sure. The puts and takes in the first half of the year, a positive is the build ahead plan because that creates activity in the factory. But on the negative side, as you get close to the closure date, you do reach a point in time where you can't discontinue your fixed cost immediately, and so you get a bit of an underutilized facility. We're managing that very carefully. We'd love to run a facility that's essentially [debt-out] [ph] until the end of June and just make the transition. Your normal puts and takes is that second quarters and third quarters tend to be our peak revenue, so that they would provide volume for us, which obviously helps in the overall transition getting from period-to-period. Then in the second half of the year we have the -- biggest favorable is the discontinuance of a lot of fixed expenses. And we start to ratchet up our new capacity with a fair amount of utilization. And that depends on how efficiently the new capacity can develop yield and capabilities. Obviously, they're going to be making new customer sets. Plus another favorable is we'll actually begin to take products from the new external sources which have good cost structures and so we've negotiated good prices with them. I guess the only other thing would be a modest merit that we're going to do starting in the second quarter per normal. So those are most of the puts and takes. I'd say inventory E&O is -- we've allowed for a slightly higher than normal run rate in our running of the business just to coincide with the prebuilt, but it is an area that surprised us a bit in Q4 and we're keeping our eye on it for 2015.

Ross, the one detail I would add to what Mark just said is as expected we're taking up the build plan significantly in Q1, which obviously will benefit Q2.

Great. Thank you.

And we'll take our next question from Harlan Sur with JPMorgan.

Hi. Good morning; and thank you for taking my questions. On that last question on factory loadings in Q1 how much of that is due to the build ahead of the fab closures kind of middle of this year. And how much of that is anticipation of a seasonally stronger second quarter.

I don't think I can provide an exact partitioning, but what I would say is that the two fabs that are being closed are -- have been running flat out and will continue to run flat out as Mark said until they actually shut down. So there isn't a change in loading there. The change in loading is in other parts of the businesses where we did ramp production down considerably in the third quarter.

Another way to look at is just look at the percentage increase in the midpoint of Q1 sales guide and that should correlate with the build plan related to the normal movement of revenue volume, and then add roughly a kicker for the prebuilt.

Right. So, if you look at our fixed structure the Salt Lake six-inch and Bucheon five-inch have stayed at constant maximum loading across this period, whereas our Bucheon eight-inch, which will be the primary recipient of capacity was taken down; and Maine is the other recipient of capacity it was also taken down. And so, it goes back to the comments that Mark made. Those two will receive the fill plus some foundry upon the closure of the five and the six-inch line. But the five and six-inch line today and through this will be running flat out.

Okay. Great. Thanks for that insight. And then, industrial and automotive are typically seasonally stronger here for the team in Q1, so first question is are you seeing that sort of normal seasonal trend here? And then, can you talk about some of the drivers of your double-digits growth outlook for the automotive segment this year? Thank you.

Sure. So, yes, we are seeing normal seasonal strength at least in Q1. We had some caution around some of the appliance in China which has strengthened considerably, so we feel good about that. Our automotive trajectory has been -- we have best-in-class solutions across a number of the key ways that automobile OEMs meet their either CO2 or fuel economy standard. And so, if you look at where we see growth, we see growth in acceptance of our products in electrification and electrification here isn’t hybrid or battery-powered cars, strictly speaking, although we do participate in that its removal of traditional parasitic loads like power steering and water pumps and replacing them with electric motors. And so that is in the main stream of where OEMs are going to achieve their fuel economy standards and we have best-in-class solutions there. In addition to that we have -- and the second area is integration of ignition drivers, so putting the entire control in IGBT solution right on the coil in a one coil per cylinder kind of application, and there we've taken that from simply supplying the IGBT to the integrated control module. So that's a kind of a tripling in content for us. And then finally, we are expanding our customer base. So whereas we've been traditionally concentrated in Europe and the U.S. for these kinds of solutions, especially Europe, we're increasingly seeing acceptance of design in at major Korean manufacturers and starting in China as well. So it's really -- it's a content, its content, it's customer growth and region growth.

