Filed Pursuant to Rule 424(b)(3)
Registration No. 333-107290
RESALE PROSPECTUS
(FAIRCHILD LOGO)
7,421,075 SHARES
FAIRCHILD SEMICONDUCTOR INTERNATIONAL, INC.
COMMON STOCK
- - WHO IS OFFERING THE COMMON STOCK AND RECEIVING PROCEEDS FROM ANY SALES. The
shares of common stock subject to this prospectus are currently outstanding
shares that are being offered by Court Square Capital Limited, a wholly
owned subsidiary of Citigroup Inc. Court Square Capital will receive all of
the proceeds from any sales. Fairchild Semiconductor will not receive any
of the proceeds.
- - HOW SALES WILL BE MADE; PRICE OF SHARES. Court Square Capital may sell the
shares of common stock at various times and in various types of
transactions, including: block transactions; directly to purchasers or
through agents, brokers, dealers or underwriters; and sales "at the market"
to or through a market maker or into an existing trading market or
otherwise. Sales not covered by this prospectus may also be made pursuant
to Rule 144 or another applicable exemption under the Securities Act of
1933. Shares may be sold at the market price of the common stock at the
time of a sale, at prices relating to the market price over a period of
time, or at prices negotiated with the buyers of shares.
- - FEES AND EXPENSES. Court Square Capital will pay all brokerage fees and
commissions and similar sale-related expenses. Under the terms of a
registration rights agreement between us and Court Square Capital, we are
paying certain legal, accounting and other expenses relating to the
registration of the shares with the Securities and Exchange Commission.
- - OUR COMMON STOCK is listed on the New York Stock Exchange under the symbol
"FCS." On July 22, 2003, the last reported sale price of our common stock
on the New York Stock Exchange was $13.00.
BEFORE YOU INVEST, CONSIDER THE "RISK FACTORS" BEGINNING ON PAGE 5.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Fairchild Semiconductor International, Inc.
82 Running Hill Road
South Portland, Maine 04106
(207) 775-8100
The date of this prospectus is August 1, 2003
TABLE OF CONTENTS
Page
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ABOUT THIS PROSPECTUS....................................................... 2
FORWARD-LOOKING STATEMENTS.................................................. 2
WHERE YOU CAN FIND MORE INFORMATION......................................... 3
INCORPORATION OF INFORMATION WE FILE WITH THE SEC........................... 3
FAIRCHILD SEMICONDUCTOR INTERNATIONAL, INC.................................. 5
RISK FACTORS................................................................ 5
USE OF PROCEEDS............................................................. 14
DIVIDEND POLICY............................................................. 14
THE SELLING STOCKHOLDER..................................................... 14
PLAN OF DISTRIBUTION........................................................ 15
LEGAL MATTERS............................................................... 15
EXPERTS..................................................................... 15
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement we have filed with
the Securities and Exchange Commission (SEC). The registration statement that
contains this prospectus, and the exhibits to the registration statement,
contain additional information about us and the shares that may be offered under
this prospectus. You can read that registration statement at the SEC's web site
(http://www.sec.gov) or at the SEC's office mentioned under the heading "Where
You Can Find More Information."
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. These statements relate
to analyses and other information which are based on forecasts of future results
and estimates of amounts not yet determinable. These statements also relate to
our future prospects, developments and business strategies. The statements
contained in this prospectus that are not statements of historical fact may
include forward-looking statements that involve a number of risks and
uncertainties.
We have used the words "anticipate", "believe", "could", "estimate",
"expect", "intend", "may", "plan", "predict", "project", "will" and similar
terms and phrases, including references to assumptions, in this prospectus to
identify forward-looking statements. These forward-looking statements are made
based on our management's expectations and beliefs concerning future events
affecting us and are subject to uncertainties and factors relating to our
operations and business environment, all of which are difficult to predict and
many of which are beyond our control, that could cause our actual results to
differ materially from those matters expressed in or implied by these
forward-looking statements. The following factors are among those that may cause
actual results to differ materially from the forward-looking statements:
- changes in demand for our products;
- changes in inventories at our customers and distributors;
- order cancellations or reduced bookings;
- acquisitions;
- disruption of manufacturing, marketing and distribution
activities because of the integration of acquired businesses;
- technological and product development risks;
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- changes in general economic and business conditions;
- changes in current pricing levels;
- changes in political, social and economic conditions and local
regulations;
- foreign currency fluctuations;
- reductions in sales to any significant customers;
- significant litigation;
- changes in sales mix;
- industry capacity;
- competition;
- loss of key customers;
- disruptions of established supply channels;
- manufacturing capacity constraints; and
- the availability, terms and deployment of capital.
All of our forward-looking statements should be considered in light of
these factors and the factors described under the heading "Risk Factors." We
undertake no obligation to update any forward-looking statements to reflect new
information, future events or otherwise, except as required by law.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC.
Our SEC filings are also available over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file at the SEC's
public reference rooms at 450 Fifth Street, NW, Washington, D.C. 20549. Please
call the SEC at 1-800-SEC-0330 for more information on the operation of the
public reference room and their copy charges.
We have filed a registration statement on Form S-3 with the SEC
covering sales of common stock under this prospectus. For more information about
us and the common stock, you should refer to our registration statement, its
exhibits and the documents that are "incorporated by reference" in the
registration statement. Since this prospectus may not contain all the
information that you may find important, you should review the full text of
those documents.
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
We disclose important information to you in this prospectus by
referring you to other documents and information that we have previously filed
with the SEC. Those previously filed documents are said to be "incorporated by
reference," which means that:
- incorporated documents are considered part of this prospectus;
- we can disclose important information to you by referring you
to those documents; and
- information that we file with the SEC will automatically
update and supersede this prospectus.
