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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

Commission File Number 0-22660

TRIQUINT SEMICONDUCTOR, INC.
(Exact Name of Registrant as Specified in Its Charter)

2300 NE Brookwood Parkway
Hillsboro, OR 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 ý    No o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes ý    No o

        As of March 31, 2003, there were 133,198,418 shares of the registrant's common stock outstanding.

TRIQUINT SEMICONDUCTOR, INC.

INDEX

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PART I—FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

TRIQUINT SEMICONDUCTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)

See notes to Condensed Consolidated Financial Statements.

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TRIQUINT SEMICONDUCTOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

(1)

The information in this column was derived from the Company's audited financial statements as of December 31, 2002.

See notes to Condensed Consolidated Financial Statements.

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

See notes to Condensed Consolidated Financial Statements.

5

TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands unless noted otherwise, except share and per share amounts)
(Unaudited)

1.    Basis of Presentation and Significant Accounting Policies

        The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. However, certain information or footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed, or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). In the opinion of management, the statements include all adjustments necessary (which are of a normal and recurring nature) 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 TriQuint Semiconductor, Inc. (the "Company") for the fiscal year ended December 31, 2002, as included in the Company's 2002 Annual Report on Form 10-K as filed with the SEC on March 27, 2003.

        The Company's fiscal quarters end on the Saturday nearest the end of the calendar quarter. For convenience, the Company has indicated that its first quarter ended on March 31. The Company's fiscal year ends on December 31.

Foreign Currency Exchange and Remeasurement

        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 year-end exchange rates. Certain non-monetary assets and liabilities are remeasured using historical rates. Statements of operations are remeasured at an average exchange rate for the year. Foreign currency gains and losses resulting from remeasurement or settlement of receivables and payables denominated in a currency other than the functional currency are included in "Other income (expense)".

Investments in Marketable Securities

        The Company classifies its investments as available-for-sale in accordance with Statement of Financial Accounting Standards ("SFAS") No. 115, Accounting for Certain Investments in Debt and Equity Securities ("SFAS 115"). Investments in marketable securities are comprised of U.S. treasury securities and obligations of U.S. government agencies, municipal notes and bonds, corporate debt securities and other investments. Investments are recorded at fair value. Unrealized gains and losses, net of tax, on investments are reported as a separate component of stockholders' equity.

Investments in Other Companies

        The Company has made several investments in small, privately held technology companies in which the Company holds less than 20% of the capital stock and does not have significant influence. The Company accounts for these investments using the cost method. The Company monitors these investments for impairment and makes appropriate reductions in carrying value when an other than temporary decline is evident.

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Reclassifications

        Where necessary, prior period amounts have been reclassified to conform to the current period presentation.

Stock-Based Compensation

        The Company accounts for compensation cost related to employee stock options and other forms of employee stock-based compensation plans other than ESOP in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. The Company also applies SFAS No. 123, Accounting for Stock-Based Compensation, which allows entities to continue to apply the provisions of APB Opinion No. 25 and provide pro forma net income and pro forma earnings per share disclosures for employee stock option grants as if the fair-value-based method defined in SFAS No. 123 had been applied.

        Under the 1987 and 1996 Stock Incentive Programs and the 1998 Nonstatutory Stock Option Plan (the "Plans"), the Company has authorized the issuance of 11,386,612, 24,550,000 and 4,000,000 common shares, respectively, of which a total of 7,235,509 shares were available to grant as of December 31, 2002. The 1987 and 1996 Plans provide for the grant of incentive stock options to officers and other employees of the Company or any parent or subsidiary. The 1998 Plan provides for the grant of non-qualified stock options to non-officer employees of the Company. Subject to the discretion of the Board of Directors, options granted under the Plans generally vest and become exercisable at the rate of 28% at the end of the first year, and thereafter at a rate of 2% per month and have a 10 year term.

        The stock plans were amended in 2002 to provide that options granted thereunder must have an exercise price per share no less than 100% of the fair market value of the share price on the grant date.

        With respect to any participant who owns stock possessing more than 10% of the voting rights of the Company's outstanding capital stock, the exercise price of any incentive stock option granted must equal at least 110% of the fair market value on the grant date. The terms of all options granted under the Plans may not exceed 10 years. The fair value of each stock based compensation award is estimated on the date of grant using the Black Scholes option-pricing model assuming no dividend yield and the following weighted-average assumptions for stock based compensation awards:

Stock Option Plans

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Employee Stock Purchase Plans

        The Company applies APB Opinion No. 25 in accounting for its plans and, accordingly, no compensation cost has been recognized for its stock based compensation awards in the financial statements. Had the Company determined compensation cost based on the fair value at the date of grant for its stock based compensation awards under SFAS No. 148, the Company's net income (loss) would have been adjusted to the pro forma amounts indicated below:

2.    Business Combinations

Infineon Technologies AG GaAs Business

        On July 1, 2002, the Company completed the acquisition of the GaAs Business of Infineon Technologies AG ("Infineon"). The acquisition was accounted for as a purchase transaction and the results of operations are included in the consolidated financial statements from the date of acquisition. At the closing date, the Company paid Infineon EUR50.0 million, of which EUR10.0 million represents an earnout deposit. Pursuant to the purchase agreement, Infineon may earn up to an additional EUR74.0 million over a 24-month period based upon revenues generated by the acquired business, for an aggregate purchase price of EUR 124.0 million. Subsequent to the close of the acquisition, certain fixed assets were also purchased for EUR5.5 million less EUR1.5 million in funded liabilities acquired. There are also various other guarantees and contingencies which could affect the amount of the final purchase price. On October 1, 2002, the time period lapsed for the Company to reach a subsequent agreement with Infineon as to the inclusion of Infineon's Hi Rel business in the acquisition of Infineon's GaAs Business. Since an agreement was not reached, the minimum purchase price of the acquisition was adjusted to EUR42.0 million from EUR45.0 million. The Company acquired this business to strengthen its European presence and to expand its market and product offerings in the wireless communications industry.

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        Details of the purchase price were as follows:

        The purchase price was allocated to the assets and liabilities based on fair values as follows:

        In connection with this acquisition, the Company obtained a third-party valuation of the assets for purposes of the purchase price allocation. Acquired in-process research and development ("IPR&D") assets were expensed at the date of acquisition in accordance with FASB Interpretation No. 4 ("FIN 4"), Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method. The value assigned to IPR&D related to research projects for which technological feasibility had not been established and no future alternative uses existed. The fair value was determined using the income approach, which discounts expected future cash flows from projects under development to their net present value using a risk adjusted rate. Each project was analyzed to determine the following: the technological innovations included; the utilization of core technology; the complexity, cost and time to complete development; any alternative future use or current technological feasibility; and the stage of completion. Future cash flows were estimated based upon management's estimates of revenues expected to be generated upon completion of the projects and the beginning of commercial sales and related operating costs. The projections assume that the technologies will be successful and that the product's development and commercialization will meet management's time schedule. The discount rates utilized ranged from 25% to 50% and were based on the novelty of the technology, the risks remaining to complete each project, and the extent of the Company's familiarity with the technology. The estimated cost to complete this IPR&D at the time of acquisition was approximately $900. The associated projects are still in process and on budget. As of December 31, 2002, the Company wrote off all goodwill associated with this acquisition.

A Portion of the Assets of IBM's Wireless Phone Chipset Business

        On July 1, 2002, the Company completed the acquisition of a portion of the assets of IBM's wireless phone chipset business. The acquisition was accounted for as a purchase transaction and the results of operations are included in the consolidated financial statements from the date of acquisition. At the closing date, the Company paid $21.8 million to IBM for the related assets, of which $5.0 million represents an earnout deposit. Subsequent adjustments to the purchase price contingent upon business volumes could increase the final aggregate purchase price up to $40.0 million. The Company acquired this business to expand its market and product offerings in the wireless communications industry and to strengthen its capabilities in silicon germanium process technology.

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        Details of the purchase price are as follows:

        The purchase price was allocated to the assets and liabilities based on fair values as follows:

        In connection with this acquisition, the Company obtained a third-party valuation of the assets for purposes of the purchase price allocation. Acquired IPR&D assets were expensed at the date of acquisition in accordance with FIN 4. The value assigned to IPR&D related to research projects for which technological feasibility had not been established and no future alternative uses existed. The fair value was determined using the income approach, which discounts expected future cash flows from projects under development to their net present value using a risk adjusted rate. Each project was analyzed to determine the following: the technological innovations included; the utilization of core technology; the complexity, cost and time to complete development; any alternative future use or current technological feasibility; and the stage of completion. Future cash flows were estimated based upon management's estimates of revenues expected to be generated upon completion of the projects and the beginning of commercial sales and related operating costs. The projections assume that the technologies will be successful and that the product's development and commercialization will meet management's time schedule. The discount rate utilized was 29% and was based on the novelty of the technology, the risks remaining to complete each project, and the extent of the Company's familiarity with the technology. The estimated cost to complete this IPR&D at the time of acquisition was approximately $40. The associated projects are still in process and on budget. As of December 31, 2002, the Company wrote off all goodwill and intangible assets associated with this acquisition.

        In a transaction related to this acquisition, the Company transferred $1.3 million of the acquired machinery and equipment, $1.0 million of the technology licenses, $733 of acquired workforce and $11.0 million in cash to a privately held technology company in exchange for a note receivable of $14.0 million.

        Pro forma results of operations have not been presented for this acquisition because its effects were not material on either an individual or aggregate basis.

Agere's Optoelectronics Business

        On January 2, 2003, the Company completed an acquisition of a substantial portion of the optoelectronics business of Agere Systems Inc. ("Agere") for $40 million in cash plus acquisition costs and certain assumed liabilities. The Company initially paid $35 million on January 2, 2003 and agreed to pay an additional $5 million on or about April 1, 2003. The transaction included the products, technology and some facilities related to Agere's optoelectronics business, which includes active and passive components, amplifiers, transceivers, transponders and other products. As part of the acquisition, the Company has also assumed operation of the back-end assembly and test operations

10

associated with these components at a leased facility in Matamoros, Mexico. The Company acquired this business to expand its market and product offerings in its optical networks business. Through a transition services agreement, Agere will provide some business infrastructure services to the Company for a short period following the close of the transaction to ensure seamless transition of the business operations.

        Details of the purchase price were as follows:

        The purchase price was allocated to the assets and liabilities based on fair values as follows:

        In connection with this acquisition, the Company obtained a third-party valuation of the assets for purposes of the purchase price allocation. Acquired in-process research and development ("IPR&D") assets were expensed at the date of acquisition. The value assigned to IPR&D related to research projects for which technological feasibility had not been established and no future alternative uses existed. The fair value was determined using the income approach, which discounts expected future cash flows from projects under development to their net present value using a risk adjusted rate. The project was analyzed to determine the following: the technological innovations included; the utilization of core technology; the complexity, cost and time to complete development; any alternative future use or current technological feasibility; and the stage of completion. Future cash flows were estimated based upon management's estimates of revenues expected to be generated upon completion of the projects and the beginning of commercial sales and related operating costs. The projections assume that the technologies will be successful and that the product's development and commercialization will meet management's time schedule. The discount rate was 35% and was based on the novelty of the technology, the risks remaining to complete each project, and the extent of the Company's familiarity with the technology. The estimated cost to complete this IPR&D at the time of acquisition was approximately $3,200.

        Pro forma results of operations as if the Infineon and Agere acquisitions had closed on January 1, 2002 are as follows:

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3.    Segment Information

        SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information ("SFAS 131") establishes standards for the reporting by public business enterprises of information about operating segments, products and services, geographic areas and major customers. The method for determining what information to report is based on the way that management organizes the segments within the Company for making operating decisions and assessing financial performance. The Company has aggregated its businesses into a single reportable segment as allowed under SFAS 131 because they have similar long-term economic characteristics. In addition, they are similar in regards to (a) nature of products and production processes, (b) type of customers and (c) method used to distribute products. Accordingly, the Company describes its reportable segment as high-performance components and modules for communications applications. All of the Company's revenues result from sales in its product lines.

