SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 30, 2002
COMMISSION FILE NUMBER 0-22511
RF MICRO DEVICES, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-1733461
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
7628 THORNDIKE ROAD
GREENSBORO, NORTH CAROLINA 27409-9421
(Address of principal executive offices) (Zip code)
(336) 664-1233
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the registrant's common stock held by
non-affiliates of the registrant was approximately $2,710,138,215 as of May 31,
2002. For purposes of such calculation, shares of common stock held by persons
who hold more than 10% of the outstanding shares of common stock and shares held
by directors and officers of the registrant and their immediate family members
have been excluded because such persons may be deemed to be affiliates. This
determination is not necessarily conclusive. There were 165,151,628 shares of
the registrant's common stock outstanding as of May 31, 2002.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant has incorporated by reference into Part II of this report
portions of its annual report to shareholders for the fiscal year ended March
31, 2002 and has incorporated by reference into Part III of this report portions
of its annual report to shareholders for the fiscal year ended March 31, 2002
and portions of its proxy statement for its 2002 annual meeting of shareholders.
THIS ANNUAL REPORT ON FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS THAT RELATE
TO OUR PLANS, OBJECTIVES, ESTIMATES AND GOALS. WORDS SUCH AS "EXPECT,"
"ANTICIPATE," "INTEND," "PLAN," "BELIEVE" AND "ESTIMATE," AND VARIATIONS OF SUCH
WORDS AND SIMILAR EXPRESSIONS, IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. OUR
BUSINESS IS SUBJECT TO NUMEROUS RISKS AND UNCERTAINTIES, INCLUDING PROBABLE
VARIABILITY IN OUR QUARTERLY OPERATING RESULTS, THE RATE OF GROWTH AND
DEVELOPMENT OF WIRELESS MARKETS, RISKS ASSOCIATED WITH OUR OPERATION OF
MOLECULAR BEAM EPITAXY AND WAFER FABRICATION FACILITIES, OUR ABILITY TO MANAGE
RAPID GROWTH AND TO ATTRACT AND RETAIN SKILLED PERSONNEL, VARIABILITY IN
PRODUCTION YIELDS, RAW MATERIAL AVAILABILITY, MANUFACTURING CAPACITY
CONSTRAINTS, DEPENDENCE ON A LIMITED NUMBER OF CUSTOMERS, DEPENDENCE ON OUR
GALLIUM ARSENIDE HETEROJUNCTION BIPOLAR TRANSISTOR PRODUCTS AND DEPENDENCE ON
THIRD PARTIES. THESE AND OTHER RISKS AND UNCERTAINTIES, MANY OF WHICH ARE
ADDRESSED IN MORE DETAIL BELOW IN THE SECTIONS ENTITLED "BUSINESS - ADDITIONAL
FACTORS THAT MAY AFFECT FUTURE RESULTS" AND "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," COULD CAUSE OUR
ACTUAL RESULTS AND DEVELOPMENTS TO BE MATERIALLY DIFFERENT FROM THOSE EXPRESSED
OR IMPLIED BY ANY OF THESE FORWARD-LOOKING STATEMENTS.
WE USE A 52 OR 53-WEEK FISCAL YEAR ENDING ON THE SATURDAY CLOSEST TO MARCH 31 OF
EACH YEAR. FISCAL 2002 AND 2000 WERE 52-WEEK YEARS AND FISCAL 2001 WAS A 53-WEEK
YEAR. OUR OTHER FISCAL QUARTERS END ON THE SATURDAY CLOSEST TO JUNE 30,
SEPTEMBER 30 AND DECEMBER 31 OF EACH YEAR. FOR PURPOSES OF THIS ANNUAL REPORT ON
FORM 10-K, WE DESCRIBE EACH FISCAL YEAR AS HAVING ENDED ON MARCH 31 AND THE
FIRST THREE QUARTERS OF EACH FISCAL YEAR ARE DESCRIBED AS HAVING ENDED ON JUNE
30, SEPTEMBER 30 AND DECEMBER 31.
WHERE APPROPRIATE, WE HAVE ADJUSTED REFERENCES IN THIS ANNUAL REPORT ON FORM
10-K TO EARNINGS AND LOSS PER SHARE, SHARE COUNT AND SHARE PRICE INFORMATION TO
REFLECT THREE TWO-FOR-ONE STOCK SPLITS. STOCK SPLITS WERE EFFECTED IN THE FORM
OF A 100% SHARE DIVIDEND PAYABLE ON MARCH 31, 1999 TO RECORD HOLDERS OF COMMON
STOCK ON MARCH 17, 1999, ON AUGUST 18, 1999 TO RECORD HOLDERS OF COMMON STOCK ON
AUGUST 2, 1999 AND ON AUGUST 25, 2000 TO RECORD HOLDERS OF COMMON STOCK ON
AUGUST 8, 2000.
PART I
ITEM 1. BUSINESS
INTRODUCTION
RF Micro Devices, Inc. was incorporated under the laws of North Carolina in
1991. We design, develop, manufacture and market proprietary radio frequency
integrated circuits (RFICs) primarily for wireless communications products and
applications. Our products are included primarily in cellular and PCS (personal
communications service) phones, base stations, wireless local area networks
(WLANs), and cable television modems. The majority of our revenue is derived
from sales of RFICs designed for cellular and PCS phones. We offer a broad array
of products including amplifiers, mixers, modulators/demodulators and single
chip transmitters, receivers and transceivers that represent a substantial
majority of the RFICs required in wireless subscriber equipment. These
integrated circuits perform the transmit and receive functions that are critical
to the performance of wireless and PCS phones.
We currently design products using multiple semiconductor process technologies.
These technologies include aluminum gallium arsenide (AlGaAs) (also referred to
as gallium arsenide (GaAs)), heterojunction bipolar transistor (HBT), silicon
bipolar transistor, silicon complementary metal-oxide-semiconductor (CMOS),
silicon BiCMOS (integration of bi-polar transistors and CMOS), silicon germanium
(SiGe) BiCMOS, and GaAs metal-semiconductor field-effect transistor (MESFET). We
are also evaluating the development of integrated circuits utilizing indium
gallium phosphide (InGaP) HBT, gallium nitride (GaN) and GaAs pseudomorphic high
electron mobility transistor (pHEMT). Generally speaking, GaAs-based products
offer better electrical performance while silicon-based products are less
expensive. Original equipment manufacturers (OEMs) try to maximize tradeoffs
between performance and cost. Our approach to using multiple semiconductor
process technologies allows us to offer customers products that fulfill their
performance, cost and time-to-market requirements. We call this approach to
business Optimum Technology Matching(R).
We design most of our GaAs products using HBT and believe that our GaAs HBT
RFICs have the following advantages over products manufactured using silicon or
GaAs MESFET process technologies:
o LINEARITY: GaAs HBT products exhibit good linearity, which means they
can amplify weak signals with minimal signal distortion. As a result,
our customers can design phones with clearer transmission and
reception.
o EFFICIENCY: Our GaAs HBT products are efficient, which means they use
less power than competing products to transmit the same signal
strength. As a result, our customers can design phones with improved
battery life and increased talk time.
o SIZE: Because our GaAs HBT products are small, they are relatively
inexpensive to manufacture. As a result, we believe we offer our
customers price competitive products.
Because of the importance of design to many of our parts and the strength of our
GaAs HBT process technology, we are a single-sourced supplier to many customers.
Our products are purchased by leading OEMs such as Nokia Mobile Phones, Ltd., LG
Electronics, Inc., Samsung Electronics Co., Ltd, Motorola, Inc., Wavecom, S.A.,
Kyocera America, Inc., Sony Ericsson Mobile Communications, Curitel
Communications, Inc. and Siemens, A.G.
TRW Inc. (TRW) has granted us a license (in exchange for shares of our common
stock) to use its GaAs HBT process technology to design and manufacture products
for commercial wireless applications. TRW manufactured all of our GaAs HBT
products before September 1998. We now manufacture our own GaAs HBT products
under this license at our own wafer fabrication facilities.
INDUSTRY OVERVIEW
The wireless communications industry has grown rapidly over the past decade as a
result of technological advances, changes in telecommunications regulations and
the allocation and licensing of additional radio spectrum. Technological
advances have also led to the development of competing wireless communications
services, the establishment of wireless applications and the emergence of third
generation services that offer the prospect of even higher data access speeds,
multimedia capabilities, simultaneous access to multiple services and true
global roaming. During calendar year 2001, the wireless industry experienced one
of its first declines in handset sales. Units sold decreased approximately 5% in
calendar 2001 compared to an increase of approximately 47% for calendar year
2000. This slight decline in 2001 was primarily the result of excess inventory
among manufacturers and delays in next-generation handsets by manufacturers.
The wireless industry is experiencing a movement from wireless networks that use
analog signal modulation techniques to wireless networks that use digital signal
modulation techniques. As compared to analog technologies, digital technologies
generally provide better signal quality, help the transmission of both voice and
data and improve capacity by allowing the transmission of more information in a
smaller amount of frequency space. Digital technologies place a premium on
linear power amplification, which can mean higher quality signals.
The wireless communications markets have many different air interface signal
transmission standards in different parts of the world, including digital
standards, such as Global System for Mobile Communications (GSM), Time Division
Multiple Access (TDMA) and Code Division Multiple Access (CDMA), analog
standards, such as Advanced Mobile Phone Service and Total Access Communications
Systems, and certain hybrid standards. For PCS, the Federal Communications
Commission has approved seven different air interface standards. The handsets
designed for each air interface standard generally require unique radio
frequency and baseband integrated circuit solutions. Because it has become
increasingly difficult for OEMs of subscriber equipment to develop and supply
all the required components in a timely and cost-effective manner, some OEMs
have increasingly relied on third party value-added technology providers that
have the component- and systems-level expertise to design, and the production
capacity to supply, these solutions. This technology-outsourcing trend is
particularly evident in the radio frequency segment of the equipment due to the
scarcity of RFIC engineers and the design complexity of the technology.
Radio frequency technology presents different engineering challenges than
standard semiconductor design. In general, digital and baseband semiconductor
design engineers create standard semiconductor circuit
designs that have predictable performance, which permits an automated design
process. Each radio frequency component, however, has distinctly different
characteristics that influence overall system performance in complex ways.
Instead of having stable inputs and outputs, the radio frequency circuit
characteristics can drift based on process variations, temperature, power supply
and other variables. As a result, performance characteristics are unique for
each device, and the radio frequency engineer must evaluate and develop new
designs on a continuous basis for each system performance level and air
interface standard. In addition to being skilled in semiconductor circuit
design, the radio frequency circuit designer must have a thorough understanding
of signal processing principles, must understand the totality of the system for
which the device is intended and must be able to create designs that function
within the unique parameters of different wireless system architectures. As
radio frequency technology has moved from discrete components to integrated
circuit solutions, the scarcity of engineers with both integrated circuit design
and radio frequency expertise has become more pronounced.