We incorporate by reference the documents listed below that we have
filed with the SEC under the Securities Exchange Act of 1934:
- our annual report on Form 10-K for the fiscal year ended
December 29, 2002;
- our quarterly report on Form 10-Q for the fiscal quarter ended
March 30, 2003;
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- our current reports on Form 8-K as filed with the SEC on
January 21, March 4, March 31, June 6, July 17 and July 23,
2003; and
- the information set forth under the caption "Description of
Registrant's Securities to be Registered" in amendment no. 1
to our registration statement on Form 8-A, filed with the SEC
on May 16, 2003.
We also incorporate by reference, and are deemed to disclose to you as
of the dates of their filing with the SEC, each of the following documents that
we file with the SEC after the date of the filing of the registration statement
that includes this prospectus, until all the securities offered by this
prospectus have been sold:
- reports filed under Sections 13(a) and (c) of the Exchange
Act, except for current reports on Form 8-K containing only
Regulation FD disclosure furnished under Item 9, or Regulation
G disclosure furnished under Item 12, of Form 8-K, and
exhibits relating to such disclosures, unless otherwise
specifically stated in the Form 8-K;
- definitive proxy or information statements filed under Section
14 of the Exchange Act in connection with any subsequent
stockholders' meeting; and
- any reports filed under Section 15(d) of the Exchange Act.
Any statement contained in this prospectus, including in a document
that we incorporate by reference, shall be modified or superseded for purposes
of this prospectus to the extent that a statement contained herein or
incorporated herein from a subsequently filed document modifies or supersedes
such statement. Any statement that is so modified or superseded shall not be
deemed to constitute a part of this prospectus except as so modified or
superseded.
We will provide, without charge, to each person to whom a copy of this
prospectus is delivered, upon written or oral request, a copy of any document
incorporated by reference in this prospectus, other than the exhibits to that
document, unless that exhibit is specifically incorporated by reference into the
document that this prospectus incorporates. You may request a copy of any
filings referred to above by contacting us at the following address:
Fairchild Semiconductor International, Inc.
82 Running Hill Road
South Portland, Maine 04106
Phone: (207) 775-8100
Attention: General Counsel
You should rely only on the information contained or incorporated by
reference in this prospectus and any prospectus supplement. We have not
authorized any other person to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it. We are not making an offer to sell these securities in any jurisdiction
where the offer or sale is not permitted. You should assume that the information
appearing in this prospectus and any prospectus supplement, as well as
information that we have previously filed with the SEC and incorporated by
reference, is accurate only as of the date such information was first filed with
the SEC. Our business, financial condition, results of operations and prospects
may have changed since those dates and we disclaim any obligation to update
statements regarding them except as required by law.
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FAIRCHILD SEMICONDUCTOR INTERNATIONAL, INC.
We are one of the largest independent semiconductor companies focused
solely on multi-market products. Multi-market products are building block
components that can be used in a wide range of applications and are found in
virtually all electronic devices. We design, develop and market analog,
discrete, interface and logic, non-volatile memory and optoelectronic
semiconductors. We supply customers in a diverse range of end markets, including
the computer, industrial, communications, consumer electronics and automotive
industries. We are particularly strong in providing discrete and analog power
management products, which address the growing requirement for portability and
long battery life for computing and communication devices.
Our principal executive offices are located at 82 Running Hill Road,
South Portland, Maine 04106. Our telephone number at that address is (207)
775-8100. Our website can be visited at www.fairchildsemi.com. Information
contained on our website is not part of this prospectus. We were incorporated in
Delaware on March 10, 1997.
RISK FACTORS
Our business is subject to a number of risks and uncertainties. Among
other things, these risks could cause actual results to differ materially from
those expressed in forward-looking statements. You should carefully consider the
risks described below before investing in our common stock. The risks described
below are not the only ones facing us. Additional risks not currently known to
us or that we currently believe are immaterial also may impair our business
operations and financial condition.
THE PRICE OF OUR COMMON STOCK HAS FLUCTUATED WIDELY IN THE LAST YEAR AND MAY
FLUCTUATE WIDELY IN THE FUTURE.
Our common stock, which is traded on The New York Stock Exchange, has
experienced and may continue to experience significant price and volume
fluctuations that could adversely affect the market price of our common stock
without regard to our operating performance. In addition, we believe that
factors such as quarterly fluctuations in financial results, earnings below
analysts' estimates and financial performance and other activities of other
publicly traded companies in the semiconductor industry could cause the price of
our common stock to fluctuate substantially. In addition, in recent periods, our
common stock, the stock market in general and the market for shares of
semiconductor industry-related stocks in particular have experienced extreme
price fluctuations which have often been unrelated to the operating performance
of the affected companies. Any similar fluctuations in the future could
adversely affect the market price of our common stock.
DOWNTURNS IN THE HIGHLY CYCLICAL SEMICONDUCTOR INDUSTRY OR CHANGES IN END USER
MARKET DEMANDS COULD REDUCE THE VALUE OF OUR BUSINESS.
The semiconductor industry is highly cyclical, and the value of our business may
decline during the "down" portion of these cycles. Beginning in the fourth
quarter of 2000 and continuing through most of 2001, we and the rest of the
semiconductor industry experienced backlog cancellations and reduced demand for
our products, resulting in significant revenue declines, due to excess
inventories at computer and telecommunications equipment manufacturers and
general economic conditions, especially in the technology sector. Although we
believe the trough of this most recent cycle occurred in the third quarter of
2001, the semiconductor industry has yet to begin a significant recovery. We may
experience renewed, possibly more severe and prolonged, downturns in the future
as a result of such cyclical changes. Even as demand increases following such
downturns, our profitability may not increase because of price competition that
historically accompanies recoveries in demand. For example, in 2002, we sold
approximately 7% more units than in 2001, yet our revenues were essentially
unchanged. In addition, we may experience significant changes in our
profitability as a result of variations in sales, changes in product mix,
changes in end user markets and the costs associated with the introduction of
new products. The markets for our products depend on continued demand for
personal computers, cellular telephones and consumer electronics and automotive
and industrial goods, and these end user markets may experience changes in
demand that will adversely affect our prospects.
5
WE MAY NOT BE ABLE TO DEVELOP NEW PRODUCTS TO SATISFY CHANGES IN CONSUMER
DEMANDS.
