<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
TO
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 13, 1998
TriQuint Semiconductor, Inc.
- ----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-22660 95-3654013
- ----------------------------- ---------------- --------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2300 NE Brookwood Parkway, Hillsboro, Oregon 97124
- ----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (503) 615-9000
-----------------------
Not applicable
- ----------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
The undersigned Registrant hereby amends the following items,
financial statements, exhibits, or other portions of its Current
Report on Form 8-K, originally filed with the Securities and
Exchange Commission on January 27, 1998 (the "Form 8-K") as set
forth in the pages attached hereto:
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
The following financial statements of the business acquired
are attached hereto:
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Accountants . . . . . . . . . . . . . . . . . . F-1
Statement of Assets to be Acquired and Liabilities to be Assumed,
December 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Statement of Direct Revenues and Direct Operating Expenses for the
year ended December 31, 1997. . . . . . . . . . . . . . . . . . . . . F-3
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . F-4
(b) PRO FORMA FINANCIAL INFORMATION.
The following unaudited pro forma consolidated condensed financial
statements are attached hereto:
Unaudited Pro Forma Consolidated Condensed Financial Data
As of and for the year ended December 31, 1997. . . . . . . . . . . . F-16
Unaudited Pro Forma Consolidated Condensed Balance Sheet Data
December 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . F-17
Unaudited Pro Forma Consolidated Condensed Statement of Operations
Data Year ended December 31, 1997 . . . . . . . . . . . . . . . . . . F-18
Notes to Unaudited Pro Forma Consolidated Condensed Financial
Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-19
</TABLE>
-2-
<PAGE>
(c) Exhibits.
Exhibit No. Description
2.1* Asset Purchase Agreement, dated
as of January 8, 1998, by and
between Raytheon TI Systems,
Inc. and the Company, and
related exhibits.
23.1 Consent of Coopers & Lybrand, L.L.P.
Independent Public Accountants
99.1* Press release of the Company
dated January 13, 1998
*Previously filed.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned hereunto
duly authorized.
TRIQUINT SEMICONDUCTOR, INC.
Dated: March 27, 1998 By: /s/ Steven J. Sharp
---------------------------
STEVEN J. SHARP,
President, Chief
Executive Officer and
Chairman (Principal
Executive Officer)
Dated: March 27, 1998 By: /s/ Edward C.V. Winn
---------------------------
EDWARD C.V. WINN,
Executive Vice
President, Finance and
Administration, Chief
Financial Officer and
Secretary (Principal
Financial and
Accounting Officer)
-3-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Raytheon Company:
We have audited the accompanying statement of assets to be acquired and
liabilities to be assumed of the MMIC Business of Raytheon TI Systems, Inc. (the
"MMIC Business" as defined in Note 1) as of December 31, 1997, and the related
statement of direct revenues and direct operating expenses for the year then
ended. These financial statements are the responsibility of the management of
Raytheon TI Systems, Inc. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying financial statements have been prepared for the purpose of
substantially complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the report on Form 8-K of TriQuint
Semiconductor, Inc. as described in Note 1 and are not intended to be a
complete presentation of the financial position, results of operations and
cash flows of the MMIC Business.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets to be acquired and liabilities to be
assumed of the MMIC Business as of December 31, 1997, and its direct revenues
and direct operating expenses for the year then ended, in conformity with
generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Dallas, Texas
February 27, 1998
F-1
<PAGE>
MMIC BUSINESS OF RAYTHEON TI SYSTEMS, INC.
STATEMENT OF ASSETS TO BE ACQUIRED AND LIABILITIES TO BE ASSUMED
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS
Current assets:
Accounts receivable, net $ 5,789,435
Inventories 4,548,973
-------------
Total current assets 10,338,408
-------------
Property and equipment, at cost 78,737,215
Less accumulated depreciation (62,255,488)
-------------
Property and equipment, net 16,481,727
-------------
Total assets $ 26,820,135
-------------
-------------
LIABILITIES AND NET ASSETS
Current liabilities:
Accounts payable $ 1,777,777
Accrued expenses 1,982,143
-------------
Total current liabilities 3,759,920
-------------
Total liabilities 3,759,920
-------------
Commitments and contingencies (Notes 9 and 10)
Net assets $ 23,060,215
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE>
MMIC BUSINESS OF RAYTHEON TI SYSTEMS, INC.
