Triquint Semiconductor (TQNT) 10-Q 2010 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended October 2, 2010

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from             to             

Commission File Number 0-22660

TRIQUINT SEMICONDUCTOR, INC.

(Exact name of registrant as specified in its charter)

Delaware	95-3654013
(State or other jurisdiction of incorporation)	(I.R.S. Employer Identification No.)

2300 N.E. Brookwood Parkway,

Hillsboro, Oregon 97124

(Address of principal executive offices) (Zip code)

(503) 615-9000

(Registrant’s telephone number, including area code)

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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of November 4, 2010, there were 159,065,139 shares of the Registrant’s Common Stock outstanding.

TRIQUINT SEMICONDUCTOR, INC.

INDEX

	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Operations for the three and nine months ended October 2, 2010 and September 26, 2009	1
	Condensed Consolidated Balance Sheets at October 2, 2010 and December 31, 2009	2
	Condensed Consolidated Statements of Cash Flows for the nine months ended October 2, 2010 and September 26, 2009	3
	Notes to Condensed Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	21
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 6.	Exhibits	23

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

TRIQUINT SEMICONDUCTOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

	Three Months Ended						Nine months Ended
	October 2, 2010			September 26, 2009			October 2, 2010			September 26, 2009
Revenues	$	236,998		$	172,955		$	625,314		$	460,965
Cost of goods sold		139,039			114,513			373,373			324,654
Gross profit		97,959			58,442			251,941			136,311
Operating expenses:
Research, development and engineering		32,978			28,282			96,397			78,971
Selling, general and administrative		26,115			19,422			76,727			56,089
Settlement of lawsuit		—			—			—			2,950
Total operating expenses		59,093			47,704			173,124			138,010
Income (loss) from operations		38,866			10,738			78,817			(1,699	)
Other (expense) income:
Interest income		85			139			308			677
Interest expense		(189	)		(179	)		(559	)		(721	)
Foreign currency (loss) gain		(202	)		60			(411	)		(54	)
Other, net		248			9			316			439
Total other (expense) income, net		(58	)		29			(346	)		341
Income (loss) before income tax		38,808			10,767			78,471			(1,358	)
Income tax (benefit) expense		(73,367	)		256			(69,872	)		(126	)
Net income (loss)	$	112,175		$	10,511		$	148,343		$	(1,232	)
Net income (loss) per common share:
Basic	$	0.72		$	0.07		$	0.96		$	(0.01	)
Diluted	$	0.69		$	0.07		$	0.92		$	(0.01	)
Common equivalent shares:
Basic		155,734			150,878			154,737			148,789
Diluted		162,653			157,344			161,146			148,789

The accompanying notes are an integral part of these financial statements.

1

TRIQUINT SEMICONDUCTOR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share data)

	October 2, 2010		December 31, 2009
ASSETS
Current assets:
Cash and cash equivalents	$	143,042	$	103,579
Investments in marketable securities		44,128		50,356
Accounts receivable, net		141,795		88,090
Inventories		103,346		89,964
Prepaid expenses		18,986		5,873
Deferred tax assets		40,793		—
Other current assets		27,615		20,822
Total current assets		519,705		358,684
Property, plant and equipment, net		309,914		275,985
Goodwill		3,376		3,376
Intangible assets, net		28,548		33,025
Deferred tax assets – noncurrent		30,647		—
Other noncurrent assets, net		9,308		8,971
Total assets	$	901,498	$	680,041
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	78,637	$	44,058
Accrued payroll		34,189		26,489
Other accrued liabilities		13,647		12,176
Total current liabilities		126,473		82,723
Long-term liabilities:
Long-term income tax liability		9,247		10,077
Other long-term liabilities		8,878		10,079
Total liabilities		144,598		102,879
Commitments and contingencies (Note 15)
Stockholders’ equity:
Preferred Stock, $0.001 par value, 5,000,000 shares authorized, no shares issued		—		—
Common stock, $0.001 par value, 600,000,000 shares authorized, 156,497,571 and 153,279,319 shares issued and outstanding at October 2, 2010 and December 31, 2009, respectively		156		153
Additional paid-in capital		588,088		556,690
Accumulated other comprehensive income		730		736
Retained earnings		167,926		19,583
Total stockholders’ equity		756,900		577,162
Total liabilities and stockholders’ equity	$	901,498	$	680,041

The accompanying notes are an integral part of these financial statements.

2

TRIQUINT SEMICONDUCTOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Nine months Ended
	October 2, 2010			September 26, 2009
Cash flows from operating activities:
Net income (loss)	$	148,343		$	(1,232	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		40,373			34,530
Stock-based compensation expense		12,939			10,508
Settlement of lawsuit		—			2,950
Deferred tax benefit		(71,440	)		—
Other		23			22
Changes in assets and liabilities:
Accounts receivable, net		(53,705	)		(21,807	)
Inventories		(13,201	)		17,684
Other assets		(8,202	)		(2,911	)
Accounts payable and accrued expenses		18,969			18,173
Net cash provided by operating activities		74,099			57,917
Cash flows from investing activities:
Purchase of available-for-sale investments		(50,076	)		(51,409	)
Maturity/sale of available-for-sale investments		56,299			60,558
Other		1,345			1,627
Business acquisition, net of cash acquired (Note 5)		—			(7,984	)
Capital expenditures		(63,028	)		(35,250	)
Net cash used in investing activities		(55,460	)		(32,458	)
Cash flows from financing activities:
Subscription/issuance of common stock, net		20,064			16,585
Loan commitment fees		(1,638	)		—
Excess tax benefit from stock-based compensation arrangements		2,398			—
Net cash provided by financing activities		20,824			16,585
Net increase in cash and cash equivalents		39,463			42,044
Cash and cash equivalents at beginning of period		103,579			50,773
Cash and cash equivalents at end of period	$	143,042		$	92,817
Supplemental disclosures:
Change in timing of payments related to capital expenditures	$	7,074		$	(3,270	)
Cash paid for income taxes	$	538		$	851

The accompanying notes are an integral part of these financial statements.

3

TRIQUINT SEMICONDUCTOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

1. Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). However, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed, or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In addition, the preparation of financial statements in conformity with GAAP requires management to make estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. For TriQuint Semiconductor, Inc. (the “Company”), the accounting estimates requiring management’s most difficult and subjective judgments include revenue recognition, the valuation of inventory, the valuation of deferred income tax assets and liabilities and the accounting for stock-based compensation. In the opinion of management, the condensed consolidated financial statements include all material adjustments, consisting only of normal, recurring adjustments, necessary for the fair presentation of the results of the interim periods presented. These condensed consolidated financial statements should be read in conjunction with the audited financial statements of the Company for the fiscal year ended December 31, 2009, included in the Company’s 2009 Annual Report on Form 10-K filed with the SEC on February 26, 2010.

2. Recent Accounting Pronouncements

In April 2010, the FASB issued authoritative guidance regarding, “Revenue Recognition—Milestone Method,” which provides guidance in applying the milestone method of revenue recognition to research or development arrangements. Under this guidance management may recognize revenue contingent upon the achievement of a milestone in its entirety, in the period in which the milestone is achieved, only if the milestone meets all the criteria within the guidance to be considered substantive. The new standard is effective on a prospective basis for research and development milestones achieved in fiscal years beginning on or after June 15, 2010. Early adoption is permitted; however, adoption of this guidance as of a date other than January 1, 2011 will require the Company to apply this guidance retrospectively effective as of January 1, 2010 and will require disclosure of the effect of this guidance as applied to all previously reported interim periods in the fiscal year of adoption. While the Company is still analyzing the effects of the adoption of this standard, the Company does not believe that the adoption of this standard will have a material effect on its financial position, results of operations or cash flows.