Our failure to develop new technologies, or react to changes in existing
technologies, could materially delay development of new products, which could
result in decreased revenues and a loss of market share to our competitors.
Rapidly changing technologies and industry standards, along with frequent new
product introductions, characterize the semiconductor industry. Our financial
performance depends on our ability to design, develop, manufacture, assemble,
test, market and support new products and enhancements on a timely and
cost-effective basis. We may not successfully identify new product opportunities
and develop and bring new products to market in a timely and cost-effective
manner. Products or technologies developed by other companies may render our
products or technologies obsolete or noncompetitive. Many of our competitors are
larger, older and well established international companies with greater
engineering and research and development resources than us. A fundamental shift
in technologies in our product markets that we fail to identify or capitalize on
relative to our competitors could have a material adverse effect on our
competitive position within our industry.
OUR FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS COULD ADVERSELY AFFECT
OUR FUTURE PERFORMANCE AND GROWTH.
Failure to protect our existing intellectual property rights may result in the
loss of valuable technologies or having to pay other companies for infringing on
or using their intellectual property rights. We rely on patent, trade secret,
trademark and copyright law to protect such technologies. Some of our
technologies are not covered by any patent or patent application, and we cannot
assure you that:
- the patents owned by us or numerous other patents which third
parties license to us will not be invalidated, circumvented,
challenged or licensed to other companies;
- any of our pending or future patent applications will be
issued within the scope of the claims sought by us, if at all.
In addition, effective patent, trademark, copyright and trade secret protection
may be unavailable, limited or not applied for in some countries.
We also seek to protect our proprietary technologies, including technologies
that may not be patented or patentable, in part by confidentiality agreements
and, if applicable, inventors' rights agreements with our collaborators,
advisors, employees and consultants. We cannot assure you that these agreements
will not be breached, that we will have adequate remedies for any breach or that
such persons or institutions will not assert rights to intellectual property
arising out of such research. Some of our technologies have been licensed on a
non-exclusive basis from National Semiconductor, Samsung Electronics and other
companies which may license such technologies to others, including our
competitors. In addition, under a technology licensing and transfer agreement,
National Semiconductor has limited royalty-free, worldwide license rights
(without right to sublicense) to some of our technologies. If necessary or
desirable, we may seek licenses under patents or intellectual property rights
claimed by others. However, we cannot assure you that we will obtain such
licenses or that the terms of any offered licenses will be acceptable to us. The
failure to obtain a license from a third party for technologies we use could
cause us to incur substantial liabilities and to suspend the manufacture or
shipment of products or our use of processes requiring the technologies.
OUR FAILURE TO OBTAIN OR MAINTAIN THE RIGHT TO USE SOME TECHNOLOGIES MAY
NEGATIVELY AFFECT OUR FINANCIAL RESULTS.
Our future success and competitive position depend in part upon our ability to
obtain or maintain proprietary technologies used in our principal products,
which is achieved in part by defending claims by competitors and others of
intellectual property infringement. The semiconductor industry is characterized
by claims of intellectual property infringement and litigation regarding patent
and other intellectual property rights. These claims relate both to products and
manufacturing processes. Even though we maintain procedures to avoid infringing
others' rights as part of our product and process development efforts, we cannot
assure you that we will be successful, or that others will agree that our
products are non-infringing. We receive direct and indirect claims of
intellectual property infringement (including offers to sell us licenses), have
been involved in lawsuits, and could become subject to other lawsuits, in which
it is alleged that we have infringed upon the patent or other intellectual
property rights of other companies. Our involvement in existing and future
intellectual property
6
litigation, or the costs of avoiding litigation by purchasing licenses rights or
by other means, could result in significant expense to our company, adversely
affecting sales of the challenged product or technologies and diverting the
efforts of our technical and management personnel, whether or not such
litigation is resolved in our favor. In the event of an adverse outcome as a
defendant in any such litigation, we may be required to:
- pay substantial damages;
- indemnify our customers for damages they might suffer if the
products they purchase from us violate the intellectual
property rights of others;
- stop our manufacture, use, sale or importation of infringing
products;
- expend significant resources to develop or acquire
non-infringing technologies;
- discontinue manufacturing processes; or
- obtain licenses to the intellectual property we are found to
have infringed.
We cannot assure you that we would be successful in such development or
acquisition or that such licenses would be available under reasonable terms. Any
such development, acquisition or license could require the expenditure of
substantial time and other resources.
WE MAY NOT BE ABLE TO CONSUMMATE FUTURE ACQUISITIONS OR SUCCESSFULLY INTEGRATE
ACQUISITIONS INTO OUR BUSINESS.
We have made nine acquisitions of various sizes since we became an independent
company in 1997, and we plan to pursue additional acquisitions of related
businesses. We believe the semiconductor industry is going through a period of
consolidation, and we expect to participate in this development. The costs of
acquiring and integrating related businesses, or our failure to integrate them
successfully into our existing businesses, could result in our company incurring
unanticipated expenses and losses. In addition, we may not be able to identify
or finance additional acquisitions or realize any anticipated benefits from
acquisitions we do complete.
We are constantly pursuing acquisition opportunities and consolidation
possibilities and are in various stages of due diligence or preliminary
discussions with respect to a number of potential transactions, some of which
would be significant. No material potential transactions are subject to a letter
of intent or otherwise so far advanced as to make the transaction reasonably
certain.
If we acquire another business, the process of integrating acquired operations
into our existing operations may result in unforeseen operating difficulties and
may require significant financial resources that would otherwise be available
for the ongoing development or expansion of existing operations. Some of the
risks associated with acquisitions include:
- unexpected losses of key employees, customers or suppliers of
the acquired company;
- conforming the acquired company's standards, processes,
procedures and controls with our operations;
- coordinating new product and process development;
- hiring additional management and other critical personnel;
- negotiating with labor unions; and
- increasing the scope, geographic diversity and complexity of
our operations.
In addition, we may encounter unforeseen obstacles or costs in the integration
of other businesses we acquire.