STATEMENT OF DIRECT REVENUES AND DIRECT OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
Direct revenues, net $ 23,802,560
Direct operating expenses:
Costs of revenues 17,835,117
Research and development 6,260,488
Marketing, general and administrative 1,822,013
-------------
Total direct operating expenses 25,917,618
-------------
Direct operating expenses in excess of direct revenues $ (2,115,058)
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
MMIC BUSINESS OF RAYTHEON TI SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS:
Raytheon TI Systems, Inc. ("RTIS") and TriQuint Semiconductor, Inc. (the
"Buyer" or "TriQuint") entered into a definitive agreement (the
"Agreement") on January 8, 1998 under which, on the contractually
designated closing date, the Buyer acquired certain assets and liabilities
relating to the Gallium Arsenide ("GaAs") foundry and Monolithic Microwave
Integrated Circuit ("MMIC") business of the R/F Microwave Business Unit of
RTIS including RTIS' GaAs Operations Group, RTIS' Microwave GaAs Products
Business Unit, the MMIC component of RTIS' Microwave Integrated Circuits
Center of Excellence and the MMIC research and development component of
RTIS' Systems Component Research Laboratory (collectively referred to as
the "MMIC Business"). The accompanying financial statements present the
assets to be acquired and liabilities to be assumed and the direct revenues
and direct operating expenses of the MMIC Business based upon the structure
of the transaction as described in the Agreement; this transaction is
herein referred to as the "Acquisition."
The financial statements have been prepared to substantially comply with
the rules and regulations of the Securities and Exchange Commission for
business combinations accounted for as a purchase and are not intended to
be a complete presentation of the financial position, results of operations
and cash flows as if the MMIC Business had operated as a stand-alone
company. The accompanying financial statements, rather than full audited
financial statements, are presented because the MMIC Business was not
operated as a stand-alone business within the Defense Business of Texas
Instruments ("TI") for periods prior to July 11, 1997 or RTIS subsequent to
July 11, 1997 and historically, assets used in the MMIC Business were used
as an integral part of the TI and RTIS operations to provide MMIC-based
goods and services for use in higher level products produced by the TI
Defense Business and RTIS, such as radar and communications systems, with
such activity accounted for largely as internal cost transfers without any
formal contracts, billing or revenue tracking. Because the MMIC Business
was not operated as a stand-alone business, the presentation does not
include certain indirect expenses of the MMIC Business. In addition, all
intercompany balances and transactions have been excluded from the
financial statements. Therefore, the accompanying financial statements are
not representative of the complete results of operations of the MMIC
Business for the periods presented.
F-4
<PAGE>
MMIC BUSINESS OF RAYTHEON TI SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
The MMIC Business involves the design, development and production of
advanced high power amplifiers and other devices used primarily in radar
and communications systems. The MMIC Business operates in one industry
segment, and the principal markets served include the military forces of
the United States, aerospace prime contractors, international military
customers and commercial customers who procure components and subsystems.
RTIS provides various services to the MMIC Business including, but not
limited to, general management, facilities management, human resources,
data processing, security, payroll and employee benefits administration,
financial, legal, tax, insurance administration, duplicating,
telecommunications and other miscellaneous services. Expenses related to
facilities management, data processing, security, duplicating and
telecommunications have been allocated to the MMIC Business in the
accompanying statement of direct revenues and direct operating expenses
first on the basis of direct usage when identifiable, with the remainder
allocated on the basis of revenues, headcount, or other methodologies which
comply with U.S. Government cost accounting standards. Where the
allocations are based on headcount, the number of employees associated with
the MMIC Business has been identified or estimated by management of RTIS
based on its understanding of the Agreement, in order for such allocations
to be made. In the opinion of management of RTIS, these methods of
allocating indirect costs are reasonable; however, they do not necessarily
equal the costs that the MMIC Business would have incurred on a stand-alone
basis. The financial information included herein may not necessarily
reflect the financial position, results of operations and cash flows of the
MMIC Business on a stand-alone basis in the future. Expenses related to
general management, human resources, payroll and employee benefits
administration, financial, legal, tax, insurance administration, and other
miscellaneous services have not been allocated to the MMIC Business in the
accompanying financial statements.
In the accompanying statement of direct revenues and direct operating
expenses, direct operating expenses presented reflect overhead rates that
have been retrofitted to reflect overhead rates specific to the MMIC
Business, while direct revenues presented are derived from actual billings
of the MMIC Business. Because the retrofitted overhead rates for the MMIC
Business are higher than the RTIS overhead rates which were actually used
during 1997, the direct revenues presented do not necessarily equal the
revenues that the MMIC Business would have realized had it operated as a
stand-alone company using its specific overhead rates.
The MMIC Business participates in a centralized cash management system
wherein cash receipts are transferred to and cash disbursements are funded
by RTIS. Since cash and cash equivalents related to the operations of the
MMIC Business will not be acquired by the Buyer, they are excluded from the
statement of assets to be acquired and liabilities to be assumed. However,
the accompanying statement of assets to be acquired and
F-5
<PAGE>
MMIC BUSINESS OF RAYTHEON TI SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
liabilities to be assumed includes certain RTIS corporate property that
will be acquired by the Buyer (see Notes 2 and 5).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions, in particular estimates of anticipated contract costs and
revenues utilized in the earnings recognition process, that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of direct revenues and direct operating expenses during
the reporting period. Due to the inherent uncertainty involved in making
estimates, actual results reported in future periods may be based upon
amounts which differ from those estimates.
