<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 22, 1999
REGISTRATION NO. 333-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TRIQUINT SEMICONDUCTOR, INC.
(Exact name of Registrant as specified in our charter)
------------------------------
<TABLE>
<S> <C> <C>
DELAWARE 2300 N.E. 95-3654013
BROOKWOOD
PARKWAY
(State or other jurisdiction HILLSBORO, (I.R.S. Employer
of OREGON 97124 Identification
incorporation or organization) (503) 615-9000 Number)
</TABLE>
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
STEVEN J. SHARP
PRESIDENT, CHIEF EXECUTIVE OFFICER & CHAIRMAN
TRIQUINT SEMICONDUCTOR, INC.
2300 N.E. BROOKWOOD PARKWAY
HILLSBORO, OREGON 97124
(503) 615-9000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
ROBERT P. LATTA JORGE DEL CALVO
CHRIS F. FENNELL STANTON D. WONG
JULIA REIGEL DAVINA K. KAILE
TED S. HOLLIFIELD LINDA P. SHIH
WILSON SONSINI GOODRICH & ROSATI PILLSBURY MADISON & SUTRO LLP
PROFESSIONAL CORPORATION 2550 HANOVER STREET
650 PAGE MILL ROAD PALO ALTO, CALIFORNIA 94304
PALO ALTO, CALIFORNIA 94304-1050 (650) 233-4500
(650) 493-9300
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement
------------------------------
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities being offered pursuant to dividend or interest
reinvestment plans, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
AGGREGATE PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE PRICE PER AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1)(2) SHARE(2)(3) OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common stock, $0.001 par value.............. 4,442,811 $35.25 $156,609,091 $43,538
</TABLE>
(1) Includes 579,497 shares that the underwriters have the option to purchase to
cover over-allotments, if any.
(2) Adjusted to reflect a three-for-two stock split in the form of a stock
dividend to be effected on July 2, 1999.
(3) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(c) promulgated under the Securities Act of 1933, as
amended, on the basis of the average of the high and low prices on June 15,
1999 reported on the Nasdaq National Market.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY OUR EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(A),
MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 22, 1999
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell and we are not soliciting offers to buy these securities in any
jurisdiction where the offer or sale is not permitted.
<PAGE>
PROSPECTUS
3,863,314 Shares
[LOGO]
Common Stock
Of the 3,863,314 shares of our common stock being sold in this offering,
TriQuint Semiconductor, Inc. is selling 3,000,000 shares and the selling
stockholder is selling 863,314 shares. These share numbers reflect a
three-for-two stock split in the form of a stock dividend to be effected on July
2, 1999. We will not receive any of the proceeds for the sale of shares by the
selling stockholder.
Our common stock is quoted on the Nasdaq National Market under the symbol
TQNT. On June 18, 1999, the last reported sale price of our common stock was
$56.13 per share, ($37.42 per share after taking into account the three-for-two
stock split effected in the form of a stock dividend).
Our business involves significant risks. These risks are described under the
caption "Risk Factors" beginning on page 5.
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved of these securities or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.
---------------------
<TABLE>
<CAPTION>
Per Share Total
<S> <C> <C>
Public offering price......................................... $ $
Underwriting discounts and commissions........................ $ $
Proceeds, before expenses, to TriQuint........................ $ $
Proceeds, before expenses, to the selling stockholder......... $ $
</TABLE>
The underwriters may also purchase up to an additional 579,497 shares of
common stock at the public offering price, less the underwriting discounts and
commissions, to cover over-allotments.
The underwriters expect to deliver the shares in New York, New York on
, 1999.
---------------------
SG COWEN
DONALDSON, LUFKIN & JENRETTE
BANC OF AMERICA SECURITIES LLC
CIBC WORLD MARKETS
DAIN RAUSCHER WESSELS a division of Dain
Rauscher Incorporated
U.S. BANCORP PIPER JAFFRAY
, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary................ 3
Risk Factors...................... 5
Forward Looking Statements........ 14
Use of Proceeds................... 15
Price Range of Common Stock....... 15
Dividend Policy................... 15
Capitalization.................... 16
Selected Consolidated Financial
Data............................ 17
Management's Discussion and
Analysis of Financial Condition
and Results of Operations....... 18
<CAPTION>
Page
<S> <C>
Business.......................... 29
Principal and Selling
Stockholders.................... 33
Underwriting...................... 35
Legal Matters..................... 37
Experts........................... 37
Information Incorporated by
Reference....................... 37
Where You Can Find More
Information..................... 37
Index to Consolidated Financial
Statements...................... F-1
</TABLE>
------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. WE
ARE OFFERING TO SELL AND SEEKING OFFERS TO BUY SHARES OF OUR COMMON STOCK ONLY
IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE INFORMATION CONTAINED
IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS,
REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR ANY SALE OF OUR COMMON
STOCK.
------------------------
REFERENCES IN THIS PROSPECTUS TO "TRIQUINT," "WE," "OUR" AND "US" REFER TO
TRIQUINT SEMICONDUCTOR, INC., A DELAWARE CORPORATION.
EACH TRADEMARK, TRADE NAME OR SERVICE MARK OF ANY OTHER COMPANY APPEARING IN
THIS PROSPECTUS BELONGS TO ITS HOLDER.
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS. THIS SUMMARY IS NOT COMPLETE AND DOES NOT CONTAIN ALL OF THE
INFORMATION THAT YOU SHOULD CONSIDER BEFORE INVESTING IN OUR COMMON STOCK. YOU
SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING OUR FINANCIAL STATEMENTS
AND THE RISKS OF INVESTING IN OUR COMMON STOCK DISCUSSED UNDER "RISK FACTORS,"
BEFORE MAKING AN INVESTMENT DECISION. EXCEPT AS OTHERWISE STATED, ALL
INFORMATION ON THIS PROSPECTUS ASSUMES NO EXERCISE OF THE UNDERWRITERS'
OVER-ALLOTMENT OPTION AND REFLECTS THE THREE-FOR-TWO STOCK SPLIT TO BE EFFECTED
IN THE FORM OF A STOCK DIVIDEND ON JULY 2, 1999 TO STOCKHOLDERS OF RECORD ON
JUNE 22, 1999.
TRIQUINT SEMICONDUCTOR, INC.
We are a leading supplier of high performance gallium arsenide integrated
circuits for the wireless communications, telecommunications, data
communications and aerospace markets. Our integrated circuits are incorporated
into a variety of communications products, including cellular phones and pagers,
fiber optic telecommunications equipment, satellite communications systems, high
performance data networking products and aerospace applications. We use our
proprietary gallium arsenide technology to enable our products to overcome the
performance barriers of silicon devices in a variety of applications. Gallium
arsenide has inherent physical properties that allow its electrons to move up to
five times faster than those of silicon. This higher electron mobility permits
the manufacture of gallium arsenide integrated circuits that operate at much
higher speeds than silicon devices, or operate at the same speeds with reduced
power consumption. We sell our products worldwide to end user customers,
including Alcatel, CellNet Data Systems, Ericsson, Hughes, Lucent, Motorola,
Nokia, Nortel, QUALCOMM and Raytheon.
We own and operate advanced wafer fabrication facilities and utilize
proprietary processes designed to enable us to cost effectively produce analog
and mixed signal integrated circuits in high volumes. We believe that control of
wafer fabrication assures a reliable source of supply and provides greater
opportunities to enhance quality and reliability and achieve manufacturing
efficiency. In addition, this control can facilitate new process and product
development and enables us to be more responsive to customer requirements. Our
wafer fabrication capabilities have allowed us to establish a strategic foundry
business serving leading communications companies. Our foundry business
leverages our extensive library of proprietary analog and mixed signal cells and
our advanced integrated circuit manufacturing processes.
Our strategy is to focus on the communications market by offering a broad
range of standard and custom designed integrated circuits and manufacturing
services which address numerous applications in our target markets. Key elements
of this strategy include:
- focusing on analog and mixed signal design excellence;
- continuing to serve customers across a broad array of applications in
communications markets;
- targeting high growth markets with high performance solutions;
- offering foundry services; and
- capitalizing on partnerships with industry leaders in our target markets.
We are incorporated under the laws of the state of Delaware. Our principal
executive offices are located at 2300 N.E. Brookwood Parkway, Hillsboro, Oregon
97124, and our telephone number is (503) 615-9000.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock TriQuint is offering.................. 3,000,000 shares
Common stock the selling stockholder is offering... 863,314 shares
Common stock to be outstanding after this
offering......................................... 17,734,982 shares
Use of proceeds.................................... For capital expenditures, working
capital and other general corporate
purposes.
Nasdaq National Market symbol...................... TQNT
</TABLE>
The number of shares of our common stock to be outstanding after this
offering is based on 14,563,256 shares outstanding as of June 18, 1999 and gives
effect to the exercise, after June 18, 1999, on a net exercise basis of warrants
to purchase shares of common stock resulting in the issuance of 171,726 shares
of common stock assuming a market price of $37.42 for the common stock. The
number of shares of our common stock to be outstanding after this offering
excludes, as of June 18, 1999, 3,176,618 shares of common stock issuable upon
exercise of stock options with weighted average exercise prices of $11.21 per
share. This number also excludes 1,012,122 additional shares reserved for future
issuance under our stock option plans and 514,914 additional shares reserved for
sale under our employee stock purchase plan.
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The information under "As Adjusted" in the consolidated balance sheet data
below reflects the receipt of the estimated net proceeds from the sale by us of
the 3,000,000 shares of common stock in this offering at an assumed public
offering price of $37.42.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenues.................................... $ 30,261 $ 45,943 $ 59,526 $ 71,367 $ 111,605 $ 23,681 $ 33,695
Special charges................................... -- -- -- -- 10,220 10,220 --
Income (loss) from operations..................... (9,930) 2,215 3,435 5,633 (6,345) (12,764) 2,967
Net income (loss)................................. (9,732) 3,062 6,287 6,860 (3,955) (12,290) 3,213
Net income (loss) per share:
Basic........................................... $ (1.21) $ 0.32 $ 0.52 $ 0.55 $ (0.28) $ (0.89) $ 0.22
Diluted......................................... $ (1.21) $ 0.28 $ 0.48 $ 0.50 $ (0.28) $ (0.89) $ 0.21
Weighted average shares:
Basic........................................... 8,019 9,537 12,067 12,560 14,099 13,867 14,339
Diluted......................................... 8,019 10,856 13,144 13,662 14,099 13,867 15,149
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1999
----------------------
ACTUAL AS ADJUSTED
--------- -----------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents .............................................................. $ 12,949 $ 119,096
Working capital......................................................................... 46,634 152,781
Total assets............................................................................ 146,751 252,898
Capital lease and installment note obligations, less current installments............... 8,012 8,012
Total stockholders' equity.............................................................. 110,878 217,025
</TABLE>
4
<PAGE>
RISK FACTORS
ANY INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU
SHOULD CONSIDER THE RISKS DESCRIBED BELOW CAREFULLY AND ALL OF THE INFORMATION
CONTAINED IN THIS PROSPECTUS BEFORE DECIDING WHETHER TO PURCHASE OUR COMMON
STOCK. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY RISKS AND
UNCERTAINTIES WE FACE. ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO
US OR THAT WE CURRENTLY DEEM IMMATERIAL MAY ALSO IMPAIR OUR BUSINESS OPERATIONS.
IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL CONDITION
AND RESULTS OF OPERATIONS WOULD SUFFER. IN THAT EVENT, THE TRADING PRICE OF OUR
COMMON STOCK COULD DECLINE, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT IN
OUR COMMON STOCK. THE RISKS DISCUSSED BELOW ALSO INCLUDE FORWARD-LOOKING
STATEMENTS AND OUR ACTUAL RESULTS MAY DIFFER SUBSTANTIALLY FROM THOSE DISCUSSED
IN THESE FORWARD-LOOKING STATEMENTS.
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.
5
<PAGE>
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 1997,
Nortel accounted for approximately 12.0% of total revenues. 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. We do not have long-term agreements with any of our customers.
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.
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
6
<PAGE>
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 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.
7
<PAGE>
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 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.
8
<PAGE>
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.
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.
9
<PAGE>
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.
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.
10
<PAGE>
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.
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 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 or will be of sufficient scope
11
<PAGE>
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 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;
12
<PAGE>
- 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.
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 have 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
planning phase of our audit program and are currently in the remediation phase,
for both information technology and non-information technology systems as well
as third-party vendors, manufacturers and suppliers. Because of the existence of
numerous systems and related components within our organization and the
interdependency of these systems, it is possible that some of our systems, or
systems at our suppliers, may fail to operate in the Year 2000. Our inability to
become Year 2000 compliant on a timely basis or the failure of one or more of
our systems or our suppliers' systems may have a material impact on our future
operating results.
13
<PAGE>
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.
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.
FORWARD-LOOKING STATEMENTS
This prospectus, including the sections entitled "Prospectus Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business" contains forward-looking statements. These
statements relate to future events or our future financial performance and
involve known and unknown risks, uncertainties and other factors that may cause
our or our industry's actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements. These risks and other factors include, among other
things, those listed under "Risk Factors" and elsewhere in this prospectus. In
some cases, you can identify forward-looking statements by terminology such as
"may," "will," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential," "continue," "our future success depends,"
"seek to continue" or the negative of these terms or other comparable
terminology. These statements are only predictions. Actual events or results may
differ materially. In evaluating these statements, you should specifically
consider various factors, including the risks outlined under "Risk Factors."
These factors may cause our actual results to differ materially from any
forward-looking statement.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assume responsibility for the accuracy and completeness of these statements. We
are under no duty to update any of the forward-looking statements after the date
of this prospectus to conform these statements to actual results.
14
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the 3,000,000 shares of
common stock that we are selling in this offering will be approximately
$106,147,000, based on an assumed public offering price of $37.42 per share and
after deducting the estimated underwriting discounts and commissions and
estimated offering expenses payable by us. If the underwriters exercise their
over-allotment option in full, we estimate the net proceeds will be
approximately $126,747,539. We will not receive any proceeds from the sale of
the 863,314 shares being sold by the selling stockholder.
We expect to use the net proceeds from this offering for capital
expenditures, working capital and general corporate purposes. We may use a
portion of the net proceeds to acquire complementary products, technologies or
businesses when the opportunity arises; however, we currently have no
commitments or agreements and are not involved in any negotiations with respect
to any such transactions.
Pending these uses, we intend to invest the net proceeds in interest
bearing, investment grade securities.
