Anadigics (ANAD) 10-Q 2005 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 JULY 2, 2005.
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 No. 0-25662
ANADIGICS, Inc.
(Exact name of registrant as specified in its charter)
Delaware	22-2582106
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
141 Mt. Bethel Road, Warren, New Jersey	07059
(Address of principal executive offices)	(Zip Code)
(908) 668-5000
(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 is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [ X ] No [ ]

The number of shares outstanding of the Registrant’s common stock as of July 2, 2005 was 34,011,357.

INDEX

ANADIGICS, Inc.

PART I	Financial Information
Item 1.	Financial Statements (unaudited)
	Condensed consolidated balance sheets - July 2, 2005 and December 31, 2004.
	Condensed consolidated statements of operations and comprehensive loss - Six months ended July 2, 2005 and July 3, 2004.
	Condensed consolidated statements of cash flows - Six months ended July 2, 2005 and July 3, 2004.
	Notes to condensed consolidated financial statements - July 2, 2005.
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
Item 4.	Controls and Procedures
PART II.	Other Information
Item 1.	Legal Proceedings
Item 4.	Submission of Matters to a Vote of Security Holders
Item 6.	Exhibits
	Signatures

PART I - FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS (UNAUDITED)

ANADIGICS, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

	July 2, 2005			December 31, 2004
		(unaudited)			(Note 1)
ASSETS
Current assets:
Cash and cash equivalents	$	9,203		$	11,171
Marketable securities		71,081			63,615
Accounts receivable, net		13,370			10,770
Inventories		13,114			14,436
Prepaid expenses and other current assets		3,686			3,073
Total current assets		110,454			103,065
Marketable securities		9,670			29,265
Property and equipment:
Equipment and furniture		130,328			132,864
Leasehold improvements		38,748			38,774
Projects in process		846			1,341
		169,922			172,979
Less accumulated depreciation and amortization		(132,421	)		(129,941	)
		37,501			43,038
Goodwill and other intangibles, net of amortization		6,112			6,297
Other assets		3,549			4,230
Total assets	$	167,286		$	185,895
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	9,999		$	8,021
Accrued liabilities		3,893			4,783
Accrued restructuring costs		69			726
Capital lease obligations		-			18
Total current liabilities		13,961			13,548
Long-term debt		84,700			84,700
Other long-term liabilities		3,089			3,032
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.01 par value, 144,000,000 shares authorized, 34,011,357 and 33,072,438 issued and outstanding at July 2, 2005 and December 31, 2004		340			331
Additional paid-in capital		346,175			343,594
Deferred compensation		(2,016	)		(861	)
Accumulated deficit		(278,503	)		(257,963	)
Accumulated other comprehensive loss		(460	)		(486	)
Total stockholders’ equity		65,536			84,615
Total liabilities and stockholders’ equity	$	167,286		$	185,895

See accompanying notes.

ANADIGICS, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

	Three months ended						Six months ended
		July 2, 2005			July 3, 2004			July 2, 2005			July 3, 2004
		(unaudited)			(unaudited)			(unaudited)			(unaudited)
Net sales	$	23,943		$	22,687		$	45,716		$	43,882
Cost of sales		19,511			19,207			38,763			38,382
Gross profit		4,432			3,480			6,953			5,500
Research and development expenses		7,374			8,866			15,236			17,768
Selling and administrative expenses		5,506			6,099			11,058			11,889
Restructuring and other charges		-			-			(120	)		-
Operating loss		(8,448	)		(11,485	)		(19,221	)		(24,157	)
Interest income		599			551			1,176			1,210
Interest expense		(1,249	)		(940	)		(2,498	)		(1,880	)
Other income		9			143			3			344
Net loss	$	(9,089	)	$	(11,731	)	$	(20,540	)	$	(24,483	)
Basic and diluted loss per share	$	(0.27	)	$	(0.36	)	$	(0.61	)	$	(0.77	)
Weighted average common and dilutive securities outstanding		34,057,232			32,404,755			33,780,131			31,984,714

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(AMOUNTS IN THOUSANDS)

	Three months ended						Six months ended
		July 2, 2005			July 3, 2004			July 2, 2005			July 3, 2004
		(unaudited)			(unaudited)			(unaudited)			(unaudited)
Net loss	$	(9,089	)	$	(11,731	)	$	(20,540	)	$	(24,483	)
Unrealized gain (loss) on marketable securities		213			(522	)		86			(507	)
Foreign currency translation adjustment		(39	)		(1	)		(60	)		(16	)
Reclassification adjustment:
Net realized (gain) loss previously recognized in other comprehensive income		-			-			-			(19	)
Comprehensive loss	$	(8,915	)	$	(12,254	)	$	(20,514	)	$	(25,025	)

See accompanying notes.

