File Pursuant to Rule 424(b)(3)
SEC File Number 333-99015
PROSPECTUS
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SKYWORKS SOLUTIONS, INC.
1,017,900 SHARES
COMMON STOCK, PAR VALUE $0.25 PER SHARE
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We are registering 1,017,900 shares of our common stock for resale by the
selling stockholder identified in this prospectus. We will receive none of the
proceeds from the resale of the shares by the selling stockholder. The selling
stockholder may sell the shares at market prices prevailing at the time of the
sale or at prices otherwise negotiated.
Our common stock is quoted on the Nasdaq National Market under the symbol
"SWKS." The last reported sale price of our common stock on the Nasdaq National
Market on August 29, 2002 was $4.70 per share.
Our principal executive offices are located at 20 Sylvan Road, Woburn,
Massachusetts 01801. Our telephone number at that location is (781) 935-5150.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 4 AND THE SECTIONS ENTITLED "RISK FACTORS" IN THE OTHER DOCUMENTS WE
FILE WITH THE SECURITIES AND EXCHANGE COMMISSION THAT ARE INCORPORATED BY
REFERENCE IN THIS PROSPECTUS FOR CERTAIN RISKS AND UNCERTAINTIES THAT YOU SHOULD
CONSIDER.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is September 13, 2002.
TABLE OF CONTENTS
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS....................... 1
SUMMARY................................................................. 2
INCORPORATION OF INFORMATION BY REFERENCE............................... 3
RISK FACTORS............................................................ 4
USE OF PROCEEDS......................................................... 13
SELLING STOCKHOLDER..................................................... 13
PLAN OF DISTRIBUTION.................................................... 14
MATERIAL CHANGES........................................................ 16
LEGAL MATTERS........................................................... 16
EXPERTS................................................................. 16
WHERE YOU CAN FIND MORE INFORMATION..................................... 17
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 that are subject to the "safe harbor" created by those
sections. Some of the forward-looking statements can be identified by the use of
forward-looking terms such as "believes", "expects", "may", "will', "should",
"could", "seek", "intends", "plans", "estimates", "anticipates" or other
comparable terms. Forward-looking statements involve inherent risks and
uncertainties. A number of important factors could cause actual results to
differ materially from those in the forward-looking statements, including those
factors discussed in this prospectus in "Risk Factors" and in the documents
incorporated by reference herein. Factors that could cause actual results to
differ from those reflected in forward-looking statements relating to the
operations and business of the combined company include:
- the failure to meet our expectations with respect to our future
performance, including our expectations with respect to the merger;
- the cyclical nature of the wireless communications semiconductor
industry and the markets addressed by our products and our customers'
products;
- general economic and business conditions that adversely affect us or
our suppliers, distributors or customers;
- demand for and market acceptance of new and existing products;
- successful development of new products and the timing of new product
introductions;
- the availability and extent of utilization of manufacturing capacity
and raw materials;
- pricing pressures and other competitive factors;
- fluctuations in manufacturing yields;
- product obsolescence;
- our ability to develop and implement new technologies and to obtain
protection of the related intellectual property;
- our ability to attract and retain qualified personnel;
- the disproportionate impact of our business relationships with large
customers;
- the uncertainties of litigation; and
- other risks and uncertainties, including those set forth in this
prospectus and those detailed from time to time in our filings with
the Securities and Exchange Commission.
You should read this prospectus and the documents incorporated by reference
into it completely and with the understanding that actual future results may be
materially different from expectations. All forward-looking statements made in
this prospectus are qualified by these cautionary statements. These
forward-looking statements are made only as of the date of this prospectus, and
we do not undertake any obligation, other than as may be required by law, to
update or revise any forward-looking statements to reflect changes in
assumptions, the occurrence of unanticipated events or changes in future
operating results over time.
1
SUMMARY
SKYWORKS SOLUTIONS, INC.
Skyworks Solutions, Inc. is a leading wireless semiconductor company focused
on providing front-end modules, radio frequency (RF) subsystems and complete
system solutions to wireless handset and infrastructure customers worldwide. The
Company offers a comprehensive family of components and RF subsystems, and also
provides complete antenna-to-microphone semiconductor solutions that support
advanced 2.5G and 3G services. The Company's products are used in dozens of
industry-leading handset designs.
Effective June 25, 2002, pursuant to an Agreement and Plan of
Reorganization, dated as of December 16, 2001, as amended as of April 12, 2002,
by and among Conexant Systems, Inc. (Conexant), Washington Sub, Inc. (Washington
Sub) and Alpha Industries, Inc. (Alpha), Alpha merged with Washington Sub, a
company formed by Conexant and to which Conexant contributed the assets,
liabilities (including liabilities relating to former operations) and operations
of Conexant's wireless communications business, other than certain assets and
liabilities retained by Conexant. Immediately prior to the merger, Conexant
spun-off Washington Sub by distributing outstanding shares of Washington Sub
common stock to Conexant stockholders on a one share-for-one share basis. In the
merger, Conexant stockholders received 0.351 of a share of combined company
common stock in exchange for each share of Washington Sub common stock issued to
them in the distribution. After the merger, Alpha, which was the surviving
company in the merger, changed its corporate name to Skyworks Solutions, Inc.
Immediately following completion of the merger, Skyworks Solutions purchased
Conexant's semiconductor assembly and test facility located in Mexicali, Mexico
for an aggregate purchase price of $150 million.
References in this prospectus to the Washington Business refer to the
wireless communications business contributed by Conexant to Washington Sub,
which merged with us effective June 25, 2002. References to the Mexicali
Operations refer to the assembly and test facility in Mexicali, Mexico, certain
assets used in connection with that facility and certain assets previously
utilized by Conexant's package design team employees located in Newport Beach,
California who joined Skyworks Solutions in connection with the merger, all of
which assets we purchased from Conexant immediately following the merger.
References to Washington/Mexicali refer to the Washington Business and Mexicali
Operations, collectively. The merger has been accounted for as a reverse
acquisition whereby Washington Sub was treated as the acquirer and Alpha as the
acquiree primarily because Conexant shareholders owned a majority, approximately
67 percent, interest in Skyworks Solutions upon completion of the merger.
Because the merger was accounted for as a purchase of Alpha, the historical
financial statements of Washington/Mexicali became the historical financial
statements of the Company after the merger.
2
INCORPORATION OF INFORMATION BY REFERENCE
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus, and later information filed with the Securities and Exchange
Commission will automatically update and supersede this information. We
incorporate by reference the documents and information identified below and any
future filings made with the Securities and Exchange Commission under Sections
13(a), 3(c), 14, or 15(d) of the Securities Exchange Act of 1934 until this
offering is completed.