PRICE RANGE OF COMMON STOCK
Our common stock has been traded on the Nasdaq National Market under the
symbol TQNT since December 13, 1993. The following table sets forth for the
periods indicated the high and low sale prices for our common stock, as reported
by the Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
Fiscal year ended December 31, 1997:
First Quarter............................................................ $ 25.25 $ 13.67
Second Quarter........................................................... 20.17 14.08
Third Quarter............................................................ 30.33 21.50
Fourth Quarter........................................................... 20.67 11.58
Fiscal year ended December 31, 1998:
First Quarter............................................................ $ 18.33 $ 13.17
Second Quarter........................................................... 16.67 11.08
Third Quarter............................................................ 14.42 9.67
Fourth Quarter........................................................... 15.08 7.33
Fiscal year ending December 31, 1999:
First Quarter............................................................ $ 17.83 10.33
Second Quarter (through June 18, 1999)................................... 40.83 12.42
</TABLE>
On June 18, 1999, the last reported sale price of our common stock on the
Nasdaq National Market was $37.42. As of June 18, 1999 there were approximately
14,563,256 shares of our common stock outstanding held by approximately 214
holders of record.
DIVIDEND POLICY
We have never declared or paid cash dividends on our capital stock and do
not anticipate paying cash dividends in the foreseeable future. We are
prohibited from paying cash dividends without the consent of our lenders.
15
<PAGE>
CAPITALIZATION
The following table sets forth on an unaudited basis our capitalization as
of March 31, 1999 and as adjusted to reflect the sale of the 3,000,000 shares of
common stock we are offering at an assumed offering price of $37.42 and after
deducting the estimated underwriting discounts and commissions and estimated
offering expenses payable by us and the exercise on a net exercise basis of
warrants to purchase shares of common stock resulting in the issuance of 171,726
shares of common stock assuming a market price of $37.42 for the common stock.
<TABLE>
<CAPTION>
MARCH 31, 1999
-----------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current installments of capital lease and installment note obligations................... $ 5,132 $ 5,132
---------- -----------
---------- -----------
Capital lease and installment note obligations, less current installments................ $ 8,012 $ 8,012
Stockholders' equity:
Preferred stock, $.001 par value per share, 5,000,000 shares authorized; no shares
issued and outstanding............................................................... -- --
Common stock, $.001 par value per share, 25,000,000 shares authorized; 14,354,823
shares issued and outstanding, actual; and 17,526,549 shares issued and outstanding,
as adjusted.......................................................................... 14 17
Additional paid-in capital............................................................. 133,628 239,772
Accumulated deficit.................................................................... (22,764) (22,764)
---------- -----------
Total stockholders' equity........................................................... 110,878 217,025
---------- -----------
Total capitalization............................................................. $ 118,890 $ 225,037
---------- -----------
---------- -----------
</TABLE>
The table above excludes:
- 3,146,748 shares of common stock issuable upon exercise of options
outstanding under our option plans at March 31, 1999 at a weighted average
exercise price of $10.64 per share; and
- 1,047,951 shares of common stock reserved for future grant or issuance under
our option plans and employee stock purchase plan.
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below should be read
together with "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and our financial statements and the related notes
included in this prospectus. The selected consolidated financial data set forth
below as of December 31, 1997 and 1998 and for the years ended December 31,
1996, 1997 and 1998 have been derived from our audited financial statements
included in this prospectus. The selected consolidated financial data as of
December 31, 1994, 1995 and 1996 and for the years ended December 31, 1994 and
1995 are derived from our audited financial statements that are not included or
incorporated in this prospectus. The selected consolidated financial data as of
March 31, 1999 and for the three months ended March 31, 1998 and 1999 are
derived from unaudited financial statements included in this prospectus. These
unaudited financial statements have been prepared on the same basis as the
audited financial statements and, in our management's opinion, contain all
adjustments consisting of normal recurring adjustments necessary for a fair
presentation of our financial position and results of operations. Our historical
results are not necessarily indicative of results to be expected for any future
period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenues................................... $ 30,261 $ 45,943 $ 59,526 $ 71,367 $ 111,605 $ 23,681 $ 33,695
Operating costs and expenses:
Cost of goods sold............................. 19,790 25,509 34,258 40,028 72,784 18,341 20,951
Research, development and engineering.......... 9,945 9,210 10,858 11,518 18,984 4,424 4,594
Selling, general and administrative............ 10,013 9,009 10,975 14,188 15,962 3,460 5,183
Special charges................................ 443 -- -- -- 10,220 10,220 --
--------- --------- --------- --------- --------- --------- ---------
Total operating costs and expenses........... 40,191 43,728 56,091 65,734 117,950 36,445 30,728
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from operations................ (9,930) 2,215 3,435 5,633 (6,345) (12,764) 2,967
Other income, net................................ 198 930 3,083 2,117 2,484 474 525
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes............ (9,732) 3,145 6,518 7,750 (3,861) (12,290) 3,492
Income tax expense............................... -- 83 231 890 94 -- 279
--------- --------- --------- --------- --------- --------- ---------
Net income (loss).............................. $ (9,732) $ 3,062 $ 6,287 $ 6,860 $ (3,955) $ (12,290) $ 3,213
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Per share data:
Net income (loss):
Basic........................................ $ (1.21) $ 0.32 $ 0.52 $ 0.55 $ (0.28) $ (0.89) $ 0.22
Diluted...................................... $ (1.21) $ 0.28 $ 0.48 $ 0.50 $ (0.28) $ (0.89) $ 0.21
Weighted average shares:
Basic........................................ 8,019 9,537 12,067 12,560 14,099 13,867 14,339
Diluted...................................... 8,019 10,856 13,144 13,662 14,099 13,867 15,149
<CAPTION>
DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1994 1995 1996 1997 1998 1999
--------- --------- --------- --------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents........................ $ 9,443 $ 35,051 $ 12,907 $ 18,734 $ 14,602 $ 12,949
Working capital.................................. 16,409 65,513 37,591 35,180 44,494 46,634
Total assets..................................... 34,227 94,024 107,596 121,418 141,306 146,751
Capital lease and installment note obligations,
less current installments...................... 4,062 7,392 9,891 12,550 9,369 8,012
Total stockholders' equity....................... 20,785 72,644 80,246 90,038 107,615 110,878
</TABLE>
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
YOU SHOULD READ THE FOLLOWING DISCUSSION AND ANALYSIS IN CONJUNCTION WITH
THE OUR FINANCIAL STATEMENTS AND THE NOTES THERETO INCLUDED IN THIS PROSPECTUS
AND THE SELECTED CONSOLIDATED FINANCIAL DATA ABOVE. THE DISCUSSION IN THIS
PROSPECTUS 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" IN THIS PROSPECTUS.
OVERVIEW
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 Alcatel, CellNet Data
Systems, Ericsson, Hughes, Lucent, Motorola, Nokia, Nortel, QUALCOMM and
Raytheon.
We recognize revenues on standard products when we ship them. With respect
to foundry and customer-specific products, we recognize revenues based on the
achievement of various design, manufacturing and other milestones. We recognize
revenues on cost plus contracts as we perform the work. We estimate and
establish allowances and reserves for product returns, warranty obligations,
excess and obsolete inventories, accounts receivable for which collection is
doubtful and price adjustments.
We sell our products through independent manufacturer representatives and
distributors, as well as our direct sales staff. As of December 31, 1998, we had
21 independent manufacturer representative firms and two distributors in North
America. Our seven person direct sales management staff provides sales direction
and support to manufacturer representatives and distributors. We have domestic
sales management offices in Los Angeles, California; Philadelphia, Pennsylvania;
Portland, Oregon; San Jose, California and Raleigh, North Carolina. Our
international business is supported by a network of 15 manufacturer
representatives and distributors in Europe and the Pacific Rim. We also have a
foreign subsidiary, TriQuint Semiconductor GmbH, with offices in Germany and
France. The primary activity of this subsidiary is sales and marketing.
We include in our backlog all purchase orders and contracts for products
requested by the customer for delivery within twelve months. Our business is
characterized by long-term purchase contracts predominantly relating to
customer-specific products, which are typically cancelable without significant
penalty at the option of the purchaser. Our customers have cancelled these
purchase contracts or rescheduled delivery dates in the past, and we expect that
these events may also occur in the future. In addition, we produce standard
semiconductors that frequently can be shipped from inventory within a short time
after receipt of an order. These orders may not be reflected in backlog, and
backlog as of any particular date may not necessarily be representative of
actual sales for any future period.
On January 13, 1998, we acquired our Millimeter Wave Communications
operation, which includes substantially all of the assets of the monolithic
microwave integrated circuit operations of Texas Instruments' former Defense
Systems & Electronics Group. 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. We financed the cash
portion of the purchase price through an operating lease.
18
<PAGE>
We accounted for the acquisition as a purchase and charged in-process
research and development of $8.8 million to our statement of operations and
recorded other intangibles of approximately $2.1 million on our balance sheet.
We amortize these other intangible assets on a straight-line basis over seven
years. We recognized amortization of approximately $362,000 in 1998 and $74,000
during the three months ended March 31, 1999 related to these intangibles. The
following table presents the purchase price allocations associated with the
acquisition of the Millimeter Wave Communications operation:
<TABLE>
<S> <C>
Tangible assets.................................................... $ 28,048
Workforce in place and purchased technology........................ 2,132
In-process research and development................................ 8,820
---------
$ 39,000
---------
---------
</TABLE>
We allocated the purchase price based on the fair value of the net tangible
and intangible assets acquired. In performing this allocation, we considered,
among other factors, the research and development projects in process at the
date of acquisition. The Millimeter Wave Communications operation's in-process
research and development program consisted of the development of its advanced
pseudomoropy high electric mobility transistor and retrojunction bipolar
transistor processes for millimeter wave applications. At the date of the
acquisition, Millimeter Wave Communications operation's research and development
was not complete, and we expect total continuing research and development
commitments to complete the projects to be approximately $11.0 million. We
anticipated these projects to be successfully completed within three to four
years of the acquisition date. We determined the value assigned to purchased
in-process research and development by estimating the costs to develop the
Millimeter Wave Communications operation's purchased in-process research and
development into commercially viable products, estimating the resulting net cash
flows from the projects and discounting the net cash flows to their present
value. In estimating the value of qualifying in-process research and
development, we applied a stage of completion factor to exclude cash flows
related to development efforts that had not yet begun. We used a discount rate
of 75% for valuing the in-process research and development that was intended to
be commensurate with rates of return demanded by venture capital investors for
investments in start-up companies with similar risks to those of the in-process
products. Additionally, we believe the projects will require maintenance
expenditures if and when they reach a state of technological and commercial
feasibility.
In various quarters, our fiscal quarters ended on different days near the
end of each calendar quarter. For convenience, we have indicated in this
prospectus that fiscal quarter ends coincide with the end of each calendar
quarter.
19
<PAGE>
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
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenues................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Operating costs and expenses:
Cost of goods sold............................. 57.6 56.1 65.2 77.4 62.2
Research, development and engineering.......... 18.2 16.1 17.0 18.7 13.6
Selling, general and administrative............ 18.4 19.9 14.3 14.6 15.4
Special charges................................ -- -- 9.2 43.2 --
--------- --------- --------- --------- ---------
Total operating costs and expenses........... 94.2 92.1 105.7 153.9 91.2
--------- --------- --------- --------- ---------
Income (loss) from operations................ 5.8 7.9 (5.7) (53.9) 8.8
Other income, net................................ 5.2 3.0 2.2 2.0 1.6
--------- --------- --------- --------- ---------
Income (loss) before income taxes.............. 11.0 10.9 (3.5) (51.9) 10.4
Income tax expense............................... 0.4 1.3 0.1 -- 0.8
--------- --------- --------- --------- ---------
Net income (loss).............................. 10.6% 9.6% (3.6)% (51.9)% 9.6%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
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 months ended March 31, 1999 increased 42.3% to $33.7 million, over the
three months ended March 31, 1998. The increase in revenues during the three
months ended March 31, 1999 reflected strong demand for our products, especially
those for wireless communications applications. Domestic revenues were $24.8
million and international revenues were $8.9 million for the three months ended
March 31, 1999, as compared to domestic revenues of $18.4 million and
international revenues of $5.3 million for the three months ended March 31,
1998.
OPERATING COSTS AND EXPENSES
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. In general, gross profit generated from the sale of
customer-specific products and from non-recurring engineering revenues is
typically higher than gross profit generated from the sale of standard products.
The factors affecting product mix include the relative demand in our various
market segments, as well as the number of non-recurring engineering contracts.
Cost of goods sold was $21.0 million for the three months ended March 31,
1999, an increase of $2.6 million from the three months ended March 31, 1998. As
a percentage of total revenues, cost of goods sold for the three months ended
March 31, 1999 decreased to 62.2% from 77.4% for the three months ended March
31, 1998. 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 three months ended March 31, 1998 included nonrecurring costs
related to the relocation of our manufacturing facility to our Hillsboro
facility. The factors related to these nonrecurring costs included lower than
expected
20
<PAGE>
yields on the initial products manufactured in the new facility, lower than
expected yields on products built in the old fabrication facility during our
final operation, and equipment downtime following relocation to the new
facility.
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 months ended March 31, 1999 increased to $4.6
million from $4.4 million for the three months ended March 31, 1998. Research,
development and engineering expenses as a percentage of total revenues for the
three months ended March 31, 1999 decreased to 13.6% from 18.7% for the three
months ended March 31, 1998. The slight increase in the absolute dollar level of
research, development and engineering expenses was 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 months ended March 31, 1999 increased to $5.2 million
from $3.5 million for the three months ended March 31, 1998. Selling, general
and administrative expenses as a percentage of total revenues for the three
months ended March 31, 1999 increased to 15.4% from 14.6% for the three months
ended March 31, 1998. The increase in selling, general and administrative
expenses was primarily due to increased selling costs associated with the
increased sales volume and increased costs associated with on-going development
of our information systems at our Dallas, Texas and Hillsboro, Oregon
facilities.
SPECIAL CHARGES. For the three months ended March 31, 1998, we recorded a
write-off of in-process research and development of $8.8 million associated with
our acquisition of our Millimeter Wave Communications business.
During the three months ended March 31, 1998, we settled a stockholder class
action filed in 1994 and recorded a charge of $1.4 million associated with the
settlement of this lawsuit and related legal expenses, net of accruals and
insurance proceeds.
OTHER INCOME, NET
Other income, net for the three months ended March 31, 1999 increased to
$525,000 from $474,000 for the three months ended March 31, 1998. This increase
resulted primarily from increased interest income on higher cash balances and
decreased interest expense due to reductions in long-term debt.
INCOME TAX EXPENSE
Income tax expense for the three months ended March 31, 1999 was $279,000.
No income tax expense was recorded for the three months ended March 31, 1998,
due to our operating loss in that period.
YEARS ENDED DECEMBER 31, 1998 AND 1997
TOTAL REVENUES
Total revenues for 1998 increased 56.4% to $111.6 million from $71.4 million
for 1997. The increase in total revenues primarily reflects the inclusion of
revenues from the newly acquired Millimeter Wave Communications operation since
the date of acquisition and a strong demand for wireless communication products,
offset by a reduction in demand for telecommunication products.