In October 2009, the FASB issued authoritative guidance regarding “Multiple-Delivered Revenue Arrangements,” which updates “Revenue Recognition—Multiple Element Arrangements” to eliminate the requirement that all undelivered elements have vendor-specific objective evidence (“VSOE”) or third-party evidence (“TPE”) before an entity can recognize the portion of an overall arrangement fee that is attributable to items that already have been delivered. In the absence of VSOE or TPE of the standalone selling price for one or more delivered or undelivered elements in a multiple element arrangement, entities will be required to estimate the selling prices of those elements. The overall arrangement fee will be allocated to each element (both delivered and undelivered items) based on their relevant selling prices, regardless of whether those selling prices are evidenced by VSOE or TPE or are based on the entity’s estimated selling price. Upon adoption, application of the “residual method” will no longer be permitted and entities will be required to disclose more information about their multiple-element revenue arrangements. The new standard is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. If a company elects early adoption and the period of adoption is not the beginning of its fiscal year, the requirements must be applied retrospectively to the beginning of the fiscal year. While the Company is still analyzing the effects of the adoption of this standard, the Company does not believe that the adoption of this standard will have a material effect on its financial position, results of operations or cash flows

In August 2009 , the FASB issued amendments to authoritative guidance regarding “ Fair Value Measurements and Disclosures,” to provide more robust disclosures about (1) the different classes of assets and liabilities measured at fair value, (2) the valuation techniques and inputs used, (3) the activity in Level 3 fair value measurements, and (4) the transfers between Levels 1, 2, and 3. The disclosure requirements about purchases, sales, issuances, and settlements relating to Level 3 measurements are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Early adoption is permitted. The Company’s adoption of this standard did not have a material impact on its consolidated financial position, results of operations or cash flows. See Note 3 for information and related disclosures regarding the Company’s fair value measurements.

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3. Fair Value of Financial Instruments

The Company accounts for its assets utilizing a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs have created the following fair-value hierarchy:

• Level 1—Quoted prices for identical instruments in active markets;

• Level 2—Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and

• Level 3—Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

	Carrying Amount		Total Fair Value				Fair Value Measurements as of October 2, 2010
					Cash		Level 1		Level 2		Level 3
Measured on a recurring basis:
Assets:
Cash and cash equivalents—money market funds	$	143,042	$	143,042	$	33,820	$	109,222	$	—	$	—
Short-term—marketable securities		44,128		44,128		—		3,686		40,442		—
Non-Qualified Deferred Compensation Plan		2,601		2,601		—		2,601		—		—
Total	$	189,771	$	189,771	$	33,820	$	115,509	$	40,442	$	—
Liabilities:
Earnout payment liability	$	1,180	$	1,180	$	—	$	—	$	—	$	1,180
Non-Qualified Deferred Compensation Plan		2,601		2,601		—		2,601		—		—
Total	$	3,781	$	3,781	$	—	$	2,601	$	—	$	1,180
	Carrying Amount		Total Fair Value				Fair Value Measurements as of December 31, 2009
					Cash		Level 1		Level 2		Level 3
Measured on a recurring basis:
Assets:
Cash and cash equivalents—money market funds	$	103,579	$	103,579	$	17,077	$	86,502	$	—	$	—
Short-term—marketable securities		50,356		50,356		—		11,224		39,132		—
Non-Qualified Deferred Compensation Plan		1,899		1,899		—		1,899		—		—
Total	$	155,834	$	155,834	$	17,077	$	99,625	$	39,132	$	—
Liabilities:
Earnout payment liability	$	1,509	$	1,509	$	—	$	—	$	—	$	1,509
Non-Qualified Deferred Compensation Plan		1,899		1,899		—		1,899		—		—
Total	$	3,408	$	3,408	$	—	$	1,899	$	—	$	1,509

The instruments classified as Level 1 are measured at fair value using quoted market prices. The investments classified as Level 2 were valued using quoted prices for similar instruments in markets that are not active since identical instruments were not available. The Company determines the hierarchy levels at the end of each quarter.

The Non-Qualified Deferred Compensation Plan provides employees who are eligible to participate and the members of the Board of Directors with the opportunity to defer a specified percentage of their cash compensation. The Company includes the asset deferred by the participants in the “Other noncurrent assets, net” line item of its consolidated balance sheet and the Company’s obligation to deliver the deferred compensation in the “Other long-term liabilities” line item on its consolidated balance sheet.

5

On October 2, 2010, the Company remeasured the fair value of the Level 3 financial investment. During the three and nine months ended October 2, 2010, the Company revised its estimate relating to payments of the earnout liability and accordingly recorded a reduction in the liability of $467. The Company used an income based method to measure the fair value of this liability. For additional details on the liability classified as Level 3, see Note 5, Business Combinations. Details of the level three fair value measurements are as follows:

Details of the Level 3 fair value measurements are as follows:

Opening earnout payment liability	$	1,398
Accretion		111
Ending earnout payment liability at December 31, 2009	$	1,509
Accretion		138
Change in estimate		(467	)
Ending earnout payment liability at October 2, 2010	$	1,180

4. Investments in Marketable Securities

As of October 2, 2010 all short-term investments are classified as available-for-sale and have maturity dates of less than one year. All unrealized gains and losses on available-for-sale investments are included in other comprehensive income. The cost, gross unrealized holding gains, gross unrealized holding losses and fair value of available-for-sale investments by types and classes of security at October 2, 2010 consisted of the following:

At October 2, 2010	Cost		Net unrealized holding gains		Net unrealized holding losses		Fair Value
Available-for-sale:
U.S. treasury securities and obligations of U.S government agencies – included in short-term marketable securities	$	3,685		1		—	$	3,686
Corporate debt securities and other		40,432		10		—		40,442
	$	44,117	$	11	$	—	$	44,128

The cost, gross unrealized holding gains, gross unrealized holding losses and fair value of available-for-sale investments by types and classes of security at December 31, 2009 consisted of the following:

At December 31, 2009	Cost		Net unrealized holding gains		Net unrealized holding losses			Fair Value
Available-for-sale:
U.S. treasury securities and obligations of U.S. government agencies – included in cash equivalents	$	55	$	—	$	—		$	55
U.S. treasury securities and obligations of U.S. government agencies – included in short-term marketable securities	$	11,196		28		—		$	11,224
Corporate debt securities and other		39,145		—		(13	)		39,132
	$	50,396	$	28	$	(13	)	$	50,411

The contractual maturities of investments as of October 2, 2010 and December 31, 2009 were all due or callable in one year or less.

Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary. The Company employs a methodology that reviews specific securities in evaluating potential impairment of its investments. In the event that the cost of an investment exceeds its fair value, the Company evaluates, among other factors, the Company’s intent and ability to hold the investment and extent to which the fair value is less than cost; the financial health of and business outlook for the issuer; and operational and financing cash flow factors. During the three and nine months ended October 2, 2010 the Company did not record any other-than-temporary impairments on its marketable securities.

6

5. Business Combinations

TriAccess Technologies, Inc. (“TA”)

On September 3, 2009, the Company completed the acquisition of TA, a provider of Cable TV and Fiber to the Home and RF specific integrated circuits for the amplification of multimedia content, by purchasing 100% of TA’s outstanding shares. Details of the purchase price are as follows:

Cash paid at closing, net of cash acquired	$	7,984
Estimated earnout payment liability		1,398
Total	$	9,382

The earnout payment liability has been estimated at its fair value and represents an obligation to pay up to $5,000 to the former TA shareholders upon TA product sales meeting certain revenue thresholds over three years beginning in 2010. The Company has estimated the fair value of the identifiable intangible assets, which are subject to amortization, using a cash flow based approach discounted with a market discount rate. In-process research and development (“IPR&D”) is considered an indefinite lived asset and will be amortized or impaired upon completion or abandonment of specific projects. Refer to Note 11 for more details on these IPR&D projects. All other intangible assets will be amortized over a period of three to five years. Goodwill is calculated as the purchase price in excess of the fair values of TA’s assets and liabilities and represents the Company’s opportunity to expand its product line into video delivery, a high margin, high growth market currently underserved by the Company. The goodwill is not deductible for tax purposes. The purchase price was allocated to TA’s assets and liabilities based upon fair values as follows:

Tangible assets acquired, net of cash acquired	$	(4	)
Developed technology		3,680
In-process research and development		2,330
Goodwill		3,376
Total	$	9,382

The results of operations for the TA business are included in the Company’s consolidated statements of operations for the period from September 3, 2009 forward. Pro forma results of operations have not been presented for this acquisition because its effect was not material to the Company.

