XNAS:ANAD Anadigics, Inc. Annual Report 10-K Filing - 3/15/2012

Effective Date 3/15/2012

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K
 
/x/ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2011.
   
Or
   
/ /TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
   
Commission File No. 0-25662
   
ANADIGICS, Inc.
(Exact name of registrant as specified in its charter)
   
Delaware
22-2582106
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
   
141 Mt. Bethel Road, Warren, New Jersey
07059
(Address of principal executive offices)
(Zip Code)
   
(908) 668-5000
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.01 par value

The above securities are registered on the NASDAQ Global Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes / / No /X/

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes / / No /X/

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / /

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes /X / No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated in Part III of this Form 10-K or any amendment to this Form 10-K. /X /

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one): Large accelerated filer / / Accelerated filer / X / Non-accelerated filer (Do not check if a smaller reporting company) / /  Smaller reporting company / /

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

The aggregate market value of the voting common equity held by non-affiliates of the registrant as of July 2, 2011 was approximately $215 million, based upon the closing sales price of the registrant’s common equity as quoted on the NASDAQ Global Market on such date.

The number of shares outstanding of the registrant's common stock as of March 2, 2012 was 69,877,065 (excluding 114,574 shares held in treasury).

Documents incorporated by reference: Definitive proxy statement for the registrant’s 2012 annual meeting of shareholders (Part III).

 
 

 



TABLE OF CONTENTS

   
PART I
 
Item 1:
Business
Item 1A:
Risk Factors
Item 1B:
Unresolved Staff Comments
Item 2:
Properties
Item 3: 
Legal Proceedings
Item 4: 
Removed and Reserved
   
PART II
 
Item 5: 
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6:
Selected Financial Data
Item 7:
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A:
Quantitative and Qualitative Disclosures About Market Risk
Item 8:
Financial Statements and Supplementary Data
Item 9:
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A:
Controls and Procedures
Item 9B:
Other Information
   
PART III
 
Item 10:
Directors, Executive Officers and Corporate Governance
Item 11:
Executive Compensation
Item 12:
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13:
Certain Relationships and Related Transactions and Director Independence
Item 14:
Principal Accounting Fees and Services
   
PART IV
 
Item 15:
Exhibits, Financial Statement Schedules


 
 

 

FORWARD-LOOKING INFORMATION

CERTAIN STATEMENTS IN THIS REPORT OR DOCUMENTS INCORPORATED HEREIN BY REFERENCE ARE FORWARD-LOOKING STATEMENTS (AS THAT TERM IS DEFINED IN THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED) THAT INVOLVE RISKS AND UNCERTAINTIES. THESE FORWARD-LOOKING STATEMENTS CAN GENERALLY BE IDENTIFIED AS SUCH BECAUSE THE CONTEXT OF THE STATEMENT WILL INCLUDE WORDS SUCH AS WE "BELIEVE", "ANTICIPATE", "EXPECT" OR WORDS OF SIMILAR IMPORT. SIMILARLY, STATEMENTS THAT DESCRIBE OUR FUTURE PLANS, OBJECTIVES, ESTIMATES OR GOALS ARE FORWARD-LOOKING STATEMENTS. THE CAUTIONARY STATEMENTS MADE IN THIS REPORT SHOULD BE READ AS BEING APPLICABLE TO ALL RELATED FORWARD-LOOKING STATEMENTS WHEREVER THEY APPEAR IN THIS REPORT. YOU ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISK AND UNCERTAINTIES, AS WELL AS ASSUMPTIONS THAT IF THEY MATERIALIZE OR PROVE INCORRECT, COULD CAUSE RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. FURTHER, ALL STATEMENTS, OTHER THAN STATEMENTS OF HISTORICAL FACT, ARE STATEMENTS THAT COULD BE DEEMED FORWARD-LOOKING STATEMENTS.  WE ASSUME NO OBLIGATION AND DO NOT INTEND TO UPDATE THESE FORWARD-LOOKING STATEMENTS, EXCEPT AS MAY BE REQUIRED BY LAW. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS AND DEVELOPMENTS TO BE MATERIALLY DIFFERENT FROM THOSE EXPRESSED OR IMPLIED BY THE FORWARD-LOOKING STATEMENTS PRESENTED HEREIN INCLUDE THE RISK FACTORS DISCUSSED IN THIS ANNUAL REPORT ON FORM 10-K, AS WELL AS THOSE DISCUSSED ELSEWHERE HEREIN.

PART I

ITEM 1. BUSINESS.

Overview
 
    ANADIGICS, Inc. (“we” or the “Company”) is a leading provider of semiconductor solutions in the growing broadband wireless and wireline communications markets.  Our products include radio frequency (RF) power amplifiers (PAs), tuner integrated circuits, active splitters, line amplifiers and other components, which can be sold individually or packaged as integrated front end modules (FEMs).  We believe that we are well-positioned to capitalize on the high growth and convergence occurring in the voice, data and video segments of the broadband wireless and wireline communications markets.  Our RF power amplifier products enable mobile handsets, datacards and other devices to access third and fourth generation (3G and 4G) wireless networks utilizing international standards including LTE (Long Term Evolution), WCDMA (Wideband Code Division Multiple Access), HSPA (High Speed Packet Access), CDMA (Code Division Multiple Access), EVDO (Evolution Data Optimized) and WiMAX (Worldwide Interoperability for Microwave Access).  Our WiFi products enable connectivity for wireless mobile devices and other computing devices.  Our CATV (Cable Television) products enable fixed-point, wireline broadband communications over CATV infrastructure as well as cable modem and set-top box products.  Our Wireless infrastructure products support operator commitments worldwide to optimize the increasing demands for subscriber data through deployment of new small-cell base stations as part of a heterogeneous network.
 
    Our business strategy focuses on enabling anytime, anywhere connectivity which enhances the consumer’s broadband and wireless experience. We develop RF front end solutions for communications equipment manufacturers and we partner with industry-leading wireless and wireline chipset providers who incorporate our solutions into their reference designs.  Our solutions cost-effectively enhance communications devices by improving RF performance, efficiency, reliability, time-to-market and integration while reducing the size, weight and cost of these products.
 
    We were incorporated in Delaware in 1984. Our corporate headquarters are located at 141 Mt. Bethel Road, Warren, New Jersey 07059, and our telephone number at that address is 908-668-5000.
 
   We expect our business will benefit in the long-term from three key factors: (1) accelerated use and growth in the established markets for 3G, 4G and CATV and Wireless infrastructure products, (2) increasing penetration of newer-generation wireless and wireline broadband communications technology into developing markets worldwide, and (3) an increased demand for our solutions within the latest-generation products in these end markets. We believe that in the long run the combination of these factors will enable us to outpace the overall end product unit growth in these broadband wireless and wireline communications markets.  For example, multiple higher-performance PAs are required in new 3G and 4G wireless handsets and smartphones in order to access higher-speed wireless broadband data services being deployed in markets around the world.  In addition, changes in network architectures necessary to accommodate a more data-centric usage model demand new types of small-cell wireless base station products that require RF amplifiers better optimized for power efficiency. The greater complexity and more demanding performance required of the infrastructure and subscriber equipment needed for evolving networks, coupled with our product compatibility on several leading reference designs allows us to capitalize on the growth in the 3G and 4G markets.  We believe our new MMIC and hybrid line amplifier products will expand our addressable share of the CATV infrastructure market and we further believe that our infrastructure business will continue to benefit from the adoption of 1 GHz CATV systems worldwide as well as green initiatives focused on reducing power consumption.
 
    We leverage our technological knowledge and advantages to be a leading technology-enabler via innovative semiconductor solutions for broadband wireless and wireline communications.  We believe our patented InGaP-plus technology, which combines bipolar amplifying structures and pHEMT RF switches on the same die, coupled with our three level metal interconnect process provides us with a competitive advantage in the marketplace.  Additionally, we believe proprietary designs of our HELP™ (High Efficiency at Low Power) power amplifiers when combined with higher efficiency at high output power provide our customers a competitive advantage by delivering performance required for 3G and 4G devices with lower battery power consumption and longer use time than comparable products in these markets.

Industry Background

Wireless 3G and 4G Market
 
    The number of wireless handsets designed for 3G and 4G standards like CDMA/EVDO, WCDMA/HSPA and LTE is expected to grow significantly faster than the overall market as these standards become dominant over the next several years.  According to the February 2012 report from Strategy Analytics, annual shipments of all types of 3G and 4G cellular terminals are forecast to grow from 1,057 million units in 2011 to 2,137 million units by 2016, a compound annual growth rate of 15.1%.  As a qualified PA supplier to top-tier handset manufacturers such as Samsung Electronics Co. Ltd (Samsung), Huawei, ZTE Corporation, Research in Motion (RIM), and LG Electronics, we believe we are well positioned to benefit from the continuing transition to 3G and 4G wireless technologies.
 
    Traditionally, the chipset in a wireless handset required one or two power amplifiers.  As wireless operators acquire additional frequency licenses to deploy 3G and 4G networks, requirements for mobile devices that can operate in multiple bands has increased demand for power amplifiers in handsets, datacards and wireless modems.  These wireless devices also require PAs with higher power and better linearity to meet more demanding performance specifications.

The key drivers of growth in the wireless handset market are:
·  
Deployment of 4G networks and services.
·  
Expansion of 3G footprint and subscriber base in emerging markets.
·  
New features and applications to drive replacements in established markets.
·  
Increased demand for smartphones and converged wireless devices such as tablet computers.
·  
Convergence of voice, data and video services.
 
    Wireless handsets and mobile data devices utilize a semiconductor chipset to enable communication with the network.  Key components of a wireless semiconductor chipset include a baseband, transceiver and one or more power amplifiers.  Each PA boosts the transmitter RF output to deliver enough signal power to enable connection with the radio access network for voice and data throughput.  As additional features and functionality are incorporated into wireless handsets to leverage the higher network data rates that enable applications such as high speed data and streaming video services, increasing demands are placed on the handset battery, thereby reducing battery life.  The high-performance PA is a critical component in the handset because it directly affects battery life in both talk and data modes.  We believe our manufacturing processes and design technologies such as HELP™ combined with high efficiency at high output power provide a competitive advantage by enabling us to provide PAs that consume less battery power and extend use time.
 
    In addition to wireless handsets and datacards, 3G and 4G capabilities are increasingly being embedded in tablets and in equipment designed for machine-to-machine (M2M) communication including automotive applications.  We are a leading enabler in this market through the use of our power amplifiers in industry standard reference designs and in embedded wireless modules manufactured by leading original equipment manufacturers (OEM) providers to this growing market.
 
    The 4G LTE wireless standard continues to gain momentum worldwide, as commercial mobile broadband wireless networks that use OFDM modulation technology continue deployment.  We supply LTE PAs to many equipment makers, and believe that our relationships with leading LTE equipment and chipset vendors, in conjunction with our strong product portfolio position us to enable high-speed data and internet connectivity in these 4G networks.
 
    LTE is the 4G standard most widely adopted by the GSM (Global System for Mobile Communications) operators’ community.  A survey by the GSA (GSM Suppliers Association) in January 2012 identified 285 operators in 93 countries who are investing in the technology, with 49 LTE networks already launched and another 59 operators engaged in test, study or trial. According to the GSA, LTE has become the fastest developing mobile system technology ever.  The rapid increase in wireless broadband data traffic is driving the interest in deploying LTE as quickly as possible.   ANADIGICS long-standing business relationships with key players in the LTE ecosystem position us well to benefit from the developing demand for LTE-capable power amplifiers as more networks are deployed.
 
    A defining benefit of 3G and 4G networks is their ability to provide higher data rate connectivity, in support of data-intensive applications such as large file transfer, streaming video, and other multimedia services.  It is anticipated that with today's network architectures, a growing consumer demand for these types of applications will quickly limit user capacity.  More prolific use of small-cell base stations in wireless networks will increase coverage and user capacity, and maintain a satisfying user experience.  Our manufacturing processes and design technologies enable us to provide PAs optimized for new small-cell wireless infrastructure equipment that will support this transition in wireless networks. Further, WiFi data and video access is taken for granted in today’s wireless world and we offer products that enable connectivity to a great range of wireless mobile devices. The desire for increased functionality and use of multi-band applications continues and our products meet these more sophisticated demands. Our expertise and relationships with key industry participants position us to provide enabling WiFi PAs addressing these advanced demands including the emerging 802.11ac standard.

Cable Set-Top Box and Cable Modem Markets
 
    The markets for CATV set-top boxes and cable modems are being shaped by several key trends.  Set-top boxes are incorporating advanced functionality, to leverage the convergence of voice, data and video services over the broadband network, such as DVR, HDTV, wireless internet access, interactive services, home networking and gaming.  These new features are driving demand for both new and replacement set-top boxes, including a transition to home gateways with support of Internet Protocol Television (IPTV).  Unlike a traditional set-top box, IPTV does not require a tuner in order to access video content.  Cisco Systems Inc. (Cisco) and Motorola, Inc., both long-time customers of ANADIGICS for set-top box components, are prominent suppliers of home gateway products that will eliminate the need over time for our tuner and splitter products.
 
    As the cable modem market transitions to the DOCSIS 3.0 standard, we believe it will provide additional opportunity for our upstream amplifier products.  The DOCSIS 3.0 standard uses multiple channels simultaneously and higher RF power levels to provide wider bandwidth and higher data throughput than previous technologies, and we believe that we are well positioned to support this market opportunity.

CATV Infrastructure
 
    We are a leading supplier of 12V and 24V line amplifier radio frequency integrated circuit (RFIC) amplifiers to the CATV infrastructure market.  This market shows continuing demand for equipment upgrades as a result of increasing CATV infrastructure bandwidth requirements, the need of cable service providers to offer converged voice, data and video services over their broadband networks, and the continued deployment of CATV fiber nodes.  We are participating in these upgrades in established markets and benefitting from the rollout of digital cable in China and parts of Europe.  We anticipate that new line amplifier products in industry-standard packages will expand our addressable market for CATV infrastructure. These include our traditional GaAs-based and new GaN (Gallium Nitride)-based products.  Historically, we have enjoyed long product life cycles in these markets.

