TRIQUINT SEMICONDUCTOR INC, 10-Q, 1999-11-16

TRIQUINT SEMICONDUCTOR INC
10-Q, 1999-11-16
SEMICONDUCTORS & RELATED DEVICES

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

------------------------

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTER ENDED OCTOBER 2, 1999

COMMISSION FILE NUMBER 0-22660

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TRIQUINT SEMICONDUCTOR, INC.

(Registrant)

INCORPORATED IN THE STATE OF DELAWARE

I.R.S. EMPLOYER IDENTIFICATION NUMBER 95-3654013

2300 NE BROOKWOOD PARKWAY, HILLSBORO, OR 97124

TELEPHONE: (503) 615-9000

------------------------

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /

As of October 2, 1999, there were 18,500,366 shares of the registrant's
common stock outstanding.

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TRIQUINT SEMICONDUCTOR, INC.
INDEX

<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Statements of Operations--Three
months and nine months ended September 30, 1999 and
1998...................................................... 3

Condensed Consolidated Balance Sheets--September 30, 1999
and December 31, 1998..................................... 4

Condensed Consolidated Statements of Cash Flows--Nine months
ended September 30, 1999 and 1998......................... 5

Notes to Condensed Consolidated Financial Statements........ 6

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 10

Item 3. Qualitative and Quantitative Disclosures about Market and
Interest Rate Risk........................................ 25

PART II. OTHER INFORMATION

Item 1. Legal Proceedings........................................... 26

Item 2. Changes in Securities and Use of Proceeds................... 26

Item 6. Exhibits and Reports on Form 8-K............................ 26

SIGNATURES............................................................ 27
</TABLE>

2
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS

TRIQUINT SEMICONDUCTOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

Operating costs and expenses:
Cost of goods sold...................... 24,384 17,933 68,138 53,884
Research, development and engineering... 5,475 4,568 15,482 14,067
Selling, general and administrative..... 5,985 4,288 16,934 11,308
Special charges......................... -- -- -- 10,220
------- ------- -------- -------
Total operating costs and expenses.... 35,844 26,789 100,554 89,479
------- ------- -------- -------
Income (loss) from operations......... 6,639 2,323 13,733 (8,812)
------- ------- -------- -------
Other income (expense):
Interest income......................... 2,509 825 4,135 2,434
Interest expense........................ (256) (360) (839) (1,108)
Other, net.............................. 3 102 60 156
------- ------- -------- -------
Total other income, net............... 2,256 567 3,356 1,482
------- ------- -------- -------
Income (loss) before income taxes..... 8,895 2,890 17,089 (7,330)
Income tax expense........................ 1,690 29 2,344 94
------- ------- -------- -------
Net income (loss)..................... $ 7,205 $ 2,861 $ 14,745 $(7,424)
======= ======= ======== =======
Per share data:
Basic................................. $ 0.41 $ 0.20 $ 0.95 $ (0.53)
======= ======= ======== =======

Weighted average common shares........ 17,775 14,180 15,503 14,048
======= ======= ======== =======

Diluted............................... $ 0.36 $ 0.19 $ 0.84 $ (0.53)
======= ======= ======== =======

Weighted average common and common
equivalent shares................... 20,173 14,703 17,522 14,048
======= ======= ======== =======
</TABLE>

See notes to Condensed Consolidated Financial Statements.

3
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TRIQUINT SEMICONDUCTOR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998(1)
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 91,039 $ 14,602
Investments............................................... 92,558 11,460
Accounts receivable, net.................................. 27,899 21,020
Inventories, net.......................................... 23,462 19,706
Prepaid expenses and other assets......................... 5,426 2,028
-------- --------
Total current assets.................................... 240,384 68,816
-------- --------
Property, plant and equipment, net.......................... 29,510 30,529
Restricted investments...................................... 40,163 40,163
Other non-current assets, net............................... 4,809 1,798
-------- --------
Total assets............................................ $314,866 $141,306
======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of capital lease and installment note
obligations............................................. $ 4,767 $ 4,934
Accounts payable and accrued expenses..................... 23,229 19,388
-------- --------
Total current liabilities............................... 27,996 24,322

Capital lease obligations and installment note obligations,
less current installments................................. 5,715 9,369
-------- --------
Total liabilities....................................... 33,711 33,691
-------- --------
Shareholders' equity:
Common stock.............................................. 292,386 133,592
Accumulated deficit....................................... (11,231) (25,977)
-------- --------
Total shareholders' equity.............................. 281,155 107,615
-------- --------
Total liabilities and shareholders' equity.................. $314,866 $141,306
======== ========
</TABLE>

- ------------------------

(1) The information in this column was derived from the Company's audited
financial statements as of December 31, 1998.

See notes to Condensed Consolidated Financial Statements.

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TRIQUINT SEMICONDUCTOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------------
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ 14,745 $ (7,424)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization........................... 5,444 4,202
Deferred income taxes................................... 2,000 0
Special charges......................................... 0 8,820
Gain on disposal of assets.............................. (9) (140)
Change in assets and liabilities (net of assets acquired
and liabilities assumed)
(Increase) decrease in:
Accounts receivable................................. (6,879) (1,618)
Inventories......................................... (3,756) (3,169)
Prepaid expense and other assets.................... 119 (173)
Increase (decrease) in:
Accounts payable and accrued expenses............... 3,840 6,577
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES............. 15,504 7,075

Cash flows from investing activities:
Purchase of investments................................... (240,539) (70,569)
Sale/Maturity of investments.............................. 159,440 67,029
Capital expenditures...................................... (4,230) (3,397)
Proceeds from sale of assets.............................. 39 149
-------- --------
NET CASH USED BY INVESTING ACTIVITIES................. (85,290) (6,788)

Cash flows from financing activities:
Principal payments under capital lease obligations........ (3,821) (4,138)
Issuance of common stock, net............................. 150,044 916
-------- --------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES...... 146,223 (3,222)

NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS......................................... 76,437 (2,935)

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD.... 14,602 18,734
-------- --------

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD.......... $ 91,039 $ 15,799
======== ========
</TABLE>

See notes to Condensed Consolidated Financial Statements.

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TRIQUINT SEMICONDUCTOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

1. BASIS OF PRESENTATION

The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles. However, certain
information or footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed, or omitted, pursuant to the rules and regulations of the Securities
and Exchange Commission. In the opinion of management, the statements include
all adjustments necessary (which are of a normal and recurring nature) for the
fair presentation of the results of the interim periods presented. These
consolidated financial statements should be read in conjunction with the
Company's audited financial statements for the year ended December 31, 1998, as
included in the Company's 1998 Annual Report to Shareholders.

The Company's quarters end on the Saturday nearest the end of the calendar
quarter. For convenience, the Company has indicated that its third quarter ended
on September 30. The Company's fiscal year ends on December 31.

2. STOCK ACTIVITY AND NET INCOME PER SHARE

On June 10, 1999, the Board of Directors approved a three-for-two stock
split of the outstanding common shares effected in the form of a stock dividend
on July 2, 1999 to stockholders of record as of June 22, 1999. Common share and
per share data for all periods presented in the accompanying financial
statements have been adjusted to give effect to the stock split effected in the
form of a stock dividend.