- Audited Combined Financial Statements of Washington Business and the
Mexicali Operations and the notes thereto contained on pages F-1 through
F-28 of the proxy statement/prospectus-information statement included
in our Registration Statement on Form S-4 (Registration No. 333-83768)
filed with the Securities and Exchange Commission on May 10, 2002;
- Management's Discussion and Analysis of Financial Condition and Results
of Operations of the Washington Business and the Mexicali Operations
contained on pages 94 through 113 of the proxy
statement/prospectus-information statement included in our Registration
Statement on Form S-4 (Registration No. 333-83768) filed with the
Securities and Exchange Commission on May 10, 2002;
- Unaudited Condensed Combined Financial Statements of the Washington
Business and the Mexicali Operations and the notes thereto contained on
pages 22 through 28 of our Registration Statement on Form S-3
(Registration No. 333-92394) filed with the Securities and Exchange
Commission on July 15, 2002;
- Unaudited Pro Forma Condensed Combined Financial Information of the
Washington Business and the Mexicali Operations and the notes thereto
contained on pages 29 through 30 of our Registration Statement on Form
S-3 (Registration No. 333-92394) filed with the Securities and Exchange
Commission on July 15, 2002;
- Management's Discussion and Analysis of Financial Condition and Results
of Operations of the Washington Business and the Mexicali Operations
contained on pages 31 through 43 of our Registration Statement on Form
S-3 (Registration No. 333-92394) filed with the Securities and Exchange
Commission on July 15, 2002;
- Unaudited Pro Forma Condensed Combined Financial Information of the
combined company contained on pages 44 through 54 of our Registration
Statement on Form S-3 (Registration No. 333-92394) filed with the
Securities and Exchange Commission on July 15, 2002;
- Annual Report on Form 10-K of Alpha Industries, Inc. for the fiscal year
ended March 31, 2002 filed with the Securities and Exchange Commission
on July 1, 2002;
- Quarterly Report on Form 10-Q of Skyworks Solutions, Inc. for the fiscal
quarter ended June 28, 2002 filed with the Securities and Exchange
Commission on August 12, 2002;
- Current Report on Form 8-K filed with the Securities and Exchange
Commission on May 2, 2002;
- Current Report on Form 8-K filed with the Securities and Exchange
Commission on June 28, 2002, as amended on August 18, 2002; and
- The description of our common stock contained in Item 1 of our
Registration Statement on Form 8-A filed with the Securities and
Exchange Commission on May 29, 1998, including any amendments or reports
filed for the purpose of updating the description.
All documents that we file with the Securities and Exchange Commission
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent
to the date of this registration statement and prior to the filing of a
post-effective amendment to this registration statement that indicates that all
securities offered under this prospectus have been sold, or that deregisters all
securities then remaining unsold, will be deemed to be incorporated in this
registration statement by reference and to be a part hereof from the date of
filing of such documents.
Any statement contained in a document we incorporate by reference will be
modified or superseded for all purposes to the extent that a statement contained
in this prospectus (or in any other document that is subsequently filed with the
Securities and Exchange Commission and incorporated by reference) modifies or is
contrary to that previous statement. Any statement so modified or superseded
will not be deemed a part of this prospectus except as so modified or
superseded.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Investor Relations
Skyworks Solutions, Inc.
4311 Jamboree Road
Newport Beach, California 92660
Telephone (949) 231-4700
3
RISK FACTORS
WE HAVE RECENTLY INCURRED SUBSTANTIAL OPERATING LOSSES AND ANTICIPATE FUTURE
LOSSES.
Our operating results have been adversely affected by a global economic
slowdown and an abrupt decline in demand for many of the end-user products that
incorporate wireless communications semiconductor products and system solutions.
As a result, we incurred substantial operating losses during the quarter and
nine months ended June 30, 2002. Additionally, during the nine months ended June
30, 2002, we implemented a number of expense reduction initiatives, including a
work force reduction, a modification of employee work schedules and reduced
discretionary spending. We expect that reduced end-customer demand,
underutilization of our manufacturing capacity, changes in our revenue mix and
other factors will continue to adversely affect our operating results in the
near term. In order to return to profitability, we must achieve substantial
revenue growth and we will face an environment of uncertain demand in the
markets for our products. We cannot assure you as to whether or when we will
return to profitability or whether we will be able to sustain such
profitability, if achieved.
WE OPERATE IN THE HIGHLY CYCLICAL WIRELESS COMMUNICATIONS SEMICONDUCTOR
INDUSTRY, WHICH IS SUBJECT TO SIGNIFICANT DOWNTURNS.
The wireless communications semiconductor industry is highly cyclical and
is characterized by constant and rapid technological change, rapid product
obsolescence and price erosion, evolving technical standards, short product life
cycles and wide fluctuations in product supply and demand. From time to time
these and other factors, together with changes in general economic conditions,
cause significant upturns and downturns in the industry. Periods of industry
downturns -- as we experienced through most of calendar year 2001 -- have been
characterized by diminished product demand, production overcapacity, high
inventory levels and accelerated erosion of average selling prices. These
factors, and in particular the level of demand for digital cellular handsets,
may cause substantial fluctuations in our revenues and results of operations. We
have experienced these cyclical fluctuations in our business and may experience
cyclical fluctuations in the future.
During the late 1990's and extending into 2000, the wireless communications
semiconductor industry enjoyed unprecedented growth, benefiting from the rapid
expansion of wireless communication services worldwide and increased demand for
digital cellular handsets. During calendar year 2001, we were adversely impacted
by a global economic slowdown and an abrupt decline in demand for many of the
end-user products that incorporate our respective wireless communications
semiconductor products and system solutions, particularly digital cellular
handsets. The impact of weakened end-customer demand was compounded by higher
than normal levels of inventories among our original equipment manufacturer, or
OEM, subcontractor and distributor customers. We expect that reduced
end-customer demand, underutilization of our manufacturing capacity, changes in
revenue mix and other factors will continue to adversely affect our operating
results in the near term.
WE ARE SUBJECT TO INTENSE COMPETITION.
The wireless communications semiconductor industry in general and the
markets in which we compete in particular are intensely competitive. We compete
with U.S. and international semiconductor manufacturers that are both larger and
smaller than us in terms of resources and market share. We currently face
significant competition in our markets and expect that intense price and product
competition will continue. This competition has resulted and is expected to
continue to result in declining average selling prices for our products. We also
anticipate that additional competitors will enter our markets as a result of
growth opportunities in communications electronics, the trend toward global
expansion by foreign and domestic competitors and technological and public
policy changes.
We believe that the principal competitive factors for semiconductor
suppliers in our market include, among others:
- time-to-market;
- new product innovation;
- product quality, reliability and performance;
- price;
- compliance with industry standards;
- strategic relationships with customers; and
- protection of intellectual property.
We cannot assure you that we will be able to successfully address these
factors.
Many of our competitors have advantages over us, including:
- longer presence in key markets;
- greater name recognition;
- ownership or control of key technology or intellectual property;
and
- greater financial, sales and marketing, manufacturing,
distribution, technical or other resources.
As a result, certain competitors may be able to adapt more quickly than us
to new or emerging technologies and changes in customer requirements or may be
able to devote greater resources to the development, promotion and sale of their
products than we can.
4
Current and potential competitors also have established or may establish
financial or strategic relationships among themselves or with our customers,
resellers or other third parties. These relationships may affect customers'
purchasing decisions. Accordingly, it is possible that new competitors or
alliances among competitors could emerge and rapidly acquire significant market
share. We cannot assure you that we will be able to compete successfully against
current and potential competitors.
A number of our competitors have combined with each other and consolidated
their businesses, including the consolidation of competitors with our customers.
This consolidation is attributable to a number of factors, including the
historically high-growth nature of the communications electronics industry and
the time-to-market pressures on suppliers to decrease the time required for
product conception, research and development, sampling and production launch
before a product reaches the market. This consolidation trend is expected to
continue, since investments, alliances and acquisitions may enable semiconductor
suppliers, including us and our competitors, to achieve economies of scale, to
augment technical capabilities or to achieve faster time-to-market for their
products than would be possible solely through internal development.
This consolidation is creating entities with increased market share,
customer base, technology and marketing expertise in markets in which we
compete. These developments may adversely affect the markets we seek to serve
and our ability to compete successfully in those markets.
OUR SUCCESS WILL DEPEND UPON OUR ABILITY TO DEVELOP NEW PRODUCTS AND REDUCE
COSTS IN A TIMELY MANNER.
The markets into which we sell demand cutting-edge technologies and new and
innovative products. Our operating results will depend largely on our ability to
continue to introduce new and enhanced products on a timely basis. Successful
product development and introduction depends on numerous factors, including,
among others:
- the ability to anticipate customer and market requirements and
changes in technology and industry standards;
- the ability to define new products that meet customer and market
requirements;
- the ability to complete development of new products and bring
products to market on a timely basis;
- the ability to differentiate our products from offerings of our
competitors; and
- overall market acceptance of our products.