ANADIGICS, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(AMOUNTS IN THOUSANDS)

	Six months ended
		July 2, 2005			July 3, 2004
		(unaudited)			(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(20,540	)	$	(24,483	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		5,772			8,375
Amortization		912			780
Stock-based compensation		1,431			19
Amortization of premium on marketable securities		732			1,166
Loss on disposal of equipment		14			-
Changes in operating assets and liabilities:
Accounts receivable		(2,600	)		(955	)
Inventory		1,322			(3,639	)
Prepaid expenses and other assets		(622	)		(986	)
Accounts payable		1,978			1,193
Accrued liabilities and other liabilities		(1,525	)		271
Net cash used in operating activities		(13,126	)		(18,259	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of plant and equipment		(349	)		(2,058	)
Proceeds from sale of equipment		38			-
Purchases of marketable securities		(24,412	)		(17,396	)
Proceeds from sale of marketable securities		35,895			37,362
Business acquisitions		-			(55	)
Net cash provided by investing activities		11,172			17,853
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of capital lease obligations		(18	)		(35	)
Issuance of common stock		4			1,229
Net cash (used in) provided by financing activities		(14	)		1,194
Net (decrease)increase in cash and cash equivalents		(1,968	)		788
Cash and cash equivalents at beginning of period		11,171			18,525
Cash and cash equivalents at end of period	$	9,203		$	19,313

See accompanying notes.

ANADIGICS, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - JULY 2, 2005

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

1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 BASIS OF PRESENTATION

 The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals and adjustments) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended July 2, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005.

 The condensed consolidated balance sheet at December 31, 2004 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

 The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

 INCOME TAXES

 The Company maintains a full valuation allowance on its deferred tax assets. Accordingly, the Company has not recorded a benefit for income taxes.

 IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

 In November 2004, the Financial Accounting Standards Board issued Statement No. 151 (FAS 151), Inventory costs, an amendment of Accounting Research Bulletin No. 43 (ARB No. 43), Chapter 4. FAS 151 clarifies that abnormal amounts of idle facility expense, freight, handling costs and wasted materials should be recognized as current period charges. In addition, FAS 151 requires that allocation of fixed production overhead to inventory be based on the normal capacity of the production facilities. FAS 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company currently believes that the adoption of FAS 151 will not have a material impact on its consolidated financial statements.

 In December 2004, the Financial Accounting Standards Board issued Statement No. 123(R) (FAS 123R), Share-Based Payment, amending FAS 123 and requiring that all share-based payments to employees be recognized in the financial statements. Generally, the approach to accounting for share-based payments in FAS 123R is similar to the approach described in FAS 123, however, pro forma footnote disclosure will no longer be an alternative to financial statement recognition. In April 2005, the SEC deferred the implementation date of FAS 123R. As a result, the Company plans to adopt FAS 123R effective January 1, 2006 rather than the initial implementation date of July 1, 2005, using the modified-prospective transition method described in FAS 123R. Under this method, the Company will be required to recognize compensation expense over the remaining vesting period for all awards that remain unvested as of January 1, 2006. As permitted by FAS 123, the Company currently accounts for share-based payments to employees using the intrinsic value method of APB25 (defined below) and, as such, generally recognized no compensation cost for employee stock options. The Company believes based on the level of share-based payments previously granted and unvested, that the adoption of FAS 123R will not have a material effect on its financial position, results of operations or cash flows, however, the level of future equity based compensation grants could have a material effect on amounts recorded in the statement of operations.

 STOCK-BASED COMPENSATION

 As permitted by FAS 123, the Company has elected to follow the intrinsic value method under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) and related interpretations in accounting for its employee stock option plans. Under APB 25, no compensation expense is recognized at the time of option grant if the exercise price of the Company’s employee stock option is fixed and equals or exceeds the fair market value of the underlying common stock on the date of grant.