On July 13, 1999, the Company issued 3,753 additional shares as part of a
secondary public offering, raising $147.2 million, net of fees and expenses.

Earnings per share is presented as basic and diluted net income per share.
Basic net income per share is net income available to common shareholders
divided by the weighted-average number of common shares outstanding. Diluted net
income per share is similar to basic except that the denominator includes
potential common shares that, had they been issued, would have had a dilutive
effect.

The following is a reconciliation of the basic and diluted earnings per
share:

<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1999 PER SHARE
INCOME SHARES AMOUNT
-------- -------- ---------
<S> <C> <C> <C>
Basic earnings per share:
Income available to shareholders................. $7,205 17,775 $0.41
=====
Effect of dilutive securities:
Stock options.................................... -- 2,398
------ ------
Diluted earnings per share:
Income available to shareholders................. $7,205 20,173 $0.36
====== ====== =====
</TABLE>

6
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TRIQUINT SEMICONDUCTOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

2. STOCK ACTIVITY AND NET INCOME PER SHARE (CONTINUED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1999 PER SHARE
INCOME SHARES AMOUNT
-------- -------- ---------
<S> <C> <C> <C>
Basic earnings per share:
Income available to shareholders................ $14,745 15,503 $.95
====
Effect of dilutive securities:
Stock options................................... -- 2,019
------- ------
Diluted earnings per share:
Income available to shareholders................ $14,745 17,522 $.84
======= ====== ====
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1998 PER SHARE
INCOME SHARES AMOUNT
-------- -------- ---------
<S> <C> <C> <C>
Basic earnings per share:
Income available to shareholders................. $2,861 14,180 $0.20
=====
Effect of dilutive securities:
Stock options and warrants....................... -- 523
------ ------
Diluted earnings per share:
Income available to shareholders................. $2,861 14,703 $0.19
====== ====== =====
</TABLE>

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1998 PER SHARE
INCOME SHARES AMOUNT
-------- -------- ---------
<S> <C> <C> <C>
Basic loss per share:
Loss attributable to shareholders............... $(7,424) 14,048 $(0.53)
======
Effect of dilutive securities:
Stock options and warrants...................... -- --
------- ------
Diluted loss per share:
Loss available to shareholders.................. $(7,424) 14,048 $(0.53)
======= ====== ======
</TABLE>

The dilutive effect of common equivalent shares outstanding totalling
approximately 2 and 18 shares for the three months and nine months ended
September 30, 1999, respectively, and 1,949 and 1,788 shares for the three
months and nine months ended September 30, 1998, respectively, were not included
in the net income (loss) per share calculations, because to do so would have
been antidilutive.

3. RESEARCH AND DEVELOPMENT COSTS

The Company charges all research and development costs associated with the
development of new products to expense when incurred. Engineering and design
costs related to revenues on non-recurring engineering services billed to
customers are classified as research, development and engineering expense.
Additionally, certain related contract engineering costs are also included in
research, development and engineering expense.

7
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TRIQUINT SEMICONDUCTOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

4. INCOME TAXES

The Company accounts for income taxes under the asset and liability method.
Under the asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases.

The provision for income taxes has been recorded based on the current
estimate of the Company's annual effective tax rate. For periods of income, this
rate differs from the federal statutory rate primarily because of the
utilization of net operating loss carryforwards.

5. INVESTMENTS

The Company's investments, both restricted and unrestricted, are comprised
of short and medium-term corporate notes, commercial paper, and market auction
preferred stock and have been classified as available-for-sale securities in
accordance with Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities, at
September 30, 1999, and December 31, 1998. The carrying value of
available-for-sale securities approximates fair value at September 30, 1999 and
December 31, 1998.

6. INVENTORIES

Inventories, net of reserves of $4,301 and $2,422 as of September 30, 1999
and December 31, 1998, respectively, stated at the lower of cost or market,
consist of:

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
Raw Material.......................................... $ 3,705 $ 5,066
Work in Progress...................................... 17,057 10,749
Finished Goods........................................ 2,700 3,891
------- -------
Total Inventories................................... $23,462 $19,706
------- -------
</TABLE>

7. SHAREHOLDERS' EQUITY

Components of shareholders' equity:

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
Preferred stock, no par value, 5,000 shares
authorized.......................................... -- --
Common stock, $.001 par value, 25,000 shares
authorized, 18,500 and 14,328 outstanding,
respectively........................................ 19 14
Additional paid-in capital............................ 292,367 133,578
</TABLE>

8
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

8. SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------------
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
------------- -------------
<S> <C> <C>
Cash Transactions:
Cash paid for interest........................... $836 $1,088
Cash paid for income taxes....................... 344 0

Non-Cash Transactions:
Purchase of assets through capital leases........ 0 2,215
</TABLE>

9. COMPREHENSIVE INCOME

The Company has adopted Statement of Financial Accounting Standards ("SFAS")
No. 130, Reporting Comprehensive Income. There is no difference between net
income (loss) and comprehensive income (loss).

10. SEGMENT INFORMATION

The Company has adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information. The Company has concluded that it has only
one reportable segment.

11. NEW ACCOUNTING PRONOUNCEMENT

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities". SFAS No. 133 establishes
accounting and reporting standards requiring that every derivative instrument be
recorded in the balance sheet as either an asset or liability measured at its
fair value. SFAS No. 133, as amended by SFAS No. 137, also requires that changes
in the derivative's fair value be recognized currently in results of operations
unless specific hedge accounting criteria are met. SFAS No. 133 is effective for
fiscal years beginning after June 15, 2000. The Company is evaluating any
possible effect SFAS No. 133 may have on its consolidated financial statements.

12. LITIGATION

See Part II, Item 1, of this Quarterly Report on Form 10-Q for a description
of legal proceedings.

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<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

INTRODUCTION

YOU SHOULD READ THE FOLLOWING DISCUSSION AND ANALYSIS IN CONJUNCTION WITH
THE FINANCIAL STATEMENTS AND THE NOTES THERETO INCLUDED IN THIS REPORT ON
FORM 10-Q. THE DISCUSSION IN THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS
THAT INVOLVE RISKS AND UNCERTAINTIES. THESE FORWARD-LOOKING STATEMENTS INCLUDE,
AMONG OTHERS, THOSE STATEMENTS INCLUDING THE WORDS "EXPECTS," "ANTICIPATES,"
"INTENDS," "BELIEVES" AND SIMILAR LANGUAGE. OUR ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED BELOW. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO
THESE DIFFERENCES INCLUDE, BUT ARE NOT LIMITED, TO THE RISKS DISCUSSED IN THE
SECTION TITLED "RISK FACTORS" BELOW.

We are a leading supplier of high performance gallium arsenide integrated
circuits for the wireless communications, telecommunications, data
communications and aerospace markets. Our products incorporate our proprietary
analog and mixed signal designs and our advanced gallium arsenide manufacturing
processes to address a broad range of applications and customers. We sell our
products worldwide to end user customers, including Ericsson, Hughes, Lucent,
Motorola, Nokia, Nortel, QUALCOMM, Raytheon and Rockwell.

RESULTS OF OPERATIONS

The following table sets forth the results of our operations expressed as a
percentage of total revenues. Our historical operating results are not
necessarily indicative of the results for any future period.