We cannot assure you that we will have sufficient resources to make the
substantial investment in research and development in order to develop and bring
to market new and enhanced products in a timely manner. We will be required
continually to evaluate expenditures for planned product development and to
choose among alternative technologies based on our expectations of future market
growth. We cannot assure you that we will be able to develop and introduce new
or enhanced wireless communications semiconductor products in a timely and
cost-effective manner, that our products will satisfy customer requirements or
achieve market acceptance or that we will be able to anticipate new industry
standards and technological changes. We also cannot assure you that we will be
able to respond successfully to new product announcements and introductions by
competitors.
In addition, prices of established products may decline, sometimes
significantly, over time. We believe that in order to remain competitive we must
continue to reduce the cost of producing and delivering existing products at the
same time that we develop and introduce new or enhanced products. We cannot
assure you that we will be able to continue to reduce the cost of our products
to remain competitive.
WE MAY NOT BE ABLE TO KEEP ABREAST OF THE RAPID TECHNOLOGICAL CHANGES IN OUR
MARKETS.
The demand for our products can change quickly and in ways we may not
anticipate. Our markets generally exhibit the following characteristics:
- rapid technological developments;
- rapid changes in customer requirements;
- frequent new product introductions and enhancements;
- short product life cycles with declining prices over the life
cycle of the product; and
- evolving industry standards.
Our products could become obsolete or less competitive sooner than
anticipated because of a faster than anticipated change in one or more of the
technologies related to our products or in market demand for products based on a
particular technology, particularly due to the introduction of new technology
that represents a substantial advance over current technology. Currently
accepted industry standards are also subject to change, which may contribute to
the obsolescence of our products.
WE MAY NOT BE ABLE TO ATTRACT AND RETAIN QUALIFIED PERSONNEL NECESSARY FOR THE
DESIGN, DEVELOPMENT, MANUFACTURE AND SALE OF OUR PRODUCTS. OUR SUCCESS COULD BE
NEGATIVELY AFFECTED IF KEY PERSONNEL LEAVE.
Our future success depends on our ability to continue to attract, retain
and motivate qualified personnel, including executive officers and other key
management and technical personnel. As the source of our technological and
product innovations, our key technical personnel represent a significant asset.
The competition for management and technical personnel is intense in the
semiconductor industry. We cannot assure you that we will be able to attract and
retain qualified management and other personnel necessary for the design,
development, manufacture and sale of our products.
5
We may have particular difficulty attracting and retaining key personnel
during periods of poor operating performance, given, among other things, the use
of equity-based compensation by us and our competitors. The loss of the services
of one or more of our key employees, including David J. Aldrich, our chief
executive officer, or certain key design and technical personnel, or our
inability to attract, retain and motivate qualified personnel, could have a
material adverse effect on our ability to operate our business.
IF OEMS OF COMMUNICATIONS ELECTRONICS PRODUCTS DO NOT DESIGN OUR PRODUCTS INTO
THEIR EQUIPMENT, WE WILL HAVE DIFFICULTY SELLING THOSE PRODUCTS. MOREOVER, A
"DESIGN WIN" FROM A CUSTOMER DOES NOT GUARANTEE FUTURE SALES TO THAT CUSTOMER.
Our products will not be sold directly to the end-user but will be
components of other products. As a result, we will rely on OEMs of wireless
communications electronics products to select our products from among
alternative offerings to be designed into their equipment. Without these "design
wins" from OEMs, we would have difficulty selling our products. Once an OEM
designs another supplier's product into one of its product platforms, it is more
difficult for us to achieve future design wins with that OEM product platform
because changing suppliers involves significant cost, time, effort and risk for
that OEM. Also, achieving a design win with a customer does not ensure that we
will receive significant revenues from that customer. Even after a design win,
the customer is not obligated to purchase our products and can choose at any
time to reduce or cease use of our products, for example, if its own products
are not commercially successful or for any other reason. We may be unable to
achieve design wins or to convert design wins into actual sales.
BECAUSE OF THE LENGTHY SALES CYCLES OF MANY OF OUR PRODUCTS, WE MAY INCUR
SIGNIFICANT EXPENSES BEFORE WE GENERATE ANY REVENUES RELATED TO THOSE PRODUCTS.
Our customers may need three to six months to test and evaluate our
products and an additional three to six months to begin volume production of
equipment that incorporates our products. The lengthy period of time required
increases the possibility that a customer may decide to cancel or change product
plans, which could reduce or eliminate our sales to that customer. As a result
of this lengthy sales cycle, we may incur significant research and development,
and selling, general and administrative expenses before we generate the related
revenues for these products, and we may never generate the anticipated revenues
if our customer cancels or changes its product plans.
UNCERTAINTIES INVOLVING THE ORDERING AND SHIPMENT OF OUR PRODUCTS COULD
ADVERSELY AFFECT OUR BUSINESS.
Our sales will typically be made pursuant to individual purchase orders and
not under long-term supply arrangements with our customers. Our customers may
cancel orders prior to shipment. In addition, we will sell a portion of our
products through distributors, some of whom will have rights to return unsold
products. We may purchase and manufacture inventory based on estimates of
customer demand for our products, which is difficult to predict. This difficulty
may be compounded when we sell to OEMs indirectly through distributors or
contract manufacturers, or both, as our forecasts of demand will then be based
on estimates provided by multiple parties. In addition, our customers may change
their inventory practices on short notice for any reason. The cancellation or
deferral of product orders, the return of previously sold products, or
overproduction due to the failure of anticipated orders to materialize, could
result in us holding excess or obsolete inventory, which could result in
write-downs of inventory.
OUR RELIANCE ON A SMALL NUMBER OF CUSTOMERS FOR A LARGE PORTION OF OUR SALES
COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS.
A significant portion of our sales are concentrated among a limited number
of customers. If we lost one or more of these major customers, or if one or more
major customers significantly decreased its orders, our business would be
materially and adversely affected. Sales to Samsung Electronics Co., Ltd.
represented approximately 45% of net revenues from third parties during the
first nine months of fiscal 2002. Our future operating results will depend on
the success of this customer and other customers and our success in selling
products to them.
THE TERMS OF OUR FINANCING AGREEMENT WITH CONEXANT MAY RESTRICT OUR OPERATING
AND FINANCIAL FLEXIBILITY.
In connection with our acquisition from Conexant of its semiconductor
assembly and test facility located in Mexicali, Mexico and assets related
thereto, we and certain of our subsidiaries entered into a financing agreement,
dated as of June 25, 2002, with Conexant. Pursuant to the terms of the financing
agreement, in payment for the semiconductor assembly and test facility in
Mexicali, Mexico, we, and our new subsidiary, Conexant Systems, S.A. de C.V.,
issued short-term promissory notes to Conexant in the aggregate principal amount
of $150 million. In addition, Conexant committed to make a short-term $100
million revolving loan facility available to us to fund working capital and
other requirements. Interest on the promissory notes and the revolving loans is
payable at a rate of 10% per annum for the first ninety days following June 25,
2002, 12% per annum for the next ninety days and 15% per annum thereafter.
Our obligations under the financing agreement are jointly and severally
guaranteed by all of our domestic subsidiaries and certain of our foreign
subsidiaries, and are secured by a first priority lien on our, and our
guaranteeing subsidiaries', current and future tangible and intangible assets
and real property.