21
<PAGE>
Domestic and international revenues for 1998 were $84.8 million and $26.8
million, as compared to $47.1 million and $24.3 million for 1997.
OPERATING COSTS AND EXPENSES
COST OF GOODS SOLD. Cost of goods sold was $72.8 million in 1998 and
increased from $40.0 million in 1997. Cost of goods sold for 1998 increased as a
percentage of total revenues to 65.2% from 56.1% for 1997. The increase in
absolute dollar value of cost of goods sold was primarily attributable to the
related increase in sales volume. The increase in cost of goods sold as a
percentage of total revenues was due to an increase in lower-margin products in
the mix of products sold and costs related to the transition to our Hillsboro
wafer fabrication facility. However, cost of goods sold, as a percentage of
total revenues, improved sequentially over each quarter of 1998 due to continued
yield improvements and increases in economies of scale from higher production
volumes.
RESEARCH, DEVELOPMENT AND ENGINEERING. Our research, development and
engineering expenses for 1998 increased 64.8% to $19.0 million from $11.5
million for 1997. Research, development and engineering expenses as a percentage
of total revenues increased to 17.0% for 1998 from 16.1% for 1997. The increase
in research, development and engineering expenses reflected the inclusion of
research, development and engineering expenses related to the newly acquired
Millimeter Wave Communications operation and increased product development
activities and nonrecurring engineering expenses.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for 1998 increased 12.5% to $16.0 million from $14.2 million for 1997.
Selling, general and administrative expenses decreased as a percentage of total
revenues to 14.3% for 1998 from 19.9% for 1997. The increase in absolute dollar
level of selling, general and administrative expenses was primarily attributable
to the inclusion of selling, general and administrative expenses related to the
newly acquired Millimeter Wave Communications operation and increased selling
expenses associated with increased sales volume. As a percentage of total
revenues, the decrease in selling, general and administrative expenses was due
to revenues increasing at a faster rate than these expenses.
SPECIAL CHARGES. During 1998, we recorded a one time write-off of
in-process research and development of $8.8 million. This charge was associated
with our acquisition of the Millimeter Wave Communications operation.
During 1998, we settled a stockholder class action filed in 1994 and
recorded a charge of $1.4 million associated with the settlement of this lawsuit
and related legal expenses, net of accruals and insurance proceeds.
OTHER INCOME, NET
Other income, net for 1998 increased to $2.5 million as compared to $2.1
million for 1997. This increase resulted primarily from lower interest expense,
gain on sale of assets and other miscellaneous receipts, partially offset by
lower interest income.
INCOME TAX EXPENSE
Income tax expense for 1998 decreased to $94,000 from $890,000 for 1997. The
decrease in income tax expense was attributable to our operating loss in 1998.
At December 31, 1998, we had federal and Oregon state net operating loss
carryforwards for tax reporting purposes of approximately $45.7 million and
$22.0 million. Our ability to use our net operating loss carryforwards against
taxable income is subject to additional restrictions and limitations under
Section 382 of the Internal Revenue Code of 1986 if we experience a change of
ownership as defined in that section.
22
<PAGE>
YEARS ENDED DECEMBER 31, 1997 AND 1996
TOTAL REVENUES
Total revenues for 1997 increased 19.9% to $71.4 million from $59.5 million
for 1996. The increase in total revenues was due to significantly increased
demand for products in all three product areas: wireless communications,
telecommunications and computing revenues. Domestic and international revenues
for 1997 were $47.1 million and $24.3 million as compared to $41.4 million and
$18.1 million for 1996.
OPERATING COSTS AND EXPENSES
COST OF GOODS SOLD. Cost of goods sold was $40.0 million in 1997 and
increased from $34.3 million in 1996. Cost of goods sold for 1997 decreased
slightly as a percentage of total revenues to 56.1% from 57.6% for 1996. The
decrease in cost of goods sold as a percentage of total revenues was primarily
attributable to improvements in production yields and increased volume, which
were partially offset by costs associated with startup of our Hillsboro wafer
fabrication facility and expediting costs.
RESEARCH, DEVELOPMENT AND ENGINEERING. Our research, development and
engineering expenses for 1997 increased 6.1% to $11.5 million from $10.9 million
for 1996. Research, development and engineering expenses as a percentage of
total revenues decreased to 16.1% for 1997 from 18.2% for 1996. The increase in
the absolute dollar level of research, development and engineering expenses was
primarily due to increased product development activities and nonrecurring
engineering expenses in response to increased demand from customers.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for 1997 increased 29.3% to $14.2 million from $11.0 million for 1996.
Selling, general and administrative expenses increased as a percentage of total
revenues to 19.9% for 1997 from 18.4% for 1996. The increase in the level of
selling, general and administrative expenses was primarily due to costs
associated with our move to our facility in Hillsboro, Oregon, increased
information technology support costs, increased sales commissions in connection
with the increase in the level of total revenues and professional fees.
OTHER INCOME, NET
Other income, net for 1997 decreased to $2.1 million as compared to $3.1
million for 1996. This decrease resulted from a one-time gain of $680,000 from
our sale of a minority interest in our primary distributor in Europe in 1996 and
from higher interest expense in 1997 associated with an increase in capital
lease obligations.
INCOME TAX EXPENSE
Our effective tax rate for 1997 was 11.5%, which was less than the federal
and state statutory rate of approximately 40% due to the use of net operating
loss carryforwards. The effective tax rate for 1996 was 3.5%.
QUARTERLY RESULTS OF OPERATIONS
The following table presents our operating results for each of the five
quarters in the period ended March 31, 1999 as well as those results expressed
as a percentage of total revenues. The information for each of these quarters is
unaudited and has been prepared on the same basis as the audited financial
statements appearing elsewhere in this prospectus. In the opinion of management,
all necessary adjustments, consisting only of normal recurring adjustments, have
been included to present
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<PAGE>
fairly the unaudited quarterly results when read together with our audited
financial statements and the related notes. These operating results are not
necessarily indicative of the results of any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1998 1998 1998 1998 1999
------------- ------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenues................................. $ 23,681 $ 27,874 $ 29,112 $ 30,938 $ 33,695
Operating costs and expense:
Cost of goods sold........................... 18,341 17,610 17,933 18,900 20,951
Research, development and engineering........ 4,424 5,075 4,568 4,917 4,594
Selling, general and administrative.......... 3,460 3,560 4,288 4,654 5,183
Special charges.............................. 10,220 -- -- -- --
------------- ------------- ------------- ------------- -------------
Total operating costs and expenses......... 36,445 26,245 26,789 28,471 30,728
Income (loss) from operations.............. (12,764) 1,629 2,323 2,467 2,967
Other income, net.............................. 474 441 567 1,002 525
------------- ------------- ------------- ------------- -------------
Income (loss) before income taxes............ (12,290) 2,070 2,890 3,469 3,492
Income tax expense............................. -- 65 29 -- 279
------------- ------------- ------------- ------------- -------------
Net income (loss)........................ $ (12,290) $ 2,005 $ 2,861 $ 3,469 $ 3,213
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
AS A PERCENTAGE OF TOTAL REVENUES:
Total revenues................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Operating costs and expenses:
Cost of goods sold........................... 77.4 63.2 61.6 61.1 62.2
Research, development and engineering........ 18.7 18.2 15.7 15.9 13.6
Selling, general and administrative.......... 14.6 12.8 14.7 15.0 15.4
Special charges.............................. 43.2 0.0 0.0 0.0 0.0
------------- ------------- ------------- ------------- -------------
Total operating costs and expenses......... 153.9 94.2 92.0 92.0 91.2
Income (loss) from operations.............. (53.9) 5.8 8.0 8.0 8.8
Other income, net.............................. 2.0 1.6 1.9 3.2 1.6
------------- ------------- ------------- ------------- -------------
Income (loss) before income taxes............ (51.9) 7.4 9.9 11.2 10.4
Income tax expense............................. 0.0 0.2 0.1 0.0 0.8
------------- ------------- ------------- ------------- -------------
Net income (loss)........................ (51.9)% 7.2% 9.8% 11.2% 9.6%
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>
Our revenues increased in each of the five quarters ended March 31, 1999.
The overall growth trend reflects increasing demand for our wireless
communications products and growing revenue from our Millimeter Wave
Communications operation, partially offset by reduced demand for our
telecommunications products. The lower gross margin of 22.6% in the three months
ended March 31, 1998 was attributable to certain nonrecurring costs related to
the relocation of our wafer fabrication and manufacturing facilities to our new
Hillsboro facility. In connection with the relocation, we realized lower than
expected yields on initial products manufactured in the new facility, lower than
expected yields on products built in the old fabrication facility during final
operation and equipment downtime on some equipment following transfer to the new
facility. Thereafter, improvements in production yields and increased economies
of scale associated with increased sales volume resulted in gross margins
remaining relatively constant over the succeeding four quarters. Our research,
development and engineering expense fluctuated from quarter to quarter primarily
as a result of the level of expenditures for design activities. Selling, general
and administrative expenses increased over the five quarters as sales volume
increased and as we expanded our administrative and support functions. See "Risk
Factors--Our operating results may fluctuate substantially."
24
<PAGE>
We expect that our quarterly operating results will continue to fluctuate in
the future as a result of risk factors such as 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, and the variability of the life cycles of our customers'
products. 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.
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.
LIQUIDITY AND CAPITAL RESOURCES
We completed a follow-on public offering in September 1995 and raised
approximately $48.1 million, net of offering expenses. In December 1993 and
January 1994, we completed our initial public offering and raised 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 March 31, 1999, we had working
capital of approximately $46.6 million, including $27.5 million in cash, cash
equivalents and 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 us 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 $82.2 million and (d) cash and investments, including
restricted investments, greater than $45.0 million. As of March 31, 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, Oregon 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 who 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 securities. 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 March 31, 1999, we were in compliance with the covenants
described above.
In November 1997, we entered into a $1.5 million lease 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 March 31, 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.
25
<PAGE>
The following table presents a summary of our cash flows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------- --------------------
1996 1997 1998 1998 1999
---------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net cash provided by operating activities.................. $ 5,374 $ 4,152 $ 10,218 $ 1,727 $ 4,207
Net cash and cash equivalents provided (used) by investing
activities............................................... (25,687) 3,266 (10,874) (4,812) (4,751)
Net cash used by financing activities...................... (1,831) (1,591) (3,476) (1,048) (1,109)
---------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash equivalents....... $ (22,144) $ 5,827 $ (4,132) $ (4,133) $ (1,653)
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
</TABLE>
Of the cash provided by operating activities for the three months ended
March 31, 1999, net income was $3.2 million and an increase in accounts payable
and accrued expenses was $3.3 million, which were offset by increases in
accounts receivable and inventories of $2.9 million and $1.4 million. The cash
used by operating activities for the three months ended March 31, 1998 related
to an increase in accounts payable and accrued expenses of $4.1 million and an
adjustment of $8.8 million related to the special charges associated with the
acquisition of the Millimeter Wave Communications operation as an offset to the
net loss of $12.3 million.
The cash used by investing activities for the three months ended March 31,
1999 related to the purchase of $64.9 million of investments and $1.6 million of
capital expenditures, offset in part by the sale or maturity of $61.8 million of
investments. The cash used by investing activities for the three months ended
March 31, 1998 related to the net purchase of investments of $3.5 million and
capital expenditures of approximately $1.3 million.
The cash used by financing activities for the three months ended March 31,
1999 related primarily to the payment of principal on capital leases and was
offset in part by the issuance of common stock upon option exercises. The cash
used by financing activities for the three months ended March 31, 1998 also
related primarily to the payment of principal on capital leases and was offset
in part by the issuance of common stock upon option exercises.
Capital expenditures for the three months ended March 31, 1999 were
approximately $1.6 million. During the quarter ended March 31, 1999, we did not
establish any new capital leases. We anticipate that our capital equipment
needs, including manufacturing and test equipment and computer hardware and
software, will require additional expenditures of approximately $13.3 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, anticipated financing
arrangements and this offering, 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 financing or credit facilities, or if these funds are
available, that they will be on satisfactory terms.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board 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 is effective for fiscal years beginning
26
<PAGE>
after June 15, 1999. We do not expect SFAS No. 133 to have a significant impact
on our consolidated financial statements.
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, which is comprised solely of highly-rated, short-term investments. 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.
YEAR 2000 READINESS
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.
STATE OF READINESS. We have initiated a comprehensive Year 2000 audit
program, which consists of a six step plan to inventory and correct any
non-compliant systems. We expect to complete this audit by October of 1999.
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 planning phase of our audit program and are currently in the
remediation phase, for both information technology and non-information
technology systems as well as third-party vendors, manufacturers and suppliers.
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. We do not believe that the historical or anticipated costs of
remediation have had, or will have, 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 or will
be encompassed in the normal anticipated expenditures for maintenance contracts
and version upgrades. We estimate total incremental cost of remediation at
$150,000.
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 anticipate that our
audit and remediation program will demonstrate that many of 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 that have met our desired level of Year 2000 readiness, we
will use our existing contingency plans to mitigate or eliminate problems we may
experience if an unanticipated system failure were to occur. For components that
have not met our desired level of
27
<PAGE>
readiness, specific contingency plans will be developed to determine the actions
we would take if such a component failed. We will be better able to develop a
contingency plan as we move through the testing phase of the audit program and
as we continue to monitor progress of critical third-party vendors,
manufacturers and suppliers. At the present time, we anticipate the development
in the third quarter of 1999 of a contingency plan to respond to a worst case
scenario. 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. Our inability to become Year 2000 compliant on a timely basis or the
failure of our systems or at an entity that provides 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."
28
<PAGE>
BUSINESS
THE FOLLOWING BUSINESS SECTION CONTAINS FORWARD LOOKING STATEMENTS RELATING
TO FUTURE EVENTS OR THE FUTURE FINANCIAL PERFORMANCE OF TRIQUINT, WHICH INVOLVE
RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS,
INCLUDING THOSE SET FORTH IN "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
TriQuint Semiconductor designs, develops, manufactures and markets a broad
range of high performance analog and mixed signal integrated circuits for
communications markets. Our integrated circuits are incorporated into a variety
of communications products, including cellular phones and pagers, fiber optic
telecommunications equipment, satellite communications systems, high performance
data networking products and aerospace applications. We use our proprietary
gallium arsenide technology to enable our products to overcome the performance
barriers of silicon devices in a variety of applications. Gallium arsenide has
inherent physical properties that allow its electrons to move up to five times
faster than those of silicon. This higher electron mobility permits the
manufacture of gallium arsenide integrated circuits that operate at much higher
speeds than silicon devices, or operate at the same speeds with reduced power
consumption. We sell our products worldwide to end user customers, including
Alcatel, CellNet Data Systems, Ericsson, Hughes, Lucent, Motorola, Nokia,
Nortel, QUALCOMM and Raytheon.