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------- -----------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Total revenues............................ 100.0% 100.0% 100.0% 100.0 %
Operating costs and expenses:
Cost of goods sold...................... 57.4 61.6 59.6 66.8
Research, development and engineering... 12.9 15.7 13.6 17.4
Selling, general and administrative..... 14.1 14.7 14.8 14.0
Special charges......................... 0.0 0.0 0.0 12.7
----- ----- ----- -----
Total operating costs and expenses.... 84.4 92.0 88.0 110.9
----- ----- ----- -----
Income (loss) from operations............. 15.6 8.0 12.0 (10.9)
Other income, net......................... 5.3 1.9 2.9 1.8
----- ----- ----- -----
Income (loss) before income taxes....... 20.9 9.9 14.9 (9.1)
Income tax expense........................ 4.0 0.1 2.0 0.1
----- ----- ----- -----
Net income (loss)......................... 16.9% 9.8% 12.9% (9.2)%
===== ===== ===== =====
</TABLE>

TOTAL REVENUES

We derive revenues from the sale of standard and customer-specific products
and services. Our revenues also include non-recurring engineering revenues
relating to the development of customer-specific products. Total revenues for
the three and nine months ended September 30, 1999 increased 45.9% and 41.7%,
respectively, to $42.5 million and $114.3 million from $29.1 million and
$80.7 million, respectively, for the comparable three and nine months ended
September 30, 1998. The increases in total revenues in the three and nine months
ended September 30, 1999 reflected strong demand for our products. Domestic
revenues for the three and nine months ended September 30, 1999 increased to
$24.7 and $76.8 million, respectively, from $22.9 and $61.3 million,
respectively, for the three and nine months ended September 30, 1998.
International revenues increased to $17.8 and $37.5 million for the three and
nine months

10
<PAGE>
ended September 30, 1999, respectively, from $6.2 and $19.3 million,
respectively, for the three and nine months ended September 30, 1998.

COST OF GOODS SOLD

Cost of goods sold includes all direct material, labor and overhead expenses
and certain production costs related to non-recurring engineering revenues.

Cost of goods sold increased to $24.4 million for the three months ended
September 30, 1999 from $17.9 million for the three months ended September 30,
1998. Cost of goods sold as a percentage of total revenues for the three months
ended September 30, 1999 decreased to 57.4% from 61.6% for the three months
ended September 30, 1998. For the nine months ended September 30, 1999, cost of
goods sold increased to $68.1 million from $53.9 million for the nine months
ended September 30, 1998. As a percentage of total revenues, cost of goods sold
for the nine months ended September 30, 1999 decreased to 59.6% from 66.8% for
the nine months ended September 30, 1998. The increase in absolute dollar value
of cost of goods sold was primarily attributable to the related increase in
sales volume. The decrease in cost of goods sold as a percentage of revenues is
attributable to continuing improvements in production yields and increased
economies of scale associated with increased sales volumes. In addition, cost of
goods sold for the nine months ended September 30, 1998 included nonrecurring
costs related to the relocation of our manufacturing facility to our Hillsboro
facility.

We have at various times in the past experienced lower than expected
production yields which have delayed shipments of a given product and adversely
affected gross margins. There can be no assurance that we will be able to
maintain acceptable production yields in the future and, to the extent that we
do not achieve acceptable production yields, our operating results would be
materially adversely affected. The operation of our own leased wafer fabrication
facilities entails a high degree of fixed costs and requires an adequate volume
of production and sales to be profitable. During periods of decreased demand,
high fixed wafer fabrication costs would have a material adverse effect on our
operating results.

RESEARCH, DEVELOPMENT AND ENGINEERING

Research, development and engineering expenses include the costs incurred in
the design of products associated with nonrecurring engineering revenues, as
well as ongoing product development and research and development expenses. Our
research, development and engineering expenses for the three and nine months
ended September 30, 1999 increased to $5.5 million and $15.5 million,
respectively, from $4.6 million and $14.1 million, respectively for the three
and nine months ended September 30, 1998. Research, development and engineering
expenses as a percentage of total revenues for the three and nine months ended
September 30, 1999 decreased to 12.9% and 13.6%, respectively, from 15.7% and
17.4%, respectively, for the three and nine months ended September 30, 1998. The
increase in research, development and engineering expenses on an absolute dollar
basis is primarily due to the addition of new employees. The decrease in
research, development and engineering expenses as a percentage of total revenues
was due to revenues increasing at a faster rate than research, development and
engineering spending. We are committed to substantial investments in research,
development, and engineering and expect these expenses will continue to increase
in absolute dollar amount in the future.

SELLING, GENERAL AND ADMINISTRATIVE

Selling, general and administrative expenses for the three and nine months
ended September 30, 1999 increased to $6.0 million and $16.9 million,
respectively, from $4.3 million and $11.3 million, respectively, for the three
and nine months ended September 30, 1998. Selling, general and administrative
expenses as a percentage of total revenues for the three and nine months ended
September 30, 1999 was 14.1% and 14.8%, respectively, compared to 14.7% and
14.0%, respectively, for the three and nine months ended September 30, 1998. The
increase in selling, general and administrative expenses on an absolute dollar

11
<PAGE>
basis is primarily attributable to increased costs associated with the on-going
development of infrastructure and business support and increased selling costs
associated with the increased sales volume.

SPECIAL CHARGES

Special charges for the nine months ended September 30, 1998 relate to a
one-time write-off of in-process research and development of $8.8 million
associated with our acquisition of our Millimeter Wave Communications business
and a charge of $1.4 million related to the settlement of a stockholder class
action filed in 1994.

OTHER INCOME, NET

Other income, net for the three and nine months ended September 30, 1999
increased to $2,256,000 and $3,356,000, respectively, from $567,000 and
$1,482,000, respectively, for the three and nine months ended September 30,
1998. This increase resulted primarily from increased interest income on higher
cash balances generated primarily by the $147.2 million net proceeds of the
July 1999 secondary public offering and decreased interest expense due to
reductions in long-term debt.

INCOME TAX EXPENSE

Income tax expense for the three and nine month periods ended September 30,
1999 increased to $1,690,000 and $2,344,000, respectively, from $29,000 and
$94,000 for the three and nine months ended September 30, 1998. The increase in
income tax expense is attributable to the increased income before income taxes.

RECENT ACCOUNTING PRONOUNCEMENT

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities". SFAS No. 133 establishes
accounting and reporting standards requiring that every derivative instrument be
recorded in the balance sheet as either an asset or liability measured at its
fair value. SFAS No. 133 also requires that changes in the derivative's fair
value be recognized currently in results of operations unless specific hedge
accounting criteria are met. SFAS No. 133, as amended by SFAS No. 137, is
effective for fiscal years beginning after June 15, 2000. The Company is
evaluating any possible effect SFAS No. 133 may have on its consolidated
financial statements.

12
<PAGE>
RISK FACTORS

OUR OPERATING RESULTS MAY FLUCTUATE SUBSTANTIALLY.

