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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-K
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM MAY 31, 1999 TO DECEMBER 26, 1999
COMMISSION FILE NUMBER 001-15181
FAIRCHILD SEMICONDUCTOR INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 04-3363001
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
333 WESTERN AVENUE, SOUTH PORTLAND, ME 04106
(Address of principal executive offices) (Zip Code)
(207) 775-8100
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Class A Common Stock, par value $.01 per share
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 15, 2000 was 1,935,000,000.
The number of shares outstanding of the Registrant's Class A and Class B
Common Stock as of March 15, 2000 was 79,264,020 and 17,281,000 respectively.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the transition period
covered by this Annual Report on Form 10-K are incorporated by reference into
Parts I and II.
Portions of the definitive Proxy Statement for the Annual Meeting of
Stockholders to be held on May 16, 2000 are incorporated by reference into Part
III.
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PART I
ITEM 1. BUSINESS
Throughout this Annual Report on Form 10-K, the terms "we," "our" and
"Fairchild International" refer to Fairchild Semiconductor International, Inc.
and its consolidated subsidiaries, including Fairchild Semiconductor
Corporation, our principal operating subsidiary. We refer to specific
subsidiaries where appropriate.
We have recently changed our fiscal year-end from the last Sunday in May to
the last Sunday in December. Our last fiscal year under our old accounting
calendar was the year ended May 30, 1999, which we refer to as "Fiscal 1999."
Our first fiscal year under the new accounting calendar is the year ending
December 31, 2000. The transition period from May 31, 1999 to December 26, 1999,
which we refer to as "Stub Year 1999," is the period covered by this Annual
Report on Form 10-K.
GENERAL
Fairchild International is one of the largest independent semiconductor
companies focused solely on multi-market products. We design, develop and market
analog, discrete, logic and non-volatile memory semiconductors. Within our
multi-market products portfolio, we are particularly strong in providing
discrete and analog power management and interface solutions. Multi-market
products are the building block components for virtually all electronic devices,
from sophisticated computers and internet hardware to telecommunications
equipment to household appliances. Because of their basic functionality, our
products provide customers with greater design flexibility than more highly
integrated products and improve the performance of more complex devices or
systems. Given such characteristics, our products have a wide range of
applications. Our products are sold to customers in the personal computer,
industrial, telecommunications, consumer electronics and automotive markets.
With a history dating back more than 35 years, Fairchild Semiconductor was
among the original founders of the semiconductor industry. The original
Fairchild Semiconductor Corporation was established in 1959 as a provider of
memory and logic semiconductors. The Fairchild Semiconductor business was
acquired by Schlumberger Limited in 1979 and by National Semiconductor
Corporation in 1987. In March 1997, as part of its recapitalization, the
Fairchild Semiconductor business was sold to a new, independent company -
Fairchild Semiconductor Corporation. At the time of the recapitalization,
Fairchild Semiconductor Corporation consisted of the discrete, logic and
non-volatile memory businesses of National Semiconductor. On December 31, 1997,
Fairchild Semiconductor Corporation acquired Raytheon Semiconductor, Inc., a
wholly owned subsidiary of Raytheon Company, for approximately $117.0 million in
cash. That business designs, manufactures and markets high-performance analog
and mixed signal semiconductors for the personal computer, communications,
broadcast video and industrial markets. Raytheon Semiconductor was combined with
the Non-Volatile Memory Products Group to form the Analog, Mixed Signal and
Non-Volatile Memory Products Group. Fairchild International's other product
groups include the Discrete Power and Signal Technologies Products Group and the
Interface and Logic Products Group.
On April 13, 1999, we purchased the power device business of Samsung
Electronics for approximately $414.9 million, including fees and expenses. The
power device business designs, manufactures and markets power discrete
semiconductors and standard analog integrated circuits serving the personal
computer, industrial, telecommunications and consumer electronics markets. The
power device business has developed a number of new product designs with
industry leading performance characteristics, such as its recent process
developments in trench technology and silicon bonding. The acquisition of the
power device business not only enhanced our analog and power discrete product
offerings, but also provided us with a greater market presence in South Korea.
The acquisition of the power device business also provided us with additional
revenue opportunities through our relationship with Samsung Electronics:
- Samsung Electronics is required to purchase guaranteed minimum annual
levels of products from the power device business based on historical
volumes and market prices for a three-year period according to terms of
a product supply agreement.
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- We are required to provide contract manufacturing services in the form
of wafer foundry services for Samsung Electronics Co., Ltd. for a
three-year period according to the terms of a foundry sale agreement.
The agreement is designed to provide us levels of profitability totaling
W53,700 million over three years.
In connection with the acquisition of the power device business, we have
obtained a full income tax holiday for a period of seven years in South Korea.
PRODUCTS AND TECHNOLOGY
We design, develop and manufacture a broad range of products used in a wide
variety of microelectronic applications, including personal computer,
industrial, telecommunications, consumer products and automotive systems. Our
products are organized into three principal products groups: the Analog, Mixed
Signal and Non-Volatile Memory Products Group, the Discrete Power and Signal
Technologies Products Group, and the Interface and Logic Products Group. The
power device business includes power discrete and analog products. For purposes
of this presentation, these products have been combined with Analog and Mixed
Signal Products and the Discrete Power and Signal Technologies Group.
ANALOG, MIXED SIGNAL AND NON-VOLATILE MEMORY PRODUCTS GROUP
ANALOG AND MIXED SIGNAL PRODUCTS
Fairchild International designs, manufactures and markets high-performance
analog and mixed signal integrated circuits for the personal computer,
industrial, consumer electronics and broadcast video markets. These products are
manufactured using leading-edge CMOS, BiCMOS, DMOS and bipolar technologies.
Analog and mixed signal products represent a significant long-term growth area
of the semiconductor industry. The increasing demand to integrate high
performance microprocessor-based electronics in equipment ranging from personal
computers to scientific instrumentation, telecommunications and data
communications networks has led analog and mixed signal semiconductor suppliers
to create designs that have higher levels of integration to reduce space and
power requirements and provide greater functionality, all at lower cost. We
offer over 2,300 analog device products, including offerings in all of the top
100 best selling (in terms of volume) analog product types. Major competitors
include Analog Devices, Burr Brown, Linear Technology, Intersil, ON
Semiconductor, Philips and Semtech.
Analog. Analog products control continuously variable functions such as
light, color, sound and power. They enable human beings to interface with the
digital world. We provide analog products that solve problems relating to power
conversion, temperature sensing, management functions, battery chargers and
motor controls. Our Smart Power Switch is a proprietary, multichip module
consisting of a power management integrated circuit and a MOSFET. Smart Power
Switches provide a solution for off-line power converter designs in power
supplies, battery chargers, PC peripherals, and home and consumer applications.
We also offer a mix of mature products, such as operational amplifiers, audio
amplifiers, regulators, compurators, references and timers, and ground fault
interrupters, which continue to generate significant revenues due to their long
product life cycles.
Mixed Signal. Mixed signal products are those which can process both
analog and digital information. Our mixed signal offerings include analog to
digital converters, digital to analog converters and market-leading digital
video encoders and decoders sold to manufacturers of high-end video equipment
and set top boxes.
We believe our Analog product portfolio is further enhanced by a wide
variety of packaging solutions that we have developed. These solutions include
surface mount and tiny packages.
NON-VOLATILE MEMORY PRODUCTS
Fairchild International designs, manufactures and markets non-volatile
memory circuits which retain data after power to the device has been shut off.
We offer an extensive portfolio of high performance serial EEPROM and EPROM
products. We do not participate in the FLASH market segment. EPROMs are
electrically programmable read-only memories. These non-volatile memory devices
are used in the personal
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computer, industrial, telecommunications, consumer electronics and automotive
systems. Major competitors include ST Microlectronics, Advanced Micro Devices,
Atmel, Xicor and Microchip Technology.
EEPROMS. EEPROMs are used primarily to store changing information in
consumer products and automotive applications such as microwaves, televisions,
stereos and automotive controls. We serve the EEPROM market with product
offerings in (i) standard EEPROM and (ii) Application Specific Standard Products
(or ASSP). Our standard EEPROM products serve each of the three serial bus
interface protocols used with all industry standard microcontrollers. Our
Application Specific Standard Products are individually developed for specific
applications and combine our core EEPROM competencies with logic capabilities.
Key product offerings in the ASSP category include the ACEx family of
microcontrollers and the SoftSelect(TM) family of devices for software control
of power management and frequencies.
The ACEx family consists of highly optimized 8-bit microcontrollers
featuring a rich instruction set and extremely low power consumption. Offered in
one of the smallest packages in the industry, its features make it ideal for
battery management and power management applications requiring low power
consumption and low weight. The SoftSelect(TM) family of devices provide
software control of power management and automatic configuration of motherboards
for personal computers. Other products in the ASSP category include Plug & Play
controllers for the PC market, single-chip high security solutions for
automotive remote keyless entry and other similar applications such as
garage-door openers, and the serial presence detect (SPD) device which permits
automatic configuration of memory modules on computers.