        Our sales outside of the United States were 58% of revenues for the three months ended March 31, 2003 and 54% of revenues for the three months ended March 31, 2002.

4.    Net Income (Loss) Per Share

        Earnings (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 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 earnings (loss) per share:

        Stock options and other exercisable convertible securities totaling approximately 19,622,000 shares for the three months ended March 31, 2003 and 18,474,000 shares for the three months ended March 31, 2002 were not included in the net income per share calculations, because to do so would have been antidilutive.

5.    Income Taxes

        Deferred tax assets and liabilities are determined based on the temporary differences between the financial reporting and tax basis of assets and liabilities, applying enacted statutory tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is recorded when it is more likely than not that all or a portion of the deferred tax assets will not be realized. The Company considers future taxable income and prudent and feasible tax planning strategies in

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determining the need for a valuation allowance. During 2002, the Company determined that a valuation allowance should be recorded against all of its deferred tax assets.

6.    Inventories

        Inventories, net of reserves of $19,179 million and $19,786 million as of March 31, 2003 and December 31, 2002, respectively, are stated at the lower of cost or market and consist of:

7.    Goodwill and Other Acquisition-Related Intangible Assets

        In accordance with SFAS No. 142, Goodwill and Other Intangible Assets ("SFAS 142"), goodwill is no longer amortized. The Company is required to perform impairment tests at least annually or when events and circumstances warrant. The Company intends to perform this test in the fourth quarter of each year.

        Changes in the carrying amount of goodwill for the three months ended March 31, 2003 are as follows:

        Information regarding the Company's other acquisition-related intangible assets is as follows (in thousands):

        Amortization expense of other acquisition-related intangible assets was $637 for the three months ended March 31, 2003 and $39 for the three months ended March 31, 2002. The periods over which the Company amortizes these intangible assets range from three to seven years, depending on the estimated useful life of the intangible asset.

8.    Product Warranty

        The Company estimates a liability for costs to repair or replace products under warranties and technical support costs when the related product revenue is recognized. The liability for product warranties is calculated based upon historical experience and specific warranty issues.

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        Product warranty activity consisted of:

9.    Commitments

        In conjunction with the Company's purchase of Infineon's GaAs Business, Infineon and the Company entered into an interim supply agreement whereby Infineon is required to sell, and the Company is required to purchase EUR22.5 million ($24.26 million at March 31, 2003 exchange rate of $1.0782/EUR1.00) of GaAs Business products during a one-year period at stipulated prices. The remaining commitment as of March 31, 2003 is EUR9.85 million ($10.62 million at March 31, 2003 exchange rate of $1.0782/EUR1.00).

10.    Stockholders' Equity

        Components of stockholders' equity:

11.    Supplemental Cash Flow Information

12.    Comprehensive Income

        The components of comprehensive income, net of tax for 2002, are as follows (in thousands):

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13.    Off-Balance Sheet Financing

        In August 2000, the Company acquired a 420,000 square foot wafer fabrication facility located in Richardson, Texas for $87 million. The acquisition was financed by an entity which may be either a variable interest entity or a voting interest entity ("VIE") sponsored by a financial institution in which the Company contributed $73 million and a lender contributed $14 million. The Company is currently evaluating the entity to make this determination. If it is determined that the VIE would need to be consolidated with our financial results, there could be a substantial negative impact on our financial results. In September 2002, the Company completed an improvement to the Richardson, Texas facility, of which $18.5 million was financed through the same financial institution-sponsored VIE as part of the original financing agreement. The Company contributed $14.5 million and the lender contributed $4.0 million. Of the total amount contributed to the VIE, the Company is required to collateralize 97% through pledged investment securities and a participation interest in the VIE which amounts appear on the Consolidated Balance Sheets as "Restricted long-term assets" of $17.4 million and "Other investment" of $88.1 million, respectively. As of March 31, 2003, the Company was in compliance with this requirement. The VIE is not consolidated in the Company's financial statements and the Company has accounted for the arrangement as an operating lease. The Company is required to make lease payments through August 2005 or may purchase the property. If the Company elects to purchase the property, the Company will assign the pledged securities to the lender and incur some incremental closing costs to obtain title to the property. At the end of the lease, the Company may elect to purchase the property, terminate the lease or renew the lease for two additional two-year periods. The lease is secured by the value of the property, of which the Company is subject to a guarantee of at least 75% of its purchase value, as well as the pledged investment securities. The Company is subject to restrictive covenants in this financing arrangement which require the Company to maintain (a) a quick ratio of not less that 1.25 to 1.00, (b) tangible net worth not less than the sum of $433 million and (c) a maximum leverage ratio not greater than 0.50.

        The Company is further evaluating the current structure of this financing agreement and it believes that this will result in a substantial non-cash charge to earnings in the second quarter of 2003.

14.    Litigation

        On February 7, 2003, a stockholder class action lawsuit was filed against the Company's wholly-owned subsidiary Sawtek Inc. and certain of its former executives in the United States District Court for the Middle District of Florida. The Company believes this suit is without merit and intends to vigorously defend itself against the charges.

        On or about December 2, 2002, the Company filed a lawsuit in the amount of approximately $2,827 against Finisar Corporation in Multnomah County Circuit Court of Oregon. The lawsuit alleges that Finisar has failed to pay the Company for semiconductor wafers delivered between September 2000 and December 2001. Finisar alleges claims for breach of contract, breach of warranty, negligence, and restitution, seeking damages in the amount of approximately $13,000. The Company denies the counterclaim allegations and intends to vigorously defend itself against them. The parties are currently engaging in discovery and no trial date has been set.

        From time to time, the Company is involved in judicial and administrative proceedings incidental to the Company's business. Although occasional adverse decisions (or settlements) may occur, the Company believes that the final disposition of such matters will not have a material adverse effect on its financial position or results of operations.

15.    Recent Accounting Pronouncements

        In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51. This Interpretation addresses the consolidation by business enterprises

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of variable interest entities as defined in the Interpretation. The Interpretation applies immediately to variable interests in variable interest entities created after January 31, 2003, and to variable interests in variable interest entities obtained after January 31, 2003 and to existing interests in VIE's after June 15, 2003. The Company may have an interest in a VIE as more fully discussed in Note 13. The Company has not yet determined the effect the application of this Interpretation will have on the Company's financial statements.

16.    Subsequent Events

        On April 1, 2003, the Company paid $5 million in cash to complete the purchase of the facilities related to the portion of the Agere optoelectronics business that the Company acquired in January 2003. For further details, see Footnote 2.

        On May 6, 2003, the Company sold the undersea pump laser business acquired as part of the Agere optoelectronics business to JDS Uniphase Corporation for $6.6 million in cash.

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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. The discussion in this Report contains both historical information and forward-looking statements. A number of factors affect our operating results and could cause our actual future results to differ materially from any forward-looking results discussed below, including, but not limited to, those related to operating results; demand for integrated circuits, SAW filters and optoelectronic components and the products into which they are manufactured, including wireless phones; sales to a limited number of customers; new competitive technologies; growth and diversification of our markets, technologies and product applications; investments in new facilities; startup or integration of new facilities; equity investments in closely held companies; integration of our acquisitions of Infineon's GaAs business, IBM's wireless phone chipset business, Agere's optoelectronics business and integration of any future acquisitions. In some cases, you can identify forward-looking statements by terminology such as "anticipates", "appears", "believes", "continue", "estimates", "expects", "hope", "intends", "may", "our future success depends", "plans", "potential", "predicts", "reasonably", "seek to continue", "should", thinks", "will" or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. In addition, historical information should not be considered an indicator of future performance. Factors that could cause or contribute to these differences include, but are not limited to, the risks discussed in the section of this report titled "Factors Affecting Future Operating Results". These factors may cause our actual results to differ materially from any forward-looking statement.

        Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of these statements. We are under no duty 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.

        We are a leading supplier of high-performance components and modules for communications applications. Our focus is on the specialized expertise, materials and know-how for radio frequency/intermediate frequency ("RF/IF") and optical applications. We enjoy diversity in our markets, applications, products, technology and customer base. Markets include wireless phones, infrastructure networks, optical networks, and defense. We provide customers with standard and custom product solutions as well as foundry services. Products are based on advanced process technologies including gallium arsenide ("GaAs"), indium phosphide ("InP"), silicon germanium ("SiGe"), and surface acoustic wave ("SAW"). Our customers include major communication companies worldwide.

        Our products are designed on various wafer substrates such as GaAs, SiGe, InP, lithium niobate ("LiNbO3"), lithium tantalate ("LiTaO3") and quartz, using a variety of device technologies including Pseudomorphic High Electron Mobility Transistor ("pHEMT"), Metamorphic HEMT ("mHEMT"), Heterojunction Bipolar Transistor ("HBT"), Heterostructure Field Effect Transistor ("HFET"), Metal Semiconductor Field Effect Transistor ("MESFET") and SAW. Using these materials, devices and our proprietary technology, our products can overcome the performance barriers of competing devices in a variety of applications and offer other key advantages such as steeper selectivity, lower distortion, 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 sell our products worldwide to end-user customers, including

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Agere Systems, Ericsson, Kyocera, LG Group, Motorola, Inc., Nokia Corporation, Nortel Networks Corporation, Northrop Grumman, Raytheon Company and Schlumberger.

        In the United States, we have design and manufacturing facilities in Oregon, Texas, Florida and Pennsylvania and design facilities in New England. We also have production plants in Costa Rica and Mexico, a design facility in Germany, application sales support offices in Taiwan and Korea and we are in the process of opening an assembly facility in China. We own and operate our own wafer fabrication and product test facilities and use our proprietary processes to produce radio frequency ("RF"), analog and mixed-signal components, lasers, detectors, modulators and modules cost-effectively in high volumes. We believe that control of these manufacturing processes provides us with a reliable source of supply and greater opportunities to enhance quality, reliability and manufacturing efficiency. In addition, control of our manufacturing process and our combined research and design capabilities assists us in developing new processes and products and in being more responsive to customer requirements. We have also established a strategic foundry business serving leading communications companies.

        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.

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 and 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. We review our estimates, including, but not limited to, those related to our allowance for doubtful accounts, sales returns reserves, inventory reserves, income tax valuation, warranty reserves, investment impairments, impairments of goodwill and long-lived assets and commitments and contingencies on a regular basis and make adjustments based on historical experiences and existing and expected future conditions. These evaluations are performed regularly and adjustments are made as information is available. We believe that these estimates are reasonable; however, actual results could differ from these estimates.

Revenue Recognition

        Standard product revenues are recognized upon shipment of product with provisions established for estimated customer and distributor product returns based on our experiences and/or contractual agreements provided that persuasive evidence of a sales arrangement exists, the price is fixed and determinable, title has transferred, collection is reasonably assured and there are no remaining significant obligations. Generally, we ship products FOB shipping point. We recognize revenues on certain foundry and customer-specific products based on certain design, manufacturing and other milestones. We recognize revenues on cost-plus contracts as work is performed. Revenues from customers who have acceptance criteria is not recognized until all acceptance criteria are satisfied.

Accounts Receivable and Allowance for Doubtful Accounts

        Our accounts receivable represent those amounts which have been billed to our customers but not yet collected. We establish an allowance for doubtful accounts for the portion of those accounts which we determine may become uncollectible. If we know of a specific customer's inability to meet its

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financial obligation to us, we record a specific allowance to reduce their receivable to an amount which we reasonably believe will be collectible. For all other customers, we estimate the allowance based on the length of time past due, historical experience and judgment of economic conditions. If the financial condition of our customers were to deteriorate or if economic conditions became worse than our expectations, our established allowance may not be sufficient and we may be required to provide additional allowances.