7
Possible future acquisitions could result in the incurrence of additional debt,
contingent liabilities and amortization expenses related to goodwill and other
intangible assets, all of which could have a material adverse effect on our
financial condition and operating results.
WE DEPEND ON SUPPLIERS FOR TIMELY DELIVERIES OF RAW MATERIALS OF ACCEPTABLE
QUALITY. PRODUCTION TIME AND PRODUCT COSTS COULD INCREASE IF WE WERE TO LOSE A
PRIMARY SUPPLIER OR IF A PRIMARY SUPPLIER INCREASED THE PRICES OF RAW MATERIALS.
PRODUCT PERFORMANCE COULD BE AFFECTED AND QUALITY ISSUES COULD DEVELOP AS A
RESULT OF A SIGNIFICANT DEGRADATION IN THE QUALITY OF RAW MATERIALS WE USE IN
OUR PRODUCTS.
Our manufacturing operations depend upon obtaining adequate supplies of raw
materials on a timely basis. Our results of operations could be adversely
affected if we were unable to obtain adequate supplies of raw materials in a
timely manner or if the costs of raw materials increased significantly. Results
could also be adversely affected if there is a significant degradation in the
quality of raw materials used in our products, or if the raw materials give rise
to compatibility or performance issues in our products, any of which could lead
to an increase in customer returns or product warranty claims. Although we
maintain rigorous quality control systems, errors or defects may arise from a
supplied raw material and be beyond our detection or control. We purchase raw
materials such as silicon wafers, lead frames, mold compound, ceramic packages
and chemicals and gases from a limited number of suppliers on a just-in-time
basis. From time to time, suppliers may extend lead times, limit supplies or
increase prices due to capacity constraints or other factors. In addition, we
subcontract a portion of our wafer fabrication and assembly and test operations
to other manufacturers, including Amkor, AUK, Enoch, Wooseok, SPS, NS
Electronics (Bangkok) Ltd., Samsung Electronics, and ChipPAC. Our operations and
ability to satisfy customer obligations could be adversely affected if our
relationships with these subcontractors were disrupted or terminated.
DELAYS IN BEGINNING PRODUCTION AT NEW FACILITIES, EXPANDING CAPACITY AT EXISTING
FACILITIES, IMPLEMENTING NEW PRODUCTION TECHNIQUES, OR IN CURING PROBLEMS
ASSOCIATED WITH TECHNICAL EQUIPMENT MALFUNCTIONS, ALL COULD ADVERSELY AFFECT OUR
MANUFACTURING EFFICIENCIES.
Our manufacturing efficiency is an important factor in our profitability, and we
cannot assure you that we will be able to maintain our manufacturing efficiency
or increase manufacturing efficiency to the same extent as our competitors. Our
manufacturing processes are highly complex, require advanced and costly
equipment and are continuously being modified in an effort to improve yields and
product performance. Impurities or other difficulties in the manufacturing
process can lower yields. We have begun initial production at a new assembly and
test facility in Suzhou, China. We are transferring some production from
subcontractors to this new facility. In addition, we are currently engaged in an
effort to expand capacity at some of our manufacturing facilities. As is common
in the semiconductor industry, we have from time to time experienced difficulty
in beginning production at new facilities or in completing transitions to new
manufacturing processes at existing facilities. As a consequence, we have
suffered delays in product deliveries or reduced yields.
We may experience delays or problems in bringing our new factory in Suzhou,
China or other new manufacturing capacity to full production. Such delays, as
well as possible problems in achieving acceptable yields, or product delivery
delays relating to existing or planned new capacity could result from, among
other things, capacity constraints, construction delays, upgrading or expanding
existing facilities or changing our process technologies, any of which could
result in a loss of future revenues. Our operating results could also be
adversely affected by the increase in fixed costs and operating expenses related
to increases in production capacity if revenues do not increase proportionately.
MORE THAN HALF OF OUR SALES ARE MADE BY DISTRIBUTORS WHO CAN TERMINATE THEIR
RELATIONSHIPS WITH US WITH LITTLE OR NO NOTICE. THE TERMINATION OF A DISTRIBUTOR
COULD REDUCE SALES AND RESULT IN INVENTORY RETURNS.
Distributors accounted for 63% of our net sales for the three months ended June
29, 2003. Our top five distributors worldwide accounted for 17% of our net sales
for the three months ended June 29, 2003. As a general rule, we do not have
long-term agreements with our distributors and they may terminate their
relationships with us with little or no advance notice. Distributors generally
offer competing products. The loss of one or more of our distributors, or the
decision by one or more of them to reduce the number of our products they offer
or to carry the product lines of our competitors, could have a material adverse
effect on our business, financial condition and results of operations. The
termination of a significant distributor,
8
whether at our or the distributor's initiative, or a disruption in the
operations of one or more of our distributors, could reduce our net sales in a
given quarter and could result in an increase in inventory returns.
THE SEMICONDUCTOR BUSINESS IS VERY COMPETITIVE, ESPECIALLY IN THE MARKETS WE
SERVE, AND INCREASED COMPETITION COULD REDUCE THE VALUE OF AN INVESTMENT IN OUR
COMPANY.
The semiconductor industry is, and the multi-market semiconductor product
markets in particular are, highly competitive. Competitors offer equivalent or
similar versions of many of our products, and customers may switch from our
products to competitors' products on the basis of price, delivery terms, product
performance, quality, reliability and customer service or a combination of any
of these factors. Competition is especially intense in the multi-market
semiconductor segment because it is relatively easier for customers to switch
suppliers of more standardized, multi-market products like ours, compared to
switching suppliers of more highly integrated or customized semiconductor
products such as processors or system-on-a-chip products, which we do not
manufacture. Even in strong markets, price pressures may emerge as competitors
attempt to gain a greater market share by lowering prices. Competition in the
various markets in which we participate comes from companies of various sizes,
many of which are larger and have greater financial and other resources than we
have and thus are better able to pursue acquisition candidates and can better
withstand adverse economic or market conditions. In addition, companies not
currently in direct competition with us may introduce competing products in the
future.