Unless paid earlier at our option or pursuant to the mandatory prepayment
provisions of the financing agreement, fifty percent of the principal amount of
the promissory notes issued by us is due on March 21, 2003, and the remaining
fifty percent of the principal amount of the promissory notes and the entire
principal amount of the revolving loans is due June 24, 2003. We may prepay
amounts outstanding under the revolving loans at any time without penalty. We
are required to prepay amounts outstanding under the financing agreement in
certain circumstances. Commencing in July 2002, if at the end of any month the
aggregate amount of our cash, cash equivalents and marketable securities on a
consolidated basis, which we refer to as available cash, exceeds $60 million, we
are required to use our available cash in excess of $60 million to repay amounts
outstanding under the financing agreement. In addition, if at any time, the net
cash proceeds
6
from a sale of assets, an equity offering or an incurrence of indebtedness
causes our available cash to exceed $60 million, we are required to use our
available cash in excess of $60 million to repay amounts outstanding under the
financing agreement. These mandatory prepayments will be applied first to reduce
the principal amount of the promissory notes due March 21, 2003, second to
reduce the balance of the promissory notes and third to reduce the revolving
loans.
The financing agreement contains representations and warranties of, and an
indemnity by, us and our guaranteeing subsidiaries in favor of Conexant. In
addition, the financing agreement contains certain covenants, including without
limitation, covenants:
- requiring us to maintain a minimum balance of cash, cash equivalents and
marketable securities;
- imposing limitations on the incurrence of additional indebtedness;
- restricting sales of assets, investments, acquisitions and capital
expenditures;
- requiring us to establish a finance committee; and
- restricting inter-company transfers of working capital and assets to
foreign subsidiaries.
Although we believe that we will be able to comply with these requirements,
compliance with these requirements may restrict our operating and financial
flexibility. We cannot assure you that we will in fact be able to satisfy all of
the requirements in the financing agreement. Our inability to satisfy the
requirements of the financing agreement would have a material adverse effect on
us.
THE OCCURRENCE AND CONTINUANCE OF AN EVENT OF DEFAULT UNDER OUR FINANCING
AGREEMENT WITH CONEXANT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS,
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Our financing agreement with Conexant contains certain events of default (as
defined in the financing agreement). Upon the occurrence and continuance of an
event of default, Conexant may choose from a number of remedies, including:
- terminating the revolving facility and declaring all outstanding amounts
under the revolving loans due and payable;
- declaring all amounts outstanding under the promissory notes due and
payable; and
- foreclosing on the collateral, which includes our and our guaranteeing
subsidiaries' tangible and intangible assets and real property.
Conexant's enforcement of any of these remedies upon an event of default
would have a material adverse effect on us. If Conexant were to declare amounts
outstanding under the revolving loans and/or the promissory notes immediately
due and payable, we may not have sufficient capital to repay these amounts and
we may not be able to raise sufficient capital to repay these amounts. If
Conexant were to foreclose on the collateral, it would have a material adverse
effect on our business, financial condition and results of operations.
WE FACE A RISK THAT CAPITAL NEEDED FOR OUR BUSINESS WILL NOT BE AVAILABLE WHEN
WE NEED IT.
We will need to obtain sources of financing in the near future. We expect
that we will be required to raise capital to satisfy our working capital needs
and to repay the short-term note in the amount of $150 million delivered to
Conexant in payment of the purchase price of our semiconductor assembly and test
facility in Mexicali, Mexico and assets relating thereto and amounts
outstanding, if any, under the revolving loans under our financing agreement
with Conexant. Under the terms of the financing agreement we must, subject to
certain exceptions, use 100% of the proceeds from asset sales or other
dispositions of property or from the issuance of debt or equity to prepay the
amount outstanding under the financing agreement until paid in full. In
addition, the Company has incurred expenses and has assumed obligations as a
result of this merger which the Company estimates will require cash of
approximately $80 million. The Company's ability to meet these expenses, the
expenses of our ongoing operations, and to repay the debt owed to Conexant is
dependent upon our ability to obtain suitable financing.
We expect that we will seek to raise capital through a public or private
offering of equity, debt or some combination thereof within six months. We
cannot assure you that the capital required to fund these expenses will be
available in the future. Conditions existing in the U.S. capital markets when
the Company seeks financing will affect our ability to raise capital, as well as
the terms of any financing. Further, the financing agreement limits our ability
to raise additional capital by, among other things, imposing limitations on the
incurrence of additional indebtedness. In addition, under a tax allocation
agreement, dated as of June 25, 2002, entered into among Conexant, Washington
Sub and Alpha in connection with the merger, if we fail to satisfy the
short-term notes delivered to Conexant pursuant to their terms, we may be
required to indemnify Conexant for a material amount of taxes that it may incur
with respect to the spin-off. The Company may not be able to raise enough
capital to meet our capital needs on a timely basis or at all. Failure to obtain
capital when required would have a material adverse effect on the Company.
In addition, any strategic investments and acquisitions that we may make to
help us grow our business may require additional capital resources. We cannot
assure you that the capital required to fund these investments and acquisitions
will be available in the future.
OUR MANUFACTURING PROCESSES ARE EXTREMELY COMPLEX AND SPECIALIZED.
7
Our manufacturing operations are complex and subject to disruption due to
causes beyond our control. The fabrication of integrated circuits is an
extremely complex and precise process consisting of hundreds of separate steps.
It requires production in a highly controlled, clean environment. Minor
impurities, errors in any step of the fabrication process, defects in the masks
used to print circuits on a wafer or a number of other factors can cause a
substantial percentage of wafers to be rejected or numerous die on each wafer
not to function.
Our operating results are highly dependent upon our ability to produce
integrated circuits at acceptable manufacturing yields. Our operations may be
affected by lengthy or recurring disruptions of operations at any of our
production facilities or those of our subcontractors. These disruptions may
include electrical power outages, fire, earthquake, flooding or other natural
disasters. Disruptions of our manufacturing operations could cause significant
delays in shipments until we are able to shift the products from an affected
facility or subcontractor to another facility or subcontractor.
In the event of these types of delays, we cannot assure you that the
required alternate capacity, particularly wafer production capacity, would be
available on a timely basis or at all. Even if alternate wafer production
capacity is available, we may not be able to obtain it on favorable terms, which
could result in higher costs and/or a loss of customers. We may be unable to
obtain sufficient manufacturing capacity to meet demand, either at our own
facilities or through external manufacturing or similar arrangements with
others.
Due to the highly specialized nature of the gallium arsenide integrated
circuit manufacturing process, in the event of a disruption at the Newbury Park,
California or Woburn, Massachusetts semiconductor wafer fabrication facilities,
alternate gallium arsenide production capacity would not be immediately
available from third-party sources. These disruptions could have a material
adverse effect on our business, financial condition and results of operations.
WE MAY NOT BE ABLE TO ACHIEVE MANUFACTURING YIELDS THAT CONTRIBUTE POSITIVELY TO
OUR GROSS MARGIN AND PROFITABILITY.
Minor deviations in the manufacturing process can cause substantial
manufacturing yield loss, and in some cases, cause production to be suspended.
Manufacturing yields for new products initially tend to be lower as we complete
product development and commence volume manufacturing, and typically increase as
we bring the product to full production. Our forward product pricing includes
this assumption of improving manufacturing yields and, as a result, material
variances between projected and actual manufacturing yields will have a direct
effect on our gross margin and profitability. The difficulty of forecasting
manufacturing yields accurately and maintaining cost competitiveness through
improving manufacturing yields will continue to be magnified by the increasing
process complexity of manufacturing semiconductor products. Our manufacturing
operations also will face pressures arising from the compression of product life
cycles which will require us to manufacture new products faster and for shorter
periods while maintaining acceptable manufacturing yields and quality without,
in many cases, reaching the longer-term, high-volume manufacturing conducive to
higher manufacturing yields and declining costs.
WE ARE DEPENDENT UPON THIRD PARTIES FOR THE MANUFACTURE, ASSEMBLY AND TEST OF
OUR PRODUCTS.