Great. Thanks for the detail.

And we'll take our next question from Chris Caso with Susquehanna Fin Group.

Yes. Thank you. Good morning. If I could just go back to gross margins first and maybe ask in a little different way and tie back to what you said at the Analyst Day and at the Analyst Day you outlines a number of different initiatives with several hundred basis points of gross margin improvement, the biggest being the fab closures. Could you help us to quantify which one of those and how much hits in the second half of this year out of all the things you talked at the Analyst Day and then how much we would expect to be further as we go into 2016?

As I recall, there were about four major things we showed you, the cost reduction impact of the closures. The additional depreciation that happens over time simply because we are investing less and more depreciating in the business. Positive mix coming from some of the applications that Mark just mentioned and some of our emerging mobile applications and just general volume, which is a 4% growth kind of assumption. For the second half of the year obviously the major impact and it won't be a 100% of the impact because it comes out over time, is the cost reduction related to the manufacturing consolidation. The volume of let's say the revenues get into the $380 million, $390 million plus range, you saw what the impact was last year when that happened. So you can kind of use the same math. The depreciation happens over time. We'll work at giving you a schedule and try to give you a little more visibility on that because we really don't anticipate capital needs that would exceed say $60 million, $65 million per year in the foreseeable future. So essentially you can calculate what that would look like. And then the mix will happen as we get market penetration in that we'll get a little bit of it in Q2 and it will pick up steam and we expect that to actually be a fairly large contributor in 2016.

Okay. Thank you. As a follow-up, if for some time we've been talking about distributors reducing inventory. I think last quarter was maybe the first quarter they raised dollars, but I think it was down in days if I recall correctly. Obviously there's a broader trend of distributors lowering inventory I guess that's the question again of -- is there something else underlying here that's indicated by distributors taking the inventory down? At what point do you think that likely has to flatten out and then what your expectations are for the first quarter? Are you anticipating further distributor inventory reductions in your guidance?

So first of all I didn't see anything special in Q4. I think it's really normal that customers try to manage their inventory going out of December because they report year end in many cases. More broadly speaking if you go back to the earlier part of the last decade, channels have tried to take about a day, a year out of inventory and they've been successful at that and I think it's been good for the industry. In terms of Q1, we'll seek to replenish some of it. So we at the very low nine-week range, we feel a bit discomfortable if we did a surge in end demand. So in our thinking it would be a bit of a replenishment.

Okay. Thank you.

And we'll take our next question from Craig Hettenbach with Morgan Stanley.

Yes, thank you. On the wireless front, can you talk about kind of where you are from a design to revenue perspective on things like rapid charging and then also any update on some of the traction that you're seeing within China specifically?

Sure Craig. So we're seeing the adoption today of a rapid/adaptive charging both in the large Korean manufacturer as well as the significant China manufacturers and that is occurring as we speak and adoption rates are going up. The early implementations have been well received. If you saw some of the reviews of the latest Samsung offering for example, there were a number of positive reviews about how rapidly it recharged and so it’s a thing that is getting positive attention. People see that and they know that’s a feature they need to add. So that’s one that will be a net positive across 2014. In general what we expect is that the -- we think the unit volumes will go up modestly overall in 2015, but our content position in every case will increase in 2015. So that will be a bigger contributor for us than unit volume.

Got it. And then as a follow up, you guys have been very clear about use of cash in terms of going to buybacks. It sounds like that continues to be the case, but as you look at whether at some point later this year in 2016, how does the Company and the Board think about a dividend kind of entering the mix at some point here?