WE MAY FACE PRODUCT WARRANTY OR PRODUCT LIABILITY CLAIMS THAT ARE
DISPROPORTIONATELY HIGHER THAN THE VALUE OF THE PRODUCTS INVOLVED.
Our products are typically sold at prices that are significantly lower than the
cost of the equipment or other goods in which they are incorporated. For
example, our products that are incorporated into a personal computer would be
sold for several dollars, whereas the personal computer would be sold by the
computer maker for several hundred dollars. Although we maintain rigorous
quality control systems, we manufacture and sell approximately 16 billion
individual semiconductor devices per year to customers around the world, and in
the ordinary course of our business we receive warranty claims for some of these
products that are defective or that do not perform to published specifications.
Since a defect or failure in our product could give rise to failures in the
goods that incorporate them (and consequential claims for damages against our
customers from their customers), we may face claims for damages that are
disproportionate to the revenues and profits we receive from the products
involved. We attempt, through our standard terms and conditions of sale and
other customer contracts, to limit our liability for defective products to
obligations to replace the defective goods or refund the purchase price.
Nevertheless, we receive claims for other charges, such as for labor and other
costs of replacing defective parts, lost profits and other damages. In addition,
our ability to reduce such liabilities may be limited by the laws or the
customary business practices of the countries where we do business. And, even in
cases where we do not believe we have legal liability for such claims, we may
choose to pay for them to retain a customer's business or goodwill. Our results
of operations and business could be adversely affected as a result of a
significant quality or performance issue in our products, if we are required or
choose to pay for the damages that result.
OUR INTERNATIONAL OPERATIONS SUBJECT OUR COMPANY TO RISKS NOT FACED BY DOMESTIC
COMPETITORS.
Through our subsidiaries we maintain significant operations in the Philippines,
Malaysia and South Korea and also operate facilities in China and Singapore. We
are constructing another facility in China. We have sales offices and customers
around the world. Almost three-quarters of our revenues in 2002 were from Asia.
The following are risks inherent in doing business on an international level:
- economic and political instability;
- foreign currency fluctuations;
- transportation delays;
- trade restrictions;
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- work stoppages; and
- the laws, including tax laws of, and the policies of the
United States toward, countries in which we manufacture our
products.
THE POWER DEVICE BUSINESS SUBJECTS OUR COMPANY TO RISKS INHERENT IN DOING
BUSINESS IN KOREA, INCLUDING POLITICAL RISK, LABOR RISK AND CURRENCY RISK.
As a result of the acquisition of the power device business from Samsung
Electronics in 1999, we have significant operations and sales in South Korea and
are subject to risks associated with doing business there. Korea accounted for
21% of our revenue for the second quarter of 2003.
Relations between South Korea and North Korea have been tense over most of South
Korea's history, and recent concerns over North Korea's nuclear capability, and
relations between the United States and North Korea, have created a global
security issue that may adversely affect Korean business and economic
conditions. We cannot assure you as to whether or when this situation will be
resolved or change abruptly as a result of current or future events. An adverse
change in economic or political conditions in South Korea or in its relations
with North Korea could have a material adverse effect on our Korean subsidiary
and our company. And, in addition to other risks disclosed relating to
international operations, some businesses in South Korea are subject to labor
unrest.
Our power device business' sales are denominated primarily in U.S. dollars while
a significant portion of its costs of goods sold and its operating expenses are
denominated in South Korean won. Although we have taken steps to fix the costs
subject to currency fluctuations and to balance won revenues and won costs, a
significant change in this balance, coupled with a significant change in the
value of the won relative to the dollar, could have a material adverse effect on
our financial performance and results of operations. In addition, an unfavorable
change in the value of the won could require us to write down our
won-denominated assets.
WE ENTERED INTO A NUMBER OF SUPPLY AND SUPPORT CONTRACTS WITH SAMSUNG
ELECTRONICS IN CONNECTION WITH OUR ACQUISITION OF ITS POWER DEVICE BUSINESS IN
1999, MOST OF WHICH HAVE NOW ENDED. ANY SIGNIFICANT DECREASE IN PURCHASES BY
SAMSUNG ELECTRONICS COULD SUBSTANTIALLY REDUCE OUR FINANCIAL PERFORMANCE.
As a result of the acquisition of Samsung Electronics' power device business in
1999, we entered into numerous arrangements with Samsung Electronics, including
arrangements relating to product sales, designation as a preferred vendor to
affiliated Samsung companies and other services. Although most of these
arrangements have expired, Samsung Electronics remains a significant customer,
due in part to the historical relationship between the business we acquired and
its former parents and affiliates. There can be no assurances that these
relationships will continue at historical levels. Samsung Electronics (together
with its affiliates) is our largest customer, accounting for approximately 11%
of total sales during the second quarter of 2003. Any material reduction in the
purchases of Samsung Electronics could have a material adverse effect on our
results of operations.
A CHANGE IN FOREIGN TAX LAWS OR A DIFFERENCE IN THE CONSTRUCTION OF CURRENT
FOREIGN TAX LAWS BY RELEVANT FOREIGN AUTHORITIES COULD RESULT IN US NOT
RECOGNIZING THE BENEFITS WE ANTICIPATED IN CONNECTION WITH THE TRANSACTION
STRUCTURE USED TO CONSUMMATE THE ACQUISITION OF THE POWER DEVICE BUSINESS.
The transaction structure we used for the acquisition of the power device
business is based on assumptions about the various tax laws, including
withholding tax, and other relevant laws of foreign jurisdictions. In addition,
our Korean subsidiary was granted a ten-year tax holiday under Korean law in
1999. The first seven years are tax-free, followed by three years of income
taxes at 50% of the statutory rate. In 2000, the tax holiday was extended such
that the exemption amounts were increased to 75% in the eighth year and a 25%
exemption was added to the eleventh year. If our assumptions about tax and other
relevant laws are incorrect, or if foreign taxing jurisdictions were to change
or modify the relevant laws, or if our Korean subsidiary were to lose its tax
holiday, we could suffer adverse tax and other financial consequences or lose
the benefits anticipated from the transaction structure we used to acquire that
business.