WJ Communications, Inc. (“WJ”)

As part of its acquisition of WJ, the Company committed to a restructuring plan to consolidate facilities in San Jose, California and China and to reduce certain redundant positions in the WJ operations as a result of the acquisition. The consolidation of the facilities and the reduction of personnel were substantially complete by the end of the third quarter of 2009. The plan to consolidate facilities includes partial abandonment of the San Jose facility and full abandonment of the China leases. The China lease expired in 2009 and San Jose lease expires in 2011. Payments related to this restructuring are expected to be completed during 2011. During 2009, the Company revised its estimate of future payments relating to the San Jose lease and accordingly recorded a reduction to the future liability of $534.

The following table summarizes the charges taken as part of the restructuring plan:

	Personnel			Lease abandonment costs			Total
Balance at May 22, 2008	$	3,859		$	11,148		$	15,007
Payments		(2,194	)		(2,248	)		(4,442	)
Accretion		—			310			310
Balance at December 31, 2008	$	1,665		$	9,210		$	10,875
Payments		(1,611	)		(3,963	)		(5,574	)
Accretion		—			404			404
Change in estimate		—			(534	)		(534	)
Balance at December 31, 2009	$	54		$	5,117		$	5,171
Payments		(54	)		(3,104	)		(3,158	)
Accretion		—			165			165
Balance at October 2, 2010	$	—		$	2,178		$	2,178

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6. Net Income (Loss) Per Share

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

The following is a reconciliation of the basic and diluted shares:

	Three Months Ended				Nine months Ended
	October 2, 2010		September 26, 2009		October 2, 2010		September 26, 2009
Net income (loss)	$	112,175	$	10,511	$	148,343	$	(1,232	)
Shares for net income (loss) per share:
Weighted-average shares outstanding—Basic		155,734		150,878		154,737		148,789
Dilutive securities		6,919		6,466		6,409		—
Weighted-average shares outstanding—Diluted		162,653		157,344		161,146		148,789

Options and other exercisable convertible securities were excluded from the calculation as their effect would have been antidilutive. Antidilutive shares excluded from the calculation were as follows:

	Three Months Ended				Nine months Ended
	October 2, 2010		September 26, 2009		October 2, 2010		September 26, 2009
Antidilutive securities		13,254		13,462		14,686		31,778

7. Comprehensive Income (Loss)

The components of other comprehensive income (loss) were as follows:

	Three Months Ended						Nine months Ended
	October 2, 2010			September 26, 2009			October 2, 2010			September 26, 2009
Net income (loss)	$	112,175		$	10,511		$	148,343		$	(1,232	)
Other comprehensive loss:
Net unrealized loss on available for sale investments		(3	)		(43	)		(6	)		(220	)
Comprehensive income (loss)	$	112,172		$	10,468			148,337		$	(1,452	)

8. Foreign Currency Exchange

The Company’s functional currency for all operations worldwide is the U.S. dollar. For foreign operations with the U.S. dollar as the functional currency, monetary assets and liabilities are remeasured at the period-end exchange rates. Certain non-monetary assets and liabilities are remeasured using historical rates. Statements of operations for each month are remeasured at the prior month’s balance sheet rate, which approximates the average exchange rates for the month.

The Company reported foreign currency (loss) gain as follows:

	Three Months Ended					Nine months Ended
	October 2, 2010			September 26, 2009		October 2, 2010			September 26, 2009
Foreign currency (loss) gain from remeasurement	$	(202	)	$	60	$	(411	)	$	(54	)

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9. Inventories

Inventories, stated at the lower of cost or market, consisted of the following:

	October 2, 2010		December 31, 2009
Inventories:
Raw materials	$	21,115	$	21,393
Work-in-process		60,372		41,385
Finished goods		21,859		27,186
	$	103,346	$	89,964

10. Property, Plant and Equipment

Property, plant and equipment for operations consisted of the following:

	October 2, 2010			December 31, 2009
Land	$	19,691		$	19,691
Buildings		89,471			89,386
Leasehold improvements		12,240			9,896
Machinery and equipment		425,694			405,173
Furniture and fixtures		5,883			5,899
Computer equipment and software		37,989			36,037
Assets in process		65,792			28,103
Total property, plant and equipment, gross		656,760			594,185
Accumulated depreciation		(346,846	)		(318,200	)
Total property, plant and equipment, net	$	309,914		$	275,985

The Company reported depreciation expense as follows:

	Three Months Ended				Nine months Ended
	October 2, 2010		September 26, 2009		October 2, 2010		September 26, 2009
Depreciation expense	$	12,306	$	10,545	$	35,934	$	30,646

11. Goodwill and Other Acquisition-Related Intangible Assets

The Company is required to perform an impairment analysis on its goodwill at least annually, or when events and circumstances warrant. Conditions that would trigger an impairment assessment, include, but are not limited to, a significant adverse change in legal factors or in the business climate that could affect the value of an asset or an adverse action or assessment by a regulator. The Company is considered one reporting unit. As a result, to determine whether or not goodwill may be impaired, the Company compares its book value to its market capitalization. If the trading price of the Company’s common stock is below the book value per share at the date of the annual impairment test or if the average trading price of the Company’s common stock is below book value per share for a sustained period, a goodwill impairment test will be performed by comparing book value to estimated market value. If the comparison of book value to estimated market value indicates impairment, then the Company compares the implied fair value of goodwill to its carrying amount in a manner similar to a purchase price allocation for a business combination. If the carrying amount of goodwill exceeds its implied fair value, an impairment loss is recognized equal to that excess.

The Company performs this test in the fourth quarter of each year, unless indicators warrant testing at an earlier date. During the three and nine months ended October 2, 2010 and September 26, 2009, there were no impairments or impairment indicators present and no loss was recorded.

Information regarding the Company’s acquisition-related intangible assets is as follows:

	Useful Life (Years)		Gross		October 2, 2010						December 31, 2009
					Accumulated Amortization		Write-off		Net Book Value		Gross		Accumulated Amortization		Net Book Value
Non-Amortizing:
Goodwill			$	3,376	$	—	$	—	$	3,376	$	3,376	$	—	$	3,376
In process research and development				1,960		—		38		1,922		2,330		—		2,330
Amortizing:
In process research and development		5		370		25		—		345		—		—		—
Patents, trademarks and other		2 -10		47,388		21,107		—		26,281		47,388		16,693		30,695
Total intangible assets			$	53,094	$	21,132	$	38	$	31,924	$	53,094	$	16,693	$	36,401

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The Company’s patents, trademarks and other intangible assets are being amortized over a period of two to ten years. During the nine months ended October 2, 2010 a product line that was included in IPR&D reached technological feasibility. As a result the Company began amortizing that portion of IPR&D over a period of 5 years. During the three months ended October 2, 2010, no other product line reached technological feasibility. Additionally, the Company abandoned and wrote off one product line that was included in IPR&D during the nine months ended October 2, 2010. The Company did not incur a similar charge for the three months ended October 2, 2010. Amortization expense for amortizing intangible assets was as follows:

	Three Months Ended				Nine months Ended
	October 2, 2010		September 26, 2009		October 2, 2010		September 26, 2009
Amortization expense	$	1,460	$	1,347	$	4,439	$	3,884

12. Bank Line

On September 30, 2010, the Company, the domestic subsidiaries of the Company (the “Guarantors”), Bank of America, N.A., as administrative agent and lender, and Union Bank, N.A.,Wells Fargo Bank, N.A., Bank of the West, BBVA Compass Bank and US Bank, as lenders (together with the Administrative Agent, the “Lenders”), entered into a Credit Agreement dated as of September 30, 2010 (the “Agreement”). The Agreement provides the Company with a three-year unsecured revolving syndicated credit facility of $200,000. The Company’s obligations under the Agreement are jointly and severally guaranteed by the Guarantors.

The Company may elect to borrow at either a Eurodollar Rate or a Base Rate (each as defined in the Agreement). Eurodollar Rate loans bear interest at an amount equal to the sum of a rate per annum calculated from the British Bankers Association LIBOR rate plus a designated percentage per annum (the “Applicable Rate”). The Applicable Rate for Eurodollar Rate loan is based on the Company’s consolidated total leverage ratio (as defined in the Agreement) and is subject to a floor of 2.50% per annum and a cap of 3.00% per annum. Base Rate loans bear interest at a rate equal to the higher of the federal funds rate plus 0.50%, the prime rate of the Lender plus the Applicable Rate or the Eurodollar Rate plus 1.0%. The Applicable Rate for Base Rate loans is subject to a floor of 1.50% per annum and a cap of 2.00% per annum. The interest payment date (as defined in the Agreement) will vary based on the type of loan but generally will be quarterly. The Company paid commitment fees, an arrangement fee and upfront fees pursuant to the terms of the Agreement. The Company will also pay a quarterly fee for any letters of credit issued under the Agreement.