 The following table illustrates the effect on net loss and loss per common share as if the Company had applied the fair value method to measure stock-based compensation, required under the disclosure provisions of FAS 123:

	Three months ended						Six months ended
		July 2, 2005			July 3, 2004			July 2, 2005			July 3, 2004
Net loss, as reported	$	(9,089	)	$	(11,731	)	$	(20,540	)	$	(24,483	)
Stock based compensation included in reported net loss		784			9			1,431			19
Stock based compensation expense under fair value reporting		(995	)		(1,919	)		(1,909	)		(3,577	)
Pro-forma net loss		(9,300	)	$	(13,641	)		(21,018	)	$	(28,041	)
Basic and diluted loss per share:
As reported	$	(0.27	)	$	(0.36	)	$	(0.61	)	$	(0.77	)
Pro-forma	$	(0.27	)	$	(0.42	)	$	(0.62	)	$	(0.88	)

 On July 3, 2003, the Company announced a voluntary stock option exchange program for employees and officers. Directors of the Company were not eligible for the exchange program. Pursuant to the terms and conditions of the offer, which expired on August 4, 2003, the Company accepted for cancellation options to purchase 1,673,931 shares of common stock having a weighted average exercise price of $19.49. On February 6, 2004, participating employees were issued 551,564 stock options, under this one for three exchange program, for the cancelled options. The new options have an exercise price equal to $7.27, which represented the fair market value at the date of grant and are now fully vested.

 On December 22, 2004, the Company authorized an immediate vesting of eligible employees’ unvested share options with an exercise price greater than $5.00 per share. Directors were not eligible. In total, 1,772,289 options with an average exercise price of $7.26 immediately vested and have an average remaining contractual life of 9.1 years. The unamortized fair value associated with these accelerated-vest shares in the amount of $2,654 amortized immediately. Had the accelerated-vest program not occurred, the related cost in the years ended December 31, 2005, 2006 and 2007 would have included $1,846, $751 and $57, respectively. In addition to its employee-retention value, the Company’s decision to accelerate the vesting of these “out-of-the-money” options was based upon the accounting of such costs moving from disclosure-only in 2004 to being included in the Company’s statement of operations in 2005 based upon the Company’s expected adoption of FAS 123R prior to its required adoption date being deferred.

 On July 23, 2004, the Company granted 403,204 restricted shares under the 1995 and 1997 Long-Term Incentive Share Award plans (“Plans”). On the date of the grant, the market price of the shares was $4.01. The value of the grant has been recorded as deferred compensation, a component of Stockholders’ Equity and amortized over the required one-year vest period. At July 2, 2005, 45,786 restricted shares were forfeited under the conditions of the Plans. On July 27, 2005, 355,341 restricted shares were formally issued, of which the Company repurchased into Treasury 121,611 shares from the employees and officers for the purpose of funding their withholding tax obligations.

 During the first quarter of 2005, the Company granted an additional 1,017,466 restricted shares under the 1995 Plan at an average market price of $2.77 and carrying vesting periods of one or three years. At July 2, 2005, 55,612 restricted shares have been forfeited under the conditions of the Plan. On August 4, 2005, the Company granted 286,036 restricted shares under the 2005 Long Term Incentive and Share Award Plan at a market price of $2.60, which will fully vest on August 4, 2006.

 WARRANTY

 The Company provides, by a current charge to income, an amount it estimates, by examining historical returns and other information it deems critical, will be needed to cover future warranty obligations for products sold during the year. The accrued liability for warranty costs is included in Accrued liabilities in the condensed consolidated balance sheets. Warranty reserve movements in the six months ended July 2, 2005 included $83 in actual charges and $205 in provisions resulting in the balance of $281 at July 2, 2005. Warranty reserve movements in the six months ended July 3, 2004 were $175 in actual charges and $147 in additional provisions.

 RECLASSIFICATIONS

 Certain prior year amounts have been reclassified to conform to the current year presentation.

2. BUSINESS ACQUISITIONS

 On March 31, 2003, the Company acquired certain assets and liabilities of the WLAN power amplifier business of RF Solutions (“RFS”). The RFS acquisition was a strategic initiative that allows the Company to participate in the emerging and fast-growing WLAN market with a depth of experienced design personnel and cutting-edge products. The Company paid cash purchase consideration on March 31, 2003 of $2,800 and issued 747,280 shares effective March 31, 2004, valued at $4,648 after RFS achieved certain revenue milestones. In addition, the Company incurred $217 in acquisition-related costs.

3.INVENTORIES

 Inventories are stated at the lower of cost (first-in, first-out method) or market. Inventories consist of the following:

		July 2, 2005			December 31, 2004
Raw materials	$	4,214		$	3,510
Work in process		8,818			9,026
Finished goods		4,551			5,974
		17,583			18,510
Reserves		(4,469	)		(4,074	)
Total	$	13,114		$	14,436

4.LOSS PER SHARE

 The reconciliation of shares used to calculate basic and diluted loss per share consists of the following:

	Three months ended			Six months ended
		July 2, 2005	July 3, 2004		July 2, 2005	July 3, 2004
Weighted average common shares outstanding used to calculate basic loss per share		34,057,232	32,404,755		33,780,131	31,984,714
Net effect of dilutive securities based upon the treasury stock method using an average market price		-*	-*		-*	-*
Weighted average common and dilutive securities outstanding used to calculate diluted loss per share		34,057,232	32,404,755		33,780,131	31,984,714

* Any dilution arising from the Company's outstanding stock options or shares potentially issuable upon conversion of the Convertible Senior Notes are not included as their effect is anti-dilutive.