REVENUE RECOGNITION
Revenues under long-term fixed price and fixed-price incentive contracts
are recognized as deliveries are made or as performance targets are
achieved. Revenues under long-term cost reimbursement contracts are
recorded as costs are incurred and include estimated earned fees.
Expected profits or losses on long-term fixed price contracts are based on
management estimates of total sales values and costs at completion. These
estimates are reviewed and revised periodically throughout the lives of the
contracts, and adjustments resulting from such revisions are recorded in
the periods in which the revisions are made. In certain cases the
estimated sales values include amounts expected to be realized from
contract adjustments or claims subject to negotiations. Losses on
contracts are recorded in full as they are identified.
Certain contracts contain cost or performance incentives or both. These
incentives provide for increases in fees or profits for surpassing stated
targets or other criteria, or for decreases in fees or profits for failure
to achieve such targets or other criteria. Performance incentives are
included in sales at the time there is sufficient information to relate
actual performance to targets or other criteria.
ACCOUNTS RECEIVABLE
Accounts receivable include amounts due from commercial customers and the
United States Government principally related to long-term contracts and
programs, as well as unreimbursed costs and fees. Unreimbursed costs and
fees relate to accrued but unbilled revenues under long-term cost
reimbursement contracts. These amounts are billed in
F-6
<PAGE>
MMIC BUSINESS OF RAYTHEON TI SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
accordance with contract terms. Amounts billed under retainage provisions
of contracts are not significant and substantially all amounts are
collectible within one year.
INVENTORIES
Inventories related to long-term contracts are stated at actual production
costs, including manufacturing overhead and special tooling and engineering
costs, reduced by amounts identified with revenues recognized on units
delivered or with progress completed. Such inventories are reduced by
charging any amounts in excess of estimated realizable value to cost of
revenues. The costs attributed to units delivered under long-term
contracts are based on the estimated average cost of all units to be
produced under existing contracts and are determined under the learning
curve concept, which anticipates a predictable decrease in unit costs as
tasks and production techniques become more efficient through repetition.
PROPERTY AND EQUIPMENT
Pursuant to the Agreement, property and equipment owned by RTIS which is
located in Dallas, Texas, and used in connection with the MMIC Business,
has been purchased by the Buyer, and the cost and related accumulated
depreciation of such property and equipment is included in the accompanying
financial statements.
Property and equipment is recorded at cost less accumulated depreciation.
Depreciation is computed primarily using the double declining-balance
method over the estimated useful lives of the related assets. Fully
depreciated assets are written off against accumulated depreciation.
Maintenance and repairs are charged to expense and any gain or loss on the
retirement of assets is recognized currently. Recoverability of property
is periodically evaluated by assessing whether the net book value can be
recovered over its remaining life through undiscounted cash flows generated
by the asset.
INCOME TAXES
No provision or benefit for income taxes has been provided in the
accompanying statements of direct revenues and direct operating expenses
due to the fact that the MMIC Business was not operated as a stand-alone
company and no allocation of RTIS' income tax provision/benefit has been
made to the MMIC Business.
F-7
<PAGE>
MMIC BUSINESS OF RAYTHEON TI SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. ACCOUNTS RECEIVABLE:
As of December 31, 1997, accounts receivable are comprised as follows:
<TABLE>
<S> <C>
Commercial $ 4,249,046
United States Government 777,399
Receivable from RTIS for assumption of incentive
obligations 808,740
------------
Total 5,835,185
Less allowance for doubtful accounts (45,750)
------------
Accounts receivable, net $ 5,789,435
------------
------------
</TABLE>
4. INVENTORIES:
As of December 31, 1997, inventories are comprised as follows:
<TABLE>
<S> <C>
Raw materials and purchased parts $ 1,258,966
Work in process 2,755,509
Finished goods 534,498
------------
Total $ 4,548,973
------------
------------
</TABLE>
Advertising costs incurred in connection with marketing products of the
MMIC Business are charged to expense as incurred. Such costs totaled
approximately $597,000 for the year ended December 31, 1997. Cash received
from direct sales of MMIC Business products was approximately $23,134,000
for the year ended December 31, 1997.
F-8
<PAGE>
MMIC BUSINESS OF RAYTHEON TI SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
5. PROPERTY AND EQUIPMENT:
As of December 31, 1997, property and equipment are comprised as follows:
<TABLE>
<CAPTION>
Estimated Life
(in years)
---------------
<S> <C> <C>
Machinery and equipment 10 - 13 $ 61,726,646
Furniture and fixtures 10 - 20 10,133,377
Computer software and hardware 3 - 6 5,122,402
Equipment under construction N/A 1,754,790
--------------
Total 78,737,215
Less accumulated depreciation (62,255,488)
--------------
Property and equipment, net $ 16,481,727
--------------
--------------
</TABLE>
Depreciation expense for the year ended December 31, 1997 was approximately
$5,673,000.
