Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
TQNT > SEC Filings for TQNT > Form 10-Q on 1-Nov-2012All Recent SEC Filings

Show all filings for TRIQUINT SEMICONDUCTOR INC

Form 10-Q for TRIQUINT SEMICONDUCTOR INC


1-Nov-2012

Quarterly Report


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

Introduction
You should read the following discussion and analysis in conjunction with our condensed consolidated financial statements and the related notes thereto included in this Report on Form 10-Q and with Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2011. The discussion in this Report contains forward-looking statements, including statements regarding key advantages of our products and the benefits to our customers, participation in government programs and expansion of programs in the future, projected working capital and capital expenditures, potential investment needs, ongoing litigation, and other statements preceded by terminology such as "believes," "continue," "could," "estimates," "expects," "goal," "hope," "intends," "may," "our future success depends," "plans," "potential," "predicts," "projects," "reasonably," "should," "thinks," "will" or the negative of these terms or other comparable terminology. These statements are only predictions. A number of factors affect our operating results and could cause our actual future results to differ materially from any forward-looking statements made below, including, those related to expected demand and growth in the wireless mobile devices, networks and defense & aerospace markets and our ability to take advantage of that growth; changes in our critical accounting estimates and the reasonableness of those estimates; the ability to enter into defense & aerospace contracts; department of defense spending levels and the degree to which we may be affected by particular defense spending; the pace at which we release new products to support the defense & aerospace end market; reinvestment of all our foreign earnings except existing earnings that have previously been taxed; the ability to diversify our customer base; transitions in the mobile devices market including concentration of revenue in the handset market, continued growth of smartphones, shifts in end market demand to top smartphone suppliers, and growth in data traffic outpacing the capability of the existing infrastructure worldwide; our ability to achieve positive operating results; expected operating expenses, gross margins and per share earnings; transactions affecting liquidity and our ability to satisfy our projected expenditures through the next twelve months; factory utilization levels; and other factors and risks referenced in this Report on Form 10-Q and in Item 1A of

Part II of the Company's Annual Report on Form 10-K for the year ended
December 31, 2011 entitled "Risk Factors." In addition, historical information should not be considered an indicator of future performance.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we do not guarantee future results, levels of activity, performance or achievements. Moreover, we do not intend to update any of the forward-looking statements after the date of this Report on Form 10-Q to conform these statements to actual results. These forward-looking statements are made in reliance upon the safe harbor provision of The Private Securities Litigation Reform Act of 1995.
Overview
We are a supplier of high performance modules and components for communications applications. We design, develop and manufacture advanced high-performance radio frequency ("RF") solutions with gallium arsenide ("GaAs"), gallium nitride
("GaN"), surface acoustic wave ("SAW") and bulk acoustic wave ("BAW")
technologies for customers worldwide. We serve growing markets and a diverse customer base of manufacturers building connected mobile devices, second, third and fourth generation cellular wireless standards ("2G/3G/4G") cellular base stations, triple-play cable solutions, fiber optic networks, wireless local area networks ("WLAN"), worldwide interoperability for microwave access/long-term evolution and defense & aerospace applications.
We provide our customers with high-performance, low-cost RF solutions in three end markets: mobile devices, networks, defense & aerospace. Our mission is to deliver RF solutions that improve performance and lower the overall cost of our customer's applications and we accomplish this through a diversified product portfolio within these markets. In the mobile devices end market, we provide high performance devices such as integrated modules, duplexers and other filters, small signal components, power amplifiers and switches. In the networks end market, we are a supplier of an extensive portfolio of GaAs microwave monolithic integrated circuits and transistors and SAW and BAW filter components. We provide the defense & aerospace end market with phased-array radar, communications and electronic warfare components and have been recognized as a leader in GaN development.
Wafer and semiconductor manufacturing facilities require a significant level of fixed cost due to investments in plant and equipment, labor costs and repair and maintenance costs. During periods of high demand, factories run at higher utilization rates, generally resulting in improved financial performance. As the overall RF market has grown in recent years, with continuing desire for content expansion in smartphones, there was increased demand for our products. In response, we increased capital expenditures in order to add capacity to our factories. Now with the increased capacity installed, higher fixed manufacturing costs adversely affect operating results because factories are not fully utilized.