Sales Returns and Allowances

        We record a sales return reserve for estimated sales returns and allowances. A portion of our reserve is based on the contractual level of returns allowed to our distributors. This portion is recorded in the same period that the related revenues are recorded. A second portion is based on known quantities of products we expect to receive from specific customers for reasons we have agreed to which are unrelated to product warranty issues. The third and final portion is a general reserve based on historical experience and our judgment of expected levels of returns. If actual returns were higher than our estimates, our financial results would be adversely affected to the extent of the additional charges.

Inventories and Excess and Obsolescence Reserves

        We state our inventories at the lower of cost or market. We use a 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 costing our inventory at a lower of cost or market valuation, we also evaluate it each period for excess quantities and obsolescence. This evaluation includes identifying those parts specifically identified as obsolete and reserving for them, analyzing forecasted demand versus quantities on hand and reserving for the excess, identifying and recording other specific reserves, and estimating and recording a general reserve based on historical experience and our judgment of economic conditions. If future demand or market conditions are less favorable than our projections, additional inventory reserves may be required and would be reflected in the financial statements in the period the adjustment is made.

Deferred Taxes

        We record a valuation allowance to reduce deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets may not be realized. We consider future taxable income and prudent and feasible tax planning strategies in determining the need for a valuation allowance. We evaluate the need for valuation allowance on a regular basis and adjust as needed. These adjustments have an impact on our financial statements in the periods in which they are recorded. In 2002, we determined that a valuation allowance should be recorded against all of our deferred tax assets based on the criteria of Statement of Financial Accounting Standards No. 109 ("SFAS109"), "Accounting for Income Taxes". As of March 31, 2003, this valuation allowance is still in place.

Warranty Costs

        We accrue for warranty costs based on a combination of factors including historical product return experience, known product warranty issues with specific customers, and judgment of expected levels of returns based on economic and other factors. If we experience warranty claims in excess of our projections, additional accruals may need to be recorded which would adversely affect our financial results.

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Investments in Privately Held Companies

        We have made several investments in small, privately held technology companies in which we hold less than 20% of the capital stock or hold notes receivable. We account for these investments using the cost method. We monitor these investments for impairment and make appropriate reductions in carrying value when an other-than-temporary decline is evident. We evaluate the financial condition of the investee, market conditions, and other factors providing an indication of the fair value of the investments. In 2002 we recorded impairment charges on these investments due to deteriorating financial and market conditions. Adverse changes in market conditions or poor operating results of the investees could result in additional other-than-temporary losses in future periods.

Long-Lived Assets

        We evaluate long-lived assets for impairment of their carrying value when events or circumstances indicate that the carrying value may not be recoverable. If impairment appears probable, we evaluate whether the sum of the estimated undiscounted cash flows attributable to the assets in question is less than their carrying value. If this is the case, we recognize an impairment loss to the extent that carrying value exceeds fair value. The fair value of the asset then becomes the asset's new carrying value, which is depreciated over the remaining useful life of the asset. In 2002 we incurred significant impairment of the carrying values of our long-lived assets and we may incur impairment losses in future periods if factors influencing our estimates change.

Goodwill

        We perform goodwill impairment tests at least annually or when events and circumstances warrant. Factors to be considered which would trigger an impairment review include a significant underperformance of the acquired assets relative to expected historical or projected future operating results, significant changes in the manner of use of the acquired assets or the strategy for the overall business, significant negative industry or economic trends, significant decline in our stock price for a sustained period, and a decline of our market capitalization below net book value. In 2002, we recognized an impairment charge related to the assets assigned to the Oregon operating unit. We recorded an impairment loss for the full value of all of our goodwill from recent acquisitions assigned to the Oregon operating unit.

Commitments and Contingencies

        In the ordinary course of business, we may from time to time be involved in legal matters which may represent contingent liabilities or losses for us. We may also enter into contracts or other agreements representing commitments to third parties. A determination of the amount of reserves required for these commitments and contingencies, if any, would be a charge against earnings. Any required reserve could change in the future due to new developments or circumstances of each matter. Changes in required reserves could increase or decrease our earnings in the period the changes are made.

Acquisitions

Acquisition of Infineon's GaAs Business

        On July 1, 2002, we completed the acquisition of Infineon's GaAs Business. We added approximately 60 employees as part of the acquisition. The acquisition was accounted for as a purchase transaction and the results of operations of this business are included in our consolidated financial statements from the date of acquisition. At the closing date, we paid Infineon EUR50.0 million, of which EUR10.0 million represents an earnout deposit. Pursuant to the purchase agreement, Infineon may earn up to an additional EUR74.0 million over a 24-month period based upon revenues generated

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by the acquired business, for an aggregate purchase price of EUR124.0 million. Subsequent to the completion of the acquisition, we also purchased certain fixed assets from Infineon for EUR5.5 million less EUR1.5 million in funded liabilities acquired. There are also various other guarantees and contingencies which could affect the amount of the final purchase price.

        In connection with this acquisition, we obtained a third-party valuation of the assets for purposes of the purchase price allocation. Acquired in-process research and development ("IPR&D") assets were expensed at the date of acquisition in accordance with FASB Interpretation No. 4 ("FIN 4"), Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method. The value assigned to IPR&D related to research projects for which technological feasibility had not been established and no future alternative uses existed. We determined the fair value using the income approach, which discounts expected future cash flows from projects under development to their net present value using a risk adjusted rate. Each project was analyzed to determine the following: the technological innovations included; the utilization of core technology; the complexity, cost and time to complete development; any alternative future use or current technological feasibility; and the stage of completion. We estimated future cash flows based upon our estimates of revenues expected to be generated upon completion of the projects and the beginning of commercial sales and related operating costs. The projections assume that the technologies will be successful and that the product's development and commercialization will meet management's time schedule. The discount rates utilized ranged from 25% to 50% and were based on the novelty of the technology, the risks remaining to complete each project, and the extent of our familiarity with the technology. The estimated cost to complete this IPR&D at the time of acquisition was approximately $900,000. The associated projects are still in process and on budget.

        In connection with our acquisition of the Infineon GaAs business, we had the right to negotiate the purchase of Infineon's Hi Rel business. On October 1, 2002, the time period lapsed for us to reach a subsequent agreement as to our additional acquisition of Infineon's Hi Rel business. Since an agreement was not reached, the minimum purchase price of the acquisition has been adjusted to EUR42 million from EUR45 million.

Acquisition of a portion of the assets of IBM's wireless phone chipset business

        On July 1, 2002, we completed the acquisition of a portion of the assets of IBM's wireless phone chipset business. We added nine employees as part of the acquisition. The acquisition was accounted for as a purchase transaction and the results of operations are included in our consolidated financial statements from the date of acquisition. At the closing date, we paid $21.8 million to IBM for the related assets, of which $5.0 million represents an earnout deposit. Subsequent adjustments contingent upon business volumes could increase the final aggregate purchase price up to $40.0 million.

        In connection with this acquisition, we obtained a third-party valuation of the assets for purposes of the purchase price allocation. Acquired IPR&D assets were expensed at the date of acquisition in accordance with FIN 4. The value assigned to IPR&D related to research projects for which technological feasibility had not been established and no future alternative uses existed. We determined the fair value using the income approach, which discounts expected future cash flows from projects under development to their net present value using a risk adjusted rate. Each project was analyzed to determine the following: the technological innovations included; the utilization of core technology; the complexity, cost and time to complete development; any alternative future use or current technological feasibility; and the stage of completion. We estimated future cash flows based upon our estimates of revenues expected to be generated upon completion of the projects and the beginning of commercial sales and related operating costs. The projections assume that the technologies will be successful and that the product's development and commercialization will meet management's time schedule. The discount rate utilized was 29% and was based on the novelty of the technology, the risks remaining to complete each project, and the extent of our familiarity with the technology. The estimated cost to complete this IPR&D at the time of acquisition was approximately $40,000. The associated projects are still in process and on budget.

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Acquisition of a portion of Agere's optoelectronics business

        On January 2, 2003, we completed our acquisition of a substantial portion of the optoelectronics business of Agere for $40 million in cash plus acquisition costs and certain assumed liabilities. We initially paid $35 million on January 2, 2003 and an additional $5 million on April 1, 2003. The transaction included the products, technology and some facilities related to Agere's optoelectronics business, which includes active and passive components, amplifiers, transceivers, transponders and other products. As part of the acquisition, we have also assumed operation of the back-end assembly and test operations associated with these components at a leased facility in Matamoros, Mexico. As part of the transaction, approximately 340 Agere research and development, process engineering, marketing, product management and assembly and test employees joined our company. Approximately 215 of these employees are located in Pennsylvania and 125 are located in Matamoros, Mexico. We expect this business will have an operating loss in 2003.

        In connection with this acquisition, we obtained a third-party valuation of the assets for purposes of the purchase price allocation. Acquired in-process research and development ("IPR&D") assets were expensed at the date of acquisition in accordance with FASB Interpretation No. 4 ("FIN 4"), Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method. The value assigned to IPR&D related to research projects for which technological feasibility had not been established and no future alternative uses existed. The fair value was determined using the income approach, which discounts expected future cash flows from projects under development to their net present value using a risk adjusted rate. The project was analyzed to determine the following: the technological innovations included; the utilization of core technology; the complexity, cost and time to complete development; any alternative future use or current technological feasibility; and the stage of completion. Future cash flows were estimated based upon management's estimates of revenues expected to be generated upon completion of the projects and the beginning of commercial sales and related operating costs. The projections assume that the technologies will be successful and that the product's development and commercialization will meet management's time schedule. The discount rate was 35% and was based on the novelty of the technology, the risks remaining to complete each project, and the extent of our familiarity with the technology. The estimated cost to complete this IPR&D at the time of acquisition was approximately $3.2 million.

        Through a transition services agreement, Agere will provide some business infrastructure services to us for a short period following the close of the transaction to ensure seamless transition of the business operations.

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Results of Operations

        The following table sets forth the results of our operations expressed as a percentage of revenues. Our historical operating results are not necessarily indicative of the results for any future period.

Revenues

        We derive revenues from the sale of standard and customer-specific products and services. Our revenues also include nonrecurring engineering revenues relating to the development of customer-specific products. Our markets during these comparative periods included wireless phones; infrastructure networks such as base station, satellite, and point-to-point; defense and optical networks. For the three months ended March 31, 2003, revenues were $71.7 million, an increase of 14.9% from revenues of $62.4 million for the three months ended March 31, 2002. This increase in revenues was primarily the result of the additional revenues from the optoelectronics business which we acquired from Agere in January 2003 and from slightly higher sales of wireless phone and wireless local area network products. We expect revenues for the three months ending June 30, 2003 to be flat to slightly higher than the three months ended March 31, 2003.

        Domestic revenues for the three months ended March 31, 2003 increased to $30.3 million from $28.4 million for the three months ended March 31, 2002. International revenues for the three months ended March 31, 2003 increased to $41.4 million from $34.0 million for the three months ended March 31, 2002.

Gross Profit

        Gross profit is equal to revenues less cost of goods sold. Cost of goods sold includes direct material, labor and overhead expenses and certain production costs related to nonrecurring engineering revenues. In general, gross profit generated from the sale of customer-specific products and from nonrecurring engineering revenues is typically higher than gross profit generated from the sale of standard products. For the three months ended March 31, 2003, gross profit was $15.9 million, a decrease of 24.4% from the $21.1 million reported for the three months ended March 31, 2002. The decrease in gross profit was attributable to the decreased demand for our products, underutiliziation of our fabrication facilities and the currently high level of manufacturing costs relative to sales associated with our newly acquired optoelectronics business.