In early wireless communications equipment, individually packaged discrete
components were mounted on circuit boards to form complex circuits used to
transmit and receive radio frequency signals. Size, reliability and cost
concerns ultimately led to a move from discrete devices to silicon-based
integrated circuits. Particularly for the critical power amplifier function, the
use of silicon integrated circuits at cellular and PCS frequencies has been
limited because of decreased operating performance. In particular, at high
frequencies silicon RFICs consume more power, have relatively higher noise and
distortion parameters and create excess heat.
Within the last decade, GaAs semiconductor technology has emerged as an
effective alternative or complement to silicon technology in many high
performance radio frequency applications. GaAs has inherent physical properties
that allow electrons to move up to five times faster than in silicon, which
permits the manufacture of GaAs devices that operate at much higher speeds than
silicon devices or at the same speeds with lower power consumption. This is
particularly important in battery powered portable applications such as
handsets. Moreover, the semi-insulating GaAs substrate significantly reduces
some of the unwanted parasitic effects of the conductive silicon substrate that
cause its performance to degrade at high frequencies.
GaAs integrated circuits were first implemented using a type of transistor known
as MESFET. GaAs MESFET integrated circuits have certain inherent limitations,
including difficulty meeting high linearity performance criteria without
sacrificing other performance criteria, the general requirement of both a
positive and negative power supply for power stages and the inability to shrink
the device size due to the lateral structure. A different type of GaAs
transistor known as an HBT, which has been used in military and space
applications, is now used in commercial radio frequency applications.
Our products manufactured using the GaAs HBT process technology include power
amplifiers and small signal devices that have been designed into advanced
subscriber handsets manufactured by leading OEMs. In addition to the advantages
that GaAs provides over silicon in terms of speed, efficiency and the ability to
operate at high frequencies, we believe that GaAs HBT components offer benefits
over GaAs MESFET devices in comparable applications in a number of ways,
including efficiency, linearity, size and complexity.
STRATEGY
Our goal is to be the leading worldwide supplier of RFICs for a broad range of
commercial wireless applications. To meet this goal, we have developed a focused
strategy. The key elements are:
o ESTABLISH SOLID CUSTOMER RELATIONSHIPS. We currently have strong
customer relationships with several of the leading OEMs. These OEMs
are interested in suppliers that have the design capability and
manufacturing capacity to meet industry demands. In fiscal 2002, we
began construction of a test and tape and reel facility in China
located near a Nokia handset assembly facility, which we believe will
accelerate time-to-market of key components, reduce shipping costs and
contribute to improved inventory management. We expect to have this
facility operational by the fall of 2002. We continue to expand our
sales offices in existing locations as well as establish new offices
in order to enhance our direct support for our major customers.
o MAINTAIN DIVERSIFICATION IN PROCESS TECHNOLOGIES. We believe that we
are the only provider of RFICs in commercial volumes that is able to
design products in six distinct process technologies -- GaAs HBT,
silicon bipolar, silicon CMOS, silicon BiCMOS, SiGe BiCMOS and GaAs
MESFET. While attempting to leverage our GaAs HBT capabilities, we
also intend to continue to expand our line of silicon-based RFICs. We
are pursuing agreements with external foundries to provide us with a
guaranteed source of supply and favorable pricing for silicon wafers.
During fiscal 2002, we acquired as an investment in process technology
RF Nitro Communications, Inc. (RF Nitro), a privately held company
with advanced materials and products in broadband wireless and
wireline (fiber-optic). RF Nitro provided us access to advanced
compound semiconductor processes, such as GaN, as well as additional
resources to conduct advanced research on this and other technologies.
In addition, RF Nitro sold InGaP transistors and amplifiers, which is
expected to accelerate our initiatives to introduce InGaP for certain
wireless applications.
o CONTINUE TO EXPAND MANUFACTURING CAPACITY. Our first wafer fabrication
facility has the capacity to produce 60,000 four-inch wafers annually.
Our second wafer fabrication facility currently has the capacity to
produce 60,000 four-inch wafers annually. We are installing additional
equipment and expanding to the clean room to increase capacity within
our second wafer fabrication facility to 60,000 six-inch wafers
annually, which represents the equivalent of 135,000 four-inch wafers
per year. We believe operating our own GaAs HBT wafer fabrication
facilities has improved our ability to respond to customer demand for
products manufactured using the GaAs HBT process technology and is
providing us with greater opportunities to enhance product and process
quality and reliability. We started construction on a test and tape
and reel facility in Beijing, China in fiscal 2002. This facility is
expected to be operational by the fall of calendar 2002. We anticipate
this test facility will provide us 50% additional capacity in tape and
reel operations and 29% additional test capacity.
o OFFER A WIDE RANGE OF RADIO FREQUENCY PRODUCTS. We offer a full line
of products that include power amplifiers, low noise
amplifiers/mixers, quadrature modulators/demodulators, and single chip
transceivers. For cellular and PCS applications, we offer products
addressing virtually all of the analog and digital air interface
standards. Our design engineering staff has developed proprietary
design and fabrication modeling techniques and tools to enable us to
deliver state-of-the-art integrated circuit designs that meet our
customers' stringent technical specifications. In response to customer
requests, we are also offering RFICs in a module package that, in
addition to one or more RFMD-designed integrated circuits, includes
passive components, such as capacitors, inductors and resistors, that
are commonly incorporated into end-user devices. We continuously work
to expand our range of radio frequency products, and in December 2001
we acquired the global positioning system (GPS) development operation
of International Business Machine Corp. (IBM). This acquisition
provides us with advanced GPS technology that works with a wide
variety of end products including handsets and marine and in-vehicle
automotive devices.
o FOCUS PRIMARILY ON WIRELESS MARKETS. Since RF Micro Device's formation
in 1991, we have focused our efforts almost exclusively on the design,
development, manufacture and sale of RFICs to participants in the
commercial wireless markets. We have developed and sold integrated
circuits for a broad range of applications within these markets,
including cellular and PCS, base stations, cordless telephony,
industrial radios, WLANs, local loop, security, Bluetooth and utility
meter reading. We believe our recent GPS product expansion broadens
our wireless market opportunities and positions us to include GPS
functions in handsets in the future. IBM's GPS development operation
was the first to introduce GPS solutions using SiGe, which reduces
size, power consumption and noise figure, and enables higher levels of
integration. Despite our focus on wireless markets, we also evaluate
other markets and will attempt to enter them if the opportunity
presents itself.
o MAINTAIN BALANCED PRODUCT MIX. We strive to maintain a balance between
custom and standard products. Custom-designed products are usually
developed for volume production orders from large OEMs. Custom
products normally are manufactured on an exclusive basis for the
originating customer for an agreed period of time. Once exclusive
production is over, we attempt to quickly move custom products into
the standard product category in order to broaden our customer base
and leverage our design and product development expenditures.
MARKETS
We design, develop, manufacture and market our products to both domestic and
international OEMs for commercial applications primarily in the wireless
markets, cellular and PCS handsets, base stations and WLAN equipment.
CELLULAR AND PCS HANDSETS
In cellular and PCS applications, calls are placed through handheld subscriber
devices by making a connection with a base station via radio frequency channels.
BASE STATIONS
Base stations installed across an area create a wireless telecommunications
network that enables cell phones to communicate with one another or with wired
telephones. Each base station is equipped to receive and send radio frequency
signals through an antenna, as well as amplify outgoing signals to ensure the
transmission reaches its destination without fading. For both existing and
future generation wireless technologies, these base stations provide the system
backbone and must be in place before cell phones can be used.
WIRELESS NETWORKS
Wireless networking involves the transmission and reception of data such as
e-mail, faxes, computer files and Internet content by desktop and portable
computers via wireless radio frequency links rather than wired lines. Network
coverage ranges from WLANs, which might be found within a business or single
building, to metropolitan area networks, which would be limited to a defined
metropolitan or geographic area, to wide area networks, which connect
individuals and work groups over larger geographic areas.
OTHER MARKETS
We also supply custom components for other applications. In the wireless market,
we supply components for local loop systems, cordless telephony, industrial
radios, satellite radio, global positioning system, security systems, utility
meter reading systems, two-way paging, monitoring devices, interactive toys,
home networking, PC modem cards, keyless entry and handheld devices used for
point-of-sale, bar coding and other applications. In other markets, we supply
components for set-top converter boxes and cable modems and for optical
transceivers and transponders. We also market various components for satellite
and microwave communications applications, and certain of our components, such
as gain blocks and attenuators, are used for instruments and in other wired
applications.
MANUFACTURING, PACKAGING AND TESTING
We are an ISO 9001 certified manufacturer. Our production process starts with
GaAs substrates, called wafers. A transistor layer is grown on the wafer using a
molecular beam expitaxy (MBE) process in our MBE facility. These wafers are sent
to our wafer fabrication facility where we isolate the transistor layer and
interconnect the transistors according to circuit design. The wafers are then
scribed and broken into individual die. The die must be assembled, or packaged,
and tested. After testing, the RFICs are prepared for shipment through a tape
and reel process.
We have one MBE facility and two wafer fabrication facilities located in
Greensboro, North Carolina. We began manufacturing our own GaAs HBT products in
September 1998 in our first wafer fabrication facility and our second
fabrication facility qualified for production in the third quarter of fiscal
2002. During fiscal 2002, we manufactured products representing approximately
90% of our total revenue at these fabrication facilities.
We currently use independent foundries to supply our silicon-based product
requirements and our GaAs MESFET devices. Use of independent foundries involves
a number of risks, including the possibility of material disruptions in the
supply of key RFICs and the lack of control over delivery schedules,
manufacturing yields, quality and fabrication costs. During the first quarter of
fiscal 2002, we announced a strategic alliance with Agere in which we agreed to
deploy silicon-manufacturing equipment within Agere's manufacturing line in
Orlando, Florida. The alliance was designed to provide us a guaranteed source of
supply and favorable pricing of silicon wafers. On January 23, 2002, Agere
announced that it was seeking a buyer for its Orlando wafer fabrication
operation. We are engaged in discussions with Agere regarding the terms of our
alliance and the effect of this potential sale. Management currently cannot
predict the outcome of these discussions or what form the alliance will take in
the future, but currently does not believe that these developments will have a
material adverse effect on our business, financial condition or results of
operations.
We currently use nine vendors located in Asia, one vendor located in France and
one vendor located in the United States to package and assemble our products.
All of these vendors are certified to applicable ISO 9000 or QS 9000 series
specifications, which means that their operations have in each case been
determined by independent examiners to comply with certain internationally
developed quality control standards. We qualify and monitor assembly contractors
based on cost and quality. These contractors typically provide us with per-unit
pricing.