Concurrent with the closing of the Acquisition, RTIS and TriQuint
Semiconductor Texas, Inc. ("TSTI"), a wholly-owned subsidiary of TriQuint,
entered into certain sublease agreements (the "Subleases") whereby RTIS
agreed to sublease to TSTI space occupied by the MMIC Business in RTIS'
North Building and its Research East building. The Subleases contain
certain renewal options and escalation clauses. Under the terms of the
Subleases, TSTI will pay RTIS a monthly rental based upon the ratio of net
square feet occupied by the MMIC Business (the "Sublease Premises") divided
by the square feet of the premises in which the Sublease Premises are
located. Minimum rental commitments under the Subleases as of December 31,
1997 are as follows:
<TABLE>
<S> <C>
1998 $ 1,332,815
1999 1,359,599
2000 1,782,320
2001 1,993,680
2002 996,840
------------
Total $ 7,465,254
------------
------------
</TABLE>
Rental expense allocated to the MMIC Business for the year ended December
31, 1997 was approximately $1,766,000.
Pursuant to the Agreement, and within one year from the closing of the
Acquisition, RTIS has agreed to cooperate with TriQuint to move those
operations of the MMIC
F-9
<PAGE>
MMIC BUSINESS OF RAYTHEON TI SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Business which are located in the Research East Building to the North
Building where the rest of the operations of the MMIC Business are
located. RTIS has agreed to reimburse TriQuint up to $8,764,000 for
TriQuint's reasonable out-of-pocket expenses in connection with the
move as well as the cost of constructing and demising walls and
other improvements in the North Building. Any leasehold improvements
resulting from the move and payments from RTIS to TriQuint will be owned by
TriQuint.
6. ACCRUED EXPENSES:
As of December 31, 1997, accrued expenses are comprised as follows:
<TABLE>
<S> <C>
Accrued retention and incentive bonuses (payable on
behalf of RTIS) $ 808,740
Accrued payroll and benefits 677,226
Stock option liability as required by asset purchase
agreement 496,177
------------
Total $ 1,982,143
------------
------------
</TABLE>
7. PENSION AND HEALTH CARE PLANS:
The employees of the MMIC Business participate in RTIS pension and retiree
health care benefit plans. Pursuant to the Agreement, liabilities
pertaining to participation by such employees of the MMIC Business in RTIS
pension and retiree health care benefit plans are not assumed by the
Buyer. Accordingly, such liabilities are excluded from the accompanying
statement of assets to be acquired and liabilities to be assumed.
8. STOCK OPTIONS:
Certain employees of the MMIC Business have stock options outstanding under
the Raytheon Company ("Raytheon") 1995 Stock Option Plan. The Raytheon
stock options were granted to replace unvested stock options outstanding
under the Long Term Incentive Plan of TI which were held by employees of
TI's Defense Business and canceled upon the purchase of TI's Defense
Business by Raytheon effective July 11, 1997. Under the Raytheon plan, the
exercise price per share may not be less than 100 percent of the fair
market value on the date of the grant. Substantially all of the options
have a 10-year term and become exercisable over the four year period after
the original grant date. Under the terms of the Agreement as they pertain
to these plans, unvested Raytheon stock options held by employees of the
MMIC Business will be canceled and replaced with TriQuint stock options.
As of December 31, 1997, 29,305 Raytheon stock options held by employees of
the MMIC Business were unvested.
F-10
<PAGE>
MMIC BUSINESS OF RAYTHEON TI SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Stock option transactions related to the MMIC Business were as follows for
the year ended December 31, 1997:
<TABLE>
<CAPTION>
Weighted-
Average
Number of Exercise
Options under TI plan: Options Price
---------------------- --------- ----------
<S> <C> <C>
Balance at December 31, 1996 6,933 $ 44.64
Granted 9,840 67.69
Forfeited - -
Expired - -
Exercised - -
------- --------
Balance at July 11, 1997 16,773 $ 58.16
------- --------
------- --------
<CAPTION>
Weighted-
Average
Number of Exercise
Options under Raytheon plan: Options Price
---------------------------- --------- ---------
<S> <C> <C>
Balance at July 11, 1997 29,305 $33.32
Granted - -
Forfeited - -
Expired - -
Exercised - -
------- --------
Balance at December 31, 1997 29,305 $33.32
------- --------
------- --------
</TABLE>
As required by SFAS No. 123, the following disclosures of hypothetical
values for stock option awards are provided below.