EPROMS. The ability of EPROMs to be programmed electrically by the
equipment manufacturer enables them to achieve shorter time to market for new
products than if they used products that must be programmed by the chip
manufacturer. Today, EPROMs are primarily utilized in applications where storage
of the instruction sets for microcontrollers requires less than 2 Mb in density,
which is virtually all segments of the low-end consumer electronic market (e.g.,
answering machines, garage door openers and washing machines). The EPROM market
is declining as FLASH becomes cost-effective at lower densities. As a result, we
are incurring minimal research and development expenditures in this product
line. We currently sell EPROMs in densities ranging from 64K to 4Mb.
DISCRETE POWER AND SIGNAL TECHNOLOGIES PRODUCTS GROUP
Discrete devices are individual diodes or transistors that perform basic
signal amplification and switching functions in electronic circuits. Driving the
long-term growth of discretes is the increasing importance of power management,
particularly in portable applications (e.g., pagers and notebook computers). We
participate in both the power and small signal discrete markets using our DMOS
and Bipolar technologies, manufacturing semiconductors that condition (or shape)
power or signals for use by other devices. The acquisition of the power device
business added significantly to our discrete product portfolio, with only small
signal transistors overlapping with our existing portfolio. While the world
market is dominated by such multinational semiconductor manufacturers as
Toshiba, ON Semiconductor and Philips, a significant portion of the industry is
fragmented where competition is primarily on a regional basis. Other competitors
include Siliconix and International Rectifier.
DMOS. DMOS discrete devices are used to convert, switch or otherwise shape
or condition electricity. We offer a wide range of DMOS power MOSFETs designed
for low and high voltage applications over a wide range of performance
characteristics, power handling capabilities and package options. We are
focusing on DMOS as our growth area due to the trend towards smaller and lighter
products and longer battery life, as well as batteries with built-in smart
functions. DMOS products are the focus of our research and development
expenditures. These expenditures have been directed primarily toward the
development of our leading-edge Trench technology. These products are commonly
found in portable computers and peripherals, portable telephones, automobiles,
and battery-powered devices. Our DMOS products include:
Low Voltage MOSFET. This product line is focused on developing products in
the Low Voltage DMOS area in support of the trend towards smaller and lighter
products, longer battery life expectancy, as well as batteries with built-in
smart functions. Research and development efforts and expenditures have been
directed towards the development of our leading edge Trench Technology. The
combination of leading edge wafer
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fabrication processes and new packaging technology continues to allow our Low
Voltage DMOS product families to set new standards for low resistance and high
current performance in miniature surface mount power packaging. Our Low Voltage
DMOS products are commonly found in portable computers and peripherals, portable
telephones, automobiles and battery-powered devices.
High Voltage MOSFET. This product line offers a wide variety of HV MOSFET
devices designed for high voltage applications (200V to 900V) over a wide range
of performance characteristics, power handling capabilities and package options.
The product portfolio includes both N channel and P channel devices using
proprietary HDMOS process technology. These products are commonly found in power
system applications including flyback and forward converters and power factor
correction in switch-mode power supplies (SMPS).
IGBT. This product line offers very high voltage devices (600V to 1500V)
in a variety of package options. A proprietary silicon bonding process is being
used in the production of this family of products. Typical applications for
these devices are motor control, inverters, robotics, servo controls, power
supply and lamp ballast. IGBT will be a focused growth product line as more
industrial applications are using this technology.
Bipolar. We manufacture and sell a wide range of bipolar discretes,
including single junction glass diodes, small signal transistors, bipolar power
transistors, JFETs and Zener diodes in a wide variety of package configurations.
These devices switch, amplify and otherwise shape or modify electronic signals
and are found in nearly every electronic product, including computers, cellular
phones, mass storage devices, televisions, radios, VCRs and camcorders.
INTERFACE AND LOGIC PRODUCTS GROUP
We design, develop and manufacture high-performance interface and logic
devices utilizing three wafer fabrication processes: CMOS, BiCMOS and Bipolar.
Within each of these production processes, we manufacture products that possess
advanced performance characteristics, as well as mature products that provide
high performance at low cost to customers.
Interface Products. The significant growth in the internet hardware and
cellular base station markets has increased demand for interface products.
Interface products generally connect signals from one part of a system to
another part of a system. Typical interface applications include backplane
driving, bus driving, clock driving and signal integrity. These applications all
require high speed, high current drive and low noise attributes. These types of
products are mixed signal in nature and require a high level of analog wave
shaping techniques on the output structures, minimizing the number of suppliers
with the capability to develop them. We believe we have developed some unique
competencies and patented circuit techniques along with a broad range of process
technologies which facilitate our expansion into the interface products market.
The interface market is divided into two categories: "building block
interface" and "standards-specific interface products." Current building block
products include our FST and GTL product families with planned expansions into
an LVDS family of products and clock driving products. Standards-specific
products are normally based on industry standards which are developed by
consortiums of hardware suppliers, software suppliers, end segment customers and
industry experts. We are an active participant on many committees where industry
standards are developed, and have product offerings in printer interface, dual
inline memory module drivers and Universal Serial Bus applications. Major
competitors include Texas Instruments, National Semiconductor, Maxim and Linear
Technology.
Logic Products. Since market adoption rates of new standard logic families
have historically spanned several years, we continue to generate significant
revenues from our mature products. Customers are typically slow to move from an
older product to a newer one. Further, for any given product, standard logic
customers use several different generations of logic products in their designs.
As a result, typical life cycles for logic families are between 20 and 25 years.
Since it takes new logic products an average of three to five years to
reach full market acceptance, we continue to invest in new products to generate
future revenue growth. In addition, many of these investments have established
our logic devices as key components for the personal computer and
telecommunications
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markets, particularly in the internet and networking sector and cellular
communications sector. Internet appliances and internet infrastructure equipment
(such as LAN and WAN switches, hubs, routers and servers) require high speed,
high drive and low noise characteristics. We offer logic devices using CMOS,
BiCMOS and Bipolar processes that are required to achieve these characteristics.
Our ABT, LVT and ECL logic devices have all successfully penetrated the internet
hardware market. In addition, cellular communications equipment such as cellular
phones, pagers and base stations and consumer set top box require low power and
noise generation in very small packages. We believe our Tiny Logic, VHC, LCX and
FST switch technologies have established our logic products among the leading
technologies addressing these requirements. Major competitors include Texas
Instruments, ON Semiconductor and Philips.
SALES, MARKETING AND DISTRIBUTION
In Stub Year 1999, Fairchild International derived approximately 54% of its
trade sales from original equipment manufacturer customers through its regional
sales organizations and 46% of its trade sales through distributors. Fairchild
International operates regional sales organizations in Europe, headquartered in
Swindon, England, the Americas, headquartered in Sunnyvale, California, the
Asia/Pacific region, with its office in Kowloon, Hong Kong, the Japan region
with its office in Tokyo, Japan and the Korea region, with its office in Puchon,
South Korea. Each of the regional sales organizations, with the exception of
Korea, is supported by logistics organizations which manage
independently-operated free-on-board warehouses. Product orders flow to
Fairchild International's manufacturing facilities, where the product is made.
Products are then shipped either directly to the customer or indirectly to the
customer via independently-operated warehouses in Singapore, the United States
and the United Kingdom.
Fairchild International has dedicated direct sales organizations operating
in Europe, the Americas, Asia/ Pacific, Japan and Korea that serve its major
original equipment manufacturer customers. Fairchild International also has a
large network of distributors and manufacturer's representatives to distribute
its products around the world. We believe that maintaining a small, highly
focused, direct sales force selling products for each of Fairchild
International's businesses, combined with an extensive network of distributors
and manufacturer's representatives, is the most efficient way to serve our
multi-market customer base. Fairchild International also maintains a dedicated
marketing organization, which consists of marketing organizations in each
product group, including tactical and strategic marketing and applications, as
well as marketing personnel located in each of the sales regions.
Typically, distributors handle a wide variety of products, including
products that compete with Fairchild International products, and fill orders for
many customers. Some of Fairchild International's sales to distributors
primarily in North America, are made under agreements allowing for market price
fluctuations and/or the right of return on unsold merchandise, subject to the
right terminating after the expiration of a limited time period. Virtually all
distribution agreements contain a standard stock rotation provision allowing for
minimum levels of inventory returns. In Fairchild International's experience,
these inventory returns can usually be resold. Manufacturer's representatives
generally do not offer products that compete directly with Fairchild
International's products, but may carry complementary items manufactured by
others. Manufacturer's representatives do not maintain a product inventory;
instead, their customers place large quantity orders directly with Fairchild
International and are referred to distributors for smaller orders.
The power device business has been historically supported by sales
organizations in Korea and in foreign sales subsidiaries of Samsung Electronics
throughout the world. As of December 26, 1999, support from the foreign sales
subsidiaries of Samsung Electronics ended in accordance with an agreement with
Samsung Electronics. Fairchild International's sales organizations in North
America and Europe have assumed distribution responsibilities for power device
business products in those regions. Distribution of power device business
products in Korea and in the rest of Asia and warehousing in Korea are
facilitated by Samsung Electronics under a transition services agreement.