Our quarterly and annual results of operations have varied in the past and
may vary significantly in the future due to a number of factors including, but
not limited to, the following:

- cancellation or delay of customer orders or shipments;

- our success in achieving design wins in which our products are designed
into those of our customers;

- market acceptance of our products and those of our customers;

- variability of the life cycles of our customers' products;

- variations in manufacturing yields;

- timing of announcement and introduction of new products by us and our
competitors;

- changes in the mix of products we sell;

- declining average sales prices for our products;

- changes in manufacturing capacity and variations in the utilization of
that capacity;

- variations in operating expenses;

- the long sales cycles associated with our customer specific products;

- the timing and level of product and process development costs;

- the cyclicality of the semiconductor industry;

- the timing and level of nonrecurring engineering revenues and expenses
relating to customer specific products; and

- significant changes in our and our customers' inventory levels.

We expect that our operating results will continue to fluctuate in the
future as a result of these and other factors. Any unfavorable changes in these
or other factors could cause our results of operations to suffer as some of
these factors have had in the past. For example, in June 1994, Nortel, formerly
Northern Telecom, requested that we delay shipment of some of our products.
Nortel was then our largest customer and the delay, together with lower than
expected orders, materially reduced our revenues and results of operations in
the second quarter and for the remainder of 1994. Due to potential fluctuations,
we believe that period to period comparisons of our results of operations are
not necessarily meaningful and should not be relied upon as indicators of our
future performance.

WE RELY ON A LIMITED NUMBER OF CUSTOMERS FOR A SUBSTANTIAL PART OF OUR REVENUES.

A limited number of customers have accounted for a significant portion of
our revenues in each fiscal period. In recent periods, sales to some of our
major customers as a percentage of total revenues have fluctuated. In 1998,
Nokia accounted for approximately 12.0% and Raytheon accounted for approximately
11.7% of total revenues. We expect that sales to a limited number of customers
will continue to account for a substantial portion of our total revenues in
future periods. Customers generally purchase our products pursuant to cancelable
short-term purchase orders. Our results of operations have been negatively
affected in the past by the failure of anticipated orders to materialize and by
delays in or cancellations of orders. If we were to lose a major customer or if
orders by or shipments to a major customer were to otherwise decrease or be
delayed, our results of operations would be harmed.

13
<PAGE>
WE FACE RISKS FROM FAILURES IN OUR MANUFACTURING PROCESSES.

The fabrication of integrated circuits, particularly those made of gallium
arsenide, is a highly complex and precise process. Our integrated circuits are
manufactured from four inch round wafers made of gallium arsenide. During
manufacturing, each wafer is processed to contain numerous die, the individual
integrated circuits. We may reject or be unable to sell a substantial percentage
of wafers or the die on a given wafer because of:

- minute impurities;

- difficulties in the fabrication process;

- defects in the masks used to print circuits on a wafer;

- electrical performance;

- wafer breakage; or

- other factors.

We refer to the proportion of final good integrated circuits that have been
processed, assembled and tested relative to the gross number of integrated
circuits that could be constructed from the raw materials as our manufacturing
yield. Compared to the manufacture of silicon integrated circuits, gallium
arsenide technology is less mature and more difficult to design and manufacture
within specifications in large volume. In addition, the more brittle nature of
gallium arsenide wafers can result in lower manufacturing yields than with
silicon wafers. We have in the past experienced lower than expected
manufacturing yields, which have delayed product shipments and negatively
impacted our results of operations. We may experience difficulty maintaining
acceptable manufacturing yields in the future.

In addition, the maintenance of our two fabrication facilities is subject to
risks, including:

- the demands of managing and coordinating workflow between two
geographically separate production facilities;

- disruption of production in one of our facilities as a result of a
slowdown or shutdown in our other facility; and

- higher operating costs from managing two geographically separate
manufacturing facilities.

IF WE FAIL TO SELL A HIGH VOLUME OF PRODUCTS, OUR OPERATING RESULTS WILL BE
HARMED.

Because the majority of our manufacturing costs are relatively fixed, our
manufacturing volumes are critical to our operating results. If we fail to
achieve acceptable manufacturing volumes or experience product shipment delays,
our results of operations could be harmed. During periods of decreased demand,
our high fixed manufacturing costs could have a negative effect on our results
of operations. We base our expense levels in part on our expectations of future
orders and these expense levels are predominantly fixed in the short-term. If we
receive fewer customer orders than expected, we may not be able to reduce our
manufacturing costs in the short-term and our operating results would be harmed.

IF WE DO NOT SELL OUR CUSTOMER-SPECIFIC PRODUCTS IN LARGE VOLUMES, OUR OPERATING
RESULTS MAY BE HARMED.

We manufacture a substantial portion of our products to address the needs of
individual customers. Frequent product introductions by systems manufacturers
make our future success dependent on our ability to select development projects
which will result in sufficient volumes to enable us to achieve manufacturing
efficiencies. Because customer specific products are developed for unique
applications, we expect that some of our current and future customer specific
products may never be produced in volume and may impair our ability to cover our
fixed manufacturing costs. In addition, if we experience delays in

14
<PAGE>
completing designs or if we fail to obtain development contracts from customers
whose products are successful, our revenues could be harmed.

OUR OPERATING RESULTS COULD BE HARMED IF WE LOSE ACCESS TO SOLE OR LIMITED
SOURCES OF MATERIALS OR SERVICES.

We currently obtain some components and services for our products from
limited or single sources, such as ceramic packages from Kyocera. We purchase
these components and services on a purchase order basis, do not carry
significant inventories of these components and do not have any long-term supply
contracts with these vendors. Our requirements are relatively small compared to
silicon semiconductor manufacturers. Because we often do not account for a
significant part of our vendors' business, we may not have access to sufficient
capacity from these vendors in periods of high demand. If we were to change any
of our sole or limited source vendors, we would be required to requalify each
new vendor. Requalification could prevent or delay product shipments that could
negatively affect our results of operations. In addition, our reliance on these
vendors may negatively affect our production if the components vary in
reliability or quality. If we are unable to obtain timely deliveries of
sufficient components of acceptable quality or if the prices of components for
which we do not have alternative sources increase, our results of operations
could be harmed.

IF OUR PRODUCTS FAIL TO PERFORM OR MEET CUSTOMER REQUIREMENTS, WE COULD INCUR
SIGNIFICANT ADDITIONAL COSTS.

The fabrication of gallium arsenide integrated circuits is a highly complex
and precise process. Our customers specify quality, performance and reliability
standards that we must meet. If our products do not meet these standards, we may
be required to rework or replace the products. Gallium arsenide integrated
circuits may contain undetected defects or failures that only become evident
after we commence volume shipments. We have experienced product quality,
performance or reliability problems from time to time. Defects or failures may
occur in the future. If failures or defects occur, we could:

- lose revenue;

- incur increased costs such as warranty expense and costs associated with
customer support;

- experience delays, cancellations or rescheduling of orders for our
products; or

- experience increased product returns or discounts.

OUR OPERATING RESULTS MAY SUFFER IF WE DO NOT EXPAND OUR MANUFACTURING CAPACITY
IN A TIMELY MANNER.

We may attempt to increase our capacity by converting our existing facility
to accommodate equipment that uses six-inch wafers. We do not have any
experience processing six-inch wafers in our fabrication facilities. We may be
required to redesign our processes and procedures substantially to accommodate
the larger wafers. As a result, implementing additional capacity for six-inch
wafers may take longer than planned, which could harm our results of operations.