5.REVENUE SOURCES

The Company classifies its revenues based upon the end application of the product in which its integrated circuits are used. Net sales by end application are regularly reviewed by the chief operating decision maker and are as follows:

	Three months ended				Six months ended
		July 2, 2005		July 3, 2004		July 2, 2005		July 3, 2004
Broadband	$	14,009	$	12,173	$	25,241	$	22,091
Wireless		9,934		10,514		20,475		21,791
Total	$	23,943	$	22,687	$	45,716	$	43,882

 The Company primarily sells to three geographic regions: Asia, USA and Canada, and Other. The geographic region is determined by the destination of the shipped product. Net sales to each of the three geographic regions are as follows:

	Three months ended				Six months ended
		July 2, 2005		July 3, 2004		July 2, 2005		July 3, 2004
Asia	$	13,152	$	12,098	$	25,357	$	24,315
USA and Canada		9,000		9,131		16,991		16,526
Other		1,791		1,458		3,368		3,041
Total	$	23,943	$	22,687	$	45,716	$	43,882

6. RESTRUCTURING AND OTHER CHARGES

 During the fourth quarter of 2003, the Company recorded restructuring and other charges of $300 associated with obligations for certain redundant leasehold premises. That obligation was settled during the first quarter of 2005 resulting in a savings to the Company of $120. During the first six months of 2005, the Company recognized costs of $537 for lease-related restructuring costs in addition to the aforementioned $120 adjustment. As of July 2, 2005, the accrued restructuring balance of $69 relates to lease-related obligations.

7. LONG-TERM DEBT

 On September 24, 2004, the Company issued $38,000 aggregate principal amount of 5% Convertible Senior Notes (“2009 Notes”) due October 15, 2009. The 2009 Notes are convertible into shares of the Company’s common stock at any time prior to their maturity, at an initial conversion rate, subject to adjustment, of 200 shares for each $1,000 principal amount, which is equivalent to a conversion price of $5.00 per share. Interest on the 2009 Notes is payable semi-annually in arrears on April 15 and October 15 of each year.

 On November 27, 2001, the Company issued $100,000 aggregate principal amount of 5% Convertible Senior Notes ("2006 Notes") due November 15, 2006. During the third quarter of 2002, the Company repurchased and retired $33,300 principal amount of the Convertible notes. In addition, in the third quarter of 2004 and concurrent with the issuance of the 2009 Notes, the Company repurchased and retired $20,000 aggregate principal amount of the 2006 Notes for $19,758 in cash, inclusive of accrued interest of $358. The Company recognized a gain of $327 on the repurchase after adjusting for the write-off of a proportionate share of unamortized offering costs. The $46,700 balance of 2006 Notes outstanding are convertible into shares of common stock at any time prior to their maturity or prior redemption by the Company. The notes are convertible into shares of common stock at a rate of 47.619 shares for each $1,000 principal amount (convertible at a price of $21.00 per share), subject to adjustment. Interest is payable semi-annually on May 15 and November 15 of each year.

8. OTHER INCOME

 Other income for the three months ended July 3, 2004 is principally comprised of income from a $368 gain on the sale of securities and a $490 settlement received in connection with a claim against a former supplier, partially offset by a charge of $750 relating to the settlement of a contractual claim.

ANADIGICS, Inc.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

 ANADIGICS, Inc. (“we” or the "Company") was incorporated in Delaware in 1984. Our corporate headquarters are located at 141 Mt. Bethel Road, Warren, New Jersey 07059, and our telephone number at that address is 908-668-5000.

 We design and manufacture radio frequency integrated circuit (RFIC) solutions for the wireless and broadband communications markets. Our high frequency RFIC products enable manufacturers of communications equipment to enhance overall system performance and reduce manufacturing cost and time to market. Our products are primarily included in cellular and personal communications service (PCS) phones and base stations, wireless local area networks (WLANs), and cable television infrastructure and set-top boxes. We offer a broad array of products including amplifiers, switches, tuner integrated circuits, photodiodes and integrated RF modules. These integrated circuits perform the transmit and receive functions that are critical to the performance of wireless and broadband communication systems.