Product orders flow to the power device business' manufacturing facility in
Puchon, South Korea, where silicon wafers are fabricated. Products are assembled
and tested by either independently operated subcontractors or manufacturing
entities of Samsung Electronics. Finished products are warehoused in a Samsung
Electronics facility in Onyang, South Korea. From there they
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are shipped either directly to customers, distributors or sales agents or first
to Fairchild International's facility in Penang, Malaysia and then to customers.
RESEARCH AND DEVELOPMENT
Fairchild International's expenditures for research and development in Stub
Year 1999, Fiscal 1999, Fiscal 1998 and Fiscal 1997 were $35.0 million, $39.3
million, $35.7 million and $18.9 million, respectively. Such expenditures
represented 4.9%, 6.0%, 5.6% and 3.2% of trade sales in Stub Year 1999, Fiscal
1999, Fiscal 1998 and Fiscal 1997, respectively. Manufacturing technology is a
key determinant in the improvement of semiconductor products. Each new
generation of process technology has resulted in products with higher speed and
greater performance produced at lower cost. Infrastructure investments made in
recent years will enable Fairchild International to continue to achieve high
volume, high reliability and low-cost production using leading edge process
technology. Fairchild International's research and development efforts are
focused on new product development and improvements in process technology in
Fairchild International's growth areas: CMOS logic, DMOS power discretes, and
analog and mixed signal products.
Each of Fairchild International's product groups maintain independent
research and development organizations. Fairchild International works closely
with its major customers in many research and development situations in order to
increase the likelihood that Fairchild International's products will be designed
directly into the customers' products and achieve rapid and lasting market
acceptance.
MANUFACTURING
We operate five manufacturing facilities, three of which are front-end
wafer fabrication plants in the United States and South Korea and two of which
are back-end assembly and test facilities in Asia. Our products are manufactured
and designed using a broad range of manufacturing processes and proprietary
design methods. We use all of the prevalent function-oriented process
technologies for wafer fabrication, including CMOS, Bipolar, BiCMOS, DMOS and
non-volatile memory technologies. We use primarily through-hole and surface
mount technologies in our assembly and test operations, in lead counts from two
to fifty-six leads.
The table below sets forth information with respect to our manufacturing
facilities, products and technologies.
MANUFACTURING FACILITIES
LOCATION PRODUCTS TECHNOLOGIES
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FRONT-END FACILITIES:
South Portland, Maine Bipolar, CMOS and BiCMOS 4-inch fab - 5.0/3.0 micron
Interface and logic products
Standard Linear products 5-inch fab - 3.0/1.5 micron Op
Amps, Ground Fault Interruptors
National Semiconductor contract 6-inch fab - 1.5/0.5 micron
Manufacturing CMOS and BiCMOS
Salt Lake City, Utah EPROMs, EEPROMs, ACE 6-inch fab - 1.0/0.65 micron
And USB CMOS EPROM
Discrete power -2.0/0.8 micron CMOS
National Semiconductor contract EPROM
Manufacturing -2.0 micron DMOS
Puchon, South Korea Power discrete semiconductors, 4-inch fab - 5.0/4.0 micron
Standard analog integrated Bipolar
Circuits 5-inch fab - 2.0/0.8 micron
Bipolar and DMOS
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LOCATION PRODUCTS TECHNOLOGIES
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BACK-END FACILITIES:
Penang, Malaysia Bipolar, CMOS and BiCMOS MDIP, SOIC, EIAJ, TSSOP,
Interface and logic products SSOP, 8-56 Pins
National Semiconductor assembly
and test services
Cebu, the Philippines Power and small signal discrete TO92, SOT-23, Super SOT,
National Semiconductor SOT-223, TO220, TO263
Assembly and test services
Fairchild International subcontracts a minority of its wafer fabrication
needs, primarily to Advanced Semiconductor Manufacturing Corporation of
Shanghai, Chartered Semiconductor, Torex Semiconductor and New Japan Radio
Corporation. In order to maximize our production capacity, some of our back-end
assembly and testing operations are also subcontracted. Primary subcontractors
include Carsem, Amkor, NS Electronics (Bangkok) Ltd., and Korea Micro Industry.
The power device business also subcontracts manufacturing services from Samsung
Electronics. As a result of the acquisition of the power device business, these
services are provided under manufacturing agreements with Samsung Electronics.
Our manufacturing processes use many raw materials, including silicon
wafers, copper lead frames, mold compound, ceramic packages and various
chemicals and gases. We obtain our raw materials and supplies from a large
number of sources on a just-in-time basis. Although supplies for the raw
materials used by us are currently adequate, shortages could occur in various
essential materials due to interruption of supply or increased demand in the
industry.
BACKLOG
Our trade sales are made primarily pursuant to standard purchase orders
that are generally booked from one to twelve months in advance of delivery.
Backlog is influenced by several factors including market demand, pricing and
customer order patterns in reaction to product lead times. Quantities actually
purchased by customers, as well as prices, are subject to variations between
booking and delivery to reflect changes in customer needs or industry
conditions.
Fairchild International sells products to many key customers pursuant to
contracts. Contracts are annual fixed-price agreements with customers setting
forth the terms of purchase and sale of specific products. These contracts allow
Fairchild International to schedule production capacity in advance and allow
customers to manage their inventory levels consistent with just-in-time
principles while shortening the cycle times required to produce ordered
products. However, quantity and price agreements under these contracts are, as a
matter of industry practice, difficult to maintain and implement. Fairchild
International recognizes revenue from contract manufacturing services but does
not track backlog. For these reasons, Fairchild International believes that the
amount of backlog at a particular date is not meaningful and is not necessarily
a relevant indicator of future revenues.
SEASONALITY
Generally, Fairchild International is affected by the seasonal trends of
the semiconductor and related industries. With the change of our fiscal year end
we expect revenues will be higher in the second and fourth quarters, and lower
in the first quarter due to holidays around the world and in the third quarter
due to the historically slow summer months. In Stub Year 1999, however, typical
seasonality was offset by the effects of the recovery of the overall
semiconductor market, as the Company recorded sequential revenue increases in
each quarter.
COMPETITION
Markets for our products are highly competitive. Although only a few
companies compete with us in all of our product lines, we face significant
competition within each of our product lines from major international
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semiconductor companies. Some of our competitors may have substantially greater
financial and other resources with which to pursue engineering, manufacturing,
marketing and distribution of their products. Competitors include manufacturers
of standard semiconductors, application-specific integrated circuits and fully
customized integrated circuits, as well as customers who develop their own
integrated circuit products.
We compete in different product lines to various degrees on the basis of
price, technical performance, product features, product system compatibility,
customized design, availability, quality and sales and technical support. Our
ability to compete successfully depends on elements both within and outside of
our control, including successful and timely development of new products and
manufacturing processes, product performance and quality, manufacturing yields
and product availability, customer service, pricing, industry trends and general
economic trends.
TRADEMARKS AND PATENTS
Fairchild International's corporate policy is to protect proprietary
products by obtaining patents for such products when practicable. Under a
technology licensing and transfer agreement with National Semiconductor entered
into in connection with the recapitalization of the Fairchild Semiconductor
business, Fairchild International acquired approximately 150 U.S. patents and
obtained perpetual, royalty free non-exclusive licenses on approximately 250 of
National Semiconductor's patents. Pursuant to an acquisition agreement with
Raytheon Company, Fairchild International acquired over 100 patents owned by
Raytheon Semiconductor, Inc., as well as licensing rights (similar to those
granted to Fairchild International by National Semiconductor in the
recapitalization of Fairchild Semiconductor Corporation) for other
semiconductor-related intellectual property of Raytheon Company not directly
owned by Raytheon Semiconductor, Inc. Similarly, Fairchild International
acquired from Samsung Electronics a significant number of licenses and patents
(granted, applied for and under review for application). We obtained
approximately 125 U.S. patents and over 1,000 Korean patents pursuant to the
acquisition of the power device business. Fairchild International also received
the rights to use all relevant trademarks. We believe that we have the right to
use all technology used in the production of our products.
ENVIRONMENTAL MATTERS
Our operations are subject to environmental laws and regulations in the
countries in which we operate that regulate, among other things, air and water
emissions and discharges at or from our manufacturing facilities; the
generation, storage, treatment, transportation and disposal of hazardous
materials by our company; the investigation and remediation of environmental
contamination; and the release of hazardous materials into the environment at or
from properties operated by our company and at other sites. As with other
companies engaged in like businesses, the nature of our operations exposes our
company to the risk of liabilities and claims with respect to such matters. We
believe, however, that our operations are in substantial compliance with
applicable environmental laws and regulations. Fairchild International's costs
to comply with environmental regulations were immaterial in Stub Year 1999,
Fiscal 1999, Fiscal 1998 and Fiscal 1997.
Fairchild International's facilities in South Portland, Maine, and, to a
lesser extent, Salt Lake City, Utah, have ongoing remediation projects to
respond to releases of hazardous materials that occurred prior to the
consummation of the recapitalization. Under the Asset Purchase Agreement with
National Semiconductor as supplemented by ancillary agreements entered into in
conjunction with the recapitalization, National Semiconductor has agreed to
indemnify Fairchild International for the cost of these projects, subject to
limitations. Based on the historical costs of these projects, we do not believe
that future remediation costs will be material, even without the indemnity.