Our Strategy

Our objective is creating value through innovative RF solutions that enable instantaneous connectivity anytime, anywhere.  The key elements of our strategy include:

·  
Expand our serviceable available market (SAM) by developing new product families within both the wireless user equipment and wireless infrastructure market segments. These products include multi-mode multi-band power amplifiers (MMPA), dual band power amplifier duplexers (PAD) and small-cell wireless infrastructure power amplifiers.  The MMPA also integrates a quad-band power amplifier for GSM/EDGE (2/2.5G), adding additional content to our SAM.
 
·  
Expand share in the highest-growth end markets of broadband wireless communications and the CATV Infrastructure market. We target the fastest-growing segments of the wireless communications markets that demand the highest performance. These segments are wireless handsets and small-cell infrastructure.  In addition, we expect to increase share in the CATV Infrastructure market by expanding the line amplifier product offering in RFIC and industry standard packages.  We believe these markets offer the largest growth opportunity to create and extract value.
 
·  
Bring patented innovative RF technology to industry-leading products. Our longstanding commitment to innovation in process technology and design has resulted in best-in-class RF products. ANADIGICS new PA architecture creates a competitive advantage by combining the lowest average talk-time current in the industry with high efficiency in high power mode for data only applications in 4G LTE.  Power amplifier products leveraging this new architecture provide a performance advantage that helps our customers deliver differentiated products to market at a competitive price.
 
·  
Work closely with industry-leading customers and partners. We endeavor to develop close relationships with industry leaders in the wireless and broadband markets to create value. These relationships support our technology road-maps and give insight into the most important specifications for next-generation products.
 
·  
Build upon our operational excellence and further realize economies of scale. Delivering leading technology products in volume requires expert execution and results in long-term value add for our entire value chain, most importantly our customers. We will focus on reducing our product cost structure by leveraging our three level metal inter layer dielectric process, conversion to lower cost metallization and implementation of flip-chip technology.  Business growth, driven by increased unit volume with high quality is critical to semiconductor companies and consistent with our long-term business strategy.
 
·  
Incorporate additional and flexible capacity through co-operation and partnerships. Leveraging third-party capabilities to supplement our existing manufacturing capabilities supports our ability to grow scale while limiting costly further capital investment in manufacturing. These capabilities encompass GaAs, GaN and CMOS wafer fabrication, assembly, packaging and test technologies.
 
·
Improvements to our financial model via increased growth.  Over the long term, we seek to increase our gross margins and profitability by focusing on products for markets in which we can achieve a strong competitive position.  This is achieved by demonstrating technological innovation and leadership, by growing share and volumes and by controlling the growth in our expenses.  Consequently, we intend to focus on supplying products in the following markets:  (1) user equipment for networks based on 3G and 4G standards including LTE, CDMA/EVDO, WCDMA/HSPA, UMTS and WiMAX and (2) CATV and Wireless infrastructure amplifiers.  Additionally, over the long term, we expect to grow research, development and sales expenses at rates slower than our revenue and gross margins growth rates to enable a leveraged increase in profitability dollars and return on revenue percentage.
 
Products
 
    We classify our revenues based upon the end application of the product in which our integrated circuits are used.  For the years ended December 31, 2011, 2010 and 2009, wireless accounted for approximately 78%, 74% and 66%,  respectively, of our total net sales, while broadband accounted for approximately 22%, 26% and 34%, respectively, of our total net sales.
 
Wireless
 
    Our Wireless product line includes power amplifier modules for CDMA/EVDO, GSM/EDGE, WCDMA/HSPA, LTE and other wireless technologies for mobile handsets and data devices. The following table describes our principal products for these applications:

Product
Application
Power Amplifier (PA)
Used in RF transmit chain of wireless handset, smartphone, datacard, or embedded module to amplify uplink signal to base station.
HELP™ PA Module   (multiple versions)
ANADIGICS proprietary High Efficiency at Low Power PA design reduces PA average power consumption in LTE, WCDMA/HSPA and CDMA/EVDO devices.
Dual-band PA Modules
Two HELP™ PAs in a single package that enables operation in two different frequency bands at lower cost and with less board area versus single-band PAs.
Dual-band PA Duplexer Modules
Two HELP™ PAs and two duplexer filters in a single package that requires significantly less board area versus discrete PA and filter implementations.
Penta-band PA Modules
Five HELP™ PAs in a single package that enables operation in five different frequency bands at lower cost and significantly less board area versus discrete PA implementations.
Quad-band PA Modules
GSM-EDGE PAs that enable operation in GSM frequencies worldwide.
MMPA Modules
GSM-EDGE and CDMA/WCDMA/LTE PAs in a single package that enables operation in different frequency bands at lower cost and with less board area versus single-band PAs.

Broadband
 
    Our Broadband product line encompasses video, voice and data telecommunications systems, consisting of CATV, Wireless Infrastructure and WiMAX/WiFi applications.

The following table outlines our principal Broadband products and their applications:

Product
Application
 
CATV Infrastructure Products
GaAs and GaN Line Amplifiers
Used to distribute RF signals from headends to subscribers.
75 Ohm Gain Block Amplifiers
Used to amplify RF signals at intermediate points in the CATV network and at individual subscriber locations.
Optical Network RF Amplifiers
Used to amplify RF signals for Fiber-To-The-Premises and FiOS.
 
Wireless Infrastructure Products
Power Amplifiers
Used in RF transmit chain of small-cell base stations to amplify the downlink signal to the user equipment (i.e. picocells, femtocells).
 
CATV Set-Top Box and Cable Modem Products
Tuner Upconverters and
Downconverters
Used to perform signal amplification and frequency conversion in double-conversion video and data tuners.
Active Splitters
Used to split an incoming signal to feed multiple tuners.
Integrated Tuners
Used to integrate tuner upconverters, downconverters and synthesizers in a single package.
Upstream Amplifiers
Used to amplify and control the level of signals in the return path.

WiMAX, LTE and WiFi Products
 
Mobile WiMAX and LTE PAs
Used in RF transmit chain of handsets, smartphones, datacards, or embedded modules to amplify uplink signal to base station.
Fixed Point WiMAX PAs
Used in RF transmit chain of Consumer Premises Equipment (CPEs) and femtocells.
Wi-Fi PAs and Front End ICs (FEIC)
Used in RF transmit and receive chains in embedded notebooks, access points and wireless mobile devices.
 
Marketing, Sales, Distribution and Customer Support
 
    We sell our products primarily to our direct customers worldwide and have developed close working relationships with leading companies in the broadband wireless and wireline communications markets.  Additionally, we selectively use independent manufacturers’ representatives and distributors to complement our direct sales and customer support efforts.  Our relationships with our distributors enable them to maintain local practices regarding inventories and payment terms while supporting our growth in Asian wireless and global broadband markets.  Working with distributors like World Peace Group and Richardson Electronics, who have extensive sales networks, provides us access to tier-one customers in these markets.  We believe this is critical to our objective of expanding our customer base, especially as we expand our product portfolio.
 
    We believe that the technical nature of our products and markets demands an unwavering commitment to building and maintaining close relationships with our customers.  Our sales and marketing staff, which are assisted by our technical staff and senior management, visit prospective and existing customers worldwide on a regular basis.  Our design and applications engineering staff actively communicate with customers during all phases of design and production.  We have highly specialized field application engineering teams in North America, Korea, Taiwan and China, located near key handset OEM’s and chipset providers.  We believe that these contacts are vital to the development of close, long-term working relationships with our customers, and in obtaining regular forecasts, market updates and information regarding technical and market trends.
 
    We believe that reference-design manufacturers in the broadband wireless and wireline communications markets will continue to play an important role in the future of these markets.  Therefore, we believe it is essential that we maintain strong relationships in partnering with these companies to define products that are compatible with and provide value to their OEM manufacturers.

Process Technology, Manufacturing, Assembly and Testing
 
    We design, develop and manufacture RFICs primarily using GaAs compound semiconductor substrates with various process technologies, Metal Semiconductor Field Effect Transistors (MESFET), Pseudomorphic High Electron Mobility Transistors (pHEMT), and Heterojunction Bipolar Transistors (HBT).  Our patented technology, which utilizes InGaP-plus, combines InGaP HBT and pHEMT processes on a single substrate, enabling us to integrate the PA function and the RF active switch function on the same die.

Manufacturing
 
    We fabricate substantially all of our ICs in our six-inch diameter GaAs wafer fab in Warren, New Jersey. Our 150mm (six-inch diameter) GaAs (Gallium Arsenide) wafer fabrication facility (fab) has been operational since 1999. Our Warren fab was first certified as ISO 9001 compliant in December 1993.  Since that time, we have updated our compliance to the ISO 9001:2000 upgrade of this standard.  In 2004, we also received ISO 14001 certification and remain certified.
 
    We have a strategic foundry agreement with WIN Semiconductors (Taiwan) to supplement our existing wafer fabrication capability and allow for additional and flexible capacity without the requisite capital investment. We have begun shipping certain new products that use this additional production and process capability.

Assembly
 
    Fabricated GaAs wafers are shipped to contractors in Asia for packaging. Certain processes cannot be easily or economically integrated onto a single die, and consequently multi-chip modules that combine multiple die within a single package are now required, enabling the selection of the optimal process technology for each IC within the package.  This provides enhanced integration at the sub-system level and these solutions generate significant size reductions in wireless handset component circuitry.
 
    Modules allow our customers to get their product to market more rapidly at a lower overall end product cost due largely to reductions in parts count and required engineering effort.  We believe we are well positioned to address the shift toward more complex multi-chip modules because we possess both extensive process breadth (a key advantage, as modules typically incorporate numerous process technologies) and a large portfolio of RF expertise (e.g., PAs, switches, transceivers, and discretes).

Final Test
 
    After assembly, packaged ICs are tested prior to shipment to our customers.  We outsource the majority of our production RF testing operations, which are performed near our module assembly contractors in Asia.  This adds considerable efficiencies to the device manufacturing process in reducing product cycle times and supports our initiative to reduce manufacturing costs.

Raw Materials
 
    GaAs wafers, HBT/pHEMT epitaxial wafers, passive components, other raw materials, and equipment used in the production of our ICs are available from a limited number of sources.  See “Risk Factors—Sources for certain components, materials and equipment are limited, which could result in delays or reductions in product shipments.”

Research and Development
 
    We have made significant investments in our proprietary processes, including product design, packaging and wafer fabrication, which we believe gives us a competitive advantage.  Research and development expenses were $45.0 million, $50.1 million and $46.0 million in 2011, 2010 and 2009, respectively. We continue to focus our research and development primarily on advanced PAs and front end modules for 3G and 4G wireless markets, Wireless infrastructure PAs, and CATV infrastructure line amplifiers in the broadband market.
 
    Further, we develop other components, for example silicon CMOS and GaN (Gallium Nitride) components, to support our PA module and other products.  We do not intend to manufacture this technology in-house, as we believe there will be adequate external foundry capacity available.  See “Risk Factors—Sources for certain components, materials and equipment are limited, which could result in delays or reductions in product shipments.”

Customers
 
    Sales to RIM, Samsung and ZTE Corporation accounted for 22%, 19% and 13%, respectively, of total net sales during 2011. No other customer accounted for 10% or more of total net sales during 2011.  See “Risk Factors—We depend on a small number of customers; a loss of a customer or a decrease in purchases and/or changes in purchasing or payment patterns by one of these customers could materially and adversely affect our revenues and our ability to forecast revenues.”

Employees
 
    As of December 31, 2011, we had 540 employees.

Competition
 
    We compete with U.S. and international semiconductor and integrated circuit manufacturers of all sizes.  Our key competitors are Avago Technologies Limited, RF Micro Devices, Inc., Skyworks Solutions, Inc. and TriQuint Semiconductor, Inc.
 
    Our competitors have significantly greater financial, technical, manufacturing and marketing resources than we do.  Increased competition could adversely affect our revenue and profitability through price reductions or reduced demand for our products.  See “Risk Factors—We face intense competition, which could result in a decrease in our products’ prices and sales.”

 
Patents, Licenses and Proprietary Rights
 
    It is our practice to seek U.S. patent and copyright protection on our products and developments where appropriate and to protect our valuable technology under U.S. laws affording protection for trade secrets and for semiconductor chip designs.  We own 74 U.S. patents and have 8 pending U.S. patent applications.  The U.S. patents were issued between 1995 and 2011 and will expire between 2013 and 2029.
 
    We rely primarily upon trade secrets, technical know-how and other unpatented proprietary information relating to our product development and manufacturing activities. To protect our trade secrets, technical know-how and other proprietary information, our employees are required to enter into agreements providing for maintenance of confidentiality and the assignment of rights to inventions made by them while in our employ.  We have also entered into non-disclosure agreements to protect our confidential information delivered to third parties in conjunction with possible corporate collaborations and for other purposes.  See “Risk Factors—We may not be successful in protecting our intellectual property rights or in avoiding claims that we infringe on the intellectual property rights of others.”

Environmental Matters
 
    Our operations are subject to federal, state and local environmental laws, regulations and ordinances that govern activities or operations that may have adverse effects on human health or the environment.  These laws, regulations or ordinances may impose liability for the cost of remediating, and for certain damages resulting from, sites of past releases of hazardous materials.  We believe that we currently conduct, and have conducted, our activities and operations in substantial compliance with applicable environmental laws and regulations, and that costs arising from existing environmental laws and regulations will not have a material adverse effect on our results of operations.  We cannot assure you, however, that such environmental laws and regulations will not become more stringent in the future or that we will not incur significant costs in the future in order to comply with these laws and regulations.  See “Risk Factors—We are subject to stringent environmental laws and regulations both domestically and abroad.”
 
Available Information
 
    Copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge through our website (www.anadigics.com) as soon as reasonably practicable after we electronically file the material with, or furnish it to, the Securities and Exchange Commission.  All SEC filings are also available at the SEC’s Web site at www.sec.gov

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ITEM 1A. RISK FACTORS

Risks Related to ANADIGICS

We have experienced losses in the past, and may experience losses in the future.
 
    We have incurred substantial operating and net losses in the past, including 2011, and we expect to continue to incur losses in 2012. If economic conditions worsen or there is an abrupt change in our customers’ businesses or markets, our business, financial condition and results of operations will likely be materially and adversely affected.

Our results of operations can vary significantly due to the cyclical nature of the semiconductor industry and our end markets.
 