We own and operate advanced wafer fabrication facilities and utilize
proprietary processes designed to enable us to cost effectively produce analog
and mixed signal integrated circuits in high volumes. We believe that control of
wafer fabrication assures a reliable source of supply and provides greater
opportunities to enhance quality and reliability and achieve manufacturing
efficiency. In addition, this control can facilitate new process and product
development and enables us to be more responsive to customer requirements. Our
wafer fabrication capabilities have allowed us to establish a strategic foundry
business serving leading communications companies. Our foundry business
leverages our extensive library of proprietary analog and mixed signal cells and
our advanced integrated circuit manufacturing processes.
TRIQUINT STRATEGY
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. Key elements
of our strategy include:
FOCUSING ON ANALOG AND MIXED SIGNAL DESIGN EXCELLENCE. We have made
substantial investments in our analog and mixed signal circuit design
capabilities. Our design staff has specialized expertise to address the needs of
each of our target markets. The foundation of our design resources is an
extensive library of digital and analog cells and associated software tools and
databases necessary to develop new products rapidly and cost effectively. We
believe that our analog and mixed signal design capabilities provide us with a
competitive advantage in designing and developing integrated circuits for
standard or customer specific products in our target markets.
CONTINUING TO SERVE CUSTOMERS ACROSS A BROAD ARRAY OF APPLICATIONS IN
COMMUNICATIONS MARKETS. We offer a broad range of standard and customer specific
integrated circuits, as well as manufacturing and design services, which address
numerous end-user applications in a variety of communications markets. The
breadth of our offerings resulted in the direct delivery of products and
services to more than 265 customers during 1998. In addition, we had over 20
customers that each contributed more than $1.0 million to our revenues in 1998.
We believe that our broad customer base and wide range of
29
<PAGE>
applications provide us with significant insights into future customer
requirements, which facilitates the timely development of new products and
services for our target markets. This enables us to participate in emerging
communications markets.
TARGETING HIGH GROWTH MARKETS WITH HIGH PERFORMANCE SOLUTIONS. We use our
advanced proprietary gallium arsenide technology to produce high performance
integrated circuits that are intended to overcome the performance limitations of
silicon devices in the wireless communications, telecommunications, data
communications and aerospace markets. We design and manufacture innovative
analog and mixed signal products that provide high performance solutions for
targeted applications within these growing markets. These applications require
integrated circuits that have one or more attributes of gallium arsenide
technology, such as low noise for superior signal quality, high speed for
operation at higher frequencies and low power consumption for battery powered
portability.
OFFERING FOUNDRY SERVICES. We believe that our foundry capabilities are a
key element in forming long-term partnerships with our customers and enable us
to capitalize further on the growth in communications markets. We also believe
many semiconductor companies are embracing a manufacturing outsourcing model and
that, as a result, foundries will play an important role in the overall growth
of the semiconductor industry. We believe our ability to offer both leading edge
analog and mixed signal devices, as well as state-of-the-art gallium arsenide
processes, is a key competitive advantage. We seek to continue to expand our
foundry capabilities, including our integrated circuit manufacturing,
post-fabrication and product engineering services, in order to meet the rigorous
demands of our customers. For example, we have entered into agreements with a
number of design firms to offer design services to our customers. These
agreements enable us to enhance the value of our services without significantly
increasing overhead. We currently provide foundry services for, among others,
CellNet Data Systems, Ericsson, Lucent, Motorola and QUALCOMM.
CAPITALIZING ON PARTNERSHIPS WITH INDUSTRY LEADERS IN OUR TARGET
MARKETS. We seek to continue to establish and maintain close working
relationships with industry leaders in each of our target market segments. We
also intend to establish strategic relationships with companies that provide
access to new technologies, products and markets. We have relationships with
leading manufacturers in our target markets such as Alcatel, Bosch, Ericsson,
Hughes, Lucent, Nokia, Nortel, Philips and QUALCOMM.
TARGET MARKETS
We focus on commercial and aerospace applications in the wireless
communications, telecommunications, data communications and millimeter wave
communication markets, which can benefit significantly from the performance of
gallium arsenide and our analog and mixed signal design expertise.
WIRELESS COMMUNICATIONS. Gallium arsenide design and manufacturing
technologies are being used in commercial communications applications such as
satellites, satellite receivers, wireless transceivers for data networks,
wireless local area networks, cellular telephones and pagers.
Frequency bands are allocated to the various wireless communications
applications by government regulatory bodies throughout the world. The
allocation is based, among other factors, upon the availability of unallocated
frequency bands and the ability of equipment to operate effectively in these
bands. As the lower frequency bands become fully allocated and congested, and
the volume and rate of communications increases, the trend is toward the
allocation and use of higher frequency bands. The speed of gallium arsenide
technology makes it well suited for applications at these higher frequencies.
The ability of gallium arsenide to operate at higher frequencies also makes
it well suited for use in aerospace applications. In addition, other key
performance advantages of gallium arsenide over silicon in key wireless
communications system functions for both commercial and aerospace applications
are
30
<PAGE>
improved signal reception and transmission, better signal processing in
congested bands and greater power efficiency for longer battery life in portable
applications.
TELECOMMUNICATIONS. Gallium arsenide technologies are well suited for the
growing markets and applications that require the transmission or manipulation
of large amounts of information at high speeds with high data integrity. These
applications typically require customer specific solutions. These applications
include digital, analog and mixed signal functions and are found primarily in
the telecommunications industry, but also include other industries such as
instrumentation and aerospace. For many of these applications, we believe our
products enable these systems to achieve superior performance.
We believe that the increasing use of fiber optic cable in
telecommunications and data communications systems has created a significant
growth opportunity for our gallium arsenide products. Because data transmission
rates in fiber optic cable can be many times greater than those of copper lines,
a single fiber line can cost-effectively replace multiple copper lines. In order
to take advantage of the potential cost advantages of fiber optic
communications, information must be transmitted at higher rates generally
achievable by using gallium arsenide products such as those manufactured by
TriQuint.
The telecommunications industry has established a series of standards that
define transmission rates, protocols, signal quality and reliability. These
standards include synchronous optical network, integrated services digital
network and asynchronous transfer mode. Gallium arsenide integrated circuits
address the performance requirements of these standards, as well as higher speed
communication standards (2.48 gigabits per second and above).
DATA COMMUNICATIONS. Data communications equipment is typically used to
interconnect mainframe computers, clients and servers, workstations, disk
storage arrays and other peripheral devices. Other applications that require
transmission of large amounts of data at high speed include multimedia
computing, supercomputing, multiprocessor systems, interactive computer aided
design/ computer aided manufacturing, medical imaging and high speed, high
resolution printing. As new applications requiring higher volume data transfer
have proliferated, the use of gallium arsenide technology has also increased.
Using our mixed signal technology, our products enable high speed data
transmission with high data integrity.
MILLIMETER WAVE COMMUNICATIONS. On January 13, 1998, we acquired from
Raytheon TI Systems our Millimeter Wave Communications operation, which included
substantially all of the assets of the monolithic microwave integrated circuit
operations of Texas Instruments' former Defense Systems & Electronics Group. The
Millimeter Wave Communications operation designs, develops, manufactures and
markets advanced gallium arsenide integrated circuits that are used in
commercial applications such as wireless and satellite communications as well as
in aerospace systems.
We provide products that are used in applications for the digital radio
market. The point to point radio market is driven by expansion of the wireless
telephone market, as these radios serve as the infrastructure to link the
various remote towers to the switching centers. The point to multipoint radio
market is being driven by local multipoint distribution systems for wireless
distribution of phone, video and two-way data services and the growing demand
for other high speed wireless networks.
31
<PAGE>
CUSTOMERS
We have a broad customer base of leading systems manufacturers. We shipped
products or provided manufacturing services directly to more than 265 end user
customers and distributors in 1998. Our largest customers include Nokia, which
accounted for approximately 12.0%, and Raytheon, which accounted for
approximately 11.7%, of our total revenues in 1998. In 1997, Nortel accounted
for approximately 12.0% of our total revenues. No other single customer
accounted for greater than 10% of total revenues during these periods.
The following is a list of our customers that contributed more than $1.0
million to our revenues in 1998:
<TABLE>
<S> <C>
Alcatel Motorola
Ascend Nokia
Bosch Nortel
CellNet Data Systems Northrop Grumman
Cisco Systems Philips
DSC Communications QUALCOMM
Ericsson Raytheon
Hittite Rockwell
Hughes Stratus
Lucent Tellabs
Mini-Circuits
</TABLE>
OPERATIONS
Our Oregon wafer manufacturing facility is located in Hillsboro. We moved
our executive, administrative, test and technical offices to this 124,000 square
foot facility in the first quarter of 1997. The adjoining Hillsboro wafer
fabrication facility consists of an additional 38,000 square feet, of which
17,000 square feet are operated as a class 10 performance clean room.
Our Texas facility is located in Dallas. The Texas facility comprises
approximately 100,000 square feet, of which 15,000 square feet are operated as a
class 10 performance clean room. We sublease the Texas facility from Raytheon
through July 10, 2002. Raytheon leases the premises from Texas Instruments. We
have the right to renew our sublease of this facility for up to three additional
five-year periods if Raytheon exercises its rights to renew its lease from Texas
Instruments.
Our research and development efforts are focused on the design of new
integrated circuits, improvement of existing device performance, development of
new processes, cost reductions in the manufacturing process and improvements in
device packaging. Our research, development and engineering expenses were
approximately $10.9 million in 1996, $11.5 million in 1997 and $19.0 million in
1998, and include nonrecurring engineering expenses funded by customers.
Expenses in 1998 related to research, development and engineering increased
substantially from the level incurred in 1997 primarily due to the inclusion of
the new Millimeter Wave Communications operation. We expect that we will
continue to spend substantial funds on research and development.
As of March 31, 1999, we employed a total of 709 persons, including 328 in
manufacturing, 255 employees engaged in activities related to process and
product research and development, 20 in quality and reliability, 40 in marketing
and sales and 66 in finance and administration. None of our employees are
represented by a collective bargaining agreement, nor have we experienced any
work stoppage. We consider our relations with our employees to be good.
32
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information known to us with respect to the
beneficial ownership of our common stock as of June 18, 1999, and as adjusted to
reflect the sale of common stock offered hereby by:
- each stockholder known by us to own beneficially more than five percent of
our common stock,
- each of the executive officers named in the Summary Compensation Table set
forth in our proxy materials on Schedule 14A incorporated by reference in
this prospectus,
- each of our directors, and
- all directors and executive officers as a group.
Except as otherwise noted below, the address of each person listed on the
table is 2300 N.E. Brookwood Parkway, Hillsboro, Oregon 97124.
The table below assumes the underwriters do not exercise their
over-allotment option. If the over-allotment option is exercised in full, we
will sell an aggregate of 3,579,497 shares of common stock.
We have determined beneficial ownership in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person, we
include shares of common stock subject to options or warrants held by that
person that are currently exercisable or will become exercisable within 60 days
after June 18, 1999, while those shares are not included for purposes of
computing percentage ownership of any other person. Unless otherwise indicated,
the persons and entities named in the table have sole voting and investment
power with respect to all shares beneficially owned, subject to community
property laws where applicable.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR NUMBER OF
TO OFFERING SHARES AFTER OFFERING
----------------------- BEING -------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENTAGE OFFERED NUMBER PERCENTAGE
- ------------------------------------------------- ---------- ----------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C>
Lucent Technologies, Inc.(1)..................... 991,588 6.7 863,314 0 --
600 Mountain Avenue
Murray Hill, New Jersey 07974
Steven J. Sharp(2)............................... 263,866 1.8 -- 263,866 1.5
Edward C.V. Winn(3).............................. 81,937 * -- 81,937 *
Charles Scott Gibson(4).......................... 66,712 * -- 66,712 *
Bruce Fournier(5)................................ 64,878 * -- 64,878 *
Walden Rhines(6)................................. 54,000 * -- 54,000 *
J. David Pye(7).................................. 44,850 * -- 44,850 *
Edward F. Tuck(8)................................ 43,500 * -- 43,500 *
Thomas V. Cordner(9)............................. 28,270 * -- 28,270 *
Paul A. Gary(10)................................. 5,025 * -- 5,025 *
All executive officers and directors as a
group(13) persons(11).......................... 848,450 5.6 -- 848,450 4.6
</TABLE>
- ------------------------
* Less than 1% of the outstanding shares of common stock.
(1) We were advised in a Schedule 13D filed with the Securities and Exchange
Commission on December 11, 1996 by Lucent Technologies, Inc. as follows:
Lucent acquired sole voting and dispositive power over 991,588 shares of
our common stock from AT&T Corp. on September 27, 1996. The interest in our
common stock was transferred to Lucent from AT&T pursuant to the
33
<PAGE>
Separation and Distribution Agreement dated February 1, 1996 and Amended
and Restated as of March 29, 1996 between AT&T, Lucent and NCR Corporation.
Lucent's beneficial ownership of 991,588 shares includes 300,000 shares
issuable pursuant to a presently exercisable warrants. Number of shares
being offered reflects the exercise on a net exercise basis of the warrants
to purchase 300,000 shares resulting in the issuance of 171,726 shares of
common stock assuming a market price of $37.42 for the common stock.
(2) Includes 246,625 shares issuable pursuant to options exercisable within 60
days of June 18, 1999.
(3) Includes 75,436 shares issuable pursuant to options exercisable within 60
days of June 18, 1999.
(4) Includes 7,500 shares held by Mr. Gibson's wife, 2,977 held in trust for
Mr. Gibson's minor sons, 29,985 held in Trust by Mr. Gibson, and 24,000
shares issuable pursuant to options exercisable within 60 days of June 18,
1999.
(5) Includes 60,274 shares issuable pursuant to options exercisable within 60
days of June 18, 1999.
(6) Includes 3,000 shares held by Mr. Rhines' wife and daughter and 31,500
shares issuable pursuant to options exercisable within 60 days of June 18,
1999.
(7) Represents 44,850 shares issuable pursuant to options exercisable within 60
days of June 18, 1999.
(8) Includes 22,500 shares issuable pursuant to options exercisable within 60
days of June 18, 1999.
(9) Includes 26,982 shares issuable pursuant to options exercisable within 60
days of June 18, 1999.
(10) Mr. Gary is a former employee of the predecessor of Lucent, AT&T. Mr. Gary
has no shared voting or investment control over the shares of our common
stock held by Lucent. Mr. Gary does not represent Lucent on our board of
directors.
(11) Includes 706,014 shares issuable pursuant to options exercisable within 60
days of June 18, 1999.
34
<PAGE>
UNDERWRITING
TriQuint, the selling stockholder and the underwriters named below will
enter into an underwriting agreement with respect to the shares being offered.