Fairchild International's previously owned Mountain View, California,
facility is listed on the National Priorities List under the Comprehensive
Environmental Response, Compensation, and Liability Act. Under the terms of the
Acquisition Agreement with Raytheon Company, Raytheon Company retained
responsibility for, and has agreed to indemnify us with respect to, remediation
costs or other liabilities related to pre-acquisition contamination.
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Although we believe that the power device business has no significant
environmental liabilities, Samsung Electronics has agreed to indemnify Fairchild
International for environmental liabilities arising out of the Puchon, South
Korea plant or the power device business, subject to limitations.
Future laws or regulations and changes in existing environmental laws or
regulations may subject our operations to different, additional or more
stringent standards. While historically the cost of compliance with
environmental laws has not had a material adverse effect on our results of
operations, business or financial condition, we cannot predict with certainty
our future costs of compliance because of changing standards and requirements.
We cannot assure you that material costs will not be incurred in connection with
the future compliance with environmental laws.
EMPLOYEES
Fairchild International's worldwide workforce consisted of 8,397 full-and
part-time employees as of December 26, 1999, none of whom were represented by
collective bargaining agreements. Of the total number of employees, 6,943 were
engaged in manufacturing and information services, 332 were engaged in marketing
and sales, 677 were engaged in administration and 445 were engaged in research
and development. Of the total number of employees, 3,440, or 41%, were employed
in the Interface and Logic Products Group, 4,263, or 51%, were employed in the
Discrete Power and Signal Technologies Products Group, 322, or 4%, in the
Analog, Mixed Signal and Non-Volatile Memory Products Group and 372, or 4%, in
corporate administration or centralized sales and marketing activities.
Fairchild International believes that its relations with its employees are
satisfactory.
Our wholly owned Korean subsidiary, which we refer to as "Fairchild Korea,"
sponsors a Power Device Business Labor Council consisting of seven
representatives from the non-management workforce and seven members of the
management workforce. The Labor Council, under Korean law, is recognized as a
representative of the workforce for the purposes of consultation and cooperation
only. The Labor Council therefore has no right to take a work action or to
strike and is not party to any labor or collective bargaining agreements with
Fairchild Korea. We believe that relations with Fairchild Korea employees and
the Labor Council are satisfactory.
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EXECUTIVE OFFICERS OF FAIRCHILD INTERNATIONAL
The following table sets forth information with respect to the executive
officers of our company.
NAME AGE TITLE
---- --- -----
Kirk P. Pond................................. 55 Chairman of the Board of Directors, President
and Chief Executive Officer
Joseph R. Martin............................. 52 Executive Vice President and Chief Financial
Officer and Director
Daniel E. Boxer.............................. 54 Executive Vice President and Chief
Administrative Officer, General Counsel and
Secretary
Jerry M. Baker............................... 48 Executive Vice President, Global Operations
Keith Jackson................................ 44 Executive Vice President and General Manager,
Analog, Mixed Signal and Non-Volatile Memory
Products Group
Darrell Mayeux............................... 57 Executive Vice President, Worldwide Sales and
Marketing
Deok J. Kim.................................. 47 Senior Vice President, President, Fairchild
Korea Semiconductor Ltd.
W.T. Greer, Jr............................... 59 Senior Vice President and General Manager,
Interface and Logic Group
Izak Bencuya................................. 46 Senior Vice President and General Manager,
Discrete Power & Signal Technologies Group
Ernesto M. D'Escoubet........................ 56 Senior Vice President, Technology and Quality
John M. Watkins, Jr.......................... 57 Senior Vice President, Chief Information Officer
David A. Henry............................... 38 Vice President, Corporate Controller
Matthew W. Towse............................. 37 Vice President, Treasurer
Kirk P. Pond, Chairman of the Board of Directors, President and Chief
Executive Officer. Mr. Pond has been the President of our company since June
1996. Since 1987, Mr. Pond had held several executive positions with National
Semiconductor, most recently Executive Vice President and Chief Operating
Officer. Prior executive management positions were with Fairchild Semiconductor
Corporation, Texas Instruments and Timex Corporation. Mr. Pond is a director of
Sybron Chemical.
Joseph R. Martin, Executive Vice President, Chief Financial Officer and
Director. Mr. Martin has been the Executive Vice President and Chief Financial
Officer of our company since June 1996. Mr. Martin had held several senior
financial positions with National Semiconductor since 1989, most recently as
Vice President of Finance, Worldwide Operations. Prior to joining National
Semiconductor, Mr. Martin was Senior Vice President and Chief Financial Officer
of VTC Incorporated. Mr. Martin is a director of ChipPAC Corp.
Daniel E. Boxer, Executive Vice President and Chief Administrative Officer,
General Counsel and Secretary. Mr. Boxer joined our company in March 1997. He
has practiced law for 27 years and since 1975 had been a partner at the law firm
of Pierce Atwood, Portland, Maine. His practice at Pierce Atwood included
advising many large manufacturing companies, including our company, on business,
governmental, legal compliance and environmental issues. He was most recently a
senior partner and Chairman of the firm's Management Committee.
Jerry M. Baker, Executive Vice President, Global Operations. Mr. Baker has
been Executive Vice President, Global Operations, since February 2000.
Previously Mr. Baker had been Executive Vice President and General Manager,
Discrete Power and Signal Technologies Group, since December 1996. He has spent
more than 24 years in a variety of engineering and management positions within
National Semiconductor, most recently as Vice President and General Manager,
Discrete Products Division.
Keith Jackson, Executive Vice President and General Manager, Analog, Mixed
Signal and Non-Volatile Memory Products Group. Mr. Jackson joined our company
in March 1998. He has over 20 years of
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semiconductor industry experience. Most recently, Mr. Jackson was President of
TriTech Microelectronics in Singapore, a manufacturer of analog and mixed signal
products, which he joined in 1996. Prior to that, he worked for National
Semiconductor for 10 years, most recently as Vice President and General Manager
of the Analog and Mixed Signal division. He has also held various marketing and
engineering positions at National Semiconductor and Texas Instruments.
Darrell Mayeux, Executive Vice President, Worldwide Sales and
Marketing. Mr. Mayeux has been Executive Vice President, Worldwide Sales and
Marketing since November 1996. He had been with National Semiconductor since
1992 as Vice President of Sales and Marketing for Logic Products Group. He
previously held engineering, marketing and general management positions with
Texas Instruments and Philips.
Deok J. Kim, Sr. Vice President, President, Fairchild Korea Semiconductor
Ltd. Mr. Kim became Senior Vice President, President of Fairchild Korea
Semiconductor Ltd. when we acquired the power device business from Samsung
Electronics in April 1999. He has over 24 years of experience in the
semiconductor industry. Mr. Kim joined the power device business in 1990 as
director of power product development and later became managing director and
vice president and general manager of the power device business prior to its
acquisition by Fairchild International. Before joining Samsung Electronics, Mr.
Kim held engineering and development positions with Goldstar Semiconductor, AMI
and General Electric.
W.T. Greer, Jr., Senior Vice President and General Manager, Interface and
Logic Group. Mr. Greer has been Senior Vice President and General Manager,
Interface and Logic Group since February 2000. Mr. Greer has over 30 years of
engineering and management experience in the semiconductor and electronics
industries. Prior to joining our company in 1997 as Vice President of Logic
Products, he served for ten years as vice president and director of Motorola
Semiconductor's Advanced Technologies Division and Military products Operation
to. Prior to that, he held various management positions at Texas Instruments.
Izak Bencuya, Senior Vice President and General Manager, Discrete Power and
Signal Technologies Group. Mr. Bencuya has been Senior Vice President and
General Manager, Discrete Power and Signal Technologies Group, since February
2000. Mr. Bencuya has worked in the semiconductor industry and electronics field
for 24 years. Prior to his current assignment, Mr. Bencuya spent six years as
Director of Power MOSFET Products. Mr. Bencuya also worked at GTE Laboratories
and Siliconix in various research and management roles.
Ernesto M. D'Escoubet, Senior Vice President, Technology and Quality. Mr.
D'Escoubet has been Senior Vice President, Technology and Quality, since
February 2000. Mr. D'Escoubet has over 30 years of experience in the
semiconductor industry. Prior to assuming his current role, Mr. D'Escoubet spent
eight years as Vice President of Operations for the Interface and Logic Group.
Prior to that, he held various management positions at National Semiconductor,
Solid State Scientific and Harris Corporation.
John M. Watkins, Jr. Senior Vice President, Chief Information Officer. Mr.
Watkins joined our company in March 2000. Prior to joining our company, Mr.
Watkins spent five years as Chief Information Officer of Pratt and Whitney.
Prior to that, Mr. Watkins retired as a General after eleven years in the United
States Army. His most recent assignment was as Director of the Defense
Information Systems Agency in Washington D.C.