We rely upon independent wafer fabrication facilities, called foundries, to
provide silicon-based products and to supplement our gallium arsenide wafer
manufacturing capacity. There are significant risks associated with reliance on
third-party foundries, including:
- the lack of ensured wafer supply, potential wafer shortages and higher
wafer prices;
- limited control over delivery schedules, manufacturing yields,
production costs and product quality; and
- the inaccessibility of, or delays in obtaining access to, key process
technologies.
Although we have long-term supply arrangements to obtain additional external
manufacturing capacity, the third-party foundries we use may allocate their
limited capacity to the production requirements of other customers. If we choose
to use a new foundry, it will typically take an extended period of time to
complete the qualification process before we can begin shipping products from
the new foundry. The foundries may experience financial difficulties, be unable
to deliver products to us in a timely manner or suffer damage or destruction to
their facilities, particularly since some of them are located in earthquake
zones. If any disruption of manufacturing capacity occurs, we may not have
alternative manufacturing sources immediately available. We may therefore
experience difficulties or delays in securing an adequate supply of our
products, which could impair our ability to meet our customers' needs and have a
material adverse effect on our operating results.
We also intend to utilize subcontractors to package, assemble and test a
portion of our products. Because we rely on others to package, assemble or test
our products, we are subject to many of the same risks as are described above
with respect to foundries.
WE ARE DEPENDENT UPON THIRD PARTIES FOR THE SUPPLY OF RAW MATERIALS AND
COMPONENTS.
We believe we have adequate sources for the supply of raw materials and
components for our manufacturing needs with suppliers located around the world.
However, we are currently dependent on two suppliers for epitaxial wafers used
in the gallium arsenide semiconductor manufacturing processes at our
manufacturing facilities. Although in the past the number of qualified
alternative suppliers for wafers has been limited and the process of qualifying
a new wafer supplier has required a substantial lead-time, more epitaxial wafer
capacity has recently become available and the supplier qualification process
has become less lengthy and complex. Nevertheless, while we historically have
not experienced any significant difficulties in obtaining an adequate supply of
raw materials, including epitaxial wafers, and components necessary for our
manufacturing operations, we cannot assure you that we will not lose a
significant supplier or that a supplier will be able to meet performance and
quality specifications or delivery schedules.
8
WE ARE SUBJECT TO THE RISKS OF DOING BUSINESS INTERNATIONALLY.
Historically, a substantial majority of the Company's net revenues from
third parties were derived from customers located outside the United States,
primarily countries located in the Asia-Pacific region and Europe. In addition,
we have suppliers located outside the United States and third-party packaging,
assembly and test facilities and foundries located in the Asia-Pacific region.
Our international sales and operations are subject to a number of risks inherent
in selling and operating abroad. These include, but are not limited to, risks
regarding:
- currency exchange rate fluctuations;
- local economic and political conditions;
- disruptions of capital and trading markets;
- restrictive governmental actions (such as restrictions on
transfer of funds and trade protection measures, including export
- duties and quotas and customs duties and tariffs);
- changes in legal or regulatory requirements;
- limitations on the repatriation of funds;
- difficulty in obtaining distribution and support;
- the laws and policies of the United States and other countries
affecting trade, foreign investment and loans, and import or
export licensing requirements;
- tax laws; and
- limitations on our ability under local laws to protect our
intellectual property.
Because our international sales are denominated in U.S. dollars our
products could become less competitive in international markets if the value of
the U.S. dollar increases relative to foreign currencies. Moreover, we may be
competitively disadvantaged relative to our competitors located outside the
United States who may benefit from a devaluation of their local currency. We
cannot assure you that the factors described above will not have a material
adverse effect on our ability to increase or maintain our international sales.
OUR OPERATING RESULTS MAY BE NEGATIVELY AFFECTED BY SUBSTANTIAL QUARTERLY AND
ANNUAL FLUCTUATIONS AND MARKET DOWNTURNS.
Our revenues, earnings and other operating results have fluctuated in the
past and our revenues, earnings and other operating results may fluctuate in the
future. These fluctuations are due to a number of factors, many of which are
beyond our control. These factors include, among others:
- changes in end-user demand for the products (principally digital
cellular handsets) manufactured and sold by our customers;
- the effects of competitive pricing pressures, including decreases
in average selling prices of our products;
- production capacity levels and fluctuations in manufacturing
yields;
- availability and cost of products from our suppliers;
- the gain or loss of significant customers;
- our ability to develop, introduce and market new products and
technologies on a timely basis;
- new product and technology introductions by competitors;
- changes in the mix of products produced and sold;
- market acceptance of our products and our customers;
- intellectual property disputes;
- seasonal customer demand;
- the timing of receipt, reduction or cancellation of significant
orders by customers; and
- the timing and extent of product development costs.
The foregoing factors are difficult to forecast, and these, as well as
other factors, could materially adversely affect our quarterly or annual
operating results. If our operating results fail to meet the expectations of
analysts or investors, it could materially and adversely affect the price of our
common stock.
OUR GALLIUM ARSENIDE SEMICONDUCTORS MAY NOT CONTINUE TO BE COMPETITIVE WITH
SILICON ALTERNATIVES.
We manufacture and sell gallium arsenide semiconductors, principally power
amplifiers and switches. The production of gallium arsenide integrated circuits
is more costly than the production of silicon circuits. As a result, we must
offer gallium arsenide products that provide superior performance to that of
silicon for specific applications to be competitive with silicon products. If we
do not continue to offer products that provide sufficiently superior performance
to offset the cost differential, our operating results may be materially and
adversely affected. It is expected that the costs of producing gallium arsenide
integrated circuits will continue to exceed the costs associated with the
production of silicon circuits. The costs differ because of higher costs of raw
materials for gallium arsenide and higher unit costs associated with
smaller-sized wafers and lower production volumes. Silicon semiconductor
technologies are widely-used process technologies for certain integrated
circuits and these technologies continue to improve in performance. We cannot
assure you that we will continue to identify products and markets that require
performance superior to that offered by silicon solutions.
THE VALUE OF OUR COMMON STOCK MAY BE ADVERSELY AFFECTED BY MARKET VOLATILITY.
The trading price of our common stock may fluctuate significantly. This
price may be influenced by many factors, including:
9
- our performance and prospects;
- the performance and prospects of our major customers;
- the depth and liquidity of the market for our common stock;
- investor perception of us and the industry in which we operate;
- changes in earnings estimates or buy/sell recommendations by
analysts;
- general financial and other market conditions; and
- domestic and international economic conditions.
Public stock markets have experienced, and are currently experiencing,
extreme price and trading volume volatility, particularly in the technology
sectors of the market. This volatility has significantly affected the market
prices of securities of many technology companies for reasons frequently
unrelated to or disproportionately impacted by the operating performance of
these companies. These broad market fluctuations may adversely affect the market
price of our common stock.
WE MAY BE SUBJECT TO CLAIMS OF INFRINGEMENT OF THIRD-PARTY INTELLECTUAL PROPERTY
RIGHTS OR DEMANDS THAT WE LICENSE THIRD-PARTY TECHNOLOGY, WHICH COULD RESULT IN
SIGNIFICANT EXPENSE AND PREVENT US FROM USING OUR TECHNOLOGY.
The semiconductor industry is characterized by vigorous protection and
pursuit of intellectual property rights. From time to time, third parties have
asserted and may in the future assert patent, copyright, trademark and other
intellectual property rights to technologies that are important to our business
and have demanded and may in the future demand that we license their technology.