 In the wireless market, we focus on RFIC solutions for wireless communication handset applications operating over various air interface standards, including Code Division Multiple Access (CDMA), Global System for Mobile communication (GSM), Wideband CDMA (WCDMA), General Packet Radio Service (GPRS) and Enhanced Data rate for GSM Evolution (EDGE). In the broadband markets, our focus is on applications for WLAN systems, cable television (CATV) subscriber products, CATV infrastructure systems, and fiber optic communications systems. We believe we have a competitive advantage in the markets we serve due to our design, development and applications expertise, our superior compound semiconductor technologies, our high-volume, low-cost state-of-the-art manufacturing processes and expertise, and our strong working relationships with leading original equipment manufacturers (OEMs), original design manufacturers (ODMs) and reference design houses.

 We design, develop and manufacture RFICs primarily using Gallium Arsenide (GaAs) compound semiconductor substrates with various process technologies, Metal Semiconductor Field Effect Transistors (MESFET), Pseudomorphic High Electron Mobility Transistors (pHEMT), and Heterojunction Bipolar Transistors (HBT).

 The quality and reliability of our products results from a comprehensive design, characterization, qualification, and robust manufacturing process. In addition to the manufacturing facility and design team located at our corporate headquarters in Warren, New Jersey, we operate a development center and manufacturing facility in Camarillo, California and development centers in Richardson, Texas; Atlanta, Georgia; Aalborg, Denmark; Taipei, Taiwan; Seoul, Korea and Shanghai, China.

 Our design and applications engineering staff is strategically active and engaged with customers during all phases of design and production. This strategy helps our customers streamline their design process and time to market, achieve cost-effective and manufacturable designs, and ensure a smooth transition into high-volume production.

 We have two company-owned fabrication facilities (fabs): a state-of-the-art six-inch diameter analog GaAs fab located at our corporate headquarters in Warren, New Jersey, and a two-inch diameter indium phosphide (InP) fab located in Camarillo, California. Our six-inch wafer fab allows us to produce, at a small incremental cost, more than twice the RF die per wafer compared with a four-inch wafer, still used by some of our competition. We believe our strong manufacturing fabrication capability, combined with logistics expertise and innovative product designs, allow us to quickly develop and manufacture products in line with market and customer requirements.

RESULTS OF OPERATIONS

The following table sets forth unaudited consolidated statements of operations data as a percent of net sales for the periods presented:

	Three months ended					Six months ended
		July 2, 2005		July 3, 2004			July 2, 2005		July 3, 2004
Net sales		100.0	%	100.0	%		100.0	%	100.0	%
Cost of sales		81.5	%	84.6	%		84.8	%	87.5	%
Gross margin		18.5	%	15.4	%		15.2	%	12.5	%
Research and development expenses		30.8	%	39.1	%		33.3	%	40.5	%
Selling and administrative expenses		23.0	%	26.9	%		24.2	%	27.1	%
Restructuring and other charges		-		-			(0.3	%)	-
Operating loss		(35.3	%)	(50.6	%)		(42.0	%)	(55.1	%)
Interest income		2.5	%	2.4	%		2.6	%	2.8	%
Interest expense		(5.2	%)	(4.1	%)		(5.5	%)	(4.3	)%
Other income		-		0.6	%		-		0.8	%
Net loss		(38.0	%)	(51.7	%)		(44.9	%)	(55.8	%)

SECOND QUARTER 2005 (ENDED JULY 2, 2005) COMPARED TO SECOND QUARTER 2004 (ENDED JULY 3, 2004)

 NET SALES.Net sales increased 5.5% during the second quarter of 2005 to $23.9 million from $22.7 million in the second quarter of 2004. For the six months ended July 2, 2005, net sales were $45.7 million, a 4.2% increase from net sales of $43.9 million for the six months ended July 3, 2004.

 Sales of integrated circuits for Broadband applications increased 15.1% during the second quarter of 2005 to $14.0 million from $12.2 million in the second quarter of 2004. For the six months ended July 2, 2005, net sales of integrated circuits for Broadband applications increased 14.3% to $25.2 million from $22.1 million in the six-month period ended July 3, 2004. The increase in sales in the three and six month periods ended July 2, 2005 was primarily due to an increase in demand for WLAN power amplifiers as well as integrated circuits shipped into cable subscriber applications.