David A. Henry, Vice President, Corporate Controller. Mr. Henry has been
Corporate Controller since December 1996. Previously, he had been with National
Semiconductor for eight years, and held various financial management positions,
most recently as Director of Financial Planning and Analysis for the Fairchild
Business of National Semiconductor. Mr. Henry previously worked for Amfac, Inc.
as well as Ernst and Whinney, and is a Certified Public Accountant.
Matthew W. Towse, Vice President, Treasurer. Mr. Towse became Treasurer in
March 1997. He had been with National Semiconductor for six years and has held
various financial management positions, most recently as Controller for the
Fairchild International plant in South Portland, Maine. Mr. Towse previously
worked for Ernst & Young and is a Certified Public Accountant.
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STATEMENT REGARDING THE PRIVATE SECURITIES LITIGATION REFORM ACT
Some information in this Annual Report on Form 10-K, including but not
limited to the "Management's Discussion and Analysis of Financial Condition and
Results of Operations" section, may constitute forward-looking statements as
such term is defined in Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Forward-looking statements can be
identified by the use of forward-looking terminology such as, "believes,"
"expects," "may," "will," "should," "seeks," "approximately," "intends,"
"plans," "estimates," "anticipates," or "hopeful," or the negative of those
terms or other comparable terminology, or by discussions of strategy, plans or
intentions. Forward-looking statements involve risks and uncertainties,
including those described in the Risk Factors section of Item 1 of this Annual
Report set forth below. Such risks and uncertainties could cause actual results
to be materially different than those in the forward-looking statements. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date hereof. We assume no obligation to update such
information.
RISK FACTORS
Our business is subject to the following risks.
WE ARE A LEVERAGED COMPANY WITH A DEBT TO EQUITY RATIO OF 1.6 TO 1.0, WHICH
COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH AND LIMIT OUR ABILITY TO GROW AND
COMPETE.
After giving effect to our follow-on public stock offering in January 2000,
and the application of the proceeds of that offering, as of December 26, 1999,
we would have had total indebtedness of $718.6 million, stockholders' equity of
$452.9 million and a ratio of debt to equity of 1.6 to 1.0. In addition, we and
our subsidiaries may be able to incur substantial additional indebtedness in the
future, which would increase our leverage.
Our substantial indebtedness:
- would have required us to dedicate approximately $42.1 million of our
cash flow to interest payments on our indebtedness in Stub Year 1999,
thereby reducing the availability of our cash flow to fund working
capital, capital expenditures, research and development efforts and
other general corporate purposes;
- increases our vulnerability to general adverse economic and industry
conditions;
- limits our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate;
- restricts us from making strategic acquisitions, introducing new
technologies or exploiting business opportunities; and
- places us at a competitive disadvantage compared to our competitors that
have less debt.
WE MAY NOT BE ABLE TO GENERATE THE NECESSARY AMOUNT OF CASH TO SERVICE OUR
EXISTING DEBT, WHICH MAY REQUIRE US TO REFINANCE OUR DEBT OR DEFAULT ON OUR
SCHEDULED DEBT PAYMENTS.
Interest expense for Stub Year 1999 was $56.2 million. 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
the senior credit facilities in an amount sufficient to enable us to pay our
indebtedness or to fund our other liquidity needs. In addition, because our
senior credit facilities, which represented approximately 16.5% of our
indebtedness as of December 26, 1999, have variable interest rates, the cost of
those borrowings will increase if market interest rates increase. If we are
unable to service our indebtedness, we may need to refinance all or a portion of
our indebtedness on or before maturity. We cannot assure you that we would be
able to refinance any of our indebtedness on commercially reasonable terms or at
all, which could cause us to default on our obligations and impair our
liquidity.
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See " -- Cyclical Industry" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations " below.
OUR DEBT INSTRUMENTS MAY RESTRICT OR PROHIBIT OUR ABILITY TO ENGAGE IN OR ENTER
INTO 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 our debt
instruments may limit our ability to finance our future operations or capital
needs or engage in other business activities that may be in our interest. Our
debt instruments impose significant operating and financial restrictions on us,
affecting 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, which could place us at a
disadvantage relative to competitors not subject to such limitations. Failure to
comply with any such restrictions could result in a default under the terms of
our debt instruments. In the event of any such default, our debtholders could
demand payment of all borrowings outstanding, including accrued interest and
other fees. In addition, if we were unable to repay any borrowings under our
senior credit facilities when due, the lenders could proceed against their
collateral, which consists of substantially all of the assets of our company,
Fairchild Semiconductor Corporation and its subsidiary guarantors. If the
indebtedness under our debt instruments were to be accelerated, the value of our
common stock would likely decrease significantly.
AS A HOLDING COMPANY, WE ARE TOTALLY DEPENDENT ON DIVIDENDS FROM OUR OPERATING
SUBSIDIARIES TO PAY DIVIDENDS.
We expect our subsidiaries to retain substantially all of their earnings to
meet their own obligations. As a result, and because our subsidiary, Fairchild
Semiconductor Corporation, is prohibited by terms in its debt instruments from
making payments to us, it is unlikely that we will be able to make dividend
payments in the near future. We are a holding company with no business
operations, and our only significant asset is the outstanding capital stock of
our subsidiaries. We will rely on payments from our subsidiaries to meet our
future obligations. Absent such payments, we will not be able to pay cash
dividends on our Class A Common Stock. We currently expect that the earnings and
cash flow of our subsidiaries will be retained and used by them in their
operations, including by Fairchild Semiconductor Corporation to service its debt
obligations. Even if we decided to pay a dividend on or make a distribution in
respect of our Class A Common Stock, we cannot assure you that our subsidiaries
will generate sufficient cash flow to pay a dividend or distribute funds to us
or that applicable state law and contractual restrictions, including
restrictions in Fairchild Semiconductor Corporation's debt instruments, will
permit such dividends or distributions.
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. During the latter half of
Fiscal 1998 and most of Fiscal 1999, we, as well as many others in our industry,
experienced significant declines in the pricing of our products as customers
reduced demand forecasts and manufacturers reduced prices to keep capacity
utilization high. We believe these trends were due primarily to the Asian
financial crisis and excess personal computer inventories. Although markets for
semiconductors have improved, we cannot assure you that they will continue to
improve or that our markets will not experience renewed, possibly more severe
and prolonged, downturns in the future. In addition, we may experience
significant changes in our profitability as a result of variations in sales,
changes in product mix, price competition for orders and the costs associated
with the introduction of new products. The markets for our products depend on
continued demand for personal computer, industrial, telecommunications, consumer
electronics and automotive goods, and these end user markets may experience
changes in demand that will adversely affect our prospects.
NEW TECHNOLOGIES COULD RESULT IN THE DEVELOPMENT OF NEW PRODUCTS AND A DECREASE
IN DEMAND FOR OUR PRODUCTS, AND 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 our development of new products, which
could result in decreased revenues and a loss of market share to
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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. For example, because we do not have a Flash
Memory product which is becoming a more significant product in the memory
market, our revenues from the memory segment of our business have decreased. We
cannot assure you that we will successfully identify new product opportunities
and develop and bring new products to market in a timely and cost-effective
manner, or that products or technologies developed by others will not render our
products or technologies obsolete or noncompetitive. A fundamental shift in
technologies in our product markets could have a material adverse effect on our
competitive position within the industry.
THE SEMICONDUCTOR BUSINESS IS VERY COMPETITIVE AND INCREASED COMPETITION COULD
REDUCE THE VALUE OF AN INVESTMENT IN OUR COMPANY.
The semiconductor industry, and the multi-market semiconductor product
markets in particular, is highly competitive. Competition is based on price,
product performance, quality, reliability and customer service. In addition,
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.
BECAUSE THE POWER DEVICE BUSINESS PREVIOUSLY OPERATED AS A DIVISION OF SAMSUNG
ELECTRONICS, THE COSTS OF OPERATING THIS BUSINESS AS AN INDEPENDENT ENTITY MAY
BE SIGNIFICANTLY GREATER THAN INITIALLY ESTIMATED.
The operation of the power device business as an independent entity may
result in our incurring operating costs and expenses significantly greater than
we anticipated prior to the acquisition of the power device business. Prior to
our purchase, the power device business was operated as a division of Samsung
Electronics. During 1998, the power device business incurred costs for research
and development, sales and marketing and general and administrative activities.
These costs represent expenses incurred directly by the power device business
and charges allocated to it by Samsung Electronics. The power device business
now obtains many of these services on an arm's length basis. However, to provide
these services for a transition period after the acquisition of the power device
business, we entered into a Transitional Services Agreement with Samsung
Electronics under which the power device business continues to obtain a number
of these services. We cannot assure you that upon termination of the
Transitional Services Agreement, we will be able to obtain similar services on
comparable terms.
WE ENTERED INTO A NUMBER OF LONG-TERM SUPPLY AND SUPPORT CONTRACTS WITH SAMSUNG
ELECTRONICS IN CONNECTION WITH THE ACQUISITION OF THE POWER DEVICE BUSINESS, AND
ANY DECREASE IN THE PURCHASE REQUIREMENTS OF SAMSUNG ELECTRONICS OR THE
INABILITY OF SAMSUNG ELECTRONICS TO MEET ITS CONTRACTUAL OBLIGATIONS COULD
SUBSTANTIALLY REDUCE THE FINANCIAL PERFORMANCE OF OUR KOREAN SUBSIDIARY.