Any litigation to determine the validity of claims our products infringe or may
infringe these rights, including claims arising from our contractual
indemnification of our customers, regardless of their merit or resolution, could
be costly and divert the efforts and attention of our management and technical
personnel. Regardless of the merits of any specific claim, we cannot assure you
that we would prevail in litigation because of the complex technical issues and
inherent uncertainties in intellectual property litigation. If litigation were
to result in an adverse ruling, we could be required to:
- pay substantial damages;
- cease the manufacture, import, use, sale or offer for sale of
infringing products;
- discontinue the use of infringing technology;
- expend significant resources to develop non-infringing
technology; or
- license technology from the third party claiming infringement,
which license may not be available on commercially reasonable
terms.
IF WE ARE NOT SUCCESSFUL IN PROTECTING OUR INTELLECTUAL PROPERTY RIGHTS, IT MAY
HARM OUR ABILITY TO COMPETE.
We rely on patent, copyright, trademark, trade secret and other
intellectual property laws, as well as nondisclosure and confidentiality
agreements and other methods, to protect our proprietary technologies, devices,
algorithms and processes. In addition, we often incorporate the intellectual
property of our customers, suppliers or other third parties into our designs,
and we have obligations with respect to the non-use and non-disclosure of such
third-party intellectual property. In the future, it may be necessary to engage
in litigation or like activities to enforce our intellectual property rights, to
protect our trade secrets or to determine the validity and scope of proprietary
rights of others, including our customers. This could require us to expend
significant resources and to divert the efforts and attention of our management
and technical personnel from our business operations. We cannot assure you that:
- the steps we take to prevent misappropriation, infringement or
other violation of our intellectual property or the intellectual
property of our customers, suppliers or other third parties will
be successful;
- any existing or future patents, copyrights, trademarks, trade
secrets or other intellectual property rights will not be
challenged, invalidated or circumvented; or
- any of the measures described above would provide meaningful
protection.
Despite these precautions, it may be possible for a third party to copy or
otherwise obtain and use our technology without authorization, develop similar
technology independently or design around our patents. If any of our patents
fails to protect our technology, it would make it easier for our competitors to
offer similar products. In addition, effective patent, copyright, trademark and
trade secret protection may be unavailable or limited for certain technologies
and in certain foreign countries.
OUR SUCCESS DEPENDS, IN PART, ON OUR ABILITY TO EFFECT SUITABLE INVESTMENTS,
ALLIANCES AND ACQUISITIONS, AND WE MAY HAVE DIFFICULTY INTEGRATING COMPANIES WE
ACQUIRE. THE COMPANY'S MERGER WITH THE WIRELESS BUSINESS OF CONEXANT PRESENTS
SUCH RISKS.
Although we intend to invest significant resources in internal research and
development activities, the complexity and rapidity of technological changes and
the significant expense of internal research and development make it impractical
for us to pursue development of all technological solutions on our own. On an
ongoing basis, we intend to review investment, alliance and acquisition
prospects that would complement our product offerings, augment our market
coverage or enhance our technological capabilities. However, we cannot assure
you that we will be able to identify and consummate suitable investment,
alliance or acquisition transactions in the future.
Moreover, if we consummate such transactions, they could result in:
- issuances of equity securities dilutive to our stockholders;
- large one-time write-offs;
- the incurrence of substantial debt and assumption of unknown
liabilities;
- the potential loss of key employees from the acquired company;
10
- amortization expenses related to intangible assets; and
- the diversion of management's attention from other business
concerns.
Additionally, in periods following an acquisition, we will be required to
evaluate goodwill and acquisition-related intangible assets for impairment. When
such assets are found to be impaired, they will be written down to estimated
fair value, with a charge against earnings.
Integrating acquired organizations and their products and services may be
difficult, expensive, time-consuming and a strain on our resources and our
relationship with employees and customers and ultimately may not be successful.
WE MAY BE RESPONSIBLE FOR PAYMENT OF A SUBSTANTIAL AMOUNT OF U.S. FEDERAL INCOME
TAXES IF CONEXANT'S SPIN-OFF OF WASHINGTON SUB DOES NOT QUALIFY AS A
REORGANIZATION FOR U.S. FEDERAL INCOME TAX PURPOSES AS A RESULT OF CERTAIN
ACQUISITIONS OF STOCK BY US.
In connection with Conexant's spin-off of Washington Sub prior to the
merger of Washington Sub into Alpha, Conexant sought and received a ruling from
the Internal Revenue Service to the effect that the spin-off qualified as a
reorganization for U.S. federal income tax purposes. While the tax ruling
generally will be binding on the Internal Revenue Service, the continuing
validity of the ruling will be subject to certain factual representations and
assumptions.
A tax allocation agreement among Conexant, Washington Sub and Alpha
generally provides that we will be responsible for any taxes imposed on
Conexant, Washington Sub or Conexant stockholders as a result of either:
- the failure of Conexant's spin-off of Washington Sub to qualify as a
reorganization for U.S. federal income tax purposes, or
- the subsequent disqualification of the distribution of Washington Sub
common stock to Conexant stockholders in connection with the spin-off
of Washington Sub as a tax-free transaction to Conexant for U.S.
federal income tax purposes,
if such failure or disqualification is attributable to certain post-spin-off
actions by or in respect of Skyworks Solutions (including our subsidiaries) or
our stockholders, such as the acquisition of Skyworks Solutions by a third party
at a time and in a manner that would cause such failure or disqualification. For
example, even if the spin-off otherwise qualifies as a reorganization for U.S.
federal income tax purposes, the distribution of the Washington Sub common stock
to Conexant stockholders in connection with the spin-off may be disqualified as
tax-free to Conexant if there is an acquisition of our stock as part of a plan
(or series of related transactions) that includes the spin-off and that results
in a deemed acquisition of 50% or more of Washington Sub common stock. For
purposes of this test, any acquisitions of Conexant stock or Skyworks Solutions
stock within two years before or after the spin-off are presumed to be part of
such a plan, although we or Conexant may be able to rebut that presumption. Also
for purposes of this test, the merger will be treated as resulting in a deemed
acquisition by Alpha stockholders of approximately 33% of Washington Sub common
stock. The process for determining whether a change of ownership has occurred
under the tax rules is complex and uncertain. If we do not carefully monitor our
compliance with these rules, we might inadvertently cause or permit a change of
ownership to occur, triggering our obligation to indemnify Conexant pursuant to
the tax allocation agreement. In addition, our indemnity obligation could
discourage or prevent a third party from making a proposal to acquire Skyworks
Solutions.
If we were required to pay any of the taxes described above, the payment
would be very substantial and would be expected to have a material adverse
effect on our business, financial condition, results of operations and cash
flow.
WE MAY BE AFFECTED BY SIGNIFICANT RESTRICTIONS WITH RESPECT TO ISSUANCE OF OUR
EQUITY SECURITIES FOR TWO YEARS AFTER CONEXANT'S SPIN-OFF OF WASHINGTON SUB.
Even if Conexant's spin-off of Washington Sub otherwise qualifies as a
reorganization within the meaning of Sections 355 and 368 of the Internal
Revenue Code of 1986, the distribution of Washington Sub common stock to
Conexant stockholders in connection with the spin-off may be disqualified as
tax-free to Conexant under Section 355(e) of the Internal Revenue Code if 50% or
more of the stock of Conexant or the Company is acquired as part of a plan (or
series of related transactions) that includes the spin-off. For this purpose,
any acquisitions of Conexant stock or our stock within two years before or after
the spin-off transaction are presumed to be part of such a plan, although
Conexant or we may be able to rebut that presumption. The merger was treated as
resulting in a deemed acquisition by Alpha stockholders of approximately 33% of
Washington Sub common stock. The process for determining whether a change of
ownership has occurred under the tax rules is complex. Section 355(e) is a
relatively new provision of law. Accordingly, little guidance exists regarding
its interpretation. In particular, there is uncertainty over the analysis to be
used to determine whether transactions are part of a plan (or series of related
transactions). In addition, such a determination is inherently factual and
subject to the interpretation of the facts and circumstances of a particular
case. If an acquisition of Conexant stock or our stock triggers the application
of Section 355(e), Conexant would recognize taxable gain but the spin-off would
generally be tax-free to Conexant stockholders. Under the tax allocation
agreement, we would be required to indemnify Conexant against that taxable gain
incurred if Conexant's spin-off of Washington Sub from Conexant is disqualified
as tax-free to Conexant stockholders, if it were triggered by actions by or in
respect of us (including our subsidiaries) or our stockholders.