Table of Contents

Highlights for the Nine Months Ended September 29, 2012 Revenue decreased 11% for the nine months ended September 29, 2012 compared to the nine months ended October 1, 2011.
Mobile devices represents the largest of our three major end markets. Revenue from the sales of our products in the mobile devices end market for the nine months ended September 29, 2012 decreased 18% compared to the nine months ended October 1, 2011. The decrease is primarily due to a decline in revenue from some of our smaller customers as demand shifts amongst the top smartphone suppliers. Revenue from sales of our products in the networks end market increased 5% for the nine months ended September 29, 2012 compared to the nine months ended October 1, 2011. This increase is being driven primarily by base station expansion and strong demand for our optical products. Growth in data traffic, in the form of streaming video, location services and social networking continues to outpace the capability of the existing infrastructure worldwide. Billions of terabytes of electronic data move around the globe today and traffic continues to expand at an unprecedented rate. This creates demand for TriQuint products to support the upgrades and build-out of the worldwide wireless and wireline networks.
Revenue from sales of our products in the defense & aerospace end market increased 7% for the nine months ended September 29, 2012 compared to the nine months ended October 1, 2011 due to growth in revenue from contracts with the federal government. Our revenue in this market is dependent on program timing, which can result in swings from quarter to quarter. We have continued to win significant production orders during the nine months ended September 29, 2012 for the latest generation of radar systems such as the F-35 Lightning II Joint Strike Fighter, and the Army's TPQ-53 Counter Fire Target and Acquisition Radar. We continue to accelerate the release of new products to support this market. Most notably, we extended our family of industry leading packaged GaN discrete products, adding five new products that provide superior gain and efficiency in a variety of industry standard packages. Critical Accounting Policies and Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. The accounting policies involve critical accounting estimates because they are particularly dependent on estimates and assumptions made by management about matters that are highly uncertain at the time the accounting estimates are made. Although we have used our best estimates based on facts and circumstances available to us at the time, different estimates reasonably could have been used. Changes in the accounting estimates we use are reasonably likely to occur from time to time, which may have a material effect on the presentation of our financial condition and results of operations.
Our most critical accounting estimates include revenue recognition; valuation of inventory, which affects gross margin; accounting for income taxes, which affects our tax provision; precious metals reclaim, which affects cost of goods sold; stock-based compensation, which affects cost of goods sold and operating expenses and our accounting for litigation and settlement costs. We also have other policies that we consider to be key accounting policies, such as the valuation of accounts receivable, reserves for sales returns and allowances:
however, these policies either do not meet the definition of critical accounting estimates described above or are not currently material items in our financial statements. We review our estimates, judgments, and assumptions periodically and reflect the effects of revisions in the period in which they are deemed to be necessary. We believe that these estimates are reasonable; however, actual results could differ from these estimates.
We added a critical accounting policy during the nine months ended September 29, 2012 related to our accounting for litigation and settlement costs, which is described below. Refer to our most recent Annual Report on Form 10-K for a description of the remaining policies.
Litigation and settlement costs
From time to time, we are involved in legal actions. There are many uncertainties associated with any litigation or investigation, and we cannot be certain that these actions or other third-party claims against us will be resolved without costly litigation, fines and/or substantial settlement payments. If information becomes available that causes us to determine that a loss in any of our pending litigation, investigations or settlements is probable, and we can reasonably estimate the loss associated with such events, we will record the loss in accordance with GAAP. However, the actual liability in any such litigation or investigations may be materially different from our estimates, which could require us to record additional costs. In addition, settlement agreements