 Sales of integrated circuits for Wireless applications decreased 5.5% during the second quarter of 2005 to $9.9 million from $10.5 million in the second quarter of 2004. For the six months ended July 2, 2005, net sales of integrated circuits for Wireless applications decreased 6.0% to $20.5 million from $21.8 million in the six-month period ended July 3, 2004. The decrease in sales of integrated circuits for Wireless applications was primarily due to lower demand of switch and infrastructure products, representing a decline of $0.8 and $1.5 million during the three and six months ended July 2, 2005, respectively. Power amplifier sales increased $0.2 and $0.1 million during the three and six months ended July 2, 2005, respectively, with GSM power amplifier sales increasing $1.6 and $4.7 million, respectively, offsetting CDMA power amplifiers sales declines of $1.5 and $4.6 million, respectively. The primary factor for the lower CDMA revenue was declines in average selling prices.

 GROSS MARGIN. Gross margin during the second quarter of 2005 increased to 18.5% from 15.4% in the second quarter of 2004. For the six months ended July 2, 2005, gross margin increased to 15.2% from 12.5% for the six months ended July 3, 2004. The increases in gross margin in the three and six month periods ended July 2, 2005 were primarily due to a shift in product mix to higher margin products favoring Broadband applications, while decreases in depreciation expense of $1.4 and $2.6 million, respectively, offset declines in average selling prices.

 RESEARCH AND DEVELOPMENT. Company sponsored research and development expense decreased 16.8% during the second quarter of 2005 to $7.4 million from $8.9 million during the second quarter of 2004. Company sponsored research and development expense for the six months ended July 2, 2005 decreased 14.3% to $15.2 million from $17.8 million during the six-month period ended July 3, 2004. The decrease in the three and six month periods ended July 2, 2005 was primarily attributable to decreased headcount and related compensation cost.

 SELLING AND ADMINISTRATIVE. Selling and administrative expenses decreased 9.7% during the second quarter of 2005 to $5.5 million from $6.1 million in the second quarter of 2004. Selling and administrative expenses decreased 7.0% during the six-month period ended July 2, 2005 to $11.1 million from $11.9 million in the six-month period ended July 3, 2004. The decreases in selling and administrative expenses in the three and six months ended July 2, 2005 were primarily due to decreased headcount and compensation expense within sales and marketing.

 RESTRUCTURING AND OTHER CHARGES. During the first quarter of 2005, the Company settled an exit obligation for certain redundant leasehold premises resulting in a savings of $0.1 million against a previously recorded restructuring charge.

 INTEREST INCOME.Interest income increased 8.7% to $0.6 million during the second quarter of 2005 from $0.6 million during the second quarter of 2004. For the six months ended July 2, 2005, interest income decreased 2.8% to $1.2 million from $1.2 million in the six-month period ended July 3, 2004. The increase in the second quarter was due to improved interest rates while the decrease for the six-month period ended July 2, 2005 was driven by lower invested funds.

 INTEREST EXPENSE. Interest expense increased 32.9% to $1.2 million during the second quarter of 2005 from $0.9 million during the second quarter of 2004. For the six months ended July 2, 2005, interest expense increased 32.9% to $2.5 million from $1.9 million in the six-month period ended July 3, 2004. The interest relates to the $46.7 million outstanding balance of our 5% Convertible Senior Notes due in 2006 (the “2006 Notes”) and the $38.0 million outstanding balance of our 5% Convertible Senior Notes due in 2009 (the “2009 Notes”).

LIQUIDITY AND CAPITAL RESOURCES

 As of July 2, 2005, we had $9.2 million in cash and cash equivalents and $80.8 million in marketable securities. In addition, as of July 2, 2005, we had outstanding $46.7 million aggregate principal amount of our 2006 Notes and $38.0 million aggregate principal amount of our 2009 Notes.

 Operating activities used $13.1 million in cash during the six-month period ended July 2, 2005. Investing activities, consisting principally of net sales of marketable securities of $11.5 million, provided $11.2 million of cash during the six-month period ended July 2, 2005.

 As of July 2, 2005, we had purchase commitments of approximately $1.6 million.

 We believe that our existing sources of capital, including our existing cash and marketable securities, will be adequate to satisfy operational needs and anticipated capital needs for the next twelve months as well as the repayment of our 2006 Notes due in November 2006. Our anticipated capital needs may include acquisitions of complimentary businesses or technologies, or investments in other companies or repurchases of our outstanding debt or equity. However, we may elect to finance all or part of our future capital requirements through additional equity or debt financing. There can be no assurance that such additional financing would be available on satisfactory terms. Our ability to pay principal and interest on our outstanding 2006 Notes due in November of 2006 and our outstanding 2009 Notes due in October 2009, and our other debt and to fund our planned capital expenditures depends on our future operating performance.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

 In November 2004, the Financial Accounting Standards Board issued Statement No. 151 (FAS 151), Inventory costs, an amendment of ARB No. 43, Chapter 4. FAS 151 clarifies that abnormal amounts of idle facility expense, freight, handling costs and wasted materials should be recognized as current period charges. In addition, FAS 151 requires that allocation of fixed production overhead to inventory be based on the normal capacity of the production facilities. FAS 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company currently believes that the adoption of FAS 151 will not have a material impact on its consolidated financial statements.