As a result of the acquisition of the power device business, we have
numerous arrangements with Samsung Electronics, including arrangements relating
to product sales, designation as a vendor to affiliated Samsung companies and
other services. Any material adverse change in the purchase requirements of
Samsung Electronics, in its ability to supply the agreed-upon services or in its
ability to fulfill its other obligations could have a material adverse effect on
our Korean subsidiary. Although historically the power device business generated
significant revenues from the sale of products to affiliated Samsung companies,
we cannot assure you that we will be able to sell any products to affiliated
Samsung companies or that the designation of the power device business as a
vendor to those affiliated Samsung companies will generate any revenues for our
company. Furthermore, under the Korean Fair Trade Law, the Korean Fair Trade
Commission may issue an order requiring a change in the terms and conditions of
the agreements between us and Samsung Electronics if it concludes that Samsung
Electronics has provided us with undue support or discriminated against our
competitors.
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THE POWER DEVICE BUSINESS SUBJECTS OUR COMPANY TO RISKS INHERENT IN DOING
BUSINESS IN KOREA, INCLUDING LABOR RISK, POLITICAL RISK AND CURRENCY RISK.
As a result of the acquisition of the power device business, we have
significant operations in South Korea and are subject to risks associated with
doing business in that country.
- In addition to other risks relating to international operations, some
businesses in South Korea are subject to labor unrest. Also, relations
between South Korea and North Korea have been tense over most of South
Korea's history. Events involving, among other things, North Korea's
refusal to comply with the Nuclear Non-Proliferation Treaty and several
naval confrontations, have caused the level of tension between the two
countries to increase. 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.
- The 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 U.S. Dollar vs. Won costs, a significant decrease in the value
of the U.S. Dollar relative to the Won could have a material adverse
effect on our financial performance and 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 OUR 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 utilized 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,
Fairchild Korea has been granted a ten year tax holiday. The first seven years
are tax-free, followed by three years of income taxes at 50% of the statutory
rate. 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
Fairchild Korea were to lose its tax holiday, we could suffer adverse tax and
other financial consequences or lose the benefits anticipated from our
transaction structure.
OUR INTERNATIONAL OPERATIONS SUBJECT US TO RISKS NOT FACED BY DOMESTIC
COMPETITORS.
We may not be successful in overcoming the risks related to or arising from
operating in international markets. We maintain significant operations in Cebu,
the Philippines, Penang, Malaysia and in South Korea. The following are risks
inherent in doing business on an international level:
- changes in import duties;
- trade restrictions;
- transportation delays;
- work stoppages;
- economic and political instability;
- foreign currency fluctuations; and
- the laws, including tax laws, and policies of the United States and of
the countries in which we manufacture our products.
PRODUCTION TIME AND THE OVERALL COST OF OUR PRODUCTS COULD INCREASE IF WE WERE
TO LOSE ONE OF OUR PRIMARY SUPPLIERS OR IF A PRIMARY SUPPLIER INCREASED THE
PRICES OF RAW MATERIALS.
Our manufacturing operations depend upon obtaining adequate supplies of raw
materials on a timely basis, and 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. We
purchase raw materials such as silicon wafers, lead frames, mold compound,
ceramic packages and chemicals and gases
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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 minority of
our wafer fabrication and assembly and test operations to other manufacturers,
including Torex, NS Electronics Ltd., Samsung Electronics and National
Semiconductor. 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, IMPLEMENTING NEW PRODUCTION
TECHNIQUES, OR IN CURING PROBLEMS ASSOCIATED WITH TECHNICAL EQUIPMENT
MALFUNCTIONS ALL COULD ADVERSELY AFFECT OUR MANUFACTURING EFFICIENCIES.
Our manufacturing efficiency will be an important factor in our future
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.
In addition, as is common in the semiconductor industry, we have from time
to time experienced difficulty in beginning production at new facilities or in
effecting transitions to new manufacturing processes. As a consequence, we have
suffered delays in product deliveries or reduced yields. We may experience
manufacturing problems in achieving acceptable yields or experience product
delivery delays in the future as a result of, 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.
THE FAILURE OF NATIONAL SEMICONDUCTOR TO MAINTAIN ITS PURCHASE REQUIREMENTS OR
MEET ITS CONTRACTUAL OBLIGATIONS COULD ADVERSELY AFFECT OUR CAPACITY UTILIZATION
AND PROFITABILITY.
We have several arrangements with National Semiconductor relating to the
provision of our services and the sale of our products. Any material adverse
change in the arrangements, such as National Semiconductor's ability to provide
the agreed-upon services or its ability to fulfill its other obligations, could
have a material adverse effect on us. In addition, any material adverse change
in the purchase requirements of National Semiconductor under the foundry
services agreement, or failure to continue making purchases after expiration of
the agreement on June 11, 2000, could adversely affect our factory utilization
and profitability.
BECAUSE MUCH OF OUR SUCCESS AND VALUE LIES IN OUR OWNERSHIP AND USE OF
INTELLECTUAL PROPERTY, OUR FAILURE TO PROTECT THAT PROPERTY COULD ADVERSELY
AFFECT OUR FUTURE GROWTH AND CONTINUED SUCCESS.
Failure to protect our existing intellectual property rights may result in
our losing valuable technologies or having to pay others for infringing on 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:
- any of the more than 250 U.S. patents owned by us or numerous other
patents which third parties license to us will not be invalidated,
circumvented, challenged or licensed to others; or
- 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 certain foreign
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. Certain of our technologies
have been
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licensed on a non-exclusive basis from National Semiconductor which may license
such technologies to others, including, commencing on March 11, 2002, 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 CERTAIN TECHNOLOGIES MAY
NEGATIVELY AFFECT OUR FINANCIAL RESULTS.
Our future success and competitive position depend in part upon our ability
to obtain or maintain certain proprietary technologies used in our principal
products, which is achieved in part by defending claims by our competitors of
intellectual property infringement. We are involved in lawsuits, and could
become subject to other lawsuits, in which it is alleged that we have infringed
upon the intellectual property rights of others. See "Legal Proceedings" below.
Our involvement in existing and future intellectual property litigation could
result in significant expense to us, 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;
- cease the manufacture, use, sale or importation of infringing products;
- expend significant resources to develop or acquire non-infringing
technologies;
- discontinue processes; or
- obtain licenses to the infringing technologies.
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, AND CONSEQUENCES OF THOSE
ACQUISITIONS WHICH WE DO COMPLETE MAY ADVERSELY AFFECT US.
We plan to continue to pursue additional acquisitions of related
businesses. The expense incurred in consummating the future acquisition of
related businesses, or our failure or inability to integrate such businesses
successfully into our existing business, could result in our incurring
unanticipated expenses and losses. We plan to continue to pursue additional
acquisitions of related businesses in the future. We cannot assure you, however,
that we will be able to identify or finance additional acquisitions or that, if
consummated, we will realize any anticipated benefits from such acquisitions.
Should we successfully 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 our
existing operations. In addition, although Samsung Electronics assists us in
integrating the operations of the power device business into our operations
pursuant to the Transitional Services Agreement, we may encounter unforeseen
obstacles or costs in such integration. 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.
ITEM 2. PROPERTIES
In the United States, our corporate headquarters as well as the
headquarters and wafer fabrication operations of the Interface and Logic
Products Group are currently located in approximately 240,000 square feet of
space in properties that we own in South Portland, Maine. On August 6, 1999 we
entered into a lease to
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occupy approximately 120,000 square feet of space at a new location in South
Portland, Maine. This facility will serve as our new worldwide corporate
headquarters and also provide additional space for the Interface and Logic
Products Group, and is expected to be occupied in the spring of 2000. Additional
manufacturing, warehouse and office facilities are housed in approximately
300,000 square feet of space in properties that we own in Salt Lake City, Utah.
Additional office space is located in leased facilities in South Portland,
Maine, Sunnyvale, California and San Diego, California.
Fairchild International transferred its analog wafer fabrication capability
from its Mountain View, California facility to its South Portland, Maine
facility. On April 23, 1999, Fairchild International sold its Mountain View
property for approximately $35.7 million. The sale price was subject to (1) a
$3.5 million holdback which was paid to Fairchild International in February
2000; and (2) a $500,000 deposit which was placed into an escrow account and
will be released to Fairchild International upon the demolition of the existing
structures on the Mountain View property. In connection with the sale of the
Mountain View property, Fairchild International entered into an agreement to
lease back the property. We pay monthly rent of $125,000 under the lease, which
expires on December 31, 2000.
In Asia, we own or lease approximately 397,000 square feet, 170,000 square
feet and 766,000 square feet of manufacturing, office and warehouse space in
Penang, Malaysia, Cebu, the Philippines and Puchon, South Korea, respectively.