Table of Contents

can be complex and involve multiple elements. Determining the fair value of elements within a multiple element settlement arrangement involves estimates and assumptions determined by management, which if different estimates had been used, could materially change the determination of fair value of the elements. Additionally, certain elements of an arrangement may not be reliably determinable and in these cases, we use a residual approach to value these elements.
Results of Operations
The following table sets forth the results of our operations expressed as a percentage of revenue for the three and nine months ended September 29, 2012 and October 1, 2011:

                                              Three Months Ended                Nine Months Ended
                                         September 29,      October 1,     September 29,     October 1,
                                              2012             2011             2012            2011
Revenue                                      100.0  %          100.0  %        100.0  %         100.0  %
Cost of goods sold                            69.3              65.1            71.6             61.9
Gross profit                                  30.7              34.9            28.4             38.1
Operating expenses:
Research, development and engineering         20.3              16.9            19.4             16.6
Selling, general and administrative           13.1              10.6            13.3             11.0
Litigation expense                               -               1.8             1.3              2.5
Total operating expenses                      33.4              29.3            34.0             30.1
(Loss) income from operations                 (2.7 )             5.6            (5.6 )            8.0
Other (expense) income:
Interest income                                0.0               0.0             0.0              0.1
Interest expense                              (0.3 )            (0.2 )          (0.2 )           (0.2 )
Foreign currency gain (loss)                   0.0              (0.1 )          (0.0 )           (0.0 )
Recovery of investment                           -               0.2             1.2              0.1
Other, net                                     0.0               0.0             0.0              0.0
Total other (expense) income, net             (0.3 )            (0.1 )           1.0             (0.0 )
(Loss) income before income tax               (3.0 )             5.5            (4.6 )            8.0
Income tax expense (benefit)                   2.6              (1.4 )          (0.8 )            1.4
Net (loss) income                             (5.6 )%            6.9  %         (3.8 )%           6.6  %

Three Months Ended September 29, 2012 and October 1, 2011
Revenue from Operations
Revenue decreased $15.2 million, or 7%, for the three months ended September 29,
2012 compared to the three months ended October 1, 2011.
Revenue by end market for the three months ended September 29, 2012 and
October 1, 2011, was as follows:
                             Three Months Ended
                       September 29,      October 1,
(in millions)               2012             2011
Mobile Devices        $    127.0         $      151.5
Networks                    49.8                 43.7
Defense & Aerospace         24.0                 20.8
Total                 $    200.8         $      216.0

Mobile Devices
Revenue from the sales of our products in the mobile devices end market decreased approximately 16% to for the three months ended September 29, 2012 compared to the three months ended October 1, 2011. Revenue from the sales of our products in the three primary submarkets of the mobile devices end market was as follows:


Table of Contents

Three Months Ended
                 September 29,      October 1,
(in millions)         2012             2011
3G/4G           $    102.8         $      112.6
2G                     4.7                  7.1
Connectivity          19.5                 31.8
Total           $    127.0         $      151.5

3G/4G revenue declined primarily as a result of decreased demand from our smaller customers due to shifts in market share and consolidation among top smartphone suppliers. 2G revenue declined as we shifted focus away from this product area. Connectivity revenue declined primarily as a result of transition to the next generation of products.
Networks
Revenue from the sales of our products in the networks end market increased approximately 14% for the three months ended September 29, 2012 compared to the three months ended October 1, 2011. The increase was primarily due to higher sales of our transport products, driven largely by the strong growth in demand for our optical products. Revenue from the sales of our products in the three primary submarkets of the networks end market was as follows:

Three Months Ended
                  September 29,       October 1,
(in millions)          2012              2011
Radio Access    $     17.8           $      16.9
Transport             25.0                  20.2
Multi-market           7.0                   6.6
Total           $     49.8           $      43.7