 In December 2004, the Financial Accounting Standards Board issued Statement No. 123(R) (FAS 123R), Share-Based Payment, amending FAS 123 and requiring that all share-based payments to employees be recognized in the financial statements. Generally, the approach to accounting for share-based payments in FAS 123R is similar to the approach described in FAS 123, however, pro forma footnote disclosure will no longer be an alternative to financial statement recognition. In April 2005, the SEC deferred the implementation date of FAS 123R. As a result, the Company plans to adopt FAS 123R effective January 1, 2006 rather than the initial implementation date of July 1, 2005, using the modified-prospective transition method described in FAS123R. Under this method, the Company will be required to recognize compensation expense over the remaining vesting period for all awards that remain unvested as of January 1, 2006. As permitted by FAS 123, the Company currently accounts for share-based payments to employees using APB 25's intrinsic value method and, as such, generally recognized no compensation cost for employee stock options. The Company believes based on the level of share-based payments previously granted and unvested, that the adoption of FAS 123R will not have a material effect on its financial position, results of operations or cash flows, however, the level of future equity based compensation grants could have a material effect on amounts recorded in the statement of operations. On December 22, 2004, the Company authorized an immediate vesting of eligible employees’ unvested share options with an exercise price greater than $5.00 per share. Directors were not eligible. In total, 1,772,289 options with an average exercise price of $7.26 immediately vested and have an average remaining contractual life of 9.1 years. The unamortized fair value associated with these accelerated-vest shares of approximately $2.65 million amortized immediately. In addition to its employee-retention value, the Company’s decision to accelerate the vesting of these “out-of-the-money” options was based upon the accounting of such costs moving from disclosure-only in 2004 to being included in the Company’s statement of operations in 2005 based upon the Company’s expected adoption of FAS 123R prior to its required adoption date being deferred.

FORWARD-LOOKING STATEMENTS

 This quarterly report on Form 10-Q contains projections and other forward-looking statements (as that term is defined in the Securities Exchange Act of 1934, as amended). These projections and forward-looking statements reflect the Company’s current views with respect to future events and financial performance and can generally be identified as such because the context of the statement will include words such as “believe”, “anticipate”, “expect”, or words of similar import. Similarly, statements that describe our future plans, objectives, estimates or goals are forward-looking statements. No assurances can be given, however, that these events will occur or that these projections will be achieved and actual results and developments could differ materially from those projected as a result of certain factors. Important factors that could cause actual results and developments to be materially different from those expressed or implied by such projections and forward-looking statements include, but are not limited to, the following risks which are described in greater detail in the Company’s Annual Report on Form 10-K referred to below: (i) our history of recent losses and expectation that we will continue to incur losses; (ii) our underutilized manufacturing capacity has adversely affected our gross margins and profitability; (iii) our dependence on a small number of customers; (iv) our need to keep pace with rapid product and process development and technological changes as well as product cost reductions to be competitive; (v) our products have experienced rapidly declining unit prices; (vi) the manufacturing of our products could be delayed as a result of the outsourcing of our test operations; (vii) the short life cycles of some of our products may leave us with obsolete or excess inventories; (viii) we face intense competition, which could result in a decrease in our products’ prices and sales; (ix) we may not have sufficient cash flow to make payments on our Convertible Senior Notes and any other debt we may incur; (x) capital required for our business may not be available when we need it; (xi) we may pursue selective acquisitions and alliances which dilute the ownership of our current shareholders and the management and integration of additional operations may be expensive and divert management time; (xii) we may face interruptions in our manufacturing processes; and (xiii) provisions in our governing documents and our shareholders rights agreement could discourage takeovers and prevent shareholders from realizing an investment premium. The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included herein or detailed from time to time in our reports filed with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. The Company undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 The Company's market risk has not changed significantly for the risks disclosed in Item 7A of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2004.

ITEM 4. CONTROLS AND PROCEDURES

 Under the supervision and with the participation of our management, including our Chief Executive Officer, or CEO and Chief Financial Officer, or CFO, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of July 2, 2005. Based on that evaluation, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported as specified within the SEC’s rules and forms.

 There was no change in the Company’s internal control over financial reporting during the Company’s last fiscal quarter that has materially affected, or is reasonably likely to

 materially affect, the Company’s internal control over financial reporting.