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        The operation of our own wafer fabrication facilities entails a high degree of fixed costs and requires an adequate volume of production and sales to be profitable. During periods of decreased demand, as we have experienced recently, high fixed wafer fabrication costs have a materially adverse effect on our operating results. We expect gross profit to continue to be affected by decreased absorption of fixed overhead costs associated with decreased demand and production volume, which will continue to affect our results of operations for as long as demand continues at existing or lower levels.

        Additionally, we have at various times in the past experienced lower than expected production yields, which have delayed shipments of a given product and adversely affected gross profits. There can be no assurance that we will be able to maintain acceptable production yields in the future and, to the extent that we do not achieve acceptable production yields, our operating results would be materially adversely affected.

        We expect our gross profit in 2003 to be lower, as a percentage of revenue, compared to 2002. This decrease will be attributable to a high level of transition costs associated with our newly acquired optoelectronics business, continued underutilization of our fabrication facilities and a continuing weakening of average selling prices for our products. We believe these adverse conditions will be partially offset by increased demand for wireless products and the completion of the transfer of the fabrication of the products associated with the business we acquired from Infineon to our Oregon fabrication facility.

Research, Development and Engineering

        Research, development and engineering expenses include the costs incurred in the design of new products, as well as ongoing product research and development expenses. Research, development and engineering expenses for the three months ended March 31, 2003 increased to $17.4 million from $13.2 million for the three months ended March 31, 2002. As a percentage of revenues for the three months ended March 31, 2003, research, development and engineering expenses increased to 24.2% from 21.2% for the three months ended March 31, 2002. The increase in research, development and engineering expenses was primarily due to the addition of our newly acquired optoelectronics business and to other costs associated with the increased investment and product development in wireless, broadband and microwave products and technologies. We are committed to substantial investments in research, development and engineering and expect these expenses will continue to increase in the future.

Selling, General and Administrative

        Selling, general and administrative expenses include commissions, labor expenses for marketing and administrative personnel, costs associated with the acquisition of the Agere optoelectronics business and other corporate administrative expenses. Selling, general and administrative expenses for the three months ended March 31, 2003 increased to $13.2 million from $10.7 million for the three months ended March 31, 2002. This increase was due to the increased operating and transition expenses associated with our newly acquired optoelectronics business. Selling, general and administrative expenses as a percentage of revenues for the three months ended March 31, 2003 increased to 18.4% from 17.2% for the three months ended March 31, 2002.

In-Process Research and Development

        During the three months ended March 31, 2003, we recorded a charge of $500,000 for the write-off of acquired in-process research and development associated with our acquisition of the Agere optoelectronics business. The value of acquired in-process research and development is determined through independent appraisal.

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Interest Income (Expense) and Other

        Interest income (expense) and other was a net expense of $1.3 million for the three months ended March 31, 2003, compared to $134,000 for the three months ended March 31, 2002. This decrease resulted primarily from decreased interest income on investments, which was attributable to lower interest rates, and a lower level of investments primarily due to our recent acquisition of the Agere optoelectronics business.

Income Tax Expense (Benefit)

        We recorded an income tax expense of $120,000 for the three months ended March 31, 2003 compared to an income tax benefit of $548,000 recorded in the three months ended March 31, 2002. The income tax expense was attributable to taxes associated with our Pennsylvania and Germany entities.

Outlook for the Three Months Ending June 30, 2003

        Based upon our forecasts of revenues and operating costs for the three months ending June 30, 2003, we expect to incur a net loss from operations for the three months ending June 30, 2003.

        This loss is based on our expectation of revenues being flat to slightly higher in the three months ending June 30, 2003 compared to the three months ending June 30, 2002, due to strong sales of products for handsets and WLAN components and offset somewhat by continued softness in the base station and satellite markets. In addition, we expect continued high operating costs primarily due to continued underutilization of our fabrication facilities, increasing engineering and research and development spending, and continued transition costs associated with our newly acquired optoelectronics business.

        In addition, we are further evaluating the current structure of our off-balance sheet financing agreement and we believe that this will result in a substantial non-cash charge to earnings in the second quarter of 2003. See Note 13 of the Notes to Condensed Consolidated Financial Statements for a discussion of our off-balance sheet financing.

Liquidity and Capital Resources

        As of March 31, 2003, we had cash, cash equivalents and short-term investments of $318.6 million. In addition, we had $98.9 million of investments in long-term marketable securities, which are investments in high-grade securities whose initial maturity is one year to 18 months. As of March 31, 2003, working capital declined to $354.1 million from $377.1 million as of December 31, 2002. The decrease in working capital was primarily attributable to the acquisition of the Agere optoelectronics business and purchases of capital equipment.

        For the three months ended March 31, 2003, cash used by operating activities was $4.2 million. For the three months ended March 31, 2002, cash provided by operating activities was $5.1 million. Cash used by operating activities for the three months ended March 31, 2003 was mainly due to the net loss for the three month period and increases in accounts receivable and inventories, offset by depreciation and amortization and increases in accounts payable and accrued expenses. For the three months ended March 31, 2002, cash provided by operating activities was primarily due to depreciation and amortization, reduction of inventory and tax benefits from stock option exercises, which was offset by net loss and the reduction of accounts payable and accrued expenses.

        For the three months ended March 31, 2003, cash provided by investing activities was $25.9 million, due to the maturity and or sale of investments offset by the acquisition of the Agere optoelectronics business and capital expenditures. For the three months ended March 31, 2002, cash

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used in investing activities was $13.3 million which was comprised mainly of purchases of capital equipment.

        For the three months ended March 31, 2003 and March 31, 2002, cash used in financing activities was $28,000 and $112,000, respectively. The cash used in financing activities for both three month periods was from principal payments on capital leases offset by the proceeds from the issuance of common stock.

        In August 2000, we acquired a 420,000 square foot wafer fabrication facility located in Richardson, Texas for $87 million. The acquisition was financed by a VIE sponsored by a financial institution to which we contributed $73 million and a lender contributed $14 million. If it is determined that the VIE would need to be consolidated with our financial results, there could be a substantial negative impact on our financial results. In September 2002, we completed an $18.5 million improvement to the Richardson, Texas facility, which was financed through the same financial institution-sponsored VIE as part of the original financing agreement. We contributed $14.5 million and the lender contributed $4.0 million. Of the total amount contributed to the VIE, we are required to collateralize 97% through pledged investment securities and a participation interest in the VIE which amounts appear on our balance sheet as "Restricted Long-Term Assets" and "Other Investment," respectively. As of March 31, 2003, we were in compliance with this requirement. The VIE is not consolidated in our financial statements and we have accounted for the arrangement as an operating lease. We are required to make lease payments through August 2005 or may purchase the property. If we elect to purchase the property, we will assign the pledged securities to the lender and incur some incremental closing costs to obtain title to the property. At the end of the lease, we may elect to purchase the property, terminate the lease or renew the lease for two additional two-year periods. The lease is secured by the value of the property, of which we are subject to a guarantee of at least 75% of its purchase value, as well as the pledged investment securities. Restrictive covenants are also included in this financing arrangement which require us to maintain (a) a quick ratio of not less than 1.25 to 1.00, (b) tangible net worth not less than the sum of $433.0 million and (c) a maximum leverage ratio not greater than .50. As of March 31, 2003, we were in compliance with these restrictive covenants. We are further evaluating the current structure of this financing agreement and we believe that this will result in a substantial non-cash charge to earnings in the second quarter of 2003.

        In February and March 2000, we completed a private placement of $345.0 million (net proceeds of $333.9 million) of 4% convertible subordinated notes due 2007. The notes are unsecured obligations, are initially convertible into our common stock at a conversion price of $67.80 per share and are subordinated to all of our present and future senior indebtedness. To date, we have repurchased approximately $76.2 million of the 4% convertible subordinated notes due 2007. From time to time, we evaluate opportunities to repurchase additional portions of the debt and may from time to time repurchase portions of the debt. We have, in prior periods, completed public offerings of our common stock in order to fund our operating and capital needs. In addition, we have funded our operations to date through other private sales of equity, borrowings, equipment leases and cash flow from operations.

        On July 1, 2002, we completed the acquisition of Infineon's GaAs Business. We added approximately 60 employees as part of the acquisition. Pursuant to the purchase agreement, Infineon may earn up to an additional EUR74.0 million over a 24-month period based upon revenues generated by the acquired business, for an aggregate purchase price of EUR124.0 million. We intend to fund this additional obligation, if it arises, with cash generated by the acquired business. In conjunction with our purchase of Infineon's GaAs Business, we entered into an interim supply agreement whereby Infineon is required to sell, and we are required to purchase EUR22,500 ($24,260 at March 31, 2003 exchange rate of $1.0782/EUR1.00) of GaAs Business products during a one-year period at stipulated prices. The remaining commitment as of March 31, 2003 was EUR9,850 ($10,620 at March 31, 2002 exchange rate of $1.0782/EUR1.00).

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        On July 1, 2002, we completed the acquisition of a portion of the assets of IBM's wireless phone chipset business. We added 9 employees as part of the acquisition. At the closing date, we paid $21.8 million to IBM for the related assets. Subsequent adjustments contingent upon business volumes could increase the final aggregate purchase price up to $40.0 million. We intend to fund the payment of such additional amounts, if they arise, with cash generated by the acquired business.

        On January 2, 2003, we completed our acquisition of a substantial portion of the optoelectronics business of Agere for $40 million in cash plus acquisition costs and certain assumed liabilities. We initially paid $35 million on January 2, 2003 for the acquisition of the business and paid an additional $5 million on April 1, 2003 for the related facilities. The transaction includes the products, technology and some facilities related to Agere's optoelectronics business, which includes active and passive components, amplifiers, transceivers, transponders and other products. As part of the transaction, approximately 340 Agere research and development, process engineering, marketing, product management and assembly and test employees will join our Company. Approximately 215 of these employees are located in Pennsylvania and 125 are located in Matamoros, Mexico. Through a transitional manufacturing agreement, Agere will supply components for us for a short period following the close of the transaction to ensure seamless service to customers. The majority of these components were manufactured in Agere's Breinigsville, Pennsylvania facility, which we acquired on April 1, 2003. As part of the acquisition, we have also assumed operation of the back-end assembly and test operations associated with these components at a leased facility in Matamoros, Mexico. Agere will also continue to provide some business infrastructure services to us for a short period following the close of the transaction to provide for an uninterrupted transition of the business operations.

        We believe that our current cash, cash equivalent and short-term investments balances, together with cash anticipated to be generated from operations and any financing arrangements we may enter into, will satisfy our projected working capital and capital expenditure requirements and possible future acquisitions, at a minimum, through the next 12 months. However, we may be required to finance any additional requirements through additional equity, debt financings or credit facilities. We may not be able to obtain additional financings or credit facilities, or if these funds are available, they may not be available on satisfactory terms.

Recent Accounting Pronouncements

        See Note 15 of the Notes to Condensed Consolidated Financial Statements for a discussion of recent accounting pronouncements.

Factors that May Affect Future Results

        An investment in our common stock is extremely risky. This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our actual results to differ materially from those expressed or implied by such forward-looking statements. Such statements reflect management's current expectations, assumptions and estimates of future performance and economic conditions. Such statements are made in reliance upon the safe harbor provisions of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended. The following are some of the factors we believe could cause our actual results to differ materially from expected and historical results. The trading price of our common stock could decline due to any of these risks and you may lose part or all of your investment. Other factors besides those listed here could also adversely affect us.

Our operating results may fluctuate substantially, which may cause our stock price to fall.