Because of the change in control limitation imposed by Section 355(e) of
the Internal Revenue Code of 1986, we may be limited in the amount of stock that
we can issue to make acquisitions or to raise additional capital in the two
years subsequent to the merger. Also, our indemnity obligation to Conexant might
discourage, delay or prevent a change of control during this two year period
that stockholders may consider favorable.
11
CERTAIN PROVISIONS IN OUR ORGANIZATIONAL DOCUMENTS AND DELAWARE LAW MAY MAKE IT
DIFFICULT FOR SOMEONE TO ACQUIRE CONTROL OF US.
We have certain anti-takeover measures that may affect our common stock.
Our restated certificate of incorporation, as amended, and our second amended
and restated by-laws and the Delaware General Corporation Law contain several
provisions that would make more difficult an acquisition of control of us in a
transaction not approved by our board of directors. Our certificate of
incorporation and by-laws include provisions such as:
- the division of our board of directors into three classes to be
elected on a staggered basis, one class each year;
- the ability of our board of directors to issue shares of preferred
stock in one or more series without further authorization of
stockholders;
- a prohibition on stockholder action by written consent;
- elimination of the right of stockholders to call a special meeting of
stockholders;
- a requirement that stockholders provide advance notice of any
stockholder nominations of directors or any proposal of new business
to be considered at any meeting of stockholders;
- a requirement that the affirmative vote of at least 66 2/3% of our
shares be obtained to amend or repeal any provision of the by-laws or
the provision of our certificate of incorporation relating to
amendments to the by-laws;
- a requirement that the affirmative vote of at least 80% of our shares
be obtained to amend or repeal the provisions of our certificate of
incorporation relating to the election and removal of directors, the
classified board or the right to act by written consent;
- a requirement that the affirmative vote of at least 80% of our shares
be obtained for business combinations unless approved by a majority of
the members of the board of directors and, in the event that the other
party to the business combination is the beneficial owner of 5% or
more of our shares, a majority of the members of board of directors in
office prior to the time such other party became the beneficial owner
of 5% or more of our shares;
- a fair price provision; and
- a requirement that the affirmative vote of at least 90% of our shares
be obtained to amend or repeal the fair price provision.
In addition to the provisions in our certificate of incorporation and
by-laws, Section 203 of the Delaware General Corporation Law generally provides
that a corporation shall not engage in any business combination with any
interested stockholder during the three-year period following the time that such
stockholder becomes an interested stockholder, unless a majority of the
directors then in office approves either the business combination or the
transaction that results in the stockholder becoming an interested stockholder
or specified stockholder approval requirements are met.
WE MAY BE LIABLE FOR PENALTIES UNDER ENVIRONMENTAL LAWS, RULES AND REGULATIONS,
WHICH COULD ADVERSELY IMPACT OUR BUSINESS.
We have used, and will continue to use, a variety of chemicals in
manufacturing operations and have been or will be subject to a wide range of
environmental protection regulations in the United States. While we have not
experienced any material adverse effect on our operations as a result of such
regulations, we cannot assure you that current or future regulations would not
have a material adverse effect on our business, financial condition and results
of operations.
Environmental regulations often require parties to fund remedial action
regardless of fault. Consequently, it is often difficult to estimate the future
impact of environmental matters, including potential liabilities. We cannot
assure you that the amount of expense and capital expenditures that might be
required to satisfy environmental liabilities, to complete remedial actions and
to continue to comply with applicable environmental laws will not have a
material adverse effect on our business, financial condition and results of
operations.
12
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of our common stock by
the selling stockholder. The principal purpose of this offering is to effect an
orderly disposition of the selling stockholder's shares.
SELLING STOCKHOLDER
We are registering for resale certain shares of our common stock issuable to
the selling stockholder identified below upon the exercise of a warrant to
purchase common stock issued by us to the selling stockholder on June 25, 2002,
in connection with the consummation of the merger with Conexant. The following
table sets forth:
- the name of the selling stockholder;
- the number and percent of shares of our common stock that the
selling stockholder beneficially owned prior to the offering for
resale of any of the shares of our common stock being registered by
the registration statement of which this prospectus is a part;
- the number of shares of our common stock that may be offered for
resale for the account of the selling stockholder pursuant to this
prospectus; and
- the number and percent of shares of our common stock to be held by
the selling stockholder after the offering of the resale shares
(assuming all of the resale shares are sold by the selling
stockholder).
This information is based upon information provided by the selling
stockholder and assumes the sale of all of the resale shares by the selling
stockholder. The term selling stockholder includes the stockholder listed below
and its transferees, pledgees, donees or other successors. The applicable
percentages of ownership are based on an aggregate of 137,576,508 shares of our
common stock issued and outstanding as of August 28, 2002.
SHARES BENEFICIALLY OWNED NUMBER OF SHARES BENEFICIALLY OWNED
PRIOR TO OFFERING SHARES AFTER OFFERING
========================= BEING =========================
SELLING STOCKHOLDER NUMBER PERCENT OFFERED NUMBER PERCENT
============================== ========== ======= ========= ====== =======
Jazz Semiconductor, Inc. 1,017,900 * 1,017,900 0 *
4321 Jamboree Road
Newport Beach, CA 92660
* Less than 1%.
13
PLAN OF DISTRIBUTION
The selling stockholder may sell the resale shares from time to time in one
or more transactions at:
- fixed prices;
- market prices at the time of sale;
- varying prices determined at the time of sale; or
- negotiated prices.
The selling stockholder will act independently of us in making decisions
regarding the timing, manner and size of each sale. The selling stockholder may
effect these transactions by selling the resale shares to or through
broker-dealers. Broker-dealers engaged by the selling stockholder may arrange
for other broker-dealers to participate in the resales. The resale shares may be
sold in one or more of the following transactions:
- a block trade in which a broker-dealer attempts to sell the shares
as agent but may resell a portion of the block as principal to
facilitate the transaction;
- a purchase by a broker-dealer as principal and resale by the
broker-dealer for its account under this prospectus;
- an exchange distribution in accordance with the rules of the
exchange;
- ordinary brokerage transactions and transactions in which a broker
solicits purchasers;
- privately negotiated transactions; and
- a combination of any of the above transactions.
We may amend or supplement this prospectus from time to time to describe a
specific plan of distribution. If the plan of distribution involves an
arrangement with a broker-dealer for the sale of shares through a block trade,
special offering, exchange distribution or secondary distribution, or a purchase
by a broker-dealer, the supplement will disclose:
- the name of the selling security holder and the participating
broker-dealer;
- the number of shares involved;
- the price at which the shares were sold;
- the commissions paid or discounts or concessions allowed to the
broker-dealer;
- that the broker-dealer did not conduct any investigation to verify
the information contained or incorporated by reference in this
prospectus; and
- other facts material to the transaction.
The selling stockholder may enter into hedging transactions with
broker-dealers in connection with distributions of the resale shares. In these
transactions, broker-dealers may engage in short sales of the shares to offset
the positions they assume with the selling stockholder. The selling stockholder
also may sell shares short and redeliver the shares to close out their short
positions. The selling stockholder may enter into option or other transactions
with broker-dealers which require the delivery to the broker-dealer of the
resale shares. The broker-dealer may then resell or otherwise transfer the
shares under this prospectus. The selling stockholder also may loan or pledge
the resale shares to a broker-dealer. The broker-dealer may sell the loaned or
pledged shares under this prospectus.