The Agreement contains non-financial covenants of the Company and the Guarantors, including restrictions on the ability to create, incur or assume liens and indebtedness, make certain investments, dispositions and restricted payments, change the nature of the business, and merge with other entities subject to certain caps as defined in the agreement. The Agreement requires the Company to maintain ratios defined in the Agreement, which include a consolidated total leverage ratio as of the end of any fiscal quarter not in excess of 2.50 to 1.00, a consolidated liquidity ratio of at least 1.25 to 1.00 and a consolidated interest coverage ratio not in excess of 3.00 to 1.00.

Outstanding amounts are due in full on the maturity date of September 30, 2013, subject to a one-year extension at the Company’s option and with the Lender’s consent. Upon the occurrence of certain events of default specified in the Agreement, amounts due under the Agreement may be declared immediately due and payable.

At October 2, 2010 there were no amounts outstanding under the Agreement. During the three months ended October 2, 2010, the Company paid $1,638 of commitment fees. This Agreement replaces the $50,000 unsecured credit facility dated June 27, 2008, amended on April 20, 2010.

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13. Stock-Based Compensation

Stock-based compensation expense consists of expense related to unvested grants of employee stock options and the Company’s 2007 Employee Stock Purchase Program. The table below summarizes the stock-based compensation expense for the three and nine months ended October 2, 2010 and September 26, 2009:

	Three Months Ended				Nine months Ended
	October 2, 2010		September 26, 2009		October 2, 2010		September 26, 2009
Stock-based compensation expense:
Cost of goods sold	$	1,321	$	1,268	$	3,406	$	2,531
Operating expenses:
Research, development and engineering		1,627		1,450		4,749		4,252
Selling, general and administrative		1,709		1,251		4,784		3,725
Total in operating expenses		3,336		2,701		9,533		7,977
Total in income from operations	$	4,657	$	3,969	$	12,939	$	10,508

Stock Option Plans

The following summarizes the Company’s stock option transactions for the nine months ended October 2, 2010:

	Nine months ended October 2, 2010
	Shares			Weighted- average exercise price per share
Outstanding at the beginning of the period		30,101		$	7.96
Granted		7,091			7.11
Exercised		(2,277	)		4.98
Forfeitures		(1,321	)		29.61
Outstanding at the end of the period		33,594		$	7.14

14. Income Taxes

The Company recorded a tax benefit of $73,367 and $69,872 for the three and nine month periods ended October 2, 2010. The benefit primarily resulted from the release of the valuation allowance which was recorded against the deferred tax assets and the release of certain liabilities due to the expiration of the statute of limitations. For the nine months ended October 2, 2010, this benefit was offset by the U.S. federal tax expense because of the “with-and-without” approach for excess share-based deductions recognized in the net operating loss. The Company has excess share-based deductions when using the “with-and-without” approach due to cash tax savings of these deductions within the alternative minimum tax calculation. The tax expense for the three months ended September 26, 2009 was primarily associated with U.S. federal and foreign taxes. For the nine months ended September 26, 2009, the tax benefit was primarily attributable to the release of a contingent tax liability related to an uncertain tax position for which the tax assessment’s statute of limitations expired.

Due to strong results for the three and nine months ended October 2, 2010, greater visibility into the forecast for the remainder of 2010 and beyond and increased confidence that the Company will continue to generate taxable income into the foreseeable future, the Company’s assessment regarding the realizability of the Company’s deferred tax assets changed. This assessment required the Company to exercise significant judgment and make estimates about its ability to generate revenues, gross profits, operating income and taxable income in future periods. The result was the release of a majority of the valuation allowance on the deferred tax assets. The Company continues to record a valuation allowance against a portion of U.S. deferred tax assets since it is not “more-likely-than-not” that it will be able to utilize these deferred tax assets in future periods. Specifically, sources of capital gain taxable income were not identified to utilize capital loss carryforwards and the statute of limitations may expire before a portion of certain net operating loss carryforwards is utilized.

For the three and nine-month periods ended October 2, 2010, the difference between the Company’s effective tax rate and the 35% federal statutory rate resulted primarily from a tax benefit related to a reduction in the federal and state deferred tax asset valuation allowance offset by state and foreign earnings taxed at rates lower than the federal statutory rate. Discussion of the effective tax rate for prior periods is not meaningful given the impact of the valuation allowance during those periods.

Deferred Income Taxes

As of October 2, 2010, deferred tax assets of $71,440, net of a $11,991 valuation allowance were recorded on the balance sheet. As of December 31, 2009, the Company did not record similar balances due to a full valuation allowance of $123,222.

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Unrecognized Tax Benefits

In the nine months ended October 2, 2010 and September 26, 2009, unrecognized tax benefits decreased $830 and $804, respectively. This was due to the expiration of the statute of limitations. The Company did not incur a similar benefit in the three months ended October 2, 2010 and September 26, 2009, respectively. Interest and penalties associated with unrecognized tax benefits are classified as a component of tax expense in the statement of operations.

Unrecognized tax benefits at October 2, 2010 and December 31, 2009 were as follows:

	October 2, 2010		December 31, 2009
Unrecognized tax benefits	$	9,247	$	10,077

Other

No provision has been made for U.S., state or additional foreign income taxes related to approximately $106,000 of undistributed earnings of foreign subsidiaries which have been and are intended to be permanently reinvested. The Company’s income tax liability recorded on its condensed consolidated balance sheets is based on management’s estimate of income tax expense in the jurisdictions in which the Company has operations.

Due to agreements with the Costa Rican government, the Company was granted a 50% income tax exemption through March 24, 2009 and a 100% exemption thereafter. Full exemption from Costa Rican income tax is expected through March 2017, subject to the Company meeting certain employment and investment requirements.

15. Commitments and Contingencies

Legal Matters

On July 23, 2009, the Company filed a complaint in the United States District Court for the District of Arizona against Avago Technologies Limited, Avago Technologies U.S., and Avago Technologies Wireless IP (collectively, “Avago”). The Company’s complaint seeks a declaration that four of the Avago patents are invalid and that none of TriQuint products infringe upon them. The Company’s complaint also alleges that three Avago products infringe upon certain of TriQuint’s U.S. patents.

Avago filed an answer and counterclaims on September 17, 2009. Avago’s answer and counterclaims denies the Company’s patent infringement allegations, and alleges that certain of the Company’s products infringe upon ten of Avago’s U.S. patents and seeks unspecified damages and injunctive relief. In response to Avago’s answer and counterclaims, the Company filed an answer and counterclaims on October 16, 2009. The Company’s answer and counterclaims denies Avago’s patent infringement allegations, and alleges that Avago engaged in anticompetitive conduct in violation of U.S. antitrust laws, through its acquisition of the bulk acoustic wave (“BAW”) business of Infineon Technologies, Inc. (“Infineon”) and a series of acquisitions of BAW-related patents from Infineon and other companies, and through other anticompetitive conduct in the market. On March 5, 2010, Avago filed an amended answer and counterclaims asserting violation of the California Uniform Trade Secret Act and, per the court’s order, the Company simultaneously filed an amended complaint, answer and counter-claim. Avago’s trade secret allegations relate to Infineon information included in Avago’s acquisition of Infineon’s BAW division and TriQuint’s employment of two former Infineon employees. On April 5, 2010, the Company filed an answer to Avago’s amended answer and counterclaims, in which the Company denied Avago’s allegations regarding violation of the California Uniform Trade Secret Act. Following further motion practice, on August 4, 2010 TriQuint filed its First Amended complaint and on August 26, 2010. Avago filed its answer and counterclaims expanding its patent and trade secret claims to include copyright infringement. On September 16, 2010, TriQuint submitted its answer, in which the Company denied Avago’s allegations. At this time, the Company does not believe it is possible to estimate the outcome of the litigation.

On February 28, 2007, a purported derivative action (case no. C-07-0299) was filed in the United States District Court for the District of Oregon, allegedly on behalf of TriQuint, against certain of TriQuint’s officers and directors. The case was settled on September 28, 2009 and the Company paid the plaintiffs $2,950. The settlement was expensed in the three and nine months ended September 26, 2009.