Subject to the terms and conditions of the underwriting agreement, each
underwriter has severally agreed to purchase the number of shares indicated in
the following table at the public offering price less the underwriting discounts
and commissions set forth on the cover page of this prospectus. SG Cowen
Securities Corporation, Donaldson, Lufkin & Jenrette Securities Corporation,
Banc of America Securities LLC, CIBC World Markets Corp., Dain Rauscher Wessels,
a division of Dain Rauscher Incorporated, and U.S. Bancorp Piper Jaffray Inc.,
are the underwriters.
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- --------------------------------------------------------------------------- -----------------
<S> <C>
SG Cowen Securities Corporation............................................
Donaldson, Lufkin & Jenrette Securities Corporation........................
Banc of America Securities LLC.............................................
CIBC World Markets Corp....................................................
Dain Rauscher Wessels......................................................
U.S. Bancorp Piper Jaffray Inc.............................................
-----------------
Total.............................................................. 3,863,314
-----------------
-----------------
</TABLE>
The underwriting agreement provides that the obligations of the underwriters
are conditional and may be terminated at their discretion based on their
assessment of the state of the financial markets. The obligations of the
underwriters may also be terminated upon the occurrence of other events
specified in the underwriting agreement. The underwriters are severally
committed to purchase all of the common stock being offered by us if any shares
are purchased, other than those covered by the over-allotment option described
below.
The underwriters propose to offer the common stock directly to the public at
the public offering price set forth on the cover page of this prospectus. The
underwriters may offer the common stock to securities dealers at that price less
a concession not in excess of $ per share. Securities dealers may reallow a
concession not in excess of $ per share to other dealers. After the shares
of the common stock are released for sale to the public, the underwriters may
vary the offering price and other selling terms from time to time.
We have granted to the underwriters an option to purchase up to 579,497
additional shares of common stock at the public offering price set forth on the
cover of this prospectus to cover over-allotments, if any. The option is
exercisable for a period of 30 days. If the underwriters exercise their
over-allotment option, the underwriters have severally agreed to purchase shares
in approximately the same proportion as shown in the table above.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act, and to contribute to payments
that the underwriters may be required to make in respect of those liabilities.
TriQuint and our directors and executive officers who hold an aggregate of
848,450 shares (including 706,014 shares issuable pursuant to options
exercisable within 60 days of June 18, 1999) have agreed with the underwriters
that for a period of 90 days following the date of this prospectus, without the
prior written consent of SG Cowen Securities Corporation, they will not dispose
of or hedge any shares of common stock or any securities convertible into or
exchangeable for common stock, except for an aggregate of 200,000 shares which
may be sold by our executive officers and directors, not to exceed 40,000 shares
to be sold by any individual officer or director.
35
<PAGE>
The underwriters may engage in over-allotment, stabilizing transactions,
covering transactions, penalty bids and passive market making in accordance with
Regulation M under the Securities Exchange Act of 1934. Over-allotment involves
syndicate sales in excess of the offering size, which creates a syndicate short
position. Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a specified maximum.
Syndicate covering transactions involve purchases of the common stock in the
open market after the distribution has been completed in order to cover
syndicate short positions. Penalty bids permit the representatives to reclaim a
selling concession from a syndicate member when the common stock originally sold
by such syndicate member is purchased in a syndicate covering transaction to
cover syndicate short positions. In passive market making, market makers in the
common stock who are underwriters or prospective underwriters may, subject to
certain limitations, make bids for or purchases of the common stock until the
time, if any, at which a stabilizing bid is made. These stabilizing
transactions, syndicate covering transactions and penalty bids may cause the
price of the common stock to be higher than it would otherwise be in the absence
of these transactions. These transactions may be effected on the Nasdaq National
Market or otherwise and, if commenced, may be discontinued at any time.
We estimate that our out of pocket expenses for this offering will be
approximately $500,000.
36
<PAGE>
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
TriQuint by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California. Pillsbury Madison & Sutro LLP, Palo Alto, California, is
acting as counsel for the underwriters in connection with selected legal matters
relating to the shares of common stock offered by this prospectus.
EXPERTS
The consolidated financial statements and related consolidated financial
statement schedule of TriQuint Semiconductor, Inc. as of December 31, 1997 and
1998, and for each of the years in the three-year period ended December 31,
1998, included herein and in the registration statement are included in reliance
upon the reports of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein and in the registration statement and
upon the authority of said firm as experts in accounting and auditing.
INFORMATION INCORPORATED BY REFERENCE
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents that we have
previously filed with the Commission or documents that we will file with the
Commission in the future. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the Commission will automatically update and supersede this information. We
incorporate by reference the documents listed below, and any future filings made
with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
of 1934, until we close this offering, and the over-allotment option expires or
is exercised. The documents we incorporate by reference are:
1. Our Annual Report on Form 10-K for the year ended December 31, 1998.
2. Our Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.
3. Our proxy materials on Schedule 14A as filed with the Securities and
Exchange Commission on April 22, 1999.
4. The description of our common stock contained in our registration
statement on Form 8-A as filed on October 21, 1993.
5. The description of our common stock contained in our registration
statement on Form 8-B filed with the Commission on February 18, 1997.
6. The description of our Preferred Share Purchase Rights contained in our
registration statement on Form 8-A filed with the Commission on July 24,
1998.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address and number: TriQuint Semiconductor,
Inc., 2300 N.E. Brookwood Parkway, Hillsboro, Oregon 97124; telephone number
(503) 615-9000.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements, and other
information with the Securities and Exchange Commission. You may read and copy
any materials we file with the Commission at the Commission's public reference
room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the
Commission at 1-800-SEC-0330 for more information on its public reference rooms.
The Commission also maintains an Internet Website at http://www.sec.gov that
contains reports,
37
<PAGE>
proxy and information statements, and other information regarding issuers that
file electronically with the Commission.
We have filed with the Commission a registration statement (which contains
this prospectus) on Form S-3 under the Securities Act of 1933. The registration
statement relates to the common stock offered by us and the selling stockholder.
This prospectus does not contain all of the information set forth in the
registration statement and the exhibits and schedules to the registration
statement. Please refer to the registration statement and its exhibits and
schedules for further information with respect to us and our common stock.
Statements contained in this prospectus as to the contents of any contract or
other document are not necessarily complete and, in each instance, we refer you
to the copy of that contract or document filed as an exhibit to the registration
statement. You may read and obtain a copy of the registration statement and its
exhibits and schedules from the Commission, as described in the preceding
paragraph.
38
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Form of Independent Auditors' Report....................................................................... F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998 and March 31, 1999 (unaudited)................ F-3
Consolidated Statements of Operations for the years ended December 31, 1996, 1997 and 1998 and the three
months ended March 31, 1998 and 1999 (unaudited)......................................................... F-4
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1996, 1997 and 1998 and
the three months ended March 31, 1999 (unaudited)........................................................ F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1997 and 1998 and the three
months ended March 31, 1998 and 1999 (unaudited)......................................................... F-6
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>
F-1
<PAGE>
When the stock split effected in the form of a stock dividend referred to in
note 6(a) of the notes to the consolidated financial statements has been
consummated, we will render the following opinion.
FORM OF INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
TriQuint Semiconductor, Inc.:
We have audited the accompanying consolidated balance sheets of TriQuint
Semiconductor, Inc. and subsidiary as of December 31, 1997 and 1998, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits 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 consolidated 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 audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of TriQuint
Semiconductor, Inc. and subsidiary as of December 31, 1997 and 1998, and the
results of its operations, and its cash flows for each of the years in the
three-year period ended December 31, 1998 in conformity with generally accepted
accounting principles.
Portland, Oregon
February 11, 1999, except as to note 13
which is as of February 26, 1999 and
note 6(a) which is as of
July , 1999
F-2
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1998
---------- ---------- MARCH 31,
1999
-----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................................. $ 18,734 $ 14,602 $ 12,949
Investments................................................................ 5,729 11,460 14,591
Trade accounts receivable, net............................................. 15,986 21,020 23,963
---------- ---------- -----------
40,449 47,082 51,503
---------- ---------- -----------
Inventories, net:
Raw material............................................................. 2,776 5,066 6,236
Work in process.......................................................... 7,708 10,749 11,496
Finished goods........................................................... 1,804 3,891 3,397
---------- ---------- -----------
12,288 19,706 21,129
---------- ---------- -----------
Prepaid expenses and other assets.......................................... 1,273 2,028 1,863
---------- ---------- -----------
Total current assets................................................... 54,010 68,816 74,495
---------- ---------- -----------
Property, plant and equipment, net........................................... 27,235 30,529 30,386
Other non-current assets, net................................................ 11 1,798 1,707
Restricted investments....................................................... 40,162 40,163 40,163
---------- ---------- -----------
Total assets........................................................... $ 121,418 $ 141,306 $ 146,751
---------- ---------- -----------
---------- ---------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of capital lease and installment note obligations..... $ 5,045 $ 4,934 $ 5,132
Accounts payable........................................................... 8,737 10,027 11,933
Other accrued liabilities.................................................. 2,609 6,237 7,242
Accrued payroll............................................................ 2,439 3,124 3,554
---------- ---------- -----------
Total current liabilities.............................................. 18,830 24,322 27,861
Capital lease and installment note obligations, less current installments.... 12,550 9,369 8,012
---------- ---------- -----------
Total liabilities...................................................... 31,380 33,691 35,873
---------- ---------- -----------
Commitments and contingency
Stockholders' equity:
Preferred stock, $.001 par value. Authorized 5,000,000 shares at
December 31, 1997 and 1998, and March 31, 1999; none issued and
outstanding at December 31, 1997 and 1998, and March 31, 1999............ -- -- --
Common stock, $.001 par value. Authorized 25,000,000 shares at
December 31, 1997 and 1998, and March 31, 1999; issued and outstanding
12,741,348, 14,327,670 and 14,354,823 shares at December 31, 1997 and
1998, and March 31, 1999, respectively................................... 12 14 14
Additional paid-in capital................................................. 112,048 133,578 133,628
Accumulated deficit........................................................ (22,022) (25,977) (22,764)
---------- ---------- -----------
Total stockholders' equity............................................. 90,038 107,615 110,878
---------- ---------- -----------
Total liabilities and stockholders' equity............................. $ 121,418 $ 141,306 $ 146,751
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEAR ENDED DECEMBER 31, 31,
---------------------------------------- --------------------------
1996 1997 1998 1998 1999
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Total revenues............................. $ 59,526 $ 71,367 $ 111,605 $ 23,681 $ 33,695
Operating costs and expenses:
Cost of goods sold....................... 34,258 40,028 72,784 18,341 20,951
Research, development and engineering.... 10,858 11,518 18,984 4,424 4,594
Selling, general and administrative...... 10,975 14,188 15,962 3,460 5,183
Special charges.......................... -- -- 10,220 10,220 --
------------ ------------ ------------ ------------ ------------
Total operating costs and expenses..... 56,091 65,734 117,950 36,445 30,728
------------ ------------ ------------ ------------ ------------
Income (loss) from operations.......... 3,435 5,633 (6,345) (12,764) 2,967
------------ ------------ ------------ ------------ ------------
Other income (expense):
Interest income.......................... 3,460 3,497 3,375 857 791
Interest expense......................... (1,015) (1,463) (1,454) (379) (313)
Other, net............................... 638 83 563 (4) 47
------------ ------------ ------------ ------------ ------------
3,083 2,117 2,484 474 525
------------ ------------ ------------ ------------ ------------
Income (loss) before income taxes...... 6,518 7,750 (3,861) (12,290) 3,492
Income tax expense......................... 231 890 94 -- 279
------------ ------------ ------------ ------------ ------------
Net income (loss)...................... $ 6,287 $ 6,860 $ (3,955) $ (12,290) $ 3,213
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Per share data:
Net income (loss):
Basic.................................. $ 0.52 $ 0.55 $ (0.28) $ (0.89) $ 0.22
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Diluted................................ $ 0.48 $ 0.50 $ (0.28) $ (0.89) $ 0.21
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Weighted average shares:
Basic.................................. 12,066,872 12,559,965 14,099,484 13,867,116 14,338,940
Diluted................................ 13,144,076 13,662,323 14,099,484 13,867,116 15,148,643
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
------------------------ ------------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
----------- ----------- ------------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995............... -- $ -- 11,894,822 $ 12 $ 107,801 $ (35,169)
Issuance of common stock under option
plans and warrant exercises............ -- -- 356,198 -- 897 --
Issuance of common stock under stock
purchase plan.......................... -- -- 34,168 -- 264 --
Tax benefit of stock option exercises.... -- -- -- -- 154 --
Net income............................... -- -- -- -- -- 6,287
--- ----- ------------ ----- ---------- ------------
Balance, December 31, 1996............... -- -- 12,285,188 12 109,116 (28,882)
Issuance of common stock under option
plans and warrant exercises............ -- -- 384,114 -- 1,428 --
Issuance of common stock under stock
purchase plan.......................... -- -- 72,046 -- 996 --
Tax benefit of stock option exercises.... -- -- -- -- 508 --
Net income............................... -- -- -- -- -- 6,860
--- ----- ------------ ----- ---------- ------------
Balance, December 31, 1997............... -- -- 12,741,348 12 112,048 (22,022)
Issuance of common stock under option
plans and warrant exercises............ -- -- 152,759 -- 498 --
Issuance of common stock under stock
purchase plan.......................... -- -- 166,644 -- 1,924 --
Issuance of common stock for acquisition
of Millimeter Wave Communications
operation.............................. -- -- 1,266,919 2 19,108 --
Net loss................................. -- -- -- -- -- (3,955)
--- ----- ------------ ----- ---------- ------------
Balance, December 31, 1998............... -- -- 14,327,670 14 133,578 (25,977)
Issuance of common stock under option
plans and warrant exercises............ -- -- 27,153 -- 50 --
Net income............................... -- -- -- -- -- 3,213
--- ----- ------------ ----- ---------- ------------
Balance, March 31, 1999 (unaudited)...... -- $ -- 14,354,823 $ 14 $ 133,628 $ (22,764)
--- ----- ------------ ----- ---------- ------------
--- ----- ------------ ----- ---------- ------------
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
------------
<S> <C>
Balance, December 31, 1995............... $ 72,644
Issuance of common stock under option
plans and warrant exercises............ 897
Issuance of common stock under stock
purchase plan.......................... 264
Tax benefit of stock option exercises.... 154
Net income............................... 6,287
------------
Balance, December 31, 1996............... 80,246
Issuance of common stock under option
plans and warrant exercises............ 1,428
Issuance of common stock under stock
purchase plan.......................... 996
Tax benefit of stock option exercises.... 508
Net income............................... 6,860
------------
Balance, December 31, 1997............... 90,038
Issuance of common stock under option
plans and warrant exercises............ 498
Issuance of common stock under stock
purchase plan.......................... 1,924
Issuance of common stock for acquisition
of Millimeter Wave Communications
operation.............................. 19,110
Net loss................................. (3,955)
------------
Balance, December 31, 1998............... 107,615
Issuance of common stock under option
plans and warrant exercises............ 50
Net income............................... 3,213
------------
Balance, March 31, 1999 (unaudited)...... $ 110,878
------------
------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ 6,287 $ 6,860 $ (3,955) $ (12,290) $ 3,213
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization......................... 3,068 4,249 5,889 1,375 1,837
Non-cash special charge............................... -- -- 8,820 8,820 --
(Gain) loss on sale of assets......................... (728) (32) (475) 4 --
Change in assets and liabilities:
Receivables......................................... (4,614) (3,984) 939 (1,679) (2,943)
Inventories......................................... (1,141) (2,438) (2,795) 446 (1,423)
Prepaid expenses and other assets................... (79) (710) (66) 671 182
Accounts payable.................................... 2,637 (896) (453) 4,053 3,341
Other accrued liabilities........................... (56) 1,103 2,314 327 --
--------- --------- --------- --------- ---------
Net cash provided by operating activities....... 5,374 4,152 10,218 1,727 4,207
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Purchase of investments................................. (97,266) (42,410) (67,993) (65,168) (64,892)
Sale of investments..................................... 75,415 46,290 62,262 61,653 61,761
Decrease (increase) in restricted cash.................. (504) 504 -- -- --
Capital expenditures.................................... (4,060) (1,388) (5,618) (1,297) (1,620)
Proceeds from sale of assets............................ 728 270 475 -- --
--------- --------- --------- --------- ---------
Net cash provided (used) by investing
activities.................................... (25,687) 3,266 (10,874) (4,812) (4,751)
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Principal payments under capital lease and installment
note obligations........................................ (2,992) (4,015) (5,508) (1,468) (1,159)
Issuance of common stock, net............................. 1,161 2,424 2,032 420 50
--------- --------- --------- --------- ---------
Net cash used by financing activities........... (1,831) (1,591) (3,476) (1,048) (1,109)
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash
equivalents................................... (22,144) 5,827 (4,132) (4,133) (1,653)
Cash and cash equivalents at beginning of year.............. 35,051 12,907 18,734 18,734 14,602
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of year.................... $ 12,907 $ 18,734 $ 14,602 $ 14,601 $ 12,949
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Supplemental disclosures of cash flow information:
Cash paid for:
Interest................................................ $ 1,015 $ 1,489 $ 1,452 $ 410 $ 295
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Income taxes............................................ $ 20 $ 54 $ 4 $ -- $ 94
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Supplemental schedule of non-cash investing and financing
activities:
Purchase of assets through capital lease and installment
notes................................................. $ 6,535 $ 8,346 $ 2,216 $ 2,216 $ --
Tax benefit of stock option exercises................... 154 508 --
Recorded in acquisition of Millimeter Wave:
Receivables........................................... -- -- 5,973 5,973 --
Inventories........................................... -- -- 4,623 4,623 --
Prepaid expenses and other assets..................... -- -- 2,839 2,839 --
Equipment............................................. -- -- 987 987 --
Accounts payable...................................... -- -- 1,743 1,743 --
Accrued liabilities................................... -- -- 1,999 1,999 --
Common stock.......................................... -- -- 19,500 19,500 --
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1997 AND 1998, AND MARCH 31, 1998 AND 1999
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1998 AND 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) DESCRIPTION OF THE COMPANY
TriQuint Semiconductor, Inc. (the Company) is a leading supplier of high
performance gallium arsenide integrated circuits for the wireless
communications, telecommunications, data communications and aerospace markets.