Broker-dealers or agents may receive compensation from the selling
stockholder in the form of commissions, discounts or concessions. Broker-dealers
or agents may also receive compensation from the purchasers of the resale shares
for whom they act as agents or to whom they sell as principals, or both. A
broker-dealer's compensation will be negotiated in connection with the sale and
may exceed the broker-dealer's customary commissions. Broker-dealers, agents or
the selling stockholder may be deemed to be underwriters within the meaning of
the Securities Act in connection with sales of the resale shares. Any
commission, discount or concession received by these broker-dealers or agents
and any profit on the resale of the shares purchased by them may be deemed to be
underwriting discounts or commissions under the Securities Act.
Because the selling stockholder may be deemed to be an underwriter within
the meaning of the Securities Act, it may be subject to the prospectus delivery
requirements of the Securities Act. In addition, any securities covered by this
prospectus which qualify for sale pursuant to Rule 144 under the Securities Act
may be sold under Rule 144 rather than under this prospectus. The selling
stockholder has
14
advised us that it has not entered into any agreements, understandings or
arrangements with any underwriter or broker-dealer regarding the sale of the
resale shares. There is no underwriter or coordinating broker acting in
connection with the proposed sale of the resale shares by the selling
stockholder.
We agreed to keep this prospectus effective until the earlier of (i) the
expiration of the exercise period under the warrant, which is January 20, 2005
(unless sooner terminated in accordance with the terms of the warrant) or (ii)
when all of the shares have been sold pursuant to the prospectus. The resale
shares will be sold only through registered or licensed brokers or dealers if
required under applicable state securities laws. In addition, in certain states
the resale shares may not be sold unless they have been registered or qualified
for sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the resale shares may not simultaneously engage
in market-making activities with respect to our common stock for a period of two
business days prior to the commencement of the distribution. In addition, the
selling stockholder will be subject to applicable provisions of the Exchange Act
and the rules and regulations thereunder, including Regulation M, which may
limit the timing of purchases and sales of shares of our common stock by the
selling stockholder or any other person. We will make copies of this prospectus
available to the selling stockholder and have informed it of the need to deliver
a copy of this prospectus to each purchaser at or prior to the time of the sale.
The Company will pay all costs, expenses and fees associated with the
registration of the resale shares, subject to reimbursement by Conexant Systems,
Inc. in accordance with the terms of the warrant issued to the selling
stockholder. The selling stockholder will pay all commissions and discounts, if
any, associated with the sale of the resale shares. The selling stockholder may
agree to indemnify any broker-dealer or agent that participates in sales of the
resale shares against specified liabilities, including liabilities arising under
the Securities Act. The selling stockholder has agreed to indemnify certain
persons, including broker-dealers and agents, against specified liabilities in
connection with the offering of the resale shares, including liabilities arising
under the Securities Act.
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MATERIAL CHANGES
On June 25, 2002, Alpha merged with Washington Sub, a company formed by
Conexant and to which Conexant contributed the assets, liabilities (including
liabilities relating to former operations) and operations of Conexant's wireless
communications business, other than certain assets and liabilities retained by
Conexant (the Washington Business). After the merger, Alpha, which was the
surviving company in the merger, changed its corporate name to Skyworks
Solutions, Inc. Immediately following completion of the merger, Skyworks
Solutions, Inc. purchased Conexant's semiconductor assembly and test facility
located in Mexicali, Mexico for an aggregate purchase price of $150 million (the
Mexicali Operations). The merger has been accounted for as a reverse acquisition
whereby Washington Sub was treated as the acquirer and Alpha as the acquiree,
whereby the historical financial statements of the Washington Business and
Mexicali Operations became the historical financial statements of the Company
after the merger.
The audited Combined Financial Statements and Schedule of the Washington
Business and the Mexicali Operations for each of the three years in the period
ended September 30, 2001 and the related Management's Discussion and Analysis of
the Financial Condition and Results of Operations of the Washington Business and
the Mexicali Operations for such period were previously filed with the
Securities and Exchange Commission as part of the proxy
statement/prospectus-information statement included in Alpha Industries'
Registration Statement on Form S-4, as amended (Registration No. 333-83768),
filed with the Securities and Exchange Commission on May 10, 2002, and are
incorporated herein by reference.
The unaudited Condensed Combined Financial Statements and notes thereto of
the Washington Business and the Mexicali Operations as of and for the six months
ended March 31, 2002 and the related Management's Discussion and Analysis of the
Financial Condition and Results of Operations of the Washington Business and the
Mexicali Operations for such period, the unaudited Pro Forma Condensed Combined
Financial Information of the Washington Business and the Mexicali Operations,
reflecting the contribution of the Washington Business and the Mexicali
Operations to Washington Sub and the spin-off of Washington Sub by Conexant,
which we refer to collectively as the spin-off transaction, as if they had been
completed on March 31, 2002, and the unaudited Pro Forma Condensed Combined
Financial Information of Alpha and Washington Sub, reflecting the spin-off
transaction and the merger as if they had been completed as of October 1, 2000
for statement of operations data and as of March 31, 2002 for balance sheet
data, were all previously filed with the Securities and Exchange Commission on
our Registration Statement on Form S-3 (Registration No. 333-92394), on July 15,
2002, and are incorporated herein by reference.
The unaudited Condensed Combined Financial Statements and notes thereto of
the combined company, Skyworks Solutions, Inc. as of and for the quarter and
nine months ended June 30, 2002, reflecting the operating results of the
Washington Business and the Mexicali Operations for all periods presented and
the operating results of Alpha for the three days following the date of
acquisition (June 25, 2002) through the end of the period, and the related
Management's Discussion and Analysis of the Financial Condition and Results of
Operations of Skyworks Solutions, Inc. for such period, were previously filed
with the Securities and Exchange Commission on our Quarterly Report on Form
10-Q, on July 15, 2002, and are incorporated herein by reference.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for us by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts.
EXPERTS
The consolidated financial statements of Alpha Industries, Inc. as of March
31, 2002 and April 1, 2001 and for each of the years in the three-year period
ended March 31, 2002 have been incorporated by reference herein in reliance upon
the report of KPMG LLP, independent accountants, and upon the authority of said
firm as experts in accounting and auditing.
The combined financial statements and the related financial statement
schedule of the Washington Business and the Mexicali Operations of Conexant
Systems, Inc. as of September 30, 2000 and 2001 and for each of the three years
in the period ended September 30, 2001 incorporated in this prospectus by
reference to Alpha Industries' Registration Statement on Form S-4, as amended,
dated May 10, 2002, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any document we file with the Securities and Exchange Commission at the Security
and Exchange Commission's public reference room in Washington, D.C. and Chicago,
Illinois. Please call the Securities and Exchange Commission at 1-800-SEC-0330
for further information on the operation of the public reference rooms. Our
Securities and Exchange Commission filings are also available to the public at
the Securities and Exchange Commission's web site at http://www.sec.gov.
We have filed with the Securities and Exchange Commission a registration
statement (which term includes all amendments, exhibits and schedules thereto)
on Form S-3 under the Securities Act with respect to the shares offered by this
prospectus. This prospectus does not contain all the information set forth in
the registration statement because certain information has been incorporated
into the registration statement by reference in accordance with the rules and
regulations of the Securities and Exchange Commission. Please review the
documents incorporated by reference for a more complete description of the
matters to which such documents relate. The registration statement may be
inspected at the public reference facilities maintained by the Securities and
Exchange Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and is available to you on the Securities and Exchange
Commission's web site.
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