So we are open-minded about that. When we turned on the current share buyback program, we had active conversations with our major shareholders and so I would consider that to be the approach that we'll take this time. As we increase the amount of cash that we have that will -- there is obviously an opportunity for us to both buyback and layer in a dividend if that’s what majority of our shareholders prefer that we do. So what I would say is that I wouldn’t expect there to be a policy change certainly in the first half of the year, but probably mid-year say in the third quarter, we'll probably go back out and add that into our dialog with our major owners and then our policies will represent the center -- kind of the center of gravity of their point of view.

I appreciate the color. Thank you.

And we will take our next question from Christopher Rolland with FBR Capital Markets.

Hey guys. Thanks for the question. You guys usually point to gross margins as a result of utilizations the quarter before and you guys also have a benefit of couple of weeks into the next quarter to judge loadings. So I was wondering -- I guess you guys talked a little bit about inventory write-downs, but what created a scenario where you missed the growth margin range like we had in 4Q and why not more accuracy in your guidance. Thanks.

Well, most of the miss was inventory write-downs. Historically we have about 1.5% I believe of our revenue as excess and obsolete and that lines up pretty well with competitors, but it is not forecastable with huge accuracy because what we do is we have an algorithm like most of the companies that looks at run rates of demand and current inventory and tries to calculate a need. And it’s hard -- some of those rates are hard to predict because they are part -- number specific going forward and I think exacerbating it in this particular instance is when you close a factory all the way down, you get higher scrappage activity because people are beginning to prepare for closing the entire facility. And of course on the pre-build although we generally exempt the E&O calculation we do, on some parts that have low expected part life, we have taken special reserves for them. So it represented a surprise to us, but that was most of the impact on the gross margin.

Okay. And now that we sort of have a new lower run rate here because of some sort of near-term gross margin pressures, I think a lot of us are having trouble figuring out where gross margins eventually settle out after the restructuring. Do we have a stronger snapback because of these near-term effects here? It seems like a bit of a moving target. I know before we were talking about maybe flirting with 37%, 38%, 39% gross margins by the time we settle out and now it seems more like 36%, 37%. Am I thinking about that right? Are those the moving parts?

I think you are thinking about it right. I don’t see anything in the fourth quarter or the first quarter guide that’s going to change the end point after we complete the consolidation program. So again the same material that we showed in September.

Okay. Great. Thanks guys.

And we will take our next question from Tristan Gerra with Robert W. Baird.

Hi good morning. As a follow-up to an earlier question, how much of the distributor inventory replenishment that you're expecting in Q1 is embedded in your Q1 revenue guidance and what would be your expectation for distributor sell-through sequentially in Q1?

Sure. So Tristan, there is a couple of moving parts there. So the net is that we think that we will take the dollar amount up approximately $4 million in Q1 is what’s anticipated in our guidance recall. So Q4 went down about $8 million, but we're also taking a -- one of the large China mobile customer's direct, which actually impacts so that we will not ship -- that won’t be a channel event any more. That will be a direct revenue event. So the net amount approximately $4 million of what you -- of what you would call classic replenishment right. So a pretty small number.

Okay.

In terms of point of sale, point of sale -- the five-year average for point of sale in Q1 is up 1% or 2% versus Q4 and so we would normally model that right. So the only replenishment would be that $4 million and then basically we would follow point of sale up typically and match ship-in to ship-out and that’s -- that’s the framework that we use to create the guidance.

Okay. That’s useful and then company’s last quarter has talked about the rebound in October following what was weakness end of Q3. Then we saw weakness again and now we're hearing about a rebound into the beginning of the year. What is the level of visibility you have into March post Chinese New Year holidays particularly given some signs of weakness potentially in the white good market in China? What gives you the confidence that -- and the visibility that the pick up that you're seeing continues beyond February?

So Tristan, one of the -- if you look, Q1 has an unknowable in the same way, the Q4 has an unknowable right. So we always know that there will be a bit of a slowdown in December and we always know that there will be a bit of a slowdown around Chinese New Year. What you can’t really do is model its depth and duration right and so we -- as a placeholder, we'll typically use five-year averages for that and so that’s the way we look at it this year. Now on the specific concern around weakness in China, I am less concerned about that there maybe your words reflect in the sense that we've got a lot better visibility into inventory situation than we -- than we had say a few years ago. We put a number of tracking systems in place. We’ve seen a big inventory reduction that people worked on in the fourth quarter that is now presently reversing. We think the inventory levels are okay and we see the resale activities there being quite healthy.