        Our quarterly and annual results of operations have varied in the past and may vary significantly in the future due to a number of factors including, but not limited to, the following:

•

cancellation or delay of customer orders or shipments;



•

our success in achieving design wins in which our products are designed into those of our customers;



•

market acceptance of our products and those of our customers;



•

variability of the life cycles of our customers' products;

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•

variations in manufacturing yields;



•

timing of announcements and introduction of new products by us and our competitors;



•

changes in the mix of products we sell;



•

declining average sales prices for our products;



•

ability to integrate existing and newly developed technologies;



•

changes in manufacturing capacity and variations in the utilization of that capacity;



•

variations in operating expenses;



•

the long sales cycles associated with our customer-specific products;



•

the timing and level of product and process development costs;



•

performance of vendors and subcontractors;



•

realization of research and development efforts;



•

variations in raw material quality and costs;



•

delays in new process qualification or delays in transferring processes;



•

the cyclical nature of the semiconductor and electronic communications component industries;



•

continued significant downturn in the wireless infrastructure network and optical network markets;



•

the timing and level of nonrecurring engineering revenues and expenses relating to customer-specific products;



•

our ability to successfully integrate the operations of acquired businesses and to retain the customers of acquired businesses;



•

possible changes in accounting requirements in accounting for off-balance sheet financing;



•

significantly higher costs associated with integrating the operations of acquired businesses than we anticipated; and



•

significant changes in our and our customers' inventory levels.

        We expect that our operating results will continue to fluctuate in the future as a result of these and other factors. Any unfavorable changes in these or other factors could cause our results of operations to suffer as they have in the past. Due to potential fluctuations, we believe that period-to-period comparisons of our results of operations are not necessarily meaningful and should not be relied upon as indicators of our future performance.

        Additionally, if our operating results are not within the market's expectations, then our stock price may fall. The public stock markets have experienced, and are currently experiencing, extreme price and trading volume volatility, particularly in high technology sectors of the market. This volatility has significantly affected the market prices of securities of many technology companies for reasons frequently unrelated to or disproportionately impacted by the operating performance of these companies. These broad market fluctuations may adversely affect the market price of our common stock.

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Our operating results may suffer due to fluctuations in demand for semiconductors and electronic communications components.

        From time to time, the wireless phone, infrastructure network, optical network, and defense markets have experienced significant downturns and wide fluctuations in product supply and demand, often in connection with, or in anticipation of, maturing product cycles, capital spending cycles and declines in general economic conditions. This cyclical nature of these markets has led to significant imbalances in demand, inventory levels and production capacity. It has also accelerated the decrease of average selling prices per unit. We have experienced, and may experience again, periodic fluctuations in our financial results because of these or other industry-wide conditions. We expect that the current decline in demand for various elements of the wireless phone, infrastructure network, optical network and defense components, including ours, could last throughout 2003, if not longer. For example, if demand for communications applications were to decrease substantially, demand for the integrated circuits and modules, optical components and modules and SAW filter components in these applications would also decline, which would negatively affect our operating results.

We depend on the continued growth of communications markets.

        We derive all of our product revenues from sales of products for electronic communication applications. These markets are characterized by the following:

•

cyclical demand;



•

intense competition;



•

rapid technological change; and



•

short product life cycles, especially in the wireless phone market.

        Recently, the electronic communications markets have reversed their previous pattern of growth. These markets may not resume historical growth rates. If these markets do not recover and demand for electronic communications applications continues to decline, our operating results could suffer. In addition, to the extent this economic downturn affects our customers' business, it may affect their ability to pay us for products we have already shipped to them.

        Products for electronic communications applications are often based on industry standards, which are continually evolving. Our future success will depend, in part, upon our ability to successfully develop and introduce new products based on emerging industry standards, which could render our existing products unmarketable or obsolete. If communications markets evolve to new standards, we may be unable to successfully design and manufacture new products that address the needs of our customers or that will meet with substantial market acceptance.

Our revenues are at risk if we do not introduce new products and/or decrease costs.

        Historically, the average selling prices of some of our products have decreased over the products' lives and we expect them to continue to do so. To offset these decreases, we rely primarily on achieving yield improvements and other cost reductions for existing products and on introducing new products that can often be sold at higher average selling prices. Selling prices for our SAW products have declined due to competitive pricing pressures and to the use of newer surface mount package devices that are smaller and less expensive than previous generation filters. For example, we have experienced declines in average selling prices for RF filters for wireless phones due to competitive pressure and filters for base stations due to the use of surface mount packages. We believe our future success depends, in part, on our timely development and introduction of new products that compete effectively

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on the basis of price and performance and adequately address customer requirements. The success of new product and process introductions depends on several factors, including:

•

proper selection of products and processes;



•

successful and timely completion of product and process development and commercialization;



•

market acceptance of our or our customers' new products;



•

achievement of acceptable manufacturing yields; and



•

our ability to offer new products at competitive prices.

        Our product and process development efforts may not be successful and our new products or processes may not achieve market acceptance. To the extent that our cost reductions and new product introductions do not occur in a timely manner, our results of operations could suffer.

If we fail to sell a high volume of products, our operating results will be harmed.

        Because large portions of our manufacturing costs are relatively fixed, our manufacturing volumes are critical to our operating results. If we fail to achieve acceptable manufacturing volumes or experience product shipment delays, our results of operations could be harmed. During periods of decreased demand, as we are currently experiencing, our high fixed manufacturing costs negatively effect our results of operations. We base our expense levels in part on our expectations of future orders and these expense levels are predominantly fixed in the short-term. However, if the rate of growth of demand continues to decrease from past levels, as we are currently experiencing, we will not be able to grow our revenue. If we receive fewer customer orders than expected or if our customers delay or cancel orders, we may not be able to reduce our manufacturing costs in the short-term and our operating results would be harmed.

If we do not sell our customer-specific products in large volumes, our operating results may be harmed.

        We manufacture a substantial portion of our products to address the needs of individual customers. Frequent product introductions by systems manufacturers make our future success dependent on our ability to select development projects, which will result in sufficient volumes to enable us to achieve manufacturing efficiencies. Because customer-specific products are developed for unique applications, we expect that some of our current and future customer-specific products may never be produced in volume and may impair our ability to cover our fixed manufacturing costs. Furthermore, if customers cancel or delay orders for these customer-specific products, our inventory of these products may become unmarketable or obsolete, which would negatively affect our operating results.

        In addition, if we experience delays in completing designs, if we fail to obtain development contracts from customers whose products are successful or if we fail to have our product designed into the next generation product of existing volume production customers, our revenues could be harmed.

Increases in our manufacturing capacity may adversely affect our operating results if the current economic downturn continues for an extended period of time.

        We have converted our Hillsboro facility from four-inch wafer production to six-inch wafer production and have recently expanded the capacity of our Texas operations with the transition to the Richardson facility. In addition, we have acquired additional manufacturing facilities and personnel in connection with our recent acquisition of businesses from Infineon, IBM and Agere.

        These increases in capacity will directly relate to significant increases in fixed costs and operating expenses. These increased costs could have an adverse effect on our results of operations during the

30

current economic downturn. If this economic downturn were to continue for an extended period of time, the decreased levels of demand and production in conjunction with these increased expense levels will have an adverse effect on our business, financial condition and results of operations.

We face challenges and risks associated with our acquisition of the optoelectronics business of Agere and, as a result, may not realize the expected benefit of this acquisition.

        On January 2, 2003, we completed of the acquisition of a substantial portion of the optoelectronics business of Agere for $40 million in cash plus acquisition costs and certain assumed liabilities. We initially paid $35 million on January 2, 2003 for the acquisition of the business and paid an additional $5 million on April 1, 2003 for the related facilities. The transaction includes the products, technology and some facilities related to Agere's optoelectronics business, which includes active and passive components, amplifiers, transceivers, transponders and other products.

        Our risks associated with this acquisition include:

•

our ability to conduct business successfully selling products which we have not previously sold and to support these markets with a substantially smaller sales force than that of Agere;



•

our ability to successfully consolidate all manufacturing operations into the Breinigsville, Matamoros and Richardson facilities without disrupting product shipments to customers;



•

our ability to establish systems and other support infrastructure on a timely basis;



•

our ability to manage a facility in Mexico and our ability to absorb the incremental costs and regulatory compliance required for an additional foreign subsidiary;



•

our ability to continue and integrate manufacturing processes substantially different from our current processes;



•

our ability to generate sufficient revenues to offset the operating costs of the Agere business due to a continued depressed market for optoelectronics products;



•

the costs we may face from warranty claims associated with products shipped by Agere prior to our acquisition of the business;



•

Agere's ability to support us and the business through a transition period and our ability to sustain the business once the transition period has expired;



•

our ability to retain existing partners and customers of the Agere business;



•

our ability to retain Agere's employees and to integrate them into our corporate culture;



•

our ability to dedicate significant management attention and financial resources needed to assimilate these businesses without harming our existing business; and



•

increased complexity of our corporate structure requiring additional resources for such responsibilities as tax planning, foreign currency management, financial reporting and risk management.

We may face challenges with the integration of our acquisition of Infineon's GaAs business and the acquired assets of IBM's wireless phone chipset business and, as a result, may not realize the expected benefits of those acquisitions.

        On July 1, 2002, we completed the acquisition of Infineon's GaAs semiconductor business and a portion of the assets of IBM's wireless phone chipset business.

        The challenges involved in integrating these businesses include:

•

realization of expected benefits from the acquisitions such as increased business in Europe;

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•

fulfillment of the supply agreement between Infineon and us until we are able to produce the products within our existing facilities;



•

retention of existing partners and customers;



•

transfer and integration of Infineon's process and technologies into our Oregon facility;



•

redesign of Infineon products to allow for manufacture in our Oregon facility;



•

retention of Infineon's and IBM's employees and their integration into the our corporate culture;



•

incremental costs associated with a foreign subsidiary such as taxes, duties and employee benefits;



•

significant management attention and financial resources needed to assimilate these businesses; and



•

increased complexity of our corporate structure requiring additional resources for such responsibilities as tax planning, foreign currency management and risk management.

If investors or financial or industry analysts do not think our integration of our acquisitions are proceeding as anticipated or that the benefits of the acquisitions may not be realized, the market price of our common stock may decline.

        The market price of our common stock may decline if:

•

the integration of our acquisitions is not completed in a timely and efficient manner;



•

our assumptions about our acquisitions' business models and operations are incorrect, considered on a stand-alone basis, or their role in our business model does not develop as we plan;



•

we are unable to introduce new products incorporating acquired technology;



•

the effect of the acquisitions on our financial results is not consistent with the expectations of financial or industry analysts; or



•

following the acquisitions, our stockholders that hold relatively larger interests in our company may decide to dispose of their shares because the results of the acquisitions are not consistent with their expectations.

We face risks from failures in our manufacturing processes, the maintenance of our fabrication facilities and the processes of our vendors.

        The fabrication of integrated circuits, particularly those made of GaAs, is a highly complex and precise process. Our integrated circuits are currently manufactured on wafers made of GaAs, InP, LiNbO3 and SiGe. Our SiGe products are manufactured externally by Atmel, our strategic partner in the development of these products and by IBM. Our SAW filters are currently manufactured primarily on LiNbO3, LiTaO3 and quartz wafers. During manufacturing, each wafer is processed to contain numerous integrated circuits or SAW filters. We may reject or be unable to sell a substantial percentage of wafers or the components on a given wafer because of:

•

minute impurities;



•

difficulties in the fabrication process, such as failure of special equipment, operator error or power outages;



•

defects in the masks used to print circuits on a wafer;



•

electrical and/or optical performance;

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•

wafer breakage; or



•

other factors.