The weighted-average grant-date value of options granted during 1997 was
estimated to be $31.38 for the TI plan and $24.75 for the Raytheon plan.
These values were estimated using the Black-Scholes option-pricing model
with the following weighted-average assumptions: expected dividend yields
of 1.58% (TI plan) and 5.92% (Raytheon plan), expected volatility of 37%
(TI plan) and 15% (Raytheon plan), risk-free interest rates of 6.36%
(TI plan) and 5.71% - 6.57% (Raytheon plan), and expected lives of 6
years (TI plan) and 4 years (Raytheon plan). Had compensation expense
been recorded based on these hypothetical values, the MMIC Business'
1997 direct operating expenses in excess of direct revenues would have
been $(2,389,015). Because options vest over several years and additional
option grants are expected, the effects of these hypothetical
calculations are not likely to be representative of similar future
calculations.
F-11
<PAGE>
MMIC BUSINESS OF RAYTHEON TI SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Summarized information about stock options outstanding under the Raytheon
stock option plan as of December 31, 1997 for current employees of the MMIC
Business is as follows:
<TABLE>
<CAPTION>
Options Outstanding
---------------------------------------------------------- Options Exercisable
Weighted-Average --------------------------
Number ---------------------- Number
Outstanding Remaining Exercisable Weighted-
as of Contractual as of Average
Range of December 31, Life Exercise December 31, Exercise
Exercise Prices 1997 (in years) Price 1997 Price
---------------- ----------- ---------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$20.41 to $38.78 29,305 8.58 $33.32 - 0 - N/A
</TABLE>
9. RISK CONCENTRATIONS, COMMITMENTS AND CONTINGENCIES:
CREDIT RISK
Financial instruments which subject the MMIC Business to concentrations of
credit risk primarily relate to accounts receivable. Contracts
involving the U.S. Government do not require collateral or other
security. However, ongoing credit evaluations of domestic non-U.S.
Government customers are conducted. Generally collateral or other
security is not required from these customers. International customers
are generally required to furnish letters of credit or to make advance
payments in amounts sufficient to limit the MMIC Business' credit risk
to a minimal level. Historically, no significant credit-related
losses have been incurred by the MMIC Business.
MARKET CONCENTRATIONS AND EXPORT SALES
Sales under United States Governmental contracts (including contracts for
which the MMIC Business is either the prime contractor or a subcontractor)
were approximately 15% of net sales for the year ended December 31,
1997. No single United States Government contract accounted for more
than 2% of revenues. Revenues under United States Government prime
contracts and subcontracts approximated $420,615 and $3,114,786,
respectively, for the year ended December 31, 1997. Percentages of
United States Government sales by contract type for the year ended
December 31, 1997 were as follows:
<TABLE>
<S> <C>
Cost 5%
Firm-fixed-price 95
---
Total 100%
---
---
</TABLE>
F-12
<PAGE>
MMIC BUSINESS OF RAYTHEON TI SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Export sales from the U.S. for the year ended December 31, 1997 were
approximately as follows:
<TABLE>
<S> <C>
Europe $ 3,609,000
Asia 453,000
Other 57,000
------------
Total $ 4,119,000
------------
------------
</TABLE>
COMMITMENTS
Pursuant to the Agreement, TriQuint acquired all of the rights and
obligations of RTIS in connection with purchase orders relating to the MMIC
Business which were outstanding at the closing of the Acquisition. These
purchase orders relate primarily to raw materials and purchased parts for
inventories and equipment under construction. As of December 31, 1997,
open commitments for such purchase orders totaled $2,476,766.
LITIGATION AND REGULATORY PROCEEDINGS
The MMIC Business is subject to various lawsuits, claims and proceedings
arising in the normal course of business. RTIS management believes the
disposition of matters which are pending or asserted will not have a
material adverse effect on the financial statements of the MMIC Business.
RTIS is included among a number of U.S. defense contractors which are
currently the subject of U.S. government investigations regarding alleged
procurement irregularities. RTIS is unable to predict the outcome of the
investigations at this time or to estimate the kinds or amounts of claims
or other actions that could be instituted against the MMIC Business.
Under present government procurement regulations, such investigations
could lead to a government contractor being suspended or debarred from
eligibility for awards of new government contracts. In the current
environment, even matters that seem limited to disputes about contract
interpretation can result in criminal prosecution. While criminal
charges against contractors have resulted from such investigations,
RTIS does not believe such charges would be appropriate in its case and
has not, at any time, lost its eligibility to enter into government
contracts or subcontracts under these regulations.