Great. Thank you.

And we will take our next question from Vivek Arya with Bank of America, Merrill Lynch.

Thank you for taking my question. I had a high level question and then one more detail. So Mark, on the high level question, I think investors are grappling a little bit with some of the macro volatility we're seeing and the need for stimulus in different places versus what the semiconductor companies are saying for example yourself and then Linear, which is at industrial and automotive and some of these macro drivers are holding up pretty well right now. Are we missing something here? Is it just a content gain opportunity that I think people might be underestimating? I am just curious what your views are on this disconnect?

So I don’t know if it’s a disconnect per say right. If you look at the -- if you look at the things that are driving our business, there are things that are typically influenced by one of two things. Either government requirements for things like energy efficiency for example and that in the case of automobiles and appliances really makes the content gains mandatory in effect right. And so if you look at the car example or the appliance example, the worldwide appliance demand isn’t growing that much and maybe 1% or 2% a year. If you look at the -- except for very, very cheap cars in China, the same is true for high content cars. The volumes are not going up. What is going up is the Silicon content drastically going up and so that’s -- so that’s I think part of the disconnect. So car volumes can have a poor year and people like us who are supplying the ability to convert to the electrification of traditional parasitic loads can see substantial growth as we have. So I think that’s one piece of the disconnect. I think the other one is -- is what are people doing with their money right, the discretionary income? And so far the mobile -- the high end mobile sector is experiencing a disproportionate share of people’s disposable income to the expense of some other categories right. And if you look at -- the thing to remember is when you look at a phone, it isn’t just a phone, it’s the whole infrastructure behind the phone. So it’s the -- it’s the Bay stations, it’s the data rates in the Bay stations, it’s all the server farms that make it run, it’s growing content and video, social networks are big part of that right. So there is an apportioning of the demand from those macro trends that I think is just -- is just gaining a disproportionate share of whatever discretionary income exists. So I think that's to the extent there appears to be a disconnect, I think that there are those two things. And then if you look at the industrial side, I think if you look at factories, if you have a factory, you have to make it as efficient as you possibly can. So people are continuing to capitalize and improve their -- the capabilities of their plants right. So a lot of that drives things like -- aspects of the so called Internet of Things and so forth. So I think that’s -- those are some of the reasons why they don’t exactly line up the way you might think.

Got it. Very useful. And then as my last question, I think late last year, you had mentioned some weakness at some gaming customers. If you could, A, give us some update on that and then B, I think you sort of alluded to it, but if you could give us some color around your large Korean customer. Do you see any improvement in trends? I know you mentioned more content, but are you seeing any improvement on the unit side as we'll? Thank you.

Sure. So the gaming customers have a tradition of making their suppliers life miserable in the fourth quarter and they did that again in Q4 and then normally, they -- once they built what they think they need, then they just turned it off and then launched new platform starting in Q1 and we are saying that exact plans right. So it was a hole in Q4 and it will recover toward the end of Q1 and then into Q2 and to the middle of the year. So that’s a -- that’s a kind of a normal thing. It was -- like several other inventory moves, it was a little bit bigger than normal exiting 2014, but the trend is -- it was more or less the same. In terms of the big Korean supplier, from a percentage point of view in 2014 they lost a lot of share. Everybody knows that. But the volumes actually were only down a little bit. And so our expectation is that the volumes will also only be down a little bit in 2015, but on a percentage basis of course that will given that the total is growing will appear to be a share loss. So -- but it was big pain for us and all their suppliers in 2014 because their models didn't reflect -- their models reflected more volume than they actually wound up selling and so they had big corrections that occurred particularly in the second half of the year. I would say -- I think their expectations are more aligned with what I think reality will be and more aligned kind of with 2014. So I think that that pain and correction that everyone experienced in 2014 will be substantially mitigated in 2015.