Leases affecting the Penang and Cebu facilities are generally in the form of
long-term ground leases, with Fairchild International owning improvements on the
land. The initial terms of these leases will expire beginning in 2014. In some
cases Fairchild International has the option to renew the lease term, while in
others Fairchild International has the option to purchase the leased premises.
We lease additional warehouse space in Singapore.
We maintain regional sales offices in leased space in Swindon, England,
Kowloon, Hong Kong, and Tokyo, Japan. In addition, we maintain smaller sales
offices in leased space around the world.
We believe that our facilities around the world, whether owned or leased,
are well-maintained. Our manufacturing facilities contain sufficient productive
capacity to meet our needs for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
On November 2, 1999, our principal operating subsidiary, Fairchild
Semiconductor Corporation, was named as a defendant in a patent infringement
lawsuit filed by Siliconix Incorporated in the United States District Court for
the Northern District of California. The complaint filed in the suit alleges
that some of our products infringe two Siliconix patents and claims an
unspecified amount of damages. We intend to contest these claims vigorously.
On December 22, 1999, we, Fairchild Semiconductor Corporation and Fairchild
Korea Semiconductor Ltd. were named as defendants in a patent infringement
lawsuit filed by IXYS Corporation in the United States District Court for the
Northern District of California. The complaint filed in the lawsuit alleges that
one or more of our products infringe one IXYS patent and claims an unspecified
amount of damages. We believe these claims are subject to indemnification by
Samsung Electronics under the patent indemnification provisions of the Business
Transfer Agreement with Samsung Electronics. We intend to contest these claims
vigorously.
In addition to the above proceedings, from time to time we are involved in
other legal proceedings in the ordinary course of business. We believe that
there is no such ordinary course litigation pending that could have,
individually or in the aggregate, a material adverse effect on our business,
financial condition, results of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
period beginning November 29, 1999 and ending on December 26, 1999.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information appearing under the caption "Market for Common Equity and
Related Stockholder Matters" on page 59 of the Stub Year 1999 Annual Report to
Stockholders is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information appearing under the caption "Selected Financial Data" on
page 14 of the Stub Year 1999 Annual Report to Stockholders is incorporated
herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information appearing under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 15 to 30 of
the Stub Year 1999 Annual Report to Stockholders is incorporated herein by
reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information appearing under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on page 28 of the
Stub Year 1999 Annual Report to Stockholders is incorporated herein by
reference.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements, related notes and independent
auditors' report appearing on pages 31 to 59 of the Stub Year 1999 Annual Report
to Stockholders is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding directors set forth under the caption "Proposal
1 -- Election of Directors" appearing in Fairchild International's definitive
proxy statement for the Annual Meeting of Stockholders to be held on May 16,
2000, which will be filed with the Securities and Exchange Commission not later
than 120 days after December 26, 1999 (the "2000 Proxy Statement"), is
incorporated herein by reference.
The information regarding executive officers set forth under the caption
"Executive Officers of Fairchild International" in Item 1 of this Annual Report
on Form 10-K is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the caption "Executive Compensation" in the
2000 Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN HOLDERS AND MANAGEMENT
The information set forth under the caption "Stock Ownership by 5%
Stockholders, Directors and Certain Executive Officers" in the 2000 Proxy
Statement is incorporated herein by reference.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Certain Relationships and
Related Transactions" in the 2000 Proxy Statement is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial Statements. The following financial statements are
included in Fairchild International's Stub Year 1999 Annual Report to
Stockholders and are incorporated herein by reference.
Consolidated Balance Sheets as of December 26, 1999 and May 30, 1999
Consolidated Statements of Operations for the seven months ended December
26, 1999 and for the fiscal years ended May 30, 1999, May 31, 1998 and May 25,
1997.
Consolidated Statements of Stockholders' Equity (Deficit) for the seven
months ended December 26, 1999 and for the fiscal years ended May 30, 1999, May
31, 1998 and May 25, 1997.
Consolidated Statements of Cash Flows for the seven months ended December
26, 1999 and for the fiscal years ended May 30, 1999 and May 31, 1998.
Notes to Consolidated Financial Statements.
Independent Auditors' Report.
(2) FINANCIAL STATEMENT SCHEDULES. Financial statement schedules are
listed under Item 14(c) in this Annual Report.
(3) LIST OF EXHIBITS. See the Exhibit Index beginning on page 24 in
this Annual Report.
(b) REPORTS ON FORM 8-K: No reports on Form 8-K were filed by the Company
during the period beginning November 29, 1999 and ending on December 26, 1999.
(c)FINANCIAL STATEMENT SCHEDULES.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
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REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
The Board of Directors
Fairchild Semiconductor International, Inc.
Under date of January 21, 2000, except as to Note 21, which is as of January 25,
2000, we reported on the consolidated balance sheets of Fairchild Semiconductor
International, Inc. and subsidiaries as of December 26, 1999 and May 30, 1999,
the related consolidated statements of operations and stockholders' equity
(deficit) for the seven months ended December 26, 1999 and for each of the years
in the three-year period ended May 30, 1999, and the related consolidated
statements of cash flows for the seven months ended December 26, 1999 and for
the years ended May 30, 1999 and May 31, 1998. In connection with our audits of
the aforementioned consolidated financial statements, we also audited the
related financial statement schedule listed in Item 14(c). This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
/s/ KPMG LLP
Boston, Massachusetts
January 21, 2000
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SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS.
DEFERRED TAX
RETURNS AND VALUATION
ALLOWANCES ALLOWANCE TOTAL
----------- ------------- ------
(IN MILLIONS)
Balances at May 26, 1996................................... $ -- $ -- $ --
Charged to costs and expenses.............................. 3.1 -- 3.1
Charged to other accounts.................................. 12.8(1) 30.7(1) 43.5
------ ----- ------
Balances at May 25, 1997................................... 15.9 30.7 46.6
Charged to costs and expenses.............................. 41.8 -- 41.8
Deductions................................................. (45.5) -- (45.5)
Charged to other accounts.................................. 2.0(2) -- 2.0
------ ----- ------
Balances at May 31, 1998................................... 14.2 30.7 44.9
Charged to costs and expenses.............................. 29.8 32.0 61.8
Deductions................................................. (34.9) -- (34.9)
Charged to other accounts.................................. 0.1(2) -- 0.1
------ ----- ------
Balances at May 30, 1999................................... 9.2 62.7 71.9
Charged to costs and expenses.............................. 20.4 17.6 38.0
Deductions................................................. (15.9) -- (15.9)
------ ----- ------
Balances at December 26, 1999.............................. $ 13.7 $80.3 $ 94.0
====== ===== ======
- ---------------
(1) Upon the consummation of the Recapitalization on March 11, 1997, these
amounts were established and charged to Business Equity.
(2) These amounts represent valuation reserves obtained through the acquisitions
of Raytheon Semiconductor and the power device business for $2.0 million and
$0.1 million, respectively.
All other schedules are omitted because of the absence of the conditions
under which they are required or because the information required by such
omitted schedules is set forth in the financial statements or the notes thereto.
