RF MICRO DEVICES INC - 10-Q Quarterly Report

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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 January 1, 2005

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0-22511

RF MICRO DEVICES, INC.

(Exact name of registrant as specified in its charter)

North Carolina	56-1733461
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

7628 Thorndike Road

Greensboro, North Carolina 27409-9421

(Address of principal executive offices, including zip code)

(336) 664-1233

(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 Exchange Act).

Yes X No
_____ _____

As of January 31, 2005, there were 187,526,189 shares of the registrant's common stock outstanding.

RF MICRO DEVICES, INC. AND SUBSIDIARIES

INDEX

PART I-	FINANCIAL INFORMATION

ITEM 1.	CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	PAGE

	Condensed Consolidated Balance Sheets as of December 31, 2004 and March 31, 2004	3
	Condensed Consolidated Statements of Operations for the three months ended December 31, 2004 and 2003	4
	Condensed Consolidated Statements of Operations for the nine months ended December 31, 2004 and 2003	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2004 and 2003	6

	Notes to Condensed Consolidated Financial Statements	7

ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	16

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	22

ITEM 4.	CONTROLS AND PROCEDURES	22


PART II -	OTHER INFORMATION

ITEM 6.	EXHIBITS	23

PART I - FINANCIAL INFORMATION

ITEM 1.

RF MICRO DEVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

	DECEMBER 31, 2004					MARCH 31, 2004
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$				99,315	$				220,915
Short-term investments	105,158					106,930
Accounts receivable, net of allowances of $701 at December 31, 2004 and $1,547 at March 31, 2004	75,310					86,287
Inventories (Note 3)	80,794					58,552
Prepaid expenses	6,104					3,854
Other current assets	3,920					6,244
Total current assets	370,601					482,782

Property and equipment, net of accumulated depreciation of $216,184 at December 31, 2004 and $179,492 at March 31, 2004	306,375					280,356
Goodwill	118,760					110,006
Long-term investments	59,679					59,739
Intangible assets, net of amortization of $17,920 at December 31, 2004 and $12,952 at March 31, 2004	49,690					50,165
Investment in equity method investee	-					3,169
Other non-current assets	3,535					1,799
Total assets	$			908,640		$			988,016

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$		42,101			$		33,465
Accrued liabilities	28,342					22,206
Current obligations under capital leases	116					213
Total current liabilities	70,559					55,884

Long-term debt, net of unamortized discount of $4,030 at December 31, 2004 and $5,374 at March 31, 2004	225,970					324,626
Other long-term liabilities	4,531					4,368
Total liabilities	301,060					384,878

Shareholders' equity:
Preferred stock, no par value; 5,000 shares authorized; no shares issued and outstanding	-					-
Common stock, no par value; 500,000 shares authorized; 187,494 and 186,257 shares issued and outstanding at December 31, 2004 and March 31, 2004, respectively	452,421					448,942
Additional paid-in capital	78,577					76,957
Deferred compensation	(11,913)					(14,442)
Accumulated other comprehensive income, net of tax (Note 4)	385					499
Retained earnings	88,110					91,182
Total shareholders' equity	607,580					603,138

Total liabilities and shareholders' equity	$	908,640				$	988,016

See accompanying Notes to Condensed Consolidated Financial Statements.

RF MICRO DEVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

	THREE MONTHS ENDED
	DECEMBER 31, 2004					DECEMBER 31, 2003

Revenue	$				168,917	$				192,973

Operating costs and expenses:
Cost of goods sold	110,550					112,555
Research and development	38,848					31,894
Marketing and selling	11,971					11,891
General and administrative	6,594					5,722
Other operating expenses	-					527
Total operating costs and expenses	167,963					162,589
Income from operations	954					30,384

Interest expense	(1,025)					(2,169)
Interest income	755					990
Loss in equity method investee	-					(781)
Other income (expense), net	137					(163)

Income before income taxes	821					28,261

Income tax expense (Note 6)	239					61
Net income	$			582		$			28,200

Net income per share (Note 2):
Basic	$		0.00			$		0.15
Diluted	$	0.00				$	0.13

Shares used in per share calculation:
Basic	187,384					185,461
Diluted	192,002					222,889

See accompanying Notes to Condensed Consolidated Financial Statements.

RF MICRO DEVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

	NINE MONTHS ENDED
	DECEMBER 31, 2004					DECEMBER 31, 2003

Revenue	$				483,798	$				487,958

Operating costs and expenses:
Cost of goods sold	311,477					302,491
Research and development	111,337					93,797
Marketing and selling	34,510					33,625
General and administrative	17,768					15,493
Other operating expenses	7,056					1,581
Total operating costs and expenses	482,148					446,987
Income from operations	1,650					40,971

Interest expense	(5,416)					(10,784)
Interest income	2,936					2,589
Loss in equity method investee	(1,761)					(1,737)
Other (expense) income, net	(17)					(79)

(Loss) income before income taxes	(2,608)					30,960

Income tax expense (Note 6)	464					393
Net (loss) income	$			(3,072)		$			30,567

Net (loss) income per share (Note 2):
Basic	$		(0.02)			$		0.17
Diluted	$	(0.02)				$	0.16

Shares used in per share calculation:
Basic	186,801					184,690
Diluted	186,801					210,369

See accompanying Notes to Condensed Consolidated Financial Statements.

RF MICRO DEVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)

	NINE MONTHS ENDED
	DECEMBER 31, 2004		DECEMBER 31, 2003
Cash flows from operating activities:
Net (loss) income	$	(3,072)	$	30,567
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation	42,029		42,533
Amortization	7,825		11,144
Acquired in-process research and development cost	6,201		-
Loss on disposal of assets, net	968		327
Loss from equity method investee	1,761		1,737
Amortization of deferred compensation	4,148		5,955
Other	(23)		203
Changes in operating assets and liabilities:
Accounts receivable, net	11,085		(21,150)
Inventories	(22,006)		532
Recoverable income taxes	-		6,330
Prepaid expense and other current and non-current assets	(907)		(3,296)
Accounts payable and accrued liabilities	5,724		10,233
Other liabilities	(96)		2,863
Net cash provided by operating activities	53,637		87,978

Investing activities:
Purchase of property and equipment	(68,374)		(27,757)
Proceeds from sale of property and equipment	881		-
Purchase of license	(1,112)		-
Proceeds from maturities of securities available for sale	112,325		127,159
Purchase of securities available for sale	(112,221)		(152,512)
Purchase of business, net of cash received	(10,133)		-
Purchase of non-public investment	-		(36,000)
Net cash used in investing activities	(78,634)		(89,110)

Financing activities:
Proceeds from exercise of stock options, warrants and employee
stock purchases	3,480		4,319
Proceeds from 1.50% convertible subordinated notes, net	-		224,781
Repurchase of 3.75% convertible subordinated notes	(100,000)		(200,000