    The semiconductor industry and our end markets have been cyclical, seasonal and subject to significant downturns.  Further, the industry can have limited visibility into customers’ forecasts and inventory levels. In past years, the industry has experienced periods marked by market weaknesses that created lower order demand, production overcapacity, high inventory levels, and accelerated declines in average selling prices for our products.  These factors negatively affected our financial condition and results of operations during these periods and may negatively affect our financial condition and results of operations in the future.
 
    Our results of operations also may be subject to significant quarterly and annual fluctuations.  These fluctuations are due to a number of factors, many of which are beyond our control, including, among others: (i) changes in end-user demand for the products manufactured with our products and sold by our customers; (ii) the effects of competitive pricing pressures, including decreases in average selling prices of our products; (iii) industry production capacity levels and fluctuations in industry manufacturing yields; (iv) levels of inventory in our end markets; (v) availability and cost of products from our suppliers; (vi) the gain or loss of significant customers; (vii) our ability to develop, introduce and market new products and technologies on a timely basis; (viii) new product and technology introductions by competitors; (ix) changes in the mix of products produced and sold; (x) market acceptance of our products and our customers; and (xi) intellectual property disputes.
 
    As a result, we may experience substantial period-to-period fluctuations in future operating results.  Investors should not rely on our results of operations for any previous period as an indicator of what results may be for any future period.  Failure of our operating results to meet the expectations of analysts or investors could materially and adversely affect the price of our common stock.

We depend on a small number of customers; a loss of a customer or a decrease in purchases and/or changes in purchasing or payment patterns by one of these customers could materially and adversely affect our revenues and our ability to forecast revenues.
 
    We receive a significant portion of our revenues from a few significant customers and their subcontractors.  Our financial condition and results of operations have been materially and adversely affected in the past by the failure of anticipated orders to be realized and by deferrals or cancellations of orders as a result of changes in customer requirements.  If we were to lose any of our major customers, or if sales to these customers were to decrease materially, our financial condition and results of operations could be materially and adversely affected. Further, if a customer encounters financial difficulties of its own as a result of a change in demand or for any other reason, the customer’s ability to make timely payments to us for non-returnable products could be impaired.

If we fail to sell a high volume of products, our operating results may be harmed.
 
    We have both increased capacity in and underutilized our manufacturing facility in recent years.  In years in which we had excess capacity, this excess capacity meant we incurred higher fixed costs for our products relative to the revenues we generate.  Because large portions of our manufacturing costs are relatively fixed, our manufacturing volumes are critical to our operating results.  If we fail to achieve and maintain acceptable manufacturing volumes or experience product shipment delays, our results of operations could be harmed.  During periods of decreased demand, our high fixed manufacturing costs negatively affect our results of operations.  We base our expense levels in part on our expectations of future orders and these expense levels are predominantly fixed.  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, which would have an adverse effect on our results of operations. If we are unable to improve utilization levels and correctly manage capacity, the increased expense levels relative to revenue will have an adverse effect on our business, financial condition and results of operations.

We face intense competition, which could result in a decrease in our products’ prices and sales.
 
    The markets for our products are intensely competitive and are characterized by rapid technological change.  We compete with U.S. and international semiconductor and integrated circuit (IC) manufacturers of all sizes, some of whom have significantly greater financial, technical, manufacturing and marketing resources than we do.  We currently face significant competition in our markets and expect that intense price and product competition will continue.  This competition has resulted in, and is expected to continue to result in, declining average selling prices for our products and increased challenges in maintaining or increasing market share.  We believe that the principal competitive factors for suppliers in our markets include, among others: (i) time-to-market; (ii) timely new product innovation; (iii) product quality, reliability and performance; (iv) product price; (v) features available in products; (vi) compliance with industry standards; (vii) strategic relationships with leading reference design providers and customers; and (viii) access to and protection of intellectual property.
 
    Certain of our competitors may be able to adapt more quickly than we can to new or emerging technologies and changes in customer requirements or may be able to devote greater resources to the development, promotion and sale of their products than we can.
 
    Current and potential competitors have established, or may in the future establish, financial or strategic relationships among themselves or with customers, distributors, reference design providers or other third parties with whom we have or may in the future have relationships.  If our competitors are able to strengthen existing, or establish new, relationships with these third parties they may rapidly acquire market share at our expense, which has occurred to some extent in the past when we were unable to fully meet customer demand due to capacity constraints.  We cannot assure you that we will be able to compete successfully against current and potential competitors.  Increased competition could result in pricing pressures, decreased gross margins and loss of market share and may materially and adversely affect our financial condition and results of operations.

We need to keep pace with rapid product and process development and technological changes as well as product cost reductions to be competitive.
 
    The markets for our products are characterized by rapid changes in both product and process technologies based on the continuous demand for product enhancements, higher levels of integration, decreased size and reduced power consumption.  Because the continuous evolution of these technologies and frequent introduction of new products and enhancements have generally resulted in short product life cycles for our wireless products, we believe that our future success will depend, in part, upon our ability to continue to improve the efficiency of our products and process technologies and rapidly develop new products and process technologies.  The successful development of our products is highly complex and depends on numerous factors, including our ability to anticipate customer and market requirements and changes in technology and industry standards, our ability to differentiate our products from offerings of our competitors, and our ability to protect, develop or otherwise obtain adequate intellectual property for our new products.  If a competing technology emerges that is, or is perceived to be, superior to our existing technology and we are unable to develop and/or implement the new technology successfully or to develop and implement a competitive and economically acceptable alternative technology, our financial condition and results of operations could be materially and adversely affected.  This implementation may require us to modify the manufacturing process for our products, design new products to more stringent standards, and redesign some existing products, which may prove difficult for us and result in sub-optimal manufacturing yields, delays in product deliveries and increased expenses. We will need to make substantial investments to develop these enhancements and technologies, and we cannot assure investors that we will have funds available for these investments or that these enhancements and technologies will be successful.

If Original Equipment Manufacturers (OEMs) and Original Design Manufacturers (ODMs) of communications electronics products do not design our products into their equipment, we will have difficulty selling those products. Moreover, a “design win” from a customer does not guarantee future sales to that customer.
 
    Our products are not sold directly to the end-user, but are components or subsystems of other products. As a result, we rely on OEMs and ODMs of wireless communications electronics products to select our products from among alternative offerings to be designed into their equipment. Without these “design wins,” we would have difficulty selling our products. If a manufacturer designs another supplier’s product into one of its product platforms, it is more difficult for us to achieve future design wins with that platform because changing suppliers involves significant cost, time, effort and risk on the part of that manufacturer. Also, achieving a design win with a customer does not ensure that we will receive significant revenues from that customer. Even after a design win, the customer is not obligated to purchase our products and can choose at any time to reduce or cease use of our products, including for example, if its own products are not commercially successful. We may not continue to achieve design wins or to convert design wins into actual sales, and failure to do so could materially and adversely affect our operating results.
 
Lengthy product development and sales cycles associated with many of our products may result in significant expenditures before generating any revenues related to those products.
 
    After our product has been developed, tested and manufactured, our customers may need three to six months or longer to integrate, test and evaluate our product and an additional three to six months or more to begin volume production of equipment that incorporates the product. This lengthy cycle time increases the possibility that a customer may decide to cancel or change product plans, which could reduce or eliminate our sales to that customer. As a result of this lengthy sales cycle, we may incur significant research and development expenses, and selling and administrative expenses, before we generate the related revenues for these products. Furthermore, we may never generate the anticipated revenues from a product after incurring such expenses if our customer cancels or changes its product plans.

Uncertainties involving the ordering and shipment of our products could adversely affect our business.
 
    Our sales are typically made pursuant to individual purchase orders and not under long-term supply arrangements with our customers. Our customers may cancel orders before shipment. Additionally, we sell a portion of our products through distributors, some of whom have certain rights to return unsold products. We may purchase and manufacture inventory based on estimates of customer demand for our products, which is difficult to predict. This difficulty may be compounded when we sell to OEMs or ODMs indirectly through distributors or contract manufacturers, or both, as our forecasts of demand will then be based on estimates provided by multiple parties. In addition, our customers may change their inventory practices on short notice for any reason. The cancellation or deferral of product orders, the return of previously sold products, or overproduction due to a change in anticipated order volumes could result in us holding excess or obsolete inventory, which could result in inventory write-downs and, in turn, could have a material adverse effect on our financial condition. In addition, shortened customer order lead times and opportunistic orders may not be filled timely due to a lack of, or inadequate level of uncommitted inventory resulting in lower revenues than possible. In addition, shortened customer order lead times may make it difficult to forecast revenues.

We face risks from failures in our manufacturing processes 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 primarily manufactured on wafers made of GaAs requiring multiple process steps.  It requires production in a highly controlled, clean environment.  Minor impurities, contamination of the clean room environment, errors in any step of the fabrication process, defects in the masks used to print circuits on a wafer, defects in equipment or materials, downtime on equipment, human error, interruptions in electrical supply or a number of other factors can cause a substantial interruption in our manufacturing processes.  Moreover, our manufacturing process is subject to fluctuations in our demand and fab utilization. In an environment of increasing manufacturing output and personnel to satisfy increasing demand, we may incur manufacturing disruptions limiting supply to customers.
 
    Additionally, our operations may be affected by lengthy or recurring disruptions of operations at our production facility or those of our subcontractors.  These disruptions may include electrical power outages, fire, earthquakes, flooding, international conflicts, war, acts of terrorism, or other natural or man-made disasters.  Specifically, in the fourth quarter of 2011, one of our subcontractors was impacted by the floods in Thailand, resulting in a temporary interruption of supply.  Disruptions of our manufacturing operations could cause significant delays in our shipments unless and until we are able to shift the manufacturing of such products from an affected facility to another facility or the disruption is remedied.  Furthermore, many of our customers require that they qualify a new manufacturing source before they will accept products from such source.  This qualification process may be expensive and time consuming.  In the event of such delays, we cannot assure you that the required alternative capacity would be available on a timely basis or at all.  Even if alternative manufacturing capacity or assembly and test capacity is available, we may not be able to obtain it on favorable terms, which could result in higher costs and/or a loss of customers.  We may be unable to obtain sufficient manufacturing capacity to meet demand, either at our own facilities or through external manufacturing. In the event we are unable to supply our customers with products previously assembled by our subcontractors on a timely basis, such customers may seek alternative suppliers.
 
    Due to the highly specialized nature of the gallium arsenide integrated circuit manufacturing process, in the event of a disruption at the Warren, New Jersey semiconductor wafer fab, alternative gallium arsenide production capacity for certain processes would not be readily available from third-party sources.  Any disruptions could have a material adverse effect on our business, financial condition and results of operations.
 
    We also 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.

Our dependence on foreign semiconductor component suppliers, assembly and test operations contractors could lead to delays in or reductions of product shipments.
 
    We do not assemble or test all of our integrated circuits or multi-chip modules.  Instead, we provide the integrated circuit die and, in some cases, packaging and other components to assembly and test vendors located primarily in Asia.  Our products contain numerous component parts, substrates and silicon-based products, obtained from external suppliers. The use of external suppliers involves a number of risks, including the possibility of material disruptions in the supply of key components and the lack of control over delivery schedules, capacity constraints, manufacturing yields, quality, fabrication costs, warranty issues and protection of intellectual property. Further, we are dependent upon a few foreign semiconductor assembly and test subcontractors.  If these vendors’ processes vary in reliability or quality, they could negatively affect our products and, therefore, our results of operations. If we are unable to obtain sufficient high quality and timely component parts, assembly or test service, if we experience delays in transferring or requalifying our production between suppliers, assembly or test locations or if means of transportation to or from these locations are interrupted, we would experience increased costs, delays or reductions in product shipment, and/or reduced product yields, which could materially and adversely affect our financial condition and results of operations.

The short life cycles and nature of semiconductor production, including the potential for order cancellation and need to build product to forecast for some of our products may leave us with obsolete or excess inventories.
 
    The life cycles of some of our products depend heavily upon the life cycles of the end products into which our products are designed.  For example, we estimate that current life cycles for wireless handsets, and in turn our wireless products, are approximately 9 to 12 months.  Products with short life cycles require us to manage production and inventory levels closely.  We cannot be certain that obsolete or excess inventories, which may result from unanticipated changes in the estimated total demand for our products and/or the estimated life cycles of the end products into which our products are designed, will not result in significant charges that will negatively affect our operating profit and net income.

Our products may experience significant declines in unit prices.
 
    In each of the markets where we compete, prices of established products tend to decline significantly over time and in some cases rapidly.  Accordingly, in order to remain competitive, we believe that we must continue to develop product enhancements and new technologies that will either slow the price declines of our products or reduce the cost of producing and delivering our products.  If we fail to do so, our financial condition and results of operations could be materially and adversely affected.

Sources for certain components, materials and equipment are limited, which could result in delays or reductions in product shipments.
 
    We do not manufacture any of the starting wafers, packaging or passive components used in the production of our gallium arsenide integrated circuits. Epitaxial wafers, packaging and passive components are available from a limited number of sources. To the extent that we are unable to obtain these materials, packaging or passive components in the required quantities, as has occurred from time to time in the past, we could experience delays or reductions in product shipments, which could materially and adversely affect our financial condition and results of operations.
 
    We depend on a limited number of vendors to supply the equipment used in our manufacturing processes.  When demand for semiconductor manufacturing equipment is high, lead times for delivery of such equipment can be substantial.  We cannot assure you that we would not lose potential sales if required manufacturing equipment is unavailable and, as a result, we are unable to maintain or increase our production levels.  A delay for any reason in increasing capacity would limit our ability to increase sales volumes, which could harm our relationships with customers.

We may pursue selective investments, acquisitions and alliances; the management and integration of additional operations could be expensive and divert management time and acquisitions may dilute the ownership of our stockholders.
 