Got it. Thank you very much.

And we'll take our next question from John Pitzer with Credit Suisse.

Yes, good morning, guys. Thanks for letting me ask the question. Mark I know you guys only guide -- Thompson I know you guys only guide one quarter out. But if I grow kind of revenues seasonally to the five-year medium off of the March guide, I am barely getting any revenue growth for all of '15, which is somewhat inconsistent I think with the qualitative guidance you've kind of given on the call. I guess can you help me understand are you expecting above seasonal quarters and beyond March and if you are what do you think the most likely drivers of that will be.

So I think there's a couple of drivers. So if you look at -- you can break it up in a couple of different ways. If you look at 2014, we had -- if all we had done is hold that one large customer flat, we would have been up 5% '14 versus '13. We remodel them as flat in 2015. So if you look at the uplift that comes I think -- so the other piece of it is that we've had -- we've been -- we've had as I mentioned in my commentary two years of mobile contraction because of some significant shifts in strategy that are done. So I guess -- I suppose I wouldn’t view it as seasonal as more reversal of trends in a couple of key places in our business, which have been a drag on our ability to move the top line. So we certainly expect a 2015 that -- if you look back to 2014 and held that large customer flat, it would have been a 5% revenue progression versus 2013, we expect something of that magnitude in 2015. And that’s what we're planning around driven by all the constant areas that we've been talking about and focusing on and I think that they will all align positively in 2015.

That’s helpful Mark. And then longer term, as you guys execute to the restructuring any kind of hit the target margin you laid out at the Analyst Day last fall. You're going to end up being significantly more profitable than many of your direct competitors. And I guess my question is, how do you avoid customers using that fact to try to extract their pound of flesh relative to pricing and do your targets kind of contemplate passing some of those benefits on to customers or does it assume that all the benefits occur to you.

We haven’t changed the slope of expectation of price reductions from our customers, right. So that’s the way I would look like at it right is, if we had changed that, that might represent a risk element, but there is a -- to your point, there is an ongoing expectation that things costs less than they did before. So you have to keep both productivity in front of that, but you also have to have the quality of product that allows you privilege position with the customer right. So I think you have to have both the productivity and the product in order to sustainably have maintained those margins. If I look at our positions from Brushless DC motor control to electrification of vehicles and in places like travel adaptors, we've been able to sustain I guess what you might call an unfair share, disproportionate share of those for quite a while in large part because our product is better than any of our competitors and our customers value what it will do and then therefore the socket stays. And so it's predicated upon the quality of our products continuing to improve by quality. I don't mean defect level -- I mean the value to the OEM. We understand that we have to continue to improve the value of the product of the OEM in order to make that model work and that’s really the foundation of what we've been working so hard on over the years to put in place as a sustainable kind of engine.

Thanks guys. Appreciate it.

And we'll take our next question from Steve Smigie with Raymond James.

Great. Thanks a lot guys. Mark, assuming you could talk a little bit about the products further, you had pretty positive tone here on what's coming in 2015. And I know you probably want to go into more detail in the future, but could you give us some sense at least, is this more the fully integrated sets of solutions or is it some updated versions of some facts and stuff like that or some mix of that?

It's all the above.

Okay. And is there any particular end market you laid out, cloud and industrial as your new target markets, is that kind of the thrust there is that’s where the new product is coming or is it one of the those markets in particular?

No, it's very broad based. If you look at the approach that we've taken, it isn’t singular in its approach. It looks at place where people are really driving performance and efficiency and enables that to happen.

Okay. And for the facts or the discrete is it -- do you have newer versions of say high voltage facts, low voltage facts, IGBTs or is it just that you had already introduced versions and they're just -- you're going to benefit from design ends at this point?