We have encountered packaging quality problems with certain of our vendors,
particularly with regard to GaAs products. We have taken steps to improve the
reliability of packaging quality; however, we cannot be sure that we will not
experience additional packaging quality problems in the future. We will continue
to monitor closely our vendors as the complexity of our products and our
production volumes increase.
The tape and reel function is performed in part internally, and we outsource the
balance of our requirements to one domestic outside vendor and one vendor
located in Asia. We use two independent test vendors in Asia to test our
products. In September 2000, we opened a new internal test facility located in
Greensboro, North Carolina. During fiscal 2002, we began construction on a test
and tape and reel facility near a handset assembly facility operated by Nokia in
Beijing, China. This facility is scheduled to be operational by the fall of
calendar 2002. The tape and reel portion of the facility is expected to increase
our in-house capacity for this function by 50%. The test portion of the facility
is expected to increase our module test capacity by 29%.
We maintain an inventory of certain standard products based on our internal
forecasts of expected demand for these products. For custom-designed products,
designs of our products are verified both by us and by the customer before
orders for production wafers are placed. Upon receipt of orders, we schedule
production based on order size, customer delivery requirements, production
schedules and other production considerations.
We typically experience lower yields on new products compared to yields on our
mature products. Due to the complexity of our new module products, we have
encountered significant technical challenges with respect to module assembly and
testing that have also contributed to lower yields. These lower yields, combined
with higher costs, have negatively impacted our gross margins. During fiscal
2002, we implemented a series of cost reduction and yield improvement
initiatives designed to improve gross margins on our module products and plan to
continue these initiatives in fiscal 2003. We are also evaluating alternatives
in the design of modules.
PRODUCTS AND APPLICATIONS
We offer a broad range of standard and custom-designed RFICs. Custom-designed
products are usually developed for volume production orders from large OEMs.
Custom orders are normally manufactured on an exclusive basis for a negotiated
period. Once exclusivity periods expire, we attempt to convert custom products
into standard products to broaden our customer base and leverage our design and
product expenditures. At March 31, 2002, we offered over 379 products in the
following categories:
POWER AMPLIFIERS
Power amplifiers are our largest product class, representing approximately 39%
of our products offered during fiscal 2002. Power amplifiers provide signal
amplification in the transmitter section of a wireless system in order to boost
a signal through the antenna. Power amplifiers operate at different frequencies,
power levels and air interface standards and generally are classified either as
linear amplifiers, which add a minimum amount of distortion to the shape of the
input signal, or non-linear amplifiers, which are used in analog devices. Power
amplifiers are often the most critical radio frequency component for a number of
reasons. They frequently are the most expensive RF component and are difficult
to design and implement. In addition, power amplifiers normally use the greatest
amount of battery power in a handset, which impacts talk time, and they
generally dissipate the greatest amount of heat.
GAIN BLOCKS
Gain blocks are simple general-purpose amplifiers that boost signals over a
broad frequency range. They are used for amplifier applications whenever noise
is not a concern and whenever a signal's strength has been diminished by
processing through a filter or other component. Gain blocks accounted for
approximately 17% of our products offered in fiscal 2002.
LOW NOISE AMPLIFIERS/MIXERS
Low noise amplifiers/mixers accounted for approximately 14% of our products
offered in fiscal 2002. A low noise amplifier is a device in the receiver
section of a wireless system that receives signals from an antenna at extremely
low microvolt levels and amplifies the signals by a factor of approximately 10
to 1,000 times with the addition of as little "white noise" as possible. Low
noise amplifiers are commonly integrated into circuits with mixers (also
referred to as "down-mixers" or "down converters"), and this combination
generally is referred to as a "receiver front end." Mixers accept the filtered
output from the low noise amplifiers, which is typically at a high frequency and
difficult to process, and mix it with a local oscillator signal to produce a
lower intermediate frequency (IF) signal, which is easier to process.
QUADRATURE MODULATORS/DEMODULATORS
Quadrature modulators are devices in the transmitter section of a wireless
system that combine digital information with an radio frequency signal by
varying the phase and amplitude of the signal so that the resulting signal can
be transmitted. Quadrature demodulators reverse this process in the receiver
section by taking received radio frequency signals and recovering the embedded
digital information for further processing. Approximately 9% of our products
offered in fiscal 2002 were quadrature modulators/demodulators.
TRANSMITTERS, RECEIVERS AND TRANSCEIVERS
Single chip transmitters and receivers send and receive wireless signals.
Transceivers are highly integrated circuits that combine transmitters with
receivers into a single device. This category accounted for approximately 8% of
our products offered during fiscal 2002.
GLOBAL POSITIONING SYSTEM RECEIVER/CHIPSET
A GPS receiver processes signals from visible GPS satellites broadcasting radio
frequency navigation information. The GPS receiver works with a wide variety of
end products including handheld, marine and in-vehicle automotive devices. A GPS
chipset enables systems to receive signals from visible GPS satellites using
signal-processing techniques that produce highly accurate, smoothed navigation
data. The chipset is suited to a broad range of applications including
in-vehicle systems, recreational navigation and asset location services. This
category accounted for approximately 5% of our products offered during fiscal
2002.
INTERMEDIATE FREQUENCY COMPONENTS
In a typical handset, high frequency RF signals are converted into lower
frequency IF signals by the low noise amplifier/mixer and then to baseband in
the receive functions. In the transmit function, baseband inputs (e.g., voice)
are converted from analog to digital form and processed through the intermediate
frequency range to the higher radio frequency before transmission through the
antenna. Our IF devices include digitally controlled intermediate frequency
amplifiers, which amplify baseband signals after they have been converted from
analog to digital form, and IF amplifiers with automatic gain control and
received signal strength indicators, which are used for intermediate
frequency-to-baseband conversion in the receive mode. IF components accounted
for approximately 3% of our products offered during fiscal 2002.
ATTENUATORS
An attenuator is a device that reduces the level of an input signal by
controllable amounts. Our attenuators are programmable through use of an
external analog or digital control signal to reduce signals to desired levels
with minimal noise and signal loss when the device is not active. Like gain
blocks, attenuators have many applications both within and outside the wireless
markets. Approximately 2% of our products offered in fiscal 2002 were
attenuators.
PRODUCTS BY TECHNOLOGY
By technology, approximately 59% of our products offered during fiscal 2002 were
fabricated with GaAs HBT. Approximately 25% of our products offered used
conventional silicon technology. SiGe and GaAs MESFET technologies were used in
approximately 10% and 6%, respectively, of our products offered.
RAW MATERIALS
Given the number of component parts used in module production, we may experience
shortages of raw materials. However, due to slowing of orders in the industry,
component supply has become more readily available.
CUSTOMERS
Sales to our largest customer, Nokia, were approximately $238.6 million in
fiscal 2002, representing approximately 65% of our revenue for that year. No
other customer accounted for 10% or more of revenue during fiscal 2002.
We have agreed to provide Nokia with access to certain RFIC technologies and to
our GaAs HBT wafer fabrication facilities, and Nokia has agreed to provide us
with rights to bid for and supply Nokia's requirements for certain RFICs. This
arrangement does not obligate Nokia to purchase any additional products from us,
and there can be no assurance that Nokia will remain a significant customer of
ours or that this relationship will continue.
In fiscal 2000, we entered into an alliance with QUALCOMM, Inc. to jointly
develop CDMA power amplifier modules. During fiscal 2001, two families of
products were developed. These products provide higher levels of integration
and, with advanced packaging technology, enable handset manufacturers to produce
phones with smaller form factors and increased talk-time. In March 2001, we
expanded our alliance with QUALCOMM to develop a wideband CDMA power amplifier
module for inclusion in QUALCOMM's integrated circuit family. Initial sales of
these products have been lower than expected due to a combination of technical
and marketing-related issues. In fiscal 2002, based on changes in market
conditions, we agreed to modify the alliance with respect to how CDMA products
would be brought to market. The alliance continues unchanged in terms of new
product definition and the use of our CDMA power amplifier modules in QUALCOMM's
reference designs and applications boards as well as use of QUALCOMM's
intellectual property in several of our CDMA power amplifier modules.
Responsibility for marketing, sales and application engineering support has been
transferred from QUALCOMM to us, however. We believe this change allows us to
re-establish direct relationship with the customers for these products and take
full responsibility for design-ins. Given the competitiveness and rate of change
of this market, we believe that this will benefit the alliance by allowing us to
improve time-to-market, responsiveness to customers and prices. We are currently
engaged in negotiations with QUALCOMM regarding formalization of the
modifications to the alliance.
SALES AND MARKETING
We sell our products worldwide directly to customers as well as through a
network of 15 domestic sales representative firms and nine foreign sales
representative firms. No sales representative firm accounted for more that 10%
of total revenues in fiscal 2002. We select our domestic and foreign
representatives based on technical skills and sales experience, as well as the
presence of complementary product lines and the customer base served. We provide
ongoing training to our representatives to keep them knowledgeable of our
products. We maintain an internal marketing organization that is responsible for
key account management, application engineering support to customers, developing
sales and advertising literature, such as product announcements, catalogs,
brochures and magazine articles in trade and other publications, and preparing
technical presentations for industry conferences. We have sales and customer
support centers in Greensboro, North Carolina; San Diego, California; Reading,
England; Oulu, Finland; Seoul, South Korea; and Taipei, Taiwan and sales offices
in Tokyo, Japan; Malmo, Sweden; and Munich, Germany. We also have an unmanned
sales office in Copenhagen, Denmark available to our staff while traveling to
customer locations. The opening of these sales offices represents the shift of a
greater portion of our sales and marketing efforts in-house, a trend that we
intend to continue.
We believe that maintaining a close relationship with customers and providing
customers with ongoing technical support is essential to customer satisfaction
in the wireless communications industry. Our marketing application staff
interacts with customers during all stages of design and production, provides
customers with current product application notes and engineering data, maintains
regular contact with customer engineers and assists in the resolution of
technical problems. We assign to our largest customers a contract account
manager who maintains regular contact with the customer to determine its product
needs and concerns. Members of senior management also are involved in managing
relationships with significant customers. We believe that maintaining close
contact with customers improves their level of satisfaction and enables us to
anticipate their future product needs.
STRATEGIC RELATIONSHIP WITH TRW
In June 1996, we entered into a broad strategic relationship with TRW based on a
technology license from TRW to us and a supply arrangement between the parties.
As a part of this relationship, TRW provided us with $25.0 million of equity and
debt financing and became a significant shareholder of RF Micro Devices. Our key
goal in entering into this alliance was to enable us to construct a four-inch
wafer fabrication facility to manufacture products using GaAs HBT technologies
developed by TRW and licensed to us.