Defense & Aerospace
Revenue from the sales of our products in the defense & aerospace end market increased approximately 15% for the three months ended September 29, 2012 compared to the three months ended October 1, 2011, due primarily to the timing of programs.
Significant Customers
For the three months ended September 29, 2012 and October 1, 2011, sales to Foxconn Technology Group accounted for 31% and 35% of our revenue, respectively. While we strive to maintain a strong relationship with our customers, our customers' product life cycles are short as they continually develop new products. The selection process for our products to be included in our customers' new products is highly competitive. There are no guarantees that our products will be included in the next generation of products introduced by Foxconn Technology Group or our other customers. Any significant loss of, or a significant reduction in purchases by this, or other significant customers, could have an adverse affect on our financial condition and results of operations.
Some of our mobile devices end customers use multiple subcontractors for product assembly and test and some of those subcontractors have multiple customers. Therefore, revenues from our customers may not necessarily equal the business of a single mobile devices end customer.
Gross Profit
Our gross profit as a percentage of revenue decreased to 30.7% for the three months ended September 29, 2012, from 34.9% for the three months ended October 1, 2011. The decrease in gross profit was primarily the result of increased capacity placed into service during the nine months ended September 29, 2012 coupled with lower demand, which resulted in a lower factory utilization rate in the three months ended September 29, 2012. Operating expenses
Research, development and engineering
Our research, development and engineering expenses for the three months ended September 29, 2012 compared to the three months ended October 1, 2011 increased $4.4 million, or 12%. The increase was primarily the result of increased spending on material to develop new products, qualification costs and prototypes.
Selling, general and administrative


Table of Contents

Selling, general and administrative expenses for the three months ended September 29, 2012 increased $3.5 million, or 15%, compared to the three months ended October 1, 2011. The increase in selling, general and administrative expenses primarily resulted from more medical claims submitted under our self-insurance program.
Litigation expense
Litigation expense for the three months ended September 29, 2012 decreased $4.1 million, or 100% compared to the three months ended October 1, 2011, as a result of settling the Avago litigation. Details regarding this matter are more fully described in Part II, Item 1 - Legal Proceedings. Other expense, net
Other expense, net was relatively flat for the three months ended September 29, 2012 compared to the three months ended October 1, 2011, with an increase of $0.3 million, or less than 1% as a percentage of total revenue. Income tax expense (benefit)
We recorded an income tax expense of $5.1 million and an income tax benefit of $3.1 million for the three months ended September 29, 2012 and October 1, 2011, respectively. Income tax expense for the three months ended September 29, 2012 was primarily associated with U.S. federal and state income taxes due to the mix of profit and loss between jurisdictions and the recognition of additional valuation allowance. The income tax benefit for the three months ended October 1, 2011 was primarily associated with the release of certain liabilities due to the expiration of the statue of limitations and the recognition of additional tax credits related to Research and Experimental ("R&E") spending. Nine Months Ended September 29, 2012 and October 1, 2011 Revenue from Operations
Revenue decreased $73.5 million, or 11%, for the nine months ended September 29, 2012 compared to the nine months ended October 1, 2011.
Revenue by end market for the nine months ended September 29, 2012 and October 1, 2011, was as follows:

                             Nine Months Ended
                       September 29,     October 1,
(in millions)              2012             2011
Mobile Devices        $    387.7        $      472.5
Networks                   142.3               135.1
Defense & Aerospace         65.6                61.5
Total                 $    595.6        $      669.1

Mobile Devices
Revenue from the sales of our products in the mobile devices end market
decreased approximately 18% for the nine months ended September 29, 2012
compared to the nine months ended October 1, 2011. Revenue from the sales of our
products in the three primary submarkets of the mobile devices end market was as
follows:
                      Nine Months Ended
                 September 29,    October 1,
(in millions)        2012            2011
3G/4G              309.2               339.1
2G                  18.3                30.4
Connectivity        60.2               103.0
Total              387.7               472.5

3G/4G revenue declined primarily as a result of reduced demand from our smaller customers due to shifts in market share and consolidation among top smartphone suppliers. 2G revenue declined as we shifted focus away from this product area. Connectivity revenue declined as a result of transition to the next generation of products.