        We refer to the proportion of final components that have been processed, assembled and tested relative to the gross number of components that could be constructed from the raw materials as our manufacturing yield. Compared to the manufacture of silicon integrated circuits, GaAs technology is less mature and more difficult to design and manufacture within specifications in large volume. In addition, the more brittle nature of GaAs wafers can result in lower manufacturing yields than with silicon wafers. We have in the past experienced lower than expected manufacturing yields, which have delayed product shipments and negatively impacted our results of operations. We may experience difficulty maintaining acceptable manufacturing yields in the future.

        In addition, the maintenance of our fabrication facilities and our assembly facilities are subject to risks, including:

•

the demands of managing and coordinating workflow between geographically separate production facilities;



•

disruption of production in one of our facilities as a result of a slowdown or shutdown in our other facility; and



•

higher operating costs from managing geographically separate manufacturing facilities.

        We depend on certain vendors for components, equipment and services. We maintain stringent policies regarding qualification of these vendors. However, if these vendors' processes vary in reliability or quality, they could negatively affect our products, and thereby, our results of operations.

We face risks from an increasing proportion of our operations and employees being located outside of the United States.

        As we continue to expand our operations, an increasing number of our employees and operations are located in countries other than the United States. The laws and governance of these countries may differ substantially from that of the United States and may expose us to increased risks of adverse impacts on our operations and results of operations. These risks could include: loss of protection of proprietary technology, disruption of production processes, interruption of freight channels and delivery schedules, currency exposure, financial institution failure, government expropriation, labor shortages, and political unrest.

Some of our manufacturing facilities are located in areas prone to natural disasters.

        We have a SAW manufacturing and assembly facility located in Apopka, Florida. We also have an assembly facility for SAW products in San Jose, Costa Rica. Hurricanes, tropical storms, flooding, tornadoes, and other natural disasters are common events for the southeastern part of the United States and in Central America. Additionally, mud slides, earthquakes and volcanic eruptions could also affect our Costa Rican facility. Any disruptions from these or other events would have a material adverse impact on our operations and financial results.

        Although we have manufacturing and assembly capabilities for our Sawtek products in both Apopka and San Jose, we are only capable of fabricating wafers for those products in our Apopka facility. As a result, any disruption to our Apopka facility would have a material adverse impact on our operations and financial results.

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A disruption in our Costa Rican, Mexican or Chinese operations would have an adverse impact on our operating results.

        Operating facilities in Costa Rica, Mexico and China presents risks of disruption such as government intervention, currency fluctuations, labor disputes, limited supplies of labor, power interruption or war. Any such disruptions could have a material adverse effect on our business, results of operations and financial condition.

        Our Costa Rican operation has been a significant contributor to our operating results in the past. We expect our Costa Rican operations to continue to account for a significant proportion of our SAW operations in the future, our Chinese operation to serve significant customers and our Mexican operation to be an important part of our optoelectronics component business. Any disruption in these operations would have a significant negative impact on our operating results.

We face risks from changes in tax regulations and a change in our Costa Rican subsidiary's favorable tax status would have an adverse impact on our operating results.

        We are subject to taxation in many different countries and localities worldwide. In some jurisdictions, we have employed specific business strategies to minimize our tax exposure. To the extent the tax laws and regulations in these various countries and localities could change, our tax liability in general could increase or our tax saving strategies could be threatened. Such changes could have a material adverse effect on our operations and financial results.

        For example, our subsidiary in Costa Rica operates in a free trade zone. We expect to receive a 100% exemption from Costa Rican income taxes through 2003 and a 75% exemption through 2007. The Costa Rican government continues to review its policy on granting tax exemptions to companies located in free trade zones and it may change our tax status or minimize our benefit at any time. Any adverse change in the tax structure for our Costa Rican subsidiary made by the Costa Rican government would have a negative impact on our net income.

Our business may be adversely affected by acts of terrorism or war.

        Acts of terrorism or war could interrupt or restrict our business in several ways. We rely extensively on the use of air transportation to move our inventory to and from our vendors and to ship finished products to our customers. If war or terrorist acts cause air transportation to be grounded or interrupted, our business would be similarly adversely impacted.

        In addition, war or acts of terrorism could cause existing export regulations to be changed, which could limit the extent to which we are allowed to export our products. To the extent that war or acts of terrorism also reduce customer confidence and create general economic weakness, our business would also be adversely affected.

Our business could be adversely affected by recent health problems originating in Asian countries.

        We conduct a substantial amount of our business in Asian countries. We recently established an assembly and test facility in Tianjin, China and we have engineering and marketing operations located in Seoul, Korea and Taipei, Taiwan. During 2002, revenues to Korea accounted for 13.1% of our total revenues, which represented the only foreign country to which revenues were 10% or more of our total revenues.

        To the extent the recent outbreak of an infectious disease interrupts business or creates general economic weakness in these countries due to quarantines and closures of business operations, our business would be adversely affected. In addition, due to our heavy reliance on air transportation to move our inventory between our company, our vendors and our customers, any general interruption to air transportation caused by this health problem could adversely affect our business on a global basis.

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We face risks from the financial problems facing the air transportation industry.

        In addition to possible disruptions to air transportation described above, the airline industry is currently experiencing a severe economic downturn. Many air carriers are experiencing serious financial problems resulting in cancelled or reduced flights, workforce reductions, and bankruptcy filings. To the extent these events interrupt or delay our ability to ship inventory and finished products and we are unable to make alternative transportation arrangements on acceptable terms, our financial results would be adversely affected.

Our operating results could be harmed if we lose access to sole or limited sources of materials, equipment or services.

        We currently obtain some components, equipment and services for our products from limited or single sources, such as certain ceramic packages and chemicals. We purchase these components, equipment, supplies and services on a purchase order basis, do not carry significant inventories and generally do not have long-term supply contracts with these vendors. Our requirements are relatively small compared to silicon semiconductor manufacturers. Because we often do not account for a significant part of our vendors' business, we may not have access to sufficient capacity from these vendors in periods of high demand. If we were to change any of our sole or limited source vendors, we would be required to requalify each new vendor. Requalification could prevent or delay product shipments, which could negatively affect our results of operations.

        Our reliance on a limited number of suppliers for certain raw materials and parts may impair our ability to produce our products on time and in acceptable yields. For example, at times in the past, we have experienced difficulties in obtaining ceramic packages used in the production of bandpass filters. At other times, the acquisition of relatively simple devices, such as capacitors, has been problematic because of the large demand swings that can occur in the cellular handset market for such components. Our newly acquired optical components group is dependent upon a large number of suppliers, some of which are very small companies, for components that make up their integrated product offerings such as transceivers, transponders and optical amplifiers. The success of these products is critical to the overall success of our business. The primary risk to our source of supply to manufacture these products is the currently depressed state of the optical network market and its potential impact on smaller vendors in terms of possible bankruptcy or inability to meet delivery schedules. In addition, our reliance on these vendors may negatively affect our production if the components, equipment or services vary in reliability or quality. If we are unable to obtain timely deliveries of sufficient quantities of acceptable quality or if the prices increase, our results of operations could be harmed.

Our operating results could be harmed if our subcontractors and partners are unable to fulfill our requirements.

        We currently utilize subcontractors for the majority of our integrated circuit and module assemblies. Our strategic partners, IBM and Atmel, also manufacture all of our SiGe products. Infineon continues to manufacture our products acquired from them while we transfer the manufacturing processes to our Oregon facility. Infineon will also continue to provide assembly and test services for an indeterminant period of time after the transfer of the manufacturing processes. There are certain risks associated with dependence on third party providers, such as minimal control over delivery scheduling, adequate capacity during demand peaks, warranty issues and protection of intellectual property. Additionally, if these subcontractors are unable to meet our needs, it could prevent or delay production shipments that could negatively affect our results of operations. If we were to change any of our subcontractors, we would be required to requalify each new subcontractor, which could also prevent or delay product shipments that could negatively affect our results of operations. In addition, our reliance on these subcontractors may negatively affect our production if the services vary in reliability or quality.

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If we are unable to obtain timely service of acceptable quality or if the prices increase, our results of operations could be harmed.

If our products fail to perform or meet customer requirements, we could incur significant additional costs.

        The fabrication of integrated circuits and SAW filters from substrate materials such as GaAs, SiGe, InP, LiNbO3, LiTaO3 and quartz and the modules containing these components is a highly complex and precise process. Our customers specify quality, performance and reliability standards that we must meet. If our products do not meet these standards, we may be required to rework or replace the products. Our products may contain undetected defects or failures that only become evident after we commence volume shipments. We have experienced product quality, performance or reliability problems from time to time. We are currently experiencing field failures and returns on some components and are collecting data for analysis and evaluation as to the extent of the problem. Other defects or failures may also occur in the future. If failures or defects occur, we could:

•

lose revenues;



•

incur increased costs such as warranty expense and costs associated with customer support;



•

experience delays, cancellations or rescheduling of orders for our products; or



•

experience increased product returns or discounts.

We may face fines or our facilities could be closed if we fail to comply with environmental regulations.

        Federal, state and local regulations impose various environmental controls on the storage, handling, discharge and disposal of chemicals and gases used in our manufacturing process. For our manufacturing facilities, we generally provide our own manufacturing waste treatment and contract for disposal of some materials. We are required to report usage of environmentally hazardous materials.

        The failure to comply with present or future regulations could result in fines being imposed on us and we could be required to suspend production or cease our operations. These regulations could require us to acquire significant equipment or to incur substantial other expenses to comply with environmental regulations. Any failure by us to control the use of, or to adequately restrict the discharge of, hazardous substances could subject us to future liabilities and harm our results of operations.

Our business will be impacted if systems manufacturers do not use components made of GaAs or other alternative materials we utilize.

        Silicon semiconductor technologies are the dominant process technologies for integrated circuits and the performance of silicon integrated circuits continues to improve. Recently, we introduced SiGe components jointly developed and manufactured with Atmel and acquired the SiGe wireless chipset business of IBM. System designers may be reluctant to adopt our products because of:

•

their unfamiliarity with designing systems with our products;



•

their concerns related to manufacturing costs and yields;



•

their unfamiliarity with our design and manufacturing processes; and



•

uncertainties about the relative cost effectiveness of our products compared to high-performance silicon components.

        Systems manufacturers may not use GaAs components because the production of GaAs integrated circuits has been, and continues to be, more costly than the production of silicon devices. Systems

36

manufacturers may not use our SiGe components because this is a newly introduced process. Systems manufacturers may be reluctant to rely on a technology that is new to us and not widely understood. Systems manufacturers may also be reluctant to rely on a jointly produced product because future supplies may depend on the continued good relationships with Atmel and IBM. As a result, we must offer devices that provide superior performance to that of traditional silicon-based devices.

        Our recently acquired optoelectronics business may be negatively impacted if our customers were to move to a non-LiNbO3 modulator product base, or if the customers of this business refuse to recognize the product qualification status of the acquired product offerings. The very demanding product qualification process in these relatively immature technologies is typically characterized by long and expensive cycles.

        In addition, customers may be reluctant to rely on a smaller company like us for critical components. We cannot be certain that additional systems manufacturers will design our products into their systems or that the companies that have utilized our products will continue to do so in the future. If our products fail to achieve market acceptance, our results of operations would suffer.

New competitive products and technologies have been announced which could reduce demand for our SAW filter products.

        Products have been introduced that may have some application in GSM phones, which will impact sales of GSM IF filters for wireless phones. Several companies recently announced a new product based on a direct conversion concept that will eliminate a SAW IF filter in most CDMA phones over time. These products likely will reduce or eliminate demand for our IF filters for CDMA phones and our revenues would be harmed if we do not introduce competitive or alternative products. SAW IF filters for wireless phones accounted for approximately 11% of our revenues in 2002. Any development of a cost-effective and reliable technology that replaces SAW filtering technology or reduces the need for SAW filtering technology could have a material adverse effect on our business, financial condition and results of operations.