Under our license agreement, TRW has granted us fully paid up, royalty-free,
worldwide licenses with respect to certain of TRW's existing and future GaAs HBT
patent rights and MBE process patent rights, with accompanying know-how and
technical information, to design, develop, manufacture, market, service and
repair certain existing products of ours and any GaAs HBT product in which the
emitter of the GaAs HBT has a width of one to three microns. These products must
be for commercial wireless communications applications and operate on signals
having a frequency of less than 10 GHz. Subject to TRW's right to use the
licensed technology to provide to customers on an ongoing basis certain
specified foundry services, both licenses are exclusive as to all persons
including TRW. The GaAs HBT and MBE patent rights expressly referenced in the
license agreement expire at various times between March 2007 and July 2016.
TRW also granted us non-exclusive licenses to use certain of its existing GaAs
HBT rights and MBE rights for the development and sale of certain of our
existing products for applications other than commercial wireless
communications. The license agreement provides that TRW will offer to us, on the
same terms as are offered to third parties, certain future non-HBT related
technologies that it develops for a period of 10 years following June 15, 1998.
We have agreed to share with TRW any modifications or improvements that we make
in the technology or the products developed there from, and to grant TRW a
non-exclusive, royalty-free license to use any of these modifications or
improvements in applications outside our field of use. Upon any termination of
the license agreement for default by either party, our rights to TRW's
technologies would cease.
In November 1999, we expanded our license with TRW to permit us to use TRW's
GaAs HBT technology also to manufacture products for commercial coaxial and
other non-fiber wire applications. In consideration for this expanded license,
we granted TRW two additional warrants for the purchase of shares of our common
stock. The first, for 500,000 shares of common stock, was exercised on January
3, 2001 at an exercise price of $20.00 per share. The second warrant was for
1,000,000 shares of common stock at $20.00 per share and expired unexercised as
of December 31, 2001 because we did not meet certain sales milestones.
RESEARCH AND DEVELOPMENT
Our research and development efforts are focused primarily on the development of
new integrated circuit products, and also at improving manufacturing processes
and yields. At March 31, 2002, there were 429 employees in our research and
development organization. Given favorable business conditions, we anticipate
adding approximately 71 employees in research and development in fiscal 2003. We
have design centers in Scotts Valley, California; Cedar Rapids, Iowa; Chandler,
Arizona; Boston, Massachusetts; Pandrup, Denmark; Calgary, Canada; Irvine,
California; and Charlotte, North Carolina to accommodate our radio frequency
integrated circuit design engineers. We are currently staffed by a total of 98
engineers.
The Calgary and Irvine design centers were the result of our acquisition of
IBM's GPS operations and the merger with RF Nitro provided us with our Charlotte
design center.
Our circuit design staff is continually developing RFIC design solutions for new
and emerging wireless applications. Our research and development activities
include not only new circuit designs, but also the development and refinement of
proprietary design tools and models to facilitate new product development.
Moreover, we are continually evaluating test radio frequency circuits under
emerging semiconductor process technologies to augment our OPTIMUM TECHNOLOGY
MATCHING(R) program and to meet our customers' future wireless equipment needs.
In fiscal 2001, we established an Advanced Development Group to focus on
next-generation technology in the areas of RFIC design, packaging and
semiconductor processes. The purpose of this group is to develop technologies
that can be quickly transitioned into new state-of-the art products.
In fiscal 2002, 2001 and 2000, we incurred approximately $74.4 million, $60.3
million, and $33.3 million, respectively, in research and development expenses.
We do not separately account for RF Micro Devices-sponsored and
customer-sponsored research and development expenses.
The market for RFICs is characterized by rapid changes in product designs and
the emergence of new semiconductor technologies used to fabricate higher
performance devices. Because the demand of OEMs for continual improvements in
product performance is expected to increase, we believe that our future success
depends in part on our ability to design RFICs under emerging wafer fabrication
technologies that meet the cost and performance parameters of our customers.
Moreover, we believe we must be able to attract and retain qualified research
and development personnel.
COMPETITION
Competition in the markets for our products is intense. We face competition from
several companies engaged in the business of designing, manufacturing and
selling RFICs, as well as suppliers of discrete products such as transistors,
capacitors and resistors. We also experience competition for products
manufactured using the GaAs HBT process technology from companies that have or
may develop GaAs HBT or other fabrication processes. In addition, our current
and potential competitors include OEMs that have or may develop the ability to
produce RFICs or discrete products internally for their own requirements. Our
primary competitors are Conexant Systems, Inc. and Hitachi Ltd. We believe
Hitachi is the current leader in module development. However, we feel we are
well positioned to improve current module designs and offer flexibility to our
customers in the production of future modules.
We believe that competition within the markets for our products is driven
primarily by the ability to design and deliver high-performance and
price-competitive products in sufficient quantities and in a timely manner.
Competition is also affected by the quality of customer service and technical
support and the ability to design customized products that address each
customer's particular requirements and cost limitations. Many of our current and
potential competitors have entrenched market positions, established patents,
copyrights, trade names, trademarks and intellectual property rights and
substantial technological capabilities. Further, many of our competitors may
have significantly greater financial, technical, manufacturing and marketing
resources than we do. Increased competition could adversely affect our revenue
and profitability by causing us to reduce prices or by reducing demand for our
products.
INTELLECTUAL PROPERTY
It is our practice to seek U.S. patent and copyright protection on our products
and developments, where appropriate, and to protect our proprietary technology
under U.S. and foreign laws affording protection for trade secrets and for
integrated circuit designs. We own several U.S. patents for GaAs HBT power
amplifiers and related circuits, the earliest of which will expire in 2015.
Numerous additional patent applications are pending; although it is possible
that the inventions referenced in patent applications will not mature to issued
patents or will infringe upon intellectual property rights of others. It is also
possible that a court will find the issued patents invalid or unenforceable
under numerous legal principles relating to prior art disclosures or inequitable
conduct before the U.S. Patent and Trademark Office.
We have numerous trademark registrations and applications pending in the United
States and throughout the world. We seek registrations for our primary
trademarks, servicemarks and trade names; however, others may have trademark
rights superior to ours in certain jurisdictions, and in some instances our
designations may not be viewed as sufficiently distinctive to warrant exclusive
trademark protection. We believe that we have the right to use our selected
designations, and that these designations are distinctive and capable of
trademark protection. Nevertheless, if our marks are successfully challenged on
this basis, it is possible that we will not be permitted to operate in a
jurisdiction under our trademark, servicemark or trade name or that we will not
have the exclusive right to use these designations.
We rely also upon trade secrets, technical know-how and other unpatented
proprietary information relating to our product development and manufacturing
activities. To protect our trade secrets, technical know-how and other
proprietary information, our employees are required to enter into agreements
providing for maintenance of confidentiality and the assignment of rights to
inventions made by them while in our employ. We also have entered into
non-disclosure agreements to protect our confidential information delivered to
third parties in conjunction with possible corporate collaborations and for
other purposes. However, we cannot be sure that these types of agreements will
effectively prevent unauthorized disclosure of our confidential information,
that these agreements will not be breached, that we would have adequate remedies
for any breach or that our trade secrets and proprietary know-how will not
otherwise become known or independently discovered by others.
RF Micro Devices has been named a defendant in a patent infringement lawsuit
filed on August 3, 2001 in the U.S. District Court for the District of Arizona
by Lemelson Medical, Education and Research Foundation, LP. The suit alleges
that we have infringed claims of a total of at least 17 and possibly 18 patents,
including "machine vision" claims of 12 patents, "bar code" claims of four
patents and "integrated circuit" claims of three or four patents and seeks
injunctive relief, damages for the alleged infringements and payment of the
plaintiff's attorneys' fees. The suit has been stayed pending resolution of one
of two related actions to which we are not a party. This case was stayed before
any discovery, and is in its very preliminary stages. Therefore, we cannot
predict the ultimate outcome of this litigation. We cannot be sure that third
parties will not assert additional claims against us, our customers or TRW with
respect to existing and future products. Any litigation to determine the
validity of any third party's claims could result in significant expense to us,
and divert the efforts of our technical and management personnel, whether or not
the litigation is determined in our favor. The wireless industry is subject to
frequent litigation regarding patent and other intellectual property rights.
Leading companies and organizations in the wireless industry have numerous
patents that protect their intellectual property rights in these areas. In the
event of an adverse result of any intellectual property rights litigation, we
could be required to expend significant resources to develop non-infringing
technology or to obtain licenses to the technology, which is the subject of the
litigation. We cannot be sure that we would be successful in such development or
that any such license would be available on commercially reasonable terms. We
have on occasion been made aware that aspects of our technology may overlap
technology discussed or claimed in issued United States patents. On these
occasions, we attempt to investigate thoroughly the underlying issues and
determine whether design changes or patent licenses are appropriate.
BACKLOG
At March 31, 2002, our backlog was approximately $100.7 million, compared to
approximately $86.7 million at the end of fiscal 2001. We include in backlog all
accepted product purchase orders for which delivery has been specified within
one year. Product orders in our backlog are subject to changes in delivery
schedules or to cancellation at the option of the purchaser without significant
penalty. Our backlog may vary significantly from time to time depending upon the
level of capacity available to satisfy unfilled orders. Accordingly, although
useful for scheduling production, backlog as of any particular date may not be a
reliable indicator of sales for any future period.
EMPLOYEES
At March 31, 2002, we had 1,325 employees. We believe that our future prospects
will depend, in part, on our ability to continue to attract and retain skilled
technical, marketing and management personnel. Competition for such personnel is
intense, and the number of persons with relevant experience, particularly in
engineering, RFIC design and technical marketing, is limited. None of our
employees is represented by
a labor union, and we have never experienced any work stoppage. We believe that
our employee relations are good.
ENVIRONMENTAL MATTERS
By virtue of operating our MBE and wafer fabrication facilities, we are subject
to a variety of extensive and changing federal, state and local governmental
laws, regulations and ordinances related to the use, storage, discharge and
disposal of toxic, volatile or otherwise hazardous chemicals used in the RFIC
manufacturing process. Any failure to comply with such requirements currently in
effect or subsequently adopted could result in the imposition of fines on us,
the suspension of production or a cessation of operations. In addition, such
requirements could restrict our ability to expand our facilities or require us
to acquire costly equipment or incur other significant expenses to comply with
environmental regulations or clean up discharges. We believe that costs arising
from existing environmental laws will not have a material adverse effect on our
financial position or results of operations. There can be no assurance, however,
that the environmental laws will not become more stringent in the future or that
we will not incur significant costs in the future in order to comply with these
laws.