    Although we have invested in the past, and intend to continue to invest, significant resources in internal research and development activities, the complexity and rapidity of technological changes and the significant expense of internal research and development make it impractical for us to pursue development of all technological solutions on our own. On an ongoing basis, we review investment, alliance and acquisition prospects that would complement our product offerings, augment our market coverage or enhance our technological capabilities. Our ability to complete acquisitions or alliances is dependent upon, and may be limited to, the availability of suitable candidates and capital.  In addition, acquisitions and alliances involve risks that could materially adversely affect our financial condition and results of operations, including the management time that may be diverted from operations in order to pursue and complete such transactions and difficulties in integrating and managing the additional operations and personnel of acquired companies.  We cannot assure you that we will be able to obtain the capital necessary to consummate acquisitions or alliances on satisfactory terms, if at all.  Further, any businesses that we acquire will likely have their own capital needs, which may be significant, and which we could be called upon to satisfy independent of the acquisition price.  Future acquisitions or alliances could result in the incurrence of debt, costs and contingent liabilities, all of which could materially adversely affect our financial condition and results of operations.  Any debt could subject us to substantial and burdensome covenants.  The growth that may result from future acquisitions or alliances may place significant strains on our resources, systems and management.  If we are unable to effectively manage such growth by implementing systems, expanding our infrastructure and hiring, training and managing employees, our financial condition and results of operations could be materially adversely affected.  In addition, if we issue additional shares of our common stock in order to acquire another business, our stockholders’ interest in us, or the combined company, could be materially diluted. Further, in periods following an acquisition, we will be required to evaluate goodwill and acquisition-related intangible assets for impairment. When such assets are found to be impaired, they will be written down to estimated fair value, with a charge against earnings.

If our products fail to perform or meet customer requirements, we could incur significant additional costs. 
 
    The fabrication of integrated circuits from substrate materials 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, which we may experience from time to time. Other defects or failures may also occur in the future. If such failures or defects occur, we could: (i) lose revenues; (ii) incur increased costs such as warranty expense and costs associated with customer support; (iii) experience delays, cancellations or rescheduling of orders for our products; and (iv) experience increased product returns or discounts.

We have implemented restructuring programs in the past and may need to again in the future.
 
    We implemented cost restructuring programs in the past, including in 2011. Such restructuring programs are costly to implement and may inadequately address the operating environment. No assurance can be given that the implementation of cost reduction programs will generate the anticipated cost savings and other benefits or that future or additional measures may be required. We could incorrectly anticipate the extent and term of the market decline and weakness for our products and services and we may be forced to restructure further or may incur future operating charges due to poor business conditions.

The variability of our manufacturing yields may affect our gross margins.
 
    Our manufacturing yields vary significantly among products, depending on the complexity of a particular integrated circuit’s design and our experience in manufacturing that type of integrated circuit.  We have experienced difficulties in achieving planned yields in the past, particularly in pre-production and upon initial commencement of full production volumes, which have adversely affected our gross margins.
 
    Regardless of the process technology used, the fabrication of integrated circuits is a highly complex and precise process.  Problems in the fabrication process can cause a substantial percentage of wafers to be rejected or numerous integrated circuits on each wafer to be nonfunctional, thereby reducing yields.  These difficulties can include: (i) defects in masks, which are used to transfer circuit patterns onto our wafers; (ii) impurities in the materials used; (iii) operator errors; (iv) contamination of the manufacturing environment; (v) equipment failure; and (vi) interruptions in electrical supply.
 
    Many of our manufacturing costs are fixed and average selling prices for our products tend to decline over time.  Therefore, it is critical for us to increase the number of shippable integrated circuits per wafer and increase the production volume of wafers in order to maintain or improve our results of operations.  Yield decreases can result in substantially higher unit costs, which could materially and adversely affect our financial condition and results of operations and have done so in the past.  We cannot assure you that we will not suffer periodic yield problems, particularly during the early production of new products or introduction of new process technologies.  If any new yield problems were to arise or any existing yield problems were to continue, our financial condition and results of operations could be materially and adversely affected.

Unfavorable general economic conditions in individual or world markets could negatively impact our financial performance.
 
    Unfavorable general economic conditions, such as a recession or economic slowdown in the United States or in one or more of our other major markets, could negatively affect the demand for some of our products. Our customer base includes OEMs and ODMs that are reliant on consumer demand. Consumers may seek to reduce discretionary spending, which can soften demand for our customers’ products and can negatively affect our financial performance.

Our gallium arsenide semiconductors may cease to be competitive with silicon alternatives.
 
    Among our product portfolio, we manufacture and sell gallium arsenide semiconductor devices and components, principally PAs and switches, which tend to be more expensive than their silicon counterparts.  The cost differential is due to higher costs of raw materials for gallium arsenide and higher unit costs associated with smaller sized wafers and lower production volumes.  We expect the cost of producing gallium arsenide devices will continue for the foreseeable future to exceed the costs of producing their silicon counterparts.  In addition, silicon semiconductor technologies are widely-used process technologies for certain integrated circuits and these technologies continue to improve in performance.  Therefore, to remain competitive, we must offer gallium arsenide products that provide superior performance over their silicon-based counterparts.  If we do not continue to offer products that provide sufficiently superior performance to justify their higher cost, our financial condition and results of operations could be materially and adversely affected.  We cannot assure you that there will continue to be products and markets that require the performance attributes of gallium arsenide solutions.

We face a risk that capital needed for our business will not be available when we need it.
 
    In the future, we may need to access sources of financing to fund our growth.  Taking into consideration our combined cash and marketable securities balance of $93.6 million as of December 31, 2011, we believe that our existing sources of liquidity will be sufficient to fund our research and development, capital expenditures, working capital requirements, interest and other financing requirements for at least the next twelve months.
 
    However, there is no assurance that the capital required to fund these expenditures will be available in the future.  Conditions existing in the U.S. capital markets, as well as the then current condition of our company, will affect our ability to raise capital, as well as the terms of any financing.  We may not be able to raise enough capital to meet our capital needs on a timely basis or at all.  Failure to obtain capital when required could have a material adverse effect on us.
 
    In addition, any strategic investments and acquisitions that we may make to help us grow our business may require additional capital.  We cannot assure you that the capital required to fund these investments and acquisitions will be available in the future.

 The liquidity and valuation of our investments in marketable securities could be affected by disruption in financial markets.
 
    We maintain investments in financial instruments including corporate debt obligations, auction rate securities, and government-related obligations, which included $6.0 million carrying value of auction rate securities at December 31, 2011. These investments must be supported by actively trading financial markets in order to be liquid investments. Financial markets can temporarily or permanently have an imbalance of buyers and sellers that can impact valuations and liquidity. Auction rate markets have experienced imbalances since late 2007 and may continue to be imbalanced. Such imbalances could negatively impact the fair value of our investments, requiring a charge against income as has occurred in the past, our access to cash and the liquidity of our marketable securities. We cannot assure you that our marketable securities could be sold for their carrying value or in our required time frame to support our intermediate term cashflow and liquidity needs.

Our success depends on our ability to attract and retain qualified personnel.
 
    A small number of key executive officers manage our business.  Their departure could have a material adverse effect on our operations.  We believe that our future success will also depend in large part on our continued ability to attract and retain highly qualified manufacturing personnel, technical sales and marketing personnel, design and application engineers, as well as senior management.  We believe that there is, and will continue to be, intense competition for qualified personnel in the semiconductor industry as the emerging broadband wireless and wireline communications markets develop, and we cannot assure you that we will be successful in retaining our key personnel or in attracting and retaining highly qualified manufacturing personnel, technical sales and marketing personnel, design and application engineers, as well as senior management.  The loss of the services of one or more of our key employees or our inability to attract, retain and motivate qualified personnel could have a material effect on our ability to operate our business. We do not presently maintain key-man life insurance for any of our key executive officers.

We are subject to risks due to our international customer base and our subcontracting operations.
 
    Sales to customers located outside the United States (based on shipping addresses and not on the locations of ultimate end users) accounted for approximately 95% of our net sales for each of the last three years.  We expect that international sales will continue to represent a significant portion of our net sales.  In addition, independent third parties located in Asia supply a substantial portion of the package substrates and components that we use in the production of gallium arsenide integrated circuits, and assemble and test nearly all of our products.
 
    Due to our reliance on international sales and on foreign suppliers, assemblers and test houses, we are subject to risks of conducting business outside of the United States, including primarily those arising from local economic and political conditions, fluctuations in exchange rates, international health epidemics, natural disasters, restrictive governmental actions (e.g., exchange controls, duties, etc.), limitation of protecting intellectual property rights in foreign jurisdictions and potential acts of terrorism.

We are subject to stringent environmental laws and regulations both domestically and abroad.
 
    We are subject to a variety of federal, state, local and foreign laws and regulations governing the protection of the environment.  These environmental laws and regulations include those related to the use, storage, handling, discharge and disposal of toxic or otherwise hazardous materials used in or resulting from our manufacturing processes.  Failure to comply with environmental laws and regulations could subject us to substantial liability or force us to significantly change our manufacturing operations.  In addition, under some of these laws and regulations, we could be held financially responsible for remedial measures if our properties are contaminated, even if we did not cause the contamination.  Although we are aware of contamination resulting from historical third-party operations at one of our facilities, a prior owner of such facility has been performing, and paying for the costs associated with, remediation of this property pursuant to an agreement with the state environmental regulatory authority.  However, we cannot assure you that such prior owner will continue to do so or that we will not incur any material costs or liabilities associated with compliance with environmental laws in the future.

We may not be successful in protecting our intellectual property rights or in avoiding claims that we infringe on the intellectual property rights of others.
 
    Our success depends in part on our ability to obtain patents and copyrights.  Despite our efforts to protect our intellectual property, unauthorized third parties may violate our patents or copyrights.  In addition to intellectual property that we have patented and copyrighted, we also rely on trade secrets, technical know-how and other non-patented proprietary information relating to our product development and manufacturing activities, which we seek to protect, in part, by entering into confidentiality agreements with our collaborators and employees.  We cannot assure you that these agreements will not be breached, that we would have adequate remedies for any breach or that our trade secrets and proprietary know-how will not otherwise become known or independently discovered by others.
 
    We seek to operate without infringing on the intellectual property rights of third parties.  As is typical in the semiconductor industry, we have been notified, and may be notified in the future, that we may be infringing on certain patents and/or other intellectual property rights of other parties.  We cannot assure you that we will not be subject to litigation to defend our products or processes against claims of patent infringement or other intellectual property claims.  Any such litigation could result in substantial costs and diversion of our resources.  If we infringe on the intellectual property rights of others, we cannot assure investors that we would be able to obtain any required licenses on commercially reasonable terms and we may be required to pay substantial damages, including treble damages, and cease production of our work product or use of one or more manufacturing processes.  Even if we are ultimately successful, patent litigation can be time consuming, disruptive to management and expensive.  If any of the foregoing were to occur, our financial condition and results of operations could be materially adversely affected.

We have had significant volatility in our stock price and it may fluctuate in the future.  Therefore, you may be unable to sell shares of our common stock at or above the price you paid for such shares.
 
    The trading price of our common stock has and may continue to fluctuate significantly.  Such fluctuations may be influenced by many factors, including: (i) our operating results and prospects; (ii) the operating results and prospects of our major customers; (iii) announcements by our competitors; (iv) the depth and liquidity of the market for our common stock; (v) investor perception of us and the industry in which we operate; (vi) changes in our earnings estimates or buy/sell recommendations by analysts covering our stock; (vii) general financial and other market conditions; and (viii) domestic and international economic conditions.
 
    Public stock markets have experienced extreme price and trading volume volatility, particularly in the technology sectors of the market.  This volatility significantly affected and may in the future affect 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 materially and adversely affect the market price of our common stock.
 
    In addition, fluctuations in our stock price and our price-to-earnings multiple may have made our stock attractive to momentum, hedge or day-trading investors who often shift funds into and out of stocks rapidly, exacerbating price fluctuations in either direction, particularly when viewed on a quarterly basis.

Certain provisions in our amended and restated certificate of incorporation, our amended and restated bylaws and our stockholders’ rights agreement and of Delaware law could deter, delay or prevent a third party from acquiring us and that could deprive you of an opportunity to obtain a takeover premium for our common stock.
 
    Our amended and restated certificate of incorporation, our amended and restated bylaws and Delaware law contain provisions that could have the effect of making it more difficult for a third party to acquire us, or of discouraging a third party from attempting to acquire control of us.  In addition, we have a stockholders’ rights agreement that under certain circumstances would significantly impair the ability of third parties to acquire control of us without prior approval of our board of directors.
 
    Together, our amended and restated certificate of incorporation, our amended and restated by-laws, certain provisions of Delaware law and our stockholders’ rights agreement may discourage transactions that otherwise could provide for the payment of a premium over prevailing market prices for our common stock and could also limit the price that investors may be willing to pay in the future for our common stock.

We and certain of our directors are defendants in litigation and the outcome of these lawsuits may, to the extent not covered by insurance, negatively affect our financial condition, results of operations and cash flows.
 
    Since late 2008, the Company, a former officer and a former officer-director have been parties to a now consolidated putative securities class action lawsuit pending in the United States District Court for the District of New Jersey. This lawsuit alleges federal securities fraud claims and seeks unspecified damages arising out of the alleged non-disclosure of information concerning, among other things, manufacturing inefficiencies and customer demand.  Following plaintiffs’ submission of the Second Amended Complaint, filed on October 4, 2010, the alleged class period runs from February 12, 2008 through August 7, 2008.  By an Opinion and an Order dated September 30, 2011, the District Court dismissed with prejudice plaintiffs' Second Amended Complaint.  Plaintiff filed a notice of appeal to the United States Court of Appeals for the Third Circuit.  The appeal is pending.  In early 2009, two shareholders’ derivative lawsuits were filed in New Jersey Superior Court against the Company, as a nominal defendant, and certain of its current and former directors, alleging state law claims and seeking unspecified damages arising out of the same events at issue in the putative class action lawsuits.  Neither the putative class action lawsuits nor the shareholders’ derivative lawsuits have yet advanced beyond the preliminary procedural stages.  (See “Item 3. Legal Proceedings” for additional details on these cases and related matters.)
 
    At this time, we cannot predict the probable outcome of these lawsuits.  The pendency of these lawsuits, and any others that might subsequently be filed against us, could divert the attention of management from our business, harm our reputation and otherwise have a negative effect on our financial condition, results of operations and cash flows.  Any adverse outcome in any one of these lawsuits may, to the extent not reimbursed by insurance, have a negative effect on our financial condition, results of operations and cash flows.
 
ITEM 1B. UNRESOLVED STAFF COMMENTS
 
    Not applicable.

ITEM 2. PROPERTIES.
 
    Our executive offices and primary fabrication facility are located at 141 Mt. Bethel Road, Warren, New Jersey 07059. We currently lease space in several buildings in Warren, New Jersey, located within the industrial complex. Approximately 150,000 square feet of manufacturing and office space is occupied in a building located at 141 Mt. Bethel Road in Warren, New Jersey under a twenty-year lease expiring on December 31, 2016.  We occupy another 25,000 square feet of office space in a nearby building under a two-year lease expiring on October 31, 2012.
 