Our facilities have a level of capacity beyond which we cannot cost
effectively produce our products. Although we are not currently approaching
those constraints, we may be unable to further expand our business if we fail to
plan and build sufficient capacity. The process of building, testing and
qualifying a gallium arsenide integrated circuit fabrication facility is time
consuming. We must begin to design and implement additional manufacturing
facilities well in advance of our needs.

WE MAY FACE FINES OR OUR FACILITIES COULD BE CLOSED IF WE FAIL TO COMPLY WITH
ENVIRONMENTAL REGULATIONS.

Federal, state and local regulations impose various environmental controls
on the storage, handling, discharge and disposal of chemicals and gases used in
our manufacturing process. For our manufacturing

15
<PAGE>
facility located in Hillsboro, Oregon, we provide our own manufacturing waste
treatment and disposal. We are required by the State of Oregon Department of
Environmental Quality to report usage of environmentally hazardous materials.

At our Texas facility, we utilize Texas Instruments' waste treatment and
waste storage facilities and services for the treatment, storage, disposal and
discharge of wastes we generate. Our waste streams are commingled with those of
Texas Instruments and are covered by Texas Instruments' waste water permit.

The failure to comply with present or future regulations could result in
fines being imposed on us and we could be required to suspend production or
cease our operations. These regulations could require us to acquire significant
equipment or to incur substantial other expenses to comply with environmental
regulations. We rely to a great extent on Texas Instruments' hazardous waste
disposal system at our Texas facility. Any failure by us, or by Texas
Instruments with respect to our Texas facility, to control the use of, or to
adequately restrict the discharge of, hazardous substances could subject us to
future liabilities and harm our results of operations.

WE DEPEND ON THE CONTINUED GROWTH OF COMMUNICATIONS MARKETS.

We derive a substantial portion of our product revenues from sales of
products for communication applications. These markets are characterized by the
following:

- intense competition;

- rapid technological change; and

- short product life cycles, especially in the cellular telephone market.

In addition, although the communications markets have grown rapidly in the
last few years, these markets may not continue to grow or a significant slowdown
in these markets may occur.

Products for communications applications are often based on industry
standards, which are continually evolving. Our future success will depend, in
part, upon our ability to successfully develop and introduce new products based
on emerging industry standards, which could render our existing products
unmarketable or obsolete. If communications markets evolve to new standards, we
may be unable to successfully design and manufacture new products that address
the needs of our customers or that will meet with substantial market acceptance.

OUR BUSINESS WILL BE IMPACTED IF SYSTEMS MANUFACTURERS DO NOT USE GALLIUM
ARSENIDE COMPONENTS.

Silicon semiconductor technologies are the dominant process technologies for
integrated circuits and the performance of silicon integrated circuits continues
to improve. Our prospective customers may be systems designers and manufacturers
who are utilizing such silicon technologies in their existing systems and who
are evaluating gallium arsenide integrated circuits for use in their next
generation high performance systems. Customers may be reluctant to adopt our
products because of:

- their unfamiliarity with designing systems with gallium arsenide products;

- their concerns related to manufacturing costs and yields;

- their unfamiliarity with design and manufacturing processes; and

- uncertainties about the relative cost effectiveness of our products
compared to high performance silicon components.

Systems manufacturers may not use gallium arsenide components because the
production of gallium arsenide integrated circuits has been and continues to be
more costly than the production of silicon devices. As a result, we must offer
devices that provide superior performance to that of silicon-based devices.

16
<PAGE>
In addition, customers may be reluctant to rely on a smaller company like us
for critical components. We cannot be certain that additional systems
manufacturers will design our products into their systems, that the companies
that have utilized our products will continue to do so in the future or that
gallium arsenide technology will continue to achieve widespread market
acceptance. If our gallium arsenide products fail to achieve market acceptance,
our results of operations would suffer.

CUSTOMERS MAY DELAY OR CANCEL ORDERS DUE TO REGULATORY DELAYS.

The increasing demand for communications products has exerted pressure on
regulatory bodies worldwide to adopt new standards for these products, generally
following extensive investigation of and deliberation over competing
technologies. The delays inherent in the regulatory approval process may in the
future cause the cancellation, postponement or rescheduling of the installation
of communications systems by our customers. These delays have in the past had
and may in the future have a negative effect on our sales and our results of
operations.

OUR REVENUES ARE AT RISK IF WE DO NOT INTRODUCE NEW PRODUCTS AND/OR DECREASE
COSTS.

Historically, the average selling prices of our products have decreased over
the products' lives, and we expect them to continue to do so. To offset these
decreases, we rely primarily on achieving yield improvements and other cost
reductions for existing products and on introducing new products that can often
be sold at higher average selling prices. We believe our future success depends,
in part, on our timely development and introduction of new products that compete
effectively on the basis of price and performance and adequately address
customer requirements. The success of new product and process introductions
depends on several factors, including:

- proper selection of products and processes;

- successful and timely completion of product and process development and
commercialization;

- market acceptance of our or our customers' new products;

- achievement of acceptable manufacturing yields; and

- our ability to offer new products at competitive prices.

Our product and process development efforts may not be successful and our
new products or processes may not achieve market acceptance. To the extent that
our cost reductions and new product introductions do not occur in a timely
manner, our results of operations could suffer.

WE MUST IMPROVE OUR PRODUCTS AND PROCESSES TO REMAIN COMPETITIVE.

If technologies or standards supported by our or our customers' products
become obsolete or fail to gain widespread commercial acceptance, our results of
operations may be materially impacted. Because of continual improvements in
semiconductor technology, including those in high performance silicon where
substantially more resources are invested than in gallium arsenide, we believe
that our future success will depend, in part, on our ability to continue to
improve our product and process technologies. We must also develop new
technologies in a timely manner. In addition, we must adapt our products and
processes to technological changes and to support emerging and established
industry standards. We may not be able to improve our existing products and
process technologies, develop new technologies in a timely manner or effectively
support industry standards. If we fail to do so, our customers may select
another gallium arsenide product or move to an alternative technology.

17
<PAGE>
OUR RESULTS OF OPERATIONS MAY SUFFER IF WE DO NOT COMPETE SUCCESSFULLY.

The semiconductor industry is intensely competitive and is characterized by
rapid technological change, rapid product obsolescence and price erosion.
Currently, we compete primarily with manufacturers of high performance silicon
integrated circuits such as Applied Micro Circuits, Motorola and Philips and
with manufacturers of gallium arsenide integrated circuits such as Anadigics,
Raytheon, RF Micro Devices and Vitesse. We also face competition from the
internal semiconductor operations of some of our current and potential
customers. We expect increased competition from existing competitors and from a
number of companies that may enter the gallium arsenide integrated circuits
market, as well as future competition from companies that may offer new or
emerging technologies such as silicon germanium. Most of our current and
potential competitors have significantly greater financial, technical,
manufacturing and marketing resources than we do. Manufacturers of high
performance silicon integrated circuits have achieved greater market acceptance
of their existing products and technologies in some applications.

We compete with both gallium arsenide and silicon suppliers in the wireless,
data communications and telecommunications markets. In the microwave and
millimeter wave markets, our competition is primarily from a limited number of
gallium arsenide suppliers, which are in the process of expanding their product
offerings to address commercial applications other than aerospace.