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
IN ADDITION TO THE OTHER INFORMATION IN THIS ANNUAL REPORT ON FORM 10-K, READERS
SHOULD CAREFULLY CONSIDER THE FOLLOWING IMPORTANT FACTORS. THESE FACTORS, AMONG
OTHERS, IN SOME CASES HAVE AFFECTED, AND IN THE FUTURE COULD AFFECT, OUR
FINANCIAL CONDITION AND RESULTS OF OPERATIONS AND COULD CAUSE OUR FUTURE RESULTS
TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED IN ANY FORWARD-LOOKING
STATEMENTS THAT APPEAR IN THIS ANNUAL REPORT ON FORM 10-K OR THAT WE HAVE MADE
OR WILL MAKE ELSEWHERE.
OUR OPERATING RESULTS FLUCTUATE.
Our revenue, earnings and other operating results have fluctuated significantly
in the past and may fluctuate significantly in the future. Our future operating
results will depend on many factors, including the following:
o our ability to design, manufacture and deliver our products in large
enough volumes to satisfy our customers' requirements;
o the ability of third party foundries, assembly, test and tape and reel
partners to handle our products in a timely and cost-effective manner
that meets our customers' requirements;
o our ability to achieve cost savings and improve yields on our new
products;
o unexpected poor line, assembly or test yields for our products;
o our ability to increase capacity utilization; and
o our ability to successfully integrate and exploit our recent
acquisitions.
During the second half of fiscal 2001 and early in fiscal 2002, we have
experienced lower-than-expected order activity due to three factors: an overly
optimistic forecast for the growth of the handset market that led to excess
inventories among manufacturers and reduced component demand; introduction
delays by manufacturers for some highly complex next-generation handsets; and a
delay in the introduction of one of our next-generation products. These factors
negatively impacted our operating results during this period. Excess inventory
among manufacturers, delays in next generation handsets by manufacturers and
downward pressure on selling prices also negatively affected our operating
results during fiscal 2002. We have continued to experience order delays during
the early part of fiscal 2003, and we expect pricing pressure to continue
throughout fiscal 2003.
It is likely that our future operating results will again be adversely affected
by the factors set forth above or other factors. If our future operating results
are below the expectations of stock market analysts or our investors, our stock
price may decline.
WE FACE CHALLENGES MANAGING RAPID GROWTH.
We experienced significant growth that placed a great strain on our management
and other resources. We have grown to 1,325 employees on March 31, 2002 from 133
employees on March 31, 1997. To manage our growth effectively, we must:
o coordinate the construction, upfit and start-up of our new facilities;
o expand our presence in international locations, including China;
o train and manage our employee base; and
o attract qualified people with experience in radio frequency
engineering, integrated circuit design and technical marketing and
support.
Competition for these people is intense. We must also manage multiple
relationships with various customers, business partners and other third parties,
such as our foundry, assembly, test and tape and reel partners. Our systems,
networks, software tools, procedures or controls may not be adequate to support
our operations and we may not be able to expand quickly enough to exploit
potential market opportunities. Our future operating results may also depend on
expanding sales and marketing, research and development and administrative
support. If we cannot attract qualified people or manage growth effectively, our
operating results will be adversely affected.
WE FACE RISKS ASSOCIATED WITH OUR MOLECULAR BEAM EPITAXY AND WAFER FABRICATION
FACILITIES.
Our production process starts with GaAs substrates called wafers. A transistor
layer is grown on the wafer using a molecular beam epitaxy process in our MBE
facility. These wafers are then sent to our wafer fabrication facilities for
further processing.
We have operated one wafer fabrication facility since 1998, and in the third
quarter of fiscal 2002, we qualified our second facility for production. As we
initiate production at this second facility, we must qualify each new integrated
circuit design with our customers. As parts are brought into production, we must
continue to maintain our cycle times and our line, assembly and test yields in
order to reach our manufacturing goals.
A number of factors will affect the future success of our facilities,
including the following:
o demand for our products;
o our ability to generate revenues in amounts that cover the significant
fixed costs of operating the facilities;
o our ability to qualify new products in a timely manner at our wafer
fabrication facilities;
o availability of raw materials, including GaAs substrates, and high
purity source materials such as gallium, aluminum, arsenic, indium,
silicon and beryllium in our MBE facility and passive component parts
in our wafer fabrication facilities;
o our wafer fabrication manufacturing cycle times;
o our production yields;
o our ability to hire, train and manage qualified production personnel;
o our compliance with applicable environmental and other laws and
regulations; and
o our inability to use all or any significant portion of our facilities
for prolonged periods of time for any reason.
Bringing the new fabrication facility on-line has required us to make
significant investments of labor, including the hiring and training of skilled
production personnel. Before production could commence, wafers had to be
qualified by individual customers on a component-by-component basis, even for
products previously qualified at our first wafer facility.
We cannot be sure that we will be able to successfully continue to produce
wafers using the GaAs HBT process technology at acceptable manufacturing yields
or in a manner that allows us to offer GaAs HBT products from our facilities at
competitive prices. A failure or delay in our efforts to fabricate GaAs HBT
wafers at acceptable manufacturing cycle times, yields, costs and quality and in
volumes sufficient to satisfy customer demands could have a material adverse
effect on our business, financial condition and results of operations.
WE DEPEND ON A FEW LARGE CUSTOMERS.
Historically, a substantial portion of our revenue has come from large purchases
by a small number of customers. We expect that trend to continue. In fiscal
2002, our top five customers accounted for 80% of total revenue. Nokia was our
largest customer during fiscal 2002, accounting for 65% of our total revenue.
Accordingly, our future operating results depend on the success of our largest
customers and on our success in selling large quantities of our products to
them.
We typically manufacture custom products on an exclusive basis for one customer
for a negotiated period of time. This factor makes it difficult for us to
diversify our customer base. The concentration of our revenue with a few large
customers makes us particularly dependent on factors affecting those customers.
For example, if demand for their products decreases, they may stop purchasing
our products and our operating results would suffer. We experienced such a
decrease in demand during the last half of fiscal 2001 and the first half of
fiscal 2002. Most of our customers can cease incorporating our products into
their products with little notice to us and with little or no penalty. The loss
of a large customer and failure to add new customers to replace lost revenue
would have a material adverse effect on our business, financial condition and
results of operations.
IF WE EXPERIENCE POOR PRODUCTION YIELDS, OUR OPERATING RESULTS MAY SUFFER.
Our integrated circuit products, especially our products manufactured using the
GaAs HBT process technology, are very complex. Each product has a unique design
and each product is fabricated using semiconductor process technologies that are
highly complex. In many cases, the products are assembled in customized
packages. Our new module products, which consist of multiple components in a
single package, feature enhanced levels of integration and complexity. Our
customers insist that our products meet their exact specifications for quality,
performance and reliability.
Our products are manufactured on gallium arsenide or silicon substrates, called
wafers. Before our customers can use our products, the wafers must be processed
and scribed and broken into individual die. The die must be assembled, or
packaged, and then the final product must be tested. Our manufacturing yield is
a combination of:
o line yield, which is the number of usable wafers that result from our
fabrication process;
o assembly yield, which is the number of assembled parts we actually
receive from the packaging house divided by the number of die
available on the wafer; and
o test yield, which is the number of assembled parts that pass all
component level testing divided by the total number of parts tested.
Due to the complexity of RFICs, we periodically experience difficulties in
achieving acceptable yields on certain new products. We are implementing yield
improvement programs and have experienced improvements in fiscal 2002; however,
we cannot be sure what yield levels we will be able to achieve.
Our customers also test our RFICs once they have been assembled into their
products. The number of usable RFICs that result from our production process can
fluctuate as a result of many factors, including the following:
o design errors;
o defects in photomasks used to print circuits on a wafer;
o minute impurities in materials used;
o contamination of the manufacturing environment;
o equipment failure or variations in the fabrication process;
o losses from broken wafers or other human error; and
o defects in packaging.
Because average selling prices for our products tend to decline over time and
because many of our manufacturing costs are fixed, we are constantly trying to
improve our manufacturing yields. For a given level of sales, when our yields
improve, our gross margins improve; and when our yields decrease, our unit costs
are higher, our margins are lower, and our operating results are adversely
affected.
OUR OPERATING RESULTS ARE SUBSTANTIALLY DEPENDENT ON DEMAND FOR OUR GAAS HBT
PRODUCTS.
Although we design products using multiple distinct process technologies, a
substantial portion of our revenue comes from the sale of products manufactured
using the GaAs HBT process technology. During fiscal 2002, 93% of our revenue
came from the sale of GaAs HBT products We currently expect that this process
concentration will continue in the near term. Our dependence on GaAs HBT
products could ultimately hurt our operating results in the future. Competitors
have begun to enter the market and offer their own GaAs products, and direct
competition with competitors with GaAs HBT process technology could adversely
affect our selling prices. Also, new process technologies are constantly being
developed and one or more of these processes could have characteristics that are
superior to GaAs HBT. If we are unable to access these technologies through
licenses or foundry service arrangements, we will be competitively
disadvantaged. These and other factors could reduce the demand for GaAs HBT
components or otherwise adversely affect our operating results.
OUR OPERATING RESULTS ARE SUBSTANTIALLY DEPENDENT ON DEVELOPMENT OF NEW
PRODUCTS.
Our future success will depend on our ability to develop new radio frequency
integrated circuit solutions for existing and new markets. We must introduce new
products in a timely and cost-effective manner and we must secure production
orders from our customers. The development of new RFICs is a highly complex
process, and we have experienced delays in completing the development and
introduction of new products at times in the past, including during fiscal 2002.
Our successful product development depends on a number of factors, including the
following:
o the accuracy of our prediction of market requirements and evolving
standards;
o acceptance of our new product designs;
o the availability of qualified RFIC designers;
o our timely completion of product designs; and
o acceptance of our customers' products by the market.
We may not be able to design and introduce new products in a timely or
cost-efficient manner and our new products may fail to meet the requirements of
the market or our customers. In that case, we will not likely reach the expected
level of production orders, which could adversely affect our operating results.
Even when a design win is achieved, our success is not assured. Design wins
require significant expenditures by us and typically precede volume revenues by
six to nine months or more. The actual value of a design win to us will
ultimately depend on the commercial success of our customers' products.
OUR INDUSTRY'S TECHNOLOGY CHANGES RAPIDLY AND WE DEPEND ON THE DEVELOPMENT AND
GROWTH OF WIRELESS MARKETS.
We depend on the development and growth of markets for wireless communications
products and services. We cannot be sure about the rate at which markets for
these products will develop or our ability to produce competitive products for
these markets as they develop.