    We also lease approximately 41,500 square feet in aggregate of office space in the following locations: Atlanta, Georgia; Tyngsboro, Massachusetts; Richardson, Texas; San Diego, California; Taipei, Taiwan; Aalborg, Denmark; China; South Korea; and Japan under lease agreements with remaining terms ranging from one month to seven years that can be extended, at our option.

ITEM 3. LEGAL PROCEEDINGS.
 
    On or about November 11, 2008, plaintiff Charlie Attias filed a putative securities class action lawsuit in the United States District Court for the District of New Jersey, captioned Charlie Attias v. Anadigics, Inc., et al., No. 3:08-cv-05572, and, on or about November 21, 2008, plaintiff Paul Kuznetz filed a related class action lawsuit in the same court, captioned Paul J. Kuznetz v. Anadigics, Inc., et al., No. 3:08-cv-05750 (jointly, the "Class Actions").  The Complaints in the Class Actions, which were consolidated under the caption In re Anadigics, Inc. Securities Litigation, No. 3:08-cv-05572, by an Order of the District Court dated November 24, 2008, seek unspecified damages for alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as well as Rule 10b-5 promulgated thereunder, in connection with alleged misrepresentations and omissions in connection with, among other things, Anadigics's manufacturing capabilities and the demand for its products.  On October 23, 2009, plaintiffs filed a Consolidated Amended Class Action Complaint, (the “First Amended Complaint”), which names the Company, a former officer and a former officer-director, and alleges a proposed class period that runs from July 24, 2007 through August 7, 2008.  On December 23, 2009, defendants filed a motion to dismiss the First Amended Complaint; that motion was fully briefed as of March 30, 2010.  After holding extensive oral argument on defendants' motion on August 3, 2010, the District Court found plaintiffs' First Amended Complaint to be deficient, but afforded them another opportunity to amend their pleading.  The District Court therefore denied defendants' motion to dismiss without prejudice to defendants' renewing the motion in response to plaintiffs' Second Amended Complaint, which plaintiffs filed on October 4, 2010.  The Second Amended Complaint, which contains the same substantive claims that were alleged in the First Amended Complaint, alleges a proposed class period that runs from February 12, 2008 through August 7, 2008.  Defendants filed a motion to dismiss the Second Amended Complaint on December 3, 2010.  By an Opinion and an Order dated September 30, 2011, the District Court dismissed with prejudice plaintiffs' Second Amended Complaint.  On October 27, 2011, plaintiffs filed with the District Court a notice of appeal to the United States Court of Appeals for the Third Circuit from the District Court's September 30, 2011 Opinion and Order.  The appeal is pending.
 
    On or about January 14, 2009, a shareholder's derivative lawsuit, captioned Sicari v. Anadigics, Inc., et al., No. SOM-L-88-09, was filed in the Superior Court of New Jersey, and, on or about February 2, 2009, a related shareholder's derivative lawsuit, captioned Moradzadeh v. Anadigics, Inc., et al., No. SOM-L-198-09, was filed in the same court (jointly, the "Derivative Lawsuits").  The Derivative Lawsuits seek unspecified damages for alleged state law claims against certain of the Company's current and former directors arising out of the matters at issue in the Class Actions.  By Order dated March 6, 2009, the New Jersey Superior Court consolidated the Derivative Lawsuits under the caption In re Anadigics, Inc. Derivative Litigation, No. SOM-L-88-09.  By Order dated March 27, 2009, the Superior Court stayed the Derivative Lawsuits pending disposition of the defendants' motion to dismiss the First Amended Complaint in the Class Actions.  By Order dated September 13, 2010, the Superior Court extended the stay of the Derivative Lawsuits until the disposition of defendants' motion to dismiss the Second Amended Complaint in the Class Actions.
 
    Because the Class Actions and the Derivative Lawsuits, which are in a preliminary stage, do not specify alleged monetary damages, we are unable to reasonably estimate a possible range of loss, if any, to the Company in connection therewith.
 
    We are also a party to ordinary course litigation arising out of the operation of our business. We believe that the ultimate resolution of such ordinary course litigation should not have a material adverse effect on its consolidated financial condition or results of operations.

ITEM 4. REMOVED AND RESERVED.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
 
    Our $0.01 par value Common Stock, (“Common Stock”) has been quoted on the NASDAQ Global Market under the symbol "ANAD" since the commencement of trading on April 21, 1995 following our initial public offering of our Common Stock. The following table sets forth for the periods indicated the high and low sale prices for our Common Stock.

   
High
   
Low
 
Calendar 2011
           
Fourth Quarter
  $ 2.90     $ 1.92  
Third Quarter
    3.44       2.12  
Second Quarter
    4.51       2.82  
First Quarter
    8.20       3.96  
                 
Calendar 2010
               
Fourth Quarter
  $ 7.90     $ 5.20  
Third Quarter
    6.25       3.55  
Second Quarter
    5.44       3.40  
First Quarter
    5.02       3.41  
 
    As of December 31, 2011, there were  69,279,551 shares of Common Stock outstanding (excluding shares held in Treasury) and 244 holders of record of the Common Stock.
 
    We have never paid cash dividends on our capital stock. We currently anticipate that we will retain available funds for use in the operation and expansion of our business, and do not anticipate paying any cash dividends in the foreseeable future.
 
    See also “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” under Part III, Item 12 of this report.

ITEM 6. SELECTED FINANCIAL DATA.
 
    The selected financial data set forth below should be read in conjunction with Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations", and our financial statements, related notes and other financial information included herein. The selected consolidated financial data set forth below as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009 have been derived from our audited financial statements included herein. The selected consolidated financial data set forth below as of December 31, 2009, 2008 and 2007 and for the years ended December 31, 2008 and 2007 have been derived from our audited financial statements, as adjusted for discontinued operations, that are not included herein or incorporated by reference herein. The Company sold the majority of the operating assets of Telcom Devices Inc, (Telcom, a wholly-owned subsidiary of the Company) on April 2, 2007 and effectively ceased Telcom’s operations. Accordingly, the financial results and position of Telcom have been classified as discontinued operations in the 2007 financial statements. Our historical results are not necessarily indicative of the results that may be expected for any future period.


 (amounts in thousands, except for per share amounts)
 
2011
   
2010
   
2009
   
2008
   
2007
 
RESULTS OF OPERATIONS
                             
Net sales
  $ 152,827     $ 216,714     $ 140,484     $ 258,170     $ 230,556  
Gross profit
    31,103       75,845       20,158       78,587       78,788  
Operating (loss) income from continuing operations
    (50,119 )     (535 )     (55,323 )     (38,267 )     2,078  
(Loss) income before income taxes
    (49,323 )     963       (57,404 )     (41,872 )     6,916  
Benefit from income taxes
    -       (297 )     (321 )     -       -  
Net (loss) income from continuing operations
    (49,323 )     1,260       (57,083 )     (41,872 )     6,916  
                                         
(Loss) earnings per share from continuing operations:
                                       
Basic
  $ (0.73 )   $ 0.02     $ (0.92 )   $ (0.70 )   $ 0.13  
Diluted
  $ (0.73 )   $ 0.02     $ (0.92 )   $ (0.70 )   $ 0.12  
                                         
BALANCE SHEET DATA:
                                       
Total cash and marketable securities
  $ 93,578     $ 106,093     $ 92,526     $ 145,724     $ 176,812  
Total assets
    188,801       233,812       214,452       303,777       333,461  
Total capital lease obligations
    -       -       -       -       -  
Current portion of long-term debt
    -       -       -       38,000       -  
Long-term debt
    -       -       -       -       38,000  
Total stockholders’ equity
    166,525       202,964       189,058       230,008       250,106  

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

OVERVIEW
 
    We are a leading provider of semiconductor solutions in the growing broadband wireless and wireline communications markets.  Our products include RF power amplifiers, tuner integrated circuits, active splitters, line amplifiers and other components, which can be sold individually or packaged as FEM’s.  We believe that we are well-positioned to capitalize on the high growth and convergence occurring in the voice, data and video segments of the broadband wireless and wireline communications markets. Our RF power amplifier products enable mobile handsets, datacards and other devices to access 3G and 4G wireless networks utilizing international standards including LTE, WCDMA, HSPA, CDMA, EVDO and WiMAX.  Our WiFi products enable connectivity for wireless mobile devices and other computing devices.  Our CATV products enable fixed-point, wireline broadband communications over CATV infrastructure as well as cable modem and set-top box products. Our Wireless infrastructure products support operator commitments worldwide to optimize the increasing demands for subscriber data through deployment of new small-cell base stations as part of a heterogeneous network.
 
    Our business strategy focuses on enabling anytime, anywhere connectivity which enhances the consumer’s broadband and wireless experience. We develop RF front end solutions for communications equipment manufacturers and we partner with industry-leading wireless and wireline chipset providers who incorporate our solutions into their reference designs.  Our solutions cost-effectively enhance communications devices by improving RF performance, efficiency, reliability, time-to-market and integration while reducing the size, weight and cost of these products.
 
    We leverage our technological knowledge and advantages to be a leading technology-enabler via innovative semiconductor solutions for broadband wireless and wireline communications.  We believe our patented InGaP-plus technology, which combines bipolar amplifying structures pHEMT RF switches on the same die, coupled with our three level metal interconnect process provides us with a competitive advantage in the marketplace.  Additionally, we believe proprietary designs of our HELP™ power amplifiers when combined with higher efficiency at high output power provide our customers a competitive advantage by delivering performance required for 3G and 4G devices with lower battery power consumption and longer use time than comparable products in these markets.
 
    Our six-inch diameter GaAs fab located at our corporate headquarters in Warren, New Jersey, has been operational since 1999.  In addition, we have a strategic foundry agreement with WIN Semiconductors of Taiwan to supplement our existing wafer fabrication capability and allow for additional and flexible capacity without the requisite capital investment.
 
    Our annual revenues decreased in 2011 after increasing in 2010 from 2009, as the Company experienced a decline in Wireless revenues resulting from a decline in revenue from one of our largest customers resulting from certain of their programs reaching end of life and their change in chipset suppliers that did not utilize our power amplifiers. We anticipate a decline in total revenues in the first quarter of 2012.
 
    We believe our markets are, and will continue to remain, competitive which could result in continued quarterly volatility in our net sales. This competition has resulted in, and is expected over the long-term to continue to result in competitive or declining average selling prices for our products and increased challenges in maintaining or increasing market share.
 
    We have only one reportable segment. For financial information related to such segment and certain geographic areas, see Note 3 to the accompanying consolidated financial statements.

CRITICAL ACCOUNTING POLICIES & SIGNIFICANT ESTIMATES

    We believe the following accounting policies are critical to our business operations and the understanding of our results of operations. Such accounting policies may require management to exercise a higher degree of judgment and make estimates used in the preparation of our consolidated financial statements.
 
         
       
Effect if Actual Results Differ
Description
 
Judgments and Uncertainties
 
From Assumptions
         
Revenue Recognition
 
Revenue from product sales is recognized when title to the products is transferred to the customer, which occurs upon shipment or delivery, depending upon the terms of the sales order.  We maintain revenue allowances for price protection and stock rotation for certain distributor sales. These allowances are recorded upon shipment and calculated based on distributors’ indicated intent, historical data, current economic conditions and contractual terms.
 
 
 
Our revenue recognition accounting methodology contains uncertainties because it requires management to make assumptions and to apply judgment to estimate the value of future credits to customers for price protection and stock rotation. Our estimates of the amount and timing of the reserves is based primarily on distributors’ indicated intent, historical data, current economic conditions and contractual terms.
 
 
 
We have not made any material changes in our accounting methodology used to record revenue allowances for the years ended December 31, 2011, 2010 and 2009. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions that would have a material impact to our consolidated financial statements.
 
         
Allowance for Doubtful Accounts
 
We maintain an allowance for doubtful accounts for estimated losses resulting from our customers’ failure to make payments. The reserve is based on historical experience and an analysis of credit risk.
 
 
 
Our allowance for doubtful accounts methodology contains uncertainties because it requires management to apply judgment to evaluate credit risk and collectability of aged accounts receivables based on historical experience and forward looking assumptions.
 
 
 
We have not made any material changes in our accounting methodology used to create and maintain the allowance for doubtful accounts for the years ended December 31, 2011, 2010 and 2009. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions that would have a material impact to our consolidated financial statements.
Inventory Valuation
 
We value our inventory at lower of cost or market (LCM), using the first-in, first-out method. We establish reserves for excess and obsolete inventory based upon a review of forecasted short-term demand in relation to on-hand inventory, salability, general market conditions, and product life cycles.
 
 
 
Our inventory reserves contain uncertainties because the calculation requires management to make assumptions and to apply judgment regarding historical experience, forecasted demand and technological obsolescence.
 
 
 
We have not made any material changes to our inventory reserve methodology for the years ended December 31, 2011, 2010 and 2009.  We do not believe that significant changes will be made in future estimates or assumptions we use to calculate these reserves. However, if our estimates are inaccurate or technological changes affect consumer demand we may be exposed to unforeseen gains or losses. A 10% difference in our inventory reserves at December 31, 2011 would affect our consolidated financial statements for year then ended by approximately $0.6 million.
         
Warranty Costs
 
We provide for potential warranty claims by recording a current charge to income. We estimate potential claims by examining current and historical returns, current economic conditions and contractual terms to provide for an amount which we believe will cover future warranty obligations for products sold.
 
 
 
Our warranty reserve methodology contains uncertainties because it requires management to make assumptions and to apply judgment to estimate the value of future product returns by customers. Our estimates of the amount and timing of the reserves is based primarily on historical experience and specific contractual arrangements.
 
 
 
We have not made any material changes to our warranty reserve methodology for the years ended December 31, 2011, 2010 and 2009. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions that would have a material impact to our consolidated financial statements.
         