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WE PLAN TO SIGNIFICANTLY EXPAND OUR MANUFACTURING OPERATIONS IN CHINA AND, AS A
RESULT, WILL BE INCREASINGLY SUBJECT TO RISKS INHERENT IN DOING BUSINESS IN
CHINA, WHICH MAY ADVERSELY AFFECT OUR FINANCIAL PERFORMANCE.
We have completed the first phase of an 800,000 square foot assembly and test
facility in Suzhou, China, and began production there in July 2003. Although we
expect a significant portion of our production from this new facility will be
exported out of China, especially initially, we are hopeful that a significant
portion of our future revenue will result from the Chinese markets in which our
products are sold, and from demand in China for goods that include our products.
In addition, since 2000 we have operated an optoelectronics manufacturing
facility in Wuxi, China. Our ability to operate in China may be adversely
affected by changes in that country's laws and regulations, including those
relating to taxation, import and export tariffs, environmental regulations, land
use rights, property and other matters. In addition, our results of operations
in China are subject to the economic and political situation there. We believe
that our operations in China are in compliance with all applicable legal and
regulatory requirements. However, there can be no assurance that China's central
or local governments will not impose new, stricter regulations or
interpretations of existing regulations that would require additional
expenditures. Changes in the political environment or government policies could
result in revisions to laws or regulations or their interpretation and
enforcement, increased taxation, restrictions on imports, import duties or
currency revaluations. In addition, a significant destabilization of relations
between China and the United States could result in restrictions or prohibitions
on our operations or the sale of our products in China. The legal system of
China relating to foreign trade is relatively new and continues to evolve. There
can be no certainty as to the application of its laws and regulations in
particular instances. Enforcement of existing laws or agreements may be sporadic
and implementation and interpretation of laws inconsistent. Moreover, there is a
high degree of fragmentation among regulatory authorities resulting in
uncertainties as to which authorities have jurisdiction over particular parties
or transactions.
OUR BUSINESS IS SUBJECT TO RISKS ASSOCIATED WITH SEVERE ACUTE RESPIRATORY
SYNDROME (SARS), INCLUDING THE RISKS OF REDUCED DEMAND FOR OUR PRODUCTS AND THE
RISK OF REDUCED PRODUCTION CAPACITY.
As described above, we operate a facility in Wuxi, China and are in the process
of constructing a new assembly and test facility in Suzhou, China, near
Shanghai, the first phase of which has been completed. Our sales headquarters
for the Asia Pacific region are located in Hong Kong and we have sales and
administrative offices in Beijing, Shanghai and Shenzhen, China as well as in
Singapore and Taiwan. We also have significant facilities in Malaysia, the
Philippines and South Korea. Although it now appears that SARS is under control,
during the height of the crisis we restricted employee travel, resulting in
reduced direct contacts with customers. We are continuing to monitor the effects
of SARS on our business. SARS, its actual and perceived effects, or a renewed
outbreak of the disease, and the general economic and other disruptions caused
by SARS may lead to reduced demand for our products in China and the rest of
Asia. In the second quarter of 2003, the Asian region, including Korea,
accounted for 73% of our revenue. In addition, a SARS outbreak in one of our
manufacturing facilities or the facility of a supplier could have an adverse
effect on our operations if we are not able to address the lost production
capacity that could result.
WE ARE SUBJECT TO MANY ENVIRONMENTAL LAWS AND REGULATIONS THAT COULD AFFECT OUR
OPERATIONS OR RESULT IN SIGNIFICANT EXPENSES.
Increasingly stringent environmental regulations restrict the amount and types
of pollutants that can be released from our operations into the environment.
While the cost of compliance with environmental laws has not had a material
adverse effect on our results of operations historically, compliance with these
and any future regulations could require significant capital investments in
pollution control equipment or changes in the way we make our products. In
addition, because we use hazardous and other regulated materials in our
manufacturing processes, we are subject to risks of liabilities and claims,
regardless of fault, resulting from accidental releases, including personal
injury claims and civil and criminal fines, any of which could be material to
our cash flow or earnings. For example:
- we currently are remediating contamination at some of our
operating plant sites;
- we have been identified as a potentially responsible party at
a number of Superfund sites where we (or our predecessors)
disposed of wastes in the past; and
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- significant regulatory and public attention on the impact of
semiconductor operations on the environment may result in more
stringent regulations, further increasing our costs.
Although most of our known environmental liabilities are covered by indemnities
from Raytheon Company, National Semiconductor, Samsung Electronics and Intersil
Corporation, these indemnities are limited to conditions that occurred prior to
the consummation of transactions with those companies. Moreover, we cannot
assure you that their indemnity obligations to us for the covered liabilities
will be adequate to protect us.
WE MAY NOT BE ABLE TO ATTRACT OR RETAIN THE TECHNICAL OR MANAGEMENT EMPLOYEES
NECESSARY TO REMAIN COMPETITIVE IN OUR INDUSTRY.
Our continued success depends on the retention and recruitment of skilled
personnel, including technical, marketing, management and staff personnel. In
the semiconductor industry, the competition for qualified personnel,
particularly experienced design engineers and other technical employees, is
intense, particularly in the "up" portions of our business cycle, when
competitors may try to recruit our most valuable technical employees. There can
be no assurance that we will be able to retain our current personnel or recruit
the key personnel we require.
WE ARE A LEVERAGED COMPANY WITH A DEBT-TO-EQUITY RATIO AT JUNE 29, 2003 OF
APPROXIMATELY 0.8 TO 1, WHICH COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH AND
LIMIT OUR ABILITY TO GROW AND COMPETE.