Environmental Remediation

Current operations are subject to federal, state and local laws and regulations governing the use, storage, disposal of and exposure to hazardous materials, the release of pollutants into the environment and the remediation of contamination.

The Company continues to be in compliance with the remedial action plans being monitored by various regulatory agencies at WJ’s former Palo Alto and Scotts Valley, California sites. WJ had entered into funded fixed price remediation contracts and obtained cost-overrun and unknown pollution conditions insurance coverage. The Company believes that it is remote that it would incur any

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significant liability beyond that which it has recorded of approximately $51. The Company does ultimately retain responsibility for these environmental liabilities in the unlikely event that the environmental remediation firm and the insurance company do not meet their obligations.

With respect to other former production facilities, to date either no contamination of significance has been identified or reported to the Company or the regulatory agency involved has granted closure with respect to the identified contamination. Nevertheless, the Company may face environmental liabilities related to these sites in the future.

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

Introduction

You should read the following discussion and analysis in conjunction with our condensed consolidated financial statements and the related notes thereto included in this Report on Form 10-Q and with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. The discussion in this Report contains forward-looking statements, including statements regarding key advantages of our products and the benefits to our customers, participation in government programs and expansion of programs in the future, projected working capital and capital expenditures, potential investment needs, ongoing litigation, and other statements preceded by terminology such as “believes,” “continue,” “could,” “estimates,” “expects,” “goal,” “hope,” “intends,” “may,” “our future success depends,” “plans,” “potential,” “predicts,” “projects,” “reasonably,” “should,” “thinks,” “will” or the negative of these terms or other comparable terminology. These statements are only predictions. A number of factors affect our operating results and could cause our actual future results to differ materially from any forward-looking statements made below, including, but not limited to, those related to expected demand and growth in the wireless mobile devices, networks and defense & aerospace markets; changes in our critical accounting estimates; the reasonableness of our estimates; the ability to enter into defense & aerospace contracts; our ability to meet our revenue guidance and penetrate our market; expected operating expenses, gross margins and per share earnings; transactions affecting liquidity; expected capital expenditures; the outcome of ongoing litigation; and other factors and risks referenced in this Report on Form 10-Q and in Item 1A of Part II of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 entitled “Risk Factors.” In addition, historical information should not be considered an indicator of future performance.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we do not guarantee future results, levels of activity, performance or achievements. Moreover, we do not intend to update any of the forward-looking statements after the date of this Report on Form 10-Q to conform these statements to actual results. These forward-looking statements are made in reliance upon the safe harbor provision of The Private Securities Litigation Reform Act of 1995.

Overview

We are a supplier of high performance modules, components and foundry services for communications applications. Our focus is on the specialized expertise, materials and know-how of radio frequency (“RF”) and other high and intermediate frequency applications. We enjoy diversity in our markets, applications, products, technology and customer base. Our products are designed on various wafer substrates, including compound semiconductor materials such as gallium arsenide (“GaAs”), gallium nitride on silicon carbide (“GaN”), and piezoelectric crystals such as lithium tantalite (“LiTaO3”). We use a variety of process technologies using GaAs substrates, including heterojunction bipolar transistors (“HBT”) and pseudomorphic high electron mobility transistors (“pHEMT”). Using various other substrates we also manufacture surface acoustic wave (“SAW”) and bulk acoustic wave (“BAW”) products. Using these materials and our proprietary technology, we believe our products can offer key advantages such as steeper selectivity, lower distortion, higher power and power-added efficiency, better linearity, reduced size and weight and more precise frequency control. For example, GaAs has inherent physical properties that allow its electrons to move up to five times faster than those of silicon. This higher electron mobility permits the manufacture of GaAs integrated circuits that operate at higher levels of performance than silicon devices. We believe that these advantages are a tremendous benefit to our customers, which include major communication companies worldwide.

We are incorporated under the laws of the State of Delaware. Our principal executive offices are located at 2300 N.E. Brookwood Parkway, Hillsboro, Oregon 97124 and our telephone number at that location is (503) 615-9000. Information about the company is also available at our website at www.triquint.com, which includes links to reports we have filed with the Securities and Exchange Commission (“SEC”). The contents of our website are not incorporated by reference in this Report on Form 10-Q.

Strategy and Industry Considerations

Our business strategy is to provide our customers with high-performance, low-cost solutions for applications in the mobile device, networks, and defense & aerospace markets. Our mission is “Connecting the Digital World to the Global Network^®,” and we accomplish this through a diversified product portfolio within the communications and defense markets. In the mobile device market, we provide high performance devices such as integrated modules, duplexers, small signal components, power amplifiers, switches and RF filters. We leverage our manufacturing and integrated module expertise to win additional sockets with phone manufacturers by adding value added capabilities such as global positioning system (“GPS”), worldwide interoperability for microwave access (“WiMAX”) and wireless local area networks (“WLAN”). In the networks market, we are a supplier of both active GaAs power and SAW and BAW filter components. We provide the defense & aerospace market with phased-array antenna and communications components. We have been a leader in GaN development since 1999.

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Wafer and semiconductor manufacturing facilities require a significant level of fixed cost due to investments in plant and equipment, labor costs, and repair and maintenance costs. During periods of high demand factories run at higher utilization rates resulting in improved financial performance. Strong growth in demand is driving increased capital expenditures for added capacity in our factories.

We experienced 36% overall revenue growth for the nine months ended October 2, 2010 compared to the nine months ended September 26, 2009, with growth in all three of our markets.

Mobile devices comprise the largest of our three major markets. Revenues for the nine months ended October 2, 2010 increased 33% compared to the nine months ended September 26, 2009. Growth in this market was driven primarily by the strong demand for mobile data connectivity and the transition of the RF market from discrete to integrated solutions. As a result of the demand for smartphones and the expansion of RF content required for wideband code division multiple access (“WCDMA”) technology, revenue from WCDMA mobile devices increased 46% in the nine months ended October 2, 2010 compared to the nine months ended September 26, 2009.

Networks revenue increased 56% in the nine months ended October 2, 2010 compared to the nine months ended September 26, 2009 as a result of a broad recovery in this market. Our networks market includes products that support the transfer of data at high rates across wireless or wired networks. Our products for this market include those related to radio access, transport, and emerging markets. Radio access is composed of primarily base station infrastructure and WLAN access points. Transport includes submarkets such as cable television, microwave radio, satellite groundstation, and optical communications. We also support emerging wireless markets such as wireless “hotspots”, automotive and radio-frequency identification (“RFID”). We include our multi-market standard products in the emerging markets category.

Our defense & aerospace revenues increased 20% in the nine months ended October 2, 2010 compared to the nine months ended September 26, 2009. We have focused on the defense market and are recognized for leadership technology in compound semiconductors, BAW and SAW filters. We are successfully partnering with industry leaders creating next generation solutions. In the short term we are benefiting from positive cycles in airborne radar programs such as Joint Strike Fighter (“JSF”) and other active electronically scanned array (“AESA”), and in the longer term we are shifting our strategy to emulate our successful module efforts in the commercial market. This involves transitioning from a technology provider to a solutions supplier by creating RF solutions in high performance, cost effective packages and modules. For example, module integration can increase the functionality and reduce the space requirements in a high density phased array antenna.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. The following accounting policies involve critical accounting estimates because they are particularly dependent on estimates and assumptions made by management about matters that are highly uncertain at the time the accounting estimates are made. While we have used our best estimates based on facts and circumstances available to us at the time, different estimates reasonably could have been used. Changes in the accounting estimates we use are reasonably likely to occur from time to time, which may have a material effect on the presentation of our financial condition and results of operations.

Our most critical accounting estimates include revenue recognition; the valuation of inventory, which affects gross margin; valuation of deferred income tax assets, which affects our tax provision; and stock-based compensation, which affects cost of goods sold and operating expenses. We also have other policies that we consider to be key accounting policies, such as our policies for the valuation of accounts receivable, reserves for sales returns and allowances, and our reserves for commitments and contingencies; however, these policies either do not meet the definition of critical accounting estimates described above or are not currently material items in our financial statements. We review our estimates, judgments, and assumptions periodically and reflect the effects of revisions in the period in which they are deemed to be necessary. We believe that these estimates are reasonable; however, actual results could differ from these estimates.