 Because of their inherent limitations, disclosure controls and procedures and internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

ANADIGICS, Inc.

PART II - OTHER INFORMATION

ITEM1.LEGAL PROCEEDINGS

 ANADIGICS is a party to litigation arising in the ordinary course out of the operation of our business. We believe that the ultimate resolution of such litigation should not have a material adverse effect on our financial condition, results of operations or liquidity.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 The Company held its annual meeting of stockholders on May 19, 2005 at which the Company’s stockholders voted on:

·   The election of two Class I Directors of the Company to hold office until 2008.

·   The amendment and restatement of the Employee Stock Purchase Plan that extends the Plan through December 31, 2014 and increases the number of shares issuable thereunder by 1,000,000 to 2,693,750.

·   The adoption of the 2005 Long Term Incentive and Share Award Plan with respect to a maximum number of 2,700,000 shares which plan replaces the 1995 Long Term Incentive and Share Award Plan which terminated on February 28, 2005.

 The three matters listed above were voted upon and approved by the shareholders of the Company as follows:

·   The election of Harry Rein as Class I Director was approved by holders of 27,193,883 shares of the Company’s outstanding capital stock. Holders of 2,940,755 shares withheld from voting on such election. The election of Dennis Strigl as Class I Director was approved by holders of 27,181,847 shares of the Company’s outstanding capital stock. Holders of 2,952,791 shares withheld from voting on such election. Messrs. Rein and Strigl join the continuing Directors of the Company Messrs. Bachow, Bastani, Rosenzweig, Solomon and McGuire.

·   The amendment and restatement of the Employee Stock Purchase Plan that extends the Plan through December 31, 2014 and increases the number of shares issuable was approved by holders of 14,503,358 shares of the Company’s outstanding capital stock. Holders of 847,494 shares voted against the ratification, holders of 252,552 shares abstained from voting on such ratification and broker non-votes totaled 14,531,254.

·   The proposal on the 2005 Long Term Incentive and Share Award Plan which replaces the 1995 Long Term Incentive and Share Award Plan was approved by holders of 11,983,762 shares of the Company’s outstanding capital stock. Holders of 3,344,337 shares voted against the ratification, holders of 275,305 shares abstained from voting on such ratification and broker non-votes totaled 14,531,234.

ITEM6.EXHIBITS

31.1 Rule 13a-14(a)/15d-14(a) Certification of Bami Bastani, President and Chief Executive Officer of ANADIGICS, Inc.

31.2 Rule 13a-14(a)/15d-14(a) Certification of Thomas C. Shields, Senior Vice President and Chief Financial Officer of ANADIGICS, Inc.

32.1 Section 1350 Certification of Bami Bastani, President and Chief Executive Officer of ANADIGICS, Inc.

32.2 Section 1350 Certification of Thomas C. Shields, Senior Vice President and Chief Financial Officer of ANADIGICS, Inc.

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.

ANADIGICS, INC.

By:	/s/ Thomas C. Shields
	Thomas C. Shields
	Senior Vice President
	And Chief Financial Officer

Dated: August 5, 2005

 Exhibit 31.1

CERTIFICATION

I, Bami Bastani, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of ANADIGICS, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)   Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:August 5, 2005

By:	/s/ Bami Bastani
	Bami Bastani
	President and
	Chief Executive Officer

 Exhibit 31.2

CERTIFICATION

I, Thomas C. Shields, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of ANADIGICS, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)   Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:August 5, 2005

By:	/s/ Thomas C. Shields
	Thomas C. Shields
	Senior Vice President
	and Chief Financial Officer

Exhibit 32.1

CERTIFICATION

The undersigned, Bami Bastani, President and Chief Executive Officer of ANADIGICS, Inc. (the "Company") hereby certifies that the Quarterly Report of the Company on Form 10-Q for the period ended July 2, 2005 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 5, 2005

By:	/s/ Bami Bastani
	Bami Bastani
	President and
	Chief Executive Officer

This certification shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any registration statement filed under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated by reference.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to ANADIGICS, Inc. and will be retained by ANADIGICS, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

CERTIFICATION

The undersigned, Thomas C. Shields, Senior Vice President and Chief Financial Officer of ANADIGICS, Inc. (the "Company") hereby certifies that the Quarterly Report of the Company on Form 10-Q for the period ended July 2, 2005 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 5, 2005

By:	/s/ Thomas C. Shields
	Thomas C. Shields
	Senior Vice President
	and Chief Financial Officer

This certification shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any registration statement filed under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated by reference.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to ANADIGICS, Inc. and will be retained by ANADIGICS, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.