F-13
<PAGE>
MMIC BUSINESS OF RAYTHEON TI SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
10. SUPPLY AND SERVICES AGREEMENTS:
SUPPLY AGREEMENT
Concurrent with the closing of the Acquisition, RTIS and TriQuint
Semiconductor Texas, Inc. ("TSTI"), a wholly-owned subsidiary of TriQuint,
entered into a supply agreement (the "Supply Agreement") whereby TSTI
agreed to provide, and RTIS agreed to purchase, various MMIC products,
including related design services (collectively, the "MMIC Products").
Under the terms of the Supply Agreement, TSTI has agreed to continue
using the historical wafer charging systems and cost estimating systems
used by the MMIC Business immediately prior to the closing of the
Acquisition for all MMIC Product orders for RTIS for a period of at
least one year.
For production or high volume production wafers sold to RTIS by TSTI, new
orders (i.e. jobs that have not commenced as of the closing of the
Acquisition) of $500,000 or more will be priced at estimated cost plus a
fee of 14%. Such price will be adjusted based on actual costs upon
completion, so that the final price will be the actual cost plus the
applicable fee. If the actual cost exceeds the estimated cost, the fee
will be decreased linearly to 4% of the estimated cost when the actual
cost exceeds 120% of the estimated cost and will remain at 4% of the
estimated cost thereafter. If the actual cost is less than the estimated
cost, the fee will increase linearly to 24% of the actual cost when the
actual cost equals 80% of the estimated cost and will remain at 24% of
the actual cost thereafter. New orders of less than $500,000 and work
in process as of the closing of the Acquisition will be priced at
estimated cost plus a fee of 14%.
Development wafers sold to RTIS by TSTI will be priced at estimated cost
plus 10%. Orders for work in process for Research and Development ("RAD")
contracts and Internal Research and Development ("IRAD") projects as well
as pending RAD proposals as of the closing of the Acquisition will be
priced at actual cost plus a fee of 8% of the estimated cost. New orders
for RAD contracts and IRAD projects as well as pending IRAD projects will
be priced at actual cost plus a fee of up to 15% of the estimated cost.
Under the Supply Agreement, general RTIS requests for time and material
services from TSTI will be priced at $115 per hour in 1998 and $120
per hour in 1999 for all TSTI labor.
MASTER SERVICES AGREEMENT
Concurrent with the closing of the Acquisition, RTIS and TSTI entered
into a master services agreement (the "Services Agreement") whereby
RTIS agreed to provide, and TSTI agreed to purchase, certain support,
services and facilities (collectively, the "RTIS Services") including
records retention services, cafeteria vending and catering services,
F-14
<PAGE>
MMIC BUSINESS OF RAYTHEON TI SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
information technology services, facilities and maintenance services,
calibration support services, human resource consulting, training
materials, mail services and accounting and financial reporting services.
Generally, the cost to TSTI for the RTIS Services will be the cost to RTIS
including labor, out of pocket costs to third parties and a reasonable
allocation for overhead costs.
F-15
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
Unaudited Pro Forma Consolidated
Condensed Financial Data
As of and for the year ended December 31, 1997
Raytheon TI Systems, Inc. (RTIS) and TriQuint Semiconductor, Inc. (TriQuint)
entered into a definitive agreement (the Agreement) on January 8, 1998 under
which, on the contractually designated closing date, TriQuint acquired
certain assets and liabilities relating to the Gallium Arsenide (GaAs)
foundry and Monolithic Microwave Integrated Circuit (MMIC) business of the
R/F Microwave Business Unit of RTIS including RTIS' GaAs Operations Group,
RTIS' Microwave GaAs Products Business Unit, the MMIC component of RTIS'
Microwave Integrated Circuits Center of Excellence and the MMIC research and
development component of RTIS' Systems Component Research Laboratory
(collectively referred to as the MMIC Business). This transaction is herein
referred to as the Acquisition.
The following unaudited pro forma consolidated condensed financial data has
been derived from the respective historical financial statements. The
historical financial statements of the MMIC Business present the assets to be
acquired and liabilities to be assumed and the direct revenues and direct
operating expenses of the MMIC Business based upon the structure of the
transaction at and for the year ended December 31, 1997. The MMIC Business
financial statements, rather than full audited financial statements, are
presented because the MMIC Business was not operated as a stand-alone
business within the Defense Business of Texas Instruments (TI) for periods
prior to July 11, 1997 or RTIS subsequent to July 11, 1997 and, historically,
assets used in the MMIC Business were used as an integral part of the TI and
RTIS operations to provide MMIC-based goods and services for use in higher
level products produced by the TI Defense Business and RTIS, such as radar
and communications systems, with such activity accounted for largely as
internal cost transfers without any formal contracts, billing or revenue
tracking. Because the MMIC Business was not operated as a stand-alone
business, the presentation does not include certain indirect expenses of the
MMIC Business. In addition, all intercompany balances and transactions have
been excluded from the financial statements. Therefore, the financial
statements are not representative of the complete results of operations of
the MMIC Business for the periods presented.