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EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- ------- -----------
2.01 Agreement and Plan of Recapitalization dated January 24,
1997 between Sterling and National Semiconductor(1)
2.02 Asset Purchase Agreement dated as of March 11, 1997 between
Fairchild Semiconductor and National Semiconductor(1)
2.03 Acquisition Agreement dated November 25, 1997 between
Fairchild Semiconductor Corporation and Raytheon Company(2)
2.04 Amendment No. 1 to Acquisition Agreement dated December 29,
1997 between Fairchild Semiconductor Corporation and
Raytheon Company(2)
2.05 Business Transfer Agreement dated December 20, 1998 between
Samsung Electronics and Fairchild Semiconductor
Corporation(3)
2.06 Closing Agreement dated April 13, 1999 among Samsung
Electronics, Fairchild Korea Semiconductor Ltd. and
Fairchild Semiconductor Corporation(3)
3.01 Restated Certificate of Incorporation of Fairchild
International(7)
3.02 Bylaws of Fairchild International(10)
4.01 Indenture dated April 7, 1999 among Fairchild Semiconductor
Corporation, Fairchild International, as Guarantor,
Fairchild Semiconductor Corporation of California, as
Guarantor, and the United States Trust Company of New
York(5)
4.02 Form of 10 3/8% Senior Subordinated Notes Due 2007 (included
in Exhibit 4.01)
4.03 Registration Rights Agreement dated March 11, 1997 among
Fairchild International, Sterling, National Semiconductor
and certain investors(5)
4.04 Amendment to Securities Purchase and Holders Agreement dated
May 29, 1998(8)
4.05 Securities Purchase and Holders Agreement dated as of March
11, 1997 among Fairchild International, Sterling, National
Semiconductor and Management Investors(5)
10.01 Indenture dated as of March 11, 1997 among Fairchild
Semiconductor Corporation, Fairchild International, as
Guarantor and United States Trust Company of New York, as
Trustee relating to Fairchild's 10 1/8% Senior Subordinated
Notes(1)
10.02 Form of 10 1/8% Senior Subordinated Notes Due 2007 (included
in Exhibit 10.01)
10.03 Technology Licensing and Transfer Agreement dated March 11,
1997 between National Semiconductor and Fairchild
Semiconductor Corporation(6)
10.04 Transition Services Agreement dated March 11, 1997 between
National Semiconductor and Fairchild Semiconductor
Corporation(1)
10.05 Fairchild Foundry Services Agreement dated March 11, 1997
between National Semiconductor and Fairchild Semiconductor
Corporation(6)
10.06 Revenue Side Letter dated March 11, 1997 between National
Semiconductor and Fairchild Semiconductor Corporation(6)
10.07 Fairchild Assembly Services Agreement dated March 11, 1997
between National Semiconductor and Fairchild Semiconductor
Corporation(6)
10.08 National Foundry Services Agreement dated March 11, 1997
between National Semiconductor and Fairchild Semiconductor
Corporation(6)
10.09 National Assembly Services Agreement dated March 11, 1997
between National Semiconductor and Fairchild Semiconductor
Corporation(6)
10.10 Mil/Aero Wafer and Services Agreement dated March 11, 1997
between National Semiconductor and Fairchild Semiconductor
Corporation(6)
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25
EXHIBIT
NO. DESCRIPTION
- ------- -----------
10.11 Shared Services Agreement (South Portland) dated March 11,
1997 between National Semiconductor and Fairchild
Semiconductor Corporation(6)
10.12 Corporate Agreement dated February 20, 1992 between Torex
Semiconductor Ltd. and National Semiconductor(6)
10.13 Assembly/Test Subcontract Agreement dated August 13, 1998
between NS Electronics Bangkok (1993) Ltd. and Fairchild
Semiconductor Corporation(7)
10.14 Supply Agreement dated January 20, 1996 between National
Semiconductor and Dynacraft Industries Sdn. Bhd.(6)
10.15 Licensing and Manufacturing Agreement dated April 27, 1990
between National Semiconductor and Waferscale Integration,
Inc.(6)
10.16 Qualified Titles Corresponding to Registry Title Nos. 19, 44
and 3400-Mk 12 from the State of Penang, Malaysia and
corresponding Sale and Purchase Agreements, each dated March
11, 1997, between National Semiconductor Sdn. Bhd. and
Fairchild Semiconductor Sdn. Bhd.(1)
10.17 Lease Agreement dated October 10, 1979 between Export
Processing Zone Authority and Fairchild Semiconductor (Hong
Kong) Limited, and Supplemental Agreements thereto dated May
1, 1982; December 12, 1983; August 17, 1984; March 10, 1987;
February 16, 1990; August 25, 1994; May 29, 1995; June 7,
1995; November 9, 1995; and October 24, 1996(1)
10.18 Shared Facilities Agreement (South Portland) dated March 11,
1997 between National Semiconductor and Fairchild
Semiconductor Corporation(1)
10.19 Environmental Side Letter dated March 11, 1997 between
National Semiconductor and Fairchild Semiconductor
Corporation(1)
10.20 Fairchild Benefit Restoration Plan(1)
10.21 Fairchild Incentive Plan(1)
10.22 FSC Semiconductor Corporation Executive Officer Incentive
Plan(1)
10.23 Fairchild Semiconductor International, Inc. Amended and
Restated Stock Option Plan(11)
10.24 Employment Agreement dated March 11, 1997 among Fairchild
Semiconductor Corporation, Fairchild International, Sterling
and Kirk P. Pond(1)
10.25 Employment Agreement dated March 11, 1997 among Fairchild
Semiconductor Corporation, Fairchild International, Sterling
and Joseph R. Martin(1)
10.26 Form of Promissory Note between Fairchild Semiconductor
Corporation and Management Investors dated June 3, 1998(7)
10.27 Transitional Services Agreement dated April 13, 1999 between
Samsung Electronics and Fairchild Korea Semiconductor
Ltd.(5)
10.28 Product Supply Agreement dated April 13, 1999 between
Samsung Electronics and Fairchild Korea Semiconductor
Ltd.(5)
10.29 Foundry Sale Agreement dated April 13, 1999 between Samsung
Electronics and Fairchild Korea Semiconductor Ltd.(5)
10.30 Intellectual Property License Agreement dated April 13, 1999
Between Samsung Electronics and Fairchild Korea
Semiconductor Ltd.(5)
10.31 Trademark License Agreement dated April 13, 1999 between
Samsung Electronics and Fairchild Korea Semiconductor
Ltd.(5)
10.32 Assembly and Test Services Agreement (Onyang) dated April
13, 1999 between Samsung Electronics and Fairchild Korea
Semiconductor Ltd.(5)
10.33 Assembly and Test Services Agreement (Suzhou) dated April
13, 1999 between SESS Electronics Suzhou Semiconductor Co.,
Ltd. and Fairchild Korea Semiconductor Ltd.(5)
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EXHIBIT
NO. DESCRIPTION
- ------- -----------
10.34 EPI Services Agreement dated April 13, 1999 between Samsung
Electronics and Fairchild Korea Semiconductor Ltd.(5)
10.35 Photo Mask Supply Agreement dated April 13, 1999 between
Samsung Electronics and Fairchild Korea Semiconductor
Ltd.(5)
10.36 Credit Agreement dated April 14, 1999 among Fairchild
Semiconductor Corporation, Fairchild International, certain
Lenders named within the Credit Agreement, Credit Suisse
First Boston Corporation, Salomon Brothers Holding Company,
Inc., ABN Amro Bank NV and Fleet National Bank(5)
10.37 Employment Agreement dated March 28, 1999 between Fairchild
International and Deok-Jung Kim(5)
10.38 Employment Agreement dated as of April 23, 1999 between
Fairchild Semiconductor Corporation and Kyoung-Soo Kim(5)
10.39 Sublease Agreement dated April 23, 1999 between Veritas
Software Corporation and Fairchild Semiconductor Corporation
of California(5)
10.40 Fairchild Executive Incentive Plan, as amended and restated,
effective June 1, 1998(5)
10.41 Intellectual Property Assignment and License Agreement dated
December 29, 1997 between Raytheon Semiconductor, Inc. and
Raytheon Company(3)
13.01 Stub year 1999 Annual Report to Stockholders (which is not
deemed to be "filed" except to the extent that portions
thereof are expressly incorporated by reference in this
Annual Report on Form 10-K)
21.01 Subsidiaries of Fairchild International(9)
23.01 Consent of KPMG LLP
27.01 Financial Data Schedule
- ---------------
(1) Incorporated by reference from Fairchild Semiconductor Corporation's
Registration Statement on Form S-4 filed May 12, 1997 (File No. 333-26897).
(2) Incorporated by reference from Fairchild International's Current Report on
Form 8-K dated December 31, 1997, filed January 13, 1998.
(3) Incorporated by reference from Fairchild International's Current Report on
Form 8-K dated April 13, 1999, filed April 27, 1999.
(4) Incorporated by reference from Fairchild International's Registration
Statement on Form S-8 filed July 7, 1998 (File No. 333-58603).
(5) Incorporated by reference from Amendment No. 1 to Fairchild International's
Registration Statement on Form S-1 dated, filed June 30, 1999 (File No.
333-78557).
(6) Incorporated by reference from Amendment No. 3 to Fairchild Semiconductor
Corporation's Registration Statement on Form S-4, filed July 9, 1997 (File
No. 333-28697).
(7) Incorporated by reference from Fairchild International's Annual Report on
Form 10-K for the fiscal year ended May 31, 1998, filed August 27, 1998.
(8) Incorporated by reference from Fairchild International's Quarterly Report
on Form 10-Q for the quarterly period ended March 1, 1998, filed April 13,
1998.
(9) Incorporated by reference from Fairchild International's Registration
Statement on Form S-1, filed May 14, 1999 (file No. 333-78557).
(10) Incorporated by reference from Fairchild International's Registration
Statement on Form S-4 (File No. 333-33082), filed March 23, 2000.
(11) Incorporated by reference from Fairchild International's Annual Report on
Form 10-K for the fiscal year ended May 30, 1999, filed August 27, 1999.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FAIRCHILD SEMICONDUCTOR
INTERNATIONAL, INC.
By: /s/ KIRK P. POND
------------------------------------
Kirk P. Pond
President and Chief Executive
Officer
Date: March 24, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- -------------------------------------- --------------
/s/ KIRK P. POND Chairman of the Board of Directors, March 24, 2000
- --------------------------------------------- President and Chief Executive Officer
Kirk P. Pond (Principal Executive Officer)
/s/ JOSEPH R. MARTIN Executive Vice President, Chief March 24, 2000
- --------------------------------------------- Financial Officer and Director
Joseph R. Martin (Principal Financial Officer)
/s/ DAVID A. HENRY Vice President, Corporate Controller March 24, 2000
- --------------------------------------------- (Principal Accounting Officer)
David A. Henry
/s/ WILLIAM N. STOUT Director March 24, 2000
- ---------------------------------------------
William N. Stout
Director
- ---------------------------------------------
Richard M. Cashin, Jr.
Director
- ---------------------------------------------
Paul C. Schorr, IV
/s/ RONALD W. SHELLY Director March 24, 2000
- ---------------------------------------------
Ronald W. Shelly
27