1408710--9/8/2010--Fabrinet

related topics

{operation, international, foreign}

{stock, price, operating}

{customer, product, revenue}

{cost, operation, labor}

{acquisition, growth, future}

{product, market, service}

{condition, economic, financial}

{property, intellectual, protect}

{loss, insurance, financial}

{cost, regulation, environmental}

{provision, law, control}

{product, liability, claim}

{regulation, change, law}

{competitive, industry, competition}

{system, service, information}

{operation, natural, condition}

{tax, income, asset}

{interest, director, officer}

{debt, indebtedness, cash}

{control, financial, internal}

{personnel, key, retain}

Risks Related to Our Business Our sales depend on and may continue to depend on a few customers, many of which have substantial purchasing power and leverage in negotiating contracts with us. A reduction in orders from any of these customers, the loss of any of these customers, or a customer exerting significant pricing and margin pressures on us could harm our business, financial condition and operating results. If the optical communications market does not expand as we expect, our business may not grow as fast as we expect, which could adversely impact our business, financial condition and operating results. If we are unable to continue diversifying our precision optical and electro-mechanical manufacturing services across other markets within the optics industry, such as the semiconductor processing, biotechnology, metrology and material processing markets, our business may not grow as fast as we expect. Our quarterly revenues, gross profit margins and operating results have fluctuated significantly and may continue to do so in the future, which may cause the market price of our ordinary shares to decline or be volatile. Our exposure to financially troubled customers or suppliers could harm our business, financial condition and operating results. We purchase some of the critical materials used in certain of our products from a single source or a limited number of suppliers. Supply shortages have in the past, and could in the future, impair the quality, reduce the availability or increase the cost of materials, which could harm our revenues, profitability and customer relations. Managing our inventory is complex and may require write-downs due to excess or obsolete inventory, which could cause our operating results to decrease significantly in a given fiscal period. We face significant competition in our business. If we are unable to compete successfully against our current and future competitors, our business, financial condition and operating results could be harmed. We conduct operations in a number of countries, which creates logistical and communications challenges for us and exposes us to other risks that could harm our business, financial condition and operating results. Political unrest and demonstrations, as well as changes in the political, social, business or economic conditions in Thailand, could harm our business, financial condition and operating results. We expect to increase our manufacturing operations in the PRC, which will continue to expose us to risks inherent in doing business in the PRC, any of which risks could harm our business, financial condition and operating results. Fluctuations in foreign currency exchange rates and changes in governmental policies regarding foreign currencies could increase our operating costs, which would adversely affect our operating results. Our business and operations would be adversely impacted in the event of a failure of our information technology infrastructure. Cancellations, delays or reductions of customer orders and the relatively short-term nature of the commitments of our customers could harm our business, financial condition and operating results. Consolidation in the markets we serve could harm our business, financial condition and operating results. If we fail to adequately expand our manufacturing capacity, we will not be able to grow our business, which would harm our business, financial condition and operating results. Conversely, if we expand too much or too rapidly, we may experience excess capacity, which would harm our business, financial condition and operating results. We may encounter difficulties completing or integrating acquisitions, asset purchases and other types of transactions that we may pursue in the future, which could disrupt our business, cause dilution to our shareholders and harm our business, financial condition and operating results. We may experience manufacturing yields that are lower than expected, potentially resulting in increased costs, which could harm our business, operating results and customer relations. If the products that we manufacture contain defects, we could incur significant correction costs, demand for our services may decline and we may be exposed to product liability and product warranty claims, which could harm our business, financial condition, operating results and customer relations. If we are unable to meet regulatory quality standards applicable to our manufacturing and quality processes for the products we manufacture, our business, financial condition or operating results could be harmed. If we fail to attract additional skilled employees or retain key personnel, our business, financial condition and operating results could suffer. Failure to comply with applicable environmental laws and regulations could have a material adverse effect on our business, results of operations and financial condition. The effects of the recent global economic crisis have and may continue to adversely impact our business, operating results and financial condition. Epidemics, natural disasters, acts of terrorism and other political and economic developments could harm our business, financial condition and operating results. If we fail to develop and maintain an effective system of internal controls or comply with the requirements of Section 404 of the Sarbanes-Oxley Act, we may not be able to accurately report our financial results or prevent fraud. As a result, our shareholders could lose confidence in our financial reporting, which would harm our business and the market price of our ordinary shares. We are subject to the risk of increased income taxes, which could harm our business, financial condition and operating results. We may become a passive foreign investment company, which could result in adverse U.S. tax consequences to U.S. investors. We may not be able to obtain capital when desired on favorable terms, if at all, or without dilution to our shareholders. Intellectual property infringement claims against our customers or us could harm our business, financial condition and operating results. Any failure to protect our customers intellectual property that we use in the products we manufacture for them could harm our customer relationships and subject us to liability. There are inherent uncertainties involved in estimates, judgments and assumptions used in the preparation of financial statements in accordance with U.S. GAAP. Any changes in estimates, judgments and assumptions could have a material adverse effect on our business, financial condition and operating results. We are subject to governmental export and import controls in several jurisdictions that could subject us to liability or impair our ability to compete in international markets. The loan agreements for our long-term debt obligations contain financial ratio covenants that may impair our ability to conduct our business. We are subject to risks associated with the availability and coverage of insurance. Energy price increases may negatively impact our results of operations. Risks Related to Our Corporate Structure Our share price may be volatile due to fluctuations in our operating results and other factors, each of which could cause our stock price to decline. If securities or industry analysts do not publish research or if they publish misleading or unfavorable research about our business, the market price and trading volume of our ordinary shares could decline. We are controlled by a small group of existing shareholders, whose interests may differ from the interests of our other shareholders. Certain provisions in our constitutional documents may discourage our acquisition by a third party, which could limit your opportunity to sell shares at a premium. Our shareholders may face difficulties in protecting their interests because we are organized under Cayman Islands law. Certain judgments obtained against us by our shareholders may not be enforceable.

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