Our prospective customers are typically systems designers and manufacturers
that are considering the use of gallium arsenide integrated circuits for their
high performance systems. Competition is primarily based on performance elements
such as speed, complexity and power dissipation, as well as price, product
quality and ability to deliver products in a timely fashion. Due to the
proprietary nature of our products, competition occurs almost exclusively at the
system design stage. As a result, a design win by TriQuint or our competitors
typically limits further competition with respect to manufacturing a given
design.

OUR OPERATING RESULTS MAY SUFFER DUE TO DECLINING DEMAND FOR SEMICONDUCTORS.

From time to time, the semiconductor industry has experienced significant
downturns and wide fluctuations in product supply and demand. This cyclicality
has led to significant imbalances in demand and production capacity. It has also
accelerated the decrease of average selling prices per unit. We may experience
periodic fluctuations in our future financial results because of these or other
industry wide conditions.

IF WE FAIL TO INTEGRATE ANY FUTURE ACQUISITIONS, OUR BUSINESS WILL BE HARMED.

We face risks from any future acquisitions, including the following:

- we may fail to combine and coordinate the operations and personnel of
newly acquired companies with our existing business;

- our ongoing business may be disrupted or receive insufficient management
attention;

- we may not cost effectively and rapidly incorporate the technology we
acquire;

- we may not be able to recognize the cost savings or other financial
benefits we anticipated;

- we may not be able to retain the existing customers of newly acquired
operations;

- our corporate culture may clash with that of the acquired businesses; and

- we may incur unknown liabilities associated with acquired businesses.

We may not successfully address these risks or any other problems that arise
in connection with future acquisitions.

18
<PAGE>
We will continue to evaluate strategic opportunities available to us and we
may pursue product, technology or business acquisitions. On January 13, 1998, we
acquired our Millimeter Wave Communications operation, which included
substantially all of the assets of the monolithic microwave integrated circuit
operation of Texas Instruments' former Defense Systems & Electronics Group. In
addition, in connection with any future acquisitions, we may issue equity
securities that could dilute the percentage ownership of our existing
stockholders, we may incur additional debt and we may be required to amortize
expenses related to goodwill and other intangible assets that may negatively
affect our results of operations.

WE MUST MANAGE OUR GROWTH.

Our total number of employees grew from 371 in 1997 to 679 in 1998. The
resulting growth has placed, and is expected to continue to place significant
demands on our personnel, management and other resources. We must continue to
improve our operational, financial and management information systems to keep
pace with the growth of our business.

IF WE DO NOT HIRE AND RETAIN KEY EMPLOYEES, OUR BUSINESS WILL SUFFER.

Our future success depends in large part on the continued service of our key
technical, marketing and management personnel. We also depend on our ability to
continue to identify, attract and retain qualified technical employees,
particularly highly skilled design, process and test engineers involved in the
manufacture and development of our products and processes. We must also recruit
and train employees to manufacture our products without a substantial reduction
in manufacturing yields. There are many other semiconductor companies located in
the communities near our facilities and it may become increasingly difficult for
us to attract and retain those employees. The competition for these employees is
intense, and the inability to recruit employees or the loss of key employees
could negatively affect us.

OUR BUSINESS MAY BE HARMED IF WE FAIL TO PROTECT OUR PROPRIETARY TECHNOLOGY.

We rely on a combination of patents, trademarks, copyrights, trade secret
laws, confidentiality procedures and licensing arrangements to protect our
intellectual property rights. We currently have patents granted and pending in
the United States and in foreign countries and intend to seek further
international and United States patents on our technology. We cannot be certain
that patents will be issued from any of our pending applications or that patents
will be issued in all countries where our products can be sold or that any
claims allowed from pending applications will be of sufficient scope or strength
to provide meaningful protection or any commercial advantage. Our competitors
may also be able to design around our patents. The laws of some countries in
which our products are or may be developed, manufactured or sold, including
various countries in Asia, may not protect our products or intellectual property
rights to the same extent as do the laws of the United States, increasing the
possibility of piracy of our technology and products. Although we intend to
vigorously defend our intellectual property rights, we may not be able to
prevent misappropriation of our technology. Our competitors may also
independently develop technologies that are substantially equivalent or superior
to our technology.

OUR ABILITY TO PRODUCE OUR SEMICONDUCTORS MAY SUFFER IF SOMEONE CLAIMS WE
INFRINGE ON THEIR INTELLECTUAL PROPERTY.

The semiconductor industry is characterized by vigorous protection and
pursuit of intellectual property rights or positions, which have resulted in
significant and often protracted and expensive litigation. If it is necessary or
desirable, we may seek licenses under such patents or other intellectual
property rights. However, we cannot be certain that licenses will be offered or
that we would find the terms of licenses that are offered acceptable or
commercially reasonable. Our failure to obtain a license from a third party for
technology used by us could cause us to incur substantial liabilities and to
suspend the manufacture of products. Furthermore, we may initiate claims or
litigation against third parties for

19
<PAGE>
infringement of our proprietary rights or to establish the validity of our
proprietary rights. Litigation by or against us could result in significant
expense and divert the efforts of our technical personnel and management,
whether or not the litigation results in a favorable determination. In the event
of an adverse result in any litigation, we could be required to:

- pay substantial damages;

- indemnify our customers;

- stop manufacturing, use and sale of the infringing products;

- expend significant resources to develop non-infringing technology;

- discontinue the use of certain processes;

- or obtain licenses to the technology.

We may be unsuccessful in developing noninfringing products or negotiating
licenses upon reasonable terms, or at all. These problems might not be resolved
in time to avoid harming our results of operations. If any third party makes a
successful claim against our customers or us and a license is not made available
to us on commercially reasonable terms, our business could be harmed.

On February 26, 1999, a lawsuit was filed against 88 firms, including
TriQuint, in the United States District Court for the District of Arizona. The
suit alleges that the defendants, including us, infringe upon certain patents
held by The Lemelson Medical, Education and Research Foundation, Limited
Partnership. Although we believe the suit is without merit and intend to
vigorously defend ourselves against the charges, we cannot be certain that we
will be successful. Moreover, this litigation may require us to spend a
substantial amount of time and money and could distract management from our day
to day operations.

OUR BUSINESS MAY SUFFER DUE TO RISKS ASSOCIATED WITH INTERNATIONAL SALES.

Our sales outside of the United States were 30.4% of total revenues in 1996,
34.0% of total revenues in 1997 and 24.0% of total revenues in 1998. We face
inherent risks from these sales, including:

- imposition of government controls;

- currency exchange fluctuations;

- longer payment cycles and difficulties related to the collection of
receivables from international customers;

- reduced protection for intellectual property rights in some countries;

- the impact of recessionary environments in economies outside the United
States;

- unfavorable tax consequences;

- political instability; and

- tariffs and other trade barriers.

In addition, due to the technological advantages provided by gallium
arsenide integrated circuits in many military applications, all of our sales
outside of North America must be licensed by the Office of Export Administration
of the U.S. Department of Commerce. If we fail to obtain these licenses or
experience delays in obtaining these licenses in the future, our results of
operations could be harmed. Also, because substantially all of our foreign sales
are denominated in U.S. dollars, increases in the value of the dollar would
increase the price in local currencies of our products and make our products
less price competitive.