Table of Contents

Networks
Revenue from the sales of our products in the networks end market increased
approximately 5% for the nine months ended September 29, 2012 compared to the
nine months ended October 1, 2011. The increase was primarily driven by an
increase in sales of our transport products, driven largely by the strong growth
in demand for our optical products. Revenue from the sales of our products in
the three primary submarkets of the networks end market was as follows:
                      Nine Months Ended
                 September 29,    October 1,
(in millions)        2012            2011
Radio Access        47.9                45.9
Transport           72.5                67.8
Multi-market        21.9                21.4
Total              142.3               135.1

Defense & Aerospace
Revenue from the sales of our products in the defense & aerospace end market increased approximately 7% for the nine months ended September 29, 2012 compared to the nine months ended October 1, 2011, primarily due to the timing of programs.
Significant Customers
For the nine months ended September 29, 2012 and October 1, 2011, Foxconn Technology Group accounted for 31% and 34% of our revenue, respectively. Gross Profit
Our gross profit as a percentage of revenue decreased to 28.4% for the nine months ended September 29, 2012, from 38.1% for the nine months ended October 1, 2011. The decrease in gross profit was primarily the result of increased capacity put in place during 2012, coupled with lower demand, thereby resulting in a lower factory utilization rate.
Operating expenses
Research, development and engineering
Our research, development and engineering expenses for the nine months ended September 29, 2012, compared to the nine months ended October 1, 2011 increased of $5.1 million, or 5%. The increase was primarily the result of increased spending on material to develop new products, qualification costs and prototypes.
Selling, general and administrative
Selling, general and administrative expenses for the nine months ended September 29, 2012 increased $5.7 million, or 8%, compared to the nine months ended October 1, 2011. The increase in selling, general and administrative expenses primarily resulted from more medical claims submitted under our self-insurance program.
Litigation expense
Litigation expense for the nine months ended September 29, 2012 decreased $9.4 million, or 56%, compared to the nine months ended October 1, 2011, as a result of settling the Avago litigation in May 2012. Details regarding this matter are more fully described in Part II, Item 1 - Legal Proceedings. Other income (expense), net
Other income, net for the nine months ended September 29, 2012 was $6.0 million, compared to other expense, net of $0.2 million for the nine months ended October 1, 2011. The fluctuation in other income (expense), net when comparing the nine months ended September 29, 2012 to the nine months ended October 1, 2011, was primarily due to the $7.0 million gain/recovery on the sale of a previously impaired investment for the nine months ended September 29, 2012. Income tax (benefit) expense
We recorded an income tax benefit of $5.1 million for the nine months ended September 29, 2012 and income tax expense of $9.6 million for the nine months ended October 1, 2011. The income tax benefit for the nine months ended September 29, 2012 was primarily associated with our pre-tax loss, offset by an accrual for unrecognized tax benefits. The


Table of Contents

income tax expense for the nine months ended October 1, 2011 primarily resulted from U.S. federal and state income taxes, offset by benefits from the release of certain liabilities due to the expiration of the statute of limitations and the recognition of additional tax credits related to R&E spending.

Liquidity and Capital Resources
Liquidity
As of September 29, 2012, our cash, cash equivalents and short-term marketable
securities decreased $17.7 million, or 11%, from December 31, 2011, primarily as
a result of the repurchase of approximately 4.9 million shares of our stock for
$25.0 million. Other related changes at September 29, 2012 compared to
December 31, 2011 were:
         Our accounts receivable balance increased $6.3 million, or 5%,
          primarily due to higher shipment activity during the last five weeks
          leading up to the end of the period, partially offset by lower
          quarterly revenue.


         Our inventory balance increased $2.6 million, or 2%. The increase was
          primarily due to the building of inventory in anticipation of increased
          demand.


         Our net property, plant and equipment decreased $25.2 million, or 5%.
          The decrease was the result of depreciation expense recognized on
          existing assets of $64.4 million, which outpaced capital additions in
          the first nine months of 2012. Capital expenditures during the period
          amounted to $46.0 million, which excludes the timing effects of
. . .
  Add TQNT to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for TQNT - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.