Well we have -- we have generational versions of sort of all of our major platforms from low voltage through mid-to-high voltage. And so parametrically people expect progress on two fronts. One is switching efficiency and then the other is resistance per unit area right. So some pitches continue to get smaller. It’s a power switch version of Moore's Law though strictly speaking it's not driven by the process, by the pure feature size of the process technology, but the ability to construct the trench structures and ever finer pitches. And constructing the mix of inflating gate layers and poly to allow very, very high switching efficiencies to run at higher frequencies and reduce passives and so forth. So there is a lot of moving parts in the technology and we'll typically advance those about every other year. So it's not like one big thing. If you look across that, there is improvements in IGBTs, improvements in high voltages, improvements in mid voltage, improvements in low voltage and they hit at different times. Now those also increasingly we see are becoming highly integrated co-package with drivers and so specific improvements on drivers for unique application is all part of the package right. So we're seeing increasing need for what we anticipated, which is the switch needs a driver, needs a controller, needs a very high power density packaging capability to do system and a package. And those things just a piece at a time occur and so you can't attribute progress to a specific function. It's really -- you have to maintain competitive or super competitiveness in each of those and then the ability to integrate them as the customer platforms evolve.

Okay. And for the integrated solutions and is it -- what you're talking about is just like driver plus moss that integration or is there something more sophisticated generally?

Well I regard that as pretty sophisticated. But the driver plus moss, plus controller in advance package technology is where it's going.

All right. Thank you very much.

And we will take our next question from Kevin Cassidy with Stifel Financial.

Thanks for taking my question. Can you say what the impact if any foreign exchange is for Fairchild?

Yes, the Euro has been a headwind because we have more revenue dollars in Euro than we do expenses and the Yuan has been a tailwind. So we have more cost in Korea than we don't really do a lot of revenue in Yuan. And so our costs in Korea are translating back to smaller dollar equivalents. You don't see a lot of that in the current results because we hedge the Yuan and therefore the -- you don't see that move quarter-to-quarter very rapidly, but if the Yuan stays in this 1100 range, that would be a net tailwind to the financials in the second half of this year and 2016.

And just as a follow-on how about from competition, say from European manufacturers?

Well for European manufacturers obviously, they're getting a cost reduction for European fabs. We tend to package in the same places. So our packaging is all in the same currency and the same is true with the Japanese manufacturing in Yen.

Okay. Great. Thank you.

And we'll take our next question from Shawn Harrison with Longbow Research.

Hi, hopefully a quick clarification and two questions, I got on the call a bit late. Did you highlight a book-to-bill ratio for the first quarter and if so what was it so far?

We didn't highlight a book-to-bill ratio quantitatively what we did offer was the booking rate so far, which is a run rate north of $400 million a quarter. So if you took our guidance on that, it would for that period if it was all liner, it would translate into some number around 1.2.

Okay. And the book-to-bill ratio must have been below one then in the fourth quarter.

Correct.

Okay. And then the two I guess focus questions I have, you took some incremental cost out of SG&A this quarter as you've been progressing through kind of the three structuring actions. Are you seeing additional cost to take out of the model and if so, how much is that in magnitude? And the second question is in '14 you essentially spend all your free cash generation on buy backs. Should we expect a similar dynamic in '15?

So in real spend on OpEx, we took -- if you take out the variable pay component, which is can confuse the picture, is we took out about $30 million of real spend in 2014 versus 2013. I don't think that we'll be able to do quite that much in 2015, but it certainly every year we try to get more efficient on the whole bunch of fronts from our R&D efficiency to the infrastructure that we use to run the company. So that's just a constant of life that we try to get better at every single year. From a cash use point of view, we have no policy changes in 2015 versus 2014 and so as we generate cash we will return it to the shareholder.

Okay. Thank you so much.

And we have no further questions in the queue.

Okay. Well thank you operator. Well with that, we will conclude our call today. Thank you for your interest in Fairchild.