20
<PAGE>
WE MAY BE SUBJECT TO A SECURITIES CLASS ACTION SUIT IF OUR STOCK PRICE FALLS.

Following periods of volatility in the market price of a company's stock,
some stockholders may file a securities class action litigation. For example, in
1994, a stockholder class action lawsuit was filed against us, our underwriters,
and some of our officers, directors and investors, which alleged that we, our
underwriters, and certain of our officers, directors and investors intentionally
misled the investing public regarding our financial prospects. We settled the
action and recorded a special charge of $1.4 million associated with the
settlement of this lawsuit and related legal expenses, net of accruals in 1998.
Any future securities class action litigation could be expensive and divert our
management's attention and harm our business, regardless of its merits.

WE FACE RISKS FROM THE YEAR 2000 ISSUE.

Many information technology hardware and software systems, as well as other
non-information technology equipment utilizing microprocessors, can accept only
two digit entries in the date code field. To operate using dates after
December 31, 1999, the date code fields will need to accept four digit entries
to distinguish twenty-first century dates from twentieth century dates. This is
commonly referred to as the "Year 2000" issue. We initiated a comprehensive Year
2000 audit program, which consists of a six step plan to inventory and correct
any systems that are not Year 2000 compliant. We have completed the audit
program for both information technology and non-information technology systems
as well as third-party vendors, manufacturers and suppliers. We believe that all
priority information technology and non-information technology systems used
internally in our business to be compliant for use in the Year 2000. We also
believe that, to the extent verifiable, third party vendors, manufacturers and
suppliers critical to our business are Year 2000 compliant. Because of the
existence of numerous systems and related components within our organization and
the interdependency of these systems, however, it is possible that some of our
systems, or systems at our suppliers, may fail to operate in the Year 2000. An
unanticipated system failure or the failure of our suppliers' systems may have a
material impact on our future operating results.

OUR CERTIFICATE OF INCORPORATION AND BYLAWS INCLUDE ANTITAKEOVER PROVISIONS
WHICH MAY DETER OR PREVENT A TAKEOVER ATTEMPT.

Some provisions of our certificate of incorporation and bylaws and
provisions of Delaware law may deter or prevent a takeover attempt, including a
takeover that might result in a premium over the market price for our common
stock. These provisions include:

CUMULATIVE VOTING. Our stockholders are entitled to cumulate their votes
for directors. This may limit the ability of the stockholders to remove a
director other than for cause.

STOCKHOLDER PROPOSALS AND NOMINATIONS. Our stockholders must give advance
notice, generally 120 days prior to the relevant meeting to nominate a candidate
for director or present a proposal to our stockholders at a meeting. These
notice requirements could inhibit a takeover by delaying stockholder action.

STOCKHOLDER RIGHTS PLAN. We may trigger our stockholder rights plan in the
event our board of directors does not agree to an acquisition proposal. The
rights plan may make it more difficult and costly to acquire our company.

PREFERRED STOCK. Our certificate of incorporation authorizes our board of
directors to issue up to 5 million shares of preferred stock and to determine
what rights, preferences and privileges such shares have. No action by our
stockholders is necessary before our board of directors can issue the preferred
stock. Our board of directors could use the preferred stock to make it more
difficult and costly to acquire our company.

21
<PAGE>
DELAWARE ANTI-TAKEOVER STATUTE. The Delaware anti-takeover law restricts
business combinations with some stockholders once the stockholder acquires 15%
or more of our common stock. The Delaware statute makes it harder for our
company to be acquired without the consent of our board of directors and
management.

LIQUIDITY AND CAPITAL RESOURCES

We completed follow-on public offerings in July 1999 and September 1995,
raising approximately $147.2 million and $48.1 million, respectively, net of
offering expenses. In December 1993 and January 1994, we completed our initial
public offering raising approximately $16.7 million, net of offering expenses.
In addition, we have funded our operations to date through other sales of
equity, bank borrowing, equipment leases, and cash flow from operations. As of
September 30, 1999, we had working capital of approximately $212.4 million,
including $183.6 million in cash, cash equivalents, and unrestricted
investments.

We have a $10.0 million unsecured revolving line of credit with a financial
institution. Restrictive covenants included in the line of credit require the
Company to maintain (a) a total liability to tangible net worth ratio of not
more than 0.75 to 1.00, (b) a current ratio of not less than 1.75 to 1.00,
(c) minimum tangible net worth greater than $209.9 million and (d) cash and
investments, including restricted investments, greater than $45.0 million. As of
September 30, 1999 we were in compliance with the restrictive covenants
contained in this line of credit.

In May 1996, we entered into a five year synthetic lease through a
participation agreement with Wolverine Leasing Corp., Matisse Holding Company
and United States National Bank of Oregon ("USNB"). The lease provides for the
construction and occupancy of our headquarters and wafer fabrication facility in
Hillsboro under an operating lease from Wolverine and provides us with an option
to purchase the property or renew our lease for an additional five years. Under
the terms of the agreement, USNB and Matisse made loans to Wolverine, which in
turn advanced the funds to us for the construction of the Hillsboro facility and
other associated costs and expenses. The loan from USNB is collateralized by
investment securities we have pledged. These investment securities are
classified on our balance sheet as restricted investments. In addition,
restrictive covenants in the participation agreement require us to maintain
(a) a total liability to tangible net worth ratio of not more than 0.75 to 1.00,
(b) minimum tangible net worth greater than $50.0 million and (c) cash and
liquid investment securities, including restricted securities, greater than
$45.0 million. As of September 30, 1999, we were in compliance with the
covenants described above.

In November 1997, we entered into a $1.5 million lease agreement for land
adjacent to our Hillsboro facility. Under the terms of that agreement, USNB
provided loans to Matisse to purchase the land, and Matisse in turn leased it to
us under a renewable one year lease agreement. The loan from USNB is partially
collateralized by a guarantee from us. As of September 30, 1999 we were in
compliance with the terms of the agreement.

In January 1998, we acquired our Millimeter Wave Communications operation
for approximately $19.5 million in cash and 1,266,919 shares of our common stock
then valued at approximately $19.5 million. The cash portion of the purchase
price was financed through an operating lease.

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<PAGE>
The following table presents a summary of the Company's cash flows (IN
THOUSANDS):

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Net cash and cash equivalents provided by operating
activities.............................................. $15,504 $ 7,075
Net cash and cash equivalents used in investing
activities.............................................. (85,290) (6,788)
Net cash and cash equivalents provided (used) by financing
activities.............................................. 146,223 (3,222)
------- -------
Net increase (decrease) in cash and cash equivalents...... $76,437 $(2,935)
======= =======
</TABLE>

The $15.5 million of cash provided by operating activities for the nine
months ended September 30, 1999 related primarily to net income of
$14.7 million, as well as increases in accounts payable and accrued expenses of
$3.8 million, depreciation and amortization of $5.4 million and deferred income
taxes of $2.0 million. This was offset by increases in accounts receivable of
$6.9 million and inventories of $3.8 million. The $7.1 million of cash provided
by operating activities for the nine months ended September 30, 1998 related
primarily to a combined increase in accounts payable and accrued expenses of
$6.6 million and depreciation and amortization of $4.2 million. This was offset
by increases in accounts receivable of $1.6 million, inventories of
$3.2 million and a net loss of $7.4 million. Cash provided by operating
activities also included $8.8 million related to the special charges associated
with the acquisition of the MMIC business as an offset to the net changes in
assets and liabilities.