We supply RFICs almost exclusively for wireless applications. The wireless
markets are characterized by frequent introduction of new products and services
in response to evolving product and process technologies and consumer demand for
greater functionality, lower costs, smaller products and better performance. As
a result, we have experienced and will continue to experience some product
design obsolescence. We expect our customers' demands for improvements in
product performance will increase, which means that we must continue to improve
our product designs and develop new products using new wafer fabrication
technologies. It is likely that a competing process technology will emerge that
permits the fabrication of integrated circuits that are superior to the RFICs we
make under existing processes. If that happens and we cannot design products
using that technology or develop competitive products, our operating results
will be adversely affected.
WE DEPEND HEAVILY ON OUR RELATIONSHIP WITH NOKIA.
We have agreed to provide Nokia with access to certain radio frequency
integrated circuit technologies and to our GaAs HBT wafer fabrication
facilities, and Nokia has agreed to provide us with rights to bid for and supply
Nokia's requirements for certain RFICs. This arrangement does not obligate Nokia
to purchase any additional products from us, and there can be no assurance that
Nokia will remain a significant customer of ours or that this relationship will
continue. In fiscal 2002 sales to Nokia were 65% of our revenue. The loss of
Nokia as a customer for any reason would have a material adverse effect on our
operating results.
WE DEPEND ON TRW FOR GAAS HBT PROCESS TECHNOLOGY.
During fiscal 2002, 93% of our revenue came from the sale of products
manufactured using the GaAs HBT process technology, of which 97% was
attributable to products produced at our facility.
We depend on our exclusive license from TRW for its GaAs HBT technology. If the
license is terminated or if it were determined that this technology infringed on
a third party's intellectual property rights, our operating results would be
adversely affected. TRW made no representation to us about whether the licensed
technology infringed on the intellectual property rights of anyone else.
WE DEPEND HEAVILY ON THIRD PARTIES.
We use three independent foundries to manufacture our silicon-based products. We
will remain dependent on a small number of independent foundries to manufacture
our products on a timely basis, to achieve acceptable manufacturing yields and
to offer us competitive pricing. The inability of these independent foundries to
deliver our products on a timely basis, allocate us sufficient manufacturing
capacity, achieve acceptable yields or offer us competitive pricing would have a
material adverse effect on our operating results. In the first quarter of fiscal
2002, we announced a strategic alliance with Agere that is intended to
guarantee supply and favorable pricing of silicon wafers. On January 23, 2002,
Agere announced that it was seeking a buyer for its Orlando wafer fabrication
operation. We are engaged in discussions with Agere regarding the terms of our
alliance and the effect of this potential sale. Management currently cannot
predict the outcome of these discussions or what form the alliance will take in
the future. We cannot be sure that we would be able to locate other foundries to
make our products if we lost any of these sources of supply.
We use eleven independent vendors to assemble and package all of our integrated
circuits, two independent vendors to test our products and two independent
vendors to tape and reel our products. We have had packaging quality problems
with some of our vendors, especially with products manufactured using the GaAs
HBT process technology, and it is possible that we may have more packaging
problems in the future. However, we have taken steps to improve the reliability
of packaging quality, including the hiring of a Vice President of Quality, the
expansion of our in-house package testing and qualification line and the hiring
of additional packaging engineers to engage in both package testing and the
development of new packaging designs. In addition, we will continue to monitor
our vendors. A delay or reduction in product shipments or unexpected product
returns because of these problems could have an adverse effect on our operating
results.
Given the shift to module production, we also rely on suppliers of passive
component parts. A delay in the receipt of these raw materials could delay
product shipments and have an adverse effect on our operating results.
WE OPERATE IN A VERY COMPETITIVE INDUSTRY.
Competition in the markets for our products is intense. We compete with several
companies primarily engaged in the business of designing, manufacturing and
selling RFICs, as well as suppliers of discrete products such as transistors,
capacitors and resistors. Several of our competitors either have GaAs HBT
process technology or are developing GaAs HBT or new fabrication processes. In
addition, many of our existing and potential customers manufacture or assemble
wireless communications devices and have substantial in-house technological
capabilities. Any of them could develop products that compete with or replace
ours. A decision by any of our large customers to design and manufacture
integrated circuits internally could have an adverse effect on our operating
results. Increased competition could mean lower prices for our products, reduced
demand for our products and a corresponding reduction in our ability to recover
development, engineering and manufacturing costs. Any of these developments
would have an adverse effect on our operating results.
Many of our existing and potential competitors have entrenched market positions,
considerable internal manufacturing capacity, established intellectual property
rights and substantial technological capabilities. Many of our existing and
potential competitors, including Conexant and Hitachi may have greater
financial, technical, manufacturing and marketing resources than we do.
Additionally, the pending merger of Conexant's wireless integrated circuit
business with Alpha Industries, Inc. may introduce increased competition. We
cannot be sure that we will be able to compete successfully with our
competitors.
WE DEPEND HEAVILY ON KEY PERSONNEL.
Our success depends in part on keeping key technical, marketing, sales and
management personnel. We do not have employment agreements with the substantial
majority of our employees. We must also continue to attract qualified personnel.
The competition for qualified personnel is intense, and the number of people
with experience, particularly in radio frequency engineering, integrated circuit
design, and technical marketing and support, is limited. We cannot be sure that
we will be able to attract and retain other skilled personnel in the future.
WE ARE SUBJECT TO RISKS FROM INTERNATIONAL SALES AND OPERATIONS.
Sales to customers located outside the United States accounted for about 71% of
our revenue in fiscal 2002. We expect that revenue from international sales will
continue to be a significant part of our total revenue. International sales are
subject to a variety of risks, including risks arising from currency
fluctuations and restrictions, tariffs, trade barriers, taxes and export license
requirements. Because all of
our foreign sales are denominated in U.S. dollars, our products become less
price-competitive in countries with currencies that are low or are declining in
value against the U.S. dollar. Also, we cannot be sure that our international
customers will continue to accept orders denominated in U.S. dollars. If they do
not, our reported revenue and earnings will become more directly subject to
foreign exchange fluctuations.
All but one of our circuit assembly vendors and both of our test vendors are
located outside the United States. Also, we are building a test and tape and
reel facility in China that we expect to be operational by the fall of 2002.
This subjects us to regulatory, geopolitical and other risks of conducting
business outside the United States. We do business with our foreign assemblers
in U.S. dollars. Our assembly costs increase in countries with currencies that
are increasing in value against the U.S. dollar. Also, we cannot be sure that
our international assemblers will continue to accept orders denominated in U.S.
dollars. If they do not, our costs will become more directly subject to foreign
exchange fluctuations.
WE RELY ON INTELLECTUAL PROPERTY AND FACE ACTUAL AND POTENTIAL CLAIMS OF
INFRINGEMENT.
Our success depends in part on our ability to obtain patents, trademarks and
copyrights, maintain trade secret protection and operate our business without
infringing on the proprietary rights of other parties. Although we do not
believe this to be the case, it could be determined in the future that TRW or we
are infringing someone's intellectual property rights. We cannot be sure that we
could obtain licenses on commercially reasonable terms or that litigation would
not occur if there were any infringements. If we were unable to obtain necessary
licenses or if litigation arose out of infringement claims, our operating
results could be adversely affected.
RF Micro Devices has been named a defendant in a patent infringement lawsuit
filed on August 3, 2001 in the U.S. District Court for the District of Arizona
by Lemelson Medical, Education and Research Foundation, LP. The suit alleges
that we have infringed claims of a total of at least 17 and possibly 18 patents,
including "machine vision" claims of 12 patents, "bar code" claims of four
patents and "integrated circuit" claims of three or four patents and seeks
injunctive relief, damages for the alleged infringements and payment of the
plaintiff's attorneys' fees. The suit has been stayed pending resolution of one
of two related actions to which we are not a party. This case was stayed before
any discovery, and is in its very preliminary stages. Therefore, we cannot
predict the ultimate outcome of this litigation.
In addition to patent and copyright protection, we also rely on trade secrets,
technical know-how and other unpatented proprietary information relating to our
product development and manufacturing activities. We try to protect this
information with confidentiality agreements with our employees and other
parties. We cannot be sure that these agreements will not be breached, that we
would have adequate remedies for any breach or that our trade secrets and
proprietary know-how will not otherwise become known or independently discovered
by others.
WE ARE SUBJECT TO STRINGENT ENVIRONMENTAL REGULATION.
We are subject to a variety of federal, state and local requirements governing
the protection of the environment. These environmental regulations include those
related to the use, storage, handling, discharge and disposal of toxic or
otherwise hazardous materials used in our manufacturing processes. Failure to
comply with environmental laws could subject us to substantial liability or
force us to significantly change our manufacturing operations. In addition,
under some of these laws and regulations, we could be held financially
responsible for remedial measures if our properties are contaminated, even if we
did not cause the contamination.
OUR STOCK PRICE IS SUBJECT TO VOLATILITY.
The trading price of our common stock is subject to wide fluctuations in
response to quarterly variations in operating results, adverse business
developments, changes in financial estimates by securities analysts,
announcements of technological innovations, new products by us or our
competitors, transactions by corporate insiders and other events and factors. In
addition, the stock market has experienced extreme price and volume fluctuations
based on factors outside our control that have particularly affected the
market prices for many high technology companies. These broad market
fluctuations may materially and adversely affect the market price of our common
stock.
FUTURE SALES OF SHARES COULD HAVE AN ADVERSE EFFECT ON MARKET PRICE.
Sales of substantial amounts of common stock in the public market or the
prospect of such sales could adversely affect the market price for our common
stock and our ability to raise equity capital in the future. As of May 31, 2002
we had outstanding a total of 168.0 million shares of common stock. Of these
shares, approximately 165.2 million shares are freely tradable without
restriction or further registration under the Securities Act, except for any
shares acquired by our "affiliates," as that term is defined in Rule 144 under
the Securities Act. We believe that the holders of the remaining 2.8 million
shares are affiliates and, accordingly, that their shares may be sold without
registration only in compliance with the Securities Act (including Rule 144). As
of March 31, 2002, options to purchase 19.5 million shares of common stock were
outstanding under our stock option plans, with a weighted average exercise price
of $15.03 per share and a weighted average remaining contractual life of 7.7
years. Of these, options to purchase 5.4 million shares were exercisable at
March 31, 2002, at a weighted average exercise price of $12.72 per share.
WE MAY ENGAGE IN FUTURE ACQUISITIONS THAT DILUTE OUR SHAREHOLDERS, CAUSE US TO
INCUR DEBT AND ASSUME CONTINGENT LIABILITIES.