The Company's products incorporate its proprietary analog and mixed signal
design and its advanced gallium arsenide manufacturing processes to address a
broad range of applications and customers.
(B) PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiary. All significant inter-company
accounts and transactions are eliminated in consolidation.
(C) MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions 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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(D) REVENUE RECOGNITION
Standard product revenue is recognized upon shipment of product. The Company
recognizes revenue on foundry and customer-specific products based on certain
design, manufacturing and other milestones. The Company recognizes revenue on
cost plus contracts as work is performed.
(E) CASH EQUIVALENTS
The Company considers all highly liquid debt and equity instruments
purchased with an original maturity of three months or less to be cash
equivalents.
(F) INVESTMENTS
The Company's investments, both restricted and unrestricted, are comprised
of 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. The carrying value of
available-for-sale securities approximates fair value.
(G) TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable are shown net of allowance for doubtful accounts
of $196 and $262 at December 31, 1997 and 1998, respectively.
F-7
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(H) INVENTORIES
Inventories are stated at the lower of cost (approximates actual cost on a
first-in, first-out basis) or market (net realizable value). Inventories are
shown net of a valuation reserve of $1,324, $2,422 and $2,612 at December 31,
1997 and 1998, and March 31, 1999, respectively.
(I) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Machinery and equipment
under capital leases are stated at the lower of the present value of the minimum
lease payments at the beginning of the lease term or the fair value of the
leased assets at the inception of the lease.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets, which are as follows: five years for machinery and
equipment, furniture and fixtures and computer equipment; three to seven years
for leasehold improvements; and ten years for buildings. Leasehold improvements
are amortized over the shorter of the estimated life of the asset or the term of
the related lease. Depreciation begins on assets in process at the time the
related assets are placed in service. Maintenance and repairs are expensed as
incurred.
(J) 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.
(K) COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted the provisions of SFAS No.
130, REPORTING COMPREHENSIVE INCOME. The objective of SFAS No. 130 is to report
all changes in equity that result from transactions and economic events other
than transactions with owners. There is no difference between net income (loss)
and comprehensive income (loss) for any of the periods presented.
(L) NET INCOME PER SHARE
The Company has adopted SFAS No. 128, EARNINGS PER SHARE. SFAS No. 128
requires presentation of basic and diluted net income per share. Basic net
income per share is net income available to common stockholders 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
F-8
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
that, had they been issued, would have had a dilutive effect. The reconciliation
of shares used to calculate basic and diluted income per share consists of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------------------------------- --------------------------
1996 1997 1998 1998 1999
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Basic weighted average shares of common
stock.................................... 12,066,872 12,559,965 14,099,484 13,867,116 14,338,940
Effect of dilutive securities:
Stock options and warrants............. 1,077,204 1,102,358 -- -- 809,703
------------ ------------ ------------ ------------ ------------
Diluted weighted average shares of common
stock.................................... 13,144,076 13,662,323 14,099,484 13,867,116 15,148,643
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
Common stock equivalents related to stock options and warrants totaling
395,976, 56,358, 664,247, 879,504 and 849,305 are anti-dilutive and, therefore,
were not included in the diluted per share calculation for the years ended
December 31, 1996, 1997 and 1998, and for the three month periods ended March
31, 1998 and 1999, respectively.
(M) 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. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amounts expected to be realized.
(N) FINANCIAL INSTRUMENTS
The carrying amount of cash equivalents, investments, trade accounts
receivable and accounts payable approximate fair value because of the short-term
nature of these instruments. The fair value of long-term borrowings was
estimated by discounting the future cash flows using market interest rates and
does not differ significantly from that reflected in the accompanying financial
statements.
Fair value estimates are made at a specific point in time, based on relevant
market information about the financial instrument. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and therefore cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
(O) STOCK OPTION PLANS
The Company accounts for its stock option plans in accordance with the
provisions of Accounting Principles Board (APB) Opinion No. 25, ACCOUNTING FOR
STOCK ISSUED TO EMPLOYEES, and related interpretations. As such, compensation
expense would be recorded on the date of grant only if the current market price
of the underlying stock exceeded the exercise price. The Company also applies
SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, which allows entities to
continue to apply the provisions of APB Opinion No. 25 and provide pro forma net
income and pro forma earnings per
F-9
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
share disclosures for employee stock option grants as if the fair-value-based
method defined in SFAS No. 123 had been applied.
(P) RECLASSIFICATIONS
Certain reclassifications have been made to the 1996 and 1997 statements to
conform with the 1998 presentation.
(Q) UNAUDITED QUARTERLY INFORMATION
The financial statements and related notes as of March 31, 1999 and for the
three months ended March 31, 1998 and 1999 are unaudited but, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments, which are necessary for a fair presentation of the financial
condition, results of operations and cash flows of the Company. The operating
results for the three months ended March 31, 1999 are not necessarily indicative
of the results that may be expected for the year ended December 31, 1999.
(2) MILLIMETER WAVE COMMUNICATIONS ACQUISITION
On January 13, 1998, the Company acquired substantially all of the assets of
the Millimeter Wave Communications operation of Texas Instruments' former
Defense Systems and Electronics Group from Raytheon TI Systems, Inc. (RTIS), a
Delaware corporation and a wholly-owned subsidiary of Raytheon company. The
Millimeter Wave Communications business designs, develops, manufactures and
markets advanced GaAs MMIC products which are used in defense and commercial
applications. Pursuant to an Asset Purchase Agreement (the Agreement) with RTIS,
the Company acquired the Millimeter Wave Communications business for
approximately $19,500 in cash and 1,266,919 shares of the Company's common stock
then valued at approximately $19,500 for total purchase consideration of
approximately $39,000. The cash portion of the purchase price was financed
through an operating lease arrangement involving certain assets pursuant to the
Agreement.
The following table presents the purchase price allocations associated with
this acquisition:
<TABLE>
<S> <C>
Tangible assets.................................................... $ 28,048
Workforce in place and purchased technology........................ 2,132
In-process research and development................................ 8,820
---------
$ 39,000
---------
---------
</TABLE>
Workforce in place and purchased technology, classified as other non-current
assets, are amortized on a straight line basis over 7 years, and are shown net
of related accumulated amortization of $0 and $362 at December 31, 1997 and
1998, respectively.
The Company allocated the purchase price based on the fair value of the net
tangible and intangible assets acquired. In performing this allocation, the
Company considered, among other factors, the research and development projects
in process at the date of acquisition. Millimeter Wave Communication's
in-process research and development program consisted of the development of its
advanced pHEMT and HBT processes for millimeter wave applications (the
projects). At the date of the acquisition, Millimeter Wave Communications'
research and development was not complete and total continuing research and
development commitments to complete the projects were expected to be
approximately $11.0 million. The projects were anticipated to be successfully
completed within three to four years of the acquisition date. The value assigned
to purchased in-process research and
F-10
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
development was determined by estimating the costs to develop Millimeter Wave
Communications' purchased in-process research and development into commercially
viable products, estimating the resulting net cash flows from the projects and
discounting the net cash flows to their present value. In estimating the value
of qualifying in-process research and development, a stage of completion factor
was applied to exclude cash flows related to development efforts not yet
underway. A discount rate of 75% was used for valuing the in-process research
and development and is intended to be commensurate with rates of return demanded
by venture capital investors for investments in start-up companies with similar
risks to those of the in-process products. Additionally, the projects will
require maintenance expenditures if and when they reach a state of technological
and commercial feasibility.
The pro forma results shown below assume the acquisition described above
occurred as of the beginning of the earliest year presented, and exclude special
charges for in-process research and development totaling $8,820:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
---------------------
1997 1998
--------- ----------
<S> <C> <C>
Revenues............................................................... $ 95,170 $ 112,407
Net income............................................................. 4,383 4,417
Diluted net income per share........................................... $ 0.29 $ 0.31
</TABLE>
The pro forma results are not necessarily indicative of what actually would
have occurred had the acquisition been in effect for the periods presented. In
addition, they are not intended to be a projection of future results that may be
achieved from the combined operations.
(3) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
Machinery and equipment................................................. $ 40,834 $ 47,539
Leasehold improvements.................................................. 424 2,507
Building and equipment.................................................. -- 103
Furniture and fixtures.................................................. 1,556 1,657
Computer equipment...................................................... 9,893 11,841
Assets in process....................................................... 10,058 7,192
Other................................................................... 618 619
--------- ---------
63,383 71,458
Less accumulated depreciation and amortization.......................... 36,148 40,929
--------- ---------
$ 27,235 $ 30,529
--------- ---------
--------- ---------
</TABLE>
(4) CAPITAL LEASE AND INSTALLMENT NOTE OBLIGATIONS
At December 31, 1997 and 1998, the Company had outstanding $7,595 and
$14,303, respectively of capital leases and installment notes with interest
rates ranging from 7.9% to 9.9%. The notes are payable in monthly installments
of principal and interest through 2003 and are secured by equipment with a net
book value of $16,991 and $14,002 at December 31, 1997 and 1998, respectively.
F-11
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
Additionally, the Company leases certain equipment under capital and
operating leases. The future minimum lease payments under installment notes and
non-cancelable leases as of December 31, 1998 are as follows:
<TABLE>
<CAPTION>
INSTALLMENT
NOTES AND
CAPITAL OPERATING
LEASES LEASES
----------- -----------
<S> <C> <C>
Year ending:
1999................................................................ $ 5,944 $ 10,024
2000................................................................ 5,181 5,485
2001................................................................ 3,091 3,195
2002................................................................ 1,705 1,024
2003................................................................ 389 --
----------- -----------
Total....................................................... 16,310 $ 19,728
-----------
-----------
Less amounts representing interest.................................... 2,007
-----------
Present value of minimum payments........................... 14,303
-----------
Less current installments............................................. 4,934
-----------
$ 9,369
-----------
-----------
</TABLE>
Balances applicable to capital leases and installment notes, which are
included in machinery and equipment, are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
Machinery and equipment................................................. $ 24,922 $ 26,149
Less accumulated amortization........................................... 7,931 12,147
--------- ---------
$ 16,991 $ 14,002
--------- ---------
--------- ---------
</TABLE>
Rent expense under operating leases was $1,065, $2,736 and $9,779 during the
years ended December 31, 1996, 1997 and 1998, respectively.
The Company entered into a five year agreement to construct and lease an
office building and fabrication facility in Hillsboro, Oregon (Hillsboro
Facility) in 1996. Rent obligations began in February of 1997 and are equal to
the lessor's debt service costs. At the end of the lease term, the Company may
(i) renew the lease for up to five additional years, (ii) exercise its purchase
option, or (iii) cause the leased assets to be sold to a third party whereby the
Company guarantees up to a maximum of 85% of the original cost. The future
minimum lease payments stated above exclude any payments required at the end of
the lease term.
As part of the above lease, the Company restricted $40,163 of its securities
as collateral for specified obligations of the lessor under the lease. These
securities will be restricted as to withdrawal and will be managed by the
Company subject to certain limitations under its investment policy. In addition,
the Company must maintain a minimum consolidated tangible net worth of $50
million, total liabilities to net worth ratio equal to or less than 0.75 to 1.00
and maintain cash and liquid investments, including restricted investments,
greater than $45 million.
F-12
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
In November 1997, the Company entered into a $1,500 lease agreement for
additional property adjacent to its Hillsboro Facility. Pursuant to the terms of
that agreement, the transaction is partially collateralized by a guarantee from
the Company.