Revenue Recognition

We derive revenues primarily from the sale of products and foundry services in the mobile devices, networks, and defense & aerospace markets. We also receive revenues from non-recurring engineering fees and cost-plus contracts for research and development work, which collectively have been less than 5% of consolidated revenues for any period. Our distribution channels include our direct sales staff, manufacturers’ representatives and independent distributors. The majority of our shipments are made directly to our customers. Revenues from the sale of our products are recognized when title passes to the buyer.

We receive periodic reports from customers who utilize inventory hubs and recognize revenue when customers acknowledge they have pulled inventory from our hub, the point at which title to the product passes to the customer.

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Revenues from foundry services and non-recurring engineering fees are recorded when the service is completed. Revenues from cost plus contracts are recognized as costs are incurred.

Revenues from our distributors are recognized when the product is sold to the distributors. Our distributor agreements provide selling prices that are fixed at the date of sale, although we offer price protections, which are specific, of a fixed duration and for which we reserve. Further, the distributor’s payment obligation is not contingent on reselling the product. The distributors take title to the product, bear the risks of ownership and have economic substance and we have no significant obligations for future performance to bring about resale. Sales to our distributors were approximately 10% to 15% of our total revenues for the three and nine months ended October 2, 2010 and September 26, 2009, respectively. We allow our distributors to return products for warranty reasons and stock rotation rights, within certain limitations, and we reserve for such instances. Customers that are not distributors can only return products for warranty reasons. If we are unable to repair or replace products returned under warranty, we will issue a credit for a warranty return. We can reasonably estimate the amount of future returns.

For the three months ended October 2, 2010, Futaihua Industrial (Shenzhen) Co Ltd, a sister company of Foxconn, and Samsung Electronics Co Ltd, accounted for 24% and 12% of our revenues, respectively. For the nine months ended October 2, 2010, Futaihua Industrial (Shenzhen) Co Ltd, accounted for 19% of our revenues. For the three and nine months ended September 26, 2009, Futaihua Industrial (Shenzhen) Co Ltd, accounted for 21% and 19% of our revenues, respectively. Some of our mobile device customers use multiple subcontractors for product assembly and test. Therefore, revenues for our customers may not necessarily represent the entire business of a single mobile device manufacturer.

Inventories

We state our inventories at the lower of cost or market. We use standard cost methodology to determine our cost basis for our inventories. This methodology approximates actual cost on a first-in, first-out basis. In addition to stating our inventory at the lower of cost or market, we also evaluate it each period for excess quantities and obsolescence. We analyze last usage date as well as forecasted demand compared to quantities on hand, and reserve for the excess and identify and record other specific reserves.

Income Taxes

We are subject to taxation from federal, state and international jurisdictions. A significant amount of judgment is involved in preparing our provision for income taxes and the calculation of resulting deferred tax assets and liabilities. We evaluate liabilities for estimated tax exposures in all of our jurisdictions of operation. Significant income tax exposures include potential challenges on foreign entities, merger, acquisition and disposition transactions and intercompany pricing. Exposures are settled primarily through the completion of audits within these tax jurisdictions, but can also be affected by other factors. Changes to our assumptions could cause us to find a revision of past estimates appropriate. The liabilities are reviewed for their adequacy and appropriateness. As of October 2, 2010, we were not under audit by United States (“U.S.”) income tax authorities. We concluded federal income tax audits for our U.S. consolidated tax group on earlier years, most recently for the years 2000 and 2001. A German tax audit of our subsidiary, TriQuint Semiconductor GmbH, was completed during 2009 for the fiscal years 2004 to 2007, with no adjustments. Tax periods within the statutory period of limitations not previously audited are potentially open for examination by the tax authorities. Potential liabilities associated with these years will be resolved when an event occurs to warrant closure, primarily through the completion of audits by the tax jurisdictions and/or the expiration of the statutes of limitation. To the extent audits or other events result in a material adjustment to the accrued estimates, the effect would be recognized during the period of the event. We believe that an appropriate estimated liability has been established for potential exposures.

We follow the asset and liability method of accounting for income taxes. Under this method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using enacted tax rates expected to be in effect during the years in which the basis differences reverse. We use the “with-and-without” approach, disregarding indirect tax impacts, for determining the period in which tax benefits for excess share-based deductions are recognized. The utilization of net operating loss carryforwards arising from both operations and excess stock option deductions reduce federal and state taxes payable such that we do not have significant income taxes payable at October 2, 2010.

We recorded a net tax benefit of approximately $73.4 million and $69.9 million for the three and nine month periods ended October 2, 2010. The benefit primarily resulted from the release of the valuation allowance which was recorded against the deferred tax assets and the release of certain liabilities due to the expiration of the statute of limitations. The benefit for the nine month period ended October 2, 2010 was also offset by U.S. federal tax expense because of the “with-and-without” approach for excess share-based deductions recognized in the net operating loss. We have excess share-based deductions when using the “with-and-without” approach due to cash tax savings of these deductions within the alternative minimum tax calculation. We did not recognize a similar benefit in relation to the valuation allowance release in the three and nine months ended September 26, 2009.

We record a valuation allowance to reduce deferred tax assets when it is “more-likely-than-not” that some or all of the deferred tax assets may not be realized. In 2002, we determined that a valuation allowance should be recorded against all of our deferred tax assets. Due to strong results for the three and nine months ended October 2, 2010, greater visibility into the forecast for the remainder of 2010 and beyond and the likelihood that we will continue to generate taxable income into the foreseeable future, our assessment regarding

16

the realizability of the deferred tax assets changed. This assessment required us to exercise significant judgment and make estimates about our ability to generate revenues, gross profits, operating income and taxable income in future periods. The result was the release of $71.4 million of the valuation allowance during the three months ended October 2, 2010. We continue to record a valuation allowance against a portion of U.S. deferred tax assets, as we do not believe it is “more-likely-than-not” that we will be able to utilize these deferred tax assets in future periods. Specifically, sources of capital gain taxable income were not identified to utilize capital loss carryforwards and the statute of limitations may expire before a portion of certain net operating loss carryforwards are utilized.

Stock-Based Compensation

There were no significant changes to our stock-based compensation accounting estimates and assumptions in the three months ended October 2, 2010. Refer to our most recent Annual Report on Form 10-K for a complete description of our stock-based compensation accounting estimates and assumptions.

Results of Operations

The following table sets forth the results of our operations expressed as a percentage of revenues for the three and nine months ended October 2, 2010 and September 26, 2009:

	Three Months Ended						Nine months Ended
	October 2, 2010			September 26, 2009			October 2, 2010			September 26, 2009
Revenues		100.0	%		100.0	%		100.0	%		100.0	%
Cost of goods sold		58.7			66.2			59.7			70.4
Gross profit		41.3			33.8			40.3			29.6
Operating expenses:
Research, development and engineering		13.9			16.4			15.4			17.1
Selling, general and administrative		11.0			11.2			12.3			12.2
Settlement of lawsuit		—			—			—			0.6
Total operating expenses		24.9			27.6			27.7			29.9
Income (loss) from operations		16.4			6.2			12.6			(0.3	)
Other (expense) income:
Interest income		0.1			0.1			0.0			0.1
Interest expense		(0.1	)		(0.1	)		(0.1	)		(0.2	)
Foreign currency (loss) gain		(0.1	)		0.0			(0.1	)		(0.0	)
Other, net		0.1			0.0			0.1			0.1
Total other (expense) income, net		(0.0	)		0.0			(0.1	)		0.0
Income (loss) before income tax		16.4			6.2			12.5			(0.3	)
Income tax (benefit) expense		(30.9	)		0.1			(11.2	)		(0.0	)
Net income (loss)		47.3	%		6.1	%		23.7	%		(0.3	)%

Three Months Ended October 2, 2010 and September 26, 2009

Revenues from Operations.

Our revenues increased $64.0 million, or 37%, to $237.0 million for the three months ended October 2, 2010 compared to $173.0 million for the three months ended September 26, 2009.