At June 29, 2003, we had total long-term debt of $852.7 million and a ratio of
debt to equity of approximately 0.8 to 1. On June 19, 2003, we entered into a
new credit facility that included a $300 million term B loan, the proceeds of
which have been used to redeem our 10-3/8% Senior Subordinated Notes due 2007,
as well as a $180 million revolving line of credit. Our substantial indebtedness
could have important consequences. For example, it could
- require us to dedicate a substantial portion of our cash flow
from operations to payments on our indebtedness, thereby
reducing the availability of our cash flow to fund working
capital, capital expenditures, research and development
efforts and other general corporate purposes;
- increase the amount of our interest expense, because certain
of our borrowings (namely borrowings under our senior credit
facility) are at variable rates of interest, which, if
interest rates increase, could result in higher interest
expense;
- increase our vulnerability to general adverse economic and
industry conditions;
- limit our flexibility in planning for, or reacting to, changes
in our business and the industry in which we operate;
- restrict us from making strategic acquisitions, introducing
new technologies or exploiting business opportunities;
- make it more difficult for us to satisfy our obligations with
respect to the instruments governing our indebtedness;
- place us at a competitive disadvantage compared to our
competitors that have less indebtedness; and
- limit, along with the financial and other restrictive
covenants in our debt instruments, among other things, our
ability to borrow additional funds, dispose of assets or pay
cash dividends. Failing to comply with those covenants could
result in an event of default which, if not cured or waived,
could have a material adverse effect on our business,
financial condition and results of operations.
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DESPITE CURRENT INDEBTEDNESS LEVELS, WE MAY STILL BE ABLE TO INCUR SUBSTANTIALLY
MORE INDEBTEDNESS. INCURRING MORE INDEBTEDNESS COULD EXACERBATE THE RISKS
DESCRIBED ABOVE.
We may be able to incur substantial additional indebtedness in the future. The
indenture governing Fairchild Semiconductor Corporation's outstanding 5%
Convertible Senior Subordinated Notes Due 2008 does not limit the amount of
additional debt that we may incur. Although the terms of the indenture governing
Fairchild Semiconductor Corporation's outstanding 10 1/2% Senior Subordinated
Notes, and the credit agreement relating to the senior credit facility contain
restrictions on the incurrence of additional indebtedness, these restrictions
are subject to a number of qualifications and exceptions and, under certain
circumstances, additional indebtedness incurred in compliance with these
restrictions could be substantial. The senior credit facility permits borrowings
of up to $180.0 million in revolving loans, in addition to the outstanding
$300.0 million term B loan that is currently outstanding under that facility. As
of June 29, 2003, adjusted for outstanding letters of credit, we had up to
$179.3 million available under the revolving loan portion of the senior credit
facility. If new debt is added to our subsidiaries' current debt levels, the
substantial risks described above would intensify.
WE MAY NOT BE ABLE TO GENERATE THE NECESSARY AMOUNT OF CASH TO SERVICE OUR
INDEBTEDNESS, WHICH MAY REQUIRE US TO REFINANCE OUR INDEBTEDNESS OR DEFAULT ON
OUR SCHEDULED DEBT PAYMENTS. OUR ABILITY TO GENERATE CASH DEPENDS ON MANY
FACTORS BEYOND OUR CONTROL.
Our historical financial results have been, and our future financial results are
anticipated to be, subject to substantial fluctuations. We cannot assure you
that our business will generate sufficient cash flow from operations, that
currently anticipated cost savings and operating improvements will be realized
on schedule or at all, or that future borrowings will be available to us under
our senior credit facility in an amount sufficient to enable us to pay our
indebtedness or to fund our other liquidity needs. In addition, because our
senior credit facility has variable interest rates, the cost of those borrowings
will increase if market interest rates increase. If we are unable to meet our
expenses and debt obligations, we may need to refinance all or a portion of our
indebtedness on or before maturity, sell assets or raise equity. We cannot
assure you that we would be able to refinance any of our indebtedness, sell
assets or raise equity on commercially reasonable terms or at all, which could
cause us to default on our obligations and impair our liquidity. Restrictions
imposed by the credit agreement relating to our senior credit facility and the
indenture governing Fairchild Semiconductor Corporation's 10 1/2% Senior
Subordinated Notes restrict or prohibit our ability to engage in or enter into
some business operating and financing arrangements, which could adversely affect
our ability to take advantage of potentially profitable business opportunities.
The operating and financial restrictions and covenants in most of our debt
instruments, such as the credit agreement relating to our senior credit facility
and the indenture governing Fairchild Semiconductor Corporation's 10 1/2% Senior
Subordinated Notes may limit our ability to finance our future operations or
capital needs or engage in other business activities that may be in our
interests. These debt instruments impose significant operating and financial
restrictions on us that affect our ability to incur additional indebtedness or
create liens on our assets, pay dividends, sell assets, engage in mergers or
acquisitions, make investments or engage in other business activities. These
restrictions could place us at a disadvantage relative to competitors not
subject to such limitations.
In addition, the credit agreement governing our senior credit facility contains
other and more restrictive covenants and limits us from prepaying our other
indebtedness. The senior credit facility also requires us to maintain specified
financial ratios. Our ability to meet those financial ratios can be affected by
events beyond our control, and we cannot assure you that we will meet those
ratios. As of June 29, 2003, we were in compliance with these ratios. A breach
of any of these covenants, ratios or restrictions could result in an event of
default under the senior credit facility. Upon the occurrence of an event of
default under the senior credit facility, the lenders could elect to declare all
amounts outstanding under the senior credit facility, together with accrued
interest, to be immediately due and payable. If we were unable to repay those
amounts, the lenders could proceed against the collateral granted to them to
secure the indebtedness. If the lenders under the senior credit facility
accelerate the payment of the indebtedness, we cannot assure you that our assets
would be sufficient to repay in full that indebtedness and our other
indebtedness.
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USE OF PROCEEDS
The common stock is being offered by Court Square Capital Limited, a wholly
owned subsidiary of Citigroup Inc., for its own account. We will not receive any
proceeds from the sale of common stock in this offering. We will pay certain
legal, accounting and other expenses incidental to the sale of shares by the
selling stockholder. These costs are estimated to be $40,275.