As part of our business strategy, we expect to continue to review potential
acquisitions that could complement our current product offerings, augment our
market coverage or enhance our technical capabilities, or that may otherwise
offer growth opportunities. While we currently have no definitive agreements
providing for any such acquisitions, we may acquire businesses, products or
technologies in the future. In the event of such future acquisitions, we could
issue equity securities that would dilute our current shareholders' percentage
ownership, incur substantial debt or assume contingent liabilities. Such actions
by us could seriously harm our results of operations or the price of our common
stock. Acquisitions also entail numerous other risks that could adversely affect
our business, results of operations and financial condition, including:
o difficulties in assimilating acquired operations, technologies or
products;
o unanticipated costs or capital expenditures associated with the
acquisition;
o acquisition-related charges and amortization of acquired technology
and other intangibles that could negatively affect our reported
results of operation;
o diversion of management's attention from our business;
o injury to existing business relationships with suppliers and
customers; and
o failure to successfully integrate these businesses, products,
technologies and personnel.
PROVISIONS IN OUR GOVERNING DOCUMENTS COULD DISCOURAGE TAKEOVERS AND PREVENT
SHAREHOLDERS FROM REALIZING AN INVESTMENT PREMIUM.
Certain provisions of our articles of incorporation and bylaws could have the
effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, control of our company.
These provisions include the ability of the board of directors to designate the
rights and preferences of preferred stock and issue such shares without
shareholder approval and the requirement of supermajority shareholder approval
of certain transactions with parties affiliated with our company. Such
provisions could limit the price that certain investors might be willing to pay
in the future for shares of RF Micro Devices' common stock.
On August 10, 2001, our board of directors adopted a shareholder rights plan,
pursuant to which uncertificated stock purchase rights were distributed to our
shareholders at a rate of one right for each share of common stock held of
record as of August 30, 2001. The rights plan is designed to enhance the board's
ability to prevent an acquirer from depriving shareholders of the long-term
value of their investment and to
protect shareholders against attempts to acquire RF Micro Devices by means of
unfair or abusive takeover tactics. However, the existence of the rights plan
may impede a takeover of our company not supported by the board, including a
takeover that may be desired by a majority of our shareholders or involving a
premium over the prevailing stock price.
ITEM 2. PROPERTIES
We currently do not own any of our facilities. We lease three office facilities
and one storage facility in Greensboro, North Carolina. We previously owned one
of the office properties, which houses our corporate headquarters; however, in
March 2001, we completed a sale-leaseback transaction with respect to the
property.
Adjacent to our office facilities are our two wafer fabrication facilities and
our research and development packaging facility. The first wafer facility is
substantially fully utilized. The second wafer facility is approximately 20%
utilized and can be expanded as demand requires.
We lease two additional facilities in Greensboro, North Carolina. One facility
houses our molecular beam epitaxy wafer starting material production operations
and the other facility comprises our RFIC testing and tape and reel operations.
Utilization of the molecular beam epitaxy facility is approximately 75% and
utilization of the testing and tape and reel facility is approximately 50%.
We also lease space for our design centers in Irvine, California; Scotts Valley,
California; Cedar Rapids, Iowa; Boston, Massachusetts; Chandler, Arizona;
Charlotte, North Carolina; and Pandrup, Denmark; for sales and customer support
centers in Reading, United Kingdom; Oulu, Finland; Seoul, South Korea; and
Taipei, Taiwan; and for unmanned offices in Copenhagen, Denmark; and for test
and tape and reel operations in Beijing, PRC. In the opinion of our management,
our properties have been well maintained, are in sound operating condition and
contain all equipment and facilities necessary to operate at present levels.
ITEM 3. LEGAL PROCEEDINGS
The Company has been named a defendant in a patent infringement lawsuit,
captioned LEMELSON MEDICAL, EDUCATION & RESEARCH FOUNDATION, LP V. BROADCOM
CORPORATION; RF MICRO DEVICES, INC.; SANDISK CORPORATION; TRANSSWITCH
CORPORATION; WJ COMMUNICATIONS, INC., filed August 3, 2001 in the U.S. District
Court for the District of Arizona by Lemelson Medical, Education and Research
Foundation, LP. The suit alleges that the Company has infringed claims of a
total of at least 17 and possibly 18 patients, including "machine vision" claims
of 12 patents, "bar code" claims of four patents and "integrated circuit" claims
of three or four patents and seeks injunctive relief, damages for the alleged
infringements and payment of the plaintiff's attorneys' fees. This case was
stayed pending resolution of one of two related actions to which we are not a
party. This case was stayed before any discovery, and in its very preliminary
stages. Therefore, the Company cannot predict the ultimate outcome of this
litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is traded on the Nasdaq National Market under the symbol
"RFMD." The table below shows the high and low per-share sales prices of our
common stock for the periods indicated, as reported by the Nasdaq National
Market. Prices have been adjusted to reflect a two-for-one stock split, effected
in the form of a 100% share dividend, payable on August 25, 2000 to record
holders on August 8, 2000. As of June 3, 2002, there were 1,454 holders of
record of our common stock.
HIGH LOW
---- ---
YEAR ENDED MARCH 31, 2002
First Quarter $ 37.50 $ 8.75
Second Quarter 32.53 13.80
Third Quarter 28.56 13.40
Fourth Quarter 23.40 14.88
For Fiscal Year 2002 37.50 8.75
YEAR ENDED MARCH 31, 2001
First Quarter $ 70.75 $ 33.56
Second Quarter 49.97 30.13
Third Quarter 37.38 12.09
Fourth Quarter 28.50 10.06
For Fiscal Year 2001 70.75 10.06
We have never paid dividends on our capital stock. We intend to retain earnings
for use in our business and do not anticipate paying any cash dividends in the
foreseeable future. We are prohibited from paying dividends without the consent
of our lenders.
EQUITY COMPENSATION PLAN INFORMATION
Plan Category (a) (b) (c)
Number of securities to be Weighted-average exercise Number of securities remaining
issued upon exercise of price of outstanding available for future issuance
outstanding options, options, warrants and rights under equity compensation plans
warrants and rights (excluding securities reflected in
column(a))
Equity compensation plans 19,851,615 $15.06 4,802,080(1)
approved by security holders
Equity compensation plans not 138,049 $3.36 3,355
approved by security holders(2)
Total 19,989,664 4,805,435
(1) A total of 568,322 restricted awards are available for future issuance
pursuant to restricted stock awards granted under our 1999 Stock Incentive
Plan.
(2) In connection with our acquisition of RF Nitro Communications, Inc., we
assumed options to purchase an aggregate of 34,756 shares of common stock
and a restricted stock award for 17,363 shares of common stock under the RF
Nitro Communications, Inc. 2001 Stock Incentive Plan. The outstanding
options have a weighted average exercise price of $7.156.
NON-STOCKHOLDER APPROVED PLANS
INDIVIDUAL OPTION AGREEMENTS WITH CERTAIN NON-EMPLOYEE DIRECTORS. In October
1998, we granted options to purchase an aggregate of 120,000 shares (as adjusted
for stock splits) to certain directors outside of the Non-Employee Directors'
Stock Option Plan. The weighted average exercise price for the options is
$2.609. The options were granted at an option price equal to the fair market
value at the time of grant, had 10-year terms and vested in three annual
installments.
RF NITRO COMMUNICATIONS, INC. 2001 STOCK INCENTIVE PLAN. In connection with our
acquisition of RF Nitro, we assumed outstanding options and an outstanding
restricted stock award issued under the RF Nitro Communications, Inc. 2001 Stock
Incentive Plan. The 2001 Stock Incentive Plan provides for the grant of
incentive options, nonqualified options and restricted stock awards to key
employees, non-employee directors and consultants in service to our company. The
aggregate number of shares reserved for issuance under outstanding awards is
52,123. The terms of awards may be adjusted upon certain events affecting our
company's capitalization. No awards may be granted under the plan after May 29,
2011.
ITEM 6. SELECTED FINANCIAL DATA
Information required by this Item is contained in the section entitled "Selected
Financial Data" in our fiscal 2002 annual report to shareholders, which is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information required by this Item is contained in the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in our fiscal 2002 annual report to shareholders, which is
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this Item is contained in the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in our fiscal 2002 annual report to shareholders, which is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Information required by this Item is contained in the section entitled
"Financial Statements and Supplemental Data" in our fiscal 2002 annual report to
shareholders, which is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this Item is contained in our definitive proxy statement
relating to our Annual Meeting of Shareholders to be held on July 23, 2002 under
the captions "Executive Officers," "Nominees for Election of Directors" and
"Section 16(a) Beneficial Ownership Reporting Compliance," which are
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this Item is contained in our definitive proxy statement
relating to our Annual Meeting of Shareholders to be held on July 23, 2002 under
the caption "Executive Compensation," which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this Item is contained in our definitive proxy statement
relating to our Annual Meeting of Shareholders to be held on July 23, 2002 under
the caption "Security Ownership of Certain Beneficial Owners and Management,"
which is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this Item is contained in our definitive proxy statement
relating to our Annual Meeting of Shareholders to be held on July 23, 2002 under
the caption "Certain Transactions," which is incorporated herein by reference.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The following consolidated financial statements of RF Micro Devices, Inc. are
included in our fiscal 2002 annual report to shareholders and are incorporated
herein by reference:
i. Consolidated Balance Sheets as of March 31, 2002 and 2001
ii. Consolidated Statements of Operations for the fiscal years ended March
31, 2002, 2001 and 2000
iii. Consolidated Statements of Shareholders' Equity for the fiscal years
ended March 31, 2002, 2001 and 2000
iv. Consolidated Statements of Cash Flows for the fiscal years ended March
31, 2002, 2001 and 2000
v. Notes to Consolidated Financial Statements
(a)(2) Schedule II; Valuation and Qualifying Accounts -- see additional section
of this Report.
No other financial statement schedules are to be filed with this Annual Report
on Form 10-K due to the absence of the conditions under which they are required
or because the required information is included within the consolidated
financial statements or the notes thereto which are included in our fiscal 2002
annual report to shareholders and are incorporated herein by reference.