Marketable Securities
 
Available-for-sale securities are stated at fair value, as determined by quoted market prices or independent valuation models, which uses a combination of two calculations: (1) a discounted cash flow model and (2) a market comparables method. We review our investments on an ongoing basis for indications of possible impairment, and if an impairment is identified and considered other-than-temporary, it is recorded as a charge to income. The primary factors we consider in classifying the timing of an impairment are the extent to which and period of time that the fair value of each investment has declined below its cost basis. Unrealized improvement gains in value subsequent to recording an impairment charge to income are reflected in other comprehensive income, whereas realized gains and losses are recorded through Other income (expense). The amortized cost of debt securities is adjusted for accretion of market discounts over the effective life of the debt securities and recorded through interest income.
 
 
 
The valuations include numerous assumptions such as assessments of the underlying structure of each security, expected cash flows, discount rates, credit ratings, workout periods and overall capital market liquidity. Further, the determination of whether the impairment is temporary or other-than-temporary requires significant judgment regarding the extent and timing of declines in value versus its cost basis.
 
 
 
 
 
While we have not made any material changes to our valuation methodology for the years ended December 31, 2011, 2010 and 2009, capital market expectations, liquidity and rates have fluctuated in the periods. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions that would have a material impact to our consolidated financial statements.
         
Stock-Based Compensation
 
We have a stock-based compensation plan which includes non-qualified stock options, share awards, and an employee stock purchase plan. See Note 10 of Item 8 for a discussion of our stock-based compensation programs. We determine the fair value of stock-based compensation for our non-qualified stock options and employee stock purchase plans at the date of grant using the Black Scholes options-pricing model. Our determination of fair value of share-based payment awards on the date of grant contains assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, our expected stock price volatility over the term of the award, risk-free rate, the expected life and potential forfeitures of awards. Management periodically evaluates these assumptions and updates stock-based compensation expense accordingly.
 
 
 
Option-pricing models and generally accepted valuation techniques require management to make assumptions and to apply judgment to determine the fair value of our awards. These assumptions and judgments include estimating the future rates of volatility of our stock price, employee turnover and employee stock option exercise behaviors. Changes in these assumptions can materially affect the fair value estimate and stock based compensation recognized by the Company.
 
 
 
We have not made any material changes in the accounting methodology we used to calculate stock-based compensation for the years ended December 31, 2011, 2010 and 2009.  We do not believe that there is a reasonable likelihood there will be a material change in future estimates or assumptions used to determine stock-based compensation expense.
         
Valuation of Long-Lived Assets
 
Long-lived assets is primarily comprised of fixed assets. We regularly review these assets for indicators of impairment and assess the carrying value of the assets against market values. When an impairment exists, we record an expense to the extent that the carrying value exceeds fair market value. We assess the impairment of long-lived assets whenever events or changes in circumstances indicate that their carrying value may not be recoverable.
 
 
 
Our impairment loss calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate asset fair values, including estimating future cash flows, useful lives and selecting an appropriate discount rate that reflects the risk inherent in future cash flows.
 
 
 
We have not made any material changes in the accounting methodology we use to assess impairment loss for the years ended December 31, 2011, 2010 and 2009. As of December 31, 2011, we evaluated fixed assets for impairment and performed a recoverability analysis.  The results of the analysis indicate that the assets are fully-recoverable.  We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate long-lived asset impairment losses. However, if actual results are not consistent with our estimates and assumptions used in estimating future cash flows and asset fair values, we may record material losses.
         
 Income Taxes
 
We account for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between tax and financial reporting. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled. We record a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
 
 
 
Management judgment is required in developing our provision for income taxes, including the determination of deferred tax assets and liabilities and any valuation allowances that might be required against the deferred tax assets. We maintain a full valuation allowance on our deferred tax assets. Accordingly, we have not recorded a benefit or provision for income taxes other than for the refund of certain research and experimental tax credits during 2010.
 
 
 
We have not made any material changes in the accounting methodology we used to measure our deferred tax asset valuation allowance for the years ended December 31, 2011, 2010 and 2009. We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to record our valuation allowances for deferred tax assets. However, if actual results are not consistent with our estimates and assumptions used in estimating future taxable income, we may record material income tax benefits.
         

RESULTS OF OPERATIONS
 
    The following table sets forth statements of operations data as a percentage of net sales for the periods indicated:

   
2011
   
2010
   
2009
 
                   
Net sales
    100.0 %     100.0 %     100.0 %
Cost of sales
    79.6       65.0       85.7  
                         
Gross profit
    20.4 %     35.0     14.3
Research and development expense
    29.5       23.1       32.7  
Selling and administrative expenses
    23.0       12.9       19.2  
Restructuring and impairment (recovery) charges
    0.7       (0.8 )     1.8  
                         
Operating loss
    (32.8 %)     (0.2 %)     (39.4 %)
Interest income
    0.4       0.4       0.8  
Interest expense
    -       (0.1 )     (1.3 )
Other income (expense), net
    0.1       0.4       (0.9 )
                         
Income (loss) before income taxes
    (32.3 %)     0.5 %     (40.8 %)
Benefit from income taxes
    -       (0.1 )     (0.2 )
                         
Net income (loss)
    (32.3 %)     0.6 %     (40.6 %)

2011 COMPARED TO 2010
 
    NET SALES. Net sales for the year ended December 31, 2011 decreased 29.5% to $152.8 million, compared to net sales for the year ended December 31, 2010 of $216.7 million. The net sales decrease primarily resulted from a decrease in market demand for WCDMA cellular device markets and in Broadband from lower cable set-top box and WiMax applications’ demand.
 
    Net sales for the year ended December 31, 2011 of the Company’s wireless products decreased 25.3% to $119.5 million compared to net sales for the year ended December 31, 2010 of $159.9 million.  The decrease in sales was primarily the result of decreased demand in our WCDMA cellular device markets due to 1) declines at one of our largest customers due to certain products reaching end of life and their change in chipset providers that do not utilize our power amplifiers and 2) a decline in the market penetration of datacard products for embedded wireless connectivity.
 
    Net sales for the year ended December 31, 2011 of the Company’s broadband products decreased 41.3% to $33.3 million compared to net sales for the year ended December 31, 2010 of $56.8 million. The decrease in sales was primarily due to decreased demand from cable set-top box and WiMax applications.
 
    GROSS MARGIN. Gross margin for 2011 decreased to 20.4% of net sales, compared with 35.0% of net sales in the prior year. The decrease in gross margin was primarily due to lower production and sales volume and a concentration of fixed costs as a percent of smaller revenues. Fixed production costs include, but are not limited to depreciation, maintenance and operations’ support functions.
 
    RESEARCH & DEVELOPMENT. Company-sponsored Research and development (R&D) expenses decreased 10.1% during 2011 to $45.0 million from $50.1 million during 2010. The decrease resulted from improved controls over our key projects, lower labor costs and recruitment expense.
 
    SELLING AND ADMINISTRATIVE. Selling and administrative expenses increased 25.6% during 2011 to $35.1 million from $28.0 million in 2010.  The increase was primarily due to management separation charges recorded in the first and fourth quarters of 2011 totaling $6.4 million.
 
    RESTRUCTURING AND IMPAIRMENT (RECOVERY) CHARGES. During the second quarter of 2011, we implemented workforce reductions, which eliminated approximately 40 positions, resulting in a restructuring charge of $1.0 million for severance and related benefits. During the second quarter of 2010, we sold the wafer fabrication building in Kunshan, China which had been fully written-off in 2008. The sale resulted in a net recovery of $1.7 million.
 
    BENEFIT FROM INCOME TAXES.   The Housing and Economic Recovery Act of 2008 included the partial refund of certain carried-forward Research and Experimental (R&E) tax credits. During the third quarter of 2010, the Company finalized and filed its R&E claim as part of its 2009 Federal tax return and subsequently received cash of $0.3 million.  Such refund was recorded as a benefit from income taxes.

2010 COMPARED TO 2009
 
    NET SALES. Net sales for the year ended December 31, 2010 increased 54.3% to $216.7 million, compared to net sales for the year ended December 31, 2009 of $140.5 million. The net sales increase resulted from an increase in market demand, particularly for wireless products.
 
    Net sales for the year ended December 31, 2010 of the Company’s wireless products increased 71.7% to $159.9 million compared to net sales for the year ended December 31, 2009 of $93.2 million.  The increase in sales was primarily due to increased demand in WCDMA and to a lesser degree CDMA cellular device markets.
 
    Net sales for the year ended December 31, 2010 of the Company’s broadband products increased 19.9% to $56.8 million compared to net sales for the year ended December 31, 2009 of $47.3 million. The increase in sales was primarily due to increased demand for WiMax and CATV subscriber and infrastructure products, partly offset by declines in WiFi PAs shipped into the PC Notebook market.
 
    GROSS MARGIN. Gross margin for 2010 increased to 35.0% of net sales, compared with 14.3% of net sales in the prior year. Gross margin for 2009 included charges of $5.3 million, representing 3.8% of revenue, arising from a settlement of a commercial dispute with a customer and certain inventory reserve charges.  After considering the charge outlined above, the remaining increase in gross margin was primarily due to increased product shipments and wafer production, and fixed production costs decreasing as a percent of higher revenues and was further supported by variable cost improvements gained over the prior year.  Fixed production costs include, but are not limited to depreciation, maintenance and operations’ support functions.
 
    RESEARCH & DEVELOPMENT. Company-sponsored Research and development (R&D) expenses increased 9.0% during 2010 to $50.1 million from $46.0 million during 2009. The increase was primarily due to greater material spending, personnel and support costs for our accelerated R&D product and process development efforts.
 
    SELLING AND ADMINISTRATIVE. Selling and administrative expenses increased 3.9% during 2010 to $28.0 million from $26.9 million in 2009.  The increase was driven by increased investment in our sales effort, which was partly offset by reductions in general and administrative costs.
 
    RESTRUCTURING AND IMPAIRMENT (RECOVERY) CHARGES. During the second quarter of 2010, we sold the wafer fabrication building in Kunshan, China which had been fully written-off in 2008. The sale resulted in a net recovery of $1.7 million. During the first quarter of 2009 we implemented workforce reductions, which eliminated approximately 110 positions, resulting in a restructuring charge of $2.6 million principally for severance and related benefits.
 
    INTEREST INCOME. Interest income decreased 30.9% to $0.8 million during 2010 from $1.1 million in 2009. The decrease was primarily due to lower average funds invested.
 
    INTEREST EXPENSE. Interest expense decreased 91.9% to $0.2 million in 2010 compared to $1.9 million in 2009. The decrease principally related to the repayment of our 5% Convertible Senior Notes due in October 2009.
 
    OTHER INCOME (EXPENSE), NET.  Other income (expense) primarily results from valuation activity in marketable securities we hold.  Other income of $0.9 million in 2010 compares to $1.3 million of other expense in 2009.  In 2010, other income principally relates to recoveries on redemptions of certain action rate securities.  In 2009, other expense was comprised of a $1.5 million other-than-temporary decline in value on certain auction rate securities and a corporate debt security held by the Company, offset by $0.2 million of income recorded on par value redemption recoveries.
 
    BENEFIT FROM INCOME TAXES.   The Housing and Economic Recovery Act of 2008 included the partial refund of certain carried-forward Research and Experimental (R&E) tax credits. During the third quarter of 2010 and 2009, the Company finalized and filed its R&E claim as part of its 2009 and 2008 Federal tax return and subsequently received cash of $0.3 million in each of these periods.  Such refund was recorded as a benefit from income taxes.

LIQUIDITY AND SOURCES OF CAPITAL
 
    At December 31, 2011 we had $32.7 million of cash and cash equivalents and $60.9 million in marketable securities.
 
    Operations used $8.2 million in cash during 2011, primarily as a result of our operating results adjusted for non-cash expenses, as reduced by $11.2 million of cash generated by reducing working capital.  Investing activities used $57.9 million of cash during 2011, consisting of net purchases of marketable securities of $52.4 million and net purchases of equipment of $5.8 million, as reduced by $0.3 million of proceeds on sale.  Financing activities provided $1.7 million of cash during 2011, consisting of proceeds received from the employee stock purchase plan and stock option exercises.
 
    At December 31, 2011, the Company had unconditional purchase obligations of approximately $3.0 million.
 
   We believe that our existing sources of capital, including our existing cash and marketable securities, will be adequate to satisfy operational needs and anticipated capital needs for at least the next twelve months. Our anticipated capital needs may include acquisitions of complementary businesses or technologies, investments in other companies or repurchases of our equity. Subject to liquidity considerations of our auction rate securities as discussed more fully in Item 7A, we may elect to finance all or part of our future capital requirements through additional equity or debt financing. There can be no assurance that such additional financing would be available on satisfactory terms.
 
    The table below summarizes required cash payments as of December 31, 2011:

CONTRACTUAL OBLIGATIONS
 
PAYMENTS DUE BY PERIOD (in thousands)
 
   
Total
   
Less than 1 year
   
1 – 3 years
   
4 – 5 years
   
After 5 years
 
Operating leases
    12,363       2,886       4,472       4,676       329  
Unconditional purchase obligations
    3,041       3,041       -       -       -  
Total contractual cash obligations
  $ 15,404     $ 5,927     $ 4,472     $ 4,676     $ 329  

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
 
    Changes to accounting principles generally accepted in the United States of America are established by the Financial Accounting Standards Board (FASB) in the form of Accounting Standards Updates to the FASB’s Accounting Standards Codification.
 
    In May 2011, the FASB issued guidance on fair value measurements and disclosure requirements. The guidance provides a consistent definition of fair value to ensure fair value measurement and disclosure requirements are similar between U.S. Generally Accepted Accounting Principles and International Financial Reporting Standards. This guidance is effective for interim and annual periods beginning on or after December 15, 2011.  We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
 
    In June and December 2011, the FASB issued guidance on the presentation of other comprehensive income (OCI).  This guidance eliminates the option to present the components of OCI as part of the statement of changes in stockholders’ equity and also requires presentation of reclassification adjustments from OCI to net income on the face of the financial statements.  This guidance is effective for fiscal years and interim periods beginning after December 15, 2011, with the exception of the requirement to present reclassification adjustments from OCI to net income on the face of the financial statements, which has been deferred pending further deliberation by the FASB.  We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

OFF-BALANCE SHEET ARRANGEMENTS
 
    None.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
    Our cash and available-for-sale securities are exposed to changes in short-term interest rates. Our available-for-sale securities consist of fixed income securities, U.S. government agency debt securities, a corporate bond security and certain auction rate securities, the latter of which are discussed more specifically below. We continually monitor our exposure to changes in interest rates and the credit ratings of issuers with respect to our available-for-sale securities. Accordingly, we believe that the effects of changes in interest rates and the credit ratings of these issuers are limited and would not have a material impact on our financial condition or results of operations. However, it is possible that we would be at risk if interest rates or the credit ratings of these issuers were to change in an unfavorable direction. The magnitude of any gain or loss would be a function of the difference between the fixed rate of the financial instrument and the market rate and our financial condition and results of operations could be materially affected.
 