The unaudited pro forma consolidated condensed balance sheet financial data
gives effect to the Acquisition on a purchase basis as if it had been
consummated on December 31, 1997. The unaudited pro forma consolidated
condensed statement of operations financial data gives effect to the
Acquisition on a purchase basis as if it had been consummated on January 1,
1997.
In the opinion of management of TriQuint, all adjustments necessary to
present fairly such unaudited pro forma consolidated condensed financial data
have been made based on the terms and structure of the Acquisition. These
unaudited pro forma consolidated condensed financial data are not necessarily
indicative of what actual results would have been if the Acquisition had
occurred at the beginning of the respective periods nor do they purport to
indicate the results of future operations of TriQuint. These unaudited pro
forma consolidated condensed financial data should be read in conjunction
with the accompanying notes to the pro forma consolidated condensed financial
data and the historical financial statements of TriQuint and the MMIC
Business.
Prior to the Acquisition, the MMIC Business was operated as a part of RTIS.
Management of RTIS allocated certain costs in preparation of the historical
financial statements of the MMIC Business. These cost allocations do not
necessarily reflect the actual costs that would have been incurred by the
MMIC Business if it had been operated as a stand-alone business.
The adjustments to the unaudited pro forma consolidated condensed financial
data are preliminary and are subject to adjustment based on the Agreement and
the actual amounts of assets acquired and liabilities assumed as of the
closing date, January 13, 1998.
F-16
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
Pro Forma Consolidated Condensed Balance Sheet Data
December 31, 1997
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
MMIC
TRIQUINT BUSINESS PRO FORMA
HISTORICAL HISTORICAL CONSOLIDATED
DECEMBER 31, DECEMBER 31, PRO FORMA DECEMBER 31,
ASSETS 1997 1997 (1) ADJUSTMENTS REFERENCES 1997
------------ ------------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Cash, cash equivalents and investments $ 24,463 -- (19,500) B 24,963
20,000 E
Receivables 15,708 5,789 -- 21,497
Inventory 12,288 4,549 -- 16,837
Other current assets 1,551 -- 377 C 1,928
Property, plant and equipment, net 27,235 16,482 3,518 D 27,235
(20,000) E
Other non-current assets 40,173 -- 3,037 D 43,210
------------ ------------ ------------
Total assets $121,418 26,820 135,670
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 8,737 1,778 -- 10,515
Accrued expenses 5,048 1,982 200 B 7,230
Long-term obligations 17,595 -- -- 17,595
Total shareholders' equity 90,038 -- (9,208) D 100,330
19,500 B
------------ ------------ ------------
Total liabilities and
shareholders' equity $121,418 135,670
------------ ------------
------------ ------------
Net assets $23,060
------------
------------
</TABLE>
(1) MMIC Business historical December 31, 1997 amounts represent only the
assets to be acquired and liabilities to be assumed.
See accompanying notes to pro forma consolidated condensed financial data.
F-17
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
Pro Forma Consolidated Condensed Statement of Operations Data
Year ended December 31, 1997
(Unaudited)
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
MMIC
TRIQUINT BUSINESS PRO FORMA
HISTORICAL HISTORICAL PRO FORMA CONSOLIDATED
1997 1997 (2) ADJUSTMENTS REFERENCES 1997
----------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Total revenues $ 71,367 23,803 -- I 95,170
----------- ----------- ------------
Operating costs and expenses:
Cost of goods sold (40,028) (17,835) -- F, H, I (57,863)
Research, development and engineering (11,518) (6,261) -- H, J (17,779)
Selling, general and administrative (14,188) (1,822) 1,413 E (15,030)
(433) D
-- F, H, J
----------- ----------- ------------
Total operating costs and expenses (65,734) (25,918) (90,672)
----------- ----------- ------------
Income (loss) from operations 5,633 $ (2,115) 4,498
-----------
-----------
Other income (expense), net 2,117 2,117
----------- ------------
Income before income taxes 7,750 6,615
Income tax expense (890) (890)
----------- ------------
Net income $ 6,860 5,725
----------- ------------
----------- ------------
Per share data:
Net income:
Basic 0.82 N/A -- 0.62
Diluted 0.75 N/A -- 0.57
Weighted average shares:
Basic 8,373,310 N/A 844,613 G 9,217,923
Diluted 9,108,215 N/A 873,871 G 9,982,086
</TABLE>
(2) MMIC Business historical 1997 amounts represent only direct revenues and
direct operating expenses.
See accompanying notes to pro forma consolidated condensed financial data.
F-18
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
Notes to Pro Forma Consolidated
Condensed Financial Data
(Unaudited)
(In thousands, except share data)
(A) The unaudited pro forma consolidated condensed balance sheet financial data
gives effect to the Acquisition on a purchase basis as if it had been
consummated on December 31, 1997. The unaudited pro forma consolidated
condensed statement of operations financial data gives effect to the
Acquisition on a purchase basis as if it had been consummated on January 1,
1997.