Our revenues by end market for the three months ended October 2, 2010 and September 26, 2009 were as follows:

(as a % of Total Revenues)	Three Months Ended
	October 2, 2010			September 26, 2009
Mobile devices		68	%		63	%
Networks		23			25
Defense & aerospace		9			12
Total		100	%		100	%

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Mobile Devices

Revenues from our mobile devices market products increased approximately 37% for the three months ended October 2, 2010 compared to the three months ended September 26, 2009. The revenue increase resulted primarily from a higher volume of sales of our WCDMA products. Revenues from our WCDMA products increased approximately 65% for the three months ended October 2, 2010 compared to the three months ended September 26, 2009. These products collectively accounted for 63% of mobile devices revenues for the three months ended October 2, 2010 and 53% of mobile devices revenues for the three months ended September 26, 2009. Revenues from our WLAN products increased approximately 49% for the three months ended October 2, 2010 compared to the three months ended September 26, 2009. These products accounted for 14% of mobile devices revenues for the three months ended October 2, 2010 compared with 13% of mobile devices revenues for the three months ended September 26, 2009.

The increases in WCDMA and WLAN product revenues were partially offset by decreases in revenues from sales of our code division multiple access (“CDMA”) products and from our global system for mobile communication (“GSM”)/general packet radio service (“GPRS”) products of approximately 26% and 27%, respectively, for the three months ended October 2, 2010 compared to the three months ended September 26, 2009. The revenues from our CDMA products and GSM/GPRS products comprised approximately 8% and 6%, respectively, of total mobile devices revenues for the three months ended October 2, 2010, compared to 15% and 11%, respectively, of total mobile devices revenues for the three months ended September 26, 2009.

Networks

Revenues from our networks market products increased approximately 61% for the three months ended October 2, 2010, compared to the three months ended September 26, 2009, as a result of increases in sales across all of our markets. Our radio access, emerging markets, and transport products increased 17%, 166%, and 63%, respectively in the three months ended October 2, 2010 compared to the three months ended September 26, 2009.

Defense & Aerospace

Revenues from our defense & aerospace market products remained relatively flat with a slight increase of approximately 3% for the three months ended October 2, 2010 compared to the three months ended September 26, 2009.

Gross Profit

Our gross profit as a percentage of revenues increased to 41.3% for the three months ended October 2, 2010, from 33.8% for the three months ended September 26, 2009. The increase in gross profit was a result of favorable product mix, improved management of the supply line and better factory utilization.

Operating expenses

Research, development and engineering

Our research, development and engineering expenses for the three months ended October 2, 2010 increased $4.7 million, or 17%, to $33.0 million, from $28.3 million for the three months ended September 26, 2009. The increase was a result of increases in labor costs and technical supply costs.

Selling, general and administrative

Selling, general and administrative expenses for the three months ended October 2, 2010 increased $6.7 million, or 35%, to $26.1 million, from $19.4 million for the three months ended September 26, 2009. The increase was primarily a result of increases in labor costs, labor related costs and legal expenses.

Other (expense) income, net

For the three months ended October 2, 2010, other net (expense) income remained relatively flat compared to the three months ended September 26, 2009.

Income tax expense

During the three months ended October 2, 2010 and September 26, 2009, we recorded a net income tax benefit of $73.4 million and an income tax expense of $0.3 million, respectively. For the three months ended October 2, 2010, the benefit primarily resulted from the release of the valuation allowance which was recorded against the deferred tax assets and the release of certain liabilities due to the expiration of the statute of limitations. The tax expense for the three months ended September 26, 2009 was primarily associated with U.S. federal and foreign taxes.

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We record a valuation allowance to reduce deferred tax assets when it is “more-likely-than-not” that some or all of the deferred tax assets may not be realized. In 2002, we determined that a valuation allowance should be recorded against all of our deferred tax assets. Due to strong results for the three and nine months ended October 2, 2010, greater visibility into the forecast for the remainder of 2010 and beyond and the likelihood that we will continue to generate taxable income into the foreseeable future, our assessment regarding the realizability of the deferred tax assets changed. This assessment required us to exercise significant judgment and make estimates about our ability to generate revenues, gross profits, operating income and taxable income in future periods. The result was the release of $71.4 million of the valuation allowance during the three months ended October 2, 2010. We continue to record a valuation allowance against a portion of U.S. deferred tax assets since it is not “more-likely-than-not” that we will be able to utilize the deferred tax assets in future periods. Specifically, sources of capital gain taxable income were not identified to utilize capital loss carryforwards and the statute of limitations may expire before a portion of certain net operating loss carryforwards are utilized.

Nine months Ended October 2, 2010 and September 26, 2009

Revenues increased $164.3 million, or 36%, to $625.3 million for the nine months ended October 2, 2010 compared to $461.0 million for the nine months ended September 26, 2009. Our revenues by end market for the nine months ended October 2, 2010 and September 26, 2009 were as follows:

(as a % of Total Revenues)	Nine months Ended
	October 2, 2010			September 26, 2009
Mobile devices		64	%		62	%
Networks		25			25
Defense & aerospace		11			13
Total		100	%		100	%

Mobile Devices

Revenues from our mobile devices market products increased approximately 33% for the nine months ended October 2, 2010 compared to the nine months ended September 26, 2009. The revenue increase resulted primarily from a higher volume of sales of our WCDMA products. Revenues from our WCDMA products increased approximately 54% for the nine months ended October 2, 2010 compared to the nine months ended September 26, 2009. These products collectively accounted for 59% of mobile devices revenues for the nine months ended October 2, 2010 and 51% of mobile devices revenues for the nine months ended September 26, 2009. Revenues from our WLAN products increased approximately 94% for the nine months ended October 2, 2010 compared to the nine months ended September 26, 2009. These products accounted for 14% of mobile devices revenues for the nine months ended October 2, 2010, compared with 10% of mobile devices revenues for the nine months ended September 26, 2009.

The increases in WCDMA and WLAN product revenues were partially offset by decreases in revenues from sales of our CDMA products of approximately 24% for the nine months ended October 2, 2010 compared to the nine months ended September 26, 2009. The revenues from our CDMA products comprised approximately 11% of total mobile devices revenues for the nine months ended October 2, 2010, compared to 20% of total mobile devices revenues for the nine months ended September 26, 2009.

Networks

Revenues from our networks market products increased approximately 56% for the nine months ended October 2, 2010 compared to the nine months ended September 26, 2009, as a result of increases in sales across all of our markets. Our radio access, emerging markets, and transport products increased 18%, 198% and 46%, respectively; in the nine months ended October 2, 2010 compared to the nine months ended September 26, 2009.

Defense & Aerospace

Revenues from our defense & aerospace market products increased approximately 20% for the nine months ended October 2, 2010 compared to the nine months ended September 26, 2009. The increase in revenue was primarily the result of a 70% increase in radar products revenue. As a percentage of our total revenues, defense & aerospace products decreased to 11% for the nine months ended October 2, 2010 from 13% for the nine months ended September 26, 2009.

Gross Profit

Our gross profit as a percentage of revenues increased to 40.3% for the nine months ended October 2, 2010, from 29.6% for the nine months ended September 26, 2009. The increase in gross profit was a result of favorable product mix, improved management of the supply line and better factory utilization compared to the nine months ended September 26, 2009 attributable to the general economic conditions resulting in a production slowdown at that time.

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Operating expenses

Research, development and engineering

Our research, development and engineering expenses for the nine months ended October 2, 2010 increased $17.4 million, or 22%, to $96.4 million, from $79.0 million for the nine months ended September 26, 2009. The increase was a result of increases in labor costs and technical supply costs for the nine months ended October 2, 2010, and short-term cost reduction measures imposed in the nine months ended September 26, 2009 that were not taken during the nine months ended October 2, 2010.

Selling, general and administrative

Selling, general and administrative expenses for the nine months ended October 2, 2010 increased $20.6 million, or 37%, to $76.7 million, from $56.1 million for the nine months ended September 26, 2009. The increase was primarily a result of increases in labor costs, labor related costs and legal expenses.

Settlement of lawsuit

During the nine months ended September 26, 2009 we recorded a settlement for a derivative lawsuit of $2.95 million. We recorded no lawsuit settlements in the nine months ended October 2, 2010.

Other (expense) income, net

For the nine months ended October 2, 2010, we recorded net other expense of $0.3 million, a decrease from the net other income of $0.3 million recorded for the nine months ended September 26, 2009. The change from the prior year was primarily a result of changes in foreign currency rates.