    At December 31, 2011, we held marketable securities with an estimated fair value of $60.9 million. Our primary interest rate exposure results from changes in short-term interest rates. We do not purchase financial instruments for trading or speculative purposes. All of our marketable securities are classified as available-for-sale securities. The following table provides information about our marketable securities at December 31, 2011:

Estimated Principal Amount and Weighted Average Stated Interest Rate by Expected Maturity Value
   
Fair Value
 
($’s 000)
2012
 
2013
 
> 10 years
 
Total
   
($’s 000)
                     
Principal
$ 24,040   $ 27,765   $ 14,525   $ 66,330     $ 60,883  
                                 
Weighted Average Stated Interest Rates
  2.82 %   1.29 %   1.61 %   1.92
%
    -  
 
    The stated rates of interest expressed in the above table may not approximate the actual yield of the securities which we currently hold since we have valued some of our marketable securities at other than face value. Additionally, some of the securities represented in the above table may be called or redeemed, at the option of the issuer, prior to their expected due dates. If such early redemptions occur, we may reinvest the proceeds realized on such calls or redemptions in marketable securities with stated rates of interest or yields that are lower than those of our current holdings, which would affect both future cash interest streams and future earnings.
 
    We invest the majority of our cash in money market funds, fixed income securities and U.S. government agency debt securities in order to protect principal, maintain liquidity as well as fund operations. Fluctuations in interest rates will affect the yield on monies invested by the Company. Such fluctuations can have an impact on our future cash interest streams and future earnings, but the impact of such fluctuations are not expected to be material.
 
    All of our marketable securities are classified as available-for-sale and therefore reported on our balance sheet at market value. Within our $60.9 million in marketable securities at December 31, 2011, we held a total of $32.5 million of fixed income securities, $19.6 million of U.S. government agency debt securities, $6.0 million of auction rate securities (ARS), and $2.8 million as a former-auction corporate debt security originally purchased as an ARS prior to its exchange for the underlying 30 year notes due 2037. ARS were a short-term cash management instrument used by the market and the Company prior to 2008. The instrument used a monthly Dutch auction process to provide liquidity on long-term financial instruments by resetting the applicable interest rate and through the reset, allowed existing investors to rollover or liquidate their holdings at par value. During the second half of 2007 and the first quarter of 2008, ARS failed to auction due to sell orders exceeding buy orders and trading continues to be constrained. The funds associated with the failed auctions will not be accessible until a successful auction occurs, a suitable buyer is found outside of the auction process or an issuer redeems its security.  To date, we have not realized any losses on ARS held by the Company or the notes received in exchange for an ARS, but have recognized other-than-temporary impairments of $8.2 million. The fair market values of certain of our ARS, when combined with the fair market values of our corporate debt security have subsequently increased by $2.5 million which was recorded to other comprehensive income.
 
    We anticipate selling the existing and former-auction corporate debt securities prior to a recovery in valuation. We will continue to monitor and evaluate these investments for impairment and for short term classification purposes. We may not be able to access cash by selling the aforementioned debt or preferred securities without the loss of principal until a buyer is located, a future auction for these investments is successful, they are redeemed by their issuers or they mature. If we are unable to sell these securities in the market or they are not redeemed, then we may be required to hold them to maturity or in perpetuity for the preferred ARS.  Based on our ability to access our cash, our expected operating cash flows, and our other sources of cash, we do not anticipate that the potential illiquidity of these investments will affect our ability to execute our current business plan.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 
Report of Independent Registered Public Accounting Firm


The Board of Directors and Stockholders
ANADIGICS, Inc.


We have audited the accompanying consolidated balance sheets of ANADIGICS, Inc. as of December 31, 2011 and 2010, and the related consolidated statements of operations, comprehensive (loss) income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2011. Our audit also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of ANADIGICS, Inc. at December 31, 2011 and 2010, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2011, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), ANADIGICS, Inc.’s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 15, 2012 expressed an unqualified opinion thereon.


/s/ Ernst & Young LLP


MetroPark, New Jersey
March 15, 2012




 
 

 


 ANADIGICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

   
YEAR ENDED DECEMBER 31,
 
   
2011
   
2010
   
2009
 
                   
Net sales
  $ 152,827     $ 216,714     $ 140,484  
Cost of sales
    121,724       140,869       120,326  
                         
Gross profit
    31,103       75,845       20,158  
Research and development expenses
    45,037       50,120       45,969  
Selling and administrative expenses
    35,138       27,977       26,914  
Restructuring and impairment (recovery) charges
    1,047       (1,717 )     2,598  
      81,222       76,380       75,481  
                         
Operating loss
    (50,119 )     (535 )     (55,323 )
                         
Interest income
    576       784       1,134  
Interest expense
    (25 )     (154 )     (1,897 )
Other income (expense), net
    245       868       (1,318 )
                         
(Loss) income before income taxes
  $ (49,323 )   $ 963     $ (57,404 )
Benefit from income taxes
    -       (297 )     (321 )
                         
Net (loss) income
  $ (49,323 )   $ 1,260     $ (57,083 )
                         
(Loss) earnings per share:
                       
Basic
  $ (0.73 )   $ 0.02     $ (0.92 )
Diluted
  $ (0.73 )   $ 0.02     $ (0.92 )
                         
Weighted average common shares outstanding used in computing (loss) earnings per share:
                       
Basic
    67,771       65,084       62,372  
Diluted
    67,771       67,554       62,372  


 
 

 
 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(AMOUNTS IN THOUSANDS)

   
Year Ended December 31,
 
   
2011
   
2010
   
2009
 
Net (loss) income
  $ (49,323 )   $ 1,260     $ (57,083 )
Other comprehensive (loss) income:
                       
Unrealized (loss) gain on marketable securities
    (143 )     665       2,701  
Foreign currency translation adjustment
    -       (42 )     (85 )
                         
Reclassification adjustment:
                       
Net recognized gain on marketable securities previously included in other comprehensive  (loss) income
    (193 )     (588 )     -  
Comprehensive (loss) income
  $ (49,659 )   $ 1,295     $ (54,467 )

 
See accompanying notes.

 

 
 

 


ANADIGICS, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

   
December 31,
 
   
2011
   
2010
 
ASSETS
           
Current assets:
           
Cash and cash equivalents
  $ 32,695     $ 97,129  
Short-term marketable securities
    24,127       -  
Accounts receivable, net of allowance for doubtful accounts of $172 and $739 at December 31, 2011 and December 31, 2010, respectively
    17,329       35,299  
Inventories
    19,733       20,734  
Prepaid expenses and other current assets
    3,198       3,319  
                 
Total current assets
    97,082       156,481  
                 
Marketable securities
    36,756       8,964  
Plant and equipment
               
Equipment and furniture
    199,908       205,493  
Leasehold improvements
    46,667       46,482  
Projects in process
    2,049       3,693  
      248,624       255,668  
Less accumulated depreciation and amortization
    193,900       187,549  
      54,724       68,119  
Other assets
    239       248  
    $ 188,801     $ 233,812  
LIABILITIES AND STOCKHOLDERS EQUITY
               
                 
Current liabilities:
               
Accounts payable
  $ 11,905     $ 17,968  
Accrued liabilities
    7,946       10,191  
Total current liabilities
    19,851       28,159  
                 
Other long-term liabilities
    2,425       2,689  
                 
Commitments and contingencies
               
                 
Stockholders’ equity
               
Preferred stock, $0.01 par value, 5,000 shares authorized, none issued or outstanding
               
Common stock, convertible, non-voting, $0.01 par value, 1,000 shares authorized, none issued or outstanding
               
Common stock, $0.01 par value, 144,000 shares authorized at December 31, 2011 and 2010, and 69,394 and 66,916 issued at December 31, 2011 and 2010, respectively
    694       669  
Additional paid-in capital
    602,757       589,562  
Accumulated deficit
    (439,113 )     (389,790 )
Accumulated other comprehensive income
    2,446       2,782  
Treasury stock at cost:  115 shares at December 31, 2011 and 2010
    (259 )     (259 )
Total stockholders’ equity
    166,525       202,964  
    $ 188,801     $ 233,812  

 
See accompanying notes.
 
 

 
 

 


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS)
 
   
Common Stock Shares
   
Common Stock Amount
   
Treasury Stock Shares
   
Treasury Stock Amount
   
Additional Paid-In Capital
   
Accumulated Deficit
    Accumulated Other Comprehensive Income (loss )    
Total Stockholders’ Equity
 
                                                 
Balance, December 31, 2008
    63,424     $ 634       (114 )   $ (258 )   $ 563,468     $ (333,967 )   $ 131     $ 230,008  
                                                                 
Stock options exercised
    49       1                       101                       102  
Shares issued under employee stock purchase plan
    729       7                       1,006                       1,013  
Treasury share purchase
                    (1 )     (1 )                             (1 )
Restricted stock activity, net of forfeitures
    315       3                       (3 )                     -  
Amortization of stock-based compensation
                                    12,403                       12,403  
Other comprehensive income
                                                    2,616       2,616  
Net loss
                                            (57,083 )             (57,083 )
                                                                 
Balance, December 31, 2009
    64,517     $ 645       (115 )   $ (259 )   $ 576,975     $ (391,050 )   $ 2,747     $ 189,058  
                                                                 
Stock options exercised
    758       7                       1,504                       1,511  
Shares issued under employee stock purchase plan
    488       5                       1,860                       1,865  
Restricted stock activity, net of forfeitures
    1,153       12                       (12 )                     -  
Amortization of stock-based compensation
                                    9,235                       9,235  
Other comprehensive income
                                                    35       35  
Net income
                                            1,260               1,260  
                                                                 
Balance, December 31, 2010
    66,916     $ 669       (115 )   $ (259 )   $ 589,562     $ (389,790 )   $ 2,782     $ 202,964  
                                                                 
Stock options exercised
    441       4                       931                       935  
Shares issued under employee stock purchase plan
    384       4                       767                       771  
Restricted stock activity, net of forfeitures
    1,653       17                       (17 )                     -  
Amortization of stock-based compensation
                                    11,514                       11,514  
Other comprehensive income
                                                    (336 )     (336 )
Net loss
                                            (49,323 )             (49,323 )
                                                                 
Balance, December 31, 2011
    69,394     $ 694       (115 )   $ (259 )   $ 602,757     $ (439,113 )   $ 2,446     $ 166,525  

See accompanying notes.


 

 

 
 

 


ANADIGICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)

   
YEAR ENDED DECEMBER 31,
 
   
2011
   
2010
   
2009
 
                   
CASH FLOWS FROM OPERATING ACTIVITIES
                 
Net (loss) income
  $ (49,323 )   $ 1,260     $ (57,083 )
Adjustments to reconcile net (loss) income to net cash  (used in) provided by operating activities:
                       
Depreciation
    18,239       19,115       18,463  
Amortization
    -       -       341  
Stock based compensation
    11,514       9,235       12,403  
Amortization of premium on marketable securities
    405       -       -  
Marketable securities recovery, accretion, impairment and other
    (208 )     (808 )     1,504  
Recovery on sale of China building
    -       (1,717 )     -  
Gain on disposal of equipment
    (41 )     (116 )     (167 )
Changes in operating assets and liabilities:
                       
Accounts receivable
    17,970       (15,286 )     5,371  
Inventories
    1,001       (2,484 )     15,328  
Prepaid expenses and other assets
    190       (784 )     300  
Accounts payable
    (5,462 )     5,790       (1,489 )
Accrued and other liabilities
    (2,509 )     (1,251 )     (3,480 )
Net cash (used in) provided by operating activities
    (8,224 )     12,954       (8,509 )
                         
CASH FLOWS FROM INVESTING ACTIVITIES
                       
Purchases of plant and equipment
    (5,812 )     (5,566 )     (10,346 )
Proceeds from sale of building and equipment
    348       1,918       1,346  
Purchases of marketable securities
    (65,152 )     -       (15,201 )
Proceeds from sales and redemptions of marketable securities
    12,700       1,275       29,216  
Net cash (used in) provided by investing activities
    (57,916 )     (2,373 )     5,015  
                         
CASH FLOWS FROM FINANCING ACTIVITIES
                       
Repayment of Convertible notes
    -       -       (38,000 )
Issuances of common stock, net of related costs
    1,706       3,376       1,115  
Repurchase of common stock into treasury
    -       -       (1 )
Net cash provided by (used in) financing activities
    1,706       3,376       (36,886 )
                         
Net (decrease) increase in cash and cash equivalents
    (64,434 )     13,957       (40,380 )
Cash and cash equivalents at beginning of period
    97,129       83,172       123,552  
                         
Cash and cash equivalents at end of period
  $ 32,695     $ 97,129     $ 83,172  
                         
Supplemental disclosures of cash flow information:
                       
Interest paid
  $ -     $ -     $ 1,900  
Net taxes paid (refunded)
    136       (243 )     (311 )


See accompanying notes.

 

 
 

 


ANADIGICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
NATURE OF OPERATIONS AND BASIS OF PRESENTATION
  
    ANADIGICS, Inc (the Company) is a leading provider of semiconductor solutions in the growing broadband wireless and wireline communications markets.  The Company’s products include radio frequency (RF) power amplifiers (PAs), tuner integrated circuits, active splitters, line amplifiers and other components, which can be sold individually or packaged as integrated front end modules (FEMs).  The Company’s RF power amplifier products enable mobile handsets, datacards and other devices to access third and fourth generation (3G and 4G) wireless networks utilizing international standards including Long Term Evolution (LTE), Wideband Code Division Multiple Access (WCDMA), High Speed Packet Access (HSPA), Code Division Multiple Access (CDMA), Evolution Data Optimized (EVDO) and Worldwide Interoperability for Microwave Access (WiMAX). The Company’s WiFi products enable connectivity for wireless mobile devices and other computing devices.  The Company’s Cable Television (CATV) products enable fixed-point, wireline broadband communications over CATV infrastructure as well as cable modem and set-top box products.  The Company’s Wireless infrastructure products support operator commitments worldwide to optimize the increasing demands for subscriber data through deployment of new small-cell base stations as part of a heterogeneous network.
 