A decline either in the growth of wireless communications or in the continued acceptance of CDMA technology, particularly in emerging markets, would have an adverse impact on us.

        Our products for CDMA-based systems, including filters for base stations and receivers and power amplifiers for wireless phones comprise a significant part of our business. CDMA technology is relatively new to the marketplace and there can be no assurance that emerging markets, such as China and India, will continue to adopt this technology. We have recently experienced slowing demand for both base station and handset CDMA-based products in these areas. Our business and financial results would be adversely impacted if CDMA technology does not continue to gain acceptance or if demand continues to soften.

Our business may be adversely impacted if we fail to successfully introduce new products or to gain our customers' acceptance of those new products.

        The markets for electronic communications applications in which we participate are subject to intense competition, rapid technological change, and short product life cycles. It is critical for companies such as ours to continually and quickly develop new products to meet the changing needs of these markets. If we fail to develop new products to meet our customers' needs on a timely basis, we will not be able to effectively compete in these markets.

        For example, we announced our intention to develop and market RF front-end modules for wireless phones at cost-effective prices. We will also need to continue to expand our wireless applications into CDMA and GSM applications. If we fail to design and produce these products in a

37

manner acceptable to our customers or have incorrectly anticipated our customers' demand for these types of products, our operating results could be harmed.

Our business will be adversely impacted if we do not gain market acceptance of our wireless phone module products.

        Our strategy for wireless phone products depends in large part upon the success of our design and marketing of wireless phone modules. Wireless phone modules represent the incorporation of some or all of the components of the wireless phone radio into a single product. If we are unable to design these modules in a manner acceptable to our customers, have incorrectly anticipated our customers' demand for these products or are unable to cost-effectively produce them, our operating results will be adversely affected.

We have substantial indebtedness.

        We have $268.8 million of indebtedness remaining in the form of our convertible subordinated notes due in 2007. Our other indebtedness is for operating and capital leases. We may incur substantial additional indebtedness in the future. The level of our indebtedness, among other things, could:

•

make it difficult for us to make payments on the notes and leases;



•

make it difficult for us to obtain any necessary future financing for working capital, capital expenditures, debt service requirements or other purposes;



•

require us to dedicate a substantial portion of our expected cash flow from operations to service our indebtedness, which would reduce the amount of our expected cash flow available for other purposes, including working capital and capital expenditures;



•

limit our flexibility in planning for or reacting to, changes in our business; and



•

make us more vulnerable in the event of a downturn in our business.

        There can be no assurance that we will be able to meet our debt service obligations, including our obligation under the notes.

We may not be able to pay our debt and other obligations.

        If our cash flow is inadequate to meet our obligations, we could face substantial liquidity problems. If we are unable to generate sufficient cash flow or otherwise obtain funds necessary to make required payments on the notes or our other obligations, we would be in default under the terms thereof. Default under the indenture would permit the holders of the notes to accelerate the maturity of the notes and could cause defaults under future indebtedness we may incur. Any such default could have a material adverse effect on our business, prospects, financial condition and operating results. In addition, we can not assure you that we would be able to repay amounts due in respect of the notes if payment of the notes were to be accelerated following the occurrence of an event of default as defined in the indenture.

Customers may delay or cancel orders due to regulatory delays.

        The increasing significance of electronic communications products has increased pressure on regulatory bodies worldwide to adopt new standards for electronic communications, generally following extensive investigation of and deliberation over competing technologies. The delays inherent in the regulatory approval process may in the future cause the cancellation, postponement or rescheduling of the installation of communications systems by our customers. These delays have in the past had, and may in the future have, a negative effect on our sales and our results of operations.

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We must improve our products and processes to remain competitive.

        If technologies or standards supported by our or our customers' products become obsolete or fail to gain widespread commercial acceptance, our results of operations may be materially impacted. Because of continual improvements in semiconductor technology, including those in high-performance silicon technologies such as CMOS, where substantially more resources are invested than in other technologies such as GaAs, SiGe or SAW products, we believe that our future success will depend, in part, on our ability to continue to improve our product and process technologies. We must also develop new technologies in a timely manner. In addition, we must adapt our products and processes to technological changes and to support emerging and established industry standards. We have and must continue to perform significant research and development into advanced material development such as InP, gallium nitride (GaN), silicon carbide (SiC) and SiGe to compete with future technologies of our competitors. For example, we have entered into agreements with Atmel and IBM to fabricate portions of our new SiGe products. These research and development efforts may not be accepted by our customers, and therefore may not achieve sustained production in the future. We may not be able to improve our existing products and process technologies, develop new technologies in a timely manner or effectively support industry standards. If we fail to do so, our customers may select another GaAs, SiGe or SAW product or move to an alternative technology.

Our results of operations may suffer if we do not compete successfully.

        The markets for our products are characterized by price competition, rapid technological change, short product life cycles, and heightened global competition. Many of our competitors have significantly greater financial, technical, manufacturing and marketing resources. Due to the increasing requirements for high-speed, high-frequency components, we expect intensified competition from existing integrated circuit and SAW device suppliers, as well as from the entry of new competitors to our target markets and from the internal operations of some companies producing products similar to ours for their internal requirements. Several key customers in our newly acquired optoelectronics business have either captive internal suppliers or long-term contractual relationships with suppliers based on factors other than cost and quality.

        For products in depressed markets, such as for optical components and modules, competition can be even more intense as companies attempt to maximize their revenue to cover as much of their fixed cost base as possible, even if it means selling products at a loss. There is no guarantee that pricing will stay at a level where we can sell our products on a profitable basis.

        For our integrated circuit devices, we compete primarily with both manufacturers of high-performance silicon integrated circuits as well as manufacturers of GaAs integrated circuits. Our silicon-based competitors include companies such as Applied Micro Circuits Corporation, Maxim Integrated Products Inc., Motorola, Philips, STMicroelectronics N.V and others. Our GaAs-based competitors include companies such as Anadigics Inc., Fujitsu Microelectronics, Inc., Raytheon, RF Micro Devices, Skyworks Solutions, Inc., Vitesse Semiconductor Corp and others. For our SAW devices our competitors include companies such as CTS Wireless Components, Micro Networks, Phonon, RF Monolithics, Vectron, EPCOS AG, Thales, Fujitsu, Murata, Toyocom and others. For our optoelectronics business, competitors include companies such as JDS Uniphase, Bookham, Fujitsu, Agilent, and Alcatel. Competition could also come from companies ahead of us in developing alternative technologies such as SiGe and InP integrated circuits and digital filtering and direct conversion devices.

        Competition from existing or potential competitors may increase due to a number of factors including, but not limited to, the following:

•

offering of new or emerging technologies in integrated circuit or optical component design using alternative materials such as SiGe or InP;

39

•

offering of new or emerging technologies such as digital filtering or direct conversion as alternatives to SAW filters;



•

transition to arrays of optical sources and detectors in place of discrete lasers in systems and subsystems;



•

mergers and acquisitions;



•

longer operating histories and presence in key markets;



•

development of strategic relationships;



•

access to a wider customer base; and



•

access to greater financial, technical, manufacturing and marketing resources.

        Additionally, manufacturers of high-performance silicon integrated circuits have achieved greater market acceptance of their existing products and technologies in some applications.

        We compete with both GaAs and silicon suppliers in all of our target markets. In microwave and millimeter wave applications, our competition is primarily from a limited number of GaAs suppliers, which are in the process of expanding their product offerings to address commercial applications other than aerospace.

        Our prospective customers are typically systems designers and manufacturers that are considering the use of GaAs or SiGe integrated circuits or SAW filters, as the case may be, for their high-performance systems. Competition is primarily based on performance elements such as speed, complexity and power dissipation, as well as price, product quality and ability to deliver products in a timely fashion. Due to the proprietary nature of our products, competition occurs almost exclusively at the system design stage. As a result, a design win by our competitors or by us typically limits further competition with respect to manufacturing a given design.

If we fail to integrate any future acquisitions or successfully invest in privately held companies, our business will be harmed.

        We face risks from any future acquisitions, including the following:

•

we may fail to merge and coordinate the operations and personnel of newly acquired companies with our existing business;



•

we may fail to retain the key employees required to make the operation successful;



•

additional complexity may affect our flexibility and ability to respond quickly to market and management issues;



•

we may experience difficulties integrating our financial and operating systems;



•

we may experience additional financial and accounting challenges and complexities in areas such as tax planning, treasury management, financial reporting and risk management;



•

our ongoing business may be disrupted or receive insufficient management attention;



•

we may not cost-effectively and rapidly incorporate the technologies we acquire;



•

we may not be able to recognize the cost savings or other financial benefits we anticipated;



•

we may not be able to retain the existing customers of newly acquired operations;



•

existing customers of the acquired operations may demand significant price reductions or other detrimental term changes as a result of the change in ownership;

40

•

our corporate culture may clash with that of the acquired businesses;



•

we may incur unknown liabilities associated with acquired businesses; and



•

our increasing international presence resulting from acquisitions increases our exposure to foreign political, currency, and tax risks.

        We face risks from equity investments in privately held companies, such as:

•

we may not realize the expected benefits associated with the investment;



•

we may need to provide additional funding to support the privately held company; or



•

if their value decreases, we may realize losses on our holdings.

        We may not successfully address these risks or any other problems that arise in connection with future acquisitions or equity investments in privately held companies.

        We will continue to evaluate strategic opportunities available to us and we may pursue product, technology or business acquisitions or investments in strategic partners. In addition, in connection with any future acquisitions, we may issue equity securities that could dilute the percentage ownership of our existing stockholders, we may incur additional debt and we may be required to amortize expenses related to other intangible assets or record impairment of goodwill that may negatively affect our results of operations.

If we do not hire and retain key employees, our business will suffer.

        Our future success depends in large part on the continued service of our key technical, marketing and management personnel. We also depend on our ability to continue to identify, attract and retain qualified technical employees, particularly highly skilled design, process and test engineers involved in the manufacture and development of our products and processes. We must also recruit and train employees to manufacture our products without a substantial reduction in manufacturing yields. There are many other semiconductor companies located in the communities near our facilities and it may become increasingly difficult for us to attract and retain those employees. The competition for key employees is intense, and the loss of key employees could negatively affect us.

Our business may be harmed if we fail to protect our proprietary technology.

        We rely on a combination of patents, trademarks, copyrights, trade secret laws, confidentiality procedures and licensing arrangements to protect our intellectual property rights. We currently have patents granted and pending in the United States and elsewhere and intend to seek further international and United States patents on our technology. In addition to our own inventions, we have acquired a substantial portfolio of U.S. and foreign patent applications in the optoelectronics area of technology. These applications are just starting to issue as patents, and will have lives that will extend 20 years from their respective filing dates. We cannot be certain that patents will be issued from any of our pending applications or that patents will be issued in all countries where our products can be sold or that any claims allowed from pending applications or will be of sufficient scope or strength to provide meaningful protection or any commercial advantage. Our competitors may also be able to design around our patents. The laws of some countries in which our products are or may be developed, manufactured or sold, may not protect our products or intellectual property rights to the same extent as do the laws of the United States, increasing the possibility of piracy of our technology and products. Although we intend to vigorously defend our intellectual property rights, we may not be able to prevent misappropriation of our technology. Our competitors may also independently develop technologies that are substantially equivalent or superior to our technology.

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        Our involvement in any patent dispute or other intellectual property dispute or action to protect trade secrets and know-how could have a material adverse effect on our business. Adverse determinations in any litigation could subject us to significant liabilities to third parties, require us to seek licenses from third parties and prevent us from manufacturing and selling our products. Any of these situations could have a material adverse effect on our business.