(a)(3) Exhibits
EXHIBIT
NO. DESCRIPTION
-------- -------------
3.1 Amended and Restated Articles of Incorporation of RF Micro
Devices, Inc. (1)
3.2 Amendment to Articles of Incorporation dated July 26, 2000 (2)
3.3 Amendment to Articles of Incorporation dated August 10, 2001
(3)
3.4 Bylaws of RF Micro Devices, Inc. (4)
4.1 Specimen Certificate of Common Stock (4)
4.2 Rights Agreement, dated August 10, 2001, between RF Micro
Devices, Inc. and First Union National Bank, as Rights Agent
(5)
4.3 Form of Global Note for 3.75% Convertible Subordinated Notes
due August 15, 2005 (6)
4.4 Indenture, dated August 1, 2000 (6)
THE REGISTRANT HEREBY UNDERTAKES TO FURNISH TO THE SECURITIES
AND EXCHANGE COMMISSION, UPON ITS REQUEST, A COPY OF ANY
INSTRUMENT DEFINING THE RIGHTS OF HOLDERS OF LONG-TERM DEBT OF
THE REGISTRANT NOT FILED HEREWITH PURSUANT TO ITEM
601(B)(4)(III) OF REGULATION S-K
10.1 1992 Stock Option Plan of RF Micro Devices, Inc. (4)*
10.2 Form of Stock Option Agreement (1992 Stock Option Plan) (4)*
10.3 1997 Key Employees Stock Option Plan of RF Micro Devices, Inc.,
as amended (7)*
10.4 Form of Stock Option Agreement (1997 Key Employees' Stock
Option Plan) (4)*
EXHIBIT
NO. DESCRIPTION
-------- -------------
10.5 Amended and Restated Nonemployee Directors' Stock Option Plan
of RF Micro Devices, Inc. (8) *
10.6 Form of Stock Option Agreement (Directors' Stock Option Plan)
(8) *
10.7 1999 Stock Incentive Plan of RF Micro Devices, Inc., as amended
(7)*
10.8 Stock Option Agreement, dated October 27, 1998, between RF
Micro Devices, Inc. and Walter H. Wilkinson, Jr., as amended
(7)*
10.9 Stock Option Agreement, dated October 27, 1998, between RF
Micro Devices, Inc. and Albert E. Paladino, as amended (7)*
10.10 Stock Option Agreement dated October 27, 1998, between RF Micro
Devices, Inc. and Erik H. van der Kaay, as amended (7)*
10.11 License and Technical Assistance Agreement, dated June 6, 1996,
between RF Micro Devices, Inc. and the Electronic Systems &
Technology Division of the Space and Electronics Group of TRW
Inc. (4)
10.12 Lease Agreement, dated October 31, 1995, between RF Micro
Devices, Inc. and Piedmont Land Company, as amended (4)
10.13 Lease Agreement, dated October 9, 1996, between RF Micro
Devices, Inc. and Highwoods/Forsyth Limited Partnership, as
amended (4)
10.14 Master Equipment Lease Agreement, dated as of December 2, 1996,
between Finova Technology Finance, Inc. and RF Micro Devices,
Inc. (4)
10.15 Lease Agreement, dated February 12, 1999, between Highwoods
Realty Limited Partnership and RF Micro Devices, Inc. (8)
10.16 Lease dated May 25, 1999, between RF Micro Devices, Inc. and CK
Deep River, LLC (7)
10.17 Lease Agreement, dated November 5, 1999, between Highwoods
Realty Limited Partnership and RF Micro Devices, Inc. (7)
10.18 License Agreement, dated November 15, 1999, between TRW Inc.
and RF Micro Devices, Inc. (7)
10.19 Cooperation Agreement, dated November 15, 1999, between TRW
Inc. and RF Micro Devices, Inc. (7)
10.20 Amended, Restated and Replacement Participation Agreement,
dated as of December 31, 1999, among RF Micro Devices, Inc., as
the Construction Agent and as the Lessee; First Security Bank,
National Association, not individually, except as expressly
stated therein, but solely as the Owner Trustee under the RFMD
Real Estate Trust 1999-1; the Various Banks and Other Lending
Institutions Which Are Parties Thereto from Time to Time, as
the Holders; the Various Banks and Other Lending Institutions
Which Are Parties Thereto from Time to Time, as the Lenders;
and First Union National Bank, as the Agent for the Lenders and
respecting the Security Documents, as the Agent for the Lenders
and the Holders, to the extent of their interests (7)
10.21 Amended, Restated and Replacement Lease Agreement, dated as of
December 31, 1999, between First Security Bank, National
Association, not individually, but solely as the Owner Trustee
under the RFMD Real Estate Trust 1999-1, as Lessor, and RF
Micro Devices, Inc., as Lessee (7)
EXHIBIT
NO. DESCRIPTION
-------- -------------
10.22 Amended, Restated and Replacement Credit Agreement, dated as of
December 31, 1999, among First Security Bank, National
Association, not individually, except as expressly stated
therein, but solely as the Owner Trustee under the RFMD Real
Estate Trust 1999-1, as the Borrower; the Several Lenders from
Time to Time Parties thereto; and First Union National Bank, as
the Agent (7)
10.23 First Amendment to Certain Operative Agreements (RFMD Real
Estate Trust No. 1999-1) dated as of April 17, 2000 among RF
Micro Devices, Inc., as the Construction Agent and as the
Lessee, First Security Bank, National Association, not
individually, except as expressly stated herein, but solely as
the Owner Trustee under the RFMD Real Estate Trust 1999-1, the
Various Banks and Other Lending Institutions which are Parties
Thereto from Time to Time, as the Holders, the Various Banks
and Other Lending Institutions which are Parties Thereto from
Time to Time, as the Lenders, First Union National Bank, as the
Agent for the Lenders and respecting the Security Documents, as
the Agent for the Lenders and the Holders, to the extent of
their interests and Credit Suisse First Boston, as Syndication
Agent (2)
10.24 Second Amendment to Certain Operative Agreements, dated as of
August 13, 2001, among RF Micro Devices, Inc., as the
Construction Agent and as the Lessee; Wells Fargo Bank
Northwest, National Association (formerly First Security Bank,
National Association), not individually, except as expressly
stated therein, but solely as the Owner Trustee under the RFMD
Real Estate Trust 1999-1; the Various Banks and Other Lending
Institutions which are Parties Thereto from time to time, as
the Holders; the Various Banks and Other Lending Institutions
which are Parties Thereto from time to time, as the Lenders;
First Union National Bank, as the Agent for the Lenders and
Respecting the Security Documents, as the Agent for the Lenders
and the Holders, to the extent of their interests; and Credit
Suisse First Boston, as Syndication Agent (3)
10.25 Summary of terms of RF Micro Devices, Inc. FY 2002 Executive
Bonus Plan*
10.26 Change of Control Agreement, dated March 1, 2001, between RF
Micro Devices, Inc. and David A. Norbury (9)*
10.27 Change of Control Agreement, dated March 1, 2001, between RF
Micro Devices, Inc. and William J. Pratt (9)*
10.28 Change of Control Agreement, dated March 1, 2001, between RF
Micro Devices, Inc. and Jerry D. Neal (9)*
10.29 Change of Control Agreement, dated March 1, 2001, between RF
Micro Devices, Inc. and Arthur E. Geiss (9)*
10.30 Change of Control Agreement, dated March 1, 2001, between RF
Micro Devices, Inc. and Robert A. Bruggeworth (9)*
10.31 Change of Control Agreement, dated March 1, 2001, between RF
Micro Devices, Inc. and William A. Priddy, Jr. (9)*
10.32 Change of Control Agreement, dated March 1, 2001, between RF
Micro Devices, Inc. and Powell T. Seymour (9)*
10.33 Change of Control Agreement, dated March 1, 2001, between RF
Micro Devices, Inc. and Gary J. Grant (9)*
10.34 Change of Control Agreement, dated March 1, 2001, between RF
Micro Devices, Inc. and J. Forrest Moore (9)*
13 Excerpts from Annual Report to Shareholders for the fiscal year
ended March 31, 2002
EXHIBIT
NO. DESCRIPTION
-------- -------------
21 Subsidiaries of RF Micro Devices, Inc.
23 Consent of Ernst & Young LLP
- --------------
(1) Incorporated by reference to the exhibit filed with our Quarterly
Report on Form 10-Q for the quarterly period ended June 26, 1999
(2) Incorporated by reference to the exhibit filed with our Quarterly
Report on Form 10-Q for the quarterly period ended July 1, 2000
(3) Incorporated by reference to the exhibit filed with our Quarterly
Reort on Form 10-Q for the quarterly period ended September
29,2001
(4) Incorporated by reference to the exhibit filed with our
Registration Statement on Form S-1 (File No. 333-22625)
(5) Incorporated by reference to the exhibit filed with our
Registration Statement on Form 8-A filed August 14, 2001
(6) Incorporated by reference to the exhibit filed with our
Registration Statement on Form S-3 (File No. 333-49432)
(7) Incorporated by reference to the exhibit filed with our Quarterly
Report on Form 10-Q for the quarterly period ended December 25,
1999
(8) Incorporated by reference to the exhibit filed with our Annual
Report on Form 10-K for the fiscal year ended March 27, 1999
(9) Incorporated by reference to the exhibit filed with our Annual
Report on Form 10-K for the fiscal year ended March 31, 2001
* Executive compensation plan or agreement
(b) Reports on Form 8-K filed in the 4th quarter of fiscal 2002:
None.
(c) Exhibits
The exhibits required by Item 601 of Regulation S-K are filed herewith and
incorporated by reference herein. The response to this portion of Item 14 is
submitted under Item 14(a)(3).
(d) Financial Statement Schedules
The response to this portion of Item 14 is submitted under Item 14(a)(2).
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
RF Micro Devices, Inc.
Date: June 18, 2002 /s/ David A. Norbury
----------------------------------
By: David A. Norbury
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on June 18, 2002.
/s/ David A. Norbury
- --------------------------------------
Name: David A. Norbury
Title: Chief Executive Officer
And Director
(principal executive officer)
/s/ William A. Priddy, Jr.
- --------------------------------------
Name: William A. Priddy, Jr.
Title: Chief Financial Officer and Vice President of Administration
(principal financial officer)
/s/ Barry D. Church
- --------------------------------------
Name: Barry D. Church
Title: Corporate Controller
(principal accounting officer)
/s/ Erik H. van der Kaay
- --------------------------------------
Name: Erik H. van der Kaay
Title: Director
/s/ Albert E. Paladino
- --------------------------------------
Name: Dr. Albert E. Paladino
Title: Director
/s/ William J. Pratt
- --------------------------------------
Name: William J. Pratt
Title: Director
/s/ Walter H. Wilkinson, Jr.
- --------------------------------------
Name: Walter H. Wilkinson, Jr.
Title: Director
Schedule II
Valuation and Qualifying Accounts
Years Ended March 31, 2002, 2001 and 2000
(In thousands)
Balance at Beginning Additions Charged to Deductions from Balance at End of
of Period Costs and Expenses Reserve Period
---------------------------------------------------------------------------------------------
Year ended March 31, 2002
Allowance for doubtful accounts $ 951 $ 395 $ 212(1) $ 1,134
Inventory reserve 19,884 11,499 6,190(2) 25,193
Year ended March 31, 2001
Allowance for doubtful accounts $ 775 $ 359 $ 183 (1) $ 951
Inventory reserve 11,114 13,181 4,411 (2) 19,884
Year ended March 31, 2000
Allowance for doubtful accounts $ 391 $ 385 $ 1(1) $ 775
Inventory reserve 4,386 9,639 2,911(2) 11,114
(1) The Company wrote-off a fully reserved balance against the related receivable.
(2) The Company wrote-off scrap related to quality and obsolescence for a fully reserved balance.