Income tax expense (benefit)

During the nine months ended October 2, 2010 and September 26, 2009, we recorded a net income tax benefit of $69.9 million and $0.1 million, respectively. For the nine months ended October 2, 2010, the benefit primarily resulted from the $71.4 million release of the valuation allowance which was recorded against the deferred tax assets and the release of certain liabilities due to the expiration of the statute of limitations. This benefit was offset by the U.S. federal tax expense because of the “with-and-without” approach for excess share-based deductions recognized in the net operating loss. For the nine months ended September 26, 2009, the tax benefit was primarily attributable to the release of a contingent tax liability related to an uncertain tax position for which the tax assessment’s statute of limitations expired. The release of this reserve was netted against a provision for state tax and Costa Rican tax liability.

Liquidity and Capital Resources

Liquidity

As of October 2, 2010 our cash, cash equivalents and short-term marketable securities increased $33.3 million, or 22%, to $187.2 million, from $153.9 million as of December 31, 2009.

At October 2, 2010, our net accounts receivable balance increased $53.7 million, or 61%, to $141.8 million, from $88.1 million at December 31, 2009. This increase was primarily a result of an increase in customer sales and shipments. Our days sales outstanding were 54 days as of October 2, 2010 compared to 49 days as of December 31, 2009.

At October 2, 2010, our net inventory balance increased $13.3 million, or 15%, to $103.3 million, from $90.0 million at December 31, 2009. Inventory turns calculated using ending inventory were 5.4 as of October 2, 2010 compared to 5.0 as of December 31, 2009.

At October 2, 2010, our net property, plant and equipment increased $33.9 million, or 12%, to $309.9 million, from $276.0 million at December 31, 2009. The change in property, plant, and equipment was primarily a result of capital expenditures of $63.0 million during the nine months ended October 2, 2010 which includes the timing effects of payments of capital expenditures in prepaid expenses and accounts payable of $7.1 million. This amount was offset by depreciation of $35.9 million. The capital expenditures made during the nine months ended October 2, 2010 were primarily for capacity expansion and equipment to support new products and technologies.

At October 2, 2010, our deferred tax assets increased $71.4 million or 100% of which $40.8 million was classified as current and $30.6 million was classified as noncurrent. This increase was related to the valuation allowance release.

At October 2, 2010, our accounts payable and accrued expenses increased $43.8 million, or 53%, to $126.5 million, from $82.7 million at December 31, 2009. The increase was consistent with our increase in material purchases due to higher production levels.

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Sources of Liquidity

Our current cash, cash equivalent and short-term investment balances together with cash anticipated to be generated from operations and the balance available on our $200 million syndicated credit facility constitute our principal sources of liquidity. We believe these will satisfy our projected expenditures through the next 12 months. The principal risks to these sources of liquidity are lower than expected earnings or capital expenditures in excess of our expectations, in which case we may be required to finance any shortfall through additional equity offerings, debt financings or credit facilities. We may not be able to obtain additional financing or credit facilities, or if these funds are available, they may not be available on satisfactory terms.

There have been no material changes in the disclosure related to our contractual obligations contained in our Annual Report on Form 10-K for the year ended December 31, 2009.

Recent Accounting Pronouncements

See Note 2 of the Notes to Condensed Consolidated Financial Statements for a discussion of recent accounting pronouncements.

Off Balance Sheet Arrangements

As of October 2, 2010, we did not have any off balance sheet arrangements as defined in Regulation S-K Item 303 (a)(4). We did not have any relationships with unconsolidated entities or financial partnerships such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Our investments in cash equivalents are classified as available-for-sale securities and consist of highly rated, short-term investments, such as money market funds, in accordance with an investment policy approved by our board of directors. All of these investments are held at fair value. We do not hold or issue derivatives, derivative commodity instruments or other financial instruments for speculative trading purposes. The following table shows the fair values of our investments as of October 2, 2010 (in millions):

	Cost		Fair Value
Cash and cash equivalents (including unrealized gain of less than $0.1)	$	143.0	$	143.0
Short-term available-for-sale investments (including net unrealized gains of less than $0.1)	$	44.1	$	44.1

Foreign Currency Risk

We are exposed to currency exchange rate fluctuations, because we sell our products internationally and have operations in Costa Rica and Germany. We manage the foreign currency risk of our international sales, purchases of raw materials and equipment by denominating most transactions in U.S. dollars.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures. We conducted an evaluation (pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”)), under the supervision and with the participation of management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. These disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports that are filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Our disclosure controls and procedures include controls and procedures designed to ensure that this information is accumulated and communicated to management, including the principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q.

Changes in internal control over financial reporting. There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

On July 23, 2009, we filed a complaint in the United States District Court for the District of Arizona against Avago Technologies Limited, Avago Technologies U.S., and Avago Technologies Wireless IP (collectively, “Avago”) seeking a declaratory judgment that four U.S. patents owned by Avago, which Avago had asserted in letters to our customers were infringed by our products, are not infringed upon by any of our products and are invalid. Our complaint further alleged that certain Avago products infringe upon our U.S. Patent Nos. 6,114,635, 5,231,327 and 5,894,647.

Avago filed an answer and counterclaims on September 17, 2009 denying the patent infringement allegations made by us in our complaint, and asserting that our products infringed upon ten of Avago’s U.S. patents. The patents asserted by Avago are: 6,262,637, 6,377,137, 6,841,922, 6,864,619, 6,909,340, 6,933,807, 7,268,436, 7,365,619, 6,051,907 and 6,812,619. Avago’s counterclaim asserts that our alleged infringement is willful and seeks unspecified compensatory and enhanced damages and injunctive relief. On October 16, 2009, we filed an answer and counterclaims denying Avago’s patent infringement allegations, and asserting antitrust claims under Section 7 of the Clayton Act and Section 2 of the Sherman Act. As stated in the counterclaim, the antitrust claims relate to Avago’s anticompetitive conduct through its acquisition of the BAW business of Infineon Technologies, Inc. (“Infineon”) and a series of acquisitions of BAW-related patents from Infineon and other companies, and through other anticompetitive conduct in the market. On March 5, 2010, Avago filed an amended answer and counterclaims asserting violation of the California Uniform Trade Secret Act and, per the court’s order, we simultaneously filed an amended complaint, answer and counter-claim. Avago’s trade secret allegations relate to Infineon information included in Avago’s acquisition of Infineon’s BAW division and our employment of two former Infineon employees. On April 5, 2010, we filed an answer to Avago’s amended answer and counterclaims, in which we denied Avago’s allegations regarding violation of the California Uniform Trade Secret Act. Following further motion practice, on August 4, 2010, we filed our First Amended Complaint and on August 26, 2010. Avago filed its answer and counterclaims expanding its patent and trade secret claims to include copyright infringement. On September 16, 2010, we submitted our answer, in which we denied Avago’s allegations.

Item 1A. Risk Factors

There have been no material changes to our market risk exposures from the risk factors previously disclosed in our 2009 Annual Report on Form 10-K for the year ended December 21, 2009. For a discussion on our exposure to market risk, refer to Item 1A, Risk Factors, contained in our 2009 Annual Report on Form 10-K as filed with the SEC on February 26, 2010.

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Item 6. Exhibits

10.1	Credit Agreement, dated September 30, 2010 by and between TriQuint Semiconductor, Inc and Bank of America, N.A. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 4, 2010).
31.1	Certification of Chief Executive Officer pursuant to Rule 13a—14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Rule 13a—14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification pursuant to 18.U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Label Linkbase Document.

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SIGNATURES

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

	TRIQUINT SEMICONDUCTOR, INC.
Dated: November 10, 2010	By:	/s/    RALPH G. QUINSEY
		Ralph G. Quinsey President and Chief Executive Officer
Dated: November 10, 2010	By:	/s/    STEVE BUHALY
		Steve Buhaly
		Vice President of Finance, Secretary and Chief Financial Officer

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INDEX TO EXHIBITS

Exhibit Number	Description of Exhibit
10.1	Credit Agreement, dated September 30, 2010 by and between TriQuint Semiconductor, Inc and Bank of America, N.A. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 4, 2010).
31.1	Certification of Chief Executive Officer pursuant to Rule 13a—14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Rule 13a—14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification pursuant to 18.U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Label Linkbase Document.

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