(B) TriQuint paid the following consideration for the Acquisition: $19,500 in
cash, $19,500 in shares of TriQuint common stock (844,613 shares valued at
$23.0875 per share). In addition, $200 of direct and incremental costs
were incurred directly related to the Acquisition and are shown as a pro
forma adjustment to accrued expenses and the purchase price.
(C) "Adjustment to Purchase Price" called for by the Agreement, is based on
the difference between the MMIC Business Net Assets at the closing date
compared to a pre-determined amount per the Agreement. Any differences
will either be a payable to or a receivable from RTIS. The amount
represents the "Adjustment to Purchase Price" had the Acquisition occurred
on December 31, 1997.
(D) Amounts represent adjustments to the assets acquired and liabilities
assumed based on the allocation of the purchase price: increase to fixed
assets based on an independent appraisal; charge related to in-process
research and development; the value of the work force in place; purchased
technology relating to products currently in place; and goodwill related to
the excess of the purchase price over the fair value of the assets
acquired. The purchased technology, work force in place and goodwill will
be amortized ratably over seven years.
(E) Concurrent with the Acquisition, TriQuint financed approximately $20,000 in
equipment through a transaction whereby a leasing company purchased the
equipment and the cash received from the financing was used in part to fund
the cash consideration for the Acquisition. The difference between the
operating lease payments and the depreciation of the sold assets recorded
by the MMIC Business on a historical basis results in a decrease of
approximately $1,413 in annual expenses.
(F) TriQuint and the MMIC Business estimate that, following the Acquisition,
additional one-time charges to operations will be incurred associated with
integrating the two businesses. However, these integration costs cannot be
currently estimated.
F-19
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
Notes to Pro Forma Consolidated
Condensed Financial Data, Continued
(Unaudited)
(In thousands, except share data)
(G) The following table reconciles the number of shares used in the pro forma
per share calculation to the number set forth in TriQuint's historical
statement of operations:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
Weighted average shares:
Historical - basic 8,373,310
Shares issued 844,613
------------
Pro forma - basic 9,217,923
------------
------------
Historical - diluted 9,108,215
Shares issued 844,613
Dilutive effect of RTIS stock options
converted to TriQuint stock options* 29,258
------------
Pro forma - diluted 9,982,086
------------
------------
</TABLE>
*The 29,305 RTIS stock options outstanding at the designated closing
date were converted into 61,452 TriQuint stock options. The dilutive
effect of these options was calculated using the treasury stock
method.
(H) As part of the Acquisition, TriQuint was given the option to "return" up to
10% of the work force of the MMIC Business to RTIS within ninety days of
closing or April 13, 1998. TriQuint has partially exercised this option to
date and, if fully exercised, the option may result in significant annual
expense reductions. The pro forma consolidated condensed financial data
does not reflect any adjustments for this option.
(I) Historically, the MMIC Business had sales to RTIS. The historical MMIC
Business financial statements do not give effect to related party
transactions since only direct revenues and direct operating expenses are
presented. Due to the related party nature of these transactions in the
past, the future sales volume and revenues associated with sales to RTIS
cannot be currently estimated. Concurrent with the closing of the
Acquisition, RTIS and the MMIC Business entered into a supply agreement
whereby the MMIC Business agreed to provide and RTIS agreed to purchase,
various MMIC Business products, including related design services.
F-20
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
Notes to Pro Forma Consolidated
Condensed Financial Data, Continued
(Unaudited)
(In thousands, except share data)
(J) Pursuant to the Agreement, and within one year from the closing of the
Acquisition, RTIS has agreed to cooperate with TriQuint to move those
operations of the MMIC Business which are located in the Research East
Building to the North Building where the rest of the operations of the MMIC
Business are located. RTIS has agreed to reimburse TriQuint up to $8,764
for TriQuint's reasonable out-of-pocket expenses in connection with the
move as well as the cost of constructing and demising walls and other
improvements in the North Building. As a result, TriQuint expects annual
expense reductions relating to rent and utilities, although the magnitude
of these reductions cannot be currently estimated.
F-21
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of TriQuint Semiconductor, Inc. on Form S-8 (File Nos. 33-75464, 333-02166,
333-08891, 333-08893 and 333-31585) of our report dated February 27, 1998 on
our audit of the statement of assets to be acquired and liabilities to be
assumed of the MMIC Business of Raytheon TI Systems, Inc. as of December 31,
1997 and the related statement of direct revenues and direct operating
expenses for the year then ended, which report is included in this Current
Report on Form 8-K of TriQuint Semiconductor, Inc.
/s/ Coopers & Lybrand L.L.P.
Dallas, Texas
March 27, 1998