In 1997 and 1998, the Company entered into two-year agreements to lease
equipment in Dallas, Texas and Hillsboro, Oregon. Rent obligations are equal to
the lessor's debt service costs and will expire at the end of the initial lease
terms. At the end of the lease terms, the Company may (i) renew the leases for
up to three additional years, (ii) exercise its purchase options, or (iii) cause
the equipment to be sold to a third party whereby the Company guarantees
residual values to the lessor. The future minimum lease payments stated above
exclude any payments required at the end of the lease term. The Company intends
to renew the leases for three additional years at the end of each initial lease
term.
(5) DEBT
The Company has a line of credit agreement for general corporate purposes
with a commercial bank. The agreement is unsecured, and provides for aggregate
borrowings of $10,000. The interest rate is based on three pricing options
(LIBOR, bankers' acceptance, and prime) plus an interest rate spread which is
determined quarterly based on the Company's ratio of total liabilities to
tangible net worth. Interest is payable periodically with maturity set at May
31, 2000. No amount was outstanding on the line of credit at December 31, 1997
or 1998. The line of credit is subject to loan covenants for which the Company
was in compliance at December 31, 1997 and 1998.
F-13
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(6) STOCKHOLDERS' EQUITY
(A) STOCK SPLIT EFFECTED IN THE FORM OF A STOCK DIVIDEND
On June 10, 1999, the Board of Directors approved a three-for-two stock
split of the outstanding common shares to be 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.
(B) STOCK OPTION PLANS AND EMPLOYEE STOCK PURCHASE PLANS
Under the 1987 and 1996 Stock Incentive Programs and the 1998 Nonstatutory
Stock Option Plan (the Plans), the Company has authorized the issuance of
2,864,652, 1,875,000 and 750,000 common shares, respectively, of which a total
of 454,322 shares are available to grant. The Plans provide for the grant of
incentive stock options to officers and other employees of the Company or any
parent or subsidiary, and non-qualified stock options to officers and other
employees of the Company, directors, and consultants of the Company. Subject to
the discretion of the Board of Directors, options granted under the Plans
generally vest and become exercisable at the rate of 28% at the end of the first
year, and thereafter at a rate of 2% per month and have a ten-year term.
The exercise price of all incentive stock options granted under the Plans
must be at least equal to the fair market value of the shares on the date of
grant. With respect to any participant who owns stock possessing more than 10%
of the voting rights of the Company's outstanding capital stock, the exercise
price of any incentive stock option granted must equal at least 110% of the fair
market value on the grant date. The exercise price of all non-statutory stock
options granted under the Plans must be at least 50% of the fair market value of
the common stock on the date of grant. However, it is the Company's practice to
issue options at fair market value. The terms of all options granted under the
Plans may not exceed ten years.
Under the 1998 Employee Stock Purchase Plan (the "Purchase Plan"), the
Company has authorized the issuance of 900,000 common shares, of which 627,141
were available at December 31, 1998. The Purchase Plan allows eligible employees
to purchase the Company's common stock through payroll deductions, which may not
exceed 15% of an employee's base compensation, not to exceed $25 per year,
including commissions, bonuses and overtime, at a price equal to 85% of the
lower of the fair value at the beginning or end of each enrollment period.
F-13
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
The fair value of each stock based compensation award is estimated on the
date of grant using the Black-Scholes option pricing model assuming no dividend
yield and the following weighted average assumptions for stock based
compensation awards during the years ended December 31:
<TABLE>
<CAPTION>
STOCK OPTION PLANS
-------------------------------------
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Risk-free interest rate............................................ 6.3% 6.2% 5.2%
Expected lives in years............................................ 5 5 5
Expected volatility................................................ 75% 78% 62%
</TABLE>
<TABLE>
<CAPTION>
EMPLOYEE STOCK
PURCHASE PLANS
-------------------------------------
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Risk-free interest rate............................................ 5.3% 5.1% 4.8%
Expected lives in years............................................ 0.5 0.5 0.5
Expected volatility................................................ 57% 56% 66%
</TABLE>
The weighted average fair value of stock based compensation awards under the
various plans are as follows for the years ended December 31:
<TABLE>
<CAPTION>
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Stock Option Plans....................................................... $ 7 $ 11 $ 7
Employee Stock Purchase Plans............................................ $ 3 $ 10 $ 4
</TABLE>
The Company applies APB Opinion No. 25 in accounting for its Plans and,
accordingly, no compensation cost has been recognized for its stock based
compensation awards in the financial statements. Had the Company determined
compensation cost based on the fair value at the date of grant for its stock
based compensation awards under SFAS No. 123, the Company's net (loss) income
would have changed to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Net income (loss)
As reported............................................................. $ 6,287 $ 6,860 $ (3,955)
Pro forma............................................................... 5,481 4,136 (8,314)
Net income per share:
Basic
As reported............................................................. 0.52 0.55 (0.28)
Pro forma............................................................... 0.45 0.33 (0.59)
Diluted
As reported............................................................. 0.48 0.50 (0.28)
Pro forma............................................................... 0.42 0.30 (0.59)
</TABLE>
Pro forma net income (loss) reflects only stock based compensation awards
granted in 1998, 1997 and 1996. Therefore, the full impact of calculating
compensation cost for stock based compensation awards under SFAS No. 123 is not
reflected in the pro forma net income (loss) amounts presented above because
compensation cost is reflected over the option's vesting period of four years
and
F-14
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
compensation cost for options granted prior to January 1, 1996 is not considered
and additional stock based compensation awards are anticipated in future years.
Activity under the Company's stock option plans is as follows:
<TABLE>
<CAPTION>
WEIGHTED-
NUMBER AVERAGE
OF EXERCISE
SHARES PRICE
----------- -----------
<S> <C> <C>
Options outstanding at December 31, 1995....................................... 1,708,074 $ 3.69
Options:
Granted...................................................................... 407,639 12.00
Exercised.................................................................... (356,198) 2.57
Canceled..................................................................... (128,225) 7.39
-----------
Options outstanding at December 31, 1996....................................... 1,631,290 5.72
Options:
Granted...................................................................... 1,022,282 15.89
Exercised.................................................................... (384,114) 3.74
Canceled..................................................................... (208,176) 17.11
-----------
Options outstanding at December 31, 1997....................................... 2,061,282 9.96
Options:
Granted...................................................................... 2,431,751 12.75
Exercised.................................................................... (152,759) 3.25
Canceled..................................................................... (1,185,255) 15.02
-----------
Options outstanding at December 31, 1998....................................... 3,155,019 $ 10.54
-----------
-----------
</TABLE>
In September 1998, the Compensation Committee of the Board of Directors
adopted a resolution to offer employees holding stock options for 1,324,818
shares the opportunity to exchange their existing stock options for new stock
options. The exchange allowed employees to receive options for the same number
of shares at $10.75 per share, which exceeded the market price during the
employee decision period, instead of an average original exercise price of
$14.75. The new options vest over one to four years. The offer was made because
the Board of Directors believed the lower priced options provide greater
retention advantage and incentive. Options for directors and officers were not
repriced. Option holders elected to exchange options covering 1,056,941 shares,
which is included as both options granted and canceled during 1998 in the
preceding table.
F-15
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
The following table summarizes information concerning stock options
outstanding and exercisable at December 31, 1998:
<TABLE>
<CAPTION>
NUMBER WEIGHTED- NUMBER
OUTSTANDING AVERAGE WEIGHTED- EXERCISABLE WEIGHTED-
AS OF REMAINING AVERAGE AS OF AVERAGE
RANGE OF DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
EXERCISE PRICES 1998 LIFE PRICE 1998 PRICE
- ---------------------- ------------ ------------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
$ 0.9333 - 4.2500 593,649 5.04 $ 3.4734 578,999 $ 3.4558
4.3333 - 10.5833 230,747 6.91 8.2950 176,501 8.1252
10.6667 - 10.7500 1,066,361 9.73 10.7499 15,246 10.7500
10.7917 - 14.0000 804,789 9.08 12.7915 127,139 12.8251
14.1667 - 26.7083 459,474 7.34 16.3341 154,046 17.1863
------------ --- ---------- ------------ ----------
$ 0.9333 - 26.7083 3,155,019 8.13 $ 10.5353 1,051,929 $ 7.4881
------------ --- ---------- ------------ ----------
------------ --- ---------- ------------ ----------
</TABLE>
(C) WARRANTS
On August 31, 1993, the Company issued a warrant to purchase up to 187,500
shares of common stock at $16.00 per share which is exercisable through August
2000. On December 19, 1994, the Company issued an additional warrant to purchase
up to 112,500 shares of common stock at $16.00 per share which is exercisable
through December 2001.
(D) PREFERRED SHARES RIGHTS AGREEMENT
On June 30, 1998, the Company adopted a Preferred Shares Rights Agreement
(the "Agreement"). Pursuant to the Agreement, rights were distributed as a
dividend at the rate of one right for each share of TriQuint common stock, par
value $0.001 per share of the Company held by stockholders of record as of the
close of business on July 24, 1998. The rights will expire on June 29, 2008,
unless redeemed or exchanged. Under the Agreement, each right initially will
entitle the registered holder to buy one unit of a share of preferred stock for
$83.33. The rights will become exercisable only if a person or group (other than
stockholders currently owning 15% of the Company's common stock) acquires
beneficial ownership of 15% or more of the Company's common stock, or commences
a tender offer or exchange offer upon consummation of which such person or group
would beneficially own 15% or more of the Company's common stock.
F-16
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(7) INCOME TAXES
The provision for income taxes consists of:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1996 1997 1998
--------- --------- -----
<S> <C> <C> <C>
Current:
Federal.............................................................. $ 145 $ 637 $ --
State................................................................ 86 200 94
Foreign.............................................................. -- 53 --
--------- --------- ---
Total current...................................................... 231 890 94
--------- --------- ---
Deferred:
Federal.............................................................. -- -- --
State................................................................ -- -- --
Foreign.............................................................. -- -- --
--------- --------- ---
Total deferred..................................................... -- -- --
--------- --------- ---
Total.............................................................. $ 231 $ 890 $ 94
--------- --------- ---
--------- --------- ---
</TABLE>
The effective tax rate differs from the federal statutory income tax rate as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Tax computed at federal statutory rate.......................................... 34.0% 34.0% (34.0)%
State income tax, net of federal effect......................................... 4.4 4.4 (4.3)
Increase (decrease) in valuation allowance...................................... (16.3) (6.7) 55.8
Differences between financial and tax reporting for stock option exercises...... (19.2) (25.0) (13.3)
Other........................................................................... 0.6 4.8 (1.8)
--------- --------- ---------
Effective tax rate.............................................................. 3.5% 11.5% 2.4%
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-17
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
The deferred income tax provision (benefit) results from changes in deferred
tax assets and liabilities as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1997 1998
--------- ---------- ---------
<S> <C> <C> <C>
Reserves not currently deductible...................................... $ (45) $ 382 $ (379)
Tax depreciation and amortization...................................... 384 (20,509) (1,813)
Capital leases......................................................... -- 20,417 7,896
Accrued liabilities.................................................... 85 231 (233)
Net operating loss carryforward........................................ 801 207 (7,528)
Valuation allowance.................................................... (1,060) (517) 2,207
Other.................................................................. (165) (211) (150)
--------- ---------- ---------
Total.............................................................. $ -- $ -- $ --
--------- ---------- ---------
--------- ---------- ---------
</TABLE>
The tax effects of significant items comprising the Company's deferred tax
asset and liability are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1998
---------- ----------
<S> <C> <C>
Deferred tax liabilities:
Amortization.................................................................. $ -- $ 686
Capital leases................................................................ 20,417 28,313
---------- ----------
Total deferred tax liability................................................ 20,417 28,999
---------- ----------
---------- ----------
Deferred tax assets:
Accounts receivable........................................................... 75 81
Inventory..................................................................... 629 1,002
Accrued liabilities........................................................... 395 628
Net operating loss carryforwards.............................................. 9,277 16,805
Depreciation.................................................................. 19,532 22,031
Other......................................................................... 644 794
---------- ----------
Total deferred tax asset before valuation allowance......................... 30,552 41,341
Valuation allowance........................................................... (10,135) (12,342)
---------- ----------
Total deferred tax asset.................................................... 20,417 28,999
---------- ----------
Net deferred tax liability (asset).......................................... $ -- $ --
---------- ----------
---------- ----------
</TABLE>
The valuation allowance for deferred tax assets as of January 1, 1996 was
$11,712. The net change in the total valuation allowance for the years ended
December 31, 1996, 1997 and 1998 was an increase (decrease) of $(1,060), $(517)
and $2,207, respectively. Approximately $5,151 of the valuation allowance for
deferred tax assets will be credited directly to stockholders' equity in the
event tax benefits of net operating losses that resulted from stock option
exercises are subsequently recognized.
At December 31, 1998, the Company had approximately $45,700 of net operating
loss carryforwards to offset against future income for federal income tax
purposes which expire from 2003
F-18
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
through 2018, and $22,003 for Oregon state income tax purposes which expire in
years 2006 through 2013.
The Company's ability to use its net operating loss carryforwards to offset
future taxable income is subject to annual restrictions contained in the United
States Internal Revenue Code of 1986, as amended (the Code). These restrictions
act to limit the Company's future use of its net operating losses following
certain substantial stock ownership changes enumerated in the Code and referred
to hereinafter as an "ownership change."
Consummation of the Company's initial public offering created an ownership
change that has resulted in approximately $12,600 of the pre-1994 net operating
loss carryforwards being limited to approximately $1,750 per year. In addition,
approximately $7,108 are further limited to approximately $967 per year due to
changes in the Company's ownership structure during 1991.
(8) CONTINGENCIES
EMPLOYMENT AGREEMENTS
The Company has employment contracts with two key officers that in the event
of their termination provide for total payments up to approximately $365.
(9) BENEFIT PLANS
The Company sponsors a voluntary contribution profit sharing and savings
plan under Section 401(k) of the Internal Revenue Code which is available to
substantially all employees. Employees can make voluntary contributions up to
limitations prescribed by the Internal Revenue Code. Company matching
contributions are discretionary. For the years ended December 31, 1996, 1997 and
1998 the Company made no discretionary matching contributions.
(10) CONCENTRATION OF RISK
(A) SUPPLIERS
The Company currently procures certain components and services for its
products from single sources. The Company purchases these components and
services on a purchase order basis, does not carry significant inventories of
these components and does not have any long-term supply contracts with its sole
source vendors. If the Company were to change any of its sole source vendors,
the Company would be required to requalify the components with each new vendor.
Requalification could prevent or delay product shipments which could materially
adversely affect the Company's results of operations. In addition, the Company's
reliance on sole source vendors involves several risks, including reduced
control over the price, timely delivery, reliability and quality of the
components. Any inability of the Company to obtain timely deliveries of
components of acceptable quality in required quantities or any increases in the
prices of components for which the Company does not have alternative sources
could materially adversely affect the Company's business, financial condition
and results of operations.