The $85.3 million of cash used in investing activities for the nine months
ended September 30, 1999 related to the purchase of $240.5 million of
investments and capital expenditures of $4.2 million, offset in part by the
sale/maturity of $159.4 million of investments. The $6.8 million of cash used in
investing activities for the nine months ended September 30, 1998 related to the
purchase of $70.6 million of investments and capital expenditures of
$3.4 million, offset in part by the sale/maturity of $67.0 million of
investments.

The $146.2 million of cash provided by financing activities for the nine
months ended September 30, 1999 related primarily to the issuance of common
stock of $150.0 million and was offset in part by payment of principal on
capital leases of $3.8 million. The $3.2 million of cash used by financing
activities for the nine months ended September 30, 1998 related primarily to the
payment of principal on capital leases of $4.1 million and was offset in part by
the issuance of common stock of approximately $916,000 upon option exercises.

Cash used for capital expenditures for the nine months ended September 30,
1999 was approximately $4.2 million. We anticipate that our capital equipment
needs, including manufacturing and test equipment and computer hardware and
software, will require additional expenditures of approximately $8.6 million
during the remainder of 1999.

We believe that our current cash and cash equivalent balances, together with
cash anticipated to be generated from operations and anticipated financing
arrangements, will satisfy our projected working capital and capital expenditure
requirements, at a minimum, through the end of 2000. However, we may be required
to finance any additional requirements through additional equity, debt
financings, or credit facilities. We may not be able to obtain additional
financings or credit facilities, or if these funds are available, they may not
be available on satisfactory terms.

YEAR 2000 READINESS

23
<PAGE>
distinguish twenty-first century dates from twentieth century dates. This is
commonly referred to as the "Year 2000" issue.

STATE OF READINESS. We initiated a comprehensive Year 2000 audit program,
which consists of a six step plan to inventory and correct any non-compliant
systems. These six steps are: inventory, assessment, planning, remediation,
testing and implementation. Our audit program encompasses a review of
information technology systems used in our internal business as well as
non-information technology systems such as manufacturing systems and building
systems. It also includes an audit and evaluation of third party vendors,
manufacturers and suppliers. We have completed the audit program for both
information technology and non-information technology systems as well as
third-party vendors, manufacturers and suppliers. We believe that all priority
information technology and non-information technology systems used internally in
our business to be compliant for use in the Year 2000. We also believe that, to
the extent verifiable, third party vendors, manufacturers and suppliers critical
to our business are Year 2000 compliant. Our products have no specific date
functions or date dependencies and will operate according to specifications
through the Year 2000 date rollover and thereafter.

COSTS. The costs of remediation have not had a material effect on our
financial condition or results of operations. For information technology systems
and most non-information technology systems, the costs of remediation have been
encompassed in the normal anticipated expenditures for maintenance contracts and
version upgrades. Any incremental costs of remediation were not material.

RISK, CONTINGENCY PLANS AND REASONABLY LIKELY WORST CASE SCENARIO. While we
rely heavily on our computer systems, software applications and other
electronics containing date-sensitive, embedded technology as part of our
business operations, the components upon which we primarily rely were developed
with current state-of-the-art technology. Accordingly, we believe that our audit
and remediation program has demonstrated that our high-priority systems do not
present material Year 2000 compliance issues. For computer systems, software
applications and other electronics containing date-sensitive embedded technology
we will use our existing contingency plans to respond to a worst case scenario
and to mitigate or eliminate problems we may experience if an unanticipated
system failure were to occur. Because of our numerous systems and related
components and the interdependency of these systems, it is possible that certain
of our systems, or systems at entities that provide us services or goods may
fail to operate in the Year 2000. An unanticipated system failure or the failure
of systems at entities that provide services or goods to us may have a material
impact on our future operating results or financial condition. See "Risk
Factors--We face risks from the Year 2000 issue."

24
<PAGE>
ITEM 3: QUALITATIVE AND QUANTITATIVE DISCLOSURES
ABOUT MARKET AND INTEREST RATE RISK

We are exposed to minimal market risks. We manage the sensitivity of our
results of operations to these risks by maintaining a conservative investment
portfolio. Our investments, both restricted and unrestricted, are classified as
available-for-sale securities and are comprised solely of highly-rated, short
and medium-term investments, such as corporate notes, commercial paper, and
market auction preferred stock. We do not hold or issue derivative, derivative
commodity instruments or other financial instruments for trading purposes. We
are exposed to currency exchange fluctuations, as we sell our products
internationally. We manage the sensitivity of our international sales by
denominating all transactions in U.S. dollars.

We are exposed to interest rate risk, as we use additional financing
periodically to fund capital expenditures. The interest rate that we may be able
to obtain on financings will depend on market conditions at that time and may
differ from the rates we have secured in the past. Sensitivity of results of
operations to market and interest rate risks is managed by maintaining a
conservative investment portfolio.

25
<PAGE>
PART II--OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS.

ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS

(d) Use of Proceeds

On July 13, 1999, our registration statement on Form S-3, file number
333-81245, became effective. Proceeds were $147.2 million, net of fees
and expenses. These proceeds will be used for capital expenditures,
working capital, and general corporate purposes. A portion of the
proceeds may also be used to acquire complementary products,
technologies, or businesses if the opportunity arises.

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

Exhibit 27.1 Financial Data Schedule

(b) Reports on Form 8-K

The Company did not file any reports on Form 8-K during the nine months
ended September 30, 1999.

26
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

TRIQUINT SEMICONDUCTOR, INC.

<TABLE>
<S> <C>
Dated: November 16, 1999 /s/ STEVEN J. SHARP
----------------------------------------
STEVEN J. SHARP
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
CHAIRMAN (PRINCIPAL EXECUTIVE OFFICER)

Dated: November 16, 1999 /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)
</TABLE>

27
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
INDEX TO EXHIBITS

<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- -----------
<C> <S> <C>
27.1 Financial Data Schedule
</TABLE>

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1999 AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 91,039
<SECURITIES> 92,558
<RECEIVABLES> 28,193
<ALLOWANCES> (294)
<INVENTORY> 23,462
<CURRENT-ASSETS> 240,384
<PP&E> 73,547
<DEPRECIATION> (44,037)
<TOTAL-ASSETS> 314,866
<CURRENT-LIABILITIES> 27,996
<BONDS> 5,715
0
0
<COMMON> 292,383
<OTHER-SE> (11,228)
<TOTAL-LIABILITY-AND-EQUITY> 314,866
<SALES> 114,287
<TOTAL-REVENUES> 114,287
<CGS> 68,138
<TOTAL-COSTS> 100,554
<OTHER-EXPENSES> (64)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 839
<INCOME-PRETAX> 17,089
<INCOME-TAX> 2,344
<INCOME-CONTINUING> 14,745
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,745
<EPS-BASIC> 0.95
<EPS-DILUTED> 0.84

</TABLE>