DIVIDEND POLICY
We have never declared or paid dividends on our common stock. We currently do
not intend to pay dividends on our common stock in the foreseeable future so
that we may reinvest in our business. The payment of dividends, if any, in the
future will be at the discretion of our board of directors.
THE SELLING STOCKHOLDER
The following table shows information known to us about the beneficial ownership
of common stock of the selling stockholder before and after the offering covered
by this prospectus. Percentages are based on the number of shares outstanding on
June 29, 2003. Figures representing shares owned after the offering assume all
shares offered will be sold.
Shares owned before offering Shares owned after offering
---------------------------- ---------------------------
Percentage of shares Percentage of shares
Name of selling stockholder Number of shares outstanding Number of shares outstanding
---------------- --------------------- ---------------- ---------------------
Court Square Capital Limited 6,453,375* 5.5% 0 0%
- -------------------------------------------------------
* As of the date of this prospectus; reflects sales made under Rule 144
Paul C. Schorr IV, an employee of Citigroup Venture Capital Equity Partners,
which is also an affiliate of Court Square Capital, has been a member of our
board of directors since 1997. In May and June, 2002, we completed a follow-on
public stock offering in which the company sold 16,219,196 shares of common
stock and Court Square Capital sold 6,000,000 of its then-existing shares. Smith
Barney, an affiliate of Court Square Capital, was co-lead managing underwriter
for that offering.
In connection with our formation in 1997, we, an affiliate of Court Square
Capital which previously owned the shares now held by Court Square Capital, some
of our key employees, and National Semiconductor Corporation, entered into a
registration rights agreement. Pursuant to the registration rights agreement,
upon the written request of Court Square Capital, we are required to prepare and
file a registration statement with the SEC concerning the distribution of all or
part of the shares held by Court Square Capital and use our best efforts to
cause such registration statement to become effective. The registration
statement that includes this prospectus has been filed as a result of such a
request. Under the terms of the registration rights agreement, we will pay the
fees and expenses associated with the filing of the registration statement, and
we have agreed to indemnify and hold the selling stockholder harmless against
certain liabilities under the Securities Act of 1933 that could arise in
connection with the selling stockholder's sale of the shares covered by this
prospectus. No other parties to the registration rights agreement are currently
eligible to include shares in the registration covered by this prospectus and,
upon the sale of all of the shares covered by this prospectus, no outstanding
shares of our common stock will be subject to the registration rights agreement.
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PLAN OF DISTRIBUTION
The shares of common stock covered by this prospectus may be offered
and sold from time to time by Court Square Capital. We will not receive any
proceeds from this offering. The shares may be sold from time to time to
purchasers directly by Court Square Capital.
Alternatively, Court Square Capital may from time to time offer the
shares through dealers or agents, who may receive compensation in the form of
commissions from Court Square Capital, and/or the purchasers of the shares for
whom they may act as agent. Court Square Capital and any dealers or agents that
participate in the distribution of the shares may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933 and any profit on the sale of
the shares by them and any commissions received by such dealers or agents might
be deemed to be underwriting commissions under the Securities Act of 1933.
At a time a particular offer of the shares is made, a prospectus
supplement, if required, will be distributed that will set forth the names of
any dealers or agents and any commissions and other terms constituting
compensation from Court Square Capital and any other required information.
Shares may be sold at the market price of the common stock at the time of a
sale, at prices relating to the market price over a period of time, or at prices
negotiated with the buyers of shares.
In order to comply with the securities laws of certain states, if
applicable, the shares may be sold only through registered or licensed brokers
or dealers. In addition, in certain states, the shares may not be sold unless
they have been registered or qualified for sale in such state or an exemption
from such registration or qualification requirement is available and is complied
with.
The shares may also be sold in one or more of the following
transactions: (a) block transactions (which may involve crosses) in which a
broker-dealer may sell all or a portion of such stock as agent but may position
and resell all or a portion of the block as principal to facilitate the
transaction; (b) purchases by any such broker-dealer as principal and resale by
such broker-dealer for its own account pursuant to a prospectus supplement; (c)
ordinary brokerage transactions and transactions in which any such broker-dealer
solicits purchasers; (d) sales "at the market" to or through a market maker or
into an existing trading market, on an exchange or otherwise, including the New
York Stock Exchange, for such shares; and (e) sales in other ways not involving
market makers or established trading markets, including direct sales to
purchasers. In effecting sales, broker-dealers engaged by Court Square Capital
may arrange for other broker-dealers to participate.
Sales not covered by this prospectus may also be made pursuant to Rule
144 or another applicable exemption under the Securities Act of 1933.
LEGAL MATTERS
The validity of the shares of common stock offered pursuant to this
prospectus will be passed upon by Paul D. Delva, General Counsel of Fairchild
Semiconductor International, Inc. Mr. Delva beneficially owns 3,520 shares of
our common stock and holds vested options to purchase 27,712 shares of our
common stock, unvested options to purchase 47,038 shares of our common stock and
deferred stock units representing 1,334 shares of our common stock, all issued
under the Fairchild Semiconductor Stock Plan.
EXPERTS
The consolidated financial statements of our company and its
subsidiaries as of December 29, 2002 and December 30, 2001, and for the each of
the years in the three-year period ended December 29, 2002, have been
incorporated by reference herein in reliance upon the report of KPMG LLP,
independent accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
The audit report of KPMG LLP covering the aforementioned consolidated
financial statements refers to a change in the method of accounting for goodwill
and other intangible assets as a result of adopting the provisions of Statement
of Financial Accounting Standards No. 142, "Goodwill and Other Intangible
Assets."
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This prospectus does not offer to sell or ask for offers to buy any
securities other than those to which this prospectus relates and it does not
constitute an offer to sell or ask for offers to buy any of the securities in
any jurisdiction where it is unlawful, where the person making the offer is not
qualified to do so, or to any person who cannot legally be offered the
securities. The information contained in this prospectus is current only as of
its date.
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