(B) CREDIT RISK
The Company generally sells its products to customers engaged in the design
and/or manufacture of high technology products either recently introduced or not
yet introduced to the marketplace. Substantially all the Company's trade
accounts receivable are due from such sources.
F-19
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
The Company performs continuing credit evaluations of its customers and
generally does not require collateral; however, in certain circumstances, the
Company may require letters of credit from its customers.
(11) SEGMENT INFORMATION
The Company has adopted SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION. SFAS No. 131 establishes standards for the
reporting by public business enterprises of information about operating
segments, products and services, geographic areas and major customers. The
method for determining what information to report is based on the way that
management organizes the segments within the Company for making operating
decisions and assessing financial performance.
The Company's chief operating decision maker is considered to be the
President and Chief Executive Officer (CEO). The Company's CEO evaluates both
consolidated and disaggregated financial information in deciding how to allocate
resources and assess performance. The CEO uses certain disaggregated financial
information for the Company's product lines: Wireless Communications;
Telecommunications and Data Communications; and Millimeter Wave Communications.
The Company has aggregated its three product lines into a single reportable
segment as allowed under SFAS No. 131 because these product lines have similar
long-term economic characteristics, such as average gross margin, and product
lines are similar in regards to (a) nature of products and production processes,
(b) type of customers, and (c) method used to distribute products.
Accordingly, the Company describes its reportable segment as gallium
arsenide integrated circuits for the communications market. All of the Company's
revenues result from sales in its product lines. The Company's operating
expenses are allocated to its three product lines, with the exception of certain
manufacturing variances (cost of goods sold) and, to a lesser extent, certain
general and administrative expenses for all years presented and, for 1998, the
Company's legal settlement discussed in note 12. Unallocated corporate operating
expenses totaled $4,651, $8,538 and $12,103 for the years ended December 31,
1996, 1997 and 1998, respectively. In addition, all non-operating income and
expenses are recorded in Corporate. The Company does not allocate assets to its
product lines.
Revenues by product line (as defined by the Company) as a percentage of
total revenues for years ended December 31, 1996, 1997 and 1998 were as follows:
Wireless Communications, 49%, 47% and 45%, respectively; Telecommunications and
Data Communications, 51%, 53% and 18%, respectively; Millimeter Wave
Communications, 0%, 0% and 37%, respectively.
Revenues outside of the United States were approximately $18,100, $24,300
and $26,800 in 1996, 1997 and 1998, respectively, of which sales to Canada
comprised $6,100, $8,527 and $10,524, respectively. There were no other foreign
countries to which sales represented 5% or more of total revenues.
F-20
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
Revenues for significant customers, those representing approximately 10% or
more of total revenues for each period, are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Customer A............................................................. 12% 12% 10%
Customer B............................................................. 17 -- --
Customer C............................................................. 13 -- --
Customer D............................................................. -- -- 12
Customer E............................................................. -- -- 12
</TABLE>
Related receivables from such customers were 31% and 26% of trade accounts
receivable at December 31, 1997 and 1998, respectively.
(12) LITIGATION
SETTLEMENT OF LAWSUIT
On July 12, 1994, a stockholder class action lawsuit was filed against the
Company, its underwriters, and certain of its officers, directors and investors
in the United States District Court for the Northern District of California. The
suit alleged that the Company, its underwriters, and certain of its officers,
directors and investors intentionally misled the investing public regarding the
financial prospects of the Company. Following the filing of the complaint, the
plaintiffs dismissed without prejudice a director defendant, the principal
stockholder defendant, the underwriter defendants and certain analyst
defendants. During 1998, the Company settled the action and recorded a special
charge of $1,400 associated with the settlement of the lawsuit and the related
legal expenses, net of accruals.
From time to time the Company is involved in various claims and legal
actions arising in the ordinary course of business. In the opinion of
management, the ultimate disposition of these matters will not have a material
effect on the Company's consolidated financial position, results of operations
or cash flows.
(13) SUBSEQUENT EVENT
On February 26, 1999, a lawsuit was filed against 88 firms, including the
Company, in the United States District Court for the District of Arizona. The
suit alleges that the defendants infringe upon certain patents held by The
Lemelson Medical, Education and Research Foundation, Limited Partnership. The
Company believes the suit is without merit and intends to vigorously defend
itself against the charges.
F-21
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3,863,314 Shares
[LOGO]
Common Stock
---------------------
PROSPECTUS
---------------------
SG COWEN
DONALDSON, LUFKIN & JENRETTE
BANC OF AMERICA SECURITIES LLC
CIBC WORLD MARKETS
DAIN RAUSCHER WESSELS
a division of Dain Rauscher Incorporated
U.S. BANCORP PIPER JAFFRAY
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by TriQuint in connection with
the sale of common stock being registered. All amounts are estimates except the
SEC registration fee, the NASD filing fee and the Nasdaq National Market listing
fee.
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee.............................................................. $ 43,951
NASD filing fee................................................................... 16,161
Nasdaq National Market listing fee................................................ 17,500
Printing and engraving costs...................................................... 120,000
Legal fees and expenses........................................................... 125,000
Accounting fees and expenses...................................................... 110,000
Blue Sky fees and expenses........................................................ 5,000
Transfer Agent, Custodian and Registrar fees...................................... 15,000
Miscellaneous expenses............................................................ 47,388
----------
Total......................................................................... $ 500,000
----------
----------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a court to
award or a corporation's board of directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Article VI, Section 1, of the Registrant's
bylaws provides for mandatory indemnification of its directors and officers and
permissible indemnification of employees and other agents to the maximum extent
permitted by the Delaware General Corporation Law. The Registrant's certificate
of incorporation provides that, pursuant to Delaware law, its directors shall
not be liable for monetary damages for breach of the directors' fiduciary duty
as directors to the Registrant and its stockholders. This provision in the
certificate of incorporation does not eliminate the directors' fiduciary duty,
and in appropriate circumstances equitable remedies such as injunctive or other
forms of non-monetary relief will remain available under Delaware law. In
addition, each director will continue to be subject to liability for breach of
the director's duty of loyalty to the Registrant for acts or omission not in
good faith or involving international misconduct, for knowing violations of law,
for actions leading to improper personal benefit to the director, and for
payment of dividends or approval of stock repurchases or redemptions that are
unlawful under Delaware law. The provision also does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws. The Registrant has entered into
Indemnification Agreements with its officers and directors, a form of which was
attached as Exhibit 10.1 to the Registrant's registration statement on Form 8-B
filed with the Commission on February 18, 1997 and incorporated herein by
reference. The Indemnification Agreements provide the Registrant's officers and
directors with further indemnification to the maximum extent permitted by the
Delaware General Corporation Law. Reference is made to Section 9 of the
Underwriting Agreement contained in Exhibit 1.1 hereto, indemnifying officers
and directors of the Registrant against certain liabilities.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
<C> <S>
1.1* Form of Underwriting Agreement
4.1(1) Specimen Stock Certificate
4.2(2) Preferred Shares Rights Agreement, dated as of June 30, 1998 between TriQuint Semiconductor,
Inc. and Chase Mellon Shareholder Services L.L.C., including the Certificate of Determination,
the form of Rights Certificate and the Summary of Rights attached thereto as Exhibits A, B and
C, respectively.
5.1....... Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation
23.1...... Form of consent of KPMG Peat Marwick LLP, Independent Auditors
23.2...... Consent of Counsel (included in Exhibit 5.1)
24.1...... Power of Attorney (see Page II-4)
</TABLE>
----------------------------
* To be filed by amendment
(1) Incorporated by reference to the Registrant's Registration Statement on
Form S-1 (File No. 33-70594) as declared effective by the Securities and
Exchange Commission on December 13, 1993.
(2) Incorporated by reference to the Registrant's Registration Statement on
Form 8-A/A (File No. 000-22660) as declared effective by the Securities
and Exchange Commission on July 24, 1998.
(B) CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statement schedule and independent
auditors' report thereon are filed herewith:
<TABLE>
<CAPTION>
PAGE NO.
---------
<S> <C>
Form of Independent Auditors' Report on Consolidated Financial Statement Schedule... S-1
Schedule II--Valuation and Qualifying Accounts...................................... S-2
</TABLE>
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions referenced in
Item 15 of this Registration Statement, the Underwriting Agreement or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act, and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-2
<PAGE>
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of Prospectus shall be
deemed to be a new registrant on statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
(3) The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(5) For the purpose of determining liability under the Securities Act, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934, (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on our behalf by the
undersigned, thereunto duly authorized, in the City of Hillsboro, State of
Oregon, on the 21st day of June 1999.
<TABLE>
<S> <C> <C>
TRIQUINT SEMICONDUCTOR, INC.
By: /s/ STEVEN J. SHARP
-----------------------------------------
Steven J. Sharp
PRESIDENT, CHIEF EXECUTIVE OFFICER &
CHAIRMAN
</TABLE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Steven J. Sharp and Edward C. V. Winn and each of
them, his attorneys-in-fact, each with the power of substitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and to sign any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, as amended, and all
post-effective amendments thereto, and to file the same, with all exhibits
thereto and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of them, or his or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
President, Chief Executive
/s/ STEVEN J. SHARP Officer and Chairman
- ------------------------------ (Principal Executive June 21, 1999
(Steven J. Sharp) Officer)
Executive Vice President,
Finance and
/s/ EDWARD C. V. WINN Administration, Chief
- ------------------------------ Financial Officer and June 21, 1999
(Edward C. V. Winn) Secretary (Principal
Financial and Accounting
Officer)
/s/ PAUL A. GARY
- ------------------------------ Director June 21, 1999
(Paul A. Gary)
- ------------------------------ Director June , 1999
(Charles Scott Gibson)
/s/ WALDEN C. RHINES
- ------------------------------ Director June 21, 1999
(Walden C. Rhines)
/s/ EDWARD F. TUCK
- ------------------------------ Director June 21, 1999
(Edward F. Tuck)
</TABLE>
II-4
<PAGE>
When the stock split effected in the form of a stock dividend referred to in
note 6(a) of the notes to the consolidated financial statements has been
consummated, we will render the following opinion.
FORM OF INDEPENDENT AUDITORS' REPORT
ON CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
The Board of Directors
TRIQUINT SEMICONDUCTOR, INC.:
Under date of February 11, 1999, except as to note 13 which is as of
February 26, 1999 and note 6(a) which is as of July , 1999, we reported on the
consolidated balance sheets of TriQuint Semiconductor, Inc. and subsidiary as of
December 31, 1997 and 1998, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1998. In connection with our audit of the
aforementioned consolidated financial statements, we also audited the
accompanying related consolidated financial statement schedule. This
consolidated financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this consolidated
financial statement schedule based on our audits. In our opinion, such
consolidated financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
KPMG PEAT MARWICK LLP
Portland, Oregon
February 11, 1999
S-1
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
OF PERIOD EXPENSES DEDUCTIONS PERIOD
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Year ended December 31, 1996:
Allowance for doubtful accounts................................ $ 202 119 102 219
Inventory valuation reserve.................................... 2,309 3,668 3,594 2,383
Year ended December 31, 1997:
Allowance for doubtful accounts................................ 219 0 23 196
Inventory valuation reserve.................................... 2,383 4,539 5,598 1,324
Year ended December 31, 1998:
Allowance for doubtful accounts................................ 196 99 33 262
Inventory valuation reserve.................................... 1,324 7,429 6,331 2,422
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER NUMBER
- ----------- -----------
<C> <S> <C>
1.1* Form of Underwriting Agreement
4.1(1) Specimen Stock Certificate
4.2(2) Preferred Shares Rights Agreement, dated as of June 30, 1998 between TriQuint Semiconductor,
Inc. and Chase Mellon Shareholder Services L.L.C., including the Certificate of
Determination, the form of Rights Certificate and the Summary of Rights attached thereto as
Exhibits A, B and C, respectively.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation
23.1 Form of consent of KPMG Peat Marwick LLP, Independent Auditors
23.2 Consent of Counsel (included in Exhibit 5.1)
24.1 Power of Attorney (see Page II-4)
</TABLE>
- ------------------------
* To be filed by amendment
(1) Incorporated by reference to the Registration Statement on Form S-1 (File
No. 33-70594) as declared effective by the Securities and Exchange
Commission on December 13, 1993.
(2) Incorporated by reference to the Registrant's Registration Statement on Form
8-A/A (File No. 000-22660) as declared effective by the Securities and
Exchange Commission on July 24, 1998.
<PAGE>
EXHIBIT 5.1
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050
TELEPHONE 650-493-9300 FACSIMILE 650-493-6811
WWW.WSGR.COM
June 21, 1999
TriQuint Semiconductor, Inc.
2300 N.E. Brookwood Parkway
Hillsboro, Oregon 97124
RE: REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 (File No.
333- ) to be filed by you with the Securities and Exchange Commission on
or about June 22, 1999 (the "Registration Statement") in connection with the
registration under the Securities Act of 1933, as amended, of 4,442,811 shares
(including 579,497 shares issuable upon exercise of the underwriters'
over-allotment option) of Common Stock of TriQuint Semiconductor, Inc. (the
"Shares"). Of the Shares, 3,579,497 shares (including all shares subject to the
above-referenced over-allotment option) are authorized but heretofore unissued,
and 863,314 shares are or will be issued and outstanding and held by the selling
stockholder referred to in the Registration Statement. As your counsel in
connection with this transaction, we have examined the proceedings proposed to
be taken in connection with said sale and issuance of the Shares.
It is our opinion that, upon completion of the proceedings being taken or
contemplated by us, as your counsel, to be taken prior to the issuance of the
Shares, and upon completion of the proceedings being taken in order to permit
such transactions to be carried out in accordance with the securities laws of
various states, where required, the Shares, when issued and sold in the manner
referred to in the Registration Statement, will be legally and validly issued,
fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement, including the prospectus constituting a part thereof,
and any amendment thereto.
Very truly yours,
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
/s/ WILSON SONSINI GOODRICH & ROSATI
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
TriQuint Semiconductor, Inc.:
We consent to the use of our "Form of Independent Auditors' Report," dated
February 11, 1999, except as to note 13 which is as of February 26, 1999 and
note 6(a) which is as of July , 1999, relating to the consolidated balance
sheets of TriQuint Semiconductor, Inc. as of December 31, 1997 and 1998, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three year period ended December 31, 1998,
and to the use of our "Form of Independent Auditors' Report," dated February 11,
1999 on the related consolidated financial statement schedule which form of
reports are included in the Registration Statement on Form S-3, dated June 22,
1999, of TriQuint Semiconductor, Inc., and to the reference to our firm under
the heading "Experts" in the Registration Statement.
/s/ KPMG Peat Marwick LLP
Portland, Oregon
June 22, 1999