    The Company designs, develops and manufactures RF integrated circuits (RFICs) primarily using Gallium Arsenide (GaAs) compound semiconductor substrates with various process technologies, Metal Semiconductor Field Effect Transistors (MESFET), Pseudomorphic High Electron Mobility Transistors (pHEMT), and Heterojunction Bipolar Transistors (HBT). The Company’s proprietary technology, which utilizes InGaP-plusTM, combines InGaP HBT and pHEMT processes on a single substrate, enabling it to integrate the PA function and the RF active switch function on the same die. The Company fabricates substantially all of its ICs in its six-inch diameter GaAs wafer fabrication facility.
 
    The consolidated financial statements include the accounts of ANADIGICS, Inc. and its wholly owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation.
 
    The Company has evaluated subsequent events and determined that there were no subsequent events to recognize or disclose in these consolidated financial statements other than the redemption at a gain of an auction rate security discussed in Note 4.

USE OF ESTIMATES
 
    The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and the accompanying notes. Actual results could differ from those estimates. Significant estimates that affect the financial statements include, but are not limited to: allowance for doubtful accounts, recoverability and valuation of inventories, warranty reserve, valuation of stock-based compensation, reserves for distributor arrangements and returns, valuation of certain marketable securities, useful lives and amortization periods and recoverability of long-lived assets.
 
CONCENTRATION OF CREDIT RISK
 
    The Company grants trade credit to its customers, who are primarily foreign manufacturers of wireless communication devices, cable and broadcast television receivers and fiber optic communication devices. The Company performs periodic credit evaluations of its customers and generally does not require collateral. Sales and accounts receivable from customers are denominated in U.S. dollars. The Company has not experienced significant losses related to receivables from these individual customers.
 
    Net sales to individual customers and their affiliates who accounted for 10% or more of the Company’s total net sales and corresponding end application information are as follows:

   
YEAR ENDED DECEMBER 31
 
   
2011
   
2010
   
2009
 
Customer (primary application)
                             
Research In Motion Limited (Wireless)
    33,704       22 %     56,284       26 %     19,824       14 %
Samsung Electronics (Wireless)
    29,326       19 %     24,052       11 %   <10 %     <10 %  
ZTE Corporation (Wireless)
    20,416       13 %     21,772       10 %   <10 %     <10 %  
LG Electronics, Inc. (Wireless)
  <10 %     <10 %     <10 %     <10 %       20,359       15 %
 
    Accounts receivable at December 31, 2011 and 2010 from the greater than 10% customers accounted for 62% and 54% of total accounts receivable, respectively.

REVENUE RECOGNITION
 
    Revenue from product sales is recognized when title to the products is transferred to the customer, which occurs upon shipment or delivery, depending upon the terms of the sales order. The Company sells to certain distributors who are granted limited contractual rights of return and exchange and certain pre-negotiated individual product-customer price protection. Revenue from sales of products to distributors is recognized, net of allowances, upon shipment of the products to the distributors. At the time of shipment, title transfers to the distributors and payment from the distributors is due on our standard commercial terms; payment terms are not contingent upon resale of the products. Revenue is appropriately reduced for the portion of shipments subject to return, exchange or price protection. Allowances for the distributors are recorded upon shipment and calculated based on the distributors’ indicated intent, historical data, current economic conditions and contractual terms.  The Company believes it can reasonably and reliably estimate allowances for credits to distributors in a timely manner. The Company charges customers for the costs of certain contractually-committed inventories that remain at the end of a product's life. Such amounts are recognized as cancellation revenue when cash is received. The value of the inventory related to cancellation revenue may, in some instances, have been reserved during prior periods in accordance with the Company’s inventory obsolescence policy. The Company maintains an allowance for doubtful accounts for estimated losses resulting from customers' failure to make payments.
 
ALLOWANCE FOR DOUBTFUL ACCOUNTS
 
    The Company establishes an allowance for doubtful accounts for estimated losses resulting from customers' failure to make payments, based upon historical experience.

WARRANTY COSTS
 
    The Company provides, by a current charge to income, an amount it estimates, by examining historical returns and other information it deems critical, will be needed to cover future warranty obligations for products sold during the year. The liability for warranty costs is included in Accrued liabilities in the consolidated balance sheets.

PLANT AND EQUIPMENT
 
    Plant and equipment are stated at cost. Depreciation of plant, furniture and equipment has been provided on the straight-line method over 3-7 years. Leasehold improvements are amortized and included in depreciation over the useful life of the leasehold or the life of the lease, whichever is shorter.

IMPAIRMENT OF LONG-LIVED ASSETS
 
    Long-lived assets used in operations are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. For long-lived assets to be held and used, the Company recognizes an impairment loss if its carrying amount is not recoverable through its undiscounted cash flows and measures the impairment loss based on the difference between the carrying amount and fair value. Long-lived assets held for sale are reported at the lower of cost or fair value less costs to sell.

INCOME TAXES
 
    Deferred income taxes reflect the net effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the income tax basis of such assets and liabilities. The Company maintains a full valuation allowance on its deferred tax assets. Accordingly, the Company has not recorded a benefit or provision for income taxes other than for the refund of certain research and experimental tax credits during 2010 and 2009. The Company recognizes interest and penalties related to the underpayment of income taxes in income tax expense. No unrecognized tax benefits, interest or penalties were accrued at December 31, 2011 and 2010. The Company’s U.S. federal net operating losses have occurred since 1998 and as such, tax years subject to potential tax examination could apply from that date because carrying-back net operating loss opens the relevant year to audit.

RESEARCH AND DEVELOPMENT COSTS
 
    The Company charges all research and development costs associated with the development of new products to expense when incurred.

CASH EQUIVALENTS
 
    The Company considers all highly liquid marketable securities with a maturity of three months or less when purchased to be cash equivalents.
 
MARKETABLE SECURITIES
 
    Available for sale securities are stated at fair value, as determined by quoted market prices or as needed, independent valuation models, with unrealized gains and losses reported in other accumulated comprehensive income or loss. Unrealized losses are reviewed and those considered other than temporary are recorded as a charge to other income (expense). Subsequent gains or losses upon redemption or sale of these securities in excess of, or below, their adjusted cost basis are also recorded as other income (expense). The Company considers it more likely than not that it will sell certain auction rate securities prior to a full recovery in valuation. The cost of securities sold is based upon the specific identification method. The amortized cost of securities is adjusted for amortization of premium and accretion of market discounts over the securities’ effective life or maturity and recorded in interest income.  See Note 4 for a summary of marketable securities.

INVENTORY
 
    Inventories are valued at the lower of cost or market ("LCM"), using the first-in, first-out method. The Company capitalizes production overhead costs to inventory on the basis of normal capacity of its production facility and in periods of abnormally low utilization charges the related expenses as a period cost in the statement of operations.  In addition to LCM limitations, the Company reserves against inventory items for estimated obsolescence or unmarketable inventory. The reserve for excess and obsolete inventory is primarily based upon forecasted short-term demand for the product. Once established, these write-downs are considered permanent adjustments to the cost basis of the excess inventory. If actual demand and market conditions are less favorable than those projected by management, additional inventory write-downs may be required.  In the event the Company sells inventory that had been covered by a specific inventory reserve, the sale is recorded at the actual selling price and the related cost of goods sold at the full inventory cost, net of the reserve.

DEFERRED RENT
 
    Aggregate rental expense is recognized on a straight-line basis over the lease terms of operating leases that contain predetermined increases in rentals payable during the lease term.
 
FOREIGN CURRENCY TRANSLATION
 
    The financial statements of subsidiaries outside of the United States are measured using the local currency as the functional currency. Assets and liabilities of these subsidiaries are translated at the rates of exchange at the balance sheet dates. The resultant translation adjustments are included in other accumulated comprehensive income or loss. Income and expense items are translated at the average monthly rates of exchange. Gains and losses from foreign currency transactions of these subsidiaries are included in the determination of net income or loss.
 
EARNINGS PER SHARE
 
    Basic earnings per share is computed by dividing net (loss) income by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised resulting in the issuance of common stock of the Company. Any dilution arising from the Company's outstanding stock awards will not be included where their effect is anti-dilutive.
 
FAIR VALUE OF FINANCIAL INSTRUMENTS
 
    The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The fair value of each of the following instruments approximates their carrying value because of the short maturity of these instruments: cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities. See Note 4 for additional fair value disclosures. 

STOCK-BASED COMPENSATION
 
    The Company has various stock-based compensation plans for employees and directors, which are described more fully in Note 11.  The Company records stock compensation expense for all stock-based payment awards made to its employees and directors. Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period which in most cases is the vesting period.

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

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
 
    Changes to accounting principles generally accepted in the United States of America are established by the Financial Accounting Standards Board (FASB) in the form of Accounting Standards Updates to the FASB’s Accounting Standards Codification.
 
    In May 2011, the FASB issued guidance on fair value measurements and disclosure requirements. The guidance provides a consistent definition of fair value to ensure fair value measurement and disclosure requirements are similar between U.S. Generally Accepted Accounting Principles and International Financial Reporting Standards. This guidance, effective for interim and annual periods beginning on or after December 15, 2011.  The Company does not expect the adoption of this guidance to have a material impact its consolidated financial statements.
 
    In June and December 2011, the FASB issued guidance on the presentation of other comprehensive income (OCI). This guidance eliminates the option to present the components of OCI as part of the statement of changes in stockholders’ equity and also requires presentation of reclassification adjustments from OCI to net income on the face of the financial statements. This guidance is effective for fiscal years and interim periods beginning after December 15, 2011, with the exception of the requirement to present reclassification adjustments from OCI to net income on the face of the financial statements, which has been deferred pending further deliberation by the FASB.  The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.
 
2.    RESTRUCTURING, MANAGEMENT SEPARATION CHARGES, IMPAIRMENT (RECOVERY) AND OTHER CHARGES

RESTRUCTURING
 
    During the second quarter of 2011, the Company implemented a workforce reduction that eliminated approximately 40 positions, resulting in a Restructuring charge of $1,047 for severance and related benefits.
 
    During the fourth quarter of 2008 and first quarter of 2009, the Company implemented certain workforce reduction programs, which eliminated approximately 210 positions throughout the Company, resulting in charges aggregating $4,738 for severance and related benefits.

Activity and liability balances related to the restructuring were as follows:

   
Workforce-related
   
Other
   
Total
 
December 31, 2008 balance
  $ 1,065     $ 100     $ 1,165  
Restructuring expense
    2,598       -       2,598  
Payments
    (3,608 )     (100 )     (3,708 )
December 31, 2009 balance
  $ 55     $ -     $ 55  
Payments
    (55 )     -       (55 )
December 31, 2010 balance
  $ -     $ -     $ -  
Restructuring expense
    1,047       -       1,047  
Payments
    (1,047 )     -       (1,047 )
December 31, 2011 balance
  $ -     $ -     $ -  

MANAGEMENT SEPARATION CHARGES
    During the fourth quarter of 2011, the Company recorded a $4,234 management separation charge, inclusive of accelerated stock-based compensation of $1,775, within Selling and administrative expenses. The management separation charge arose from the resignation of our former Chief Financial Officer, and included contractual separation pay, accelerated vesting of certain equity awards, and certain other costs.
 
    During the first quarter of 2011, the Company recorded certain management separation charges of $838 and $2,111, inclusive of accelerated stock-based compensation of $568 and $116, within Research and development and Selling and administrative expenses, respectively. The management separation charges arose from the resignations of our former Chief Executive Officer and another Executive Officer, and included contractual separation pay, accelerated vesting of certain equity awards, and certain other costs.
 
    In the fourth quarter of 2009, the Company recorded management separation charges of $2,125.  Of this amount, $1,755 was included in Research and development and $370 was included in Selling and administrative expenses.

IMPAIRMENT (RECOVERY)
    During the second quarter of 2010, the Company sold its wafer fabrication building in Kunshan, China for net proceeds of $1,717, resulting in the partial recovery of a related impairment charge. During 2008, the Company had written-off the value of this unfinished wafer fabrication building following an evaluation of alternatives in light of the then current circumstances, including: surplus industry production capacity, reduced demand experienced by the Company as well as the broader macroeconomic environment. As a result of its analysis of projected discounted cashflows, the Company recorded a $12,957 impairment charge in 2008 related to the China wafer fabrication facility.
 
OTHER CHARGES
    In the third quarter of 2009, the Company recorded a charge within Cost of sales in the amount of $3,879 in settlement of a commercial dispute with a customer.  The settlement required an initial payment of $1,110 which was paid in the fourth quarter of 2009, and six quarterly payments of $500 which commenced in March 2010.

3.    SEGMENTS
 
    The Company has one reportable segment. Its integrated circuits are primarily manufactured using common manufacturing facilities located in the same domestic geographic area. The method for determining what information to report is based on management’s use of financial information for the purposes of assessing performance and making operating decisions.  All operating expenses and assets of the Company are combined and reviewed by the chief operating decision maker on an enterprise-wide basis, resulting in no additional discrete financial information or operating segment information.  The Company’s business units share similar long term business models, research and development expenses and selling and administrative expenses.  The Company has concluded at December 31, 2011 that it has only one reportable segment.  The Company will re-assess its conclusions at least annually.
 
    The Company classifies its revenues based upon the end application of the product in which its integrated circuits are used.  Net sales by end application are regularly reviewed by the chief operating decision maker and are as follows:

   
Year Ended December 31,
 
   
2011
   
2010
   
2009
 
Wireless
  $ 119,472     $ 159,937     $ 93,147  
Broadband
    33,355       56,777       47,337  
Total
  $ 152,827     $ 216,714     $ 140,484  
 
    The Company sells to five geographic regions: Asia, Europe, Latin America, USA and Other. The geographic region is determined by the destination of the shipped product.  Net sales to each of the five geographic regions are as follows:

   
Year Ended December 31,
 
   
2011
   
2010
   
2009
 
Asia
  $ 102,437     $ 131,298     $ 101,064  
Europe
    14,146       24,941       9,518  
Latin America
    29,027       46,007       20,647  
USA
    6,934       11,341       7,498  
Other
    283       3,127       1,757  
Total
  $ 152,827     $ 216,714