Our ability to produce our products may suffer if someone claims we infringe on their intellectual property.

        The integrated circuit and SAW device industries are characterized by vigorous protection and pursuit of intellectual property rights or positions, which have resulted in significant and often protracted and expensive litigation. If it is necessary or desirable, we may seek licenses under such patents or other intellectual property rights. However, we cannot be certain that licenses will be offered or that we would find the terms of licenses that are offered acceptable or commercially reasonable. Our failure to obtain a license from a third party for technology used by us could cause us to incur substantial liabilities and to suspend the manufacture of products. Furthermore, we may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights. Litigation by or against us could result in significant expense and divert the efforts of our technical personnel and management, whether or not the litigation results in a favorable determination. In the event of an adverse result in any litigation, we could be required to:

•

pay substantial damages;



•

indemnify our customers;



•

stop the manufacture, use and sale of the infringing products;



•

expend significant resources to develop non-infringing technology;



•

discontinue the use of certain processes; or



•

obtain licenses to the technology.

        We may be unsuccessful in developing non-infringing products or negotiating licenses upon reasonable terms, or at all. These problems might not be resolved in time to avoid harming our results of operations. If any third party makes a successful claim against our customers or us and a license is not made available to us on commercially reasonable terms, our business could be harmed.

Our business may suffer due to risks associated with international sales.

        Our sales outside of the United States were 58% of revenues for the three months ended March 31, 2003 and 56% of revenues in 2002. We face inherent risks from these sales, including:

•

imposition of government controls;



•

currency exchange fluctuations;



•

longer payment cycles and difficulties related to the collection of receivables from international customers;



•

reduced protection for intellectual property rights in some countries;



•

unfavorable tax consequences;



•

difficulty obtaining distribution and support;



•

political instability; and



•

tariffs and other trade barriers.

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        In addition, due to the technological advantages provided by GaAs integrated circuits in many military applications, the Office of Export Administration of the U.S. Department of Commerce must license all of our sales outside of North America. We are also required to obtain licenses from that agency for sales of our SAW products to customers in certain countries. If we fail to obtain these licenses or experience delays in obtaining these licenses in the future, our results of operations could be harmed. Also, because a majority of our foreign sales are denominated in U.S. dollars, increases in the value of the dollar would increase the price in local currencies of our products and make our products less price competitive.

We may be subject to a securities class action suit if our stock price falls.

        Following periods of volatility in the market price of a company's stock, some stockholders may file securities class action litigation. For example, in 1994, a stockholder class action lawsuit was filed against us, our underwriters and some of our officers, directors and investors, which alleged that we, our underwriters and certain of our officers, directors and investors intentionally misled the investing public regarding our financial prospects. We settled the action and recorded a special charge of $1.4 million associated with the settlement of this lawsuit and related legal expenses, net of accruals, in 1998.

        Recently, in February 2003, several nearly identical civil class action lawsuits were filed in the United States District Court for the Middle District of Florida against Sawtek, Inc., our wholly owned subsidiary since July 2001. The lawsuits also name as defendants current and former officers of Sawtek and our company. The class action complaints purportedly are filed on behalf of purchasers of Sawtek's stock between January 2000 and May 23 or May 24, 2001. All of the complaints allege that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act, as well as Securities and Exchange Commission Rule 10b-5, by making false and misleading statements and/or omissions to inflate Sawtek's stock price and conceal the downward trend in revenues disclosed in Sawtek's May 23, 2001 press release. At least one complaint alleges a third cause of action for breach of fiduciary duty to the shareholders. The complaints do not specify the amount of monetary damages sought. We deny the allegations contained in these complaints and intend to defend against these claims vigorously. This litigation may, however, require us to spend a substantial amount of time and money and could distract management from our day to day operations. In addition, there can be no assurance as to our success in defending ourselves against these charges. This and any future securities class action litigation could be expensive and divert our management's attention and harm our business, regardless of its merits.

Our stock will likely be subject to substantial price and volume fluctuations due to a number of factors, many of which are beyond our control and may prevent our stockholders from reselling our common stock at a profit.

        The securities markets have experienced significant price and volume fluctuations and the market prices of the securities of semiconductor companies have been especially volatile. The market price of our common stock may experience significant fluctuations in the future. For example, our common stock price has fluctuated from a high of approximately $13.09 to a low of approximately $2.55 during the 52 weeks ended March 31, 2003. This market volatility, as well as general economic, market or political conditions could reduce the market price of our common stock in spite of our operating performance. In addition, our operating results could be below the expectations of public market analysts and investors, and in response, the market price of our common stock could decrease significantly.

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Our certificate of incorporation and bylaws include anti-takeover provisions, which may deter or prevent a takeover attempt.

        Some provisions of our certificate of incorporation and bylaws and provisions of Delaware law may deter or prevent a takeover attempt, including a takeover that might result in a premium over the market price for our common stock. These provisions include:

        Cumulative voting.    Our stockholders are entitled to cumulate their votes for directors. This may limit the ability of the stockholders to remove a director other than for cause.

        Stockholder proposals and nominations.    Our stockholders must give advance notice, generally 120 days prior to the relevant meeting, to nominate a candidate for director or present a proposal to our stockholders at a meeting. These notice requirements could inhibit a takeover by delaying stockholder action.

        Stockholder rights plan.    We may trigger our stockholder rights plan in the event our board of directors does not agree to an acquisition proposal. The rights plan may make it more difficult and costly to acquire our company.

        Preferred stock.    Our certificate of incorporation authorizes our board of directors to issue up to five million shares of preferred stock and to determine what rights, preferences and privileges such shares have. No action by our stockholders is necessary before our board of directors can issue the preferred stock. Our board of directors could use the preferred stock to make it more difficult and costly to acquire our company.

        Delaware anti-takeover statute.    The Delaware anti-takeover law restricts business combinations with some stockholders once the stockholder acquires 15% or more of our common stock. The Delaware statute makes it harder for our company to be acquired without the consent of our board of directors and management.

ITEM 3: QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET AND INTEREST RATE RISK

Cash Equivalents, Short-term and Long-term Investments

        Our investments in cash equivalents, short-term investments and long-term investments, both restricted and unrestricted, are classified as available-for-sale securities and are comprised of highly rated, short and medium-term investments, such as U. S. government agencies, corporate debt securities and other such low risk investments, in accordance with an investment policy approved by our Board of Directors. Classified as available-for-sale, all of these investments are held at fair value. Although we manage investments under an investment policy, economic, market and other events may occur, which we cannot control. Although the risks are minimal, fixed rate securities may have their fair value adversely impacted because of changes in interest rates and credit ratings. Due in part to these factors, our future investment income may fall short of expectations because of changes in interest rates or we may suffer principal losses if we were to sell securities that have declined in value because of changes in interest rates or issuer credit ratings. We do not hold or issue derivatives, derivative commodity instruments or other financial instruments for trading speculative purposes. We do not believe that our results operations would be materially impacted by an immediate 10% change in interest rates.

Debt

        Our convertible subordinated notes due 2007 have a fixed interest rate of 4%. Consequently, we do not have significant interest rate cash flow exposure on our long-term debt. However, the fair value of the convertible subordinated notes is subject to significant fluctuations due to their convertibility into

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shares of our stock and other market conditions. The fair value of these convertible subordinated notes is also sensitive to fluctuations in the general level of the U.S. interest rates. We would be exposed to interest rate risk, if we used additional financing to fund capital expenditures. The interest rate that we may be able to obtain on financings will depend on market conditions at that time and may differ from the rates we have secured in the past.

        The following table shows the fair values of our investments and convertible subordinated notes as of March 31, 2003 (in thousands):

Foreign Currency Risk

        We are exposed to currency exchange fluctuations, as we sell our products internationally and have operations in Costa Rica, Germany and Mexico. We have also recently completed the establishment of an operation in China. We manage the sensitivity of our international sales, purchases of raw materials and equipment and our Costa Rican operations by denominating most transactions in U.S. dollars. We do engage in limited foreign currency hedging transactions, principally to lock in the cost of purchase commitments that are not denominated in U.S. dollars. At March 31, 2003, we had no open commitments to purchase foreign currency.

ITEM 4: CONTROLS AND PROCEDURES

(a)

Evaluation of disclosure controls and procedures. Our chief executive officer and chief financial officer performed an evaluation of our disclosure controls and procedures as of a date within 90 days prior to the filing of this Quarterly Report on Form 10-Q. Based on this evaluation, we believe that such controls and procedures effectively insure that information required to be disclosed in this Quarterly Report on Form 10-Q is appropriately recorded, processed and reported.

(b)

Changes in internal controls. There have been no significant changes in our disclosure controls and procedures or in other factors that could significantly affect these controls subsequent to the date of their evaluation. There were no significant deficiencies or material weaknesses, and therefore there were no corrective actions taken.

PART II—OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

        In February 2003, several nearly identical civil class action lawsuits were filed in the United States District Court for the Middle District of Florida against Sawtek, Inc., our wholly owned subsidiary since July 2001. The lawsuits also name as defendants current and former officers of Sawtek and our company. The class action complaints purportedly are filed on behalf of purchasers of Sawtek's stock between January 2000 and May 23 or May 24, 2001. All of the complaints allege that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act, as well as Securities and Exchange Commission Rule 10b-5, by making false and misleading statements and/or omissions to inflate Sawtek's stock price and conceal the downward trend in revenues disclosed in Sawtek's May 23, 2001 press release. At least one complaint alleges a third cause of action for breach of fiduciary duty to the shareholders. The complaints do not specify the amount of monetary damages sought. We deny the allegations contained in these complaints and intend to defend against these claims vigorously.

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        In December 2002, we filed a lawsuit against Finisar Corporation in Multnomah County Circuit Court of Oregon. The lawsuit alleges that Finisar failed to pay us for semiconductor wafers delivered between September 2000 and December 2001. Our complaint seeks payment in the amount of $2.8 million, plus prejudgment and post-judgment interest. In response to the complaint, Finisar Corporation filed an answer, affirmative defenses and counterclaims alleging that our wafers were defective. Finisar alleges claims for breach of contract, breach of warranty, negligence, and restitution, seeking damages in the amount of $13.0 million, plus interest. We have filed a reply denying the counterclaim allegations and intend to vigorously defend against them. The parties are currently engaging in discovery and no trial date has been set.

        In addition, from time to time we are involved in judicial and administrative proceedings incidental to our business. Although occasional adverse decisions (or settlements) may occur, we believe that the final disposition of such matters will not have a material adverse effect on our financial position or results of operations.

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

(a)

Exhibits

99.1

Certification Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b)

Reports on Form 8-K

We filed a Report on Form 8-K/A (File No. 000-22660) with the Securities and Exchange Commission on March 17, 2003 to amend the Report on Form 8-K filed on January 17, 2003. The amendment was filed to disclose the audited financial statements of Agere's optoelectronics business which we purchased.

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SIGNATURES

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

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CERTIFICATIONS

        I, Ralph Quinsey, certify that:

1.

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

2.

Based on my knowledge, this quarterly 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 quarterly report;

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report;

4.

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)

designed such disclosure controls and procedures 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 quarterly report is being prepared;

b)

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c)

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, 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 in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.

The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 13, 2003

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        I, Raymond A. Link, certify that:

1.

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

2.

Based on my knowledge, this quarterly 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 quarterly report;

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report;

4.

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)

designed such disclosure controls and procedures 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 quarterly report is being prepared;

b)

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c)

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, 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 in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.

The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 13, 2003

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QuickLinks

ITEM 1: FINANCIAL STATEMENTS

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

ITEM 3: QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET AND INTEREST RATE RISK
ITEM 4: CONTROLS AND PROCEDURES

ITEM 1: LEGAL PROCEEDINGS
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K